<PAGE>
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
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MOLECULAR BIOSYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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>
[MBI LOGO]
MOLECULAR BIOSYSTEMS, INC.
10030 Barnes Canyon Road
San Diego, California 92121
NOTICE OF
1995 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 7, 1995
Dear Shareholder:
You are cordially invited to attend the 1995 Annual Meeting of Shareholders
of Molecular Biosystems, Inc. (the "Company"), which will be held on September
7, 1995, at 2:00 p.m. PDT at the Sheraton Grande Torrey Pines, 10950 North
Torrey Pines Road, La Jolla, CA 92037, for the following purposes:
1. ELECTION OF DIRECTORS. To elect a Board of Directors to serve for the
ensuing year.
2. RETENTION OF INDEPENDENT PUBLIC ACCOUNTANTS. To ratify the appointment of
Arthur Andersen LLP as the Company's independent public accountants for
the ensuing year.
3. OTHER BUSINESS. To transact any other business that properly comes before
the meeting or any adjournment thereof.
Only shareholders of record at the close of business on July 17, 1995 are
entitled to notice of and to vote at the Annual Meeting and any adjournment.
Your proxy is enclosed. Whether or not you plan to attend the Annual Meeting
in person, PLEASE PROMPTLY COMPLETE, SIGN AND RETURN THE ENCLOSED MANAGEMENT
PROXY IN THE ENCLOSED RETURN ENVELOPE. If you do attend the Annual Meeting and
you have already submitted your proxy, you may still vote personally on each
matter brought before the meeting. Thank you.
For the Board of Directors,
/s/ Kenneth J. Widder
Kenneth J. Widder, M.D.
Chairman of the Board
Dated: June 28, 1995
San Diego, California
<PAGE>
MOLECULAR BIOSYSTEMS, INC.
10030 Barnes Canyon Road
San Diego, California 92121
PROXY STATEMENT FOR
1995 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 7, 1995
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Molecular Biosystems, Inc. (the "Company")
for use at the 1995 Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on Thursday, September 7, 1995 at 2:00 p.m. PDT at the
Sheraton Grande Torrey Pines, 10950 North Torrey Pines Road, La Jolla,
California 92037, and at all adjournments of the meeting.
This Proxy Statement and the accompanying notice and proxy are being mailed
to shareholders on or about July 18, 1995.
The Company's 1995 Annual Report, including financial statements for the
year ended March 31, 1995, is being mailed to all shareholders concurrently with
this Proxy Statement. Shareholders are referred to the 1995 Annual Report for
financial and other information about the Company, but the report is not
incorporated in this Proxy Statement and is not a part of the proxy soliciting
material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH
31, 1995, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE TO EACH
SHAREHOLDER WITHOUT CHARGE ON WRITTEN REQUEST TO KENNETH J. WIDDER, CHAIRMAN OF
THE BOARD AND CHIEF EXECUTIVE OFFICER OF THE COMPANY, AT 10030 BARNES CANYON
ROAD, SAN DIEGO, CALIFORNIA 92121.
REVOCABILITY OF PROXIES
A proxy for use in connection with the Annual Meeting is enclosed. Any
shareholder who signs and delivers a proxy has the right to revoke it, at any
time before it is exercised, by filing a signed revocation with the Secretary of
the Company or by filing a duly signed proxy bearing a later date. In addition,
the powers of the proxyholders will be revoked if the person signing the proxy
is present at the Annual Meeting and elects to vote in person. Subject to these
rights of revocation, all shares represented by a properly signed proxy received
in time for the Annual Meeting will be voted by the proxyholders in accordance
with the instructions on the proxy. IF NO INSTRUCTION IS SPECIFIED WITH REGARD
TO A MATTER TO BE ACTED UPON, THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
SHARES OUTSTANDING AND VOTING RIGHTS
There were approximately 12,171,975 shares of the Company's Common Stock
outstanding on July 17, 1995, which has been fixed as the record date for the
purpose of determining the shareholders entitled to notice of and to vote at the
Annual Meeting. Each holder of shares of the Company's Common Stock will be
entitled to one vote, in person or by proxy, for each share of Common Stock held
of record as of the record date, on any matter submitted to a vote of the
shareholders at the Annual Meeting.
One-half of the outstanding shares of the Company's Common Stock,
represented in person or by proxy, will constitute a quorum at the Annual
Meeting. Shares with respect to which authority to vote is withheld,
- 1 -
<PAGE>
abstentions and shares held of record by a broker or its nominee ("broker
shares") that are voted on any matter will be included in determining the shares
present. Broker shares that are not voted on any matter will not be included in
determining the shares present. The election of each director and the approval
of any other matter submitted to a vote of the shareholders requires the
affirmative vote of a majority of the shares voting. Shares with respect to
which authority is withheld, abstentions and broker shares that are not voted
will not be included in determining the number of shares voting on the election
of directors or any other matter submitted to a vote of the shareholders.
ITEM ONE
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of five members.
