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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 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, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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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 29, 1999
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 29,
1999 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 Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock
from 15,000,000 to 35,000,000 shares.
3. 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 550,000 shares.
4. To approve an amendment to the Company's 1993 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to increase the aggregate number of
shares of Common Stock authorized for issuance under such Plan by 200,000
shares
5. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Company for its fiscal year ending December 31, 1999.
6. 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 29, 1999
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
May 27, 1999
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 29, 1999 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 May 27, 1999, 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
29, 1999 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 29, 1999 the Company had outstanding and entitled to
vote 13,195,372 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. Except for Proposal 2, broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether a matter has been approved. With respect to Proposal 2, abstentions and
broker non-votes will have the same effect as negative votes.
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 2000 Annual Meeting on or around June
27, 2000. Thus, proposals of stockholders that are intended to be presented at
the Company's 2000 Annual Meeting of Stockholders must be received by the
Company not later than February 28, 2000 in order to be included in the proxy
statement and proxy relating to that Annual Meeting. Unless a stockholder who
wishes to bring a matter before the stockholders at the Company's 2000 Annual
Meeting of Stockholders notifies the Company of such matter prior to May 15,
2000, management will have discretionary authority to vote all shares for which
it has proxies in opposition to such matter.
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PROPOSAL 1
ELECTION OF DIRECTORS
There are seven nominees for the seven 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 seven 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.................. 44 President and Chief Executive Officer
William C. Moeller.............. 60 Chairman of the Board and Treasurer
Theodore H. Stanley, M.D........ 59 Founding Chairman and Secretary
Daniel L. Kisner, M.D. (1)...... 52 President and Chief Executive Officer of Caliper Technologies Corp.
Richard H. Leazer (1)(2)........ 57 Managing Director of the Wisconsin Alumni Research Foundation
Emanuel M. Papper, M.D., Ph.D... 83 Professor of Anesthesiology at the University of Miami, School of Medicine
Richard P. Urfer (2)............ 62 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 until December 1997. 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 also has been
an Adjunct Professor of Anesthesiology at the University of Texas (Houston)
since 1985. He also 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.
Daniel L. Kisner, M.D. has served as a director of the Company since
February 1996. Dr. Kisner has served as President and Chief Executive Officer
of Caliper Technologies Corp. since April 1, 1999. Prior to joining Caliper,
Dr. Kisner 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, 1998 the Board of Directors
held ten 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, 1998.
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. Mr. Kania has elected not to be
nominated for reelection to the Board of Directors and will not serve on the
Audit Committee after the annual meeting.
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. Mr. Kania has
elected not to be nominated for reelection to the Board of Directors and will
not serve on the Compensation Committee after the annual meeting.
4
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PROPOSAL 2
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Restated Certificate of Incorporation (the
"Certificate of Incorporation") to increase the Company's authorized number of
shares of Common Stock from 15,000,000 shares to 35,000,000 shares.
The additional Common Stock to be authorized by adoption of the
amendment will have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed amendment and issuance of the Common
Stock will not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number of
shares of the Company's Common Stock outstanding, such as dilution of the
earnings per share and voting rights of current holders of Common Stock. If the
amendment is adopted, it will become effective upon filing of a Certificate of
Amendment of the Company's Certificate of Incorporation with the Secretary of
State of the State of Delaware.
In addition to the 13,195,372 shares of Common Stock outstanding as of
April 29, 1999, the Board has reserved 1,568,493 shares for issuance upon
exercise of options and rights under the Company's stock option plans, of which
1,358,522 have been granted.
The additional shares of Common Stock that will become available for
issuance if the Proposal is adopted may also be used by the Company to oppose a
hostile takeover attempt or delay or prevent changes in control or management of
the Company. For example, without further stockholder approval, the Board could
strategically sell shares of Common Stock in a private transaction to purchasers
who would oppose a takeover or favor the current Board. Although this Proposal
to increase the authorized Common Stock has been prompted by business and
financial considerations and not by the threat of any hostile takeover attempt
(nor is the Board currently aware of any such attempts directed at the Company),
nevertheless, stockholders should be aware that approval of this Proposal could
facilitate future efforts by the Company to deter or prevent changes in control
of the Company, including transactions in which the stockholders might otherwise
receive a premium for their shares over then current market prices.
The affirmative vote of the holders of a majority of the shares of
Common Stock is required to approve this amendment to the Company's Certificate
of Incorporation. As a result, abstentions and broker non-votes will have the
same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
5
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PROPOSAL 3
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. In April 1998, the Board approved an amendment to the Plan to
increase the number of shares authorized for issuance from an aggregate of
1,500,000 shares to an aggregate of 1,850,000 shares. In June 1998 such
amendment was 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 29, 1999, the Plan had net outstanding options to purchase
an aggregate of 1,252,022 shares held by 66 persons at a weighted average
exercise price of $12.38 per share. As of April 29, 1999, options to purchase
409,757 shares of Common Stock granted pursuant to the Plan had been exercised.
