<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 Rule 14a-11(c) or Rule 14a-12
Matrix Pharmaceutical, Inc.
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(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
MATRIX PHARMACEUTICAL, INC.
34700 CAMPUS DRIVE
FREMONT, CALIFORNIA 94555
APRIL 16, 1998
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of Matrix Pharmaceutical, Inc. (the "Company"), which will be
held at 10:00 A.M. on May 18, 1998, at the Company's headquarters, 34700 Campus
Drive, Fremont, California 94555.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals:
(i) to elect eight directors to serve as the Company's Board of
Directors for the ensuing year or until their successors are duly
elected and qualified;
(ii) to ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending
December 31, 1998.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote IN FAVOR OF each
such proposal.
After reading the Proxy Statement, please mark, date, sign and return by no
later than May 8, 1998, the enclosed proxy card in the accompanying reply
envelope. If you attend the Annual Meeting and vote by ballot, your proxy will
be automatically revoked and only your vote at the Annual Meeting will be
counted. YOUR SHARES CANNOT BE VOTED UNLESS YOU MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY, OR ATTEND THE ANNUAL MEETING IN PERSON.
Copies of the Matrix Pharmaceutical, Inc. 1997 Annual Report to
Stockholders as well as the Company's Annual Report on Form 10-K are also
enclosed.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Michael D. Casey
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY
IN THE ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE SO THAT IF YOU
ARE UNABLE TO ATTEND THE ANNUAL MEETING YOUR SHARES MAY BE
VOTED.
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<PAGE>
MATRIX PHARMACEUTICAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1998
TO THE STOCKHOLDERS OF MATRIX PHARMACEUTICAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Matrix Pharmaceutical, Inc., a Delaware corporation (the
"Company"), will be held at 10:00 A.M. local time on Monday, May 18, 1998, at
the Company's headquarters, at 34700 Campus Drive, Fremont, California 94555,
for the following purposes:
1. To elect eight directors to serve as the Company's Board of Directors
for the ensuing year or until their respective successors are duly
elected and qualified.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1998.
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Stockholders of record at the close of business on March 23, 1998 are
entitled to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. The stock transfer books will not be closed between the
record date and the date of the Annual Meeting. A list of the stockholders
entitled to vote at the Annual Meeting will be available for inspection at the
Company's offices for a period of 10 days prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you plan to attend, please carefully read the
accompanying Proxy Statement, which describes the matters to be voted upon at
the Annual Meeting, and mark, date, sign and return the enclosed proxy card in
the reply envelope provided. Should you receive more than one proxy because
your shares are registered in different names and addresses, each proxy should
be returned to ensure that all your shares will be voted. You may revoke your
proxy at any time prior to the Annual Meeting. If you attend the Annual Meeting
and vote by ballot, your proxy vote will be revoked automatically and only your
vote at the Annual Meeting will be counted. The prompt return of your proxy
card will assist us in preparing for the Annual Meeting.
Sincerely,
James R. Glynn
CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER
AND ASSISTANT SECRETARY
Fremont, California
April 16, 1998
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY AND PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS
POSSIBLE.
<PAGE>
MATRIX PHARMACEUTICAL, INC.
34700 Campus Drive
Fremont, California 94555
_______________________________
PROXY STATEMENT
_______________________________
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1998
GENERAL INFORMATION FOR STOCKHOLDERS
THE ENCLOSED PROXY ("PROXY") IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS (THE "BOARD") OF MATRIX PHARMACEUTICAL, INC., A DELAWARE CORPORATION
(THE "COMPANY"), FOR USE AT THE 1998 ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL
MEETING") TO BE HELD AT 10:00 A.M. ON MAY 18, 1998 AT THE COMPANY'S
HEADQUARTERS, 34700 CAMPUS DRIVE, FREMONT, CALIFORNIA 94555, AND AT ANY
ADJOURNMENT THEREOF.
This Proxy Statement and the accompanying form of Proxy was first mailed to
the stockholders entitled to vote at the Annual Meeting on or about April 16,
1998.
RECORD DATE AND VOTING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. Stockholders of record at the close of business
on March 23, 1998, are entitled to notice of and to vote at the Annual Meeting.
As of the close of business on such date, there were 21,933,765 shares of the
Company's common stock (the "Common Stock") outstanding and entitled to vote,
held by 271 stockholders of record. No shares of the Company's preferred stock
are outstanding. Stockholders may not cumulate votes in the election of
directors. Directors are determined by a plurality vote. The other matters
submitted for stockholder approval at this Annual Meeting will be decided by the
affirmative vote of a majority of shares present in person or represented by
proxy and entitled to vote on such matters. Each stockholder is entitled to one
vote for each share of Common Stock held by such stockholder as of the record
date. If a choice as to the matters coming before the Annual Meeting has been
specified by a stockholder on the Proxy, the shares will be voted accordingly.
If no choice is specified, the shares will be voted IN FAVOR OF the election of
the eight directors nominated by the Board unless the authority to vote for the
election of directors (or for any one or more nominees) is withheld and, if no
contrary instructions are given, the proxy will be voted IN FAVOR OF the
approval of Proposal Two described in the accompanying Notice of Annual Meeting
of Stockholders and in this Proxy Statement. 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 (I.E., the
submission of a Proxy by a broker or nominee specifically indicating the lack of
discretionary authority to vote on the matter.) Abstentions and broker
non-votes are counted for purposes of determining the presence or absence of a
quorum (at least 50% of the voting stock) for the transaction of business.
Abstentions will be counted towards the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes,
whereas broker non-votes will not be counted for purposes of determining whether
a proposal has been approved.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or
<PAGE>
accommodation to allow him or her to participate at the Annual Meeting may
request reasonable assistance or accommodation from the Company by contacting
Peter Dworkin in Investor Relations in writing at 34700 Campus Drive,
Fremont, California 94555 or by telephone at (510) 742-9900. To provide the
Company sufficient time to arrange for reasonable assistance, please submit
such requests by May 8, 1998.
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation may revoke it
at any time prior to exercise by filing with the Secretary of the Company at its
principal executive offices at 34700 Campus Drive, Fremont, California 94555, a
written notice of such revocation or a duly executed Proxy bearing a later date,
or by attending the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of the Notice of Annual Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished
to brokerage houses, fiduciaries and custodians holding shares in their names
that are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. To assure that a quorum will be present in
person or by proxy at the Annual Meeting, it may be necessary for certain
officers, directors, employees or other agents of the Company to solicit proxies
by telephone, facsimile or other means or in person. The Company will not
compensate such individuals for any such services. Other than as described
above, the Company does not presently intend to solicit proxies other than by
mail.
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
POSTAGE-PREPAID, RETURN ENVELOPE BY NO LATER THAN MAY 8, 1998 SO THAT IF YOU ARE
UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997 (THE "ANNUAL REPORT") AND THE ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1997, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "FORM 10-K"), HAVE BEEN MAILED CONCURRENTLY WITH THE
MAILING OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT TO ALL STOCKHOLDERS
ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL MEETING. NEITHER THE ANNUAL
REPORT NOR THE FORM 10-K IS CONSIDERED PROXY SOLICITING MATERIAL.
2
<PAGE>
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors consisting of between five and nine members. The number of directors
is currently set at eight. The term of office of all eight directors expires at
the Annual Meeting. At the Annual Meeting, a Board of eight directors will be
elected to serve until the Company's next Annual Meeting, or until their
successors shall have been duly elected and qualified or until their death,
resignation or removal. The Board has selected eight nominees, all of whom are
current directors of the Company. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unavailable to serve. Unless otherwise instructed, the Proxy holders
will vote the Proxies received by them IN FAVOR OF the nominees named below.
The eight candidates receiving the highest number of affirmative votes of all
the shares entitled to vote at the Annual Meeting will be elected. If any
nominee is unable to or declines to serve as a director, the Proxies may be
voted for a substitute nominee designated by the current Board. As of the date
of this Proxy Statement, the Board is not aware of any nominee who is unable or
will decline to serve as a director.
