<PAGE>
SCHEDULE 14A
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 Rule 14A-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
PROTEIN POLYMER TECHNOLOGIES, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
__________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PROTEIN POLYMER TECHNOLOGIES, INC.
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 25, 1997
---------------
To Our Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Protein Polymer Technologies, Inc., which will be held at the
Company's executive offices, located at 10655 Sorrento Valley Road, San Diego,
California, on Friday, April 25, 1997 at 10:00 a.m. for the following purposes:
(a) To elect a Board of eight Directors for the ensuing year;
(b) To consider and act upon a proposal to approve the Company's
Employee Stock Purchase Plan described in the accompanying Proxy
Statement;
(c) To ratify the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 1997; and
(d) To consider and act upon such other matters as may properly come
before the meeting.
The close of business on March 21, 1997 has been fixed as the record
date for stockholders to receive notice of and to vote at the meeting or any
adjournment or postponement thereof. Holders of a majority of the outstanding
shares must be present either in person or by proxy in order for the meeting to
be held. The proxy is revocable at any time in the manner set forth on page 1 of
the Proxy Statement and will not affect your right to vote in person in the
event you attend the meeting.
By Order of the Board of Directors,
Philip J. Davis
Secretary
March 21, 1997
- ------------------------------------------------------------------------------
WHETHER YOU ATTEND THE MEETING OR NOT, YOU ARE REQUESTED TO SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE AT YOUR EARLIEST
CONVENIENCE. FOR THOSE ATTENDING THE MEETING, AMPLE PARKING WILL BE AVAILABLE.
- ------------------------------------------------------------------------------
<PAGE>
PROTEIN POLYMER TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
April 25, 1997
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished by Protein Polymer Technologies,
Inc. (the "Company"), 10655 Sorrento Valley Road, San Diego, CA, 92121, in
connection with the solicitation by the Company's Board of Directors (the
"Board") of proxies to be voted at the Annual Meeting of Stockholders to be held
on Friday, April 25, 1997 at 10:00 a.m., or any adjournments or postponements
thereof (the "Meeting"). The Board has fixed the close of business on March 21,
1997 as the record date for determining stockholders entitled to notice of and
to vote at the Meeting. As of that date, 9,141,228 shares of the Company's
Common Stock, $.01 par value (the "Common Stock") were issued and outstanding.
Any person giving a proxy has the right to revoke it before it is
exercised. It may be revoked either by filing an instrument of revocation with
the Secretary of the Company or by delivering at the Meeting a duly executed
proxy bearing a later date. It also may be revoked by attending the Meeting and
voting in person.
All expenses incurred in connection with solicitation of the enclosed
proxy will be paid by the Company. In addition to solicitation by mail,
officers, directors and regular employees of the Company, who will receive no
additional compensation for their services, may solicit proxies by mail,
telephone, telegraph or personal call. The Company has requested brokers and
nominees who hold stock in their names to furnish this proxy material to their
customers and the Company will reimburse such brokers and nominees for their
related out-of-pocket expenses.
The approximate date on which this Proxy Statement and the enclosed
proxy are first being sent to the Company's stockholders is March 21, 1997. A
copy of the Company's Annual Report for the fiscal year ended December 31, 1996
accompanies this Proxy Statement.
VOTING RIGHTS
Each share of Common Stock outstanding on the record date is entitled
to one vote. The holders of Common Stock do not have the right to cumulate
votes. An affirmative vote of a majority of the shares voted at the Meeting, by
person or in proxy, is required for approval of each item being submitted to the
stockholders for consideration. Proxies will be received and tabulated by the
Company's transfer agent. Votes cast in person at the meeting will be tabulated
by an election inspector appointed by the Company. Abstentions and "broker non-
votes" are each included in the determination of the number of shares present
and voting, with each tabulated separately. Abstentions are counted in
tabulations of the votes cast on proposals presented to the stockholders,
whereas broker non-votes are not counted for purposes of determining whether a
proposal has been approved. Any unmarked proxies, including those submitted by
brokers or nominees, will be voted for the directors nominated and for all
proposals submitted herewith.
