<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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14A-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 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 the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
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(4) Date Filed:
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<PAGE>
PROTEIN POLYMER TECHNOLOGIES, INC.
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 4, 1999
---------------
To Our Stockholders:
You are cordially invited to attend the 1999 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 Tuesday, May 4, 1999 at 9:00 a.m. for the following purposes:
(a) To elect a Board of eight Directors for the ensuing year;
(b) To amend the Company's Certificate of Incorporation to increase
the authorized number of shares of Common Stock from 25,000,000
to 40,000,000;
(c) To ratify the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 1999; and
(d) To consider and act upon such other matters as may properly come
before the meeting.
The close of business on March 30, 1999 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
April __, 1999
===============================================================================
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
May 4, 1999
---------------
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 Tuesday,
May 4, 1999 at 9:00 a.m., or any adjournments or postponements thereof (the
"Meeting"). The Board has fixed the close of business on March 30, 1999 as the
record date for determining stockholders entitled to notice of and to vote at
the Meeting. As of March 19, 1999, there were 10,995,493 shares of the
Company's Common Stock, $.01 par value (the "Common Stock") 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 April __, 1999. A copy of
the Company's Annual Report for the fiscal year ended December 31, 1998
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, except for the proposal to amend the Company's
certificate of incorporation, which must be approved by a majority of the
outstanding shares of Common Stock. 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.
Common Stock Ownership
The following table sets forth information as of March 19, 1999 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
<PAGE>
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)(4)(5)................. 651,777 5.83%
Philip J. Davis(3)(4)(6).................... 522,345 4.68%
Brent R. Nicklas(3)(7)
Lexington Partners, Inc.
660 Madison Avenue, 23/rd/ Floor
New York, New York 10021.................. 287,327 2.61%
Patricia J. Cornell(3)(8)(11)
Taurus Advisory Group
2 Landmark Square
Stamford, Connecticut 06901............... 5,029,348 37.33%
J. Paul Jones(3)(9)......................... 13,000 *
Johnson & Johnson Development Company(10)... 1,648,933 14.06%
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
Taurus Advisory Group (11).................. 5,018,348 37.28%
2 Landmark Square
Stamford, Connecticut 06901
George R. Walker(3)(12)..................... 151,012 1.37%
Edward E. David, Ph.D.(3)(13)............... 61,107 *
Edward J. Hartnett(3)(14)................... 35,000 *
Patrick A. Gerschel(3)(15).................. 1,705,000 13.42%
c/o Gerschel & Co.
720 Fifth Avenue
New York, New York 10019
GBA Capital, LLC (16)....................... 1,700,000 13.39%
c/o Gerschel & Co.
720 Fifth Avenue
New York, New York 10019
Joseph Cappello, Ph.D.(4)(17)............... 174,866 1.58%
Franco A. Ferrari, Ph.D.(4)(18)............. 159,306 1.44%
John E. Flowers(4)(19)...................... 148,184 1.34%
Erwin R. Stedronsky, Ph.D.(4)(20)........... 116,168 1.05%
Protein Fund (21)........................... 1,400,000 11.29%
c/o Williams Jones Associates
717 Fifth Avenue, 24th Fl.
New York, New York 10022
CPR (USA) Inc. (22)......................... 821,400 6.96%
101 Hudson Street, Suite 3700
Jersey City, New Jersey 07302
All Directors and Executive Officers
as a Group (14 persons)(23)................. 9,070,690 56.45%
- ------------------------------------
</TABLE>
* Amount represents less than one percent of the Common Stock.
-2-
<PAGE>
(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) Executive Officer.
(5) Includes (i) 120,000 shares subject to options exercisable within 60 days,
(ii) 30,000 warrants exercisable within 60 days (which warrants were issued
in connection with the Company's Series E Preferred Stock) and (iii) 40,000
shares issuable upon conversion of 500 shares of the Company's Series E
Preferred Stock convertible within 60 days.
