MEDCO RESEARCH INC.
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NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 29, 1998
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Dear Shareholder:
Notice is hereby given that the annual meeting of shareholders (the
"Annual Meeting") of Medco Research, Inc. (the "Company") will be held at the
Michelangelo Hotel - 152 West 51st Street, New York, New York at 10:00 a.m. on
July 29, 1998 for the following purposes, as more fully described in the
attached Proxy Statement:
1. To elect six directors of the Company to serve until the next
annual meeting of shareholders;
2. To approve an amendment to the Company's 1989 Stock Option and
Stock Appreciation Rights Plan increasing by 590,000 shares (from
1,500,000 to 2,090,000) the number of shares of Common Stock
authorized to be issued thereunder;
3. To ratify the appointment of Coopers & Lybrand LLP as independent
accountants for the Company; and
4. 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 June 15, 1998 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
June 19, 1998
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MEDCO RESEARCH, INC.
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PROXY STATEMENT FOR ANNUAL MEETING
TO BE HELD JULY 29, 1998
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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 July 29, 1998, 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, (ii) the proposed amendment to Company's 1989 Stock Option and Stock
Appreciation Rights Plan and (iii) the ratification of the appointment of
Coopers & Lybrand L.L.P. 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 June 15, 1998
are entitled to vote at the Annual Meeting. There were 10,549,732 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 June 24, 1998.
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ELECTION OF DIRECTORS
(Item 1)
The Board of Directors
The Company's business is managed under the direction of its Board of
Directors. The Board of Directors has designated as nominees for election five
of the directors currently serving on the Board (the other two not standing for
reelection) and Dr. Roger D. Blevins, the Company's President and Chief
Executive Officer. See "Nominees for Director" below for profiles of the
nominees.
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 the
proxies. The proxy holders may cast such votes entirely for one nominee or split
their votes among such number of nominees as they 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.
The Board recommends a vote FOR and solicits proxies in favor of the
nominees named below. 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, or until earlier resignation
or removal.
Nominees for Director
William M. Bartlett, age 64, has served as a Director of the Company since
September 1992. Since then Mr. Bartlett has been an independent health care
business consultant. He currently serves on the board of Vysis, Inc., a public
genomic diagnostic research company. 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 at American Hospital Supply Corporation as
President of the Atlantic International Division, and as President of the V.
Mueller Surgical Instrument Division. Mr. Bartlett has a BSCE from Duke
University and an Advanced Marketing Certification from the Kellogg School of
Northwestern University.
Roger D. Blevins, Pharm. D., age 42, is the President and Chief Executive
Officer of the Company. 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 and was appointed Chief Executive Officer in February 1998. 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.
Jay N. Cohn, M.D., age 67, joined the Company as a Director in May 1996. He
is currently Professor of Medicine, 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 500
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 is currently President of the American Society of Heart Failure
and President of the International Society of Hypertension. He received his M.D.
from Cornell University in 1956, and is a Fellow of the American College of
Physicians, the American College of Cardiology, and the American Association for
the Advancement of Science.
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Mark B. Hirsch, age 51, joined the Company as a Director in May 1996. Mr.
Hirsch is currently a consultant to the Biotech Industry. From December 1996 to
June 1997, Mr. Hirsch was the Chief Executive Officer and President of RedCell,
Inc. From May 1996 to December 1996, he was 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. From 1969 to 1985, Mr.
Hirsch held several positions with American Hospital Supply Corporation,
including Vice President of American's Hospital Sector. Mr. Hirsch received a
B.S. in accounting from the University of Illinois, and he is a certified public
accountant.
Eugene L. Step, age 67, has served as a Director of the Company since
January 1993. He currently serves as a Director of Scios, Inc., Cell-Genesis,
Inc., DBT Online Inc., Guidant Corp., and Pathogenesis, Inc. He served as
Executive Vice President and President of the Pharmaceutical Division of Eli
Lilly and Company from 1986 until his retirement in 1992. From 1973 through
1985, he also served as President of that company's Pharmaceutical Division. Mr.
Step 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 54, 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 Director of
Vysis, Inc., a public genomic diagnostic research company. 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 an MBA from the Wharton School of Business.
Compensation and Committees of the Board of Directors
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 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 if
they are not full-time employees of the Company. All such director options have
a term of ten years, are granted at an exercise price equal to the fair market
value of such shares on the date of grant of such options, and vest in full
after one year.
In October 1996 the Company changed its option grant policy by increasing
the term of new option grants to directors and employees from four to ten years.
Accordingly, in order to extend the benefits of such policy to the current
directors whose initial option grant had a term of four years and have expired,
on November 12, 1997 the Board granted to Eugene L. Step and William B. Bartlett
a ten-year option to purchase 20,000 and 10,000 shares of Common Stock,
respectively, at a price of $15.75, the closing price of the Company's Common
Stock on the American Stock Exchange on the trading date of grant. The expired
initial election options granted to Messrs. Step and Bartlett had exercise
prices of $16.5625 and $12.875, respectively. On November 12, 1997, the Company
also granted Mr. Bartlett a ten-year option to purchase 10,000 shares of Common
Stock at $15.75 in consideration of consulting services rendered.
