<PAGE> 1
ADVANCED POLYMER SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 1995
------------------------
To the Stockholders of Advanced Polymer Systems, Inc.:
The Annual Meeting of Stockholders of Advanced Polymer Systems, Inc. (the
"Company") will be held at the Garden Court Hotel, 520 Cowper Street, Palo Alto,
California, on June 14, 1995, at 10:00 a.m. local time, for the following
purposes:
1. To elect eight directors to hold office until the next annual meeting
of stockholders and until their successors are elected.
2. To transact such other business as properly may come before the
meeting, or any adjournments or postponements of the meeting.
Only stockholders of record at the close of business on April 20, 1995, are
entitled to notice of, and to vote at, the meeting and any adjournments or
postponements of the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Julian N. Stern, Secretary
Redwood City, California
May 5, 1995
-- IMPORTANT --
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE
IN THE ENCLOSED POSTPAID ENVELOPE.
THANK YOU FOR ACTING PROMPTLY.
<PAGE> 2
ADVANCED POLYMER SYSTEMS, INC.
3696 HAVEN AVENUE
REDWOOD CITY, CALIFORNIA 94063
(415) 366-2626
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Advanced Polymer Systems, Inc. ("APS" or the "Company"), a Delaware
corporation. The proxy is solicited for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at 10:00 a.m. local time on June
14, 1995, at the Garden Court Hotel, 520 Cowper Street, Palo Alto, California.
The approximate date on which this proxy statement and the accompanying notice
and proxy are being mailed to stockholders is May 5, 1995.
VOTING
Only stockholders of record at the close of business on April 20, 1995, are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
or postponements thereof. At the close of business on that date, the Company had
outstanding 16,404,399 shares of its Common Stock, $.01 par value (the "Common
Stock"). Holders of a majority of the outstanding shares of Common Stock of the
Company, either present in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting. Holders of Common Stock are
entitled to one vote for each share of Common Stock held. In the election of
directors, the eight (8) candidates receiving the highest number of affirmative
votes of the shares represented and voting at the Annual Meeting will be elected
directors. An affirmative vote of a majority of the shares present and voting at
the meeting is generally required for approval of any other items submitted to
the stockholders for their consideration. Abstentions and broker non-votes are
each included in the determination of whether a quorum is present at the
meeting. Each is tabulated separately; abstentions are counted in tabulations of
the votes cast on proposals presented to stockholders and have the same effect
as negative votes, while broker non-votes are not counted for purposes of
determining whether a proposal has been approved or not.
REVOCABILITY OF PROXIES
Any stockholder giving a proxy has the power to revoke the proxy prior to
its exercise. A proxy can be revoked by an instrument of revocation delivered
prior to the Annual Meeting to the Secretary of the Company, by a duly executed
proxy bearing a later date or time than the date or time of the proxy being
revoked, or at the Annual Meeting if the stockholder is present and elects to
vote in person. Mere attendance at the Annual Meeting will not serve to revoke a
proxy.
SOLICITATION OF PROXIES
Solicitation of proxies may be made by directors, officers and other
employees of the Company by personal interview, telephone, telegraph or telefax.
No additional compensation will be paid for any such services. Costs of
solicitation will be borne by the Company. APS will, upon request, reimburse the
reasonable charges and expenses of brokerage houses or other nominees or
fiduciaries for forwarding proxy materials to, and obtaining authority to
execute proxies from, beneficial owners for whose accounts they hold shares of
Common Stock.
ELECTION OF DIRECTORS
Eight directors are to be elected to the Board at the Annual Meeting, each
to serve for a one year term until the Annual Meeting to be held in 1996, and
until his or her successor has been elected and qualified. All the nominees
presently are directors of APS. It is intended that proxies received will be
voted "FOR" the election of the nominees, unless marked to the contrary.
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The Board has no reason to believe that any of the nominees will be unable
or unwilling to serve as a director if elected. If any nominee should become
unavailable prior to the election, the accompanying proxy will be voted for the
election of any nominee who is designated by the present Board of Directors to
fill the vacancy.
