<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
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 Section240.14a-11(c) or
Section240.14a-12
PHARMAPRINT 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 (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:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
SEPTEMBER 24, 1999
---------------------
To the Stockholders of PharmaPrint Inc:
On behalf of the Board of Directors, you are hereby notified of and
cordially invited to attend the Annual Meeting of Stockholders of PharmaPrint
Inc. (the "Company") to be held on Friday, September 24, 1999 at 9:00 a.m.,
local time, at the Hyatt Regency Hotel, 17900 Jamboree Road, Irvine, California,
92614. At the meeting you are being asked to:
1. Elect five (5) directors to hold office until the Company's next Annual
Meeting of Stockholders;
2. Approve the appointment of Arthur Andersen LLP as independent public
accountants for the Company for the fiscal year ending March 31, 2000;
and
3. Transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on July 28, 1999 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting. Only holders of Common Stock at the close of
business on the record date will be entitled to vote at the Annual Meeting. A
list of the stockholders entitled to vote at the Annual Meeting will be
available for inspection at the offices of the Company.
Whether or not you plan to attend the Annual Meeting in person, please sign,
date, and return your proxy in the enclosed envelope so that your shares may be
voted at the meeting. If the shares are held in more than one name, all holders
of record must sign. If you plan to attend the Annual Meeting, please notify me
so that identification can be prepared for you. Thank you for your interest and
consideration.
By Order of the Board of Directors,
[SIGNATURE]
James R. Wodach
SECRETARY
Irvine, California
August 27, 1999
<PAGE>
PHARMAPRINT INC.
------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 24, 1999
------------------------
This Proxy Statement is furnished in connection with the solicitation, on
behalf of the Board of Directors of PharmaPrint Inc., a Delaware corporation
("PharmaPrint" or the "Company"), of proxies for use at the Annual Meeting of
Stockholders of the Company ("Annual Meeting"), to be held at the Hyatt Regency
Hotel, 17900 Jamboree Road, Irvine California, 92614, on Friday, September 24,
1999 at 9:00 a.m., and at any and all adjournments thereof. This Proxy Statement
and the enclosed form of proxy are first being mailed on or about August 27,
1999. The mailing address of the principal executive offices of the Company is
2600 Michelson Drive, Suite 1600, Irvine, California 92612.
RECORD DATE AND VOTING
Only the stockholders of record at the close of business on July 28, 1999
will be entitled to vote at the meeting. At the close of business on July 28,
1999 there were 13,889,918 shares of the Company's Common Stock, par value $.001
("Common Stock") outstanding and entitled to vote, held by 97 stockholders of
record. No shares of the Company's preferred stock are outstanding. Each
stockholder is entitled to one vote for each share of Common Stock held as of
the record date.
If a choice as to matters coming before the Annual Meeting has been
specified by a stockholder in a Proxy, the shares will be voted accordingly. If
no choice has been specified, the shares will be voted FOR the nominees for
director and the proposals described in the Notice of Annual Meeting and in this
Proxy Statement. Abstentions and broker non-votes (i.e., the submission of a
Proxy by a broker or nominee indicating the lack of discretion or authority to
vote on the matter) are each included in the determination of the presence or
absence of a quorum for the transaction of business. An affirmative vote of the
majority of the votes cast at the meeting is required for the election of each
director and for the approval of the other proposals. Abstentions are counted in
all tabulations of the votes cast and will have the same effect as a vote
"against". Broker non-votes are not counted for purposes of determining whether
a proposal has been approved or not.
PLEASE MARK, DATE, SIGN, AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
POSTAGE-PAID, RETURN ENVELOPE NO LATER THAN SEPTEMBER 15, 1999 SO THAT, IF YOU
ARE UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
STOCKHOLDERS OR OMNIBUS PROXIES ARE URGED TO SIGN, DATE, AND PROMPTLY MAIL
THE CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING.
1
<PAGE>
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Bylaws provide for the election of all Directors at each
Annual Meeting and for each Director elected to serve until the next Annual
Meeting and until their successors shall have been duly elected and qualified or
until their earlier death, resignation or removal. The Board has selected five
nominees, all of whom are current directors of the Company. All nominees have
consented to being named herein and to serve if elected.
Shares represented by proxies solicited hereby will be voted FOR the
election of the Board's nominees unless authority to so vote is withheld. If any
or all of the nominees should become unable to or declines to serve as a
director prior to the Annual Meeting, the proxies may be voted for a substitute
nominee designated by the Board of Directors.
The following sets forth, for each of the nominees, their principal
occupation or employment during at least the last five years, and the period
during which they have served as a Director of the Company.
JOHN H. ABELES, MD, age 54, has been a director of the Company since August
1996. Dr. Abeles has served as President of MedVest, Inc., a venture capital and
consulting firm, since 1980. He serves as a director of Encore Medical Inc.,
I-Flow Corporation, DUSA Pharmaceuticals, Inc. and Oryx Technology, Inc.
