<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
AQUILA BIOPHARMACEUTICALS, INC.
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
AQUILA BIOPHARMACEUTICALS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 31, 2000
------------------------
To the Shareholders of
Aquila Biopharmaceuticals, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of
Aquila Biopharmaceuticals, Inc. (the "Company") will be held on Wednesday, May
31, 2000, at 10:00 a.m. at the offices of the Company, 175 Crossing Boulevard,
Framingham, Massachusetts 01702, for the following purposes:
1. To elect two Class II directors to the board of directors to hold
office until the annual meeting of shareholders in 2003;
2. To transact such other business as may properly come before the
meeting or any adjournment of this meeting.
The board of directors has fixed the close of business on April 7, 2000 as
the record date for the determination of shareholders entitled to notice of and
to vote at this annual meeting and at any adjournment thereof.
All shareholders are cordially invited to attend the meeting; however, to
assure your representation at the meeting you are urged to mark, sign, date and
return the enclosed form of proxy as promptly as possible. Any shareholder
attending the meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors
JANE V. HAWKES, Secretary
<PAGE> 3
AQUILA BIOPHARMACEUTICALS, INC.
175 CROSSING BOULEVARD
FRAMINGHAM, MASSACHUSETTS 01702
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This proxy statement is being furnished to shareholders of Aquila
Biopharmaceuticals, Inc. (the "Company") in connection with the solicitation by
the Company's board of directors (the "Board of Directors" or "Board") of
proxies for use at the annual meeting of shareholders of the Company (the
"Annual Meeting") to be held on Wednesday, May 31, 2000 at 10:00 a.m. at the
offices of the Company, 175 Crossing Boulevard, Framingham, Massachusetts, and
any adjournment thereof. A copy of the Company's 1999 Annual Report on Form 10-K
is being mailed concurrently with this proxy statement to each shareholder
entitled to vote at the meeting. This proxy statement and accompanying proxy
materials will be mailed beginning April 20, 2000 to all shareholders entitled
to vote at the meeting.
VOTING AND PROXIES
The Board of Directors has fixed the close of business on April 7, 2000 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Accordingly, only holders of record of shares of
the Company's common stock at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. At the close of business on March 29, 2000, there were 8,506,915 shares
of the Company's common stock outstanding.
Each holder of record of shares of the Company's common stock on the record
date is entitled to cast one vote per share, in person or by properly executed
proxy, on any matter that may properly come before the Annual Meeting. The
presence in person or by properly executed proxy of the holders of a majority of
the shares of the Company's common stock outstanding on the record date is
necessary to constitute a quorum at the Annual Meeting. The affirmative vote of
a plurality of the votes properly cast at the Annual Meeting on the election of
directors is necessary for the election of a director. With respect to the
required vote on any particular matter, abstentions and votes withheld by
nominee record holders who did not receive specific instructions from the
beneficial owners of such shares will not be treated as votes cast although they
will count toward the presence of a quorum. The failure of a broker to return a
signed proxy card will result in the shares held of record by such broker not
being counted towards the determination of a quorum.
PROXY VOTING AND REVOCATION
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld. Where a choice is
specified as to the proposal, the proxies will be voted in accordance with such
specification. If no choice is specified, the persons named in the proxies
solicited by the Board of Directors intend to vote for the election of the
nominees for director.
The Board of Directors does not know of any matters, other than the matters
described in this Proxy Statement, which are expected to be presented for
consideration at the Annual Meeting. If any other matters are properly presented
for consideration at the Annual Meeting, the persons named in the accompanying
proxy will have discretion to vote on such matters in accordance with their best
judgment.
Shareholders of the Company who execute proxies may revoke them by giving
written notice to the Secretary of the Company at any time before such proxies
are voted or by executing and delivering later-dated proxies. Attendance at the
Annual Meeting will not have the effect of revoking a proxy unless the
shareholder so attending so notifies the Secretary of the Company in writing at
any time prior to the voting of the proxy.
<PAGE> 4
SOLICITATIONS
Proxies are being solicited by and on behalf of the Board of Directors. In
addition to solicitation by mail, directors, officers, and regular employees of
the Company (who will not be specifically compensated for such services) may
solicit proxies by telephone or otherwise. Arrangements will be made with
brokerage houses and other custodians, nominees, and fiduciaries to forward
proxies and proxy material to their principals, and the Company will reimburse
them for their expenses. In addition, the Company has retained American Stock
Transfer & Trust Company to assist in the solicitation of proxies from its
shareholders. For such service American Stock Transfer & Trust Company will
receive reimbursement of out of pocket costs and expenses but will receive no
consideration in addition to that received as transfer agent.
