<PAGE>
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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
ANESTA CORP.
4745 WILEY POST WAY
SALT LAKE CITY, UT 84116
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 21, 2000
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 Wednesday, June
21, 2000 at 2:00 p.m. local time at the Wyndham Hotel, 215 West South Temple,
Salt Lake City, Utah 84101 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the Company's 1993 Stock Option Plan (the
"Plan") to increase the aggregate number of shares of Common Stock
authorized for issuance under such Plan by 500,000 shares.
3. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Company for its fiscal year ending December 31, 2000.
4. 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 22, 2000 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 19, 2000
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, SALT LAKE CITY, UTAH 84116.
<PAGE>
ANESTA CORP.
4745 WILEY POST WAY
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 21, 2000 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 Wyndham Hotel, 215 West South Temple, Salt
Lake City, Utah 84101. The Company intends to mail this proxy statement and
accompanying proxy card on or about May 19, 2000, 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
22, 2000 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 22, 2000 the Company had outstanding and entitled to
vote 13,392,432 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, 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 2001 Annual Meeting on or around June 20,
2001. Thus, proposals of stockholders that are intended to be presented at the
Company's 2001 Annual Meeting of Stockholders must be received by the Company
not later than January 15, 2001 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 2001 Annual Meeting of
Stockholders notifies the Company of such matter prior to April 21, 2001,
management will have discretionary authority to vote all shares for which it has
proxies in opposition to such matter.
1
<PAGE>
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.................. 45 President and Chief Executive Officer
William C. Moeller.............. 61 Chairman of the Board and Treasurer
Theodore H. Stanley, M.D........ 60 Founding Chairman and Secretary
Daniel L. Kisner, M.D. (1)...... 53 President, Chief Executive Officer and Director of Caliper Technologies Corp.
Richard H. Leazer (1)(2)........ 58 Retired
Emanuel M. Papper, M.D., Ph.D... 84 Professor of Anesthesiology at the University of Miami, School of Medicine
Richard P. Urfer (2)............ 63 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.
2
<PAGE>
William C. Moeller has been Chairman of the Board of Directors of the
Company since January 1998 and served as a Director of the Company since he co-
founded the Company in 1985. Mr. Moeller served as Chief Executive Officer of
the Company from 1985 until December 1997 and 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, Chief Executive Officer and
Director 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 been a director of the Company since September 1994.
Mr. Leazer retired from the Wisconsin Alumni Research Foundation, a not-for-
profit corporation supporting research at the University of Wisconsin, on
December 31, 1999 after having served as its Managing Director 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.
3
<PAGE>
Board Committees and Meetings
During the fiscal year ended December 31, 1999 the Board of Directors held
eight meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee held two meetings and the Compensation Committee held four
meetings during the fiscal year ended December 31, 1999.
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 two Non-Employee Directors:
Messrs. Leazer (Chair) and Urfer.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of two Non-Employee Directors:
Dr. Kisner (Chair) and Mr. Leazer.
During 1999, all directors except Dr. Papper attended at least 75% of the
aggregate of the meetings of the Board, and of the committees on which such
director served, held during the period for which he was a director or committee
member, respectively.
4
<PAGE>
PROPOSAL 2
APPROVAL OF THE 1993 STOCK OPTION PLAN, AS AMENDED
In September 1993, the Company adopted its 1993 Stock Option Plan (the
"Plan"), under which 750,000 shares have been reserved for issuance. In August
1996 and February 1997, the Board approved amendments to the Plan to increase
the number of shares authorized for issuance from an aggregate of 750,000 shares
to an aggregate of 1,500,000 shares. In June 1997 such amendments were approved
by stockholders. 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. In April 1999, the Board approved an
amendment to the Plan to increase the number of shares authorized for issuance
from an aggregate of 1,850,000 shares to an aggregate of 2,400,000 shares. In
June 1999 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 22, 2000, the Plan had net outstanding options to purchase an
aggregate of 1,438,444 shares held by 80 persons at a weighted average exercise
price of $12.53 per share. As of April 22, 2000, options to purchase 588,675
shares of Common Stock granted pursuant to the Plan had been exercised.
In April 2000, 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 2,400,000 shares to an aggregate of
2,900,000 shares. The Board adopted this amendment to ensure that the Company
can continue to grant Stock Awards to employees and consultants at levels
determined appropriate by the Board and the Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
5
<PAGE>
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, 1999, the closing price of the
Company's Common Stock as reported on the NASDAQ National Market System was
$17.1875 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
6
<PAGE>
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 20% while the maximum
7
<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).
