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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 (AMENDMENT NO )
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Check the appropriate box:
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RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Proxy Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240a-12
Cell Pathways, Inc.
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(Name of Registrant as Specified in its Charter)
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[ ] Fee paid previously with preliminary materials.
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CELL PATHWAYS, INC.
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
April 18, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Cell Pathways, Inc. which will be held on Wednesday, May 30, 2001 at 10:00 a.m.
local time at the Rittenhouse Hotel, 210 West Rittenhouse Square, Philadelphia,
Pennsylvania.
At this year's meeting, you will be asked to elect three directors to serve
terms of three years each and to ratify the selection of the Company's
independent auditors for 2001, as well as to consider and act upon such other
business as may properly come before the meeting or any adjournment(s) of the
meeting.
The Notice of Annual Meeting of Stockholders, Proxy Statement, form of
proxy and 2000 Annual Report to Stockholders are included with this letter.
Upon adjournment of the meeting, the directors and officers of the Company
will be available to confer informally with stockholders.
We hope that many of you will be with us. Whether or not you plan to
attend, please sign, date and return your proxy promptly in the enclosed
envelope.
Sincerely yours,
/s/ Robert J. Towarnicki
Robert J. Towarnicki
President and Chief Executive Officer
Chairman of the Board of Directors
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CELL PATHWAYS, INC.
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 2001
To the Stockholders of Cell Pathways, Inc.:
The 2001 Annual Meeting of Stockholders of Cell Pathways, Inc. will be held
at the Rittenhouse Hotel, 210 West Rittenhouse Square, Philadelphia,
Pennsylvania on Wednesday, the 30th day of May at 10:00 a.m. local time, for the
purpose of asking the stockholders to:
1. Elect three directors for terms of three years each;
2. Ratify the selection of Arthur Andersen LLP as the Company's independent
auditors for 2001; and
3. Consider and act upon such other business as may properly come before
the meeting.
Stockholders of record at the close of business on April 2, 2001 will be
entitled to vote at the meeting. The date of mailing of this Notice of Meeting
and Proxy Statement is on or about April 18, 2001.
By order of the Board of Directors
Martha E. Manning
Secretary
Horsham, Pennsylvania
April 18, 2001
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
THE COMPANY'S 2000 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THE PROXY STATEMENT
AND FORM OF PROXY.
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CELL PATHWAYS, INC.
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
PROXY STATEMENT
SOLICITATION OF PROXY
The enclosed proxy is solicited by the Board of Directors (the "Board") of
Cell Pathways, Inc., (the "Company") for use at the 2001 Annual Meeting of
Stockholders to be held on Wednesday, May 30, 2001 at 10:00 a.m. local time at
the Rittenhouse Hotel, 210 West Rittenhouse Square, Philadelphia, Pennsylvania,
including any adjournment or rescheduling thereof (the "Annual Meeting"). A copy
of the Notice of the Annual Meeting accompanies this Proxy Statement. It is
anticipated that the mailing of this Proxy Statement will take place on or about
April 18, 2001.
Whether or not you plan to attend the Annual Meeting, the Board
respectfully requests the privilege of voting on your behalf and urges you to
sign, date and return the enclosed proxy. By doing so you will, unless such
proxy is subsequently revoked by you, authorize the persons named therein, or
any of them, to act on your behalf at the Annual Meeting.
Any stockholder who submits a proxy may revoke it by giving a written
notice of revocation to the Secretary, or by submitting a duly executed proxy
bearing a later date, at or before the Annual Meeting and before the proxy is
voted.
MATTERS PROPOSED FOR VOTE OF THE STOCKHOLDERS AT THE ANNUAL MEETING
The following matters will be proposed to the stockholders at the Annual
Meeting:
1. Election of three directors to serve for terms of three years each and
until their respective successors are elected and qualified.
2. Ratification of the selection of Arthur Andersen LLP as independent
auditors of the Company for 2001.
SHARES OUTSTANDING; VOTING
Shares represented by valid proxies in the accompanying form, and not
revoked prior to exercise, will be voted in accordance with the instructions
indicated thereon. If no contrary instruction is indicated, shares represented
by such proxies will be voted FOR the election of the individuals herein
nominated for directors and FOR the ratification of the selection of the
Company's independent auditors. The Company does not know of any other matters
that will be presented at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting, or any of its adjournments, the person
or persons voting the proxies will vote them in accordance with their best
judgment on such matters. If a director nominee is unable to serve or for good
cause will not serve, the proxies will be voted for such substitute nominee as
the Board may propose; the Company has no reason to believe that this
contingency may arise in connection with the Annual Meeting.
Only holders of shares of the Common Stock of the Company (the "Common
Stock") at the close of business on April 2, 2001, the record date for the
Annual Meeting, will be entitled to vote at the Annual Meeting. On April 2,
2001, the outstanding stock of the Company entitled to vote consisted of
31,100,904 shares of Common Stock, with each such share entitled to one vote.
Appearance at the Annual Meeting in person or by proxy of the holders of Common
Stock entitled to cast 15,550,453 votes is required for a quorum. Shares
represented by abstentions or broker non-votes will be counted as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. A broker "non-vote" occurs when a registered broker holding a customer's
shares in the name of the broker has not received voting instructions on the
matter from the customer, is barred by applicable rules from exercising
discretionary voting authority in the matter,
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and so indicates on the proxy. The following paragraphs set forth the vote of
eligible shares required for each proposal, assuming the presence of a quorum.
With respect to Proposal No. 1, directors will be elected by a plurality of
the votes cast. This means that the director nominee with the most affirmative
votes for a particular slot is elected for that slot. In an uncontested election
for directors, the plurality requirement is not a factor. Abstentions will not
negatively affect the election of candidates receiving the plurality of votes.
Brokers who have not received voting instructions from beneficial owners by ten
days prior to the Annual Meeting are permitted to vote the shares of such
holders in their discretion, subject to any instructions subsequently given by
such holders prior to the Annual Meeting.
With respect to Proposal No. 2, ratification of the selection of Arthur
Andersen LLP as independent auditors for 2001, action of the stockholders will
be taken by a majority of the votes cast, excluding abstentions. The failure of
abstentions to be counted may affect the outcome of the vote by virtue of not
being counted one way or the other. Brokers who have not received voting
instructions from beneficial owners by ten days prior to the Annual Meeting are
permitted to vote the shares of such holders in their discretion, subject to any
instructions subsequently given by such holders prior to the Annual Meeting.
