<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Anesta Corp.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
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ANESTA CORP.
4745 WILEY POST WAY, SUITE 650
SALT LAKE CITY, UT 84116
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 17, 1997
TO THE STOCKHOLDERS OF ANESTA CORP:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ANESTA
CORP., a Delaware corporation (the "Company"), will be held on Tuesday, June
17, 1997 at 2:00 p.m. local time at the University Park Hotel, 480 Wakara Way,
Salt Lake City, Utah 84108 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's 1993 Stock Option Plan (the
"Plan") to increase the aggregate number of shares of Common Stock
authorized for issuance under such Plan by an additional 750,000 shares.
3. To approve an amendment to the Company's 1993 Non-Employee Directors'
Stock Option Plan (the "Directors' Plan") to increase the
non-discretionary grant to each non-employee director by 3,500 shares per
year.
4. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the Company for its fiscal year ending December 31, 1997.
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 21, 1997,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
Theodore H. Stanley, M.D.
Secretary
Salt Lake City, Utah
May 16, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
INVESTORS MAY REQUEST ADDITIONAL INFORMATION REGARDING ANESTA CORP.,
INCLUDING A COPY OF THE FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, FREE OF CHARGE. PLEASE ADDRESS YOUR REQUEST TO: INVESTOR
RELATIONS, ANESTA CORP., 4745 WILEY POST WAY, SUITE 650, SALT LAKE CITY, UTAH
84116.
<PAGE> 3
ANESTA CORP.
4745 WILEY POST WAY, SUITE 650
SALT LAKE CITY, UT 84116
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
ANESTA CORP., a Delaware corporation (the "Company") for use at the Annual
Meeting of Stockholders to be held on June 17, 1997 at 2:00 p.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at the University Park Hotel, 480 Wakara Way,
Salt Lake City, Utah 84108. The Company intends to mail this proxy statement
and accompanying proxy card on or about May 16, 1997, to all stockholders
entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or
other regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
21, 1997 will be entitled to notice of and to vote at the Annual Meeting. At
the close of business on April 21, 1997 the Company had outstanding and
entitled to vote 9,478,597 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, Anesta
Corp., 4745 Wiley Post Way, Suite 650, Salt Lake City, Utah 84116, a written
notice of revocation or a duly executed proxy bearing a later date, or it may
be revoked by attending the meeting and voting in person. Attendance at the
meeting will not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
The Company intends to holds its 1998 Annual Meeting on or around June 17,
1998. Thus, proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than January 17, 1998 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
1.
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PROPOSAL 1
ELECTION OF DIRECTORS
There are eight nominees for the eight Board positions presently
authorized by the Board of Directors in accordance with the Company's
Certificate of Incorporation and Bylaws. Each director to be elected will hold
office until the next annual meeting of stockholders and until his successor is
elected and has qualified, or until such director's earlier death, resignation
or removal. Each nominee listed below is currently a director of the Company.
Shares represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of the eight nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for
election has agreed to serve if elected and management has no reason to believe
that any nominee will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION/
NAME AGE POSITION HELD WITH THE COMPANY
<S> <C> <C>
William C. Moeller 58 Chief Executive Officer and Treasurer
Thomas B. King 42 President and Chief Operating Officer
Theodore H. Stanley, M.D 57 Chairman of the Board and Secretary
Edwin M. Kania, Jr. (1)(2) 39 Managing General Partner of One Liberty Ventures, L.P.
Daniel L. Kisner, M.D. (1) 50 President and Chief Operating Officer of Isis
Pharmaceuticals, Inc.
Richard H. Leazer (1)(2) 55 Managing Director of the Wisconsin Alumni Research Foundation
Emanuel M. Papper, M.D., Ph.D. 81 Professor of Anesthesiology at the University of Miami,
School of Medicine
Richard P. Urfer (2) 60 Executive Vice President of Resource Investment Advisors, Inc.
</TABLE>
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(1) Member of the Compensation Committee
(2) Member of the Audit Committee
William C. Moeller has been Chief Executive Officer and Director of the
Company since he co-founded the Company in 1985 and served as President from
August 1985 until December 1996. Prior to joining Anesta, Mr. Moeller held
senior management positions with several medical companies that manufactured
products for orthopedic and cardiovascular surgery and for anesthesiology.
These positions included general management responsibilities in the large
multinational companies of Howmedica, Inc., a medical devices company, from
1964 to 1973 and The BOC Group, from 1973 to 1981, in its medical division.
Mr. Moeller was Chief Operating Officer of Symbion, Inc., a company in the
field of artificial organs, from 1982 to 1985. He received an M.B.A. degree
from Harvard Graduate School of Business Administration in 1964.
Thomas B. King has been Chief Operating Officer and a Director of the
Company since December 1994 and has served as its President since December
1996. Mr. King was the Company's Executive Vice President from December 1994
until December 1996. Prior to joining Anesta, he was employed by Somatogen,
Inc., a biotechnology company, from January 1990 to December 1994 as Vice
President of Marketing and Business
2.
<PAGE> 5
Development. Prior to joining Somatogen, he was director of the Cardiovascular
Business Unit at Abbott Laboratories ("Abbott"), a pharmaceutical company, from
January 1988 to December 1989 and held various marketing and business
development positions at Anaqust, the pharmaceutical division of BOC
Healthcare, a producer of medical gases and manufacture of medical devices and
pharmaceuticals, from June 1982 to December 1987. Mr. King received an M.B.A.
in finance and marketing from the University of Kansas in 1982.
Theodore H. Stanley, M.D. has been Chairman of the Board of Directors of
the Company since he co-founded the Company in 1985. Dr. Stanley served as
Medical Director of the Company from 1985 to April 1994. He also has been
Professor of Anesthesiology and Professor of Surgical Research at the
University of Utah School of Medicine since 1978. Dr. Stanley has also been an
Adjunct Professor of Anesthesiology at the University of Texas (Houston) since
1985. He is internationally known for his work in the clinical testing of
intravenous anesthetic drugs and has been a clinical research investigator for
numerous pharmaceutical companies in the investigation of new anesthetic drugs.
Dr. Stanley received an M.D. degree from Columbia University, College of
Physicians and Surgeons in 1965.
Edwin M. Kania, Jr. has served as director of the Company since April
1987. Mr. Kania is the Managing General Partner of One Liberty Ventures, L.P.,
a venture capital firm where he has been employed since 1985. Mr. Kania is a
director of PerSeptive Biosystems, Inc., a supplier to the pharmaceutical and
biotechnical industries, and Cytyc Corporation, a diagnostic company. Mr.
Kania received an M.B.A. degree from Harvard Graduate School of Business
Administration in 1982.
