<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
NASTECH PHARMACEUTICAL COMPANY INC.
(Name of Registrant as Specified in its Charter)
NASTECH PHARMACEUTICAL COMPANY INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check in 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
is determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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 No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NASTECH PHARMACEUTICAL COMPANY INC.
45 DAVIDS DRIVE
HAUPPAUGE, NEW YORK 11788
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 29, 1998 AT 10:00 A.M.
TO THE STOCKHOLDERS OF NASTECH PHARMACEUTICAL COMPANY INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
NASTECH PHARMACEUTICAL COMPANY INC. (the "Company") will be held at 150
Vanderbilt Motor Parkway, Hauppauge, New York 11788 at 10:00 A.M. on Monday,
June 29, 1998, to consider and vote on the following proposals:
1. To elect nine (9) directors, each to hold office for a term of one
(1) year or until their respective successors shall have been duly
elected or appointed;
2. To ratify the amendment to the Company's Stock Option Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998; and
4. To transact such other business as may properly come before the
meeting.
Only holders of shares of Common Stock of record on the Company's books
at the close of business on May 5, 1998 will be entitled to vote at the meeting.
All such stockholders are requested to be represented at the meeting either in
person or by proxy. The stock transfer books will not be closed.
Enclosed is a copy of the Annual Report for the year ended December 31,
1997 along with a proxy statement and a proxy card.
It is desirable that all holders of Common Stock of the Company be
represented at the meeting either in person or by proxy.
SUCH STOCKHOLDERS WHO CANNOT ATTEND THE MEETING IN PERSON ARE REQUESTED
TO DATE AND EXECUTE THEIR PROXIES AND RETURN THEM TO THE COMPANY IN THE ENCLOSED
ENVELOPE AS PROMPTLY AS POSSIBLE.
By Order of the Board of Directors,
Joel Girsky,
Secretary
May 11, 1998
Hauppauge, New York
<PAGE> 3
NASTECH PHARMACEUTICAL COMPANY INC.
45 DAVIDS DRIVE
HAUPPAUGE, NEW YORK 11788
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 29, 1998
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the management of NASTECH PHARMACEUTICAL COMPANY INC. (the
"Company"), a Delaware corporation, for use at the Annual Meeting of
Stockholders to be held on June 29, 1998 and at any postponements or
adjournments thereof. This material is first being mailed to stockholders on
or about May 11, 1998.
The cost of such solicitation will be borne by the Company. The Company
may also agree to pay banks, brokers, nominees and other fiduciaries their
reasonable charges and expenses incurred in forwarding the proxy material to
their principles.
A form of proxy is enclosed for use at the meeting. The issuance of a
proxy by a shareholder will not affect his right to vote his shares if he
attends the meeting and desires to vote in person. A proxy may be revoked at
any time prior to the voting thereof, but a revocation will not be effective
unless notice thereof is received, in writing, by the Secretary of the
Company prior to such voting. All such shares represented by effective
proxies on the enclosed form received by the Company will be voted at the
meeting or any adjourned session thereof in accordance with the terms of
such proxies. If no direction is indicated, all shares represented by valid
proxies received pursuant to this solicitation will be voted FOR all
directors and proposals contained therein. Proxies marked "abstain" will be
treated as present for the purpose of determining a quorum but will not be
voted with respect to any proposal marked "abstain."
BENEFICIAL OWNERSHIP OF SECURITIES AND VOTING RIGHTS
Shares of common stock, of which 6,335,168 shares were outstanding as
of April 24, 1998, are the only voting securities of the Company. Each share
is entitled to one vote and a vote of a majority of the shares present, or
represented, and entitled to vote at the meeting is required to approve each
proposal to be acted upon at the meeting. Only holders of shares of Common
Stock of the Company of record on its books at the close of business on May
5, 1998 will be entitled to notice of, and to vote at the meeting. Any such
stockholder may vote his shares either in person or by his duly authorized
proxy.