If any additional matters should properly come before the Annual Meeting,
then, except as otherwise provided by law or by the Certificate of Incorporation
or Bylaws of the Company with respect to particular types of matters, action of
the stockholders would be taken by a majority of the votes cast at the Annual
Meeting, excluding abstentions which would not be counted as votes for or
against.
Your vote is important. Accordingly, you are asked to complete, sign and
return the accompanying proxy card (or voting instruction sheet for your broker
or other nominee), whether or not you plan to attend the Annual Meeting. If you
plan to attend the Annual Meeting to vote in person and your shares are
registered with the Company's transfer agent in the name of a broker or other
nominee, you must secure a proxy card from the broker or other nominee assigning
voting rights to you for your shares.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board is divided into three classes, Class I, Class II and Class III.
Each class consists as nearly as may be possible of one-third of the total
number of directors, and one class is elected each year for a three-year term.
The terms of the Class III directors expire at the Annual Meeting and their
successors are to be elected at the Annual Meeting for three-year terms expiring
at the annual meeting of 2004. The terms of the Class I and Class II directors
expire at the annual meetings in 2002 and 2003, respectively.
The nominees for election as Class III directors of the Company are Judith
A. Hemberger, Ph.D., Robert J. Towarnicki and Rifat Pamukcu, M.D.
The following information is provided for the three nominees proposed to be
elected as Class III directors, and also for the continuing Class I and Class II
directors. All of such nominees and Class I and Class II directors were elected
by the Company's stockholders, except for Dr. Pamukcu who was elected by the
Board as a Class III director in September 2000 for a term expiring at the
Annual Meeting. Mr. Ross who has been a director of the Company since January
1998 is retiring from the Board as of May 30, 2001, the date of the Annual
Meeting. The Board intends to fill the vacancy left by Mr. Ross in Class I.
DIRECTOR
NAME AGE SINCE POSITION WITH THE COMPANY
- ---- --- -------- -------------------------
NOMINEES FOR CLASS III DIRECTORS
Judith A. Hemberger, Ph.D.(2)........... 53 1998 Director
Rifat Pamukcu, M.D. .................... 43 2000 Director; Executive Vice President,
Research and Development; and Chief
Scientific Officer of the Company
Robert J. Towarnicki.................... 49 1996 Chairman of the Board of Directors;
Chief Executive Officer; and
President of the Company
CONTINUING CLASS II DIRECTORS
William A. Boeger(1,2).................. 51 1992 Director
Louis M. Weiner, M.D. .................. 49 1998 Director
CONTINUING CLASS I DIRECTOR
Thomas M. Gibson(1)..................... 74 1996 Director
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(1) Member of the Audit Committee
(2) Member of the Compensation and Stock Option Committee
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board unanimously recommends a vote FOR election of the nominees for
Class III directors.
THE BOARD OF DIRECTORS
William A. Boeger, 51, has served as a director of the Company since
December 1992 and as Chairman of the Board from September 1996 to May 2000. Mr.
Boeger is Chief Executive Officer and a director of Chronix Biomedical, Inc.
Since 1986 he has been Managing General Partner of Quest Ventures, a venture
capital company that he founded. From 1994 to 1999 he served as President and
Chief Executive Officer of Calypte Biomedical Corporation; he served as Chairman
of the board of Calypte Biomedical Corporation from 1993 to 1999. From 1980 to
1986, Mr. Boeger was employed by Continental Capital Ventures, a venture capital
fund focused on early stage technology companies, where he attained the position
of General Partner. Mr. Boeger is also a director of Calypte Biomedical, Inc.
and Iridex Corporation.
Thomas M. Gibson, 74, has served as a director of the Company since August
1996. From 1947 to 1992 he served with Gibson Electric Company, Inc., of which
he was Chief Executive Officer at the time of his retirement. He served as
President of Jupiter Electric Company, Inc. until 1996 and has served as
President of Integrated Technologies Development Corporation since 1995. In the
early 1980s he co-founded Gibson
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Information Systems, a data service bureau which he sold in 1986. He is
President of TMG Technical, Inc., which does business as Jupiter Technical
Services.
Judith A. Hemberger, Ph.D., 53, has served as a director of the Company
since June 1998. She is Executive Vice President and Chief Operating Officer of
Pharmion Corporation. From 1998 to 1999 she served as Senior Vice President,
Business and Planning, Avax Technologies, Inc. From 1979 to 1997, she served
with Marion Merrell Dow Inc., most recently as Senior Vice President, Global
Regulatory Affairs (1995-1997), and Vice President, Global Medical Affairs and
Commercial Development (1994-1995). She is a member of the board of directors of
Schein Pharmaceutical Company, the International board of directors of
Pharmaceutical Research Associates and Regulatory/Clinical Consultants, Inc.
Since 1985, she has been Adjunct Associate Professor, Division of Pharmacology,
University of Missouri at Kansas City School of Pharmacy.
Rifat Pamukcu, M.D., 43, has served as a director of the Company since
September 2000, as Executive Vice President since July 2000, as Senior Vice
President from 1997 to July 2000 and as Chief Scientific Officer since 1993. Dr.
Pamukcu is a co-founder of the Company. Prior to joining the Company full time
in 1993, from 1989 to March 1993, he was Assistant Professor of Medicine at the
University of Cincinnati and co-chair of the Company's scientific advisory
board. He continued as an Adjunct Assistant Professor of Medicine at the
University of Cincinnati from 1993 to 1995. He was a postdoctoral fellow from
1986 to 1989 in the Division of Gastroenterology at the University of Chicago.
Dr. Pamukcu received a B.A. in Biology from Johns Hopkins University in 1979 and
an M.D. degree from the University of Wisconsin School of Medicine in 1983.
Robert J. Towarnicki, 49, has served as a director of the Company and Chief
Executive Officer since October 1996, as Chairman of the Board since May 2000
and as President of the Company since January 1998. Prior to joining the
Company, from 1992 to 1996, he served as President, Chief Operating Officer, a
director and most recently as Executive Vice President of Integra LifeSciences
Corporation, which is the publicly held parent firm for a group of biotechnology
and medical device companies including Collatech, Inc., ABS LifeSciences Inc.,
Telios Pharmaceuticals, Inc. and Vitaphore Corporation. From 1991 to 1992, he
served as Founder, President and Chief Executive Officer of MediRel, Inc. From
1989 to 1991, he was General Manager of Focus/MRL, Inc., from 1985 to 1989, he
was Vice President of Development and Operations for Collagen Corporation, and
from 1974 to 1985, he held a variety of operations management positions at
Pfizer, Inc. and Merck & Co., Inc.
