<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
GUILFORD PHARMACEUTICALS INC.
- --------------------------------------------------------------------------------
(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)(1) 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:(*)
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------
(5) Total fee paid:
------------------------------------------------
( * ) Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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:
----------------------------------------------------
<PAGE> 2
NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
Guilford Pharmaceuticals Inc.
Annual Meeting of Stockholders
May 18, 1999
6611 Tributary Street
Baltimore, Maryland 21224
[Guilford Logo]
<PAGE> 3
[Guilford Logo]
- --------------------------------------------------------------------------------
Craig R. Smith, M.D. Guilford Pharmaceuticals Inc.
Chairman of the Board 6611 Tributary Street
and Chief Executive Officer Baltimore, Maryland 21224
April 13, 1999
Dear Stockholder:
I'd like to invite you to attend our annual meeting of stockholders, which
we will hold on May 18, 1999, at 10:00 a.m. (Eastern Time) at the Center Club,
100 Light Street, 15th Floor, Baltimore, Maryland. We have enclosed a copy of
our 1998 annual report to stockholders for your review.
At the meeting, I will review our 1998 performance, discuss our plans for
1999, and answer questions you and other stockholders may have about our
company. In addition, you and our other stockholders will vote on the following
business matters:
- the annual election of directors,
- certain proposed changes to our Certificate of Incorporation to require:
- that official actions of stockholders may only occur at duly called and
held meetings of stockholders and that this new provision can only be
altered by a vote of at least eighty percent (80%) of our outstanding
stock, and
- that members of the board of directors may only be removed by our
stockholders for "cause" and by a vote of holders of at least eighty
percent (80%) of our outstanding stock and that this new provision can
only be altered by a vote of at least eighty percent (80%) of our
outstanding stock, and
- to ratify the selection of KPMG LLP as our independent auditors for 1999.
We've enclosed a proxy card that lists all matters that require your vote.
PLEASE COMPLETE YOUR PROXY CARD AND RETURN IT PROMPTLY IN THE PRE-ADDRESSED,
POSTAGE PAID ENVELOPE PROVIDED. This will allow your shares to be voted whether
or not you plan to attend the meeting. If you plan to attend the meeting, please
check the box on your proxy card.
The Center Club is handicapped accessible.
Thank you for your continued support of Guilford Pharmaceuticals Inc.
Sincerely,
/s/ CRAIG R. SMITH, M.D.
-----------------------------------------------
Craig R. Smith, M.D.
Chairman, President and Chief Executive Officer
2
<PAGE> 4
GUILFORD PHARMACEUTICALS INC.
6611 TRIBUTARY STREET
BALTIMORE, MARYLAND 21224
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1999
We will hold our annual meeting of stockholders on TUESDAY, MAY 18, 1999 at
10:00 a.m. (Eastern Time) at the Center Club, 100 Light Street, 15th Floor,
Baltimore, Maryland. The meeting is being held for the following purposes:
1. To elect seven directors to serve on our board for the next year and
until their successors are elected and qualified;
2. To consider and act upon a proposal of the board of directors to amend
our Certificate of Incorporation to require that official actions of
stockholders may occur only at duly called and held meetings of
stockholders and that this new provision can only be altered by a vote
of at least eighty percent (80%) of our outstanding stock;
3. To consider and act upon a proposal of the board of directors to amend
our Certificate of Incorporation to require that members of the board of
directors only be removed by our stockholders for "cause" and by a vote
of holders of at least eighty percent (80%) of our outstanding stock and
that this new provision can only be altered by a vote of at least eighty
percent (80%) of our outstanding stock;
4. To ratify the selection of KPMG LLP as our independent auditors for
1999; and
5. To transact such other business as may properly come before the annual
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 THROUGH 4.
We discuss the above business matters in more detail in the attached Proxy
Statement.
Our stock transfer books will not be closed before the annual meeting.
Common stockholders of record at the close of business on March 25, 1999 will be
entitled to vote at the meeting.
/s/ THOMAS C. SEOH
------------------------------------
Thomas C. Seoh
Vice President, General Counsel &
Secretary
Baltimore, Maryland
April 13, 1999
3
<PAGE> 5
GUILFORD PHARMACEUTICALS INC.
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
Frequently Asked Questions.................................. 5
Business Matters to Be Voted On............................. 9
Board of Directors.......................................... 11
Nominees for the Board of Directors............... 11
Board Committees.................................. 14
Attendance at Board and Committee Meetings........ 15
Directors' Compensation........................... 15
Section 16(a) Beneficial Ownership Reporting
Compliance...................................... 16
Beneficial Ownership of Common Stock........................ 17
Executive Compensation...................................... 20
Summary Compensation Table........................ 20
Option Grants..................................... 21
Options Exercises and Holdings.................... 21
Employment Agreements............................. 22
401(k) Retirement Savings Plan.................... 23
Employee Share Option and Restricted Share
Plans........................................... 23
Key Person Life Insurance......................... 24
Compensation Committee Interlocks and Insider
Participation................................... 24
Certain Relationships and Related Party Transactions........ 24
Compensation Committee Report on Executive Compensation..... 24
Stock Performance Chart..................................... 29
Proposals to Amend Certificate of Incorporation............. 30
Amend certificate to require that official actions
of stockholders may only occur at duly called
and held meetings of stockholders and that this
new provision can only be altered by a vote of
at least eighty percent (80%) of our outstanding
stock........................................... 30
Amend certificate to require that members of the
board of directors may only be removed by our
stockholders for "cause" and by a vote of
holders of at least eighty percent (80%) of our
outstanding stock and that this new provision
can only be altered by a vote of at least eighty
percent (80%) of our outstanding stock.......... 31
</TABLE>
4
<PAGE> 6
FREQUENTLY ASKED QUESTIONS
Q: WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING AND HOW MANY VOTES DO THEY
HAVE?
A: Common stockholders of record at the close of business on March 25,
1999 may vote at the meeting. Each share has one vote. There were
19,415,293 shares of common stock outstanding on that date.
-------------------------
Q: WHEN ARE THE ANNUAL REPORT TO STOCKHOLDERS AND THIS PROXY FIRST BEING SENT TO
STOCKHOLDERS?
A: The annual report to stockholders and this proxy statement are being
sent to stockholders beginning on or about April 13, 1999.
-------------------------
Q: WHAT AM I VOTING ON?
A: 1. Election of seven directors.
2. The board's proposal to amend our Certificate of Incorporation to
require that official actions of stockholders may only occur at duly
called and held meetings of stockholders and that this new provision
can only be altered by a vote of at least eighty percent (80%) of
our outstanding stock.
3. The board's proposal to amend our Certificate of Incorporation to
require that members of the board of directors may only be removed
by our stockholders for "cause" and by a vote of holders of at least
eighty percent (80%) of our outstanding stock and that this new
provision can only be altered by a vote of at least eighty percent
(80%) of our outstanding stock.
4. Ratification of KPMG LLP as our independent auditors.
5. Any other business that properly comes before the meeting for a
vote.
-------------------------
Q: HOW DO I VOTE?
A: You must be present, or represented by proxy, at the annual meeting in
order to vote your shares. Since many of our stockholders are unable to
attend the meeting in person, we send proxy cards to all of our
stockholders.
-------------------------
Q: WHAT IS A PROXY?
A: A proxy is a person you appoint to vote on your behalf. Proxies are
solicited so that all common shares may be voted at the annual meeting.
You must complete and return the enclosed proxy card to have your
shares voted by proxy.
-------------------------
Q: BY COMPLETING AND RETURNING THE PROXY CARD, WHO AM I DESIGNATING AS MY
PROXY?
A: You will be designating: Craig R. Smith, M.D. (Chairman of the Board
and Chief Executive Officer), Andrew R. Jordan (Senior Vice President
and Chief
5
<PAGE> 7
Financial Officer) and Thomas C. Seoh (Vice President, General Counsel
and Secretary) as your proxies.
-------------------------
Q: HOW WILL MY PROXY VOTE MY SHARES?
A: Your proxy will vote according to the instructions you mark on your
proxy card. If you complete and return your proxy card but do not
indicate your vote on the business matters, your proxy will vote "FOR"
Items 1 through 4. Also, your proxy is authorized to vote, using his
best judgment, on any other business that properly comes before the
meeting.
-------------------------
Q: HOW DO I REVOKE MY PROXY?
A: You may revoke your proxy at any time before your shares are voted at
the annual meeting by:
- notifying our Corporate Secretary, Thomas C. Seoh, in writing at 6611
Tributary Street, Baltimore, Maryland 21224, that you are revoking
your proxy;
- executing a later dated proxy card; or
- attending the annual meeting and voting by ballot.
-------------------------
Q: HOW DO I VOTE USING MY PROXY CARD?
A: There are three steps.
