<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
- --------------------------------------------------------------------------------
(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/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
MOLECULAR BIOSYSTEMS, INC.
10030 Barnes Canyon Road
San Diego, California 92121
NOTICE OF
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 20, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Molecular Biosystems, Inc. (the "Company"), which will be held on August 20,
1997, 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. ADOPTION OF 1997 OUTSIDE DIRECTORS STOCK OPTION PLAN. To act on a
proposal to adopt the 1997 Outside Directors Stock Option Plan,
pursuant to which options for a total of 300,000 shares may be
granted.
3. RETENTION OF INDEPENDENT PUBLIC ACCOUNTANTS. To ratify the
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the ensuing year.
4. OTHER BUSINESS. To transact any other business that properly comes
before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 23, 1997 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: July 9, 1997 San Diego, California
<PAGE>
MOLECULAR BIOSYSTEMS, INC.
10030 Barnes Canyon Road
San Diego, California 92121
PROXY STATEMENT FOR
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 20, 1997
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 1997 Annual Meeting of Stockholders of the Company (the "Annual
Meeting") to be held on Wednesday, August 20, 1997 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, the accompanying notice and proxy are being mailed to
stockholders on or about July 21, 1997.
The Company's 1997 Annual Report, including financial statements for the
year ended March 31, 1997, is being mailed to all stockholders concurrently with
this Proxy Statement. Stockholders are referred to the 1997 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 FISCAL YEAR
ENDED MARCH 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS
AVAILABLE TO EACH STOCKHOLDER WITHOUT CHARGE ON WRITTEN REQUEST TO GERARD A.
WILLS, CHIEF FINANCIAL 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
stockholder 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 17,759,397 shares of the Company's Common Stock
outstanding on June 23, 1997, which has been fixed as the record date for the
purpose of determining the stockholders 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
stockholders 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,
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
1
<PAGE>
in determining the shares present. The election of each director and the
approval of any other matter submitted to a vote of the stockholders 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
stockholders.
ITEM ONE
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of eight members.
Eight directors are to be elected at the Annual Meeting, each of whom is to
serve until the next Annual Meeting. The eight 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 eight nominees unless authority
to vote has been withheld on the proxy returned by the stockholder. Directors
are elected by a majority of the shares voting.
There is set forth below for each of the eight 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., 44
Chairman of the Board and Former Chief Executive Officer
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. Dr. Widder also served as the Company's Chief Executive Officer
from July 1981 until May 1997. 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. Dr. Widder also
currently serves on the Board of Directors of Wilshire Technologies, Inc.,
DigiVision, Inc., and Titan Pharmaceuticals.
BOBBA VENKATADRI, 53
President and Chief Executive Officer
Bobba Venkatadri has served as the Company's President since October 1995
and as a director of the Company since November 1995. He served as Chief
Operating Officer from October 1995 until May 1997, at which time he was elected
by the Company's Board to the office of Chief Executive Officer. He served as
Executive Vice President of the Pharmaceutical Division of Centocor, Inc., from
September 1992 until he joined the Company, and as Vice President - Operations
of Centocor's Pharmaceutical Division from March 1992 to September 1992. He was
employed by Warner-Lambert Company from 1967 until February 1992, last serving
as Senior Director, Pharmaceutical Operations, at its manufacturing facility in
Vegabaja, Puerto Rico.
DAVID W. BARRY, M.D., 53
Chairman and Chief Executive Officer
Triangle Pharmaceuticals, Inc.
David W. Barry, M.D., was elected to the Company's Board of Directors in
May 1996. He currently serves as Chairman and Chief Executive Officer of
Triangle Pharmaceuticals, Inc. Prior to joining Triangle Pharmaceuticals in
1995, Dr. Barry served for 18 years with Burroughs Wellcome and the Wellcome
Foundation in various positions, including Worldwide Group Director, Research,
Development & Medical Affairs of the Wellcome Foundation; President of the
Wellcome Research Laboratories; and a member of the Board of Directors for the
Wellcome Foundation and Wellcome PLC. He previously spent five years with the
U.S. Food and Drug Administration in various capacities. Dr. Barry received his
medical degree from Yale University School of Medicine.
2
<PAGE>
ROBERT W. BRIGHTFELT, 54
Executive Vice President
Dade International
Robert W. Brightfelt has served as a director of the Company since 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 held various management positions in Du Pont's
Medical Products Department. Mr. Brightfelt retired from Du Pont in May, 1996
and currently serves as Executive Vice President and as a member of the Board of
Directors for Dade International.
CHARLES C. EDWARDS, M.D., 73
Charles C. Edwards, M. D., has served as a director of the Company since
March 1987. In 1969 he was appointed by President Nixon as Commissioner of
the U. S. Food and Drug Administration, and in 1973 he was appointed
Assistant Secretary for Health in the U.S. Department of Health, Education
and Welfare. In 1977 Dr. Edwards assumed the position of President and Chief
Executive Officer of Scripps Clinic and Research Foundation which was renamed
the Scripps Institutes of Medicine and Science in 1991. He retired from
there 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. He received his medical degree from the University of Colorado
in 1948, and received his surgical training at the Mayo Clinic in Rochester,
Minnesota.
JERRY T. JACKSON, 56
Jerry T. Jackson has served as a director of the Company since December
1996. From 1965 until his retirement in 1995, Mr. Jackson was employed with
Merck & Company, Inc. in various management positions. From 1993 until
retirement, he served as Executive Vice President of Merck. During this time,
Mr. Jackson had responsibility for Merck's International Human Health
Division, Worldwide Human Vaccines, the AgVet Division, Astra/Merck U.S.
Operations and Worldwide Marketing. Mr. Jackson was Senior Vice President of
Merck & Company, Inc. from 1991 to 1992 and previously was President of Merck
Sharp and Dohme International. Mr. Jackson currently serves as a director on
the boards of CorTherapeutics, Inc. and SunPharm Corporation and as Chairman
of Transcend Therapeutics, Inc.