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Mr. Richard C. Williams, Chairman of the Board, continued to provide
consulting services to the Company during 1997 pursuant to a consulting
agreement which commenced December 1, 1994. For his consulting services in 1997
on, among other things, the Company's potential acquisitions, its then pending
litigations and its financial public relations, the Company paid Mr. Williams
$144,000 as well as related travel expenses.
During the year ended December 31, 1997, the Board of Directors met on four
occasions. A number of matters that otherwise would have been addressed in
separate meetings of the Compensation Committee, Finance and Audit Committee,
and Corporate Governance Committee of the Board of Directors during that period
were instead addressed at Board meetings. Each director attended at least 75% of
the meetings of the Board and those committees on which the director served.
A Compensation Committee of the Board of Directors, currently consisting of
Mr. Angel and Drs. Cohn and Hausman, administers the Company's stock option
plans, 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. The Compensation Committee took
action on one occasion by written consent during the year ended December 31,
1997.
The Finance and Audit Committee of the Board of Directors, whose members
currently are Messrs. Bartlett, Hirsch and Step, reviews certain financial and
audit matters relating to the Company. The Finance and Audit Committee held one
meeting during the year ended December 31, 1997.
The Corporate Governance Committee currently are Messrs. Step, Angel and
Williams. A Corporate Governance Committee makes recommendations to the full
Board of Directors concerning nominees for election as directors of the Company.
In making its recommendations, the Corporate Governance 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 1999 Annual Meeting".
APPROVAL OF AMENDMENT TO THE
1989 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
(Item 2)
The Proposed Amendment
At the Annual Meeting, holders of Common Stock will be asked to approve an
amendment increasing by 590,000 shares (from 1,500,000 to 2,090,000) the number
of shares of Common Stock reserved for issuance under the Company's 1989 Stock
Option and Stock Appreciation Rights Plan (the "Plan"). This amendment was
adopted, subject to shareholder approval, by the Board of Directors on June 5,
1998.
As of June 19, 1998, there were outstanding stock options under the Plan
covering 980,130 shares of Common Stock, and only 6,583 shares remained
available for future awards under the Plan. Following the Annual Meeting, it is
expected that pursuant to the terms of the Plan each of the five non-employee
directors of the Company shall be granted nonstatutory options to purchase 3,000
shares of Common Stock upon their reelection. The Company does not have
available sufficient shares of Common Stock available for these or future option
grants. The Board believes the Plan has been successful in advancing the
interests of the Company and its shareholders and that the proposed amendment is
necessary to allow the Company to continue to attract, retain and stimulate the
performance of key employees, and to attract and retain qualified directors, by
giving them an opportunity to acquire a proprietary interest in the Company and
an increased personal interest in its continued success and progress.
The Board recommends that the shareholders vote FOR the proposal to amend
the Plan. The affirmative vote of the holders of at least a majority of the
Common Stock present in person, or represented by proxy, at
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the Annual Meeting and entitled to vote on this proposal is required to approve
the amendment to the Plan. For this purpose, abstentions will be counted as
votes against and broker non-votes will not be treated as voting on the
proposal. The persons named on the accompanying proxy will vote in accordance
with the choice specified thereon, or, if no choice is properly indicated, in
favor of the amendment to the Plan.
Summary of the Plan
The Plan is administered by the Compensation Committee. Options granted
under the Plan may be either "incentive stock options," that is, options which
meet the requirements of Section 422 of the Internal Revenue Code of 1986 (the
"Code"), or nonqualified stock options, that is, options which do not meet the
requirements of Section 422(b) of the Code.
All options under the Plan must be granted not later than November 15, 1999.
The aggregate fair market value (determined as of the date of grant) of the
stock for which an optionee may be granted incentive stock options under the
Plan must comply with the limitation set forth in Section 422(d) of the Code
(i.e., shall not become exercisable for the first time during any calendar year
at a rate in excess of $100,000).
The Plan limits 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
thereunder. In any one calendar year no participant may receive options under
the Plan with respect to more than 15% of the shares reserved for issuance. The
Plan fixes the number of shares for which options may be granted each year to
directors of the Company who are not full-time employees thereof: Each director
who is not a full-time employee of the Company is automatically granted (i) a
non-qualified option to purchase 20,000 shares of Common Stock on the date such
person first becomes a director and (ii) a non-qualified option to purchase an
additional 3,000 shares of Common Stock at each annual meeting of shareholders
at which he or she is re-elected.
Both incentive stock options and nonqualified stock options granted under
the Plan must have an exercise price equal to at least 100% of the fair market
value of the Company's Common Stock on the date that the option is granted.
However, any incentive stock option granted under the Plan to an optionee who at
the time of grant owns more than 10% of the total combined voting power or value
of all classes of the Company's capital stock (a "Ten Percent Owner Optionee")
must have an exercise price equal to at least 110% of the fair market value of
the Company's Common Stock on the date that the option is granted. The
Compensation Committee has the power to set the time or times within which each
option may be exercisable or the event or events upon occurrence of which all or
a portion of each option shall be exercisable and the terms of each option;
provided, however, that the term of any option cannot exceed ten years, and the
term of an incentive stock option granted to a Ten Percent Owner Optionee cannot
exceed five years, from the date of grant. Options may be exercised by payment
of the option exercise price in cash, by tender to the Company of shares of the
Company's Common Stock owned by the holder for at least six months which have a
fair market value, as determined by the Compensation Committee, of not less than
the exercise price, or by a combination of the foregoing. An optionee may also
exercise an option using the proceeds to be received from the sale of Common
Stock issuable pursuant to the option (i.e., a "cashless exercise"). Options are
not transferable except to an optionee's immediate family members, trusts,
partnerships and corporations owned by immediate family members or to charitable
organizations, or by the laws of descent and distribution.
