<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
U.S. Bioscience, 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), 14a-6(i)(1), 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:
(4) Date Filed:
Notes:
<PAGE>
U.S. BIOSCIENCE, INC.
One Tower Bridge
100 Front Street
West Conshohocken, PA 19428
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, MAY 19, 1995
----------------
The Annual Meeting of Stockholders (the "Meeting") of U.S. Bioscience, Inc.,
a Delaware corporation (the "Company"), will be held on Friday, May 19, 1995,
at 10:00 a.m. at The Philadelphia Marriott West, 111 Crawford Avenue, West
Conshohocken, Pennsylvania 19428, for the following purposes:
1. To elect eight directors to hold office until the Annual Meeting of
the Stockholders in 1996 and until their respective successors are duly
elected and qualified.
2. To transact such other business as may properly come before the
Meeting and any and all adjournments and postponements thereof.
The Board of Directors has fixed the close of business on April 3, 1995 as
the record date for the Meeting. Only stockholders of record at that time are
entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the accompanying Proxy Statement for further information
with respect to the business to be transacted at the Meeting.
A complete list of the stockholders entitled to vote at the Meeting will be
open to the examination of any stockholder, for any purpose germane to the
Meeting, during ordinary business hours, for a period of at least 10 days prior
to the Meeting, at the offices of the Company, One Tower Bridge, 100 Front
Street, West Conshohocken, Pennsylvania 19428.
THE BOARD OF DIRECTORS URGES YOU TO DATE, SIGN AND RETURN THE ENCLOSED PROXY
PROMPTLY. THE RETURN OF THE ENCLOSED PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IF YOU DO ATTEND THE MEETING.
By Order of the Board of Directors,
Martha E. Manning
Secretary
West Conshohocken, Pennsylvania
April 19, 1995
<PAGE>
U.S. BIOSCIENCE, INC.
One Tower Bridge
100 Front Street
West Conshohocken, PA 19428
----------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1995
----------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of U.S. Bioscience, Inc., a Delaware
corporation (the "Company"), for use at the Company's Annual Meeting of
Stockholders (together with any and all adjournments and postponements, the
"Meeting") which is scheduled to be held at 10:00 a.m. (local Philadelphia
time), on Friday, May 19, 1995 at The Philadelphia Marriott West, 111 Crawford
Avenue, West Conshohocken, Pennsylvania 19428 for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement,
the foregoing notice and the enclosed proxy are being sent to stockholders on
or about April 19, 1995.
The Board of Directors knows of no other matters which are likely to be
brought before the Meeting. If any other matters properly come before the
Meeting, however, the persons named in the enclosed proxy, or their duly
constituted substitutes acting at the Meeting, will be authorized to vote or
otherwise act thereon in accordance with their judgment on such matters. If the
enclosed proxy is properly executed and returned prior to voting at the
Meeting, the shares represented thereby will be voted in accordance with the
instructions marked thereon. In the absence of instructions, executed proxies
will be voted "FOR" the eight nominees of the Board of Directors for election
as directors.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary of the Company in writing, by delivering a duly executed proxy
bearing a later date, or by attending the Meeting and voting in person.
<PAGE>
VOTING SECURITIES AND SECURITY OWNERSHIP
VOTING SECURITIES
At the close of business on April 3, 1995, the record date fixed for the
determination of stockholders entitled to notice of and to vote at the Meeting,
there were outstanding 40,770,780 shares of the Company's Common Stock, par
value $.005 per share ("Common Stock"), which have one vote per share. The
presence at the Meeting, in person or by proxy, of stockholders entitled to
cast at least a majority of the votes which all stockholders are entitled to
cast will constitute a quorum for the meeting. Stockholders do not have
cumulative voting rights in the election of directors or otherwise. Directors
will be elected by a plurality of votes cast. Abstentions and broker non-votes
are not treated as votes cast, and thus are not the equivalent of votes
against.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The table below sets forth certain information as of April 3, 1995 regarding
the holdings of Common Stock of (i) each person who is known to the Company to
be the beneficial owner of more than 5% of the outstanding shares of the
Company's Common Stock, (ii) each Director of the Company, (iii) each nominee
for Director, (iv) the Company's Chief Executive Officer and each of the
Company's four other most highly compensated executive officers who were
serving as executive officers at the end of 1994 and (v) all directors and
executive officers as a group. Unless otherwise specified, the named beneficial
owner has sole voting and investment power. The information in the table below
was furnished by the persons listed, and constitutes beneficial ownership as
defined in regulations of the Securities and Exchange Commission. Shares
issuable pursuant to the exercise of stock options are included in the table
below if such options are currently exercisable or exercisable by June 2, 1995.