Louis M. Weiner, M.D., 49, has served as a director of the Company and as a
member of the Company's scientific advisory board since the latter part of 1998.
He has served as the Chairman of the Department of Medical Oncology, Division of
Medical Science at Fox Chase Cancer Center since 1994 and has been on staff at
Fox Chase Cancer Center since 1984. Since 1995, Dr. Weiner has been a Professor
in the Department of Medicine, Temple University School of Medicine. Since 1995,
he has chaired the Biologic Response Modifiers Committee of the Eastern
Cooperative Oncology Group.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 2000, the Board held six full Board meetings and eleven committee
meetings. All directors attended at least 75% of the meetings of the Board and
of the committees of which they were members, with the exception of Mr. Ross who
attended 83% of the Board meetings and 57% of the meetings of the committee of
which he is a member. The Board has standing audit and compensation committees.
The Board does not have a standing nominating committee; nominees for director
are selected by the Board, all but two of whose members are outside directors.
The Compensation and Stock Option Committee of the Board determines the
salaries and bonuses of the principal executive officers of the Company and
administers the 1997 Equity Incentive Plan. This committee met seven times in
2000. The Compensation and Stock Option Committee during 2000 consisted of
directors Boeger, Gibbons, Hemberger and Ross. See "Compensation Committee
Report."
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The Audit Committee of the Board assists the Board in the discharge of its
responsibility for oversight of the Company's financial function, including
accounting, auditing, financial reporting, internal controls, internal audit,
investment and risk management. The Audit Committee selects and evaluates the
Company's outside auditors, confers with the auditors with respect to the scope
and results of the annual audit and other matters affecting the audit, reviews
with the auditors and Company personnel the financial statements and matters
pertaining to the internal accounting function, and, in general, acts as the
delegate of the Board with respect to relations with the independent auditors.
See "Audit Committee Report." The Board has adopted a written charter for the
Audit Committee, a copy of which is appended as Appendix A to this Proxy
Statement.
The Audit Committee met four times during 2000. The Audit Committee during
2000 consisted of directors Boeger, Gibbons, who resigned from the Board on
March 31, 2001, and Gibson, each of whom is independent as defined in Rule 4200
of the marketplace rules of the National Association of Securities Dealers
("NASD"), with the exception of Mr. Gibbons who served as the Chief Executive
Officer of Tseng Labs, Inc. ("Tseng") up to the time the Company acquired Tseng
in November 1998, but has not served as an officer or employee of the Company or
any subsidiary thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No director who served as a member of the Compensation and Stock Option
Committee during 2000 is a current or former officer or employee of the Company.
The following directors served on the Compensation and Stock Option Committee
for at least part of 2000: Boeger, Gibbons, Hemberger and Ross, as well as Roger
J. Quy and Peter G. Schiff, both of whom left the Board in 2000. Mr. Gibbons
served as Chief Executive Officer of Tseng up to the time the Company acquired
Tseng in November 1998, but has not served as an officer or employee of the
Company or any subsidiary thereafter.
COMPENSATION OF DIRECTORS
The Company's non-employee directors do not currently receive any
compensation for service on the Board or any committee thereof other than
pursuant to the 1997 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). Directors are reimbursed for certain expenses in connection with
attendance at Board and committee meetings. Directors who are employees of the
Company do not receive separate compensation for their services as directors.
The Directors' Plan was adopted by the Board on October 14, 1997 and
approved by the Company's stockholders shortly thereafter. The Directors' Plan
provides for the automatic grant of options to purchase shares of Common Stock
to non-employee directors of the Company. The Directors' Plan is administered by
the Board, unless the Board delegates administration to a committee.
Each person who first becomes a non-employee director is automatically
granted an option to purchase 18,157 shares of Common Stock (the "Inaugural
Grant"). In addition, on the date of each annual stockholder meeting, each
non-employee director who has served at least one full year as a director is
automatically granted an option to purchase 5,447 shares of Common Stock (the
"Anniversary Grant"). Options subject to an Inaugural Grant under the Directors'
Plan vest in three equal annual installments commencing on the first anniversary
of the date of the grant of the option. Options subject to an Anniversary Grant
under the Directors' Plan vest in full on the first anniversary of the date of
the grant of the option. The vesting of options under the Directors' Plan is
conditioned on the continued service of the recipient as a director, employee or
consultant of the Company or any affiliate of the Company through the respective
vesting dates.
The exercise price of the options granted under the Directors' Plan is
equal to the fair market value of the Common Stock on the date of grant. No
option granted under the Directors' Plan may be exercised after the expiration
of 10 years from the date it was granted. In the event of certain changes of
control, options outstanding under the Directors' Plan will automatically become
fully vested and will terminate if not exercised prior to such change of
control.
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At the time Dr. Weiner agreed to become a member of the Board, he also
agreed to become a member of the Company's scientific advisory board. In the
latter capacity, Dr. Weiner received an option, vesting over three years, to
acquire 13,750 shares of Common Stock at $6.60 per share, and is compensated at
the rate of $4,000 per quarter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of February 28, 2001 as to each person who owns
more than five percent of the outstanding Common Stock, each director, each of
the five most highly compensated executive officers during 2000, and all
directors and such executive officers as a group. For purposes of calculating
beneficial ownership, such persons are deemed to own shares subject to options
or warrants that are currently exercisable or will become exercisable within 60
days after February 28, 2001.