8
<PAGE>
New Plan Benefits
The following table presents certain information with respect to shares
granted during the Company's last fiscal year under the Plan to (i) the
executive officers named in the Summary Compensation Table, (ii) all current
executive officers as a group, (iii) all employees, including all current
officers who are not executive officers, as a group and (iv) all current non-
employee directors as a group. As of April 22, 2000 there has been no
determination by the Compensation Committee with respect to future awards under
the Option Plan.
<TABLE>
<CAPTION>
Number of Shares
Underlying Options
Name and Position Dollar Value ($)(1) Granted
- ----------------- ------------------- ------------------
<S> <C> <C>
Thomas B. King...................................... $ 543,750 50,000
President, Chief Executive Officer and Director
Martha V. Arnold.................................... $ 141,375 13,000
Senior Vice President
Franck P. Kiser..................................... $ 141,375 13,000
Vice President, European Operations
Paul A. Litka, M.D.................................. $ 141,375 13,000
Vice President, Clinical Drug Development
Steven A. Shoemaker, M.D............................ $ 141,375 13,000
Vice President, Medical Affairs
All current executive officers as a group $2,544,750 234,000
All employees, including all current officers who $1,903,641 172,375
are not executive officers, as a group
</TABLE>
- --------------------------
(1) Exercise price multiplied by the number of shares granted.
9
<PAGE>
PROPOSAL 3
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, 2000
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 3.
10
<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 22, 2000 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 9.0%
Wentworth, Hauser & Violich (3)
333 Sacramento Street
San Francisco, CA 94111............................... 930,625 7.0
Capital Research and Management Company (4)
333 South Hope Street
Los Angeles, CA 90071................................. 740,000 5.5
T. Rowe Price Associates, Inc. (5)
100 E. Pratt Street
Baltimore, MD 21202................................... 739,700 5.5
Capital Group International, Inc. (6)
11100 Santa Monica Blvd.
Los Angeles, CA 90025................................. 700,000 5.2
Theodore H. Stanley (7)............................... 600,327 4.5
William C. Moeller (8)................................ 447,854 3.3
Thomas B. King (9).................................... 251,617 1.9
Steven A. Shoemaker (10).............................. 69,815 1.0
Daniel L. Kisner (11)................................. 18,406 **
Richard H. Leazer (12)................................ 11,406 **
Emanuel M. Papper (13)................................ 25,203 **
Richard P. Urfer (14)................................. 33,119 **
Martha V. Arnold (15)................................. 45,050 **
Franck P. Kiser (16).................................. 52,029 **
Paul A. Litka (17).................................... 31,874 **
All executive officers and directors as a group (18).. 1,586,700 11.4%
</TABLE>
** Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
sixty (60) days of April 22, 2000, 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
11
<PAGE>
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 13,392,432 shares of Common
Stock outstanding as of April 22, 2000.
(3) Wentworth, Hauser & Violich, and Laird Norton Trust Company of Seattle
report that they have sole or shared voting and dispositive power over
930,625 shares owned as of March 31, 2000. Wentworth, Hauser & Violich is
a registered investment adviser to certain persons.
(4) 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,
1999. Capital Research and Management Company is a registered investment
adviser and manages the American Funds Group of mutual funds.
(5) T. Rowe Price reports that they have sole or shared voting and dispositive
power over 739,700 shares owned as of March 31, 2000.
(6) Capital Group International has filed a Schedule 13G pursuant to which they
report sole or shared voting and dispositive power over 700,000 shares
owned as of December 31, 1999. Capital Group International, Inc. is the
parent company of five investment management companies. Each of these
companies provides investment management to various institutional clients.
(7) Includes options exercisable for 25,110 shares of Common Stock. Of the
600,327 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.
(8) Includes options exercisable for 59,014 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.
(9) Includes options exercisable for 200,450 shares of Common Stock.
(10) Includes options exercisable for 37,966 shares of Common Stock.
(11) Includes options exercisable for 18,406 shares of Common Stock.
(12) Includes options exercisable for 9,906 shares of Common Stock.
(13) Includes options exercisable for 8,703 shares of Common Stock.
(14) Includes options exercisable for 15,239 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.
(15) Includes options exercisable for 45,050 shares of Common Stock.
(16) Includes options exercisable for 37,029 shares of Common Stock.
(17) Includes options exercisable for 31,874 shares of Common Stock.
(18) See notes 7 through 17.
12
<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, 1999, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent stockholders were complied
with; except that one report, covering one transaction, was filed late by Mr.
Dennis Coleman; two reports, covering an aggregate of four transactions, were
filed late by Mr. Franck Kiser; one report, covering one transaction, was filed
late by Mr. Richard Leazer; one report, covering one transaction, was filed late
by Dr. Emanuel Papper; and one report, covering an aggregate of two
transactions, was filed late by Mr. Richard Urfer.
MANAGEMENT
Executive Officers
The following table sets forth certain information concerning the Executive
Officers of the Company as of April 22, 2000:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Thomas B. King............. 45 President and Chief Executive Officer
William C. Moeller......... 61 Chairman of the Board and Treasurer
Theodore H. Stanley, M.D... 60 Founding Chairman and Secretary
Carl J. Accettura.......... 46 Vice President, Manufacturing Operations
Martha V. Arnold........... 44 Senior Vice President
Dennis L. Coleman, Ph.D.... 53 Vice President, Research and Development
Roger P. Evans, CPA........ 35 Vice President, Finance and Administration
Franck P. Kiser............ 40 Vice President, European Operations
Paul A. Litka, M.D......... 51 Vice President, Clinical Drug Development
Steven A. Shoemaker, M.D... 48 Vice President, Medical Affairs
W. Davis Templeton, Jr..... 43 Vice President, Sales and Field Operations
Jeffrey S. Williams........ 35 Vice President, Office of Development
</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 Senior Vice President of the Company since March
2000. Prior to March 2000, Ms. Arnold served as Vice President, Marketing of
the Company since February 1999. Prior to February 1999, she served as the
Company's 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.
13
<PAGE>
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.
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, Medical Affairs since
March 2000. Prior to March 2000, Dr. Shoemaker served as Vice President,
Medical Communications, Outcomes and Pharmacoeconomics since June 1999. From
July 1998 to June 1999 he served as a Vice President in the Office of
Development. 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, Jr. has been Vice President, Sales and Field Operations
since March 2000. Prior to March 2000 Mr. Templeton served as Vice President,
OTFC Business Unit beginning 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.
Jeffrey S. Williams has been Vice President, Office of Development since
June 1999. Prior to June 1999, Mr. Williams served as a Director, Corporate
Development and Strategy for the Company since December 1996. Prior to joining
Anesta, he was employed by Vertex Pharmaceuticals, a pharmaceutical company,
from June 1994 to November 1996 in the areas of business development and program
management. From August 1992 to June 1994 he was a full-time student at the
Massachusetts Institute of Technology (MIT). From June 1989 to August 1992 he
was a director with Phase V Technologies, a consulting firm specializing in
pharmacoeconomic and quality of life studies. He received an MBA degree from
MIT in 1996.
14
<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. Each person
who is 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 30,800 shares to the Non-Employee Directors of the Company, with
exercise prices per share ranging from $9.50 to $21.50, which was equal to the
fair market value on the respective dates of grant (based on the closing sales
price reported in the Nasdaq National Market). As of December 31, 1999, options
to acquire 35,750 shares had been exercised under the Directors' Plan.
Compensation of Executive Officers
The following table sets forth, for the fiscal year ended December 31,
1999, certain compensation, including salary, bonuses, stock options and certain
other compensation, awarded or paid to, or earned by, the Company's Chief
Executive Officer and its four most highly compensated executive officers at
December 31, 1999 (the "Named Executive Officers").
15
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Salary Bonus Underlying All Other
Name and Principal Position Year ($) ($) Options(#) Compensation($)
- --------------------------- ---- ------ ----- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Thomas B. King 1999 270,000 65,000 50,000 4,396(1)
President and Chief 1998 240,000 200,000 45,000 3,924(1)
Executive Officer 1997 192,000 50,000 60,000 3,170(1)
Martha V. Arnold 1999 180,000 30,791 13,000 2,990(1)
Senior Vice President 1998 160,000 80,840 12,500 2,690(1)
1997 140,000 27,010 15,000 1,378(1)
Franck P. Kiser (2) 1999 165,000 42,075 13,000 290(1)
Vice President, European Operations 1998 150,000 43,125 12,500 290(1)
Paul A. Litka, M.D. (3) 1999 200,000 34,000 13,000 748(1)
Vice President, Clinical Drug 1998 157,083 56,091 50,000 242(1)
Development
Steven A. Shoemaker, M.D. 1999 185,000 36,168 13,000 1,790(1)
Vice President, Medical Affairs 1998 170,000 62,263 12,500 1,790(1)
1997 160,000 26,416 15,000 1,790(1)
</TABLE>
- --------------------------
(1) Consists of matching contributions to each Named Executive Officer's 401(k)
account and the dollar value of life insurance premiums paid by the
Company.
