SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INTERCARDIA, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
INTERCARDIA, INC.
3200 EAST HIGHWAY 54
CAPE FEAR BUILDING, SUITE 300
RESEARCH TRIANGLE PARK, NORTH CAROLINA 27709
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 19, 1997
TO THE STOCKHOLDERS OF
INTERCARDIA, INC.:
The Annual Meeting of Stockholders of Intercardia, Inc. (the "Company")
will be held at the North Carolina Biotechnology Center, 15 Alexander Drive,
Research Triangle Park, North Carolina, on Wednesday, February 19, 1997 at 9:00
a.m., for the following purposes:
1. To elect a board of five directors;
2. To approve amendments to the Company's 1994 Stock Option Plan to, among
other things, increase the number of shares of Common Stock reserved for
issuance thereunder from 1,000,000 shares to 1,500,000 shares;
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the independent
auditors of the Company for the fiscal year ending September 30, 1997;
and
4. To act upon such other matters as may properly come before the meeting
or any adjournment thereof.
The foregoing items are more fully described in the attached Proxy Statement.
The Board of Directors has fixed the close of business on January 10, 1997,
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting or any adjournment or adjournments thereof. All such
stockholders are cordially invited to attend the meeting in person. However, to
assure your representation at the meeting, you are urged to mark, sign, date and
return the enclosed proxy card as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person, even if such stockholder returned a proxy.
The Company's Proxy Statement and proxy is submitted herewith along with
the Company's Annual Report to Stockholders for the fiscal year ended September
30, 1996.
IMPORTANT -- YOUR PROXY IS ENCLOSED
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, STOCKHOLDERS ARE URGED TO
EXECUTE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors
RICHARD W. REICHOW,
SENIOR VICE PRESIDENT, CHIEF
FINANCIAL OFFICER, TREASURER AND
SECRETARY
Research Triangle Park,
North Carolina
January 21, 1997
<PAGE>
INTERCARDIA, INC.
3200 EAST HIGHWAY 54
CAPE FEAR BUILDING, SUITE 300
RESEARCH TRIANGLE PARK, NORTH CAROLINA 27709
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 19, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited by the Board of Directors of Intercardia,
Inc., a Delaware corporation (the "Company"), for use at the Company's Annual
Meeting of Stockholders to be held at the North Carolina Biotechnology Center,
15 Alexander Drive, Research Triangle Park, North Carolina, at 9:00 a.m. on
Wednesday, February 19, 1997, and any adjournments thereof (the "Meeting"). The
cost of soliciting proxies will be borne by the Company. In addition to
solicitation of proxies by mail, employees of the Company, without extra
remuneration, may solicit proxies personally or by telephone. The Company will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy materials to
beneficial owners and seeking instruction with respect thereto. The mailing
address of the principal executive offices of the Company is P.O. Box 14287,
Research Triangle Park, North Carolina 27709. Copies of this Proxy Statement and
accompanying proxy card were mailed to stockholders on or about January 21,
1997.
REVOCABILITY OF PROXIES
Any stockholder giving a proxy has the power to revoke it at any time
before it is voted by giving a later proxy or written notice to the Company
(Attention: Richard W. Reichow, Corporate Secretary), or by attending the
Meeting and voting in person.
VOTING
When the enclosed proxy is properly executed and returned (and not
subsequently properly revoked), the shares it represents will be voted in
accordance with the directions indicated thereon, or, if no direction is
indicated thereon, it will be voted: (i) FOR the election of the five nominees
for director identified below; (ii) FOR the approval of amendments to the 1994
Stock Option Plan to, among other things, increase the number of shares of
Common Stock reserved for issuance thereunder from 1,000,000 shares to 1,500,000
shares; (iii) FOR ratification of the appointment of Coopers & Lybrand L.L.P.,
Raleigh, North Carolina, as independent auditors of the Company for the fiscal
year ending September 30, 1997; and (iv) in the discretion of the proxies with
respect to any other matters properly brought before the stockholders at the
Meeting.
RECORD DATE
Only the holders of record of the Company's Common Stock at the close of
business on the record date, January 10, 1997 (the "Record Date"), are entitled
to notice of and to vote at the Meeting. On the Record Date, 6,741,603 shares of
Common Stock were outstanding. Stockholders will be entitled to one vote for
each share of Common Stock held on the Record Date.
<PAGE>
PROPOSAL NO. 1 -- ELECTIONS OF DIRECTORS
NOMINEES
The Company's By-Laws provide that the number of directors constituting the
Board of Directors shall be no less than one nor greater then seven. The number
of directors currently authorized is five. Therefore, that number of directors
are to be elected to serve for one year, until the election and qualification of
their successors, and it is intended that proxies, not limited to the contrary,
will be voted FOR all of the nominees named below. If any nominee is unable or
declines to serve as a director at the time of the Meeting, the individuals
named in the enclosed proxy may exercise their discretion to vote for any
substitute proposed by the Board of Directors. It is not anticipated that any
nominee listed below will be unable or will decline to serve as a director. None
of the nominees is related by blood, marriage or adoption to any other nominee
or any executive officer of the Company.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE DIRECTOR SINCE
<S> <C> <C>
Clayton I. Duncan.................................................... 47 1995
Glenn L. Cooper, M.D................................................. 44 1994
Roger W. Brimblecombe, Ph.D.......................................... 67 1995
Joseph J. Ruvane, Jr................................................. 71 1995
David B. Sharrock.................................................... 60 1995
</TABLE>
CLAYTON I. DUNCAN has been President, Chief Executive Officer and a
director of the Company since January 1995. From 1989 until December 1993, Mr.
Duncan was President and Chief Executive Officer of Sphinx Pharmaceuticals
Corporation ("Sphinx"), a biopharmaceutical company which was acquired by Eli
Lilly and Company ("Lilly") in September 1994. From December 1993 until
September 1994, he served as an independent consultant to Sphinx with regard to
the sale of Sphinx to Lilly. From 1987 to 1989, Mr. Duncan was a General Partner
of Intersouth Partners, a venture capital firm. From 1979 to 1987, he was an
executive with Carolina Securities Corporation, a regional investment banking
firm, serving as Executive Vice President and a director from 1984 to 1987. Mr.
