<PAGE> 1
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
[ X ] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SONUS PHARMACEUTICALS, INC.
......................................................................
(Name of Registrant as Specified In Its Charter)
SONUS PHARMACEUTICALS, INC.
......................................................................
(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:
.................................................................
Notes:
.................................................................
.................................................................
<PAGE> 2
SONUS PHARMACEUTICALS, INC.
22026 20TH AVENUE, S.E., SUITE 102
BOTHELL, WASHINGTON 98021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 18, 1997
TO THE STOCKHOLDERS OF SONUS PHARMACEUTICALS, INC.
The 1997 Annual Meeting of Stockholders of SONUS Pharmaceuticals, Inc.
(the "Company"), will be held at the Washington Athletic Club, 1325 Sixth
Avenue, Seattle, Washington, on June 18, 1997, at 9:00 A.M., for the following
purposes as more fully described in the accompanying Proxy Statement:
(1) To elect the following four (4) nominees to serve as directors
until the next annual meeting of stockholders or until their
successors are elected and have qualified:
Steven C. Quay, M.D., Ph.D. Harry A. Shoff
Donald B. Milder Dwight Winstead
(2) To approve an amendment to the Company's Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan --
1991 to increase the number of shares subject thereto to a total
of 1,500,000;
(3) To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31,
1997; and
(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 22, 1997
will be entitled to vote at the meeting or any adjournment or postponement
thereof.
By Order of the Board of Directors
Steven C. Quay, M.D., Ph.D
President, Chief Executive Officer and
Secretary
April 29, 1997
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any
stockholder present at the meeting may withdraw his or her proxy and vote
personally on each matter brought before the meeting. Stockholders attending the
meeting whose shares are held in the name of a broker or other nominee who
desire to vote their shares at the meeting should bring with them a proxy or
letter from that firm confirming their ownership of shares.
<PAGE> 3
SONUS PHARMACEUTICALS, INC.
22026 20TH AVENUE, S.E., SUITE 102
BOTHELL, WASHINGTON 98021
---------------
PROXY STATEMENT
---------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of SONUS Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), for use at its 1997 Annual Meeting
of Stockholders ("Annual Meeting") to be held on June 18, 1997, at 9:00 A.M., at
the Washington Athletic Club, 1325 Sixth Avenue, Seattle, Washington. This Proxy
Statement and the accompanying proxy are being mailed to stockholders on or
about May 9, 1997. The Company has retained the services of Corporate Investor
Communications, Inc. to assist in soliciting proxies from brokers and nominees
for the Annual Meeting. The estimated costs for these services is $3,000 and
will be borne by the Company. It is contemplated that this solicitation of
proxies will be made primarily by mail; however, if it should appear desirable
to do so in order to ensure adequate representation at the meeting, directors,
officers and employees of the Company may communicate with stockholders,
brokerage houses and others by telephone, telegraph or in person to request that
proxies be furnished and may reimburse banks, brokerage houses, custodians,
nominees and fiduciaries for their reasonable expenses in forwarding proxy
materials to the beneficial owners of the shares held by them. All expenses
incurred in connection with this solicitation shall be borne by the Company.
Holders of shares of common stock of the Company ("stockholders") who
execute proxies retain the right to revoke them at any time before they are
voted. Any proxy given by a stockholder may be revoked or superseded by
executing a later dated proxy, by giving notice of revocation to the Secretary,
SONUS Pharmaceuticals, Inc., 22026 20th Avenue, S.E., Suite 102, Bothell,
Washington 98021, in writing prior to or at the meeting or by attending the
meeting and voting in person. A proxy, when executed and not so revoked, will be
voted in accordance with the instructions given in the proxy. If a choice is not
specified in the proxy, the proxy will be voted "FOR" the nominees for election
of directors named in this Proxy Statement, "FOR" the amendment of the Incentive
Stock Option, Nonqualified Stock Option and Restricted Stock Purchase Plan--1991
and "FOR" the ratification of Ernst & Young LLP as the Company's independent
auditors.
VOTING SECURITIES
The shares of Common Stock, $.001 par value, constitute the only
outstanding class of voting securities of the Company. Only the stockholders of
the Company of record as of the close of business on April 22, 1997 (the "Record
Date"), will be entitled to vote at the meeting or any adjournment or
postponement thereof. As of the Record Date, there were 8,553,152 shares of
Common Stock outstanding and entitled to vote. No shares of the Company's
preferred stock, $0.001 par value, were outstanding. A majority of shares
entitled to vote represented in person or by proxy will constitute a quorum at
the meeting. Each stockholder is entitled to one vote for each share of Common
Stock held as of the Record Date. Abstentions and broker non-votes are each
included in the determination of the number of shares present and voting for the
purpose of determining whether a quorum is present. Abstentions will be treated
as shares present and entitled to vote for purposes of any matter requiring the
affirmative vote of a majority or other proportion of the shares present and
entitled to vote. With respect to shares relating to any proxy as to which a
broker non-vote is indicated on a proposal, those shares will not be considered
present and entitled to vote with respect to any such proposal. Abstentions or
broker non-votes or other failures to vote will have no effect in the election
of directors, who will be elected by a plurality of the affirmative votes cast.
With respect to any matter brought before the Annual Meeting requiring the
affirmative vote of a majority or other
<PAGE> 4
proportion of the outstanding shares, an abstention or broker non-vote will have
the same effect as a vote against the matter being voted upon.