In April 1999, the Board approved an amendment to the Plan, subject to
stockholder approval, to increase the number of shares authorized for issuance
under the Plan from an aggregate of 1,850,000 shares to an aggregate of
2,400,000 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 3.
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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 does 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, 1998, the closing price of the
Company's Common Stock as reported on the NASDAQ National Market System was
$26.625 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 capital gains rate
for federal income tax purposes is currently 28% while the maximum
8
<PAGE>
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).
9
<PAGE>
PROPOSAL 4
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. In April 1998, the Board approved an
amendment to the Directors' Plan 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 regularly scheduled meeting of the Board
of Directors attended in person. In June 1998 such amendment was approved by
stockholders. The Directors' plan will terminate in December 2003, unless
sooner terminated by the Board.
As of April 29, 1999, the Directors' Plan had net outstanding options to
purchase an aggregate of 106,500 shares held by five persons at a weighted
average exercise price of $14.89 per share. As of April 29, 1999, options to
purchase 21,750 shares of Common Stock granted pursuant to Directors' Plan had
been exercised, and there were 21,750 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 1999, the Board approved an amendment to the Directors' Plan,
subject to stockholder approval, to increase the number of shares authorized for
issuance under the Directors' Plan from an aggregate of 150,000 shares to an
aggregate of 350,000 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 4.
10
<PAGE>
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. An additional 400 shares will be granted to each
Non-Employee Director for each regularly scheduled meeting of the Board of
Directors attended in person or via telephone.
As of April 29, 1999, the Company had granted options under the
Directors' Plan to purchase 28,200 shares to Mr. Leazer, 25,800 to Mr. Kania,
25,200 to Dr. Kisner, 24,600 to Dr. Papper, and 23,200 shares to Mr. Urfer.
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>
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>
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending December 31, 1999
and has further directed that management submit the selection of independent
accountants for ratification by the stockholders at the Annual Meeting.
PricewaterhouseCoopers LLP has audited the Company's financial statements since
1986, when the Company's financial statements were first audited.
Representatives of PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP
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
PricewaterhouseCoopers LLP 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 PricewaterhouseCoopers LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5.
13
<PAGE>
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 29, 1999 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.
Number
of Shares Percent
Beneficially Beneficially
Name of Beneficial Owner Owned Owned(1)(2)
- ------------------------ ------------ ------------
Abbott Laboratories
One Abbott Park Road, D-980, AP30
Abbott Park, IL 60064-3500....................... 1,202,840 9.1%
The Capital Group Companies, Inc. (3)
333 South Hope Street
Los Angeles, CA 90071............................ 740,000 5.6
Theodore H. Stanley (4)
4745 Wiley Post Way, Suite 650
Salt Lake City, UT 84116......................... 589,434 4.5
William C. Moeller (5)
4745 Wiley Post Way, Suite 650
Salt Lake City, UT 84116......................... 422,944 3.2
Edwin M. Kania, Jr. (6).......................... 9,000 **
Thomas B. King (7)............................... 195,053 1.5
Daniel L. Kisner (8)............................. 13,167 **
Richard H. Leazer (9)............................ 23,667 **
Emanuel M. Papper (10)........................... 23,000 **
Richard P. Urfer (11)............................ 49,880 **
Carl J. Accettura (12)........................... 13,541 **
Martha V. Arnold (13)............................ 26,613 **
Dennis L. Coleman (14)........................... 80,288 **
Roger P. Evans (15).............................. 12,340 **
Franck P. Kiser (16)............................. 21,197 **
Paul A. Litka (17)............................... 16,666 **
Steven A. Shoemaker (18)......................... 75,775 **
W. Davis Templeton (19).......................... 18,766 **
All executive officers and directors as a group
(16 persons) (4) - (19).......................... 1,591,331 11.7%
** 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
14
<PAGE>
subject to options or warrants currently exercisable or exercisable within
sixty (60) days of April 29, 1999, 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 13,195,372 shares of Common
Stock outstanding as of April 29, 1999.
(3) 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 740,000 shares owned as of December 31,
1998. Capital Research and Management Company is a registered investment
adviser and manages the American Funds Group of mutual funds.
(4) Includes options exercisable for 14,217 shares of Common Stock. Of the
588,964 issued and outstanding shares, Dr. Stanley owns 227,211 shares,
Mary Ann Stanley, Dr. Stanley's spouse, owns 181,976 shares, the Stanley
Research Foundation owns 83,065 shares, the Theodore H. and Mary Ann
Stanley Foundation owns 58,065 shares and Dr. Stanley owns 24,900 shares
jointly with Ellen Stanley.