INFORMATION CONCERNING THE BOARD OF DIRECTORS:
The nominees for Directors of APS and their ages and position with the
Company are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH COMPANY SINCE
------------------------------------- --- ---------------------------- --------
<S> <C> <C> <C>
John J. Meakem, Jr................... 58 Chairman, President and CEO 1991
Carl Ehmann, M.D., F.A.C.P........... 52 Director 1994
Jorge Heller, Ph.D.(3)............... 67 Director 1991
Helen C. Leong(3).................... 67 Director 1985
Peter Riepenhausen(2)................ 58 Director 1991
Toby Rosenblatt(1)(2)................ 56 Director 1983
Gregory H. Turnbull(1)............... 56 Director 1986
Dennis Winger(1)..................... 47 Director 1993
</TABLE>
- ---------------
(1) Member of the Finance and Audit Committee of the Board.
(2) Member of the Compensation and Stock Options Committee of the Board.
(3) Member of the Science Oversight Committee of the Board.
John J. Meakem, Jr. -- chief executive officer and president of APS since
June, 1991, director since July, 1991; chairman of APS board of directors since
March, 1993; chairman of Premier, Inc., a privately held company, from 1986
until its acquisition by APS in 1993. From 1970 to 1986, Mr. Meakem was
corporate executive vice president and president of Combe, North America and
Combe, Inc. Prior to that Mr. Meakem was vice president of Richardson-Vicks,
Inc.
Carl Ehmann -- director of APS since June, 1994. Since 1992, Mr. Ehmann has
been executive vice president -- research and development of R.J. Reynolds
Company where he also serves as a member of the executive and operating
committee. Prior to joining R.J. Reynolds Company, Mr. Ehmann served as
executive vice president -- research and development of Johnson & Johnson
Consumer Products Worldwide, Inc. between 1989 and 1992. He also serves as a
director of Biosource Technologies Corporation.
Jorge Heller, Ph.D. -- director of APS since April, 1991 and executive
director of the APS Research Institute since January, 1994. Dr. Heller was
director of the controlled release and biomedical polymers program at SRI
International until January, 1994, where he was a staff member since 1974. He is
also adjunct professor of pharmacy at the University of California, San
Francisco, and at the University of Utah. He is editor of the Journal of
Controlled Release and past president of the Controlled Release Society.
Helen C. Leong -- director of APS since March, 1985, and chairwoman of the
Board in 1986 and 1987. Mrs. Leong is, and has been for more than five years,
the managing partner of Leong Ventures, which makes investments in the areas of
biogenetics and health oriented technologies. She is a director of Erox
Corporation. Mrs. Leong is also a founder of the Mid-Peninsula Bank where she
has served as a director since 1988.
Peter Riepenhausen -- director of APS since April, 1991. Mr. Riepenhausen
is currently president and chief executive officer of ReSound Corporation. He
serves as a director of Chiron Vision Inc. and Caradon plc. He served as vice
chairman of the board of directors of The Cooper Companies, Inc. from January,
1987 until September, 1989, and from January, 1984 until December, 1986 he was
executive vice president of the Cooper Companies, Inc. From January 1990 until
November 1992, he was an independent management consultant. Mr. Riepenhausen has
also held executive positions with Blendax-Werke R. Schneider GmbH & Co. of West
Germany and Pepsico, Inc.
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<PAGE> 4
Toby Rosenblatt -- director of APS since September, 1983. Mr. Rosenblatt is
president of The Glen Ellen Company and partner of Founders Investments, Ltd.
Both companies are involved in private investment activities. Mr. Rosenblatt
serves as a director of Biosource Technologies Corporation, Pherin Corporation,
the State Street Investment Trust and the Met Life-State Street Family of Mutual
Funds. He is also a trustee of numerous civic and educational institutions.
Gregory H. Turnbull -- director of APS since February, 1986. Mr. Turnbull
is currently a self-employed consultant and a director of Planar Systems. He was
managing director of Kemper Securities from mid-1992 to April, 1993. Prior to
that, he was partner of Cable & Howse Ventures, a venture capital organization
which he first joined in 1983, and of which he is currently a special limited
partner.
Dennis Winger -- director of APS since February, 1993. Mr. Winger is
currently senior vice president, finance and administration and chief financial
officer of Chiron Corporation which he joined in August 1989. He is also a
member of Chiron's Strategy Committee. Prior to joining Chiron, Mr. Winger held
a series of financial positions at The Cooper Companies, Inc., including chief
financial officer.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors met 5 times during 1994. Each of the directors
participated in at least 75% of the total number of meetings of the Board and of
the committees of the Board on which each served.