AMOUNT AND NATURE
BENEFICIAL OWNER AND ADDRESS(1) OF BENEFICIAL OWNERSHIP PERCENT
- ------------------------------- ----------------------- -------
Morgan Stanley Dean Witter & Co.(2)......................... 4,245,613 13.1%
1585 Broadway
New York, NY 10036
Jackson Boulevard Capital Management, Ltd.(3)............... 2,002,783 6.2%
53 West Jackson Boulevard, Suite 400
Chicago, IL 60604
DIRECTOR OR EXECUTIVE OFFICER
- ------------------------------------------------------------
William A. Boeger(4)........................................ 60,279 *
Thomas M. Gibson(5)......................................... 133,331 *
Lloyd G. Glenn(6)........................................... 45,382 *
Brian J. Hayden(7).......................................... 45,433 *
Judith A. Hemberger, Ph.D.(8)............................... 19,287 *
Rifat Pamukcu, M.D.(9)...................................... 431,436 1.4%
Bruce R. Ross(10)........................................... 23,604 *
Robert J. Towarnicki(11).................................... 330,044 1.1%
Richard H. Troy(12)......................................... 249,720 *
Louis M. Weiner, M.D.(13)................................... 21,272 *
---------
All executive officers and directors (10 persons)(14)....... 1,359,788 4.4%
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* Indicates beneficial ownership of less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders, including, in particular, reports filed on Form
13G, Form 4 and Form 5 with the Securities and Exchange Commission. Unless
otherwise indicated in the footnotes to this table, and subject to
community property laws where applicable, the Company believes that each of
the stockholders named in this table has sole voting and investment power
with respect to the shares indicated as beneficially owned. Applicable
percentages are based on 31,095,904 shares of the Common Stock outstanding
as of February 28, 2001, adjusted as required by the rules promulgated by
the Securities and Exchange Commission. The address of the directors and
executive officers is 702 Electronic Drive, Horsham, PA 19044.
(2) Represents shares held by funds managed by Morgan Stanley Dean Witter & Co.
and its affiliates. Voting and dispositive power is shared. Includes
warrants to purchase 1,282,500 shares of Common Stock at $12 per share.
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(3) Represents shares held by, or by funds managed by, Jackson Boulevard
Capital Management, Ltd., Jackson Boulevard Partners, Paul J. Duggan and
their affiliates. Voting and dispositive power is shared with respect to
all shares except 12,998. Includes warrants to purchase 1,153,750 shares of
Common Stock at $12 per share.
(4) Includes 33,938 shares and options to purchase 16,341 shares owned of
record by Mr. Boeger. Also includes 5,940 shares owned of record by Quest
Ventures II and 4,060 shares owned of record by Quest Ventures
International; Mr. Boeger is a managing general partner of Quest Ventures
and may be deemed to share voting and investment power with respect to such
shares; Mr. Boeger disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein.
(5) Includes options to purchase 16,341 shares beneficially owned by Thomas M.
Gibson and 106,690 shares in the Thomas M. Gibson Trust established by
Thomas M. Gibson.
(6) Includes options to purchase 39,200 shares.
(7) Represents options to purchase 45,433 shares.
(8) Includes 635 shares owned jointly with Dr. Hemberger's mother, and options
to purchase 11,500 shares of Common Stock.
(9) Includes options to purchase 140,075 shares, 6,250 of which are unvested
and would currently be subject to a repurchase option by the Company.
(10) Represents options to purchase 23,604 shares. Mr. Ross is retiring from the
Board effective May 30, 2001.
(11) Includes options to purchase 144,500 shares. Also includes 3,678 shares
beneficially owned by Mr. Towarnicki's son, 3,678 shares owned by Mr.
Towarnicki's daughter, and 43,750 shares in a limited partnership in which
Mr. Towarnicki's son and daughter have a limited interest, with respect to
all of which shares Mr. Towarnicki disclaims beneficial ownership except to
the extent of his pecuniary interest therein.
(12) Includes 2,500 shares subject to repurchase by the Company and options to
purchase 37,500 shares. Also includes 21,600 shares beneficially owned by
Mr. Troy's spouse, with respect to which shares Mr. Troy disclaims
beneficial ownership except to the extent of his pecuniary interest
therein. Mr. Troy resigned his positions of director and executive officer
in September 2000.
(13) Represents options to purchase 21,272 shares.
(14) Includes options to purchase shares, as well as shares as to which
directors and executive officers of the Company disclaim beneficial
ownership. See Notes 4 through 13 above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto and
written representations furnished to the Company, the Company believes that all
directors and executive officers of the Company filed in timely fashion all
reports of beneficial ownership of Common Stock required to be filed by Section
16 (a) of the Securities and Exchange Act of 1934 with the exception of the
purchase of 25,000 shares of Common Stock pursuant to exercise of a stock option
by Brian J. Hayden in March 2000, which purchase was reported on a Form 4 for
June 2000 and again on a Form 5 for 2000.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER AND EXECUTIVE OFFICERS OF THE
COMPANY
The following Summary Compensation Table provides the annual and long-term
compensation for the fiscal years ended December 31, 2000, 1999 and 1998 awarded
or paid to, or earned by, the five most highly compensated executive officers
during 2000, including the Chief Executive Officer.
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SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ----------- -------- -------- ------------ ------------
Robert J. Towarnicki........... 2000 $273,000 $ -- 225,000 $ 7,500(1)
Chairman; Chief Executive 1999 260,000 75,000 -- --
Officer; President 1998 195,000 115,000 120,000 25,000(2)
Rifat Pamukcu, M.D. ........... 2000 204,750 -- 175,000 7,500(1)
Chief Scientific Officer; 1999 195,000 52,500 -- --
Executive Vice President -- 1998 175,000 75,000 80,000 --
Research and Development
Brian J. Hayden................ 2000 178,500 -- 125,000 11,546(5)
Chief Financial Officer; 1999 170,000 33,750 -- --
Vice President -- Finance; 1998 155,000 42,500 30,000 --
Treasurer
Lloyd G. Glenn................. 2000 175,000 20,000 150,000 --
Vice President -- Sales and 1999 154,380 29,000 -- 25,000(2)
Marketing 1998 78,462(3) 19,615 50,000 --
Richard H. Troy(4)............. 2000 189,000 -- 25,000 7,500(1)
Senior Vice President -- 1999 180,000 33,750 -- --
Corporate Development; 1998 160,000 62,500 50,000 --
General Counsel; Secretary
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(1) Represents financial planning services.
(2) Represents relocation expenses.
(3) Lloyd G. Glenn began serving as Vice President, Marketing in June 1998. He
was promoted to Vice President of Sales and Marketing in March 2000.
(4) Richard H. Troy resigned from his positions of director, Senior Vice
President -- Corporate Development, General Counsel and Secretary in
September 2000.
(5) Represents financial planning services and relocation expenses.
EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENTS
In October 1996, the Company entered into an employment agreement with
Robert J. Towarnicki providing for initial annual compensation of $175,000 and
up to $35,000 as an annual bonus, certain relocation expenses and a severance
payment equal to six months of salary.
In February 1993, the Company entered into an employment agreement with
Rifat Pamukcu providing for initial annual compensation of $110,000 and up to
$30,000 as an annual bonus, certain relocation expenses and a severance payment
equal to nine months of salary in the event of involuntary termination or
termination by Dr. Pamukcu for good reason.
In November 1997, the Company entered into an employment agreement with
Brian J. Hayden providing for initial annual compensation of $155,000 and up to
20% of base compensation as an annual bonus, an option to purchase 90,785 shares
of Common Stock at $4.75 per share subject to a four year vesting schedule and a
severance payment equal to six months of salary and twelve months of health care
premiums in the event of termination without cause.
In November 2000, the Company entered into an employment agreement with
Lloyd G. Glenn providing for initial annual compensation of $175,000 and such
annual bonus as may be awarded, and a severance
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payment equal to six months of salary and eighteen months of health care
premiums in the event of termination without cause.
In January 1993, the Company entered into a memorandum of employment with
Richard H. Troy providing for initial compensation of $110,000, up to $30,000 as
an annual bonus, and a severance payment, after two months' notice, equal to six
months of salary and benefits in the event of termination without cause or
termination by Mr. Troy for good reason.
The Company has entered into Change in Control Agreements with Messrs.
Towarnicki, Glenn, Hayden and Dr. Pamukcu. These Agreements provide that if
within two years following a "change in control" of the Company either the
executive's employment with the Company is terminated by the Company for any
reason other than the executive's death, disability or for "cause," or if the
executive resigns for "good reason," the Company will make a lump sum severance
payment to the executive. The lump sum will be equal to two times (three times
in the case of Mr. Towarnicki) base salary, annual bonus and matching
contribution under the Company's 401(k) plan (and any supplemental defined
contribution plan), plus the after-tax cost of continuing the Company's medical
and dental coverage in effect for two years (three years in the case of Mr.
Towarnicki). Any stock option or restricted stock which is not already vested
and exercisable pursuant to the terms of the applicable plan will become fully
vested and exercisable as of the date of the executive's termination and will
remain exercisable until the later of the end of the post-termination exercise
period provided under the applicable option agreement or one year after
executive's termination date, but not longer than the expiration of the option
term. Each executive will receive outplacement assistance services for a period
of 12 months at a cost not to exceed $10,000.
Generally, and as more fully defined in the agreements, a "change in
control" means any of the following circumstances: (i) the acquisition of
beneficial ownership of 20% or more of the Company's voting securities by any
person, entity or group (with certain exceptions, including the consent of the
Company); (ii) during any two-year period the persons serving as directors of
the Company on the date of the agreement, together with replacements or
additions subsequently approved by two-thirds of the board, cease to make up at
least a majority of the board of directors; (iii) a merger, consolidation or
reorganization in which the stockholders of the Company prior to the merger wind
up owning less than 50% of the voting power of the surviving corporation or in
which a person, entity or group (with certain exceptions, including the consent
of the Company) becomes the beneficial owner of 20% or more of the voting power
of the surviving corporation; or (iv) the liquidation or dissolution of the
Company or disposition of all or substantially all of the assets of the Company.
The agreements also provide that if any benefit to the executive would
constitute an excess parachute payment within the meaning of Section 280G of the
Internal Revenue Code, the Company will make additional payments to place the
executive in the same after-tax position (with de minimis exceptions) as if no
such excise tax had been imposed.
STOCK OPTION GRANTS TO AND EXERCISES BY EXECUTIVE OFFICERS
The Company grants options to its executive officers and employees under
its 1997 Equity Incentive Plan (the "Plan"), as amended. As of February 28,
2001, options to purchase a total of 2,992,822 shares of Common Stock were
outstanding under the Plan and options to purchase 1,961,859 shares of Common
Stock remained available for grant thereunder. The following tables show for the
fiscal year ended December 31, 2000 certain information regarding options
granted to, exercised by and held at such dates by the five most highly
compensated executive officers in 2000, including the Chief Executive Officer.
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OPTION GRANTS IN 2000
POTENTIAL REALIZABLE VALUE
AT
PERCENT OF ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION
NUMBER OF GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE(1) 5% 10%
- ---- ---------- ------------- --------- ---------- ------------ ------------
Robert J. Towarnicki.......... 25,000 1.3% $12.13 01/09/10 $ 493,962 $ 786,552
200,000 10.6 5.45 11/28/10 3,951,698 6,292,419
Rifat Pamukcu, M.D. .......... 25,000 1.3 12.13 01/09/10 493,962 786,552
150,000 7.9 5.45 11/28/10 2,963,774 4,719,314
Brian J. Hayden............... 25,000 1.3 12.13 01/09/10 493,962 786,552
100,000 5.3 5.45 11/28/10 1,975,894 3,146,210
Lloyd G. Glenn................ 10,000 .5 12.13 01/09/10 493,962 786,552
40,000 2.1 49.88 02/22/10 3,249,971 5,175,035
100,000 5.3 5.45 11/28/10 1,975,894 3,146,210
Richard H. Troy............... 25,000 1.3 12.13 01/09/10 493,962 786,552
- ---------------
(1) Options granted pursuant to the Plan expire ten years after the date of
grant. The options granted in 2000 vest at a rate of 24% on the first annual
anniversary date and 2% per month thereafter.
(2) The potential realizable value is calculated assuming that the fair market
value of the Common Stock, on the date of the grant as determined by the
Board, appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and the Common
Stock received therefore is sold on the last day of the term of the option
for the appreciated price. The 5% and 10% rates of appreciation are mandated
by the rules of the Securities and Exchange Commission and do not represent
the Company's estimate or projection of future increases in the price of
Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 2000 AT DECEMBER 31, 2000
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
- ---- ----------- ---------- -------------------- -----------------------
Robert J. Towarnicki........ -- $ -- 137,000/308,000 $ 80,850/$24,150
Rifat Pamukcu, M.D. ........ -- -- 132,575/207,425 292,050/ --
Brian J. Hayden............. 50,000 2,053,125(3) 37,933/157,852 --/ --
Lloyd G. Glenn.............. -- -- 25,000/175,000 --/ --
Richard H. Troy............. -- -- 30,000/ 45,000 --/ --
- ---------------
(1) All options are subject to vesting. With respect to options granted prior to
August 1997, early exercise is possible with the unvested portions thereof
remaining subject to a repurchase option by the Company.