All stockholders entitled to vote at the Annual Meeting may cumulate the
votes in the election of directors. With cumulative voting, each stockholder is
entitled to a number of votes as shall equal the number of votes which the
stockholder would be entitled to cast for the election of directors with respect
to the stockholder's shares of stock multiplied by the number of directors to be
elected by the stockholders, and each stockholder may cast all of such votes for
a single director or may distribute them among the number to be voted for, or
for any two or more of them as the stockholder may see fit. The proxies
solicited by the Board of Directors confer discretionary authority in the proxy
holders to cumulate votes so as to elect the maximum number of nominees.
PROPOSAL ONE
ELECTION OF DIRECTORS
Currently, there are four (4) members of the Board of Directors.
Directors are elected at each annual stockholders' meeting to hold office until
the next annual meeting or until their successors are elected and have
qualified. Unless otherwise instructed, the proxy holders named in the enclosed
proxy will vote the proxies received by them for the four (4) nominees named
below. All of the nominees presently are directors of the Company.
If any nominee becomes unavailable for any reason before the election,
the enclosed proxy will be voted for the election of such substitute nominee or
nominees, if any, as shall be designated by the Board of Directors. The Board of
Directors has no reason to believe that any of the nominees will be unavailable
to serve.
Under Delaware law, the four (4) nominees receiving the highest number
of votes will be elected as directors at the annual meeting. As a result,
proxies voted to "Withhold Authority," which will be counted, and broker
non-votes, which will not be counted, will have no practical effect.
The names and certain information concerning the four (4) nominees for
election as directors are set forth below. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Steven C. Quay, M.D., Ph.D 46 President, Chief Executive Officer, Secretary and Director
Donald B. Milder 43 Director
Harry A. Shoff 64 Director
Dwight Winstead 48 Director
</TABLE>
Steven C. Quay, M.D., Ph.D. founded the Company in 1991 and has served
as President, Chief Executive Officer and a director of the Company since its
inception. From 1984 to 1990, Dr. Quay was the Chief Executive Officer of
Salutar, Inc., a company founded by Dr. Quay to develop contrast agents for MRI
tests. Dr. Quay invented OmniScan(R), the first non-ionic MRI contrast agent
used for diagnosing tumors of the head and spine approved for marketing in the
United States. From 1980 to 1986, Dr. Quay was a member of the faculty of the
Stanford University School of Medicine. Dr. Quay holds an M.D. and a Ph.D. from
the University of Michigan Medical School and took post-graduate training at the
Massachusetts Institute of Technology and Harvard Medical School. He has been
awarded 31 United States patents covering diagnostic imaging and has written
more than 100 scientific papers related to diagnostic imaging, oncology and
biochemistry. Dr. Quay is a Member of the American Society of Echocardiography,
the American Society of Biochemistry and Molecular Biology, the Radiological
Society of North America and the American Institute of Ultrasound in Medicine.
2
<PAGE> 5
Donald B. Milder has served as a director of the Company since its
inception. Since March 1989, Mr. Milder has served as a general partner of
Crosspoint Venture Partners, a venture capital firm. From September 1985 to
March 1989, Mr. Milder served as Chief Executive Officer of Infusion Systems, a
medical delivery device company. Mr. Milder serves as a director of six
privately-held companies. Mr. Milder holds a B.A. from Union College and an
M.B.A. from Harvard Business School, Harvard University.
Harry A. Shoff has served as a director of the Company since May 1995.
From June 1993 to November 1994, Mr. Shoff served as Vice President, Business
Operations of the Pharmaceuticals Group of Sterling Winthrop, Inc., a health
care company, which among other things is a leading developer and distributor of
contrast media. Mr. Shoff joined Sterling Winthrop in 1985 and served as
President of Winthrop Pharmaceuticals until June 1993. Mr. Shoff has been
employed in various executive capacities by several pharmaceutical companies for
33 years, including Johnson & Johnson, Abbott Laboratories, Inc., Beecham, Inc.
(now SmithKline Beecham, PLC) and Pfizer, Inc. Mr. Shoff holds a B.S. from St.
Francis College.
Dwight Winstead has served as a director of the Company since July 1995.
Commencing in May 1997, Mr. Winstead will serve as President of Owen
Healthcare, Inc., a hospital pharmacy management company and a subsidiary of
Cardinal Health, Inc. From January 1991 to May 1997, Mr. Winstead has served as
Executive Vice President of VHA, Inc., a performance improvement company serving
more than 1,200 health care organizations in the United States. Prior to his
promotion to Executive Vice President, Mr. Winstead served in various capacities
of VHA Supply Company, a subsidiary of VHA, Inc., including Vice President,
Sales and Marketing, Senior Vice President and Chief Operating Officer and
President from July 1987 to January 1991. Prior to joining VHA, Inc. in March
1984, Mr. Winstead served in a variety of materials management and sales
positions at several companies, including Ortho Instruments and Worthington
Diagnostics. Mr. Winstead holds a B.S. from Delta State University.
OTHER EXECUTIVE OFFICERS
Charles H. Davis joined the Company as Vice President, Regulatory
Affairs in October 1992. From November 1980 to September 1992, Mr. Davis served
as Director of Regulatory Affairs for Alpha Therapeutic Corporation, a
pharmaceutical company. From 1976 to 1980, Mr. Davis served as a manager of
regulatory affairs of the American McGaw Division of American Hospital Supply, a
medical products supply company. From 1970 to 1976, Mr. Davis served as a
regulatory coordinator of ALZA Corporation, a pharmaceutical company. He holds a
B.S. from the University of California at Berkeley.
