<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Corvas International, 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:
----------------------------------------------------------------------
4. Date Filed:
----------------------------------------------------------------------
<PAGE>
[LETTERHEAD]
3030 Science Park Road
San Diego, California 92121
(619) 455-9800
April 20, 1998
Dear Stockholder:
The Annual Meeting of Stockholders will be held on Thursday, May 28, 1998,
at 3:00 p.m. at the Sheraton Grande Torrey Pines located at 10950 North Torrey
Pines Road, La Jolla, California.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation.
After reading the Proxy Statement, please complete, date, sign and return
promptly the enclosed Proxy. A postage-prepaid envelope is enclosed for
mailings originating within the United States. YOUR SHARES CANNOT BE VOTED
UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING
IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, IT IS
IMPORTANT THAT YOU RETURN THE ENCLOSED PROXY TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. Any stockholder returning the enclosed Proxy may revoke it prior
to its exercise by voting in person at the meeting or by filing with the
Secretary of the Company a written revocation or a duly executed Proxy bearing a
later date.
A copy of the Company's Annual Report to Stockholders is also enclosed.
Management and the Board of Directors look forward to seeing you at the
meeting.
Sincerely yours,
/S/ RANDALL E. WOODS
--------------------
RANDALL E. WOODS
President and Chief Executive Officer
<PAGE>
CORVAS INTERNATIONAL, INC.
3030 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
-----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
TO THE STOCKHOLDERS OF CORVAS INTERNATIONAL, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of Corvas
International, Inc., a Delaware corporation, (the "Company") will be held at the
Sheraton Grande Torrey Pines located at 10950 North Torrey Pines Road, La Jolla,
California, on May 28, 1998 at 3:00 p.m., for the following purposes:
1. To elect three directors to hold office until the 2001 Annual Meeting
of Stockholders.
2. To ratify KPMG Peat Marwick LLP as the Company's independent public
accountants for its fiscal year ending December 31, 1998.
3. To transact such other business as may be properly presented to the
Annual Meeting or any postponement or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
The Board of Directors has fixed the close of business on March 31, 1998 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting and at any postponement or adjournment thereof. A
complete list of stockholders entitled to vote will be available at the
Corporate Secretary's office, 3030 Science Park Road, San Diego, California, for
ten days before the meeting.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE
YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID
IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST BRING TO THE
MEETING A LETTER FROM THE BROKER, BANK OR OTHER NOMINEE CONFIRMING YOUR
BENEFICIAL OWNERSHIP OF THE SHARES. ADDITIONALLY, IN ORDER TO VOTE AT THE
MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
By Order of the Board of Directors,
/s/ JEAN ELLIS
--------------
JEAN ELLIS
Corporate Secretary
San Diego, California
April 20, 1998
<PAGE>
CORVAS INTERNATIONAL, INC.
-------------------
PROXY STATEMENT
-------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Corvas International, Inc., a Delaware corporation (the "Company" or "Corvas"),
for use at the Annual Meeting of Stockholders to be held on May 28, 1998, at
3:00 p.m. (the "Annual Meeting"), or at any postponement or adjournment thereof,
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting of Stockholders. The Annual Meeting will be held at the Sheraton Grande
Torrey Pines located at 10950 Torrey Pines Road, La Jolla, California. The
Company intends to mail this Proxy Statement and accompanying proxy card on or
about April 20, 1998 to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of the Company's Common Stock, Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock at the close of
business on March 31, 1998 will be entitled to receive notice of, and to vote
at, the Annual Meeting. At the close of business on March 31, 1998, the Company
had outstanding and entitled to vote 14,014,347 shares of Common Stock,
1,000,000 shares of Series A Convertible Preferred Stock and 250,000 shares of
Series B Convertible Preferred Stock. Each holder of record of Common Stock,
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock on
March 31, 1998 will be entitled to one vote for each share held on all matters
to be voted upon.
1
<PAGE>
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted toward a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Corporate Secretary of the Company at the Company's principal executive office,
3030 Science Park Road, San Diego, California 92121, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company no
later than December 16, 1998 in order to be considered for inclusion in the
proxy statement and proxy relating to that annual meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and By-laws provide that the
Board of Directors shall be divided into three classes, each class consisting,
as nearly as possible, of one-third of the total number of directors, with each
class having a three-year term. Vacancies on the Board may be filled only by
persons elected by a majority of the remaining directors. A director elected by
the Board to fill a vacancy (including a vacancy created by an increase in the
size of the Board of Directors) shall serve for the remainder of the full term
of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified, or until such director's earlier
death, resignation or removal.
The Board of Directors is presently composed of eight members. David S.
Kabakoff, Ph.D. resigned from the Board on February 20, 1997, at which time the
number of authorized directors was reduced from 10 to nine. Thomas S.
Edgington, M.D. and Theodor H. Heinrichs retired from the Board on May 1, 1997,
at which time the number of authorized directors was reduced from nine to seven.
On November 10, 1997, the Board authorized an increase in the number of
directors from seven to eight and elected R. Douglas Norby to the Board to fill
the vacancy created by such an increase effective December 4, 1997. There are
three directors in the class whose term of office expires in 1998. All three of
the nominees for election are currently directors of the Company. M. Blake
Ingle, Ph.D. was previously elected by the stockholders, and Randall E. Woods
and R. Douglas Norby were appointed by the Board to fill vacancies due to
increases in the number of seats on the Board of Directors in May 1996 and
November 1997, respectively. If elected at the Annual Meeting, each of the
nominees would serve until the annual meeting to be held in the year 2001 and
until his successor is elected and has qualified, or until such director's
earlier death, resignation or removal.
2
<PAGE>
Directors will be elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the three nominees named below. In the event that any of the
nominees should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. All of the persons nominated for election
have agreed to serve if elected, and management has no reason to believe that
any of the nominees will be unable to serve.
Set forth below is biographical information for all persons nominated for
election at, and for each person whose term of office as a director will
continue after, the Annual Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM
EXPIRING AT THE 2001 ANNUAL MEETING (CLASS III)
M. BLAKE INGLE, PH.D. Dr. Ingle, age 55, has served as a director of the
Company since January 1994. Dr. Ingle was the President and Chief Executive
Officer of Canji, Inc., a biopharmaceutical company, from March 1993 to his
retirement in February 1996, when it was acquired by Schering-Plough Corporation
("Schering-Plough"). Prior to that, he was employed in a variety of capacities
with the IMCERA Group, Inc., a healthcare company, consisting of Mallinckrodt
Medical, Mallinckrodt Specialty Chemicals and Pitman Moore, from 1980 to 1993,
most recently serving as President and Chief Executive Officer. Dr. Ingle was a
director of Telios Pharmaceuticals, Inc. ("Telios"), a biotechnology company,
and was its Chief Executive Officer from December 1994 to January 1995. Telios
filed for protection under Chapter 11 in the Federal Bankruptcy Court in January
1995 and was subsequently acquired by Integra LifeSciences Corporation. He
currently serves on the Boards of Directors of Synbiotics Corporation and Vical,
Inc. and is a member of the Board of Trustees at The Burnham Institute.
