<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
ALLIANCE PHARMACEUTICAL CORP.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ALLIANCE PHARMACEUTICAL CORP.
3040 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Alliance Pharmaceutical Corp. (the "Corporation") will be held at 10:00 a.m. on
Wednesday, November 8, 2000, at offices of the Corporation at 9333 Genesee
Avenue, Suite 300, San Diego, California 92121 for the following purposes:
1. To elect ten directors of the Corporation.
2. To consider and act upon a proposal to amend the
Corporation's Certificate of Incorporation to
increase the number of authorized shares of Common
Stock from 75,000,000 shares to 125,000,000 shares,
as described in the attached Proxy Statement.
3. To approve the 2000 Stock Option Plan of Alliance
Pharmaceutical Corp.
4. To ratify the appointment by the Corporation's Board
of Directors of Ernst & Young LLP as independent
auditors of the Corporation for its fiscal year
ending June 30, 2001.
5. To transact such other business as may properly come
before the annual meeting and any adjournments
thereof.
Only holders of record of the Corporation's Common Stock at the close
of business on September 14, 2000, are entitled to notice of, and to vote at,
the meeting and any adjournments thereof. Such shareholders may vote in person
or by proxy. The stock transfer books of the Corporation will not be closed.
Shareholders are urged to attend the meeting in person. If you are not
able to do so and wish that your shares be voted, please sign, date and return
the accompanying proxy in the enclosed envelope. No postage is required if
mailed in the United States.
By Order of the Board of Directors,
DUANE J. ROTH, CHAIRMAN
Dated: October 5, 2000
<PAGE>
ALLIANCE PHARMACEUTICAL CORP.
3040 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
--------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
November 8, 2000
--------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Alliance Pharmaceutical
Corp. (the "Corporation") to be voted at the Annual Meeting of Shareholders
to be held on Wednesday, November 8, 2000, at 10:00 a.m. at offices of the
Corporation at 9333 Genesee Avenue, Suite 300, San Diego, California 92121
and at any adjournment or adjournments thereof (the "Meeting") for the
purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
The mailing address of the principal executive offices of the
Corporation is 3040 Science Park Road, San Diego, California 92121 (telephone
number 858/410-5200). The enclosed Proxy and this Proxy Statement are being
first sent to shareholders of the Corporation on or about October 5, 2000.
The Board of Directors has fixed the close of business on September
14, 2000 as the record date for the determination of shareholders of the
Corporation entitled to receive notice of, and vote at, the Meeting. At the
close of business on the record date, an aggregate of 47,644,596 shares of
common stock, par value $.01 per share, of the Corporation (the "Common
Stock") were issued and outstanding and entitled to one vote on each matter
to be voted upon at the Meeting.
All votes will be tabulated by the inspector of election appointed
for the Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the shareholders and will
have the same effect as negative votes. Broker non-votes are not counted for
any purpose in determining whether a matter has been approved.
SOLICITATION AND REVOCATION
PROXIES IN THE FORM ENCLOSED ARE SOLICITED BY, OR ON BEHALF OF, THE
BOARD OF DIRECTORS OF THE CORPORATION. THE PERSONS NAMED IN THE PROXY HAVE
BEEN DESIGNATED AS PROXIES BY THE BOARD OF DIRECTORS. Shares represented by
properly executed proxies received by the Corporation will be voted at the
Meeting in the manner specified therein or, if no specification is made, will
be voted FOR the election of the ten directors listed herein, FOR an increase
in the number of shares of Common Stock authorized for issuance under the
Corporation's Certificate of Incorporation, FOR the 2000 Stock Option Plan,
and FOR the ratification of the appointment by the Corporation's Board of
Directors of Ernst & Young LLP as independent auditors of the Corporation for
its fiscal year ending June 30, 2001, all as described in this Proxy
Statement.
Any proxy given by a shareholder pursuant to this solicitation may
be revoked by the shareholder at any time before it is exercised, by written
notification delivered to the Secretary of the Corporation, by voting in
person at the Meeting, or by executing another proxy bearing a later date.
Proxies will be solicited by mail. They may also be solicited by
officers and regular employees of the Corporation personally, by telephone or
otherwise, but such persons will not be specifically compensated for such
<PAGE>
services. The Corporation may use the services of Georgeson Shareholder
Communications Inc. to aid in the solicitation of proxies. The Corporation
estimates that the fee for such services should not exceed $4,000. Banks,
brokers, nominees, and other custodians and fiduciaries will be reimbursed
for their reasonable out-of-pocket expenses in forwarding soliciting material
to their principals, the beneficial owners of Common Stock. The costs of
soliciting proxies will be borne by the Corporation.
1. ELECTION OF DIRECTORS
Ten directors are to be elected at the Meeting to hold office until
the next annual meeting of shareholders and until the election and
qualification of their respective successors. The Board of Directors has
nominated Pedro Cuatrecasas, M.D., Fred M. Hershenson, Ph.D., Carroll O.
Johnson, Stephen M. McGrath, Donald E. O'Neill, Helen M. Ranney, M.D., Duane
J. Roth, Theodore D. Roth, Jean G. Riess, Ph.D., and Thomas F. Zuck, M.D.,
all of whom are currently directors of the Corporation. Directors are elected
by a plurality vote.
Unless otherwise specified in the accompanying proxy, the shares voted
pursuant thereto will be cast for these nominees. If, for any reason, any of the
nominees should be unable to accept nomination or election, it is intended that
such proxy will be voted for the election, in his or her place, of a substituted
nominee who would be recommended by management. Management, however, has no
reason to believe that any nominee will be unable to serve as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Set forth below is certain information with respect to each nominee as
of September 14, 2000:
DUANE J. ROTH. Mr. Roth is 50 and has served as a director of the
Corporation since 1985. He has served as Chief Executive Officer of the
Corporation since 1985 and as Chairman since October 1989. Prior to joining
the Corporation, Mr. Roth served as President of Analytab Products, Inc., an
American Home Products company involved in manufacturing and marketing
medical diagnostics, pharmaceuticals and devices. For the previous ten years,
he was employed in various sales, marketing and general management capacities
with Ortho Diagnostic Systems, Inc., a Johnson & Johnson company, which is a
manufacturer of diagnostic and pharmaceutical products. Mr. Roth's brother,
Theodore D. Roth, is President and Chief Operating Officer of the Corporation.
THEODORE D. ROTH. Mr. Roth is 49 and served as Executive Vice
President and Chief Financial Officer of the Corporation since November 1987,
and was appointed President and Chief Operating Officer in May 1998. For more
than ten years prior to joining the Corporation, he was General Counsel of
SAI Corporation, a company in the business of operating manufacturing
concerns, and General Manager of Holland Industries, Inc., a manufacturing
company. Mr. Roth received his J.D. from Washburn University and an LL.M. in
Corporate and Commercial Law from the University of Missouri in Kansas City.
He is the brother of Duane J. Roth, the Chairman and Chief Executive Officer
of the Corporation.