Duncan was founder and Chairman of the Board of CRX Medical, Inc., a medical
products company that conducted research and development in wound management,
ophthalmic disorders and interventional radiology. Mr. Duncan is also a director
of Transcell Technologies, Inc. ("Transcell"), a privately held majority-owned
subsidiary of Interneuron Pharmaceuticals, Inc. ("Interneuron"), which owned
approximately 60% of the Company's outstanding Common Stock as of the Record
Date. Mr. Duncan received an M.B.A. from the University of North Carolina at
Chapel Hill.
GLENN L. COOPER, M.D. has been Chairman of the Board of Directors of the
Company since March 1994. He was President and Chief Executive Officer of the
Company from March 1994 to January 1995. Dr. Cooper has been President, Chief
Executive Officer and a director of Interneuron since May 1993. He was President
and Chief Executive officer of Progenitor, Inc. ("Progenitor"), a privately held
majority-owned subsidiary of Interneuron, from September 1992 to June 1994. Dr.
Cooper was Executive Vice President and Chief Operating Officer of Sphinx from
1990 to 1992. Prior to that time and since 1985, he was associated with Lilly,
from 1987 to 1990 as Director, Clinical Research, Europe, of Lilly Research
Center Limited, and from 1986 to 1987 as International Medical Advisor,
Regulatory Affairs, Chemotherapy Division at Lilly Research Laboratories. Dr.
Cooper is a director of Transcell, Progenitor and InterNutria, Inc., a privately
held majority-owned subsidiary of Interneuron. Dr. Cooper received his M.D. from
Tufts University School of Medicine.
ROGER W. BRIMBLECOMBE, PH.D. has been a director of the Company since
October 1995. Since 1990, he has been an independent consultant in the field of
pharmaceutical research and development. From 1987 to 1990, he was employed by
SmithKline & French serving as Vice-President, Collaborative Research and
Development (Worldwide) between 1987 and 1988 and as Vice-President,
Collaborative Research and Development and Compound Acquisition (Worldwide)
between 1988 and 1990. From 1982 to 1986, Dr. Brimblecombe served as Vice
President, Research and Development of SmithKline & French. He received his
Ph.D. and D.Sc. from the University of Bristol in England. Dr. Brimblecombe
currently serves on the Board of Directors of Vertex Pharmaceuticals
Incorporated and is Chairman of the Board of Vanguard Medica, Ltd.
JOSEPH J. RUVANE, JR. has been director of the Company since May 1995. Mr.
Ruvane was a director of Sphinx from 1989 to 1994, serving as its Chairman of
the Board from 1990 to 1994. From 1988 to 1990, Mr. Ruvane served as Vice
Chairman of the Board of Directors of Glaxo Inc. ("Glaxo"), a multinational
pharmaceutical company. From 1981 to 1988 he served as President and Chief
Executive Officer of Glaxo. Mr. Ruvane also serves as Chairman of the Board of
Systemix, Inc., a biotechnology company, and as a director of Connective
Therapeutics, Inc., a biotechnology company.
2
<PAGE>
DAVID B. SHARROCK has been a director of the Company since October 1995.
Mr. Sharrock was associated with Marion Merrell Dow Inc., a multinational
pharmaceutical company, and its predecessor companies for over 35 years until
his retirement in December 1993. Most recently, since December 1989, he served
as Executive Vice President, Chief Operating Officer and a director, and in
1988, he was named President and Chief Operating Officer of Merrell Dow
Pharmaceutical Inc. Mr. Sharrock is also a director of Interneuron, Progenitor,
Unitog Co. and Cincinnati Bell Inc.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The business of the Company is under the general management of the Board of
Directors as provided by the laws of Delaware and the By-Laws of the Company.
During the fiscal year ended September 30, 1996, the Board of Directors held
four formal meetings, excluding actions by unanimous written consent during the
fiscal year. Each member of the Board attended all of the fiscal 1996 meetings
of Board of Directors and Board committees of which he was a member.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Board has no Nominating Committee. The Audit
Committee currently consists of Mr. Ruvane, Mr. Sharrock and Dr. Brimblecombe.
The Audit Committee held its first meeting on December 11, 1996. The Audit
Committee reviews the results and scope of the audit and other services provided
by the Company's independent public accountants. The Compensation Committee
currently consists of Dr. Cooper, Dr. Brimblecombe and Mr. Ruvane. During 1996,
the Compensation Committee held three formal meetings, excluding actions by
unanimous written consent. The Compensation Committee makes recommendations to
the Board of Directors regarding salaries and incentive compensation for
officers of the Company, and determines the amount and type of equity incentives
granted to participants in the Company's 1994 Stock Option Plan.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted at the Meeting shall be
elected as directors of the Company. Votes withheld from any director will be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, but have no other effect under Delaware law. While
there is no definitive statutory or case law authority in Delaware as to the
proper treatment of abstentions in the election of directors, the Company
believes that abstentions should be counted for purposes of determining whether
a quorum is present at the Meeting. In the absence of controlling precedent to
the contrary, the Company intends to treat abstentions with respect to the
election of directors in this manner. However, because directors are elected by
a plurality vote, abstentions in the election of directors have no effect once a
quorum exists. In a 1988 case, BERLIN V. EMERALD PARTNERS, the Delaware Supreme
Court held that broker non-votes may be counted as present or represented for
purposes of determining the presence or absence of a quorum for the transaction
of business. Accordingly, the Company intends to treat broker non-votes with
respect to the election of directors in this manner.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2 -- APPROVAL OF AMENDMENTS
TO THE 1994 STOCK OPTION PLAN
The Company's 1994 Stock Option Plan (the "Option Plan") was adopted and
approved by the Board of Directors and by the stockholders of the Company in
October 1994. A total of 1,500,000 shares of Common Stock have been reserved for
issuance under the Option Plan, 500,000 of which are subject to stockholder
approval at the Meeting. As of December 31, 1996, options to purchase 6,000
shares had been exercised under the Option Plan, options for 1,116,298 shares
were outstanding thereunder at a weighted average exercise price of $8.40 per
share. Therefore, no additional Option Plan shares are available without
stockholder approval.