Daniel Kisner, M.D. has served as a director of the Company since February
1996. Dr. Kisner has served as Chief Operating Officer of Isis
Pharmaceuticals, Inc., a biotechnology company, since February 1993, as a
Director since March 1991 and as President since May 1994. From March 1991
until February 1993, he was Executive Vice President of Isis. From December
1988 until March 1991, he was Division Vice President of Pharmaceutical
Development for Abbott. From March 1988 until November 1988, Dr. Kisner served
as the Vice President, International Clinical Research and Development for
Smith Kline & French Laboratories and from May 1985 until March 1988 he served
as Vice President, Clinical Research R & D, Continental Europe for the same
company. Dr. Kisner was an Associate Professor of Oncology at the University
of Texas and an acting Associate Director at the National Cancer Institute.
Dr. Kisner received an M.D. degree from Georgetown University in 1972.
Richard H. Leazer has served as Managing Director of the Wisconsin Alumni
Research Foundation, a not-for-profit corporation supporting research at the
University of Wisconsin, since March 1993. Prior to such time, he was
President of Ohmeda, an anesthesia device and equipment manufacturer and a
division of BOC HealthCare, from 1988 to September 1992 and was President of
Anaquest, an anesthesia pharmaceutical company and a division of BOC
HealthCare, from 1981 to 1988. Mr. Leazer received an M.B.A. degree from
Drexel University in 1966.
Emanuel M. Papper, M.D., Ph.D. has been a director of the Company since
July 1990. He has been Professor of Anesthesiology at the University of Miami
since 1969 and was Professor of Pharmacology there from 1974 to 1981. Dr.
Papper also served as the Vice President for Medical Affairs and the Dean of
the University of Miami School of Medicine from 1969 to 1981. Prior to that
time, Dr. Papper was a Professor of Anesthesiology and Chairman of the
Department of Anesthesiology at Columbia University from 1949 to 1969. Dr.
Papper served as a director of Abbott from 1971 to 1984. He received an M.D.
degree from New York University in 1938 and a Ph.D. degree in English
Literature from the University of Miami in 1990. In addition, Dr. Papper holds
numerous honorary degrees.
Richard P. Urfer has served as a director of the Company since August
1996. Mr. Urfer has served as Executive Vice President of Resource Investment
Advisors, Inc., a natural resources asset management company, since June 1995.
From May 1987 until June 1995, Mr. Urfer was Managing Director of R.P. Urfer &
Co., investment bankers. From September 1982 until May 1987 he was Chief
Operating Officer of Chase Manhattan Capital Markets Corporation. Mr. Urfer
received an M.B.A. degree from Harvard Graduate School of Business
Administration in 1964.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
3.
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BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996 the Board of Directors held
seven meetings. The Board has an Audit Committee and a Compensation Committee,
the Audit Committee held two meetings and the Compensation Committee held four
meetings during the fiscal year ended December 31, 1996.
The Audit Committee meets with the Company's independent accountants to
review the results of the annual audit and discuss the financial statements;
recommends to the Board the independent accountants to be retained; and receives
and considers the accountants' comments as to controls, adequacy of staff and
management performance and procedures in connection with audit and financial
controls. The Audit Committee is composed of three non-employee directors:
Messrs. Leazer, Kania, and Urfer.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of three non-employee
directors: Dr. Kisner and Messrs. Kania and Leazer.
During the fiscal year ended December 31, 1996, all directors except Dr.
Papper attended at least 75% of the meetings of the Board held during the
period for which they were a director.
4.
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PROPOSAL 2
APPROVAL OF THE 1993 STOCK OPTION PLAN, AS AMENDED
In September 1993, the Company adopted its 1993 Stock Option Plan (the
"Plan"), under which 750,000 shares have been reserved for issuance. The Board
believes that the Company's existing Plan has been effective in attracting and
retaining executives and key employees. The Plan provides for the grant
of both incentive stock options ("ISOs") intended to qualify as such under
Section 422 of the Internal Revenue Code of 1996, as amended (the "Code"), and
non-statutory stock options ("NSOs") (collectively "Stock Awards"). The Plan
will terminate in September 2003, unless sooner terminated by the Board of
Directors.
As of April 21, 1997, the Plan had net outstanding options to purchase an
aggregate of 880,677 shares held by 57 persons at a weighted average exercise
price of $9.64 per share. As of the year ended December 31, 1996, options to
purchase 24,105 shares of Common Stock granted pursuant to the Plan had been
exercised.
In August 1996 and February 1997, the Board approved amendments to the
Plan, subject to stockholder approval, to increase the number of shares
authorized for issuance under the Plan from an aggregate of 750,000 shares to
an aggregate of 1,500,000 shares. The Board adopted this amendment to ensure
that the Company can continue to grant Stock Awards to employees and
consultants at levels determined appropriate by the Board and the Compensation
Committee.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
5.
<PAGE> 8
THE ESSENTIAL FEATURES OF THE PLAN ARE OUTLINED BELOW:
ADMINISTRATION
The Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the Plan and, subject to the
provisions of the Plan, to determine the persons to whom and the dates on which
options will be granted, the number of shares to be subject to each option, the
time or times during the term of each option within which all or a portion of
such option may be exercised, the exercise price, the type of consideration and
other terms of the option. The Board of Directors is authorized to delegate
administration of the Plan to a committee composed of not fewer than two
members of the Board. The Board had delegated administration of the Plan to
the Compensation Committee of the Board. As used herein with respect to the
Plan, the "Board" refers to the Compensation Committee as well as to the Board
of Directors itself.
ELIGIBILITY
Incentive stock options may be granted under the Plan only to employees
(including officers) of the Company and its affiliates. Employees (including
officers), directors and consultants are eligible to receive nonstatutory stock
options under the Plan. Directors who are not salaried employees of or
consultants to the Company or to any affiliate of the Company are not eligible
to participate in the Plan.
No incentive stock option may be granted under the Plan to any person who,
at the time of the grant, owns (or is deemed to own) stock possessing more than
10% of the total combined voting power of the Company or any affiliate of the
Company, unless the option exercise price is at least 110% of the fair market
value of the stock subject to the option on the date of grant, and the term of
the option dies not exceed five years from the date of grant. For incentive
stock options granted under the Plan, the aggregate fair market value,
determined at the time of grant, of the shares of Common Stock with respect to
which such options are exercisable for the first time by an optionee during any
calendar year (under all such plans of the Company and its affiliates) may not
exceed $100,000.