GORDON C. LUCE, 71
Gordon C. Luce has served as a director of the Company since June 1989.
Mr. Luce joined Great American First Savings Bank in San Diego, California in
1969 as its President and Chief Executive Officer and served as its Chairman
of the Board from 1979 until his retirement in July 1990. During 1982, he
was an Alternate Delegate to the United Nations and has served as member of
three Presidential commissions. Mr. Luce is a former Chairman of Scripps
Clinic and Research Foundation and Scripps Health and is a former trustee of
Scripps Research Institute. He is also currently serving as a director of
two other publicly held companies, PS Group and All American Communications,
Inc. and is a Trustee of the University of Southern California in Los Angeles.
DAVID RUBINFIEN, 75
David Rubinfien has served as a director of the Company since December
1985. He served as President and Chief Executive Officer of Systemix, Inc.
from January 1989 until January 1991, and from 1985 to 1988 he 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. Mr. Rubinfien also currently serves as
a director of three other publicly held companies: ChemTrak, Inc.,
Biocircuits Corporation and Matritech, Inc.
3
<PAGE>
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
nominating committee.
The Executive Committee, composed of Dr. Widder and Mr. Venkatadri,
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 stockholders 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 Drs. Barry and 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. Acting as the Officer Options Committee,
the Compensation Committee administers the Company's stock option plans as they
relate to the executive officers of the Company.
MEETINGS
During the fiscal year ended March 31, 1997, the Board of Directors held
five meetings. The Executive Committee met formally nine times during the year
and met informally on a number of additional occasions. The Audit Committee met
once during the year and the Compensation Committee met three times during the
year and acted informally (by written consent) on one occasion. Dr. Widder and
Messrs. Venkatadri, Brightfelt, Luce and Rubinfien each attended all five
meetings of the Board; Dr. Edwards attended four meetings; Dr. Barry attended
three of the four meetings held following his election as a director and Mr.
Jackson attended the two meetings held following his election as a director.
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 a retainer of $8,000 per year. No additional cash fee is
paid for attendance at board meetings; however, a fee of $750 is paid to each
board member for attendance at each regular committee meeting. Pursuant to the
terms of the proposed 1997 Outside Directors Stock Option Plan (see Item Two on
page 14), beginning March 1997 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") will be granted an option for
6,500 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.
4
<PAGE>
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 June 23, 1997:
<TABLE>
<CAPTION>
Shares of Percent of
Name and Address of Common Stock Outstanding
Beneficial Owner Beneficially Owned Common Stock
------------------- ------------------ ------------
<S> <C> <C>
Mallinckrodt Group, Inc. 1,300,579 7.32%
675 McDonnell Blvd.
St. Louis, MO 63134
State of Wisconsin Investment Board 1,716,450 9.67%
P.O. Box 7842
Madison, WI 53707
</TABLE>
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 June 23, 1997 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. 487,037 2.71%
Bobba Venkatadri 143,197
David W. Barry, M.D. - *
Robert W. Brightfelt 20,000 *
Charles C. Edwards, M.D. 21,000 *
Jerry T. Jackson - *
Gordon C. Luce 21,500 *
David Rubinfien 30,000 *
Howard Dittrich, M.D. 20,593 *
Allan H. Mizoguchi, Ph.D. 100,327 *
Gerard A. Wills 40,578 *
All directors and executive officers
as a group (13 persons) 5.49%
</TABLE>
- -----------------------------------
* Represents less than 1% of the Company's outstanding Common Stock.
(1) Each person named has voting and investment power over the shares
listed, and these powers are exercised solely by the person named or
shared with a spouse.
5
<PAGE>
(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 June 23, 1997. These shares are as follows: Dr.
Widder, 230,000 shares; Mr. Venkatadri, 140,000 shares; Mr. Brightfelt,
20,000 shares; Dr. Edwards, 20,000 shares; Mr. Luce, 20,000 shares; Mr.
Rubinfien, 20,000 shares; Dr. Dittrich, 17,500 shares; Mr. Wills, 38,750
shares; Dr. Mizoguchi, 98,000 shares; and the group of all directors and
executive officers, 732,250 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 June 23, 1997.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company during
the fiscal years ended March 31, 1997, 1996 and 1995 to (i) the Chief Executive
Officer and (ii) each of the other four most highly compensated executive
officers of the Company during the fiscal year ended March 31, 1997 (the "named
executive officers"):
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-----------------------------------------------------------------------------------
Year Other Annual Restricted Securities All Other
Ended Compensation Stock Award Underlying Compensation
Name March 31 Salary($) Bonus($) ($) ($) Options(#) ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kenneth J. Widder,M.D.(1) 1997 $241,215 $ 55,439 (2) $ - $ 60,000 (3) 50,000 $ -
Chairman of the Board 1996 240,905 - - - 50,000 -
Chief Executive Officer 1995 239,846 590,000 (4) - - 60,000 634,632 (4)
and Member of the
Executive Committee
Bobba Venkatadri (1) 1997 285,012 36,000 (2) 38,825 (5) 20,000 (3) 50,000 -
President, Chief 1996 125,640 - 34,106 (5) - 335,000 -
Operating Officer
and Member of the
Executive Committee
Howard Dittrich, M.D. 1997 163,758 - - 57,750 (6) 92,000 -
Vice President - Research/ 1996 30,000
Medical and Regulatory
Affairs
Gerard A. Wills 1997 139,058 26,844 (2) - 30,000 (3) 80,000 -
Vice President - Finance 1996 120,440 30,000 (7) - - 20,000 -
and Chief Financial 1995 100,693 11,520 (4) - - 27,500 -
Officer
Allan H. Mizoguchi, Ph.D. 1997 138,325 23,489 (2) - 30,000 (3) 30,000 -
Vice President - Clinical 1996 118,985 30,000 (7) - - 18,000 -
and Quality 1995 109,048 17,640 (4) - - 30,000 -
</TABLE>
(1) In May 1997 Dr. Widder resigned as Chief Executive Officer, and the
Board of Directors elected Mr. Venkatadri as the Company's new Chief
Executive Officer. Dr. Widder will remain Chairman of the Board.