There were six members until May 1995, when Vincent A. Frank, the Company's
President, resigned as an officer and director of the Company in order to
concentrate on his continuing medical treatment for a brain tumor. The Company
is actively recruiting a replacement for Mr. Frank and anticipates that the
sixth position on the Board will be held open until a new president is hired.
Five directors are to be elected at the Annual Meeting, each of whom
is to serve until the next Annual Meeting. The five nominees for election are
now serving as directors, and the proxyholders named in the accompanying proxy
will vote the shares represented by the proxy FOR the five nominees unless
authority to vote has been withheld on the proxy returned by the shareholder.
Directors are elected by a majority of the shares voting.
There is set forth below for each of the five nominees for election as
a director his principal occupation, age, the year that he became a director of
the Company and additional biographical data:
KENNETH J. WIDDER, M.D., 42
Chairman of the Board and Chief Executive Officer,
and a Member of the Executive Committee
Kenneth J. Widder, M.D., one of the Company's founders, has served as
a member of the Company's Board of Directors since the Company's formation in
April 1980. After receiving his medical degree from Northwestern University
Medical School in 1979, he was a resident in pathology at Duke University
Medical Center in Durham, North Carolina. Since July 1981, he has been the
Company's Chairman of the Board and Chief Executive Officer. Dr. Widder also
currently serves on the Board of Directors of Wilshire Technologies, Inc.
ROBERT W. BRIGHTFELT, 52
Business Director, Diagnostics
Medical Products
E. I. du Pont de Nemours and Company
Robert W. Brightfelt was elected to the Company's Board of Directors
in October 1987. Mr. Brightfelt received his B.S. and M.S. degrees in
mechanical engineering from the University of Nebraska in 1965 and 1967,
respectively, and his M.B.A. from the University of Georgia in 1970. He joined
E.I. du Pont de Nemours and Company in 1967 and has held various management
positions in Du Pont's Medical Products Department, including Manager - Product
Management and Strategic Planning, Development Manager, and Marketing Manager.
Mr. Brightfelt currently serves as Business Director, Diagnostics of Du Pont's
Medical Products Group.
CHARLES C. EDWARDS, M.D., 71
Charles C. Edwards was elected to the Company's Board of Directors in
March 1987. He earned his medical degree from the University of Colorado in
1948, and received his surgical training at the Mayo Clinic in Rochester,
Minnesota. Following several years of private practice in surgery, he joined
the management and
- 2 -
<PAGE>
consulting firm of Booz, Allen & Hamilton as Vice President and Managing Officer
of Health and Related Affairs. In 1969 he was appointed by President Nixon as
Commissioner of the United States Food and Drug Administration, and in 1973 he
was appointed Assistant Secretary for Health in the United States Department of
Health, Education and Welfare. In 1975 Dr. Edwards joined the Becton-Dickinson
Company as Senior Vice President and Director, and in 1977, he assumed the
position of President and Chief Executive Officer at Scripps Clinic and Research
Foundation. In 1991 he assumed to the position of President and Chief Executive
Officer at Scripps Institutes of Medicine and Science, from which he retired in
July 1993. Dr. Edwards currently serves as a director of Bergen Brunswig
Corporation and as a director of Northern Trust of California. In addition, Dr.
Edwards serves on the Board of Trustees of IDEC Pharmaceutical Corporation.
GORDON C. LUCE, 69
Gordon C. Luce was elected to the Company's Board of Directors in June
1989. Mr. Luce joined Great American First Savings Bank in San Diego,
California in 1969 as its President and Chief Executive Officer and was elected
Chairman of the Board in 1979. During 1982, he was an Alternate Delegate to the
United Nations and has served as member of three Presidential commissions. Mr.
Luce retired from his position as Chairman of the Board of Great American Bank
in July 1990. He is a past Chairman of Scripps Clinic and Research Foundation
and is a Director of the Scripps Institutions of Medicine and Science, Scripps
Health and the Scripps Research Institute. He is also currently serving as a
director of two other publicly held companies, PS Group and All American
Communications, Inc.
DAVID RUBINFIEN, 73
David Rubinfien was elected to the Company's Board of Directors in
December 1985. Mr. Rubinfien served as President and Chief Executive Officer of
Systemix, Inc. from January 1989 until January 1991. From 1985 to 1988 Mr.
Rubinfien was Chairman and Chief Executive Officer of Microgenics Corporation in
Concord, California. From 1973 to 1984, he served in several key positions at
Syntex Corporation in Palo Alto, California, including Vice President - New
Technologies, President - Syntex Diagnostics Division, President - Syva Company,
and Chairman of the Board of Oncogen, a partnership with Bristol-Myers and
Genetic Systems in Seattle, Washington. Mr. Rubinfien also currently serves as
a director of three other publicly held companies: ChemTrak, Inc., Biocircuits
Corporation and Matritech, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has standing Executive, Audit,
Compensation and Officer Options Committees. It does not have a standing nomi-
nating committee.
The Executive Committee, which was composed of Dr. Widder and Mr.