Gregory Sessler joined the Company as Chief Financial Officer in January
1995. From October 1990 to January 1995, Mr. Sessler was with MicroProbe
Corporation, a publicly-traded developer of therapeutic compounds and diagnostic
tests, most recently as Senior Vice President and Chief Financial Officer. From
1986 to 1990, Mr. Sessler served as Chief Financial Officer and Secretary of
Molecular Devices Corporation, a manufacturer of biomedical instrumentation.
From 1981 to 1986, Mr. Sessler served as Vice President, Chief Financial Officer
and Secretary of Monoclonal Antibodies, Inc., a manufacturer of fertility
diagnostic test kits. He holds a B.S. from Syracuse University and an M.B.A.
from the Stanford University Graduate School of Business and is a Certified
Public Accountant.
Terry E. Willard joined the Company as Vice President, Marketing and
Business Development in March 1994. From June 1989 to March 1994, Mr. Willard
served as Senior Director of Worldwide Marketing of the Radiopharmaceuticals
Division of the DuPont/Merck Pharmaceutical Company. Prior to DuPont/Merck, Mr.
Willard held a number of sales and marketing positions in American Hospital
Supply Corporation and Baxter International. He holds a B.S. from Southern
Illinois University and an M.B.A. from the Keller Graduate School of Management
in Chicago, Illinois.
Dilip M. Worah joined the Company as Vice President, Research and
Development in January 1992. From August 1984 to December 1991, Mr. Worah was
employed by Salutar, Inc. as Manager, Biological Sciences. From 1981 to 1984,
Mr. Worah served as a scientist at Miles Laboratories, a pharmaceutical company.
Prior to joining Salutar and Miles Laboratories, Mr. Worah served as a manager
of research and development at BioRad Laboratories and as a manager of research
and development of International Diagnostic Technology. Mr. Worah
3
<PAGE> 6
holds an M.S. from the University of Denver. He has been awarded two United
States patents covering MRI technology and x-ray imaging agents and has
published over 22 scientific papers.
BOARD MEETINGS AND ATTENDANCE
The Board of Directors of the Company held eleven (11) meetings during
the fiscal year ended December 31, 1996. Each incumbent Director attended at
least seventy-five percent (75%) of the aggregate of the number of meetings of
the Board and the number of meetings held by all committees of the Board on
which he served. There are no family relationships among any of the directors or
executive officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee is presently comprised of two (2) directors
selected by the Board of Directors of the Company. The members of the Audit
Committee are Donald B. Milder and Harry A. Shoff. The Audit Committee is
authorized to handle all matters which it deems appropriate regarding the
Company's independent accountants and to otherwise communicate and act upon
matters relating to the review and audit of the Company's books and records,
including the scope of the annual audit and the accounting methods and systems
to be utilized by the Company. In addition, the Audit Committee also makes
recommendations to the Board of Directors with respect to the selection of the
Company's independent accountants. The Audit Committee held three (3) meetings
during the fiscal year ended December 31, 1996.
The Compensation Committee is presently comprised of two (2) directors
selected by the Board of Directors of the Company. The members of the
Compensation Committee are Harry A. Shoff and Dwight Winstead. The functions of
the Compensation committee include advising the Board of Directors on officer
and employee compensation. The Board of Directors, based on input from the
Compensation Committee, establishes the annual compensation rates for the
Company's executive officers. The Compensation Committee held three (3) meetings
during the fiscal year ended December 31, 1996.
The Company does not have a nominating committee. Instead, the Board of
Directors, as a whole, identifies and screens candidates for membership on the
Company's Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation received for the fiscal year
ended December 31, 1996, by the Company's Chief Executive Officer and its
executive officer (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Awards -
Securities
Name and Principal Annual Compensation Underlying All Other
Position Year Salary($) Bonus($)(1) Options(#) Compensation($)(2)
- - ----------------------- ---- --------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Stephen C. Quay, M.D., 1996 360,000 95,625 449,951 --
Ph.D. 1995 314,500 39,700 -- --
President and Chief 1994 300,000 -- 76,335 542,301
Executive Officer
Charles H. Davis 1996 169,000 29,250 15,634 --
Vice President - 1995 154,750 13,650 2,290 --
Regulatory Affairs 1994 154,062 -- -- 64,605
Gregory Sessler(3) 1996 165,000 32,625 18,400 --
Chief Financial 1995 129,292 5,000 61,068 --
Officer 1994 -- -- -- --
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C>
Terry E. Willard(4) 1996 180,000 33,750 17,676 --
Vice President - 1995 165,000 7,200 4,580 --
Marketing 1994 127,897 -- 68,702 119,246
and Business
Development
Dilip M. Worah 1996 157,000 30,375 14,800 --
Vice President - 1995 144,250 7,700 2,290 6,379
Research and 1994 139,167 -- 11,450 141,422
Development
David E. Wormuth(5) 1996 180,000 15,000 13,634 --
Vice President - 1995 165,000 12,907 4,580 1,024
Operations 1994 163,750 -- -- 85,473
</TABLE>
- - -------------------
(1) Bonus is earned during the fiscal year pursuant to Company's Executive
Incentive Compensation Plan, which provides for bonuses to be paid on a
percentage of salary provided that certain objectives are met. The
percentage of salary and objectives to be met are approved by the
Compensation Committee of the Board. Amounts earned in 1996 were paid in
February 1997.