STOCK SUBJECT TO THE PLAN
If options granted under the Plan expire or otherwise terminate without
being exercised, the Common Stock not purchased pursuant to such options again
becomes available for issuance under the Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the Plan may not be less than the fair market value of the Common Stock
subject to the option on the date of the option grant, and in some cases (see
"Eligibility" above), may not be less than 110% of such fair market value. The
exercise price of nonstatutory options under the Plan may not be less than 85%
of the fair market value of the Common Stock subject to the option on the date
of the option grant. In the event of a decline in the value of the Company's
Common Stock, the Board has the authority to offer employees the opportunity to
replace outstanding higher priced options, whether incentive or nonstatutory,
with new lower priced options. At December 31, 1996, the closing price of the
Company's Common Stock as reported on the NASDAQ National Market System was
$19.25 per share.
The exercise price of options granted under the Plan must be paid either:
(a) in cash at the time the option is exercised; or (b) at the discretion of
the Board, (i) by delivery of other Common Stock of the Company or (ii)
pursuant to a deferred payment arrangement or (c) in any other form of legal
consideration acceptable to the Board.
Option Exercise. Options granted under the Plan may become exercisable in
cumulative increments ("vest") as determined by the Board. Shares covered by
currently outstanding options under the Plan typically vest at the rate of
1/48th per month (25% per year) during the optionee's employment or services as
a consultant. Shares covered by options granted in the future under the Plan
may be subject to different vesting terms. The Board has
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the power to accelerate the time during which an option may be exercised. In
addition, nonstatutory options granted under the Plan may permit exercise prior
to vesting, but in such event the optionee may be required to enter into an
early exercise stock purchase agreement that allows the Company to repurchase
shares not yet vested at their exercise price should the optionee leave the
employ of the Company before vesting. To the extent provided by the terms of
an option, an optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such option by a cash payment upon
exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the optionee, by delivering already-owned stock of the
Company or by a combination of these means.
Term. The maximum term of options under the Plan is 10 years, except that
in certain cases (see "Eligibility") the maximum term is five years. Options
under the Plan terminate forty-five days after the optionee ceases to be
employed by the Company or any affiliate of the Company, unless (a) the
termination of employment is due to such person's permanent and total
disability (as defined in the Code), in which the case the option may, but not
need not, provide that it may be exercised at any time within one year of such
termination; (b) the optionee dies while employed by the Company or any
affiliate of the Company, or within forty-five days after termination of such
employment, in which case the option may, but need not, provide that it may be
exercised (to the extent the option was exercisable at the time of the
optionee's death) within twelve months of the optionee's death by the person or
persons to whom the rights to such option pass by will or by the laws of
descent and distribution; or (c) the option by its terms specifically provides
otherwise. Individual options by their terms may provide for exercise within a
longer period of time following termination of employment or the consulting
relationship. The option term may also be extended in the event that exercise
of the option within these periods is prohibited for specified reasons.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Plan or subject to any
option granted under the Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Board shall have the power and
discretion to prescribe the terms and conditions for the exercise of or
modification of, the options outstanding under the Plan.
EFFECT OF CERTAIN CORPORATE EVENTS
The Plan provides that, in the event of a dissolution or liquidation of
the Company, specified type of merger or other corporate reorganization, to the
extent permitted by law, the Board shall have the power and discretion to
prescribe the terms and conditions for the exercise of, or modification of, the
options.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Plan without stockholder approval
or ratification at any time or from time to time. Unless sooner terminated,
the Plan will terminate in September 2003.
The Board may also amend the Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its adoption by the Board if
the amendment would: (a) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval in
order for the Plan to satisfy Section 422 of the Code, if applicable, or Rule
16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")); (b) increase the number of shares reserved for issuance upon
exercise of options; or (c) change any other provision of the Plan in any other
way if such modification requires stockholder approval in order to comply with
Rule 16b-3 or satisfy the requirements of Section 422 of the Code.
7.
<PAGE> 10
RESTRICTIONS ON TRANSFER
Under the Plan, an option may not be transferred by the optionee otherwise
than by will or by the laws of descent and distribution. During the lifetime
of an optionee, an option may be exercised only by the optionee. In addition,
shares subject to repurchase by the Company under an early exercise stock
purchase agreement may be subject to restrictions on transfer which the Board
deems appropriate.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive Stock options under the Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for more than two years from the date which the option is granted and
more than one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss upon the disqualifying disposition will
be a capital gain or loss which will be long-term or short-term depending on
whether the stock was held for more than one year. Capital gains currently are
generally subject to lower tax rates than ordinary income. The maximum capital
gains rate for federal income tax purposes is currently 28% while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness and perhaps, in the future, the satisfaction
of a withholding obligation) to a corresponding business expense deduction in
the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date of exercise
over the option exercise price. Generally, with respect to employees, the
Company is required to withhold from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness and the satisfaction of any withholding
obligation, the Company will generally be entitled to a business expense
deduction equal to the taxable ordinary income realized by the optionee. Upon
disposition of the stock, the optionee will recognize a capital gain or loss
equal to the difference between the selling price and the sum of the amount
paid for such stock plus any amount recognized as ordinary income upon exercise
of the option. Such gain or loss will be long or short-term depending on
whether the stock was held for more than one year. Slightly different rules
may apply to optionees who acquire stock subject to certain repurchase options
or who are subject to Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to stock options, when combined
8.
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with all other types of compensation received by a covered employee from the
Company, may cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed Treasury regulations issued under Code Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period; (ii) the per-employee limitation is approved by the
stockholders; (iii) the option is granted by a compensation committee comprised
solely of "outside directors"; and (iv) either the exercise price of the option
is no less than the fair market value of the stock on the date of grant, or the
option is granted (or exercisable) only upon the achievement (as certified by
the compensation committee) of an objective performance goal established by the
compensation committee while the outcome is substantially uncertain. At this
time, the Plan has not been designed to meet the requirements of Section 162(m)
that would qualify stock options under the Plan as performance-based
compensation.
The Company would expect to design the Plan to permit options granted
under the Plan to satisfy the requirements for performance-based compensation
in the event that the Plan becomes subject to Section 162(m).
9.
<PAGE> 12
PROPOSAL 3
APPROVAL OF THE 1993 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN, AS AMENDED
In December 1993, the Company adopted its 1993 Non-Employee Directors'
Stock Option Plan (the "Directors' Plan"), under which 150,000 shares of Common
Stock have been reserved for issuance. The Board believes that the Directors'
Plan had been effective in attracting, motivating and retaining individuals to
serve on the Board. The Directors' plan will terminate in December 2003,
unless sooner terminated by the Board.
As of April 21, 1997, the Directors' Plan had net outstanding options to
purchase an aggregate of 66,000 shares held by five persons at a weighted
average exercise price of $11.75 per share. As of the year ended December 31,
1996, options to purchase 1,750 shares of Common Stock granted pursuant to
Directors' Plan had been exercised. As of April 21, 1997, there were 82,250
shares of Common Stock available for future grants under the Directors' Plan
(plus shares that may become available as a result of cancellation or
expiration of options).
