SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(x ) Filed by the Registrant
( ) 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-b(e)(2))
(x ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12
Medco Research Inc.
(Name of Registrant as Specified In Its Charter)
Medco Research Inc.
(Name of Person(s) Filing Proxy Statement If Other Than Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
( ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $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: *
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
(Set forth the amount on which the filing fee is calculated and state how
it was determined)
( ) Fee previously paid 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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4) Date Filed:
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MEDCO RESEARCH INC.
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 20, 1996
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 Warwick, 65 West 54th Street, New York, New York at 10:00 a.m. on June
20, 1996 for the following purposes, as more fully described in the
attached Proxy Statement:
1. To elect eight 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 May 3, 1996
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 Annual
Meeting by complying with the procedures set forth in the following Proxy
Statement under "General Information."
By Order of the Board of Directors
ADAM C. DERBYSHIRE
SECRETARY
Research Triangle Park,
North Carolina 27709
May 22, 1996
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MEDCO RESEARCH, INC.
PROXY STATEMENT FOR ANNUAL MEETING
TO BE HELD JUNE 20, 1996
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 June 20, 1996, and 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 by
the Board 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, and they also will have
discretionary authority to cumulate votes in the election of directors in the
event any shareholder gives notice of his or her intention to cumulate votes for
directors of the Company. 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.
A proxy may be revoked at any time before it has been exercised by written
notice of revocation given 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 May 3, 1996
are entitled to vote at the Annual Meeting. There were 11,155,832 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.
This Proxy Statement, together with the accompanying proxy, is first being
mailed to shareholders on or about May 22, 1996.
<PAGE>
ELECTION OF DIRECTORS
NOMINEES
The Board of Directors has recommended, and approved, the nomination of the
following persons, all of whom are currently directors:
Albert D. Angel
William M. Bartlett
Jay N. Cohn, M.D.
Marvin S. Hausman, M.D.
Mark B. Hirsch
Manfred Mosk, Ph.D
Eugene L. Step
Richard C. Williams
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 nomine 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 nominees. Directors are to be
elected to hold office until the next annual meeting of shareholders and until
their successors are elected and qualified.
The following biographical information is furnished with respect to the
eight nominees for election as directors:
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 Llewellyn Park, 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.
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. He currently serves on the advisory board of AMOCO Technology
Company, a Division of AMOCO Corporation. He is a Director of North American
Medical Corporation. 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 a
Corporate Vice President, President and Chief Executive Officer of G.D. Searle &
Company's Medical Products Group, and as President of the Atlantic International
Division, 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.
JAY N. COHN, M.D., age 65, joined the Company as a director in May 1996. He
is currently Professor of Medicine and Head, Cardiovascular Division, Department
of Medicine, University of Minnesota Medical School, and holds a staff
appointment at the VA Medical Center in Minneapolis. Dr. Cohn is the author of
over 400 scientific publications and is currently editor-in-chief of the JOURNAL
OF CARDIAC FAILURE. He is internationally recognized for contributions to the
management of cardiovascular diseases and holds several patents on inventions
aimed at improving diagnostic and therapeutic approaches to heart failure and
hypertension. He received his
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M.D. from Cornell University in 1956, and is a Fellow of the American College of
Physicians and the American College of Cardiology.
MARVIN S. HAUSMAN, M.D., age 54, rejoined the Company as a director in May
1996. He currently serves as a consultant to the pharmaceutical industry. He is
President of Northwest Medical Research Partners, Inc. and a Director of Regent
Assisted Living, Inc. Dr. Hausman served as Clinical Instructor and Visiting
Surgeon, Department of Surgery, U.C.L.A. Medical Center from 1975-1992. He is a
co-founder of Medco Research, Inc. He received his M.D. from the New York
University School of Medicine in 1967, and he is a Fellow of the American
College of Surgeons.
MARK B. HIRSCH, age 49, joined the Company as a director in May 1996. Since
May 1996, Mr. Hirsch has been Executive Vice President and Chief Financial
Officer of RedCell, Inc.. From April 1993 to April 1996, he was Vice President,
Corporate Development, of CV Therapeutics. From 1991 to March 1993, Mr. Hirsch
was Vice President of Business Development and Chief Financial Officer of Arris
Pharmaceutical Corporation. From 1988 to 1991, Mr. Hirsch was a partner at
Montgomery Medical Ventures, L.P. II. From 1985 to 1988, he was Vice President
of Business Development of Genentech, Inc. and from 1969 to 1985 he was a Vice
President at American Hospital Supply Corporation's Hospital Sector and Hospital
and Pharmaceutical Business Divisions. Mr. Hirsch received a B.S. in accounting
from the University of Illinois, and he is a certified public accountant.