<TABLE>
<CAPTION>
AMOUNT AND NATURE % OF
OF BENEFICIAL COMMON
NAME OF BENEFICIAL OWNER OWNERSHIP STOCK
------------------------ ----------------- ------
<S> <C> <C>
The Dow Chemical Company (1)..................... 2,210,770 5.4
State of Wisconsin Investment Board (2).......... 2,462,000 6.0
Joseph L. Harrosh (3)............................ 2,327,450 5.7
Philip S. Schein, M.D............................ 1,219,800(4) 3.0
Russell C. McLauchlan............................ 133,334(5) *
Robert L. Capizzi, M.D........................... 222,800(6) *
Robert I. Kriebel................................ 175,500(7) *
Paul Calabresi, M.D.............................. 30,000(8) *
Maxwell Gordon, Ph.D............................. 30,000(9) *
Douglas J. MacMaster, Jr......................... 10,000(10) *
Allen Misher, Ph.D............................... 43,960(11) *
Jonah Shacknai................................... 40,200(12) *
Betsey Wright.................................... 10,200(13) *
Donald O. Brown.................................. 134,600(14) *
All directors and executive officers as a group
(13 persons).................................... 2,341,194(15) 5.7
</TABLE>
- - --------
(*)Less than 1% of class.
[notes continued on following page]
2
<PAGE>
(1) The address of this stockholder is The Dow Chemical Company, 2030 Dow
Center, Midland, MI 48674. These shares are owned directly by Marion
Merrill Dow Inc., a 71%-owned subsidiary of The Dow Chemical Company.
(2) The address of this stockholder is State of Wisconsin Investment Board,
P.O. Box 7842, Madison WI 53707.
(3) The address of this stockholder is 40900 Grimmer Boulevard, Fremont, CA
94535.
(4) Includes 430,000 shares issuable upon exercise of stock options held by Dr.
Schein. Also includes 761,920 shares owned directly and as joint tenant
with Dorothy Schein, Dr. Schein's wife, 400 shares held by Mrs. Schein as
custodian for their two children, and 27,480 shares held by Mrs. Schein as
co-trustee of two trusts for the benefit of their two children. Dr. Schein
disclaims beneficial ownership of all of these shares not owned directly or
as joint tenant.
(5) Represents shares issuable upon exercise of stock options held by Mr.
McLauchlan. In January 1995 Mr. McLauchlan left the employ of the Company
in a corporate reorganization, and resigned as a director.
(6) Includes 222,000 shares issuable upon exercise of stock options held by Dr.
Capizzi.
(7) Represents shares issuable upon exercise of stock options held by Mr.
Kriebel.
(8) Represents shares issuable upon exercise of stock options held by Dr.
Calabresi.
(9) Represents shares issuable upon exercise of stock options held by Dr.
Gordon.
(10) Represents shares issuable upon exercise of stock options held by Mr.
MacMaster.
(11) Includes 30,000 shares issuable upon exercise of stock options held by Dr.
Misher.
(12) Includes 30,000 shares issuable upon exercise of stock options held by Mr.
Shacknai.
(13) Includes 10,000 shares issuable upon exercise of stock options held by Ms.
Wright.
(14) Represents shares issuable upon exercise of stock options held by Mr.
Brown.
(15) Includes 1,495,934 shares issuable upon exercise of stock options.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
At the Meeting, the stockholders will elect eight directors to hold office
until the Annual Meeting of Stockholders in 1996 and until their respective
successors are duly elected and qualified. Unless contrary instructions are
given, the shares represented by a properly executed proxy will be voted "FOR"
the election of the following nominees: Paul Calabresi, M.D., Robert L.
Capizzi, M.D., Robert I. Kriebel, Douglas J. MacMaster, Jr., Allen Misher,
Ph.D., Philip S. Schein, M.D., Jonah Shacknai and Betsey Wright. All of the
nominees are presently members of the Board of Directors of the Company.
The Board of Directors believes that the nominees are willing to serve as
directors. If any nominee at the time of election is unable or unwilling to
serve or is otherwise unavailable for election and, as a result, another
nominee is designated, the persons named in the enclosed proxy or their
substitutes will have discretion and authority to vote for or to refrain from
voting for the other nominee in accordance with their judgment.
3
<PAGE>
Set forth below is certain information concerning the nominees for election
as directors:
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH
NAME AGE SINCE THE COMPANY
---- --- -------- ------------------------------
<S> <C> <C> <C>
Philip S. Schein, M.D............... 55 1987 Chief Executive Officer and
Chairman of the Board of
Directors
Robert L. Capizzi, M.D.............. 56 1992 Executive Vice President--
Worldwide Research and
Development and Director
Robert I. Kriebel................... 52 1991 Senior Vice President-Finance
and Administration, Treasurer
and Director
Paul Calabresi, M.D.(1)............. 65 1992 Director
Douglas J. MacMaster, Jr.(2)........ 64 1994 Director
Allen Misher, Ph.D.(1).............. 62 1988 Director
Jonah Shacknai(2)................... 38 1987 Director
Betsey Wright(1).................... 51 1994 Director
</TABLE>
- - --------
(1) Member of Executive Compensation Committee
(2) Member of Audit Committee
Dr. Schein has been Chief Executive Officer and a Director of the Company
since its formation in May 1987 and Chairman since 1990. He was also President
of the Company from its formation until April 1992. From April 1987 to May 1987
he was employed by U.S. Healthcare, Inc., a publicly-owned operator of health
maintenance organizations ("HMO's"), to commence the business undertaken by the
Company. From January 1987 to February 1987 Dr. Schein was a consultant in drug
development to Unimed, Inc., a pharmaceutical company, and Professor of
Medicine and Pharmacology at the University of Pennsylvania. Dr. Schein served
as Vice President of Worldwide Clinical Research and Development, Smith, Kline
& French Laboratories, the pharmaceutical division of SmithKline Beckman
Corporation, from October 1983 to December 1986. Dr. Schein was the Scientific
Director of the Vincent T. Lombardi Cancer Research Center at Georgetown
University School of Medicine in Washington, D.C. from July 1982 to October
1983, Chief of the Division of Medical Oncology from August 1974 to October
1983 and Professor in the Departments of Medicine and Pharmacology from August
1974 to October 1983. From July 1971 to August 1974 he was a senior
investigator at the National Cancer Institute and Head of the Clinical
Pharmacology Section. Dr. Schein is a former President of the American Society
of Clinical Oncology and a former Chairman of the FDA Oncologic Drugs Advisory
Committee, where he received the Commissioner's Special Citation and the Wiley
Medal for outstanding service. In September 1994 Dr. Schein was appointed by
President Clinton to a six-year term on the National Cancer Advisory Board. He
has published more than 350 articles and texts relating to basic and clinical
research and drug development and is the recipient of numerous scientific and
medical awards and honors. He is a director of Oncor, Inc., a biotechnology-
based diagnostics company, and Medicis Pharmaceutical Corporation, a research
intensive pharmaceutical company focused on dermatology.
