<PAGE>
PROCYTE
CORPORATION
NOTICE OF 1995 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF PROCYTE CORPORATION:
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of ProCyte Corporation (the "Company") will be held on
Thursday, June 15 at 3:00 p.m., Pacific Daylight Time, at the Meydenbauer
Center, 11100 N.E. 6th Street, Bellevue, Washington, for the following purposes:
1. To approve an amendment to the Company's Restated Articles of
Incorporation to provide for a classified Board of Directors;
2. To elect members to the Board of Directors;
3. To transact such other business as may properly come before the
meeting and all adjournments and postponements thereof.
Holders of the common stock of the Company at the close of business on
April 24, 1995 are entitled to notice of and to vote upon all matters at the
Annual Meeting.
You are cordially invited to attend the Annual Meeting so that we may have
the opportunity to meet with you and discuss the affairs of the company.
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY SO THAT THE COMPANY MAY BE ASSURED OF THE PRESENCE OF A QUORUM AT
THE ANNUAL MEETING. A stamped, addressed envelope is enclosed for your
convenience in returning your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Joseph Ashley
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Kirkland, Washington
April 24, 1995
<PAGE>
PROCYTE CORPORATION
- -------------------------------------------------------------------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD JUNE 15, 1995
- -------------------------------------------------------------------------------
This Proxy Statement is furnished by and the accompanying proxy is
solicited on behalf of the Board of Directors of ProCyte Corporation, a
Washington corporation (the "Company"), for use at its Annual Meeting of
Shareholders to be held at the Meydenbauer Center, 11100 N.E. 6th Street,
Bellevue, Washington on Thursday, June 15, 1995 at 3:00 p.m., Pacific Daylight
Time, and at any adjournment thereof (the "Annual Meeting"). The Company's
Annual Report for the year ended December 31, 1994, Notice of Annual Meeting,
and a proxy accompany this proxy statement. The cost of solicitation of proxies
is to be paid by the Company. The approximate date of the mailing of this proxy
statement and proxy is April 28, 1995.
RECORD DATE AND VOTING SECURITIES
Shareholders of record at the close of business on April 24, 1995 (the
"Record Date") will be entitled to vote at the meeting. The only voting
securities of the Company are shares of common stock, $.01 par value (the
"Common Stock"). Each share of Common Stock outstanding is entitled to one vote
per share on any matter brought before the meeting. On April 24, 1995, the
Company had outstanding 13,118,495 shares of Common Stock. Under Washington law
and the Company's Articles of Incorporation, if a quorum is present at the
meeting: (i) the amendment to the Company's Restated Articles of Incorporation
to create a classified Board of Directors will be approved if a majority of the
votes entitled to be cast at the Annual Meeting are cast in the favor of the
amendment and (ii) the six nominees for election as directors who receive the
greatest number of votes cast for the election of directors at the meeting by
the shares present in person or represented by proxy at the meeting and entitled
to vote shall be elected directors.
The presence in person or by proxy of holders of record of a majority of
the outstanding shares of Common Stock is required to constitute a quorum for
the transaction of business at the meeting. Abstentions and broker nonvotes
will not be counted for voting on the amendment to the Company's Restated
Articles of Incorporation, but will have the practical effect of a vote against
the amendment since they represent one less vote for approval. In the election
of directors, any action other than a vote for a nominee will have no effect,
assuming the presence of a quorum.
The enclosed proxy card also confers discretionary authority to vote the
shares authorized to be voted thereby on any matter that was not known on the
date of mailing this proxy statement but that may properly be presented for
action at the Annual Meeting.
REVOCATION OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company at the time or before the vote is taken at the
Annual Meeting a written notice of
<PAGE>
revocation bearing a date later than the proxy, (ii) duly executing a later-
dated proxy relating to the same shares and delivering it to the Secretary of
the Company before the vote is taken at the Annual Meeting, or (iii) attending
the Annual Meeting and voting in person (although attendance at the Annual
Meeting will not in and of itself constitute a revocation of proxy). Any
written notice or subsequent proxy should be sent so as to be delivered to
ProCyte Corporation, 12040 115th Avenue N.E., Suite 210, Kirkland Washington
98034-6900, Attention: Secretary, or hand delivered to the Secretary of the
Company at or before the time the vote is taken at the Annual Meeting.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information regarding ownership of the
Company's Common Stock on April 24, 1995 by (i) each person known by the Company
to own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each director, (iii) executive officers named in the Summary Compensation Table
below, and (iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares Beneficially % of Shares
Name Of Beneficial Owner Owned (1) Outstanding
------------------------ ----- -----------
<S> <C> <C>
Joseph Ashley (2) 721,877 5.4%
12040 115th Avenue N.E.
