<PAGE> 1
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 Section 240.14a-11(c) or
Section 240.14a-12
TEXAS BIOTECHNOLOGY CORPORATION
(Name of Registrant as specified in its Charter)
TEXAS BIOTECHNOLOGY CORPORATION
(Name of Person(s) Filing Proxy Statement)
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 the transaction
applies:
-----------------------------------------------------------
(2) Aggregate number of securities to which the transaction
applies:
-----------------------------------------------------------
(3) Per unit price or other underlying value of the 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 the 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: __________________
(3) Filing Party: ______________________________________________
(4) Date Filed: ________________________________________________
<PAGE> 2
TEXAS BIOTECHNOLOGY CORPORATION
7000 FANNIN STREET, SUITE 1920
HOUSTON, TEXAS 77030
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 9, 1998
-----------------------
Notice is hereby given that the annual meeting of the stockholders of
Texas Biotechnology Corporation (the "Company") will be held at 2:00 p.m.
(Houston time) on June 9, 1998 at The Wyndham Warwick, Imperial Suite, 5701 Main
Street, Houston, Texas 77005, for the following purposes:
1. To elect a board of nine directors;
2. To consider and to act on such other business as may properly
come before the meeting.
A record of stockholders was taken at the close of business on May 4,
1998, and only those stockholders of record on that date will be entitled to
notice of and to vote at the meeting. A stockholders' list will be available at
the offices of the Company, 7000 Fannin Street, Suite 1920, Houston, Texas
77030, for a period of ten days prior to the meeting.
Your participation in the Company's affairs is important. To ensure
your representation, if you do not expect to be present at the meeting, please
sign and date the enclosed proxy and return it to the Company promptly. A
stamped envelope has been provided for your convenience. The prompt return of
proxies will ensure a quorum and save the Company the expense of further
solicitation.
By Order of the Board of Directors,
/s/ STEPHEN L. MUELLER,
STEPHEN L. MUELLER,
Vice President, Finance and Administration,
Secretary and Treasurer
May 8, 1998
<PAGE> 3
TEXAS BIOTECHNOLOGY CORPORATION
7000 FANNIN STREET, SUITE 1920
HOUSTON, TEXAS 77030
PROXY STATEMENT
This proxy statement is being furnished in connection with the
solicitation by the Board of Directors of Texas Biotechnology Corporation, a
Delaware corporation (the "Company"), of proxies to be voted at the annual
meeting of the Company's stockholders to be held in Houston, Texas on June 9,
1998, and at any adjournment thereof, for the purposes set forth in the
accompanying notice. This Proxy Statement and the accompanying proxy card are
being mailed to stockholders on or about May 8, 1998. Business at the annual
meeting is conducted in accordance with the procedures determined by the
presiding officer and is generally limited to matters properly brought before
the meeting by or at the suggestion of the Board of Directors or by a
stockholder pursuant to provisions requiring advance notice and disclosure of
relevant information.
Because many stockholders are unable to attend the meeting, the Board
of Directors solicits proxies to ensure that each stockholder has an opportunity
to vote on all matters scheduled to come before the meeting. Stockholders are
urged to read carefully the material in this Proxy Statement, to register votes
by marking the appropriate boxes on the enclosed proxy card and to sign, date
and return the proxy card in the enclosed stamped envelope. Proxies will be
voted in accordance with the directions specified thereon and otherwise in
accordance with the judgment of the persons designated as proxies. Abstentions
and broker non-votes will be treated as present at the meeting for purposes of
determining a quorum, but will be disregarded in the calculation of a plurality
or of "votes cast". Broker nonvotes will be treated as not present and not
entitled to vote on any matter as which the broker has indicated that it does
not have authority to vote. Any proxy on which no direction is specified will be
voted for (i) the election of all nominees for director named below and (ii) in
the discretion of the persons named on the proxy cards on any other matter which
may properly come before the meeting. A stockholder may revoke a proxy by
delivering to the Company written notice of revocation, delivering to the
Company a signed proxy of a later date or appearing at the meeting and voting in
person.
OUTSTANDING VOTING SECURITIES
The number of voting securities of the Company outstanding on May 4,
1998, the record date for the determination of stockholders entitled to vote at
the annual meeting (the "Record Date"), was 33,930,658 shares of the Company's
common stock, par value $.005 per share (the "Common Stock"), each of which is
entitled to one vote on all matters properly brought before the meeting. Holders
of a majority of the shares of Common Stock entitled to vote must be present, in
person or by proxy, to constitute a quorum for the transaction of business.
<PAGE> 4
ELECTION OF DIRECTORS
At the annual meeting, nine directors are to be elected, each director
is to hold office until the next annual meeting of stockholders or until his
successor is elected and qualified. The persons named in the accompanying proxy
have been designated by the Board of Directors, and unless authority is
withheld, they intend to vote for the election of the nominees named below to
the Board of Directors. All of the nominees have previously been elected by the
Company's stockholders except Dr. Ron J. Anderson, who was elected by the Board
on December 9, 1997. If any nominee should become unavailable for election, the
proxy may be voted for a substitute nominee selected by the persons named in the
proxy or the Board may be reduced accordingly; however, the Board of Directors
is not aware of any circumstances likely to render any nominee unavailable.