The Board has a Finance and Audit Committee, a Compensation and Stock
Options Committee and a Science Oversight Committee. The Finance and Audit
committee, which met 2 times during the last fiscal year, consisted of Messrs.
Rosenblatt, Turnbull and Winger. The function of the Finance and Audit Committee
is to review the Company's accounting policies with the Company's independent
accountants. The Compensation and Stock Options Committee, which met 3 times
during the year, consisted of Messrs. Rosenblatt and Riepenhausen. The function
of the Compensation and Stock Options Committee is to propose and review the
compensation policies of the Company and to administer the Company's stock
options plan. The Science Oversight Committee, which met 2 times during the
year, consisted of Dr. Ehmann, Mrs. Leong and Dr. Heller. The function of the
Science Oversight Committee is to review the Company's research and development
activities.
COMPENSATION OF DIRECTORS
Under the Company's 1992 Stock Option Plan, each nonemployee director of
the Company is automatically granted an option to acquire 10,000 shares of
Common Stock annually and receives a one-time automatic grant to acquire 25,000
shares when first elected as a director. The Company paid no other Directors'
fees for the fiscal year ended December 31, 1994. Certain directors of the
Company have received consulting fees. See "Certain Transactions."
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<PAGE> 5
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth beneficial Common Stock ownership as of
April 20, 1995, (i) by each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) by
each director, including nominees, and each executive officer named in the
Summary Compensation Table included in the Proxy Statement and (iii) by all
executive officers and directors as a group. Each person has sole investment and
voting power with respect to the shares indicated, subject to community property
laws where applicable and except as otherwise set forth in the footnotes to the
table.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME SHARES(1) CLASS(1)
- ----------------------------------------------------------------------- --------- ----------
<S> <C> <C>
Robert Albus(2)........................................................ 396,194 2.4
Thomas Bigger(3)....................................................... 0 *
Carl Ehmann(4)......................................................... 18,250 *
Jorge Heller, Ph.D.(5)................................................. 60,000 *
Helen C. Leong(6)...................................................... 169,940 1.0
John J. Meakem, Jr.(7)................................................. 657,139 3.9
Sergio Nacht(8)........................................................ 166,583 1.0
Michael O'Connell(9)................................................... 79,370 *
Toby Rosenblatt(10).................................................... 225,526 1.4
Peter Riepenhausen(11)................................................. 58,000 *
Gregory H. Turnbull(12)................................................ 35,000 *
Dennis Winger(13)...................................................... 22,500 *
Johnson & Johnson Development Corporation(14).......................... 1,923,006 11.6
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
GDK Inc.(15)........................................................... 1,095,836 6.4
129 Front Street, Penthouse
Hamilton, HM12, Bermuda
Ortelius, L.P.(16)..................................................... 1,096,736 6.4
667 Madison Avenue, 10th Floor
New York, NY 10021
Smith Barney Inc.(17).................................................. 2,278,704 13.9
1345 Avenue of the Americas
New York, NY 10105
Officers and Directors as a group (11 persons)......................... 1,888,502 10.8
(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)
</TABLE>
- ---------------
* Less than one percent.
(1) Assumes the exercise of all outstanding options and warrants to purchase
Common Stock held by such person or group to the extent exercisable on or
before June 20, 1995, and that no other person has exercised any
outstanding stock options.
(2) Includes 150,000 shares underlying presently exercisable stock options.
(3) Mr. Bigger currently has no exercisable stock options.
(4) Includes 16,250 shares underlying presently exercisable stock options.
(5) Consists of 60,000 shares underlying presently exercisable stock options.
(6) Includes 77,500 shares underlying presently exercisable stock options.
(7) Includes 411,562 shares underlying presently exercisable stock options.
(8) Includes 165,742 shares underlying presently exercisable stock options.
(9) Includes 79,370 shares underlying presently exercisable stock options.
(10) Includes 35,000 shares underlying presently exercisable stock options.
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<PAGE> 6
(11) Includes 3,000 shares held as joint tenant with Mr. Riepenhausen's spouse
and 55,000 shares underlying presently exercisable stock options.
(12) Consists of 35,000 shares underlying presently exercisable stock options.
(13) Consists of 22,500 shares underlying presently exercisable stock options.
(14) Includes warrants to purchase 200,000 shares of common stock. Number of
shares outstanding is based on the Schedule 13D filed on May 20, 1994 by
Johnson & Johnson Development Corporation and Johnson & Johnson.