Kirkland, WA 98034-6900
Jules Blake (3) 31,000 *
Gordon W. Duncan (4) 110,000 *
Karen L. Hedine (5) 103,280 *
G. Bradford Jones (3) 36,550 *
C. Brian Melonakos -0- *
Robert E. Patterson (6) 8,334 *
William M. Sullivan (3) 31,000 *
All Directors and executive officers
as a group (8 persons) (8) 1,042,041 7.6%
- -----------------------------------------
<FN>
* Less than 1%
(1) Unless otherwise indicated, each person named in the table exercises sole
voting and investment power with respect to all shares beneficially owned,
subject to applicable community property laws.
(2) Includes 200,000 shares subject to options exercisable within 60 days of
April 24, 1995.
(3) Includes 31,000 shares subject to options exercisable within 60 days of
April 24, 1995.
(4) Includes 110,000 shares subject to options exercisable within 60 days of
April 24, 1995.
(5) Includes 103,280 shares subject to options exercisable within 60 days of
April 24, 1995.
(6) Includes 8,334 shares subject to options exercisable within 60 days of
April 24, 1995.
(7) Includes 514,614 shares subject to options exercisable within 60 days of
April 24, 1995.
</TABLE>
<PAGE>
PROPOSAL TO AMEND THE COMPANY'S RESTATED
ARTICLES OF INCORPORATION
The Board of Directors has approved, and recommends that the shareholders
adopt, an amendment to the Company's Restated Articles of Incorporation that
would divide the Board of Directors into three classes with staggered terms.
The proposal is as follows:
RESOLVED, that Article VIII of the Restated Articles of Incorporation be
amended in its entirety to read as follows:
"The Board of Directors shall be composed of not less than three nor
more than twelve directors, the specific number to be set by resolution of
the Board of Directors; provided that the board may be less than three
until vacancies are filled. No decrease in the number of directors shall
have the effect of shortening the term of any incumbent director. The
Board of Directors shall be divided into three classes, with the classes to
be as equal in number as may be possible, with any director or directors in
excess of the number divisible by three being assigned to Class 3 and Class
2, as the case may be. At the 1995 Annual Meeting of Shareholders, the
following classes shall be elected for the terms set forth below:
CLASS TERM
------- -------
Class 1 1 year
Class 2 2 years
Class 3 3 years
At each annual meeting of shareholders following the 1995 annual
meeting, the number of directors equal to the number of directors in the
class whose term expires at the time of such meeting shall be elected to
serve until the third ensuing annual meeting of shareholders. Unless a
director dies, resigns, or is removed, he or she shall hold office for the
term elected or until his or her successor is elected and qualified,
whichever is later. Directors may be removed only for cause. Directors
need not be shareholders of the corporation or residents of the State of
Washington. Written ballots are not required in the election of
directors."
The Board of Directors recommends that the Restated Articles of
Incorporation be amended to divide the Board of Directors into three classes, as
nearly equal in size as possible. Except during the initial phase-in period,
and for directors elected to fill vacancies, the term of office of the directors
of each class shall expire at the third annual meeting of shareholders after
their election. Any director elected by the board to fill a vacancy will,
pursuant to the Washington Business Corporation Act (the "WBCA"), stand for
election by shareholders at the next meeting of shareholders at which directors
are elected. This proposal is intended to provide continuity and stability to
the Company's management as it grows by increasing the amount of effort
necessary for a substantial shareholder to gain control of the Board of
Directors. The Company, however, has not recently experienced any turnover in
its management. Adoption of this proposal will make it more difficult to change
the composition of the Board of Directors. The present provision requires that
the entire Board of Directors be subject to election each year, so it would take
only one year for the Board of Directors to be replaced. Following adoption of
the proposal, at least two annual meetings, or a special meeting called for the
purpose of removing a director for cause, will be required to effect a change in
the majority of the Board of Directors.
<PAGE>
While the Board of Directors believes that the proposed amendment to the
Restated Articles of Incorporation should be adopted for reasons set forth
above, the Board of Directors is aware that the proposed amendment may have
potential anti-takeover effects. Dividing the Board of Directors into three
classes with staggered terms will make it more difficult for shareholders to
change a majority of current directors. This provision is effective without
regard to whether a change of control has occurred or is occurring and therefore
may also have the effect of deterring or preventing shareholders from replacing
directors for reasons unrelated to the control of the Company.