(2) Paid in respect of performance for the fiscal year ended March 31, 1996.
6
<PAGE>
(3) Awarded in respect of performance for the fiscal year ended March 31,
1996 and as additional compensation. The awards were paid in
unregistered shares from which shares to satisfy withholding requirements
were withheld. The net shares awarded were as follows: Dr. Widder,
4,220 shares; Mr. Venkatadri, 1,197 shares; Mr. Wills, 1,828 shares and
Dr. Mizoguchi, 2,327 shares. At March 31, 1997, the fair market value of
these shares was as follows: Dr. Widder, $38,529; Mr. Venkatadri,
$10,929; Mr. Wills, $16,690 and Dr. Mizoguchi, $21,246. The shares
were issued in April 1996 and were taxable immediately to the recipients,
but the unregistered shares that they received could not be sold in the
public market for two years (a period subsequently reduced to one year
as a result of changes in holding period requirements of the Securities
and Exchange Commission's Rule 144).
(4) 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 from Mallinckrodt Medical, Inc.
("Mallinckrodt") for distribution to "key employees" pursuant to the
Distribution Agreement dated December 7, 1988 between the Company and
Mallinckrodt. Dr. Widder received a cash bonus of $590,000 and loan
forgiveness of $634,632; Mr. Wills and Dr. Mizoguchi received cash bonuses
of $11,520 and $17,640, respectively.
(5) Represents relocation expense payments made.
(6) Awarded to Dr. Dittrich in connection with his employment in May 1996.
The award was paid in unregistered shares from which shares to satisfy
withholding requirements were withheld. At March 31, 1997, the fair
market value of the 3,093 shares issued to Dr. Dittrich was $28,239. The
shares were issued in May 1996 and Dr. Dittrich is contractually
restricted from selling any of these shares for a three-year period.
(7) Paid in respect of performance for the fiscal year ended March 31, 1995.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The Company granted stock options under the Company's 1993 Stock Option
Plan in January 1997, in respect of performance during the fiscal year ended
March 31, 1997. The following table sets forth each grant of stock options
made during the fiscal year ended March 31, 1997 to each of the named executive
officers:
<TABLE>
<CAPTION>
Individual Grants (1) (2)
--------------------------------------------------
Potential Realizable Value
at Assumed Annual
Number of % of Total Exercise Rates of Stock Price
Securities Options Granted Price Appreciation for Option Term
Underlying to Employees Per Expiration ----------------------------
Name Options (#) in Fiscal Year Share Date 5% ($) (7) 10% ($) (7)
- ---- ----------- --------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Widder, M.D. 50,000 (1) 5.2% $ 11.125 1/15/07 $ 349,823 $ 886,519
Bobba Venkatadri 50,000 (1) 5.2% 11.125 1/15/07 349,823 886,519
Howard Dittrich, M.D. 30,000 (1) 3.1% 11.125 1/15/07 209,894 531,912
30,000 (2) 3.1% 7.625 11/13/06 143,860 364,569
2,000 (2) 0.2% 7.500 9/05/06 9,433 23,906
30,000 (3) 3.1% 9.625 5/28/06 181,593 460,193
Gerard A. Wills 40,000 (1) 4.1% 11.125 1/15/07 279,858 709,215
20,000 (4) 2.1% 7.625 11/12/06 95,906 243,046
20,000 (5) 2.1% 7.875 9/12/06 99,051 251,014
Allan H. Mizoguchi, Ph.D. 10,000 (1) 1.0% 11.125 1/15/07 69,965 177,304
20,000 (5) 2.1% 7.875 9/12/06 99,051 251,014
</TABLE>
(1) These options were granted on January 15, 1997 under the
Company's 1993 Stock Option Plan in respect of performance for the
fiscal year ended March 31, 1997. All options, with the exception
of Dr. Mizoguchi's options, vest in four equal installments
beginning on the first anniversary of the date of grant.
Dr. Mizoguchi resigned as an employee effective May 30,1997 and as
of that date the Company accelerated the vesting of his unvested
options. 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 employment. In the discretion
of the Compensation 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 November 13, 1996 and September 5, 1996
in recognition of Dr. Dittrich's contributions to the overall
success of the Company. The options granted vest upon approval of
OPTISON-TM-. If the product is approved in either the United States or in
Europe before December 31, 1997, 50% of the option grant will immediately
vest upon approval, provided that 50% of the option grant has not already
vested according to the normal stock option vesting schedule. Should
approval occur in both Europe and the United States before December 31,
1997, 100% of the stock option grant will immediately vest. Conversely,
if neither event occurs before December 31, 1997, all options granted
will vest according to the Company's normal vesting schedule. All other
terms of the option are similar to those described in note (1) above.
8
<PAGE>
(3) These options were granted on May 28, 1996 under the Company's 1993
Stock Option Plan in connection with Dr. Dittrich's employment. The
options granted vest in four equal installments beginning the first
anniversary of the date of grant. All other items of the option are
similar to those described in note (1) above.
(4) These options were granted November 12, 1996 in recognition of Mr.
Wills' contributions to the overall success of the Company. The options
granted vest in four equal installments beginning on the first anniversary
of the date of grant. All other terms of the option are similar to those
described in note (1) above.
(5) These options were granted on September 12, 1996 in recognition of
Mr. Wills' and Dr. Mizoguchi's contributions to the overall success of the
Company. The option granted to Mr. Wills vests in four equal installments
beginning the first anniversary of the date of grant. The option granted
to Dr. Mizoguchi was accelerated to vest immediately on May 30, 1997, when
Dr. Mizoguchi resigned as an employee. (See note (1).) All other terms of
the option are similar to those described in note (1) above.
