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
MEDCO RESEARCH, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 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>
MEDCO RESEARCH, INC.
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 30, 1995
TO THE SHAREHOLDERS:
Notice is hereby given that the annual meeting of shareholders (the
"Annual Meeting") of Medco Research, Inc. (the "Company") will be held at
the Hotel InterContinental, 505 North Michigan Avenue, Chicago, Illinois
60611, at 10:00 a.m. on November 30, 1995 for the following purposes, as
more fully described in the attached Proxy Statement:
1. To elect five directors of the Company to serve until the next
annual meeting of shareholders;
2. To ratify the appointment of KPMG Peat Marwick LLP as
independent accountants for the Company; and
3. To consider and act upon such other matters as may properly
come before the meeting.
The Board of Directors has fixed the close of business on October 16,
1995 as the record date for determining the shareholders entitled to
notice of and to vote at the Annual Meeting or at any adjournment thereof.
You are cordially invited to attend the Annual Meeting in person. In
order to ensure your representation at the Meeting, however, please
promptly complete, date, sign, and return the enclosed proxy in the
accompanying envelope. A majority of the outstanding shares of Common
Stock must be represented (in person or by proxy) at the Annual Meeting in
order that business may be transacted. Therefore, your promptness in
returning the completed and signed proxy will help to ensure that the
Company will not have to bear the expense of undertaking a second
solicitation. A shareholder who executes and returns the accompanying
proxy may revoke such proxy at any time before it is voted at the Meeting
by following the procedures set forth in the proxy statement under
"General Information".
By Order of the Board of Directors
JOHN E. BARNHARDT
Secretary
Research Triangle Park,
North Carolina 27709
October 16, 1995
<PAGE>
MEDCO RESEARCH, INC.
PROXY STATEMENT FOR ANNUAL MEETING
TO BE HELD NOVEMBER 30, 1995
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Medco
Research, Inc. (the "Company") for use at the annual meeting of shareholders
(the "Annual Meeting") to be held November 30, 1995, or any adjournment of the
Annual Meeting and it will be voted by the proxy holders in accordance with the
instructions given in the proxy if it is returned and received in time for the
Annual Meeting, is duly executed and is not revoked. If no direction is given in
the proxy, it will be voted "For" (i) the election of the directors nominated
and (ii) the ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent accountants. With respect to any other item of business
that may come before the Annual Meeting, the proxy holders will vote the proxy
in accordance with their best judgment. So far as the Company is aware, no
matters will be presented to the meeting for action on the part of the
shareholders other than those stated in the foregoing Notice.
The proxy may be revoked at any time before it has been exercised by giving
written notice of revocation to the Secretary of the Company, by executing and
delivering to the Secretary a proxy dated as of a later date than the enclosed
proxy, or by attending the Annual Meeting and voting in person. Attendance at
the meeting will not in and of itself revoke a proxy.
Abstentions will be deemed to be present at the meeting for purposes of
determining a quorum and will be counted as voting (but not "for" or "against")
with regard to the issue to which the abstention relates. Any "broker non-vote"
also will be deemed to be present for quorum purposes, but will not be counted
as voting with regard to the issue to which it relates. Thus, an abstention will
have the same effect as a vote "against" such issue while a broker non-vote will
have no effect.
Holders of record of Common Stock at the close of business on October 16,
1995 are entitled to vote at the Annual Meeting. There were 11,097,247 shares of
Common Stock outstanding as of the record date. The presence, in person or by
proxy, of shareholders entitled to cast at least a majority of the votes
entitled to be cast by all shareholders will constitute a quorum for the
transaction of business at the Annual Meeting.
Shareholders are entitled to cast one vote per share on each matter
presented for consideration and action by the shareholders. With respect to the
election of directors, however, shareholders may cumulate their votes.
Cumulative voting permits each shareholder to cast a total number of votes equal
to the number of directors to be elected multiplied by the number of shares
actually owned; all of the votes may be cast for one nominee, may be divided
equally among the nominees, or may be divided among the nominees in any other
manner. However, a shareholder may cumulate votes for one or more nominees only
if the nominees' names are placed in nomination prior to voting and any
shareholder gives notice at the meeting, prior to the voting, of his or her
intention to cumulate votes. If any shareholder gives such notice, all
shareholders may cumulate their votes for the nominees. Discretionary authority
to cumulate votes in the election of directors is solicited hereby.
This Proxy Statement, together with the accompanying proxy, is first being
mailed to shareholders on or about October 16, 1995.
