SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MEDICIS PHARMACEUTICAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions 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:
[LOGO]
MEDICIS
--------------------------------------
NOTICE OF
1997 ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 21, 1997
--------------------------------------
Dear Fellow Stockholder:
The 1997 Annual Meeting of Stockholders (the "Meeting") of Medicis
Pharmaceutical Corporation (the "Company") will be held at The Phoenician in
Scottsdale, Arizona, on November 21, 1997, at 9:30 a.m., local time, for the
following purposes:
1. To elect two directors for a term of three years;
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending June 30, 1998; and
3. To transact such other business as may properly come before the
Meeting and all adjournments thereof. The Company is currently unaware of any
additional business to be presented at the Meeting.
The Board of Directors has fixed the close of business on September 22,
1997, as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting.
IN ORDER THAT YOUR STOCK MAY BE REPRESENTED AT THE MEETING IN CASE YOU
ARE NOT PERSONALLY PRESENT, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY/VOTING CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING ADDRESSED ENVELOPE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE MEETING, YOU
MAY VOTE YOUR SHARES IN PERSON EVEN IF YOU HAVE SIGNED AND RETURNED THE PROXY
CARD.
By Order of the Board of Directors,
/s/ Mark A. Prygocki, Sr.
Mark A. Prygocki, Sr.
Chief Financial Officer,
Treasurer, and Secretary
September 23, 1997
Phoenix, Arizona
[LOGO]
MEDICIS
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 21, 1997
This Proxy Statement is furnished to stockholders of Medicis
Pharmaceutical Corporation (the "Company") in connection with the solicitation
of proxies by the Company's Board of Directors (the "Board") for use at the
Annual Meeting of Stockholders to be held on November 21, 1997, at 9:30 a.m.,
local time, at The Phoenician, Scottsdale, Arizona, and at all adjournments
thereof (the "Meeting"). It is anticipated that this Proxy Statement and the
accompanying form of proxy will first be mailed to stockholders on or about
September 23, 1997.
The Company will bear the cost of solicitation of proxies, including
the charges and expenses of brokerage firms and others that forward solicitation
material to beneficial owners of the Company's stock. Proxies may be solicited
by mail, telephone, telegraph, or personal communications. The Company may elect
to retain Stockholder Communications Corporation ("SCC") to assist in the
solicitation of proxies for a fee of approximately $5,000 and reimbursement of
certain expenses.
The close of business on September 22, 1997, has been fixed as the
"Record Date" for the determination of stockholders entitled to notice of and to
vote at the Meeting. On that date, there were 14,040,726 shares of Class A
Common Stock and 281,974 shares of Class B Common Stock outstanding
(collectively, the "Capital Stock"). Each share of Class A Common Stock is
entitled to one vote on each matter of business to be considered at the Meeting.
Each share of Class B Common Stock outstanding on the Record Date is entitled to
ten votes on each such matter. The outstanding shares of Capital Stock
representing the majority of the voting power thereof and entitled to vote at
the Meeting shall constitute a quorum.
Each proxy properly executed and returned to the Company will be voted
FOR (i) the election of the two director nominees named herein; and (ii) the
appointment of Ernst & Young LLP as auditors, unless the stockholder otherwise
directs in his or her proxy, in which case the proxy will be voted according to
the stockholder's direction.
Proxies may be revoked by written notice to the Secretary of the
Company at any time prior to their being voted at the Meeting. Stockholders who
are present at the Meeting may revoke in writing their proxies previously
submitted and vote in person, if they so desire.
The headquarters office of the Company is located at 4343 East
Camelback Road, Suite 250, Phoenix, Arizona 85018.
---------------
PROPOSAL 1: ELECTION OF DIRECTORS
At the Meeting, two directors will be elected to the class of two
directors whose three year terms are scheduled to expire at the close of the
Annual Meeting of Stockholders held in 2000. The shares represented by the
enclosed proxy will be voted for the election as directors of the two nominees
named below, unless a vote is withheld from either or both of the individual
nominees. If either nominee becomes unavailable for any reason or if a vacancy
should occur before election (which events are not anticipated), the shares
represented by the enclosed proxy may be voted for such other person as may be
determined by the holders of the proxy.
Arthur G. Altschul, Jr., and Philip S. Schein, M.D., have been proposed
unanimously by the Board as nominees for election as directors at the meeting.
Both Mr. Altschul and Dr. Schein are currently directors of the Company.
Biographical information on Mr. Altschul and Dr. Schein is furnished below under
"Directors, Nominees and Executive Officers."
VOTE REQUIRED
The two nominees receiving the highest number of votes cast at the
meeting will be elected to serve for terms of three years, or until their
successors are duly elected and qualified.
BOARD RECOMMENDATION
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
DIRECTOR SPECIFIED IN PROPOSAL 1.
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following biographical information is furnished with regard to the
directors, the nominees for election as director at the Meeting, and the
executive officers.
DIRECTOR TERM
NAME AGE POSITION SINCE EXPIRES
- ----------------------------------- ---------- -------------------------------------------- ------------ -----------
Jonah Shacknai(1) 40 Chairman and Chief Executive Officer 1988 1998
Mark A. Prygocki, Sr. 31 Chief Financial Officer, Treasurer, and N/A N/A
Secretary
Arthur G. Altschul, Jr.(2) 33 Director 1992 1997
Richard L. Dobson, M.D.(2) 69 Director 1991 1999
Peter S. Knight, Esq. (3) 46 Director 1997 1999
Michael A. Pietrangelo(1)(3) 55 Director 1990 1998
Philip S. Schein, M.D.(2) 58 Director 1990 1997
Lottie H. Shackelford(2) 56 Director 1993 1998
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Stock Option and Compensation Committee
JONAH SHACKNAI is a founder of the Company and has served as Chairman
and as its Chief Executive Officer since July 1988. From 1982 to June 1988, Mr.
Shacknai was a member of the Washington, D.C., law firm of Royer, Shacknai &
Mehle, specializing in business, regulatory, and legislative matters relating to
pharmaceutical, cosmetic, and food products. From January 1981 to October 1982,
Mr. Shacknai served as counsel to the United States House of Representatives
Committee on Science and Technology. From 1977 to 1981, Mr. Shacknai served as
chief of staff of the Chairman of the Subcommittee on Consumer Protection and
Finance of the House Energy and Commerce Committee. Mr. Shacknai served as a
founding director of IVAX Corporation from 1986 to 1988. In addition, Mr.
Shacknai served as a member of the Commission on the Federal Drug Approval
Process. He presently serves as a trustee of the National Public Radio
Foundation, a member of the National Arthritis and Musculoskeletal and Skin
Diseases Advisory Council of the National Institutes of Health, and a member of
the Joint High Level Advisory Panel of the United States-Israel Science and
Technology Commission. Mr. Shacknai currently serves as vice chairman of the
Board of Directors of the Delta Society, a not-for-profit organization aiding in
the physical assistance and psychological therapy of disabled people with the
use of animals, and as a director of Miravant Medical Technologies, a publicly
held corporation specializing in photo point drugs and devices.
MARK A. PRYGOCKI, SR., CPA, has served as Chief Financial Officer,
Treasurer, and Secretary since May 1995 and served as Controller of the Company
from October 1992 until May 1995. From July 1990 through October 1992, Mr.
Prygocki was employed by Salomon Brothers, Inc., an investment banking firm, as
an Accountant in the Regulatory Reporting Division. Mr. Prygocki was employed by
Ernst & Young LLP as a Senior Auditor in the Financial Service Division from
September 1988 through July 1990.
ARTHUR G. ALTSCHUL, JR., has been a director of the Company since
December 1992. He has worked in investment banking, venture capital, and as a
member of senior management of a publicly-traded healthcare concern. Mr.
Altschul is a founder and Co-Chairman of Diaz & Altschul Group, LLC, a merchant
banking organization which, through its subsidiaries, provides investment
banking and investment advisory services. Between 1985 and 1991, Mr. Altschul
worked in the Equity and Fixed-Income trading departments at Goldman, Sachs &
Co., was a founding limited partner of The Maximus Fund, LP, and worked in the
Equity Research department at Morgan Stanley & Co. From 1992 to 1996, Mr.