(15) Includes warrants to purchase 617,718 shares of common stock.
(16) Includes warrants to purchase 617,718 shares of common stock.
(17) Number of shares outstanding is based on the Schedule 13G filed on January
26, 1995 by Smith Barney Inc., Smith Barney Holdings Inc. and The Travelers
Inc.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, as well as any holders of more than 10% of the Company's
Common Stock, to file with the Securities and Exchange Commission certain
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Based solely on review of such reports
and certain representations furnished to it, the Company believes that during
the fiscal year ended December 31, 1994, except for Dr. Carl Ehmann who was
delayed in filing his Form 3, all Section 16(a) filing requirements applicable
to its officers and directors were complied with.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table shows the total compensation for
fiscal years 1994, 1993 and 1992 of the chief executive officer and each of the
other four most highly compensated executive officers whose salary exceeded
$100,000 in 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS
------------ ---------------------------
SALARY OPTIONS ALL OTHER
NAME AND POSITION YEAR ($) (#) COMPENSATION(1)
- --------------------------------------------- ---- ------------ ------- ---------------
<S> <C> <C> <C> <C>
John J. Meakem, Jr.(2)....................... 1994 290,122 50,000 1,000
President and Chief Executive Officer 1993 259,222 175,000 1,000
1992 179,167 0 1,000
Robert Albus(3).............................. 1994 194,790 0 1,000
Senior Vice President, President of Premier 1993 166,830 100,000 750
1992 N/A N/A N/A
Thomas Bigger(4)............................. 1994 42,278 100,000 0
Senior Vice President 1993 N/A N/A N/A
1992 N/A N/A N/A
Sergio Nacht, Ph.D........................... 1994 167,727 20,000 1,000
Senior Vice President 1993 157,738 15,000 1,000
Science and Technology 1992 148,831 50,000 1,000
Michael O'Connell(5)......................... 1994 172,779 100,000 1,000
Senior Vice President, Chief Financial 1993 158,771 30,000 1,000
and Administrative Officer 1992 73,846 100,000 0
</TABLE>
- ---------------
(1) The stated amounts are Company matching contributions to the Advanced
Polymer Systems Salary Reduction Profit Sharing Plan.
(2) Mr. Meakem joined the Company in June, 1991. Prior to the acquisition of
Premier, Inc., Mr. Meakem devoted 25% of his business time to Premier and
was compensated by Premier for these services. Since the acquisition, Mr.
Meakem has devoted all of his business time to affairs of the Company and
has received all of his compensation from the Company.
(3) Mr. Albus joined the Company in April, 1993. The annual compensation for
1993 excludes salary from Premier, Inc. prior to the acquisition on April 2,
1993.
(4) Mr. Bigger joined the Company in October, 1994 and he is compensated at an
annual rate of $185,000.
(5) Mr. O'Connell joined the Company in July, 1992.
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The following table sets forth certain information with respect to options
granted during 1994 to the executive officers named in the Summary Compensation
Table.
STOCK OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION ------------------
NAME (#)(2) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---------------------------------- ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John J. Meakem, Jr. .............. 50,000(3) 8.7 $5.375 04/21/04 169,015 428,318
Robert Albus...................... 0 0.0 0 N/A 0 0
Thomas Bigger..................... 100,000 17.4 $4.250 10/03/04 271,736 691,244
Sergio Nacht, Ph.D. .............. 20,000 3.5 $5.375 04/21/04 67,606 171,327
Michael P.J. O'Connell............ 50,000 8.7 $5.375 04/21/04 169,015 428,318
50,000 8.7 $4.406 11/08/04 138,555 351,125
</TABLE>
- ---------------
(1) Potential realizable value is based on an assumption that the price of the
common stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten year option term. The
numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission ("SEC") and do not reflect the Company's
estimate of future stock price growth.
(2) The options granted under the Company's 1992 Stock Plan typically vest over
4 years at 25% annually. Payments on exercise, including any taxes the
Company is required to withhold, may be made in cash, by a full recourse
promissory note or by tender of shares. Options are granted at fair market
value on the date of grant.
(3) Options vest annually over a three-year period ending 1/8/98.