PROPOSAL 1
ELECTION OF DIRECTORS
Under the Company's By-laws, the Board of Directors consists of such number
as the Board shall determine but not less than one. The Board has set the number
of Board members at five. The Board is classified into three classes, as nearly
equal in number as possible, whose terms of office expire at different times in
annual succession. If the nominees are elected, there will be two directors (Dr.
Taunton-Rigby and Mr. Carpenter) whose terms expire at the Annual Meeting of the
Company's shareholders in 2003, one director (Mr. Hillback) whose term expires
at the Annual Meeting of the Company's shareholders in 2002 and two directors
(Mr. Beaver and Dr. Dorrington) whose terms expire at the Annual Meeting of the
Company's shareholders in 2001. The members of each class are elected to serve a
three-year term unless the membership of a class or classes is being
reapportioned. It is intended that the persons named on the proxy card as
proxies will vote shares of the Company's common stock so authorized for the
election of Mr. Carpenter and Dr. Taunton-Rigby to the Board of Directors. The
Board of Directors expects that the nominees will be available for election; but
in the event that they should become unavailable, it is intended that the proxy
would be voted for nominees who would be designated by the Board of Directors,
unless the Board reduces the number of directors.
Mr. Carpenter and Dr. Taunton-Rigby will serve until the Annual Meeting of
the shareholders in 2003 and until their successors are elected and qualified.
The nominees are currently directors of the Company, and the nominees have
agreed to serve as directors if elected at the meeting.
The Board of Directors recommends a vote FOR the election of the nominees
set forth below.
The Biographical summaries of the nominees for director of the Company
appear below.
Robert J. Carpenter
Robert J. Carpenter, 54, has been a Director of the Company since April of
1998. Mr. Carpenter served as President of VacTex, Inc. from November 1995 to
April 1998 when VacTex was acquired by Aquila. Mr. Carpenter has served as
Chairman of the Board of GelTex Pharmaceuticals, Inc. since 1991. He is
President of Boston Medical Investors, Inc., an investment firm. Mr. Carpenter
served as President and Chief Executive Officer of GelTex from 1991 to 1993. He
served as an Executive Vice President of Genzyme Corporation, a human health
care company, from 1989 to 1991, and was Chief Executive Officer and Chairman of
the Board of IG Laboratories, Inc., a genetic testing service company, from 1989
to 1991. Prior to that, he was Chairman, President and Chief Executive Officer
of Integrated Genetics, Inc., a biotechnology company, which he joined as
President in 1981. He is a director of Genzyme Corporation. He is a member of
the Compensation Committee of the Company's Board of Directors.
Alison Taunton-Rigby
Alison Taunton-Rigby, Ph.D., 55, has served as President, Chief Executive
Officer and Director since March of 1996. Dr. Taunton-Rigby served as President
and Chief Executive Officer and a member of the Board of Directors of the
Company's predecessor, Cambridge Biotech Corporation ("CBC"), from April 1995
until October of 1996. From 1993 to 1994, she served as President and Chief
Executive Officer of Mitotix, Inc., a biopharmaceutical company. Prior to
joining Mitotix, Dr. Taunton-Rigby was Senior Vice President,
2
<PAGE> 5
Biotherapeutics, of Genzyme Corporation, where she had overall responsibility
for Genzyme's biotherapeutics business. Dr. Taunton-Rigby is a past member of
the Board of Directors of BIO, the national trade organization, and is a past
Chair of the Emerging Companies section. She is also a member of the Board of
Directors and a past President of the Massachusetts Biotech Council, the trade
organization representing Massachusetts biotechnology companies. Dr.
Taunton-Rigby received her doctorate in Chemistry from the University of Bristol
in England, and is a graduate of the Advanced Management Program of the Harvard
Business School. She is a director of Synaptic Pharmaceutical Corporation. She
is also a member of the Bentley College Ethics Board.
Biographical summaries of the remaining directors of the Company whose
terms of office will continue after the Annual Meeting appear below.
Elliott D. Hillback, Jr.
