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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 23, 1998
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 23, 1998 at 2:00 p.m. local time at the Doubletree Hotel, 255 South West
Temple, Salt Lake City, Utah 84101 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 350,000 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 upon initial election of a Non-Employee
Director ("Non-Employee Director") by 5,000 shares; to grant 2,000
shares per year to each Non-Employee Director serving as a committee
chair; and to grant 400 shares to each Non-Employee Director for each
meeting of the Board of Directors attended in person
4. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants of the Company for its fiscal year ending December 31,
1998.
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 27,
1998, 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
/s/ Theodore H. Stanley
Theodore H. Stanley, M.D.
Secretary
Salt Lake City, Utah
June 1, 1998
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.
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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 23, 1998 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 Doubletree Hotel, 255 South West Temple, Salt
Lake City, Utah 84101. The Company intends to mail this proxy statement and
accompanying proxy card on or about June 1, 1998, to all stockholders entitled
to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
April 27, 1998 will be entitled to notice of and to vote at the Annual Meeting.
At the close of business on April 27, 1998 the Company had outstanding and
entitled to vote 9,579,993 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 1999 Annual Meeting on or around June 23, 1999.
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 February 1, 1999 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
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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>
Thomas B. King.............................. 43 President and Chief Executive Officer
William C. Moeller ......................... 59 Chairman of the Board and Treasurer
Theodore H. Stanley, M.D.................... 58 Founding Chairman and Secretary
Edwin M. Kania, Jr. (1)(2).................. 40 General Partner of One Liberty Ventures, Inc.
Daniel L. Kisner, M.D. (1).................. 51 President and Chief Operating Officer of Isis
Pharmaceuticals, Inc.
Richard H. Leazer (1)(2).................... 56 Managing Director of the Wisconsin Alumni Research
Foundation
Emanuel M. Papper, M.D., Ph.D............... 82 Professor of Anesthesiology at the University of
Miami, School of Medicine
Richard P. Urfer (2)........................ 61 President of BW Capital Markets, Inc.
</TABLE>
- --------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Thomas B. King has been Chief Executive Officer of the Company since
January 1998, a Director since December 1994 and has served as its President
since December 1996. Mr. King was the Company's Chief Operating Officer from
December 1994 until December 1997 and 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 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 Anaquest, an
anesthesia pharmaceutical company and a division of BOC HealthCare, from June
1982 to December 1987. Mr. King received an M.B.A. in finance and marketing from
the University of Kansas in 1982.
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William C. Moeller has been Chairman of the Board of Directors of the
Company since January 1998. Mr. Moeller served as 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 the
Harvard Graduate School of Business Administration in 1964.
Theodore H. Stanley, M.D. has been Founding Chairman of the Company
since January 1998. Dr. Stanley served as 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
has also 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 General Partner of One Liberty Ventures, Inc., which he
co-founded in 1995. Previously, he had been General Partner in a predecessor
firm, Morgan Holland Ventures. Mr. Kania serves as a director of several private
companies. He received his M.B.A. degree from the 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. 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.
Richard P. Urfer has served as a director of the Company since August
1996. Mr. Urfer has served as President of BW Capital Markets, Inc., an
investment banking firm, since June 1997. From June 1995 until June 1997, Mr.
Urfer served as Executive Vice President of Resource Investment Advisors, Inc.
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 the Harvard Graduate School of Business
Administration in 1964.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
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BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997 the Board of Directors
held six meetings. The Board has an Audit Committee and a Compensation
Committee, the Audit Committee held two meetings and the Compensation Committee
held three meetings during the fiscal year ended December 31, 1997.
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 (Chair), 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 (Chair) and Messrs. Kania and Leazer.
During the fiscal year ended December 31, 1997, 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.
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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. In August
1996 and February 1997, the Board approved amendments to the Plan to increase
the number of shares authorized for issuance from an aggregate of 750,000 shares
to an aggregate of 1,500,000 shares. In June 1997 such amendments were approved
by stockholders. 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 27, 1998, the Plan had net outstanding options to purchase
an aggregate of 1,185,403 shares held by 68 persons at a weighted average
exercise price of $11.09 per share. As of April 27, 1998, options to purchase
101,508 shares of Common Stock granted pursuant to the Plan had been exercised.