(6) The dollar amounts presented in these columns are the results 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 correspondingly benefit all
stockholders. For options granted on January 15, 1997 (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
$18.12 and $28.86, respectively, on January 14, 2007. For options granted
on November 13, 1996 (see note (2)) and November 12, 1996 (see note (4)),
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 November 12, 2006 and November 11,
2006. For options granted on September 5, 1996, (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 $12.22 and
$19.45, respectively, on September 4, 2006. For options granted on May 28,
1996, (see note (3)), 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 $15.68 and $24.96, respectively, on May 27, 2006.
For options granted on September 12, 1996, (see notes (4) and (5)),
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
$12.83 and $20.43, respectively, on September 11, 2006. The share price of
the Company's Common Stock on March 31, 1997 was $9.13.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
None of the named executive officers exercised stock options during the
fiscal year ended March 31, 1997. The following table sets forth, for each of
the named executive officers, the fiscal year-end number and value of
unexercised options:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at 3/31/97 (#) Options at 3/31/97 ($)(1)
---------------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Kenneth J. Widder, M.D. 152,500 127,500 $ 71,563 $124,688
Bobba Venkatadri 140,000 245,000 297,500 414,375
Howard Dittrich, M.D. 2,500 114,500 7,188 112,938
Gerard A. Wills 36,250 111,250 6,875 60,625
Allan Mizoguchi, Ph.D. 47,000 61,000 24,563 68,688
</TABLE>
(1) Based on the $9.13 per share closing price of the Company's Common Stock on
March 31, 1997.
- -------------
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company currently has employment contracts with Dr. Widder and Messrs.
Venkatadri and Wills. As of April 1, 1997, Dr. Widder is paid an annual salary
of $250,000; Mr. Venkatadri is paid an annual salary of $300,000; Dr. Dittrich
is paid an annual salary of $197,000; Mr. Wills is paid an annual salary of
$160,000; and Dr. Mizoguchi is paid an annual salary of $142,000. The Company's
employment contracts with its executive officers are of indefinite duration,
subject, however, to termination in certain events. Dr. Mizoguchi resigned as
an employee effective May 30, 1997.
On May 12, 1997, the Board of Directors of the Company implemented its
previously adopted plan of management succession. As part of the transition
plan, Kenneth J. Widder, M.D. relinquished the office of Chief Executive Officer
but will remain Chairman of the Board. Dr. Widder will continue to be
responsible for the Company's strategic planning and corporate development
activities. The Company's Board elected Bobba Venkatadri, currently President
and Chief Operating Officer, to the additional office of Chief Executive
Officer.
Under the Company's respective employment contracts with Messrs. Venkatadri
and Wills, 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, or, in Mr. Venkatadri's
case, two years' 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. The
four members of the Compensation Committee, Drs. Edwards and Barry and Messrs.
Brightfelt and Rubinfien, are outside directors of the Company.
10
<PAGE>
Decisions of the Compensation Committee relating to executive officers'
base salaries, cash bonuses and stock awards are reviewed by the full Board;
decisions of the Compensation Committee relating to executive officers' stock
options 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 attract,
motivate and retain executive officers whose contributions are critical to the
Company's long-term success and to reward executive officers for attaining
individual and corporate objectives which enhance stockholder value.
The Company's compensation program for its executive officers consists of
cash compensation and long-term compensation. Cash compensation is paid in the
form of a base salary and a cash bonus, and long-term compensation is paid in
the form of stock options and restricted stock awards. Cash bonuses are awarded
under the Company's executive and management incentive program and are intended
to provide executive officers with an opportunity to earn additional cash
compensation 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.
Similarly, restricted stock awards, in the form of unregistered shares of the
Company's common stock, are intended to provide executive officers with
additional compensation which, because the shares in question cannot be sold
immediately, provides an additional incentive to manage the Company with a view
to long-term stock appreciation.
SALARIES. The Compensation Committee determines the salaries of executive
officers on the basis of (i) the individual 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 indications of
salary trends and informal surveys by the Company of other biomedical companies
of roughly similar size.
For fiscal year 1997, Dr. Widder and Mr. Venkatadri did not receive salary
increases (in Dr. Widder's case, in view of the magnitude of the cash bonus paid
to him in fiscal year 1995, and in Mr. Venkatadri's case, in view of the fact
that he only started at the Company in mid-fiscal year 1996). Mr. Wills received
a raise of $19,200, or 16.0%, to $139,200, and Dr. Mizoguchi received a raise of
$18,000, or 15%, to $138,000. Dr. Dittrich was hired in May 1996 at a starting
salary of $180,000.
CASH BONUSES. During fiscal year 1997, the Company paid cash bonuses of
$55,439, $36,000, $26,844 and $23,849 to Dr. Widder, Mr. Venkatadri, Mr. Wills
and Dr. Mizoguchi, respectively, for their services during fiscal year 1996.
These bonuses were paid under the Company's executive and management incentive
program, which is open to the Company's management and staff and senior
scientists and is intended to encourage productivity by linking the payment of
cash bonuses to individual and Company performance. The program provides for the
payment of cash bonuses after the close of each fiscal year using individual
target incentives ranging from 10% to 35% of the midpoints of base salary ranges
established by the Company for each management position. Salary ranges are
based on published industry standards. Each bonus is determined in the first
instance on the basis of the Company's percentage of attainment of its
performance objectives for the year, and then on the basis of the individual's
percentage of attainment of his or her personal performance objectives. However,
due to the broad scope of their responsibilities, Dr. Widder's and Mr.
Venkatadri's performance objectives are identical to the Company's performance
objectives. For fiscal year 1996, the target incentives for Dr. Widder, Mr.