<PAGE>
ELECTION OF DIRECTORS
NOMINEES
The authorized number of directors is currently fixed at five. Directors
are to be elected to hold office until the next annual meeting of shareholders
and until their successors are elected and qualified. The Board of Directors has
recommended and approved the nomination of the following persons, all of whom
are currently directors:
Richard C. Williams
Elizabeth M. Greetham
William M. Bartlett
Eugene L. Step
Albert D. Angel
All of the nominees have indicated a willingness to serve as directors, but
if any of them should decline or be unable to act as a director, the proxy
holders will vote for the election of another person or persons as the Board of
Directors recommends. The Company has no reason to believe that any nominee will
be unavailable. In the event that any shareholder gives notice at the Annual
Meeting of his or her intention to cumulate votes for the election of directors,
the proxy holders in their discretion may cumulate the votes represented by
proxies. The proxy holders may cast such votes entirely for one nominee or split
the votes among such number of nominees as the proxy holders may determine in
their discretion. Proxies received cannot be voted for a greater number of
persons than the number of nominees for election as directors.
Nominees receiving the highest number of affirmative votes cast, up to the
number of directors to be elected, will be elected as directors. The proxy
holders will vote the proxies for the above five nominees.
The following biographical information is furnished with respect to the
five nominees for election as directors:
Richard C. Williams, age 52, has served as a director of the Company since
January 1991 and as Chairman of the Company's Board of Directors since October
1992. Mr. Williams has been President of Conner-Thoele Limited, a consulting and
financial advisory firm which services the health care and pharmaceutical
industries, since March 1989. Mr. Williams also serves as a director of
Immunomedics, Inc. a biopharmaceutical research company, and as a member of the
advisory board of AMOCO Technology Company, a division of AMOCO Corporation.
From November 1983 to March 1989, Mr. Williams served as Vice President-Finance
and Chief Financial Officer of Erbamont N.V., a pharmaceutical company. Prior to
that, he served in various financial executive positions with Field Enterprises,
Inc., a real estate and communications company, and with Abbott Laboratories,
UNC Resources, and American Hospital Supply Corporation. He is also a director
of Centaur, Inc., an equine diagnostic company. Mr. Williams has a B.A. degree
from DePauw University and a MBA from the Wharton School of Business.
Elizabeth M. Greetham, age 46, has served as a director of the Company
since May 1991. Since 1982 Mrs. Greetham has been the President of Libracorn
Financial Consultants, a Bermuda-based company that provides health care
research to the health care industry and investment community. Libracorn's
principal client in the investment industry is Weiss, Peck & Greer. Mrs.
Greetham serves as a director of Chemex Pharmaceuticals, a pharmaceutical
company specializing in the dermatologic area, and Repligen Corporation, an
emerging biotechnology company. Mrs. Greetham has an M.A. (Honors) in Economics
from Edinburgh University.
William M. Bartlett, age 63, has served as a director of the Company since
September 1992. Since then Mr. Bartlett has been an independent business
consultant. Since 1994 and 1995 he has served on the advisory boards of AMOCO
Technology Company, a division of AMOCO Corporation, and North American Medical
Corporation, respectively. From 1990 to 1992, Mr. Bartlett served as the chief
operating officer of McDermott, Will & Emory, a large Chicago-based law firm.
From 1982 to 1990, he served as the President, Chief Executive Officer and a
director of Kewaunee Scientific Corporation, a manufacturer of scientific
laboratory furniture and equipment. Prior to that, Mr. Bartlett served as
President and Chief Executive Officer of G.D. Searle & Co.'s Medical Products
Group and as President of the V. Mueller Surgical Instrument Division of
American Hospital Supply Corporation. Mr. Bartlett has a BSCE from Duke
University and an Advanced Marketing Certification from the Kellogg School of
Northwestern University.
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Eugene L. Step, age 66, has served as a director of the Company since
January 1993. He served as the Executive Vice President of Eli Lilly and Company
and the President of the Pharmaceutical Division of Eli Lilly and Company from
1986 through 1992. From 1973 through 1985, he also served as President of that
company's Pharmaceutical Division. Mr.Step also served as a member of the Board
of Directors and Executive Committee of Eli Lilly and Company from 1973 through
1992. Since then Mr. Step has been an independent business consultant. Mr. Step
serves as a director of Scios Nova, Inc., Cell-Genesis, Inc., Pathogenesis, Inc.
and GMIS, Inc. Mr. Step has a B.A. degree in Economics from the University of
Nebraska and an M.S. degree in Accounting and Finance from the University of
Illinois.
Albert D. Angel, age 58, became a director of the Company in September
1995. He is currently President of Angel Consulting, a management consulting
firm in Short Hills, New Jersey and a director of Immunomedics, Inc. a
biopharmaceutical research company. He is a former President of The Merck
Company Foundation and was also Vice President, Public Affairs, of Merck & Co.,
Inc. from September 1985 until December 1993. Mr. Angel joined Merck in 1967,
serving initially in various legal counsel positions and later as a Management
Executive as Vice President of Merck Sharp & Dohme-Europe. Prior to joining
Merck, Mr. Angel was an attorney at Hughes Hubbard Blair & Reed, and received
his LL.B. from Yale Law School in 1960.
COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS
The business affairs of the Company are managed by and under the direction
of the Board of Directors, although the Board of Directors is not involved in
the Company's day-to-day operations. The Company pays each director who is not a
full-time employee of the Company a quarterly retainer fee of $4,000. Each such
director is also paid $1,000 for each quarterly Board meeting and the Annual
Shareholders Meeting attended by that director and up to $600 for each Board or
Board Committee telephone conference meeting attended by that director.
Directors also are reimbursed for their travel expenses incurred to attend
meetings. Pursuant to the Company's stock option plans, directors who are not
full-time employees of the Company automatically are granted an option to
purchase 3,000 shares of the Company's Common Stock upon re-election as a
director at the Annual Meeting of Shareholders. In addition, in order to attract
experienced individuals, new directors joining the Board of Directors
automatically are granted an option to purchase 20,000 shares of the Company's
Common Stock. All such director options are granted at an exercise price equal
to the fair market value of such shares on the date of grant of such options,
and such options vest after one year.
A Compensation Committee of the Board of Directors, currently consisting of
Mrs. Greetham and Messrs. Williams and Bartlett, administers the Company's Stock
Option Plan (the "1983 Option Plan") and 1989 Stock Option and Stock
Appreciation Rights Plan (the "1989 Option Plan") described below, votes on
matters concerning participation in these Plans and makes recommendations to the
entire Board of Directors as to other matters of compensation of officers and
directors. The members of this committee may themselves participate therein. The
Compensation Committee met on four occasions by written consent during the year
ended December 31, 1994.
The Finance and Audit Committee of the Board of Directors, whose members
are Mr. Williams, Mrs. Greetham, and Mr. Bartlett, reviews certain financial and
audit matters relating to the Company. The Finance and Audit Committee held two
meetings during the year ended December 31, 1994. A Planning Committee of the
Board of Directors, currently consisting of Mr. Bartlett and Mr. Step,
coordinates corporate strategic planning. The Planning Committee held three
meetings during the year ended December 31, 1994.
A Nominating Committee makes recommendations to the full Board of Directors
concerning nominees for election as directors of the Company. The Nominating
Committee members are Mr. Williams and Mr. Step. In making its recommendations,
the Nominating Committee will consider as potential nominees persons recommended
by the Company's shareholders. Any such recommendations should be in writing and
should be mailed or delivered to the Company, marked for the attention of the
Company's Secretary, on or before the date for receipt of shareholder proposals
for the next annual meeting. See "Shareholder Proposals for the 1996 Annual
Meeting."
During the year ended December 31, 1994, the Board of Directors met on six
occasions and also took action on one occasion by written consent. Due to the
frequent meetings of the Board of Directors during the year, a
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<PAGE>
number of matters that otherwise would have been addressed in separate meetings
of the Compensation Committee, Finance and Audit Committee, and Planning
Committee during that period were instead addressed at meetings of the entire
Board of Directors. Each director attended at least 75% of the meetings of the
Board and those committees on which the director served.
Two directors served under consulting agreements during calendar year 1994.
Mr. Bartlett finished serving under a two year consulting agreement which
commenced September 15, 1992 and expired September 15, 1994. In consideration
for consulting during 1994 on Company operations, business development, and
strategic planning, the Company paid Mr. Bartlett approximately $18,000 at the
rate of $1,800 per diem of invoiced consulting time as well as related travel
expenses. Pursuant to a consulting agreement which commenced December 1, 1994,
for consulting on all matters pertaining to its acquisition program, its pending
litigations and its financial public relations program in 1994 the Company paid
Mr. Williams $56,000 as well as related travel expenses.
EXECUTIVE OFFICERS
In addition to Mr. Williams, Chairman of the Board, the following persons
are executive officers of the Company:
Roger D. Blevins, Pharm.D., age 39, joined the Company as Director of
Cardiovascular Research in July 1988, appointed Vice President of Research and
Development in October 1990 and was appointed President and Chief Operating
Officer in June 1995. From July 1986 to July 1988, he was Director of
Cardiovascular Research, Department of Medicine, Sinai Hospital of Detroit, and
from July 1985 to July 1986 he was the Associate Director of the Center for
Cardiovascular Research at the same institution. Dr. Blevins received his
doctorate of pharmacy degree from Wayne State University, Detroit, Michigan in
May 1982.
John E. Barnhardt, age 47, joined the Company as Corporate Controller in
November 1993 and was appointed Chief Financial Officer and Corporate Secretary
in September 1994. His primary responsibilities include Finance and
Administration, Investor Relations and Human Resources. From 1979 to 1993, he
served as Controller, Secretary and Treasurer for U.S. Floor Systems, Inc. and
Microwave Laboratories, Inc., two high-tech manufacturing corporations, and was
employed from 1976 to 1979 as a Certified Public Accountant for Ernst & Young.