NOMINEES
Certain information regarding the nominees is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
John M. Pietruski (1)(2) 65 Chairman of the Board of Directors 1990
David B. McWilliams(1) 55 President, Chief Executive Officer 1992
and Director
Richard A. F. Dixon, Ph.D.(1) 44 Vice President of Research and Director 1990
James T. Willerson, M.D.(1)(2) 58 Chairman of the Scientific Advisory 1990
Board and Director
Ron J. Anderson, M.D. 51 Director 1997
Frank C. Carlucci(3) 67 Director 1990
Rita R. Colwell, Ph.D., D.Sc. (Hon)(3) 63 Director 1997
Robert J. Cruikshank(3) 67 Director 1993
James A. Thomson, Ph.D.(2) 53 Director 1994
</TABLE>
- ------------------------
(1) Member, Executive Committee of the Board of Directors
(2) Member, Compensation and Personnel Committee of the Board of Directors
(3) Member, Audit Committee of the Board of Directors
John M. Pietruski has been chairman of the board of directors of the
Company since May 1990. Mr. Pietruski has served as president of Dansara
Company, a private investment consulting firm, since 1988. He served as chairman
of the board of directors and chief executive officer of Sterling Drug Inc., a
pharmaceutical company, from 1985 to 1988 and as president and chief operating
officer from 1983 to 1985. Mr. Pietruski currently serves as a director of GPU,
Inc., Hershey Foods Corporation, Lincoln National Corporation and McKesson
Corporation. Mr. Pietruski received a B.S. degree with honors in business
administration from Rutgers University, where he graduated Phi Beta Kappa.
David B. McWilliams has served as president and chief executive officer
of the Company and as a member of the board of directors since July 1992. Mr.
McWilliams served as president, chief executive officer and a director of
Zonagen, Inc., a pharmaceutical research company involved in reproductive
health, from June 1989 to July 1992 and as president and chief executive officer
of Kallestad Diagnostics, a medical diagnostics manufacturing company, from 1984
to 1988. He served as president of E.M. Industries, Harleco Diagnostics Division
from 1980 to 1984. Mr. McWilliams has held various executive and senior
management positions with
2
<PAGE> 5
Abbott Laboratories, McKinsey & Company and Amoco Chemicals Corporation and
currently serves as a director of Structural Bioinformatics, Inc. and Zonagen,
Inc. Mr. McWilliams received a B.S. from Washington and Jefferson College in
chemistry, graduating magna cum laude and Phi Beta Kappa, and received an M.B.A.
from the University of Chicago.
Richard A.F. Dixon, Ph.D. has been a director of the Company since July
1990. Dr. Dixon served as a scientific director and director of molecular
biology of the Company from July 1990 to December 1992, at which time he was
appointed vice president of research. From 1988 to July 1990, Dr. Dixon was
director and head of molecular biology at Merck Sharp & Dohme Research
Laboratories, a division of Merck & Co. In addition, Dr. Dixon serves as a
professor of the department of internal medicine at The University of Texas
Medical School at Houston. Dr. Dixon is the author or co-author of more than 80
scientific papers and has invented twelve patented therapeutic technologies. He
received a B.S. degree from Texas A & M University, graduating cum laude, and
received a Ph.D. in virology from the Baylor College of Medicine.
James T. Willerson, M.D. has served as chairman of the Company's
scientific advisory board since January 1990 and has been a director of the
Company since May 1990. Dr. Willerson has served as a professor and chairman of
the Department of Internal Medicine at The University of Texas Medical School at
Houston since 1989. He was chief of cardiology of Parkland Memorial Hospital in
Dallas, Texas from 1975 to 1989, director and principal investigator of The
University of Texas Southwestern Medical School Ischemic Heart Disease,
Specialized Center of Research, in Dallas from 1975 to 1989, director of the
cardiology division at The University of Texas Southwestern Medical School from
1977 to 1989, and professor of medicine and professor of radiology from 1979 to
1989. He also served as co-director of the Bugher Molecular Biology and
Cardiology Research Center at The University of Texas Health Science Center in
Dallas from 1986 to 1989. Dr. Willerson has published more than 600 manuscripts
and has been editor or co-editor of eight textbooks. In 1961, Dr. Willerson
received a B.A. from The University of Texas at Austin, graduating Phi Beta
Kappa. In 1965, he received an M.D. from the Baylor College of Medicine,
graduating as a member of Alpha Omega Alpha. Dr. Willerson's medical and
cardiology training was undertaken at the Massachusetts General Hospital,
Boston, Massachusetts.
Ron J. Anderson, M.D. has served as a director of the Company since
December 1997. He has been president and chief executive officer of Parkland
Health & Hospital System since 1982. Parkland is the general public hospital for
Dallas County, Texas and the primary teaching hospital for The University of
Texas Southwestern Medical Center at Dallas. He previously served as Parkland's
medical director for Ambulatory Care and Emergency Services. He served
concurrently as head of the Division of Ambulatory Care, which became the
Division of General Internal Medicine under his guidance in the Department of
Internal Medicine at Southwestern. Dr. Anderson has remained on the faculty of
the Medical School as Professor of Internal Medicine. Dr. Anderson is also a
director of Stemmons Corridor Business Association, Parkland Foundation, Dallas
Medical Resource, American Indian Center, and Texans Care for Children. He has
authored and co-authored more than 200 articles on medicine, ethics, and health
policy. Dr. Anderson received his medical degree from the University of Oklahoma
and his pharmacy degree from Southwestern Oklahoma State University where he was
selected as a Distinguished Alumni in 1987.