(5) Includes options exercisable for 34,104 shares of Common Stock, 25,000
shares held by the William and Joanne Moeller Foundation, of which Mr.
Moeller is the trustee, and 50,000 shares held by the Joanne Moeller Living
Trust.
(6) Includes options exercisable for 8,000 shares of Common Stock and 1,000
shares held by One Liberty Ventures Retirement Trust FBO Edwin M. Kania,
Jr.
(7) Includes options exercisable for 178,058 shares of Common Stock.
(8) Includes options exercisable for 13,167 shares of Common Stock.
(9) Includes options exercisable for 23,667 shares of Common Stock.
(10) Includes options exercisable for 7,500 shares of Common Stock.
(11) Includes options exercisable for 10,000 shares of Common Stock and 3,225
shares held by Cynthia Urfer, Mr. Urfer's spouse and 1,655 shares owned by
Courtney Urfer, Mr. Urfer's daughter.
(12) Includes options exercisable for 13,541 shares of Common Stock.
(13) Includes options exercisable for 26,613 shares of Common Stock.
(14) Includes options exercisable for 33,695 shares of Common Stock.
(15) Includes options exercisable for 12,161 shares of Common Stock.
(16) Includes options exercisable for 21,197 shares of Common Stock.
(17) Includes options exercisable for 16,666 shares of Common Stock.
(18) Includes options exercisable for 33,695 shares of Common Stock.
(19) Includes options exercisable for 18,416 shares of Common Stock.
15
<PAGE>
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, 1998, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent stockholders were complied
with; except a report covering one transaction was filed late by Dennis Coleman.
MANAGEMENT
Executive Officers
The following table sets forth certain information concerning the
Executive Officers of the Company as of April 29, 1999:
Name Age Position
- ---- --- --------
Thomas B. King............. 44 President and Chief Executive Officer
William C. Moeller......... 60 Chairman of the Board and Treasurer
Theodore H. Stanley, M.D... 59 Founding Chairman and Secretary
Carl J. Accettura.......... 45 Vice President, Manufacturing Operations
Martha V. Arnold........... 43 Vice President, Marketing
Dennis L. Coleman, Ph.D.... 52 Vice President, Research and Development
Roger P. Evans, CPA........ 34 Vice President, Finance and Administration
Franck P. Kiser............ 39 Vice President, European Operations
Paul A. Litka, M.D......... 50 Vice President, Clinical Drug Development
Steven A. Shoemaker, M.D... 47 Vice President in the Office of Development
W. Davis Templeton......... 42 Vice President, OTFC(R) Business Unit
See "Proposal 1 - Election of Directors" for the biographies of Mr. King, Mr.
Moeller and Dr. Stanley.
Carl J. Accettura joined the Company as Vice President, Manufacturing
Operations in June 1998. Prior to joining Anesta, he was Vice President,
Worldwide Supply Chain Management for the ConvaTec subsidiary of Bristol-Myers
Squibb (BMS). Prior to joining BMS, he was Vice President, Materials Management,
for Hoffman-LaRoche from 1992 to 1997. His previous pharmaceutical industry
experience was with Pfizer Inc. from 1984 to 1992, where he held various
production positions, including Director, Planning. Mr. Accettura received an
M.B.A. with honors from New York University Graduate School of Business in 1980.
Martha V. Arnold has been Vice President, Marketing of the Company since
February 1999. Prior to February 1999, Ms. Arnold served as Vice President,
OTFC Business Unit since 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, 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.
16
<PAGE>
Roger P. Evans, CPA has been Vice President, Finance and Administration
of the Company since July 1998. Prior to July 1998, Mr. Evans served as the
Company's Corporate Controller since July 1993. Prior to joining Anesta, he was
employed by Coopers & Lybrand LLP from September 1990 to July 1993 where he
worked in both the financial audit and electronic data processing audit areas.
Mr. Evans received a MAcc degree in accounting from Brigham Young University in
1990.
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 May 1993 to February 1997, where he specialized in developing
and executing European strategies for international companies. Previously, from
May 1993 to February 1997, 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.
Paul A. Litka, M.D. joined Anesta in March 1998 as Vice President,
Clinical 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 May 1996 to February 1998 and as Vice
President, Clinical Research from April 1995 to May 1996. 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 in the Office of
Development since July 1998. From January 1997 to July 1998 he served as Vice
President, Medical Communications. Dr. Shoemaker served as the Company's Vice
President, Medical Affairs from April 1994 to January 1997. 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.