1. Vote on each of the business matters as follows:
- ITEM 1. THE ELECTION OF SEVEN DIRECTORS. The names of all the
directors to be elected are listed on your proxy card. You have three
options:
- OPTION 1. To vote for all directors, you check the box marked "FOR."
- OPTION 2. To vote for some of the directors and against the rest,
you should write the names of the directors you do NOT want to vote
for in the space provided on the proxy card. You should NOT check
the box marked "FOR."
- OPTION 3. To abstain from voting for all directors (that is, not
vote for or against any of the directors), you check the box marked
"WITHHOLD AUTHORITY."
- ITEMS 2, 3 and 4. BOARD PROPOSALS TO:
(1) AMEND THE CERTIFICATE OF INCORPORATION TO REQUIRE THAT OFFICIAL
ACTIONS OF STOCKHOLDERS MAY ONLY OCCUR AT DULY CALLED AND HELD
MEETINGS OF STOCKHOLDERS AND THAT THIS NEW PROVISION CAN ONLY BE
ALTERED BY A VOTE OF AT LEAST EIGHTY PERCENT (80%) OF OUR OUTSTANDING
STOCK,
(2) TO AMEND THE CERTIFICATE OF INCORPORATION TO REQUIRE THAT MEMBERS
OF THE BOARD OF DIRECTORS MAY ONLY BE REMOVED BY OUR STOCKHOLDERS FOR
"CAUSE" AND
6
<PAGE> 8
BY A VOTE OF HOLDERS OF AT LEAST EIGHTY PERCENT (80%) OF OUR
OUTSTANDING STOCK AND THAT THIS NEW PROVISION CAN ONLY BE ALTERED BY A
VOTE OF AT LEAST EIGHTY PERCENT (80%) OF OUR OUTSTANDING STOCK, AND
(3) RATIFY THE SELECTION OF KPMG LLP AS OUR INDEPENDENT AUDITORS FOR
1999.
You check the box "FOR," or "AGAINST," or "ABSTAIN" (to cast no vote).
2. Sign and date your proxy card. IF YOU DO NOT SIGN YOUR PROXY CARD, YOUR
SHARES CANNOT BE VOTED.
3. Mail your proxy card in the pre-addressed, postage paid envelope.
REMEMBER TO CHECK THE BOX ON YOUR PROXY CARD IF YOU PLAN TO ATTEND THE
ANNUAL MEETING.
-------------------------
Q: WHAT IS A QUORUM OF STOCKHOLDERS, AND HOW MANY VOTES DOES IT TAKE TO PASS
EACH BUSINESS MATTER?
A: A quorum is the presence at the annual meeting in person or by proxy of
stockholders entitled to cast a majority of all the votes entitled to
be cast. Since on March 25, 1999, there were 19,415,293 shares of
common stock outstanding, 9,707,647 shares are a quorum.
Broker non-votes, abstentions and withhold-authority votes COUNT for
purposes of determining a quorum.
Assuming that a quorum of stockholders is present at the meeting:
- the affirmative vote of a majority of all the shares outstanding on
the record date (that is, 9,707,647 shares) is needed to pass each of
the two proposals to amend our Certificate of Incorporation;
- the affirmative vote of a majority of all the votes cast at the
meeting is needed to ratify the selection of our independent
auditors; and
- those directors who receive a plurality of the votes cast at the
meeting will be elected, meaning those individuals nominated for the
seven directorships who receive the highest number of votes cast,
even if less than a majority of the votes cast.
Broker non-votes, abstentions and withhold-authority votes DO NOT
COUNT as votes cast.
-------------------------
Q: WHY MIGHT I RECEIVE MORE THAN ONE PROXY CARD?
A: First, you may have various accounts with us that are registered
differently, perhaps in different names or different social security or
federal tax identification numbers. Second, you may own shares
indirectly through one or more brokers. Each of your brokers will send
you a proxy card for these shares. You should vote on EACH PROXY CARD
you receive and mail it to the address shown on the proxy card.
-------------------------
7
<PAGE> 9
Q: CAN I VOTE BY PROXY EVEN IF I PLAN TO ATTEND THE ANNUAL MEETING?
A: Yes. If you vote by proxy, you do not need to fill out a ballot at the
annual meeting, unless you want to change your vote.
-------------------------
Q: WHO IS SOLICITING MY PROXY, HOW IS IT BEING SOLICITED, AND WHO PAYS THE
COST?
A: Through our directors, officers and employees and on behalf of our
board of directors, we are soliciting proxies primarily by mail. We
have also hired D.F. King & Co., Inc., a proxy solicitation firm, to
assist us in soliciting proxies for a fee that we do not expect to
exceed $10,000 plus out-of-pocket expenses. We and D.F. King may also
solicit proxies in person, by telephone or facsimile. We will pay the
cost of soliciting proxies.
-------------------------
Q: WHEN IS THE DEADLINE FOR STOCKHOLDER PROPOSALS TO BE CONSIDERED FOR
INCLUSION IN OUR PROXY STATEMENT FOR OUR 2000 ANNUAL MEETING?
A: You must submit your proposal in writing to our Corporate Secretary,
Thomas C. Seoh, at 6611 Tributary Street, Baltimore, Maryland 21224, so
that he receives it by December 13, 1999. Proposals will not be
accepted by facsimile.
-------------------------
Q: WHEN MAY GUILFORD MANAGEMENT USE ITS DISCRETIONARY VOTING AUTHORITY TO VOTE
PROXIES ON A STOCKHOLDER PROPOSAL SUBMITTED FOR CONSIDERATION AT OUR 2000
ANNUAL MEETING?
A: Pursuant to Rule 14a-4(c) under the Securities Exchange Act of 1934, if
we do not receive advance notice of a stockholder proposal to be raised
at our Annual Meeting for 2000 in accordance with the requirements of
our company bylaws, our management may use its discretionary voting
authority to vote management proxies on the stockholder proposal.
Our bylaws provide that written notice of a stockholder proposal must
be delivered to or mailed and received by our Corporate Secretary at
our principal executive offices at least 45 days before the date on
which we mailed notice of the annual meeting of stockholders and proxy
materials for the previous year's annual meeting of stockholders. Thus
assuming that next year's Annual Meeting is to be held within 30 days
of May 18, 2000, in order for a stockholder proposal to be properly
brought before the 2000 Annual Meeting, we need to have received notice
of the proposal no later than February 27, 2000.
If our 2000 Annual Meeting is not held within 30 days of May 18, 2000,
however, in order for a stockholder proposal to be properly brought
before the 2000 Annual Meeting, we must receive the stockholder's
notice of the proposal no later than the close of business on the 10th
day following the day on which we mail or make public disclosure of the
date of the 2000 Annual Meeting.
8
<PAGE> 10
BUSINESS MATTERS TO BE VOTED ON
ITEM 1. ELECTION OF DIRECTORS.
Our entire board of directors is elected each year at the annual meeting.
Directors serve for one year and until a successor director is elected and
qualified. All of the nominees except Mr. Joseph ("Skip") Klein, III, were
elected directors at the 1998 annual meeting. Mr. Klein joined the board in
August 1998. Each of the nominated directors agrees to serve if elected.
However, if for some reason one or more of them is unable to accept nomination
or election, we intend to vote proxies for the election of a nominee or nominees
designated by the board of directors, unless the board reduces the total number
of directors on the board or decides to fill the vacant position at a later
time. Biographical information for each of the nominees and other information
about them is presented beginning on page 11.
ITEM 2. PROPOSAL OF THE BOARD OF DIRECTORS TO AMEND OUR CERTIFICATE OF
INCORPORATION TO REQUIRE THAT OFFICIAL ACTIONS OF STOCKHOLDERS MAY ONLY
OCCUR AT DULY CALLED AND HELD MEETINGS OF STOCKHOLDERS AND THAT THIS
NEW PROVISION CAN ONLY BE ALTERED BY A VOTE OF AT LEAST EIGHTY PERCENT
(80%) OF OUR OUTSTANDING STOCK.
This proposal of our board of directors is set forth beginning on page 30.
ITEM 3. PROPOSAL OF THE BOARD OF DIRECTORS TO AMEND OUR CERTIFICATE OF
INCORPORATION TO REQUIRE THAT MEMBERS OF THE BOARD OF DIRECTORS MAY
ONLY BE REMOVED BY OUR STOCKHOLDERS FOR "CAUSE" AND BY A VOTE OF
HOLDERS OF AT LEAST EIGHTY PERCENT (80%) OF OUR OUTSTANDING STOCK AND
THAT THIS NEW PROVISION CAN ONLY BE ALTERED BY A VOTE OF AT LEAST
EIGHTY PERCENT (80%) OF OUR OUTSTANDING STOCK.
This proposal of our board of directors is set forth beginning on page 31.
ITEM 4. RATIFICATION OF OUR SELECTION OF KPMG LLP AS OUR INDEPENDENT AUDITORS
FOR 1999.