PEDRO CUATRECASAS, M.D. Dr. Cuatrecasas is 64 and was elected as a
director of the Corporation in August 1996. He has over 20 years of
experience in the pharmaceutical industry. Dr. Cuatrecasas retired from the
positions of Vice President of Warner-Lambert Company and President,
Parke-Davis Pharmaceutical Research on December 31, 1996, positions he had
held since 1989. During the previous four years, he had been Senior Vice
President of Research and Development and Director of Glaxo, Inc. For the
prior ten years, he was Vice President of Research, Development and Medical
at Burroughs Wellcome Company. Dr. Cuatrecasas is a member of the National
Academy of Sciences and the Institute of Medicine. He is currently a director
of Mitokor Corp. and an independent consultant in pharmaceutical research. He
received his M.D. from Washington University School of Medicine.
FRED M. HERSHENSON, PH.D. Dr. Hershenson is 59 and was elected as a
director of the Corporation in August 2000. In July 2000, he retired as
Senior Vice President - Drug Development of Warner-Lambert Company. During
his 19 year tenure with Warner-Lambert, Dr. Hershenson served in several
executive capacities including Senior Vice President, Technical Development.
For the thirteen years prior to his employment at Warner-Lambert, he held
several managerial positions with G.D. Searle & Company. He has served as an
Adjunct Professor of Medicinal Chemistry at the University of Michigan. Dr.
Hershenson received his Ph.D. from the University of Illinois.
<PAGE>
CARROLL O. JOHNSON. Mr. Johnson is 67 and has served as a director
of the Corporation since 1989. He has been President of Research Management,
Inc. ("RMI") since 1985, an independent contract research organization which
provides services to the pharmaceutical industry in the implementation of
clinical trials. Previously, he served for 25 years in various research,
sales and marketing positions with several pharmaceutical companies,
including Pharmacia Laboratories, Inc., where he created a national sales
force which introduced three major products.
STEPHEN M. MCGRATH. Mr. McGrath is 64 and has served as a director
of the Corporation since 1989. In May 1998, he retired as Executive Vice
President of CIBC Oppenheimer & Co., Inc. and as the Director of its
Corporate Finance Department. For the eleven years prior to his employment by
CIBC Oppenheimer in 1983, he held various executive positions with
Warner-Lambert Company. Before joining Warner-Lambert, Mr. McGrath was
Controller and Assistant Treasurer of Sterling Drug, Inc. and a certified
public accountant for Price Waterhouse & Co. He is a director of PetroCorp,
Inc.
DONALD E. O'NEILL. Mr. O'Neill is 74 and has served as a director of
the Corporation since 1991. He retired from Warner-Lambert Company in 1991
after 20 years of service. During his tenure, he held various managerial
positions, including President of the Parke-Davis Group, President of the
Health Technologies Group and President - International Operations. At the
time of his retirement from Warner-Lambert, he held the offices of Executive
Vice President of the company, and President and Chairman of its
International Operations, and was a member of Warner-Lambert's board of
directors.
HELEN M. RANNEY, M.D. Dr. Ranney is 80 and has served as a director
of the Corporation since 1991. She is Professor EMERITA, Department of
Medicine, University of California at San Diego, having served as Chairman of
the Department from 1973 through 1986. From 1986 through 1991, she was
Distinguished Physician of the U.S. Department of Veterans Affairs. She
formerly was Professor of Medicine at Albert Einstein College of Medicine
(New York) and at the State University of New York, Buffalo. Dr. Ranney is a
member of many professional societies, including the National Academy of
Sciences, the Institute of Medicine, the Association of American Physicians
(past President), and the American Society of Hematology (past President).
She has more than 150 publications, primarily relating to blood and blood
disorders. Dr. Ranney served on the Board of Directors of Squibb Corp. prior
to its merger with Bristol-Myers. She received her M.D. from the College of
Physicians and Surgeons, Columbia University.
JEAN G. RIESS, PH.D. Professor Riess is 63 and has served as a
director of the Corporation since 1989. Until his retirement in 1996, he had
been the Director of Laboratoire de Chimie Moleculaire at the University of
Nice for over 20 years. He has been an active researcher since receiving a
Ph.D. from the University of Strasbourg, with numerous patents and over 300
publications. For more than 20 years, Dr. Riess has focused on chemistry
related to perfluorochemical emulsions for medical application. He has
directed research in synthesis of tailored perfluorochemicals, in emulsion
technology, in synthesis of fluorinated surfactants, in the physical
chemistry of emulsion stabilization, and in surfactant self-aggregation.
THOMAS F. ZUCK, M.D. Dr. Zuck is 66 and has served as a director of
the Corporation since 1990. He is Professor of Transfusion Medicine and
Director of Hoxworth Blood Center at the University of Cincinnati Medical
Center and is President of Ohio Enterprises International, Inc. ("OEI"), a
consulting company. Dr. Zuck formerly was director of the Division of Blood
and Blood Products at the Office of Biologics Research & Review within the
U.S. Food and Drug Administration. He has served in numerous scientific
professional societies, including as President of the American Association of
Blood Banks and the Council of Community Blood Centers. He was
Editor-in-Chief of the journal TRANSFUSION and has more than 100 publications
to his credit. Dr. Zuck is a retired U.S. Army Colonel, where he was a
Commander of the Letterman Army Institute of Research and, for many years,
involved with the Army's blood substitute development program. Dr. Zuck
received his LL.B. from Yale Law School and his M.D. from Hahnemann Medical
College.
COMPENSATION OF DIRECTORS
Directors do not receive cash compensation for attendance at Board
of Directors' meetings or committee meetings. Non-qualified stock options are
awarded to nonemployee directors of the Corporation pursuant to the Formula
Stock Option Plan for Nonemployee Directors of the Corporation (the
"Directors' Formula Option Plan"). Options under
<PAGE>
the Directors' Formula Option Plan are granted under and subject to the
Corporation's 1991 Stock Option Plan. The options have a term of ten years
from the date of grant and are exercisable at a price per share equal to the
fair market value of a share of Common Stock on the date of grant. Each
nonemployee director (i) upon his or her initial election, shall
automatically be granted an option to acquire 25,000 shares of Common Stock
which shall be exercisable in four installments of 6,250 shares each with the
first installment being at his or her initial election and the remaining
installments becoming exercisable on the date of each annual meeting of the
Board of Directors of the Corporation ("Annual Meeting") thereafter that such
person is a director, until fully exercisable, and (ii) upon the third Annual
Meeting following his or her initial election and each Annual Meeting
thereafter that such person remains a nonemployee director, shall
automatically be granted an option to acquire 7,500 shares of Common Stock.
Except as otherwise described above, all options are immediately exercisable
in full on the date of grant.
OTHER TRANSACTIONS
The following affiliations exist between the Corporation and certain
directors:
In December 1999, the Corporation renewed a one-year research
services agreement with RMI for $2,000 per month, plus $500 per day for each
day per month in excess of four days Mr. Johnson devotes to consulting for
the Corporation. Mr. Johnson is the president and owner of RMI. RMI received
$38,000 for consulting services in the fiscal year ended June 30, 2000.