RANDALL E. WOODS. Mr. Woods, age 46, has served as President and Chief
Executive Officer and a director of Corvas since May 1996. Prior to joining
Corvas, Mr. Woods served as President of the U.S. Operations, Boehringer
Mannheim Pharmaceuticals Corporation ("Boehringer"), a pharmaceutical company,
from March 1994 to March 1996, and was Vice President of Marketing and Sales for
Boehringer from December 1993 to March 1994. From 1973 to December 1993, he
served in various capacities at Eli Lilly and Company ("Eli Lilly"), a
pharmaceutical company, where he was most recently responsible for the marketing
of hospital products.
R. DOUGLAS NORBY. Mr. Norby, age 62, has served as a director of the
Company since December 1997. Since October 1996, he has served as Executive
Vice President and Chief Financial Officer of LSI Logic Corporation ("LSI"), a
semiconductor company, and also serves on the Board of Directors of LSI. He was
a member of the Board of Directors of Epitope, Inc., an Oregon-based technology
company, from 1989 through February 1998. He served as Senior Vice President
and Chief Financial Officer at Mentor Graphics Corporation, a software company,
from July 1993 to November 1996, and as President of Pharmetrix Corporation, a
drug delivery company, from July 1992 to September 1993. Previously, Mr. Norby
held several positions including Senior Vice President and Chief Financial
Officer of Syntex Corporation ("Syntex"), a pharmaceutical company, President
and Chief Operating Officer with Lucasfilm, and in various consulting capacities
for McKinsey & Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
3
<PAGE>
BOARD OF DIRECTORS INFORMATION
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING (CLASS I)
GERARD VAN ACKER. Mr. Van Acker, age 54, has served as a director of the
Company since March 1991. Mr. Van Acker has been President and Chief Executive
Officer of Investeringsmaatschappij voor Vlaanderen, N.V. ("GIMV"), the
Investment Company for Flanders, based in Antwerp, Belgium, since founding it in
1980. Since October 1989, Mr. Van Acker has also been a director of BARCO, N.V.
W. LEIGH THOMPSON, JR., M.D., PH.D. Dr. Thompson, age 59, has served as a
director of the Company since January 1996. Dr. Thompson retired in December
1994 as Chief Scientific Officer of Eli Lilly, where he had served in various
capacities since 1982. He has been President and Chief Executive Officer of
Profound Quality Resources, Ltd., a consulting company, since January 1995 and
serves on the Boards of Directors of Chrysalis International Corporation
(formerly DNX Corporation), Guilford Pharmaceuticals, Inc., Orphan Medical,
Inc., Ergo Sciences Corporation, La Jolla Pharmaceutical Company, Medarex, Inc.,
BAS, Inc., DepoMed, Inc. and Ontogeny, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING (CLASS II)
JOHN H. FRIED, PH.D. Dr. Fried, age 68, was elected Chairman of the Board
in February 1997, and has served as a director of the Company since May 1992.
He has been President of Fried & Company, Inc., a biopharmaceutical consulting
firm, since March 1992. Dr. Fried served in various executive capacities at
Syntex, a pharmaceutical company, from April 1964 to March 1992. He served as
President of Syntex Research, a subsidiary of Syntex, from 1976 to March 1992,
Senior Vice President of Syntex from 1981 to 1985, and Vice Chairman of Syntex
from 1985 to January 1993. Dr. Fried is also Chairman of the Board of Alexion
Pharmaceuticals, Inc.
MICHAEL SORELL, M.D. Dr. Sorell, age 50, has served as a director of the
Company since April 1996. Since March 1996, he has been the Managing Partner of
MS Capital, LLC, an advisement firm based in New York. From July 1986 to
February 1992, he was associated with Morgan Stanley & Co. ("Morgan Stanley"),
an investment banking firm, in various capacities, the last being principal.
From March 1992 to July 1994, he was a partner in a joint venture with Essex
Investment Management of Boston, an investment management firm. In August 1994,
he rejoined Morgan Stanley as the emerging growth strategist and principal where
he served until February 1996. Prior to that, he was on the staff of Memorial
Sloan-Kettering Cancer Center and worked in clinical development at
Schering-Plough. Dr. Sorell also serves on the Board of Directors of Dynagen,
Inc.
NICOLE VITULLO. Ms. Vitullo, age 40, has served as a director of the
Company since April 1996. She was a Vice President from November 1992 to
November 1996, and has been a Senior Vice President since November 1996, of
Rothschild Asset Management Inc., which manages two publicly traded funds,
International Biotechnology Trust ("IBT") and Biotechnology Investments,
Limited. She served as Director of Corporate Communications at Cephalon, Inc.,
a neuropharmaceutical company, from July 1991 to November 1992. Prior to that,
she was Manager, Healthcare Investments at Eastman Kodak Company. She also
serves on the Boards of Directors of Cytel Corporation, Anergen, Inc., Onyx
Pharmaceuticals Inc. and Cadus Pharmaceutical Corporation.
4
<PAGE>
EXECUTIVE OFFICERS
Set forth below is information regarding the executive officers of the
Company as of April 9, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Randall E. Woods 46 President and Chief Executive Officer
George P. Vlasuk, Ph.D. 42 Executive Vice President,
Research and Development
Jean Ellis (1) 41 Executive Director, Patents
and Intellectual Property
and Corporate Secretary
Carolyn M. Felzer 41 Senior Director of Finance and
Assistant Corporate Secretary
</TABLE>
- -------------
(1) Jean Ellis was named Corporate Secretary effective April 3, 1998, upon John
Crawford's resignation from the Company as Executive Vice President, Chief
Financial Officer and Corporate Secretary.
BACKGROUND OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
GEORGE P. VLASUK, PH.D. Dr. Vlasuk has served as the Company's Executive
Vice President, Research and Development since September 1996. Previously,
Dr. Vlasuk served as Vice President, Biological Research from January 1995 to
September 1996, as Executive Director, Molecular Pharmacology from July 1993 to
January 1995 and as Director, Molecular Pharmacology from July 1991 to July
1993. Before joining Corvas, he was employed for six years at Merck Sharp &
Dohme Research Laboratories, a pharmaceutical company, most recently as
Associate Director of Hematology Research. Dr. Vlasuk received his Ph.D. in
biochemistry from Kent State University.
JEAN ELLIS. Ms. Ellis has served as Corporate Secretary since April 1998
and as Executive Director, Patents and Intellectual Property since February
1997. She joined Corvas in April 1995 as Patent Attorney, and was named
Director, Patents and Intellectual Property in April 1996. Prior to Corvas, Ms.
Ellis managed patent activities at Telios beginning in 1991 and at SIBIA
Neurosciences, Inc. prior to joining Telios. She received a J.D. from the
University of San Diego and holds B.S. and M.S. degrees in the biological
sciences from schools within the University of California system.
CAROLYN M. FELZER. Ms. Felzer has served as Senior Director of Finance and
Assistant Corporate Secretary since December 1997. Previously, Ms. Felzer
served as the Company's Controller from January 1993 through December 1997 and
as Accounting Manager from July 1991 through January 1993. Prior to joining
Corvas, Ms. Felzer held various financial positions with private companies since
beginning her career at Peat, Marwick, Mitchell & Co., an accounting firm now
known as KPMG Peat Marwick LLP. She received a B.S. in accounting from The
Pennsylvania State University and is a Certified Public Accountant.
5
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD
During the fiscal year ended December 31, 1997, the Board of Directors held
seven meetings and took action by unanimous written consent without a meeting on
three other occasions during such fiscal year. The Company has three standing
committees of the Board of Directors: an Executive Committee, a Compensation and
Stock Option Committee and an Audit Committee. The Company does not have a
standing Nominating Committee.