KPMG LLP, certified public accountants, have been our independent auditors
since our inception in 1993. A member of their firm will be at the annual
meeting and will have the opportunity to make a statement and answer appropriate
questions.
KPMG audited our 1998 consolidated financial statements as well as our
401(k) Retirement Savings Plan. As part of their audit function, they also
reviewed our 1998 annual report to stockholders and various filings with the
Securities and Exchange Commission.
The audit committee of the board of directors reviewed the non-audit
services provided by KPMG during 1998 and concluded that these services do not
affect KPMG's independence as our auditors.
If you do not approve the appointment of KPMG as independent public
auditors for 1999, we will consider this adverse vote as a direction to our
board of directors to consider the selection of other auditors for 2000.
However, because of the difficulty in making any substitution of auditors so
long after the beginning of the current year, we contemplate that
9
<PAGE> 11
their appointment for 1999 will be permitted to stand unless our board finds
other good reason for making a change.
ITEM 5. OTHER BUSINESS MATTERS.
The board of directors is not aware of any other business matters to be
presented for action at the annual meeting. However, if any other matters come
before the meeting, your proxy holders intend to vote or act in accordance with
their best judgment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 THROUGH 4.
10
<PAGE> 12
BOARD OF DIRECTORS
NOMINEES FOR THE BOARD OF DIRECTORS
Below we set out brief biographical descriptions for each of our seven
nominated directors:
<TABLE>
<S> <C>
Craig R. Smith, M.D.................. Chairman of the Board of Directors, President and
Age 53 Chief Executive Officer.
Dr. Smith joined Guilford as a director at
Guilford's inception in July 1993. Dr. Smith was
elected president and chief executive officer in
August 1993 and was elected chairman of the board
in January 1994. Prior to joining Guilford, Dr.
Smith was senior vice president for business and
market development at Centocor, Inc. (a
biotechnology company). Dr. Smith joined Centocor
in 1988 as vice president of clinical research
after serving on the faculty of the Department of
Medicine at Johns Hopkins Medical School for 13
years. Dr. Smith received his M.D. from the State
University of New York at Buffalo in 1972 and
received training in Internal Medicine at Johns
Hopkins Hospital from 1972 to 1975.
Richard L. Casey..................... Director and Chairman of the Audit Committee.
Age 52
Mr. Casey has been a director since Guilford's
inception in July 1993 and served as chairman of
the board from inception through December 1993.
Mr. Casey retired as chairman of the board and
chief executive officer of Scios Inc. (a
biopharmaceutical company) in September 1998. He
joined Scios in December 1987 as president and
chief executive officer and was elected chairman
of the board of Scios in November 1992. Mr. Casey
held his position as chairman and served as a
director of Scios until his retirement. Mr. Casey
has over 20 years' experience in the
pharmaceutical industry and has served in various
positions with ALZA Corporation, Syntex Medical
Diagnostics and Eli Lilly and Company. Mr. Casey
serves on the boards of directors of Karo Bio AB
(a Swedish biotechnology corporation affiliated
with Scios) and VIVUS, Inc. (a medical devices
corporation).
</TABLE>
11
<PAGE> 13
<TABLE>
<S> <C>
Solomon H. Snyder, M.D............... Director, member of the Audit Committee, and
Age 60 consultant to Guilford.
Dr. Snyder has been a Guilford director since
Guilford's inception in July 1993 and a
consultant of ours since August 1993. Dr. Snyder
received his M.D. in 1962 from Georgetown Medical
School, trained as a research associate with
Julius Axelrod at the National Institute of
Mental Health and completed his Psychiatry
Residency at Johns Hopkins Hospital. He is
presently director of the Department of
Neuroscience at Johns Hopkins Medical School and
Distinguished Service Professor of Neuroscience,
Pharmacology and Molecular Sciences, and
Psychiatry. Dr. Snyder has received a number of
awards including the Albert Lasker Award in Basic
Biomedical Research, the Wolf Prize and the Bower
Award. He is a member of the U.S. National
Academy of Sciences, the Institute of Medicine
and the American Academy of Arts and Sciences.
Dr. Snyder is a director of Scios.
W. Leigh Thompson, M.D., Ph.D........ Director and member of the Compensation
Committee.
Age 60
Dr. Thompson has been a Guilford director since
April 1995. Dr. Thompson joined Eli Lilly in 1982
and was appointed executive vice president for
research in 1991 and chief scientific officer in
1993. Dr. Thompson retired from Eli Lilly in
December 1994 and is president and chief
executive officer of Profound Quality Resources,
Ltd. (an independent consulting firm advising
clients in the pharmaceutical industry). Dr.
Thompson is a director of Chrysalis Corporation,
Corvas International, Inc., DepoMed, Inc.,
Inspire Pharmaceuticals, Inc., La Jolla
Pharmaceutical Co., Ontegeny, Inc., Ophidian
Pharmaceuticals, Inc., and Orphan Medical, Inc.
Elizabeth M. Greetham................ Director and member of the Compensation
Age 49 Committee.
Ms. Greetham has been a Guilford director since
November 1995. Since 1992, Ms. Greetham has been
portfolio manager of WPG Life Sciences Fund, L.P.
and WPG Institutional Life Sciences Fund, L.P.,
and since 1990 she has been involved in health
care investments for institutional, growth and
individual high net worth accounts at Weiss, Peck
& Greer, L.L.C. She is president of Libracorn
Financial Consultants and a member of the boards
of directors of Clinchem Diagnostics,
Pathogenesis Corp., and Sangstat Medical Corp.
</TABLE>
12
<PAGE> 14
<TABLE>
<S> <C>
George L. Bunting, Jr................ Director and Chairman of the Compensation
Age 58 Committee.
Mr. Bunting has been a Guilford director since
May 1996. Mr. Bunting is president and chief
executive officer of Bunting Management Group, a
position he has held since July 1991. He formerly
served as chairman of the board and chief
executive officer of the Noxell Corporation (a
Procter & Gamble Company as of November 1989).
Mr. Bunting joined Noxell Corporation in 1966 as
a product manager. In 1968, he was elected to the
board of directors of Noxell. In March 1970, he
was elected to the position of executive vice
president and served as president and chief
executive officer from November 1973 until April
1986, when he became chairman and chief executive
officer. Mr. Bunting is a director of Baltimore
Equitable Insurance Board, Crown Central
Petroleum Corporation, Mercantile Bankshares
Corporation, and Mercantile Safe Deposit & Trust
Co. He served as chairman of the Johns Hopkins
University, Johns Hopkins Health System, and
Johns Hopkins Hospital from 1994 until 1998 and
for Johns Hopkins Medicine from 1996 until 1998.
Mr. Bunting continues to serve as a trustee for
these institutions.
Joseph ("Skip") Klein, III........... Director and member of the Audit Committee.
Age 38
Mr. Klein has been a Guilford director since
August 1998. Since June 1998, Mr. Klein has been
a health care analyst with The Kaufmann Fund (an
emerging growth mutual fund). Previously, he
served as an investment consultant from April
1998 until June 1998. Mr. Klein was employed at
T. Rowe Price Associates (an investment
management firm) from December 1988 until March
1998, for a time as a portfolio manager and
chairman of the investment advisory committee of
T. Rowe Price Associates and also as a vice
president and health care investment analyst. He
holds an M.B.A. from the Stanford Graduate School
of Business and a B.A. in economics from Yale
University. Mr. Klein is a director of NPS
Pharmaceuticals, Inc. and Synbiotics Corp.
</TABLE>
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR LISTED
ABOVE.
13
<PAGE> 15
BOARD COMMITTEES
Our board had two standing committees: a compensation committee and an
audit committee.
Compensation Committee. The compensation committee has three members and
serves the functions set forth in the following table.
<TABLE>
<CAPTION>
NO. OF
NAME OF MEETINGS
COMPENSATION COMMITTEE MEMBERS COMPENSATION COMMITTEE FUNCTIONS IN 1998
<S> <C> <C>
- fixes compensation of the chief
executive officer
- reviews and approves executive
compensation
George L. Bunting, Jr. - prepares annual report to
stockholders on executive
compensation practices
W. Leigh Thompson, M.D., Ph.D. - administers employee stock 4
option and restricted share plans
and such other plans as we may
adopt from time to time
Elizabeth M. Greetham - approves and establishes
policies with regard to company
salary, incentive, equity and
other compensation programs
</TABLE>
Audit Committee. The audit committee has three members and serves the
functions set forth in the following table. None of the directors on the audit
committee has ever been employed by Guilford.