<PAGE>
COMMON STOCK OWNERSHIP
The following table sets forth information as of March 21, 1997 with
respect to (i) all persons known by the Company to be the beneficial owner of
more than 5% of the Common Stock, (ii) all Directors and nominees for Director,
(iii) each executive officer named below and (iv) all directors and executive
officers as a group. The business address of each of the Company's directors
and named executive officers is the Company's address unless otherwise stated in
the table below.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF COMMON STOCK PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1)(2) OF CLASS(1)(2)
------------------- ------------------------ --------------
<S> <C> <C>
J. Thomas Parmeter(3)(6)(8).............................. 521,777 5.68%
Philip J. Davis(3)(6)(9)................................. 376,345 4.11%
Brent R. Nicklas(3)(10)
Landmark Partners, Inc.
One State Street Plaza
New York, New York 10004................................ 263,327 2.88%
Russell T. Stern, Jr.(4)(11)............................. 311,805 3.40%
Patricia J. Cornell(5)(7)
Taurus Advisory Group
2 Landmark Square
Stamford, Connecticut 06901............................ 1,234,230 13.05%
Johnson & Johnson Development Company.................... 920,480 10.01%
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
Taurus Advisory Group (21)............................... 1,233,230 13.05%
2 Landmark Square
Stamford, Connecticut 06901
George R. Walker(3)(12).................................. 141,012 1.54%
Edward E. David, Ph.D.(3)(13)............................ 51,107 *
Bertram I. Rowland(3)(14)................................ 65,269 *
Edward J. Hartnett(3)(15)................................ 10,000 *
Joseph Cappello, Ph.D.(6)(16)............................ 136,200 1.48%
Franco A. Ferrari, Ph.D.(6)(17).......................... 135,200 1.47%
John E. Flowers(6)(18)................................... 127,000 1.38%
Erwin R. Stedronsky, Ph.D.(6)(19)........................ 48,000 *
All Directors and Executive Officers
as a Group (14 persons)(20).............................. 2,273,042 23.55%
</TABLE>
- ----------------------
* Amount represents less than one percent of the Common Stock.
(1) Information with respect to beneficial ownership is based upon the Company's
stock records and data supplied to the Company by the holders.
(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission, and includes generally voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options or warrants exercisable within 60 days are deemed
outstanding for computing the percentage of the person holding such options
or warrants but are not deemed outstanding for computing the percentage of
any other person. Except as indicated by footnote, and subject to joint
ownership with spouses and community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(3) Director and Nominee for Director.
(4) Director not standing for re-election.
(5) Nominee for Director.
(6) Executive Officer.
-2-
<PAGE>
(7) Includes (i) 919,730 shares held by clients of Taurus Advisory Group and
(ii) 313,500 shares subject to warrants exercisable within 60 days held by
clients of Taurus Advisory Group (which warrants were issued in connection
with the Company's initial public offering of its Common Stock and are
exercisable at a price of $8.00 per share). Ms. Cornell is a Vice President
and Director of Taurus Advisory Group, and may deemed to exercise
investment power over such shares. Ms. Cornell disclaims such beneficial
ownership.
(8) Includes 40,000 shares subject to options exercisable within 60 days.
(9) Includes 26,000 shares subject to options exercisable within 60 days.
(10) Includes 149,179 shares of Common Stock held by Transitions Three, L.P.
Mr. Nicklas became a general partner of this fund in December 1988, and may
be deemed to be the beneficial owner of its shares. Mr. Nicklas disclaims
such beneficial ownership. Also includes 14,000 shares subject to options
exercisable within 60 days.
(11) Includes (i) 10,000 shares held by Mr. Stern's spouse, which Mr. Stern may
be deemed to beneficially own, and (ii) 14,000 shares subject to options
exercisable within 60 days.
(12) Includes 15,000 shares subject to options exercisable within 60 days.
(13) Includes 25,000 shares subject to options exercisable within 60 days.
(14) Includes 25,000 shares subject to options exercisable within 60 days.
(15) Represents 10,000 shares subject to options exercisable within 60 days.
(16) Includes 73,500 shares subject to options exercisable within 60 days.
(17) Includes 72,500 shares subject to options exercisable within 60 days.
(18) Includes 72,000 shares subject to options exercisable within 60 days.
(19) Represents 48,000 shares subject to options exercisable within 60 days.
(20) Includes 509,000 shares subject to options exercisable within 60 days.
(21) Represents (i) 919,770 shares held by clients of Taurus Advisory Group and
(ii) 313,500 shares subject to warrants exercisable within 60 days held by
clients of Taurus Advisory Group (which warrants were issued in connection
with the Company's initial public offering of its Common Stock and are
exercisable at a price of $8.00 per share). Taurus Advisory Group exercises
investment power over such shares.