(6) Includes (i) 32,000 shares subject to options exercisable within 60 days,
(ii) 60,000 warrants exercisable within 60 days (which warrants were issued
in connection with the Company's Series E Preferred Stock) and (iii) 80,000
shares issuable upon conversion of 1,000 shares of the Company's Series E
Preferred Stock convertible within 60 days..
(7) 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 28,000 shares subject to options
exercisable within 60 days.
(8) Includes 10,000 shares subject to options exercisable within 60 days. Ms.
Cornell is also a Vice President and Director of Taurus Advisory Group, and
as such may be deemed to exercise investment power over shares held by
Taurus Advisory Group. Ms. Cornell disclaims such beneficial ownership.
(9) Includes 13,000 shares subject to options exercisable within 60 days.
(10) Includes 728,453 shares issuable upon conversion of 27,317 shares of the
Company's Series D Preferred Stock and Series F Preferred Stock convertible
within 60 days at an assumed conversion price of $3.75. The conversion
price of each share of Series D Preferred Stock and Series F Preferred
Stock is equal to $100 divided by the lesser of (i) $3.75 or (ii) the
market price at the time of conversion.
(11) Includes (i) 2,551,098 shares held by clients of Taurus Advisory Group,
(ii) 358,500 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), (iii)
903,750 warrants exercisable within 60 days held by clients of Taurus
Advisory Group (which warrants were issued in connection with the Company's
Series E Preferred Stock) and (iv) 1,205,000 shares issuable upon
conversion of 15,062.5 shares of the Company's Series E Preferred Stock
convertible within 60 days. Taurus Advisory Group exercises investment
power over such shares.
(12) Includes 25,000 shares subject to options exercisable within 60 days.
(13) Includes 35,000 shares subject to options exercisable within 60 days.
(14) Represents 35,000 shares subject to options exercisable within 60 days.
(15) Includes 5,000 shares subject to options exercisable within 60 days. Mr.
Gerschel may be deemed to exercise investment power over shares held by GBA
Capital, LLC. Mr. Gerschel disclaims such beneficial ownership.
(16) Includes (i) 900,000 warrants exercisable within 60 days (which warrants
were issued in connection with the Company's Series E Preferred Stock) and
(ii) 800,000 shares issuable upon conversion of 10,000 shares of the
Company's Series E Preferred Stock convertible within 60 days.
(17) Includes 104,500 shares subject to options exercisable within 60 days.
(18) Includes 89,500 shares subject to options exercisable within 60 days.
(19) Includes 88,000 shares subject to options exercisable within 60 days.
-3-
<PAGE>
(20) Includes 99,000 shares subject to options exercisable within 60 days.
(21) Includes (i) 600,000 warrants exercisable within 60 days (which warrants
were issued in connection with the Company's Series E Preferred Stock) and
(ii) 800,000 shares issuable upon conversion of 10,000 shares of the
Company's Series E Preferred Stock convertible within 60 days.
(22) Includes (i) 390,000 warrants exercisable within 60 days (which warrants
were issued in connection with the Company's Series E Preferred Stock) and
(ii) 412,000 shares issuable upon conversion of 5,150 shares of the
Company's Series E Preferred Stock convertible within 60 days.
(23) Includes 697,000 shares subject to options exercisable within 60 days,
2,252,250 shares subject to warrants convertible within 60 days, and
2,125,000 shares subject to preferred stock convertible within 60 days.
-4-
<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 nine 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 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 59 Chairman of the Board of Directors,
Chief Executive Officer and
President
Edward E. David, Ph.D.(1) 73 Director
George R. Walker (1)(2)(3) 74 Director
Brent R. Nicklas (2) 51 Director
Patricia J. Cornell (2)(3) 50 Director
J. Paul Jones 57 Director
Philip J. Davis (3) 68 Director, Secretary
Edward J. Hartnett (1) 67 Director
Patrick A. Gerschel 53 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.
(3) Member of the Finance 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. In addition, he is
now a principal in the Washington Advisory Group, LLC, advisor to industry,
universities and institutions. 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., InterView, Inc.,
Acquasearch Inc., and is a life member of the Massachusetts Institute of
Technology Corporation. Dr. David is also Chairman of the Company's Technical
Advisory Group.