The Plan permits the grant of stock appreciation rights ("SARs") in
conjunction with the grant of an option. If granted with an option, SARs permit
an optionee, upon exercise of the SAR and the related option, to receive a cash
payment equal to the excess of the fair market value of the shares over the
option exercise price for such shares; provided, however, that in no event shall
such cash payment exceed 200% of the option exercise price of the related
option. To date, no SARs have been granted by the Company.
No option granted under the Plan will be exercisable after the expiration of
the term fixed by the Board of Directors (which may not exceed ten years from
the date of the grant). If an optionee ceases to be an employee of the Company
or a nonemployee ceases to provide services to the Company for any reason,
except death, disability or retirement pursuant to a Company retirement plan, if
any, or pursuant to the approval of the Compensation Committee, any option which
he holds will terminate at the earlier of the date his employment terminates or
he ceases providing
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services to the Company or the date he receives written notice that his
employment or rendering of services is or will be terminated. If an optionee
dies or becomes disabled, any option that he holds will be exercisable (to the
extent exercisable on the date of death or disability) by the optionee or his
legal representative or successors for the term (not to exceed one year from the
date of the optionee's death or disability) fixed by the Compensation Committee
when the option was granted, unless the term of the option otherwise expires. If
an optionee ceases to be an employee of the Company due to retirement or a
nonemployee optionee ceases providing services to the Company pursuant to the
approval of the Compensation Committee, the option may be exercised within such
period after the date of the optionee's retiring or ceasing to provide services
(not to exceed three months) as the Compensation Committee has fixed when the
option was granted, unless the term of the option otherwise expires.
In the event of a stock split, stock dividend, combination or
reclassification or certain other corporate transactions, appropriate
adjustments will be made to the exercise price and number of shares subject to
options under the Plan. In the event the Company or its shareholders enter into
an agreement to dispose of all or substantially all of the assets or capital
stock of the Company by means of a sale, merger, consolidation, reorganization,
liquidation, or otherwise, all options granted under the Plan will, subject to
the consummation of such disposition of assets or stock, become immediately
exercisable during the period commencing as of the date of execution of such
agreement and ending as of the earlier of the normal termination date of the
option or the date on which the disposition of assets or capital stock
contemplated by the agreement is consummated. Upon the consummation of any such
disposition of assets or stock, the Plan and any unexercised options issued
thereunder shall terminate and cease to be effective. Notwithstanding the
foregoing, the Compensation Committee may, at its election and subject to the
approval of the corporation purchasing or acquiring the stock or assets of the
Company (the "surviving corporation"), arrange for an optionee to receive upon
surrender of the optionee's option a new option covering shares of the surviving
corporation in the same proportion, at an equivalent option price and subject to
the same terms and conditions as the old option.
The Board of Directors may terminate or amend the Plan at any time, but,
without the approval of the Company's shareholders, the Board of Directors may
not amend the Plan to increase the total number of shares subject thereto, to
change the class of persons eligible to receive incentive stock options under
the Plan, or to expand the class of persons eligible to receive nonqualified
stock options.
Certain Tax Information Regarding the Plan
The following is a brief summary of the United States Federal income tax
consequences to the Company and optionees under the Plan. The following summary
is based upon an analysis of the Internal Revenue Code as currently in effect
(the "Code"), existing laws, judicial decisions, administrative rulings,
regulations and proposed regulations, all of which are subject to change.
Moreover, the following is only a summary of United States Federal income tax
consequences, and the tax consequences to an optionee may be either more or less
favorable than those described below depending on his or her particular
circumstances.
Incentive Stock Options
There are no federal tax consequences to an optionee or the Company upon
grant of an incentive stock option. In addition, there will be no federal income
tax consequences to an optionee, except for certain individuals who may be
subject to the alternative minimum tax or to the Company when the optionee
purchases shares by exercising an incentive stock option.
Upon the sale of shares acquired by exercise of an incentive stock option,
any gain realized by the optionee will be long-term capital gain if the shares
have been held more than two years after the date of grant and more than one
year after the date of the exercise. However, if the optionee disposes of the
shares before such holding period has expired, including the use of such shares
to exercise an option to acquire other shares, the difference between the price
he paid for the shares and the fair market value of such shares as of the date
on which he exercises his option will be ordinary income to him in the year he
disposes of the shares; the portion of gain (or loss) represented by the amount
that the shares have appreciated (or depreciated) between the date of exercise
of the option and the date of sale of the shares
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will continue to be capital gain (or loss), which will be long-term or
short-term depending upon whether the shares are held for a period longer than
one-year prior to disposition.
If the shares are held until the termination of such holding period, the
Company will not be entitled to a tax deduction upon the disposition of shares
acquired pursuant to an exercise of an incentive stock option; however, it will
be entitled to a tax deduction upon disposition of such shares, if, and to the
same extent as, the optionee recognizes ordinary income as discussed above.