Frank C. Carlucci has served as a director of the Company since May
1990. He has been principally employed as chairman of The Carlyle Group, a
private merchant bank, since 1989. Mr. Carlucci served as Secretary of Defense
of the U.S. from January 1988 through January 1989. Prior to his appointment as
Secretary of Defense, Mr. Carlucci was chairman and chief executive officer of
Sears World Trade Inc. from 1986 to 1987, after having served as president and
chief operating officer from 1983 to 1984. Mr. Carlucci is also a director of
3
<PAGE> 6
Ashland Inc., Neurogen Corporation, IRI International, Quaker Oats Co., Kaman
Corporation, Northern Telecom, Ltd., SunResorts, Ltd., CBS Corporation (will
resign May 6, 1998) and Pharmacia & Upjohn, Inc. Mr. Carlucci is a graduate of
Princeton University and attended the Harvard Graduate School of Business
Administration.
Rita R. Colwell, Ph.D., D.Sc. (Hon) has served as a director of the
Company since May 1997. She has been president of the University of Maryland
Biotechnology Institute since 1991. She also serves as a director of Life
Technologies, Inc., Biospherics, Inc. and Dynamac, Inc. From 1987 until 1991 she
served as a founding director of the Maryland Biotechnology Institute and was a
founding director of the Center for Marine Biotechnology at the University of
Maryland. Dr. Colwell held various faculty and director appointments prior to
1987 including vice president for academic affairs, University of Maryland,
1983-1987. Dr. Colwell has served as president of the American Society for
Microbiology, the International Union of Microbiological Societies, Sigma Xi,
and the American Association for the Advancement of Science (the largest
scientific society in the world). Dr. Colwell has served, or is a member of,
advisory boards and/or committees for the National Science Foundation, the
National Institutes of Health, U.S. Environmental Protection Agency and the Food
and Drug Administration. Dr. Colwell graduated from Purdue University, received
a M.S. in Genetics from Purdue and a Ph.D. from the University of Washington.
Robert J. Cruikshank has served as a director of the Company since May
1993. Mr. Cruikshank was a senior partner at Deloitte & Touche LLP from 1989
until retiring in March 1993. Mr. Cruikshank was a partner, office managing
partner and member of the board of directors of the predecessor firms to
Deloitte & Touche LLP in Houston from 1968 until 1989. He is a trustee of the
Ray C. Fish Foundation and Hermann Hospital. He also serves as a director of
Houston Industries Incorporated, American Residential Services, Inc., MAXXAM
Incorporated, Compass Bank of Houston, Kaiser Aluminum Corporation, Texas
Medical Center, the National Jewish Center for Immunology and Respiratory
Medicine, and Weingarten Realty Investors. Mr. Cruikshank received a B.A. in
economics and accounting from Rice University and completed the Advanced
Management Program at Harvard University.
James A. Thomson, Ph.D. has served as a director of the Company since
May 1994. He has been president and chief executive officer of the RAND
Corporation since 1989 and has served the institution in a variety of roles
beginning in 1981. The RAND Corporation is a non-profit institution that seeks
to improve public policy through research analysis in such areas as national
defense, education and health. He also serves as a director of AK Steel Holding
Co. From 1977 until 1981, he served on the National Security Council, at the
White House. From 1974 until 1977, Dr. Thomson served as an operations research
analyst in the Office of the Secretary of Defense, the Pentagon. Dr. Thomson is
the author of numerous scholarly articles and reports on defense and scientific
subjects. Dr. Thomson graduated from the University of New Hampshire in 1967 and
received an M.S. and Ph.D. in Physics from Purdue University.
4
<PAGE> 7
BOARD AND COMMITTEE ACTIVITY: STRUCTURE AND COMPENSATION
In accordance with Delaware corporate law, the business of the Company
is managed under the direction of its Board of Directors. There are currently
three standing committees of the Board of Directors. Committee membership and
the functions of those committees are described below.
During 1997, the Board of Directors held ten meetings. All directors,
except for James T. Willerson, attended at least 75% of the total meetings of
the Board and the committees on which they serve.
EXECUTIVE COMMITTEE. The current members of the Executive Committee are
David B. McWilliams (Chairman), Richard A.F. Dixon, John M. Pietruski and James
T. Willerson. The Executive Committee did not meet in 1997. The Executive
Committee meets in place of the full Board during the intervals between meetings
of the Board of Directors. The Executive Committee may act on behalf of the
Board on all matters permitted by the laws of the State of Delaware except as
limited by the Company's Certificate of Incorporation and the Bylaws. All
actions taken by the Executive Committee must be reported at the Board's next
meeting.
AUDIT COMMITTEE. The current members of the Audit Committee are Frank
C. Carlucci (Chairman), Rita R. Colwell and Robert J. Cruikshank. The Audit
Committee met twice during 1997. The Audit Committee assists the Board in
fulfilling its responsibilities to stockholders and other matters relating to
the corporate accounting and reporting practices of the Company and the quality
and integrity of the financial reports of the Company. The Audit Committee
recommends the selection of independent accountants, reviews the independent
accountants' and internal auditors' assessments of the adequacy of the Company's
internal control systems, reviews the scope and results of the internal and
external audit process.
The Audit Committee supports the independence of the Company's
independent and internal auditors and the objectivity of the Company's financial
statements; reviews the Company's principal policies for accounting, internal
control and financial reporting; recommends to the Board the engagement or
discharge of the independent auditors; reviews with the independent auditors the
plan, scope and timing of their audit; reviews the auditors' fees and, after
completion of the audit, reviews with management and the independent auditors,
the auditors' report.
The Audit Committee is charged with satisfying the Board that the
activities of the Company's independent auditors and the internal control
procedures are reasonably designed to assure sound accounting procedures,
adequate reserves, the safekeeping of the Company's assets and properties and
the proper control of income and expenditures. The Audit Committee also reviews
the Company's Annual Report to Stockholders before its release, oversees the
Company's policies on business integrity and ethics, conflict of interest and
sensitive payments programs and receives reports from the internal audit
department, which reports directly to it as well as to management. The Audit
Committee also performs a number of other review functions related to auditing
the financial statements and internal controls.