-3-
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
At the Meeting, it is intended that the persons named in the proxy
will vote for the election of the eight nominees listed below, each director to
serve until the next annual meeting or until his or her successor is elected and
qualified. All of the nominees other than Patricia J. Cornell are now members
of the Board. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH
OF THE NOMINEES LISTED BELOW. The persons named in the accompanying proxy
intend to vote for the election of the nominees listed below unless authority to
vote for one or more of such nominees is specifically withheld in the proxy. If
any nominee, for any reason currently unknown, cannot be a candidate for
election, proxies will be voted for the election of a substitute recommended by
the Board.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR
The following information is furnished concerning the Company's
nominees for director:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
J. Thomas Parmeter 57 Chairman of the Board of Directors,
Chief Executive Officer and President
Edward E. David, Ph.D.(1) 71 Director
George R. Walker (1)(2) 72 Director
Brent R. Nicklas (2) 49 Director
Patricia J. Cornell 48 None
Bertram I. Rowland 66 Director
Philip J. Davis 66 Director, Secretary
Edward J. Hartnett (1) 65 Director
</TABLE>
_______________________
(1) Member of the Stock Option and Compensation Committee of Board of
Directors.
(2) Member of the Audit Committee of Board of Directors.
Mr. J. Thomas Parmeter has been the Company's President, Chief
Executive Officer and Chairman of the Board of Directors since its inception in
July 1988. He also served as its Chief Financial Officer from its inception
until July 1992. From 1982 to November 1987, Mr. Parmeter was President, Chief
Executive Officer and, from June 1987 to June 1988, Chairman of the Board of
Syntro Corporation.
Dr. Edward E. David has served as a Director of the Company since
January 1989. Dr. David has been a private consultant since 1986. From 1977 to
1986, he was the President of Exxon Research and Engineering. From 1981 to 1988,
Dr. David sat on the White House Science Council. Among his current
responsibilities and affiliations, Dr. David is a Director of Intermagnetics
General Corp., Spacehab, Inc., and California Microwave, Inc., and is a member
of the Executive Committee of the Massachusetts Institute of Technology
Corporation. Dr. David is also Chairman of the Company's Technical Advisory
Group.
-4-
<PAGE>
Mr. George R. Walker has served as a Director of the Company since
January 1989. Mr. Walker, retired since January 1985, was formerly the Vice
President - Finance for Esso Europe, an operating division of the Exxon
Corporation.
Mr. Brent R. Nicklas has served as a director of the Company since
September 1991. He is a Managing Director of LPNY Advisors, Inc., an affiliate
of Landmark Partners, Inc., a venture capital and merchant banking firm
("Landmark"). From December 1988 to December 1993, Mr. Nicklas was a Managing
Director of Landmark. From June 1976 to May 1988, Mr. Nicklas was with Merrill
Lynch Capital Markets, most recently as Vice President of the Technology and
Emerging Growth Group.
Ms. Patricia J. Cornell, CFA, has served as vice president and
director of Taurus Advisory Group, a registered investment adviser, since March
1984. From 1976 through 1984, Ms. Cornell held senior positions in portfolio
management at Morris Offit Associates and Lionel D. Edie & Company. Although
clients of Taurus Advisory Group hold significant amounts of the Company's
Common Stock and Series D Preferred Stock, Ms. Cornell does not serve as a
member of the Board pursuant to any arrangement, agreement or understanding with
either the Company or Taurus Advisory Group.
Mr. Bertram I. Rowland has served as a director of the Company since
February 1993. Since 1991, Mr. Rowland has been of counsel to the law firm of
Flehr, Hohbach, Test, Albritton & Herbert, which has acted as patent counsel to
the Company since 1991. From 1988 to 1990, Mr. Rowland was patent counsel at
Leydig, Voit and Mayer. From January 1990 to October 1991, he was general
counsel for Systemix, Inc. From 1990 to July 1991, Mr. Rowland was a patent
attorney at Cooley Godward Castro Huddleson & Tatum.
Mr. Philip J. Davis has been the Company's Secretary since January
1989. Mr. Davis has been a director of the Company since April 1994; he
previously served as a director of the Company from January 1989 until October
1991. Mr. Davis has been a Senior Vice President with Donaldson, Lufkin &
Jenrette since March 1994. He was formerly Director, Institutional Sales, at
Merrill Lynch, Inc. (formerly Merrill Lynch Capital Markets) from February 1991
until March 1994, and had been a Vice President at Merrill Lynch, Inc. since
1986.