Venkatadri, Mr. Wills and Dr. Mizoguchi were 35%, 30%, 25% and 25% of the
midpoints of their respective base salary ranges.
11
<PAGE>
The Company's executive and management incentive program is reviewed
annually by the Company's Board of Directors. The bonuses for fiscal year 1996
paid to Mr. Wills and Dr. Mizoguchi were determined by the Executive Committee
of the Company's Board of Directors (consisting of Dr. Widder and Mr.
Venkatadri), subject to review by the Compensation Committee and approval by the
Board of Directors. The bonuses paid to Dr. Widder and Mr. Venkatadri were
determined by the Compensation Committee subject to review and approval by the
Board of Directors.
STOCK AWARDS. During fiscal year 1997, the Compensation Committee
recommended restricted stock awards of 4,220, 1,197, 1,828 and 2,327 shares (net
of shares withheld in satisfaction of withholding requirements) to Dr. Widder,
Mr. Venkatadri, Mr. Wills and Dr. Mizoguchi, respectively, for their services
during fiscal year 1996. These stock awards were taxable immediately to the
recipients, but the unregistered shares that they received could not be sold in
the public market for two years (a period subsequently reduced to one year as a
result of changes in holding period requirements of the Securities and Exchange
Commission's Rule 144).
In addition, Dr. Dittrich received an award of 3,093 unregistered shares of
stock (net of shares withheld in satisfaction of withholding requirements) in
connection with his employment by the Company in May 1996. Dr. Dittrich is
contractually restricted from selling any of these shares for a three-year
period.
STOCK OPTIONS. During fiscal year 1997, the Compensation Committee awarded
stock options to Dr. Widder, Mr. Venkatadri, Dr. Dittrich, Mr. Wills and Dr.
Mizoguchi for 50,000, 50,000, 62,000, 80,000 and 30,000 shares, respectively, in
recognition of their contributions to the Company's attainment of its
performance objectives. In addition, Dr. Dittrich received a stock option for
30,000 shares in connection with his employment by the Company in May 1996.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee determined the compensation for fiscal year 1997
of the Company's Chairman of the Board and Chief Executive Officer, Kenneth J.
Widder, on the basis of the criteria applicable to the Company's executive
officers generally.
As noted, Dr. Widder did not receive a salary increase for fiscal year
1997. The cash bonus of $55,439 paid to him during fiscal year 1997 for his
services during fiscal year 1996 was based on the Company's successful expansion
of the geographical scope and duration of the Company's distribution agreement
with Mallinckrodt Medical, Inc. and on the Company's progress in developing its
second-generation ultrasound contrast imaging agent, OPTISON-TM-. Dr. Widder's
award of 4,220 shares of stock (net of shares withheld to satisfy withholding
requirements) and his grant of a stock option for 50,000 shares, as described
earlier, were based on the Company's continuing progress in developing and
obtaining regulatory approval for OPTISON-TM-.
Compensation Committee
David W. Barry, M.D.
Robert W. Brightfelt
Charles C. Edwards, M.D.
David Rubinfien
12
<PAGE>
STOCK PERFORMANCE GRAPH
The graph set forth below compares cumulative total stockholder return
on the Company's Common Stock for the five years ended March 31, 1997, with
the cumulative total return over the same period of companies on the Standard
& Poor's Smallcap 600 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. The graph assumes that
$100 was invested on April 1, 1991 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
stockholder return on the Company's Common Stock shown on the graph below is
not necessarily indicative of future performance.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------------------
3/92 3/93 3/94 3/95 3/96 3/97
<S> <C> <C> <C> <C> <C> <C> <C>
MOLECULAR BIOSYSTEMS INC MB 100 69 64 31 33 34
S & P SMALLCAP 600 1600 100 117 128 134 176 191
NASDAQ PHARMACEUTICAL INPQ 100 69 70 70 123 112
</TABLE>
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended March 31, 1997, the Company entered into a
real estate investment agreement with Mr. Venkatadri and his wife in
connection with the purchase of their home in San Diego, California. The
Company contributed $300,000 to the purchase and acquired an undivided 53%
interest in the home as tenants in common with Mr. and Mrs. Venkatadri.
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 was evidenced by a note to
the Company and is or was secured by the stock purchased. During the fiscal
year ended March 31, 1997 the two loans which remained outstanding were
forgiven. The officers surrendered the shares of Common Stock securing the
loans to the Company.
<TABLE>
<CAPTION>
Highest Balance
Outstanding # of
During the Year Interest Shares
Name and Title Date of Loan Due Date Loan Amount Ended 3/31/97 Rate Purchased
- -------------- ------------ -------- ---------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
James L. Barnhart 12/31/93 01/31/98 213,482 255,102 6% 14,000
Vice President - Research
and Development
John Young 12/31/93 01/31/98 112,944 134,964 6% 7,500
Former Vice President -
Operations
</TABLE>
ITEM TWO
ADOPTION OF 1997 OUTSIDE DIRECTORS STOCK OPTION PLAN
The Board of Directors of the Company has adopted the Molecular
Biosystems, Inc. 1997 Outside Directors Plan (the "1997 Plan") subject to
approval by the Company's stockholders. The 1997 Plan will become effective
when so approved and replaces the 1993 Outside Directors Stock Option Plan.
The following summary describes the principal terms of the Outside
Directors Plan. The complete text of the Outside Directors Plan is attached
to this Proxy Statement as Exhibit A.
PURPOSE
The primary purpose of the 1997 Plan is to permit the Company to grant
stock options to Outside Directors to reward them for their efforts on the
Company's behalf and to provide an additional incentive to contribute to the
attainment of the Company's long-term plans and objectives.
NUMBER OF SHARES
The 1997 Plan authorizes options to be granted for a maximum of 300,000
shares of the Company's Common Stock. If any option expires unexercised or
is surrendered prior to the 1997 Plan's expiration, the number of underlying
shares in respect of the Option shall be added back to the number of shares
of Common Stock for which options may be granted under the 1997 Plan. The
underlying shares to be delivered upon the exercise of an option may be
either authorized but unissued shares or issued shares reacquired by the
Company (or any combination of the two).