<TABLE>
<CAPTION>
NO. OF
NAME OF MEETINGS
AUDIT COMMITTEE MEMBERS AUDIT COMMITTEE FUNCTIONS IN 1998
<S> <C> <C>
- recommends action to the board on the
appointment or discharge of the
independent auditing firm
- reviews the proposed scope of the
annual audit and estimated fees
- reviews any major new accounting
policies or changes to existing ones
Richard L. Casey - reviews with the independent auditors
their annual audit report and our
quarterly and annual financial
statements
Solomon H. Snyder, M.D. - consults with auditors and our internal 2
accounting staff on their appraisals of
the strengths and limitations of our
accounting personnel, internal
accounting controls and systems, and
other factors pertinent to the
integrity of our published financial
reports
Joseph Klein, III - reviews the annual letter from the
independent auditors on internal
accounting controls
- reviews and approves other services and
fees of independent auditors
- reviews and approves plans to ensure
Year 2000 compliance
</TABLE>
14
<PAGE> 16
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During 1998, our board held seven meetings. All of our directors attended
at least 75% of these meetings as well as at least 75% of the meetings of the
committees on which they serve.
DIRECTORS' COMPENSATION
We do not pay directors who are also officers of Guilford. Except for Dr.
Snyder, we paid all non-employee directors the following in 1998:
- an annual retainer of $10,000, and
- $1,500 for each board meeting attended.
In addition, we reimbursed each director, whether an employee or not, for
expenses of attending board and committee meetings.
In 1994, we adopted our Directors' Stock Option Plan to attract individuals
to serve as outside directors. We believe that by granting options to purchase
our stock to our outside directors, we align the interests of our outside
directors with our stockholders and thus can increase the incentives for them to
make significant contributions to our long-term performance and growth. Those
directors who are not (1) Guilford officers or employees or (2) officers or
employees of an organization that owns 20% or more of our stock are eligible to
receive options under the Director Plan.
We can issue up to 300,000 shares of stock to our outside directors under
the Director Plan. To date, we have issued options for 172,500 shares under that
plan. Options we issue under the Director Plan are considered "non-qualified"
stock options for tax purposes, meaning that directors may be subject to certain
federal and state taxes at the time they exercise these options.
The exercise price of options we grant under the Director Plan is equal to
the closing price of our stock (as reported on the NASDAQ Stock Market) on the
day immediately prior to the date we grant the options. Directors may exercise
these options for up to one-half of the shares covered on the first anniversary
of the date of grant. The remaining 50% vests on the second anniversary date.
Once vested, directors may exercise these options for up to 10 years from the
initial option grant date.
Each eligible director receives an option to purchase 30,000 shares of our
common stock at the time he or she initially begins serving on the board.
Thereafter, each eligible director receives additional options to purchase 7,500
shares of our common stock immediately following each of the next four annual
elections of directors so long as he or she has served on the board for at least
one full year and continues to serve as a director on the grant date.
A director may also transfer these options to his or her spouse, children
or grandchildren (and certain trusts for the benefit of these family members or
partnerships in which such family members are the only partners) so long as a
director receives no payment for that transfer. The Director Plan also permits
these immediate family members (or their trusts or partnerships) to transfer
options among themselves, again so long as no amounts are paid for these
transfers. A director may also transfer options following his or her death by
will or the laws of descent and distribution. In 1998, neither Mr. Casey nor Dr.
Snyder participated in the Director Plan.
Dr. Snyder has provided consulting services to Guilford since August 1993.
Under the terms of our consulting agreement with Dr. Snyder, except for amounts
specified in that agreement, Dr. Snyder receives no other compensation (other
than reimbursement of
15
<PAGE> 17
expenses) for his service as a director. For a description of our current
consulting arrangement with Dr. Snyder, you should see the section of this Proxy
Statement entitled "Certain Relationships and Related Party Transactions"
beginning on page 24.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For 1998, we believe that our officers and directors filed all the reports
required by Section 16 of the Securities Exchange Act of 1934 on a timely basis,
except as follows: Dr. W. Leigh Thompson, one of our directors, inadvertently
filed a late Form 5 in 1998 to report the transfer of options to his adult child
in 1997, and Dr. Craig R. Smith, our chief executive officer and chairman of the
board of directors, filed his Form 5 for 1998 to report a gift of shares to his
adult children one day late.
16
<PAGE> 18
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table shows the beneficial ownership of our common stock as
of April 1, 1999 of each nominee for director, the five executive officers shown
in the Summary Compensation table on page 20, and all of our directors and
executive officers as a group. The table also lists those stockholders that
beneficially hold 5% or more of our common stock as of April 1, 1999.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES RIGHT TO OUTSTANDING
NAME OWNED (1) ACQUIRE (2) SHARES
- ---- ---------- ------------ -----------
<S> <C> <C> <C>
College Retirement Equities Fund (3)....... 1,661,000 -- 8.6%
Biotechnology Value Fund, L.P. (4)......... 996,974 -- 5.1%
Amgen Inc. (5)............................. 640,095 700,000 6.7%
Capital Research and Management Company
(6)...................................... 1,100,000 -- 5.7%
Craig R. Smith, M.D. (7)................... 406,081 136,168 2.8%
John P. Brennan............................ 70,191 89,967 *
Andrew R. Jordan........................... 130,819 90,937 1.1%
David R. Savello, Ph.D. (8)................ 3,847 -- *
Peter D. Suzdak, Ph.D...................... 1,397 93,436 *
George L. Bunting, Jr. (9)................. 758,650 41,250 4.1%
Richard L. Casey........................... 5,400 75,000 *
Elizabeth M. Greetham...................... 177,450(10) 41,250 1.1%
Solomon H. Snyder, M.D. (7)................ 582,217 90,000 3.4%
W. Leigh Thompson, M.D., Ph.D.............. 18,705 -- *
All officers and directors as a group...... 2,236,389 774,883 14.9%
</TABLE>
- -------------------------
* Represents less than 1% of the shares outstanding.
(1) Includes shares for which the named person:
- has sole voting and investment power,
- has shared voting and investment power with a spouse or minor child, or
- holds in a 401(k) Retirement Savings Plan account, unless otherwise stated
in these footnotes.
Excludes shares that may be acquired through stock option or warrant
exercises.
(2) Shares that can be acquired upon the exercise of stock options or warrants
through May 30, 1999.
(3) The address of this stockholder is 730 Third Avenue, New York, NY 10017. The
information concerning this stockholder is based solely on a Schedule 13G,
dated February 11, 1999, filed with the SEC.
17
<PAGE> 19
The number of shares reported for this stockholder in the above table is as
of December 31, 1998. According to the Schedule 13G, the investment advisor
for this stockholder, TIAA-CREF Investment Management, LLC, is affiliated
with and employs some of the same investment personnel as Teachers Advisors,
Inc., the investment advisor for certain entities that hold Guilford stock
as follows:
<TABLE>
<CAPTION>
NUMBER
NAME OF ENTITY OF SHARES
<S> <C>
- - TIAA Separate Account VA-1 - 2,400
- - TIAA-CREF Mutual Funds - 54,380
- - NYS College Choice Tuition LLC - 1,414
</TABLE>
According to the Schedule 13G, because separate investment decisions are
made with respect to the holdings of each of the entities listed above and
the College Retirement Equities Fund, and there is no oral or written
agreement or arrangement among them and the College Retirement Equities
Fund with respect to acquisition, voting, disposition or otherwise of their
securities, each of these entities and the College Retirement Equities Fund
(a) disclaims beneficial ownership of the others' securities holdings and
(b) disclaims its membership in a group with the others where the purpose
of the group is to acquire control of or influence management of Guilford.
(4) The address of this stockholder and the entities listed below is 227 West
Monroe Street, Suite 4800, Chicago, Illinois 60606. The information
concerning this stockholder is based solely on a Schedule 13G filed with
the SEC on February 5, 1999. This stockholder shares voting and investment
power with respect to its Guilford shares with certain related entities as
follows:
<TABLE>
<CAPTION>
NUMBER
NAME OF ENTITY OF SHARES
<S> <C>
- - Biotechnology Value Fund, L.P. - 515,297
- - BVF Inc. - 996,974
</TABLE>
(5) The address of this stockholder is One Amgen Center Drive, Thousand Oaks,
CA 92320.
(6) The address of this stockholder it 333 South Hope Street, Los Angeles, CA
90071. The information concerning this stockholder is based solely on a
Schedule 13G filed with the SEC on February 8, 1999. The number of shares
reported in the above table is as of December 31, 1998. According to the
Schedule 13G, this stockholder is an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940.
(7) Drs. Smith and Snyder have entered into so-called "covered call" options
with a third party that will be able to exercise these options on October
30, 2000. If this third party decides to exercise them on that day, Dr.
Smith will be required to sell up to 100,000 shares to this third party at
a price of $40.58 per share, and Dr. Snyder will be required to sell up to
93,478 shares to this third party at $36.98 per share.
(8) Dr. Savello voluntarily resigned his position with Guilford effective
February 12, 1999.
18
<PAGE> 20
(9) Includes 750,000 shares held by The Abell Foundation, Inc., for which Mr.