Dr. Capizzi has been Executive Vice President-Worldwide Research and
Development of the Company since joining the Company in September 1991. From
September 1982 until joining the Company, Dr. Capizzi
4
<PAGE>
was Charles L. Spurr Professor, and Director of the Comprehensive Cancer
Center, of Wake Forest University, Chief of the Section on Hematology/Oncology,
and Chairman of the Piedmont Oncology Association at the Bowman Gray School of
Medicine of Wake Forest University, Winston-Salem, North Carolina. Dr. Capizzi
is a former member of the FDA Oncologic Drugs Advisory Committee and the Board
of Directors of the American Society of Clinical Oncology. He has published
over 300 manuscripts and texts relating to clinical pharmacology and cancer
treatment.
Mr. Kriebel joined the Company in April 1991 as Senior Vice President-Finance
and Administration and Treasurer. He held various positions with Rhone-Poulenc
Rorer Inc. (formerly Rorer Group Inc.) from 1974 until November 1990. From 1987
to November 1990 he was Vice President and Controller of Rorer Group Inc.'s
Armour Pharmaceutical Company subsidiary. In 1986, Mr. Kriebel was Vice
President-Investor Relations of Rorer Group Inc. and from 1979 to 1985 he was
Treasurer of Rorer Group Inc. Mr. Kriebel is a director of Wheaton, Inc., a
pharmaceutical supplies manufacturer.
Dr. Calabresi has since 1993 been Chairman Emeritus and Professor of
Medicine, and from 1974 to 1993 was Chairman of the Department of Medicine, of
Brown University School of Medicine. He is a member of the Institute of
Medicine of the National Academy of Sciences, was the recipient in 1992 of the
Oscar B. Hunter Memorial Award in Therapeutics of the American Society for
Clinical Pharmacology and Therapeutics, and was the recipient in 1995 of the
American Cancer Society's St. George Medal. Dr. Calabresi was president of the
American Society of Clinical Oncology from 1969 to 1970, and Chairman of the
National Cancer Advisory Board from 1991 to 1994. He is the author or editor of
over 200 manuscripts and books relating to the pharmacology of anticancer
agents and the management of cancer patients.
Mr. MacMaster has been retired since 1991. For 30 years prior to his
retirement, Mr. MacMaster was employed by Merck & Co., as a Senior Vice
President from 1988 to 1991 and as President of its Merck, Sharpe & Dohme
Division from 1985 to 1988. He is a director of American Precision Industries,
Inc., a manufacturer of heat transfer and motion control equipment, and Martek
Biosciences Corp., a research-intensive pharmaceutical company.
Dr. Misher was President of the Philadelphia College of Pharmacy and Science
from 1984 until his retirement on December 31, 1994, and since February 1995
has been President Emeritus. He was Senior Vice President of National Medical
Care, Inc. from 1982 to 1984, and President of SmithKline Medical Diagnostics,
a division of SmithKline Beckman Corporation, from 1978 to 1982. He is a
director of U.S. Healthcare, Inc., Marsam Pharmaceuticals Inc., a manufacturer
of generic injectable drugs, and Cortech, Inc., a biopharmaceutical company
engaged in drug research and development.
Mr. Shacknai has been Chairman and Chief Executive Officer of Medicis
Pharmaceutical Corporation, a research-intensive pharmaceutical company, since
July 1988. From 1982 to June 1988 he was a partner of Royer, Shacknai & Mehle,
a law firm specializing in regulatory and legislative matters relating to food,
drugs, medical devices, cosmetics and other health issues.
Ms. Wright has since March 1993 been Executive Vice President of The Wexler
Group, a government relations and public affairs firm in Washington, DC. From
1980 until March 1993, she was associated in Arkansas with Governor Bill
Clinton, as his chief of staff for seven years, as manager of three re-election
campaigns, as chair and executive director of the Arkansas Democratic Party, as
deputy chair of his presidential campaign, and as a member of his transition
staff.
5
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee and an Executive Compensation Committee,
but does not have an Executive Committee or a Nominating Committee. The Audit
Committee, which held one meeting in 1994, consists of Dr. Gordon and Messrs.
MacMaster and Shacknai. The functions of the Audit Committee generally include
reviewing with the independent auditors the scope and results of their
engagement and reviewing the adequacy of the Company's system of internal
accounting controls.
The Executive Compensation Committee, which held two meetings in 1994,
consists of Drs. Calabresi and Misher and Ms. Wright. The Executive
Compensation Committee is responsible for establishing salaries, bonuses and
other compensation, and granting stock options, for the Company's officers.
The Board of Directors held six meetings in 1994. In 1994 each director
attended at least 75% of the combined number of meetings of the Board and of
the Committees on which such directors served, except Mr. Shacknai, who
attended 71.4% of such meetings.
COMPENSATION OF DIRECTORS
The Company pays to each of its non-employee directors $1,000 for each day
upon which the director attends a meeting of the Board of Directors or a
committee of the Board of Directors.
The Company's 1992 Stock Option Plan (the "Plan") contains special provisions
with regard to those directors of the Company who are not employees of the
Company, which provisions are intended to permit no discretion with regard to
the timing of grants of stock options to such directors, the price at which
shares of common stock covered by such options may be purchased and the number
of shares of common stock covered by such options. These provisions are
intended to enable the Plan to satisfy the conditions relating to
administration of employee stock option plans set forth in Rule 16b-3 ("Rule
16b-3") promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Rule 16b-3 provides exemptions for officers and directors from
the "short-swing" profit provisions of Section 16(b) under the Exchange Act
with respect to, among other things, the grant of options under a stock option
plan. Pursuant to the terms of the Plan, each non-employee director who was a
director when the Plan was adopted on April 15, 1992 was granted on November
16, 1993 an option to purchase 30,000 shares of common stock exercisable in
three equal installments on the three anniversary dates of the date of grant,
at an exercise price equal to the fair market value of the shares on the date
of grant, and each such director will receive a grant of 30,000 shares on the
same basis every three years thereafter. With respect to non-employee directors
first elected to the board after April 15, 1992 each such director received, or
will receive, on the date such director becomes a director, an option to
purchase 30,000 shares of common stock on the same basis described above and
will receive a similar option every three years thereafter.
For service as special FDA consultant to the Company, on December 16, 1992
Mr. Shacknai received a stock option to purchase an aggregate of 30,000 shares
of the Company's Common Stock. The option will become exercisable in increments
of 10,000 shares at such time, if ever, as the Company obtains each of the next
three FDA approvals (if Mr. Shacknai, at the Company's request, assisted the
Company with respect to such approvals) to market its pharmaceutical products.
The exercise price of Mr. Shacknai's options is $11.00 per share, the fair
market value on date of grant. The options granted to Mr. Shacknai expire five
years from the date of grant.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid or accrued during each of the last three fiscal years to the Company's
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------- --------------------------------
AWARDS PAYOUTS
OTHER ------------------- ---------
ANNUAL RESTRICTED LONG-TERM
COMPEN- STOCK INCENTIVE ALL OTHER
NAME AND SALARY BONUS SATION AWARD(S) OPTIONS PLAN(S) COMPENSATION (4)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (SHARES) ($) ($)
------------------ ---- ------- ------ ------- ---------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip S. Schein........ 1994 346,605 57,763 0 N/A 50,000 N/A 96,196
Chief Executive Officer 1993 343,435 86,652 0 N/A 50,000 N/A 75,971
and Chairman 1992 327,167 82,525 0 N/A 250,000(5) N/A 77,140
Russell C.
McLauchlan(1).......... 1994 240,540 0 0 N/A 40,000 N/A 61,048
Chief Operating Officer 1993 238,513 60,135 71,155(3) N/A 26,667 N/A 46,046
and President 1992 154,184 60,000 97,940(3) N/A 320,000 N/A 15,380
Robert L. Capizzi....... 1994 254,100 42,346 0 N/A 40,000 N/A 67,011
Executive Vice 1993 251,773 63,525 19,601(3) N/A 40,000 N/A 52,140
President 1992 240,833 60,500 129,090(3) N/A 330,000(5) N/A 28,386
Worldwide Research and
Development
Robert I. Kriebel....... 1994 168,237 27,997 0 N/A 30,000 N/A 43,078
Senior Vice President 1993 166,462 42,000 0 N/A 30,000 N/A 39,301
Finance 1992 158,333 40,000 0 N/A 162,500(5) N/A 37,999
and Administration and
Treasurer
Donald O. Brown(2)...... 1994 160,130 26,664 0 N/A 33,000 N/A 39,749
Senior Vice President 1993 139,290 44,000 0 N/A 20,000 N/A 36,271
Pharmaceutical 1992 87,500 32,500 84,015(3) N/A 200,000 N/A 8,951
Operations
</TABLE>
- - --------
(1) Mr. McLauchlan joined the Company in April 1992. In January 1995, Mr.
McLauchlan left the employ of the Company in a corporate reorganization,
and resigned as a director.
(2) Mr. Brown joined the Company in April 1992.
(3) Reflects employee relocation costs including income tax gross-up.
(4) Represents employer contributions to life insurance, Executive Deferred
Compensation Plan, Employee Pension Plan and Employee Savings Plan
(401(k)). For each above named executives, the 1994 amounts are as
follows:
Dr. Schein: life insurance, $9,427; deferred compensation, $66,593;
pension, $17,096; and 401(k), $3,080.
Mr. McLauchlan: life insurance, $3,456; deferred compensation, $37,416;
pension, $17,096; and 401(k), $3,080.
Dr. Capizzi: life insurance, $8,322; deferred compensation, $39,834;
pension, $17,096; and 401(k), $1,759. Mr. Kriebel: life insurance,
$4,161; deferred compensation, $19,463; pension, 17,096; and 401(k),
$2,358. Mr. Brown: life insurance, $3,462; deferred compensation,
$16,111; pension, $17,096; and 401(k), $3,080.
7
<PAGE>
(5) Reflects all options granted in each fiscal year. In 1992, under a program
open to all employees, a majority of the options granted in 1991 were
canceled at the election of the employee and most of the options granted in
1992 were granted to replace such canceled options. The granting of
replacement options was due to the decline in the price of the Company's
Common Stock in early 1992 and the need to maintain, in the opinion of
management, the Executive Compensation Committee and the Management Option
Committee, the valuable employee incentive program that stock options
represent. 1992 option grants for such replacement were: Dr. Schein 200,000
options, Dr. Capizzi 320,000 options and Mr. Kriebel 140,000 options. In
sum, of the 742,500 options granted to those three officers in 1992,
660,000 or 89% were granted to replace the same number of canceled 1991
options. Replacement options were granted to all employees who elected to
participate in the program, at an exercise price lower than that of the
canceled options but 11% higher than the market price of the Company's
Common Stock on the date of grant.
Dr. Schein has an employment agreement terminable by the Company or Dr.
Schein upon notice, pursuant to which he will receive a minimum annual salary
of $346,605.
The Company has entered into agreements (the "Executive Severance
Agreements") with certain Company vice presidents and with all officers holding
higher office, pursuant to which the Company has agreed to provide specified
severance benefits to each such executive. Each of the Executive Severance
Agreements provides that if the executive's employment with the Company is
terminated by the Company for any reason other than the executive's death,
disability or for "cause" (as defined in the Executive Severance Agreements to
cover specified serious misconduct), or if the executive resigns for "good
reason" (as defined in the Executive Severance Agreements to cover a
downgrading of the executive by the Company or non-fulfillment by the Company
of certain contractual commitments to the executive), within three years
following a "change in control of the Company," the Company will make a lump
sum severance payment to the executive equal to the product determined by
multiplying the highest annual compensation paid or payable by the Company to
the executive with respect to each of the three calendar years ending with the
year in which the date of termination occurs, by the number of years (including
any fraction of a year) remaining in the three-year period commencing with the
date of change in control of the Company. The compensation base on which such
payment is calculated includes bonuses and deferred compensation as well as
salary. In addition, in lieu of any fringe benefits to be paid to the executive
with respect to the remainder of the aforesaid three-year period, the executive
will receive an additional lump sum equal to the product of multiplying $20,000
(in the case of Dr. Schein $35,000, and in the case of Dr. Capizzi $30,000) by
the number of years (including any fraction of a year) remaining in the
aforesaid three-year period, and a further payment designed to compensate the
executive for lost pension benefits by reason of his or her termination of
employment earlier than three years following the change in control of the
Company.
A "change in control of the Company" is deemed to have occurred if (i) there
has been a change in control of a nature that would be required, if the Company
would be subject to reporting requirements under the Exchange Act, to be
reported in response to Securities and Exchange Commission disclosure
requirements for proxy statements and Current Reports on Form 8-K relating to
changes in control; or (ii) any person, entity or group (within the meaning of
certain provisions of the Exchange Act), other than any employee benefit plan
(or related trust) sponsored or maintained by the Company or any subsidiary of
the Company, is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 30% or
8
<PAGE>
more of the combined voting power in the election of directors; or during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to have authority to cast at
least a majority of the votes which all directors on the Board are entitled to
cast, unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-
thirds of the votes entitled to be cast by the directors then still in office
who were directors at the beginning of the period.
The Executive Severance Agreements provide that payments required to be made
to an executive are to be reduced to the extent they would not be deductible by
the Company for federal income tax purposes due to the provisions of Section
280G of the Internal Revenue Code, as determined by independent tax counsel.
STOCK OPTION GRANTS IN 1994
The following table sets forth certain information with respect to individual
grants of stock options in 1994 to the Company's Chief Executive Officer and
each of the Company's four other most highly compensated executive officers:
<TABLE>
<CAPTION>
NUMBER PERCENT
OF OF POTENTIAL REALIZABLE VALUE AT
SECURITIES TOTAL ASSUMED ANNUAL RATES OF STOCK
UNDERLYING OPTIONS/SRAS PRICE APPRECIATION FOR OPTION
OPTIONS/SARS GRANTED TO TERM (3)
GRANTED EMPLOYEES EXERCISE -----------------------------
IN FISCAL IN FISCAL OR BASE 5% 10%
YEAR (1) YEAR PRICE (2) EXPIRATION -------------- --------------
NAME (#) (%) ($/SH) DATE ($) ($)
---- ------------ ------------ --------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Philip S. Schein........ 50,000 5.5% $8.25 3/01/05 259,419 657,419
Russell C. McLauchlan... 40,000 4.4% $8.25 3/01/05 207,535 525,935
Robert L. Capizzi....... 40,000 4.4% $8.25 3/01/05 207,535 525,935
Robert I. Kriebel....... 30,000 3.3% $8.25 3/01/05 155,651 394,451
Donald O. Brown......... 33,000 3.6% $8.25 3/01/05 171,217 433,896
</TABLE>
- - --------
(1) The Company's stock option plans are administered with respect to senior
officers by the Executive Compensation Committee, made up entirely of
members of the Board of Directors who are not employees of the Company. The
Committee determines the number of options to be granted to each senior
officer and the terms of such options. All stock options granted to the
above named executives in 1994 are non-statutory options receiving no
special tax benefit, have an exercise price equal to the fair market value
on the date of grant, become exercisable at a rate of 20% per year
following the date of grant and have a term of 10 years.