In December 1999, the Corporation renewed a one-year consulting
agreement with OEI for $2,000 per month. Dr. Zuck is the president and owner
of OEI.
Dr. Ranney receives $2,000 per month and office space for providing
consulting services to the Corporation.
In return for the rights to certain inventions and concepts, the
Corporation paid Dr. Reiss $200,000 in February 2000. A subsidiary of the
Corporation has a one-year consulting agreement with Dr. Riess which will pay
him $100,000 through December 2000.
In connection with the sale of $25 million of common stock in June
1999, the Corporation paid Roth Capital Partners ("RCP") sales commissions of
$1.5 million and issued to RCP a 5-year warrant for 760,000 shares of common
stock, exercisable at $3.675 (a 150% premium to the market price at the
time). RCP was also paid sales commissions of $50,000 in connection with the
Corporation's sale of $10 million in debentures in August 2000. RCP also
provides financial advisory services to the Corporation from time to time.
Byron Roth, the president, chief executive officer and a principal
shareholder of RCP, is the brother of Duane J. Roth, Chief Executive Officer
and director of the Corporation and Theodore D. Roth, President, Chief
Operating Officer and director of the Corporation.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The standing committees of the Board of Directors consist of an
Executive Committee, a Compensation Committee, an Audit Committee, and a
Nominating Committee. The Executive Committee was established to act when the
full Board of Directors is unavailable. It has all the authority of the Board
between meetings of the entire Board as to matters which have not been
specifically delegated to other committees of the Board, except the authority
that by law cannot be delegated by the Board of Directors. The members of the
Executive Committee are Dr. Ranney and Messrs. McGrath and D. Roth. The
Compensation Committee advises and makes recommendations to the Board of
Directors regarding matters relating to the compensation of directors,
officers, and senior management. The members of the Compensation Committee
are Drs. Ranney and Cuatrecasas and Messrs. O'Neill and McGrath. The Audit
Committee advises and makes recommendations to the Board concerning the
internal controls of the Corporation, the independent auditors of the
Corporation, and other matters relating to the financial activities of the
Corporation. The members of the Audit Committee are Messrs. Johnson and
McGrath and Dr. Zuck. The Nominating Committee has the authority to nominate
members of the Board of Directors to the entire Board for consideration. The
Nominating Committee will not consider nominees recommended by shareholders.
The members of the Nominating Committee are Dr. Riess and Messrs. Johnson, D.
Roth and T. Roth.
<PAGE>
During the fiscal year ended June 30, 2000, there were five regular
meetings of the Board of Directors. The Compensation Committee held one
meeting, the Audit Committee held one meeting, the Nominating Committee held
one meeting, and the Executive Committee did not meet. Each Board member
attended more than 75% of the meetings of the Board and all of the meetings
of the committee(s) of which he or she is a member.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers and persons who own more than 10%
of a registered class of the Corporation's equity securities to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of the Corporation. Officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Corporation with copies of all
Section 16(a) forms they file.
To the Corporation's knowledge, based solely on a review of the
copies of such reports furnished to the Corporation during the fiscal year
ended June 30, 2000, one report, covering one transaction was filed late on
behalf of Dr. Cuatrecasas.
OWNERSHIP OF VOTING SECURITIES BY CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of the Corporation's voting securities as of
September 14, 2000 as to (i) each of the directors and director nominees,
(ii) each of the executive officers listed in the Summary Compensation Table,
(iii) each person known by the Corporation to own more than 5% of any class
of the Corporation's outstanding voting securities, and (iv) all directors
and executive officers of the Corporation as a group:
<TABLE>
<CAPTION>
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Common Stock
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP (1) CLASS (2)
---------------- ------------------------ ---------
<S> <C> <C>
Duane J. Roth 922,295 (3) 1.9%
Pedro Cuatrecasas, M.D. 123,000 (4) *
Fred M. Hershenson, Ph.D. 12,500 (5) *
Carroll O. Johnson 69,500 (6) *
Stephen M. McGrath 259,016 (7) *
Donald E. O'Neill 103,000 (8) *
Helen M. Ranney, M.D. 82,900 (9) *
Jean G. Riess, Ph.D. 177,733 (10) *
Theodore D. Roth 367,792 (11) *
Thomas F. Zuck, M.D. 57,800 (12) *
Harold W. DeLong 265,800 (13) *
N. Simon Faithfull, M.D., Ph.D. 137,096 (14) *
Artemios B. Vassos, M.D., F.A.C.P. 37,500 (15) *
All directors and executive officers as a group (22 persons) 3,199,659 6.4%
FMR Corp. 4,798,160 (16) 10.1%
82 Devonshire Street
Boston, MA 02109
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</TABLE>
* Indicates ownership of less than 1% of outstanding shares.
(1) Each person listed or included in the group has sole voting power and
sole investment power with respect to the shares owned by such person,
except as indicated below.
<PAGE>
(2) Shares subject to options and warrants exercisable within 60 days are
deemed to be outstanding for percentage calculations with respect to
the person holding such options and warrants.
(3) Consists of (i) 285,778 shares owned by Mr. D. Roth, (ii) 633,900
shares subject to options granted by the Corporation under its 1991
Stock Option Plan ("the 1991 Plan"), and (iii) 2,617 shares owned by
Mr. Roth's spouse.
(4) Consists of (i) 73,000 shares owned by Dr. Cuatrecasas and
(ii) 50,000 shares subject to options granted by the
Corporation under the 1991 Plan.
(5) Consists of 12,500 shares subject to options granted to Dr.
Hershenson by the Corporation under the 1991 Plan.
(6) Consists of (i) 4,000 shares owned by Mr. Johnson and (ii) 65,500
shares subject to options granted by the Corporation under the 1991
Plan.
(7) Consists of (i) 177,683 shares owned by Mr. McGrath, (ii) 33,333
shares subject to warrants, and (iii) 48,000 shares subject to
options granted by the Corporation under the 1991 Plan.
(8) Consists of (i) 25,000 shares owned by Mr. O'Neill, (ii) 76,000 shares
subject to options granted by the Corporation under the 1991 Plan, and
(iii) 2,000 shares owned by Mr. O'Neill's spouse.
(9) Consists of (i) 6,900 shares owned by Dr. Ranney and (ii) 76,000
shares subject to options granted by the Corporation under the 1991
Plan.
(10) Consists of (i) 79,733 shares owned by Dr. Riess and (ii) 98,000
shares subject to options granted by the Corporation under the 1991
Plan.
(11) Consists of (i) 48,042 shares owned by Mr. T. Roth and (ii) 319,750
shares subject to options granted by the Corporation under the 1991
Plan.
(12) Consists of (i) 9,800 shares owned by Dr. Zuck and (ii) 48,000
shares subject to options granted by the Corporation under the 1991
Plan.
(13) Consists of (i) 20,000 shares owned by Mr. DeLong, (ii) 245,000 shares
subject to options granted by the Corporation under the 1991 Plan, and
(iii) 800 shares owned by Mr. DeLong's minor children.