Frank until May 1995 when Mr. Frank resigned and of which Dr. Widder is now the
sole member, generally possesses the same powers as the full Board of Directors
to manage the affairs of the Company, but may not amend the Company's
certificate of incorporation or by-laws or make recommendations to the
shareholders with respect to the merger, consolidation or dissolution of the
Company or the sale of all or substantially all of the Company's assets.
The Audit Committee, composed of Messrs. Brightfelt, Luce and
Rubinfien, reviews the scope and results of the independent public accountants'
engagement, the Company's internal accounting controls and other pertinent
auditing and internal control matters.
The Compensation Committee, composed of Messrs. Brightfelt and
Rubinfien and Dr. Edwards, reviews and recommends to the Board of Directors the
compensation levels of the Company's executive officers. In addition, the
Compensation Committee reviews the procedures involved in setting management
compensation and employee benefits.
The Officer Options Committee, composed of the members of the
Compensation Committee, administers the Company's stock option plans as they
relate to executive officers of the Company.
- 3 -
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Compensation Committee interlocks, and there is no
insider participation requiring disclosure.
MEETINGS
During the fiscal year ended March 31, 1995, the Board of Directors
held four meetings. The Executive Committee met formally sixteen times during
the year and met informally on a number of additional occasions. The Audit
Committee met once during the year and the Compensation and Officer Options
Committees each met twice during the year. Dr. Widder and Messrs. Brightfelt,
Luce and Rubinfien each attended all four meetings of the Board; Dr. Edwards
attended three meetings and Mr. Frank attended two meetings. All of the
respective members of the Executive, Audit, Compensation and Officer Options
Committees attended each of the meetings of those committees during the year.
DIRECTORS' COMPENSATION
Directors receive $1,000 for each meeting of the Board that they
attend for their services as directors, and are also reimbursed for their
expenses in attending meetings of the Board. Under the Company's 1993 Outside
Directors Stock Option Plan, each director who is not an officer and who is not
serving as a director pursuant to a contractual arrangement between his employer
and the Company (an "outside director") is also granted an option for 5,000
shares of the Company's Common Stock at its closing price on the New York Stock
Exchange on the last business day in March of each year.
STOCK OWNERSHIP
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of each person (other than directors and executive officers
of the Company) known to the Company to own more than 5% of the Company's
outstanding Common Stock as of July 17, 1995:
<TABLE>
<CAPTION>
Shares of Percent of
Name and Address of Common Stock Outstanding
Beneficial Owner Beneficially Owned Common Stock
------------------- ------------------ -------------
<S> <C> <C>
State of Wisconsin Investment Board 1,197,000 9.83%
P.O. Box 7842
Madison, WI 53707
</TABLE>
- 4 -
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the
shares of the Company's Common Stock beneficially owned as of July 17, 1995 by
(i) each director and nominee for director, (ii) each executive officer and
former executive officer named in the Summary Compensation Table on page 6 and
(iii) all of the directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Shares of Percent of
Common Stock Outstanding
Name Beneficially Owned (1)(2) Common Stock (3)
- ----------------------- -------------------------- -----------------
<S> <C> <C>
Kenneth J. Widder, M.D. 626,565 5.08%
Vincent A. Frank 483,743 3.92%
Robert W. Brightfelt 18,750 *
Charles C. Edwards, M.D. 18,750 *
Gordon C. Luce 19,250 *
David Rubinfien 28,750 *
James L. Barnhart, Ph.D. 60,296 *
Steven Lawson 45,250 *
Richard M. Stern 48,022 *
All directors and executive officers
as a group (12 persons) 1,406,751 11.03%
_______________________________
<FN>
* Represents less than 1% of the Company's outstanding Common Stock.
(1) Each person named, with the exception of Dr. Barnhart, has voting and
investment power over the shares listed, and these powers are exercised
solely by the person named or shared with a spouse. Dr. Barnhart's shares
include (a) 913 shares held in a trust established by his mother-in-law
for the benefit of his wife and daughter and (b) 619 shares held in his
wife's IRA, of which he disclaims beneficial ownership.
(2) The shares listed for each person named or the group include shares of the
Company's Common Stock subject to stock options exercisable on or within 60
days after July 17, 1995. These shares are as follows: Dr. Widder,
166,250 shares; Mr. Frank, 166,250 shares; Mr. Brightfelt, 18,750 shares;
Dr. Edwards, 18,750 shares; Mr. Luce, 18,750 shares; Mr. Rubinfien, 18,750
shares; Dr. Barnhart, 44,500 shares; Mr. Lawson, 42,500 shares; Mr. Stern,
32,500 shares; and the group of all directors and executive officers,
584,375 shares.
(3) The percentage for each person named or the group has been determined by
including in the number of shares of the Company's outstanding Common Stock
the number of shares subject to stock options exercisable by that person or
group on or within 60 days after July 17, 1995.