The following table sets forth certain information with respect to options
exercised during 1994 and the value of options held at fiscal year end by the
executive officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN 1994 AND 1994 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT 1994 YEAR-END AT FISCAL YEAR-END(2)
UPON OPTION VALUE -------------------------- --------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($)(1) (#) (#) ($) ($)
- ------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Meakem, Jr. .... 0 0 365,822 142,092 61,327 0
Robert Albus............ 0 0 105,188 69,812 21,563 0
Thomas Bigger........... 0 0 0 100,000 0 12,500
Sergio Nacht, Ph.D. .... 0 0 149,593 50,407 13,375 0
Michael P.J.
O'Connell............. 0 0 70,833 159,167 0 0
</TABLE>
- ---------------
(1) Market value of underlying securities at exercise less the exercise price.
(2) Market value of underlying securities at fiscal year end minus the exercise
price of "in-the-money" options.
APS did not make any awards during 1994 to any of the executive officers
named in the Summary Compensation Table under any long-term incentive plan
providing compensation intended to serve as an incentive for performance to
occur over a period longer than one fiscal year, excluding options.
7
<PAGE> 9
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") is responsible for establishing compensation policies applicable to
the Company's executive officers and, pursuant to such policies, determining the
compensation payable to the Company's chief executive officer and other
executive officers of the Company, subject to Board approval. The Committee
consists of Peter Riepenhausen and Toby Rosenblatt, each of whom is a
non-employee director of the Company. The following report relates to
compensation payable to the Company's executive officers for the year ended
December 31, 1994.
COMPONENTS OF COMPENSATION
There are three (3) components of compensation payable to the Company's
executive officers; base salary and equity-based incentive compensation in the
form of stock options, as well as annual incentive compensation in the form of
cash bonuses, although no incentive bonuses were paid in 1994.
COMPENSATION POLICIES
The Company's compensation policies for all employees, including executive
officers, are designed to provide targeted compensation levels that are
competitive with those of regional high technology companies of similar size,
with whom the Company must compete in the recruitment of senior personnel. The
Committee also wished to tie incentive cash bonuses to the achievement of a
pre-established plan and to use stock options to promote equity-ownership in the
Company at levels deemed appropriate by the Committee for executive officers.
The goals of the Committee are to align compensation with the Company's
objectives and performance, and to enable the Company to attract, retain and
reward executives who contribute to the long-term success of the Company. The
Company does not believe that compensation payable by it will be subject to the
limitations on deductibility provided under Section 162(m) of the Internal
Revenue Code.
The Company has not utilized specific formulas to determine executive
compensation. The Committee retained the services of a compensation consulting
firm to provide data regarding competitive levels of salary compensation and to
provide general guidance to the Committee in evaluating executive compensation.
BASE SALARIES
The salary component of executive compensation is based on the executive's
level of responsibility for meeting the Company's objectives and performance,
and comparison to similar positions in the Company and comparable companies.
Base salaries for executive officers are reviewed and adjusted annually based on
information regarding competitive salaries, including salary survey data
provided by third parties regarding regional high technology companies.
Individual increases are established by the Committee (taking into account
recommendations of the chief executive officer concerning the overall
effectiveness of each executive.)
CASH BONUSES
Incentive cash bonuses are determined based on the Company's achievement of
certain pre-established performance objectives. No incentive bonuses were paid
in 1994.
STOCK OPTIONS
The Company's compensation policies recognize the importance of stock
ownership by senior executives and stock options are an integral part of each
executive's compensation. The Committee believes that the opportunity for stock
appreciation through stock options which vest over time promotes the
relationship between long-term interests of executive officers and stockholders.
The size of specific grants takes into account the executive officer's salary,
number of options previously granted, as well as shares of Common Stock held,
and the contributions to the Company's success.
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<PAGE> 10
COMPENSATION PAYABLE TO CHIEF EXECUTIVE OFFICER
The 1994 salary for Mr. Meakem, the Company's chairman, president and chief
executive officer, was determined principally from the terms of his employment
agreement with the Company dated May 1, 1993. The Compensation Committee and
Board of Directors increased the base salary of $285,000 to $300,000 effective
April 1, 1994 based on a variety of factors including the salaries of chief
executive officers of comparable companies. In making its decision, the
Committee particularly recognized the performance of Mr. Meakem and the progress
made by the Company in setting the stage for commercializing its first ethical
pharmaceutical products. The Compensation Committee also recognized the key
contribution of Mr. Meakem in filing two New Drug Applications for ProZone sun
protection cream and tretinoin acne treatment. Mr. Meakem also received option
grants covering 50,000 shares in 1994. As of April 20, 1995, Mr. Meakem holds
presently exercisable options to purchase 378,266 shares and, including options,
beneficially owns as of that date 623,843 shares of the Company's Common Stock.