Until February 20, 1997, the Executive Committee consisted of Dr. Kabakoff
as Chairman, Dr. Ingle and Mr. Woods. Following Dr. Kabakoff's resignation from
the Board on February 20, 1997, an action was taken by the Board on February 21,
1997 to reconstitute the Committee to consist of Dr. Fried, Dr. Ingle and Mr.
Woods. The Executive Committee is authorized to exercise the full authority of
the Board of Directors except with respect to (i) those matters not permitted
under the Delaware General Corporation Law to be delegated to any committee,
(ii) approval of obligations of the Company in amounts greater than $100,000,
(iii) approval of annual operating plans, business plans and major strategic
decisions, and (iv) approval of other major transactions such as corporate
partnerships or financing plans. The Executive Committee did not hold any
meetings during 1997.
For the period from January 1, 1997 through February 20, 1997, the
Compensation and Stock Option Committee consisted of Mr. Heinrichs as Chairman,
Dr. Fried and Ms. Vitullo. Dr. Fried and Mr. Heinrichs resigned from the
Committee on February 21, 1997, at which time an action was taken by the Board
to reconstitute the Committee to consist of Ms. Vitullo as Chairwoman and Dr.
Thompson. The Compensation and Stock Option Committee is authorized to exercise
all powers and authority of the Board of Directors in all compensation matters,
including the establishment of rates of salary, bonuses, retirement and other
compensation for all directors, officers and such other personnel of the Company
as the Board of Directors may from time to time designate. It also exercises
the authority of the Board of Directors in the administration of the Company's
1991 Incentive and Compensation Plan (the "1991 Plan") and its Employee Stock
Purchase Plan ("ESPP"). The Compensation and Stock Option Committee held seven
meetings during 1997 and took action by unanimous consent without a meeting on
two other occasions during such fiscal year.
During 1997, the Audit Committee consisted of Mr. Van Acker as Chairman,
Dr. Sorell and Dr. Ingle. The Audit Committee oversees the Company's accounting
and financial reporting policies, makes recommendations to the Board of
Directors regarding appointment of independent accountants, reviews with the
independent accountants the accounting principles and practices followed by the
Company and the adequacy thereof, reviews the Company's annual audit and
financial results and any material change in accounting principles, policies and
procedures, and makes recommendations to the Board of Directors with regard to
any of the preceding. The Audit Committee held two meetings during 1997.
During the fiscal year ended December 31, 1997, all directors attended at
least 75% of the aggregate Board of Directors meetings held while they were
serving as directors. During the fiscal year ended December 31, 1997, all
members of committees of the Board of Directors attended at least 75% of the
aggregate of the Committee meetings in which they were entitled to participate,
except for Dr. Sorell, who attended one of the two Audit Committee meetings in
which he was entitled to participate.
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Heinrichs, who served on the Compensation and Stock Option Committee of
the Board until February 21, 1997, also served as Chief Executive Officer of the
Company from February 1991 to November 1991.
6
<PAGE>
PROPOSAL TWO
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of KPMG Peat Marwick LLP ("KPMG") as the Company's
independent auditors for the year ending December 31, 1998, subject to
ratification by the stockholders at the Annual Meeting. KPMG has audited the
Company's financial statements since the Company's inception in March 1987.
Representatives of KPMG are expected to be present at the Company's Annual
Meeting. They will have an opportunity to make a statement, if they desire to
do so, and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG as the Company's
independent public accountants is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of KPMG to the
stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board, in their discretion, may direct the
appointment of a different independent accounting firm at any time during the
year if they determine that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares represented
and entitled to vote at the meeting will be required to ratify the selection of
KPMG.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL TWO.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
5% STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's stock as of April 9, 1998 by each stockholder known
by the Company to be the beneficial owner of more than 5% of a class of the
Company's voting securities. Unless otherwise indicated in the footnotes to
this table, each of the stockholders named in this table has sole voting power
and investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 15,264,347 combined shares of Common Stock
and Series A and Series B Convertible Preferred Stock outstanding on an
as-converted basis, adjusted as required by rules promulgated by the Securities
and Exchange Commission (the "SEC"). Ownership information is based upon
information furnished by the respective entities.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
---------------- ----- -----
<S> <C> <C>
Rothschild Asset Management Ltd.
International Biotechnology Trust plc (1). . . . . 2,800,000 16.8%
Five Arrows House
St. Swithin's Lane
London EC4N 8NR
England
BVF Inc.
Biotechnology Value Fund, L.P. (2). . . . . . . 1,928,143 12.6%
One Sansome Street, 39th Floor
San Francisco, California 94104
Wanger Asset Management, L.P.
227 West Monroe, Suite 3000
Chicago, Illinois 60606-5016
AKKAD (Acorn Fund) (3). . . . . . . . . . . . . 1,600,000 10.0%
c/o State Street Bank & Trust
225 Franklin Street
Boston, Massachusetts 02110
Schering Corporation(4). . . . . . . . . . . . . . 1,250,000 8.2%
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
GIMV, N.V.(5). . . . . . . . . . . . . . . . . . . 1,142,857 7.5%
Karel Oomsstraat 37
2018 Antwerp, Belgium
T. Rowe Price Associates, Inc.(6). . . . . . . . . 1,050,000 6.9%
100 East Pratt Street
Baltimore, Maryland 21202
Four Partners(7) . . . . . . . . . . . . . . . . . 980,893 6.4%
c/o Thomas J. Tisch
667 Madison Avenue
New York, New York 10021
</TABLE>
8
<PAGE>
- -------------------------
(1) Includes 1,400,000 shares of Common Stock issuable upon exercise of
warrants exercisable within 60 days. Ms. Vitullo is a Senior Vice
President of Rothschild Asset Management Inc., an affiliate of Rothschild
Asset Management Ltd., which manages the IBT fund, and disclaims beneficial
ownership of such shares owned by IBT.
(2) Biotechnology Value Fund, L.P. ("BVF, L.P.") beneficially owns 934,606
shares of Common Stock and shares voting and dispositive power of the
934,606 shares with BVF Partners, L.P. ("BVF Partners"), general partner of
BVF, L.P. BVF, Inc. ("BVF") is the general partner of BVF Partners and
beneficially owns and shares voting and dispositive power over all
1,928,143 shares with BVF, L.P. and various individual and institutional
investors, for which BVF Partners serves as investment advisor with power
to direct investments and/or sole power to vote the securities. BVF, L.P.
disclaims beneficial ownership of the 993,537 shares owned by BVF Partners.
The foregoing is based on information contained in its Schedule 13G filed
with the SEC on April 10, 1998.
(3) Includes 800,000 shares of Common Stock issuable upon exercise of warrants
exercisable within 60 days.
(4) Includes 1,000,000 shares of Series A Convertible Preferred Stock and
250,000 shares of Series B Convertible Preferred Stock.
(5) Held by a subsidiary, Take Off Fonds, N.V. Mr. Van Acker is the President
and Chief Executive Officer of GIMV and disclaims beneficial ownership of
these shares.