</TABLE>
- 5 -
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company
during the fiscal years ended March 31, 1995, 1994 and 1993 to (i) the Chief
Executive Officer and (ii) each of the other four most highly compensated
executive officers of the Company during the year ended March 31, 1995 (the
"named executive officers"):
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------- ------------
Other
Year Annual Securities All
Name and Principal Ended Compen- Underlying Other
Position March 31, Salary ($) Bonus ($) sation ($) Options (#) Compensation ($)
- ---------------------- --------- ---------- --------- ---------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Widder, M.D. 1995 $239,846 $590,000(1) $ - 60,000 $ 634,632(1)
Chairman of the Board, 1994 $225,577 $ - $ - 70,000 $ -
Chief Executive Officer, 1993 $215,000 $ 20,000 $ - 50,000 $ -
and Member of the
Executive Committee
Vincent A. Frank 1995 $234,846 $590,000(1) $ - - $ 684,324(1)
Former President and 1994 $220,673 $ - $ - 70,000 $ -
Chief Operating Officer, 1993 $210,000 $ 20,000 $ - 50,000 $ -
Secretary and Member of
the Executive Committee
James L. Barnhart, Ph.D. 1995 $119,127 $ 24,960(1) $ - 58,000 $ -
Vice President - Research 1994 $101,019 $ - $ - 30,000 $ -
and Development and Chief 1993 $ 90,000 $ 10,000 $ - 10,000 $ -
Operating Officer
Steven Lawson 1995 $129,415 $ 18,648(1) $ - 20,000 $ -
Vice President - Legal 1994 $121,615 $ - $ - 40,000 $ -
Affairs and General Counsel 1993 $114,000 $ 12,500 $ - 35,000 $ -
Richard M. Stern 1995 $113,939 $ 18,240(1) $ - 5,000 $ -
Vice President - Marketing 1994 $107,885 $ - $ - 26,000 $ -
1993 $102,000 $ 7,500 $ - 5,000 $ -
<FN>
(1) In January 1995, following and attributable to receipt by the Company
of FDA approval to market ALBUNEX-Registered Trademark-, the Company received
a bonus payment of $3.1 million (the "Approval Bonus") from
Mallinckrodt Medical, Inc. ("Mallinckrodt"). Pursuant to the
Distribution Agreement dated December 7, 1988 between Mallinckrodt and
the Company, the Approval Bonus was to be distributed to "key
employees" of the Company. In February 1995, the Company's Board of
Directors approved the payment of $1.8 million of the Approval Bonus
to the Company's employees. Also, as part of the allocation of the
Approval Bonus to key employees, the Board of Directors approved the
forgiveness of two loans (including accrued interest) which the
Company had previously extended to its chief executive and chief
operating officers to permit them to exercise certain stock options.
The total loan amount forgiven on the notes is shown above under "All
Other Compensation".
</TABLE>
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The Company granted stock options under the Company's 1993 Stock
Option Plan in February 1995, in respect of performance during the fiscal year
ended March 31, 1995. The following table sets forth each grant of stock
options made during the fiscal year ended March 31, 1995 to each of the named
executive officers:
<TABLE>
<CAPTION>
Individual Grants (1)(2)
---------------------------------------------------------- Potential Realizable Value
at Assumed Annual
Number of % of Total Exercise Rates of Stock Price
Securities Options Granted Price Appreciation for Option Term
Underlying to Employees Per Expiration ----------------------------
Name Options (#) in Fiscal Year Share Date 5% ($) 10% ($)
- ---- ----------- -------------- ----- ---- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Widder, M.D. 60,000 (1) 12.7% $ 7.625 2/27/05 $ 287,719 $ 729,137
James L. Barnhart, Ph.D 50,000 (1) 10.6% $ 7.625 2/27/05 $ 239,766 $ 607,614
8,000 (2) 1.7% 10.875 6/27/04 54,714 138,656
Steven Lawson 20,000 (1) 4.2% $ 7.625 2/27/05 $ 95,906 $ 243,046
Richard M. Stern 5,000 (1) 1.1% $ 7.625 2/27/05 $ 23,977 $ 60,761
<FN>
(1) These options were granted on February 28, 1995 under the Company's 1993
Stock Option Plan, in respect of performance for the fiscal year ended
March 31, 1995. The options granted to Drs. Widder and Barnhart and Mr.
Lawson vest in four equal installments beginning on the first anniversary
of the date of grant; the 5,000 options granted to Mr. Stern vest in three
annual installments of 1,250, 1,500 and 2,250 shares, respectively, on the
first three anniversaries of the date of grant. Each option holder has the
right to pay the exercise price by delivering shares of Common Stock that
the holder previously acquired, and to have the Company withhold, from
shares otherwise issuable upon the exercise of the option, sufficient
shares to satisfy the Company's withholding liability in connection with
the exercise. Each option generally may be exercised only when vested and
while the holder is an employee of the Company or within 90 days following
the termination of his or her employment. In the discretion of the Officer
Options Committee, which administers the 1993 Stock Option Plan as it
relates to the Company's executive officers, this 90-day period may be
extended in the case of nonstatutory stock options to any date ending on or
before the applicable expiration date of the option. No option may be
transferred except by will or applicable intestacy laws.