(14) Consists of (i) 19,096 shares owned by Dr. Faithfull and (ii)
118,000 shares subject to options granted by the
Corporation under the 1991 Plan.
(15) Consists of 37,500 shares subject to options granted to Dr. Vassos
by the Corporation under the 1991 Plan.
(16) FMR Corp has sole power to dispose of all such shares and has sole
voting power with respect to 260 shares. Fidelity Management and
Research Company ("Fidelity"), a subsidiary of FMR Corp., may be deemed
the beneficial owner of 4,797,900 shares as a result of acting as
investment adviser to various registered investment companies. Fidelity
Management Trust Company, a wholly-owned subsidiary of FMR Corp., was
the beneficial owner of 260 shares as a result of it serving as an
investment manager of the institutional accounts. The beneficial
ownership of the shares arises in the context of passive investment
activities only by various investment accounts managed by the Fidelity
companies and their affiliates on a discretionary basis (the "Fidelity
Accounts"). The Fidelity Accounts are institutional investors engaged
in the investment business. The sole power to vote such shares resides
with the Boards of Trustees of such investment companies, with voting
carried out by Fidelity under guidelines established by such Boards.
Edward C. Johnson III, Abigail P. Johnson, a director of FMR Corp., and
members of the Johnson family and trusts for their benefit may be
deemed to form a controlling group with respect to FMR Corp. under the
Investment Company Act of 1940.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning annual and
long-term compensation for the Corporation's Chief Executive Officer and the
other four highest paid executive officers (collectively, the "Named Executive
Officers") for the year ended June 30, 2000, as well as the total compensation
paid to each individual for the Corporation's two previous fiscal years:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
----------------------------------------------------------------------------------------------------------------------------------
Long-Term
Compen-
Annual Compensation sation
--------------
Awards
------------------------------------------------------------------
Name Other Securities
and Annual Underlying All Other
Principal Salary Bonus Compen- Options/ Compen-
Position Year ($) ($) sation ($)(a) SARs (#) sation ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Duane J. Roth 2000 416,000 85,000 - 194,000 11,822(b)
Chairman and 1999 430,700 - - 150,000 5,289(c)
Chief Executive Officer 1998 388,000 40,000 - 150,000 -
Theodore D. Roth 2000 310,000 47,000 - 147,000 3,859(d)
President and 1999 289,800 - 36,300(e) 100,000 1,256(f)
Chief Operating Officer 1998 257,000 60,000 38,800(g) 75,000 -
Harold W. DeLong 2000 222,000 35,000 - 85,000 -
Executive Vice President - 1999 220,200 - - 75,000 -
Business Development 1998 196,600 25,000 - 30,000 -
Artemios B. Vassos 2000 249,500 25,000 126,300(h) 60,000 -
Executive Vice President 1999 66,200 - - 75,000 -
and Chief Scientific Officer 1998 - - - - -
N. Simon Faithfull 2000 214,000 25,000 - 50,000 -
Vice President - 1999 212,400 - - 30,000 -
Medical Affairs Development 1998 194,900 20,000 - 25,000 -
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Perquisites and other personal benefits for specific officers are only
reported in specific years where such compensation exceeds the lower of 10%
of annual salary and bonus, or $50,000.
(b) This represents the present value of the economic benefit to Mr. D. Roth
for the portion of the total premium ($100,000) paid by the Corporation
during 2000 with respect to a split-dollar insurance agreement.
(c) This represents the present value of the economic benefit to Mr. D. Roth
for the portion of the total premium ($170,000) paid by the Corporation
during 1999 with respect to a split-dollar life insurance agreement.
(d) This represents the present value of the economic benefit to Mr. T. Roth
for the portion of the total premium ($60,000) paid by the Corporation
during 2000 with respect to a split-dollar life insurance agreement.
(e) Includes forgiveness of $32,400 of principal and interest on a relocation
loan.
(f) This represents the present value of the economic benefit to Mr. T. Roth
for the portion of the total premium ($60,000) paid by the Corporation
during 1999 with respect to a split-dollar life insurance agreement.
(g) Includes forgiveness of $35,100 of principal and interest on a relocation
loan.
(h) Includes relocation expense and tax reimbursement of $63,600 and
forgiveness of $50,700 of principal and interest on a loan.
<PAGE>
EMPLOYMENT ARRANGEMENTS
On June 1, 1995, the Corporation loaned Simon Faithfull $70,000. The
loan accrued interest at the rate of 9% per annum. The loan was due and payable
on demand; provided that unless and until demand is made, principal and interest
were payable in biweekly installments of $500 each. The largest outstanding
balance due since the beginning of the last fiscal year was $59,160 and the
outstanding balance of $53,687 was paid in full on February 24, 2000. The note
was secured by a lien on Dr. Faithfull's primary residence.
On February 26, 1999 the Corporation entered into an employment
agreement with Artemios B. Vassos, M.D., F.A.C.P. to serve as Executive Vice
President and Chief Scientific Officer of the Corporation. The agreement
provides that Dr. Vassos shall receive a salary of $210,000, a car allowance,
and an option for 75,000 shares of the Corporation's Common Stock at an exercise
price equal to the market price of Common Stock on the date of the agreement.
The agreement provides for a term of employment of up to two years and, upon
early termination, he will receive his monthly base rate of pay for the lesser
of 12 months or the amount of time remaining under his employment agreement. The
Corporation also agreed to cover reasonable relocation expenses. Additionally,
Dr. Vassos received the following loans which are secured by his residence in
California:
(1) A $125,000 loan, one-third of which, plus all accrued interest, will be
forgiven on the first, second and third anniversary of his employment
with the Corporation, provided he remains employed at such time. The
largest outstanding balance due since the beginning of the last fiscal
year was $134,000 and the outstanding balance on September 14, 2000 was
$87,500.
(2) A $125,000 loan with principal and interest payable on a monthly basis
over a five-year period. The largest outstanding balance due since the
beginning of the last fiscal year was $118,300 and the outstanding
balance on September 14, 2000 was $91,300.
(3) A $180,000 loan repayable with accrued interest upon the sale of his
previous residence in Michigan. The largest outstanding balance due
since the beginning of the last fiscal year was $184,000 and the
outstanding balance was paid in full on August 18, 1999.
All of the loans to Dr. Vassos accrue interest at 7.75% per annum and
entire outstanding balance of principal and interest are due and payable within
90 days of termination of employment.
The Corporation maintains a key man life insurance policy on Duane Roth
providing a death benefit of $4 million to the Corporation. The Corporation
entered into a split-dollar insurance agreement as of November 11, 1998 with
Duane Roth. Pursuant to the agreement, the Corporation and Duane Roth will share
in the premium costs of a universal life insurance policy that pays a death
benefit of not less that $8 million upon the death of Duane Roth. The
Corporation pays the government table (PS-58) cost for $4 million of key person
life coverage and is the beneficiary for this coverage. Mr. Roth contributes the
government table (PS-58) cost for his share of the balance of the coverage. The
portion of each annual premium that equals the annual increase in the cash value
of the policy is also contributed by the Corporation. The Corporation can cause
the agreement to be terminated and the policy to be surrendered at any time upon
30 days prior notice. Upon surrender of the policy or payment of the death
benefit thereunder, the Corporation is also entitled to repayment of an amount
equal to the cumulative premiums previously paid by the Corporation minus the
cumulative amount allocated to the $4 million of key person coverage, with all
remaining payments to be paid to Duane Roth or his beneficiaries.