There may be some individuals who, upon exercise of an incentive stock
option, will be subject to the alternative minimum tax. The amount by which the
fair market value of shares received exceeds the exercise price of the incentive
stock option will be an item of tax preference for calculation of the
alternative minimum tax. The alternative minimum tax is imposed to the extent
that it exceeds a taxpayer's regular tax. The alternative minimum tax ranges
from 26% to 28% of the amount of the taxpayer's AMTI (less certain statutory
exemptions). The alternative minimum tax, subject to certain adjustments, may be
credited against regular federal income tax of a subsequent year.
Non-qualified Stock Options and Stock Appreciation Rights
Non-qualified options are governed by Section 83 of the Code. There are no
federal tax consequences to the Company or an optionee upon grant of a
non-qualified option if (as in the case of the options under the Plan) it does
not have a readily ascertainable fair market value at the date of grant. Upon
exercise of a non-qualified option, the amount by which the fair market value of
the shares acquired exceeds the exercise price will constitute ordinary income
to the optionee and will be subject to the withholding of income and employment
taxes if the optionee is an employee of the Company. Options granted under the
Plan are designed to provide the Company with a deduction equal to the amount of
ordinary income recognized by the optionee at the time of such recognition by
the optionee.
No income will be recognized by an optionee for Federal income tax purposes
upon the grant of an option. Except as described below in the case of an
"insider" subject to Section 16(b) of the Exchange Act who exercises his option
less than six months from the date of grant, upon exercise of an option the
optionee will recognize ordinary income in an amount equal to the excess of the
fair market value of the shares on the date of exercise over the option price of
such shares. In the absence of an election pursuant to Section 83(b) of the
Code, an "insider" subject to Section 16(b) of the Exchange Act who exercises an
option less than six months from the date of grant will recognize income on the
date six months after the date of grant in an amount equal to the excess of the
fair market value of the shares on such date over the option price of such
shares. An "insider" optionee can avoid such deferral by making an election,
pursuant to Section 83(b) of the Code, no later than 30 days after the date of
exercise. Executive officers, directors and 10 percent stockholders of the
Company generally are considered to be "insiders" for purposes of Section 16(b)
of the Exchange Act.
The tax basis of shares transferred to an optionee pursuant to the exercise
of an option is the purchase price paid for such shares plus an amount equal to
any income recognized by the optionee as a result of the exercise thereof. The
Company will be entitled to a tax deduction equal to the amount of any such
ordinary income recognized by the holder. If an optionee thereafter sells shares
acquired upon exercise of an option, any amount realized over the basis of the
shares will constitute capital gain to the optionee and will be long or short
term depending upon the length of time the shares were held prior to their sale
or exchange.
Exercise of an SAR will result in ordinary compensation income to the holder
in the amount of the cash payment received by him and an equivalent deduction to
the Company, and such income will be subject to the withholding of income and
employment taxes if the holder of the SAR is an employee of the Company.
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RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item 3)
On March 20, 1997, the Company formally notified KPMG Peat Marwick LLP
("KPMG") that it would no longer serve as the Company's independent accountants.
The decision to change accountants was recommended by the Company's Finance and
Audit Committee and approved by the Company's Board of Directors. The report of
KPMG on the Company's financial statements for its last two fiscal years did not
contain an adverse opinion, or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles except at that
time KPMG's report contained a separate paragraph stating that the Company is
party to certain claims and litigation of which the ultimate outcome cannot
presently be determined. Accordingly, no provisions for liability, if any, that
may result from the resolution of such matters have been recognized in the
consolidated financial statements. During the Company's two most recent fiscal
years and any interim period through the date of dismissal, (1) the Company had
no disagreement with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to KPMG's satisfaction, would have caused it to make a reference to the
subject matter of the disagreement in connection with its report, and (2) there
did not occur any "reportable event" described in Regulation S-K, Item 304 (a)
(v). On March 24, 1997, the Company, upon the recommendation of the Finance and
Audit Committee which was approved by the Board of Directors, engaged Coopers &
Lybrand L.L.P. as its new independent accountants to audit its financial
statements for fiscal 1997.
The Company, upon the recommendation of the Finance and Audit Committee
which was approved by the Board of Directors, recommends ratification of the
appointment of Coopers & Lybrand L.L.P. as the independent public accountants to
serve as auditors to examine the Company's financial statements for the 1998
fiscal year. Coopers & Lybrand L.L.P. has served as the Company's independent
accountants since January 1997. Neither such firm nor any of its associates has
any relationship with the Company except in their capacity as auditors.
The Board recommends that the shareholders vote FOR the ratification of
Coopers & Lybrand L.L.P. as the Company's independent accountants. The
affirmative vote of the holders of at least a majority of the Common Stock
present in person, or represented by proxy, at the Annual Meeting and entitled
to vote on this proposal is required to approve such ratification. For this
purpose, abstentions will be counted as votes against and broker non-votes will
not be treated as voting on the proposal. The persons named in the accompanying
proxy will vote in accordance with the choice specified thereon, or, if no
choice is properly indicated, in favor of the ratification of the appointment of
Coopers & Lybrand L.L.P.
A representative of Coopers & Lybrand L.L.P. is expected to attend the
Annual Meeting and to be available to respond to appropriate questions raised
during the Annual Meeting. The representative will also have an opportunity to
make a statement during the Meeting if the representative so desires.