Mr. Barnhardt received his B.S. degree in Life Sciences from North Carolina
State University and subsequently received his Accounting degree from the
University of North Carolina at Charlotte in May 1976.
All previous employment agreements have terminated, and as a matter of
corporate policy all executive officers serve at the discretion of the Board of
Directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the American Stock Exchange. Officers, directors and greater than
ten-percent shareholders are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Form 5 were required, the Company
believes that during the year ended December 31, 1994, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with, except that Mr. Barnhardt filed late the
Report on Form 3 required as a result of his becoming an executive officer of
the Company.
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SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth as of September 30, 1995 the number and
percentage ownership of the Company's voting securities by all persons
(including any "group" as that term is defined in Section 13 (d) (3) of the
Securities Exchange Act of 1934) known to the Company to own beneficially more
than 5% of the Company's Common Stock, being the only outstanding class of the
Company's voting securities, based upon reports filed by each of such persons
with the Securities and Exchange Commission, and the number and percentage
ownership of the Company's equity securities so owned by each director, each
executive officer named in the compensation tables in this Proxy Statement and
by all directors and such executive officers as a group. Except as otherwise
indicated, and subject to applicable community property and similar laws, each
of the persons named has sole voting and investment power with respect to the
securities owned by him. An asterisk denotes beneficial ownership of less than
1%.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address Beneficially Owned Common Stock
<S> <C> <C>
State of Wisconsin.................................. 1,095,900 9.64
Investment Board
P.O. Box 7842
Madison, Wisconsin 53707
Roger D. Blevins, Pharm.D........................... 125,357(1) 1.10
John E. Barnhardt................................... 1,500(2) *
Richard C. Williams................................. 126,000(3) 1.11
Elizabeth M. Greetham............................... 66,000(4) *
William M. Bartlett................................. 16,120(5) *
Eugene L. Step...................................... 26,000(6) *
Albert D. Angel..................................... 0 *
All Directors and Executive Officers of the Company
as a Group (seven persons)........................ 360,977(7) 3.18
</TABLE>
(1) Includes 94,000 shares subject to currently exercisable options held by Dr.
Blevins.
(2) Includes 1,000 shares subject to currently exercisable options held by Mr.
Barnhardt.
(3) Includes 66,000 shares subject to currently exercisable options held by Mr.
Williams.
(4) Includes 66,000 shares subject to currently exercisable options held by Mrs.
Greetham.
(5) Includes 16,000 shares subject to currently exercisable options held by Mr.
Bartlett.
(6) Includes 26,000 shares subject to currently exercisable options held by Mr.
Step.
(7) Includes an aggregate of 269,000 shares subject to currently exercisable
options held by officers and directors of the Company.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is composed entirely
of directors who have never been employees of the Company. The Committee is
responsible for setting and administering the policies and programs that govern
both annual compensation and employee incentive options.
In 1991 the Company adopted a Management Incentive Plan (the "Incentive
Plan") to provide additional cash compensation to key Company executives based
on their individual performance as well as the financial performance of the
Company. Plan participants must be approved by the Compensation Committee of the
Board of Directors, which establishes annual ceiling amounts of distributions
under the Incentive Plan for each participant based on such individual's annual
salary.
The executive compensation program is designed to align compensation with
the Company's business strategy, values and management initiatives, taking into
account the results of a 1992 survey (the "Comparative Survey") developed by an
independent compensation consulting firm of the reported cash and stock option
compensation for the chief executive officer and other executives of the
following ten (10) pharmaceutical discovery
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companies, each believed to be comparable in size and development stage to the
Company: Athena Neurosciences, Inc. Cephalon Corp., Gensia Pharmaceuticals,
Inc., Glycomed, Inc., Icos Corp., Isis Pharmaceuticals Corp., Idec
Pharmaceuticals Corp., Medimmune, Inc., Somatogen, Inc. and U.S. Bioscience,
Inc. The purpose of the Survey was to obtain suitable comparative information to
enable the Committee to establish the executive compensation program it believed
necessary to enable the Company to attract and retain key executives critical to
the long term success of the Company. The Survey company selection was based on
the Fourth Annual Pharmaceutical Industry Executive Compensation Study, and the
companies compared in the Survey do not, as a group, correspond to the group of
companies used in the published industry index plotted in the Performance Graph
hereinafter set forth. The compensation levels and associated job descriptions
of comparable companies as reflected in the Survey are highly utilized to
establish base salary, annual bonus and options, which the Committee reviews
annually for possible adjustment. By having a significant amount of compensation
in the form of annual bonus and stock options awarded at the discretion of the
Committee based 33% on each executive's performance of his or her own set of
corporate strategic objectives ("Objectives") and 67% on the Company's
achievement of its financial plan, as described below, the program is intended
to:
(Bullet) Implement the Company's annual and long-term strategic
plans;
(Bullet) Reward superior performance; and
(Bullet) Help attract and retain key executives critical to the
long-term success of the Company.