In April 1998, 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 1,500,000 shares to an aggregate of
1,850,000 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.
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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, 1997, the closing price of the
Company's Common Stock as reported on the NASDAQ National Market System was
$16.375 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 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
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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.
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
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<PAGE> 9
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 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).
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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 has 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 27, 1998, the Directors' Plan had net outstanding options
to purchase an aggregate of 83,500 shares held by five persons at a weighted
average exercise price of $13.17 per share. As of April 27, 1998, options to
purchase 1,750 shares of Common Stock granted pursuant to Directors' Plan had
been exercised and there were 64,750 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 April 1998, the Board approved an amendment to the Directors' Plan,
subject to stockholder approval, to increase the non-discretionary grant made to
each newly elected Non-Employee Director ("Non-Employee Director")by 5,000
shares, from 10,000 shares to 15,000 shares, to grant 2,000 shares per year to
each Non-Employee Director serving as a committee chair, and to grant 400 shares
to each Non-Employee Director for each meeting of the Board of Directors
attended in person. 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.
9
<PAGE> 11
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 newly elected Non-Employee Director shall be
granted, on the date of initial election to the Board of Directors, fifteen
thousand (15,000) shares of Common Stock of the Company. Thereafter, each
Non-Employee Director of the Company shall receive, on the date of the Company's
annual meeting each year, an option grant to purchase five thousand (5,000)
shares of Common Stock of the Company. In addition, each Non-Employee Director
serving as a committee chair shall receive, on the date of the Company's annual
meeting each year, an option grant to purchase two thousand (2,000) shares of
Common Stock of the Company and an additional 400 shares will be granted to each
Non-Employee Director for each meeting of the Board of Directors attended in
person
As of April 27, 1998, the Company had granted options under the
Directors' Plan to purchase 18,000 shares to each of Messrs. Kania, Leazer and
Dr. Papper and 15,000 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.
10
<PAGE> 12
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.
11
<PAGE> 13
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, 1998
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.
12
<PAGE> 14
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 27, 1998 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
One Abbott Park Road, D-980, AP30
Abbott Park, IL 60064-3500 ..................................................... 1,202,840 12.6%
Theodore H. Stanley (3)
4745 Wiley Post Way, Suite 650
Salt Lake City, UT 84116........................................................ 647,091 6.7
The Capital Group Companies, Inc. (4)
333 South Hope Street
Los Angeles, CA 90071........................................................... 550,000 5.7
Fidelity Management & Research Corp. (5)
82 Devonshire Street
Boston, MA 02109............................................................... 500,900 5.2
William C. Moeller (6)
4745 Wiley Post Way, Suite 650
Salt Lake City, UT 84116 ....................................................... 493,360 5.1
Edwin M. Kania, Jr. (7) ........................................................ 15,167 **
Thomas B. King (8) ............................................................. 146,261 1.5
Daniel L. Kisner (9) ........................................................... 6,667 **
Richard H. Leazer (10) ......................................................... 16,458 **
Emanuel M. Papper (11) ......................................................... 19,167 **
Richard P. Urfer (12) .......................................................... 45,922 **
Martha V. Arnold (13) .......................................................... 9,999 **
Dennis L. Coleman (14) ......................................................... 81,731 **
Steven A. Shoemaker (15) ....................................................... 72,002 **
All executive officers and directors as a group
(13 persons) (3) and (6)-(15) .................................................. 1,562,158 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 27, 1998, 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.
13
<PAGE> 15
(2) Percentage of beneficial ownership is based on 9,579,993 shares of
Common Stock outstanding as of April 27, 1998.
(3) Includes options exercisable for 31,874 shares of Common Stock. Of the
647,091 issued and outstanding shares, Dr. Stanley owns 213,311 shares,
Mary Ann Stanley, Dr. Stanley's spouse, owns 170,876 shares, the
Stanley Research Foundation owns 103,065 shares, the Theodore H. and
Mary Ann Stanley Foundation owns 103,065 shares and Dr. Stanley owns
24,900 shares jointly with Ellen Stanley.
(4) 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, 1997. 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.