MANFRED MOSK, PH.D., age 63, rejoined the Company as a director in March
1996. He is President of Technomedics Management & Systems, Inc., a private
company which identifies technologies and assists with the transfer of
technology primarily in the biopharmaceutical and medical device fields. He is
also an Advisor of Asian Pharmaceutical Holdings, a holding company with
investments in pharmaceutical companies in China, a Director of the Jonsson
Cancer Center Foundation (UCLA), Vice Chairman and a Director of the California
State University Institute, Health Economics Editor for the American Journal of
Therapeutics, and co-founder of Managed Eye Care Centers of America. Dr. Mosk is
a co-founder of Medco Research, Inc. and was its President and Chief Executive
Officer from its inception until his voluntary retirement in 1990. He holds a
Bachelor of Science degree in Business Administration, and Master of Science and
Ph.D. degrees in Business Administration, from California State University and
California Western University, respectively.
EUGENE L. STEP, age 66, has served as a director of the Company since
January 1993. He currently serves as a director of Scios Nova, Inc.,
Cell-Genesis, Inc., Pathogenesis, Inc. and GMIS, Inc. He also serves as an
independent business consultant. 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. Mr. Step has a B.A. degree in Economics from the
University of Nebraska and a M.S. degree in Accounting and Finance from the
University of Illinois.
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., a private equine diagnostic company. Mr. Williams has a B. A.
degree from DePauw University and a MBA from the Wharton School of Business.
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 per diem for each Board meeting and the Annual
Shareholders Meeting attended by that director and $400 for each Board or Board
Committee meeting held by telephone conference call lasting up
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to two hours but greater than a half hour and $600 for each such meeting lasting
more than two hours. 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. Angel 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, or itself approves, other matters of
compensation of officers and directors. The Compensation Committee met on three
occasions by written consent during the year ended December 31, 1995.
The Finance and Audit Committee of the Board of Directors, whose members
currently are Messrs. Bartlett, Step, and Williams, reviews certain financial
and audit matters relating to the Company. The Finance and Audit Committee held
two meetings during the year ended December 31, 1995.
A Nominating Committee makes recommendations to the full Board of Directors
concerning nominees for election as directors of the Company. The Nominating
Committee members currently are Messrs. Williams, Step, and Bartlett. 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 proposal for the next annual meeting. See
"Shareholder Proposals for the 1997 Annual Meeting."
During the year ended December 31, 1995, the Board of Directors met on six
occasions and also took action on three occasions by written consent. Due to the
frequent meetings of the Board of Directors during the year, a number of matters
that otherwise would have been addressed in separate meetings of the
Compensation Committee, Finance and Audit Committee, and Nominating 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.
One director, Mr. Williams, continued to provide consulting services to the
Company during the calendar year of 1995 pursuant to a consulting agreement
which commenced December 1, 1994. For consulting on all matters pertaining to
the Company's acquisition program, its pending litigations and its financial
public relations program in 1995, the Company paid Mr. Williams $144,000 as well
as related travel expenses.
EXECUTIVE OFFICERS
In addition to Mr. Williams, Chairman of the Board, the following person
currently is an executive officer of the Company:
ROGER D. BLEVINS, PHARM. D., age 40, is the President and Chief Operating
Officer of Medco Research, Inc. He joined the Company as Director of
Cardiovascular Research in July 1988, was 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.
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
(the "Commission") and the
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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, 1995, all Section 16(a) filing
requirements applicable to its officers and directors were complied with, except
that Dr. Blevins filed late his Form 5 reporting the grant of 20,000 stock
options on June 13, 1995 received when he was elected Chief Operating Officer of
the Company.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth as of May 17, 1996 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 10.01
Investment Board
P.O. Box 7842
Madison, Wisconsin 53707
Roger D. Blevins, Pharm.D........................... 130,357(1) 1.19
Albert D. Angel..................................... 500 *
William M. Bartlett................................. 17,120(2) *
Jay N. Cohn, M.D.................................... 0 *
Elizabeth M. Greetham............................... 16,000(3) *
Marvin S. Hausman, M.D.............................. 116,847(4) 1.07
Mark B. Hirsch...................................... 0 *
Manfred Mosk, Ph.D.................................. 350,715 3.20
Eugene L. Step...................................... 26,000(5) *
Richard C. Williams................................. 128,600(6) 1.18
All Directors and Executive Officers of the Company
as a Group (ten persons).......................... 786,139(7) 7.18
</TABLE>
(1) Includes 99,000 shares subject to currently exercisable options held by Dr.