COMPENSATION AND PERSONNEL COMMITTEE. The current members of the
Compensation and Personnel Committee are John M. Pietruski (Chairman), James A.
Thomson and James T. Willerson. The Compensation and Personnel Committee met
three times during 1997. The Compensation and Personnel Committee reviews and
determines the salaries for senior executive officers, and the key officers and
employees who participate in various incentive compensation plans. The
Compensation and Personnel Committee approves the grant of stock options,
including the number of shares subject to and the exercise price of, each stock
option granted, in accordance with
5
<PAGE> 8
the Company's various stock option plans. The Compensation and Personnel
Committee is also responsible for reviewing significant personnel compensation
policies and benefit programs and major changes thereto.
The Compensation and Personnel Committee reviews and recommends to the
Board the direct and indirect compensation and employee benefits of the elected
officers of the Company, administers any incentive plans and bonus plans, and
reviews the Company's policies relating to the compensation of senior management
and, generally, other employees. In addition, the Compensation and Personnel
Committee reviews management's long-range planning for executive development and
succession, establishes and periodically reviews policies on management
perquisites, and performs certain other review functions relating to management
compensation and employee relations policies. The Compensation and Personnel
Committee also monitors the Company's non-discrimination polices and practices.
The Compensation and Personnel Committee of the Board of Directors
authorized the extension of certain stock options held by directors and
employees of the Company originally granted for a five-year period to ten years.
DIRECTOR COMPENSATION. During the year ended December 31, 1997, each
non-employee director received a retainer of $2,000 per quarter; fees of $1,000
for each meeting of the Board attended in person and $150 for each meeting
conducted by telephone. Directors received a fee of $200 for each committee
meeting attended in person and a fee of $100 for each committee meeting
conducted by telephone. Dr. Willerson, however, received no retainer or meeting
fees. In addition, directors are reimbursed for expenses incurred in attending
meetings of the Board and its committees. Directors may elect to receive part or
all of the quarterly retainer and fees in Common Stock of the Company pursuant
to the Amended and Restated 1995 Non-Employee Director Stock Option Plan (the
"1995 Director Plan"). Employee directors are eligible to participate in the
Company's Stock Option Plans. See "Other Information - Executive Compensation".
Non-employee directors are entitled to participate in the Company's Stock Option
Plans for Non-Employee Directors (the "Director Plans"). The Director Plans
entitle each eligible director to receive options to purchase 15,000 shares of
Common Stock on their initial election to the Board and options to purchase
7,500 shares of Common Stock on each subsequent election to the Board.
VOTE REQUIRED FOR APPROVAL
The nine nominees for election as directors at the annual meeting who
receive the greatest number of votes cast for election by the holders of Common
Stock entitled to vote and present, in person or by proxy, at the annual meeting
shall be the duly elected directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NINE NOMINEES TO THE
COMPANY'S BOARD OF DIRECTORS.
6
<PAGE> 9
OTHER INFORMATION
CERTAIN STOCKHOLDERS
PRINCIPAL STOCKHOLDERS
The following table presents certain information as of March 31, 1998,
as to (a) each stockholder known by the Company to be the beneficial owner of
more than five percent of the outstanding shares of Common Stock, (b) each
officer named in the Summary Compensation Table and (c) all directors and
executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
--------------------------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (2) NUMBER CLASS
- ------------------------------------------ ------------- ------------
<S> <C> <C>
Larry N. Feinberg (3)........................ 2,979,424 8.8%
712 Fifth Avenue, 45th Floor
New York, New York 10019
Bernard B. Levine, M.D....................... 1,941,980 5.8%
c/o Howard S. Breslow, Esq.
Breslow & Walker
875 Third Avenue
New York, New York 10022
David B. McWilliams (4)...................... 564,577 1.6%
Richard A. F. Dixon, Ph.D. (4)............... 439,569 1.3%
Stephen L. Mueller (4) ...................... 108,782 *
Richard P. Schwarz Jr., Ph.D. (4)............ 105,200 *
Joseph M. Welch (4).......................... 99,099 *
All directors and executive officers as a
group (12 persons) (4)....................... 1,668,116 4.8%
</TABLE>
- ---------------------
*Less than 1%
(1) Except as otherwise indicated, all shares are beneficially owned, and
the sole investment and voting power is held, by the person named.
This table is based on information supplied by officers, directors and
principal stockholders and reporting forms, if any, filed with the
Securities and Exchange Commission on behalf of such persons.
(2) Unless otherwise indicated, the address of all persons set forth above
is 7000 Fannin, Suite 1920, Houston, Texas 77030.
(3) Mr. Feinberg is the deemed beneficial holder of shares of Common Stock
held by various partnerships and by managed accounts over which Oracle
Investment Management, Inc. has investment discretion.
(4) Includes 49,837 shares, 564,577 shares, 108,782 shares, 99,099 shares,
29,113 shares and 25,255 shares of Common Stock issuable on exercise
of options held by Messrs. Pietruski, McWilliams, Mueller, Welch,
Carlucci and Cruikshank, respectively, and 5,000 shares, 5,000 shares,
353,855 shares, 84,533 shares, 19,743 shares and 20,908 shares of
Common Stock issuable on exercise of options held by Drs. Anderson,
Colwell, Dixon, Schwarz, Thomson and Willerson, respectively. Includes
33,727 shares and 10,000 shares held directly by Messrs. Carlucci and
Cruikshank respectively, and 1,000 shares, 85,714 shares, 20,667
shares, 3,250 shares and 85,714 shares held directly by Drs. Colwell,
Dixon, Schwarz, Thomson and Willerson, respectively. Also includes
42,857 shares held by the Pietruski Family Partnership, of which Mr.