EXECUTIVE COMPENSATION
Executive Officers
The following persons currently are executive officers of the Company:
Roger D. Blevins, Pharm. D., age 42, is the President and Chief Executive
Officer of the Company. 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 and was appointed Chief Executive Officer in February 1998. 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.
9
<PAGE>
Glenn C. Andrews, CFA, age 47, is the Vice President, Finance and
Administration and Chief Financial Officer of the Company. He joined the Company
as Vice President and Chief Financial Officer in July 1996. From September 1995
to July 1996 he was Vice President, Planning and Analysis of Coastal Physician
Group, Inc. From September 1984 to September 1995, he was employed by Burroughs
Wellcome Co. where he served as Treasurer from 1992 to 1995 and as Director of
Business Analysis and Planning from 1989 to 1992. Mr. Andrews received his B.S.
degree in 1974 and MBA in 1977 from the University of Tennessee.
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. Incentive 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 90% on the Company's
achievement of its corporate objectives and 10% based on the Committee's
evaluation of the participant's achievement during the year of his or her
individual objectives.
Report of the Compensation Committee for 1997 Executive Compensation
The Compensation Committee of the Board of Directors, which is composed
entirely of directors who have never been employees of the Company, is
responsible for setting and administering the policies and programs that govern
both annual and long-term compensation.
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, 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.
In 1996 the Company retained the Human Strategies Group of Deloitte &
Touche, LLP to conduct a comprehensive comparative study (the "Comparative
Study") of the Company's compensation, annual and long-term components, and
benefits programs for its executive officers and other employees. This
Comparative Study was highly utilized by the Company with respect to 1997
compensation and benefits programs, and is intended to be the basis of such
programs for the next few years, subject to the Committee's annual reviews 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 10% on each executive's performance of his or her own set of individual
objectives ("Objectives") and 90% on the Company's achievement of its corporate
objectives, as described below, the program is intended to:
Provide incentive to implement the Company's annual objectives and
long-term strategy aligned with the interests of shareholders;
Reward superior performance; and
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 1997 was determined by, among other measures, comparison with the
data in the Comparative Study, as described above, 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 Study to have been paid by comparable companies. The
program substantially rewards the management team if the Company achieves
10
<PAGE>
its corporate objectives, and it also recognizes meaningful differences in
individual performance and offers the opportunity to earn rewards when merited
by individual performance.
For 1997 the Board of Directors determined that the Company's corporate
objectives were 80% achieved, and the Compensation Committee determined that
achievement of individual Objectives ranged from 114% to 150%.
The policies with respect to each of these elements, as well as the basis
for determining the 1997 compensation of the Company's 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 salary range for each position as reflected by
the 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.
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 accordance with their
respective employment agreements, if any, or otherwise based on the job
description. The percentage of base salary is 35% for the Chief Executive
Officer and 30% for other executive officers. These bonus percentages were
consistent with the information provided in the Comparative Study. Ninety
percent (90%) of the bonus is based on the Company's achievement of its
corporate objectives, and 10% of the bonus is awarded based on the Committee's
evaluation of the officer's achievement during the year of his or her individual
objectives. The Committee allows up to 125% of the named executive officer's
bonus to be awarded based on comparable over-achievement of corporate and
individual objectives, however, no bonus shall be awarded in respect of the
achievement of corporate and individual objectives unless at least 67% or 80%,
respectively, of the corporate or individual objectives is achieved. All
objectives were approved by the President of the Company except that the Chief
Executive Officer's objectives were approved by the Committee and the entire
Board.
(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. Data in the Comparative Study confirmed these levels to
approximate the median of the range of the awards reported to have been paid by
comparable companies (up to 65,000 shares for the President and 40,000 shares
for Vice Presidents/Officers). 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 1997 and
1998 option grants, the Committee considered such events and factors which
occurred during the year and took into account the accomplishment of corporate
and individual objectives. For 1997 annual option grants, granted February 10,
1997, 50% of the options awarded vest on and after the first anniversary of the
grant date, and the remaining 50% vest on and after the second anniversary of
the grant date. For 1998 annual option grants, granted November 11, 1997, 25% of
the options awarded vest on and after the first anniversary date of the grant,
25% vest on and after the second anniversary date of the grant, 25% vest on and
after the third anniversary of the grant date, and the remaining 25% vest on and
after the fourth anniversary of the grant date. The Committee allows up to 125%
of the named executive officers' option grant to be awarded based on comparable
over-achievement of corporate and individual objectives, however, no option
grant shall be awarded in respect of the achievement of corporate and individual
objectives unless at least 67% or 80%, respectively, of the corporate or
individual objectives is achieved. 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 1997 annual and long-term compensation for Dr.
Blevins near the median of the range paid by comparable companies. Effective
September 26, 1997, his annual salary was adjusted to $241,500, and in February
1997 he received a 1997 annual option grant of 45,000 shares which are to be
earned and vested as described above. In
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<PAGE>
November 1997, Dr. Blevins received a 1998 annual option grant of 50,000 shares
which are to be earned and vested as described above. He has a performance bonus
potential of up to 35% of base salary. The Committee determined that Dr. Blevins
was entitled to 86% of his bonus, based 90% on the Company's 80% achievement of
its corporate objectives and 10% on Dr. Blevins' 114% achievement of his
individual objectives: (1) increasing shareholder value; (2) providing for
commercialization of products; and (3) acquisition of adenosine-based
technology.