Blevins.
(2) Includes 16,000 shares to currently exercisable options held by Mr.
Bartlett.
(3) Includes 16,000 shares subject to currently exercisable options held by Mrs.
Greetham.
(4) Includes 11,000 shares subject to currently exercisable call options held by
Dr. Hausman.
(5) Includes 26,000 shares subject to currently exercisable options held by Mr.
Step.
(6) Includes 16,000 shares subject to currently exercisable options held by Mr.
Williams.
(7) Includes an aggregate of 184,000 shares subject to currently exercisable
options held by executive officers and directors of the Company.
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REPORT OF THE COMPENSATION COMMITTEE FOR 1995 EXECUTIVE COMPENSATION
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 companies, each then 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 Comparative 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 Comparative Survey company selection was based on the Fourth
Annual Pharmaceutical Industry Executive Compensation Study, and the companies
compared in the Comparative Survey do not, as a group, correspond to the group
of companies used in the Health Care Drugs index plotted in the Performance
Graph hereinafter set forth. The compensation levels and associated job
descriptions of comparable companies as reflected in the Comparative 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 1995 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 1995 the Board of Directors determined that the Company's financial
plan was 50% achieved, and the Compensation Committee determined that
achievement of individual Objectives ranged from 100 to 65%.
The policies with respect to each of these elements, as well as the basis
for determining the 1995 compensation of the Company's named executive officers,
and specifically Dr. Blevins, President and Chief Operating 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
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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. The maximum
percentage of base salary is 35% for the Chief Executive Officer 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 were prepared by the President of the Company 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 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 and the President, 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 1995 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 1995
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 options remaining after such
reduction, if any, as a result of less than the Company's full achievements of
its financial plan and the executive's full achievement of his personal
Objectives become exercisable at the rate of 20% per year commencing with the
fifth anniversary of the date of grant. The Committee believes that, because
these options gain value only to the extent the price of the Company's Common
Stock increases above the option exercise price during the life of the option,
management's equity participation offers a significant incentive and helps
create a long-term partnership between management/owners and other shareholders.
The Committee set the annual and long-term compensation for Dr. Blevins
when he became President and Chief Operating Officer of the Company in June 1995
near the median of the range reported in the Comparative Survey to have been
paid by the subject comparable companies, and therefore his annual salary was
increased to $200,000, and his original 1995 option grant was increased by
20,000 options to an aggregate of 80,000 stock options of which 60,000 are to be
earned and vested as described above and 20,000 are to be earned and vested
after one year from the date of grant. His performance bonus of up to 30%
remained unchanged. The Committee determined that Dr. Blevins was entitled to
63% of his bonus and option award, based 67% on the Company's 50% achievement of
its financial plan and 33% on Dr. Blevins' 90% achievement of his individual
Objectives: (1) developing an acquisition plan for in-licensing opportunities
and defining strategy for outlicensing; (2) developing business plans and
commercial strategy for products; (3) acquisition and evaluation of in-licensing
opportunities; and (4) staffing of regulatory operations.
The Compensation Committee of the Board of Directors
Elizabeth M. Greetham, Chairperson
William M. Bartlett
Richard C. Williams
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EXECUTIVE COMPENSATION
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.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
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.
In 1995, in conjunction with its decision to eliminate employment
agreements for its executive officers, the Company adopted a policy to provide
benefits to its executive officers in the event of a change of control of the
Company or an executive officer's discharge without cause. A "change of control"
is defined as the failure, within 60 days after a sale of all or substantially
all of the assets of the Company, or a merger involving the Company in which it
is not the surviving entity, or any transaction having essentially the same
effect, or the assets acquiror or surviving company to indicate in writing that
it will continue to employ the executive officer for no less than the same base
salary, maximum bonus and option terms most recently granted to such officer. As
to the Company's President, a change of control also shall be deemed to occur,
at his option, on such date as Richard C. Williams shall, for whatever reason,
cease to be Chairman of the Board of the Company. In the event of a change of
control, for three years thereafter the Company shall continue to pay such
officer his prevailing annual base salary and to provide for his participation,
to the extent permitted by applicable law or insurance policy contract, in its
group life, hospital, medical and disability insurance plans, and any
retirement, pension or death benefit plans ("Benefit Plans").