The Option Plan provides for the grant of "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), solely to employees, and nonstatutory stock options to employees,
officers and directors of, and consultants or advisors to, the Company. As of
December 31, 1996, approximately 20 employees, officers and directors of the
Company were eligible to receive grants under the Option Plan. The Option Plan
is administered by the Compensation Committee of the Board of Directors. Subject
to the restrictions of the Option Plan, the Compensation Committee determines
who is granted options, the terms of options granted, including exercise price,
the number of shares subject to the option and the option's exercisability. The
current members of the Compensation Committee are Dr. Cooper, Dr. Brimblecombe
and Mr. Ruvane.
3
<PAGE>
The exercise price of options granted under the Option Plan is determined
on the date of grant, and in the case of incentive stock options, must be at
least 100% of the fair market value per share at the time of grant. The exercise
price of any option granted to an optionee who owns stock possessing more than
10% of the voting power of the Company's outstanding capital stock must equal at
least 110% of the fair market value of the Common Stock on the date of grant.
Payment of the exercise price may be made by delivery of cash or a check to the
order of the Company, or by any other means determined by the Board of
Directors.
Options granted to employees under the Option Plan generally become
exercisable in increments, based on the optionee's continued employment with the
Company, over a period of up to seven years. The term of an incentive stock
option may not exceed 10 years. The form of option agreement generally provides
that options granted under the Option Plan, whether incentive stock options or
nonstatutory options, expire 10 years from the date of grant. Incentive stock
options granted pursuant to the Option Plan are not transferable by the
optionee, other than by will or the laws of descent and distribution, and are
exercisable during the optionee's lifetime only by the optionee. Nonstatutory
options granted under the Option Plan are transferable to the optionee's family
members. All outstanding options under the Option Plan become fully exercisable
for a period of 60 days following the occurrence of any of the following events:
(i) a tender offer or exchange offer (other than by the Company or any employee
benefit plan of the Company); (ii) the acquisition by any person or group, as
defined under Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (other than the Company or any employee benefit
plan of the Company) of beneficial ownership of stock possessing 30% or more of
the voting power of the Company's outstanding capital stock; (iii) the approval
of an agreement providing for the merger or consolidation of the Company with
another corporation where the stockholders of the Company, after the merger or
consolidation, will own stock possessing less than 80% of the voting power of
the corporation issuing cash or securities in the merger or consolidation; (iv)
the approval of an agreement providing for the sale or other disposition of all
or substantially all of the Company's assets; and (v) the date during any period
of two consecutive years when individuals who at the beginning of such period
constitute the Board of Directors cease for any reason to constitute a majority
thereof, unless the election or nomination of each new director was approved by
at least two-thirds of the directors still in office who were directors at the
beginning of such period. In the event of a merger of the Company with or into
another corporation, the Company shall request the successor corporation to
assume all options outstanding under the Option Plan. If such successor
corporation fails or refuses to assume the options or to issue substantially
equivalent options, then the outstanding options under the Option Plan shall
accelerate and become fully exercisable.
The Option Plan provides for the grant of nonstatutory options to
non-employee directors of the Company pursuant to a non-discretionary, automatic
grant mechanism (the "Automatic Grant Program"), which was amended by the Board
in June 1996 subject to ratification by the stockholders at the Meeting (the
"Automatic Grant Program Amendments"). Upon the effectiveness of the Company's
initial public offering in February 1996, each non-employee director of the
Company not the beneficial owner of 10% or more of the voting power of the
Company's outstanding capital stock ("Eligible Directors"), consisting at that
time of Dr. Brimblecombe, Mr. Ruvane and Mr. Sharrock, received an option (a
"Director Option") to purchase 10,000 shares of Common Stock. Future Eligible
Directors will be granted Director Options to purchase 5,000 shares of Common
Stock on the date each such person is first elected or appointed a director of
the Company. Each Eligible Director shall thereafter be granted automatically
each year (except in the year his or her Director Option is granted) an option
to purchase 3,000 shares of Common Stock (1,000 shares prior to the Automatic
Grant Program Amendment), as long as such director is a member of the Board of
Directors. The exercise price of options granted under the Automatic Grant
Program is the fair market value of the Company's Common Stock on the date of
grant. Such options become exercisable ratably over 36 months (four years prior
to the Automatic Grant Program Amendment) commencing one month from the date of
grant and will expire the earlier of 10 years after the date of grant or 90 days
after termination of the director's service on the Board.
The Board may amend the Option Plan at any time or from time to time or may
terminate the Option Plan without the approval of the stockholders, provided
that stockholder approval is required for any amendment to the Option Plan
requiring stockholder approval under applicable law as in effect at the time,
and provided further that amendments with respect to options granted to persons
subject to Section 16 of the Exchange Act cannot be made more frequently than
once every six months. However, no action by the Board of Directors or
stockholders may alter or impair any option previously granted under the Option
Plan. The Board may accelerate the exercisability of any option or waive any
condition or restriction pertaining to such option at any time. The Option Plan
will terminate in November 2004, unless terminated sooner by the Board.
4
<PAGE>
TAX CONSEQUENCES OF OPTIONS
An optionee who is granted an incentive stock option will generally not
recognize taxable income either at the time the option is granted or upon its
exercise, although the exercise may subject the optionee to the alternative
minimum tax. Upon the sale or exchange of the shares more than two years after
grant of the option and one year after exercising the option, any gain or loss
will be treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee will recognize ordinary income at the time of sale
or exchange equal to the difference between the exercise price and the lower of
the fair market value of the shares at the date of the option exercise or the
sale price of the shares. A different rule for measuring ordinary income upon
such a premature disposition may apply if the optionee is also an officer,
director or holder of more than 10% of the outstanding Common Stock of the
Company. The Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Any gain or loss recognized on such
a premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as long-term or short-term capital gain or
loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. Generally, an optionee will not recognize
any taxable income at the time he or she is granted a non-statutory option.
However, upon its exercise, the optionee will recognize taxable income generally
measured as the excess of the then fair market value of the shares purchased
over the purchase price. Any taxable income recognized in connection with an
option exercise by an optionee who is also an employee of the Company will be
subject to tax withholding by the Company. The Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of a nonstatutory option. Upon
resale of such shares by the optionee, any difference between the sales price
and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period.