Mr. Edward J. Hartnett has served as a director of the Company since
March 1996. Mr. Hartnett, retired since January 1996, previously served as a
Company Group Chairman for the Johnson & Johnson Company, a diversified drug and
medical products company. Mr. Hartnett is a past president of the American
Medical Manufacturers Association. Although Johnson & Johnson Development
Company, an affiliate of Mr. Hartnett's previous employer (Johnson & Johnson
Company), is a significant holder of the Company's Series D Preferred Stock and
Common Stock and its affiliate is a party to several agreements with the
Company, Mr. Hartnett does not serve as a member of the Board pursuant to any
arrangement, agreement or understanding with either the Company or Johnson &
Johnson Company.
COMMITTEES AND COMPENSATION OF THE BOARD OF DIRECTORS
In 1996 the Company had standing Stock Option, Audit and Compensation
Committees. At its meeting in February 1997, the Board resolved to merge the
Stock Option Committee and Compensation Committee into one committee. The
Company has no Nominating Committee. During the Company's last fiscal year, the
Board of Directors held six meetings; each director attended at least 75% of the
aggregate of all regular Board meetings (held during the period for which he has
been a director) and meetings of the Committees on which he served.
-5-
<PAGE>
Stock Option Committee and Compensation Committee
The Stock Option Committee met four times during the last fiscal year.
During 1996, the Stock Option Committee determined grants of stock options
under, and administered, the 1989 and 1992 stock option plans of the Company, as
well as its 1996 non-employee directors' stock option plan. These duties will be
assumed by the Stock Option and Compensation Committee in 1997. If the Company's
Employee Stock Purchase Plan is approved by the shareholders, the Stock Option
and Compensation Committee will also administer the Company's Employee Stock
Purchase Plan.
The Compensation Committee met two times during the last fiscal year.
During 1996, the Compensation Committee made recommendations to the Board on the
annual salaries of all elected officers of the Company and made recommendations
to the Board on compensation matters of the Company. These duties will be
assumed by the Stock Option and Compensation Committee in 1997.
Audit Committee
The Audit Committee met two times during the last fiscal year. The
Audit Committee makes recommendations concerning the engagement of the Company's
independent auditors, consults with the independent auditors concerning the
audit plan and reviews the comments and recommendations resulting from the
auditors' report.
Directors' Compensation
No directors received any cash compensation for their services as
directors during the 1996 fiscal year. Edward E. David, Inc., of which Dr. David
is the sole shareholder, received $16,000 during 1996 for Dr. David's services
as Chairman of the Company's Technical Advisory Group. Mr. Walker received
$4,000 during 1996 for consulting services rendered to the Company. All
directors were reimbursed for their out-of-pocket expenses in attending meetings
of the Board or committees thereof.
Outside directors may be granted options to purchase Common Stock
under the Company's 1996 Non-Employee Directors' Stock Option Plan (the "1996
Option Plan"). Non-employee directors are currently granted options to purchase
5,000 shares of Common Stock of the Company upon their election to the Board and
on the first business day in June of each calendar year. Such options are
exercisable six months after the date of grant at a price equal to the fair
market value of the Common Stock on the date of grant. During 1996, each of
Messrs. David, Davis, Hartnett, Nicklas, Rowland, Stern and Walker received
options to purchase 5,000 shares of Common Stock under the 1996 Option Plan at
an exercise price of $3.75 per share. In addition, on February 28, 1996 Mr.
Hartnett received a non-qualified stock option to purchase up to 25,000 shares
of Common Stock at an exercise price of $2.00 per share under the Company's 1992
Stock Option Plan. Mr. Hartnett's option vests in equal annual increments over
five years and expires ten years after the grant date.
-6-
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL NO. 2)
The Company's Employee Stock Purchase Plan (the "Plan") was adopted by
the Board in September 1996, subject to approval of the Company's stockholders.
The purpose of the Plan is to provide eligible employees of the Company with the
opportunity to acquire a proprietary interest in the Company through
participation in a plan designed to qualify as an employee stock purchase plan
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
It is the view of the Board that the Plan will constitute an important part of
the Company's compensation of its employees by providing them with an incentive
to increase their participation in the Company's long-term success.
The Plan is being submitted to the stockholders of the Company for
their approval at the Meeting. Approval of the stockholders requires the
affirmative vote of a majority of the shares present in person or by proxy. The
following summary description of the Plan is qualified in its entirety by
reference to the full text of the Plan.