(6) These securities are owned by various individual and institutional
investors, including T. Rowe Price New Horizons Fund, Inc., which owns
900,000 shares, for which T. Rowe Price Associates, Inc. ("Price
Associates") serves as investment advisor with power to direct investments
and/or sole power to vote the securities. Of the 1,050,000 shares owned by
Price Associates, Price Associates has sole voting power of 50,000 shares
and sole dispositive power of all 1,050,000 shares. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), Price Associates is deemed to be a beneficial owner
of such securities; however, Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such securities. The foregoing is
based on information contained in its Schedule 13G filed with the SEC on
February 9, 1998.
(7) By virtue of their status as managing trustees of the trusts which are the
general partners of Four Partners, the trustees (Andrew H. Tisch, Daniel R.
Tisch, James S. Tisch and Thomas J. Tisch) may be deemed to have indirectly
shared power to vote and dispose, or direct the vote and disposition, of
all 980,893 shares of Common Stock owned by Four Partners. The foregoing is
based on information contained in its Schedule 13G filed with the SEC on
April 10, 1998.
9
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 9, 1998 by (i) each director and
nominee for director, (ii) each of the Named Executive Officers, and (iii) all
directors and executive officers as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable. Applicable percentages are based on 15,264,347 shares of Common
Stock and Series A and Series B Convertible Preferred Stock outstanding on an
as-converted basis, adjusted as required by rules promulgated by the SEC.
Ownership information is based upon information furnished by the respective
individuals, including any filings under Section 16 of the Exchange Act.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
OWNED OWNED
----- -----
<S> <C> <C>
Nicole Vitullo(1). . . . . . . . . . . . . . . . . . . . . . 2,801,250 16.8%
Gerard Van Acker(2). . . . . . . . . . . . . . . . . . . . . 1,166,071 7.6%
John E. Crawford(3). . . . . . . . . . . . . . . . . . . . . 301,634 2.0%
Randall E. Woods(4). . . . . . . . . . . . . . . . . . . . . 187,533 1.2%
George P. Vlasuk, Ph.D.(5) . . . . . . . . . . . . . . . . . 119,693 *
William C. Ripka, Ph.D.(6) . . . . . . . . . . . . . . . . . 114,428 *
John H. Fried, Ph.D.(7). . . . . . . . . . . . . . . . . . . 61,312 *
M. Blake Ingle, Ph.D.(8) . . . . . . . . . . . . . . . . . . 23,500 *
W. Leigh Thompson, Jr., M.D., Ph.D.(9).. . . . . . . . . . . 3,750 *
Michael Sorell, M.D.(10) . . . . . . . . . . . . . . . . . . 1,250 *
R. Douglas Norby . . . . . . . . . . . . . . . . . . . . . . -- *
All directors and officers as group (13 persons)(11) . . . . 4,809,402 31.5%
</TABLE>
- --------------------------
* Less than 1%.
10
<PAGE>
(1) Represents 1,250 shares of Common Stock issuable upon exercise of options
exercisable within 60 days, 1,400,000 shares of Common Stock beneficially
owned by IBT and 1,400,000 shares of Common Stock issuable to IBT upon
exercise of warrants exercisable within 60 days. Ms. Vitullo is a Senior
Vice President of Rothschild Asset Management Inc., an affiliate of
Rothschild Asset Management Ltd., which manages the IBT fund. Ms.
Vitullo disclaims beneficial ownership of such shares beneficially owned
by IBT.
(2) Represents 23,214 shares of Common Stock issuable upon exercise of
options exercisable within 60 days and 1,142,857 shares beneficially
owned by GIMV, of which Mr. Van Acker is the President and Chief
Executive Officer. Mr. Van Acker disclaims beneficial ownership of such
shares beneficially owned by GIMV.
(3) Includes 220,240 shares of Common Stock held in a trust for which Mr.
Crawford is both a trustee and a beneficiary, 1,586 shares of Common
Stock purchased under the ESPP, and 79,688 shares of Common Stock
issuable upon exercise of options exercisable within 60 days. Mr.
Crawford resigned from the Company effective April 3, 1998, but will
continue to perform services for the Company on a consulting basis
through June 15, 1998. On March 24, 1998, the Company and Mr. Crawford
entered into a Separation Agreement (the "Crawford Separation
Agreement"), which became effective April 1, 1998. Under the Crawford
Separation Agreement, all outstanding options held by Mr. Crawford were
amended to become fully vested as of April 3, 1998 (the "Crawford
Separation Date"), and will terminate if not exercised within 36 months
of the Crawford Separation Date. See "Employment Agreements and
Termination of Employment Agreements."
(4) Includes 185,727 shares of Common Stock issuable upon exercise of options
exercisable within 60 days, and 806 shares of Common Stock purchased by
Mr. Woods under the ESPP.
(5) Includes 117,039 shares of Common Stock issuable upon exercise of options
exercisable within 60 days, and 511 shares of Common Stock purchased by
Dr. Vlasuk under the ESPP.
(6) Represents 114,428 shares of Common Stock issuable upon exercise of
options exercisable within 60 days. Dr. Ripka retired from the Company
on September 30, 1997 (the "Ripka Separation Date"). Under the terms of
the separation agreement between the Company and Dr. Ripka, all
outstanding options held by Dr. Ripka were amended to become fully vested
as of the Ripka Separation Date, and will terminate if not exercised
within 24 months from September 30, 1997.
(7) Includes 53,812 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(8) Includes 12,500 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(9) Represents 3,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(10) Represents 1,250 shares of Common Stock issuable upon exercise of options
exercisable within 60 days.
(11) Includes 2,017,711 shares of Common Stock issuable upon exercise of
warrants and options exercisable within 60 days. See footnotes (1)
through (10) above.
11
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the directors and executive
officers of the Company, and persons who own more than 10% of a registered class
of the Company's equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Corvas Common Stock. Specific
due dates for these reports have been established, and the Company is required
to disclose in this proxy statement any failure to file by these dates during
1997.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all of these requirements were satisfied for fiscal year
1997.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are employees of the Company or who
are representatives of principal stockholders do not receive compensation for
service as directors or for service as members of any committee of the Board.
Dr. Ingle, Dr. Sorell, Dr. Thompson and Mr. Norby currently receive compensation
at the rate of $12,000 per year for service as outside directors unaffiliated
with any principal stockholder. Until February 21, 1997, Dr. Fried also
received compensation at a rate of $12,000 annually for service as an outside
director unaffiliated with any principal stockholder. Currently, Dr. Fried is
compensated at the rate of $30,000 per year for service as Chairman of the Board
unaffiliated with any principal stockholder. During the fiscal year ended
December 31, 1997, the total compensation paid to outside directors in
connection with their service as directors was $72,851. The members of the
Board are also eligible for reimbursement of their expenses incurred in
connection with attendance at Board meetings in accordance with Company policy.
Pursuant to the 1991 Plan, each non-employee director of the Company also
receives annually a non-discretionary stock option grant to purchase 5,000
shares at an exercise price equal to 85% of the fair market value of the Common
Stock on the date of the grant. Options granted to the non-employee directors
under the 1991 Plan are not intended by the Company to qualify as incentive
stock options under the Internal Revenue Code of 1986, as amended (the "Code"),
nor do they disqualify the members of the Compensation and Stock Option
Committee from granting stock awards which, pursuant to Rule 16b-3, are exempt
from the application of Section 16 of the Exchange Act. Upon being named
Chairman of the Board on February 21, 1997, Dr. Fried was also granted stock
options to purchase 25,000 shares of the Company's Common Stock, at an exercise
price equal to 100% of the fair market value of the Common Stock on the date of
the grant. The options have a maximum term of 10 years from the grant date,
subject to earlier termination upon Dr. Fried's termination of service with the
Company, and vest over a four year period, 25% on the first anniversary date of
the grant and 6.25% each quarter thereafter until fully vested.