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.
-5-
<PAGE>
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 Lexington Partners, Inc., a venture capital and merchant banking firm
("Lexington"). From December 1988 to December 1993, Mr. Nicklas was a Managing
Director of Lexington. 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, 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. 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,
Series F Preferred Stock and Common Stock, 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.
Dr. J. Paul Jones has served as a director of the Company since May 1998.
Mr. Jones, retired since January 1998, was previously with Procter & Gamble
Company since 1969, most recently as its Vice President, Research & Product
Development, OTC Health Care Products Worldwide, and was formerly a member of
the Analgesics subcommittee of the American Society of Clinical Pharmacology and
Toxicology.
Mr. Patrick A. Gerschel has served as a director of the Company since
July 1998. Mr. Gerschel has been Chairman of the investment firm of Gerschel &
Company, Inc. since 1980. Although Gerschel & Company is an affiliate of GBA
Capital, LLC, Mr. Gerschel does not serve as a member of the Board pursuant to
any arrangement, agreement or understanding with either the Company or GBA
Capital, LLC.
Committees and Compensation of the Board of Directors
In 1998 the Company had standing Stock Option and Compensation, Audit,
and Finance Committees. During the Company's last fiscal year, the Board of
Directors held eight meetings. Each of Brent R. Nicklas and Patrick A. Gerschel
attended less than 75% of the aggregate of all regular Board meetings. Mr.
Nicklas and George R. Walker attended less than 75% of the aggregate of all
meetings of the Audit Committee on which they served. Edward E. David attended
less than 75% of the aggregate of all meetings of the Stock Option and
Compensation Committee on which he served.
Stock Option and Compensation Committee
The Stock Option and Compensation Committee met three times during the
last fiscal year. During 1998, the Stock Option and Compensation 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
-6-
<PAGE>
directors' stock option plan and employee stock purchase plan. The Stock Option
and Compensation Committee also 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.
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.
Finance Committee
The Finance Committee did not have any meetings during the last fiscal
year. The Finance Committee reviews and makes recommendations concerning
potential private financing transactions for the Company.
Directors' Compensation
No directors received any cash compensation for their services as directors
during the 1998 fiscal year. Edward E. David, Inc., of which Dr. David is the
sole shareholder, received $16,000 during 1998 for Dr. David's services as
Chairman of the Company's Technical Advisory Group. 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 1998, Ms. Cornell
and each of Messrs. David, Davis, Gerschel, Hartnett, Jones, Nicklas and Walker
received options to purchase 5,000 shares of Common Stock under the 1996 Option
Plan at an exercise price of $1.19 per share.
-7-
<PAGE>
APPROVAL OF AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION
(Proposal No. 2)
The Company is authorized to issue 25,000,000 shares of Common Stock. As
of March 19, 1999, 10,995,493 shares of Common Stock were outstanding; an
additional 13,031,320 shares were reserved for issuance (i) upon exercise of
options granted or to be granted under the Company's stock option plans, (ii)
upon exercise of other outstanding options or warrants, (iii) upon conversion of
the Company's outstanding Series D Preferred Stock and Series F Preferred Stock,
and (iv) upon conversion of the Company's outstanding Series E Preferred Stock.
In the opinion of the Board of Directors, the number of unreserved shares
of Common Stock available for issuance may be insufficient to meet future needs
of the Company. For this reason, the Board has approved, and directed that it
be submitted to the stockholders for approval, an amendment to Article IV of the
Company's Certificate of Incorporation to increase the authorized number of
shares of Common Stock from 25,000,000 to 40,000,000 (the "Amendment").
Although the Company has no specific plans for the issuance of such additional
shares, such shares could be issued in the future in connection with stock
dividends, acquisitions, employee benefit plans or other corporate purposes.
Authorized but unissued Common Stock will be subject to issuance as determined
by the Company's Board of Directors without further action by the stockholders.