(2) To date, all options have been granted at exercise prices equal to the fair
market value per share of Common Stock, as determined by the Board; the
closing price of the Common Stock at December 29, 2000 was $4.75 per share.
(3) This value is calculated in accordance with the rules of the Securities and
Exchange Commission and does not represent the value realized by the
optionee.
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COMPENSATION COMMITTEE REPORT
The Compensation and Stock Option Committee of the Board (the "Compensation
Committee") determines the compensation of the Company's executive officers.
Pursuant to rules adopted by the Securities and Exchange Commission, the
Compensation Committee furnishes the following report on executive compensation.
COMPENSATION PHILOSOPHY
The Company's executive compensation program seeks to accomplish several
major goals:
- To align the interests of executive officers with the long-term interests
of stockholders through participation in the Company's long-term, equity
based incentive compensation programs, principally stock options.
- To motivate executives to achieve key business objectives and to reward
them when such objectives are met.
- To recruit and retain highly qualified executive officers by offering
compensation that is competitive with that offered for comparable
positions in comparable development stage biotechnology and
pharmaceutical companies.
In reviewing the compensation packages for each executive officer, the
Compensation Committee reviewed information from published surveys and data
provided by corporate advisors. Factors that are considered in determining
salary, incentive awards and stock options include but are not limited to:
company size; stage of development; and geographic location. The Company
competes for executive talent with biotechnology and pharmaceutical companies in
the Philadelphia region; the compensation package paid by such companies is a
factor in attracting and retaining executive talent.
BASE SALARY
Base salary represents the fixed component of the executive compensation
program. Base salaries of the chief executive officer and the Company's other
executive officers are determined by reviewing comparable market base salary
compensation, individual performance, relevant experience and demonstrated
capabilities in meeting the requirements of the position. The chief executive
officer's base salary is determined by the Compensation Committee's evaluation
of his attainment of stated overall goals and targets for the Company and his
individual contribution and performance.
LONG TERM INCENTIVES
Stock option awards within the approved Company plans are designed to align
the long-term interest of the Company's executives with those of its
stockholders. Stock options are used as a mechanism to attract executives to the
Company and to be competitive with other biotechnology companies in the region.
We believe that equity based compensation, the value of which cannot be realized
immediately and depends upon the future market value of the Company's stock,
provides the continuing incentive to executives to foster the Company's success
and aligns the interests of the executives with the interests of the
stockholders. We consider corporate performance, future corporate objectives and
individual accomplishments when awarding long term incentives to executives.
CASH BONUSES
The Compensation Committee believes that discretionary cash bonuses are
important to motivate and reward executive officers. Cash bonuses are typically
based on significant achievements and may be awarded to executives based on
attainment of Company-wide and individual goals and objectives. In certain cases
a guaranteed bonus for the first year or two may be awarded in recruiting new
executives to the Company.
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COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Towarnicki's salary of $273,000 for 2000 was determined at the end of
1999 based on his experience in the industry and his accomplishments to that
time. In September 2000, the FDA issued a "not approvable" letter with respect
to the Company's NDA for Aptosyn(TM) (exisulind). Following the public
announcement of this letter, the market price of the Common Stock dropped
substantially. Upon review of the Company's plans going forward, and in further
aligning Mr. Towarnicki's interests with the interests of the stockholders, Mr.
Towarnicki received no salary adjustment at the end of 2000, no cash bonus for
2000, and was awarded, in November 2000, options to purchase 200,000 shares of
Common Stock. Apart from the receipt of the "not approvable" letter, the
Compensation Committee noted the following accomplishments during 2000:
- Continued safety trials of the Company's second compound, CP461, in
preparation for clinical trials in cancer indications in 2001.
- Expanded collaborations to prepare for clinical work with Aptosyn(TM)
(exisulind) in combination with each of Taxotere(R) (Aventis
Pharmaceuticals, Inc.), Xeloda(R) (Roche Laboratories, Inc.), Gemzar(R)
(Eli Lilly and Company) and Navelbine(R) (GlaxoSmithKline) in cancer
indications.
- Entered a marketing agreement for Nilandron(R) (nilutamide), an Aventis
drug, and commenced marketing to urologists at the end of the third
quarter.
- Established a contract sales force of approximately 13 people to promote
Nilandron(R).
- Completed a private round of financing which raised approximately $23
million of capital in 2000, in addition to the $17.2 million raised
during 2000 through the exercise of warrants issued in the 1999
financing.
Compensation and Stock Option
Committee
William A. Boeger
John J. Gibbons
Judith A. Hemberger
Bruce R. Ross
INDEBTEDNESS OF MANAGEMENT
Since January 1, 2000, none of the Company's directors, executive officers,
nominees for election as directors or certain relatives of associates of such
persons has been indebted to the Company in an aggregate amount in excess of
$60,000 except as follows. During 2000, the Company made loans to each of Robert
J. Towarnicki, Chairman, President and Chief Executive Officer, and Brian J.
Hayden, Vice President, Finance, Chief Financial Officer and Treasurer, in order
that they would not be required to sell shares of Common Stock which had been
pledged as collateral to secure indebtedness to third parties and, in the case
of Mr. Hayden, for the additional purpose of relocation. The largest aggregate
indebtedness during 2000, and the indebtedness as of March 31, 2001, was
$253,461 in the case of Mr. Towarnicki and $458,500 in the case of Mr. Hayden.
The loans are evidenced by promissory notes bearing 6% annual interest and are
to be secured by mortgages on residential real estate of each borrower.
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COMMON STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock from the commencement of public trading on November 4, 1998 through
December 31, 2000 with the cumulative total return of the Nasdaq Stock
Market -- U.S. Index and the Nasdaq Pharmaceuticals Index. The graph assumes a
$100 investment made at the beginning of the period and reinvestment of all
dividends. The comparisons depicted in the graph are required by the Securities
and Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Common Stock.
[PERFORMANCE GRAPH]
CLPA NASDAQ US NASDAQ PHARMA.