OTHER PROVISIONS RELEVANT TO PROPOSED AMENDMENT TO RESTATED ARTICLES OF
INCORPORATION
Because of the potential anti-takeover effect of the proposed amendment to
the Company's Restated Articles of Incorporation, the Securities and Exchange
Commission requires the Company to disclose certain other provisions of the
Company's charter and state law that may limit or prevent a change of control of
the Company.
THE SHAREHOLDER RIGHTS PLAN
In December 1994, the Company adopted a shareholder rights plan (the
"Rights Plan"), declaring a dividend of one preferred share purchase right (the
"Rights") for each outstanding share of Common Stock of the Company. Upon the
earlier of the close of business on the tenth business day after the date the
Company learns that a person or group (an "Acquiring Person") has acquired or
obtained the right to acquire beneficial ownership of 15% or more of the
outstanding Common Stock of the Company, or the date designated by the board
following commencement of, or first public disclosure of an intent to commence,
a tender or exchange offer for outstanding shares of Common Stock of the Company
that could result in the offeror becoming beneficial owner of 15% or more of the
outstanding shares of Common Stock of the Company, each Right will become
exercisable (other than by an Acquiring Person) for shares, or fractions of
shares, of preferred stock of the Company, or may, at the election of the board,
be exchanged for shares of preferred stock. In the event the Company is
acquired, each Right will represent the right to acquire shares of the acquiring
or surviving corporation or other entity.
THE COMPANY'S CHARTER
In addition, the Company's Restated Articles of Incorporation provide that
shareholders do not have the right to cumulate votes in the election of
directors and that the authorized capital of the Company consists of 30,000,000
shares of Common Stock and 2,000,000 shares of preferred stock, which the board
may issue from time to time in one or more classes or series (with such
designations and preferences, relative voting and other rights as the board may
deem appropriate) without the approval of the Company's shareholders. The
Company's articles and bylaws also contain provisions limiting the right of a
shareholder to raise a proposal at a shareholders' meeting or to nominate a
candidate for the board and providing that special meetings of the shareholders
may be called only by the board, its chairman, the president of the Company or
by holders of 10% or more of the outstanding shares of Common Stock of the
Company.
WASHINGTON STATE LAW
Washington law contains certain provisions that may have the effect of
delaying or discouraging a hostile takeover of the Company. Chapter 23B.17 of
the WBCA prohibits, subject to certain exceptions, a merger, sale of assets or
liquidation of a corporation involving an "Interested Shareholder" (defined
generally as a person or affiliated group
<PAGE>
who beneficially own 20% or more of the corporation's outstanding voting
securities), unless determined to be at a "fair price" or otherwise approved by
a majority of the Company's disinterested directors or the holders of two-thirds
of the votes of each voting group entitled to vote separately on the
transaction, excluding the votes of the Interested Shareholder. In addition,
Chapter 23B.19 of the WBCA prohibits a corporation, with certain exceptions,
from engaging in certain significant business transactions with a person or
group of persons who beneficially acquire 10% or more of the corporation's
outstanding voting securities for a period of five years after such acquisition.
The prohibited transactions include, among others, a merger with, disposition of
assets to, or issuance or redemption of stock to or from such person or group of
persons to receive any disproportionate benefit as a shareholder. Finally, the
WBCA prohibits a corporation from taking shareholder action by written consent
without a meeting, unless such consent is unanimous. This provision makes it
necessary for a potential acquirer to hold a meeting to obtain shareholder
approval and therefore increases the cost to an acquirer of gaining control of a
Washington corporation.
The provisions of the WBCA regarding the prohibition of significant
business transactions and unanimous shareholder consent apply automatically to
the Company by virtue of its incorporation in Washington. The WBCA does not
permit Washington corporations to "opt out" of these provisions by director or
shareholder vote. The proposal to classify the Company's board, together with
the Rights Plan and certain provisions described above of the Company's charter
documents and the WBCA, may have the effect of delaying, deterring or preventing
a hostile takeover or change of control of management of the Company. This
effect could deprive shareholders of opportunities to sell their shares at
higher-than-market prices. These items may also, however, tend to assure
continuity of management and policies for the Company and encourage those
seeking control of the Company to negotiate with management and the board. The
Company is not currently aware of any effort to accumulate its securities or to
gain control of the Company, nor is the proposed amendment to the Restated
Articles of Incorporation recommended to block any such effort.