The holders of Common Stock have full voting rights, as described under
"Voting Rights" above. Shares of Common Stock are not convertible into other
securities, are not subject to redemption or to any liability for further calls
and are nonassessable. Stockholders have no preemptive or other rights to
subscribe for the purchase of additional shares.
The proposal to increase the number of authorized shares of Common Stock
has been made to facilitate the Company's normal conduct of its business, and
not in response to any existing or planned attempt to gain control of the
Company known to the Company. However, if the Amendment is adopted, the Board
will have the ability (to the extent consistent with its duty to the Company and
its stockholders) to cause the Company to issue a substantial number of
additional shares of Common Stock, without further action by the stockholders,
for the purpose of discouraging takeover attempts by diluting the stock
ownership and voting power of persons seeking to obtain control of the Company.
In addition, to the extent the Amendment may discourage takeover attempts, it
may make removal of the Company's Board of Directors and management more
unlikely.
The affirmative vote of the holders of a majority of the Company's
outstanding Common Stock is required to adopt the Amendment.
The Board of Directors recommends that stockholders vote "FOR" approval
of the Amendment to increase the authorized number of shares of Common Stock.
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, 1999.
The independent auditors meet periodically with the Audit Committee of
the Board. The members of the Audit Committee are Ms. Cornell and Messrs. Walker
and Nicklas.
-8-
<PAGE>
Professional services performed by Ernst & Young LLP for the fiscal year
ended December 31, 1998 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, 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.
-9-
<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 named executive officers of
the Company for services rendered to the Company during 1998.
<TABLE>
<CAPTION>
Restricted
Other Annual Stock Securities
Salary Bonus Compensation Awards Underlying
Name and Principal Position Year ($) ($) ($) ($) Options
- -------------------------- ---- --------- -------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
J. Thomas Parmeter 1998 $190,000 -0- -0- -0- -0-
President, Chief Executive 1997 $180,000 -0- -0- -0- -0-
Officer and Chairman of the 1996 $150,000 -0- -0- -0- 200,000
Board
Joseph Cappello, Ph.D. 1998 $124,500 $10,000 -0- $8,594 25,000
Vice President - Research 1997 $120,000 -0- -0- -0- 25,000
and Development, Director- 1996 $108,000 -0- -0- -0- 35,000
Polymer Research and Chief
Technical Officer
Franco A. Ferrari, Ph.D. 1998 $116,850 $ 7,500 -0- $6,446 20,000
Vice President - Laboratory 1997 $114,000 -0- -0- -0- -0-
Operations and Polymer 1996 $105,000 -0- -0- -0- 30,000
Productions, Director-
Molecular Genetics
John E. Flowers 1998 $114,800 $ 7,500 -0- $6,446 20,000
Vice President-Planning 1997 $112,000 -0- -0- -0- -0-
and Operations 1996 $103,000 -0- -0- -0- 30,000
Erwin R. Stedronsky, Ph.D. 1998 $116,850 $ 8,750 -0- $7,520 10,000
Vice President-Product 1997 $114,000 -0- -0- -0- 25,000
Formulation and Engineering, 1996 $103,000 -0- -0- -0- 35,000
Director, Materials Science
</TABLE>
-10-
<PAGE>
Option Grants in Last Fiscal Year
---------------------------------
The following table provides information about the number of options
granted to each of the named executive officers of the Company during the fiscal
year ended December 31, 1998. No stock appreciation rights were granted to any
executive officer during the last fiscal year.
<TABLE>
<CAPTION>
Number of Securities % of Total Options
Underlying Options Granted to Employees Exercise Expiration
Name Granted in Fiscal Year Price ($/sh) Date
---- ------- ------------- ------------ ----
<S> <C> <C> <C> <C>
J. Thomas -0- -0-% n/a n/a
Parmeter
Joseph Cappello, 25,000 11% $1.38 7/6/08
Ph.D.
Franco A. Ferrari, 20,000 9% $1.38 7/6/08
Ph.D.