The following table sets forth as of April 24, 1998 certain information
as to persons known to the Company who may be deemed to be beneficial owners
of more than five percent of the outstanding shares of the Company's Common
Stock, each director of the Company and all officers and directors of the
Company as a group:
3
<PAGE> 4
<TABLE>
<CAPTION>
Amount and
Nature Percentage of
of Beneficial Outstanding Shares
Name of Beneficial Owner (1) Ownership (2) Owned (3)
---------------------------- ------------- ---------
<S> <C> <C>
SAFECO Corporation and
affiliates (4) 1,055,000 16.7%
Devin N. Wenig (5) 438,067 6.8
Basil Properties (6)(10) 283,537 4.5
Bruce R. Thaw (7) 153,041 2.4
Alvin Katz (8) 137,000 2.2
Vincent D. Romeo (9) 93,845 1.5
Robert H. Rosen (11) 70,000 1.1
Ian Ferrier (12) 60,000 *
Joel Girsky (8) 38,749 *
John V. Pollock (8)(10) 38,333 *
Grant W. Denison, Jr. (13) 35,000 *
Andrew P. Zinzi (14) 15,433 *
All Officers and
Directors as a Group
(10 persons) (15) 1,363,005 19.9%
</TABLE>
- -----------------------------------------------------
* Represents less than 1% of the outstanding shares of the Company's Common
Stock.
(1) The addresses of all persons other than Basil Properties, Messrs. Bruce
Thaw, Alvin Katz and John V. Pollock is c/o the Company. The address of
Bruce R. Thaw is 45 Banfi Plaza, Farmingdale, NY; the address of Basil
Properties and John V. Pollock is 1510 H Street, N.W., Washington D.C.;
and the address of Alvin Katz is 301 N. Birch Rd., Fort Lauderdale, FL.
(2) All shares are owned beneficially and of record unless indicated
otherwise. Includes 513,333 shares issuable pursuant to outstanding
stock options with the Company, which may be exercised within 60 days
of the date of this Report.
(3) Does not give effect to (i) the exercise of the Representative's
Warrant, (ii) the Underwriter's Warrant and (iii) 360,817 shares of
Common Stock reserved for issuance under the Company's stock option
plan.
(4) Based on information supplied by SAFECO Corporation and affiliates, a
registered investment advisor located at SAFECO Plaza, Seattle,
Washington 98185, in a Schedule 13G filed with the Securities and
Exchange Commission on April 10, 1998.
(5) Devin N. Wenig's shares, as indicated above, include 95,000 shares
issuable pursuant to outstanding stock options with the Company, which
may be exercised within 60 days of the date of this Report, and 166
shares held by Mr. Wenig's wife.
(6) Includes 40,000 shares held by Mrs. Sophie Basil, a general partner of
Basil Properties.
(7) Includes 75,000 shares issuable pursuant to outstanding stock options
with the Company, which may be exercised within 60 days of the date of
this Report. Does not include 38,000 shares owned by Mr. Thaw's wife,
of which Mr. Thaw disclaims beneficial ownership.
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<PAGE> 5
(8) Includes 30,000 shares issuable pursuant to outstanding stock options
with the Company, which may be exercised within 60 days of the date of
this Report.
(9) Includes 75,000 shares issuable pursuant to outstanding stock options
with the Company, which may be exercised within 60 days of the date of
this Report.
(10) John V. Pollock is a managing director of Basil Properties and its
nominee to the Company's Board of Directors.
(11) Includes 70,000 shares issuable pursuant to outstanding stock options
with the Company, which may be exercised within 60 days of the date of
this Report.
(12) Includes 60,000 shares issuable pursuant to outstanding stock options
with the Company, which may be exercised within 60 days of the date of
this Report.
(13) Includes 35,000 shares issuable pursuant to outstanding stock options
with the Company, which may be exercised within 60 days of the date of
this Report.
(14) Includes 13,333 shares issuable pursuant to outstanding stock options
with the Company, which may be exercised within 60 days of the date of
this Report, 200 shares owned by Mr. Zinzi's wife and 400 shares owned
by Mr. Zinzi's daughters.