The foregoing is only a summary, based on the Code as currently in effect,
of the effect of federal income taxation upon the optionee and the Company with
respect to the grant and exercise of options under the Option Plan, does not
purport to be complete, and does not discuss the tax consequences of the
optionee's death or the income tax laws of any municipality, state or foreign
country in which an optionee may reside.
PROPOSED AMENDMENTS
In June 1996, the Board of Directors adopted an amendment to the Option
Plan to increase the number of shares reserved for issuance thereunder from
1,000,000 shares to 1,500,000 shares (the "Share Amount Amendment"). Without
giving effect to the Share Amount Amendment, as of December 31, 1996 no shares
remained available for future grant under the Option Plan, which will not allow
the Company to meet its anticipated needs with respect to the issuance of
additional options to employees and consultants of the Company.
In June 1996, the Board of Directors also amended the Automatic Grant
Program, as described above. In December 1996, the Board of Directors adopted
additional amendments to the Option Plan to take into account certain changes to
Rule 16b-3 promulgated under the Exchange Act, which were recently adopted by
the Securities and Exchange Commission (the "Section 16 Plan Amendments"), and
to permit, in accordance with existing Option Plan provisions, the accelerated
exercisability of options in the event of certain acquisition transactions
involving Interneuron, the Company's largest stockholder. Acquisition
transactions involving Interneuron had previously been excluded from the events
triggering accelerated exercisability of options under the Option Plan. The
Section 16 Plan Amendments allow for transferability to family members of
options (other than incentive stock options) granted under the Option Plan, and
make certain other technical amendments to the Option Plan to, among other
things, conform terminology to Rule 16b-3, as amended.
At the Meeting, the stockholders are being asked to approve the
above-described amendments to the Option Plan to, among other things, increase
the number of shares authorized for issuance thereunder from 1,000,000 shares to
1,500,000 shares.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting on this proposal at the
Meeting will be required to approve the Share Amount Amendment. The other
amendments to the Option Plan do not require stockholder approval, but are being
presented to the stockholders for ratification at the Meeting. Votes withheld on
this proposal will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business and will be treated as
shares represented and voting on this proposal at the Meeting. While there is no
definitive statutory or case law authority in Delaware as to the proper
treatment of abstentions, the Company
5
<PAGE>
believes that abstentions should be counted for purposes of determining both
whether a quorum is present at the Meeting and the total number of shares
represented and voting on this proposal at the Meeting. In the absence of
controlling precedent to the contrary, the Company intends to treat abstentions
in this manner. In a 1988 case, BERLIN V. EMERALD PARTNERS, the Delaware Supreme
Court held that, while broker non-votes may be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes of determining the number of
shares represented and voting with respect to the particular proposal on which
the broker has expressly not voted. Broker non-votes with respect to this
proposal will therefore not be considered represented and voting and,
accordingly, will not affect the determination as to whether the requisite vote
has been obtained to approve this proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE "FOR"
THE PROPOSED AMENDMENTS TO THE OPTION PLAN.
PROPOSAL NO. 3 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of Coopers &
Lybrand L.L.P., Raleigh, North Carolina ("Coopers"), to serve as the independent
auditors of the Company for the fiscal year ending September 30, 1997, and
recommends that the stockholders ratify such action. Coopers has audited the
accounts of the Company since the Company's inception in March 1994 and has
advised the Company that it does not have, and has not had, any direct or
indirect financial interest in the Company or its subsidiaries in any capacity
other than that of serving as independent auditors. Representatives of Coopers
are expected to attend the Meeting. They will have an opportunity to make a
statement, if they desire to do so, and will also be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting on this proposal at the
Meeting shall constitute ratification of the appointment of Coopers. If the
appointment of Coopers is not ratified by the stockholders, the Board of
Directors will reconsider its selection.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND RECOMMENDS A VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF COOPERS AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1997.
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of shares of the Company's Common Stock as of the Record Date by (i) each person
known by the Company to beneficially own more than 5% of the outstanding shares
of Common Stock, (ii) each director of the Company, (iii) each of the Named
Officers, as listed under " -- Executive Compensation -- Summary Compensation"
below, and (iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
NAME BENEFICIALLY OWNED (1) OWNED (2)
<S> <C> <C>
Interneuron Pharmaceuticals, Inc. (3)...................................................... 4,015,629 59.6%
One Ledgemont Center
99 Hayden Avenue
Lexington, Massachusetts 02173
Glenn L. Cooper, M.D. (4).................................................................. 4,016,368 59.6%
One Ledgemont Center
99 Hayden Avenue
Lexington, Massachusetts 02173
Clayton I. Duncan (5)...................................................................... 173,688 2.5%
Joseph J. Ruvane, Jr (6)................................................................... 8,500 *
Roger W. Brimblecombe, Ph.D. (7)........................................................... 5,500 *
David B. Sharrock (8)...................................................................... 5,500 *
David P. Ward, M.D. (9).................................................................... 30,813 *
Richard W. Reichow (10).................................................................... 61,205 *
All directors and executive officers as a group (7 persons) (11)........................... 4,301,574 61.3%
</TABLE>
* Less than one percent.
(1) Except as indicated in footnotes to this table, the persons named in this
table have sole voting and investment power with respect to all shares of
Common Stock indicated below.
6
<PAGE>
(2) As of the Record Date the Company had 6,741,603 shares of Common Stock
outstanding. Share ownership in each case includes shares issuable upon
exercise of options that may be exercised within 60 days after the Record
Date for purposes of computing the percentage of Common Stock owned by such
person but not for purposes of computing the percentage owned by any other
person.
(3) Consists of shares held by Interneuron. Dr. Cooper is President, Chief
Executive Officer and a director of Interneuron. Dr. Cooper disclaims
beneficial ownership of such shares.
(4) Consists of 4,015,629 shares held by Interneuron and 739 shares held by Dr.
Cooper. Dr. Cooper is President, Chief Executive Officer and a director of
Interneuron. Dr. Cooper disclaims beneficial ownership of the shares held
by Interneuron.