W. Davis Templeton has been Vice President, OTFC Business Unit since
February 1999. Prior to February 1999, Mr. Templeton served as Director,
Strategic Marketing Group for the Company since September 1996. Prior to
joining Anesta, he was employed by Somatogen, Inc., a biotechnology company,
from February 1992 to September 1996 as Director of Commercial Development.
From August 1983 to January 1992 he held various marketing, product management
and sales management positions at Abbott Laboratories. He received an MBA
degree from the University of South Carolina in 1983.
17
<PAGE>
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 2,000 shares of Common Stock of the Company and an additional 400
shares will be granted to each Non-Employee Director for each regularly
scheduled meeting of the Board of Directors attended in person or via telephone.
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 39,800 shares to the Non-Employee Directors of the Company, with
exercise prices per share ranging from $14.25 to $25.1875, which was equal to
the fair market value on the respective dates of grant (based on the closing
sales price reported in the Nasdaq National Market). As of December 31, 1998,
options to acquire 1,750 shares had been exercised under the Directors' Plan.
Compensation of Executive Officers
The following table sets forth, for the fiscal year ended December 31,
1998, certain compensation, including salary, bonuses, stock options and certain
other compensation, awarded or paid to, or earned by, the Company's Chief
Executive Officer and its four most highly compensated executive officers at
December 31, 1998 (the "Named Executive Officers").
18
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
-------------------- --------------------------------
Securities
Salary Bonus Underlying All Other
Name and Principal Position Year ($) ($) Options(#) Compensation($)
- ------------------------------- ---- ---------- -------- --------------------------------
<S> <C> <C> <C> <C> <C>
Thomas B. King 1998 240,000 200,000 45,000 3,634(1)
President and Chief 1997 192,000 50,000 60,000 2,880(1)
Executive Officer 1996 154,000 50,000 90,000 2,117(1)
William C. Moeller 1998 156,696 125,000 10,000 2,305(1)
Chairman of the Board 1997 192,000 75,000 25,000 2,880(1)
and Treasurer 1996 160,000 50,000 50,000 2,400(1)
Martha V. Arnold 1998 160,000 80,840 12,500 2,400(1)
Vice President, Marketing 1997 140,000 27,010 15,000 1,088(1)
1996 41,971 25,000 40,000 79,640(2)
Dennis L. Coleman, Ph.D. 1998 160,000 63,160 12,500 2,309(1)
Vice President, Research 1997 150,000 15,390 15,000 2,250(1)
and Development 1996 126,000 22,453 20,000 1,890(1)
Steven A. Shoemaker, M.D. 1998 170,000 62,263 12,500 1,500(1)
Vice President in the Office 1997 160,000 26,416 15,000 1,500(1)
of Development 1996 147,000 26,197 20,000 1,500(1)
</TABLE>
(1) Consists of matching contributions to each Named Executive Officer's 401(k)
account made by the Company.
(2) Consists of relocation items paid by the Company.
19
<PAGE>
OPTION GRANTS IN 1998
The following table sets forth for the Named Executive Officers certain
information regarding options granted for the year ended December 31, 1998:
<TABLE>
<CAPTION>
Percent of
Total Potential Realizable
Options Value at
Number of Granted to Assumed Annual Rates
Securities Employees of Stock Price
Underlying In Exercise Appreciation
Options 1998 Price Expiration For Option Term(2)
Name Granted(#) (%)(1) ($/Share) Date 5%($) 10%($)
- --------------------------- ---------- ---------- -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas B. King............. 45,000 10.3 12.125 8/6/2008 343,141 869,586
William C. Moeller......... 10,000 2.3 12.125 8/6/2008 76,253 193,241
Martha V. Arnold........... 12,500 2.9 12.125 8/6/2008 95,317 241,552
Dennis L. Coleman, Ph.D.... 12,500 2.9 12.125 8/6/2008 95,317 241,552
Steven A. Shoemaker, M.D... 12,500 2.9 12.125 8/6/2008 95,317 241,552
</TABLE>
(1) Based on 435,650 options granted in 1998.
(2) The potential realizable value is based on the term of the option at its
time of grant (10 years in the case of these options). It is calculated by
assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the
option, and that the option is exercised and sold on the last day of its
term for the appreciated stock price. No gain to the optionee is possible
unless the stock price increases over the option term, which will benefit
all stockholders.