Under the Plan, the aggregate number of shares of the Company's Common
Stock which may be issued over the term of the Plan is 500,000 shares, subject
to proportionate adjustment in the event of any stock dividend, stock split,
reverse stock split, or other change affecting the outstanding Common Stock as a
class without the Company's receipt of consideration. The shares to be issued
under the Plan will be made available from either authorized but unissued shares
of Common Stock or from shares of Common Stock reacquired by the Company,
including shares of Common Stock purchased on the open market.
The Plan will be administered by a committee comprised of at least two
non-employee members of the Board of Directors appointed from time to time by
the Board (the "Plan Administrator"). It is currently contemplated that the
Stock Option and Compensation Committee of the Board will be the Plan
Administrator. Under the Plan, the administrative powers of the Plan
Administrator include (but are not limited to) authority to (i) interpret and
construe any provision of the Plan, (ii) adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with Section
423 of the Code, and (iii) make all other determinations necessary or advisable
for the administration of the Plan.
Any person (other than the Company's Chief Executive Officer) who is
regularly scheduled to work more than twenty hours per week for more than five
months per calendar year in the employ of the Company (or any affiliate of the
Company as may be authorized from time to time by the Board to extend the
benefits of the Plan to its employees) is eligible to participate in the Plan
(each an "Eligible Employee"). Each Eligible Employee actively participating in
the Plan (each a "Participant") will have the ability under the Plan to
purchase, through payroll deductions, shares of Common Stock at a discount to
the fair market value of the Common Stock. As of March 21, 1997 the Company
employed 25 Eligible Employees.
Under the Plan, shares of Common Stock will be made available for
purchase by Eligible Employees through a series of successive offering periods
until the earlier of (i) the purchase of the maximum number of shares available
for issuance under the Plan or (ii) the termination of the Plan. Each offering
period will have a maximum duration of 24 months. The duration of each offering
period will be designated by the Plan Administrator. The initial offering period
will run from January 2, 1997 to the last business day in December 1997. The
next offering period will begin on the first business day in January 1998, and
subsequent offering periods will commence annually unless otherwise designated
by the Plan Administrator.
-7-
<PAGE>
An individual who is an Eligible Employee may begin participation in
the Plan on the first business day of any calendar quarter within an offering
period in effect under the Plan. The date on which such individual joins the
offering period will become that individual's entry date (the "Entry Date") for
the offering period, and on that date such individual will be granted his or her
purchase right for the offering period. To participate in the Plan for a
particular offering period, the Eligible Employee must complete certain
enrollment forms prescribed by the Plan Administrator (including a purchase
agreement and a payroll deduction authorization) and file such forms with the
Plan Administrator.
The payroll deduction authorized by the Eligible Employee for the
purpose of acquiring shares of Common Stock under the Plan may be any multiple
of 1% of such employee's base salary paid to the employee during each calendar
quarter within the offering period, up to a maximum of 20%. The authorized
deduction rate will continue in effect for the remainder of the offering period
and for subsequent offering periods, unless changed. A Participant may reduce
the rate of payroll deduction at any time during a calendar quarter, but no more
than once per calendar quarter, and such reduction will be effective as soon as
possible after notification is made to the Plan Administrator. The rate of
payroll deduction may be increased prior to the commencement of any calendar
quarter within the offering period, and will be effective on the first day of
such calendar quarter.
Each Participant will be granted a separate purchase right for each
offering period in which he or she participates. The purchase right will be
granted on the Entry Date on which the Participant first joins the offering
period in effect under the Plan and will be automatically exercised on the last
business day of each calendar quarter (a "Quarterly Purchase Date") while that
purchase right remains outstanding. Common Stock will be issuable on each
Quarterly Purchase Date within the offering period at a purchase price per share
equal to 85% of the lower of (i) the fair market value per share on the
Participant's Entry Date (which in no event may be less than the fair market
value per share on the start date of the offering period) or (ii) the fair
market value per share on the Quarterly Purchase Date. The number of shares
purchasable by a Participant will be equal to the number of whole shares
obtained by dividing the amount collected from the Participant through payroll
deductions for the calendar quarter by the purchase price in effect for the
Quarterly Purchase Date, up to a maximum of 5,000 shares.
A Participant may terminate his or her outstanding purchase right
under the Plan at any time prior to the next Quarterly Purchase Date. Upon such
termination, no further payroll deductions will be collected from the
Participant, and any payroll deductions collected for the calendar quarter will,
at the election of the Participant, be immediately refunded or held for the
purchase of shares on the next Quarterly Purchase Date. The purchase right of a
Participant will also terminate if he or she ceases to be an Eligible Employee.