INFORMATION WITH RESPECT TO NOMINEES
Set forth below is information regarding the nominees:
<TABLE>
<CAPTION>
Name Position(s) with the Company Age Director Since
---- ---------------------------- --- --------------
<S> <C> <C> <C>
Michael D. Casey . . . . . . . . . Director, President and Chief Executive Officer 52 1997
J. Stephan Dolezalek . . . . . . . Director and Secretary 41 1994
James R. Glynn . . . . . . . . . . Director, Chief Operating Officer, Chief Financial Officer 51 1997
and Assistant Secretary
Marvin E. Jaffe, M.D . . . . . . . Director 61 1997
Bradley G. Lorimier. . . . . . . . Director 52 1997
Edward E. Luck . . . . . . . . . . Chairman of the Board 47 1985
John E. Lyons. . . . . . . . . . . Director 72 1993
Julius L. Pericola . . . . . . . . Director 69 1993
</TABLE>
BUSINESS EXPERIENCE OF NOMINEES
MR. CASEY has been President, Chief Executive Officer and a director of the
Company since September 1997. From November 1995 to December 1996, he was
Executive Vice President of Schein Pharmaceutical, Inc., ("Schein"), a generic
and ethical pharmaceutical company, and in December 1996, he was appointed
President of the retail and specialty products division of Schein. From June
1993 to November 1995, he served as President and Chief Operating Officer of
Genetic Therapy, Inc., a biopharmaceutical company. Mr. Casey was President of
McNeil Pharmaceutical, a unit of Johnson & Johnson, from 1989 to June 1993 and
Vice President, Sales and Marketing for the Ortho Pharmaceutical Corp. ("Ortho")
subsidiary of Johnson & Johnson from 1985 to 1989. Previously, he held a number
of sales and marketing positions with Ortho.
MR. DOLEZALEK has served as a director of the Company since October 1994
and as secretary since June 1997. Mr. Dolezalek has been an attorney with the
firm of Brobeck, Phleger & Harrison LLP, principal outside counsel to the
Company since 1984, and has been a partner in that firm since 1989. Mr.
Dolezalek serves as chairman of the Life Sciences Practice Group of Brobeck,
Phleger & Harrison LLP.
3
<PAGE>
MR. GLYNN was named Chief Operating Officer of the Company in September
1997 and has served as Chief Financial Officer since July 1995 and Assistant
Secretary and director of the Company since June 1997. Mr. Glynn served as
interim President and Chief Executive Officer from June to September 1997. He
joined the Company in July 1995 as Senior Vice President, Chief Financial
Officer and Secretary. Prior to joining the Company, from 1987 to February
1995, he served as Executive Vice President, Chief Financial Officer and
director of Mycogen Corporation. From 1982 to 1987, Mr. Glynn was Vice
President, Finance and Treasurer of Lubrizol Enterprises, Inc., a venture
development company.
DR. JAFFE was appointed a director of the Company in December 1997. He was
President of the R.W. Johnson Pharmaceutical Research Institute ("PRI") from its
founding in 1988 until his retirement in April 1994. From 1970 to 1988, Dr.
Jaffe held a number of medical management positions at Merck Sharp & Dohme
Research Laboratories, including Vice President, Clinical Research from 1978 to
1987, and Senior Vice President, Medical Affairs, from 1987 to 1988. He is a
board certified neurologist and a Clinical Associate Professor of Neurology at
Jefferson Medical College of Thomas Jefferson University. He is also a director
of Chiroscience Group plc, Immunomedics Inc., and Titan Pharmaceuticals, Inc.
MR. LORIMIER was appointed a director of the Company in December 1997. He
served as Senior Vice President, Business Development and a director of Human
Genome Sciences, Inc. from March 1994 to July 1997. Previously, he was Vice
President, Corporate Development, at Ortho Pharmaceutical Corp., a subsidiary of
Johnson & Johnson, from 1991 to March 1994, Vice President, Licensing on the
corporate staff of Johnson & Johnson from 1986 to 1991, and Vice President,
Licensing at Sterling Drug Inc. From 1984 to 1986, he has also held licensing,
business planning, and marketing positions at Armour Pharmaceutical Co. and
Bristol Laboratories.
MR. LUCK, a co-founder of the Company, has held the position of Chairman of
the Board since 1989. From 1985 to 1989, he held the positions of President and
Chief Executive Officer of the Company. Prior to founding the Company, he was
co-founder and President of Cytoscan, Inc., a cancer screening company from 1980
to 1982. He was co-founder, Vice President and Director of Technical Affairs of
Collagen Corporation from 1975 to 1979.
MR. LYONS has been a director of the Company since February 1993. He spent
more than 40 years with Merck & Co., Inc. ("Merck"), most recently as Vice
Chairman from 1988 to his retirement as an officer in 1991. In addition, he
served as Executive Vice President of Merck from 1985 to 1988 and as Corporate
Senior Vice President and President of the Merck, Sharp & Dohme Division from
1975 to 1985. Mr. Lyons currently serves as a director of Synaptic
Pharmaceutical Corporation and Immunex Corporation.
MR. PERICOLA has been a director of the Company since January 1993. He
worked for 40 years with Bristol- Myers Squibb Co. ("Bristol-Myers"), most
recently as Executive Vice President of Bristol-Myers International Group from
1985 to his retirement as an officer in 1990. Mr. Pericola also served as
Corporate Senior Vice President of Bristol Myers Company from 1981 to 1990, and
as President of the Bristol Laboratories division from 1975 to 1984. Mr.
Pericola is currently a director of Fujisawa U.S.A., Inc. and a trustee of
Syracuse Research Corporation and Syracuse University.
NUMBER OF DIRECTORS AND RELATIONSHIPS
The Company's Bylaws authorize the Board to appoint the number of directors
serving on the Board, provided that such number shall not be less than five nor
more than nine. The number of directors is currently set at eight. All
directors hold office until the next annual meeting of stockholders, or until
their successors shall have been duly elected and qualified or until their
earlier death, resignation or removal. Officers are appointed to serve at the
discretion of the Board.
There are no family relationships among executive officers or directors of
the Company.
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board held six (6) meetings and took action by unanimous written
consent on two (2) occasions during the fiscal year ended December 31, 1997.
The Board has an Audit Committee and a Compensation Committee, but does not have
a standing Nominating Committee. The Board had an Executive Committee from June
to December 1997. Each director, except Dr. Jaffe and Mr. Lorimier, who were
appointed in December 1997, attended or participated in at least 75% of (i) the
aggregate number of meetings of the Board and (ii) the total number of meetings
held by all the Board committees on which such director served during the 1997
fiscal year.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent public accountants and reviewing their
reports regarding the Company's accounting practices and systems of internal
accounting controls. During the fiscal year ended December 31, 1997, the Audit
Committee consisted of two directors, Messrs. Lyons and Pericola. Mr. Lyons was
appointed by the Board to serve on the Committee on June 25, 1997 to replace Mr.
Alan Salzman, at that time a director of the Company, who was appointed to the
Executive Committee on June 25, 1997. Mr. Salzman was a director of the Company
from 1988 to December 1997. The Audit Committee held one meeting during the
fiscal year ended December 31, 1997, at which both members were in attendance.
The Compensation Committee reviews and approves the Company's general
compensation policies, sets compensation levels for the Company's executive
officers and administers the Company's 1988 Restricted Stock Plan and other
employee (and officer) benefit programs. During the fiscal year ended
December 31, 1997, the Compensation Committee consisted of two directors,
Messrs. Pericola and Lyons. Mr. Lyons was appointed by the Board to serve on
the Committee on June 25, 1997 to replace Mr. Salzman, who was appointed to the
Executive Committee on June 25, 1997. The Compensation Committee met five (5)
times for the fiscal year ended December 31, 1997, at which both members were in
attendance. Furthermore, the Compensation Committee took action by unanimous
written consent on two (2) occasions during the fiscal year ended December 31,
1997.
On June 25, 1997, the Board appointed an Executive Committee, which
included Messrs. Dolezalek, Luck and Salzman, to assist the Company with its
executive search process. The Committee was dissolved on December 2, 1997,
after a successful search for Mr. Casey, the Company's President, Chief
Executive Officer and Director. Mr Salzman resigned from the Board on December
1, 1997.
DIRECTOR COMPENSATION
The non-employee Board members do not receive any cash compensation for
their service on the Board or any Committee of the Board, except for fees
related to consultation agreements between the Company and each of directors
Luck, Lorimier and Jaffe. Each consultation agreement provides for the payment
of $2,500 per full day, $1,250 per half day or $300 per hour for consulting
advice and the payment of $1,000 per day for travel time. Mr. Luck received
consulting fees of $149,500 for the 1997 fiscal year. Consulting fees and
related expenses for directors Lorimier and Jaffe incurred in December 1997 were
$3,587 and $3,660, respectively, both of which were paid in January 1998. All
other non-employee Board members are reimbursed for travel expenses incurred in
attending Board or Committee meetings.