(15) Includes shares held by Basil Properties. See notes (6) and (10) above.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company during each of the Company's last three
fiscal years to the Company's Chief Executive Officer and to each of the
Company's executive officers who received salary and bonus payments in
excess of $100,000 during the fiscal year ended December 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Name and Principle Options All Other (F)
Position Year Salary Bonus (#Shares) Compensation
-------- ---- ------ ----- --------- ------------
<S> <C> <C> <C> <C> <C>
Dr. Vincent D. Romeo,
Chief Executive Officer (C) 1997 $ 182,000 $103,000 60,000 __
(A) 1996 $ 80,000 __ 25,000 __
(B) 1996 $ 160,000 __ __ __
(B) 1995 $ 156,000 __ 25,000 __
Mr. Robert Rosen,
President (D) 1997 $ 87,000 $100,000 140,000 $243,000
Mr. Andrew P. Zinzi,
Chief Financial Officer (E) 1997 $ 165,000 $ 27,000 __ $ 14,000
1996 $ 19,000 __ 40,000 __
</TABLE>
(A) Six months ended December 31, 1996
(B) Twelve months ended June 30 (former fiscal years)
(C) Dr. Vincent D. Romeo served as Chief Executive Officer and President of
the Company from August 1991 through October 1997.
(D) Mr. Rosen assumed current position as President in October 1997. From
May 1, 1997 to October 6, 1997, he served as Executive Vice President
of Marketing and Business Development.
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<PAGE> 6
(E) Mr. Zinzi commenced employment with the Company in November 1996.
(F) The Company provides the named executive officers with certain group
life, health, medical and other non-cash benefits generally available to all
salaried employees. The amounts shown in this column include the following:
Other compensation paid to Mr. Rosen includes consulting fees ($40,000)
prior to employment, reimbursed traveling expenses ($28,000), and the fair
market value of accelerated stock options ($175,000).
Other compensation paid to Mr. Zinzi includes relocation costs of
$14,000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock during the fiscal
year ended December 31, 1997, to the person named in the Summary
Compensation Table:
Individual Grant in Last Fiscal Year
<TABLE>
<CAPTION>
% of Total
Options
Granted to
Options Employees in Exercise or Hypothetical
Granted Fiscal Base Price Expiration Value at
Name (Shares) (1) Year 1997 ($/Share) Date Grant Date (4)
---- ------------ --------- --------- ---- --------------
<S> <C> <C> <C> <C> <C>
Dr. Vincent D. Romeo 60,000 13 $11.75 (2) 9-15-02 $423,000
Mr. Robert Rosen 40,000 31 $10.25 (2) 10-7-02 $246,000
100,000 $ 8.75 (3) 5-01-02 $651,000
</TABLE>
- -----------------------------------------------------
(1) The options to be granted under the Plan are designated as
incentive stock options or non-incentive stock options by the Board of
Directors which also has discretion as to the persons to be granted options,
the number of shares subject to the options and the terms of the option
agreements. The Plan provides that options granted thereunder shall be
exercisable during a period of no more than ten years (five years in the
case of 10% stockholders) from the date of grant, depending upon the
specific stock option agreement, and that, with respect to incentive stock
options, the option exercise price shall be at least equal to 100% of the
fair market value of the Common Stock at the time of grant (110% in the case
of 10% stockholders). All outstanding options are subject to optionee's
continuous employment or association with the Company. Under the Stock
Option Plan, the Board retains discretion to modify the terms of outstanding
options, subject to the provisions of the Plan.
(2) Options granted at market value on the date of grant.
(3) Market value on date of grant was $10.50.
(4) The estimated present value at grant date of options granted during
1997 has been calculated using the Black-Scholes option pricing model, based
upon the following assumptions: estimated time until exercise of 5.0 years;
a risk-free interest rate of 6.0%, representing the
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<PAGE> 7
interest rate on a U.S. Government zero-coupon bond on the date of grant
with a maturity corresponding to the estimated time until exercise; a
volatility rate of 65.0%. The approach used in developing these assumptions
is consistent with the requirements of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation."