The Corporation maintains a key man life insurance policy on Theodore
D. Roth providing a death benefit of $4 million to the Corporation. The
Corporation entered into a split-dollar insurance agreement as of November 11,
1998 with Theodore Roth. Pursuant to the agreement, the Corporation and Theodore
Roth will share in the premium costs of a universal life insurance policy that
pays a death benefit of not less that $4 million upon the death of Theodore
Roth. The Corporation pays the government table (PS-58) cost for $4 million of
key person life coverage and is the beneficiary for this coverage. Mr. Roth
contributes the government table (PS-58) cost for his share of the balance of
the coverage. The portion of each annual premium that equals the annual increase
in the cash value of the policy is also contributed by the Corporation. The
Corporation can cause the agreement to be terminated and the policy to be
surrendered at any time
<PAGE>
upon 30 days prior notice. Upon surrender of the policy or payment of the
death benefit thereunder, the Corporation is also entitled to repayment of an
amount equal to the cumulative premiums previously paid by the Corporation
minus the cumulative amount allocated to the $4 million of key person
coverage, with all remaining payments to be paid to Theodore Roth or his
beneficiaries.
STOCK OPTION GRANTS AND EXERCISES
The Corporation has granted options to its executive officers under its
1983 Incentive Stock Option Plan (which plan expired on October 1, 1993), its
1983 Non-Qualified Stock Option Program (which plan expired on February 24,
1999), and its 1991 Stock Option Plan. No stock appreciation rights ("SARs")
have been granted by the Corporation.
The following table sets forth certain information concerning options
granted during fiscal 2000 to the Named Executive Officers:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Option/SAR Grants in Last Fiscal Year
------------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of
Individual Grants Stock Price Appreciation for
Option Term (1)
---------------------------------------------------------------------------------------------------
Securities % of Total
Options/
Underlying SARs Granted Exercise or
Options/SARs to Employees Base Price Expiration
Name Granted (#) (2) in Fiscal Year ($/Share) (5) Date 5% ($) 10% ($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Duane J. Roth 84,000 (3) 3.6% 2.75 8/11/09 145,300 368,100
110,000 (4) 4.7% 7.75 12/28/09 536,100 1,358,700
Theodore D. Roth 47,000 (3) 2.0% 2.75 8/11/09 81,300 206,000
100,000 (4) 4.3% 7.75 12/28/09 487,400 1,235,100
Harold W. DeLong 35,000 (3) 1.5% 2.75 8/11/09 60,500 153,400
50,000 (4) 2.1% 7.75 12/28/09 243,700 617,600
Artemios B. Vassos 25,000 (3) 1.1% 2.75 8/11/09 43,200 109,600
35,000 (4) 1.5% 7.75 12/28/09 170,600 432,300
N. Simon Faithfull 25,000 (3) 1.1% 2.75 8/11/09 43,200 109,600
25,000 (4) 1.1% 7.75 12/28/09 121,900 308,800
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The dollar amounts under these columns are the result of calculations
assuming that the price of Common Stock on the date of the grants of the
options increases at the hypothetical 5% and 10% rates set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation, if any, of the Corporation's stock
price.
(2) All options granted in 2000 to the Named Executive Officers were
non-qualified stock options under the 1991 Plan.
(3) Options are exercisable in increments of 50% on date of issuance and
25% on each of the next two subsequent anniversaries.
(4) Options are exercisable in increments of 20% per year commencing one
year after the date of issuance and on each subsequent
anniversary.
(5) The exercise price per share of the options granted represented at least
the fair market value of the underlying shares on the date of grant.
Options may be exercised by (i) paying the Corporation at least the par
value of the shares of Common Stock being acquired, with the remainder of
the exercise price to be borrowed from the Corporation, or (ii) by
surrendering shares of Common Stock in payment of the exercise price and
applicable withholding taxes. The 1991 Plan provides that loans to pay
the exercise price shall mature within five years (or earlier, in the
event of a termination of employment or of a consultancy), shall be
secured by the shares of Common Stock purchased, shall provide for
quarterly payments of interest at such rate as the Board of Directors may
determine, and shall be in such form and contain such other provisions as
the Board of Directors may determine from time to time.
The following table summarizes options exercised during fiscal 2000 and
presents the value of unexercised options held by the Named Executive Officers
at fiscal year end:
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying In-The-Money
Unexercised Options/SARs Options/SARs at Fiscal
at Fiscal Year End (#) Year End ($) Exercisable
Shares Acquired on Value Exercisable (E)/ (E)/
Exercise (#) Realized ($) Unexercisable (U) Unexercisable (U)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Duane J. Roth - - 495,400 (E) 1,886,625 (E)
367,000 (U) 1,388,875 (U)
Theodore D. Roth - - 248,000 (E) 857,950 (E)
238,500 (U) 952,875 (U)
Harold W. DeLong - - 199,500 (E) 693,513 (E)
135,000 (U) 596,563 (U)
Artemios B. Vassos - - 31,250 (E) 270,313 (E)
103,750 (U) 720,938 (U)
N. Simon Faithfull 43,000 479,700 90,750 (E) 385,625 (E)
86,500 (U) 374,875 (U)
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the
"Committee") has provided the following report:
The Committee is composed entirely of outside, nonemployee
directors. The Committee determines the base salaries and the amount of bonus
awards to be paid to the executive officers of the Corporation. In addition,
the Committee recommends the number of the Corporation's stock option grants
which should be made to executive officers and other employees of the
Corporation. The following is a summary of policies of the Committee that
affect the compensation paid to executive officers, as reflected in the
tables and text set forth elsewhere in the proxy statement.
EXECUTIVE COMPENSATION POLICY AND COMPONENTS OF COMPENSATION
The Committee's fundamental executive compensation philosophy is to
enable the Corporation to attract and retain key executive personnel and to
motivate those executives to achieve the Corporation's objectives. The
Corporation is still in its research and development phase and has not yet
achieved profitability. Therefore, traditional methods of evaluating
executive performance, such as sales and profit levels, return on equity, and
stock price, are inappropriate. Accordingly, assessment of each executive's
performance is based upon attainment of his or her specific objectives in
relation to the Corporation's overall annual strategic goals. The Committee
may in its discretion apply different measures of performance for future
fiscal years. However, it is presently contemplated that all compensation
decisions will be designed to further the fundamental executive compensation
philosophy described above.
Each executive officer's compensation package is reviewed annually
and is comprised of three components: base salary, bonus, and stock option
grants. In addition, executive officers of the Corporation are eligible to
participate in all benefit programs generally available to other employees.
BASE SALARY
In setting the base salary levels of each executive officer, the
Committee considers the base salaries of executive officers in comparable
positions in other similarly situated biotechnology/pharmaceutical
development companies. In setting levels, the Corporation currently targets
the 75th percentile of the relevant labor market. Factors considered include
company size, stage of development of a company's products, and geographical
location. The Committee also
<PAGE>
considers the individual experience level and actual performance of each
executive officer in view of the Corporation's needs and objectives. Salary
decisions are determined in a structured annual review by the Committee with
input from the Chief Executive Officer.
BONUSES
Annual bonus, set as a targeted percentage of total cash
compensation, may be earned by each executive officer, based upon the
achievement of performance goals established at the beginning of the fiscal
year and reviewed at least twice during the year.
Performance goals for the Corporation are developed by management,
and reviewed and approved by the Committee and the Board of Directors.
Performance goals for individual executives are developed by the Chief
Executive Officer, and reviewed and approved by the Committee. Bonuses are
awarded to executives based upon the attainment of these goals during the
year, with the Corporation and the executives accomplishing minimum
objectives prior to being eligible to receive a bonus. The Committee
considers the amounts of bonuses it expects to pay to executives when it
compares its compensation practices with other companies similarly situated.
LONG-TERM STOCK-BASED INCENTIVE COMPENSATION
Generally, the Corporation's Board of Directors or, if appointed, a
stock option committee, approves annual grants of stock options to each of
the Corporation's executive officers under the 1991 Plan based upon
recommendations from the Committee. The grants are designed to align the
interest of each executive officer with those of the shareholders and provide
each individual with a significant incentive to manage the Corporation from
the perspective of an owner with an equity stake in the business. Each grant
generally allows the officer to acquire shares of the Corporation's Common
Stock at a fixed price per share (the market price on the grant date) over a
specified period of time (up to ten years), thus providing a return to the
executive officer only if the market price of the shares appreciates over the
option term. The size of the option grant to each executive officer generally
is set as the Committee deems appropriate in order to retain and motivate key
executive officers as well as to provide them with the perspective of the
Corporation's shareholders in assessing corporate results. The grants also
take into account comparable awards to individuals in similar positions at
biotechnology/pharmaceutical development companies as reflected in external
surveys, the individual's potential for future responsibility and promotion
over the option term, the individual's personal performance in recent
periods, and the risk attached to the future growth of the pharmaceutical
industry. In making comparisons in the industry, the Corporation targets the
75th percentile of the relevant labor market.
The Committee, at its discretion, has the authority to utilize
compensation consultants to assist in defining the relevant labor market for
executive compensation and to recommend annual salary and bonus increases.
Duane J. Roth, Chief Executive Officer, although not a member of the
Committee, assisted the Committee in developing the compensation packages
awarded to executive officers other than himself.
CEO COMPENSATION
In setting the compensation payable to the Corporation's Chief
Executive Officer, the Committee sought to be competitive with other
biotechnology/pharmaceutical development companies. In making comparisons,
the Corporation targets the 75th percentile of the relevant labor market. The
Committee established Duane Roth's base salary based on an evaluation of his
personal performance and the objective of having his base salary keep pace
with salaries being paid to similarly situated chief executive officers. With
respect to his base salary, it is the Committee's intent to provide him with
a level of stability and certainty each year and not have this particular
component of compensation affected to any significant degree by Corporation
performance factors. The remaining component of his 2000 fiscal year
compensation, however, was dependent upon performance and provided no dollar
guarantees.
SECTION 162(m)
Section 162(m) of the Internal Revenue Code limits the deductibility
by a publicly held corporation of compensation paid in a taxable year to the
Chief Executive Officer and any other executive officer whose compensation
<PAGE>
is required to be reported in the Summary Compensation Table to $1 million.
For the 1999 taxable year, the Corporation did not reach and, therefore was
not affected by, this limitation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer
or employee of the Corporation or any of its subsidiaries.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Donald E. O'Neill, Chairman Dr. Helen M. Ranney
Dr. Pedro Cuatrecasas Stephen M. McGrath
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return to
the Corporation's shareholders during the five-year period ended June 30, 2000,
as well as with that of an overall stock market index (Nasdaq) and a published
industry index (Nasdaq Pharmaceutical):
<TABLE>
<CAPTION>
ALLP NASDAQ (US) NASDAQ PHARM
<S> <C> <C> <C>
6/30/1995 $100.00 $100.00 $100.00
6/30/1996 $169.23 $171.31 $100.00
6/30/1997 $103.21 $208.35 $195.99
6/30/1998 $42.95 $274.30 $199.42
6/30/1999 $26.92 $394.97 $204.26
6/30/2000 $115.38 $583.48 $639.98
</TABLE>
<TABLE>
<CAPTION>
STOCK
PRICE VALUE VALUE
<S> <C> <C> <C>
6/30/1995 9.75 228.371 204.53
6/30/1996 16.50 391.217 400.856
6/30/1997 10.06 475.806 407.872
6/30/1998 4.188 626.431 417.766
6/30/1999 2.625 902.001 582.705
6/30/2000 11.250 1332.49 1308.944
</TABLE>
2. PROPOSED AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Corporation is proposing an amendment to Paragraph 4 of the
Corporation's Certificate of Incorporation, as amended, to increase the number
of authorized shares of Common Stock from 75,000,000 shares to 125,000,000
shares (the "Common Stock Amendment").
Pursuant to its Certificate of Incorporation, as amended, the
Corporation is presently authorized to issue 75,000,000 shares of Common Stock
and 5,000,000, shares of preferred stock, $.01 par value. On September 14, 2000,
if all of the shares of Common Stock currently reserved for issuance upon the
exercise of outstanding warrants and options were issued, the number of shares
of Common Stock that would be outstanding is 55,980,056 shares. The Company has
<PAGE>
also reserved an additional 3,364,396 shares of Common Stock for issuance
upon the conversion of its Series F Preferred Stock and all outstanding
convertible debt.
On August 16, 2000, the Board of Directors approved an amendment to
the Corporation's Certificate of Incorporation providing for an increase in
the authorized number of shares of Common Stock from 75,000,000 shares to
125,000,000 shares. The Board of Directors deems it to be in the best
interest of the Corporation that the Corporation have available additional
authorized shares of Common Stock for additional public offerings and private
placements, acquisitions, financings, stock dividends, personnel recruitment
and retention, and for other opportunities which may arise in the future. The
additional shares of Common Stock would be available for issuance by action
of the Board of Directors without the need for further action by
shareholders, unless such action were specifically required by applicable law
or rules of any stock exchange on which the Corporation's securities may then
be listed. Under applicable laws of the State of New York, shareholders of
the Corporation have no pre-emptive rights with respect to the authorization
or issuance of additional shares of the Corporation's capital stock.