(5) Fidelity Management & Research Company, Fidelity Management Trust
Company, and Edward C. Johnson III have together filed a Schedule 13G
pursuant to which they report sole or shared voting and dispositive
power of 500,900 shares owned as of December 31, 1997. Fidelity
Management & Research Company and Fidelity Management Trust Company are
registered investment advisers and are wholly owned subsidiaries of FMR
Corp.
(6) Includes options exercisable for 66,289 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 14,167 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 140,766 shares of Common Stock.
(9) Includes options exercisable for 6,667 shares of Common Stock.
(10) Includes options exercisable for 16,458 shares of Common Stock.
(11) Includes options exercisable for 13,667 shares of Common Stock.
(12) Includes options exercisable for 4,167 shares of Common Stock and 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 9,999 shares of Common Stock.
(14) Includes options exercisable for 44,805 shares of Common Stock.
(15) Includes options exercisable for 70,205 shares of Common Stock.
14
<PAGE> 16
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, 1997, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent stockholders were complied
with; except that two reports, covering two transactions were filed late by
Michael Busch, an outgoing officer, and Franck Kiser, an incoming officer.
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
Executive Officers of the Company as of April 27, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Thomas B. King......................... 43 President and Chief Executive Officer
William C. Moeller..................... 59 Chairman of the Board and Treasurer
Theodore H. Stanley, M.D............... 58 Founding Chairman and Secretary
Martha V. Arnold....................... 42 Vice President, OTFC(R)Business Unit
Dennis L. Coleman, Ph.D................ 51 Vice President, Research and Development
Franck P. Kiser........................ 38 Vice President, European Operations
Paul A. Litka, M.D..................... 49 Vice President, Clinical Drug Development
Steven A. Shoemaker, M.D............... 46 Vice President, Medical Communications
</TABLE>
- ------------------
See "Proposal 1 - Election of Directors" for the biographies of Mr. King, Mr.
Moeller 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 o 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, 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.
Franck P. Kiser joined Anesta as Vice President, European Operations in
November 1997. Prior to joining Anesta, he was the principal at Group Kiser,
Switzerland, from January 1995 to November 1997, where he specialized in
developing and executing European strategies for international companies.
Previously, from September 1989 to September 1994, Mr. Kiser held various
international management, global marketing and business development positions at
Schering-Plough Corporation. Mr. Kiser received a Masters degree in
International Management from the American Graduate School of International
Management, Thunderbird in August 1989.
15
<PAGE> 17
Paul A. Litka, M.D. joined Anesta in March 1998 as Vice President,
Clinical Drug Development. Prior to joining the Company he served as Senior Vice
President, Clinical Research and Regulatory Affairs at Magainin Pharmaceuticals,
Inc., a pharmaceutical company, from April 1995 to February 1998. From April
1994 to April 1995 he was an independent consultant. From November 1991 to March
1994 he was Senior Vice President and General Manager of the IBRD Center for
Clinical Research, a contract research organization. He received an M.D. degree
from the College of Medicine and Dentistry of New Jersey-Newark in 1975.
Steven A. Shoemaker, M.D. has been Vice President, 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 from July 1985 to June 1988.
He received an M.D. degree from the University of California at Los Angeles in
1978.
16
<PAGE> 18
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. Subject
to the adoption of Proposal 3, 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 15,000 shares of Common Stock of
the Company under the Directors' Plan. 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. In
addition, each Non-Employee Director serving as a committee chair shall receive,
on the date of the Company's annual meeting each year, an option grant to
purchase two thousand (2,000) shares of Common Stock of the Company and an
additional 400 shares will be granted to each Non-Employee Director for each
meeting of the Board of Directors attended in person. 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 25,000 shares to the Non-Employee Directors of the Company, with
exercise prices per share ranging from $18.50 to $19.25, which was equal to the
fair market value on the respective dates of grant (based on the closing sales
price reported in the Nasdaq National Market). As of December 31, 1997, options
to acquire 1,750 shares had been exercised under the Directors' Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the fiscal year ended December 31,
1997, certain compensation, including salary, bonuses, stock options and certain
other compensation, awarded or paid to, or earned by, the Company's Chief
Executive Officer and its four most highly compensated executive officers at
December 31, 1997 (the "Named Executive Officers").
