<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[ ] 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 Rule 14a-11(c) or Rule 14a-12.
CIMA LABS 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] 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> 2
[CIMA LOGO]
CIMA LABS INC.
10000 Valley View Road
Eden Prairie, Minnesota 55344
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 2000
----------------------
TO THE STOCKHOLDERS OF CIMA LABS INC.:
Notice Is Hereby Given that the Annual Meeting of Stockholders of CIMA
LABS INC., a Delaware corporation (the "Company"), will be held on Friday, June
2, 2000 at 2:00 p.m., local time, at the offices of the Company at 10000 Valley
View Road, Eden Prairie, Minnesota 55344, for the following purposes:
1. To elect four directors to serve until the next Annual Meeting of
Stockholders or until their successors have been duly elected and
qualified;
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for its fiscal year ending December 31, 2000; and
3. To transact such other business as may properly come before the
meeting.
The Board has fixed the close of business on Friday, April 14, 2000 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ David A. Feste
David A. Feste
Secretary
Eden Prairie, Minnesota
April 21, 2000
YOUR PROXY IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. YOU ARE
CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED
PROXY IN THE POSTAGE-PAID ENVELOPE THAT IS PROVIDED. THE PROXY MAY BE REVOKED BY
YOU AT ANY TIME PRIOR TO BEING EXERCISED, AND RETURNING YOUR PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING AND REVOKE THE
PROXY. PLEASE NOTE, HOWEVER, THAT IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT
REGISTERED IN YOUR NAME AND YOU WISH TO VOTE AT THE MEETING, YOU WILL NEED TO
OBTAIN EVIDENCE OF YOUR OWNERSHIP OR A PROXY ISSUED IN YOUR NAME FROM THE
BROKER, BANK OR OTHER NOMINEE WHO IS THE STOCKHOLDER OF RECORD FOR THE SHARES
THAT YOU OWN.
<PAGE> 3
[CIMA LOGO]
CIMA LABS INC.
10000 Valley View Road
Eden Prairie, Minnesota 55344
-------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
---------------------
JUNE 2, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of CIMA LABS INC., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on Friday, June 2, 2000, at 2:00
p.m. local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the offices of the Company,
10000 Valley View Road, Eden Prairie, Minnesota 55344. The Company intends to
mail this Proxy Statement and accompanying Proxy card on or about April 21, 2000
to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this Proxy Statement,
the Proxy and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
14, 2000 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business April 14, 2000, the Company had outstanding and entitled to
vote 10,851,569 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to
one vote for each share held on all matters to be voted upon at the Annual
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
2
<PAGE> 4
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a Proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive offices, 10000
Valley View Road, Eden Prairie, Minnesota 55344, a written notice of revocation
or a duly executed Proxy bearing a later date, or it may be revoked by attending
the meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a Proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 2001 Annual Meeting of Stockholders must be received by the Company
not later than December 22, 2000 in order to be included in the Proxy Statement
and Proxy relating to that Annual Meeting.
Under the Third Restated Bylaws of the Company (the "Bylaws"),
stockholder proposals to be brought before any meeting of stockholders or
nominations of persons for election as a director at any meeting of stockholders
must be made pursuant to timely notice in writing to the Secretary of the
Company. To be timely, notice by the stockholder must be delivered or received
at the Company's principal executive offices not less than 90 days before the
first anniversary of the preceding year's annual meeting, or, for the 2001
Annual Meeting of Stockholders, by March 3, 2001. If, however, the date of the
annual meeting is more than 30 days before or after such anniversary date,
notice by a stockholder shall be timely only if delivered or received not less
than 90 days before such annual meeting, or, if later, within 10 days after the
first public announcement of the date of such annual meeting. The notice must
set forth certain information concerning such proposal, such stockholder and the
nominees, as specified in the Company's Bylaws. The presiding officer of the
meeting may refuse to acknowledge any proposal or nominations not made in
compliance with the foregoing procedure.
PROPOSAL 1
ELECTION OF DIRECTORS
There are four nominees for the four Board positions authorized by
resolution of the Board in accordance with the Company's Bylaws. Each director
to be elected will hold office until the next Annual Meeting of Stockholders and
until his successor is duly elected and qualified, or until such director's
earlier death, resignation or removal. Each nominee listed below is currently a
director of the Company, each director having been elected by the stockholders.
Shares represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of the four nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected, and management has no reason to believe that any
nominee will be unable to serve. Directors are elected by a plurality of the
votes present in person or represented by Proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
3
<PAGE> 5
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- --------- ------- -------------------------------------------------------------------------
<S> <C> <C>
John M. Siebert, Ph.D. 60 President and Chief Executive Officer of the Company
Terrence W. Glarner 56 Chairman of the Board; President, West Concord Ventures, Inc.
Steven B. Ratoff 57 Executive Vice President and Chief Financial Officer,
Brown-Forman Corporation
Joseph R. Robinson, Ph.D. 61 Professor of Pharmacy, University of Wisconsin at Madison
</TABLE>
JOHN M. SIEBERT, PH.D., has been the President and Chief Executive
Officer of the Company since September 1995 and a director of the Company since
May 1992. From 1992 to 1995, Dr. Siebert was Vice President, Technical Affairs,
at Dey Laboratories, Inc., a pharmaceutical company.
TERRENCE W. GLARNER has been a director of the Company since July 1990
and has served as the Chairman of the Board since April 1995. Mr. Glarner has
been President of West Concord Ventures, Inc., a venture capital company, since
February 1993, and is a consultant to Norwest Venture Capital, Inc., a venture
capital company. Mr. Glarner serves as a director of Aetrium Incorporated,
Datakey, Inc., FSI International, Inc. and Premis Corporation.
STEVEN B. RATOFF has been a director of the Company since March 1995. Mr.
Ratoff has been Executive Vice President and Chief Financial Officer of
Brown-Forman Corporation since December 1994. Mr. Ratoff serves as a director of
Inkine Pharmaceutical Company, Inc.
JOSEPH R. ROBINSON, PH.D., has been a director of the Company since
January 1993. Dr. Robinson has been a Professor of Pharmacy, University of
Wisconsin at Madison, since 1966. He serves as a director of Emisphere
Technologies, Inc.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1999, the Board held eight
meetings. The Board has an Audit Committee and a Compensation Committee. The
Board does not have a standing nominating committee.
The Audit Committee reviews the results and scope of the annual audit and
other services provided by the Company's independent auditors. It also reviews
the Company's accounting principles and its system of internal controls, and
reports the results of these reviews to management and the Board. The Audit
Committee meets with the Company's independent auditors at least once annually
to review the results of the annual audit and discuss the financial statements,
recommends to the Board the independent auditors to be retained and receives and
considers the auditors' comments as to controls, adequacy of staff and
management performance and procedures in connection with audit and financial
controls. The Audit Committee is currently composed of three non-employee
directors, Messrs. Glarner, Ratoff and Robinson. The Audit Committee held one
meeting during the fiscal year ended December 31, 1999.
The Compensation Committee (i) determines the amount of compensation for
the Chief Executive Officer and President of the Company, (ii) reviews
recommendations of the Chief Executive Officer concerning compensation for the
other executive officers and incentive compensation, including stock
4
<PAGE> 6
options, for the other employees of the Company, subject to ratification by the
Board, and (iii) otherwise administers the Company's performance compensation
and stock option plans. The Compensation Committee is currently composed of two
non-employee directors, Messrs. Glarner and Ratoff. The Compensation Committee
held one meeting during the fiscal year ended December 31, 1999.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP to serve as the Company's
independent auditors for the fiscal year ending December 31, 2000 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 1986.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Board will reconsider its
selection. Even if the selection is ratified, the Audit Committee may recommend,
and the Board in their discretion may direct, the appointment of different
independent auditors at any time during the year if they determine that such a
change would be in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
5
<PAGE> 7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of March 31, 2000 by: (i) each
director; (ii) each executive officer of the Company named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock. At March 31, 2000, there were 10,851,569
shares of Common Stock issued and outstanding.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
---------------------- ------------------------------------
<S> <C> <C>
President and Fellows of Harvard
College 646,900(2) 6.0
c/o Harvard Management Company, Inc.
600 Atlantic Avenue, Boston, Massachusetts 02210
Franklin Small Cap Growth Fund 600,000(3) 5.5
P.O. Box 11203
New York, New York, 10249
Capital Research and Management Company 617,200 5.7
and SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, California 90071
John M. Siebert, Ph.D. 365,166(4) 3.3
John Hontz, Ph.D. 107,683(5) *
Keith P. Salenger (6) 0(6) *
Jack A. Khattar (7) 0(7) *
Terrence W. Glarner 110,000(8) 1.0
Steven B. Ratoff 103,839(9) *
Joseph R. Robinson, Ph.D. 75,079(10) *
All Executive Officers and Directors as a Group (5 persons) (12) 761,767(11) 7.0
</TABLE>
- ---------------------------
* Less than one percent.
(1) Unless otherwise indicated in the footnotes below, this table is based upon
information supplied by officers, directors and certain principal
stockholders of the Company, and by certain other principal stockholders in
Schedule 13Gs filed with the Securities and Exchange Commission (the "SEC")
in February 2000. Unless otherwise indicated in the footnotes to this table
and subject to community property laws where applicable, the Company
believes that each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned.
(2) The number of shares indicated is based upon information reported to the
SEC in a Schedule 13G filed on April 10, 2000 for the month ended March 31,
2000.
(3) The number indicated is based upon information reported in the Company's
Registration Statement on Form S-3 filed with the SEC on April 14, 2000
with respect to 1.1 million shares of Common Stock sold to certain
accredited investors on March 13, 2000.
(4) Includes 319,166 shares that may be acquired within 60 days of March 31,
2000, pursuant to outstanding options.
6
<PAGE> 8
(5) Includes 101,183 shares that may be acquired within 60 days of March 31,
2000, pursuant to outstanding options.
(6) Mr. Salenger was Vice President, Finance, and Chief Financial Officer of
the Company until December 15, 1999, at which time he resigned. Between
January 1, 2000 and March 31, 2000, Mr. Salenger exercised and sold in
market transactions 60,500 shares acquired pursuant to outstanding options
that were exercisable on the date of his resignation.
(7) Mr. Khattar was Vice President, Business Development, of the Company until
May 11, 1999, at which time he resigned. After resigning from the Company,
Mr. Khattar did not exercise any outstanding options, which expired on
August 11, 1999.
(8) Includes 80,000 shares that may be acquired within 60 days of March 31,
2000, pursuant to outstanding options.
(9) Includes 65,839 shares that may be acquired within 60 days of March 31,
2000, pursuant to outstanding options.
(10) Includes 75,079 shares that may be acquired within 60 days of March 31,
2000, pursuant to outstanding options.
(11) Includes an aggregate of 641,267 shares that may be acquired within 60 days
of March 31, 2000, pursuant to outstanding options. See footnotes 4 through
10.
(12) Excludes Messrs. Khattar and Salanger as both individuals resigned from the
Company during 1999.
SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the SEC initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that each
of Messrs. Siebert and Hontz inadvertently filed their Form 5 Annual Reports
relating to an option grant in June 1999 one day late.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company is entitled to receive an
annual fee of $5,000, payable quarterly, a per meeting fee of $2,500 for each
meeting (including telephonic meetings) of the Board attended by such
non-employee director and a per meeting fee of $1,250 for each meeting of (i) a
committee of the Board not held in connection with a regular Board meeting or
(ii) an operating committee of the Company, in each case attended by such
non-employee director; provided, however, that the aggregate amount of fees paid
shall not exceed $20,000 (excluding expense reimbursement) per director per
year. The members of the Board are also eligible for reimbursement for their
reasonable expenses incurred in connection with attendance at Board meetings in
accordance with Company policy. Mr. Glarner voluntarily chose to forgo the
payment of any fees in the fiscal year ended December 31, 1999.
Pursuant to the Non-Employee Directors' Fee Option Grant Program (the
"Directors' Program"), non-employee directors may defer receipt of cash
compensation attributable solely to services as a Board
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<PAGE> 9
member and receive future payment of those fees in the form of stock options to
acquire Common Stock of the Company. Under the Directors' Program, the maximum
number of shares of Common Stock that may be issued pursuant to options is
60,000, which may be unissued shares or reacquired shares, bought in the open
market or otherwise. Shares subject to options, which expire or otherwise
terminate without having been exercised in full shall again become available for
issuance. Options granted under the Directors' Program are intended not to
qualify as incentive stock options under the Internal Revenue Code of 1986, as
amended (the "Code").
Non-employee directors who deferred director's fees and timely filed a
deferral election automatically were granted an option to purchase Common Stock
of the Company on the date of the Annual Meeting. In addition, each non-employee
director who has a deferral election in effect as of any annual meeting of the
Company automatically will be granted an option to purchase Common Stock of the
Company on the date of such Annual Meeting.
The number of shares of Common Stock subject to each option granted under
the Directors' Program is equal to A/(B x 66 2/3%), where A is the maximum
amount of the director's fees subject to the non-employee director's deferral
election and applied to the grant of such option under the Directors' Program;
and B is the fair market value per share of Common Stock on the last day of the
month prior to the option grant date. The exercise price of options granted
under the Directors' Program is 33 1/3% of the fair market value of the Common
Stock subject to such option on the last day of the month prior to the date such
option is granted. Options shall become exercisable in installments based on
when a director's fees would become payable in cash. The term of options granted
under the Directors' Program is the earlier of ten years from the grant date or
three years following termination of service as a director.
During the year ended December 31, 1999, the Company granted options
under the Directors' Program covering 18,460 shares to the non-employee
directors as a group at an exercise price per share of $1.083. The fair market
value of such Common Stock on the date of grant was $3.25 per share (based on
the closing sales price reported on the Nasdaq National Market System for the
date specified in the Directors' Program). As of March 31, 2000, options to
acquire 5,760 shares at $1.30 per share had been exercised under the Directors'
Program.
Each non-employee director of the Company also receives stock option
grants under the 1994 Directors' Stock Option Plan (the "Directors' Plan"). Only
directors of the Company who are not employees of the Company or a subsidiary of
the Company are eligible to receive grants of options under the Directors' Plan.
Options granted under the Directors' Plan are intended not to qualify as
incentive stock options under the Code.
Option grants under the Directors' Plan are non-discretionary. On the
first business day immediately following the Annual Meeting of Stockholders in
each year, each non-employee director of the Company is automatically granted
under the Directors' Plan, without further action by the Company, the Board or
the stockholders of the Company, an option to purchase 7,500 shares of Common
Stock of the Company. In addition, each new non-employee director will receive
an option to purchase 20,000 shares of Common Stock on the first business day
following the date such new director is elected to the Board. No other options
may be granted at any time under the Directors' Plan. The exercise price of
options granted under the Directors' Plan is 100% of the fair market value of
the Common Stock subject to the option on the date of the option grant.
Options granted pursuant to the initial grant to purchase of 20,000
shares of Common Stock under the Directors' Plan become exercisable as to 50% of
the option shares on the 12-month anniversary of the date of grant and the
remainder become exercisable on the 24-month anniversary of the date of grant.
Options granted on the business day following the annual meeting become fully
exercisable six months subsequent
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<PAGE> 10
to the date of grant. The term of options granted under the Directors' Plan is
ten years. In the event of a merger of the Company with or into another
corporation or a consolidation, reorganization, recapitalization, stock
dividend, stock split or other change in the corporate structure, appropriate
adjustments to the Directors' Plan and the outstanding options will be made so
as not to increase or decrease the option rights outstanding.
During the year ended December 31, 1999, the Company granted options
under the Directors' Plan covering 7,500 shares to each non-employee director of
the Company at an exercise price per share of $3.25. The fair market value of
such Common Stock on the date of grant was $3.25 per share (based on the closing
sales price reported on the Nasdaq National Market System for the date of grant
specified in the Directors' Plan). As of March 31 2000, no options had been
exercised under the Directors' Plan.
SUMMARY OF COMPENSATION
The following table sets forth the cash and non-cash compensation for the
three (3) fiscal years ended December 31, 1999 earned by the Company's Chief
Executive Officer and each of its other executive officers whose Annual
Compensation in a fiscal year exceeded $100,000 (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION --------------
------------------------------- SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS(#) ($)(2)
- ---------------------------------- ------- ------------- -------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
John M. Siebert, Ph.D. 1999 259,393 55,000 25,000 10,413(3)
President and 1998 246,818 55,000 80,000 8,483(3)
Chief Executive Officer 1997 236,509 75,020 100,000 8,465(3)
John Hontz, Ph.D. 1999 158,798 46,750 25,000 1,543
Vice President, Research 1998 150,105 54,250 125,000 5,792(4)
and 1997 143,093 21,600 72,000 30,526(5)
Development/Operations
Jack A. Khattar (6) 1999 74,208 20,750 0 6,793(6)
Vice President, Business 1998 169,760 20,750 150,000 2,898(7)
Development 1997 148,564 22,800 38,000 5,566(8)
Keith P. Salenger (9) 1999 174,995 20,250 10,000 172,787(10)
Vice President, Finance and 1998 150,775 20,250 115,000 34,615(11)
Chief Financial Officer 1997 142,488 21,600 36,000 23,761(12)
</TABLE>
- ------------------------------------
(1) Except as otherwise noted, the bonus amounts are comprised of bonuses paid
at the discretion of the Compensation Committee pursuant to the Company's
executive bonus plan.
(2) Except as otherwise noted, represents Company matching contributions under
the Company's 401-K retirement plan.
(3) Includes $7,800 of car allowance paid by the Company.
(4) Includes $4,442 of relocation expenses paid by the Company.
(5) Includes $29,851 of relocation expenses paid by the Company.
(6) Mr. Khattar was Vice President, Business Development, of the Company until
May 11, 1999, at which time he resigned. Included in other compensation is
$5,991 for accrued vacation benefits.
(7) Includes $1,200 of life insurance premiums paid by the Company.
(8) Includes $2,806 of relocation expenses and $1,200 of life insurance
premiums paid by the Company.
9
<PAGE> 11
(9) Mr. Salenger was Vice President, Finance, and Chief Financial Officer of
the Company until December 15, 1999, at which time he resigned.
(10) Includes $154,000 accrued in 1999, of which $17,349 was paid by the Company
in that year, pursuant to an agreement between Mr. Salenger and the Company
in connection with Mr. Salenger's resignation from the Company. Mr.
Salenger's base salary, at the rate in effect on the date he resigned, will
be paid by the Company on the customary payroll pay dates through October
11, 2000, except such payments shall cease on the date Mr. Salenger accepts
full-time employment.
(11) Includes $33,119 of relocation expenses paid by the Company.
(12) Includes $22,306 of relocation expenses paid by the Company.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under the CIMA LABS
INC. Equity Incentive Plan, as amended and restated (the "Plan"). As of December
31, 1999, options to purchase a total of 1,448,008 shares were outstanding under
the Plan and options to purchase 451,845 shares remained available for grant
thereunder.
The following tables show, for the year ended December 31, 1999, certain
information regarding options granted to, exercised by, and held at December 31,
1999, by the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------------------------------------- ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES IN FISCAL EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) YEAR(2) PER SHARE($)(3) DATE 5% 10%
----------------- ----------------- --------------------- ---------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
John M. Siebert 25,000 6.32% 3.375 6/01/09 $ 53,063 $ 134,472
John Hontz 25,000 6.32% 3.375 6/01/09 53,063 134,472
Jack A. Khattar 0 -- -- -- -- --
Keith P. Salenger 10,000(5) 2.53% 3.375 6/01/09 21,225 53,789
</TABLE>
- --------------------------
(1) All such options are granted under the Plan, have a ten-year term, and are
intended to be non-statutory stock options. Such options were fully vested
and exercisable on January 1, 2000.
(2) Based on options to purchase 395,273 shares of the Company's Common Stock
granted in 1999.
(3) All options were granted at the fair market value at the date of grant.
(4) Reflects the value of the stock option on the date of grant assuming (i)
for the 5% column, a five-percent annual rate of appreciation in the
Company's Common Stock over the ten-year term of the option, and (ii) for
the 10% column, a ten-percent annual rate of appreciation in the Company's
Common Stock over the ten-year term of the option, in each case without any
discounting to net present value and before income taxes associated with
the exercise. The 5% and 10% assumed rates of appreciation are based on the
rules of the SEC and do not represent the Company's estimate or projection
of the future Common Stock price. The amounts in this table may not
necessarily be achieved.
(5) Mr. Salenger forfeited his stock option grant to acquire 10,000 shares of
the Company's Common Stock on the date he resigned from his executive
officer position with the Company.
10
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS OPTIONS HELD AT
SHARES HELD AT DECEMBER 31, DECEMBER 31, 1999
ACQUIRED ON VALUE 1999 (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE REALIZED (1) UNEXERCISABLE) UNEXERCISABLE) (2)
------------------------------ ------------ ------------ ---------------------- ------------------------
<S> <C> <C> <C> <C>
John M. Siebert -0- -0- 319,166/93,334 $2,670,103/$760,885
John Hontz -0- -0- 101,183/120,817 790,453/996,783
Jack A. Khattar -0- -0- -0-/-0- -0-/-0-
Keith P. Salenger 20,000 $88,750 60,500/-0- 483,124/-0-
</TABLE>
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(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) Based on the fair market value of the Company's Common Stock at December
31, 1999 of $13.063 per share minus the exercise price of the options.
EMPLOYMENT AGREEMENT
Dr. Siebert has entered into an employment agreement (the "Agreement")
with the Company whereby the Company agreed to employ Dr. Siebert as President
and Chief Executive Officer of the Company until January 1, 2001. Under the
terms of the Agreement, Dr. Siebert's annual base salary was set at $255,000 as
of January 1, 1998. Dr. Siebert receives annual salary increases of 5% per year
on January 1st for each year of the Agreement. In addition, the Agreement
provides that Dr. Siebert will be paid a cash incentive bonus of up to 50% of
his salary upon the Company's achievement of certain objectives. In the case of
a change of control of the Company, Dr. Siebert will receive twelve months of
compensation or the remainder of his compensation under the Agreement, whichever
is longer (less amounts received in a subsequent job during such period), and a
minimum cash bonus of $100,000 per year for each year remaining under the
Agreement for which he has not already received a bonus. Pursuant to the
Agreement, the Company pays Dr. Siebert a car allowance of $650 per month. The
Agreement contains standard provisions regarding the protection of confidential
information, a one-year covenant not to compete and a covenant not to recruit.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION*
The Compensation Committee of the Board of Directors (the "Committee") is
currently composed of two non-employee directors: Messrs. Glarner and Ratoff.
The Committee is responsible for setting and administering the
compensation policies, annual executive officer compensation, making
recommendations on potential bonus and stock option plans, granting bonuses and
recommending to the Board of Directors grants of stock options to executive
officers.
- -------------------
* This Report is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, whether made before or after the date hereof and irrespective of
any general incorporation language contained in any such filing.
11
<PAGE> 13
COMPENSATION PHILOSOPHY
The goals of the Company's compensation program are to align compensation
with business objectives and performance and to ensure the compensation program
is sufficient to attract, motivate and retain executives of outstanding ability,
potential and drive commensurate with the size and innovative development
requirements of the Company. Key elements of this philosophy are:
- The Company pays competitively with comparable small companies
with which the Company competes for talent. To ensure that pay is
competitive, the Company compares its pay practices with these
companies and sets it pays parameters based in part on this
review.
- The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to
generate rewards that bring total compensation to competitive
levels.
- The Company provides significant equity-based incentives for
executives to ensure that they are motivated over the long-term to
respond to the Company's business challenges.
The Committee endeavors to balance Company needs and values with the
employees' needs and believes that it is important that the Committee maintain
this relationship.
BASE SALARY
The base salaries of the executive officers are determined initially on the
basis of one or more salary surveys conducted by third parties as well as
surveys of pharmaceutical companies both nationally and more specifically in the
Midwest, obtained from public information such as filings with the Securities
and Exchange Commission and surveys conducted by technical analysts at financial
institutions. Based upon such surveys, the executive officers' salaries are set
within the ranges of the surveys targeted at the median. The exact level of base
salary is determined after the Committee considers the experience and capability
of the executive officer, the level of responsibility, and the needs of the
Company.
PERFORMANCE COMPENSATION
Corporate and individual goals are used to establish the basis for annual
performance compensation awards. During the first quarter of each year, the
President and Chief Executive Officer establishes corporate and individual
objectives and assigns relative weights to each of such goals. At the end of the
year, results are compared to such objectives, which are then used to develop
final bonus and stock option recommendations to the Committee for the executive
officers. Recommended awards are reviewed by the Committee generally in the last
quarter of the plan year based on these corporate and individual performance
objectives, and must be approved by the Committee prior to being granted or, in
the case of stock options, recommended to the Board of Directors by the
Committee and subsequently approved by the Board of Directors.
STOCK OPTIONS
The President and Chief Executive Officer makes recommendations to the
Committee regarding grants of stock options to the executive officers based on
performance against individual and corporate objectives as well as surveys
conducted by technical analysts at financial institutions based on public
knowledge of other small companies. The Committee reviews these recommendations
and performance against corporate objectives, as well as such surveys, and
recommends to the Board of Directors grants of stock options to the executive
officers. Such recommendation of grants may vary from the recommendation
12
<PAGE> 14
of the President and Chief Executive Officer as the Committee determines based
on their knowledge and experience as well as other factors they deem relevant.
The Committee views grants of stock options as incentives for performance and,
as a result, current holdings are considered in recommending grants of
additional stock options.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Dr. Siebert's salary, potential bonus and stock option grants are set forth
in an employment agreement between the Company and Dr. Siebert, which was
negotiated on behalf of the Board of Directors by Mr. Glarner at the direction
of the Committee with due regard to Dr. Siebert's knowledge, experience,
competitive salary information and market conditions at the time. The Employment
Agreement is in the third year of its three-year term. Pursuant to the
Employment Agreement, Dr. Siebert's salary and bonus for 1999 were $259,393 and
$55,000, respectively. Bonuses and stock option grants in future years will be
at the discretion of the Committee, provided that Dr. Siebert meets certain
minimums established by the Committee in the case of bonuses.
From the members of the Compensation Committee of CIMA LABS INC.
Terrence W. Glarner
Steven B. Ratoff
13
<PAGE> 15
PERFORMANCE GRAPH*
The following stock performance graph compares the cumulative total
stockholder return on the Company's Common Stock ("CIMA") with the Russell 2000
Index (the "Russell 2000") and the Total Return Index for NASDAQ Pharmaceutical
Stocks (the "NASDAQ Pharmaceuticals") for the five years ending December 31,
1999. Cumulative total stockholder return includes stock price appreciation and
reinvested dividends, if any. No dividends have ever been paid on the Company's
Common Stock, but some of the companies included in the calculation of the
Russell 2000 and the NASDAQ Pharmaceuticals have paid dividends, which are
assumed reinvested for purposes of calculating these indices.
<TABLE>
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN **
CIMA, THE RUSSELL 2000 INDEX AND THE NASDAQ PHARMACEUTICALS INDEX
[GRAPH]
12/94 12/95 12/96 12/97 12/98 12/99
---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
CIMA.................................. $100.00 $ 58.54 $ 59.76 $ 41.46 $ 25.61 $127.44
Russell 2000.......................... $100.00 $128.45 $149.64 $183.10 $178.44 $216.37
NASDAQ Pharmaceuticals................ $100.00 $183.41 $183.98 $189.98 $241.68 $451.62
</TABLE>
- ---------------------------
* This Performance Graph is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference in any
filing of the Company under the Securities Act or the Exchange Act, whether
made before or after the date hereof and irrespective of any general
incorporation language contained in any such filing.
** Assumes that the value of the investment in CIMA and each index was
$100 on December 31, 1994 and that all dividends, if any, were reinvested.
14
<PAGE> 16
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director for such liabilities permitted under Delaware law, to
the full extent permitted under Delaware law, subject to certain limitations.
OTHER MATTERS
The Board knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, it is the intention of the persons named in the
accompanying Proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ David A. Feste
David A. Feste
Secretary
April 21, 2000
15
<PAGE> 17
[CIMA LOGO]
CIMA LABS INC.
ANNUAL MEETING
Friday,June 2,2000
2:00 p.m. Central Daylight Time
CIMA LABS INC.
10000 Valley View Road
Eden Prairie,Minnesota
CIMA LABS INC.
10000 VALLEY VIEW ROAD, EDEN PRAIRIE, MINNESOTA 55344 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
By signing this proxy, you revoke all prior proxies and appoint John M. Siebert,
Ph.D. and David A. Feste, or either one of them, as Proxies, each with the power
to appoint his substitute and to act without the other, and authorize each of
them to represent and to vote, as designated herein, all shares of common stock
of CIMA LABS INC. (the "Company") held of record by the undersigned on April 14,
2000, at the Annual Meeting of Stockholders of the Company to be held on June 2,
2000 or at any adjournment thereof.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2.
See reverse for voting instructions.
<PAGE> 18
[CIMA LOGO]
<TABLE>
<CAPTION>
<S><C>
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. Election of directors: 01 John M. Siebert, Ph.D. 02 Terrence W. Glarner [ ] Vote FOR all [ ] Vote WITHHELD for
03 Steven B. Ratoff 04 Joseph R. Robinson, Ph.D. nominees (except all nominees
as marked to the
contrary below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE THE
NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) --------------------------------------------
2. Ratification of the appointment of Ernst & Young LLP as the independent --------------------------------------------
auditors of the Company for the fiscal year ending December 31, 2000. [ ] For [ ] Against [ ] Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR EACH ITEM. THE
PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
Address Change? Mark Box [ ]
Indicate changes below: Date
-----------------------------
--------------------------------------------
--------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear(s) on the Proxy. If held in
joint tenancy, all persons must
sign. Trustees, administrators,
etc., should include title and
authority. Corporations should
provide the full name of
corporation and title of authorized
officer signing the proxy.
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