John E. Flowers 20,000 9% $1.38 7/6/08
Erwin R. Stedronsky, 10,000 4% $1.38 7/6/08
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, 1998. None of the executive officers exercised options during the fiscal
year. 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 -0- -0- 80,000 120,000 $ 0 $ 0
Parmeter
Joseph Cappello, -0- -0- 99,500 73,000 $44,115 $4,410
Ph.D.
Franco A. -0- -0- 89,500 43,000 $42,225 $3,150
Ferrari, Ph.D.
John E. Flowers -0- -0- 88,000 42,000 $28,780 $2,520
Erwin R. -0- -0- 94,000 61,000 $19,240 $6,490
Stedronsky,
Ph.D.
- ---------------------------
</TABLE>
(1) calculated using the closing price of $1.25 per share as of December 31,
1998
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<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 1998.
Employment Agreements
As of November 1, 1996, the Company entered into three-year employment
agreements with certain of its officers. As permitted by these agreements, on
July 7, 1998, the Compensation Committee of the Board determined that sufficient
progress had been made by the Company to warrant an increase specified in the
agreements in the stated annual salary of these officers. As of July 1, 1998,
the agreement with: Mr. Parmeter (provides for an annual salary of $200,000, a
term life insurance policy in the amount of $250,000 and certain other
benefits); Mr. Flowers (provides for an annual salary of $117,600 and certain
other benefits); Dr. Cappello (provides for an annual salary of $129,000 and
certain other benefits); Dr. Ferrari (provides for an annual salary of $119,700
and certain other benefits); and Dr. Stedronsky (provides for an annual salary
of $119,700 and certain other benefits).
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 1998 all Section 16 Participants
complied with all applicable Section 16(a) filing requirements, except for the
inadvertent failure of certain officers of the Company to file with respect to
certain acquisitions on Forms 4 and timely filing of Form 5, which Forms 5
covering all such transactions were filed on March 19, 1999. The required
information with respect to such inadvertent failures is as follows: Joseph
Capello and Franco Ferrari each respectively failed to file three Forms 4
covering five acquisitions and filed their Forms 5 late covering all such
transactions as well as three transactions exempt from reporting on Form 4; John
Flowers failed to file one Form 4 covering one acquisition and filed his Form 5
late covering such transaction as well as three transactions exempt from
reporting on Form 4; Erwin Stedronsky failed to file three Forms 4 covering
three acquisitions and filed his Form 5 late covering such transactions as well
as one acquisition exempt from reporting on Form 4; and Janis Neves filed her
Form 5 late covering four transactions exempt from reporting on Form 4.
Affiliate Transactions
In February 1997, the Compensation Committee approved a loan of up to
$250,000, of which a loan of $140,000 was made at a rate of 8% per annum, to Mr.
Parmeter, secured by a pledge of stock, solely to meet his tax obligations
arising from the exercise of a stock option. In February 1999, the Stock Option
and Compensation Committee extended the term of the loan until February 2000.
The Company does not anticipate seeking stockholder ratification of the loan to
Mr. Parmeter.
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.
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<PAGE>
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 1998 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.
STOCKHOLDER PROPOSALS
Proposals by stockholders to be presented at the Company's 2000 annual
meeting must be received by the Company no later than 120 days prior to April
__, 1999, 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: April __, 1999
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<PAGE>
PROTEIN POLYMER TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 1999
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 30, 1999, 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 May 4, 1999, 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.
<TABLE>
<S> <C>
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) J. Paul Jones,
7) Philip J. Davis, 8) Edward J. Hartnett, 9) Patrick A. Gerschel
[ ] For All Nominees [ ] Withhold All Nominees
</TABLE>
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 AMENDMENT TO FOR [ ] AGAINST [ ] ABSTAIN [ ]
CERTIFICATE OF INCORPORATION.
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT FOR [ ] AGAINST [ ] ABSTAIN [ ]
OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS.
Dated___________________, 1999 _____________________________________
Signature
Dated___________________, 1999 _____________________________________
Signature if held jointly
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