17
<PAGE> 19
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
SECURITIES
SALARY BONUS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --- --- ---------------------------
<S> <C> <C> <C> <C> <C>
Thomas B. King 1997 192,000 50,000 60,000 2,880(1)
President and Chief 1996 154,000 50,000 90,000 2,117(1)
Executive Officer 1995 143,001 27,000 42,500 0
William C. Moeller 1997 192,000 75,000 25,000 2,880(1)
Chairman of the Board 1996 160,000 50,000 50,000 2,400(1)
and Treasurer 1995 150,000 28,000 0 0
Martha V. Arnold 1997 140,000 27,010 15,000 1,088(1)
Vice President, OTFC 1996 41,971 25,000 40,000 79,640(3)
Business Unit (2)
Dennis L. Coleman 1997 150,000 15,390 15,000 2,250(1)
Vice President, Research 1996 126,000 22,453 20,000 1,890(1)
and Development 1995 120,000 20,400 10,000 0
Steven A. Shoemaker 1997 160,000 26,416 15,000 1,500(1)
Vice President, Medical 1996 147,000 26,197 20,000 1,500(1)
Communications 1995 140,000 23,800 10,000 0
</TABLE>
- ----------------
(1) Consists of matching contributions to each Named Executive Officer's
401(k) account made by the Company.
(2) Ms. Arnold became an officer and employee of the Company during 1996.
(3) Consists of relocation items paid by the Company.
18
<PAGE> 20
OPTION GRANTS IN 1997
The following table sets forth for the Named Executive Officers certain
information regarding options granted for the year ended December 31, 1997:
<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 1997 PRICE EXPIRATION ------------------
NAME GRANTED(#) (%)(1) ($/SHARE) DATE 5%($) 10%($)
- ---- ---------- ------ --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Thomas B. King................... 60,000 13.9 14.125 11/24/2007 532,988 1,350,697
William C. Moeller............... 25,000 5.8 14.125 11/24/2007 222,078 562,790
Martha V. Arnold ................ 15,000 3.5 14.125 11/24/2007 133,247 337,674
Dennis L. Coleman................ 15,000 3.5 14.125 11/24/2007 133,247 337,674
Steven A. Shoemaker.............. 15,000 3.5 14.125 11/24/2007 133,247 337,674
</TABLE>
- ---------------------
(1) Based on 433,000 options granted in 1997.
(2) The potential realizable value is based on the term of the option at
its time of grant (10 years in the case of these options). It is
calculated by assuming that the stock price on the date of grant
appreciates at the indicated annual rate, compounded annually for the
entire term of the option, and that the option is exercised and sold on
the last day of its term for the appreciated stock price. No gain to
the optionee is possible unless the stock price increases over the
option term, which will benefit all stockholders.
19
<PAGE> 21
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth for the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the fiscal year ended December 31, 1997 and the fiscal year-end number and value
of unexercised options:
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT DECEMBER 31,
SHARES DECEMBER 31, 1997 1997($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- ---- ----------- -------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Thomas B. King.................. 10,000 174,063 106,078/154,589 828,534/755,905
William C. Moeller.............. -- -- 59,270/58,336 506,909/248,372
Martha V. Arnold ............... 11,666 128,326 3,124/40,210 12,654/148,599
Dennis L. Coleman............... 7,813 138,290 41,471/32,296 454,763/154,614
Steven A. Shoemaker............. -- -- 60,933/34,067 527,065/169,185
</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,
1997 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 (Chair), 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
1997, 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 for which an FDA Advisory Committee meeting
was conducted), 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 companies included in industry compensation
surveys reviewed by the Committee, the Committee determined to provide for base
salaries at 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 at the mid-point of 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
20
<PAGE> 22
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 1997, in amounts ranging from $15,390 to $75,000. Such bonuses were based on
the extent to which the corporate goals described above were achieved, and
represented approximately 23% 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 the CEO
and four other executive officers would receive option grants in the year ended
December 31, 1997. 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 1997.