Upon such termination, all payroll deductions collected for the calendar quarter
will be refunded to the Participant. No purchase right granted under the Plan is
assignable or transferable by the Participant other than by will or the laws of
descent and distribution following the Participant's death, and during the
Participant's lifetime the purchase right may be exercised only by the
Participant.
In the event of (i) a merger or consolidation in which the Company is
not the surviving entity (except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated), (ii) the
sale, transfer or other disposition of all or substantially all of the assets of
the Company in complete liquidation or dissolution of the Company or (iii) any
reverse merger in which the Company is the surviving entity but in which
securities possessing more than 50% of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
merger, then all outstanding purchase rights under the Plan will automatically
be exercised immediately prior to the consummation of such event.
-8-
<PAGE>
No Participant will be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under the Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right outstanding under the Plan and (ii)
similar rights accrued under other employee stock purchase plans of the Company,
would otherwise permit such Participant to purchase more than $25,000 of stock
of the Company for each calendar year such rights are at any time outstanding.
No taxable income will be realized by a Participant upon the purchase
of shares on a Quarterly Purchase Date. The sale or disposition of Common Stock
purchased pursuant to the Plan is generally a taxable event. The Participant
will realize a gain or loss in an amount equal to the difference between his or
her basis (normally the purchase price) in the Common Stock and the proceeds
from the sale or disposition. If Common Stock acquired pursuant to the Plan is
not sold or otherwise disposed of within a specified time period after the date
of purchase (the "Holding Period"), any gain or loss resulting from the sale or
disposition of the Common Stock will be treated as long-term capital gain or
loss subject to a special rule that requires the portion of any such gain that
does not exceed the initial discount (at the time the right to purchase the
stock was granted) to be treated as compensation income. If Common Stock
acquired pursuant to the Plan is disposed of prior to the expiration of the
Holding Period (a "Disqualifying Disposition"), the excess of the fair market
value of the Common Stock on the date the shares were purchased over the
purchase price will be treated as ordinary income. However, any additional gain
will be taxed as capital gain. If a Participant disposes of the Common Stock
more than one year after the date of purchase, such capital gain or loss will be
treated as long-term capital gain or loss.
The Company normally is not entitled to a deduction with respect to
the issuance of shares of Common Stock under the Plan. However, in the event of
a Disqualifying Disposition, the Company will be entitled to deduct the ordinary
income realized by the Participant.
The Plan provides that the Board of Directors may amend, suspend or
terminate the Plan following any Quarterly Purchase Date; provided, however,
that approval of the stockholders is required to materially increase the
aggregate number of shares issuable under the Plan or the maximum number of
shares purchasable per Participant on any one Quarterly Purchase Date (other
than to reflect changes in the Company's capital structure), alter the purchase
price formula so as to reduce the purchase price for shares issuable under the
Plan, or materially increase the benefits accruing to Participants under the
Plan or materially modify the requirements for eligibility to participate in the
Plan. Unless sooner terminated the Plan will terminate on the earlier of (i)
the last business day in 2001 or (ii) the date on which all shares available for
issuance under the Plan shall have been sold pursuant to the purchase rights
exercised under the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PLAN.
-9-
<PAGE>
APPOINTMENT OF AUDITORS
(PROPOSAL NO. 3)
The firm of Ernst & Young LLP, independent auditors, has been the
Company's independent auditors since the Company's inception in 1988 and has
been selected by the Board of Directors to serve as its independent auditors for
the fiscal year ending December 31, 1997.
The independent auditors meet periodically with the Audit Committee of
the Board. The members of the Audit Committee are Messrs. Walker and Nicklas
and, until the Meeting, Mr. Stern and thereafter, if elected, Ms. Cornell.
Professional services performed by Ernst & Young LLP for the fiscal year
ended December 31, 1996 consisted of an audit of the financial statements of the
Company, consultation on interim financial information, services related to
filings with the Securities and Exchange Commission (the "SEC"), meetings with
the Company's Audit Committee, and consultation on various matters relating to
accounting and financial reporting.
The Audit Committee approved in advance or ratified each of the major
professional services provided by Ernst & Young LLP and considered the possible
effect of each such service on the independence of that firm.
Representatives of Ernst & Young LLP are expected to be present at the
meeting with the opportunity to make a statement, if they desire, and will be
available to respond to appropriate questions during the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION.