The proposed increase in the authorized number of shares of Common
Stock could have a number of effects on the Corporation's shareholders
depending upon the exact nature and circumstances of any actual issuance of
authorized but unissued shares. The increase could have an anti-takeover
effect, in that additional shares could be issued (within the limits imposed
by applicable law) in one or more transactions that could make a change in
control or takeover of the Corporation more difficult. For example,
additional shares could be issued by the Corporation so as to dilute the
stock ownership or voting rights of persons seeking to obtain control of the
Corporation. Similarly, the issuance of additional shares to certain persons
allied with the Corporation's management could have the effect of making it
more difficult to remove the Corporation's current management by diluting the
stock ownership or voting rights of persons seeking to cause such removal.
In addition, an issuance of additional shares by the Corporation
could have an effect on the potential realizable value of a shareholder's
investment. In the absence of a proportionate increase in the Corporation's
earnings and book value, an increase in the aggregate number of outstanding
shares of the Corporation caused by the issuance of the additional shares
would dilute the earnings per share and book value per share of all
outstanding shares of the Corporation's Common Stock. If such factors were
reflected in the price per share of Common Stock, the potential realizable
value of a shareholder's investment could be adversely affected.
Under New York law, the affirmative vote of the holders of
securities representing a majority of the voting power entitled to vote at
the Meeting is required to adopt the proposed Common Stock Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION
OF THE COMMON STOCK AMENDMENT.
3. PROPOSED ADOPTION OF THE 2000 STOCK OPTION PLAN
On August 16, 2000, the Board of Directors adopted the 2000 Stock
Option Plan (the "2000 Plan"). The Board believes that the 2000 Plan is
necessary to meet the Corporation's objectives of recruiting, motivating and
retaining officers, employees and nonemployee consultants with appropriate
experience and ability, and to increase the grantees' alignment of interest
with the Corporation's shareholders. The only existing stock option plan of
the Corporation, the 1991 Stock Option Plan (the "1991 Plan"), expires in
November 2001, and the Board believes it is important to have a new stock
option plan in effect when the 1991 Plan expires. The 2,100,000 shares
authorized under the 2000 Plan represent 4% of the Corporation's Common Stock
on a fully diluted basis as of June 30, 2000.
DESCRIPTION OF THE PLAN
The following is a summary of the principal features of the 2000
Plan:
PURPOSE
<PAGE>
The purpose of the 2000 Plan is to assist the Corporation in the
recruitment, retention and motivation of directors, officers, employees and
consultants who are providing, or who are expected to provide, services which
are deemed important to the Corporation, by enabling them to acquire the
Corporation's Common Stock, thereby increasing their proprietary interest in
and commitment to the growth and success of the Corporation.
ADMINISTRATION
The 2000 Plan is administered by the "Plan Administrator" which
consists of the Board of Directors of the Corporation, unless the Board of
Directors appoints a committee to administer the 2000 Plan. The Plan
Administrator has full authority, subject to the provisions of the 2000 Plan,
to determine the eligible individuals who are to receive option grants under
the 2000 Plan, the type of option (incentive stock option or non-qualified
stock option) to be granted, the consideration for the granting of such
options, the number of shares to be covered by each granted option, the date
or dates on which the option is to become exercisable, and the maximum term
for which the option is to remain outstanding. The Board of Directors
currently serves as the Plan Administrator.
ELIGIBILITY AND SHARES SUBJECT TO THE 2000 PLAN
Under the 2000 Plan, 2,100,000 shares of Common Stock have been
reserved for issuance upon the exercise of options granted pursuant to the
terms of the 2000 Plan. The 2000 Plan provides for the grant of both
incentive stock options ("ISOs") intended to qualify as such under section
422 of the Internal Revenue Code of 1986, as amended, and non-qualified stock
options ("NSOs"). ISOs may be granted only to employees of the Corporation or
its subsidiaries. NSOs may be granted to employees, nonemployee directors and
consultants who provide services which are deemed important to the
Corporation or its subsidiaries. If any options granted under the 2000 Plan
shall for any reason expire or be canceled or otherwise terminated without
having been exercised in full, the shares allocable to the unexercised
portion of such options shall again become available for new grants under the
2000 Plan. Options to purchase more than 200,000 shares may not be granted to
any individual in a single calendar year under the 2000 Plan.
TERMS OF OPTIONS
Each option granted under the 2000 Plan must be exercised within ten
years of the date of its grant, unless the Plan Administrator specifies some
lesser time. Stock options granted under the 2000 Plan must be exercised by
the optionee before the earlier of the expiration of such option or the date
ten days after termination of the optionee's employment or service, except
that this period is extended to three months in the case of the optionee's
retirement at or after age 65 or termination of employment or service due to
disability, and to six months in the case of the optionee's death, in which
case the option is exercisable by the optionee's estate. Options granted
pursuant to the 2000 Plan will vest at the time or times determined by the
Plan Administrator. Options become immediately exercisable in full upon the
optionee's retirement at or after age 65 or termination of employment or
service due to disability or death, or upon the occurrence of such
circumstance or event as in the opinion of the Plan Administrator merits
special consideration.
Options are subject to such terms and conditions, including price
and rate of exercise, as the Plan Administrator may determine. However, the
exercise price for ISOs will be no less than 100% of fair market value on the
date of grant. The exercise price for NSOs will be no less than the greater
of par value of the shares ($.01 per share) or 100% of the fair market value
of the shares on the date of grant.
Payment of the purchase price for shares purchased pursuant to the
exercise of an option may be made by cash or check, by a "cashless" exercise
method through a broker, by surrendering shares of Common Stock of the
Corporation in payment of the exercise price and applicable withholding
taxes, or by such other methods as the Plan Administrator may permit from
time to time. A grantee who is an employee of or a consultant to the
Corporation at the time of exercise of an option may, if authorized by the
Plan Administrator, exercise his/her option by paying the Corporation at
least the par value of the shares of Common Stock being acquired and
borrowing the remainder of the exercise price from the Corporation. The 2000
Plan provides that such loans shall mature within five years (or earlier, in
the event of a termination of employment or of a consultancy), shall be
secured by the shares of Common Stock purchased, shall provide for quarterly
payments of interest at such rate as the Plan Administrator may determine and
shall be in such form and contain such other provisions as the Plan
Administrator may determine from time to time.
<PAGE>
DURATION, AMENDMENT AND TERMINATION
The 2000 Plan expires on August 15, 2010. The 2000 Plan may be
amended, suspended or terminated at any time by action of the Board of
Directors or the Plan Administrator, except that no such action may, without
shareholder approval, increase the maximum number of shares reserved for
options under the 2000 Plan or for any individual, change the class of
eligible persons under the 2000 Plan. Furthermore, no action may, without the
consent of an optionee, adversely affect his/her rights under any option
theretofore granted. Without the approval of the Corporation's shareholders,
the 2000 Plan does not allow options to be repriced by lowering the option
exercise price of a previously granted option or by the cancellation of
outstanding options with subsequent replacement or regrant of options with a
lower exercise price.
FEDERAL INCOME TAX CONSEQUENCES
Neither the optionee nor the Corporation will incur any federal tax
consequences as a result of the grant of an option. The optionee will have no
taxable income upon exercising an ISO (except that the alternative minimum
tax may apply), and the Corporation will receive no deduction when an ISO is
exercised. Upon exercising an NSO, the optionee generally must recognize
ordinary income equal to the "spread" between the exercise price and the fair
market value of the Common Stock on the date of exercise; and the Corporation
will be entitled to a deduction for the same amount. In the case of an
employee, the option spread at the time an NSO is exercised is subject to
income tax withholding. The tax treatment of a disposition of option shares
acquired under the 2000 Plan depends on how long the shares have been held
and on whether such shares were acquired by exercising an ISO or NSO. The
Corporation will not be entitled to a deduction in connection with a
disposition of option shares, except in the case of a disposition of shares
acquired under an ISO before the applicable ISO holding periods have been
satisfied.
Shareholders are requested in this Proposal 3 to approve the
adoption of the 2000 Plan. Under New York law, the affirmative vote of the
holders of securities representing a majority of the voting power present in
person or represented by proxy at the Meeting is required to adopt the
proposed adoption of the 2000 Plan of the Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE
2000 STOCK OPTION PLAN.
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP,
independent auditors for the Corporation for the year ending June 30, 2000,
to serve as the independent auditors for the Corporation for the fiscal year
ending June 30, 2001. Representatives of Ernst & Young LLP are expected to be
present at the Meeting, will have the opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
Shareholder ratification of the appointment of Ernst & Young LLP as
the Corporation's independent auditors is not required by the Corporation's
Bylaws or otherwise. If the shareholders fail to ratify the appointment, the
Board will reconsider whether or not to retain that firm. Even if the
appointment is ratified, the Board in its discretion may direct the
appointment of a different independent accounting firm at any time during the
year if the Board determines that such a change would be in the best
interests of the Corporation and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
5. OTHER BUSINESS
Management knows of no other matters that may be presented to the
Meeting. However, if any other matter properly comes before the Meeting, it
is intended that proxies in the accompanying form will be voted in accordance
with the judgment of the persons named therein.
<PAGE>
FUTURE PROPOSALS BY SHAREHOLDERS
Any proposal which a shareholder of the Corporation wishes to have
included in the proxy statement and proxy relating to the Corporation's 2001
Annual Meeting pursuant to the provisions of Rule 14a-8 under the Securities
Exchange Act of 1934 must be received by the Corporation at its executive
offices no later than July 12, 2001, and must otherwise comply with the
requirements of Rule 14a-8. Shareholder proposals submitted outside the
processes of Rule 14a-8 will also be considered untimely if submitted after
July 12, 2000. The address of the Corporation's executive office is 3040
Science Park Road, San Diego, California 92121.
INFORMATION INCORPORATED BY REFERENCE
Audited financial statements, management's discussion and analysis
of financial condition and results of operations, and quantitative and
qualitative disclosures about market risk are incorporated by reference
herein to the Annual Report to Shareholders accompanying this Proxy Statement.
ANNUAL REPORT ON FORM 10-K
THE CORPORATION WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST
RECENT ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, TO EACH
PERSON SOLICITED HEREUNDER WHO MAILS A WRITTEN REQUEST THEREFOR TO ALLIANCE
PHARMACEUTICAL CORP., 3040 SCIENCE PARK ROAD, SAN DIEGO, CA 92121, ATTENTION:
LLOYD A. ROWLAND, VICE PRESIDENT AND GENERAL COUNSEL. THE CORPORATION WILL
ALSO FURNISH, UPON THE PAYMENT OF A REASONABLE FEE TO COVER REPRODUCTION AND
MAILING EXPENSES, A COPY OF ALL EXHIBITS TO SUCH ANNUAL REPORT ON FORM 10-K.
It is important that your shares be represented at the Meeting. If
you are unable to be present in person, you are respectfully requested to
sign the enclosed proxy and return it in the enclosed stamped, addressed
envelope as promptly as possible.
By Order of the Board of Directors,
Duane J. Roth, Chairman
Date: October 5, 2000
San Diego, California
<PAGE>
ALLIANCE PHARMACEUTICAL CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS --- NOVEMBER 8, 2000
The undersigned, revoking any proxy heretofore given, hereby appoints Carroll
O. Johnson, Stephen M. McGrath and Duane J. Roth, or any one of them, Proxies
of the undersigned with full power of substitution, with respect to all of
the shares of the common stock which the undersigned is entitled to vote at
the Annual Meeting of Shareholders of Alliance Pharmaceutical Corp. (the
"Corporation") to be held on November 8, 2000, at the offices of the
Corporation at 9333 Genesee Avenue, Suite 300, San Diego, California 92121 at
10:00 a.m., San Diego time, or any adjournment thereof.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED FOR ELECTION AS DIRECTORS, FOR APPROVAL OF AN INCREASE IN THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF THE CORPORATION BY 50,000,000
SHARES, FOR APPROVAL OF THE 2000 STOCK OPTION PLAN, AND FOR RATIFICATION OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30,
2001. If specific instructions are indicated, this Proxy will be voted in
accordance therewith.
In their discretion, the Proxies are authorized to transact such other
business as may properly come before the meeting or any adjournment thereof.
The Board of Directors has proposed all matters to be voted upon and
recommends a vote FOR all nominees for election as directors, FOR an increase
in the number of authorized shares of common stock of the Corporation by
50,000,000 shares, FOR adoption of the 2000 Stock Option Plan, and FOR
ratification of Ernst & Young LLP as independent auditors for the fiscal year
ending June 30, 2001. Approval of any matter in this proxy is not related to
or conditioned on the approval of any other matter.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees listed below (except as marked to the contrary) WITHHOLD AUTHORITY
to vote for all nominees
listed below
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
<TABLE>
<S> <C> <C>
Dr. Pedro Cuatrecasas Dr. Fred M. Hershenson Carroll O. Johnson
Stephen M. McGrath Donald E. O'Neill Dr. Helen M. Ranney
Dr. Jean G. Riess Duane J. Roth Theodore D. Roth
Dr. Thomas F. Zuck
</TABLE>
<TABLE>
<S> <C> <C> <C>
2. Increase of the number of authorized shares of Common Stock of the Corporation by 50,000,000 shares
FOR AGAINST ABSTAIN
3. Adoption of the 2000 Stock Option Plan
FOR AGAINST ABSTAIN
4. Ratification of Ernst & Young LLP as independent auditors
FOR AGAINST ABSTAIN
</TABLE>
(To be completed and signed on reverse side)
<PAGE>
Dated:
-------------------------------------------,
2000
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--------------------------------------------
Please sign exactly as name appears hereon.
If the shares are registered in the names of
two or more persons, each should sign.
Executors, administrators, trustees,
guardians, attorneys-in-fact, corporate
officers, general partners and other persons
acting in a representative capacity should
add their titles.
The above signed hereby acknowledges receipt
of the Notice of Annual Meeting of
Shareholders and the Proxy Statement
furnished herewith. PLEASE FILL IN, DATE,
SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POST-PAID RETURN ENVELOPE.