As discussed below under the heading ELECTION OF DIRECTORS, the Company
intends to implement the staggered Board of Directors provisions immediately
following the effective date of the proposed amendment to the Company's Restated
Articles of Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
ADOPTION OF THE PROPOSAL TO AMEND THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION.
ELECTION OF DIRECTORS
Assuming adoption and effectiveness of the proposed amendment to the
Company's Restated Articles of Incorporation, the Board of Directors will be
divided into three classes, each consisting of two directors. If, for any
reason, the proposed amendment to the Company's Restated Articles of
Incorporation is not adopted or does not become effective, each director elected
at the Annual Meeting will hold office until the next annual meeting of
shareholders, and until a successor shall have been elected and qualified.
The Board of Directors has unanimously approved the nominees named below.
It is intended that votes will be cast pursuant to the enclosed proxy card for
the election as directors of the nominees set forth below, and executing the
proxy card without giving any contrary directions will give the proxies the
authority to vote the shares in election of
<PAGE>
directors as the proxies shall determine. If any nominee shall not be a
candidate for election as a director at the Annual Meeting, it is intended that
votes will be cast pursuant to the enclosed proxy for such substitute nominee as
may be nominated by the existing directors. No circumstances are presently
known which would render any nominee named herein unavailable.
NOMINEES FOR ELECTION AS CLASS 1 DIRECTORS: The following are the nominees
of the Board of Directors to serve, following the effectiveness of the amendment
to the Restated Articles of Incorporation, as Class 1 directors until the annual
meeting of shareholders in 1996:
NAME AGE POSITION AND OFFICE
----------------------- --- ------------------------
Gordon W. Duncan, Ph.D. 62 Vice President, Research
Secretary, and Director
G. Bradford Jones 40 Director
GORDON W. DUNCAN, PH.D., age 62, Vice President, Research, January 1991-
present; was elected a director of the Company in 1991. He has served as
Secretary of the Company, May, 1991-present. Prior to joining ProCyte in April
1991, as Vice President, Research, Dr. Duncan was Vice President, Research
Administration for The Upjohn Company, a pharmaceutical company, where he held
various scientific and management positions for twenty years. Director of PATH,
a not-for-profit international healthcare organization, 1991-present.
G. BRADFORD JONES, age 40, was elected a director of the Company in 1988.
He has been a General Partner of Brentwood Associates, a venture capital and
leveraged buy-out firm, 1981-present; Director, Interpore International, a
medical devices company, 1982-present. He is currently a member of the board's
Compensation Committee.
NOMINEES FOR ELECTION AS CLASS 2 DIRECTORS: The following are the nominees
of the Board of Directors to serve, following the effectiveness of the amendment
to the Restated Articles of Incorporation, as Class 2 directors until the Annual
Meeting of Shareholders in 1997:
NAME AGE POSITION AND OFFICE
------------------- --- ------------------------
Joseph Ashley 67 Chairman of the Board,
Chief Executive Officer,
and President, Treasurer
William M. Sullivan 60 Director
JOSEPH ASHLEY, age 67, Chairman of the Board, January 1991-present;
President, Chief Executive Officer, a director of the Company and Treasurer,
January 1987-present. President and Chief Operating Officer of Genetic Systems
Corporation, a biotechnology company from 1984-1986. In various management
capacities with Beckman Instruments, Division of SmithKline Beckman Corporation,
a diversified healthcare and life sciences company, 1954-1984, including Group
Vice President of Diagnostics, 1981-84.
WILLIAM M. SULLIVAN, age 60, was elected a director of the Company in 1991.
He served as Chairman, President and CEO of Burroughs Wellcome Co., a
pharmaceutical and consumer products company, 1981-1986. Mr. Sullivan served in
various management
<PAGE>
and corporate legal positions, 1974-1980. He is Chairman of the Board,
President and CEO of Sparta Pharmaceuticals, Inc., a publicly-traded development
stage pharmaceutical company, 1991-present. Chairman of the Board, The Immune
Response Corporation, a biotechnology company, 1987-1994 and Director 1994-
present; Chairman of the Board of Binary Therapeutics, Inc., 1991-present, and a
director of BioVentures, Inc., 1989-present; both development stage
biopharmaceutical/diagnostic companies. Mr. Sullivan is a member of the
Compensation and Audit Committees.