(2) Represents payments and accruals for relocation costs.
(3) Mr. Sessler joined the Company in January 1995.
(4) Mr. Willard joined the Company in March 1994.
(5) Mr. Wormuth resigned from the Company in February 1997.
5
<PAGE> 8
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Number of Assumed Annual
Granted to % of Total Rates of Stock
Securities Options Exercise Price Appreciation
Underlying Employees or Base for Option Term(3)
Options in Fiscal Price Expiration ---------------------
Name Granted(#) Year(1) ($/Share) Date(2) 5%($) 10%($)
- - ------------------------ ---------- ---------- -------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven C. Quay, M.D., 438,931 70.2 13.25 01/16/06 3,657,521 9,268,930
Ph.D.................. 6,000 1.0 20.00 09/18/06 75,467 191,249
5,000 0.8 20.50 10/12/06 64,461 163,358
Charles H. Davis...... 7,634 1.2 13.25 01/16/06 63,613 161,208
8,000 1.3 20.00 09/18/06 100,622 254,998
Gregory Sessler....... 17,900 2.9 13.25 01/16/06 149,157 377,995
500 0.1 20.00 09/18/06 6,289 15,937
Terry E. Willard...... 17,176 2.8 13.25 01/16/06 143,124 362,707
500 0.1 20.00 09/18/06 6,289 15,937
Dilip M. Worah........ 8,880 1.4 13.25 01/16/06 73,995 187,519
6,000 1.0 20.00 09/18/06 75,467 191,249
David E. Wormuth...... 7,634 1.2 13.25 01/16/06 63,613 161,208
6,000 1.0 20.00 09/18/06 75,467 191,249
</TABLE>
- - --------------------
(1) Options to purchase an aggregate of 624,955 shares of Common Stock were
granted to employees, including the Named Executive Officers, during the
year ended December 31, 1996.
(2) Options granted have a term of 10 years, subject to earlier termination
in certain events related to termination of employment.
(3) Based on fair market value, in accordance with the rules and regulations
of the Securities and Exchange Commission, such gains are based on
assumed rates of annual compound stock appreciation of 5% and 10% from
the date on which the options were granted over the full term of the
options. The rates do not represent the Company's estimate or projection
of future Common Stock prices, and no assurance can be given that the
rates of annual compound stock appreciation assumed for the purposes of
the following table will be achieved.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal in-the-Money Options at
Shares Year-End(#) Fiscal Year-End($)(1)
Acquired on Value ---------------------------- ----------------------------
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- - ---------------- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Steven C. Quay. -- -- 217,447 308,819 4,499,183 5,068,514
Charles H. Davis -- -- 5,414 12,510 80,678 182,410
Gregory Sessler 1,000 19,595 32,517 45,951 891,371 1,156,533
Terry E. Willard -- -- 6,094 16,162 118,112 288,423
Dilip M. Worah. 33,710 678,102 7,897 15,714 163,601 290,682
David E. Wormuth 14,750 300,720 4,130 17,870 58,196 362,466
</TABLE>
- - ---------------
(1) Market value of underlying securities at exercise date or year-end, as
the case may be, minus the exercise or base price of "in-the-money"
options. The closing sale price for the Company's Common Stock as of
December 31, 1996 on the Nasdaq National Market was $29.75.
6
<PAGE> 9
DIRECTOR'S FEES
During 1996, the Company's non-employee directors received per diem cash
compensation in the amount of $3,750 per quarter for service on the Company's
Board of Directors. Accordingly, Mr. Milder, Mr. Shoff and Mr. Winstead each
received $15,000 during 1996. In addition, Mr. Shoff and Mr. Winstead each
received consulting fees of $28,800 during 1996. All directors may be reimbursed
for certain expenses incurred for meetings of the Board of Directors which they
attended.
On May 12, 1995, the Company adopted a Stock Option Plan for Directors.
Under the Directors' Plan, continuing directors receive an additional option
grant covering 5,000 shares on each anniversary of the respective director's
initial grant date. Accordingly, in 1996, Messrs. Quay, Milder, Shoff and
Winstead each were granted options to purchase 5,000 shares.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon its review of the copies of reports furnished to the
Company, or written representations that no annual Form 5 reports were required,
the Company believes that all filing requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") applicable to
its directors, officers and any persons holding ten percent (10%) or more of the
Company's Common Stock were made with respect to the Company's fiscal year ended
December 31, 1996; except for a Form 4 for Harry A. Shoff and a Form 4 for David
E. Wormuth which were filed late.
7
<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Set forth below is certain information as of the Record Date regarding
the beneficial ownership of the Company's Common Stock by (i) any person who was
known by the Company to own more than five percent (5%) of the voting securities
of the Company, (ii) all directors and nominees, (iii) each of the Named
Executive Officers identified in the Summary Compensation Table, and (iv) all
current directors and executive officers as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of
Owners Beneficial Ownership(1) Percent of Class
- - --------------------------------- ------------------------------ -------------------------------
<S> <C> <C>
Steven C. Quay, M.D., Ph.D.(2)
Debra L. Quay................... 1,619,187 18.3%
c/o SONUS Pharmaceuticals, Inc.