14
<PAGE>
TERM
The 1997 Plan has a term of 10 years expiring on the tenth anniversary
of its effective date. No option may be granted under the 1997 Plan after
its expiration.
TYPE OF OPTIONS
The options granted under this 1997 Plan are nonstatutory stock options.
A "nonstatutory" stock option is the generic description of a stock option
which does not quality for special treatment under the Internal Revenue Code.
ELIGIBILITY
Options under the 1997 Plan may be granted only to directors of the
Company who are neither officers nor employees of the Company or any
subsidiary ("Outside Directors").
ADMINISTRATION OF THE PLAN
The 1997 Plan will be administered by the Board of Directors. Subject
to the express provisions of the Plan, the Board may interpret the Plan,
adopt and revise policies and procedures to administer the Plan, and make
determinations required for the Plan's administration. The actions of the
Board are final and binding. The Board may delegate its authority to its
Executive Committee or to another committee appointed by the Board consisting
of at least two Directors.
OPTION GRANTS
On the last business day in March of each year (beginning with March
1997), the Company will grant each incumbent Outside Director who was elected
at the preceding Annual Meeting an option for 6,500 shares of Common Stock.
The Board will also have authority to grant additional options to an Outside
Director, but no Outside Director may receive options for more than 21,500
shares of Common Stock in any fiscal year.
EXERCISE PRICE
The exercise price of each option will be the closing price of the
Company's Common Stock on the New York Stock Exchange on the grant date (or
on the last trading day preceding the grant date if it is not a trading day.)
EXERCISABILITY
Each option will have a 10-year term expiring on the tenth anniversary
of the date of grant. The Board will determine whether each option will be
exercisable in full at one time or in installments at different times and the
time or times at which the option or installments will become exercisable.
No option or installment shall be exercisable prior to the first anniversary
of the grant date, except as its exercisability is accelerated by the Board.
The Board may accelerate the exercisability of any option at any time prior
to its exercisability.
EXERCISE OF OPTIONS
An exercisable option may be exercised in full or in part (but only in
respect of a whole number of shares) by (i) written notice to the Board (or
its designee) stating the number of shares of Common Stock in respect of
which the option is being exercised and (ii) full payment of the exercise
price of those shares.
Payment of the exercise price of an option must be made by certified or
bank cashier's check or by wire transfer of immediately available funds or,
if permitted by the Board (either in the applicable option agreement or at
the time of exercise): (i) by delivering shares of Common Stock having a fair
market value on the date of exercise equal to the exercise price; (ii) by
directing the Company to withhold, from the shares of Common Stock otherwise
15
<PAGE>
issuable upon exercise of the Option, shares of Common Stock having a fair
market value on the date of exercise equal to the exercise price; (iii) by
surrendering exercisable options which have a fair market value on the date
of exercise equal to the exercise price (measuring the fair market value of
the options surrendered by the excess of (y) the aggregate fair value on the
date of exercise of the shares of Common Stock issuable upon exercise of the
Option over (z) the aggregate exercise price); (iv) by any combination of the
preceding methods of payment; or (v) by any other method of payment
authorized by the Board.
TRANSFERABILITY
No option may be transferred, assigned or pledged except as provided by
will or the applicable intestacy laws.
WITHHOLDING
Each Outside Director exercising an option must remit to the Company an
amount sufficient to satisfy the Company's federal, state and local
withholding tax obligation in connection with the exercise. Payment must be
made by certified or bank cashier's check or by wire transfer of immediately
available funds or, if permitted by the Board (either in the applicable
option agreement or at the time of exercise), by either one or both of the
following methods: (i) by delivering shares of Common Stock having a fair
market value on the date of exercise equal to the Company's withholding
obligation; or (ii) by directing the Company to withhold, from the shares of
Common Stock otherwise issuable upon exercise of the Options, shares of
Common Stock having a fair market value on the date of exercise equal to the
Company's withholding obligation.
AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate the plan at any time; but
except to comply with changes in the Internal Revenue Code of 1986 and the
related regulations, the Board may not amend the Plan more than once every
six months to change: (i) the number of shares of Common Stock for which
options may be granted under the Plan; (ii) the benefits under the Plan; or
(iii) the eligibility requirements of the Plan. The Company's stockholders
shall be required to approve any such amendment that would materially
increase the number of shares, materially increase the benefits or materially
change the eligibility requirements. If the Plan is terminated, the
provisions of the Plan shall continue to apply to options granted prior to
termination, and no amendment, suspension or termination of the Plan will
adversely affect the rights of an Outside Director in respect of any option
held without his or her consent.
APPROVAL OF THE 1997 PLAN
Approval of the 1997 Plan requires affirmative vote of a majority of the
Company's outstanding shares voting on the matter.
The persons named on the accompanying form of proxy will vote FOR
approval of the 1997 Plan unless a different choice is indicated.
The Board of Directors recommends a vote FOR approval of the 1997 Plan.
It should be noted that by reason of being eligible to be granted
options under the 1997 Plan, each Director has an interest in seeing that the
1997 Plan is approved by the Company's stockholders.
16
<PAGE>
ITEM THREE
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, 1998. 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, 1998. 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.
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, 1997, all filing
requirements applicable to its directors and executive officers were
satisfied. 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.
17
<PAGE>
STOCKHOLDER PROPOSALS
Any stockholder of the Company who wishes to present a proposal to be
considered at the 1998 Annual Meeting of the Stockholders, 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, 1998.
For the Board of Directors,
/s/ KENNETH J. WIDDER
---------------------
Kenneth J. Widder, M.D.