In February 1997, the Board approved an amendment to the Directors' Plan,
subject to stockholder approval, to increase the annual non-discretionary grant
made to each non-employee director by 3,500 shares, from 1,500 shares to 5,000
shares. The Board adopted this amendment to ensure that the Company will
continue to attract and retain non-employee directors.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
10.
<PAGE> 13
THE ESSENTIAL FEATURES OF THE DIRECTORS' PLAN ARE OUTLINED BELOW:
ADMINISTRATION
The Director's Plan is administered by the Board of Directors of the
Company. The Board of Directors has the final power to construe and interpret
the Directors' Plan and options granted under it, and to establish, amend and
revoke rules and regulations for its administration.
The Board of Directors is authorized to delegate administration of the
Directors' Plan to a committee of not less than two members of the Board. The
Board of Directors does not presently contemplate delegating administration of
the Directors' Plan to any committee of the Board of Directors.
ELIGIBILITY
The Director's Plan provides that options may be granted only to
Non-Employee Directors of the Company. A "Non-Employee Director" is defined in
the Directors' Plan as a director of the Company or its affiliates who is not
otherwise an employee of the Company or any affiliate. Five of the Company's
eight current Directors (all except Messrs. Moeller and King and Dr. Stanley)
are eligible to participate in the Directors' Plan.
Option grants under the Directors' Plan are non-discretionary. Subject to
the adoption of Proposal 3, each Non-Employee Director shall be granted (i) on
the date of the Company's annual meeting of each year, beginning with the 1998
Annual Meeting, an option to purchase five thousand (5,000) shares of Common
Stock of the Company (the "Annual Option") and (ii) a one time option grant to
purchase three thousand five hundred (3,500) shares. In addition, each person
who was on January 25, 1994 (the effective date of the Company's initial public
offering) a Non-Employee Director was granted an option to purchase ten
thousand (10,000) shares of Common Stock of the Company. Thereafter, each
person who becomes a Non-Employee Director of the Company shall, upon the date
of initial election to be a Non-Employee Director, be granted an option to
purchase ten thousand (10,000) shares of Common Stock of the Company.
As of April 21, 1997, the Company had granted options under the Directors'
Plan to purchase 14,500 shares to each of Messrs. Kania, Leazer and Dr. Papper
and 11,500 shares to Mr. Urfer and Dr. Kisner.
TERMS OF OPTIONS
Each option under the Directors' Plan is subject to the following terms
and conditions:
Option Exercise. An Annual Option becomes exercisable in three equal
annual installments over a period of three years from the date of grant with
the first installment vesting on the date one year after the date of grant of
such option. All other options become exercisable in four equal annual
installments with the first installment vesting on the date one year after the
date of grant of such option. Such vesting is conditioned upon continued
service as a director.
An option granted under the Directors' Plan may be exercised by giving
written notice of exercise to the Company, specifying the number of full shares
of Common Stock to be purchased and tendering payment of the purchase price to
the Company.
Exercise Price; Payment. The exercise price of options granted under the
Directors' Plan shall be equal to 100% of the fair market value of the Common
Stock subject to such options on the day before the date such option is
granted. The exercise price of options granted under the Directors' Plan may
be paid in cash or by delivery of shares of Common Stock of the Company that
have been held for the period required to avoid a charge to the earnings of the
Company. Any shares so surrendered shall be valued at their fair market value
on the date of exercise.
Transferability; Term. Under the Directors' Plan, an option may not be
transferred by the optionee, except by will or the laws of descent and
distribution. During the lifetime of an optionee, an option may be exercised
only by the optionee.
11.
<PAGE> 14
No option granted under the Directors' Plan is exercisable by any person
after the expiration of 5 years from the date the option is granted.
Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Plan as may be
determined by the Board of Directors.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Directors' Plan or
subject to any option granted under the Directors' Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating, dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise) the
Directors' Plan and options outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to such plan
and the class, number of shares and price per share of stock subject to such
outstanding options.
In the event of a dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving corporation, a reverse
merger in which the Company is the surviving corporation but the shares of the
Company's Common Stock outstanding immediately preceding the merger were
converted by virtue of the merger into other property, or any capital
reorganization in which more than 50% of the shares of the Company entitled to
vote are exchanged, any surviving corporation shall assume any options
outstanding under the Directors' Plan or shall substitute similar options for
those outstanding under the Directors' Plan.
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate the Directors' Plan
at any time or from time to time; provided however, that the Board may not
amend the Directors' Plan with respect to the amount, price or timing of grants
more often than once every six months. No amendment will be effective unless
approved by the stockholders of the Company within twelve months before or
after its adoption by the Board if the amendment would: (i) increase the
number of shares reserved for options under the Directors' Plan; (ii) modify
the requirements as to eligibility for participation in the Directors' Plan (to
the extent such modification requires stockholder approval in order for the
Directors' Plan to comply with the requirements of Rule 16b-3); or (iii) modify
the Directors' Plan in any other way if such modification requires stockholder
approval in order for the Directors' Plan to meet the requirements of Rule
16b-3. Unless sooner terminated, the Directors' Plan will terminate in
December 2003.
TAX INFORMATION
Options granted under the Directors' Plan generally have the federal
income tax consequences described under the Plan above with respect to
non-statutory stock options.
12.
<PAGE> 15
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P. as the
Company's independent accountants for the fiscal year ending December 31, 1997
and has further directed that management submit the selection of independent
accountants for ratification by the stockholders at the Annual Meeting. Coopers
& Lybrand L.L.P. has audited the Company's financial statements since 1986, when
the Company's financial statements were first audited. Representatives of
Coopers & Lybrand L.L.P. are expected to be present at the Annual Meeting, will
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
Stockholder ratification of the selection of Coopers & Lybrand L.L.P. as
the Company's independent accountants is not required by the Company's By-laws
or otherwise. However, the Board is submitting the selection of Coopers &
Lybrand L.L.P. to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the selection, the Audit
Committee and the Board will reconsider whether or not to retain that firm. Even
if the selection is ratified, the Audit Committee and the Board in their
discretion may direct the appointment of different independent accountants at
any time during the year if they determine that such a change would be in the
best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Coopers & Lybrand L.L.P..
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
13.