(2) These options were granted on June 28, 1994 under the Company's 1993 Stock
Option Plan, in respect of Dr. Barnhart's promotion to Chief Operating
Officer. The options vest in four equal installments beginning on the
first anniversary of the date of grant. All other terms of the options are
similar to those described in note (1) above.
(3) The dollar amounts presented in these columns are the result of
calculations at the 5% and 10% annual rates of stock appreciation
prescribed by the Securities and Exchange Commission and are not intended
to forecast possible future appreciation, if any, of the Company's stock
price. No gain to the optionees is possible without an increase in the
price of the Company's stock, which will benefit all stockholders
commensurately. For options granted on February 28, 1995 (see note (1)),
assuming 5% and 10% compounded annual appreciation of the stock price over
the term of the options, the price of a share of Common Stock would be
$12.42 and $19.78, respectively, on February 27, 2005. For options granted
on June 28, 1994 (see note (2)), assuming 5% and 10% compounded annual
appreciation of the stock price over the term of the options, the price of
a share of Common Stock would be $17.71 and $28.21, respectively, on June
27, 2004. The share price of the Company's Common Stock on March 31, 1995
was $8.13.
</TABLE>
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth, for each of the named executive
officers, the shares acquired and the value realized on each exercise of stock
options during the fiscal year ended March 31, 1995 and the fiscal year-end
number and value of unexercised options:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at 3/31/95 (#) Options at 3/31/95 ($)(1)
Acquired on Value (1) -------------------------- --------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Widder, M.D. - - 150,000 115,000 $ - $30,000
Vincent A. Frank - - 150,000 55,000 - -
James L. Barnhart, Ph.D. - - 35,250 87,750 - 25,000
Steven Lawson - - 27,750 67,250 - 10,000
Richard M. Stern - - 28,750 19,250 - 2,500
<FN>
(1) Based on the $8.13 per share closing price of the Company's Common Stock
on March 31, 1995.
</TABLE>
______________
On May 11, 1995, the Board of Directors voted to offer the Company's
non-executive employees the opportunity to reprice certain stock options to the
closing price on May 31, 1995. The Board approved this repricing because it
believes retaining key employees is in the best interests of the stockholders of
the Company. Officers and Directors of the Company were not eligible for the
repricing.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has employment contracts with all of its executive
officers. Under these contracts and as of April 1, 1995, Dr. Widder is paid an
annual salary of $240,000; Dr. Barnhart is paid an annual salary of $130,000;
Mr. Lawson is paid an annual salary of $129,500; and Mr. Stern is paid an annual
salary of $114,000. The Company's employment contracts with its executive
officers except Dr. Widder are of indefinite duration, subject, however, to
termination in certain events.
On May 5, 1995, the Company entered into a new employment agreement
with Dr. Widder, replacing his prior agreement. Dr. Widder's new employment
agreement is for a six-year term, with an automatic renewal for successive one-
year terms. The agreement is divided into two periods, the "CEO period," which
runs from the start of the agreement until the earlier of March 31, 1998, or the
appointment of a new chief executive officer of the Company by its Board of
Directors, and the "advisor period," which beings immediately following the CEO
period and continues through March 31, 2001. Dr. Widder's employment agreement
may be terminated by the Company or Dr. Widder at any time prior to its
expiration. If the agreement is terminated by the Company at any time, or if
the agreement is terminated by Dr. Widder during the CEO period following a
change in control or at any time during the advisor period, Dr. Widder will be
entitled to a termination payment equal to three times the greater of $240,000
or his salary at the time of the agreement's termination. If Dr. Widder
terminates his employment agreement during the CEO period prior to a change in
control, Dr. Widder will not be entitled to a termination payment. Dr. Widder's
entitlement to a termination payment is subject to forfeiture if he engages in
competition with the Company. Under the employment agreement, Dr. Widder's
stock options become immediately exercisable (i) upon the expiration of the CEO
period or (ii) if the Company terminates the agreement during the CEO period or
if Dr. Widder terminates the agreement during the CEO period following a change
in control.
- 8 -
<PAGE>
Following Mr. Frank's resignation, the Company's Board of Directors
passed a resolution to supplement, as necessary, Mr. Frank's insurance-funded
long term disability income in an amount equal to the difference between Mr.
Frank's after-tax income from the Company prior to his disability and his long-
term disability income. The term of this arrangement is at the continuing
discretion of the Board of Directors. Currently, the level of Mr. Frank's
disability income requires no supplemental payments to be made by the Company.
Under the Company's respective employment contracts with Dr. Barnhart
and Messrs. Lawson and Stern, the Company is required to give one year's notice
in the event that it elects to terminate the contract unilaterally following a
change in control of the Company. In such an event, the Company's failure to do
so entitles the terminated employee to the payment of one year's salary.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is determined
generally by the Compensation Committee of the Company's Board of Directors.
All of the members of the Compensation Committee are outside directors of the
Company.
Decisions of the Compensation Committee relating to the base salaries and
cash bonuses of the Company's executive officers are reviewed by the full Board;
decisions of the Compensation Committee relating to the grant of stock options
to the Company's executive offices are not subject to the Board's review.