-10-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
--------------------------
The following table shows for the periods indicated the compensation paid
to or accrued to, or for the benefit of, each of the executive officers of the
Company whose aggregate remuneration exceeded $100,000 for services rendered to
the Company during 1996.
<TABLE>
<CAPTION>
OTHER ANNUAL SECURITIES
SALARY BONUS COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS
- --------------------------- ---- ------ ------- ------------ -----------
<S> <C> <C> <C> <C> <C>
J. Thomas Parmeter 1996 $150,000 -0- -0- 200,000
President, Chief Executive 1995 $140,155 -0- -0- -0-
Officer and Chairman of the 1994 $126,667 -0- -0- -0-
Board
Joseph Cappello, Ph.D. 1996 $108,000 -0- -0- 35,000
Vice President - Research 1995 $ 98,791 $6,105 -0- 17,000
and Development, Director- 1994 $ 86,667 -0- -0- -0-
Polymer Research and Chief
Technical Officer
Franco A. Ferrari, Ph.D. 1996 $105,000 -0- -0- 30,000
Vice President - Laboratory 1995 $ 97,208 $6,105 -0- 12,500
Operations and Polymer 1994 $ 86,500 -0- -0- -0-
Productions, Director-Genetic
Engineering
John E. Flowers 1996 $103,000 -0- -0- 30,000
Vice President-Planning 1995 $ 95,916 $6,105 -0- 10,000
and Operations, Director - 1994 $ 86,333 -0- -0- -0-
Business Development
Erwin R. Stedronsky, Ph.D. 1996 $103,000 -0- -0- 35,000
Vice President-Product 1995 $ 94,217 $6,105 -0- 15,000
Formulation and Engineering, 1994 $ 86,333 -0- -0- 20,000
Director, Materials Science
</TABLE>
-11-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
The following table provides information about the number of options
granted to each of the named executive officers of the Company during the fiscal
year ended December 31, 1996. No stock appreciation rights were granted to any
executive officer during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED IN FISCAL YEAR PRICE DATE
- ---- -------------------- --------------------- -------- ----------
<S> <C> <C> <C> <C>
J. Thomas Parmeter 200,000 43.0% 1.56 01/02/06
Joseph Cappello, Ph.D. 35,000 7.5% 2.75 09/01/06
Franco A. Ferrari, Ph.D. 30,000 6.5% 2.75 09/01/06
John E. Flowers 30,000 6.5% 2.75 09/01/06
Erwin R. Stedronsky, 35,000 7.5% 2.75 09/01/06
Ph.D.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
- --------------------------------------------------------------------------------
The following table provides information about the number of unexercised
options held by each of the named executive officers of the Company at December
31, 1996. During the 1996 fiscal year, J. Thomas Parmeter was the only
executive officer who exercised options. The Company has not granted stock
appreciation rights to any named executive officer.
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF SECURITIES VALUE OF UNEXERCISED
ON VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME EXERCISE REALIZED OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END/(1)/
- ---- -------- -------- -------------------------- -----------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Thomas Parmeter 120,000 $488,400 40,000 160,000 $ 40,120 $160,480
Joseph Cappello, -0- -0- 73,500 49,000 $121,211 $ 27,202
Ph.D.
Franco A. Ferrari, -0- -0- 72,500 40,000 $119,268 $ 19,430
Ph.D.
John E. Flowers -0- -0- 72,000 38,000 $118,296 $ 15,544
Erwin R. -0- -0- 48,000 72,000 $ 79,224 $ 66,231
Stedronsky, Ph.D.
</TABLE>
(1) calculated using closing price as of December 31, 1996
-12-
<PAGE>
The Company does not have a defined benefit or actuarial pension plan.
The Company does not have a long-term incentive plan and did not make any long
term awards in 1996.
EMPLOYMENT AGREEMENTS
As of November 1, 1996, the Company entered into three-year employment
agreements with: Mr. Parmeter (providing for an annual salary of $150,000, a
term life insurance policy in the amount of $250,000 and certain other
benefits); Mr. Flowers (providing for an annual salary of $103,000 and certain
other benefits); Dr. Cappello (providing for an annual salary of $108,000 and
certain other benefits); Dr. Ferrari (providing for an annual salary of $105,000
and certain other benefits) Dr. Stedronsky (providing for an annual salary of
$103,000 and certain other benefits); and Mr. Aron Stern (providing for an
annual salary of $96,000 and certain other benefits). Each of such agreements
provides for an increase in the stated annual salary upon the occurrence of
certain events.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities ("Section 16 Participants"),
to file reports of ownership and changes in ownership with the SEC. Such
persons are required to furnish the Company with copies of all forms they file
pursuant to Section 16(a). Based solely on review of the copies of such forms
furnished to the Company, or written representations that no such forms were
required, the Company believes that during 1996 all Section 16 Participants
complied with all applicable Section 16(a) filing requirements.