ELLIOT P. FRIEDMAN, age 46, has been a director of the Company since
November 1994. Mr. Friedman has been the Chairman of the Board of Directors and
Chief Executive Officer since April 1997 and was the President and Chief
Executive Officer of the Company from October 1995 to April 1997. He was also
the Chief Financial Officer of the Company from November 1994 to December 1996.
From July 1990 to July 1994, Mr. Friedman was co-founder and Chief Executive
Officer of BioTek Solutions, a provider of systems used by pathologists to
conduct diagnosis of cancer through the use of monoclonal antibodies and DNA
probes.
ERINCH R. OZADA, age 39, has been a director of the Company since June 1998.
Since 1996, Mr. Ozada has been Chairman of the Board and Chief Executive Officer
of Archery Capital LLC, an investment management company. From 1989 to 1996, Mr.
Ozada was Vice President and from 1984 to 1989, was an associate with Goldman,
Sachs & Co.
PHILLIP G. TRAD, age 50, has been a director of the Company since November
1995 and Senior Vice President and General Counsel of the Company since November
1997. From 1988 until November 1997, Mr. Trad operated his own law practice in
California. Mr. Trad has more than 20 years of experience providing legal
representation to numerous companies including General Electric, RCA and NBC.
NATHAN F. TROUM, MD, age 79, has been a director of the Company since August
1996. Since 1946, Dr. Troum has engaged in private medical practice specializing
in general medicine and rheumatology.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives $2,500 for each meeting
attended in person and $1,750 for any telephone meeting of the Board of
Directors. In addition, pursuant to the Plan, each non-employee director of the
Company annually receives options to purchase 10,000 shares of Common Stock of
the Company, although Dr. Abeles and Mr. Ozada have agreed that in connection
with their initial appointment to the Board of Directors in August 1996 and June
1998, respectively, the Company would issue each of them options to purchase
75,000 shares of Common Stock, such options to vest over
2
<PAGE>
three years, in lieu of an additional grant of options to purchase 10,000 shares
pursuant to the Plan in years two and three of their service, if elected. The
options to purchase Common Stock are granted at the fair market value of the
Common Stock on the date of grant. The options shall vest quarterly over one
year and expire ten years from the date of grant. Additionally, each
non-employee director, including Dr. Abeles and Mr. Ozada, who serves on the
Audit or Compensation Committees of the Board of Directors, and who provides
significant services to the Company in such capacity, shall receive an
additional grant of options to purchase 20,000 shares of Common Stock. Such
options shall vest quarterly over one year and expire ten years from the date of
grant.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held six meetings during fiscal 1999. The Board of
Directors currently has an Audit Committee and a Compensation Committee and does
not have a nominating committee. The Audit Committee makes recommendations to
the Board of Directors as to the engagement or discharge of the independent
public accountants; reviews the scope and results of the Company's internal
auditing procedures; reviews the adequacy of the Company's system of accounting
controls; and directs and supervises investigations into matters within the
scope of its duties. Presently, the Audit Committee is composed of Dr. Abeles
and Messrs. Ozada and Friedman. The Audit Committee met one time during fiscal
1999. The Compensation Committee reviews and approves the compensation for the
Company's executive officers and administers the Plan. The Compensation
Committee held four meetings during fiscal 1999. Presently, this Committee is
composed of Mr. Trad and Mr. Ozada. Other than as noted above, all Directors
attended all Board Meetings held during the period in which such Director was a
Director, and all Committee Meetings of which such Director is a member.
BOARD RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by Proxy and voting at the
Annual Meeting (and the affirmative vote of the holders of a majority of the
shares necessary for a quorum at the Annual Meeting) is required for the
election of each Director.
The Board of Directors unanimously recommends a vote FOR all nominees to
serve as Directors of the Company until the next Annual Meeting and until their
successors have been duly elected and qualified or until their earlier death,
resignation or removal.
PROPOSAL 2
TO RATIFY THE SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors of the
Company has selected Arthur Andersen LLP as independent public accountants for
the Company for the fiscal year ending March 31, 2000. A partner of Arthur
Andersen LLP is expected to attend the Annual Meeting. He will have an
opportunity to make a statement if he desires and will be available to respond
to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION OF
THIS PROPOSAL.
3
<PAGE>
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no other
business that will be presented for consideration at the Annual Meeting.