Bunting disclaims a beneficial interest. Mr. Bunting serves as a trustee
and a member of the finance committee of The Abell Foundation. Does not
include 3,500 shares held by a limited liability company for which Mr.
Bunting disclaims beneficial interest except as to his 1% pecuniary
interest in the limited liability company.
(10) Includes 172,950 shares held by WPG Life Sciences Fund, L.P. and WPG
Institutional Life Sciences Fund, L.P., for which Ms. Greetham serves as
portfolio manager. Ms. Greetham is a controlling person of Libracorn
Financial Consultants, a limited partner in WPG Life Sciences Fund. Except
to the extent of a beneficial interest of 1.55% in the shares held by WPG
Life Sciences Fund through Libracorn, Ms. Greetham disclaims beneficial
interest in the shares held by these two funds.
19
<PAGE> 21
EXECUTIVE COMPENSATION
The following table summarizes the compensation of certain of our
executives as of December 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------ ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) ($)(2)
- --------------------------- ---- --------- -------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Craig R. Smith, M.D...... 1998 $341,667 $75,000 $ -- 50,000 $48,498
Chairman, President and 1997 300,000 150,000 -- 80,000 2,708
Chief Executive Officer 1996 260,417 150,000 61,890 100,000 --
John P. Brennan.......... 1998 205,879 38,000 -- 20,000 23,444
Senior Vice President,... 1997 191,000 50,000 -- 30,000 2,708
Technical Operations & 1996 169,223 45,000 -- 40,000 --
General Manager, Drug
Delivery Business
Andrew R. Jordan......... 1998 205,720 50,000 -- 30,000 11,733
Senior Vice President, 1997 191,000 60,000 -- 40,000 2,708
Chief Financial Officer 1996 170,981 40,000 -- 40,000 --
and Treasurer
David R. Savello, Ph.D.
(3).................... 1998 245,250 29,556 58,125 -- 3,513
Senior Vice President, 1997 180,000 52,000 179,549 115,000 2,708
Development
Peter D. Suzdak, Ph.D.... 1998 194,167 50,000 -- 30,000 6,616
Senior Vice President, 1997 165,000 65,000 351,563 40,000 2,708
Research & Development 1996 146,242 45,000 72,656 45,000 --
</TABLE>
- -------------------------
(1) The amounts set forth under the heading Other Annual Compensation in the
above table consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Craig R. Smith, M.D.: - $10,787 paid in 1996 to cover (a) forgiveness
of debt related to Dr. Smith's purchase of shares
in 1993 and (b) anticipated tax liabilities
related to the debt forgiven, and
- $51,103 in relocation costs paid in 1996
related to Dr. Smith's move to the Baltimore
area.
----------------------------------------------------------------------------------
David R. Savello, Ph.D.: - dollar value of non-cash compensation related
to vesting in 1998 of restricted share award
granted to Dr. Savello upon the start of his
employment.
- relocation costs in 1997 related to Dr.
Savello's move to the Baltimore area.
----------------------------------------------------------------------------------
Peter D. Suzdak, Ph.D.: - dollar value of non-cash compensation related
to the vesting in 1996 and 1997 of restricted
shares granted to Dr. Suzdak upon the start of
his employment.
----------------------------------------------------------------------------------
</TABLE>
(2) Represents the value at December 31, 1998 of shares issued in 1997 and 1998
to the 401(k) Plan account of each executive listed above as part of
Guilford's program of matching employee contributions to 401(k) Plan
accounts. The value of these shares is based on a closing price of $14.25
per share on December 31, 1998. The value of
20
<PAGE> 22
the company match in 1998 was as follows: Dr. Smith -- $3,961; Mr.
Brennan -- $3,961; Mr. Jordan -$4,022; Dr. Savello -- 3,513; and Dr.
Suzdak -- $3,961. These contributions vest in each executive's 401(k) Plan
account over a four-year period based on each executive's term of service
with Guilford. In addition, the amounts for 1998 include the dollar value
of insurance premiums paid by Guilford with respect to split-dollar life
insurance policies. At such time as these policies terminate, Guilford will
be reimbursed for up to the entire amount of the premiums previously paid,
depending on the cash surrender value of the policy at the time of policy
termination.
(3) Dr. Savello began his employment in April 1997. Upon joining Guilford, Dr.
Savello was granted 10,000 restricted shares, which vested at the rate of
25% per year beginning on April 1, 1998. The value of Dr. Savello's
restricted shares, both vested and unvested, was $142,500 as of December 31,
1998. Dr. Savello resigned his position with Guilford effective February 12,
1999.
OPTION GRANTS
The following table sets forth certain information concerning the grant of
stock options to our executives in 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OR OPTION TERM (3)
GRANTED(#) FISCAL YEAR BASE PRICE EXPIRATION ---------------------
NAME AND POSITION (1) (%) ($)(2) DATE 5%($) 10%($)
- ----------------- ----------- ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Craig R. Smith, M.D............. 50,000 5.9% $12.875 2/09 $404,851 $1,025,972
John P. Brennan................. 20,000 2.4 12.875 2/09 161,940 410,389
Andrew R. Jordan................ 30,000 3.5 12.875 2/09 242,911 615,583
David R. Savello, Ph.D.......... -- -- -- -- -- --
Peter D. Suzdak, Ph.D........... 30,000 3.5 12.875 2/09 242,911 615,583
</TABLE>
- -------------------------
(1) Consists of options granted to certain executives in February 1999 relating
to performance in 1998. These options vest 25% per year on the first four
anniversaries of the grant date of the option.
(2) The exercise prices are equal to the fair market value of the common stock
on the date of grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the ten year option term. The assumed 5%
and 10% rates of stock appreciation are mandated by the rules of the
Securities and Exchange Commission and may not accurately reflect the
appreciation of the price of our common stock from the date of grant until
the end of the option term. These assumptions are not intended to forecast
future price appreciation of our common stock.
OPTION EXERCISES AND HOLDINGS
Employees and other individuals exercised options to acquire an aggregate
of 178,678 shares in 1998. The following table sets forth information with
respect to certain of our
21
<PAGE> 23
executives concerning the exercise of options during 1998 and unexercised
options held as of the end of that year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END (#)(1) AT FISCAL YEAR END ($)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Craig R. Smith, M.D....... 19,799 $297,193 71,284 236,250 $ 20,483 $220,312
John P. Brennan........... 14,783 280,315 61,842 101,875 156,347 103,281
Andrew R. Jordan.......... 14,566 181,832 63,125 118,125 181,874 101,875
David R. Savello, Ph.D.
(3)..................... -- -- -- 115,000 -- --
Peter D. Suzdak, Ph.D..... -- -- 66,249 117,501 299,905 141,218
</TABLE>
- -------------------------
(1) Includes options granted in February 1999 relating to performance in 1998.
(2) Total value of unexercised in-the-money options is based on the closing
price of the common stock of $14.25 per share on December 31, 1998 minus the
exercise price of the options.
(3) Dr. Savello resigned his position with Guilford effective February 12, 1999,
and all his options terminated as of that date.
EMPLOYMENT AGREEMENTS
Each of the executives listed in the above tables entered into an
employment agreement with Guilford upon starting his employment. These
employment agreements contain severance provisions that entitle the executive to
continuation of his then-current base salary for up to 12 months if we terminate
his employment other than for cause. In the case of Dr. Smith, our chief
executive officer, the severance payments continue for up to 36 months. If the
executive secures full-time employment during this 12 or 36 month period, we are
no longer obligated to continue to make these severance payments. During the
severance period, we also continue to provide health, life and disability
insurance coverage to the executive.
In 1998, we entered into additional severance agreements with our
executives that apply if we are subject to a "change in control" and the
executive's employment is terminated other than for cause or the executive
voluntarily resigns for "good reason". Under these agreements, the executive is
entitled to a lump-sum payment equal to two times the executive's then-current
annual base salary. In the case of Dr. Smith, our chief executive officer, the
severance amount is three times his then-current base salary. We have also
agreed to pay for certain "golden parachute" excise taxes the executive may be
liable for under section 4999 of the Internal Revenue Code of 1986, as amended.
In addition, we are obligated to continue to provide health, life and disability
insurance coverage to the executive for two years or until the executive secures
full-time employment elsewhere, whichever happens first.
22
<PAGE> 24
For purposes of these agreements, a "change in control" is deemed to have
occurred if:
- a third party or group of third parties becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of
50% or more of our outstanding voting stock;
- a third party or group of third parties acquires 30% or more of our
voting stock but less than 50%, unless prior to the acquisition of these
shares, the full board by at least a two-thirds (2/3rds) vote
specifically approves the acquisition and determines that the acquisition
shall not trigger the severance payments; or
- during any two-year period those individuals who at the beginning of this
period make up the board ("Original Directors") along with any new
directors elected or appointed during this period whose election or
appointment resulted from a vacancy on the board because of the
retirement, death, or disability of a director and whose election or
appointment was approved by a vote of at least two-thirds (2/3rds) of the
Original Directors then still on the board, cease for any reason to make
up a majority of the Board.