Elliott D. Hillback, Jr., 55, has been a Director of the Company since
March of 1996. Since July 1990 Mr. Hillback has served as Senior Vice President
of Genzyme Corporation. As Senior Vice President of Genzyme, he was initially
responsible for corporate/business development activities. He then served for
five years as President of IG Laboratories/Genzyme Genetics, Genzyme's genetic
testing business. Currently he is Senior VP of Corporate Affairs/Corporate
Communication. Prior to joining Genzyme, Mr. Hillback held executive positions
at Baxter International and BOC Group, Inc. as well as the positions of
President and CEO of Cellcor Therapies, Inc., a start-up biotechnology company.
Mr. Hillback is a member of the Council of Medical Genetics Organization, and is
chairperson of the Ethics Committee of the Trade Association BIO. In 1999, he
was appointed to the Secretary's Advisory Committee on Genetic Testing which was
created to provide policy recommendations directly to the Secretary of Health
and Human Services. He earned his B.A. degree at Cornell University and an
M.B.A. from Harvard Business School. He is chairman of the Audit Committee and a
member of the Compensation Committee of the Company's Board of Directors.
Jeffrey T. Beaver
Jeffrey T. Beaver, 62, has been a Director of the Company since March of
1996, and currently serves as the Chairman of the Board. Mr. Beaver served as a
Director of CBC since January 1983, and as Chairman of the Board of Directors
from April 1995 to October 1996. From May 1994 to April 1995, Mr. Beaver served
as President and Chief Executive Officer of CBC, and from May 1994 to March
1996, Mr. Beaver served as CBC's Treasurer. Since October 1996, Mr. Beaver has
been Managing Director of CoView Capital, Inc. From January 1991 to May 1994,
Mr. Beaver was an independent consultant in the healthcare sector. From
September 1986 to December 1990, Mr. Beaver was Senior Vice President and Head
of the Corporate Finance Group of IBJ Schroder Bank and Trust Company. Mr.
Beaver is a member of the Institute of Chartered Financial Analysts. He received
his B.A. degree from Princeton University and his M.B.A. degree from New York
University. Mr. Beaver is a member of the Nominating Committee of the Company's
Board of Directors.
Keith J. Dorrington
Keith J. Dorrington, D.Sc., 60, has been a Director of the Company since
October 1996. Since 1991 Dr. Dorrington has been associated with MDS Health
Ventures Capital Corp., the leading venture capital company for the healthcare
sector in Canada, serving as Senior Vice President, Science and Technology since
1993. In this capacity Dr. Dorrington is responsible for the scientific
evaluation of all pharmaceutical/ biotechnology proposals received by MDS and
in-depth technical review of selected proposals. Dr. Dorrington is currently a
member of American Association of Immunologists, American Society of Biological
Chemists, Biochemical Society, British Society for Immunology, Canadian
Biochemical Society, Canadian Society of Immunology, American Management
Association and Canadian Research Management Association and holds directorships
in six early stage companies in the MDS portfolio. He is Advisory Editor of
Immunological Communications, a member of the Editorial Board of Critical Review
in Immunology and a director of two of the Network Centres for Excellence. Dr.
Dorrington earned his B.Sc., Ph.D., and D.Sc. from the University of Sheffield,
U.K. He is a member of the Audit Committee and Chairman of the Nominating
Committee of the Company's Board of Directors.
3
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF THE COMPANY
The following table sets forth certain information as to the Company's
common stock owned by management of the Company as of March 24, 2000 based upon
information supplied by the Company's directors and executive officers and by
beneficial owners of more than five percent (5%) of the Company's common stock
based solely upon filings made by such beneficial owners.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ------------------------ ----------------------- ----------------
<S> <C> <C>
Alison Taunton-Rigby Ph.D.(2)............................. 264,250 3.0%
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Jeffrey T. Beaver(3)...................................... 62,922 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Robert J. Carpenter(4).................................... 117,158 1.4%
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Keith J. Dorrington Ph.D.(5).............................. 15,000 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Elliott D. Hillback, Jr.(6)............................... 17,500 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Gerald A. Beltz, Ph.D.(7)................................. 71,723 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Deborah B. Grabbe(8)...................................... 74,095 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
James L. Warren(9)........................................ 60,200 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702
Charlotte A. Kensil....................................... 14,584 *
Aquila Biopharmaceuticals, Inc.
175 Crossing Boulevard
Framingham, MA 01702(11)
Directors and Executive................................... 697,432 7.7%
Officers as a Group(12)
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(10) PERCENT OF CLASS
- ------------------------ ----------------------- ----------------
<S> <C> <C>
State of Wisconsin Investment Board(13)................... 1,580,741 18.6%
State of Wisconsin
121 E. Wilson Street
Madison, Wisconsin 53707
Marcus Schloss & Co., Inc., Douglas....................... 656,515 7.7%
Schloss, and Richard P. Schloss(14)
One Whitehall Street
New York, NY 10004
</TABLE>
- ---------------
* Less than 1%
(1) Share ownership includes shares of common stock issuable on exercise of
certain outstanding options as described in the footnotes below.
(2) Includes 246,543 shares which Dr. Taunton-Rigby may acquire upon the
exercise of options.
(3) Includes 132 shares held as custodian for one daughter and 132 shares held
as custodian for another daughter. Mr. Beaver disclaims beneficial
ownership of the shares held as custodian for his daughters. Includes
52,181 shares which Mr. Beaver may acquire upon the exercise of options.
(4) Includes 5,000 shares which Mr. Carpenter may acquire upon the exercise of
options.
(5) Includes 15,000 shares which Dr. Dorrington may acquire upon the exercise
of options.
(6) Includes 17,500 shares which Mr. Hillback may acquire upon the exercise of
options.
(7) Includes 71,667 shares which Dr. Beltz may acquire upon the exercise of
options.
(8) Includes 70,000 shares which Ms. Grabbe may acquire upon the exercise of
options.
(9) Includes 57,500 shares which Mr. Warren may acquire upon the exercise of
options.
(10) Share ownership includes shares of common stock issuable on exercise of
certain outstanding options as described in the footnotes below.
(11) Includes 14,584 shares which Ms. Kensil may acquire upon the exercise of
options.
(12) See Footnotes Numbers 1-11.
(13) Based upon information contained in Schedule 13G filed with the Company on
February 4, 2000. The State of Wisconsin Investment Board subsequently
acquired 500,000 shares of common stock from the Company through a private
sale on March 22, 2000. The total of 1,580,741 reported in this table
represents the sum of the number of shares reported on the Form 13G on
February 4, 2000 and the number of shares sold to the State of Wisconsin
Investment Board on March 22, 2000.
(14) Based solely upon information contained in Schedule 13G filed with the
Company on February 10, 2000. Marcus Schloss & Co., Inc. owns 584, 515
shares of the Company's common stock. Douglas Schloss and Richard P.
Schloss may be deemed to control Marcus Schloss & Co., Inc. Douglas Schloss
and Richard P. Schloss each also control two private investment funds which
when combined own 72,000 shares of the Company's common stock.
Consequently, Douglas Schloss and Richard P. Schloss each may be deemed to
beneficially own 656,515 shares of the Company's common stock.
5
<PAGE> 8
BOARD OF DIRECTORS
The Board of Directors meets on a regularly scheduled basis and holds
special meetings as required. The Board met seven (7) times during 1999 and
acted by written consent one (1) time. The Board of Directors has assigned
certain responsibilities to the Audit Committee, the Compensation Committee and
the Nominating Committee, each of which was established by the Board of
Directors in October of 1996. No director of the Company attended fewer than 75%
of the total meetings of the Board and Committee meetings on which such Board
member served during this period.
The members of the Audit Committee are Mr. Hillback (chairman) and Dr.
Dorrington. The Audit Committee held one (1) meeting during 1999. The functions
of the Audit Committee include recommending to the full Board the appointment of
the independent public accountants for the Company, reviewing the scope and
results of the audits by the independent public accountants, and reviewing
internal reports on various aspects of corporate operations.
The members of the Compensation Committee are Mr. Carpenter (chairman) and
Mr. Hillback. The Compensation Committee held five (5) informal meetings during
1999 (acting by written consent vote), and administered the compensation plan
for the Company's officers.
The members of the Nominating Committee are Dr. Dorrington (chairman) and
Mr. Beaver. The Nominating Committee held no meetings during 1999. The functions
of the Nominating Committee include reviewing possible candidates for the Board
of Directors and recommending nomination of appropriate candidates by the Board.
Shareholders who wish to suggest qualified candidates for the Board of
Directors must do so in accordance with the provisions of the Company's By-Laws
by sending a notice to the Company's Secretary, together with certain
information with respect to such nominees, not less than 60 nor more than 150
days prior to the date of the Annual Meeting (unless less than 70 days' notice
of the Annual Meeting is given in which case notice must be given not later than
the close of business on the tenth day following the earlier of such public
disclosure or notice of such meeting).
TRANSACTIONS WITH SHAREHOLDER
On March 22, 2000, the Company sold 500,000 shares of its common stock
through a private placement to the State of Wisconsin Investment Board, which
currently owns more than five percent (5%) of the Company's common stock, at a
price of $6.0625 per share. In July 1999 the Company sold 666,667 shares of its
common stock through a private placement to the State of Wisconsin Investment
Board at a price of $2.25 per share.
6
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information as to the annual and
long-term compensation for services to the Company for the last three completed
fiscal years of the Company's Chief Executive Officer and the other four most
highly compensated executive officers of the Company as of December 31, 1999
(collectively the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- -----------------------
AWARDS
--------------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
BONUS ANNUAL STOCK OPTIONS/ ALL OTHER
SALARY EARNED COMPENSATION AWARD(S) SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- --------------------------- ---- -------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alison Taunton-Rigby..... 1999 $265,000 $119,250 60,000 $6,920(1)
President/CEO & 1998 255,000 45,000 60,000 3,880
Director 1997 244,650 61,500 35,000 6,885
Gerald A. Beltz.......... 1999 $182,000 61,000 40,000 $3,235(2)
Senior Vice President of 1998 175,000 32,000 40,000 3,415
Research & 1997 160,474 32,000 20,000 2,962
Development
Deborah B. Grabbe........ 1999 $148,000 45,000 30,000 $2,250(3)
Vice President of 1998 142,500 34,500 30,000 3,298
Manufacturing Operations 1997 137,442 34,500 20,000 2,259
James L. Warren(4)....... 1999 $172,000 52,000 30,000 $3,193(5)
Vice President of 1998 159,144 -- 80,000 1,877
Finance Chief Financial 1997 -- -- -- --
Officer and Treasurer
Charlotte A. Kensil...... 1999 $109,633 15,000 12,500 $1,906(6)
Vice President of
Research
</TABLE>
- ---------------
(1) Represents payment by the Company of $4,420 for term life insurance and
$2,500 for the company's contribution to Dr. Taunton-Rigby's 401(k) account.
(2) Represents payment by the Company of $735 for term life insurance and $2,500
for the Company's contribution to Dr. Beltz's 401(k) account.
(3) Represents payment by the Company of $604 for term life insurance and $1,646
for the Company's contribution to Ms. Grabbe's 401(k) account.
(4) Mr. Warren joined the Company on January 19, 1998.
(5) Represents payment by the Company of $695 for term life insurance and $2,498
for the Company's contribution to Mr. Warren's 401(k) account.
(6) Represents payment by the Company of $444 for term life insurance and $1,462
for the Company's contribution to Ms. Kensil's 401(k) account.
7
<PAGE> 10
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM
OPTION/SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH.) DATE 5% ($) 10% ($)
- ---- ----------- ---------------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Alison
Taunton-Rigby....... 60,000(1) 25% 1.813 9/23/2009 68,411.16 173,367.31
Gerald A. Beltz....... 40,000(1) 17% 1.813 9/23/2009 45,607.44 115,578.20
Deborah B. Grabbe..... 30,000(1) 13% 1.813 9/23/2009 34,205.58 86,683.65
James L. Warren....... 30,000(1) 13% 1.813 9/23/2009 34,205.58 86,683.65
Charlotte A. Kensil... 12,500(1) 5% 1.813 9/23/2009 14,252.32 36,118.19
</TABLE>
- ---------------
(1) Stock option exercisable with respect to 25% of the shares on September 23,
1999, with the stock option becoming exercisable as to the remaining 75% in
increments of 1/36 each month over the next 36 months.
FISCAL YEAR END OPTION/SAR VALUE TABLE
The following chart shows the number and value of unexercised options held
by each of the Named Executive Officers at the end of the Company's last fiscal
year. The value shown for each option is equal to the difference between the
exercise price of the option and the fair market value of the underlying stock
at fiscal year end. The Company has never awarded any stock appreciation rights
to any of its employees, and thus none are outstanding. None of the Named
Executive Officers exercised any options during the Company's last fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS
YEAR-END AT FISCAL YEAR-END
NAME (#) ($)
- ---- ------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C>
Alison Taunton-Rigby........................... 240,293/103,750 $10,538/$23,183
Gerald A. Beltz................................ 92,500/67,500 $7,025/$15,455
Deborah B. Grabbe.............................. 86,875/53,125 $5,269/$11,591
James L. Warren................................ 41,875/68,125 $5,269/$11,591
Charlotte A. Kensil............................ 13,281/16,719 $2,195/$4,830
</TABLE>
The Company has entered into employment contracts with several of its
officers as described below.