(5) Consists of shares issuable upon exercise of options held by Mr. Duncan.
(6) Includes 3,000 shares owned and 5,500 shares issuable upon exercise of
options held by Mr. Ruvane.
(7) Consists of shares issuable upon exercise of options held by Dr.
Brimblecombe.
(8) Consists of shares issuable upon exercise of options held by Mr. Sharrock.
(9) Includes 813 shares owned and 30,000 shares issuable upon exercise of
options held Dr. Ward.
(10) Includes 3,205 shares owned and 58,000 shares issuable upon exercise of
options held by Mr. Reichow.
(11) Includes shares beneficially owned by the directors and Named Officers
listed above. See footnotes (4)-(10).
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth all compensation paid or accrued by the
Company for services rendered to it in all capacities for the fiscal years ended
September 30, 1995 and 1996, to the Company's Chief Executive Officer and the
Company's other executive officers who earned at least $100,000 in the
respective fiscal year (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
STOCK
NAME AND FISCAL ANNUAL COMPENSATION OPTIONS AEOLUS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (SHARES) SHARES (1) COMPENSATION (2)
<S> <C> <C> <C> <C> <C> <C>
Clayton I. Duncan, 1996 $ 251,667 $ 112,500 139,241 -- $1,555
President and Chief Executive 1995 168,750 -- 251,557 7,353 1,258
Officer (3)
David P. Ward, M.D. 1996 193,750 37,000 20,000 -- 1,364
Senior Vice President, 1995 99,615 -- 120,000 -- 1,189
Research & Development (4)
Richard W. Reichow, 1996 173,333 30,000 20,000 -- 1,600
Senior Vice President, Chief
Financial Officer, Treasurer
and Secretary
</TABLE>
(1) Shares of the Common Stock of Aeolus were issued to Mr. Duncan during the
fiscal year ended September 30, 1995 for $0.001 per share.
(2) Consists of life and long-term disability insurance premiums and health club
fees reimbursed or paid on behalf of the Named Officers.
(3) Compensation for the fiscal year ended September 30, 1995 covers the period
commencing upon Mr. Duncan joining the Company in January 1995.
(4) Compensation for the fiscal year ended September 30, 1995 covers the period
commencing upon Dr. Ward joining the Company in March 1995.
BONUS PLAN
In October 1995, the Board of Directors of the Company approved a cash
bonus plan for executive officers of the Company (the "Bonus Plan"). Under the
terms of the Bonus Plan, upon the satisfaction, prior to September 30, 1996, of
both the execution of the Company's collaborative agreement with Astra Merck
Inc. (which occurred in December 1995) and completion of the Company's initial
public offering (which occurred in February 1996), the Company's Vice Presidents
7
<PAGE>
received a cash bonus of 20% of their annual salaries and the President and
Chief Executive Officer received a cash bonus of 50% of his annual salary,
because both goals were accomplished by March 31, 1996.
MANAGEMENT INCENTIVE PLAN
In February 1996, the Compensation Committee and the Board of Directors
approved the Management Incentive Plan ("MIP") for the executive officers of the
Company. The MIP provides for cash payments to the executive officers upon the
achievement of certain corporate and individual objectives. The MIP is intended
to be an annual compensation program. For the calendar year ended December 31,
1996, the corporate objectives related to the development and commercialization
of bucindolol, the Company's most advanced development project. The corporate
and individual objectives will be evaluated and measured during January 1997,
and cash payments will be made to the executive officers at the end of January
1997.
OPTION GRANTS, EXERCISES AND HOLDINGS AND FISCAL YEAR-END OPTION VALUES
The following table summarizes all option grants during the fiscal year
ended September 30, 1996 to the Named Officers:
OPTION GRANTS DURING FISCAL YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
GRANTED TO EXERCISE RATES OF STOCK PRICE
NUMBER OF SHARES EMPLOYEES OR BASE APPRECIATION FOR
UNDERLYING OPTIONS IN FISCAL PRICE PER EXPIRATION OPTION TERM (2)
NAME GRANTED YEAR 1996 SHARE (1) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Clayton I. Duncan..... 8,975(3) 2.7% $ 15.00 2-01-2006 $ 84,665 $ 214,558
130,266(4) 39.4% 20.50 9-18-2006 1,679,434 4,256,014
David P. Ward, M.D.... 20,000(5) 6.0% 32.00 6-13-2006 402,493 1,019,995
Richard W. Reichow.... 20,000(5) 6.0% 32.00 6-13-2006 402,493 1,019,995
</TABLE>
(1) The exercise price may be paid in cash or a check to the order of the
Company, or by any other means determined by the Board of Directors.
(2) The compounding assumes a 10-year exercise period for all option grants.
These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall stock market conditions. The
amounts reflected in this table may not necessarily be achieved.
(3) These options were granted in February 1996 and are exercisable in three
equal installments which vest in February 1996, January 1997 and January
1998.
(4) These options were granted in September 1996 and are exercisable in equal
installments over a 36-month period commencing in February 1998.
(5) These options were granted in June 1996 and are exercisable in equal
installments over a 36-month period commencing in April 1999.
The following table sets forth certain information concerning all stock
option exercises during the fiscal year ended September 30, 1996 by the Named
Officers, and the number and value of unexercised options held by the Named
Officers as of September 30, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
SHARES OPTIONS AT SEPTEMBER 30,
ACQUIRED ON VALUE SEPTEMBER 30, 1996 1996 (2)
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C> <C>
Clayton I. Duncan.................. -- -- 86,844 303,954 $2,062,101
David P. Ward, M.D................. -- -- 30,000 110,000 728,500
Richard W. Reichow................. 1,000 $ 23,140 29,000 110,000 704,110
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
OPTIONS AT
SEPTEMBER 30,
1996 (2)
NAME UNEXERCISABLE
<S> <C>
Clayton I. Duncan.................. $4,677,833
David P. Ward, M.D................. 2,185,500
Richard W. Reichow................. 2,185,500
</TABLE>
(1) Market value of underlying securities on the date of exercise, minus the
exercise price.
8
<PAGE>
(2) Value based on the difference between the fair market value of the shares of
Common Stock at September 30, 1996 ($24.75), as quoted on the Nasdaq Stock
Market, and the exercise price of the options.