Under these agreements, an executive has "good reason" to resign if:
- there is any proposed reduction in the executive's base salary;
- there is any reduction in the executive's responsibilities or areas of
supervision; or
- the executive's office is relocated outside the metropolitan area in
which his or her office was located immediately prior to the change in
control.
401(k) RETIREMENT SAVINGS PLAN
We adopted a 401(k) Plan effective January 1, 1994. We intend that this
plan satisfy the tax qualification requirements of sections 401(a), 401(k) and
401(m) of the Internal Revenue Code of 1986, as amended. All employees,
including the executives listed in the above tables, who are at least 21 years
old are eligible to participate in the plan as of the first day of the calendar
quarter following completion of three months of service. The 401(k) Plan permits
participants to contribute up to a fixed dollar amount of their compensation,
excluding fringe benefits, subject to certain limits set by section 402g(1) of
the Internal Revenue Code, as amended. This limit was $10,000 in 1998. All
amounts a participant defers under the 401(k) Plan vest immediately in the
participant's account. Any contributions we make to participant accounts vest
over a four-year period based on the participant's term of service with our
company. Starting January 1, 1997, we began making "matching contributions" in
newly issued shares of our stock equal in value to fifty percent (50%) of the
first six percent (6%) of an employee's salary contributed to the employee's
401(k) Plan account.
EMPLOYEE SHARE OPTION AND RESTRICTED SHARE PLANS
We have adopted share option and restricted share plans for the benefit of
our employees and certain other individuals who provide value to our company.
All of our full-time employees, including the executives listed in the above
tables, and certain other individuals, such as consultants, whose participation
the board of directors determines is in our best interests as a corporation, are
eligible to receive options or restricted shares of our stock under our employee
share option and restricted share plans. All unvested options and restricted
shares held by our employees vest in full upon a "change in control" as
described in the section entitled "Employment Agreements" beginning on page 22.
23
<PAGE> 25
KEY PERSON LIFE INSURANCE
Our company owns and is the beneficiary of term life insurance policies in
the amount of $1,000,000 covering Drs. Smith and Snyder and Messrs. Jordan and
Brennan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Currently, Mr. Bunting, Ms. Greetham and Dr. Thompson serve on the
compensation committee of our board of directors. These individuals served on
the compensation committee during all of 1998 as well.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
CERTAIN TRANSACTIONS WITH DR. SNYDER
In September 1995, we entered into a three-year consulting agreement with
Dr. Snyder. Under this agreement Dr. Snyder provides certain consulting services
to us. These services include, among others, assisting us to recruit scientific
staff, advising us as to the purchase of laboratory equipment and acquisition of
new technologies, and participating in business meetings as our company's
president may reasonably request from time to time. Dr. Snyder has agreed to
make himself available to render these services for a minimum of 24 and a
maximum of 38 days per year. For each of the one-year periods ending on
September 1, 1996, 1997 and 1998, we paid Dr. Snyder $150,000, $160,000 and
$170,000, respectively. We paid these amounts in equal monthly installments. We
also granted Dr. Snyder stock options vesting over three years to purchase
90,000 shares of our stock at an exercise price of $5.92 per share. As of
December 31, 1998, these options were fully vested. We extended Dr. Snyder's
consulting agreement until March 31, 1999, during which period we continued to
pay Dr. Snyder a monthly retainer of $14,167.
CERTAIN TRANSACTIONS WITH SCIOS INC.
Dr. Snyder was a director of Scios during 1998. Mr. Casey was president,
chief executive officer, and chairman of the board of directors of Scios until
his retirement in September 1998. We paid approximately $833,000, $341,000 and
$295,000 for services, equipment purchases and lease payments to Scios in 1998,
1997 and 1996, respectively. These agreements with Scios resulted from
arm's-length negotiations and contain terms that are no less favorable to
Guilford than those that would have been available from unrelated third parties.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee of the board is currently comprised of Mr.
Bunting, Dr. Thompson and Ms. Greetham, all of whom are outside directors. We on
the committee are responsible for overseeing Guilford's compensation programs
for all employees, including executives. For executives, we evaluate performance
and determine compensation policies and review specific levels of compensation.
24
<PAGE> 26
COMPENSATION PHILOSOPHY
The goals of our compensation program are to:
- align employee compensation with Guilford's business objectives and
performance, and
- enable Guilford to attract and retain executive officers and other
employees who contribute to Guilford's long-term success and to motivate
them to enhance long-term stockholder value.
To achieve these goals, we on the committee:
- compare Guilford's salary practices with those of other biopharmaceutical
companies with which Guilford competes for talent to ensure that employee
salaries are competitive and adjust employee salaries from time to time
as market conditions warrant;
- establish annual incentive opportunities to motivate Guilford employees
to achieve specific short-term operating goals; and
- grant significant equity-based incentives for executives and other
employees to ensure that they are motivated over the long-term to respond
to Guilford's business challenges and opportunities, as owners and not
simply as employees.
In general, we seek to set the components of cash compensation and total
compensation (that is, base salary, annual incentives and long-term equity-based
incentives) to be competitive with other biopharmaceutical companies that:
- we deem comparable to Guilford in terms of size, stage of development,
potential, target peer group and/or other factors, or
- compete in the job market for individuals with skills desired by
Guilford.
In the fall of 1998, Guilford engaged the compensation consulting firm of
Towers Perrin to review Guilford's compensation practices with respect to both
executives and representative non-executive employees. As part of this
assignment, Towers Perrin assembled data on pharmaceutical and biopharmaceutical
companies that Towers Perrin felt constituted an appropriate benchmark of
competitors for Guilford executives and other employees. Towers Perrin concluded
that, on average, Guilford's aggregate compensation for executives and other
non-executive employees (i.e., base salary, annual cash incentives and
equity-based incentives) were competitive. In a few limited circumstances,
Towers Perrin recommended upward salary adjustments for certain executives whose
total annual cash compensation was significantly below the industry median.
BASE SALARY. We on the committee compare the base salary of each executive
officer annually, including those of the executives listed in the "Summary
Compensation Table" on page 20, against the base salaries paid for similar
positions by companies within a comparison group. We consider a range of salary
levels for comparable positions. Within this range, we consider individual
factors as we feel appropriate, including:
- individual performance,
- level of responsibility,
- prior experience,
- breadth of knowledge,
- competitive pay practices,
25
<PAGE> 27
- the extent to which Guilford has achieved its annual corporate
objectives, and
- Guilford's other significant accomplishments during the period under
review.
From year to year, the relative weighting of the individual components and
the corporate performance component may differ from executive to executive, and
can be expected to change over time as Guilford develops as a business and its
industry evolves.
Based on our review of the foregoing factors, we authorized Guilford
management to allocate $71,637 for base salary increases for all of Guilford's
executives other than its chief executive officer, whose compensation we discuss
below. This amount represents a 3.7% increase over 1998 base salary levels. In
addition, based on information set forth in the reports of Towers Perrin, we
authorized additional base salary increases in the aggregate of $30,277 for
three executives in order to bring their base salaries into line with amounts
paid by other companies who compete with Guilford for executive talent. We also
authorized certain increases to reflect promotions, where appropriate. We
authorized Guilford management to allocate $585,537 for base salary increases
for all Guilford employees as a group, again excluding its chief executive
officer. This amount represents a 4.7% increase over 1998 base salary levels.
ANNUAL INCENTIVE. In addition to base salary, Guilford offers
discretionary cash bonuses to employees, including executives, as annual
incentives to achieve short-term operating objectives. The actual incentive
award earned by any employee depends on the extent to which corporate and
individual performance objectives were achieved during the year. Guilford's
objectives consist of operating, strategic, and financial goals that are
critical to Guilford's fundamental long-term goal of building stockholder value.
After the end of the year, we evaluate the degree to which Guilford has met
its goals and, in our sole discretion, we establish a pool of funds available
for annual incentive awards. Individual awards are determined based on
Guilford's overall performance and by evaluating each participant's performance
against personal and corporate objectives. A portion of the award pool is then
allocated based on the participant's contributions during the year. Guilford
pays awards in cash and distributes these bonuses in the first quarter following
the performance year.
For 1998, we determined that Guilford met certain, but not all, of the
corporate goals set for the year. We also determined that Guilford achieved
certain other important objectives in 1998. Among these were:
- a 62% increase in the amount of royalties paid to Guilford on GLIADEL(R)
wafer sales in 1998 as compared to 1997,
- selection of NIL-A, the first lead compound under Guilford's
collaboration with Amgen to develop FKBP neuroimmunophilin drug products,
- selection of the first potential lead compound in Guilford's NAALADase
inhibition drug development program and identification of a possible
second lead compound in that program,
- the generation and optimization of several promising series of PARP
inhibitors,
- the financing and substantial construction of a new 73,000 square foot
research and development facility, and
- the recruitment of Vice Presidents of Clinical Research, Pharmaceutical
and Chemical Development, Regulatory Affairs and Intellectual Property
and the
26
<PAGE> 28
initiation of a development process for going from lead compound identification
to proof-of-principle in humans in less than 1,000 days.
Based on this performance, we authorized Guilford management to allocate
$281,400 for annual incentive bonuses for all of Guilford's executives other
than its chief executive officer. This amount equals 14.6% of the total base
salaries of these executives in 1998. We also authorized Guilford management to
allocate $1,072,400 for annual incentive bonuses for all Guilford employees as a
group, again excluding its chief executive officer. This amount equals 8.5% of
the total base salaries of these employees in 1998.
LONG-TERM INCENTIVES. Guilford implements its long-term incentive program
through its stock option and restricted share plans. The program uses vesting
periods (generally four years) to encourage executives and other full-time
employees to continue in the employ of Guilford. Through option grants and
restricted share awards, executives receive significant equity incentives to
build long-term stockholder value. Grants are made at fair market value equal to
the closing price of Guilford's common stock on the trading date immediately
preceding the grant date. Recipients realize value from these grants only if
Guilford's stock appreciates over the term of the option. We look at the
following factors to determine how many options to grant:
- the option grant practices of the companies in a comparison group,
- Guilford's philosophy of significantly linking executive and employee
compensation with stockholder interests,
- Guilford's performance relative to its objectives, and
- Guilford's other accomplishments during the year.
Based on these factors, in respect of performance in 1998, we on the
committee decided to grant options for a total for 619,695 shares of Guilford
stock for all eligible employees as a group, excluding the chief executive
officer. Of this amount, we granted options to purchase 189,500 shares of stock
to Guilford's executives, again excluding the chief executive officer.
RESTRICTED SHARE AWARDS. In order to align the interests of Guilford's
executives with those of its stockholders over the long-term, we have in the
past made and may again make restricted stock awards to executives in connection
with their recruitment. Guilford has the right to repurchase any unvested
amounts of these awards for 90 days following termination of employment at the
original purchase price, which generally is a nominal amount. These shares vest
(that is, they are released from this repurchase option) 25% per year over a
four year period so long as the executive remains employed by Guilford during
the vesting period. In 1998, we issued a total of 20,000 restricted shares to
four vice presidents who joined Guilford during this year.
CHIEF EXECUTIVE OFFICER COMPENSATION
In July 1993, Dr. Smith was recruited as Guilford's first employee and
given the mandate to organize its operations, secure additional financing and
recruit its initial staff. Based on Dr. Smith's leadership of the company, we
have voted to increase Dr. Smith's base annual salary each year since inception.
In light of his performance in 1998, we increased his base annual salary,
awarded him a cash bonus and granted him stock options as follows:
- Base Salary Increase: $20,000 (to an annual base salary of $370,000,
effective March 1, 1999),
27
<PAGE> 29
- Cash Bonus: $75,000, and
- Stock Option Grant: 50,000 shares at an exercise price of $12.875 (the
closing price of the stock on the trading day preceding the grant),
vesting 25% annually.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits tax deductions Guilford
can take for annual executive compensation over $1 million. There are several
exceptions to this limitation, including one for qualified performance-based
compensation. To be qualified, performance-based compensation must meet various
requirements, including shareholder approval. We believe that under Guilford's
current compensation practices, the limitations of Section 162(m) have no or
minimal applicability currently and will not in the near future. While it is
generally desirable to maximize the deductibility of compensation, there may be
cases where we on the committee determine that it is in the best interest of
Guilford and its stockholders to provide incentives to key employees that may
exceed the $1 million deductibility limit.
CONCLUSION
In summary, we believe that through the arrangements we describe above a
significant portion of Guilford's compensation program as well as Dr. Smith's
compensation is contingent on Guilford's performance and that the level of
benefits is closely linked to increases in long-term stockholder value. Guilford
remains committed to this philosophy of "pay for performance," recognizing that
the competitive market for talented executives and other employees and the
volatility of Guilford's business may result in highly variable compensation for
a particular time period. We will continue to monitor closely the effectiveness
and appropriateness of each of the components of compensation to reflect changes
in Guilford's business environment.
DISCLAIMER
This report is being provided to Guilford stockholders solely for
informational purposes. You should not consider this report and the stock price
performance graph that follows to be "soliciting materials" or to be "filed"
with the SEC. It also is not subject to the SEC's proxy rules or to the
liabilities of section 18 of the Securities Exchange Act of 1934. In addition,
the report and the performance graph shall not be deemed to be incorporated by
reference into any prior or subsequent filing by Guilford under the federal
securities laws.
COMPENSATION COMMITTEE
George L. Bunting, Jr., Chairman
Elizabeth M. Greetham
W. Leigh Thompson, M.D., Ph.D.
28
<PAGE> 30
STOCK PERFORMANCE CHART
The following graph assumes $100 was invested on June 17, 1994 (the date on
which our stock began to trade publicly) in each of (1) shares of our common
stock, (2) the NASDAQ Stock Market Composite Index, and (3) the BioCentury 100
Index and shows the comparative returns on these hypothetical investments
through December 31, 1998. We compute total return assuming reinvestment of any
dividends. You should not rely on historical price performance to indicate
future stock performance.
GUILFORD PHARMACEUTICALS INC.
STOCK PERFORMANCE CHART
[GRAPH]
<TABLE>
<CAPTION>
GUILFORD PHARMACEUTICALS NASDAQ STOCK MARKET
INC. BIOCENTURY 100 INDEX COMPOSITE INDEX
------------------------ -------------------- -------------------
<S> <C> <C> <C>
6/17/94 100.00 100.00 100.00
12/31/94 65.63 90.46 103.10
12/31/95 198.44 163.06 144.26
12/31/96 435.94 180.03 177.01
12/31/97 377.34 174.12 215.31
12/31/98 267.19 194.74 300.64
</TABLE>
29
<PAGE> 31
PROPOSAL NO. 2
AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
REGARDING STOCKHOLDER ACTION BY WRITTEN CONSENT
INTRODUCTION
Under Delaware law, the stockholders of a company may sign a written
consent to take any action that they could otherwise take at a properly called
meeting of stockholders, unless the company's certificate of incorporation
prohibits stockholder action by written consent. Stockholder action by written
consent requires only the number of votes that the action taken would have
required at a meeting of stockholders; stockholder action by written consent
does not have to be unanimous. Once stockholders holding the number of shares
necessary to take a specific action have signed a written consent, that action
becomes effective just as it would after a meeting of stockholders.
Our certificate of incorporation and bylaws currently permit stockholder
action by written consent. We propose to change our certificate of incorporation
and our bylaws to prohibit stockholder action by written consent. We also
propose to change our certificate of incorporation and bylaws to require that
the provisions regarding shareholder action by written consent may only be
amended with the vote of stockholders holding 80% of the outstanding voting
stock. Our board of directors has already approved this proposed change, and we
discuss below our reasons for initiating this change.
REASONS FOR THE AMENDMENT
We believe that all of our stockholders benefit from having the opportunity
to meet, listen to competing views, and then make their decisions at a properly
noticed meeting of stockholders. Stockholder action by written consent does not
require unanimous approval, and thus a group of stockholders may take an action
without consulting the rest of the stockholders. We recommend adoption of this
proposed amendment because we believe that all of our stockholders who are
entitled to vote on proposed significant corporate action should have the
opportunity to be afforded advance notice of the proposal and to participate in
determining if that action is appropriate through the normal meeting process. We
believe that in most cases it is inappropriate for a group of our stockholders,
even if a majority, to take corporate action without first notifying all our
other stockholders. Advance notice to all of our stockholders provides each of
them with the opportunity to express their views on the proposed action and to
persuade other stockholders and our management to support or oppose the action.
In addition, advance notice of a proposed action gives our management the
opportunity to review and perhaps respond to the proposal. We believe that
stockholder decisions based on notice and an opportunity to express differing
viewpoints are informed decisions.
We believe that the proposed amendment's special requirements for amending
the certificate of incorporation and bylaws would further protect us from
unsolicited takeover attempts. For example, the super-majority requirement for
amending the stockholder action by written consent would prevent one or a small
group of stockholders holding a bare majority from avoiding the requirement that
stockholders can only act at a properly called meeting
30
<PAGE> 32
by simply amending the certificate of incorporation and bylaws to delete the
provisions. This procedure is consistent with our view of a corporate democracy.
TEXT OF THE AMENDMENT
The actual text of the amendments to our certificate of incorporation that
we are asking you to approve is underlined and reads as follows:
TWELFTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected only at a duly called annual or special
meeting of the stockholders, and may not be effected by any consent in writing
by the stockholders.