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information related to the number and
value of stock options and stock appreciation rights held at fiscal year end
by the named executive officer. The Company did not issue stock appreciation
rights in 1997.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-the Money
Options at December 31, 1997 Options at December 31, 1997 (a)
---------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Dr. Vincent D. Romeo 50,000 60,000 $435,000 $ 83,000
Mr. Robert Rosen 70,000 70,000 $306,000 $246,000
Mr. Andrew P. Zinzi 13,333 26,667 --- ---
</TABLE>
(a) Market value of shares covered by in-the-money options on December 31,
1997, less option exercise price. Options are in-the-money if the market
value of the shares covered thereby is greater than the option exercise
price.
COMPENSATION OF DIRECTORS
Effective September 19, 1997, for services rendered and subject to
approval by shareholders of Proposal No. 2 included herein, each eligible
non-employee director received 10,000 stock options of the Company's
Common Stock. Further, certain eligible directors will be granted
10,000 stock options annually, effective at the time of the Annual
Meeting of Stockholders, at an option exercise price equal to the market
value of the Company's Common Stock at date of grant.
Devin N. Wenig, the Company's Chairman, was paid $95,000
in the Company's fiscal year ended December 31, 1997. This figure includes a
one-time fee of $75,000, as well as 60,000 stock options, all of which was
authorized by the Board, for assisting with the Company's public offering
in January 1997. The Chairman also received $20,000 for acting as Chairman
of the Executive Committee of the Company's Board of Directors.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Dr. Vincent Romeo, the Company's Chief Executive Officer has an
employment agreement expiring December 31, 2000, receives base compensation
of $230,000 per year, and annual incentive compensation of up to 50% of base
salary based on the achievement of certain business objectives of the
Company.
Mr. Robert Rosen, the Company's President has an employment agreement
expiring October 5, 2000, receives base compensation of $215,000 per year,
and annual incentive compensation of up to 50% of base compensation based on
the achievement of certain business objectives of the Company.
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<PAGE> 8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee presently consists of Joel Girsky
and John V. Pollock, both outside directors of the Company. The Compensation
Committee is responsible for reviewing and approving the compensation of the
Chief Executive Officer, the President, other officers of the Company and
administering and/or interpreting the Company's stock option plan.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is composed
entirely of independent, outside directors and establishes the general
compensation policies of the Company, specific compensation for each
executive officer of the Company and administers the Company's Stock Option
Plan. The Company's intent as administered through the Committee is to make
compensation packages of the executive officers of the Company sufficient to
attract and retain persons of exceptional quality, and to provide effective
incentives to motivate and reward such executives for achieving the
scientific, financial and strategic goals of the Company essential to the
Company's long-term success and to growth in shareholder value. The
Company's typical executive compensation package consists of three main
components: (1) base salary; (2) incentive cash bonuses; and (3) stock
options.
Base Compensation
The Committee's approach is to offer executive salaries competitive
with those of other executives in the industry in which the Company
operates. To that end, the Committee evaluates the competitiveness of its
base salaries based upon information drawn from various sources, including
published and proprietary survey data, consultants' reports and the
Company's own experience recruiting and training executives and
professionals. The Company's base salary levels are intended to be
consistent with competitive practice and level of responsibility, with
salary increases reflecting competitive trends, the overall financial
performance of the Company and the performance of the individual executive.
Bonuses
In addition to base salary, executives are eligible to receive
discretionary bonuses, from time to time, upon the achievement of certain
scientific, financial and marketing milestones. In addition, at the
beginning of each year, the Committee and the CEO review each individual
executive's job responsibilities and goals for the upcoming year. The amount
of the bonus and any performance criteria vary with the position and role of
the executive within the Company. In addition, for all executives, the
Committee with the assistance of the Company's CFO, reviews the Company's
actual financial performance against its internally budgeted performance in
determining year-end bonuses, if any. However, the Committee does not set
objective performance targets for employees other than executive officers.
Stock Option Grants
The Company, from time to time, grants stock options in order to
provide certain executives with a competitive total compensation package and
to reward them for their contribution to the long-term price performance of
the Company's Common Stock. Grants of stock options are designed to align
the executive's interest with that of the shareholders of the Company. In
awarding option grants, the Committee will consider, among others, the
amount of stock and options presently held by the executive, the executive's
past performance and contributions, and the executive's anticipated future
contributions and responsibilities.
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<PAGE> 9
Compensation for the CEO and President in 1997
In 1997, executive management of the Company were awarded incentive
bonuses based upon the achievement of certain scientific, marketing, and
financial milestones, including, among others, the successful financing
related to a public offering, the advancement of certain products to later
stages of development, the production, licensing, and launch of Nascobal,
and the licensing of the Company's intranasal motion sickness product,
scopolamine, currently under development. The Chief Executive Officer and
President received incentive bonuses of $103,000 and $100,000 and 60,000 and
40,000 stock options, respectively.
COMPENSATION COMMITTEE
John Girsky, John V. Pollock
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own
more than 10% of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission ("SEC"). Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such
persons. The Company is currently in compliance with Section 16(a); however,
certain officials of the Company were delinquent in filings during the
course of the year.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the
Company believes that all such filing requirements have been met.
STOCK OPTION PLAN - SEE PROPOSAL NO. 2 - AMENDMENT TO THE STOCK OPTION
PLAN TO INCREASE THE SHARES ISSUABLE UNDER THE PLAN
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Bruce R. Thaw, a director of the Company in 1998, invoiced the
Company approximately $225,000 and received 25,000 stock options, subject to
shareholder approval of Proposal No. 2 described herein, for services
rendered in connection with the Company's public offering, new product and
licensing activities, legal issues associated with various collaborative
agreements, and other legal and regulatory matters in fiscal 1997. Mr. Thaw
continues to represent the Company for which he will be paid customary legal
fees.
Dr. Ian Ferrier, a director of the Company, is the Chief Executive
Officer of Bogart Delafield Ferrier Inc. ("BDF") and is an affiliate of
Mazier Partners LLC ("MP"). BDF and MP provided consulting services to the
Company in areas of strategic planning, marketing and research and
development prioritization. For its fiscal year ended December 31, 1997, the
Company incurred fees of $154,000 and $40,000, for MP and BDF, respectively.
PROPOSAL NO. 1 - NOMINATION AND ELECTION OF DIRECTORS
At the Annual Meeting of Stockholders, nine directors are to be elected
by the holders of the Common Stock to serve until the next Annual Meeting
and until their successors have been elected and qualify. Certain
information concerning the nominees for election at the Annual Meeting, each
of whom is presently a director, and all the directors and officers as a
group, is set forth below. While the Board of Directors has no reason to
believe that any of those named will
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<PAGE> 10
not be available as a candidate, should such a situation arise, the proxy
may be voted for the election of the other nominees in the discretion of the
persons acting pursuant to the proxy.
The following information is submitted concerning the nominees for
election as directors based upon information received by the Company from
such persons:
<TABLE>
<CAPTION>
Name Age Position Director Since
---- --- -------- --------------
<S> <C> <C> <C>
Devin N. Wenig 31 Chairman 1991
Dr. Vincent D. Romeo 41 Chief Executive Officer 1991
Robert H. Rosen 41 President 1998
Joel Girsky 58 Director, Secretary and 1983
Treasurer
Bruce R. Thaw 44 Director 1991
Dr. Ian R. Ferrier 54 Director 1995
Grant W. Denison, Jr. 48 Director 1996
Alvin Katz 68 Director 1993
John V. Pollock 59 Director 1993
</TABLE>
Mr. Wenig was appointed Chairman of the Company's Board of Directors in
June 1991. Mr. Wenig received a B.A. degree from Union College and a J.D.
degree from the Columbia University School of Law. From May 1991 to May 1994
Mr. Wenig was a corporate associate with the firm of Cravath, Swaine and
Moore. Mr. Wenig is currently a practicing corporate attorney in New York
City, New York.
Dr. Romeo has been employed by the Company since 1985 as Director of
Research and was appointed President and Chief Executive Officer of the
Company in August 1991. Dr. Romeo is a registered pharmacist and received a
Ph.D. degree from St. John's University College of Pharmacy and Allied
Health Professions in Pharmaceutical Sciences in 1984, with a specialty in
pharmacology. He continues at St. John's as an Adjunct Professor of
Pharmacology, Graduate Division, College of Pharmacy and Allied Health
Professions. Dr. Romeo has devoted a significant amount of his time with the
Company formulating drugs for nasal delivery, developing animal models for
nasal drug testing, and designing clinical efficacy and safety studies. He
has authored and co-authored several published articles in the field. Dr.
Romeo has also presented his work at various meetings and conferences
sponsored by the American Association of Pharmaceutical Scientists and the
American College of Clinical Pharmacology. Dr. Romeo is an active member of
the American Association of Pharmaceutical Scientists, the American College
of Clinical Pharmacology, the Rho Chi Pharmaceutical Society, and the New
York Academy of Sciences. Dr. Romeo has also been appointed as an Adjunct
Assistant Professor of Pharmaceutics at The University of Rhode Island,
College of Pharmacy.
Mr. Rosen was appointed President in October 1997, having previously
served from May 1997 to October as Executive Vice President of Marketing and
Business Development. In 1996, Mr. Rosen served as President of Theracom
Inc., a commercialization outsource company providing services from clinical
development to reimbursement and distribution for biotechnology and
international pharmaceutical companies seeking to establish a presence in
the U.S. Prior to joining Theracom, Mr. Rosen held increasingly higher
positions at Genentech Inc.
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for 10 years, his most recent being Associate Director of Marketing, where
he was responsible for managing three therapeutic areas contributing $300
million in annual sales. During his tenure, he managed the worldwide
introduction of Pulmozyme for Cystic Fibrosis and the collaboration with
partner Roche Pharmaceutical. Prior to joining Genentech, Mr. Rosen was
marketing manager at KabiVitrum Inc. where he was responsible for
establishing a U.S. presence for several hematological products. Mr. Rosen
received a BS in Pharmacy from Northeastern University.
Mr. Girsky has been a Director of the Company since October 1983, and
the Company's Secretary/Treasurer since April 1986. From 1961 to the
present, Mr. Girsky has been President and Chairman of the Board of Jaco
Electronics, Inc., Hauppauge, New York, a publicly held company engaged in
the distribution of electronic components. Mr. Girsky received a degree in
Marketing from Brooklyn College in 1957.
Mr. Thaw has been a Director of the Company from June 1991 to January
1997 and was reappointed to the Board in January, 1998. From 1984 to the
present, Mr. Thaw has been a principal in a law firm, which serves as
general counsel to the Company. Mr. Thaw was admitted to the bar of the
State of New York in 1978 and the California State Bar in 1983. Mr. Thaw is
also a director of Information Resource Engineering, Inc., a publicly traded
company engaged in the computer network security industry and Amtech
Systems, Inc. a publicly traded company engaged in the semi-conductor
industry.
Dr. Ferrier, who was appointed to the Company's Board of Directors in
January 1995, is the founder, President and Chief Executive Officer of
Bogart Delafield Ferrier Inc., and has served in such capacity since its
inception in 1982. Trained in medicine and pharmacology, Dr. Ferrier has
managed and directed pharmaceutical programs and guided the growth of
several multinational companies. He has served on the Board of Directors of
a number of health care and biotechnical firms, as well as serving as
consultant to many of the world's major pharmaceutical companies. From 1982
to 1987, Dr. Ferrier served as President of McCann Healthcare Inc. From 1982
to 1983, Dr. Ferrier served as Chairman of The Covington Group of Companies;
in 1982 as Executive Vice President of TechAmerica Group and from 1979 to
1982, as Vice President of Kalipharma Inc. From 1975 to 1979 Dr. Ferrier
served as Chief Executive Officer of the Monadnock Medical Center. Dr.
Ferrier received a BSc in Pharmacology from the University of Edinburgh,
Edinburgh Scotland; served his residency training in nephrology/clinical
pharmacology at Southmead General Hospital, University of Bristol Associated
Hospitals, Bristol, England; and his post-graduate internship at the Western
General Hospital of the University of Edinburgh Associated Hospitals,
Edinburgh, Scotland.
Mr. Denison, who was appointed to the Company's Board of Directors in
September 1996, is Chairman and Chief Executive Officer of Bromarin
Pharmaceuticals in Novato, California and Chairman of Clubb BioCapital, an
investment bank in London, England. Previously, Mr. Denison served as
President, U.S. Operations, Searle Pharmaceuticals and as Vice President
Corporate Planning and a member of the Executive Committee of Monsanto.
Prior to joining Searle, Mr. Denison was Vice President, International
Operations for Squibb Medical Systems and held a number of senior management
positions at Pfizer, Inc., including Vice President Pharmaceuticals Planning
and Development.
Mr. Katz was appointed to the Company's Board of Directors in September
1993. Mr. Katz was formerly Chief Executive Officer of Odessa Engineering
Corp., a company engaged in the manufacturing of pollution monitoring
equipment. From 1957 to 1976, Mr. Katz was employed by United Parcel Service
holding various managerial positions, including District Manager and
Corporate Manager of Operations, Planning, Research and Development. Mr.
Katz
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<PAGE> 12
serves on the Board of Directors of several publicly held companies
including Miller Industries, a manufacturer of windows and doors; Blimpie
International, Inc., which is engaged in the franchising and marketing of
quick service sandwich restaurants; Amtech Systems, Inc., which is engaged
in the semi-conductor industry; and Foremost Industries which is engaged in
the distribution and repair of commercial refrigeration. He is also a
director of Aromatics Incorporated, a manufacturer of car wash equipment.
Mr. Katz holds a B.S. in Business Administration degree from New York
University and has done graduate work at C.U.N.Y.-Baruch School.
Mr. Pollock was appointed to the Company's Board of Directors in
September 1993. From 1991 to the present Mr. Pollock has served as a
director of Frank E. Basil, Inc., a worldwide provider of facilities
maintenance, engineering and operations management services. Mr. Pollock
also serves as a consultant to the partners of Basil Properties. Mr. Pollock
has been a senior banking executive in the Washington, D.C. area since 1975
and Executive Vice President of Sequoia National Bank
The Company does not have a nominating or similar committee. There were
five (5) Board meetings held during the year ended December 31, 1997. Each
director attended all meetings of the Board and any committee of which he
was a member, with the exception of Dr. Ian Ferrier, who missed one meeting,
Alvin Katz, who missed two meetings, and Joel Girsky who was unable to
attend three meetings.
PROPOSAL NO. 2 - AMENDMENT TO THE STOCK OPTION PLAN TO INCREASE
THE SHARES ISSUABLE UNDER THE PLAN
Under the Company's 1990 Stock Option Plan (the "Plan") options to
purchase a maximum of 700,000 shares of Common Stock of the Company (subject
to adjustment in the event of stock splits, stock dividends,
recapitalizations and other capital adjustments) may be granted to
employees, officers and directors of the Company and other persons who
provide services to the Company. Currently, there are 700,000 such options
granted and outstanding. The options to be granted under the Plan are
designated as incentive stock options or non-incentive stock options by the
Board of Directors which also has discretion as to the persons to be granted
options, the number of shares subject to the options and the terms of the
option agreements. Only employees, including officers and part-time
employees of the Company may be granted incentive stock options. The options
are intended to receive incentive stock option tax treatment pursuant to
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code").
The Plan provides that options granted thereunder shall be exercisable
during a period of no more than ten years (five years in the case of 10%
shareholders) from the date of grant, depending upon the specific stock
option agreement, and that, with respect to incentive stock options, the
option exercise price shall be at least equal to 100% of the fair market
value of the Common Stock at the time of grant (110% in the case of 10%
shareholders). Pursuant to the provisions of the Plan, the aggregate fair
market value (determined on the date of grant) of the Common Stock with
respect to which incentive stock options are exercisable for the first time
by an employee during any calendar year shall not exceed $100,000.