22026 20th Avenue, Suite 102
Bothell, Washington 98021
Donald B. Milder(3)............. 964,714 11.1%
c/o Crosspoint Venture
Partners III
18552 MacArthur Blvd., Suite 400
Irvine, CA 92715
Crosspoint Venture Partners III(4) 952,714 11.0%
One First Street, Suite #2
Los Altos, California 94022
Aperture Associates, L.P.(5)
Horsley Bridge Partners, Inc.... 574,783 6.7%
505 Montgomery Street
San Francisco, California 94111
Abbott Laboratories, Inc.(6).... 500,000 5.5%
100 Abbott Park Road
Abbott Park, Illinois 60064
West Highland Capital, Inc.(7).. 477,100 5.5%
300 Drake's Landing Road, Suite 290
Greenbrae, California 94904
Daiichi Pharmaceuticals Co., Ltd. 462,857 5.4%
14-10, Nihonbashi 3-chome,
Chuo-ku, Tokyo 103, Japan
Harry A. Shoff(8)............... 17,383 *
Dwight Winstead(8).............. 12,633 *
Charles H. Davis(9)............. 32,215 *
Gregory Sessler(10)............. 44,287 *
Terry E. Willard(11)............ 64,192 *
Dilip Worah(12)................. 56,914 *
David E. Wormuth(13)............ 32,140 *
All current executive officers
and directors as a group (8
persons)(14).................... 2,811,525 31.1%
</TABLE>
- - ---------------------------------
*Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options, warrants and convertible notes currently exercisable
or convertible, or exercisable or
8
<PAGE> 11
convertible within 60 days of the Record Date, are deemed outstanding
for computing the percentage of the person holding such options but are
not deemed outstanding for computing the percentage of any other person.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes (i) 1,312,883 shares owned by Dr. Steven C. Quay and Debra L.
Quay, (ii) 293,599 shares subject to stock options exercisable within 60
days of the Record Date, and (iii) 12,705 shares subject to warrants
exercisable within 60 days of the Record Date.
(3) Includes of (i) 5,000 shares subject to options exercisable within 60
days of the Record Date and (ii) 952,714 shares and warrants exercisable
within 60 days of the Record Date beneficially held by Crosspoint
Venture Partners III. Mr. Milder, a director of the Company, is a
general partner of Crosspoint Venture Partners III, and accordingly, may
be deemed to beneficially own such shares and warrants. Mr. Milder
disclaims beneficial ownership of the shares and warrants held by
Crosspoint Venture Partners III except to the extent of his pecuniary
interest therein.
(4) Includes 111,266 shares subject to warrants exercisable within 60 days
of the Record Date held by Crosspoint Venture Partners III.
(5) Includes 52,358 shares subject to warrants exercisable within 60 days of
the Record Date.
(6) Includes 500,000 shares subject to warrants exercisable within 60 days
of the Record Date
(7) Information is based on a report filed with the Securities and Exchange
Commission.
(8) Includes 12,633 shares subject to options exercisable within 60 days of
the Record Date.
(9) Includes 10,651 shares subject to options exercisable within 60 days of
the Record Date.
(10) Includes 23,356 shares subject to options exercisable within 60 days of
the Record Date.
(11) Includes 2,315 shares subject to warrants and 9,055 shares subject to
options exercisable within 60 days of the Record Date.
(12) Includes 14,204 shares subject to options exercisable within 60 days of
the Record Date.
(13) Includes 2,929 shares subject to warrants and 11,996 shares subject to
options exercisable within 60 days of the Record Date.
(14) Includes directors' and executive officers' shares listed above,
including the 952,714 shares held by Crosspoint Venture Partners III.
9
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
The following report is submitted by the Compensation Committee of the
Board of Directors with respect to the executive compensation policies
established by the Compensation Committee and recommended to the Board of
Directors and compensation paid or awarded to executive officers for the fiscal
year ended December 31, 1996.
The Compensation Committee determines the annual salary, bonus and other
benefits, including incentive compensation awards, of the Company's senior
management and recommends new employee benefit plans and changes to existing
plans to the Company's Board of Directors. The Compensation Committee met three
(3) times in 1996 and is presently comprised entirely of directors who are not,
and were not formerly, officers or employees of the Company.
COMPENSATION POLICIES AND OBJECTIVES
The Company's executive compensation policy is designed to attract and
retain exceptional executives by offering compensation for superior performance
that is highly competitive with other well-managed organizations in the health
care industry. The Compensation Committee measures executive performance on an
individual and corporate basis.
There are three components to the Company's executive compensation
program, and each is consistent with the stated philosophy as follows:
o Base Salary. Base salaries for executives and other key
employees are determined by individual financial and
non-financial performance, position in salary range and general
economic conditions of the Company. For purposes of
administering base pay, all executive positions are evaluated
and placed in appropriate salary grades. Salary range midpoint
levels are reviewed on an annual basis to ensure competitiveness
with a peer group of other health care companies. In
recommending salaries for executive officers, the Compensation
Committee (i) reviews the historical performance of the
executives, and (ii) formally reviews specific information
provided by Towers Perrin, a compensation consulting firm, with
respect to the competitiveness of salaries paid to the Company's
executives.
o Annual Bonus. Annual bonuses for executives and other key
employees are tied directly to the Company's financial
performance as well as individual performance. The purpose of
annual cash bonuses are to reward executives for achievements of
corporate, financial and operational goals. Annual cash bonuses
are intended to reward the achievement of outstanding
performance. When certain objective and subjective performance
goals are not met, annual bonuses would be reduced or not paid.
o Long-Term Incentives. The purpose of these plans is to create an
opportunity for executives and other key employees to share in
the enhancement of stockholder value through stock options. The
overall goal of this component of pay is to create a strong link
between the management of the Company and its stockholders
through management stock ownership and the achievement of
specific corporate financial measures that result in the
appreciation of Company share price. Stock options are awarded
if the Company and individual goals are achieved or exceeded.