Each non-employee Board member received an automatic option grant for
40,000 shares of Common Stock under the Company's 1991 Directors Stock Option
Plan (the "Directors Plan") on the date of his initial election or appointment
to the Board. Each such initial grant becomes exercisable for one-third of the
shares upon the optionee's completion of each year of Board service over the
three-year period measured from the grant date. However, the option becomes
immediately exercisable for all of the option shares if the optionee dies or
becomes disabled during his period of Board service or if the Company is
acquired by merger or asset sale or if there should occur a change in control of
the Company through a successful tender offer for more than 40% of the Company's
outstanding Common Stock or a change in the majority of the Board effected
through one or more contested elections for Board membership. In addition, on
the date of each Annual Stockholders Meeting, each individual re-elected as a
non-employee Board
5
<PAGE>
member will receive an automatic option grant for 3,000 shares of Common
Stock, provided such individual has served as a Board member for at least six
months prior to the date of the Annual Meeting. Each such annual option
grant becomes exercisable for all the option shares upon the optionee's
completion of one year of Board service measured from the grant date, subject
to acceleration upon an acquisition of the Company by merger or asset sale or
other change in control of the Company. All options under the Directors Plan
have a maximum term of 10 years, subject to earlier termination upon the
optionee's cessation of Board service. Upon the successful completion of a
hostile tender offer for more than 40% of the Company's outstanding Common
Stock, each automatic option grant will be canceled, and the non-employee
Board member will be entitled to a cash distribution from the Company based
upon the tender-offer price.
At the 1997 Annual Stockholders Meeting held on June 25, 1997, Messrs.
Dolezalek, Luck, Lyons, Pericola and Salzman each received an automatic stock
option grant under the Directors Plan for 3,000 shares of Common Stock in
connection with their re-election as non-employee Board members. Each such
option has an exercise price of $6.25 per share, the fair market value per share
of Common Stock on the grant date. This option grant will become exercisable
one year from the grant date, provided the optionee attends all of the regularly
scheduled Board meetings held during that one year period. Should the optionee
not attend all of the scheduled meetings, then the option will lapse as to the
number of shares determined by multiplying the number of total option shares by
a fraction, the numerator of which is the number of such meetings not attended
by the optionee during that one-year period and the denominator of which is the
total number of such meetings held during such period.
On July 1, 1997, Messrs. Dolezalek, Luck and Salzman, the members of the
Executive Committee, each received a stock option grant under the 1988
Restricted Stock Plan for 15,000 shares of Common Stock in connection with their
appointment to the Committee. Each such option has an exercise price of $6.69
per share, the fair market value per share of Common Stock on the grant date and
will become exercisable for 100% of the option shares upon the optionee's
continuation in Board service through the date of the 1998 Annual Meeting. The
option has a maximum term of 10 years, subject to earlier termination upon the
optionee's cessation of Board service. On January 29, 1998, the Board
authorized the acceleration of exercisability of the 15,000-share option that
was issued to Mr. Salzman on July 1, 1997.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE ELECTION OF
EACH OF THE FOLLOWING NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY UNTIL THE
NEXT ANNUAL MEETING, OR UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND
QUALIFIED OR UNTIL THEIR DEATH, RESIGNATION OR REMOVAL.
PROPOSAL TWO - RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board has appointed the firm of Ernst & Young LLP, independent public
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 1998, and is asking the stockholders to ratify this
appointment.
In the event the stockholders fail to ratify the appointment, the Board
will reconsider its selection. Even if the selection is ratified, the Board in
its discretion may direct the appointment of a different independent accounting
firm at any time during the year if the Board feels that such a change would be
in the best interest of the Company and its stockholders. The affirmative vote
of the holders of a majority of the Company's Common Stock present or
represented by Proxy at the Annual Meeting and entitled to vote is required to
ratify the selection of Ernst & Young LLP.
Ernst & Young LLP has served as independent auditors to the Company for the
fiscal year ended December 31, 1997. A representative of Ernst & Young LLP is
expected to be present at the Annual Meeting to respond to appropriate
questions, and will be given the opportunity to make a statement if he or she so
desires.
6
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the duty of the Compensation Committee to review and determine the
salaries and bonuses of executive officers of the Company, including the Chief
Executive Officer, and to establish the general compensation policies for such
individuals. The Compensation Committee also has the sole and exclusive
authority to make discretionary option grants to the Company's executive
officers under the Company's Stock Option Plan.
The Compensation Committee believes that the compensation programs for the
Company's executive officers should reflect the Company's performance and the
value created for the Company's stockholders. In addition, the compensation
programs should support the short-term and long-term strategic goals and values
of the Company and should reward individual contribution to the Company's
success. The Company is engaged in a very competitive industry, and the
Company's success depends upon its ability to attract and retain qualified
executives through the competitive compensation packages it offers to such
individuals.
GENERAL COMPENSATION POLICY. The Compensation Committee's policy is to
provide the Company's executive officers with compensation opportunities which
are tied to their personal performance, the financial performance of the Company
and their contribution to that performance and which are competitive enough to
attract and retain highly skilled individuals. Each executive officer's
compensation package is comprised of three elements: (i) base salary that is
competitive with the market and reflects individual performance, (ii) annual
variable performance awards payable in cash and tied to the achievement of pre-
defined personal and corporate performance targets and (iii) long-term stock-
based incentive awards designed to strengthen the mutuality of interests between
the executive officers and the Company's stockholders. As an officer's level of
responsibility increases, a greater proportion of his or her total compensation
will be dependent upon the Company's financial performance and stock price
appreciation rather than base salary.
FACTORS. The principal factors that were taken into account in
establishing each executive officer's compensation package for the 1997 fiscal
year are described below. However, the Compensation Committee may in its
discretion apply entirely different factors, such as different measures of
financial performance, for future fiscal years.
BASE SALARY - CHIEF EXECUTIVE OFFICER. In setting the base salary level
for the 1997 fiscal year to the Company's Chief Executive Officer, Michael D.
Casey, the Committee reviewed Mr. Casey's qualifications and experience, and
the Company goals for which Mr. Casey has responsibility. In addition, the
Compensation Committee sought to provide him with a base salary which it
believed to be competitive with the base salary levels in effect for other chief
executive officers at similar-sized companies in the industry.
BASE SALARY - OTHER EXECUTIVE OFFICERS. In setting the base salaries of
the executive officers other than the Chief Executive Officer, the Compensation
Committee identified a peer group of 25 companies for comparative compensation
purposes and reviewed the compensation data and surveys of those companies. In
selecting the peer group companies, the Compensation Committee focused primarily
on whether those companies were actually competitive with the Company in seeking
executive talent, whether those companies had a management style and corporate
culture similar to the Company's and whether similar positions existed within
their corporate structure. A majority of the peer group companies surveyed were
also included in the Nasdaq Pharmaceutical Index which the Company has chosen as
the industry index for purposes of the Company Stock Price Performance graph
which follows this report.
7
<PAGE>
The base salary for each executive officer other than the Chief Executive
Officer reflects the salary levels for comparable positions at the peer group
companies as well as the individual's personal performance and internal
alignment considerations. The relative weight given to each factor varies with
each individual in the sole discretion of the Compensation Committee. Each
executive officer's base salary is adjusted each year on the basis of (i) the
Compensation Committee's evaluation of the officer's personal performance for
the year and (ii) the competitive marketplace for persons in comparable
positions. For the 1997 fiscal year, the base salary of the Company's executive
officers was targeted at the 50th percentile of the base salary levels in effect
for comparable positions at the peer group companies, subject to 20% variance
above or below that level for certain officers of the Company.
ANNUAL INCENTIVE COMPENSATION. For the 1997 fiscal year, the Compensation
Committee established an incentive compensation program for the executive
officers. Since the Company is in the development stage, the use of traditional
performance milestones (such as profit levels and return on equity) as the basis
for such incentive compensation was not considered appropriate. Instead, the
incentive awards for the 1997 fiscal year were tied to the achievement of pre-
defined personal and corporate performance targets. The corporate performance
targets for such fiscal year were tied to appreciation in the market price of
the Company's Common Stock. On the basis of the Committee's evaluation of
personal performance for the year as well as the highly competitive market for
senior-level personnel within the pharmaceutical industry, the executive
officers (other than the Chief Executive Officer) received bonuses which ranged
from 11% to 15.9% of their base salary for the year.
LONG TERM INCENTIVES. Generally, stock option grants are made periodically
by the Compensation Committee to each of the Company's executive officers. Each
grant is designed to align the interests of the executive officer with those of
the stockholders and provide each individual with a significant incentive to
manage the Company from the perspective of an owner with an equity stake in the
business. Each grant allows the officer to acquire shares of the Company's
Common Stock at a fixed price per share (not less than 85% of the market price
of the shares on the grant date) over a specified period of time (up to 10
years). Each option becomes exercisable in a series of installments, generally,
over a four-year period, contingent upon the officer's continued employment with
the Company. Accordingly, the option will provide a meaningful return to the
executive officer only if he or she remains employed by the Company during the
vesting period, and then only if the market price of the shares appreciates over
the option term.
The size of the option grant to each executive officer, including the Chief
Executive Officer, is set by the Compensation Committee at a level that is
intended to create a meaningful opportunity for stock ownership based upon the
individual's current position with the Company, the individual's personal
performance in recent periods and his or her potential for future responsibility
and promotion over the option term. In determining the appropriate level of
equity incentive to be provided each individual, the Compensation Committee also
takes into account the number of unvested options held by the executive officer
and the comparable level of equity-based awards provided similar individuals in
the industry as reflected in comparative industry data. However, the relevant
weight given to each of these factors varied from individual to individual for
the grants made during the 1997 fiscal year.
CEO COMPENSATION. As indicated above, the base salary for the Company's
Chief Executive Officer, Michael D. Casey, for the 1997 fiscal year was
established by the Committee on the basis of a detailed review of his
qualifications and the salaries of chief executives of pharmaceutical companies
of similar size. Mr. Casey's base salary is $400,000 per year, subject to
review 12 months from his date of employment and annually thereafter. Mr. Casey
received a sign-on bonus of $150,000 in 1997. He is also eligible to receive a
$50,000 bonus upon completion of six months of employment if certain performance
milestones are attained and is eligible to receive an additional yearly
performance-based bonus beginning in the 1998 fiscal year targeted at 35% of his
base salary. Mr. Casey accordingly did not receive any performance bonuses for
the 1997 fiscal year. Mr. Casey was granted an option to acquire 550,000 shares
of the Company's Common Stock as part of the terms of employment. These options
had an exercise price of $4.125 per share and were originally structured to vest
as follows: 20% of the option immediately upon his commencement of employment,
an additional 20% of the option shares upon his completion of one year of
service and the balance of the option shares in 36 successive equal monthly
installments upon his completion of each additional month of service thereafter.
The options were repriced on October 29, 1997 at an exercise price of $3.94.
Under the repriced option, the vesting schedule will remain the same for any
option shares which were not vested at the time of
8
<PAGE>
the repricing. However, for any shares which were vested at that time, the
new option will become exercisable for 50% of those option shares upon Mr.
Casey's completion of six months of service following the repricing date and
will become exercisable for the remainder of those shares upon his completion
of an additional six months of service. These options will vest in full on
an accelerated basis should Mr. Casey's employment terminate under certain
circumstances within a specified time period following a change in control of
the Company. After the Annual Meeting, he will receive another option grant
to purchase an additional 50,000 shares of Common Stock which will vest over
a four-year period. Mr. Casey also has an automobile allowance that covers
the cost of usage, gasoline, taxes, insurance and maintenance on an
automobile having an approximate retail purchase value of $50,000.
SPECIAL OPTION REGRANT PROGRAM
During the 1997 fiscal year, the Compensation Committee felt that
circumstances had made it necessary for the Company to implement an option
cancellation/regrant program pursuant to which a number of outstanding options
held by the Company's executive officers and other employees under the Option
Plan were cancelled, and new options for the same number of shares were granted
with a lower exercise price per share equal to the market price of the Company's
Common Stock on the regrant date.
The Compensation Committee determined that this program was necessary
because equity incentives are a significant component of the total compensation
package of the Company's employees and play a substantial role in the Company's
ability to retain the services of individuals essential to the Company's long-
term financial success. Prior to the implementation of the program, the market
price of the Company's Common Stock had fallen as a result of two primary
factors. These were, first, a determination by the Company that Phase III
clinical trial data for the Company's AccuSite (fluorouracil/epinephrine)
Injectable Gel product candidate was not sufficient to pursue United States
regulatory approval of AccuSite for treatment of basal cell carcinoma and,
second, notification from the U.S. Food and Drug Administration ("FDA") that the
FDA is not prepared to approve the Company's New Drug Application for AccuSite
for treatment of genital warts. The Compensation Committee felt that the
Company's ability to retain key employees would be significantly impaired,
unless value were restored to their options in the form of regranted options at
the current market price of the Company's Common Stock. All repriced options
are subject to new vesting schedules which require an additional period of
service on each optionee's behalf. The Compensation Committee believes that the
additional service requirement is a fair exchange for the lower exercise price
which will be in effect under the repriced option.
Accordingly, on October 29, 1997, a number of outstanding options held by
the Company's executive officers and other employees with an exercise price in
excess of $3.94 per share were canceled, and new options for the same number of
shares were granted with an exercise price of $3.94 per share, the market price
of the Common Stock on that date. The vesting schedule for each new option has
been restructured to require the optionee to continue in the Company's service
in order to take advantage of the lower exercise price. Accordingly to the
extent the option was vested for one or more shares at the time of the
cancellation and regrant, the new option will only become exercisable for 50% of
those shares upon the optionee's completion of six months of service following
the date of the regrant and will become exercisable for the remainder of those
shares upon his or her completion of an additional six months of service. To
the extent the option was not vested at the time of the cancellation and
regrant, the new option will become exercisable in accordance with the same
vesting schedule as the cancelled option.
As a result of the new vesting schedules imposed on the regranted options,
the Compensation Committee believes that the program strikes an appropriate
balance between the interests of the option holders and those of the
stockholders. The lower exercise prices in effect under the regranted options
make those options valuable once again to the executive officers and key
employees critical to the Company's financial performance. However, those
individuals will enjoy the benefits of the regranted options only if they in
fact continue their employment with the Company and contribute to the Company's
future success.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for
9
<PAGE>
compensation paid to certain of their executive officers, to the extent that
compensation exceeds $1 million per covered officer in any fiscal year. The
limitation applies only to compensation which is not considered to be
performance-based. Non-performance based compensation paid to the Company's
executive officers for the 1997 fiscal year did not exceed the $1 million
limit per officer, and the Compensation Committee does not anticipate that
the non-performance based compensation to be paid to the Company's executive
officers for fiscal 1998 will exceed that limit. The Company's Restricted
Stock Plan has been structured so that any compensation deemed paid in
connection with the exercise of option grants made under that plan with an
exercise price equal to the fair market value of the option shares on the
grant date will qualify as performance-based compensation which will not be
subject to the $1 million limitation. Because it is unlikely that the cash
compensation payable to any of the Company's executive officers in the
foreseeable future will approach the $1 million limit, the Compensation
Committee has decided at this time not to take any action to limit or
restructure the elements of cash compensation payable to the Company's
executive officers. The Compensation Committee will reconsider this decision
should the individual cash compensation of any executive officer ever
approach the $1 million level.
The Board of Directors did not modify any action or recommendation made by
the Compensation Committee with respect to executive compensation for the 1997
fiscal year. It is the opinion of the Compensation Committee that the executive
compensation policies and plans provide the necessary total remuneration program
to properly align the Company's performance and the interests of the Company's
stockholders through the use of competitive and equitable executive compensation
in a balanced and reasonable manner, for both the short and long-term.
Submitted by the Compensation Committee of the Company's Board of
Directors:
John E. Lyons, Member
Julius L. Pericola, Member
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of December 31, 1997, the Compensation Committee of the Board was
comprised of Messrs. Lyons and Pericola. No current or past member of the
Compensation Committee was at any time during the 1997 fiscal year, or at any
time, an officer or employee of the Company or any of its subsidiaries.
No executive officer of the Company served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board or Compensation Committee.
10
<PAGE>
PERFORMANCE GRAPH
The graph depicted below shows the Company's stock price as an index
assuming $100 invested on January 28, 1992 (the date of the Company's initial
public offering) at the then current market price of $15.00 per share, along
with the composite prices of companies listed in the Nasdaq Pharmaceutical Index
and Nasdaq U.S. Stock Market Index. This information has been provided to the
Company by the Nasdaq Stock Market. These indices, which reflect formulas for
dividend reinvestment and weighing of individual stocks, do not necessarily
reflect returns that could be achieved by individual investors.
1998 PROXY STATEMENT
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
Matrix NASDAQ
Pharmaceutical Pharmaceutical NASDAQ Stock
Inc. Index Market Index
<S> <C> <C> <C>
1/28/92 100 100 100
3/31/92 73 85 97
6/30/92 40 71 91
9/30/92 41 67 94
12/31/92 58 81 110
3/31/93 45 59 112
6/30/93 60 62 114
9/30/93 63 67 124
12/31/93 70 73 126
3/31/94 74 59 121
6/30/94 68 52 115
9/30/94 95 58 125
12/31/94 92 55 123
3/31/95 92 59 134
6/30/95 90 69 154
9/30/95 93 86 172
12/31/95 125 100 174
3/31/96 154 104 182
6/30/96 120 101 197
9/30/96 53 103 204
12/31/96 41 100 214
3/31/97 43 95 203
6/30/97 45 103 240
9/30/97 33 115 280
12/31/97 23 104 263
</TABLE>
The indexes above assume the reinvestment of all dividends.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, WHICH MIGHT INCORPORATE FUTURE FILINGS MADE BY
THE COMPANY UNDER THOSE STATUTES, THE PRECEDING COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION AND THE COMPANY STOCK PERFORMANCE GRAPH WILL NOT BE
INCORPORATED BY REFERENCE INTO ANY OF THOSE PRIOR FILINGS, NOR WILL SUCH REPORT
OR GRAPH BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILINGS MADE BY THE
COMPANY UNDER THOSE STATUTES.
11
<PAGE>
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned, for services
rendered in all capacities to the Company and its subsidiaries, for each of the
last three fiscal years by the Company's current Chief Executive Officer, the
Company's former Chief Executive Officer and the four other highest paid
executive officers whose salary and bonus for fiscal 1997 were in excess of
$100,000. The individuals named in the table will be hereinafter referred to as
the "Named Officers." No other executive officer who would have otherwise been
included in such table on the basis of salary and bonus earned for the 1997
fiscal year resigned or terminated employment during that year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation Awards
------------------------------------ -------------------------------------
Securities Restricted Stock All Other
Salary Bonus Other Annual Underlying Options Awards Compensation
Name and Principal Position Year ($) ($)(1) Compensation ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael D. Casey (2) 1997 106,843 150,000 - 1,100,000 (3) - -
President and 1996 - - - - - -
Chief Executive Officer 1995 - - - - - -
Craig R. McMullen (4) 1997 300,000 - 6,000 (5) - - 2,489 (6)
(Former President and 1996 300,000 57,000 6,000 (5) - - 1,188 (6)
Chief Executive Officer) 1995 261,250 100,000 6,000 (5) 40,000 - -
James R. Glynn 1997 211,937 35,000 - 230,000 (3) 175,000 (7) 35,894 (8)
Chief Operating Officer, 1996 190,000 42,050 - 20,000 - 76,188 (8)
Chief Financial Officer and 1995 82,500 18,000 - 90,000 - 15,000 (8)
Assistant Secretary
Richard D. Leavitt, M.D. (9) 1997 220,000 33,000 - 125,000 (3) 175,000 (7) 82,972(10)
Senior Vice President, 1996 18,334 - - 85,000 - 20,000(10)
Medical and Regulatory Affairs 1995 - - - - - -
Richard E. Jones, Ph.D. 1997 181,650 27,250 - 90,000 (3) - 2,661(11)
Vice President, Research 1996 173,000 28,200 - 20,000 - 1,188(11)
and Development 1995 158,833 31,200 - - - -
Andrew G. Korey, Ph.D. 1997 175,000 21,000 - 70,000 (3) - -
Vice President, 1996 175,000 24,950 - 20,000 - -
Business Development/ 1995 164,625 31,800 - - - -
Scientific Licensing
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Bonuses are reported for the year earned, although generally paid in the
subsequent year, except for Mr. Casey's sign-on bonus of $150,000 which
was paid in 1997.
(2) Mr. Casey joined Matrix as President and Chief Executive Officer on
October 6, 1997, with an annualized salary of $400,000 for the 1997
fiscal year.
(3) Includes the following options regranted on October 29, 1997 in exchange
for the cancellation of preexisting options for the same number of
shares with an exercise price per share in excess of $3.94: Michael D.
Casey (550,000 shares); James Glynn (170,000 shares); Richard Leavitt
(105,000 shares); Richard Jones (70,000 shares) and Andrew Korey (60,000
shares).
(4) Mr. McMullen resigned his position as President and Chief Executive Officer
on June 20, 1997.
(5) Represents yearly automobile allowance for Mr. McMullen.
(6) Represents compensation associated with a matching contribution in shares
of Common Stock which the Company made on Mr. McMullen's behalf to the
Company's 401(k) Plan of 194 shares of Common Stock at
12
<PAGE>
$6.125 per share in 1996 and 724 shares of Common Stock at $3.438 per
share in 1997.
(7) Represents a share rights award made by the Compensation Committee on
December 2, 1997 which will entitle Mr. Glynn and Dr. Leavitt to receive
50,000 shares of the Company's Common Stock each. The shares will be
issued in a series of three (3) successive equal annual installments
upon the individual's completion of each year of service over the three
(3) year period measured from the award date. The closing selling price
per share of the Company's Common Stock on the award date was $3.50.
(8) Represents relocation allowance for Mr. Glynn of $15,000 in 1995, $75,000
in 1996 and partial loan forgiveness of $33,333 in 1997. The Company also
made a matching contribution in shares of Common Stock on Mr. Glynn's
behalf to the Company's 401(k) Plan of 194 shares of Common Stock at
$6.125 per share in 1996 and 745 shares of Common Stock at $3.438 per share
in 1997.
(9) Dr. Leavitt joined the Company as Senior Vice President, Medical and
Regulatory Affairs on December 2, 1996, with an annualized salary of
$220,000 for the 1997 fiscal year.
(10) Represents relocation allowance for Dr. Leavitt of $20,000 in 1996 and
$80,424 in 1997. In 1997, the Company also made a matching contribution on
Dr. Leavitt's behalf to the Company's 401(k) Plan in the form of 741
shares of Common Stock at $3.438 per share.
(11) Represents compensation associated with a matching contribution which the
Company made on Mr. Jones' behalf to the Company's 401(k) Plan in the form
of 194 shares of Common Stock at $6.125 per share in 1996 and 774 shares
of Common Stock at $3.438 per share in 1997.
OPTIONS AND STOCK APPRECIATION RIGHTS
The following table provides information with respect to the stock option
grants made during fiscal 1997 to the Named Officers. No stock appreciation
rights were granted during such fiscal year to the Named Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term (3)
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options Granted to
Underlying Options Employees in Exercise Expiration
Name Granted (#)(1) Fiscal Year Price (2) Date 5 % ($) 10 % ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Casey 1,100,000 (4) 36.30% $3.94 10/29/07 $3,529,790 $5,620,450
Craig R. McMullen - - - - - -
James R. Glynn 230,000 (5) 7.59% $3.94 10/29/07 $1,091,026 $1,737,230
Richard D. Leavitt, M.D. 125,000 (6) 4.12% $3.94 10/29/07 $673,869 $1,072,995
Richard E. Jones, Ph.D. 90,000 (7) 2.97% $3.94 10/29/07 $449,246 $715,330
Andrew G. Korey, Ph.D. 70,000 (8) 2.31% $3.94 10/29/07 $385,068 $613,140
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain options for each individual were originally granted at a
higher exercise price and were cancelled on October 29, 1997 in
exchange for new options for the same number of shares with an
exercise price of $3.94 per share. Under the new option, the vesting
schedule will remain the same for any option shares which were not
vested at the time of the cancellation and the regrant. To the extent
the option was vested for one or more shares at that time, the new
option will vest as to 50% of those shares upon the optionee's
completion of six
13
<PAGE>
(6) months of service measured from the regrant date and will vest as
to the balance of those shares upon the optionee's completion of an
additional six (6) months of service thereafter. These options will
vest in full on an accelerated basis should the officers' employment
terminate under certain circumstances within a specified time period
following a change in control of the Company.
Each of the granted options will immediately become exercisable for all
of the option shares in the event the Company is acquired by a merger or
asset sale, unless the options are assumed by the acquiring entity.
Each option has a maximum term of 10 years, subject to earlier
termination in the event of the optionee's cessation of service with the
Company.
(2) The exercise price may be paid in cash or in shares of Common Stock. The
option may also be exercised through a cashless exercise procedure pursuant
to which the shares purchased under the option are immediately sold by a
designated brokerage firm, and a portion of the sale proceeds is paid
directly to the Company in payment of the option exercise price for the
purchased shares. The Company may also allow the optionee to finance the
option exercise by delivering a promissory note in payment of the exercise
price for the purchased shares and any taxes incurred by the optionee in
connection with such exercise.
(3) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the 10-year option term will be at the assumed five percent and ten percent
levels or at any other defined level. Unless the market price of the
Common Stock appreciates over the option term, no value will be realized
from the option grants made to the executive officers. The indicated
dollar amounts are based on the options granted during the 1997 fiscal
year, net of options granted and cancelled in such fiscal year.
(4) Includes (a) the stock option grant for 550,000 shares he received on
October 2, 1997 and (b) the new option for the same number of shares
issued in cancellation of that option on October 29, 1997 with an
exercise price of $3.94 per share. The original 550,000-share option
was to vest as follows: the option was to become excercisable for 20% of
the option shares immediately upon his commencement of employment, an
additional 20% of the option shares was to become exercisable upon
completion of one year of service measured from the grant date, and the
option was to become exercisable for the remaining option shares in a
series of 36 successive equal monthly installments upon the optionee's
completion of each additional month of service over the next 36 months
thereafter.
(5) Includes (a) the stock option grants for 50,000 shares and 10,000 shares
he received on May 20, 1997 and July 1, 1997, respectively, (b) the new
options for the same number of shares issued in cancellation of those
options on October 29, 1997 with an exercise price of $3.94 per share and
(c) the new options issued in cancellation for all other outstanding
options held by him on that date with an exercise price in excess of $3.94
per share. The original 50,000-share option granted in May 1997 was to
vest as follows: the option was to become exercisable for the option
shares in a series of forty-eight (48) successive equal monthly
installments upon optionee's completion of each month of service over the
forty-eight (48)-month period measured from the grant date. The original
10,000-share option granted in July 1997 was to vest as follows: the
option was to become exercisable for (i) 50% of the option shares upon
optionee's completion of twelve (12) months of service measured from the
grant date and (ii) 2.083% of the option shares upon the optionee's
completion of each additional month of service over the next twenty-four
(24) months thereafter.
(6) Includes (a) the stock option grant for 20,000 shares he received on July
1, 1997, (b) the new option for the same number of shares issued in
cancellation of that option on October 29, 1997 with an exercise price of
$3.94 per share and (c) the new options issued in cancellation for all
other outstanding options held by him on that date with an exercise price
in excess of $3.94 per share. The original 20,000-share option granted in
fiscal 1997 was to vest as follows: the option was to become exercisable
for (i) 50% of the option shares upon optionee's completion of twelve (12)
months of service measured from the grant date and (ii) 2.083% of the
option shares upon the optionee's completion of each additional month of
service over the next
14
<PAGE>
twenty-four (24) months thereafter.
(7) Includes (a) the stock option grant for 20,000 shares he received on July
1, 1997, (b) the new option for the same number of shares issued in
cancellation of that option on October 29, 1997 with an exercise price
of $3.94 per share and (c) the new options issued in cancellation for
all other outstanding options held by him on that date with an exercise
price in excess of $3.94 per share. The original 20,000-share option
granted in fiscal 1997 was to vest as follows: the option was to become
exercisable for (i) 50% of the option shares upon optionee's completion
of twelve (12) months of service measured from the grant date and (ii)
2.083% of the option shares upon the optionee's completion of each
additional month of service over the next twenty-four (24) months
thereafter.
(8) Includes (a) the stock option grant for 10,000 shares he received on July
1, 1997, (b) the new option for the same number of shares issued in
cancellation of that option on October 29, 1997 with an exercise price of
$3.94 per share and (c) the new options issued in cancellation for all
other outstanding options held by him on that date with an exercise price
in excess of $3.94 per share. The original 10,000-share option granted in
fiscal 1997 was to vest as follows: the option was to become exercisable
for (i) 50% of the option shares upon optionee's completion of twelve (12)
months of service measured from the grant date and (ii) 2.083% of the
option shares upon the optionee's completion of each additional month of
service over the next twenty-four (24) months thereafter.
OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the exercise of options
during fiscal 1997 by the Named Officers and unexercised options held as of the
end of such year by such individuals. No stock appreciation rights were
exercised by the Named Officers during such fiscal year, and no stock
appreciation rights were held by such individuals at the end of such fiscal
year.
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND 1997 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
No. of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options at
Options at FY-End(#) FY-End
----------------------------------------------------------
Shares Acquired on Value Realized Exercisable Unexercis- Exercisable Unexercis-
Name Exercise (2) able ($) (1) able ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Craig R. McMullen 204,762 $833,381 72,427 -- $14,622 --
Michael D. Casey -- -- -- 550,000 -- --
James R. Glynn -- -- 6,664 213,336 -- --
Richard D. Leavitt, M.D. -- -- 23,020 131,980 -- --
Richard E. Jones, Ph.D. -- -- 60,407 67,917 $179,084 --
Andrew G. Korey, Ph.D. -- -- 36,578 57,917 $105,917 --
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined by subtracting the exercise price from the market price of the
Common Stock on December 31, 1997 of $3.438 per share, the Nasdaq National
Market trading price at the close of business that same day.
15
<PAGE>
(2) Equal to the excess of the fair market value of the purchased shares at the
time of the option exercise over the exercise price paid for those shares.
OPTION REPRICING
As discussed in the Compensation Committee Report on Executive Compensation
above, the Company implemented an option cancellation/regrant program for
executive officers and other employees holding stock options with an exercise
price per share in excess of the market price of the Company's Common Stock at
the time the cancellation/regrant occurred. The cancellation/regrant was
effected on October 29, 1997, and a number of outstanding options with an
exercise price in excess of $3.94 per share were canceled and new options for
the same aggregate number of shares were granted with an exercise price of $3.94
per share.
The following table sets forth information with respect to each of the
Company's executive officers concerning his or her participation in the option
cancellation/regrant program effected on October 29, 1997.
16
<PAGE>
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET PRICE
SECURITIES OF STOCK AT EXERCISE PRICE
UNDERLYING TIME OF AT TIME OF NEW LENGTH OF OPTION
OPTIONS REPRICING OR REPRICING OR EXERCISE TERM REMAINING AT
REPRICING REPRICED OR AMENDMENT AMENDMENT PRICE DATE OF REPRICING
EXECUTIVE OFFICERS DATE AMENDED ($) ($) ($) OR AMENDMENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Casey 10/29/97 550,000 3.94 4.13 3.94 9 years, 325 days
President and Chief Executive Officer --------
550,000
James R. Glynn 10/29/97 57,680 3.94 10.52 3.94 7 years, 267 days
Chief Operating Officer 10/29/97 32,320 3.94 12.38 3.94 7 years, 267 days
Chief Financial Officer and 10/29/97 20,000 3.94 6.38 3.94 8 years, 332 days
Assistant Secretary 10/29/97 50,000 3.94 5.05 3.94 9 years, 203 days
10/29/97 10,000 3.94 6.94 3.94 9 years, 245 days
-------
170,000
Richard E. Jones, Ph. D. 10/29/97 30,000 3.94 11.75 3.94 7 years, 37 days
Vice President, Research 10/29/97 20,000 3.94 6.38 3.94 8 years, 332 days
and Development 10/29/97 20,000 3.94 6.38 3.94 9 years, 245 days
-------
70,000
Andrew G. Korey, Ph. D. 10/29/97 30,000 3.94 11.75 3.94 7 years, 37 days
Vice President, Business Development 10/29/97 20,000 3.94 6.38 3.94 8 years, 332 days
Scientific Licensing 10/29/97 10,000 3.94 6.69 3.94 9 years, 245 days
-------
60,000
Richard D. Leavitt, M.D. 10/29/97 85,000 3.94 7.54 3.94 9 years, 34 days
Senior Vice President, 10/29/97 20,000 3.94 6.69 3.94 9 years, 245 days
Medical and Regulatory Affairs -------
105,000
Dennis M. Brown, Ph. D. 10/29/97 50,000 3.94 12.75 3.94 8 years, 262 days
Vice President, Discovery Research 10/29/97 15,000 3.94 6.38 3.94 8 years, 332 days
10/29/97 25,000 3.94 6.69 3.94 9 years, 245 days
-------
90,000
Ronald P. Lucas 10/29/97 17,408 3.94 21.00 3.94 8 years, 130 days
Vice President, Operations 10/29/97 32,592 3.94 17.85 3.94 8 years, 130 days
10/29/97 25,000 3.94 6.38 3.94 8 years, 332 days
10/29/97 25,000 3.94 6.69 3.94 9 years, 245 days
-------
100,000
Natalie L. McClure, Ph. D. 10/29/97 10,000 3.94 8.75 3.94 5 years, 102 days
Vice President, Regulatory Affairs 10/29/97 13,843 3.94 17.85 3.94 8 years, 130 days
and Quality Assurance 10/29/97 16,157 3.94 21.00 3.94 8 years, 130 days
10/29/97 20,000 3.94 6.38 3.94 8 years, 332 days
10/29/97 20,000 3.94 6.69 3.94 9 years, 245 days
-------
80,000
Harry D. Pedersen 10/29/97 55,000 3.94 6.25 3.94 9 years, 239 days
Vice President 10/29/97 10,000 3.94 6.69 3.94 9 years, 245 days
Corporate Development -------
65,000
</TABLE>
17
<PAGE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company entered into an employment agreement with Michael D. Casey on
August 25, 1997. The compensation terms of such agreement are described
elsewhere in the Proxy Statement under the heading CEO Compensation. Pursuant
to the terms of the agreement, if Mr. Casey is terminated without cause, the
Company will continue Mr. Casey's compensation for a period of twelve (12)
months from the termination date. Mr. Casey's then current base salary will be
received without consulting duties. In addition, if there is a termination
without cause as a result of an acquisition, then the forgoing amounts shall be
paid for a period of twenty-four (24) months.
The Company has entered into employment agreements with each of Messrs.
James R. Glynn, Richard E. Jones, Andrew G. Korey, and Richard D. Leavitt which
provide that, in the event the officer's employment with the Company is
Involuntarily Terminated and such termination is not a Termination for Cause,
then such officer will be entitled to six (6) months of salary continuation at
his salary level in effect at the time of such termination.
In addition, the employment agreement for each such officer provides for
accelerated vesting of the shares of Common Stock subject to his outstanding
options under the Company's 1988 Restricted Stock Plan (the "1988 Plan") in the
event his employment with the Company terminates by reason of an Involuntary
Termination, other than a Termination for Cause, within eighteen (18) months
after a change in control. Each outstanding option under the 1988 Plan which
the officer holds at the time of such Involuntary Termination will immediately
vest and become exercisable for all the shares at the time subject to the
option. Each officer will then have a limited period following such termination
of employment in which to exercise those options for any or all of the option
shares as fully-vested shares.
For purposes of these agreements, the following definitional provisions
will be in effect:
- "Change in Control":
(i) a merger or consolidation in which securities
possessing more than 50% of the total combined voting power of the Company's
outstanding voting securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction;
(ii) a sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or dissolution of
the Company;
(iii) the acquisition of beneficial ownership, by any person
or a group of related persons, of securities possessing thirty percent (30%) or
more of the total combined voting power of the Company's outstanding voting
securities pursuant to a third-party tender or exchange offer made to the
Company's stockholders; or
(iv) a change in the composition of the Board over a period
of thirty-six (36) consecutive months or less such that a majority of the Board
ceases, by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (a) have been Board members continuously
since the beginning of such period or (b) have been elected or nominated for
election as Board members during such period by at least a majority of the Board
members described in clause (a) who were still in office at the time such
election or nomination was approved by the Board.
- "Involuntary Termination": a termination of employment with the
Company
(i) involuntarily upon the officer's dismissal; or
(ii) voluntarily following: (a) a change in his position
with the Company which materially reduces his duties and responsibilities or
the level of management to which he reports; (b) a reduction of ten percent
(10%) or more in his level of compensation (including base salary, fringe
benefits and target bonus); or (c) a change in his place of employment which
is more than 50 miles from his place of employment immediately prior to the
Change in Control, provided and only if such change or reduction is effected
without his written concurrence.
- "Termination for Cause": an Involuntary Termination effected by reason
of the officer having engaged in fraud, acts of dishonesty or in any other
illegal or intentional misconduct adversely affecting the business
reputation of the Company in a material manner.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Restated Certificate of Incorporation and Bylaws provide for
indemnification of directors, officers and other agents of the Company. Each of
the current directors, and certain officers and agents of the Company have
entered into separate indemnification agreements with the Company.
The Company retains Brobeck, Phleger & Harrison LLP as its principal
outside legal counsel. J. Stephan Dolezalek, a director of the Company, has
been a partner of Brobeck, Phleger & Harrison LLP since 1989.
18
<PAGE>
OFFICER/DIRECTOR LOANS
In December 1997, the Company loaned to Mr. Michael D. Casey, President and
Chief Executive Officer and Director, the principal amount of $500,000 in
connection with Mr. Casey's purchase of his principal residence (the
"Property"). Such loan amount does not bear interest and is secured by a second
deed of trust on the Property. The loan will have a seven year term and shall
be forgiven at the end of years three through seven of Mr. Casey's employment,
in $100,000 increments.
In November 1997, the Company loaned to Mr. Harry D. Pedersen, Vice
President of Business Development, the principal amount of $100,000 in
connection with Mr. Pedersen's purchase of his principal residence (the
"Property"). The loan has a maximum term of four years and shall become due and
payable in one lump sum at the end of that term. The loan is secured by a
second deed of trust on the Property and is interest free so long as Mr.
Pedersen continues in the Company's employ.
In September 1997, the Company loaned to Mr. Edward E. Luck, Chairman of
the Board, the amount of $750,000. Such loan amount must be repaid by September
1998 with interest, which shall accrue on the outstanding principal balance at a
rate of 7% per annum. The loan is secured by a deed of trust on his residences
and the shares of the Company's Common Stock that he owns.
In October 1995, the Company loaned to Mr. Glynn, Chief Operating Officer,
Chief Financial Officer, Assistant Secretary, and Director, the principal amount
of $100,000 in connection with Mr. Glynn's purchase of his principal residence
(the "Property"). Such loan amount must be repaid no later than October 13,
2000, does not bear interest and is secured by a second deed of trust on the
Property. Subject to Mr. Glynn's continued employment, the loan will be
forgiven in a series of three successive annual installments, each equal to one
third of the original principal balance of the loan, upon his completion of each
year of service beginning July 1, 1997.
The highest outstanding balance under each of the promissory notes
delivered by the Company's executive officers and director during the year was
as follows: Mr. Casey, $500,000; Mr. Pedersen, $100,000; Mr. Luck, $764,872 and
Mr. Glynn, $100,000. The outstanding balance on each of the promissory notes as
of March 23, 1998 was as follows: Mr. Casey, $500,000; Mr. Pedersen, $100,000;
Mr. Luck, $776,667 and Mr. Glynn, $66,667.
SHARED INVESTMENT PROGRAM
In June 1997, certain officers of the Company purchased shares of the
Company's Common Stock pursuant to the Shared Investment Program under the 1988
Restricted Stock Option Plan by delivering full-recourse promissory notes in
payment of the purchase price for those shares. Under the Shared Investment
Program, Messrs. Glynn, Pedersen and Leavitt each purchased 100,000 shares at
$6.25 per share. Other executive officers, Ronald P. Lucas and Natalie L.
McClure, each purchased 15,000 and 10,000 shares, respectively, at $6.25 per
share. Each note bears interest at 6.69% per annum rate, compounded semi-
annually, required under the federal tax laws to avoid the imputation of
compensation income and has a maximum term of nine (9) years. Each note is
secured by a pledge of the purchased shares with the Company.
The shares of the Company's Common Stock purchased under the promissory
notes are subject to the following shared investment arrangement.
- If the participant remains in the Company's service until the
first anniversary of the purchase date of his or her shares under the Program,
then the Company will share any loss which the participant may incur upon the
subsequent sale of those shares. The loss sharing arrangement will be as
follows:
- to the extent any shares are sold before the third anniversary of
their purchase date, the participant will be responsible for 100% of the loss;
and
- to the extent any shares are sold on or after the third
anniversary of their purchase date, the participant will be responsible for only
50% of the loss, and the Company will remit to the participant a cash payment
19
<PAGE>
equal to the remaining 50% of that loss.
The Company will also be entitled under certain circumstances to share
in the gain (if any) which the participant may realize upon the subsequent sale
of the purchased shares. The gain sharing arrangement will be as follows:
- to the extent any of the shares are sold on or before the second
anniversary of their purchase date, the participant will only be entitled to
receive 50% of the gain, and the remaining 50% of the gain will be paid over to
the Company at the time of the sale;
- to the extent any of the shares are sold after the second
anniversary but on or before the third anniversary of their purchase date, the
participant will only be entitled to receive 75% of the gain, and the remaining
25% of the gain will be paid over to the Company at the time of the sale; and
- to the extent any of the shares are sold on or after the third
anniversary of their purchase date, the participant will be entitled to receive
100% of the gain.
The gain/loss sharing arrangement will be in effect only to the extent the
shares are sold while there is an outstanding unpaid balance under the
participant's note and the sale proceeds are applied to payment of that note.
The highest outstanding balance under each of the promissory notes
delivered by the Company's executive officers during the year was as follows:
Mr. Glynn, $646,651; Mr. Pedersen, $646,651; Mr. Leavitt, $646,651; Mr. Lucas,
$96,998 and Dr. McClure, $64,665. The outstanding balance on each of the
promissory notes as of March 23, 1998 was as follows: Mr. Glynn, $656,044; Mr.