20
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth for the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the fiscal year ended December 31, 1998 and the fiscal year-end number and value
of unexercised options:
<TABLE>
<CAPTION>
Value of
Unexercised
Number of In-the-Money
Unexercised Options at
Options at December 31,
Shares December 31, 1998 1998($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($)(1) Unexercisable Unexercisable(2)
- --------------------------- ----------- -------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
Thomas B. King............. 20,000 290,837 158,371/127,296 2,681,283/1,809,993
William C. Moeller......... 45,375 440,286 44,104/38,127 790,504/550,074
Martha V. Arnold........... -- -- 18,176/37,658 257,929/528,748
Dennis L. Coleman, Ph.D.... 16,767 266,881 39,132/30,368 701,204/432,296
Steven A. Shoemaker, M.D... 25,000 221,250 52,132/30,368 928,330/432,296
- ---------------------------
</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, 1998
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/1/
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. Mr. Kania has elected not to be nominated for reelection to the Board
of Directors and will not serve on the Compensation Committee after the annual
meeting. 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
1998, 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 breakthrough cancer pain program which received FDA Approval in
November 1998), 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
- ---------------------------
/1/ The material in this report is not "soliciting material", is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any filing
of the Company under the 1933 Act or 1934 Act, whether made before or after the
date hereof, and irrespective of any general incorporation language contained in
such filing.
21
<PAGE>
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 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
1998, in amounts ranging from $62,263 to $200,000. Such bonuses were based on
the extent to which the corporate goals described above were achieved including
the successful completion of the Company's public offering in December 1998,
resulting in net proceeds of $64,478,433, and on average, represented
approximately 60% 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, 1998. 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 1998.
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 $240,000 commencing January 1, 1998, which represented
an increase from his base salary of $192,000 in 1997. In setting such salary
level, the Committee considered the salary survey prepared by Radford Associates
for other companies in the pharmaceutical and biotechnology 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 $200,000 for 1998. Such salary and bonus were based on
the extent to which the performance objectives described above were achieved.
The Committee determined that such objectives were fully satisfied in 1998.
22
<PAGE>
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
23
<PAGE>
PERFORMANCE CHART
Research Data Group Peer Group Total Return Worksheet
Anesta Corp (NSTA)
<TABLE>
<CAPTION>
Cumulative Total Return
--------------------------------------------------------------------------------------------------
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 3/97 6/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANESTA CORP. 100 84 64 71 43 40 77 87 74 114 98 113 154 138 152
NASDAQ STOCK MARKET (U.S.) 100 93 89 96 95 104 119 133 135 141 153 158 166 157 186
BIOCENTURY DRUG DELIVERY SECTOR 100 85 72 75 67 70 82 108 118 146 143 117 114 108 116
</TABLE>
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------------
9/97 12/97 3/98 6/98 9/98 12/98
<S> <C> <C> <C> <C> <C> <C>
ANESTA CORP. 186 131 149 116 149 213
NASDAQ STOCK MARKET (U.S.) 217 203 238 244 221 286
BIOCENTURY DRUG DELIVERY SECTOR 131 105 110 93 81 92
</TABLE>
24
<PAGE>
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
procedures, 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, 1998, the
Company received $469,547 from Abbott for payments on product sales, royalties
and contract research. 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 $250,368 for the year ended December 31, 1998. Dr. Stanley receives no
remuneration from SRF, and therefore does not benefit directly from the
Company's arrangements with SRF.
Relationship with Dennis Coleman, Ph.D. Dr. Coleman, an executive
officer of the Company, borrowed $51,000 in April of 1998 and $50,904 in
September of 1998 at an interest rate of 8% in connection with the exercise of
stock options. In December of 1998, Dr. Coleman repaid all amounts, including
interest, to the Company.
25
<PAGE>
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
May 27, 1999
26
<PAGE>
ANESTA CORP.
1993 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Adopted on December 22, 1993
Approved by Stockholders on January 14, 1994
Amended by the Board on February 26, 1998
Approved by Stockholders on June 23, 1998
Amended by the Board on June 23, 1998
Amended by the Board on April 6, 1999
1. PURPOSE
(a) The purpose of the 1993 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of Anesta Corp. (the
"Company") who is not otherwise an employee of the Company or of any Affiliate
of the Company (each such person being hereafter referred to as a "Non-Employee
Director") will be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
1.
<PAGE>
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate three hundred fifty thousand
(350,000) shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS
(a) Upon the effective date of the initial public offering of shares of
the Company's Common Stock (the "IPO Date"), each person who is then a Non-
Employee Director shall be granted an option to purchase ten thousand (10,000)
shares of common stock of the Company on the terms and conditions set forth
herein (the "Initial Option").
(b) Each person who is, after the IPO Date and on or before June 23, 1998,
elected for the first time to be a Non-Employee Director shall, upon the date of
his initial election to be a Non-Employee Director by the Board or stockholders
of the Company, be granted an option to purchase ten thousand (10,000) shares of
common stock of the Company on the terms and conditions set forth herein. Each
person who is, after June 23, 1998, elected for the first time to be a Non-
Employee Director shall, upon the date of his initial election to be a Non-
Employee Director by the Board or stockholders of the Company, be granted an
option to purchase fifteen thousand (15,000) shares of common stock of the
Company on the terms and conditions set forth herein.