Compensation and Stock Option
Committee
Peter Riepenhausen
Toby Rosenblatt
9
<PAGE> 11
PERFORMANCE GRAPH
The rules of the SEC now require APS to include in this Proxy Statement a
line graph presentation comparing cumulative five year stockholder returns, on a
dividend reinvested basis, with broad based equity index and a published
industry index. The Company has selected the S&P 500 Stock Index and H&Q
Technology Stock Index for purposes of the comparison which appears below. The
graph assumes that $100 was invested in APS stock and each index on December 31,
1989, with all dividends reinvested. Past stock performance is not necessarily
indicative of future results.
[PASTEUP CRC]
<TABLE>
<CAPTION>
12/89 12/90 12/91 12/92 12/93 12/94 2/95
----- ----- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
ADVANCED POLYMER SYSTEMS INC. 100 39 183 146 91 76 89
S&P 500 100 97 126 136 150 152 162
H&Q TECHNOLOGY 100 91 135 155 170 197 211
</TABLE>
10
<PAGE> 12
CERTAIN TRANSACTIONS
On April 2, 1993, APS acquired Premier, Inc. in exchange for 454,444 shares
of APS Common Stock. Premier is a marketing and distribution company
specializing in over-the-counter drug and personal care products. Premier has
exclusive arrangements to market and distribute two sunscreens, Sundown(R) and
Johnson's Baby Sunblock(R), on behalf of Johnson & Johnson Consumer Products,
Inc. and has further licensed Take-Off(R) make-up remover from Johnson &
Johnson. Additionally, Premier markets four APS products -- EveryStep(R), a shoe
and foot deodorant, and the Exact(R) product line for the treatment of acne:
vanishing cream, tinted cream and medicated cleanser.
John J. Meakem, Jr., the chairman, chief executive officer and president of
APS, and Robert Albus, senior vice president of APS, were founders of Premier.
Mr. Meakem and Mr. Albus each received 227,222 shares of APS common stock on the
closing of the acquisition.
The Company entered into a three-year employment agreement with Mr. Meakem
in May 1993, and in connection with the acquisition of Premier, Inc. in April
1993, Mr. Albus entered into a two-year employment agreement with Premier. Each
employment agreement provides that Mr. Meakem and Mr. Albus may elect to
terminate his respective employment within stated periods of a change in control
of the Company (defined to include an acquisition of more than fifty percent of
the outstanding shares of the Company) and receive an amount equal to his prior
twelve months' salary and bonus, payable over the subsequent twelve month
period. Mr. Meakem and Mr. Albus are each entitled to receive an amount equal to
twice his prior twelve months' salary and bonus if the Company should terminate
his respective employment within stated periods of a change in control or if
either elects to terminate his respective employment following a change in
control if his position with the Company is reduced in terms of responsibility
or indicia of status.
During 1994, the Company paid to Dr. Jorge Heller, Mrs. Helen C. Leong and
Mr. Peter Riepenhausen, all of whom are directors of the Company for consulting
services in their fields of expertise, the respective amounts of $48,000, $0 and
$20,000. Payments for similar services in 1993 were $44,000, $3,000 and $47,000,
respectively, and in 1992 were $30,000, $5,000 and $36,000, respectively.