NOMINEES FOR ELECTION AS CLASS 3 DIRECTORS: The following are the nominees
of the Board of Directors to serve, following the effectiveness of the amendment
to the Restated Articles of Incorporation, as Class 3 directors until the Annual
Meeting of Shareholders in 1998:
NAME AGE POSITION AND OFFICE
------------------- --- -------------------
Jules Blake, Ph.D. 70 Director
Robert E. Patterson 52 Director
JULES BLAKE, PH.D., age 70, was elected a director of the Company in 1991.
He served as Vice President of Corporate Scientific Affairs (1987-1989) and Vice
President of Research and Development (1973-1987) for Colgate-Palmolive, a
consumer products company. Director, Martek Biosciences Corporation, a
biotechnology company, 1990-present; Member of the Board of Overseers of Forsyth
Dental Center, 1994-present. Member of the Dean's Advisory Committee, Harvard
University School of Dental Medicine and member of the Board of Directors of the
Medical College of Pennsylvania, 1992-present. Dr. Blake has served as the
Chairman of the Compensation Committee, 1991-present, and is a member of the
Audit Committee.
ROBERT E. PATTERSON, age 52, was elected a director of the Company in 1994.
He serves as the Managing Director of Thompson Clive, Inc., a U.K.-based venture
capital firm, (1983-present), and is a partner in the legal services firm of
Graham and James (1972-present). He currently serves on the board of several
private businesses, including Sequenon, Inc., a biotechnology company. He is
currently a member of the Compensation Committee and chairman of the Audit
Committee of the board.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
COMPENSATION OF DIRECTORS. Directors who were not otherwise employed by
the Company, were paid $1,000 for each meeting attended in person through
November 1994. In December, the Board of Directors approved an increase in
nonemployee director fees to $1,500 per director for each meeting attended in
person. The nonemployee directors also received $100 each for each telephonic
meeting of the Board of Directors held through November 1994. In December, the
fee was increased to $500 for participation in telephonic meetings. In 1994,
these fees totaled $6,200, $5,400, $1,000 and $5,300 for Mssrs. Sullivan, Jones,
and Patterson and Dr. Blake, respectively. Directors who are employed by the
Company are not otherwise compensated for attendance at meetings of the board or
its committees. Directors are reimbursed for any expenses attendant to board
membership.
<PAGE>
The Company's 1991 Restated Stock Option Plan for Nonemployee Directors
provides for an initial grant upon the appointment of election of a nonemployee
director to the Board of Directors of a nonqualified stock option to purchase
25,000 shares of the Company's Common Stock at an exercise price equal to the
market value on the date of grant, generally vesting one-third after each annual
shareholders' meeting following such appointment or election. Upon his
appointment in December 1994, Mr. Patterson was granted such an option. Upon
full vesting of the initial grant, each nonemployee director will be granted an
additional stock option to purchase 18,000 shares of Common Stock upon similar
terms as the initial grant. In April 1995, the Board of Directors implemented
an annual retainer fee of $12,000 to be paid to each of the Company's
nonemployee directors on a quarterly basis, commencing April 1, 1995.
BOARD OF DIRECTORS MEETINGS. During 1994, there were ten meetings of the
Board of Directors, at each of which all members of the board were present in
person or via telephone. All reference to meetings excludes actions taken by
written consent.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors has the responsibility for establishing compensation for the executive
officers; reviewing annually the operation of all compensation, employment and
benefit practices and salary administration procedures; acting as Plan
Administrator for all of the Company's stock plans; recommending benefit levels
in the Company's proposed retirement program when one is adopted; and
recommending directors' fees. The Compensation Committee consisted of three
nonemployee directors in 1994: Dr. Blake (Chairman), and Mssrs. Sullivan and
Jones. In 1995, Mr. Patterson was added to the Compensation Committee. During
1994, there were six meetings of the Compensation Committee, each of which were
attended by all of the named committee members. All reference to meetings
excludes actions taken by written consent.
AUDIT COMMITTEE. The Audit Committee of the Board of Directors has and may
exercise the following powers: to make recommendations to the Board of Directors
regarding the selection of the Company's independent auditors; to review the
scope, direction, timetable and schedule of audits conducted by the Company's
independent auditors; to review the results of such audits; to review the
Company's system of internal financial controls; and such additional powers as
may be conferred upon the Audit Committee from time to time by the Board of
Directors. In 1994, the committee consisted of three outside directors, Mssrs.
Jones (Chairman) and Sullivan, and Dr. Blake, and one employee director, Mr.
Ashley. In 1995, Mr. Jones resigned from the Audit Committee and Mr. Patterson
was appointed to serve on the committee and to act as chairman. The Audit
Committee held one meeting during fiscal year 1994, at which all of the
committee members were present.
The Company does not have a Nominating Committee.
<PAGE>
EXECUTIVE COMPENSATION
The two tables set forth below provide, with respect to Mr. Ashley and the
three other executive officers whose compensation (salary and bonus) in 1994
exceeded $100,000 (the "named executive officers"), information regarding
compensation for each of the last three years; information regarding option
exercises in 1994 and options outstanding at the end of 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------ ---------------
Securities
Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#)
- ------------------------------- ------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Joseph Ashley 1994 $192,500 $17,500
Chief Executive Officer 1993 $175,000 $35,000
1992 $154,000 200,000
Gordon W. Duncan, Ph.D. 1994 $115,500 $17,500
Vice President, Research 1993 $105,000
1992 $95,000
Karen L. Hedine 1994 $115,500 $10,000
Vice President, Business 1993 $96,667 $25,000
Development & Administration 1992 $70,000 70,000
C. Brian Melonakos 1994 $105,179
Vice President, Marketing 1993 $29,500* $15,000 75,000
<FN>
* Mr. Melonakos was hired by the Company on September 15, 1993
</TABLE>
OPTION GRANTS IN 1994
There were no option grants in 1994 to the named executive officers.
AGGREGATED OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES
There were no options exercised in 1994 by any of the named executive
officers.
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options at In-the-Money
Year-End(#) Options at Year-End
Exercisable/ ($) Exercisable/
NAME (Unexercisable) (Unexercisable)
----------------- --------------- ---------------
<S> <C> <C>
Joseph Ashley, CEO 318,932/ $528,960/
66,668 $0(1)
Gordon W. Duncan 80,000/ $0/
60,000 $0(1)
Karen L. Hedine 103,080/ $25,334/
400 $0(1)
C. Brian Melonakos 15,000/ $0/
60,000 $0(1)
<PAGE>
<FN>
(1) Value is the market price of the underlying Common Stock at year-end minus
the exercise price.
</TABLE>
CHANGE OF CONTROL AGREEMENTS
The Company has entered into Change of Control Agreements with the named
executive officers to provide compensation and benefits in the event that a
change of control (as defined therein) of the Company results in loss of their
employment. The term of each such agreement is two years from the date of the
agreement, or, if a change of control occurs during the term of the agreement,
the term is automatically extended for two years after such change of control.
In the event that a named executive officer's employment relationship is
terminated by the Company for other than cause or by the named executive officer
for good reason following a change of control, the officer will receive an
amount as severance pay equal to two times (one times for Mr. Melonakos) the
officer's annual base salary for the fiscal year in which the date of
termination occurs, any compensation due through the date of termination or
previously deferred, any accrued vacation pay which would be payable under the
Company's standard policy, and group insurance benefits for one year after
termination.
Pursuant to the Company's 1989 Restated Stock Option Plan (the "1989
Plan"), upon the occurrence of certain events including certain mergers and
business combinations and other changes of control of the Company, the vesting
of outstanding options granted under the 1989 Plan will be accelerated.
SEVERANCE AGREEMENTS
The Company has entered into Severance Agreements with the named executive
officers, which agreements provide that, if the employment of any such officer
is terminated other than for cause (as defined therein) or as a result of
voluntary resignation for good reason within two years from the date of the
agreement, the officer will be eligible to receive his or her accrued salary and
benefits and salary continuation and group insurance benefits for a period of
six months at the officer's then current annual base salary for the fiscal year
in which the termination occurs, subject to reduction of the salary continuation
by the amount of any other earnings from other employment or personal services.
INDEMNITY AGREEMENTS
The Company has entered into indemnification agreements with the named
executive officers and members of the Board of Directors. The indemnification
agreements provide that, with certain exceptions, the Company will indemnify the
named executive officers and directors to the fullest extent permitted by
applicable law against all liability (including judgments, fines, ERISA excise
taxes or penalties, and settlement amounts) and expenses actually and reasonably
incurred by the indemnitee with respect to any threatened, pending or completed
legal proceeding resulting from the fact that such indemnitee is or was an
officer or director of the Company. The Company will advance all reasonable
expenses incurred with respect to such a proceeding; provided that the officer
or director must repay all advances if it is ultimately determined that he or
she is not entitled to indemnification. The Company has the option to assume
the defense of any legal proceeding against an indemnitee.
<PAGE>
The Company is not obligated to provide indemnification under the
agreements for liabilities and/or expenses (i) which have been paid under the
Company's insurance policy; (ii) which were paid as remuneration in violation of
law; (iii) which result from violations of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar law; (iv) on account of the
officer's or director's intentional misconduct, knowing violation of law, or
receipt of an improper benefit (unless a court shall determine that the officer
or director is fairly and reasonably entitled to indemnification); (v) if the
Company disputes the claim for indemnification and a court or other forum
selected by the officer or director (including the Company's Board of Directors,
shareholders, or special legal counsel) determines that indemnification is not
proper; (vi) with respect to proceedings initiated by the officer or director
(other than proceedings to enforce the indemnity agreement); (vii) with respect
to proceedings to enforce the indemnity agreement, if the officer acted in bad
faith; and (viii) for any amounts paid in settlement without the Company's
consent.
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
All four of the Company's nonemployee directors presently comprise the
Compensation Committee (the "Committee"). The Committee considers and makes
recommendations to the Board of Directors concerning general compensation
policies and employee benefit plans, and establishes salary levels and bonus or
stock option awards for executive officers of the Company, including the chief
executive officer. The Committee, as Plan Administrator of the stock options
plans, has sole authority to grant options to executive officers.
The Company applies a consistent philosophy in its compensation practices
for all employees, including executive management. This philosophy is based on
the premise that the achievements of the Company result from the combined
efforts of all individuals working toward common objectives. The Company
strives to achieve its objectives through teamwork that is focused on meeting
the expectations of its shareholders. In 1994, the Company's executive
officers, including the president and chief executive officer, Mr. Ashley,
received compensation based on the following objectives and policy on executive
compensation.
OBJECTIVES AND POLICY
The objectives of the Company's executive compensation policy are to:
- Provide compensation that will attract, retain and motivate
experienced executive personnel;
- Align the interests of management and shareholders by making a
substantial portion of executive compensation dependent on the success
of the Company, as measured by long-term appreciation in the market
price of the common stock;
- Balance considerations of individual achievements each year with the
Company's overall performance, both financially and otherwise.
To further the Company's executive compensation objectives, the policy
provides for a combination of base salary, cash incentive bonus awards and long-
term stock options. The Company has not contributed to a retirement program on
behalf of its executive officers.
BASE SALARY. In order to determine the salary level for executive
officers, the Committee considers published data from annual surveys of
executive compensation at comparable biotechnology companies. Comparable
biotechnology companies are not
<PAGE>
necessarily the same as those in the Nasdaq Pharmaceutical Index. They are a
Company-identified sampling of twenty firms, which, like the Company, have less
than 100 employees, are at the same approximate stage of development, and have
market valuations roughly the same as that of the Company.
Using the survey data as a reference point, the Committee makes adjustments
based on its subjective evaluation of the Company executives' individual level
of experience, responsibility and performance. The Committee also takes into
consideration the executive's comparability with other Company executives. The
Committee gives weight to the views of the Chief Executive Officer and Human
Resources Manager with respect to executive salaries other than that of the
Chief Executive Officer. In 1994, the Company's executive compensation ranked
in the 35th percentile of the average compensation paid to executives in similar
positions as reported for the surveyed companies.
Based on this process, in January 1994, the Committee approved a 10%
increase for Mr. Ashley, the Company's chief executive officer, from $175,000 to
$192,500, effective January 1994. Mr. Ashley's base compensation ranked in the
35th percentile of the surveyed companies.
CASH BONUS. The Committee may occasionally recommend that the Board of
Directors approve a one-time cash bonus to named executive officers in
recognition of a specific accomplishment. In 1994, the Committee awarded Mr.
Ashley, Dr. Duncan and Ms. Hedine individual cash bonuses of $17,500, $17,500
and $10,000, respectively, for their efforts in completing the February 1994
public equity offering.
STOCK OPTIONS. The Company's 1987 Stock Benefit Plan (the "1987 Plan") and
the 1989 Plan currently represent the Company's only long-term incentive plans
for executive officers, managers and other employees. The Company uses stock
options to align executive and shareholder long-term interests. The option will
reward the executive only if the market price of the Common Stock appreciates
over the term of the option. Options granted to executive officers generally
have a ten-year term, vest over a period of three to five years, and may be
exercised at a price per share equal to or no less than 85% of the market price
on the date of grant. There presently are no fixed guidelines for annual grant
of stock options to executive officers. Stock options are granted by the
Committee based on the executive's position in the Company, previous stock
option grants and potential contribution to the success of the Company.
During 1994, there were no stock options granted to the named executive
officers.
This report is submitted by the following nonemployee directors, who
constitute all of the members of the Compensation Committee:
Jules Blake, Ph.D. (Chairman)
G. Bradford Jones
Robert E. Patterson
William M. Sullivan
<PAGE>
COMPARATIVE STOCK PERFORMANCE CHART
The following graph represents the net percentage cumulative total
shareholder return on the Company's Common Stock, compared to the cumulative
total return of the Nasdaq Stock Market Index (U.S.) and the Nasdaq
Pharmaceutical Stocks Index for the period of five fiscal years commencing
December 31, 1989 and ending December 31, 1994.
COMPARISON OF THE CUMULATIVE TOTAL RETURN SINCE DECEMBER 31, 1989
AMONG PROCYTE CORPORATION, THE NASDAQ STOCK MARKET INDEX (U.S.) AND THE
NASDAQ PHARMACEUTICAL STOCKS INDEX
(FISCAL YEAR ENDING DECEMBER 31)
[GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NASDAQ (US) 100.00 84.92 136.28 158.58 180.93 176.92
NASDAQ Pharm. 100.00 119.95 318.78 265.53 236.63 178.40
ProCyte Corp. 100.00 65.63 140.63 120.31 175.00 35.99
</TABLE>
Assuming $100 invested on December 31, 1989 in ProCyte Corporation Common Stock,
the Nasdaq Stock Market Index (U.S.) and the Nasdaq Pharmaceutical Stocks Index
with all dividends reinvested.
Note: Stock price performance shown above for ProCyte Corporation is
historical and not necessarily indicative of future price performance.
<PAGE>
PROPOSALS OF SHAREHOLDERS
Director nominations, proposals and other business which shareholders wish
to present at the 1996 annual meeting of shareholders must be received by the
Company no later than December 30, 1995.
SOLICITATION OF PROXIES
The proxy accompanying this proxy statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by directors, officers and
regular supervisory and executive employees of the Company, none of whom will
receive any additional compensation for their services. Solicitations of
proxies may be made personally, or by mail, telephone, telegraph, facsimile
transmission or messenger. All of the costs of solicitation of proxies will be
paid by the Company. The Company may use a proxy solicitation firm to solicit
proxies for the 1995 annual meeting of shareholders. If it does use such a
firm, the Company does not expect the costs to exceed $6,000.
OTHER BUSINESS
The Board of Directors has no knowledge of any other business to be acted
upon at this meeting, nor does the board intend to bring any other business
before the meeting. However, as to any other business which may properly come
before the meeting, it is intended that proxies, in the form enclosed, will be
voted in respect thereof, in accordance with the judgment of the persons voting
such proxies.
BY ORDER OF THE BOARD OF DIRECTORS
OF PROCYTE CORPORATION
Joseph Ashley
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
FRONT
PROCYTE
CORPORATION (logo)
PROXY
12040 115th Ave., N.E., Ste 210
Kirkland, WA 98034
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Joseph Ashley and Gordon W. Duncan as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of ProCyte Corporation held on record by the undersigned on April 24,
1995, at the Annual Meeting of Shareholders of ProCyte Corporation to be held on
June 15, 1995, or any adjournment thereof.
1. APPROVAL OF AN AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF
INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS
(PLEASE CHECK ONE)
___ FOR ___ AGAINST ____ ABSTAIN
2. ELECTION OF DIRECTORS (PLEASE CHECK ONE)
___ FOR all nominees listed below
___ WITHHOLD AUTHORITY to vote for the nominees indicated below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below)
CLASS 1 CLASS 2 CLASS 3
Gordon W. Duncan, Ph.D. Joseph Ashley Jules Blake, Ph.D.
G. Bradford Jones William M. Sullivan Robert E. Patterson
___ WITHHOLD AUTHORITY to vote for any nominee
<PAGE>
BACK
3. In their discretion the proxies are authorized to vote upon such other
business as may properly come before the meeting.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted FOR Proposal 1 and FOR all of the listed nominees for director.
Please sign exactly as your name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the president or other authorized officer. If a
partnership, please sign in the partnership name by an authorized person.
Date: , 1995
---------------------------
- ---------------------------------------------------
Signature
- ---------------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