The Compensation Committee of the Board of Directors
Albert D. Angel, Chairman
Jay N. Cohn, M.D.
Marvin S. Hausman, M.D.
Summary Compensation
The following Summary Compensation Table reflects certain information
regarding the most highly compensated executive officers whose total annual
salary and bonus for the last completed fiscal year exceeded $100,000 (the
"named executive officer").
<TABLE>
<CAPTION>
<S> <C>
Summary Compensation Table
Annual Compensation
Long-Term
Bonus Other Compensation
Earned Annual Securities Underlying All Other
Name & Principal Position Year Salary ($) ($)(1) Compensation ($) Options/SAR's (#) Compensation($)
----------------------------------------------------------------------------------------------------
Roger D. Blevins, Pharm. D. 1997 230,000 69,902 -- 95,000(2) --
President & Chief 1996 230,000 70,003 -- 185,000(3) --
Executive Officer 1995 180,826 34,266 -- 80,000(4) --
Glenn C. Andrews, CFA 1997 156,000 41,340 -- 69,500(5) --
Vice President, Finance 1996 75,000(6) 22,239 -- 40,000(7)
& Administration and Chief
Financial Officer
</TABLE>
1. 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.
2. The options granted to Dr. Blevins consisted of 45,000 shares associated with
the 1997 annual grant dated February 10, 1997 and 50,000 shares associated with
the 1998 annual grant dated November 12 1997.
3. The options granted to Dr. Blevins consisted of 65,000 shares associated with
the 1996 annual grant and 120,000 shares upon the signing of a three year
employment agreement. See Employment Contracts; Termination of Employment and
Change-in-Control Arrangements, above, for a description of Dr. Blevins'
employment agreement.
4. The options granted to Dr. Blevins consisted of 60,000 shares associated with
the annual grant to him as Vice President of Research and Development and
additional 20,000 shares upon his election as Chief Operating Officer.
5. The options granted to Mr. Andrews consisted of 39,500 shares associated with
the 1997 annual grant dated February 10, 1997 and 30,000 shares associated with
the 1998 annual grant dated November 12, 1997.
12
<PAGE>
6. Mr. Andrews joined the Company as Chief Financial Officer July 1, 1996 with
an annual base salary of $150,000.
7. The options granted to Mr. Andrews of 40,000 shares was associated with
joining the Company July 1, 1996.
Stock Option Grants And Exercises In 1997
The following table sets forth information regarding the number of stock options
that were granted during the calendar year ended December 31, 1997 to the named
executive officers. In addition, in accordance with the rules of the Commission,
the table shows the alternative grant date valuation for option grants in 1997.
<TABLE>
<CAPTION>
<S> <C>
Number of % of Total
Securities Options/SARs Exercise Grant
Underlying Granted to or Base Date
Options/SARs Employees in Price Present
Name Granted (#)(1) Fiscal Year ($/Sh) Expiration Date Value (2)
- ---- -------------------------------------------------------------------------------
Roger D. Blevins..... 45,000 12% 12.88 02/10/07 248,620
Roger D. Blevins..... 50,000 13% 15.75 11/12/07 337,930
Glenn C. Andrews..... 39,500 10% 12.88 02/10/97 218,233
Glenn C. Andrews..... 30,000 8% 15.75 11/12/07 202,758
- ---------------------------------------------------------------------------------------------------------
</TABLE>
1. For 1997 annual option grants, granted February 10, 1997, 50% of the options
awarded vest on and after the first anniversary of the grant date, and the
remaining 50% vest on and after the second anniversary of the grant date. For
1998 annual option grants, granted November 11, 1997, 25% of the options awarded
vest on and after the first anniversary date of the grant, 25% vest on and after
the second anniversary date of the grant, 25% vest on and after the third
anniversary of the grant date, and the remaining 25% vest on and after the
fourth anniversary of the grant date.
2. In accordance with the Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date present
value of the options set forth in the above table. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following assumptions for grants in 1997: dividend yield zero;
expected volatility of 37%; risk-free interest rate of 6%; and expected life of
five years. The real value of the options in the above table depends upon the
actual performance of the stock underlying the options during the applicable
period.
The following table sets forth information regarding the exercise of options and
the numbers of unexercised stock options held by named executive officer at
December 31, 1997:
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Aggregated Option/SAR Exercises in 1997
and Option/SAR Values at December 31, 1997
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
- ---- --- ------ ----------- ------------- ----------- -------------
Roger D. Blevins..... -- -- 121,400 258,600 208,550 825,825
Glenn C. Andrews......... -- -- 40,000 69,500 167,500 44,438
- ---------------------------------------------------------------------------------------------------------------------------
</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,
1997 closing price of the Company's Common Stock on the American Stock
Exchange.
Employment Contracts; Termination Of Employment And Change-In-Control
Arrangements
On September 26, 1996 the Company signed a three-year employment agreement with
Dr. Blevins to serve as the Company's President and Chief Operating Officer. The
Company agreed to pay Dr. Blevins a $230,000 annual base salary which is subject
to annual merit adjustments, a bonus of up to 35% of his base salary determined
at the discretion of the Board of Directors and annual awards of stock options
of up to 65,000 shares determined at the discretion of the Board of Directors.