---- --------- --------------
11/4/98 100.00 100.00 100.00
12/31/98 134.40 121.00 167.10
3/31/99 45.40 135.60 190.10
6/30/99 70.60 148.40 207.70
9/30/99 58.80 152.10 215.50
12/31/99 56.50 224.80 327.30
3/31/00 209.90 252.30 371.70
6/30/00 143.50 219.30 320.70
9/30/00 49.60 201.80 292.90
12/31/00 29.00 135.20 191.00
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AUDIT COMMITTEE REPORT
Management is responsible for the financial reporting process, including
the system of internal control, and for the preparation of consolidated
financial statements in accordance with generally accepted accounting
principles. The Company's independent auditors are responsible for auditing
those financial statements. Our responsibility is to monitor and review these
processes. However, we are not professionally engaged in the practice of
accounting or auditing and are not experts in the fields of accounting or
auditing, including with respect to auditor independence. We rely, without
independent verification, on the information provided to us and on the
representations made by management and the independent auditors. A copy of the
Charter of the Audit Committee is appended as Appendix A to this Proxy
Statement.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company with the auditors, with and without management
present. The Audit Committee has discussed with the independent auditors, Arthur
Andersen LLP, the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended, by the
Auditing Standards Board of the American Institute of Certified Public
Accountants. The Audit Committee has also received and reviewed the written
disclosures and the letter from Arthur Andersen LLP required by Independence
Standards Board Statement No. 1, Independence Discussions with Audit Committees,
as amended, and has discussed with Arthur Andersen LLP their independence.
Based on the reviews and discussions referred to above, we recommend to the
Board that the financial statements referred to above be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
Audit Fees. The aggregate fees billed by Arthur Andersen LLP for
professional services rendered to the Company for the 2000 audit and for review
of the Company's financial statements included in the Company's Quarterly
Reports on Form 10-Q for 2000 totaled $61,870.
Financial Information Systems Design and Implementation Fees. The Company
did not engage Arthur Andersen LLP during 2000 to provide professional services
with respect to financial information systems design and implementation as
described in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X.
All Other Fees. The aggregate fees billed by Arthur Andersen LLP for all
other services rendered during 2000, including tax related services, totaled
$34,146.
The Audit Committee has considered whether the provision by Arthur Andersen
LLP of professional services not related to the audit of the financial
statements referred to above and not related to the reviews of the interim
financial statements referred to above is compatible with maintaining the
independence of Arthur Andersen LLP, and has determined it to be so.
Audit Committee of the Board of
Directors
William A. Boeger, Chairman
John J. Gibbons
Thomas M. Gibson
The foregoing sections entitled Compensation Committee Report, Audit
Committee Report and Common Stock Performance Graph shall not be deemed to be
incorporated by reference in any previous or future documents filed by the
Company with the Securities and Exchange Commission under the Securities Act of
1933 or the Securities Exchange Act of 1934, each as amended, except to the
extent that the Company specifically incorporates them by reference in any such
document.
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PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP, independent accountants, has audited the
Company's accounts since the inception of the Company. The Audit Committee of
the Board has selected Arthur Andersen to audit the financial statements of the
Company for 2001. Representatives of Arthur Andersen LLP have been invited to
attend the Annual Meeting, will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Arthur Andersen LLP to audit
the financial statements of the Company for 2001 is not required by law or by
the Company's Certificate of Incorporation or Bylaws, and is solicited by the
Board as a matter of good corporate practice. Stockholder ratification requires
the affirmative vote of a majority of the votes cast, excluding abstentions. If
the stockholders determine not to ratify the selection of Arthur Andersen LLP,
the Audit Committee and the Board will reconsider whether or not to retain that
firm. If the stockholders do ratify the selection of Arthur Andersen LLP, the
Audit Committee and the Board in their discretion may, nonetheless, select a
different firm of independent auditors at any time during the year if they
determine that such a change would be in the best interests of the Company and
its stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board unanimously recommends a vote FOR ratification of Arthur Andersen
LLP as independent auditors for 2001.
OTHER BUSINESS
The Board knows of no other business which will come before the Annual
Meeting. If any other matters shall properly come before the Annual Meeting,
your authorized proxies will vote on such matters in accordance with their best
judgement on such matters.
The Bylaws of the Company provide that no business may be conducted at an
annual meeting unless properly brought before the meeting. For business to be
properly brought before an annual meeting, it must be specified in the notice of
meeting, be otherwise brought before the meeting by or at the direction of the
Board, or be otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing which must be
received by the Secretary of the Company at the principal executive offices of
the Company not later than the close of business on the sixtieth (60th), and not
earlier than the close of business on the ninetieth (90th), day prior to the
anniversary of the preceding year's annual meeting, which would mean between
March 2 and April 1, 2002, subject to adjustment if the meeting date is
substantially changed from the date in 2001. The stockholder's notice to the
Secretary must set forth with respect to each proposed matter a brief
description of the matter, the reasons for conducting the business at an annual
meeting, the name and address of the proposing stockholder as they appear on the
books of the Company, the number of shares beneficially owned by the proposing
stockholder, any material interest of the stockholder in the matter proposed,
and any other information required to be provided pursuant to Regulation 14A
under the Securities Exchange Act of 1934. The chairman of an annual meeting
shall determine whether proposed business is properly brought before the
meeting. If the Company has not received notice of a matter prior to the close
of business on the sixtieth day prior to an annual meeting, proxies received by
the Company with respect to such annual meeting may, and unless otherwise
directed, confer discretionary voting with respect to such matter.
COSTS OF SOLICITATION
The Company will pay the costs of soliciting proxies, including printing,
handling and mailing of this Proxy Statement, the proxy and related material
furnished to stockholders. Copies of solicitation materials will be furnished to
banks, brokerage houses, custodians, nominees and fiduciaries holding shares of
Common Stock in their names which are beneficially owned by others to forward to
such beneficial owners. The Company may reimburse persons representing
beneficial owners for their costs of forwarding proxy material to the beneficial
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owners. Certain officers, directors and regular employees of the Company may
solicit proxies by telephone, telegraph, facsimile or in person. These persons
will receive no extra compensation for their services.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 2002 annual meeting of stockholders must
be received by the Secretary of the Company no later than December 17, 2001 in
order to be included in the Company's proxy statement and form of proxy relating
to that meeting.
By Order of the Board of Directors
Martha E. Manning
Secretary
Horsham, Pennsylvania
April 18, 2001
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EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS OF CELL PATHWAYS, INC.