Pietruski is the general partner, 200 shares held by Dr. Thompson's
granddaughter and 14,285 shares owned by The James T. Willerson Fund,
Inc., a not-for-profit corporation, of which Dr. Willerson is the
Chairman of the Board of Directors. Includes 5,000 shares issuable on
exercise of redeemable common stock purchase warrants held by Dr.
Thomson.
7
<PAGE> 10
EXECUTIVE OFFICERS
The executive officers of the Company serve at the pleasure of the
Board of Directors and are subject to annual appointment by the Board at its
first meeting following the annual meeting of stockholders. All of the Company's
executive officers are listed in the following table, and certain information
concerning those officers who are not also members of the Board of Directors
follows the table:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David B. McWilliams 55 President, Chief Executive Officer and Director
Richard A. F. Dixon, Ph.D. 44 Vice President of Research and Director
Stephen L. Mueller 50 Vice President, Finance and Administration,
Secretary and Treasurer
Richard P. Schwarz Jr., Ph.D. 47 Vice President of Clinical and Regulatory Affairs
Joseph M. Welch 57 Vice President of Business Development
</TABLE>
Stephen L. Mueller has served as vice president, finance and
administration since March 1998, as vice president of administration since March
1995, as secretary since May 1994 and as treasurer since December 1991. From
September 1991 to March 1995, Mr. Mueller served as the Company's director of
finance and administration. Prior to joining the Company, Mr. Mueller was a
financial consultant for wholesale distribution and oil and gas companies. Mr.
Mueller was vice president and controller of Bado Equipment Co., Inc. in
Houston, Texas from 1976 to 1990. He was associated with Deloitte & Touche,
Certified Public Accountants in Houston, Texas from 1973 to 1976. Mr. Mueller
received a B.B.A. from The University of Texas at Austin in accounting and is a
Certified Public Accountant in the State of Texas.
Richard P. Schwarz Jr., Ph.D. joined the Company in February 1995 as
vice president of clinical and regulatory affairs. From 1993 to December 1994,
Dr. Schwarz was executive director of clinical development for Immunomedics,
Inc. From 1991 to 1993, he served as senior director of Clinical Development,
Astra Pharmaceuticals USA. From 1982 to 1990, Dr. Schwarz held positions of
increasing responsibility in the Sterling Research Group of Sterling Drug, Inc.
From 1977 to 1982, Dr. Schwarz was on the staff of the National Heart, Lung and
Blood Institute of the National Institutes of Health, where he was deputy
director of the cardiac diseases program. Dr. Schwarz is the author, co-author,
or editor of more than 30 publications and two books, dealing primarily with
cardiovascular clinical research and clinical trials methodology. He received a
B.S. degree in physics from the State University of New York at Albany and a
Ph.D. in physiology and biophysics from Rensselaer Polytechnic Institute. Dr.
Schwarz resigned his position effective April 30, 1998.
Joseph M. Welch joined the Company as vice president of business
development in September 1993, after serving as a consultant to the Company from
April to August 1993. Prior to joining the Company, Mr. Welch spent 26 years
with the Pharmaceutical Division of DuPont and the DuPont Merck Pharmaceutical
Company. From January 1991 to February 1993, Mr. Welch was associate director of
licensing for DuPont Merck Pharmaceutical Company. Prior to that, Mr. Welch
spent seven years in business development. In these positions, he participated
in the evaluation and negotiation of a number of major projects, including the
DuPont/Merck joint venture. Mr. Welch has a M.B.A. from the University of
Denver.
8
<PAGE> 11
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table provides information
concerning compensation paid or accrued during the fiscal years ended December
31, 1997, 1996 and 1995 to the Company's Chief Executive Officer and each of the
other four most highly-paid executive officers of the Company (collectively, the
"Named Executive Officers") determined at the end of the last fiscal year:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NAME AND OTHER ANNUAL NUMBER OF ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (1) COMPENSATION
- ------------------ ---- --------- ----- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
David B. McWilliams.............. 1997 $ 236,623 - - 120,000 -
President and Chief 1996 $ 225,737 - - 75,000 -
Executive Officer 1995 $ 214,988 - - 112,500 -
Richard A.F. Dixon, Ph.D......... 1997 $ 210,517 - - 86,400 -
Vice President of Research 1996 $ 202,592 - - 73,000 -
1995 $ 192,938 - - 90,000 -
Stephen L. Mueller............... 1997 $ 113,750 - - 33,600 -
Vice President, Finance and 1996 $ 108,500 - - 53,000 -
Administration, 1995 $ 103,900 - - 33,250 -
Secretary and Treasurer
Richard P. Schwarz Jr., Ph.D (2). 1997 $ 185,200 - - 51,600 -
Vice President, Clinical 1996 $ 178,200 - $ 39,558 (4) 51,000 -
and Regulatory Affairs 1995 $ 154,823 (3) - $ 37,156 (4) 50,000 -
Joseph M. Welch.................. 1997 $ 145,567 - - 34,800 -
Vice President, Business 1996 $ 134,400 - - 22,000 -
Development 1995 $ 134,400 - $ 18,066 (4) 36,000 -
</TABLE>
(1) See "Option Grants in Last Fiscal Year" for certain information with
respect to options granted during the fiscal year ended December 31, 1997.
(2) Dr. Schwarz resigned his position effective April 30, 1998.
(3) Dr. Schwarz joined the Company on February 28, 1995 and was compensated at
an annual rate of $172,500.