Chairman of the Board
Dated: July 9, 1997
San Diego, California
18
<PAGE>
EXHIBIT A
MOLECULAR BIOSYSTEMS, INC.
1997 OUTSIDE DIRECTORS STOCK OPTION PLAN
ARTICLE 1
PURPOSE AND EFFECTIVE DATE
1.1 PURPOSE. The purpose of the Plan is to permit the Company to grant
stock options to its outside directors to reward them for their efforts on the
Company's behalf and to provide an additional incentive to contribute to the
attainment of the Company's long-term plans and objectives.
1.2 EFFECTIVE DATE. The Plan shall become effective if and when
approved by the Company's shareholders at the 1997 Annual Meeting of
Shareholders.
1.3 TERM. The Plan shall have a term of 10 years expiring on the tenth
anniversary of its effective date. No Option may be granted under the Plan
after its expiration.
ARTICLE 2
DEFINITIONS
2.1 ANNUAL MEETING means the annual meeting of the Company's
shareholders.
2.2 BOARD means the Company's Board of Directors. If the Board
delegates its authority to administer the Plan to a committee of the Board in
accordance with Article 4, references to the "Board" shall be construed as
references to the committee.
2.3 COMMON STOCK means shares of the Company's common stock, $.01 par
value.
2.4 COMPANY means Molecular Biosystems, Inc., a Delaware corporation.
2.5 DIRECTOR means a director of the Company.
2.6 EXPIRATION DATE is defined in Paragraph 5.3.
2.7 GRANT DATE is defined in Paragraph 5.1.
A-1
<PAGE>
2.8 OFFICER means: (i) the Company's Chairman of the Board and Chief
Executive Officer; (ii) the Company's President and Chief Operating Officer;
(iii) any Vice President of the Company; and (iv) any other person who is
considered an "officer" of the Company for purposes of Rule 16a-1(f) under the
Securities Exchange Act of 1934.
2.9 OPTION is defined in Paragraph 5.1.
2.10 OPTION AGREEMENT is defined in Paragraph 5.6.
2.11 OUTSIDE DIRECTOR means a Director who is neither an Officer nor
an employee of the Company or any corporation in which the Company owns stock
possessing at least 50% of the total combined voting power of all classes of
stock.
2.12 PLAN means this stock option plan, as it may be amended. The
name of the Plan is the "Molecular Biosystems, Inc. 1997 Outside Directors
Stock Option Plan."
ARTICLE 3
TYPE AND NUMBER OF OPTIONS
3.1 TYPE OF OPTIONS. The Options granted under this Plan are
nonstatutory stock options.
3.2 MAXIMUM NUMBER OF OPTIONS. The maximum number of shares of Common
Stock for which Options may be granted is 300,000 (subject to adjustment as
provided in Paragraph 7.1). If any Option expires unexercised or is
surrendered prior to the Plan's expiration, the number of Underlying Shares in
respect of the Option shall be added back to the number of shares of Common
Stock for which Options may be granted under the Plan. The Underlying Shares
to be delivered upon the exercise of an Option may be either authorized but
unissued shares or issued shares reacquired by the Company (or any combination
of the two).
ARTICLE 4
ADMINISTRATION
The Plan shall be administered by the Board. Subject to the express
provisions of the Plan, the Board may interpret the Plan, adopt and revise
policies and procedures to administer the Plan, and make all determinations
required for the Plan's administration. The actions of the Board shall be
final and binding. The Board may delegate its authority to its Executive
Committee or to another committee appointed by the Board consisting of at least
two Directors.
A-2
<PAGE>
ARTICLE 5
STOCK OPTIONS
5.1 OPTION GRANTS.
(a) ANNUAL GRANT. On the last business day in March of each year
(beginning with March 1997) (the "Grant Date"), the Company shall
grant each incumbent Outside Director who was elected at the
preceding Annual Meeting an option for 6,500 shares of Common Stock
(an "Option"). No Option shall be granted to an incumbent Outside
Director who was not elected at the preceding Annual Meeting but
was subsequently elected or appointed by the Board to fill a
vacancy.
(b) DISCRETIONARY GRANT. The Board shall have the authority to grant
options to an Outside Director in amounts greater than the annual
grant to that Outside Director set forth in the preceding
subparagraph, provided that no Outside Director shall be entitled
to receive Options for more than 21,500 shares of Common Stock in
any fiscal year. The date on which the Board acts to grant any
such options shall be the Grant Date.
5.2 EXERCISE PRICE. The exercise price of each Option shall be the
closing price of the Company's Common Stock on the New York Stock Exchange on
the Grant Date (or on the last trading day preceding the Grant Date if it is
not a trading day).
5.3 TERM. Each Option shall have a 10-year term expiring on the
tenth anniversary of the Grant Date (the "Expiration Date") (subject to early
expiration as provided in Paragraph 5.4). The Board shall determine (i)
whether each Option shall be exercisable in full at one time or in
installments at different times and (ii) the time or times at which the
Option or installments shall become exercisable. No Option or installment
shall be exercisable prior to the first anniversary of the Grant Date, except
as its exercisability is accelerated by the Board. The Board may accelerate
the exercisability of any Option or installment at any time.
5.4 DEATH OF OUTSIDE DIRECTOR. The failure of the Outside Director
to whom an Option was granted to remain an Outside Director shall not cause
the Option to expire or otherwise terminate; but in the event of the death of
the Outside Director (whether or not he or she is then an incumbent
Director), the Option shall expire on the earlier of (i) the first
anniversary of the Outside Director's death or (ii) the Option's Expiration
Date.
A-3
<PAGE>
5.5 TRANSFERABILITY. No Option may be transferred, assigned or
pledged (whether by operation of law or otherwise), except as provided by
will or the applicable intestacy laws, and no Option shall be subject to
execution, attachment or similar process. An Option or Installment may be
exercised only by Outside Director to whom it was granted, except in the case
of his or her death, when it may be exercised by the person or persons to
whom it passes by will or inheritance.