<PAGE> 16
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 21, 1997 by: (i) each nominee for
director; (ii) the executive officers named in the Summary Compensation Table;
(iii) all executive officers and directors of the Company as a group; and (iv)
all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED (1)(2)
- ------------------------ ----- ------------
<S> <C> <C>
Abbott Laboratories........................................... 1,202,840 12.6%
One Abbott Park Road, D-980, AP30
Abbott Park, IL 60064-3500
Theodore H. Stanley and Stanley Research Foundation (3)....... 637,983 6.7
4745 Wiley Post Way, Suite 650
Salt Lake City, UT 84116
Wells Fargo Bank, N.A. (4).................................... 600,500 6.3
464 California Street
San Francisco, CA 94163
The Capital Group Companies, Inc. (5)......................... 550,000 5.8
333 South Hope Street
Los Angeles, CA 90071
William C. Moeller (6)........................................ 512,736 5.4
4745 Wiley Post Way, Suite 650
Salt Lake City, UT 84116
Edwin M. Kania, Jr. (7)....................................... 16,407 **
Thomas B. King (8)............................................ 91,133 **
Daniel L. Kisner (9).......................................... 2,500 **
Richard H. Leazer (10)........................................ 10,041 **
Emanuel M. Papper (11)........................................ 13,707 **
Richard P. Urfer (12)......................................... 49,255 **
Michael A. Busch (13)......................................... 63,428 **
Dennis L. Coleman (14)........................................ 69,057 **
Steven A. Shoemaker (15)...................................... 50,901 **
All executive officers and directors as a group
(12 persons) (3) and (6)-(15)................................ 1,525,481 15.6%
</TABLE>
- ---------------
** Less than one percent.
(1) 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 exercisable within
sixty (60) days of April 21, 1997, are deemed outstanding for computing
the percentage of the person or entity holding such securities but are not
outstanding for computing the percentage of any other person or entity.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them
(2) Percentage of beneficial ownership is based on 9,478,597 shares of Common
Stock outstanding as of April 21, 1997.
14.
<PAGE> 17
(3) Includes options exercisable for 22,602 shares of Common Stock. Of the
615,381 issued and outstanding shares, Dr. Stanley owns 261,540 shares,
Mary Ann Stanley, Dr. Stanley's spouse, owns 220,876 shares, the Stanley
Research Foundation owns 108,065 shares and Dr. Stanley owns 24,900 shares
jointly with Ellen Stanley.
(4) Wells Fargo Bank, N.A. filed a Schedule 13G pursuant to which it reported
sole or shared voting and dispositive power over 600,500 shares held in
trust accounts for the economic benefit of the beneficiaries of those
accounts as of December 31, 1996. Wells Fargo Bank, N.A. serves as
trustee for such accounts.
(5) The Capital Group Companies, Inc., Capital Research and Management
Company, and SMALLCAP World Fund, Inc. have together filed a Schedule 13G
pursuant to which they report sole or shared voting and dispositive power
over 550,000 shares owned as of December 31, 1996. Capital Research and
Management Company is a registered investment adviser and is a wholly
owned subsidiary of The Capital Group Companies, Inc. and serves as
investment adviser to the American Funds Group of mutual funds.
(6) Includes options exercisable for 46,771 shares of Common Stock and 15,000
shares held by the William and Joanne Moeller Foundation, of which Mr.
Moeller is the trustee.
(7) Includes options exercisable for 9,000 shares of Common Stock and 1,000
shares held by One Liberty Ventures Retirement Trust FBO Edwin M. Kania,
Jr.
(8) Includes options exercisable for 84,517 shares of Common Stock.
(9) Includes options exercisable for 2,500 shares of Common Stock.
(10) Includes options exercisable for 10,041 shares of Common Stock.
(11) Includes options exercisable for 9,479 shares of Common Stock.
(12) Includes 3,225 shares held by Cynthia Urfer, Mr. Urfer's spouse, 1,875
shares owned by Gilbert Urfer, Mr. Urfer's son and 1,655 shares owned by
Courtney Urfer, Mr. Urfer's daughter.
(13) Includes options exercisable for 35,446 shares of Common Stock.
(14) Includes options exercisable for 34,404 shares of Common Stock.
(15) Includes options exercisable for 49,371 shares of Common Stock.
15.
<PAGE> 18
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Securities and Exchange Commission (the "SEC") initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on a review of the copies of such reports furnished to the Company
and written representations that no other reports were required, during the
year ended December 31, 1996, all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten percent stockholders were
complied with; except that one report, covering one transaction was filed late
by Roger P. Evans.
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
Executive Officers of the Company as of April 21, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William C. Moeller............ 58 Chief Executive Officer and Treasurer
Thomas B. King................ 42 President and Chief Operating Officer
Theodore H. Stanley, M.D...... 57 Chairman of the Board and Secretary
Martha V. Arnold.............. 41 Vice President, OTFC(R) Business Unit
Dennis L. Coleman, Ph.D....... 50 Vice President, Research and Development
Steven A. Shoemaker, M.D...... 45 Vice President of Medical Communications
</TABLE>
- ---------------
See "Proposal 1 - Election of Directors" for the biographies of Mr. Moeller,
Mr. King and Dr. Stanley.
Martha V. Arnold, joined the Company as Vice President, OTFC Business Unit
in September 1996. Prior to joining Anesta, she was employed by McNeil
Consumer Products Company, a member of the Johnson & Johnson family of
companies, where she served as Director, Smoking Cessation Products from April
1994 to August 1996 and Director, New Products from September 1993 to April
1994. Since May 1983, she has held various marketing and business development
positions within the McNeil and Johnson & Johnson Merck Consumer
Pharmaceuticals organizations. Ms. Arnold received an M.B.A. degree from the
University of Chicago Graduate School of Business in 1981.
Dennis L. Coleman, Ph.D. has been Vice President of Research and
Development of the Company since March 1992 and served as Director, Technical
Marketing at the Company from April 1991 to February 1992. Prior to joining
Anesta, he was a founder of Albion Instruments, a company specializing in the
analysis of anesthetic gases, where he served as Clinical Director from 1981 to
August 1990. He also served as a consultant to Anesta from September 1990 to
March 1991. He served as Research Associate Professor at the College of
Pharmacy, Department of Pharmaceutics from 1985 to 1987 and as Research
Assistant Professor, Department of Surgery, College of Medicine, Division of
Artificial Organs from 1981 to 1986 at the University of Utah. Dr. Coleman
received a Ph.D. degree in Pharmaceutics from the University of Utah in 1980.
Steven A. Shoemaker, M.D. has been Vice President of Medical
Communications since April 1994. Prior to joining Anesta, he was employed by
Somatogen, Inc., a biotechnology company, from February 1993 to March 1994 as
Senior Vice President and from June 1989 to February 1993 as Vice President of
Drug Development and Medical Affairs. He was Assistant Professor of Medicine
at the University of Colorado Health Sciences Center
16.
<PAGE> 19
from July 1985 to June 1988. He received an M.D. degree from the University of
California at Los Angeles in 1978.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's directors do not currently receive any cash compensation for
service on the Board of Directors or any committee thereof, but directors may
be reimbursed for certain expenses in connection with attendance at Board of
Directors and committee meetings.