(4) Represents relocation expenses paid and gross up of taxable portion.
9
<PAGE> 12
Option Grants in Last Fiscal Year. The following table provides
information concerning stock options granted to the Named Executive Officers
during the year ended December 31, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION OPTION TERM(1)
NAME OPTIONS GRANTED FISCAL YEAR PRICE DATE 5% 10%
- --------------------------------- -------------- ------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
David B. McWilliams.............. 120,000 (2) 8.1% $5.875 3/4/2007 $ 443,371 $1,123,588
Richard A.F. Dixon, Ph.D......... 86,400 (2) 5.8% $5.875 3/4/2007 $ 319,227 $ 808,984
Stephen L. Mueller............... 33,600 (2) 2.3% $5.875 3/4/2007 $ 124,144 $ 314,605
Richard P. Schwarz, Jr., Ph.D.... 51,600 (2) 3.5% $5.875 3/4/2007 $ 190,649 $ 483,143
Joseph M. Welch.................. 34,800 (2) 2.4% $5.875 3/4/2007 $ 128,578 $ 325,841
</TABLE>
(1) Based on actual option term (ten years) and annual compounding at
rates shown. Because the exercise prices of options granted
equaled the fair market value of the Common Stock on the date of
grant, the potential realizable value at 0% is nil.
(2) These are incentive stock options, to the extent allowed by tax
law, granted under the 1995 Plan, and vest and become exercisable
in approximately equal annual installments over a three-year
period beginning March 4, 1997.
Aggregated Option Exercises In Last Fiscal Year and Year-End Option
Values. The following table provides information concerning the number of
unexercised options and the value of in-the-money options held by the Named
Executive Officers as of December 31, 1997:
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT FY-END IN-THE-MONEY OPTIONS (1)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David B McWilliams............. -- -- 462,077 207,500 $1,437,075 $ 311,031
Richard A.F. Dixon, Ph.D ...... -- -- 270,722 165,066 $ 912,277 $ 256,732
Stephen L. Mueller ............ -- -- 68,833 80,015 $ 207,437 $ 126,823
Richard P. Schwarz, Jr., Ph.D.. -- -- 33,667 102,266 $ 109,439 $ 156,372
Joseph M. Welch ............... -- -- 68,166 61,466 $ 207,602 $ 94,067
</TABLE>
- -------------------------------
(1) Value of in-the-money options calculated based on the closing price per
share of Common Stock at December 31, 1997 ($6.1875 per share) as reported
by the American Stock Exchange.
Compensation Committee Interlocks and Insider Participation. None
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program for officers (including the Chief
Executive Officer and the Named Executive Officers) is administered by the
Compensation and Personnel Committee (the "Committee"), which is composed of
three non-employee directors. The Compensation Committee makes decisions
regarding the reward of
10
<PAGE> 13
stock options and stock incentives under the Company's stock option plans.
Following review and approval by the Committee, all other issues pertaining to
officer compensation (other than stock options and stock incentives) are
submitted to the full Board of Directors for approval. The objective of the
Company's compensation program is to provide a total compensation package that
will enable the Company to attract, motivate and retain outstanding individuals
and align their success with that of the Company's stockholders.
Base salaries for new management employees are determined initially by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for management
talent, including a comparison of base salaries for comparable positions at
comparable companies within the biotechnology industry. In 1992, the Committee
recommended and the Board of Directors approved, the terms of the employment
contract of David McWilliams, the Company's President and Chief Executive
Officer, because it felt that the terms thereof were necessary in order to
attract a candidate of Mr. McWilliams' experience and reputation in the
biopharmaceutical industry, which in turn was deemed necessary in order to
enable the Company to move towards its long-range goal of developing and
marketing commercially viable biopharmaceutical products. In furtherance of
these goals, the Company has also entered into employment contracts with its key
management personnel. See "Employment Agreements." The employment agreements
with key personnel establish annual base salary amounts that the Board of
Directors, on recommendation of the Committee, may increase from time to time.
Annual salary adjustments are determined by evaluating the competitive
marketplace, the performance of the Company, the performance of the executive,
and any increased responsibilities assumed by the executive. Based on a number
of significant milestones during 1997, which include (i) the filing of the
Company's New Drug Application ("NDA") for NOVASTAN(R), (ii) the signing of the
SmithKline Beecham agreement, (iii) the progress of the other research and
development programs and (iv) the successful results of equity financings, the
Committee recommended and the Board approved an increase in Mr. McWilliams'
compensation by 6% effective March 1, 1998. No cash bonuses were paid during the
year.
The Revenue Reconciliation Act of 1993 restricts the ability of a
publicly held corporation to deduct compensation in excess of $1,000,000 paid to
its chief executive officer and the four most highly compensated officers. The
Committee intends to maintain executive compensation packages below this
threshold, and based on its current compensation structure, the Company does not
anticipate that any of its officers will reach the $1,000,000 threshold in the
near future.
The principal methods for long-term incentive compensation are the
Company's stock option plans. Compensation under these plans principally takes
the form of incentive and non-qualified stock options with an exercise price of
market price at time of grant. In this manner, key individuals are rewarded
commensurate with increases in stockholder value. Moreover, the Company's stock
option plans provide a non-cash form of compensation, which is intended to
benefit the Company by enabling it to continue to attract and to retain
qualified personnel.
The Committee is authorized to make incentive equity awards ("Incentive
Awards") under the stock option plans mentioned above to key employees,
including officers of the Company. In determining Incentive Awards for
management, the Committee considers management's ability to implement the
Company's research and clinical development programs, successful completion of
corporate partnering agreements, financing activities, and control of expenses.