The Company has entered into agreements with Biosource Technologies
Corporation ("Biosource") of which Mr. Toby Rosenblatt and Dr. Carl Ehmann are
directors and Mr. Toby Rosenblatt is a stockholder. All agreements between APS
and Biosource have been, and will continue to be, approved by a vote of the
disinterested directors. The agreements provide APS with worldwide rights to use
and sell Biosource's melanin in Microsponge(R) systems for all sun protection,
cosmetic, ethical dermatology and over-the-counter skin care purposes. In
return, APS is required to make annual minimum purchases of melanin, and to pay
royalties on sales of APS Melanosponge(R) products including certain
prepayments. During 1994, APS paid Biosource $3,279 for royalties on product
sales and $263,403 for the supply of melanin. The 1994 financial results also
include a $685,000 provision for the estimated loss on certain future purchase
commitments and related inventory on hand for product in excess of estimated
requirements. During the fiscal year ended December 31, 1993, the Company paid
or accrued $893,485 for the supply of melanin, an additional $200,000 to meet
the annual minimum purchase commitment, and $40,820 for royalties on product
sales. The 1993 financial results also included a $750,000 provision for the
estimated loss on certain future purchase commitments and related inventory on
hand for product in excess of estimated requirements. During the fiscal year
ended December 31, 1992, the Company paid $1,324,091 to Biosource for the supply
of melanin, $21,447 for royalties on product sales and $400,000 in prepaid
royalties.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected KPMG Peat Marwick as independent public accountants
to audit the financial statements of the Company for the fiscal year ending
December 31, 1994. KPMG Peat Marwick has acted as the Company's auditors since
the Company's inception in 1983. A representative of KPMG Peat Marwick will be
present at the Annual Meeting and will have an opportunity to make a statement
if such representative desires to do so. The representative of KPMG Peat Marwick
also will be available to respond to questions raised during the meeting.
11
<PAGE> 13
FINANCIAL STATEMENTS
The Company's annual report to stockholders for the fiscal year ended
December 31, 1994, containing audited consolidated balance sheets as of the end
of each of the past two fiscal years and audited consolidated statements of
operations, stockholders' equity and cash flows for each of the last three
fiscal years, is being mailed with this proxy statement to stockholders entitled
to notice of the Annual Meeting.
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Under the applicable rules of the Securities and Exchange Commission, a
stockholder who wishes to submit a proposal for inclusion in the proxy statement
of the Board of Directors for the annual meeting of stockholders to be held in
the spring of 1996 must submit such proposal in writing to the Secretary of the
Company at the Company's principal executive offices no later than January 5,
1996.
OTHER MATTERS
The Board knows of no other matters which will be presented to the Annual
Meeting. If, however, any other matter is properly presented at the Annual
Meeting, the proxy solicited by this Proxy Statement will be voted in accordance
with the judgment of the person or persons holding such proxy.
BY ORDER OF THE BOARD OF DIRECTORS,
Julian N. Stern, Secretary
Redwood City, California
May 5, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED POSTPAID ENVELOPE.
12
<PAGE> 14
/x/ Please mark
votes as in
this example.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE
1. To elect as directors, to hold office until 1996 and
until their successors are elected, the eight nominees
listed below:
Nominees: Carl Ehmann, Jorge Heller, Helen C. Leong, John J. Meakem, Jr.,
Peter Rippenhausen, Toby Rosenblatt, Gregory H. Turnbull and Dennis Winger.
/ / FOR / / WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
/ /
--------------------------------------
For all nominees except as noted above
2. In their discretion the proxyholders are authorized to transact such other
business as properly may come before the meeting or any adjournments or
postponements of the meeting. The Board of Directors at present knows of
no other business to be presented by or on behalf of the Company or the
Board of Directors at the meeting.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
Date and sign exactly as name(s) appear(s) on this proxy. If signing for
estates, trusts, corporations or other entities, title or capacity should be
stated. If shares are held jointly, each holder should sign.
Signature: Date
------------------------------------ -------------------------
Signature: Date
------------------------------------ -------------------------
<PAGE> 15
PROXY
ADVANCED POLYMER SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 14, 1995
The undersigned hereby appoints John J. Meakem, Jr. and Julian N. Stern, or
either of them, each with full power of substitution, as the proxyholder(s) of
the undersigned to represent the undersigned and vote all shares of the Common
Stock of Advanced Polymer Systems, Inc. (the "Company"), which the undersigned
would be entitled to vote if personally present at the annual meeting of
stockholders of the Company at the Garden Court Hotel, 520 Cowper Street, Palo
Alto, California at 10:00 a.m. local time on June 14, 1995 and at any
adjournments or postponements of such meeting, as follows.
The Board of Directors recommends that you vote FOR the following proposal.
This proxy, when properly executed, will be voted in the manner directed. WHEN
NO CHOICE IS INDICATED THIS PROXY WILL BE VOTED FOR THE FOLLOWING PROPOSAL.
This proxy may be revoked by the undersigned at any time, prior to the time it
is voted, by any of the means described in the accompanying proxy statement.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE> 16
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ADVANCED POLYMER SYSTEMS, INC.
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
Registrant
(4) Date Filed:
