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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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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 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 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 18, 1999 the Company had outstanding and entitled to
vote 13,195,133 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, Anesta
Corp., 4745 Wiley Post Way, Suite 650, Salt Lake City, Utah 84116, a written
notice of revocation or a duly executed proxy bearing a later date, or it may be
revoked by attending the meeting and voting in person. Attendance at the
meeting will not, by itself, revoke a proxy.
Stockholder Proposals
The Company intends to holds its 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 7, 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 April 13, 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. 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 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 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 13,195,133 shares of Common Stock outstanding as of
April 18, 1999, the Board has reserved 1,568,732 shares for issuance upon
exercise of options and rights under the Company's stock option plans, of which
1,360,805 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.
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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 18, 1999, the Plan had net outstanding options to purchase an
aggregate of 1,254,305 shares held by 67 persons at a weighted average exercise
price of $12.38 per share. As of April 18, 1999, options to purchase 409,518
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 dies not exceed five years from the date of grant. For incentive
stock options granted under the Plan, the aggregate fair market value,
determined at the time of grant, of the shares of Common Stock with respect to
which such options are exercisable for the first time by an optionee during any
calendar year (under all such plans of the Company and its affiliates) may not
exceed $100,000.
Stock Subject to The Plan
If options granted under the Plan expire or otherwise terminate without
being exercised, the Common Stock not purchased pursuant to such options again
becomes available for issuance under the Plan.
Terms of Options
The following is a description of the permissible terms of options under
the Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the Plan may not be less than the fair market value of the Common Stock
subject to the option on the date of the option grant, and in some cases (see
"Eligibility" above), may not be less than 110% of such fair market value. The
exercise price of nonstatutory options under the Plan may not be less than 85%
of the fair market value of the Common Stock subject to the option on the date
of the option grant. In the event of a decline in the value of the Company's
Common Stock, the Board has the authority to offer employees the opportunity to
replace outstanding higher priced options, whether incentive or nonstatutory,
with new lower priced options. At December 31, 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
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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 18, 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 18, 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 18, 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 18, 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.
<TABLE>
<CAPTION>
Number
of Shares Percent
Beneficially Beneficially
Name of Beneficial Owner Owned Owned/1//2/
- ------------------------ ------------ ------------
<S> <C> <C>
Abbott Laboratories
One Abbott Park Road, D-980, AP30
Abbott Park, IL 60064-3500....................... 1,202,840 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......................... 588,964 4.5
William C. Moeller /5/
4745 Wiley Post Way, Suite 650
Salt Lake City, UT 84116......................... 420,860 3.2
Edwin M. Kania, Jr. /6/.......................... 7,333 **
Thomas B. King /7/............................... 191,928 1.4
Daniel L. Kisner /8/............................. 10,833 **
Richard H. Leazer /9/............................ 21,333 **
Emanuel M. Papper /10/........................... 21,333 **
Richard P. Urfer /11/............................ 48,213 **
Carl J. Accettura /12/........................... 12,499 **
Martha V. Arnold /13/............................ 25,467 **
Dennis L. Coleman /14/........................... 79,559 **
Roger P. Evans /15/.............................. 11,798 **
Franck P. Kiser /16/............................. 21,197 **
Paul A. Litka /17/............................... 16,666 **
Steven A. Shoemaker /18/......................... 75,046 **
W. Davis Templeton /19/.......................... 18,599 **
All executive officers and directors as a group
(16 persons) /4/ - /19/.......................... 1,571,628 11.5%
</TABLE>
** Less than one percent.
/1/ Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
14
<PAGE>
subject to options or warrants currently exercisable or exercisable within
sixty (60) days of April 18, 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 13,195,133 shares of Common
Stock outstanding as of April 18, 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 13,747 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 32,020 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 6,333 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 174,933 shares of Common Stock.
/8/ Includes options exercisable for 10,833 shares of Common Stock.
/9/ Includes options exercisable for 21,333 shares of Common Stock.
/10/ Includes options exercisable for 5,833 shares of Common Stock.
/11/ Includes options exercisable for 8,333 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 12,499 shares of Common Stock.
/13/ Includes options exercisable for 25,467 shares of Common Stock.
/14/ Includes options exercisable for 32,966 shares of Common Stock.
/15/ Includes options exercisable for 11,619 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 32,966 shares of Common Stock.
/19/ Includes options exercisable for 18,249 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 18, 1999:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<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
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
- --------------------
</TABLE>
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
Drug Development. Prior to joining the Company he served as Senior Vice
President, Clinical Research and Regulatory Affairs at Magainin Pharmaceuticals,
Inc., a pharmaceutical company, from 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 October 1997. 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, produ ct 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 Potential Realizable
Total Value at
Options Assumed Annual Rates
Number of Granted to of Stock Price
Securities Employees Appreciation
Underlying In Exercise For Option Term/2/
Options 1998 Price Expiration ---------------------
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
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(R) 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
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
21
<PAGE>
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>
<TABLE>
<CAPTION>
Research Data Group Peer Group Total Return Worksheet
Anesta Corp (NSTA)
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>
ANS90F 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 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. 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| PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND |SEE REVERSE|
| SIDE | RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE | SIDE |
- ------------- -------------
<PAGE>
[X] Please mark
votes as in
this example.
THE BOARD RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
1. Election of seven Directors Proposal in the Accompanying Proxy Statement.
Nominees: Thomas B. King, Richard H. Leazer, William C. Moeller,
Emanuel M. Papper, Daniel L. Kisner, Theodore H. Stanley, Richard P. Urfer
FOR WITHHELD
[ ] [ ]
[ ] ______________________________________________________________________
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
2. To approve an amendment to the Company's Certificate of Incorporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve an amendment to the Company's 1993 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve an amendment to the Company's 1993 Non-Employee Directors' Stock
Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To ratify the appointment of PricewaterhouseCoopers L.L.P. 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: _____________________