The Committee utilizes Incentive Awards as a key element to provide incentives
for employees and officers consistent with the goal of increasing stockholder
value.
Based on these criteria, during the fiscal year ended December 31,
1997, the Company granted to the Chief Executive Officer and Named Executive
Officers options covering an aggregate of 326,400 shares of Common
11
<PAGE> 14
Stock at an exercise price of $5.875 per share. At December 31, 1997, the Chief
Executive Officer and Named Executive Officers held options covering an
aggregate of 1,519,778 shares of Common Stock. Of those, options covering an
aggregate of 903,465 shares were vested and exercisable. See "Executive
Compensation, Aggregated Option Exercises in Last Fiscal Year and Year-End
Option Values."
John M. Pietruski, Chairman
James A. Thomson
James T. Willerson
Performance Graph. Although the Company's Common Stock was registered
under Section 12 of the Exchange Act on June 26, 1992, the following Performance
Graph has been prepared with a starting date of January 1, 1993. On January 1,
1993, the outstanding Common Stock consisted of stock purchased by founders of
the Company and Common Stock sold pursuant to a private placement completed in
October 1991. The Company completed an initial public offering of a unit
security in December 1993 (the "IPO"), and the Company listed the unit offered
on the American Stock Exchange ("AMEX"). Each unit consisted of one share of
Common Stock and one redeemable Common Stock purchase warrant. Because the units
were comprised of Common Stock and warrants, each warrant, as a component of the
unit, affects the value of the unit selling price in the public market; however,
the value of the Common Stock and warrant could not be determined with any
certainty because they did not trade separately. The unit was separated on
November 7, 1994 into its components of one share of Common Stock and one
redeemable Common Stock purchase warrant and concurrently, the unit security
ceased trading separately on November 7, 1994.
The Peer Group selected consists of COR Therapeutics, Inc., Gensia,
Inc., Corvas International, Inc., and Vertex Pharmaceuticals Incorporated. The
Company believes that this Peer Group is comparable to the Company in that it
includes companies from the same industry sector at approximately the same stage
of development. The Performance Graph compares the Company to the American Stock
Exchange Index and the Peer Group listed above.
For purposes of preparing the Performance Graph, the Company used the
unit selling price on the AMEX as of December 31, 1993 ($6.75), recognizing that
the amount shown may be overstated by the value of the warrants included in the
unit price. The selling price of the Company's Common Stock on the AMEX as of
December 31, 1994 was used for that period since the unit no longer traded
separately.
12
<PAGE> 15
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
COMPANY
- -------
<S> <C> <C> <C> <C> <C>
Texas Biotechnology Corporation 192.86 41.14 58.86 125.00 176.86
Peer Group 107.92 42.79 58.82 74.70 82.15
Broad Market 118.81 104.95 135.28 142.74 171.76
</TABLE>
EMPLOYMENT AGREEMENTS
In July 1992, the Company entered into a three-year employment agreement with
David B. McWilliams to serve as the Company's President and Chief Executive
Officer. Upon the expiration of the initial term, the agreement automatically
renews for successive one-year periods unless either party provides notice at
least sixty days before scheduled expiration. Under the agreement, Mr.
McWilliams is entitled to receive an annual salary of $187,600, an auto
allowance of $6,000 and up to $1,400 to purchase term life insurance, for a
total salary package of $195,000.
13
<PAGE> 16
In addition, Mr. McWilliams was granted an option to purchase 142,858 shares of
Common Stock at $3.50 per share. The option vests over a period of five years in
approximately equal annual installments. The Company may terminate Mr.
McWilliams' employment for any reason; however, if such termination is not due
to disability or for cause (as defined), Mr. McWilliams will be entitled to
receive his salary and benefits under the agreement for a period of 12 months
following the date of termination. Effective March 1, 1998, the Committee
increased Mr. McWilliams' salary package for 1998 to $253,100.
In July 1990, the Company entered into a five-year employment agreement
with Dr. Richard A.F. Dixon to serve as the Company's Scientific Director and
Director of Molecular Biology. Upon the expiration of the initial period, the
agreement automatically renews for successive one-year periods unless either
party provides notice at least sixty days before scheduled expiration. Under the
agreement, Dr. Dixon is entitled to receive an annual salary of $175,000 and was
granted an option to purchase 14,286 shares of Common Stock at $3.50 per share.
Effective March 1, 1998, the Committee increased Dr. Dixon's salary for 1998 to
$222,700.
The Company entered into an employment agreement with Joseph M. Welch
in June 1993. Pursuant to the agreement, the Company agreed to compensate Mr.
Welch with (i) an annual salary of $125,000 and (ii) an option to purchase
25,000 shares of Common Stock at $3.50 per share. Mr. Welch's annual salary is
currently $153,700, effective March 1, 1998. If the Company terminates the
agreement with Mr. Welch for any reason other than for "cause" (as defined), he
will receive six months salary continuation.
The Company entered into an employment agreement with Richard P.
Schwarz, Jr., Ph.D. on March 6, 1995. Pursuant to the agreement, the Company
agreed to compensate Dr. Schwarz with (i) an annual salary of $172,500 and (ii)
an option to purchase 50,000 shares of Common Stock at $1.47 per share. Dr.
Schwarz's annual salary is currently $186,600. Dr. Schwarz resigned his position
effective April 30, 1998. Pursuant to a severance agreement, Dr. Schwarz will
receive $93,300 and certain employee benefits and continued vesting of stock
options over a twelve-month period beginning May 1, 1998.