In June 1992, the Company entered into a consulting agreement with Dr.
Fried pursuant to which Dr. Fried received annual fees of $12,000 for scientific
services rendered to the Company, in addition to the fees he received as an
outside director. The agreement, pursuant to which Dr. Fried received a
prorated fee of $7,677 in 1997, was terminated effective February 21, 1997 upon
Dr. Fried's appointment as Chairman of the Board.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth for the years ended December 31, 1997, 1996
and 1995 compensation awarded to, or paid to and earned by, the Company's Chief
Executive Officer, the two other most highly compensated executive officers at
December 31, 1997 (which were the only persons meeting the requirements to
appear in the table), and one executive officer who left the Company in 1997
(and would otherwise have been an executive officer named in the table), whose
salaries and bonuses for services rendered to the Company during the fiscal year
ended December 31, 1997 were in excess of $100,000 (collectively, the "Named
Executive Officers"). Executive officers serve at the discretion of the Board
of Directors, subject to certain existing employment agreements. See
"Employment Agreements and Termination of Employment Agreements."
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- -------------------
Shares
Name and Underlying All Other
Principal Salary(1) Bonus Options(2) Compen-
Position Year ($) ($) (#) sation(3)($)
-------- ---- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Randall E. Woods(4) 1997 315,000 110,796 125,000 194,898
----
President & Chief 1996 192,000 6,025 375,000 88,447
----
Executive Officer
George P. Vlasuk, Ph.D. 1997 200,000 -0- 100,000 1,245
----
Executive Vice President 1996 162,872 -0- 120,000 1,111
----
Research & Development 1995 130,160 -0- 63,257 843
----
John E. Crawford(5) 1997 150,000 -0- -0- 2,959
----
Executive Vice President & 1996 137,000 10,000 30,000 2,820
----
Chief Financial Officer 1995 129,000 -0- 85,000 2,725
----
William C. Ripka, Ph.D. (6) 1997 131,250 15,000 -0- 147,476
----
Senior Vice President 1996 170,000 -0- 45,000 5,412
----
Chemical Research 1995 165,000 -0- 68,000 4,694
----
</TABLE>
- --------------------
(1) Includes amounts earned but deferred into the Company's 401(k) Compensation
Deferral Savings Plan at the election of the executive officer.
(2) The Company has not issued any restricted stock awards or stock
appreciation rights to any executive officers to date. On January 16,
1995, the Compensation and Stock Option Committee of the Board of Directors
approved an offer for all employees, including executive officers, to
exchange outstanding options with exercise prices greater than $2.44 per
share for an equivalent number of options issued under the 1991 Plan at the
fair market value on January 16, 1995. The new options did not vest for
six months from the date of grant (twelve months for executive officers),
at which time the options became vested in the equivalent percentage as the
canceled options were at the time of cancellation. After the initial
vesting of at least 25%, the remainder of the options become exercisable at
6.25% per quarter. These options remain exercisable for 10 years from the
new grant date. For each employee, the receipt of the replacement grant
was subject to the employee's consent to the cancellation of the original
grants.
13
<PAGE>
(3) Includes amounts paid on behalf of executive officers for long-term
disability insurance premiums and life insurance premiums. See also
footnotes (4) and (6).
(4) Mr. Woods was appointed as President and Chief Executive Officer of the
Company on May 10, 1996. The amount set forth under the column entitled
"Bonus" is comprised of a bonus of $100,000 awarded by the Compensation and
Stock Option Committee of the Board in 1997, and $10,796, which represents
the amount of interest which would have been payable in 1997 under an
interest-free loan which the Company granted to Mr. Woods. The amount set
forth under the column entitled "All Other Compensation" includes amounts
paid to and on behalf of Mr. Woods for relocation expenses totaling
$190,243.
(5) Mr. Crawford resigned from the Company effective April 3, 1998, but will
continue to perform services for the Company on a consulting basis through
June 15, 1998.
(6) Dr. Ripka retired from the Company on September 30, 1997. The amount set
forth under the column entitled "Bonus" represents a bonus awarded to Dr.
Ripka for his contributions and efforts in connection with the selection of
a clinical development candidate in the oral thrombin inhibitor program,
pursuant to the Company's collaboration with Schering-Plough. The amount
set forth under the column entitled "All Other Compensation" includes
payments in the amount of $123,958 in accordance with the terms of Dr.
Ripka's separation agreement with the Company and $17,332 in accrued
vacation benefits.
STOCK OPTION GRANTS AND EXERCISES
The Company grants stock options to its executive officers and others under
its 1991 Plan. As of April 9, 1998, options to purchase a total of 1,907,617
shares had been granted and were outstanding under the 1991 Plan, stock awards
totaling 5,400 had been made under the 1991 Plan and options to purchase 518,509
shares remained available for grant thereunder.
14
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following tables set forth certain information regarding stock options
granted to the Named Executive Officers during the year ended December 31, 1997:
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual
Rates of Stock Price
Appreciation for
INDIVIDUAL GRANTS OPTION TERM (4), (5)
------------------------------------------------------- --------------------------
Number % of
of Total
Shares Options
Underlying Granted to Exercise
Options Employees or Base Expira-
Granted in Fiscal Price tion
Name (#) (1) Year (2) ($/Share)(3) Date 5% 10%
---- ------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mr. Woods 125,000 25.6% $4.3125 12/02/07 $339,014 $859,127
Dr. Vlasuk 100,000 20.5% $4.3125 12/02/07 $271,211 $687,301
Mr. Crawford(6) -0-
Dr. Ripka(7) -0-
</TABLE>
- -----------------------
(1) Options generally vest over a four year period, 25% on the first
anniversary of the grant date and 6.25% each quarter thereafter until fully
vested, and have a maximum term of 10 years from the grant date, subject to
earlier termination upon the optionee's cessation of service with the
Company. Upon certain corporate events resulting in a change in control,
at the discretion of the Board of Directors, (i) the outstanding options
will be assumed or replaced by substitute options granted by any surviving
corporation or (ii) the outstanding options will become exercisable for a
minimum of 30 days prior to such event.
(2) Based on an aggregate of 488,000 options granted to employees in fiscal
1997, including grants to Named Executive Officers.
(3) The exercise price is equal to 100% of the fair market value of the Common
Stock on the date of grant, as determined by the Compensation and Stock
Option Committee.
(4) The 5% and 10% assumed rates of appreciation are suggested by the rules of
the SEC and do not represent the Company's estimate or projection of the
future Common Stock price. There is no assurance that any of the values
reflected in this table will be achieved. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent upon a number of
factors, including the future performance of the Common Stock, overall
market conditions and the timing of option exercises, if any.
15
<PAGE>
(5) The potential realizable value is calculated based on the term of the
option at the time of grant (10 years in all cases above). It is
calculated by assuming that the stock price on the date of grant
appreciates at the indicated annual rate, compounded annually for the
entire term of the option, and that the option is exercised and sold on the
last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders. For example, a stockholder who
purchased one share of stock on December 3, 1997 at $4.3125, held the stock
for 10 years and sold it on December 2, 2007 while the stock appreciated at
5% and 10% compounded annually, would have profits of $2.71 and $6.87,
respectively, on his $4.3125 investment.