Dr. Taunton-Rigby, entered into an employment agreement with CBC dated
April 6, 1995, which has been assumed by the Company, which provides for an
annual base salary of $225,000, subject to increase from time to time at the
discretion of the Company. The term of the contract automatically extends for an
additional year on each anniversary date unless the Company gives a notice of
termination 90 days prior to the relevant anniversary date. Dr. Taunton-Rigby
also entered into an Employee Retention Agreement dated September 2, 1997,
pursuant to which, if Dr. Taunton-Rigby's employment is terminated within
twenty-four (24) months of a "change of control," unless such termination is by
the Company for "cause," by Dr. Taunton-Rigby other than for "good reason" or
due to her death or disability, she is entitled to a payment equal to three (3)
times her annual base salary as in effect prior to the change of control plus
the average annual bonus received by her during the three preceding years.
8
<PAGE> 11
Dr. Beltz, entered into an employment agreement with CBC dated August 21,
1995, which has been assumed by the Company, which provides for an initial
annual salary of $140,000, subject to review on an annual basis. Dr. Beltz's
employment under the agreement may be terminated any time after August 21, 1997
by either party without liability upon 180 days prior written notice. Dr. Beltz
also entered into an Employee Retention Agreement dated October 24, 1997,
pursuant to which, if Dr. Beltz's employment is terminated within twenty-four
(24) months of a "change of control," unless such termination is by the Company
for "cause," by Dr. Beltz other than for "good reason" or due to his death or
disability, he is entitled to a payment equal to two (2) times the sum of his
annual base salary as in effect prior to the change of control and the average
annual bonus received by him during the three preceding years.
Ms. Grabbe, entered into an employment agreement with CBC dated August 21,
1995, which has been assumed by the Company, which provides for an initial
annual salary of $130,000, subject to review on an annual basis. Ms. Grabbe's
employment under the agreement may be terminated at any time after August 21,
1997 by either party without liability upon 180 days prior written notice. Ms.
Grabbe also entered into an Employee Retention Agreement dated October 24, 1997,
pursuant to which, if Ms. Grabbe's employment is terminated within twenty-four
(24) months of a "change of control," unless such termination is by the Company
for "cause," by Ms. Grabbe other than for "good reason" or due to her death or
disability, she is entitled to a payment equal to her annual base salary as in
effect prior to the change of control plus the average annual bonus received by
her during the three preceding years.
Mr. Warren, entered into an employment agreement with the Company dated
January 17, 1998, which provides for an initial annual salary of $165,000
subject to review on an annual basis. Mr. Warren's employment under the
Agreement may be terminated by either party without liability upon 30 days prior
written notice. Mr. Warren also entered into an Employee Retention Agreement
dated January 17, 1998, pursuant to which, if Mr. Warren's employment is
terminated within twenty-four (24) months of a "change of control," unless such
termination is by the Company for "cause," by Mr. Warren other than for "good
reason" or due to his death or disability, he is entitled to a payment equal to
his annual base salary as in effect prior to the change of control plus the
average annual bonus received by him during the preceding three years.
9
<PAGE> 12
PERFORMANCE GRAPH
The following graph shows a comparison over a five-year period ending at
the end of the Company's last fiscal year of the cumulative total return to the
Company's shareholders with the cumulative total return of the NASDAQ Total
Return Index, the NASDAQ Pharmaceutical Index and the Biocentury 100 Index and
assumes an investment of $100 on October 24, 1996.
Previously, the Company had used the NASDAQ Pharmaceuticals Index as its
peer index. For the first time this year, the Company is now using the
Biocentury 100 Index as a peer index. Consequently, pursuant to Item 402 of
Regulation S-K, the Company is reporting both the NASDAQ Pharmaceutical Index
and the Biocentury 100 Index in addition to reporting the results for both the
NASDAQ Total Return Index and the Company itself.