(2) On February 21, 1995, the Company amended all outstanding employee stock
options with an exercise price greater than $2.44 per share, including the
options for current employees described in the table above, to change the
exercise price to $2.44 per share, the closing price of the Company's
Common Stock on the American Stock Exchange on February 21, 1995.
(3) Potential realizable value is based on the assumption that the price of the
Company's Common Stock as of the date of option grant ($8.25 per share),
appreciates at the annual rates shown (compounded annually) until the end
of the 10-year option term. These amounts are calculated based on
requirements promulgated by the Securities and Exchange Commission and do
not reflect the Company's estimate of
9
<PAGE>
future common stock price growth. If the Company's stock price does not
appreciate in value from the date of grant, options granted in 1994 will
have no value. Similarly, if the assumed annual rates of stock price
appreciation illustrated above are achieved, total stockholder value will
have increased by approximately $211,534,000 at the 5% assumed annual rate
and approximately $536,070,000 at the 10% assumed annual rate based upon a
stock price equal to the stock price on the date of grant. Under both
assumed annual rates of stock price appreciation illustrated above,
potential value realized by the above named executives represents less than
0.5% of the potential value realizable by all stockholders.
AGGREGATED OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES
The following table sets forth a summary of options exercised during 1994 and
presents the value of unexercised options as at December 31, 1994, held by the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers:
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END AT FISCAL YEAR-END (1)
ACQUIRED ON VALUE ------------------------- -------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip S. Schein........ 0 0 360,000 240,000 0 0
Russell C. McLauchlan... 0 0 133,334 253,333 0 0
Robert L. Capizzi....... 0 0 140,000 270,000 0 0
Robert I. Kriebel....... 0 0 131,000 151,500 0 0
Donald O. Brown......... 0 0 84,000 169,000 0 0
</TABLE>
- - --------
(1) Total value of "in-the money" unexercised options is based upon a
calculation of the difference between the closing market value of the
Company's Common Stock on December 31, 1994 ($3.5625 per share) and the
exercise price of the "in-the-money" options, multiplied by the number of
"in-the-money" option shares. As all outstanding options for the above
named executives had exercise prices above the closing market price of the
Company's Common Stock as at December 31, 1994, there were no "in-the-
money" options.
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee of U.S. Bioscience, Inc. (the
"Committee") is pleased to present its report on executive compensation. The
report describes the underlying philosophy and objectives of the Company's
executive compensation program, the various elements of the program, and the
basis for the 1994 compensation determinations made by the Committee with
respect to executive officers.
EXECUTIVE COMPENSATION PHILOSOPHY AND OBJECTIVES
The fundamental philosophy of the Company is to ensure that executive
compensation is linked directly to continuous improvements in corporate
performance, the achievement by officers of corporate objectives which are
linked to the Company's annual strategic plan, and increases in long-term
shareholder value. It is the philosophy of the Company to offer compensation
which is competative so that the Company is able to attract, motivate and
retain key executives.
10
<PAGE>
The compensation of the Company's top executives is established and reviewed
annually by the Committee, which is comprised entirely of non-employee
directors. The following guidelines have been adopted by the Committee in
making its compensation decisions:
. Providing a competitive total compensation package that enables the
Company to attract and retain key executives.
. Focusing executive behavior on fulfillment of both short and longer-term
business objectives and strategies.
. Emphasizing stockholders' interest by maintaining variable compensation
opportunities directly linked to corporate performance and stock
appreciation.
COMPENSATION PROGRAM ELEMENTS FOR 1994
The Company's executive compensation is comprised of three components, as
described below. Each component is intended to serve the Company's compensation
philosophy and guidelines.
Base salary: Base salary levels are established annually through a review of
the executives performance and experience, against competitive comparisons
including pharmaceutical/biotechnology companies which are provided by an
outside consulting advisor. Salaries for the Company's key executives are
generally at the median within this comparison group, some of whom are
represented within the stock performance graph.
Annual Incentive Compensation: The executive officers of the Company are
eligible to receive annual incentive payments. The objective of annual
incentive compensation is to deliver competitive levels (using the same
competitor group as described above) of total cash compensation (base salary
and incentive award) when annual financial and operational accomplishments are
made.
The specific areas used to measure key executive performance are described
below:
(1) Progress in product development, clinical preparation and development
of drugs for regulatory approval;
(2) Preparation for product commercial launch, and organizational
readiness; and
(3) Financial goals--keeping within budget guidelines.
Each of these factors is equally weighted in the Chief Executive Officer's
(CEO) performance assessment of each executive officer. These performance
evaluations are reviewed by the Committee for final determination of incentive
awards.
The performance of the CEO is evaluated by the Committee and based on the
overall progress of the Company in the specific areas described above viewed
retrospectively by the Committee. Accomplishments in 1994 considered by the
Committee in the overall judgment of the 1994 incentive awards are described
below:
. The Company made significant progress in moving its compounds through the
regulatory process. Although the company did not achieve FDA approval for
Ethyol (R) (amifostine), it did achieve a recommendation for approval of
Ethyol by the Committee for Proprietary Medicinal Products (CPMP) and
local regulatory approval of Ethyol in the United Kingdom. The company
achieved a positive recommendation from the CPMP for NeuTrexin(TM)
(trimetrexate glucuronate for injection) and local regulatory approvals
in The Netherlands, Luxembourg, and the United Kingdom. The
11
<PAGE>
Company also prepared and filed in January 1995, an additional amendment
to the Ethyol NDA which is currently pending before the FDA. The Company
achieved approval for its drug Hexalen (R) (altretamine) in Canada.
. The Company's manufacturing facility in Nijmegen, The Netherlands has
received regulatory approval by the Dutch authorities.
. The FDA inspected the Company's Nijmegen manufacturing facility in
connection with the Company's application to approve that facility to
manufacture NeuTrexin for commercial sale in the United States.
. The Company's marketing and sales organization in the United States
successfully launched NeuTrexin.
. Additional licenses and distribution agreements were executed with
commercial organizations covering additional international markets.
. Selection of the Company as the prospective exclusive licensee for NIH
drug compounds, FddA and its active metabolite, FddI.
The above accomplishments were not completed within the Company's financial
budget.
Target incentive compensation award levels for key executive officers are
slightly lower than industry standards as measured using the competitor group
described above. Incentives are, however, rational given the Company's stage of
development and relatively greater focus on longer-term (versus annual)
objectives. Incentive award target levels for 1994 were 25% of base salary.
Actual incentive awards were below that target level, based on performance in
the areas described above and at the discretion of the Committee. The Committee
set actual incentive awards for 1994 at a maximum of 33% below target levels
(17% of base salary). The competitive position of cash compensation awarded to
the Company's executives vary. It is competitive at the median level for all
positions with one exception, due to considerations in recruiting that
individual.
Stock Option Programs: The Committee strongly believes that the interests of
stockholders are best served by linking executives' financial success with the
Company's stock performance. Therefore, the Company maintains a stock option
program pursuant to which the Committee grants stock options to executives with
an exercise price equal to the fair market value on the date of grant. The
target award for each executive position is based on historical practice of the
company and also takes into account competitive norms for awarding of stock
options. Whether an individual receives more or less than his or her target
grant is based on the result of an individual performance review which measures
such individual's overall job performance. In making stock option awards, the
Executive Compensation Committee has not considered prior grants or the amount
of stock options currently held by an executive officer before granting the
executive officer stock option awards.
As a young company, the Committee believes stock options are a particularly
important and useful compensation element in the Company's efforts to attract,
retain, motivate and reward key executives who have been successful in larger,
more established companies.
On February 21, 1995, the Executive Compensation Committee amended stock
options held by executives with an exercise price greater than $2.44 per share,
by reducing the option exercise price to $2.44 per share, the closing price of
the Company's Common Stock on February 21, 1995. The Committee also
12
<PAGE>
amended outstanding stock options held by executive officers which had been
granted in 1990 and 1991, to extend the expiration date from five years to ten
years (the term of options granted to employees since 1992). These amendments
were required, in the opinion of the Executive Compensation Committee, to
retain the Company's key executives. On the same date, the Company's Management
Option Committee amended the outstanding stock options held by the Company's
other employees in the same respect.
1994 COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS
The Committee met in February 1994 to set salary levels for 1994 for the
Company's executive officers and the Committee met again in February 1995 to
award bonuses and stock option awards with respect to 1994 for the CEO and the
executive officers and to set salary levels for 1995. The current base salary
and total cash compensation awarded to the CEO with respect to 1994 are
competitive at the median levels, using the competitive group described above.
Base salary earned in the 1994 fiscal year by Philip S. Schein, M.D., the
Company's CEO, remained constant with 1993 base salary amount. As CEO, Dr.
Schein spearheaded the progress of the key elements for evaluating performance
discussed above and in February 1995 the Executive Compensation Committee
awarded him a bonus with respect to 1994 of 17% of base salary, the maximum
allowed under the Committee's revised target award program for 1994, and an
incentive stock option award of 50,000 option shares, the 1994 target level.
The Committee reviewed the performance of the other executive officers
against the same key elements that were considered significant in the
evaluation of the CEO. These executives were also awarded bonuses of 17% of
base salary and incentive stock options awards at target levels. The base
salaries of these executives were not increased in 1994 and a total of 156,000
stock options were granted to them.
At its February 1995 meeting, the Executive Compensation Committee
determined, at management's suggestion, to continue most officer salaries for
1995 at their 1993 levels.
THE LEGISLATIVE CAP ON DEDUCTIBILITY OF PAY
The Internal Revenue Code imposes a $1 million dollar limit on the
deductibility of pay for executives. The Company's cash compensation level is
far below the limit. Therefore, this legislation will not impact current pay
levels.
The Company believes that the stock options granted to their executives are
exempt from the limitations of the regulation, because they are a form of
performance based pay.
The foregoing report has been furnished by the members of the Committee who
are listed below. No member of the Committee is a former or current officer or
employee of the Company.
Paul Calabresi, M.D.
Allen Misher, Ph.D.
Betsey Wright
13
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph sets forth the cumulative total stockholder return
(assuming reinvestment of dividends, if any) to U.S. Bioscience Inc.'s
stockholders during the five year period ended December 31, 1994, (See Note 1
below) compared to the cumulative total stockholder return of a published
industry peer group index (AMEX Biotechnology Index) and an overall stock
market index (AMEX Market Value Index):
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG US BIOSCIENCE, AMEX BIOTECH INDEX AND AMEX MARKET VALUE INDEX
<CAPTION>
AMEX
AMEX MARKET
Measurement period US BIOTECH VALUE
(Fiscal Year Covered) BIOSCIENCE INDEX INDEX
- - --------------------- ---------- -------- --------
<S> <C> <C> <C>
12/31/89 100.00 100.00 100.00
12/31/90 157.58 146.75 81.51
12/31/91 630.30 453.47 104.51
12/31/92 179.80 341.21 105.62
12/31/93 135.35 231.51 126.23
12/31/94 57.58 164.09 114.72
</TABLE>
(1) U.S. Bioscience, Inc. began trading on the American Stock Exchange on
November 28, 1989.
(2) The stock performance graph assumes $100 invested on December 31, 1989 in
U.S. Bioscience, Inc., AMEX Biotechnology Index and AMEX Market Value
Index. Assumes dividends, if any, reinvested.
14
<PAGE>
CERTAIN TRANSACTIONS
The Company has a relocation policy for its employees. Loans made to
employees pursuant to this policy are generally short term and do not bear
interest. During a portion of 1994 Russell C. McLauchlan, President, Chief
Operating Officer and a director of the Company, was indebted to the Company in
the amount of $115,850 in connection with his purchase of a home in 1993. The
loan was repaid in full in 1994.
INFORMATION CONCERNING INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP to serve as
independent auditors for the Company for the current fiscal year.
Representatives of Ernst & Young LLP are expected to be present at the Meeting
and will have the opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders in 1996 must be received by the Company at its principal office in
West Conshohocken, Pennsylvania, no later than December 21, 1995 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that meeting. Stockholder proposals should be directed to Martha E.
Manning, Secretary, at the address of the Company set forth on the first page
of this proxy statement.
SOLICITATION OF PROXIES
The accompanying form of proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of solicitation of proxies for the
Meeting will be paid by the Company. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone or telecopy
by directors, officers or regular employees of the Company.
By Order of the Board of Directors,
Martha E. Manning
Secretary
15
<PAGE>
U.S. BIOSCIENCE, INC.
ONE TOWER BRIDGE, 100 FRONT STREET, WEST CONSHOHOCKEN, PA 19428
---------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
U.S. BIOSCIENCE, INC.
The undersigned, a stockholder of U.S. BIOSCIENCE, INC., hereby constitutes
and appoints PHILIP S. SCHEIN, ROBERT I. KRIEBEL and MARTHA E. MANNING, and
each of them acting individually, as the attorney and proxy of the undersigned,
with full power of substitution, for and in the name and stead of the
undersigned, to attend the Annual Meeting of Stockholders of the Company to be
held on May 19, 1995, at 10:00 a.m., at The Philadelphia Marriott West, 111
Crawford Avenue, West Conshohocken, Pennsylvania, and any adjournment or
postponement thereof, and thereat to vote all shares of Common Stock which the
undersigned would be entitled to vote if personally present.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THE SHARES
WILL BE VOTED "FOR" THE ELECTION OF ALL EIGHT NOMINEES FOR DIRECTOR. THIS PROXY
ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER
BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
<PAGE>
1. NOMINEES FOR ELECTION AS DIRECTORS ARE:
To vote FOR To WITHHOLD
all nominees AUTHORITY to vote
check this box for all nominees
check this box
[_] [_]
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING.
Philip S. Schein, M.D., Robert L. Capizzi, M.D., Robert I. Kriebel, Paul
Calabresi, M.D., Douglas J. MacMaster, Jr., Allen Misher, Ph.D., Jonah Shacknai
and Betsey Wright.
To WITHHOLD AUTHORITY to vote for any Individual nominee, so indicate on the
line below (your shares will be voted FOR the remainining nominees):
- - --------------------------------------------------------------------------------
NOTE: PLEASE SIGN THIS PROXY EXACTLY AS NAME(S) APPEARS ON THIS PROXY. WHEN
SIGNING AS ATTORNEY-IN-FACT, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE ADD YOUR TITLE AS SUCH. IF SIGNER IS A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY DULY AUTHORIZED OFFICER OR OFFICERS. WHERE STOCK IS ISSUED IN
THE NAME OF TWO OR MORE PERSONS, ALL SUCH PERSONS SHOULD SIGN. THE UNDERSIGNED
HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING, PROXY STATEMENT
AND ANNUAL REPORT OF U.S. BIOSCIENCE, INC.
- - -------------------------------------
Signature of Stockholder
- - -------------------------------------
Signature of Stockholder
DATED: , 1995
-------------------------
PLEASE SIGN, DATE AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