The purpose of the Plan is to increase the ability of the Company to
attract and retain individuals of exceptional skill upon whom, in large
measure, its sustained progress, growth and ultimate profitability depend.
In addition, the Plan is intended to advance the interests of the Company by
enabling its directors, officers and employees to acquire a financial
interest in the Company through grants of options to acquire the Company's
Common Stock. The Plan is intended to provide an increased incentive to
these individuals, thereby providing such persons
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<PAGE> 13
and to stimulate their efforts in promoting the growth, efficiency and
profitability of the Company.
As disclosed in Note 5 to the Financial Statements noted in the
Company's Annual Report to shareholders, the Company contemplated the
adoption of the 1997 Stock Option Plan. The adoption of this Plan, however,
could result in negative implications for the Company in certain mergers and
acquisitions activity. Accordingly, the Company has decided to amend the
1990 Stock Option Plan, as disclosed herein, and postpone indefinitely the
adoption of a new stock option plan. Submitted for ratification by
shareholders is an amendment to the Plan which was approved by the Board of
Directors on April 27 , 1998, extending the life of the Plan for an
additional ten (10) years and allowing for the maximum number of shares
potentially issuable under the Plan to be increased by an additional 800,000
shares, so that the total number of shares potentially issuable upon the
exercise of all options will be increased to 1,500,000 shares. Currently,
there are 494,852 shares which are authorized and available as underlying
securities for new options which may be granted under the Plan, as amended.
Assuming a quorum consisting of a majority of all of the outstanding
shares of Common Stock is present, in person or by proxy, at the Annual
Meeting, the affirmative vote of the holders of a majority of the shares
present, in person or by proxy, at the Annual Meeting is required to approve
the amendments to the Plan. If you abstain or if you hold your shares in
"street name" and fail to sign, date and return the enclosed proxy card, it
will have the same effect as a vote against this proposal.
PROPOSAL NO. 3 - INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's Board of Directors has appointed KPMG Peat Marwick LLP to
perform the annual audit of the books of the Company for the fiscal year
ended December 31, 1998. A representative of KPMG Peat Marwick LLP is
expected to be present at the Annual Meeting to respond to appropriate
questions.
The Board of Directors unanimously recommends a vote FOR approval of
Proposals No. 1, 2 and 3 and proxies solicited by the Board of Directors
will be so voted unless stockholders specify on their proxy card a contrary
choice.
SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals for action at the 1999
Annual Meeting of Stockholders should submit their proposals in writing to
the Secretary of the Company at the address of the Company set forth on the
first page of this Proxy Statement. Proposals must be received by the
Secretary on or before January 11, 1999 in order to be considered for
inclusion in next year's proxy materials.
COMPARISON OF STOCK PERFORMANCE
<TABLE>
<CAPTION>
JUNE-94 SEPTEMBER-94 DECEMBER-94 MARCH-95 JUNE-95 SEPTEMBER-95 DECEMBER-95
<S> <C> <C> <C> <C> <C> <C>
76.471 138.235 111.765 141.176 182.353 176.471 235.294
91.318 98.879 97.751 106.566 121.896 136.578 138.244
71.192 80.183 75.264 81.253 94.499 118.077 137.687
<CAPTION>
MARCH-96 JUNE-96 SEPTEMBER-96 DECEMBER-96 MARCH-97
<S> <C> <C> <C> <C>
197.059 288.235 352.941 470.588 214.706
144.692 156.503 162.068 170.033 160.817
143.255 139.153 142.335 138.087 131.138
</TABLE>
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ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the year ended
December 31, 1997, including audited financial statements is included
herein.
OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters that are to be presented for action at the Annual Meeting of
Stockholders. If any other matters are properly brought before the meeting
or any adjournments thereof, the persons named in the enclosed proxy will
have the discretionary authority to vote all proxies received with respect
to such matters in accordance with their best judgment.
By order of the Board of Directors
Joel Girsky, Secretary
May 11, 1998
Hauppauge, New York
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