The Company feels that the Biocentury 100 Index better represents the
Company's peers because the Biocentury 100 Index, unlike the NASDAQ
Pharmaceutical Index, consists solely of biotechnology companies. The Biocentury
100 Index is published by Biocentury and is made up of the one hundred (100)
largest biotech companies in the world on the basis of market capitalization.
[Performance Graph]
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET NASDAQ BIOCENTURY 100
AQUILA (US & FOREIGN) PHARMACEUTICALS --------------
BIOPHARMACEUTICALS, ------------------- STOCKS SIC 2830-2839
INC. US & FOREIGN
------------------- --------------------
<S> <C> <C> <C> <C>
12/31/1994 61.60 54.30 86.40
12/31/1995 86.10 99.60 98.80
12/31/1996 114.70 105.40 99.90 90.70
12/31/1997 98.50 128.70 103.20 71.90
12/31/1998 91.20 178.30 131.30 79.20
12/31/1999 55.90 334.60 244.30 153.30
</TABLE>
10
<PAGE> 13
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERALL POLICY
The Company's executive compensation program is designed to be closely
linked to corporate performance and return to shareholders by tying a
significant portion of executive compensation to the Company's success in
meeting specified annual performance goals. The overall objectives of this
strategy are to provide competitive salaries necessary to attract and retain the
highest quality talent, to reward performances that accomplish Company goals and
priorities, and to provide incentives that link the executive officers'
opportunities for financial reward with that of the shareholders.
The Compensation Committee is responsible for setting and administering the
policies that govern the compensation of the Company's executive officers.
Generally, the three principal components of the compensation program for
executive officers are base salary, bonus and equity-based incentives (typically
stock options), although awards are not necessarily granted in all three
categories every year. In reaching decisions on compensation, the Compensation
Committee also takes into account the full compensation package provided by the
Company to the officers, including savings plans, severance plans, insurance,
and benefits generally available to all employees of the Company.
This report addresses the Company's compensation policies as they relate to
compensation reported for 1999.
SALARY ADMINISTRATION
The ranges of appropriate base salaries are determined by analysis of
salary data on positions of comparable responsibility within the biotechnology
industry, as reported in the annual Radford Biotechnology Compensation Report by
Radford Associates/AON Consulting. Salaries of executive officers are reviewed
annually, and any adjustments are made by evaluating the performance of the
Company and of each executive officer and taking into account any change in the
executive's responsibilities. Exceptional performances are generally compensated
with performance-related bonuses and stock options rather than raising base
salaries, reflecting the Compensation Committee's increasing emphasis on tying
pay to performance criteria.
BONUS PROGRAM
Executives are eligible to receive bonuses based on the overall performance
of the Company and based on individual achievement. A number of specific goals
are established at the beginning of the year for each of the executive officers.
A target bonus as a percentage of compensation is also set for each of the
executive officers including the CEO. Bonuses are awarded based upon the
recommendation of the CEO and the Compensation Committee's evaluation of the
executive officer's achievement of his or her goals. For example, if an officer
had a target bonus of up to 25% of his compensation, he might be given a bonus
of 20% if he met most but not all of his goals. The Compensation Committee
awarded bonuses to executive officers, other than Dr. Taunton-Rigby, totaling in
the aggregate $173,000.
STOCK OPTION PROGRAM
Under the Company's 1996 Stock Award and Option Plan, the Company may grant
stock options, discounted stock options, restricted stock, deferred stock, and
stock appreciation rights to any or all of the Company's employees, officers,
and advisors and/or consultants. The Compensation Committee believes that
long-term incentive awards, such as stock options, link the executive's
opportunity for financial reward with that of the shareholders, in that the
value of an executive's stock options increases as the value of the
shareholders' shares increases. The Committee granted options to executive
officers in order to continue to incentivize the officers towards the
achievement of the Company's long term goals.
The Committee granted options for 112,500 shares of the Company's common
stock in the aggregate to the Named Executive Officers, other than Dr.
Taunton-Rigby. The options vested beginning in September of 1999.