As an inducement to Dr. Blevins to enter into this agreement the Company granted
him a one-time nonqualified stock option to purchase 120,000 shares at the
September 26, 1996 fair market value price of $8.625, which vests and becomes
exercisable on the third anniversary of the date of grant, e.g., September 26,
1999; provided, however, that the vesting of 50% of the option accelerates to
the day immediately following the twentieth consecutive trading day on which the
closing price of the Company's Common Stock exceeds $20 per share, and the
remaining 50% accelerates to the day immediately following the twentieth
consecutive trading day in which such closing price exceeds $25 per share. In
accordance with such accelerated vesting provision, during the second quarter of
1998 Dr. Blevins was vested in options to purchase 60,000 shares exercisable at
$8.625 each.
The Company's policy provides benefits to the named executive officers in the
event of a "change-in-control" of the Company. The term "Change-in-Control"
generally is defined to mean: (i) the acquisition (including as a result of a
merger) by any person or persons acting in concert of beneficial ownership,
directly or indirectly, of securities of the Company representing more than 33%
of the combined voting power of the then outstanding voting securities of the
Company or (ii) the failure of the individuals who, as of February 6, 1998
constituted the Board of Directors of the Company (the "Incumbent Board"), or
thereafter were nominated for election to the Board of Directors by the vote of
at least two-thirds of the directors then comprising the Incumbent Board, to
constitute at least a majority of the Board of Directors subsequent to such
date. In the event of a "change-in-control", the Company (1) in accordance with
its then prevailing payroll practices, shall continue to pay their prevailing
annual base salary and an amount equal to the average of the annual cash
performance bonus the Company paid to the executive officers in the preceding
three years, for 2.99 years, (2) shall continue to provide for their
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") for the
duration of the severance period or until such earlier time as they obtain
employment which provides reasonable similar health and medical coverage and (3)
shall provide full outplacement services for 12 months; provided, however, that
they shall have the option to receive the gross amount of the amounts payable to
them on account of their base salary and bonus, less withholdings and deductions
as required by applicable law, in a lump sum at any time during the severance
period, in which event their participation in and coverage under the Benefit
Plans, and their entitlement to outplacement services, each shall terminate. The
Company also has agreed to pay Mr. Andrews an
14
<PAGE>
amount equal to the difference between $14.25 and the closing price of the
Company's Common Stock on the day any "change-in-control" occurs, multiplied by
30,000.
The Company's policy in the event of the named executive officers' discharge
without cause is as follows: "Discharge without cause" is defined as the
termination of the employment of the named executive officers without "due
cause", any material reduction in their duties or authority or a more than 30%
reduction in their annual base salary from that for the immediately preceding
fiscal year. The term "due cause" is defined as the named executive officers'
material breach of any of the terms of their agreements with the Company,
willful gross negligence in carrying out their 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 such officers' annual base
salary for 12 months and to provide for their participation in the Benefit Plans
until they obtain employment which provides reasonably similar health and
medical coverage. The Company also shall provide such officers full outplacement
services for 12 months. In respect of the year of such discharge, they also
shall be entitled to receive, pro rated based on the number of completed months
of service during the year of discharge, their cash bonus and the discretionary
performance-based options they earned, in each case as determined by the
Compensation Committee using the performance level of such officers and the
Company for the prior year as their respective performance levels for the year
of discharge.
Other Benefits Plans
The Company sponsors an IRS approved 401(K) retirement plan. Employees become
eligible to participate in the plan beginning on the enrollment date coinciding
with or following 90 days of employment. Enrollment periods are limited to
January 1, April 1, July 1 and October 1 of each year. The 401(K) plan allows
employees to contribute a portion of their pre-tax earnings into their own
retirement account. Eligible employees may contribute between 2% and 15% of
their annual income up to the annual limits established by the IRS yearly. The
Board of Directors authorized the Company, for those years in which it achieves
the performance goals established in advance by the Compensation Committee, to
match 50% of each employee's annual plan contribution up to a maximum of 2% of
the salary of such employee, such Company contributions to vest equally over the
first four years of service.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth as of June 5, 1998 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>
<S> <C>
Number of Shares Percent of
Name And Address Beneficially Owned Common Stock
- ---------------- ------------------ ------------
State of Wisconsin........................................... 1,000,000 9.48
Investment Board
P.O. Box 7842
Madison, Wisconsin 53707
G. W. Capital, Inc........................................... 612,900 5.81
10900 N.E. 8th Street
Suite 235
Bellevue, Washington 98004
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
Glenn C. Andrews ............................................ 60,750 (1) *
Albert D. Angel.............................................. 26,500 (2) *
Roger D. Blevins, Pharm.D.................................... 263,532 (3) 2.50
William M. Bartlett.......................................... 10,120 (4) *
Jay N. Cohn, M.D............................................. 23,000 (5) *
Marvin S. Hausman............................................ 107,347 1.02
Mark B. Hirsch............................................... 23,000 (6) *
Eugene L. Step............................................... 9,000 (7) *
Richard C. Williams.......................................... 123,100 (8) 1.17
All Directors and Executive Officers of the Company
as a Group (seven persons)................................... 646,349 (9) 6.13
</TABLE>
(1) Includes 59,750 shares subject to currently exercisable options held by
Mr. Andrews.