However, if other proper matters are presented at the meeting, it is the
intention of the proxy holders named in the accompanying proxy to take such
action as shall be in accordance with their judgment on such matters. The quorum
requirement for convening the meeting is a majority of the outstanding shares of
Common Stock.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth information for services in
all capacities paid or accrued for the fiscal years ended March 31, 1999, 1998
and 1997 by the Company to its Chief Executive Officer and the four other
highest paid executive officers whose total annual compensation exceeded
$100,000 for such fiscal years (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------
COMPENSATION SECURITIES
FISCAL YEAR ---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION ENDED MARCH 31 SALARY ($) BONUS ($) OPTIONS
- -------------------------------------------------- ----------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Elliot P. Friedman................................ 1999 $ 235,000 $ 23,000(1) --
Chairman of the Board of Directors and Chief 1998 182,000 100,000(1) 150,000
Executive Officer 1997 171,000(2) 50,000(1) --
Robert J. Burgess................................. 1999 $ 235,000 $ 23,000(1) --
President and Chief Operating Officer (3) 1998 381,000(4) 100,000(1) 150,000
1997 163,000(5) 50,000(1) 712,708(6)
Phillip G. Trad................................... 1999 $ 200,000 $ 40,000(7) --
Senior Vice President and General Counsel 1998 56,000 -- 285,000(8)
1997 -- -- --
Joel F. Bresser, Ph.D. ........................... 1999 $ 215,000 $ 20,000(7) --
Senior Vice President of DSHEA Products 1998 80,000 -- --
1997 -- -- --
James R. Wodach................................... 1999 $ 151,000 $ 39,000(7) --
Senior Vice President and Chief Financial 1998 103,000 25,000(7) 45,000
Officer 1997 28,000 10,000(7) 55,000
</TABLE>
- ------------------------
(1) Amount represents payments made pursuant to a discretionary bonus.
(2) Pursuant to superseded employment agreements, Mr. Friedman received a
deferred salary payment of $40,000. Such payment was made upon completion of
the Company's initial public offering and is included in the salary amount
listed.
(3) Subsequent to the end of the fiscal year ended March 31, 1999, Mr. Burgess
resigned from his positions of President and Chief Operating Officer.
(4) Amount represents salary paid to Mr. Burgess in the amount of $94,000,
consulting services of $21,000 paid to Dimension Memory, Inc. ("Dimension")
and $266,000 that relates to an amended personal services agreement between
the Company and Dimension. Such agreement was deemed satisfied as of October
1, 1997. See footnote 5 to this table.
4
<PAGE>
(5) Represents amounts paid by the Company to Dimension which provided the
services of Robert J. Burgess as President and Chief Operating Officer
pursuant to a personal services agreement between the Company and Dimension.
In December 1996, the Company amended its agreement with Dimension. The
amended agreement provided for the accelerated payment by the Company of all
amounts due under the personal services agreement in exchange for Dimension
agreeing to provide additional services to the Company. As a result, the
Company paid Dimension $312,000. Of the $312,000 paid to Dimension, $35,000
relating to services provided by Dimension to the Company for the period
January 1997 through March 1997 are included, and $226,000 payable for
services to be provided for the remaining term of the Agreement are not
included. Amount also includes $50,000 of deferred payments pursuant to such
personal services agreement, which were paid upon consummation of the
Company's initial public offering.
(6) These options, which were granted to Dimension pursuant to a consulting
agreement between the Company and Dimension, were canceled in connection
with the issuance of 712,708 shares of Common Stock to Dimension for
services to be rendered by Dimension pursuant to the Personal Service
Agreement between the Company and Dimension.
(7) Amount represents payments made relating to development goals achieved, as
set forth in each individual's employment agreement.
(8) Includes options to purchase 60,000 shares granted for services performed as
a director.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants for the fiscal
year ended March 31, 1999 to the Named Executive Officers. No stock appreciation
rights ("SAR's") were awarded in fiscal 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------
<S> <C> <C> <C> <C> <C>
% OF TOTAL
OPTIONS GRANTED
TO EMPLOYEES GRANT DATE
OPTIONS IN FISCAL EXERCISE EXPIRATION PRESENT
NAME GRANTED (#) YEAR PRICE DATE VALUE (1)
- ---------------------------------------------- ------------- ------------------- ----------- ----------- -----------
Joel F. Bresser, Ph.D. ....................... 70,000 23.4% $ 9.56 June 2008 $ 395,000
</TABLE>
- ------------------------
(1) As suggested by the Commission's rules on executive compensation disclosure,
the Company used the Black-Scholes model of option valuation to determine
grant date present value. The Company does not advocate or necessarily agree
that the Black-Scholes model can properly determine the value of an option.
The present value calculation is based upon an option term of ten years and
assumes an interest rate of 4.87%, no dividend yield and volatility of 65%.