The Company's executive compensation program consists of two key elements:
(1) an annual component, i.e., base salary and annual bonus, and (2) a long-term
component, i.e. stock options. The amount of salary, bonus and options granted
for 1994 was based on the Comparative Survey with the goal of providing total
compensation that approximates the median of the range of the compensation, both
in the aggregate and for each compensation component, reported in the
Comparative Survey to have been paid by the subject comparable companies. The
program rewards the management team most substantially if the Company achieves
its financial plan, and it also recognizes meaningful differences in individual
performance and offers the opportunity to earn above average rewards when
merited by such individual performance.
For 1994 the Company's financial plan was substantially met and achievement
of individual Objectives ranged from 100 to 87 percent.
The policies with respect to each of these elements, as well as the basis
for determining the 1994 compensation of the Company's named executive officers,
and specifically Dr. Prestayko, the former President and Chief Executive
Officer, are described below.
(1) Annual Component: Base Salary and Annual Bonus
Base Salary. Base salaries for executive officers are determined by the
Committee with reference to the minimum to midpoint of the salary range for each
officer as reflected by the officer's compensation level and associated job
description and a general assessment of the executive's performance, experience
and potential. The Committee establishes these salaries annually or in
connection with the officer's employment agreement, if any. Specific measures of
corporate financial or other performance are not a factor.
Annual Bonus. An annual bonus may be paid to executive officers following
the end of each fiscal year, up to a maximum percentage of base salary as
determined by the Committee for such year either in their respective employment
agreements, if any, or otherwise based on the job description. (For 1994
performance, the Committee increased the maximum percentage of base salary to
35% for the CEO and 30% for other Officers.) The maximum bonus percentage was
based on the information in the Comparative Survey. Sixty-seven percent of the
bonus is based on the Company's achievement of its financial plan, and 33% of
the bonus is awarded based on the Committee's evaluation of the officer's
achievement during the year of his or her Objectives. All Objectives are
prepared by the Chief Executive Officer and approved by the Committee, and each
Objective had the same relative importance to the Committee. The financial plan
is prepared once a year and approved by the Board of Directors. Achievement of
such a plan is based on actual to budget variances and their controllable
significance.
(2) Long-Term Component:
Stock Options. In 1993, the Committee established levels for the amount of
annual stock options to be granted to the Chief Executive Officer and other
executive positions, which were set to approximate the median
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of the range of the awards reported in the Comparative Survey to have been paid
by the subject comparable companies (up to 65,000 shares for the CEO, 40,000
shares for Vice Presidents/Officers and 20,000 shares for the Chief Financial
Officer). Prior year option grants were not considered in determining such
levels or the size of the 1994 awards. The Committee awards options exercisable
for a period of 10 years to buy a number of shares of the Company's Common Stock
at a price equal to the market price of the stock on the date of grant. For 1994
option grants, 50% of the options awarded vest automatically after one year. The
balance of such options are subject to reduction, based 33% on the Committee's
evaluation of the executive's achievement of his Objectives for the year (which
are the same Objectives reviewed in determining the amount of the executive's
annual bonus) and based 67% on the Company's achievement of its financial plan,
and as adjusted, vest two years after grant. The Committee believes that,
because these options gain value only to the extent the stock price exceeds the
option exercise price during the life of the option, management's equity
participation helps create a long-term partnership between management/owners and
other shareholders. The Committee also believes that its policy of granting
stock options on a regular basis and encouraging stock ownership has played a
strong part in retaining an excellent team of executives and managers.
The Committee set the annual and long-term compensation for Dr. Blevins
near the median of the range reported in the Comparative Survey to have been
paid by the subject comparable companies. The Committee determined that Dr.
Blevins had achieved 100% of the following objectives: (1) finalizing all the
U.S. Food and Drug Administration requirements for approval of the Company's
Adenoscan drug; (2) developing the Company's current drug portfolio; (3)
developing an acquisition plan for inlicensing opportunities and defining
strategy for outlicensing; and (4) administering the Company's research and
development. The Committee accordingly determined that Dr. Blevins had earned
100% of both his maximum and annual bonus and options.