(6) Mr. Crawford resigned from the Company effective April 3, 1998, but will
continue to perform services for the Company on a consulting basis through
June 15, 1998.
(7) Dr. Ripka retired from the Company on September 30, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the exercise of
stock options by the Named Executive Officers during the fiscal year ended
December 31, 1997, and the number and value of securities underlying unexercised
options held by the Named Executive Officers as of December 31, 1997:
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Fiscal Options at Fiscal
Year-End (#)(2) Year-End ($)(3)
--------------- ---------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($)(1) Unexercisable Unexercisable
---- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Mr. Woods -0- -0- 137,358/362,642 -0-/-0-
Dr. Vlasuk -0- -0- 103,388/179,869 93,200/17,500
Mr. Crawford(4) -0- -0- 72,498/42,502 100,702/31,798
Dr. Ripka(5) -0- -0- 114,428/-0- 184,623/-0-
</TABLE>
- ----------------
(1) Value realized is calculated on the basis of the fair market value of the
Company's Common Stock on the date of exercise minus the exercise price and
does not necessarily indicate that the optionee sold such stock.
(2) Includes options granted under the 1987 Stock Option Plan (the "1987 Plan")
and the 1991 Plan. Options granted under the 1987 Plan generally vest at
the rate of 25% per year over four years and have a term of 10 years. In
December 1991, the Board of Directors voted to terminate the 1987 Plan and
no additional grants of options have been made under such plan since it was
terminated. Options granted under the 1991 Plan generally have the vesting
schedule reflected in footnote (1) of " Option Grants in Last Fiscal Year."
(3) Amounts reflected are based on the fair market value of the Company's
Common Stock at December 31, 1997 ($3.9375) minus the exercise price of the
options.
16
<PAGE>
(4) Mr. Crawford resigned from the Company effective April 3, 1998, but will
continue to perform services for the Company on a consulting basis through
June 15, 1998. Under the terms of the Crawford Separation Agreement, all
outstanding stock options held by Mr. Crawford were amended to become fully
vested as of the Crawford Separation Date, and will terminate if not
exercised within 36 months of the Crawford Separation Date. See
"Employment Agreements and Termination of Employment Agreements." On
February 20, 1998, Mr. Crawford exercised 60,312 stock options.
(5) Dr. Ripka retired from the Company on September 30, 1997.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
On March 18, 1997, the Company entered into employment agreements with Mr.
Woods and Mr. Crawford which replaced their prior agreements, and entered into
new agreements with Dr. Ripka and Dr. Vlasuk. Under the agreements, the base
salaries for Mr. Woods, Mr. Crawford, Dr. Ripka and Dr. Vlasuk were $300,000,
$150,000, $175,000 and $200,000, respectively. Further, the agreements allow,
but do not require, changes in compensation from time to time. The agreements
provide that in the event the employment of the officer is terminated without
cause, or if the officer terminates his employment upon a change of control of
the Company (or within six months thereafter) or in the event of a violation of
the agreement by the Company, such officer is entitled to continue to receive
his then-current annual base salary and benefits for a period of one year
following termination and immediate vesting of all stock options held by the
officer. Upon such officer's death or total disability, as defined in the
agreement, the officer or his estate or personal representative shall be
entitled to receive his then-current base salary and benefits for a period of
three months.
In June 1996, as a recruiting incentive, the Company loaned Mr. Woods
$200,000, interest-free, in connection with his relocation to San Diego County,
California. The loan was evidenced by an interest-free promissory note (the
"Original Note"), and was originally due on the earlier of (i) December 4, 1996,
(ii) the closing, or any transfer of, Mr. Woods' former residence (the "Former
Residence"), or (iii) within 90 days of Mr. Woods' termination of employment
with the Company. To further assist Mr. Woods in selling the Former Residence,
in December 1996, the Company agreed to extend the Original Note to be payable
on the earlier of (i) December 7, 1997, (ii) the closing, or any transfer of,
Mr. Woods' Former Residence, or (iii) within 90 days of Mr. Woods' termination
of employment with the Company.
On May 1, 1997, the Company agreed to pay the difference between the
original purchase price paid by Mr. Woods and the sales price of the Former
Residence once sold, in an amount not to exceed $47,500. The Former Residence
was sold on August 28, 1997, and Mr. Woods paid $47,500 against the Original
Note, thereby reducing the outstanding balance to $152,500. Also on August 28,
1997, Mr. Woods executed an Amended and Restated Secured Promissory Note (the
"Amended Note") in the amount of $152,500 in favor of the Company. The Amended
Note is secured by the rights, title and interest in a lawsuit and any proceeds
thereof related to Mr. Woods' current residence (the "Lawsuit"), and is due on
the earlier of (i) September 18, 1998, (ii) the settlement or other final
determination of the Lawsuit, or (iii) within 90 days of Mr. Woods' termination
of employment with the Company.
17
<PAGE>
Mr. Crawford resigned as Executive Vice President, Chief Financial Officer
and Corporate Secretary of the Company effective April 3, 1998, but will
continue to perform services for the Company on a consulting basis through June
15, 1998. On March 24, 1998, the Company and Mr. Crawford entered into the
Crawford Separation Agreement. Under the terms of the Crawford Separation
Agreement, Mr. Crawford received a lump sum payment equal to his current annual
base salary of $150,000. Additionally, the Company will pay Mr. Crawford's
health insurance premiums through the earlier of (i) April 3, 1999 or (ii) the
date on which he begins full-time employment with another business entity. All
outstanding stock options held by Mr. Crawford were amended to become fully
vested and will terminate if not exercised within 36 months of the Crawford
Separation Date.
The Company also agreed that Mr. Crawford shall serve as a consultant to
the Company from the Crawford Separation Date through June 15, 1998 (the
"Consulting Period"), or longer if extended by mutual agreement. During such
Consulting Period, the Company will pay Mr. Crawford the sum of $800 per day for
each day for which consulting services are provided. In addition, on the
Crawford Separation Date, Mr. Crawford received a cash bonus of $60,000 and an
option to purchase 25,000 shares of the Company's Common Stock (the
"Supplemental Option"), with an exercise price of $4.69 per share, the fair
market value on the date of grant. The Supplemental Option will be fully vested
and exercisable as of the date of grant and will terminate if not exercised
within 36 months of the Crawford Separation Date.
In exchange for the above-referenced consideration, Mr. Crawford released
the Company from any and all obligations which may have arisen directly or
indirectly from Mr. Crawford's employment.
On September 30, 1997, Dr. Ripka retired as Senior Vice President,
Chemical Research of the Company. Under the terms of the separation agreement
entered into between Dr. Ripka and the Company, Dr. Ripka received a lump sum
payment of $87,500, which was equal to six months of his base salary, with the
remainder of his then-current annual base salary of $175,000 to be paid
bi-monthly through April 1998. Additionally, the Company will pay Dr. Ripka's
health insurance premiums for one year from the Ripka Separation Date. Further,
all outstanding stock options held by Dr. Ripka were amended to become fully
vested and terminate if not exercised within 24 months of the Ripka Separation
Date. In exchange for the above-referenced consideration, Dr. Ripka released
the Company from any and all obligations which may have arisen directly or
indirectly from Dr. Ripka's employment.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE(1)
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") consists of Ms. Vitullo and Dr. Thompson. Neither of the members
is currently an officer or an employee of the Company. The Committee is
responsible for setting and administering the Company's policies governing
employee compensation and administering the Company's employee benefit plans, as
well as reviewing and granting options to the executive officers and all
eligible employees. The Committee evaluates the performance of management and
determines compensation policies and levels. The full Board of Directors
reviews the Committee's recommendations regarding the compensation of executive
officers and has ultimate responsibility regarding compensation decisions. The
Board approved the Committee's recommendations in 1997.