5
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table provides certain information concerning the exercise of
stock options for the fiscal year ended March 31, 1999 and shows the number of
shares covered by both exercisable and non-exercisable stock options held as of
the end of the Company's fiscal year ended March 31, 1999. Also shown are the
values for in-the-money options, which represent the positive difference between
the exercise price of such options and the fiscal year-end price of the
Company's Common Stock.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS
UNEXERCISED OPTIONS AT FISCAL
SHARES AT FISCAL YEAR END YEAR END (1)
ACQUIRED ON VALUE ---------------------------- ------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------------ ----------------- ------------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Elliot P. Friedman........................ -- -- 150,000 -- $ 450,000
Robert J. Burgess......................... -- -- 150,000 -- 450,000
Phillip G. Trad........................... -- -- 373,438 -- 1,433,742
James R. Wodach........................... -- -- 95,417 4,583 383,071
Joel F. Bresser, Ph.D..................... -- -- 70,000 -- --
<CAPTION>
NAME UNEXERCISABLE
- ------------------------------------------ -------------
<S> <C>
Elliot P. Friedman........................ --
Robert J. Burgess......................... --
Phillip G. Trad........................... --
James R. Wodach........................... 19,479
Joel F. Bresser, Ph.D..................... --
</TABLE>
- ------------------------
(1) At March 31, 1999, the closing price of the Company's Common Stock was
$9.00.
EMPLOYMENT AND PERSONAL SERVICE AGREEMENTS
The Company has entered into an employment agreement with Elliot P.
Friedman, effective September 1, 1997 expiring on August 30, 2000. The agreement
currently provides for an annual base salary of $235,000. If Mr. Friedman's
employment is terminated without cause or if the termination is by Mr. Friedman
on the basis of a breach by the Company, the Company is obligated to pay Mr.
Friedman the salary and benefits earned or accrued through the date of
termination, and within 30 days after termination, a lump sum of the present
value of the salary provided for by the agreement for the 12 months immediately
following termination. In the event of death or disability or if the agreement
is voluntarily terminated by Mr. Friedman, or terminated for cause by the
Company, the Company is obligated to pay only salary and benefits earned or
accrued through the date of termination.
The Company has entered into an employment agreement with Robert J. Burgess,
effective October 1, 1997, that has substantially similar terms as Mr.
Friedman's agreement described above, except that the agreement expires on
October 1, 2000. Subsequent to the end of the fiscal year ended March 31, 1999,
Mr. Burgess resigned as President and Chief Executive Officer. Prior to entering
into such employment agreement, the Company was party to a personal services
agreement with Dimension whereby, Dimension agreed to provide the services of
Mr. Burgess as an executive officer of the Company. Such agreement was deemed
satisfied as of October 1, 1997.
The Company has entered into employment agreements with each of Dr. Bresser
and Messrs. Trad and Wodach. The employment agreements provide for a base salary
of $215,000 for Dr. Bresser, and $215,000 and $175,000 for Messrs. Trad and
Wodach, respectively. The employment agreements also provide certain benefits
for each and include allowances for bonuses based upon development goals set
forth in each individual's agreement. The agreements have one year terms and
provide for, with regards to Mr. Trad, six months severance pay in certain cases
of termination, and with regards to Dr. Bresser and Mr. Wodach, three months
severance pay in certain cases of termination.
6
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has responsibility for PharmaPrint's executive
compensation policies and practices. The committee approves all elements of
compensation for corporate officers and administers the PharmaPrint Inc. 1995
Stock Option Plan, as Amended, under which stock awards are made to officers,
other executives, consultants, and other key employees. The committee regularly
reports on its activities to the Board of Directors. The committee is comprised
of Phillip G. Trad, a Director of the Company and the Company's Senior Vice
President and General Counsel, and Erinch R. Ozada, a non-employee Director.
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are based on the belief that
the interests of the executive should be directly aligned with those of the
stockholders. The programs are strongly oriented towards a pay-at-risk
philosophy that ties individual compensation to both the annual and long-term
development goals of the Company. The committee has established the following
principles to guide development of the Company's compensation programs and to
provide a framework for compensation decisions:
- provide a total compensation package that will attract the best talent to
PharmaPrint, motivate individuals to perform at their highest levels,
reward outstanding performance, and retain executives whose skills are
critical for building long-term stockholder value;
- establish incentives for senior management that are directly tied to both
specific and overall development goals of the Company; and
- implement long-term incentives to focus executives on managing from the
perspective of an owner with an equity stake in the business, and align
executive compensation with benefits realized by the Company's
stockholders.
COMPENSATION PROGRAMS AND PRACTICES
The committee determines salary ranges and incentive award opportunities for
executive officers. Many of these officers are parties to employment agreements
pursuant to which base compensation levels are fixed in amount. The committee
has the discretion to increase such rate of compensation, but not to reduce the
compensation paid.
SALARY AND INCENTIVES
Salaries are established by the committee for those executives who are not
parties to employment agreements based on an executive's scope of
responsibilities, level of experience, individual performance, and contribution
to the business. For the year ended March 31, 1999, executive officers of the
Company were entitled to incentive bonuses based upon specific development goals
of the Company. These incentive bonuses were developed by Elliot P. Friedman,
the Company's Chairman and Chief Executive Officer, and approved by the
committee.