Each non-employee director of the Company receives stock option grants
under the 1993 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). Only non-employee directors of the Company or affiliates of such
directors (as defined in the Internal Revenue Code) are eligible to receive
options under the Directors' Plan. Options granted under the Directors' Plan
do not qualify as incentive stock options under the Code.
Option grants under the Directors' Plan are non-discretionary. Each
person who is, after the effective date of the initial public offering of
shares of the Company's Common Stock, elected for the first time to be a
non-employee director shall, upon the initial election date to be a
non-employee director by the Board of Directors or stockholders of the Company,
be granted an option to purchase 10,000 shares of Common Stock of the Company
under the Directors' Plan. Subject to stockholder approval of Proposal 3, on
the date of the Company's Annual Meeting each member of the Company's Board of
Directors who is not an employee of the Company and has served as a
non-employee director for at least three months or, where specified by the
non-employee director, an affiliate of such director, is automatically granted
under the Directors' Plan, without further action by the Company, the Board of
Directors or the stockholders of the Company, an option to purchase 5,000
shares of Common Stock of the Company. No other options may be granted at any
time under the Directors' Plan. The exercise price of options granted under
the Directors' Plan is the fair market value of the Common Stock subject to the
option on the date of the option grant. Options granted under the Directors'
Plan may be exercised: (i) in installments over a period of three years from
the date of grant in three equal installments commencing on the date one year
after the date of grant, provided that the optionee has, during the entire
period prior to such vesting date, continuously served as a non-employee
director, or (ii) until the date upon which such optionee, or the affiliate of
such optionee, as the case may be, terminates his service as a non-employee
director for any reason or for no reason, the option shall terminate on the
earlier of the expiration date of the option or the date three months following
the date of termination of service. The term of options granted under the
Directors' Plan is five years. In the event of a merger of the Company with or
into another corporation or a consolidation, acquisition of assets or other
change-in-control transaction involving the Company, each option either will
continue in effect, if the Company is the surviving entity, or will be assumed
or an equivalent option will be substituted by the successor corporation, if
the Company is not the surviving entity.
During the last fiscal year, the Company granted options covering an
aggregate of 24,500 shares to the non-employee directors of the Company, with
exercise prices per share ranging from $9.25 to $12.50, which was equal to the
fair market value on the respective dates of grant (based on the closing sales
price reported in the Nasdaq National Market). As of December 31, 1996,
options to acquire 500 shares had been exercised under the Directors' Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the fiscal year ended December 31,
1996, certain compensation, including salary, bonuses, stock options and
certain other compensation, awarded or paid to, or earned by, the Company's
Chief Executive Officer and its four most highly compensated executive officers
at December 31, 1996 (the "Named Executive Officers").
17.
<PAGE> 20
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------- -----------------------------
SECURITIES
SALARY BONUS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ------- ------- ------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
William C. Moeller 1996 160,000 50,000 50,000 2,400(1)
Chief Executive Officer 1995 150,000 28,000 0 0
and Treasurer 1994 131,667 20,000 25,000 0
Thomas B. King 1996 154,000 50,000 90,000 2,117(1)
President and Chief 1995 143,001 27,000 42,500 0
Operating Officer (2) 1994 6,050 0 85,000 0
Michael A. Busch 1996 126,250 36,250 20,000 1,894(1)
Vice President, Clinical 1995 120,250 24,000 10,000 0
Research and Regulatory 1994 101,667 16,000 15,000 0
Affairs
Dennis L. Coleman 1996 126,000 22,453 20,000 1,890(1)
Vice President, Research 1995 120,000 20,400 10,000 0
and Development 1994 100,834 16,000 15,000 0
Steven A. Shoemaker 1996 147,000 26,197 20,000 1,500(1)
Vice President, Medical 1995 140,000 23,800 10,000 0
Communications (3) 1994 123,302 15,000 50,000 0
</TABLE>
- ---------------
(1) Consists of matching contributions to each Named Executive Officer's
401(k) account made by the Company.
(2) Mr. King became an officer and employee of the Company during 1994.
(3) Dr. Shoemaker became an officer and employee of the Company during 1994.
18.
<PAGE> 21
OPTION GRANTS IN 1996
The following table sets forth for the Named Executive Officers certain
information regarding options granted for the year ended December 31, 1996:
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT
OPTIONS ASSUMED ANNUAL RATES
NUMBER OF GRANTED TO OF STOCK PRICE
SECURITIES EMPLOYEES APPRECIATION
UNDERLYING IN EXERCISE FOR OPTION TERM (2)
OPTIONS 1996 PRICE EXPIRATION ----------------------
NAME GRANTED (#) (%)(1) ($/SHARE) DATE 5% ($) 10% ($)
- ---- ----------- ---------- --------- ---------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
William C. Moeller........... 25,743 6.4 11.00 08/21/2006 178,084 451,303
24,257 6.0 11.4375 08/22/2006 174,478 442,165
Thomas B. King............... 46,805 11.6 11.00 08/21/2006 323,786 820,544
43,195 10.7 11.4375 08/22/2006 310,699 787,375
Michael A. Busch............. 20,000 5.0 11.00 08/21/2006 138,356 350,622
Dennis L. Coleman............ 20,000 5.0 11.00 08/21/2006 138,356 350,622
Steven A. Shoemaker.......... 20,000 5.0 11.00 08/21/2006 138,356 350,622
</TABLE>
- ---------------
(1) Based on 403,500 options granted in 1996.
(2) The potential realizable value is based on the term of the option at its
time of grant (10 years in the case of these options). It is calculated
by assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the
option, and that the option is exercised and sold on the last day of its
term for the appreciated stock price. No gain to the optionee is possible
unless the stock price increases over the option term, which will benefit
all stockholders.
19.
<PAGE> 22
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth for the Named Executive Officers the shares
acquired and the value realized on each exercise of stock options during the
fiscal year ended December 31, 1996 and the fiscal year-end number and value of
unexercised options:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT DECEMBER 31,
DECEMBER 31, 1996 1996 ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) (1) UNEXERCISABLE UNEXERCISABLE (2)
- ---- --------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
William C. Moeller.... 32,000 417,650 38,437/54,169 488,035/477,234
Thomas B. King........ 6,833 66,954 59,206/151,461 692,320/1,469,033
Michael A. Busch...... 4,250 78,413 49,788/30,562 819,581/323,204
Dennis L. Coleman..... 4,532 42,093 35,809/30,771 562,598/326,130
Steven A. Shoemaker... -- -- 40,309/39,691 475,923/416,573
</TABLE>
- ---------------
(1) Based on the fair market value of the Common Stock as of the exercise
date as reported on the Nasdaq National Market, minus the exercise price,
multiplied by the number of shares underlying the option.