EXECUTIVE COMPENSATION POLICIES
The Company's executive compensation policies seek to coordinate
compensation with the Company's product development goals, performance
objectives and business strategy. These policies are intended to (i) attract,
motivate and retain executive officers whose contributions are critical to the
Company's long-term success and (ii) to reward executive officers for attaining
individual and corporate objectives which enhance shareholder value.
The Company's compensation program for executive officers consists of cash
compensation and long-term compensation. Cash compensation is paid in the form
of a base salary and a discretionary cash bonus, and long-term compensation is
paid in the form of stock options. Bonuses are intended to provide executive
officers with an opportunity to receive additional cash compensation, but only
if they earn it through individual and Company performance. Stock options are
intended to focus executive officers on managing the Company from the
perspective of an owner with an equity interest and to align their long-term
compensation with the benefits realized by the Company's shareholders.
LIMITS FOR TAX DEDUCTIBLE COMPENSATION. Section 162(m) of the Internal
Revenue Code provides that, in general, no deduction will be allowed to a
corporation for compensation paid to its chief executive officer and four
highest-paid executive officers to the extent that the amount paid for any
taxable year in respect to each officer exceeds $1,000,000.
The Company's policy is to maintain the federal income tax deduction for
executive officer compensation to the extent possible. However, notwithstanding
this general policy, the Company retains the authority to authorize other
payments which may not be deductible if the Company determines that the payments
are in the best interests of the Company and its shareholders.
SALARIES. The Compensation Committee determines the salaries of executive
officers on the basis of: (i) the individual executive officer's scope of
responsibilities and level of experience; (ii) the rate of inflation; (iii) the
range of the Company's merit increases for its employees generally; and (iv) the
salaries paid to comparable officers in comparable companies. The Compensation
Committee has not commissioned a formal survey of executive officer compensation
at comparable companies, but has relied on published salary surveys for general
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<PAGE>
indications of salary trends and informal surveys by the Company of other
biomedical and biotechnology companies of roughly similar size.
For fiscal year 1996 (beginning April 1, 1995), the Company did not
increase the salaries of any of its executive officers.
CASH BONUSES. During fiscal year 1995, the Company achieved the final
milestone under its Distribution Agreement dated December 7, 1988, with
Mallinckrodt Medical Inc.: approval by the U.S. Food and Drug Administration of
ALBUNEX-Registered Trademark- for commercial sale in the United States. The
Company's achievement of this milestone entitled the Company to a payment of
approximately $3.1 million (the "Mallinckrodt Bonus Amount"), which, under
the terms of the distribution agreement, was designated for payment to MBI's
key employees who had contributed toward the achievement of the final
milestone and certain earlier milestones, the achievement of which had caused
interest on portions of the Mallinckrodt Bonus Amount to begin accruing.
The Compensation Committee approved payment from the Mallinckrodt Bonus
Amount of cash bonuses to Dr. Widder and Mr. Frank of $590,000 each in
recognition of the very substantial roles that they played in leading the
Company's development and commercialization of ALBUNEX-Registered Trademark-.
The Committee also approved payment from the Mallinckrodt Bonus Amount of cash
bonuses in the aggregate amount of $575,579 to all employees of the Company
(including executive officers other than Dr. Widder and Mr. Frank) on the basis
of a formula pursuant to which each employee's bonus was the product determined
by multiplying (i) the employee's base salary by (ii) the employee's eligibility
percentage, ranging from 6% for non-exempt hourly employees to 16% for executive
officers, by (iii) the employee's "vesting" percentage, ranging from 25% for
less than one year's service to 100% for more than three years' service, by (iv)
the employee's performance rating, using the employee's most recent performance
review. Applying this formula, Dr. Barnhart received a cash bonus of $24,960
and Messrs. Lawson and Stern received cash bonuses of $18,648 and $18,240,
respectively.
STOCK OPTIONS. Stock option grants are based on a number of criteria.
These criteria consist of (i) the individual executive officer's performance,
initiative and contribution to the Company's success and criteria relating to
the Company's overall success; (ii) the Company's progress in commercializing
its products and in particular its principal product, ALBUNEX-Registered
Trademark-; (iii) the Company's financial performance, as measured by
earnings per share and the market price of the Company's Common Stock;
(iv) the Company's success in adding products to its product development
portfolio; (v) the Company's progress in developing its organization
infrastructure; and (vi) the Company's success in achieving its other
performance objectives. In general, criterion (i) is assigned a weight
of approximately 20%, criterion (ii) is assigned a weight of approximately
40%, and criteria (iii), (iv), (v) and (vi) are each assigned weights of
approximately 10%.
On the basis of these criteria, the Compensation Committee determined that
Drs. Widder and Barnhart and Messrs. Lawson and Stern should receive stock
options for fiscal year 1995 and that Drs. Widder and Barnhart should receive an
increase in the number of stock options that they were granted for fiscal year
1995 over the number of stock options that they were granted for fiscal year
1994. The stock option granted ranged in size from 5,000 shares to 60,000
shares with the average grant being 37,750 shares.