STOCK OPTIONS
The committee believes that the interests of senior management must be
closely aligned with those of the stockholders. Long-term incentives in the form
of stock options provide a vehicle to reward executives only if there is an
increase in stockholder value. Stock options are granted to officers, other
executives, key consultants, and other selected employees whose contributions
and skills are important to the long-term success of the Company. Stock options
are also granted to newly hired executives and other employees as a
7
<PAGE>
method to attract the best talent to the Company. Options to purchase Common
Stock of the Company are granted at fair market value on the date of grant with
varying terms.
During the year ended March 31, 1999, the Company only granted stock options
to executives who were hired during the year. Several factors are considered in
determining the size of such stock option grants to the executive officers.
These factors included the expected individual accomplishments and achievements
of certain executives and the experience levels of those executive hired during
the year. No specific weight was given to any factor, nor was the number of
options granted determined on any formula basis.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
Mr. Elliot P. Friedman was the Company's Chairman and Chief Executive
Officer throughout the year. During the fiscal year ended March 31, 1999, Mr.
Friedman's total salary was $235,000.
In determining the compensation levels for Mr. Friedman, the Compensation
Committee considered the level of experience, dedication, and unique
qualifications Mr. Friedman has brought to the Company. The Compensation
Committee also analyzed the Company's goals for which Mr. Friedman has
responsibility and the degree to which Mr. Friedman contributed to reaching such
goals. Among the Company's accomplishments in the year ended March 31, 1999 were
the successful development and manufacturing of herbal products to satisfy the
Company's obligations under its agreements with American Home Products
Corporation, the development of additional business opportunities for the
Company and hiring and retention of key management personnel. The Compensation
Committee believes that Mr. Friedman's contribution to attaining these goals was
crucial. Mr. Friedman's salary is an amount that the Compensation Committee
believes fairly represents his additional contributions to the Company's success
and is less than the average base salary and cash bonus received by the most
highly compensated executives during the last fiscal year of each of five peer
group companies. Additionally, a performance bonus in the amount of $23,000 was
granted to Mr. Friedman because of his contribution to the Company's success.
DISCUSSION OF CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1 MILLION A
YEAR
Internal Revenue Code Section 162(m), enacted in 1993, precludes a public
corporation from taking a federal income tax deduction in 1994 or subsequent
years for compensation in excess of $1 million for its chief executive officer
or any of its four other highest-paid officers. Certain performance-based
compensation, however, is specifically exempt from the deduction limit.
This report is submitted by the Compensation Committee:
Phillip G. Trad
Erinch R. Ozada
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during Fiscal 1999 were Phillip G.
Trad and Erinch R. Ozada. Mr. Trad is the Company's Senior Vice President and
General Counsel.
8
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock with the cumulative total stockholder return of (i) the S&P
SmallCap 600 Index, and (ii) an index of five companies in the Company's peer
group (the "Peer Group Index"), assuming an investment of $100 on August 15,
1996 in each of the Common Stock of the Company, the companies comprising the
S&P SmallCap 600 Index and the companies comprising the Peer Group. The
companies in the Peer Group are General Nutrition Companies, Inc., Hauser, Inc.,
Natrol, Inc., Rexall Sundown, Inc. and TwinLab Corporation.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL STOCKHOLDER RETURNS
<S> <C> <C> <C> <C>
15-Aug-96 Mar-97 Mar-98 Mar-99
PHARMAPRINT INC 100 83.74 240.00 180.00
S&P SMALL CAP 600 INDEX 100 117.37 173.33 140.17
PEER GROUP 100 109.46 249.20 101.44
PERIODS ENDING
</TABLE>
<TABLE>
<CAPTION>
BASE YEARS ENDING
PERIOD -------------------------------
COMPANY NAME/INDEX 8/15/96 3/97 3/98 3/99
- ---------------------------------------------------------------------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C>
PHARMAPRINT INC............................................................. 100 83.74 240.00 180.00
S&P SMALL CAP 600 INDEX..................................................... 100 117.37 173.33 140.17
PEER GROUP.................................................................. 100 109.46 249.20 101.44
</TABLE>
CERTAIN RELATIONSHIPS
As of March 31, 1999, an executive officer and a former executive officer of
the Company had outstanding indebtedness to the Company in amounts exceeding
$60,000.
On each of May 21, 1999, June 15, 1998, November 13, 1998 and March 24, 1999
the Company lent the principal amounts of $25,000, $25,000, $20,000 and
$12,925.50, respectively, to Dr. Paul Johnston, Senior Vice President of
Development of the Company. All of the loans bear interest at a rate of 9% per
annum. As of March 31, 1999, the loans had an aggregate outstanding balance of
approximately $87,448 in principal and accrued interest, which represents the
largest aggregate amount of indebtedness outstanding during the Company's fiscal
year ended March 31, 1999.