11
<PAGE> 14
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Dr. Taunton-Rigby's 1999 base compensation is pursuant to an employment
contract negotiated with CBC in 1995 and assumed by the Company. The
Compensation Committee elected to increase Dr. Taunton-Rigby's base compensation
by approximately four percent (4%), consistent with the percentage increase
given to a majority of the employees of the Company, reflecting the Committee's
goal to reward performance mainly through a bonus award. The Committee's
determination of the amount of the bonus was made after a review of the
achievement of Dr. Taunton-Rigby's goals for the year. The Compensation
Committee granted Dr. Taunton-Rigby a bonus in the amount of $119,250. Under the
Company's 1996 Stock Award and Option Plan, the Board granted Dr. Taunton-Rigby
options for 60,000 shares of the Company's common stock, which options vested
beginning in September of 1999.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Robert J. Carpenter, Chairman
Elliott D. Hillback, Jr.
12
<PAGE> 15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent of the registered
class of the Company's equity securities (collectively, "Reporting Person") to
file with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of common stock of the Company.
Each Reporting Person is required by SEC regulation to furnish the Company with
copies of such Section 16(a) reports. To the Company's knowledge, based solely
upon review of the copies of such reports furnished to the Company and written
representations that no other reports are required during the fiscal year ended
December 31, 1999, no Reporting Person has failed to file on a timely basis any
report required by Section 16(a) of the Exchange Act.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives fees of
$2,000.00 ($2,500.00 for the chairman of the Board) for each Board meeting
attended in person by such director; $1,000.00 for each standing committee
meeting, held on a day other than a day on which a meeting of the Board is held,
attended by such director in person; and $500.00 for each Board and committee
meeting attended by telephone provided such committee meeting is not held on the
same day as a Board meeting. Under provisions of the Company's 1996 Directors'
Stock Award and Option Plan, each non-employee director is awarded an option to
purchase 2,500 shares of the Company's common stock on the first trading day of
July of each year.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected PriceWaterhouseCoopers, L.L.P., independent
certified public accountants, as auditors of the Company for fiscal year ending
December 31, 1999. Coopers & Lybrand L.L.P. (predecessor to
PriceWaterhouseCoopers, L.L.P.) served as auditors during 1995, 1996, 1997 and
1998. A representative of PriceWaterhouseCoopers, L.L.P. is expected to be
present at the Annual Meeting to be available to respond to appropriate
questions and to have the opportunity to make a statement if such representative
desires to do so.
SHAREHOLDER PROPOSALS
In order for any proposal that a shareholder intends to present at the next
annual meeting of shareholders to be eligible for inclusion in the Company's
proxy material for that meeting, it must be received by the Secretary of the
Company at the Company's offices in Framingham, Massachusetts by December 9,
2000. Any shareholder proposal to be considered at the 2000 Annual Meeting of
the Company's shareholders must be received by the Company at least 60 days
prior to the scheduled date of the Annual Meeting in order to be considered
timely under Rule 14a-4(c).
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
Date: April 20, 2000
By order of the Board of Directors
JANE V. HAWKES, Secretary
13
<PAGE> 16
PROXY AQUILA BIOPHARMACEUTICALS, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, MAY 31, 2000.
The undersigned shareholder of AQUILA BIOPHARMACEUTICALS, INC. (the
"Company"), revoking all previous proxies, hereby constitutes and appoints
ALISON TAUNTON-RIGBY and JANE V. HAWKES, or either of them, attorneys and
proxies of the undersigned with full power of substitution for and in the name
of the undersigned to vote all shares of stock of the Company which the
undersigned may be entitled to vote at the annual meeting of the shareholders of
the Company to be held at the offices of the Company, 175 Crossing Boulevard,
Framingham, Massachusetts 01702, on Wednesday, May 31, 2000 at 10:00 a.m. or any
adjournment thereof, with all powers which the undersigned would possess if
personally present.
The proxies appointed hereby are instructed to vote in the manner
indicated on the following matter, as set forth in the notice of meeting and in
the Proxy Statement dated April 20, 2000, receipt of which is hereby
acknowledged.
This proxy when properly executed will be voted in accordance with the
specifications indicated by the undersigned shareholder.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.
WHERE NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS.
Proposal
- --------
Elect two Class II directors to hold office until the annual meeting of
shareholders in 2003.
Robert J. Carpenter
FOR [ ] WITHHELD [ ] ABSTAIN [ ]
Alison Taunton-Rigby
FOR [ ] WITHHELD [ ] ABSTAIN [ ]
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment thereof.
MARK HERE FOR ADDRESS CHANGE [ ]
NEW ADDRESS: __________________________
__________________________
__________________________
__________________________
__________________________
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature ______________________ Date _________________
Signature ______________________ Date _________________