In 1994 Dr. Prestayko, the former President and Chief Executive Officer,
served under an employment agreement the terms of which were determined by the
Committee taking into account the information contained in the Comparative
Survey. Accordingly, the agreement fixed each component of Dr. Prestayko's
compensation at approximately the median of the range therefor reported in the
Survey to have been paid by the subject comparable companies, as follows: Annual
salary at $215,000; Performance bonus of up to 35% of his annual salary; and
40,000 stock options to be earned and vested as described above. In February
1995, the Committee determined that Dr. Prestayko had achieved an aggregate 87%
performance of the following Objectives: (1) finalizing all the U.S. Food and
Drug Administration requirements for approval of the Company's Adenoscan drug;
(2) formulating and implementing the Company's strategic plan; (3) product
planning, acquisition, and outlicensing; (4) building and implementing
communications strategies; and (5) creating and implementing the Scientific
Advisory board activities. The Committee considered all of the foregoing
Objectives in determining both his bonus and options. Accordingly, the Committee
determined that Dr. Prestayko had earned 87% of the maximum 40,000 options
awarded under his 1994 employment agreement for vesting in two years, or 17,400
options, and a $65,000 bonus for the year.
The Compensation Committee of the Board of Directors
Elizabeth Greetham, Chairman
Richard C. Williams
William M. Bartlett
EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
Dr. Prestayko served during 1994 under a one year employment agreement which
expired December 31, 1994 providing for a $215,000 annual base salary, a bonus
of up to 35% of his base salary determined at the discretion of the Board of
Directors plus the grant of 40,000 nonqualified stock options. Dr. Blevins
served during 1994 under an employment agreement that commenced as of October 1,
1993 and expired December 31, 1994 providing for an annual base salary of
$146,600, a bonus of up to 30% of his base salary determined at the discretion
of the Board of Directors plus the grant of 20,000 stock options. For all of the
foregoing options of Dr. Prestayko and Blevins, 50% of the options vest after
one year; and the other 50% are subject to reduction based on the achievement of
the Company's financial plan (67%) and their Objectives (33%) for the year and,
as adjusted, vest two years after grant.
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INCENTIVE COMPENSATION PLAN
In 1991 the Company adopted a Management Incentive Plan (the "Incentive Plan")
to provide additional cash compensation to key Company executives based on their
individual performance as well as the financial performance of the Company. Plan
participants must be approved by the Compensation Committee of the Board of
Directors, which establishes annual ceiling amounts of distributions under the
Incentive Plan for each participant based on such individual's annual salary.
Distributions are based 67% on the Company's achievement of its financial plan
and 33% based on the Committee's evaluation of the participant's achievement
during the year of his or her Objectives.
SUMMARY COMPENSATION
The following Summary Compensation Table reflects the most highly compensated
executive officers whose total annual salary and bonus for the last completed
fiscal year exceeded $100,000 (the "named executive officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
BONUS COMPENSATION
EARNED OTHER ANNUAL SECURITIES UNDERLYING
NAME & PRINCIPAL POSITION (1) YEAR SALARY ($) ($)(2) COMPENSATION ($) OPTIONS/SAR'S (#)
<S> <C> <C> <C> <C> <C>
Archie W. Prestayko, Ph.D. 1994 215,000 65,317 183,955(3) 40,000
President & Chief Executive Officer 1993 204,527 50,000 228,146(4) 53,000
1992 179,538 42,960 -- 60,000
Roger D. Blevins, Pharm. D. 1994 146,600 43,980 -- -- (7)
Vice President Research & Development 1993 137,417 52,432(5) 83,240(6) 20,000
1992 119,166 19,578 -- 50,000
</TABLE>
(1) Archie W. Prestayko, Ph.D., the former President and Chief Executive
Officer, left the Company in June 1995 to pursue personal scientific
interests.
(2) Represents the amount paid to the named executive officer pursuant to the
Company's 1991 Management Incentive Plan. See Incentive Compensation Plan
for a brief description of the bonus plan.
(3) The Compensation Committee of the Board of Directors authorized the
forgiveness of a $100,000 Bridge Loan for the named executive officer as
well as the $83,955 "gross up" for taxes associated with the loan used to
pay his indebtedness to the Company referenced in Footnote 4 below.
(4) Represents the amount paid to the named executive officer for the sale of a
residence pursuant to the Company's relocation policy, which was applied
without discrimination to all relocated officers and employees. The
compensation represents the $112,500 difference between the market value and
appraisal value as well as the $114,661 "gross up" for taxes associated with
the sale of the residence, plus $985 of imputed fair-market interest on the
$100,000 bridge loan to the named executive officer due upon the sale of his
former residence in Redondo Beach, California. The amount subject to
gross-up ($136,568) included the difference between market value and
appraisal value along with expenses associated with the sale of the
residence.
(5) In recognition of the named executive officer's contribution over the years
to Medco, the Compensation Committee of the Board of Directors authorized
the payment of $21,131 as a bonus to the named executive officer. The bonus
was utilized for named executive officer's payment of indebtedness to the
Company. The remaining amount represents the 1993 bonus earned.