(c) On January 1 of each year, commencing with January 1, 1995 and ending
on January 1, 1997, each person who is then a Non-Employee Director and has been
a Non-Employee Director for at least three (3) months shall be granted an option
to purchase one thousand five hundred (1,500) shares of common stock of the
Company. In addition, each Non-Employee Director who received an option grant
hereunder on January 1, 1997 and who is reelected at the 1997 annual meeting of
the Company's stockholders shall, upon such reelection, be granted an option to
purchase three thousand five hundred (3,500) shares of Common Stock of the
Company. Furthermore, immediately following each annual meeting of the
Company's stockholders, commencing with the 1998 Annual Stockholders Meeting,
each person who is then a Non-Employee Director shall be granted an option to
purchase five thousand (5,000) shares of the Common Stock of the Company.
Collectively, the options granted pursuant to this subparagraph 5(c) are the
"Annual Options," and all such Annual Options shall be made on the terms and
conditions set forth in this Plan.
2.
<PAGE>
(d) Effective with respect to Board meetings occurring after June 23, 1998,
each Director who attends a meeting of the Board of Directors in person or by
conference telephone shall be granted an option to purchase 400 shares of Common
Stock. Such options shall be granted as of the date of such meeting.
(e) Each director who is serving as a chair of a committee of the Board of
Directors as of the date of each Stockholders Annual Meeting, commencing with
the Annual Meeting of Stockholders held on June 23, 1998, shall be granted an
option to purchase 2,000 shares of Common Stock. Such options shall be granted
as of the date of such annual meeting.
6. OPTION PROVISIONS
Each option shall contain the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") five (5) years from the date of grant. If the optionee's service as a
Non-Employee Director of the Company terminates for any reason or for no reason,
the option shall terminate on the earlier of the Expiration Date or the date
three (3) months following the date of termination of service; provided,
however, that if such termination of service is due to the optionee's death, the
option shall terminate on the earlier of the Expiration Date or six (6) months
following the date of the optionee's death. In any and all circumstances, an
option may be exercised following termination of the optionee's service as a
Non-Employee Director of the Company only as to that number of shares as to
which it was exercisable on the date of termination of such service under the
provisions of subparagraph 6(e).
(b) Subject to subparagraph 4(b), the exercise price of each Initial
Option shall be equal to the price to the public of the stock in the Company's
initial public offering subject to such option. The exercise price of all other
options shall be equal to the fair market value of the stock subject to such
option at the close of the market on the day before the date such option is
granted.
(c) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than 1,000 shares; but when the number of shares being purchased upon an
exercise is 1,000 or more shares, the optionee may elect to make payment of the
exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash at the time of
exercise; or
(ii) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at fair market value on
the date preceding the date of exercise; or
3.
<PAGE>
(iii) Payment by a combination of the methods of payment specified in
subparagraph 6(c)(i) and 6(c)(ii) above.
Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company prior to the
issuance of shares of the Company's common stock.
(d) Unless otherwise provided in an option, each option shall not be
transferable except by will or by the laws of descent and distribution, or
pursuant to a domestic relations order and shall be exercisable during the
lifetime of the person to whom the option is granted only by such person or by
his guardian or legal representative. Notwithstanding the foregoing, the
optionee may during his or her lifetime designate a person to receive and
exercise any of the options following the optionee's death.
(e) The Annual Options shall become exercisable in equal annual
installments over a period of three (3) years from the date of grant, commencing
on the date one year after the date of grant of the Annual Options, provided
that the optionee has, during the entire period prior to such vesting date,
continuously served as a Non-Employee Director or as an employee of or
consultant to the Company or any Affiliate of the Company, whereupon such option
shall become fully exercisable in accordance with its terms with respect to that
portion of the shares represented by that installment. All other options shall
become exercisable in installments over a period of four years from the date of
grant at the rate of two thousand five hundred (2,500) shares in four (4) equal
annual installments commencing on the date one year after the date of grant of
such option, provided that the optionee has, during the entire period prior to
such vesting date, continuously served as a Non-Employee Director or as an
employee of or consultant to the Company or any Affiliate of the Company,
whereupon such option shall become fully exercisable in accordance with its
terms with respect to that portion of the shares represented by that
installment.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then-currently-effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii), as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under
the then-applicable securities laws.
(g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
4.
<PAGE>
7. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any Non-
Employee Director with or without cause.
(c) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall be
a condition precedent to the Company's obligation to issue or transfer shares to
a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
5.