(2) Based on the fair market value of the Common Stock as of December 31,
1996 as reported on the Nasdaq National Market, minus the exercise price,
multiplied by the number of shares underlying the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer of
the Company.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Until 1994, the Board of Directors (the "Board") of the Company was
responsible for establishing the Company's compensation programs for all
executive officers. Beginning in 1994, the Board delegated to the Compensation
Committee (the "Committee") of the Board the authority to establish and
administer the Company's compensation programs. The Committee is currently
composed of three non-employee directors: Dr. Kisner, Mr. Kania and Mr. Leazer.
The Committee is responsible for setting and administering the policies which
govern executive salaries, bonuses (if any) and stock ownership programs. The
Committee annually evaluates the performance, and determine the compensation, of
the Chief Executive Officer (the "CEO") and the other executive officers of the
Company, based upon a mix of the achievement of corporate goals, individual
performance and comparisons with other pharmaceutical and drug delivery
companies.
The policies of the Company with respect to compensation of executive
officers, including the CEO, are to provide compensation sufficient to attract,
motivate and retain executives of outstanding ability and potential and to
establish an appropriate relationship between executive compensation and the
creation of stockholder value. To meet these goals, the Committee adopted a mix
among the compensation elements of salary, bonus and stock options, with a bias
toward stock options, to emphasize the link between executive incentives and the
creation of stockholder value as measured by the equity markets. In general for
1996, the salaries, bonuses and stock option awards of executive officers were
linked to the Company's achievement of corporate performance criteria with
respect to progress in clinical and product development programs (particularly
the Actiq(TM) cancer pain program where an NDA was filed), expanding the
Company's management team, strengthening the Company's pharmaceutical product
development capabilities, further development of the Company's corporate
partnering and distribution strategy, public company matters and stock price
performance. In order to conserve the Company's financial resources, and in
order to reflect the Company's size and stage of development in relation to the
20.
<PAGE> 23
companies included in industry compensation surveys reviewed by the Committee,
the Committee determined to provide for base salaries at or below the mid-point
of the compensation range for such companies. Bonuses were awarded to certain
executive officers based on the same performance criteria noted above plus the
achievement of certain individual objectives. In general, the bonus program is
designed to allow each executive officer to realize total cash compensation
that is slightly below or meaningfully above industry averages, based on
performance. Base salary and bonus were supplemented by awards under the
Company's stock option plan, designed to provide long-term incentives to all
employees of the Company. Stock option awards were set in the mid-range
compared to the companies included in the industry surveys considered by the
Committee. Each of these components is discussed in turn below.
BASE SALARY
Base salaries for all executive officers of the Company were established
at or below the mid-point of the range for companies included in the
compensation surveys considered by the Committee. In establishing such
salaries, the Committee also considers each officer's level of industry
experience, individual achievement and overall contribution to the achievement
of corporate objectives.
BONUSES
The Company paid bonuses to its CEO and four other executive officers in
1996, in amounts ranging from $22,543 to $50,000. Such bonuses were based on
the extent to which the corporate goals described above were achieved, and
represented approximately 25% of each such officer's base salary.
OPTION PLANS
The option plans offered by the Company have been established to provide
all executive officers of the Company with an opportunity to share, along with
stockholders of the Company, in the long-term performance of the Company.
Periodic grants of stock options are generally made to all eligible employees.
These grants have been reviewed by the Board on an annual basis. As the base
salaries for executive officers of the Company historically have been below the
mid-point of the range for comparable companies, the Company has used stock
options as the primary incentive to attract and retain its executive officers.
In awarding stock options, the Board considers individual performance and
overall contribution to the Company and also considers the number of unvested
stock options held by the officer and the total number of stock options
available to be awarded under the stock option plans. The Committee also
considers the stock option practices of a self-selected group of other
pharmaceutical, biotechnology and drug delivery companies. After considering
the criteria relating to awarding stock options, the Board determined that four
executive officers would receive option grants in the year ended December 31,
1996. Stock options granted under the stock option plans generally have a
four-year vesting schedule and generally expire ten years from the date of
grant, except in certain cases the maximum term is five years. The exercise
price of options granted under the stock option plans was 100% of fair market
value of the underlying stock on the date of grant for all officers who were
granted options during 1996.
CEO COMPENSATION
Mr. Moeller's base salary and grants of stock options were determined in
accordance with the criteria described above. The base salary of Mr. Moeller
was set at an annual rate of $160,000 commencing January 1, 1996, which
represented an increase from his base salary of $150,000 in 1995. In setting
such salary level, the Committee considered salary surveys prepared by Radford
Associates, Ward Howell and Ernst & Young for other companies in the
pharmaceutical, biotechnology and drug delivery sectors. Mr. Moeller's salary
was set below the mid-point of the range for such companies, reflecting the
Company's size and stage of development in relation to such companies and the
Committee's desire to conserve the Company's financial resources. Mr. Moeller
also received a bonus of $50,000 for 1996. Such salary and bonus were based on
the extent to which the performance objectives described above were achieved.
The Committee determined that certain of such objectives were fully satisfied,
and others were partially satisfied, in 1996.
21.
<PAGE> 24
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code (the "Code") limits the
Company to a deduction for federal income tax purposes of no more than $1
million of compensation paid to certain Named Executive Officers in a taxable
year. Compensation above $1 million may be deducted if it is
"performance-based compensation" within the meaning of the Code. The statute
containing this law and the applicable proposed Treasury regulations offer a
number of transitional exceptions to this deduction limit, including an
exemption for compensation plans, arrangements and binding contracts in
existence prior to the time the Company became a "publicly held corporation"
within the meaning of the Code. As a result, the Board believes that at the
present time it is quite unlikely that the compensation paid to any Named
Executive Officers in a taxable year which is subject to the deduction limit
will exceed $1 million. Therefore, the Board has not yet established a policy
for determining which forms of incentive compensation awarded to its Named
Executive Officers shall be designed to qualify as "performance-based
compensation." The Board intends to continue to evaluate the effects of the
statute and any final Treasury regulations and to comply with Code Section
162(m) in the future to the extent consistent with the best interests of the
Company.
COMPENSATION COMMITTEE
Daniel C. Kisner, M.D.
Edwin M. Kania, Jr.