EMPLOYMENT AGREEMENTS
In January 1995, the Company entered into a three-year employment agreement
with Mr. Duncan. The agreement provides for an annual base salary and annual
bonuses based on the achievement of performance milestones to be mutually agreed
upon by the Board of Directors or its Compensation Committee and Mr. Duncan.
Under the agreement Mr. Duncan was granted options to purchase 260,532 shares of
Common Stock of the Company. The agreement with Mr. Duncan also provides that
during the term of the agreement and, unless Mr. Duncan terminates his
employment for cause, for a period of one year thereafter, Mr. Duncan will not
compete with the Company, directly or indirectly. In the event Mr. Duncan's
employment is terminated by the Board of Directors without just cause, the
Company shall continue to pay Mr. Duncan's base salary plus the greater of
prorated bonuses earned or prorated average bonuses received while an employee,
subject to set-off for other employment and amounts, if any, owed to the
Company, for a period of nine months.
In November 1995, the Company entered into a three-year employment
agreement with each of Dr. Ward and Mr. Reichow. The agreements provide for base
salaries and annual bonuses based upon the achievement of performance milestones
to be set by the Board of Directors. The agreements also provide that during
their term and, unless the employee terminates his employment for cause, for a
period of six months thereafter, the employee will not compete with the Company,
directly or indirectly. In the event that the employment of Dr. Ward or Mr.
Reichow is terminated by the Board of Directors without just cause, the Company
shall continue to pay Dr. Ward or Mr. Reichow, as the case may be, his base
salary plus the greater of prorated bonuses earned or prorated average bonuses
received while an employee, subject to set-off for amounts, if any, owed to the
Company, for a period of six months.
COMPENSATION OF DIRECTORS
All directors are reimbursed for expenses incurred in connection with each
board or committee meeting attended. Each director who is not an employee of the
Company or Interneuron (a "Qualified Director") receives a fee of $2,000 per
Board meeting attended in person.
The Option Plan provides for the grant of nonstatutory options to
non-employee directors of the Company pursuant to the Automatic Grant Program,
as described above under the heading "Proposal No. 2 -- Approval of Amendments
to the 1994 Stock Option Plan".
In addition, during fiscal 1996 Mr. Sharrock received $2,000 of consulting
fees from the Company and a nonstatutory option to purchase 5,000 shares of the
Company's Common Stock at an exercise price of $1.00 per share, which was the
fair market value, as determined by the Board of Directors as of October 1995,
the date of grant.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for establishing compensation policy and administering the
compensation programs of the Company's executive officers. The Committee met
three times during fiscal year 1996 to review executive compensation policies,
compensation programs, and individual salaries and awards for the executive
officers. The purpose of this report is to inform stockholders of the Company's
compensation policies for executive officers and the rationale for the
compensation paid to executive officers in fiscal year 1996.
COMPENSATION PHILOSOPHY
The Company's compensation program is designed to motivate and reward the
executives responsible for the financial and strategic objectives essential to
the Company's long-term success and stockholder value. The financial goals for
compensation plans are reviewed and approved by the Committee.
The Company's total compensation philosophy is designed to support its
overall objective of creating value for its stockholders. Key objectives of this
philosophy are:
(Bullet) To attract and retain key executives critical to the long-term
success of the Company;
(Bullet) To support a performance-oriented environment that rewards
performance with respect to the Company's short-term and long-term
financial goals;
(Bullet) To encourage maximum performance through the use of appropriate
incentive programs; and
9
<PAGE>
(Bullet) To align the interests of executives with those of the Company's
stockholders by providing a significant portion of compensation in
the Company's Common Stock.
BASE SALARY
The Committee annually reviews the base salary of each officer. In
determining appropriate salary levels, the Committee considers individual
performance, experience, level of responsibility, internal equity and external
pay practices for the comparable positions.
BONUS PLAN
In October 1995, the Board approved the Bonus Plan to reward participants
for their contributions to the achievement of certain Company goals. At that
time, the Board recognized that significant goals of the Company included
signing a collaborative agreement for bucindolol for the United States and
raising equity financing. As both of these goals were completed by February 1,
1996, the Company paid cash bonuses to its executive officers in February 1996.
See " -- Executive Compensation -- Bonus Plan".
MANAGEMENT INCENTIVE PLAN
In February 1996, the Company established the MIP to reward participants
for their contributions to the achievement of Company-wide performance goals.
Each year the Board of Directors will approve both the performance measures
selected and the specific financial targets used under the MIP. The Committee
believes these goals will drive the future success of the Company's business and
will enhance stockholder value. For the calendar year ended December 31, 1996,
the Company's corporate objectives focused on the development and
commercialization of bucindolol, the Company's most advanced product.
The amount individual executives may earn (target awards) is directly
dependent upon the individual's position, responsibility and ability to impact
the Company's financial success. Awarded amounts are directly related to
performance. Company and individual performance for the calendar year ended
December 31, 1996 will be evaluated during January 1997, and cash payments will
be made to the executive officers at the end of January 1997. See " -- Executive
Compensation -- Management Incentive Plan".
STOCK OPTIONS
The stock option plans offered by the Company have been established to
provide all employees of the Company with an opportunity to share, along with
stockholders of the Company, in the long-term performance of the Company. Stock
options only have value to the employee if the price of the Company's stock
appreciates in value from the date the stock options were granted. Stockholders
also benefit from such stock price appreciation.
Grants of stock options are generally made upon commencement of employment,
with additional grants being made annually to all eligible employees, and,
occasionally, following a significant change in job responsibility, scope or
title. Stock options granted under the various stock plans have vesting
schedules of up to seven years and expire ten years from the date of grant. The
exercise price of options granted under the stock plans are usually 100% of fair
market value of the Common Stock on the date of grant. See " -- Executive
Compensation -- Option Grants, Exercises and Holdings and Fiscal Year-End Option
Values".
CEO COMPENSATION
Mr. Duncan's base salary and grants of stock options for fiscal year 1996
were determined in accordance with the criteria described in the Base Salary and
Stock Options sections of this report. The base salary of Mr. Duncan was set at
$265,000 as of February 1, 1996. Mr. Duncan received a bonus of $112,500
pursuant to the Bonus Plan, as the objectives established in the Bonus Plan were
completed in February 1996.