(6) Represents the amount paid to the named executive officer for the sale of a
residence pursuant to the Company's relocation policy, which was applied
without discrimination to all relocated officers and employees. The
compensation represents the $29,821 difference between payoff and market
value as well as the $30,832 "gross up" of taxes associated with the sale of
the residence. The amount subject to gross up ($36,821) included the
difference between payoff and market value along with expenses associated
with the sale of the
8
<PAGE>
residence. Also includes $15,587 representing the "gross up" for taxes
associated with the bonus paid to the named executive officer used to pay
his indebtedness to the Company referenced in Footnote 5 above.
(7) The options granted in 1993 for the named executive officer satisfied his
employment agreement which commenced October 16, 1993 and expired December
31, 1994. Therefore, no additional options were granted during 1994.
STOCK OPTION PLANS AND STOCK OPTION GRANTS AND EXERCISES IN 1994
The Company currently has two stock option plans in operation, the 1983
Option Plan and the 1989 Option Plan. Both plans authorize the grant of options
to purchase shares of Common Stock to key employees of the Company, including
directors, officers, and significant employees, and to other persons who provide
important services to the Company. The 1983 Option Plan, as subsequently
amended, authorized the grant of options to purchase a total of 1,200,000 shares
of Common Stock, and the 1989 Option Plan, as subsequently amended, authorized
the grant of options to purchase a total of 1,500,000 shares of Common Stock.
Both option plans are administered by the Compensation Committee, which,
among other things, determines the persons who are to receive options and the
number of shares to be subject to each option. With respect to option grants to
members of the Compensation Committee, the option plans are administered by the
Board of Directors as a whole. At present, there are two officers, five
non-officer directors and seven other employees of the Company who are eligible
to participate in the option plans, together with other persons who may provide
significant services to the Company.
Each option granted under the option plans (except for certain incentive
stock options which must be exercised sooner) must be exercised within a period
fixed by the Compensation Committee, which may not exceed ten years from the
date of grant of the option. Options may be made exercisable, in whole or in
installments, as determined by the Compensation Committee. Options may not be
transferred other than by will or the laws of descent and distribution, and
during the lifetime of an optionee may be exercised only by him. Options
generally must be exercised three months after the termination of the optionee's
association with the Company, except in certain cases such as retirement (in
which event the options may be exercised for up to three months following
retirement), or death (in which event the options may be exercised for up to
twelve months following death) but not later than the expiration date of the
options. Those options that are granted under the option plans at an option
exercise price equal to not less than the fair market value of the Common Stock
on the date of grant to persons employed by the Company (110% of such fair
market value in the case of any employee who owns in excess of 10% of the
Company's voting securities) will qualify to be "incentive stock options" within
the meaning of Section 422(b) of the Internal Revenue Code of 1986, and the
Compensation Committee may designate such options accordingly. Other options
granted under the option plans will be nonqualified options. The exercise price
of any option granted under the option plans may be paid in cash or, with the
consent of the Compensation Committee, partly or entirely with Common Stock
based on the fair market value thereof on the date of exercise.
The option plans both limit the maximum number of shares for which options
may be granted to any one participant to 33 1/3% of the shares reserved for
issuance under such option plans. No participant may in any one calendar year
receive options under the option plans with respect to more than 15% of the
shares reserved for issuance. The number of shares for which options may be
granted each year under both plans to directors who are not full-time employees
of the Company are fixed.
The following table sets forth information regarding the number of stock
options that were granted during the calendar year ended December 31, 1994 to
the named executive officers. In addition, in accordance with the rules of the
Commission, the table shows the hypothetical gains for such options based on
assumed rates of annual compound stock price appreciation of 5% and 10% from the
date the options were granted over the full option term.
9
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL
SECURITIES OPTIONS/SARS EXERCISE RATES OF STOCK
UNDERLYING GRANTED TO OR BASE PRICE APPRECIATED
OPTIONS/SARS EMPLOYEES IN PRICE FOR OPTION TERM (2)
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) EXPIRATION DATE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Archie W. 40,000
Prestayko......... 54% 15.00 12/31/03 377,337 956,245
</TABLE>
(1) For 1994 option grants, 50% of the options will be earned and will vest
after one year; and the other 50% will be earned based 67% on the Company's
achievement of its financial plan and 33% based on the optionee's
achievement of his Objectives for the year and will vest after two years.
(2) For the named executive officers, the value is calculated from the option
price per share of options granted in fiscal year 1994. Potential realizable
value is listed for illustration purposes only. The values disclosed are not
intended to be and should not be interpreted as representations or
projections of future value of the Company's Common Stock or of the stock
price.
The following table sets forth information regarding the exercise of
options and the numbers of unexercised stock options held by named executive
officers at December 31, 1994.