(2) Includes 26,000 shares subject to currently exercisable options held by
Mr. Angel.
(3) Includes 232,175 shares subject to currently exercisable options held by
Dr. Blevins.
(4) Includes 9,000 shares subject to currently exercisable options held by
Mr. Bartlett.
(5) Includes 23,000 shares subject to currently exercisable options held by
Dr. Cohn.
(6) Includes 23,000 shares subject to currently exercisable options held by
Mr. Hirsch.
(7) Includes 9,000 shares subject to currently exercisable options held by
Mr. Step.
(8) Includes 9,000 shares subject to currently exercisable options held by
Mr. Williams.
(9) Includes an aggregate of 390,925 shares subject to currently exercisable
options held by directors, nominees and executive officers of the Company.
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 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, 1997, all Section 16(a)
filing requirements applicable to its officers and directors were complied with,
except that Dr. Hausman filed late his Form 4 reporting the open market sale of
non-derivative securities during December 1997.
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 weighted by
market capitalization at the beginning of each period for which a return is
indicated on stocks included in the Company's Industry Peer Index. The Industry
Peer Index comprises of the 45 U.S. pharmaceutical and biotechnological
companies listed below, with the following criteria: market capitalization of
less than $200 million, assets of less than $100 million, revenues under $25
million and less than 100 employees. The investment comparisons assume the base
year (1992) 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 1993, 1994, 1995, 1996 and 1997 calendar years.
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INDEXED CUMULATIVE RETURNS
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Medco Research, Inc.......................................... 100 88.97 66.91 61.03 61.76 82.35
Industry Peer Index (1)...................................... 100 78.41 39.90 77.85 83.23 82.48
S&P 500 Index................................................ 100 110.08 111.54 153.45 188.69 251.64
</TABLE>
(1) The following companies are included in the Company's Industry Peer Index:
Abaxis Inc., Accumed International Inc., Advanced Magnetics Inc., Alkermes Inc.,
Alteon Inc., Aronex Pharmaceuticals, Atrix Labs Inc., Boston Life Sciences,
Cambridge Neuroscience Inc., Chantal Pharmaceutical Corp., CIMA Labs Inc.,
Columbia Laboratories, Cortech Inc., Corvas International, Cytel Corp., Dynagen,
Emisphere Technologies, Epitope Inc., Geltex Pharmaceuticals Inc., Genome
Therapeutics Corp., Guildford Pharmaceuticals Inc., Immunomedics Inc., Inhale
Therapeutic Systems, Insite Vision, Lidak Pharmaceuticals, Macrochem
Corporation, Medicis Pharmaceuticals, Metra Biosystems Inc., MGI Pharma Inc.,
Neoprobe Corp., Neo Rx Corp., Neurex Inc., Oncogene Science Inc., Penederm Inc.,
Pharmacyclics, Pharmos Corporation, Polymedica Industries Inc., Sano Corp.,
Sciclone Pharmaceuticals Inc., Shaman Pharmaceuticals Inc., Sonus
Pharmaceuticals Inc., T Cell Sciences Inc., Technical Chemicals & Products,
Techniclone Corp., and Theragenics Corp.
OTHER MATTERS
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 1999 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1999 annual
meeting of shareholders of the Company must be received by April 30, 1999. Such
proposals should be addressed to the Secretary of the Company.
June 19, 1998
17
<PAGE>
********************************************************************************
APPENDIX
<TABLE>
<CAPTION>
<S> <C>
FOR WITHHOLD DIRECTORS RECOMMEND: A VOTE FOR
all the all the ELECTION OF THE FOLLOWING
nominees nominees DIRECTORS FOR AGAINST ABSTAIN
1. ELECTION
OF [_] [_] Nominees: 1. William M. Bartlett 2.Proposal to approve [_] [_] [_]
DIRECTORS 2. Roger D. Blevins, Pharm.D. an amendment to the
3. Jay N. Cohn, M.D. Company's 1989 Stock
4. Mark B. Hirsch Option and Stock
5. Eugene L. Step Appreciation Rights
6. Richard C. Williams Plan.
3.Proposal to ratify the [_] [_] [_]
appointment of Coopers &
Lybrand LLP as
independent accountants.
4.In their discretion, the
proxy holder is
authorized to vote upon
such other business as
may properly come before
the meeting.
To withhold authority to vote for 4. In their discretion, the proxy holder any
individual nominee, write that is authorized to vote upon such number from the
list at right on other business as may properly come the line below. 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, 2, AND 3.
- -------------------------------------
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN THIS
PROXY USING
THE ENCLOSED ENVELOPE.
Signature ____________________________ Date _________________ __________________________ Date __________________
SIGNATURE, IF HELD JOINTLY
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.
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MEDCO RESEARCH, INC.
85 T.W. Alexander Drive
Research Triangle Park, North Carolina 27709
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This Proxy Is Solicited on Behalf of the Board of Directors.
------------------------------------------------------------
The undersigned hereby appoints Richard C. Williams, and William M. Bartlett,
and each or either of them as proxy holders with power to appoint his substitute
and hereby authorizes the proxy holders 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 June 15, 1998, at 10:00 am
local time at the annual meeting of shareholders to be held on July 29, 1998, or
any adjournment thereof.