(2) Mr. Kiser started employement with the Company in January 1998.
(3) Dr. Litka started employment with the Company in March 1998.
16
<PAGE>
OPTION GRANTS IN 1999
The following table sets forth for the Named Executive Officers certain
information regarding options granted for the year ended December 31, 1999:
<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 1999 Price Expiration -------------------
Name Granted(#) (%)(1) ($/Share) Date 5%($) 10%($)
- ---- ---------- ---------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas B. King............. 50,000 11.9 10.875 8/30/2009 341,961 866,597
Martha V. Arnold........... 13,000 3.1 10.875 8/30/2009 88,910 225,315
Franck P. Kiser............ 13,000 3.1 10.875 8/30/2009 88,910 225,315
Paul A. Litka, M.D......... 13,000 3.1 10.875 8/30/2009 88,910 225,315
Steven A. Shoemaker, M.D... 13,000 3.1 10.875 8/30/2009 88,910 225,315
</TABLE>
_____________________
(1) Based on 419,375 options granted in 1999.
(2) The potential realizable value is based on the term of the option at its
time of grant (10 years in the case of these options). It is calculated by
assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the
option, and that the option is exercised and sold on the last day of its
term for the appreciated stock price. No gain to the optionee is possible
unless the stock price increases over the option term, which will benefit
all stockholders.
17
<PAGE>
AGGREGATE OPTION EXERCISES IN 1999
AND FISCAL YEAR END OPTION VALUES
The following table sets forth for the Named Executive Officers the shares
acquired and the value realized on each exercise of stock options during the
fiscal year ended December 31, 1999 and the fiscal year-end number and value of
unexercised options:
<TABLE>
<CAPTION>
Value of
Unexercised
Number of In-the-Money
Unexercised Options at
Options at December 31,
Shares December 31, 1999 1999($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($)(1) Unexercisable Unexercisable(2)
- ---- ----------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Thomas B. King............. 48,167 252,089 173,017/114,483 967,439/592,570
Martha V. Arnold........... -- -- 36,405/32,429 175,370/166,436
Franck P. Kiser............ -- -- 29,113/36,387 102,413/165,431
Paul A. Litka, M.D......... -- -- 24,270/38,730 24,302/92,136
Steven A. Shoemaker, M.D... 25,000 162,500 40,987/29,513 280,908/153,498
</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, 1999
as reported on the Nasdaq National Market, minus the exercise price,
multiplied by the number of shares underlying the option.
SEVERANCE AGREEMENTS
Anesta entered into an executive severance benefits agreement with Thomas
B. King, Steven A. Shoemaker, Paul A. Litka, Franck P. Kiser and Martha V.
Arnold. Pursuant to the terms of the agreement, they will be entitled to the
payment of their base salary and assumed bonus for twelve months, except for Mr.
King who will receive twenty-four months, following the effective date of
certain changes in control. In addition, fifty percent of the unvested portion
of their options shall accelerate and immediately become vested and exercisable
upon the occurrence of certain changes in control on or after June 1, 1999. The
remainder of the unvested stock options will become vested in twelve equal
monthly installments following the date of the change of control or become fully
vested and exercisable if their employment is terminated without cause or they
voluntarily terminate their employment for good reason within 24 months after
the change of control.
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 two Non-Employee Directors: Dr. Kisner (Chair) and Mr. Leazer. The
Committee is responsible for setting and administering the policies which govern
executive salaries, bonuses (if any) and stock ownership programs. The
Committee annually evaluates the performance, and determine the compensation, of
the Chief Executive Officer (the "CEO") and the other executive officers of the
Company, based upon a mix of the achievement of corporate goals, individual
performance and comparisons with other pharmaceutical and drug delivery
companies.
__________________
/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.