5.6 OPTION AGREEMENTS. Each Option shall be evidenced by a written
agreement (an "Option Agreement"), in a form approved by the Board, netered
into by the Company and the Outside Director to whom the Option is granted.
ARTICLE 6
EXERCISE OF OPTIONS
6.1 MANNER OF EXERCISE. An exercisable Option may be exercised in
full or in part (but only in respect of a whole number of shares) by (i)
written notice to the Board (or its designee) stating the number of shares of
Common Stock in respect of which the Option is being exercised and (ii) full
payment of the exercise price of those shares.
6.2 PAYMENT OF EXERCISE PRICE. Payment of the exercise price of an
Option shall be made by certified or bank cashier's check or by wire transfer
of immediately available funds or, if permitted by the Board (either in the
applicable Option Agreement or at the time of exercise): (i) by delivering
shares of Common Stock having a fair market value on the date of exercise
equal to the exercise price; (ii) by directing the Company to withhold, from
the shares of Common Stock otherwise issuable upon exercise of the Option,
shares of Common Stock having a fair market value on the date of exercise
equal to the exercise price; (iii) by surrendering exercisable Options which
have a fair market value on the date of exercise equal to the exercise price
(measuring the fair market value of the Options surrendered by the excess of
(y) the aggregate fair market value on the date of exercise of the shares of
Common Stock issuable upon exercise of the Option over (z) the aggregate
exercise price); (iv) by any combination of the preceding methods of payment;
or (v) by any other method of payment authorized by the Board. For purposes
of this Paragraph and Paragraph 6.3), "fair market value" shall be determined
by the closing price of shares of the Company's Common Stock on the date in
question (or on the last trading day preceding the date in question if it is
not a trading day).
6.3 WITHHOLDING. Each Outside Director exercising an Option shall
remit to the Company an amount sufficient to satisfy the Company's federal,
state and local withholding tax obligation in connection with the exercise.
Payment shall be made by certified or bank cashier's check or by wire
transfer of immediately available funds or, if permitted by the Board (either
in the applicable Option Agreement or at the time of exercise), by either one
or both of the following methods: (i) by delivering shares of
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<PAGE>
Common Stock having a fair market value on the date of exercise equal to the
Company's withholding obligation; or (ii) by directing the Company to
withhold, from the shares of Common Stock otherwise issuable upon exercise of
the Option, shares of Common Stock having a fair market value on the date of
exercise equal to the Company's withholding obligation.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 CAPITALIZATION ADJUSTMENTS. The aggregate number of shares of
Common Stock for which Options may be granted under the Plan, the aggregate
number of Underlying Shares in respect of each outstanding Option, and the
exercise price of each such Option may be adjusted by the Board as it
considers appropriate in the event of changes in the number of outstanding
shares of Common Stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations and the like. Adjustments under this
Paragraph 7.1 shall be made in the Board's discretion, and its decisions
shall be final and binding.
7.2 AMENDMENT AND TERMINATION. The Board may amend, suspend or
terminate the Plan at any time; but except to comply with changes in the
Internal Revenue Code of 1986 and the related regulation, the Board may not
amend the Plan more once every six months to change: (i) the number of shares
of Common Stock for which Options may be granted under the Plan; (ii) the
benefits under the Plan; or (iii) the eligibility requirements of the Plan.
The Company's shareholders shall be required to approve any such amendment
(other than an amendment authorized under Paragraph 7.1) that would
materially increase the number of shares, materially increase the benefits or
materially change the eligibility requirements. If the Plan is terminated,
the provisions of the Plan shall continue to apply to Options granted prior
to termination, and no amendment, suspension or termination of the Plan shall
adversely affect the rights of an Outside Director in respect of any Option
held without his or her consent.
7.3 COMPLIANCE WITH SECTION 16(b). The Plan shall be interpreted and
administered in a manner that satisfies the applicable requirements of Rule
16b-3 under the Securities Exchange Act so that Outside Directors will be
entitled to the benefits of Rule 16b-3.
7.4 NO RIGHT TO NOMINATION. Nothing in the Plan or in any Option
Agreement shall confer on any Outside Director the right to continue to be
nominated for election as a Director.
7.5 NOTICES. Notices required or permitted under the Plan shall be
considered to have been duly given if sent by certified or registered mail
addressed to the Board at the Company's principal office or to any Outside
Director at his or her address as it appears on the Company's records.
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<PAGE>
7.6 SEVERABILITY. If any provision of the Plan is held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions, and the Plan shall be construed and administered as if
the illegal or invalid provision had not been included.
7.7 GOVERNING LAW. The Plan and all Option Agreements shall be
governed in accordance with the laws of the State of
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<PAGE>
P R O X Y MOLECULAR BIOSYSTEMS, INC. P R O X Y
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 June 23, 1997, at the 1997 Annual Meeting of
Stockholders to be held on August 20, 1997, or any adjournments thereof.
------------------------------
Please mark your votes in connection with the following proposals:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed below
(except as marked to the contrary below)
<CAPTION>
1. / / WITHHOLD AUTHORITY
<CAPTION>
To vote for all nominees listed below
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME BELOW.)
David W. Barry, Robert W. Brightfelt, Charles C. Edwards, Jerry T. Jackson
Gordon C. Luce, David Rubinfien, Bobba Venkatadri, Kenneth J. Widder
<TABLE>
<S> <C> <C> <C>
2. To approve the proposal to adopt the Company's 1997 Outside Directors Stock Option Plan, pursuant to which
options for a total of 300,000 shares may be granted.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
3. To approve the appointment of Arthur Andersen LLP as the independent public accountants of the Company for the
fiscal year ending March 31, 1998.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
SEE REVERSE SIDE
<PAGE>
IN HIS DISCRETION, THE PROXY IS 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 PROPOSALS 2 THROUGH
4, 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