The Compensation Committee generally has followed the practice
of granting options annually on terms which provide that the
options become exercisable in cumulative monthly installments
over a three (3) to four (4) year period. The Compensation
Committee believes that this feature not only provides an
employee retention factor but also makes longer term growth in
share prices important for those receiving options.
10
<PAGE> 13
FISCAL YEAR 1996 COMPENSATION
Pursuant to the Company's Executive Incentive Plan, the Company's
President and Chief Executive Officer, Steven C. Quay, M.D., Ph.D., was awarded
a 1996 cash bonus of $95,625 which was paid in February 1997. The bonus award
was made in recognition of Dr. Quay's substantial achievements made during 1996.
Special achievements noted were the considerable progress in the clinical
development and toward regulatory approval of the Company's primary product,
EchoGen(R) Emulsion, the securing of a substantial corporate partner for the
marketing and distribution of EchoGen in the U.S. and overseas territories and
achievement of profitable operations.
The Company is required to disclose its policy regarding qualifying
executive compensation deductibility under Section 162(m) of the Internal
Revenue Code of 1986, as amended, which provides that, for purposes of the
regular income tax and the alternative minimum tax, the otherwise allowable
deduction for compensation paid or accrued with respect to a covered employee of
a public corporation is limited to no more than $1 million per year. It is not
expected that the compensation to be paid to the Company's executive officers
for fiscal 1997 will exceed the $1 million limit per officer. The Company's
Incentive Stock Option, Non-Qualified Stock Option and Restricted Stock Purchase
Plan - 1991 is structured so that any compensation deemed paid to an executive
officer when he exercises an outstanding option under the plan, with an exercise
price equal to the fair market value of the option shares on the grant date,
will qualify as performance-based compensation that will not be subject to the
$1 million limitation.
The Compensation Committee of the
Board of Directors
Harry A. Shoff
Dwight Winstead
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report and
the performance graph on page 11 shall not be incorporated by reference into any
such filings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1996, the Company's Board of
Directors, based upon the recommendations of the Compensation Committee,
established the levels of compensation for the Company's executive officers.
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative stockholder
return on the Company's Common Stock with the cumulative total return of the
Nasdaq Pharmaceutical Index and the Nasdaq Stock Market -- US Index for the
period that commenced October 12, 1995, the date on which the Company's Common
Stock was first registered under the Exchange Act, and ended on December 31,
1996.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG SONUS PHARMACEUTICALS, INC.,
THE NASDAQ PHARMACEUTICAL INDEX
AND THE NASDAQ STOCK MARKET -- US INDEX
<TABLE>
<CAPTION>
SONUS NASDAQ STOCK NASDAQ
PHARMACEUTICALS, INC. MARKET-US PHARMACEUTICAL
--------------------- ------------ --------------
<S> <C> <C> <C>
10/12/95 100 100 100
12/95 175 104 122
3/96 229 109 127
6/96 289 118 123
9/96 271 122 126
12/96 425 128 122
</TABLE>
* $100 INVESTED ON 10/12/95 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
12
<PAGE> 15
PROPOSAL TWO
AMENDMENT TO THE 1991 PLAN TO INCREASE THE TOTAL
NUMBER OF SHARES ISSUABLE THEREUNDER
INTRODUCTION
The Board of Directors adopted and the stockholders of the Company
originally approved the Incentive Stock Option, Nonqualified Stock Option and
Restricted Stock Purchase Plan -- 1991 (the "1991 Plan") in November 1991. The
Board of Directors amended the 1991 Plan on January 28, 1997 to increase the
authorized number of shares of Common Stock issuable thereunder by 300,000
shares and to reserve the additional shares for issuance under the 1991 Plan,
bringing the total number of shares of Common Stock subject to the 1991 Plan to
1,500,000.
Approval of the amendments to the 1991 Plan will require the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
present or represented at the annual meeting of stockholders and entitled to
vote thereat. Proxies solicited by management for which no specific direction is
included will be voted FOR the amendment of the 1991 Plan to add 300,000 shares
of Common Stock to the pool of shares reserved for issuance thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE 1991
PLAN.
The principal features of the 1991 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1991 Plan itself.
Copies of the 1991 Plan can be obtained by writing to the Secretary, SONUS
Pharmaceuticals, Inc., 22026 20th Avenue, S.E., Suite 102, Bothell, Washington
98021.
1991 PLAN TERMS
The 1991 Plan provides for the grant by the Company of options and/or
rights to purchase up to an aggregate of 1,200,000 shares of Common Stock of the
Company to its officers, directors, key employees, consultants and other
business persons having important business relationships with the Company, or
any parent or subsidiary corporation of the Company. As of the Record Date,
approximately eight (8) executive officers and directors of the Company and
approximately thirty-four (34) other employees were eligible to participate. The
purpose of the 1991 Plan is to enable the Company to attract and retain persons
of ability as employees, officers, directors and consultants and to motivate
such persons by providing them with an equity participation in the Company. The
1991 Plan expires November 1, 2001 unless terminated earlier by the Board of
Directors.