18
<PAGE>
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
1999, 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 product sales (particularly Actiq, the Company's product
for breakthrough cancer pain which was launched in the United States by Abbott
Laboratories in March 1999), further development of the Company's corporate
partnering and distribution strategy, clinical and product development programs,
expanding the Company's management team, strengthening the Company's
pharmaceutical product development capabilities and stock price performance. In
order to conserve the Company's financial resources, and in order to reflect the
Company's size and stage of development in relation to the companies included in
industry compensation surveys reviewed by the Committee, the Committee
determined to provide for base salaries at the mid-point of the compensation
range for such companies. Bonuses were awarded to certain executive officers
based on the same performance criteria noted above plus the achievement of
certain individual objectives. In general, the bonus program is designed to
allow each executive officer to realize total cash compensation that is at the
mid-point of industry averages, based on performance. Base salary and bonus
were supplemented by awards under the Company's stock option plan, designed to
provide long-term incentives to all employees of the Company. Stock option
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
1999, in amounts ranging from $30,791 to $65,000. Such bonuses were based on
the extent to which the corporate goals described above were achieved, and on
average, represented approximately 21% 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, 1999. 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 1999.
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 $270,000 commencing January 1, 1999, which represented
an increase from his base salary of $240,000 in 1998. In setting such salary
level, the Committee considered the salary survey prepared by Aon Consulting,
Inc./Radford Division 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 $65,000 for
1999. Such salary and bonus were based on the extent to which the performance
objectives described above were achieved.
19
<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)
Richard H. Leazer
20
<PAGE>
PERFORMANCE CHART
Anesta Corp (NSTA)
<TABLE>
<CAPTION>
Cumulative Total Return
______________________________________________________________________________________________________________
12/94 3/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97 9/97 12/97 3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ANESTA CORP. 100 93 179 202 172 265 228 263 358 321 353 433 305 347 269 347 495 420 380 171 320
NASDAQ STOCK MARKET
(U.S.) 100 109 125 140 141 148 160 166 174 164 195 228 213 249 256 231 300 336 367 376 542
BIOCENTURY DRUG
DELIVERY SECTOR 100 105 122 162 177 218 214 175 170 161 172 195 158 165 139 122 139 196 192 193 230
</TABLE>
21
<PAGE>
CERTAIN TRANSACTIONS
Relationship with Abbott Laboratories. On March 13, 2000, Anesta announced
that it had renegotiated the U.S. marketing rights for Actiq with Abbott.
Effective April 2000, Anesta will have responsibility for the sales and
marketing of Actiq in the U.S. As part of the renegotiation, Anesta will make
cash payments to Abbott and is obligated to make on-going earn-out payments to
Abbott until the end of the first patent covering oral transmucosal fentanyl
citrate. Abbott will continue to manufacture Actiq and Fentanyl Oralet for
Anesta in the U.S. for a period of 24 to 36 months, after which Anesta will have
the right to manufacture such products.
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 $314,108 for the year ended December 31, 1999. Dr. Stanley receives no
remuneration from SRF, and therefore does not benefit directly from the
Company's arrangements with SRF.
Relationship with Steven A. Shoemaker, M.D. Dr. Shoemaker, an executive
officer of the Company, borrowed $200,000 in April of 1999 in connection with
the exercise of stock options. In June of 1999, Dr. Shoemaker repaid the amount
to the Company.
22
<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/ Theordore H. Stanley
Theodore H. Stanley, M.D.
Secretary
May 19, 2000
23
<PAGE>
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 21, 2000 at
2:00 p.m. local time, at the Wyndham Hotel, 215 West South 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 19, 2000; (b) the accompanying Proxy
Statement and (c) the Annual Report to Stockholders for the fiscal year ended
December 31, 1999 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
Please mark
[X] votes as in
this example.
THE BOARD RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
1. To elect seven directors to hold office until the 2001 Annual Meeting of
Stockholders.
Nominees: (01) Thomas B. King, (02) Richard H. Leazer, (03) William C. Moeller,
(04) Emanuel M. Papper, (05) Daniel L. Kisner, (06) Theodore H.
Stanley, (07) Richard P. Urfer
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]__________________________________________________
For all nominees except as noted above
2. To approve an amendment to the Company's 1993 FOR AGAINST ABSTAIN
Stock Option Plan to increase the aggregate [ ] [ ] [ ]
number of shares of Common Stock authorized for
issuance thereunder from 2,400,000 to 2,900,000.
3. To ratify the appointment of PricewaterhouseCoopers FOR AGAINST ABSTAIN
LLP as the Company's independent Certified Public [ ] [ ] [ ]
Accountants for the fiscal year ending December 31,
2000.
4. To transact such other business as may properly come before the annual
meeting or any adjournments or postponements thereof.
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
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
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_______________