On December 15, 1997, the Company lent the principal amount of $65,000 to
Dr. Michael Tempesta, then Senior Vice President of Research of the Company. The
loan bears interest at a rate of 9% per annum. As of March 31, 1999, the loan
had an outstanding balance of approximately $75,195 in principal and accrued
interest, which represents the largest aggregate amount of indebtedness
outstanding during the Company's fiscal year ended March 31, 1999.
There are no family relationships among the executive officers or directors
of the Company.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of June 30, 1999,
with respect to beneficial ownership of shares of Company Common Stock by any
person who is known by the Company to be the beneficial owner of more than 5% of
Company Common Stock, by directors individually, and by directors and executive
officers of the Company as a group. The information presented is based upon
information furnished to the Company by such beneficial owners.
<TABLE>
<CAPTION>
PHARMAPRINT COMMON STOCK
-------------------------------------
<S> <C> <C>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS
- ------------------------------------------------------------------------------ ---------------------- -------------
Tasneem A. Khwaja, Ph.D....................................................... 2,462,867(3) 17.7%
Elliot P. Friedman............................................................ 1,690,448(4) 12.0%
Robert J. Burgess............................................................. 1,481,987(5) 10.6%
T. Rowe Price Associates, Inc.(6)............................................. 1,098,900(7) 7.9%
JadiJo, Inc.(8)............................................................... 65,274(7)(9) *
D-RAM Industries Pty Ltd.(10)................................................. 200,000(7)(9) 1.4%
Dimension Memory, Inc.(11).................................................... 557,708(7)(9) 4.0%
Phillip G. Trad............................................................... 373,438(12) 2.6%
John H. Abeles, M.D.(13)...................................................... 95,000(14) *
Erinch R. Ozada(15)........................................................... 120,500(16) *
Nathan F. Troum, M.D.(17)..................................................... 27,500(18) *
All directors and executive officers as a group (12 people)................... 6,562,948(19) 47.3%
</TABLE>
The Company had 97 holders of record of its Common Stock as of July 28, 1999.
- ------------------------
* Less than one percent (1%).
(1) The address of each person listed in this table, except as otherwise noted,
is c/o PharmaPrint Inc., 2600 Michelson Drive, Suite 1600, Irvine,
California 92612.
(2) As of June 30, 1999, the Company had 13,889,918 shares of Common Stock
issued and outstanding. Includes the beneficial ownership of shares that
the person has a right to acquire within sixty (60) days of June 30, 1999.
(3) Includes call options (obligations to sell) granted by Dr. Khwaja in the
amount of 200,000, 200,000, and 30,000 to Elliot P. Friedman, Robert J.
Burgess, and Dr. Khwaja's son, respectively.
(4) Includes options to purchase 150,000 shares of Common Stock. Does not
include 200,000 call options (options to purchase) granted to Mr. Friedman
by Dr. Khwaja.
(5) Consists of 509,000, 65,274, 200,000 and 557,713 shares of Common Stock
owned of record by Mr. Burgess, JadiJo, Inc., D-RAM Industries Pty Ltd.,
and Dimension, respectively, also shown separately in this table. Also,
includes options to purchase 150,000 shares of Common Stock. Does not
include 200,000 call options (options to purchase) granted to Mr. Burgess
by Dr. Khwaja.
(6) The address of T. Rowe Price Associates, Inc. is 100 East Pratt Street,
Baltimore, Maryland 21202.
10
<PAGE>
(7) The number of shares is based upon filings made as of March 31, 1999.
(8) The address of JadiJo, Inc. is 32, EDIF, J.J. Vallarino, 1st Floor, Office
3, Panama City, Panama.
(9) These shares are also included in the shares shown as beneficially owned by
Robert J. Burgess. These entities are controlled by various of the children
and/or sons-in-law of Mr. Burgess: James R. Burgess, Dione Neilson, Jodi
Perkins, Jon Neilson and Brett Perkins
(10) The address of D-RAM Industries Pty Ltd. is 98 Edinborough Street, Benowa
Waters, Gold Coast, 4217, Queensland, Australia.
(11) The address of Dimension Memory, Inc. is 17 Baycove Lane, Newport Beach,
California 92661.
(12) Consists solely of options to purchase 373,438 shares of Common Stock.
(13) The address of Dr. Abeles is c/o MedVest, Inc., 2365 N.W. 41st Street,
Boca Raton, Florida 33431.
(14) Consists solely of options to purchase 95,000 shares of Common Stock.
(15) The address of Mr. Ozada is c/o Archery Capital LLC, 237 Park Avenue,
Suite 801, New York, New York 10017.
(16) Includes options to purchase 37,500 shares of Common Stock.
(17) The address of Dr. Troum is 3878 43rd Street, San Diego, California 92105.
(18) Consists solely of options to purchase 27,500 shares of Common Stock.
(19) Includes beneficial ownership of Company Common Stock as follows: Tasneem
A. Khwaja, Ph.D.-- 2,462,867 shares; Elliot P. Friedman--1,540,448 shares;
Robert J. Burgess--1,331,978 shares; and Erinch R. Ozada--83,000 shares.