CEO COMPENSATION
Mr. King's base salary and grants of stock options were determined in
accordance with the criteria described above. The base salary of Mr. King was
set at an annual rate of $192,000 commencing January 1, 1997, which represented
an increase from his base salary of $154,000 in 1996. In setting such salary
level, the Committee considered salary surveys prepared by Radford Associates,
iQuantic, Top Five Data Services and Ernst & Young for other companies in the
pharmaceutical, biotechnology and drug delivery sectors. Mr. King'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. King also
received a bonus of $50,000 for 1997. 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 1997.
21
<PAGE> 23
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. (CHAIR)
EDWIN M. KANIA, JR.
RICHARD H. LEAZER
22
<PAGE> 24
PERFORMANCE CHART
COMPARISON OF 47 MONTH CUMULATIVE TOTAL RETURN* AMONG ANESTA CORP., THE
NASDAQ STOCK MARKET - US INDEX AND THE BIOCENTURY DRUG DELIVERY SECTOR INDEX
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------------------------------------------------------------------
1/28/94 3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Anesta Corp 100 84 64 71 43 40 77 87 74 114 98
NASDAQ STOCK MARKET(U.S.) 100 93 89 96 95 104 119 133 135 141 153
BIOCENTURY DRUG DELIVERY SECTOR 100 85 72 75 67 70 82 108 118 146 143
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------------
9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Anesta Corp 113 154 138 152 186 131
NASDAQ STOCK MARKET(U.S.) 158 166 157 186 217 203
BIOCENTURY DRUG DELIVERY SECTOR 117 114 108 116 131 105
</TABLE>
- ---------------
* $100 invested on 1/28/94 in stock of index - including reinvestment of
dividends. Fiscal year ending December 31.
23
<PAGE> 25
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. Under the 1989
Agreement, Abbott is obligated to pay royalties and other payments on product
sales. For the year ended December 31, 1997, the Company received $186,004 from
Abbott for payments on product sales and royalties. In January 1998, the Company
exercised its right to terminate Abbott International's license rights to
OT-fentanyl products in all countries in the world except the U.S.
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 $284,030 for the year ended December 31, 1997. Dr. Stanley
receives no remuneration from SRF, and therefore does not benefit directly from
the Company's arrangements with SRF.
Relationship with Group Kiser. In 1997 the Company signed a consulting
agreement with Group Kiser. Under the agreement, Group Kiser performed various
research projects and other services related to the European pharmaceutical
industry. The Company paid Group Kiser $100,000. Franck Kiser was the principal
at Group Kiser.
24
<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
/s/ Theodore H. Stanley
Theodore H. Stanley, M.D.
Secretary
June 1, 1998
25
<PAGE> 27
DETACH HERE
PROXY
ANESTA CORP.
The undersigned hereby appoints Thomas B. King and William C. Moeller, 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 23, 1998 at
2:00 p.m. local time, at the Doubletree Hotel, 255 South West Temple, 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 proposals 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 June 1, 1998; (b) the accompanying Proxy
Statement and (c) the Annual Report to Stockholders for the fiscal year ended
December 31, 1997 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.
SEE REVERSE PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND SEE REVERSE
SIDE RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. SIDE
<PAGE> 28
DETACH HERE
Please mark
votes as in
this example
THE BOARD RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Eight Directors Proposal in
the Accompanying Proxy Statement.
Nominees Edwin M. Kania, Jr., Thomas B. FOR AGAINST ABSTAIN
King, Richard H. Leazer, William C. 2. To approve an amendment to the Company's [ ] [ ] [ ]
Moeller, Emanuel M. Papper, Daniel L. 1993 Stock Option Plan.
Kisner, Theodore H. Stanley,
Richard P. Urfer
3. To approve an amendment to the Company's [ ] [ ] [ ]
FOR WITHHELD 1993 Non-Employee Directors' Stock
[ ] [ ] Option Plan.
[ ] _____________________ MARK HERE 4. To ratify the appointment of Coopers & [ ] [ ] [ ]
For all nominees FOR ADDRESS Lybrand L.L.P., as the Company's Independent
except as noted above CHANGE AND [ ] Certified Public Accountants for the fiscal
NOTE BELOW fiscal year ending December 31, 1998.
5. To transact such other business as may properly come before the annual
meeting or any adjournments or postponements thereof.
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.
Signature: ____________________________ Date: _____________ Signature: ____________________________ Date: _____________
</TABLE>