OTHER COMPENSATION. In additional recognition of the very substantial
roles which Dr. Widder and Mr. Frank played in the development and
commercialization of ALBUNEX-Registered Trademark-, the Compensation Committee
recommended to the Company's Board of Directors, which approved the Committee's
recommendation, that the Company forgive the repayment of loans to Dr. Widder
and Mr. Frank which the Company had made to permit them to exercise certain
stock options that were due to lapse at a time when the Company imposed a
prohibition on the sale of its stock by its executive officers. The Company
forgave $634,632 (including accrued interest) owed by Dr. Widder and $684,324
(including accrued interest) owed by Mr. Frank. In regard to this loan
forgiveness, the Compensation Committee recommended to the Board of Directors,
and the Board agreed, that the forgiveness should be treated as having been paid
from the Mallinckrodt Bonus Amount.
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<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee determined the compensation of the Company's
Chairman and Chief Executive Officer, Kenneth J. Widder, M.D., on the basis of
the criteria applicable to the Company's executive officers generally, but in
connection with the allocation of the Mallinckrodt Bonus Amount, the Committee
took into account the very substantial role that Dr. Widder played in the
commercialization and development of ALBUNEX-Registered Trademark-.
As previously described, for fiscal year 1995, Dr. Widder was awarded a
cash bonus (from the Mallinckrodt Bonus Amount) of $590,000 and granted a stock
option for 60,000 shares of the Company's Common Stock. In addition (and also
from the Mallinckrodt Bonus Amount), the Compensation Committee approved the
Company's forgiveness of a loan of $634,632 (including accrued interest) which
the Company had previously made to Dr. Widder to permit him to exercise certain
stock options at a time when he was not permitted to sell any shares of the
Company's common stock.
For fiscal year 1996 (beginning April 1, 1995), the Compensation Committee
continued Dr. Widder's salary at $240,000 per year. The decision not to
increase Dr. Widder's salary was based on (i) the lack of salary increase for
the Company's executive officers, (ii) the portion of the Mallinckrodt Bonus
Amount allocated to Dr. Widder both in a cash bonus and loan forgiveness and
(iii) the Company's decision to enter into a new employment agreement with Dr.
Widder, which provides him with enhanced severance benefits, among other things.
Compensation Committee
Robert W. Brightfelt
Charles C. Edwards, M.D.
David Rubinfien
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<PAGE>
STOCK PERFORMANCE GRAPH
The graph set forth below compares cumulative total shareholder return on
the Company's Common Stock for the five years ended March 31, 1995, with the
cumulative total return over the same period of companies on the Standard &
Poor's Smallcap 600 Stock Total Return Index, the Standard & Poor's 500 Stock
Total Return Index and the NASDAQ Pharmaceutical Index. The NASDAQ
Pharmaceutical Index represents all companies trading on NASDAQ under the
Standard Industrial Classification (SIC) Code for pharmaceuticals, including
biotechnology companies. This year the Company selected the Standard & Poor's
Smallcap 600 Stock Total Return Index as they are now included in this Index.
The Standard & Poor's 500 Stock Total Return Index, which was used in the
Company's performance graph last year, is presented this year for comparison
only. The graph assumes that $100 was invested on April 1, 1989 in the Company
and each of the two indices and that all dividends were reinvested. It should
be noted that the Company has not paid dividends on its Common Stock, and no
dividends are included in the representation of the Company's performance. The
cumulative total shareholder return on the Company's Common Stock shown on the
graph below is not necessarily indicative of future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MOLECULAR BIOSYSTEMS, INC., THE S & P 500 INDEX,
THE NASDAQ PHARMACEUTICAL INDEX AND THE S & P SMALLCAP 600 INDEX
<TABLE>
<CAPTION>
3/90 3/91 3/92 3/93 3/94 3/95
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
MOLECULAR BIOSYSTEMS, INC. 100 127 144 99 93 44
S&P 500 100 114 127 146 149 172
NASDAQ PHARMACEUTICAL 100 197 272 188 190 191
S&P SMALL CAP 600 100 101 126 148 161 169
<FN>
* $100 INVESTED ON 03/31/90 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MARCH 31.