Also includes options held by directors and executive officers of the
Company to purchase the following number of shares of Common Stock: John
H. Abeles, M.D.-- 95,000 shares; Joel F. Bresser, Ph.D.--70,000 shares;
Robert Burgess--150,000 shares; Elliot P. Friedman--150,000 shares;
Kenneth Gorelick, M.D.--100,000 shares; Paul Johnston, Ph.D.--50,000
shares; Erinch R. Ozada--37,500 shares; Phillip G. Trad--373,438 shares;
Nathan F. Troum--27,500 shares; and James R. Wodach--97,708 shares.
11
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Executive Officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ------------------------------------------------------------
<S> <C> <C>
Elliot P. Friedman(1) Chairman of the Board of Directors and Chief Executive
46 Officer
Joel F. Bresser, Ph.D. 44 Senior Vice President of DSHEA Products
Paul Johnston, Ph.D. 49 Senior Vice President of Development
Phillip G. Trad(1) 50 Senior Vice President and General Counsel
James R. Wodach 37 Senior Vice President, Chief Financial Officer and Secretary
</TABLE>
- ------------------------
(1) Member of the Board of Directors of the Company
ELLIOT P. FRIEDMAN joined the Company as Chief Financial Officer and a
Director in November 1994 and became President and Chief Financial Officer in
October 1995 and Chairman of the Board of Directors in April 1997. From July
1990 to July 1994, Mr. Friedman was co-founder and Chief Executive Officer of
Biotek Solutions, a provider of monoclonal antibody and DNA-based systems used
by pathologists for the diagnosis of cancer. Mr. Friedman received a Science of
Management degree from the Massachusetts Institute of Technology.
JOEL F. BRESSER, Ph.D. joined the Company as Senior Vice President of DSHEA
Products in October 1997. From October 1995 to October 1997, Dr. Bresser was the
founder and owner of Intellihance, Inc., a consulting company that provides
strategic, marketing and technical services to healthcare and biotechnology
companies. From January 1989 to October 1995, Dr. Bresser served in various
executive capacities at Aprogenex, Inc. including President and Chief Executive
Officer from April 1992 to October 1995. Dr. Bresser received a Ph.D. in
Molecular Biology from Rice University.
PAUL JOHNSTON, Ph.D. joined the Company as Vice President of Development in
March 1997. From February 1995 to March 1997, Dr. Johnston was an independent
consultant to a number of biotechnology start-up companies. From July 1993 to
February 1995, Dr. Johnston served as the Vice President of the Product
Development Division of NeXstar Pharmaceuticals, Inc. from September 1990 to
July 1993, he was Senior Director of Pharmaceutical Development of Amylin
Pharmaceutical, Inc. and prior to that held senior positions at Molecular
Devices Corporation and Genentech Incorporated. Dr. Johnston received a Ph.D. in
Biochemistry from Brandeis University.
PHILLIP G. TRAD, has been a director of the Company since November 1995 and
Senior Vice President and General Counsel of the Company since November 1997.
From 1988 until November 1997, Mr. Trad operated his own law practice in
California. Mr. Trad has more than 20 years of experience providing legal
representation to numerous companies including General Electric, RCA and NBC.
JAMES R. WODACH, CPA joined the Company as Senior Vice President and Chief
Financial Officer in December 1996. From April 1996 to December 1996, Mr. Wodach
was Director of Finance for Paragon Biomedical, Inc. From October 1995 to April
1996, he was an independent consultant. From April 1994 to October 1995, Mr.
Wodach was Senior Vice President of Finance, from April 1993 to April 1994
Senior Vice President and Chief Financial Officer, from July 1992 to April 1993
Vice President of Finance, and from November 1989 to July 1992, Controller for
Regency Health Services, Inc.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors and executive officers of the Company and persons who hold more than
10% of a registered class of the Company's equity securities ("Reporting
Persons") to file with the Securities and Exchange Commission (the
12
<PAGE>
"Commission") initial reports of ownership and reports of changes in ownership
of equity securities of the Company. Reporting Persons are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations that
no other reports were required during the year ended March 31, 1999, all Section
16(a) filing requirements applicable to the Reporting Persons were complied with
except that Dr. Khwaja filed late one report covering one transaction and Mr.
Ozada filed late two reports each covering one transaction.
GENERAL INFORMATION
REVOCABILITY OF PROXIES
Any proxy solicited hereby by the person giving it at any time before it has
been exercised at the Annual Meeting may be revoked by giving notice of
revocation to the Secretary of the Company in writing, submitting a later-dated
proxy or by voting the shares in person at the 1999 Annual Meeting. Holders
whose shares are in street name should consult with their brokers concerning
procedures for revocation. Subject to such revocation, all shares represented by
a properly executed proxy will be voted as directed by the holder on the proxy
card. If no choice is specified, proxies will be voted FOR (i) election of the
named directors to the Board of Directors, and (ii) all such other proposals
listed in this Proxy Statement.