- -----------------------
(1) The material in this Report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference into any filing
of the Company under the Securities Act of 1933, as amended, or the Exchange Act
whether made before or after the date hereof and irrespective of any
incorporation language contained in such filing.
18
<PAGE>
COMPENSATION PROGRAM
Annual compensation for the Company's executive officers consists of three
elements: a cash salary, stock option grants and event-driven cash bonus awards.
As in previous years, to make compensation determinations, the Committee
reviewed past and present compensation information with respect to management at
other biotechnology companies in similar geographic areas and at similar stages
of growth and development, as well as a number of industry surveys regarding
short- and long-term executive compensation. This includes certain companies
which are components of either or both of the Nasdaq CRSP Total Return Index for
The Nasdaq Stock Market (U.S. Companies) ("Nasdaq US") or Nasdaq Pharmaceutical
Index ("Nasdaq PH"), the market indices included in the performance graph which
is included in this Proxy Statement. Based in part on this survey information,
the Committee generally sets salaries in the median range for companies of
comparable size in similar industries. The Committee also considers the
individual performance and responsibilities of the executive officers.
Currently, the executive officers are compensated at approximately the median
for comparable companies reviewed by the Committee or are slightly above the
median for those officers whose experience and responsibilities are above the
average level described for the position surveyed.
In making executive compensation decisions, the Committee believes that
compensation of executives should be directly linked to overall Company
performance and the long-term value created for its stockholders, as well as
individual performance. To this end, the Company's compensation programs,
including salary and incentives, seek to provide competitive compensation that
is reflective of both Company and individual performance. The Company considers
a number of factors, including the following, in determining the elements of
compensation for its executive officers.
- Compensation should be meaningfully related to the long-term value
created for stockholders.
- Compensation programs should support the short- and long-term
strategic goals and objectives of the Company.
- Compensation programs should reflect and promote the Company's values,
and reward individuals based on their contributions to the Company's
success.
- In order to attract and retain well-qualified executives, the
Company's compensation decisions take into account competitive pay
levels.
- While base compensation should be determined by individual
contribution, the actual amounts earned by executives in variable
compensation programs should be dictated by how the Company performs.
BASE SALARY. The Committee's policy is to review base salary for the Chief
Executive Officer and each of the Company's executive officers in late fall each
year for the following year. In December 1997, all executive base salaries were
reviewed for fiscal year 1998. Based on performance factors as outlined below,
the executives received an average increase of 12%. The Committee reviewed
executive salaries for other biotechnology companies at a comparable stage of
development and financial condition. The Committee also reviewed a number of
criteria, including performance of the Company and the individual executive,
relative experience and responsibilities, and competitive pay practices. Such
criteria for the Company's current stage of development include growth and
strengthening of existing collaborative agreements, achievement of product
development milestones, progress in preclinical trials of new lead compounds,
progress in clinical research and new drug discovery programs, continued
presentation of information to the scientific community, and recruitment and
retention of key personnel.
19
<PAGE>
STOCK OPTION GRANTS. The Company uses its stock option program to further align
the interests of stockholders and management by creating common incentives
related to the possession by management of a substantial economic interest in
the long-term appreciation of the Company's Common Stock. In December 1997, the
Committee granted options to executive officers based on performance and
contributions during the previous year. Items considered by the Committee were
each officer's position and responsibilities, the individual officer's
performance and contributions for the period reviewed, the equity incentives
paid to comparable officers at similar companies, the number of previously
granted options, and the desire to provide greater incentives during 1998 to
meet Company objectives.
ANNUAL BONUS. The Committee has discretionary authority to award bonuses to
executive officers and to other key employees based on individual and Company
performance. The Company has not established a specific annual bonus program
with preset goals. The Committee reviewed Company achievements and individual
performance during 1997. The types of achievements the Committee reviewed were
attainment of major product research and development milestones, entry into
collaborative relationships, obtaining corporate financing and controlling
expenditures.
COMPANY PERFORMANCE/CHIEF EXECUTIVE OFFICER COMPENSATION. During 1997, Mr.
Woods led the Company's continued progress in its strategic planning, business
development programs and ongoing collaborations. The Committee took note of his
contributions and in December 1997, to recognize Mr. Woods' efforts and
accomplishments in a challenging business environment, specifically with respect
to developmental milestones and strengthening of the Company's collaborative
position, the Committee approved an 11% salary increase for 1998. The Committee
also awarded a cash bonus to Mr. Woods in the amount of $100,000 for progress
made in the Company's collaborative relationships. In addition, Mr. Woods was
granted options to purchase 125,000 shares of Common Stock at an exercise price
of $4.3125 per share in recognition of his performance in his duties as Chief
Executive Officer and to provide Mr. Woods with additional incentives to meet
the Company's objectives. This brings Mr. Woods' total number of stock options
outstanding to 500,000.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1,000,000 of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1,000,000 may
be deducted if it is "performance-based compensation" within the meaning of the
Code.
The Committee has determined that stock options granted under the 1991 Plan
with an exercise price at least equal to the fair market value of the Company's
Common Stock on the date of grant shall be eligible to be treated as
"performance-based compensation."
Nicole Vitullo, Chairwoman W. Leigh Thompson, Jr., M.D., Ph.D.
20
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the five years ended December 31, 1997 to two
indices: The Nasdaq US and the Nasdaq PH. The total return for each of the
Company's stock, the Nasdaq US and the Nasdaq PH assumes the reinvestment of
dividends, although dividends have never been declared on the Company's Common
Stock. The Nasdaq US tracks the aggregate price performance of equity
securities of companies traded on The Nasdaq Stock Market (U.S. Companies). The
Nasdaq PH tracks the aggregate price performance of equity securities of
pharmaceutical companies listed under the Standard Industrial Classification
("SIC") code 283 (drugs) and traded on The Nasdaq Stock Market. The Company's
Common Stock is traded on The Nasdaq Stock Market and is a component of both the
Nasdaq US and the Nasdaq PH.(1)
Comparison of Five Year Cumulative
Total Return on Investment (2)
[GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Corvas NASDAQ US NASDQ PH
--------------------------------------------
Date Indexed Indexed Indexed Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Dec-92 100.000 100.000 100.000
Mar-93 63.492 99.056 77.445
Jun-93 69.841 100.958 81.615
Sep-93 52.381 109.467 88.482
Dec-93 57.143 111.619 95.894
Mar-94 47.619 106.927 78.213
Jun-94 39.683 101.928 68.269
Sep-94 31.746 110.367 76.891
Dec-94 26.984 109.108 72.174
Mar-95 23.810 118.948 77.916
Jun-95 31.746 136.059 90.619
Sep-95 57.143 152.447 113.229
Dec-95 71.429 154.306 132.033
Mar-96 69.841 161.503 137.373
Jun-96 61.905 195.131 133.439
Sep-96 58.730 180.898 136.490
Dec-96 71.429 189.789 132.417
Mar-97 69.841 179.502 125.754
Jun-97 82.540 212.405 135.754
Sep-97 65.079 248.334 152.296
Dec-97 49.206 232.896 136.835
</TABLE>
- ----------------------------
(1) The material in this Report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference into any filing
of the Company under the Securities Act of 1933, as amended, or the Exchange Act
whether made before or after the date hereof and irrespective of any
incorporation language contained in such filing.