"Discharge without cause" is defined as the termination of the employment
of an executive officer without "due cause", any material reduction in his
duties or authority or a more than 30% reduction in his annual base salary from
that for the immediately preceding fiscal year. The term "due cause" is defined
as an executive officer's material breach of any of the terms of his agreements
with the Company, willful gross negligence in carrying out his duties or
commission of an act of willful gross misconduct which has resulted in material
harm to the Company, as determined in good faith by the Board of Directors. In
the event of discharge without cause, the Company shall continue to pay the
executive officer's annual base salary for 24 months (President) or 12 months
(Chief Financial Officer) and to provide for his participation in the Benefit
Plans until he obtains employment which provides reasonably similar health and
medical coverage; provided, however, that such officer has the option,
exercisable at any time after six months from any such discharge, to receive the
balance of such payments in a lump sum, in which case his participation in the
Benefit Plans shall cease upon the payment thereof. The Company also shall
provide full outplacement services for six months (12 months for the President).
The executive officer also shall be entitled to receive, in respect of the year
of such discharge, his cash bonus, pro rated based on the number of completed
months of service during the year of discharge, and the discretionary
performance-based options he earned, in each case as determined by the
Compensation Committee using the performance level of such officer and the
Company for the prior year as their respective performance levels for the year
of discharge.
Dr. Archie W. Prestayko, the former President and Chief Executive Officer,
resigned from the Company on June 13, 1995 in order to pursue personal
scientific interests. Pursuant to the Company's Separation Agreement with Dr.
Prestayko, the Company agreed to pay him (1) severance in an aggregate amount of
$442,900, being an amount equal to 24 months of payments at the rate of his then
annual base salary of $221,450, (2) $28,096, representing an annual bonus of
5/12ths, being the pro rata portion based on five full months of service during
the 1995 calendar year, of the maximum bonus he could have earned under the
Incentive Plan assuming both he and the Company had achieved in 1995 the same
level of performance as they did in 1994, and (3) $9,227 for two weeks of earned
but unused 1994 vacation days.The Company also agreed to pay an out placement
firm $25,000
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for services to be rendered to Dr. Prestayko. Dr. Prestayko agreed to consult
with the Company for no additional consideration during the period he receives
his severance payments.
SUMMARY COMPENSATION
The following Summary Compensation Table reflects certain information
regarding the former Chief Executive Officer of the Company, who resigned in
June 1995, and the most highly compensated executive officers whose total annual
salary and bonus for the last completed fiscal year exceeded $100,000 (the
"named executive officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
BONUS OTHER COMPENSATION
EARNED ANNUAL SECURITIES UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION (1) YEAR SALARY ($) ($)(2) COMPENSATION ($) OPTIONS/SAR'S (#) COMPENSATION ($)
<S> <C> <C> <C> <C> <C> <C>
Roger D. Blevins, Pharm. D. 1995 180,826 34,266 -- 80,000(3) --
President & Chief Operating 1994 146,600 43,980 -- -- (4) --
Officer 1993 137,417 52,432 (5) 83,240(6) 20,000 --
Archie W. Prestayko, Ph.D. 1995 101,498 65,317 183,955(8) 35,000 157,275(7)
Former Chief Executive Officer 1994 215,000 50,000 228,146(9) 40,000 --
1993 204,527 53,000 --
</TABLE>
(1) Archie W. Prestayko, Ph.D., the former Chief Executive Officer, left the
Company in June 1995 to pursue personal scientific interests.
(2) Represents the amount earned by the named executive officer pursuant to the
Company's Incentive Plan. See Incentive Compensation Plan, above, for a
brief description of the Plan.
(3) The options granted to Dr. Blevins consisted of 60,000 shares associated
with the January 1995 annual grant to him as Vice President and additional
20,000 shares upon his election as Chief Operating Officer.
(4) The options granted in 1993 for Dr. Blevins satisfied his employment
agreement which commenced October 16, 1993 and expired December 31, 1994.
Therefore, no additional options were granted during 1994.