SOLICITATION COSTS
The Company will pay the cost of preparing and mailing this proxy statement
and other costs of the proxy solicitation made by the Company's Board of
Directors. Certain of the Company's officers and employees may solicit the
submission of proxies authorizing the voting of shares in accordance with the
Board of Directors' recommendations, but no additional reimbursement will be
paid by the Company for the solicitation of those proxies. Such solicitation may
by made by personal interview, telephone, and telegram. Arrangements have also
been made with brokerage firms and others for the forwarding of proxy
solicitation materials to the beneficial owners of Common Stock, and the Company
will reimburse them for reasonable out-of-pocket expenses incurred in connection
therewith.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 2000 ANNUAL MEETING
The Company's 2000 Annual Meeting is anticipated to occur on or about
September 8, 2000. A stockholder desiring to submit a proposal for inclusion in
the Company's Proxy Statement for the 2000 Annual Meeting must deliver the
proposal so that it is received by the Company no later than April 1, 2000. The
Company requests that all such proposals be addressed to Corporate Secretary,
PharmaPrint Inc., 2600 Michelson Drive, Suite 1600, Irvine, California 92612,
and mailed certified mail, return receipt requested.
By order of the Board of Directors
[SIGNATURE]
James R. Wodach
SECRETARY
Irvine, California
August 27, 1999
THE COMPANY HAS MAILED A COPY OF ITS 1999 ANNUAL REPORT TO EACH STOCKHOLDER
ENTITLED TO VOTE AT THE ANNUAL MEETING. INCLUDED IN THE 1999 ANNUAL REPORT ARE
THE COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1999. THE
COMPANY'S 1999 ANNUAL REPORT DOES NOT FORM ANY PART OF THE MATERIAL FOR
SOLICITATION OF PROXIES.
13
<PAGE>
PHARMAPRINT INC.
FOR THE HOLDERS OF COMMON STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS
1999 ANNUAL MEETING OF THE STOCKHOLDERS--SEPTEMBER 24, 1999
The undersigned stockholder of PHARMAPRINT INC. (the "Company"), revoking
all previous proxies, hereby appoints Elliot P. Friedman and James R. Wodach and
each of them acting individually, as proxies of the undersigned, and authorizes
either or both of them to vote all shares of the Company's Common Stock held of
record by the undersigned as of the close of business on July 28, 1999 at the
1999 Annual Meeting of Stockholders of the Company to be held on Friday,
September 24, 1999, at 9:00 a.m., local time, at the Hyatt Regency Hotel, 17900
Jamboree Road, Irvine, California, 92614, and at any adjournment(s) or
postponement(s) thereof (the "Annual Meeting"), according to the votes the
undersigned would be entitled to cast if then personally present.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL 1, "FOR" THE ITEM
LISTED IN PROPOSAL 2, AND "FOR" THE THIRD MATTER SET FORTH BELOW.
PROPOSAL 1
<TABLE>
<S><C> <C>
1. / / FOR nominees for director named below.
/ / WITHHOLD AUTHORITY to vote.
/ / FOR nominees for director named below, except WITHHOLD AUTHORITY to vote for the nominee(s) whose
name(s) is(are) lined through.
Nominees: JOHN H. ABELES, M.D., ELLIOT P. FRIEDMAN, ERINCH R. OZADA, PHILLIP G. TRAD AND NATHAN F. TROUM, M.D., will be
considered nominees for election at the Annual Meeting.
PROPOSAL 2
2. The ratification of Arthur Andersen LLP as the Company's independent accountants for the fiscal year ending March 31,
2000.
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
<PAGE>
<TABLE>
<S><C> <C>
3. The authority of the proxies, in their discretion, to vote on such other business as may properly come before the Annual
Meeting, or any adjournment(s) thereof.
/ / FOR / / ABSTAIN
</TABLE>
<PAGE>
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF THE ANNUAL MEETING
AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The undersigned also
hereby ratifies all that the said proxies do by virtue hereof and hereby
confirms that this proxy shall be valid and may be voted regardless of whether
the stockholder's name is signed as set forth below or a seal affixed or the
description, authority or capacity of the person signing is given or any other
defect of signature exists.
DATED: ______________________, 1999
_____________________________(SEAL)
(Stockholder's Signature)
_____________________________(SEAL)
(Stockholder's Signature)
Please sign this proxy exactly as
the name appears in the address
above. If shares are registered in
more than one name, all owners
should sign. If signing in a
fiduciary or representative
capacity, such as attorney-in-fact,
executor, administrator, trustee or
guardian, please give full title
and attach evidence of authority.
If signer is a corporation, please
sign the full corporate name and an
authorized officer should sign such
officer's name and title and affix
the corporate seal, if any.