AFFILIATE TRANSACTIONS
In February 1997, the Compensation Committee approved a loan of up to
$250,000, at a rate of 8% per annum, to Mr. Parmeter, secured by a pledge of
stock, to be drawn upon for no more than one year, solely to meet his tax
obligations arising from the exercise of a stock option. As of March 21, 1997,
such loan has not been drawn upon.
OTHER MATTERS
Management knows of no other business to be presented at the annual
meeting. If other matters do properly come before the meeting, or any
adjournments or postponements thereof, it is the intention of the persons named
in the proxy to vote on such matters according to their best judgment.
STOCKHOLDER INFORMATION
ANY PERSON FROM WHOM PROXIES FOR THE MEETING ARE SOLICITED MAY OBTAIN,
IF NOT ALREADY RECEIVED, FROM THE COMPANY, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE 1996 FISCAL YEAR BY WRITTEN
REQUEST ADDRESSED TO THE COMPANY, 10655 SORRENTO VALLEY ROAD, SAN DIEGO,
CALIFORNIA 92121, ATTENTION: INVESTOR RELATIONS DEPARTMENT. THE ANNUAL REPORT
ON FORM 10-KSB IS NOT SOLICITING MATERIAL AND IS NOT INCORPORATED IN THIS
DOCUMENT BY REFERENCE.
-13-
<PAGE>
STOCKHOLDER PROPOSALS
Proposals by stockholders to be presented at the Company's 1998 annual
meeting must be received by the Company no later than 120 days prior to March
21, 1998, in order to be considered for inclusion in the Company's proxy
statement and form of proxy for such meeting.
By Order of the Board of Directors,
PHILIP J. DAVIS
Secretary
Dated: March 21, 1997
- ------------------------------------------------------------------------------
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE COMPLETED AND RETURNED. YOUR
COOPERATION IN PROMPTLY RETURNING YOUR SIGNED PROXY CARD WILL BE HELPFUL IN
REDUCING EXPENSES INCIDENTAL TO FOLLOWING UP THIS PROXY SOLICITATION.
- ------------------------------------------------------------------------------
-14-
<PAGE>
PROTEIN POLYMER TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 25, 1997
J. Thomas Parmeter and Philip J. Davis, and each of them, with full power of
substitution, are hereby authorized to represent and to vote the shares of
Common Stock of Protein Polymer Technologies, Inc. held of record by the
undersigned on March 21, 1997, as directed on the reverse side and, in their
discretion, on all other matters which may properly come before the Annual
Meeting of Stockholders to be held on April 25, 1997, and at any adjournment or
postponement thereof, as if the undersigned were present and voting at the
meeting.
Whether or not you expect to attend the meeting, you are urged to execute and
return this proxy, which may be revoked at any time prior to its use.
The shares represented by this proxy will be voted as directed by the
stockholder. WHERE NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR ALL PROPOSALS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED IN
PROPOSAL NO. 1, FOR PROPOSAL NO. 2 AND FOR PROPOSAL NO. 3.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS: 1) J. Thomas Parmeter, 2) Edward E. David, 3) George R.
Walker, 4) Brent R. Nicklas, 5) Patricia J. Cornell,
6) Bertram I. Rowland, 7) Philip J. Davis, 8) Edward J.
Hartnett
[_] FOR ALL NOMINEES [_] WITHHOLD ALL NOMINEES
To withhold authority to vote for any individual nominee(s), write the
nominee's names on the space(s) provided below:
- --------------------------------------------------------------------------------
PROPOSAL NO. 2:
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN. FOR [_] AGAINST [_] ABSTAIN [_]
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF ERNST & FOR [_] AGAINST [_] ABSTAIN [_]
YOUNG LLP AS INDEPENDENT AUDITORS.
Dated ______________, 1997
__________________________
Signature
Dated ______________, 1997
__________________________
Signature if held jointly
THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF
DIRECTORS
TRANSFER AGENT = CONTINENTAL STOCK TRANSFER & TRUST COMPANY