CONCLUSION
The Committee believes that the Company's compensation policies are
structured to result in the highest level of performance from the Company's
executives. By providing a significant portion of each executive's total
potential compensation under the MIP and by providing each executive with a
significant number of stock options, the Committee believes that it has closely
aligned the Company executive's personal interests with those of the Company and
the stockholders. The Committee intends to continue to review and analyze its
policies in light of the environment in which the Company competes for
executives.
10
<PAGE>
Neither the material in this report, nor the performance graph included in
this proxy statement under the heading " -- Performance Graph" (the "Performance
Graph"), is soliciting material, is or will be deemed filed with the Securities
and Exchange Commission or is or will be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended, or the Exchange
Act, whether made before or after the date of this proxy statement and
irrespective of any general incorporation language in such filing.
Submitted by: The Compensation Committee
GLENN L. COOPER, M.D., CHAIRMAN
ROGER W. BRIMBLECOMBE, PH.D.
JOSEPH J. RUVANE, JR.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Dr.
Cooper, Dr. Brimblecombe and Mr. Ruvane. Neither Dr. Brimblecombe nor Mr. Ruvane
was at any time during the fiscal year ended September 30, 1996 or at any other
time an officer or employee of the Company. Dr. Cooper served as President and
Chief Executive Officer of the Company from March 1994 to January 1995. No
executive officer of the Company serves as a member of the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or the Compensation
Committee.
PERFORMANCE GRAPH
The following graph shows a one-year(1) comparison of cumulative total
stockholder returns(2) for the Company, the CRSP Nasdaq Pharmaceuticals Stocks
Index and the CRSP Total Return Index of the Nasdaq Stock Market. (The "CRSP" is
the Center for Research in Securities Prices at the University of Chicago.) The
graph assumes that $100 was invested on February 1, 1996 in each of the
Company's Common Stock, the stocks in the CRSP Nasdaq Pharmaceuticals Stocks
Index and the stocks in the CRSP Total Return Index of the Nasdaq Stock Market.
(Performance Graph appears here with the following plot points.)
2/1/96 9/30/96
ITRC 100 165
Pharmaceuticals 100 94
NASDAQ 100 116
(1) Indicates comparison of total return solely for that period of fiscal year
1996 (February 1, 1996-September 30, 1996) during which the Company's Common
Stock was registered under Section 12 of the Exchange Act.
(2) Total return assumes reinvestment of dividends. Total returns for the Nasdaq
Stock Market and the Nasdaq Pharmaceuticals Stocks indices are weighted
based on market capitalization.
11
<PAGE>
CERTAIN TRANSACTIONS
The Company was organized in March 1994 as a wholly-owned subsidiary of
Interneuron, which acquired 3,500,000 shares of the Company's Common Stock for
nominal consideration. In September 1994, Intercardia completed the acquisition
of 80.0% of CPEC, Inc. ("CPEC") for a purchase price equal to 170,000 shares of
Interneuron Common Stock and cash payments and reimbursement of expenses
aggregating approximately $1,852,000. The value of the 170,000 shares provided
by Interneuron to the Company to consummate the CPEC acquisition was deemed to
be approximately $759,000, representing approximately 70% of the market price of
the Interneuron Common Stock at such date. This amount and approximately
$608,000 of other expenses incurred by Interneuron in connection with the
acquisition of CPEC and the funding of the Beta-blocker Evaluation of Survival
Trial (the "BEST Study") were deemed to be an advance by Interneuron to the
Company. In December 1994, upon the initial closing of the private placement
referred to below, the aggregate amount of advances to the Company of
approximately $1,367,000 was converted by Interneuron into an aggregate of
182,296 shares of Series A Preferred Stock of the Company at a conversion price
equal to $7.50 per share.
The Company is required to make two additional purchase price payments to
the former CPEC stockholders, each equal to 75,000 shares of Interneuron Common
Stock (subject to adjustment based on the market price of Interneuron Common
Stock at the time of issuance) when a New Drug Application with respect to
bucindolol has been accepted for filing by the U.S. Food and Drug Administration
(the "FDA") and upon receipt of an approval letter from the FDA with respect to
bucindolol. In the event these milestones are achieved, the Company will incur
future charges to operations equal to the fair market value of the Interneuron
Common Stock advanced to the Company to make such payments. The minimum and
maximum charges incurred in connection with each additional payment would be
$750,000 and approximately $1.9 million, respectively. In exchange for
Interneuron providing such payments of Interneuron Common Stock, the Company
will pay Interneuron an amount equal to the fair market value of such
Interneuron Common Stock, payable in cash or in shares of Company Common Stock,
at the Company's option.
In January 1996, Interneuron purchased the CPEC stock held by the former
minority stockholders in exchange for 342,792 shares of Interneuron Common
Stock. The aggregate number of shares of Interneuron Common Stock was calculated
by dividing $8,750,000 by $25.525, the then market price of Interneuron's Common
Stock. Fractional shares were paid in cash. As a result of this transaction,
Interneuron recorded a non-cash charge to operations during the fiscal year
ended September 30, 1996 of approximately $6.1 million. The Company has a right
of first refusal, expiring in September 1999, with respect to certain sales
(registered or not) of CPEC stock by Interneuron.
From December 1994 through May 1995, the Company sold an aggregate of
510,325 shares of its Series A Preferred Stock in a private placement, for an
aggregate gross purchase price of approximately $3,827,000. Each investor in the
private placement also received the right to sell their Series A Preferred Stock
to Interneuron for a purchase price, payable in cash or shares of Interneuron
Common Stock, equal to their initial purchase price (the "Put Protection
Right"). The Put Protection Right, which expired on the closing of the Company's
initial public offering in February 1996, was valued at approximately 9.1% of
the purchase price and, accordingly, Interneuron received approximately $348,000
from the proceeds of the private placement.
Paramount Capital, Inc. ("Paramount") acted as the Placement Agent for the
private placement and D.H. Blair & Co., Inc. ("Blair") was a selected dealer.