Richard H. Leazer
PERFORMANCE CHART
COMPARISON OF 35 MONTH CUMULATIVE TOTAL RETURN*
AMONG ANESTA CORP., THE NASDAQ STOCK MARKET - US INDEX
AND THE BIOCENTURY DRUG DELIVERY SECTOR INDEX
<TABLE>
<CAPTION>
1/28/94 3/94 6/94 9/94 12/94 3/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96
------- ---- ---- ---- ----- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANESTA CORP........... 100 84 64 71 43 40 77 87 74 114 98 113 154
NASDAQ STOCK
MARKET - U.S......... 100 93 89 96 95 104 119 133 135 141 153 158 166
BIOCENTURY DRUG
DELIVERY SECTOR...... 100 85 72 75 67 70 82 108 118 146 143 117 114
</TABLE>
- ---------------
* $100 INVESTED ON 1/28/94 IN STOCK OF INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
CERTAIN TRANSACTIONS
Relationship with Abbott Laboratories. In December 1989, Anesta entered
into a research and development, license, supply and distribution agreement
with Abbott. Under the agreement, as amended, Anesta granted to Abbott the
exclusive right to make, use and market in the U.S. OT-products resulting from
technology owned or licensed by Anesta consisting of the OT-fentanyl product
line or other central nervous system acting drugs or intermediates thereof used
for pre-medication, sedation, analgesia, diagnostic procedures, emergency room,
post operative pain, burn treatment or cancer-related pain management.
Abbott's exclusive license terminates upon the expiration of the last U.S.
patent relative to such licensed technology. Under the 1989 Agreement, Abbott
has provided development funding and milestone payments and Abbott is obligated
to pay royalties and other payments on product sales. In 1995, the Company
entered into two new funding agreements with Abbott under which Abbott agreed
to provide to the Company $1,500,000 in each of 1995 and 1996 to further the
development of Actiq for cancer pain. Through March 31, 1997, Abbott had paid
a total of $9,750,000. Abbott is Anesta's contract manufacturer for the
OT-fentanyl product line and sells such products to Anesta. Anesta resells
OT-fentanyl products to Abbott for marketing in the U.S. under Abbott's
trademark Fentanyl Oralet(R) and Anesta's trademark Actiq.
The Company granted to Abbott International in February 1991 a license for
OT-fentanyl products for all countries in the world other than the U.S. In
August 1995, the Company and Abbott International amended the February 1991
license agreement to grant the Company an option to either terminate or make
non-exclusive Abbott International's license rights to the OT-fentanyl product
line, including Fentanyl Oralet and Actiq, in any country other than the U.S.
In conjunction with the amendment, Abbott agreed to manufacture and sell to the
Company, its distributors or licensees any OT-fentanyl products the Company
requests from Abbott for distribution into a country for which the Company has
exercised its option to terminate or made non-exclusive Abbott International's
license. The amendment also reduced by $100,000 the Company's unearned advance
royalty obligation to Abbott International, which amount was recognized as
royalty revenue during the year ended December 31, 1995.
Relationship with University of Utah Research Foundation. In September
1985, the Company entered into a license agreement with the University of Utah
Research Foundation (the "UURF") with respect to the license by UURF to the
Company of the Company's proprietary OT drug delivery system. Under the license
agreement, the Company is obligated to pay to the UURF royalties based on
Anesta's revenues related to sales of products incorporating the OT system. Dr.
Theodore H. Stanley has been Professor of Anesthesiology and Professor of
Surgical Research at the
22.
<PAGE> 25
University of Utah, an affiliate of the UURF, since 1978. As one of the
inventors of the OT system, Dr. Stanley may be entitled to a portion of the
royalties obtained by the UURF from the Company in connection with the license
of the technology to the Company pursuant to an unwritten policy of the
University of Utah. In addition, in September 1985, the Company issued to the
UURF 6,000 shares of the Company's Common Stock in connection with the issuance
of the license.
Relationship with Stanley Research Foundation. Dr. Stanley is the sole
trustee of the Stanley Research Foundation ("SRF"), a not-for-profit entity.
SRF makes grants to the University of Utah which are used to support the work
of scientists and other employees of the University of Utah. The Company
reimburses SRF for such grants. The Company obtains from SRF certain materials
and services at the same cost as that paid by SRF. Such grants and purchasing
arrangements totaled approximately $317,349 for the year ended December 31,
1996. Dr. Stanley receives no remuneration from SRF, and therefore does not
benefit directly from the Company's arrangements with SRF.
23.
<PAGE> 26
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
Theodore H. Stanley, M.D.
Secretary
May 16, 1997
24.
<PAGE> 27
DETACH HERE
ANESTA CORP.
P
R
O
X
Y
The undersigned hereby appoints William C. Moeller and Theodore H.
Stanley, and either of them, as attorneys of the undersigned with full power of
substitution, to vote all shares of stock which the undersigned is entitled to
vote at the Annual Meeting of Stockholders of Anesta Corp., to be held on
June 17, 1997 at 2:00 p.m. local time, at the University Park Hotel, 480
Wakara Way, Salt Lake City, Utah, and at any continuation or adjournment
thereof, with all powers which the undersigned might have if personally
present at the meeting.
Where no contrary choice is indicated by the stockholder, this Proxy,
when returned, will be voted FOR such nominees and prospects and with
discretionary authority upon such other matters as may properly come before the
meeting. This Proxy may be revoked at any time prior to the time it is voted.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby acknowledges receipt of: (a) Notice of Annual
Meeting of Stockholders dated May 16, 1997; (b) the accompanying Proxy
Statement and (c) the Annual Report to Stockholders for the fiscal year ended
December 31, 1996 and hereby expressly revokes any and all proxies heretofore
given or executed by the undersigned with respect to the shares of stock
represented by this Proxy and by filing this Proxy with the Secretary of the
Corporation, gives notice of such revocation.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
SEE REVERSE
SIDE
<PAGE> 28
DETACH HERE
[X] Please mark
votes as in
this example.
THE BOARD RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
1. Election of Eight Directors Proposed in the Accompanying Proxy
Statement.
Nominees: Edwin M. Kania, Jr., Thomas B. King, Richard H. Leazer, William C.
Moeller, Emanuel M. Papper, Daniel L. Kisner, Theodore H. Stanley,
Richard P. Urfer
FOR WITHHELD
[ ] [ ]
[ ]______________________________________
For all nominees except as noted above
2. To approve an amendment to the Company's 1993 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve an amendment to the Company's 1993 Non-Employee Director's
Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
Independent Certified Public Accountants for the fiscal year ending
December 31, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To transact such other business as may properly come before the annual
meeting or any adjournments or postponements thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE BELOW
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares of stock are held of record in the names of two or more persons or in
the name of husband and wife, whether as joint tenants or otherwise, both or
all of such persons should sign the Proxy. If shares of stock are held of
record by a corporation, the Proxy should be signed by the President or Vice
President and the Secretary or Assistant Secretary, Executors or
administrators or other fiduciaries who execute the above Proxy for a
deceased stockholder should give their full titles.
Signatures:______________ Date:_______ Signature:______________ Date:________