<PAGE>
10. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made 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 Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
(b) For purpose of this Section 10(b), "Change of Control" means (1) a
dissolution or liquidation of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) 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 are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; (4) if any person or group (as defined in Section 13(d)(3) of
the Securities and Exchange Act of 1934, as amended, and the regulations
promulgated thereunder) acquires voting securities representing 50% or more of
the voting power of the Company's outstanding voting securities; or (5) if any
person or group acquires voting securities representing 30% or more of the
voting power of the Company's outstanding voting securities and the Board of
Directors declares that a Change of Control has occurred. Upon the occurrence
of a Change of Control prior to June 1, 1999, any surviving corporation shall
assume any options outstanding under the Plan or, if the Company is the
surviving corporation, such options shall continue in full force and effect.
Upon the occurrence of a Change of Control on or after June 1, 1999, any
unvested options granted under this Plan that are then outstanding shall
accelerate and immediately become vested and exercisable.
11. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent such stockholder approval is required by any Nasdaq or
securities exchange listing requirements.
(b) Rights and obligations under any option granted before any amendment
of the Plan shall not be altered or impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on December 22, 2003. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
6.
<PAGE>
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
7.
<PAGE>
ANESTA CORP.
STOCK OPTION PLAN
Adopted September 13, 1993
Amended August 22, 1996
Amended February 26, 1997
Approved by Stockholders June 17, 1997
Amended April 24, 1998
Approved by Stockholders June 23, 1998
Amended April 6, 1999
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
1.
<PAGE>
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Company" means Anesta Corp., a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render services and who is compensated for such
services, provided that the term "Consultant" shall not include Directors who
are paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(g) "Continuous Status as an Employee, Director or Consultant" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(h) "Director" means a member of the Board.
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
2.
<PAGE>
(j) "Disinterested Person" means a Director: (i) who was not during the
one year prior to service as an administrator of the Plan granted or awarded
equity securities pursuant to the Plan or any other plan of the Company or any
of its affiliates entitling the participants therein to acquire equity
securities of the Company or any of its affiliates except as permitted by Rule
16b-3(c)(2)(i); or (ii) who is otherwise considered to be a "disinterested
person" in accordance with Rule 16b-3(c)(2)(i), or any other applicable rules,
regulations or interpretations of the Securities and Exchange Commission.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reporting in the Wall Street Journal or such
other source as the Board deems reliable;
3.
<PAGE>
(2) If the common stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Non-employee Director" means a Director of the Company who is not
otherwise an Employee.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
4.
<PAGE>
(t) "Optioned Stock" means the common stock of the Company subject to an
Option.
(u) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.
(v) "Plan" means this 1993 Anesta Corp. Stock Option Plan.
(w) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
3. Administration.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any
5.
<PAGE>
Option Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons, if required under subsection
3(d). If administration is delegated to a Committee, the Committee shall have,
in connection with the administration of the Plan, the powers theretofore
possessed by the Board (and references in this Plan to the Board shall
thereafter be to the Committee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan. Additionally, prior to the date of
the first registration of an equity security of the Company under Section 12 of
the Exchange Act, and notwithstanding anything to the contrary contained herein,
the Board may delegate administration of the Plan to any person or persons and
the term "Committee" shall apply to any person or persons to whom such authority
has been delegated. Notwithstanding anything in this Section 3 to the contrary,
the Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant options to eligible persons who are not then
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(d) Any requirement that an administrator of the Plan be a Disinterested
Person shall not apply (i) prior to the date of the first registration of an
equity security of the Company under
6.
<PAGE>
Section 12 of the Exchange Act, or (ii) if the Board or the Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.
4. Shares Subject to the Plan.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate Two Million Four Hundred Thousand (2,400,000) shares of
the Company's common stock. If any Option shall for any reason expire or
otherwise terminate without having been exercised in full, the stock not
purchased under such Option shall revert to and again become available for
issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. Eligibility.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) A Director shall in no event be eligible for the benefits of the Plan
unless at the time discretion is exercised in the selection of the Director as a
person to whom Options may be granted, or in the determination of the number of
shares which may be covered by Options granted to the Director: (i) the Board
has delegated its discretionary authority over the Plan to a Committee which
consists solely of Disinterested Persons; or (ii) the Plan otherwise complies
with the requirements of Rule 16b-3. The Board shall otherwise comply with the
requirements of Rule 16b-3. This subsection 5(b) shall not apply (i) prior to
the date of the first registration of
7.
<PAGE>
an equity security of the Company under Section 12 of the Exchange Act, or (ii)
if the Board or Committee expressly declares that it shall not apply.
(c) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
8.
<PAGE>
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, or the rules thereunder (a
"QDRO"), and shall be exercisable during the lifetime of the person to whom the
Option is granted only by such person or any transferee pursuant to a QDRO.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal) or pursuant to
9.