(2) Assumes $100 invested on December 31, 1992 in the Company's Common Stock,
the Nasdaq US and the Nasdaq PH.
21
<PAGE>
CERTAIN TRANSACTIONS
In December 1994, Corvas entered into a strategic alliance agreement with
Schering-Plough to collaborate on the discovery and commercialization of orally
active thrombin inhibitor drugs for the prevention and treatment of chronic
cardiovascular disorders. Under the terms of the initial agreement,
Schering-Plough compensated the Company for certain costs of research and
preclinical development of thrombin inhibitors over a two-year period which
ended December 31, 1996. Schering-Plough, which is responsible for certain
preclinical development, all future clinical trials and regulatory activities,
received exclusive worldwide manufacturing and marketing rights for any
resulting thrombin inhibitors. In January 1997, Schering-Plough selected a
clinical development candidate in the thrombin program and paid Corvas a
$3,000,000 milestone payment. Schering-Plough is expected to begin Phase I
clinical trials on this candidate in 1998. Corvas may also receive additional
milestone payments and royalties on sales of therapeutics resulting from this
alliance.
In conjunction with the December 1994 agreement, Schering-Plough acquired
an exclusive option to expand its alliance with the Company to include Factor Xa
inhibitors. In December 1996, Schering-Plough exercised this option and agreed
to compensate Corvas for certain costs of research and preclinical development
of Factor Xa inhibitors over a two-year period ending December 31, 1998.
Schering-Plough, which is responsible for preclinical development, all clinical
trials and regulatory activities, received exclusive worldwide marketing rights
for any resulting Factor Xa inhibitors. Corvas retained certain manufacturing
rights and may in the future receive milestone payments and royalties on sales
of therapeutics resulting from this alliance.
Upon execution of the initial agreement in 1994, Schering-Plough purchased
1,000,000 shares of Series A Convertible Preferred Stock of the Company,
resulting in net proceeds of $4,864,000. Upon exercise of the Factor Xa option
in 1996, Schering-Plough purchased 250,000 shares of Series B Convertible
Preferred Stock of the Company, resulting in net proceeds of $2,000,000.
Schering-Plough beneficially owns all of the outstanding shares of Series A and
Series B Convertible Preferred Stock, or approximately 8.2% of the outstanding
securities of the Company on an as-converted basis. Revenue of $4,000,000,
$5,000,000 and $7,000,000 were recognized under these agreements in each of
1995, 1996 and 1997, respectively, and $5,000,000 is anticipated to be
recognized in 1998. Through the end of 1997, Corvas has received a total of
$27,000,000 from Schering-Plough, of which $4,000,000 is recorded as deferred
revenue at December 31, 1997. If all milestones on these programs are met,
Corvas would receive an additional $54,000,000 in milestone payments, plus
royalties on any sales of commercialized products.
In June 1997, the Company entered into an additional license and
collaboration agreement with Schering-Plough which covers the design and
development of orally-bioavailable inhibitors of a key protease necessary for
hepatitis C virus replication. Under the terms of this agreement,
Schering-Plough received an exclusive worldwide license for products developed
from Corvas compounds under the agreement. Schering-Plough is responsible for
all of the development, manufacturing and marketing of any resulting inhibitors.
The Company received a license fee of $250,000 and received prepaid research
funding for a one-year period. Revenue of $1,169,000 was recognized under this
agreement in 1997. The initial term of the research program is one year;
Schering-Plough may extend the program for up to two additional one-year
periods. The funding for each extension year will be dependent upon the
manpower applied to the program, within an established minimum and maximum. The
Company may also receive milestone payments and royalty payments on product
sales if products are successfully commercialized from this agreement.
There is no assurance that products will be successfully developed and
commercialized under any of these alliances.
22
<PAGE>
In June 1996, as a recruiting incentive, the Company loaned Mr. Woods
$200,000, interest-free, in connection with his relocation to San Diego County,
California. The loan was evidenced by an interest-free promissory note, and was
originally due on the earlier of (i) December 4, 1996, (ii) the closing, or any
transfer of, Mr. Woods' Former Residence, or (iii) within 90 days of Mr. Woods'
termination of employment with the Company. To further assist Mr. Woods in
selling the Former Residence, in December 1996, the Company agreed to extend the
Original Note to be payable on the earlier of (i) December 7, 1997, (ii) the
closing, or any transfer of, Mr. Woods' Former Residence, or (iii) within 90
days of Mr. Woods' termination of employment with the Company.
On May 1, 1997, the Company agreed to pay the difference between the
original purchase price paid by Mr. Woods and the sales price of the Former
Residence once sold, in an amount not to exceed $47,500. The Former Residence
was sold on August 28, 1997, and Mr. Woods paid $47,500 against the Original
Note, thereby reducing the outstanding balance to $152,500. Also on August 28,
1997, Mr. Woods executed an Amended Note in the amount of $152,500 in favor of
the Company. The Amended Note is secured by the rights, title and interest in a
lawsuit and any proceeds thereof related to Mr. Woods' current residence, and is
due on the earlier of (i) September 18, 1998, (ii) the settlement or other final
determination of the Lawsuit, or (iii) within 90 days of Mr. Woods' termination
of employment with the Company.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly
presented to the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
Whether or not you intend to be present at the Annual Meeting, we urge you
to return your signed Proxy promptly.
By Order of the Board of Directors,
/s/ JEAN ELLIS
--------------
JEAN ELLIS
Corporate Secretary
April 20, 1998
23
<PAGE>
CORVAS INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Randall E. Woods and George P. Vlasuk,
Ph.D. or either of them, each with full power of substitution, as proxies to
vote at the Annual Meeting of Stockholders of Corvas International, Inc. (the
"Company") to be held on May 28, 1998 at 3:00 p.m., local time, at the Sheraton
Grande Torrey Pines located at 10950 Torres Pines Road, La Jolla, California,
and at any adjournment or adjournments thereof, hereby revoking any proxies
heretofore given, to vote all shares of common stock of the Company held or
owned by the undersigned as directed below, and in their discretion upon such
other matters as may come before the meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, WILL
BE VOTED FOR ALL NOMINEES FOR ELECTION LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED AND IN
FAVOR OF PROPOSAL 2.
(TO BE SIGNED ON REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
CORVAS INTERNATIONAL, INC.
MAY 28, 1998
[ARROW] PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED [ARROW]
<TABLE>
<CAPTION>
<S><C>
A /X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / Nominees: M. Blake Ingle, Ph.D. 2. Ratification of KPMG Peat Marwick / / / / / /
Directors. Randall E. Woods LLP as the Company's independent
R. Douglas Norby public accountants for fiscal year
1998.
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S)
- ----------------------------------------------------------
SIGNATURES DATE
------------------------------------------------ ----------------
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS, EACH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEES, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
</TABLE>