The 1991 Plan provides that it is to be administered by the Board of
Directors or a committee appointed by the Board. Presently, the Company's Board
of Directors administers the 1991 Plan (the "Administrator"). The Administrator
has broad discretion to determine the persons entitled to receive options and/or
rights to purchase under the 1991 Plan, the terms and conditions on which
options and/or rights to purchase are granted and the number of shares subject
thereto. The Administrator also has discretion to determine the nature of the
consideration to be paid upon the exercise of an option and/or right to purchase
granted under the 1991 Plan. Such consideration may generally consist of cash or
shares of Common Stock of the Company or, in the case of rights to purchase, a
promissory note.
Options granted under the 1991 Plan may be either "incentive stock
options," within the meaning of Section 422 of the Internal Revenue Code, or
"nonqualified stock options," as determined by the Administrator. Options may be
granted under the 1991 Plan for terms of up to ten (10) years. The exercise
price of options and the purchase price of rights to purchase must be at least
equal to the fair market value of the Common Stock of the Company as of the date
of grant. No optionee may be granted incentive stock options under the 1991 Plan
to the extent that the aggregate fair market value (determined as of the date of
grant) of the shares of Common Stock with
13
<PAGE> 16
respect to which incentive options are exercisable for the first time by the
optionee during any calendar year would exceed $100,000. Further, no optionee
may be granted options or rights to purchase in excess of 500,000 shares in any
year. Options granted under the 1991 Plan to officers, employees, directors, or
consultants of the Company may be exercised only while the optionee is employed
or retained by the Company or within three to six months after termination for
any reason, with the exact date of expiration to be determined by the
Administrator.
Upon the occurrence of a consolidation or merger in which the Company is
not the surviving corporation, the sale of substantially all of the Company's
assets and certain other similar events (a "Change-of-Control Event"), the 1991
Plan provides that the 1991 Plan itself and all outstanding options shall
terminate unless provision is made in writing for the continuance of the 1991
Plan and for the assumption of outstanding options and rights to purchase
previously granted. If provision for the assumption of outstanding options and
rights to purchase is not made in connection with a Change-of-Control Event,
then notice shall be provided to all participants and all outstanding options
and rights to purchase shall be accelerated. In the event that the outstanding
shares of Common Stock while the 1991 Plan is in effect are increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of merger, consolidation or
reorganization in which the Company is the surviving corporation, or of a
recapitalization, stock split, combination of shares, reclassification,
reincorporation, stock dividend (in excess of 2%) or of another change in the
corporate structure of the Company, appropriate adjustments will be made by the
Board of Directors to the aggregate number and kind of shares subject to the
1991 Plan and the number and kind of shares and the price per share subject to
outstanding incentive options, nonqualified options and rights to purchase in
order to preserve, but not to increase, the benefits to persons then holding
incentive options, nonqualified options or rights to purchase.
Payment for shares upon exercise of an option or upon issuance of
restricted stock must be made in full at the time of exercise, or issuance with
respect to restricted stock. The form of consideration payable upon exercise of
an option or purchase of restricted stock shall, at the discretion of the
Compensation Committee, be (i) by tender of United States dollars in cash, check
or bank draft; (ii) subject to any legal restriction against the Company's
acquisition or purchase of the Company's shares of Common Stock, shares of
Common Stock, which shall be deemed to have a value equal to the aggregate fair
market value of such shares determined on the date of exercise or purchase,
(iii) by the issuance of a promissory note acceptable to the Compensation
Committee; or (iv) pursuant to other methods described in the 1991 Plan.
As of the Record Date, options to purchase an aggregate of 1,164,470
shares of Common Stock (net of canceled options) have been granted under the
1991 Plan to the following persons or groups: (i) Steven C. Quay, M.D., Ph.D.,
444,931 shares; (ii) Charles H. Davis, 56,091 shares; (iii) Gregory Sessler,
79,468; (iv) Terry E. Willard, 90,958 shares; (v) Dilip Worah, 97,321 shares;
(vi) David Wormuth, 74,465 shares; (vii) all current executive officers (as a
group), 768,769 shares; and (viii) all other employees who are not executive
officers (as a group), 395,701 shares.
FEDERAL TAX CONSEQUENCES
The following is a brief summary of the tax effects under the Code that
may accrue to participants in the 1991 Plan.
Incentive Stock Options. No taxable income will be recognized by an
optionee under the 1991 Plan upon either the grant or the exercise of an
incentive stock option; provided the optionee holds the stock for at least two
years after the grant of the options and one year after the exercise of the
option. If an incentive stock option is exercised more than three months after a
termination due to a retirement, it will be treated as a sale or other
disposition of the shares acquired upon exercise of an incentive stock option,
and the tax treatment of the gain or loss realized will depend upon how long the
shares were held before their sale or disposition. The Company receives no tax
benefit from incentive stock options granted unless the optionee fails to meet
the holding requirements set forth above.
Nonqualified Stock Options. No taxable income is recognized by an
optionee upon the grant of a nonqualified stock option. Upon exercise, however,
the optionee will recognize ordinary income in the amount by
14
<PAGE> 17
which the fair market value of the shares purchased, on the date of exercise,
exceeds the exercise price paid for such shares. The income recognized by the
optionee will be subject to income tax withholding by the Company out of the
optionee's current compensation. If such compensation is insufficient to pay the
taxes due, the optionee will be required to make a direct payment to the Company
for the balance of the tax withholding obligation. The Company will be entitled
to a tax deduction equal to the amount of ordinary income recognized by the
optionee, provided the applicable withholding requirements are satisfied.