AGGREGATED OPTION/SAR EXERCISES IN 1994
AND OPTION/SAR VALUES AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS/SARS AT
ACQUIRED ON VALUE OPTIONS/SARS AT FISCAL YEAR-END
EXERCISE REALIZED FISCAL YEAR-END ($)(2)
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Archie W. --
Prestayko......... -- 221,750 20,000 410,625 --
Roger D. Blevins.... 75,000 467,188 94,000 10,000 -- --
</TABLE>
(1) The computation of the value realized amount is the aggregate difference
between the option exercise price and the market closing prices on the dates
of exercise of the Company's Common Stock on the American Stock Exchange.
(2) The computation of the value of unexercised in-the-money options is the
aggregate difference between the option exercise prices and the December 31,
1994 closing price of the Company's Common Stock on the American Stock
Exchange.
OTHER BENEFIT PLANS
At present, other than the Incentive Compensation Plan, the Company has no
corporate sponsored pension, retirement or other employee benefit plan (other
than group medical, life, and disability insurance benefits and parking provided
to all employees on a non-discriminatory basis).
TRANSACTIONS WITH OFFICERS
As described above in Note 3 to the Summary Compensation Table, the
Compensation Committee of the Board of Directors authorized the forgiveness of a
$100,000 bridge loan for Dr. Prestayko as well as the "gross up" for taxes
associated with the loan used to pay off his indebtedness to the Company.
10
<PAGE>
PERFORMANCE GRAPH
Set forth below is a performance graph comparing the yearly cumulative
total stockholder return on the Company's Common Stock with the yearly
cumulative total stockholder return on stocks included in the S&P 500 Index, a
broad equity market index, and the yearly cumulative total stockholder return on
stocks included in the Health Care Drugs Index, a published S&P composite index.
The investment comparisons assume the base year (1989) is equal to an index of
100. Each of the cumulative total returns was computed assuming the reinvestment
of stock dividends. The years compared are 1990, 1991, 1992, 1993 and 1994
calendar years.
[GRAPH GOES HERE]
INDEXED CUMULATIVE RETURNS
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Medco Research, Inc........ 100 38.14 166.95 115.25 102.54 77.12
S&P 500 Index.............. 100 96.90 126.42 136.05 149.76 151.74
Health Care Drugs Index.... 100 114.30 188.35 150.98 138.16 160.85
</TABLE>
11
<PAGE>
RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT ACCOUNTS
The Board of Directors unanimously recommends ratification of its
appointment of KPMG Peat Marwick to serve as independent accountants for the
Company for the 1995 fiscal year. KPMG Peat Marwick has served as the Company's
independent accountants since November 1993. A KPMG Peat Marwick representative
will be present at the Annual Meeting and will be available to make a statement,
if he or she so desires, and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY.
PROXIES WILL BE VOTED "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK
IF NO DIRECTION IS GIVEN IN THE PROXIES.
OTHER MATTERS
A copy of the Company's Annual Report for the year ended December 31, 1994
has preceded this Proxy Statement.
Management of the Company does not know of any matter to be acted upon at
the Annual Meeting other than the matters described above. If any other matter
properly comes before the Annual Meeting, however, the proxy holders will vote
the proxies thereon in accordance with their best judgment.
PROXY SOLICITATION
The cost of soliciting the proxies will be borne by the Company. This Proxy
Statement and the accompanying materials, in addition to being mailed directly
to shareholders, will be distributed through brokers, custodians, nominees, and
other like parties to beneficial owners of shares of Common Stock. The Company
will, upon request, reimburse such parties for their charges and expenses in
connection therewith.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1996 annual meeting
of shareholders of the Company must be received by June 19, 1996. Such proposals
should be addressed to the Secretary of the Company.
October 16, 1995
12
<PAGE>
MEDCO RESEARCH, INC.
85 T. W. ALEXANDER DRIVE
RESEARCH TRIANGLE PARK, NORTH CAROLINA 27709
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Richard C. Williams, as proxy holder with
power to appoint his substitute and hereby authorizes the proxy holder to
represent and vote, as designated on the reverse side of this proxy card, all
the shares of Common Stock of Medco Research, Inc. held of record by the
undersigned on October 16, 1995, at 10:00 a.m. local time at the annual
meeting of shareholders to be held on November 30, 1995, or any adjournment
thereof.
(Continued and sign on Reverse Side)
<PAGE>
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS
[ ] FOR all the nominees [ ] WITHHOLD all the nominees
DIRECTORS RECOMMEND: A VOTE FOR ELECTION OF THE FOLLOWING DIRECTORS
Nominees: 1. Richard C. Williams
2. Elizabeth M. Greetham
3. William M. Bartlett
4. Eugene L. Step
5. Albert D. Angel
2. Proposal to ratify the appointment of KPMG Peat Marwick as independent
accountants. [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxy holder is 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" PROPOSAL 1 AND 2.
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE.
SIGNATURE ________________________
DATE _________________
SIGNATURE, IF HELD JOINTLY ________________________________
DATE _________________
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AN
AUTHORIZED PARTNER.