MEMBERSHIP REQUIREMENTS
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Cell Pathways, Inc. (together with its affiliates, the "Company")
shall be designated by the Board and shall consist of at least three individuals
who are members of the Board. All Committee members shall be independent
directors as that term is defined by relevant authority from time to time;
provided, however, that the Committee may include one individual who does not
meet the applicable definition of independence if such individual is not a
current employee of the Company or an immediate family member of a current
employee of the Company and if the Board, under exceptional and limited
circumstances, determines that membership on the Committee by the individual is
required by the best interests of the Company and its stockholders.
Each Committee member must be able to read and understand fundamental
financial statements, including the Company's balance sheet, income statement
and cash flow statement or must become able to do so within a reasonable period
of time after his or her appointment to the Committee. At least one member of
the Committee must have had past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in such member's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
SCOPE OF RESPONSIBILITIES
The Committee is part of the Board and shall have Board power and authority
to the extent provided in this Charter which has been adopted by the Board by
way of delegation of its power. The Committee shall assist the Board in the
discharge of its responsibility for oversight of the Company's financial
function, including accounting, auditing, financial reporting, internal
controls, internal audit, investment and risk management. This oversight
responsibility of the Committee (and of the Board) shall not substitute for,
displace or assume in any way management's primary responsibility for these
matters, including the preparation of financial statements, or the primary
responsibility of the independent auditors to audit the financial statements and
perform functions associated therewith. Nor shall this oversight responsibility
impose upon the Committee the duty to conduct investigations, resolve
disagreements, assure compliance with laws, regulations or policy guidelines, or
undertake other measures which remain the responsibility of management and its
outside experts.
The Committee shall also be responsible for the selection, evaluation and,
where appropriate, replacement of the independent auditors, and for acting as
the delegate of the Board with respect to relations with the independent
auditors. The independent auditors shall be accountable to the Board through the
Committee.
STRUCTURE AND PROCESSES
The Committee shall elect a Chairperson at least annually, shall hold at
least three meetings each year, and shall hold such additional meetings as may
be necessary or convenient to permit the Committee to discharge its
responsibilities.
The Committee shall confer with the Company's independent auditors with
respect to the scope and results of the annual audit.
The Committee shall review and discuss the annual audited financial
statements with management and shall make recommendations to the Board as to
whether or not to accept the annual audited financial statements, to include
them in applicable filings with the Securities and Exchange Commission, and to
send them to the stockholders.
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21
The Committee shall ensure that the Company's independent auditors perform
reviews of interim quarterly financial statements prior to the filing of such
interim financial statements with the Securities and Exchange Commission, and
shall confer with the Company's independent auditors with respect to any
quarterly reviews by the independent auditors which would require such
conference.
The Committee shall confer with the Company's independent auditors with
respect to the internal control and internal audit functions, and the Committee
shall confer with management on these subjects to the extent the Committee feels
warranted.
The Committee shall receive from the Company's independent auditors a
formal written statement delineating all relationships between the auditor and
the Company, consistent with Independence Standards Board Standard No. 1, as
such may be modified or supplemented, and shall actively engage in dialogue with
the independent auditors with respect to any disclosed relationship or service
that may impact the objectivity and independence of the auditors, and shall take
(or recommend that the full Board take) appropriate action to oversee the
independence of the outside auditors.
The Committee shall discuss with the independent auditors the matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU sec. 380), as such may be modified or supplemented.
The Committee shall confer with management on, or undertake initiatives in
respect of, such aspects of accounting, auditing, financial reporting, internal
control, internal audit, investment and risk management as the Committee may
find appropriate.
The Committee shall prepare from time to time reports which may be
necessary or appropriate for inclusion in filings with Securities and Exchange
Commission, for inclusion in reports to stockholders, or for other purposes.
The Committee will review and reassess the adequacy of this Charter on an
annual basis and will recommend any proposed changes to the Board for approval.
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CELL PATHWAYS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
MAY 30, 2001
The undersigned stockholder of Cell Pathways, Inc., a Delaware corporation
("CPI"), hereby acknowledges receipt of the Notice of the 2001 Annual Meeting
of Stockholders and Proxy Statement of CPI, and hereby appoints Robert J.
Towarnicki, Brian J. Hayden and Martha E. Manning, and each of them, proxies
and attorneys-in-fact, with full power of substitution to each, on behalf and
in the name of the undersigned, to represent the undersigned at the 2001 Annual
Meeting of Stockholders of CPI, to be held at the Rittenhouse Hotel, 210 West
Rittenhouse Square, Philadelphia, Pennsylvania, on May 30, 2001, at 10:00 a.m.,
local time, and at any and all postponements, continuations and adjournments
thereof, and to vote all shares of common stock which the undersigned may be
entitled to vote if then and there personally present, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
Please be sure to sign and date Date_______________________
this Proxy in the box below.
_______________________________________________________________________
____Stockholder sign above______Co-holder (if any) sign above__________
+
_______________________________________________________________________________
__
/
Proposal 1: For Withheld For All
Election of Directors: All For All Nominees
Nominees Nominees Except
____ ____ ____
/___/ /___/ /___/
Judith A. Hemberger, Ph.D. Robert J. Towarnicki
Rifat Pamukcu, M.D.
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Nominees Except" and write that nominee's name in the space provided
below.
_________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED ABOVE.
Proposal 2:
Ratification of Arthur Andersen LLP For Against Abstain
as Auditors for 2001. ____ ____ ____
/___/ /___/ /___/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL LISTED ABOVE.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED "FOR"
PROPOSALS 1 AND 2, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH. IF ANY OTHER MATTERS SHOULD PROPERLY COME BEFORE THE CPI ANNUAL
MEETING, THIS PROXY WILL BE VOTED WITH RESPECT TO SUCH MATTERS IN ACCORDANCE
WITH THE JUDGMENT OF THE PERSON VOTING SUCH PROXIES.
+
_______________________________________________________________________________
/\ Detach above card, sign, date and mail in postage paid envelope provided. /\
CELL PATHWAYS, INC.
_______________________________________________________________________________
Signature should be exactly as your name(s) appear on proxy. If stock is held
jointly, each holder should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
________________________________________________________________________________
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY ENVELOPE PROVIDED.
________________________________________
________________________________________
________________________________________