In addition, the Company has signed agreements with five of its
officers to provide certain benefits in the event of a "change of control" (as
defined) and under certain circumstances. The agreements provide for a lump-sum
payment in cash ranging from 18 months to three years of annual base salary and
annual bonus if any. The base salary portion of the agreements would aggregate
approximately $2.0 million at December 31, 1997. In addition, the agreements
provide for gross-up for certain taxes on the lump-sum payment, continuation of
certain insurance and other benefits for periods of 18 months to three years and
reimbursement of certain legal expenses in conjunction with the agreements.
These provisions are intended to replace compensation continuation provisions of
any other agreement in effect for an officer if the specified event occurs.
CERTAIN TRANSACTIONS
In January 1992, the Company entered into a two-year consulting
agreement with John M. Pietruski, the Company's Chairman of the Board. Under the
terms of the agreement, Mr. Pietruski is expected to devote an average of one
day per week to his consulting services for the Company, for which he receives
an annual fee of $75,000. On January 1, 1997, the agreement was extended for an
additional two-year period at the same annual fee.
14
<PAGE> 17
AUDITORS
KPMG Peat Marwick, certified public accountants, have served as the
independent auditors of the Company for a number of years. Although management
anticipates that this relationship will continue to be maintained during fiscal
1998, it is not proposed that any formal action be taken at the meeting with
respect to the continued employment of KPMG Peat Marwick, inasmuch as no such
action is legally required. Representatives of KPMG Peat Marwick plan to attend
the annual meeting and will be available to answer appropriate questions. These
representatives will also have an opportunity to make a statement at the meeting
if they so desire, although it is not expected that any statement will be made.
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 directors and executive officers, and persons who own
more than 10% of the equity securities of the Company to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of the Common Stock of the Company. Officers,
directors and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file.
Except for Dr. Ron Anderson, who filed an initial Form 3 late, and Dr.
Rita Colwell, who filed a Form 4 late, to the Company's knowledge, based solely
on review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal year
ended December 31, 1997, its officers, directors and greater than 10% beneficial
owners timely filed all required Section 16(a) reports.
OTHER MATTERS
The annual report to stockholders and Form 10-K covering the fiscal
year ended December 31, 1997 has been mailed to each stockholder entitled to
vote at the annual meeting.
Any stockholder proposals to be included in the Board of Directors'
solicitation of proxies for the 1999 Annual Meeting of Stockholders must be
received by Stephen L. Mueller, Secretary, 7000 Fannin, Suite 1920, Houston,
Texas 77030, no later than January 8, 1999.
The cost of soliciting proxies in the accompanying form will be borne
by the Company. In addition to solicitations by mail, a number of regular
employees of the Company may, if necessary to assure the presence of a quorum,
solicit proxies in person or by telephone. The Company is engaging the services
of a proxy solicitation firm and estimates that the cost of such services will
approximate $5,000.
Individual investors may request the Company's Form 10-K, Form 10-Q
and other information by calling (713) 796-8822 or write to the address below:
Texas Biotechnology Corporation
Corporate Communications
7000 Fannin Street, Suite 1920
Houston, Texas 77030
15
<PAGE> 18
The persons designated to vote shares covered by the Board of
Directors' proxies intend to exercise their judgment in voting such shares on
other matters that may properly come before the meeting. Management does not
expect that any matters other than those referred to in this proxy statement
will be presented for action at the meeting.
By Order of the Board of Directors,
/s/ STEPHEN L. MUELLER,
STEPHEN L. MUELLER,
Vice President, Finance and Administration
Secretary and Treasurer
May 8, 1998
16
<PAGE> 19
TEXAS BIOTECHNOLOGY CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL STOCKHOLDERS' MEETING TO BE HELD ON JUNE 9, 1998
The undersigned stockholders of Texas Biotechnology Corporation (the
"Company") hereby appoints David B. McWilliams, Richard A.F. Dixon and Stephen
L. Mueller, or any of them, attorneys and proxies of the undersigned, each with
full power of substitution, to vote on behalf of the undersigned at the Annual
Meeting of Stockholders of the Company to be held at the Wyndam Warwick,
Imperial Suite, 5701 Main Street, Houston, Texas 77005, on June 9, 1998, at
2:00 p.m. (Houston time), and at any adjournments of said meeting, all of the
shares of common stock in the name of the undersigned or which the undersigned
may be entitled to vote.
The board of directors recommends a vote FOR the nominees listed on the
reverse side and if no specification is made, the shares will be voted FOR the
election of the nominees named herein.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders, the Annual Report and the Proxy Statement furnished
herewith.
(Please sign the reverse side of this card and return it promptly.)
TEXAS BIOTECHNOLOGY CORPORATION
P.O. BOX 11061
NEW YORK, N.Y. 10203-0061
<PAGE> 20
1. Election of Directors
FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: John M. Pietruski, Ron J. Anderson, Frank C. Carlucci, Rita R.
Colwell, Robert J. Cruikshank, Richard A.F. Dixon, David B.
McWilliams, James A. Thomson and James T. Willerson.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided
below.)
*EXCEPTIONS ________________________________________________________________
2. In their discretion, upon such other matters as may properly come before the
meeting; hereby revoking any proxy or proxies heretofore given by the
undersigned.
Address Change
and/or Comments [ ]
Signatures should agree with name printed
hereon. If Stock is held in the name of more
than one person, EACH joint owner should
sign. Executors, administrators, Trustees,
guardians, and attorneys should indicate the
capacity in which they sign. Attorneys should
submit powers of attorney.
Dated ______________________________, 1998
__________________________________________
Signature of Shareholder
__________________________________________
Signature of Shareholder
Votes must be indicated [X]
(x) in Black or Blue ink.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