Pedersen, $656,044; Mr. Leavitt, $656,044; Mr. Lucas, $98,407 and Dr. McClure,
$65,604.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and beneficial owners of more than 10% of the
outstanding Common Stock to file initial reports of ownership and reports of
changes in ownership of such Common Stock with the United States Securities and
Exchange Commission ("SEC"). Such officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations that no other reports were required, the
Company believes that during the period from January 1, 1997 to December 31,
1997, all officers, directors and beneficial owners of more than 10% of the
outstanding Common Stock complied with all Section 16(a) requirements, except
that a late Form 5 was filed by Mr. Casey with respect to the repricing of his
option grants on October 29, 1997.
20
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Common Stock as of December 31,
1997 by (i) all persons who are beneficial owners of five percent or more of the
Company's Common Stock, (ii) each director and nominee for election to the Board
at the Annual Meeting, (iii) the Named Officers in the Summary Compensation
Table above and (iv) all current directors and executive officers as a group.
PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>
Number Percent of Total
Name and Address of Shares Shares Outstanding(1)(2)
---------------- --------- ------------------------
<S> <C> <C>
Heartland Advisors, Inc. (3). . . . . . . 2,615,000 11.94%
790 North Milwaukee Street
Milwaukee, WI 53202
State of Wisconsin Investment Board (4) . 2,065,000 9.43%
Post Office Box 7842
Madison, WI 53707
Dimensional Fund Advisors, Inc. (5).. . . 1,299,300 5.93%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Edward E. Luck (6). . . . . . . . . . . . 574,975 2.62%
Craig R. McMullen (6) . . . . . . . . . . 278,107 1.27%
Richard D. Leavitt, M.D. (6) . . . . . . 127,302 *
Michael D. Casey (6). . . . . . . . . . . - *
Marvin E. Jaffe, M.D. (6).. . . . . . . . - *
Bradley G. Lorimier (6) . . . . . . . . . - *
James R. Glynn (6) . . . . . . . . . . . 114,268 *
Richard E. Jones, Ph.D. (6) . . . . . . . 63,458 *
Andrew G. Korey, Ph.D. (6). . . . . . . . 52,690 *
J. Stephan Dolezalek (7). . . . . . . . . 48,800 *
Julius L. Pericola (6). . . . . . . . . . 32,668 *
John E. Lyons (6) . . . . . . . . . . . . 27,200 *
All current directors and executive . . . 1,786,660 8.03%
officers as a group (15 persons) (8)
______________________
</TABLE>
* Less than one percent.
(1) Percentage of beneficial ownership is calculated assuming 21,908,300
shares of Common Stock were outstanding on December 31, 1997.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible with 60 days of December 31, 1997, are deemed
outstanding for computing the percentage of the person holding such
option or warrant but are not deemed outstanding for computing the
percentage of any other person. Except as indicated in the footnotes to
this table and pursuant to applicable community property laws, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned.
21
<PAGE>
(2) This table is based upon information supplied to the Company by executive
officers, directors and principal stockholders. The address of each
officer and director identified in this table is that of the Company's
executive offices, 34700 Campus Drive, Fremont, CA 94555. Unless otherwise
indicated in the footnotes to this table and subject to applicable
community property laws, each of the stockholders named in this table has
sole voting and investment power with respect to the shares shown as
beneficially owned by it or him.
(3) Pursuant to a Schedule 13G/A dated January 29, 1998, and filed with the
Securities and Exchange Commission (the "SEC"), Heartland Advisors, Inc.
has reported that as of December 31, 1997, it had sole voting power over
2,565,000 of these shares and sole dispositive power over all of these
shares. These shares are held in investment advisory accounts of Heartland
Advisors, Inc. As a result, various persons have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the
sale of, the securities.
(4) Pursuant to a Schedule 13G/A dated January 13, 1998, and filed with the
SEC, State of Wisconsin Investment Board has reported that as of December
31, 1997, it had sole voting and dispositive power over all of these
shares.
(5) Pursuant to a Schedule 13G dated February 6, 1998, and filed with the SEC,
Dimensional Fund Advisors Inc. has reported that as of December 31, 1997,
it had sole voting power over 824,100 of these shares and sole dispositive
power over all of these shares. Persons who are officers of Dimensional
Fund Advisors Inc. also serve as officers of DFA Investment Dimensions
Group Inc. (the "Fund") and the DFA Investment Trust Company (the "Trust"),
each an open-end management investment company registered under the
Investment Company Act of 1940. In their capacities as officers of the
Fund and the Trust, these persons vote 153,700 shares that are owned by the
Fund and 321,500 shares that are owned by the Trust.
(6) The amounts shown include shares which may be acquired currently or within
60 days after December 31, 1997, through the exercise of stock options, as
follows: Mr. Luck, 11,716 shares; Mr. McMullen, 72,427 shares; Dr. Leavitt,
26,561 shares; Mr. Glynn, 13,329 shares; Dr. Jones, 62,490 shares; Dr.
Korey, 38,661 shares; Mr. Pericola, 32,668 shares; Mr. Lyons, 27,200
shares; and Messrs. Casey, Jaffe and Lorimier, none.
(7) Includes 46,000 shares subject to options and 2,800 shares held directly by
Mr. Dolezalek. Mr. Dolezalek, a director of the Company since October 6,
1994, is also a Partner in the law firm of Brobeck, Phleger & Harrison LLP,
the Company's legal counsel.
(8) Includes 348,468 shares subject to options.
To the Company's knowledge, each beneficial owner of more than 10% of the
Company's capital stock filed all reports and reported all transactions on a
timely basis with the SEC, National Association of Securities Dealers, Inc. and
the Company.
22
<PAGE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting must be received by
the Company no later than December 18, 1998 so they may be included in the proxy
statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1997 (the "Annual Report") is being mailed concurrently with this
Proxy Statement to all stockholders entitled to notice of and to vote at the
Annual Meeting. The Annual Report is not incorporated into this Proxy Statement
and is not considered proxy soliciting material.
FORM 10-K
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (the "Form 10-K"), is being mailed
concurrently with the Notice of Annual Meeting and Proxy Statement. Additional
copies may be obtained, without charge, by writing to Investor Relations, Matrix
Pharmaceutical, Inc., 34700 Campus Drive, Fremont, California 94555.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed Proxy.
THE BOARD OF DIRECTORS
Dated: April 16, 1998
23
<PAGE>
MATRIX PHARMACEUTICAL, INC.
PROXY
Annual Meeting of Stockholders, May 18, 1998
This Proxy is Solicited on Behalf of the Board of
Matrix Pharmaceutical, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held May 18, 1998 and the
Proxy Statement and appoints James R. Glynn and Michael D. Casey and each of
them, the Proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock of Matrix Pharmaceutical, Inc. (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders of the Company to
be held at the Company's headquarters, 34700 Campus Drive, Fremont, California
94555 on Monday, May 18, 1998 at 10:00 A.M. (the "Annual Meeting"), and at any
adjournment or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present thereat. The shares
represented by this Proxy shall be voted in the manner set forth on the reverse
side.
1. To elect the following directors to serve until the next annual
meeting of stockholders and until their successors are elected and qualified:
WITHHOLD
AUTHORITY
FOR TO VOTE
Michael D. Casey
------- -----
J. Stephan Dolezalek
------- -----
James R. Glynn
------- -----
Marvin E. Jaffe, M.D.
------- -----
Bradley G. Lorimier
------- -----
Edward E. Luck
------- -----
John E. Lyons
------- -----
Julius L. Pericola
------- -----
2. FOR AGAINST ABSTAIN To ratify the Board of Director's selection
of Ernst & Young LLP to serve as the
Company's independent public accountants for
the fiscal year ending December 31, 1998.
In accordance with the discretion of the
proxyholders, to act upon all matters
incident to the conduct of the meeting and
upon other matters as may properly come
before the meeting.
The Board of Directors recommends a vote FOR each of the directors listed
above and a vote FOR the other proposal. This Proxy, when properly executed,
will be voted as specified above. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED IN FAVOR OF THE ELECTION OF THE DIRECTORS LISTED ABOVE AND IN FAVOR OF
THE OTHER PROPOSAL.
Please print the name(s) appearing
on each share certificate(s) over
which you have voting authority:
---------------------------------------
(Print name(s) on certificate)
Please sign your name: Date:
----------------------------------- ---------
(Authorized Signature(s))