Paramount is owned by Lindsay Rosenwald, M.D., who was a director of the Company
at the time of the private placement and who is a principal stockholder and
Chairman of the Board of Interneuron. Paramount received placement fees
aggregating approximately $399,000 and designees of Paramount received warrants
to purchase an aggregate of 46,767 shares of Series A Preferred Stock. Dr.
Rosenwald received warrants to purchase 30,092 of these shares. Blair is
substantially owned by family members of J. Morton Davis (including Dr.
Rosenwald's family), a principal stockholder of Interneuron. Blair received fees
aggregating approximately $22,000 and designees of Blair received warrants to
purchase an aggregate of 4,266 shares of Series A Preferred Stock. All of these
warrants are exercisable until February 2001 at an exercise price of $8.25 per
share, and, pursuant to a cashless exercise provision, may be exercised without
the need to pay any cash. The Company also indemnified Paramount and Blair
against certain liabilities, including liabilities under the Act.
During fiscal 1995 and 1996, Interneuron performed certain services on
behalf of the Company for which it was reimbursed an aggregate of $94,000 and
$3,000, respectively, pursuant to a management services arrangement. Interneuron
also paid for certain Intercardia expenses which were reimbursed by Intercardia
at cost. In addition, Interneuron guaranteed Intercardia's office lease (which
guarantee was released in March 1996) and its equipment leases, and, through
December 1995, the Company's employment agreement with Clayton I. Duncan. In
December 1995, the Company and Interneuron entered into a tax allocation
agreement to provide, among other things, for the payment of tax liabilities and
entitlement to tax
12
<PAGE>
refunds and the allocation of responsibility and the providing of cooperation in
the filing of tax returns. Also in December 1995, the Company and Interneuron
entered into an intercompany services agreement which provides, among other
things, for Intercardia to adopt certain policies and procedures and provides
for Interneuron to include Intercardia and its employees in certain programs
administered by Interneuron, at cost, such as insurance, and to provide research
and development services to the Company upon request, on a cost plus basis.
Pursuant to the intercompany services agreement between the Company and
Interneuron, Interneuron has the right to purchase additional shares of Common
Stock at fair market value, if necessary to provide that Interneuron's equity
ownership in the Company does not fall below 51.0%. In addition, Interneuron
purchased 333,333 shares of Company Common Stock in the Company's initial public
offering at the initial public offering price of $15.00 per share.
The Company has adopted a policy that all future transactions between the
Company and its executive officers, directors and other affiliates must be
approved by a majority of the members of the Company's Board of Directors and by
a majority of the disinterested members of the Company's Board of Directors, and
must be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties. In addition, this policy requires that any loans by
the Company to its executive officers, directors or other affiliates be for bona
fide business purposes only.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
To the Company's knowledge, there were no reports required under Section
16(a) of the Securities Exchange Act of 1934, as amended, which were not timely
filed during the fiscal year ended September 30, 1996.
DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholders having proposals that they desire to present at next year's
annual meeting of stockholders of the Company should, if they desire that such
proposals be included in the Company's Proxy Statement relating to such meeting,
submit such proposals in time to be received by the Company not later than
September 23, 1997. To be so included, all such submissions must comply with the
requirements of Rule 14a-8 promulgated under the Exchange Act and the Board of
Directors directs the close attention of interested stockholders to that Rule.
Proposals may be mailed to Richard W. Reichow, Corporate Secretary, Intercardia,
Inc., P.O. Box 14287, Research Triangle Park, North Carolina 27709.
OTHER MATTERS
The Board of Directors knows of no other business to be brought before the
Meeting, but it is intended that, as to any such other business, the shares will
be voted pursuant to the proxy in accordance with the best judgment of the
person or persons acting thereunder.
13
*******************************************************************************
APPENDIX
INTERCARDIA, INC.
THIS PROXY IS SOLICITED BY MANAGEMENT
PROXY
The undersigned, a stockholder of Intercardia, Inc., a Delaware corporation
(the "Company"), hereby constitutes and appoints Clayton I. Duncan and
Richard W. Reichow, or either of them, attorneys and proxies with full
power of substitution to act and vote all shares of the undersigned at the
Annual Meeting of Stockholders of the Company to be held at the North
Carolina Biotechnology Center, 15 Alexander Drive, Research Triangle Park,
North Carolina on February 19, 1997 commencing at 9:00 a.m., Eastern Time,
and any adjournment(s) thereof (the "Meeting"). The undersigned hereby
directs this proxy to be voted as follows:
(Continued and to be signed on other side)
<PAGE>
A [X] Please mark your
votes as in this
example.
FOR ALL NOMINEES WITHHOLD AUTHORITY
LISTED AT RIGHT TO VOTE FOR ALL
(except as marked to NOMINEES LISTED
the contrary below) AT RIGHT
1. The election Nominees:
of five [ ] [ ] Clayton I. Duncan
directors. Glenn L. Cooper, M.D.,
Roger W. Brimblecombe, Ph.D.
Joseph J. Ruvane, Jr.
David B. Sharrock
INSTRUCTIONS: To withhold authority to vote for any
Individual nominee strike a line through the
nominee's name in the list at right.
FOR AGAINST ABSTAIN
2. The approval of amendments to the 1994 [ ] [ ] [ ]
Stock Option Plan to, among other things,
increase the number of shares of Common Stock reserved for issuance
thereunder from 1,000,000 to 1,500,000 shares as described in the
accompanying Proxy Statement.
3. The ratification of the appointment of [ ] [ ] [ ]
Coopers & Lybrand LLP as the Independent
auditors of the Company for the fiscal
year ending September 30, 1997.
This Proxy will be voted as directed above. In the absence of any direction,
this Proxy will be voted for Proposals 1-3, with direction to vote upon
such other matters as may be brought before the Meeting. Any proxy
heretofore given by the undersigned for the Meeting is hereby revoked and
declared null and void and without any effect whatsoever.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING.
IF YOU ATTEND THE MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
_______________________ (SEAL) ____________ ____________________(SEAL)____________ DATED: ________, 1997
Signature Print name and title, if appropriate Signature Print name and title, if appropriate
</TABLE>
NOTE: (Please sign exactly as name appears on certificate(s))