(5) In recognition of Dr. Blevins' contribution over the years to Medco, the
Compensation Committee of the Board of Directors authorized the payment of
$21,131 as a bonus to him in 1993, which he utilized to repay indebtedness
to the Company. The remaining amount represents the 1993 bonus earned.
(6) Represents the amount paid to Dr. Blevins by the Company 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 of Dr. Blevins' residence in
California 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 residence. Also includes $15,587 representing the
"gross up" for taxes associated with the bonus paid to Dr. Blevins used to
repay his indebtedness to the Company referenced in Footnote 5 above.
(7) Represents payments made to Dr. Prestayko pursuant to his Separation
Agreement. See Employment Contracts and Termination of Employment and
Change-in-Control Arrangements, above, for a description of such payments.
(8) The Compensation Committee of the Board of Directors authorized the
forgiveness of a $100,000 Bridge Loan for Dr. Prestayko 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 9 below.
(9) Represents the amount paid to Dr. Prestayko 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 him due upon the sale of his former residence in Redondo
Beach, California. The
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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.
STOCK OPTION PLANS AND STOCK OPTION GRANTS AND EXERCISES IN 1995
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.
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 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 is fixed.
The following table sets forth information regarding the number of stock
options that were granted during the calendar year ended December 31, 1995 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.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS/SARS EXERCISE ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO OR BASE PRICE APPRECIATED FOR
OPTIONS/SARS EMPLOYEES IN PRICE OPTION TERM (2)
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) EXPIRATION DATE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Roger D. Blevins.... 60,000 29% 13.25 12/31/04 499,971 1,267,025
Roger D. Blevins.... 20,000 10% 12.88 12/31/04 161,940 410,389
Archie W. 35,000
Prestayko......... 17% 13.25 12/31/04 291,650 739,098
</TABLE>
(1) For 1995 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,
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vest two years after grant. The options remaining after such adjustments
become exercisable 20% each year commencing with the fifth anniversary of
the date of grant.
(2) Potential realizable value is calculated based on the exercise price of the
options granted in fiscal year 1995 and is listed for illustration purposes
only. Such values are not intended to be and should not be interpreted as
representations or projections of the 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, 1995.
AGGREGATED OPTION/SAR EXERCISES IN 1995
AND OPTION/SAR VALUES AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS/SARS AT OPTIONS/SARS AT
EXERCISE REALIZED FISCAL YEAR-END FISCAL YEAR-END ($)(2)
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Roger D. Blevins.... -- -- 69,000 80,000 -- --
Archie W. 90,000
Prestayko......... 568,125 131,750 52,360 -- --
</TABLE>
(1) The computation of the value realized amount is the aggregate difference
between the option exercise price and the market closing price of the
Company's Common Stock on the American Stock Exchange on the dates of
exercise.
(2) The computation of the value of unexercised in-the-money options is the
aggregate difference between the option exercise price and the December 31,
1995 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).
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 (1990) is equal to an index of
100. Each of the cumulative total returns was computed assuming the reinvest-
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ment of stock dividends. The years compared are 1991, 1992, 1993, 1994, and 1995
calendar years.
(Total Return to Stockholders graph appears here. The plot points are listed
in the table below.)
INDEXED CUMULATIVE RETURNS
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Medco Research, Inc....................................... 100 437.78 302.22 268.89 202.22 184.44
S&P 500 Index............................................. 100 130.47 140.41 154.56 156.60 215.45
Health Care Drugs Index................................... 100 164.78 132.09 120.88 140.72 241.31
</TABLE>
RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT ACCOUNTS
The Board of Directors unanimously recommends ratification of its
appointment of KPMG Peat Marwick LLP to serve as independent accountants for the
Company for the 1996 fiscal year. KPMG Peat Marwick LLP has served as the
Company's independent accountants since November 1993. A KPMG Peat Marwick LLP
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 LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY.
PROXIES WILL BE VOTED "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK
LLP IF NO DIRECTION IS GIVEN IN THE PROXIES.
OTHER MATTERS
A copy of the Company's Annual Report for the year ended December 31, 1995
has been mailed to shareholders of the Company. The Annual Report does not form
any of the material for the solicitation of proxies.
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.
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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 1997 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1997 annual meeting
of shareholders of the Company must be received by February 15, 1997. Such
proposals should be addressed to the Secretary of the Company.
May 22, 1996
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