EIGHTH: The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law, except that Article TWELFTH and this clause
of this Article EIGHTH may not be amended, altered, changed or repealed except
by affirmative vote of a least eighty percent (80%) of the shares entitled to
vote thereon.
CONFORMING BYLAW AMENDMENT
If the stockholders approve this proposed amendment, we will amend section
2.10 of our bylaws for consistency.
PROPOSAL NO. 3
AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION REGARDING REMOVAL OF DIRECTORS
INTRODUCTION
Our certificate of incorporation presently provides that stockholders
holding a majority of our outstanding stock may remove any director from our
board of directors for any reason. The remaining directors have the exclusive
power to fill vacancies on our board, whether the vacancy results from the
removal of a director or from another cause. We propose to change the
certificate of incorporation and our bylaws to provide that our stockholders may
only remove a director for cause and only with the vote of stockholders holding
80% of the outstanding voting stock. We also proposed to change the certificate
of incorporation and bylaws to state that the provisions concerning removal of
directors may only be amended with the vote of stockholders holding 80% of the
outstanding voting stock. Our board of directors has already approved this
proposed amendment, and we discuss below our reasons for initiating this change.
REASONS FOR THE AMENDMENT
We are proposing this change in our certificate of incorporation to help
protect our stockholders from a coercive or unwelcome attempt by third parties
to influence the management or direction of our company. These parties could
purchase significant amounts of our stock in order to use a controlling block of
stock to force us to enter into a specific transaction or to prevent us from
doing so. The parties might attempt to replace all or part of our board (which,
in most cases, would have been elected by the stockholders at the immediately
preceding annual meeting) rather than consult with our management
31
<PAGE> 33
about the proposed transaction. We recommend adoption of this proposed amendment
to prevent one or a small group of stockholders from removing members of our
board in order to control a specific business decision. We believe that our
company and our stockholders are better served if our board has the time and
information necessary for careful evaluation of any proposed transaction and all
of the alternatives. Therefore, we believe that permitting removal of our
directors only for cause and requiring that 80% of our stockholders vote in
favor of that removal would provide our board with the flexibility to give any
proposed transaction the required consideration. We believe that the proposed
amendment's special requirements for amending the certificate of incorporation
and bylaws would further protect us from unsolicited takeover attempts. For
example, the super-majority requirement for amending the removal of directors
provisions would prevent one or a small group of stockholders from avoiding the
requirement of obtaining an 80% stockholder vote to remove a director by simply
amending the certificate of incorporation and bylaws to delete the provisions.
This amendment would encourage persons seeking to acquire control of our company
to initiate arm's-length negotiations with our board and management. We believe
undertaking transactions in this manner best preserves continuity in our
management and business strategy.
TEXT OF THE AMENDMENTS
The actual text of the proposed amendments to the first sentence of Article
FIFTH of our certificate of incorporation and Article EIGHTH is underlined and
reads as follows:
A. Removal
Except as otherwise provided pursuant to the provisions of this Certificate
of Incorporation or a certificate of designations relating to the rights of the
holders of any class or series of Preferred Stock, voting separately by class or
series, to elect directors under specified circumstances, any director or
directors may be removed from office at any time, but only for cause and by the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding stock of the Corporation then entitled to vote generally for the
election of directors, given at a duly called annual or special meeting of
stockholders.
EIGHTH: The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law, except that the first sentence of Section A
of Article FIFTH and this clause of this Article EIGHTH may not be amended,
altered, changed or repealed except by affirmative vote of a least eighty
percent (80%) of the shares entitled to vote thereon.
OTHER EFFECTS OF PROPOSAL NO. 2 AND PROPOSAL NO. 3
Adoption of the proposed amendments to our certificate of incorporation may
have the effect of making it more difficult for a third party to take control of
our company, either by a tender offer for our stock or otherwise. Instead, these
proposals may encourage a third party who intends to take control of our company
to negotiate with our board of directors. We believe that this procedure is in
the best interest of you, the stockholders. However, eliminating stockholder
action by written consent could limit your ability to participate in
transactions favored by a majority of stockholders that might have occurred in
the absence of the requirement that it be considered at a duly called meeting of
stockholders. Both of the amendments could also increase the likelihood that our
32
<PAGE> 34
management and the board retain control of the company, if a majority of
stockholders desired a change in control of the company but were precluded by
these amendments from effecting such a change through a written consent or
removal of directors without cause. A stockholder who holds a large block of our
stock may find it more difficult to assume control of our company and remove our
management without our board's consent. The proposed amendments may also make it
more difficult for a third party to wage a proxy contest or complete a merger
with our company. In some cases, action by written consent might permit
stockholders to more rapidly take an action that our board of directors opposes
than would be possible if stockholders could only take that action at a meeting.
Also, a group of stockholders might find it easier to control our company's
business if they could replace members of the board with their own nominees.
We are not making these two proposals in response to any action by a
minority stockholder or group of stockholders to acquire greater influence in
the management of our business or gain board representation. We are not aware of
any effort of that type by any group of stockholders. Furthermore, we are not
making these proposals in response to any attempt to acquire control of us and
we are not aware of any attempt of this type. Other than these two proposals,
our board does not currently contemplate recommending to the stockholders for
approval any further measures that would affect the ability of third parties to
effect a change control of our company.
33
<PAGE> 35
GUILFORD PHARMACEUTICALS INC.
REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 1999
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of GUILFORD PHARMACEUTICALS INC. (the
"Corporation") hereby appoints Craig R. Smith, M.D., Andrew R. Jordan and Thomas
C. Seoh, or any of them, as attorneys and proxies of the undersigned, with full
power of substitution and with authority in each of them to act in the absence
of the other to vote and act for the undersigned at the Annual Meeting of
Stockholders of the Corporation to be held on Tuesday, May 18, 1999 at 10:00
a.m. (Eastern time) at the Center Club, 100 Light Street, 15th Floor, Baltimore,
Maryland, and at any adjournments thereof, in respect of all shares of the
Common Stock of the Corporation which the undersigned may be entitled to vote,
on the following matters:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. HOWEVER, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR ALL THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 TO AMEND THE
CORPORATION'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED.
The undersigned hereby acknowledges prior receipt of a copy of the Notice of
Annual Meeting of Stockholders and Proxy Statement dated April 13, 1999 and the
1998 Annual Report to Stockholders, and hereby revokes any proxy or proxies
heretofore given. This Proxy may be revoked at any time before it is voted by
delivering to the Secretary of the Corporation either a written revocation of
proxy or a duly executed proxy bearing a later date, or by appearing at the
Annual Meeting and voting in person.
(TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
<PAGE> 36
A [X] Please mark your
votes as in this
example
<TABLE>
<CAPTION>
FOR WITHHOLD AUTHORITY
all nominees to vote for the following
listed at right nominee(s):
<S> <C> <C> <C>
1. Election of [ ] [ ] NOMINEES: Craig R. Smith, M.D.
directors to Richard L. Casey
the Board of Solomon H. Snyder, M.D.
Directors W. Leigh Thompson, M.D., Ph.D.
Elizabeth M. Greetham
George L. Bunting, Jr.
Joseph Klein, III
FOR, except vote withheld from the following nominee(s): ___________________________________________
FOR AGAINST ABSTAIN
2. Approval of an amendment to the [ ] [ ] [ ]
Corporation's Amended and Restated
Certificate of Incorporation, as amended, to
require that official actions of stockholders
may only occur at duly called and held
meetings of stockholders and that this new
provision can only be altered by a vote of
at least eighty percent (80%) of the
outstanding stock.
FOR AGAINST ABSTAIN
3. Approval of an amendment to the [ ] [ ] [ ]
Corporation's Amended and Restated
Certificate of Incorporation, as
amended, to require that members of the
Board of Directors may only be removed
by stockholders for "cause" and by a
vote of holders of at least eighty percent
(80%) of the outstanding stock of the
Corporation and that this new provision
can only be altered by a vote of at least
eighty percent (80%) of the outstanding stock.
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
4. Ratification of KPMG LLP as [ ] [ ] [ ]
independent auditors for 1999.
5. In their discretion, on any other matters that may properly come before the
meeting, or any adjournment thereof, in accordance with the recommendations
of a majority of the Board of Directors.
</TABLE>
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE CORPORATION TO ADDITIONAL EXPENSE.
If you plan to attend the 1999 Annual Meeting, please mark this box [ ]
DATED:
- -------------------------------------------------------- -----------
SIGNATURE OF STOCKHOLDER OR AUTHORIZED REPRESENTATIVE
DATED:
- -------------------------------------------------------- -----------
SIGNATURE IF HELD JOINTLY
Note: Please date and sign exactly as name appears hereon. Each executor,
administrator, trustee, guardian, attorney-in-fact and other fiduciary should
sign and indicate his or her full name. In the case of stock ownership in the
name of two or more persons both persons should sign.