</TABLE>
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal years ended March 31, 1993 and 1994, the Company extended
loans to certain officers to enable them to exercise stock options that were due
to lapse and/or to enable them to pay the income taxes attributable to those
option exercises. Each loan is evidenced by a note to the Company and is
secured by the stock purchased. The loans had original maturity dates ranging
from December 1993 to February 1994. In November 1993, the Board of Directors
authorized the extension of the notes to January 31, 1995 in light of a Company-
imposed restriction on the sale of Company stock by insiders pending a decision
by the U.S. Food and Drug Administration on the Company's pre-market approval
application for ALBUNEX-Registered Trademark-. In December 1994, three of
the loans were amended to extend the due date to January 31, 1996. In
February, 1995, the Company's Board of Directors allocated a portion of a
bonus payment received from Mallinckrodt Medical, Inc. and contractually
designated for distribution to the Company's "key employees" to the repayment
of Dr. Widder's and Mr. Frank's loans. A summary of the loans outstanding
during the fiscal year ended March 31, 1995 is as follows:
<TABLE>
<CAPTION>
Highest Balance
Outstanding # of
During the Year Interest Shares
Name and Title Date of Loan Due Date Loan Amount Ended 3/31/95 Rate Purchased
- -------------- ------------ -------- ----------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Widder, M.D. 12/31/93 01/31/96 $595,754 $634,633 6% 55,393
Chairman of the Board and
Chief Executive Officer
Vincent A. Frank 12/31/93 01/31/96 642,401 684,324 6% 55,393
Former President and
Chief Operating Officer
James L. Barnhart 12/31/93 01/31/96 213,482 229,449 6% 14,000
Vice President - Research
and Development
Richard M. Stern 12/31/93 01/31/96 218,766 235,128 6% 15,000
Vice President - Marketing
John Young 12/31/93 01/31/96 112,944 121,392 6% 7,500
Former Vice President - Operations
</TABLE>
ITEM TWO
APPROVAL OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed the firm of Arthur
Andersen LLP as independent public accountants for the Company for the fiscal
year ending March 31, 1996. Arthur Andersen LLP has served as the Company's
independent public accountants since January 1981. The proxyholders named in
the accompanying proxy will vote the shares represented by the proxy FOR
approval of the appointment of Arthur Andersen LLP for the year ending March 31,
1996. If the appointment of Arthur Andersen LLP is not approved, the Board of
Directors may reconsider the appointment.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and to make a statement if
they desire to do so.
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<PAGE>
COMPLIANCE WITH REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and any persons holding more than ten percent of
the Company's stock to report their initial ownership of the Company's stock and
any subsequent changes in ownership to the Securities and Exchange Commission.
Reports of changes in ownership generally are required to be filed by the tenth
day of the month following the transaction.
Based solely on its review of copies of such reports, the Company believes
that during the fiscal year ended March 31, 1995, all filing requirements
applicable to its directors and executive officers were satisfied, except for
one late report. The report was filed approximately five months late by Allan
Mizoguchi, Ph.D., Vice-President Clinical and Regulatory Affairs, with respect
to 1,000 shares of Company stock which he sold in December 1994. The Company is
not aware of any beneficial owner of more than ten percent of the Company's
common stock.
OTHER MATTERS
The Board of Directors has no knowledge of any other business to come
before the Annual Meeting and does not intend to present any other matters.
However, if any other business properly comes before the meeting or any
adjournment of the meeting, the persons named as proxies will have discretionary
authority to vote the shares represented by the accompanying proxy in accordance
with their best judgment.
The cost of this solicitation of proxies will be borne by the Company.
Some officers and regular employees of the Company may solicit proxies in person
or by mail, telephone or telecopier, but will not receive any additional
compensation for their services. The Company may also request brokerage firms,
banks and other custodians, nominees and fiduciaries to forward soliciting
material to the persons for whom they hold shares of the Company's Common Stock,
and may reimburse their reasonable expenses in doing so.
SHAREHOLDER PROPOSALS
Any shareholder of the Company who wishes to present a proposal to be
considered at the 1996 Annual Meeting of the Shareholders, and who wishes to
have the proposal included in the Company's proxy statement and form of proxy
relating to that meeting, must deliver the proposal in writing to the Company at
10030 Barnes Canyon Road, San Diego, California 92121, no later than February
20, 1996.
For the Board of Directors,
/s/ Kenneth J. Widder
Kenneth J. Widder, M.D.
Chairman of the Board
Dated: June 28, 1995
San Diego, California
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<PAGE>
PROXY MOLECULAR BIOSYSTEMS, INC. PROXY
10030 BARNES CANYON ROAD
SAN DIEGO, CA 92121
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth J. Widder, with the power to appoint
his substitute, and hereby authorizes him to represent and vote as designated
below all of the shares of Common Stock of Molecular Biosystems, Inc. held of
record by the undersigned on July 17, 1995, at the annual meeting of
shareholders to be held on September 7, 1995, or any adjournments thereof.
------------------------------
Please mark your votes in connection with the following proposals:
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary To vote for all nominees listed
below) below
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME BELOW.)
Robert W. Brightfelt, Charles C. Edwards,
Gordon C. Luce, David Rubinfien, Kenneth J. Widder
<TABLE>
<S> <C> <C> <C>
2. To approve the appointment of Arthur Andersen LLP as the independent public accountants of the Company for the
fiscal year ending March 31, 1996.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
SEE REVERSE SIDE
<PAGE>
IN HIS DISCRETION, THE PROXIES ARE EACH AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES FOR DIRECTOR (PROPOSAL 1) AND FOR PROPOSAL 2, AND AS
TO ANY OTHER ITEM OF BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, THIS
PROXY WILL BE VOTED IN THE BEST JUDGMENT OF THE PROXIES.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as an attorney, as 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.
DATED: ___________________________
__________________________________
Signature
__________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