Restricted Stock. The receipt of restricted stock will not result in a
taxable event until the applicable period(s) of restriction lapse, unless the
participant makes an election under Section 83(b) of the Code to be taxed as of
the date of grant. If a Section 83(b) election is made, the participant will
recognize ordinary income in an amount equal to the excess of the fair market
value of such shares on the date of grant over the amount paid for such shares.
If no amount is paid for such shares, the participant will recognize ordinary
income in an amount equal to the fair market value of such shares on the date of
the grant. Even if the amount paid and the fair market value of the shares are
the same (in which case there would be no ordinary income), a Section 83(b)
election must be made to avoid deferral of the date ordinary income is
recognized. If no Section 83(b) election is made, a taxable event will occur on
each date the participant's ownership rights vest (i.e., when the period(s) of
restriction lapse) as to the number of shares that vest on that date, and the
holding period for long-term capital gain purposes will not commence until the
date the shares vest. The participant will recognize ordinary income on each
date shares vest in an amount equal to the excess of the fair market value of
such shares on that date over the amount paid for such shares.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 1997, and recommends that stockholders vote for ratification
of such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
Ernst & Young LLP has audited the Company's financial statements
annually since inception. Its representatives are expected to be present at the
meeting with the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 1998
Annual Meeting of Stockholders and presentation in the Company's Proxy Statement
with respect to such meeting should arrange for such proposal to be delivered to
the Company at its principal place of business no later than December 31, 1997
in order to be considered for inclusion in the Company's proxy statement
relating to that meeting. Matters pertaining to such proposals, including the
number and length thereof, eligibility of persons entitled to have such
proposals included and other aspects are regulated by the Securities Exchange
Act of 1934, Rules and Regulations of the Securities and Exchange Commission and
other laws and regulations to which interested persons should refer.
15
<PAGE> 18
OTHER MATTERS
Management is not aware of any other matters to come before the meeting.
If any other matter not mentioned in this Proxy Statement is brought before the
meeting, the proxy holders named in the enclosed Proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
By Order of the Board of Directors
Steven C. Quay, M.D., Ph.D.
President, Chief Executive Officer and
Secretary
April 29, 1997
The Annual Report to Stockholders of the Company for the fiscal year
ended December 31, 1996 is being mailed concurrently with this Proxy Statement
to all stockholders of record as of April 22, 1997. The Annual Report is not to
be regarded as proxy soliciting material or as a communication by means of which
any solicitation is to be made.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1996 WILL BE
PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO INVESTOR
RELATIONS, SONUS PHARMACEUTICALS, INC., 22026 20TH AVENUE, S.E., SUITE 102,
BOTHELL, WASHINGTON 98021.
16
<PAGE> 19
PROXY
SONUS PHARMACEUTICALS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF THE STOCKHOLDERS - JUNE 18, 1997
The undersigned hereby nominates, constitutes and appoints Steven C.
Quay, M.D., Ph.D. and Gregory Sessler, and each of them individually, the
attorney, agent and proxy of the undersigned, with full power of substitution,
to vote all stock of SONUS PHARMACEUTICALS, INC. which the undersigned is
entitled to represent and vote at the 1996 Annual Meeting of Stockholders of the
Company to be held at the Washington Athletic Club, 1325 Sixth Avenue, Seattle,
Washington, on June 18, 1997, at 9:00 A.M., and at any and all adjournments or
postponements thereof, as fully as if the undersigned were present and voting at
the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2 AND 3
1. Election of Directors
[ ] FOR [ ] WITHHOLD AUTHORITY
all nominees listed below (except to vote for all nominees
as marked to the contrary below) listed below
Election of the following nominees as directors: Steven C. Quay, M.D., Ph.D.,
Donald B. Milder, Harry A. Shoff and Dwight Winstead.
(INSTRUCTIONS: To withhold authority to vote for any nominee, print that
nominee's name in the space provided below.)
- - --------------------------------------------------------------------------------
2. Amendment of the Company's Incentive Stock Option, Non-Qualified Stock
Option and Restricted Stock Purchase Plan - 1991 to increase the number of
shares subject thereto by 300,000 for a total of 1,500,000 shares of Common
Stock.
3. Ratification of Ernst & Young LLP as independent auditors:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, on such other business as may properly come before the
meeting or any adjournment thereof.
<PAGE> 20
IMPORTANT--PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE DIRECTORS NAMED ON THE REVERSE SIDE OF THIS PROXY, "FOR" THE
AMENDMENT OF THE INCENTIVE STOCK OPTION, NON-QUALIFIED STOCK OPTION AND
RESTRICTED STOCK PURCHASE PLAN - 1991 AND "FOR" RATIFICATION OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS. THIS PROXY CONFERS DISCRETIONARY AUTHORITY TO
CUMULATE VOTES FOR ANY AND ALL OF THE NOMINEES FOR ELECTION OF DIRECTORS FOR
WHICH AUTHORITY TO VOTE HAS NOT BEEN WITHHELD.
Date ______________, 1997
-----------------------------------
(Signature of stockholder)
Please sign your name exactly as it
appears hereon. Executors,
administrators, guardians, officers
of corporations and others signing
in a fiduciary capacity should state
their full titles as such.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO
SIGN AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