<PAGE>
performance criteria or other factors. The Option Agreement may provide that
from time to time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted to that
period, and may be exercised with respect to some or all of the shares allotted
to such period and/or any prior period as to which the Option became vested but
was not fully exercised. During the remainder of the term of the Option (if its
term extends beyond the end of the installment periods), the option may be
exercised from time to time with respect to any shares then remaining subject to
the Option. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) Securities Law Compliance. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the
10.
<PAGE>
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(g) Termination of Employment or Relationship as Director or Consultant.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) the date forty-five (45) days after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) Disability of Optionee. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again
11.
<PAGE>
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(i) Death of Optionee. In the event of the death of an Optionee during,
or within forty-five (45) days of the termination of, the Optionee's Continuous
Status as an Employee, Director or Consultant, the Option may be exercised (to
the extent the Optionee was entitled to exercise the Option at the date of
death) by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only within the period ending
on the earlier of (i) the date twelve (12) months following the date of death
(or such longer or shorter period specified in the Option Agreement), or (ii)
the expiration of the term of such Option as set forth in the Option Agreement.
If, at the time of death, the Optionee was not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
12.
<PAGE>
(k) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the participant as a result of the exercise of the Option;
or (3) delivering to the Company owned and unencumbered shares of the common
stock of the Company.
7. Covenants of the Company.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
13.
<PAGE>
9. Miscellaneous.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Consultant) or shall affect the right of the Company or
any Affiliate to terminate the employment or relationship as a Consultant of any
Employee, Director, Consultant or Optionee with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
14.
<PAGE>
10. Adjustments upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (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 Plan and outstanding Options will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and
the class(es) and number of shares and price per share of stock subject to
outstanding Options.
(b) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving corporation;
or (3) 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 are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, then to the extent permitted by
applicable law the Board shall have the power and discretion to prescribe the
terms and conditions for the exercise of, or modification of, the options
granted hereunder. By way of illustration, and not by way of limitation, the
Board may provide for the complete or partial acceleration of the dates of
exercise of the Options, or may provide that such Options will be exchanged for
or converted into options or rights to acquire securities of the surviving or
acquiring corporation, or may provide for a payment or distribution in respect
of outstanding Options (or the portion thereof that is currently exercisable) in
cancellation thereof. The Board or the Committee may provide that Options
granted hereunder must be exercised in connection with the closing of such
transaction, and that if not so exercised such Options or rights will expire.
Any such determinations by the Board may be made generally with respect to all
Optionees, or may be made on a case-by-case basis with respect to particular
Optionees. The
15.
<PAGE>
provisions of this Section 10(b) shall not apply to any transaction undertaken
for the purpose of reincorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect the beneficial
ownership of the Company's capital stock.
11. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the
Plan;
(2) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(c) Rights and obligations under any Option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests
16.
<PAGE>
the consent of the person to whom the Option was granted and (ii) such person
consents in writing.
12. Termination or Suspension of the Plan.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on September 12, 2003. No Options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
13. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company.
17.
<PAGE>
ANE66B 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 29, 1999 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. If
specific instructions are indicated, this Proxy will be voted in accordance
therewith. 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 27, 1999; (b) the accompanying Proxy Statement
and (c) the Annual Report to Stockholders for the fiscal year ended December 31,
1998 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| CONTINUED AND TO BE SIGNED ON REVERSE SIDE |SEE REVERSE|
| SIDE | | SIDE |
- ------------- -------------
<PAGE>
DETACH HERE
[X] Please mark
votes as in
this example.
THE BOARD RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
1. To elect seven directors to hold office until the 2000 Annual Meeting of
Stockholders.
Nominees: Thomas B. King, Richard H. Leazer, William C. Moeller,
Emanuel M. Papper, Daniel L. Kisner, Theodore H. Stanley, Richard P. Urfer
FOR WITHHELD MARK HERE IF
ALL [ ] FROM ALL [ ] YOU PLAN TO [ ]
NOMINEES NOMINEES ATTEND THE
MEETING
MARK HERE
[ ] _________________________________________ FOR ADDRESS [ ]
For all nominees except as noted above CHANGE AND
NOTE BELOW
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 15,000,000
to 35,000,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve an amendment to the Company's 1993 Stock Option Plan to increase
aggregate number of shares of Common Stock authorized for issuance thereunder
from 1,850,000 to 2,400,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve an amendment to the Company's 1993 Non-Employee Directors' Plan to
increase the aggregate number of shares of Common Stock authorized for
issuance thereunder from 150,000 to 350,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
Independent Certified Public Accountants for the fiscal year ending
December 31, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. 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: _____________________