Altschul worked at SUGEN, Inc., most recently as Senior Director of Corporate
Affairs. SUGEN is a NASDAQ-traded biopharmaceutical company focused on cancer
research and drug development. Mr. Altschul serves on the Board of Directors of
General American Investors, Inc., a NYSE-traded closed-end investment company;
Delta Opportunity Fund, Ltd., an offshore investment fund which invests
primarily in private placements of publicly-traded technology companies;
Catamount Brewery Corporation, and Prototek II, Inc. Mr. Altschul holds a B.Sc.
from Columbia University in Computer Science.
RICHARD L. DOBSON, M.D., has been a director of the Company since
September 1991. He has been a Professor of Dermatology at the Medical University
of South Carolina since January 1980. He is a past President of the American
Board of Dermatology and a past President of the American Academy of
Dermatology. Dr. Dobson also serves as the Editor-in-Chief of the JOURNAL OF THE
AMERICAN ACADEMY OF DERMATOLOGY.
PETER S. KNIGHT, ESQ., has been a director of the Company since June
1997. Mr. Knight has been a partner of the law firm of Wunder, Knight, Levine,
Thelen & Forscey since 1991, where he specializes in pharmaceutical,
environmental, and communication matters. In 1996, at the request of President
Clinton, Mr. Knight served as the National Campaign Manager for Clinton/Gore
'96. Mr. Knight served as the General Counsel and Secretary of the Company from
1989 to 1991. Mr. Knight served as Chief of Staff to Senator Al Gore (D-TN) from
1977 to 1989, and served as the Campaign Director for the Gore for President
Committee in 1988. Mr. Knight currently serves on the Boards of COMSAT, Whitman
Education Group, the Center for National Policy, and the Schroder Series Trust.
Mr. Knight serves as the Chairman of the Vice President's Residence Foundation
and is the Founding Director of Builders for Peace.
MICHAEL A. PIETRANGELO has been a director of the Company since October
1990. He has served as the President of Johnson Products Company, a division of
IVAX Corporation, a pharmaceutical corporation, since July 1994. From June 1990
to March 1994, Mr. Pietrangelo was the President and Chief Executive Officer of
CLEO, Inc., a Memphis-based subsidiary of Gibson Greetings, Inc., a manufacturer
of specialized paper products.
PHILIP S. SCHEIN, M.D., has been a director of the Company since
October 1990. Dr. Schein has been the Chairman and Chief Executive Officer of
U.S. Bioscience, Inc., a publicly held pharmaceutical company involved in the
development and marketing of chemotherapeutic agents, since April 1987. He has
served as President of the American Society of Clinical Oncology and has chaired
the Food and Drug Administration Oncology Drugs Advisory Committee. Dr. Schein
presently serves as Adjunct Professor of Medicine and Pharmacology at the
University of Pennsylvania School of Medicine, and as a director of Oncor, Inc.,
a cancer-focused molecular biology company.
LOTTIE H. SHACKELFORD has been a director of the Company since July
1993. Ms. Shackelford has been Executive Vice President of Global USA, Inc., a
government relations firm, since April 1994 and has been Vice Chair of the
Democratic National Committee since February 1989. Ms. Shackelford was Executive
Vice President of U.S. Strategies, Inc., a government relations firm, from April
1993 to April 1994. She was also Co-Director of Intergovernmental Affairs for
the Clinton/Gore presidential transition team between November 1992 and March
1993, Deputy Campaign Manager of Clinton for President from February 1992 to
November 1992, and Executive Director, Arkansas Regional Minority Purchasing
Council from February 1982 to January 1992. In addition, Ms. Shackelford has
served in various local government positions, including Mayor of Little Rock,
Arkansas. She also is a director of Philander Smith College, the Chapman Funds
in Baltimore, Maryland, and the Overseas Private Investment Corporation.
COMMITTEES AND MEETINGS
The Stock Option and Compensation Committee, which met one time in the
Company's fiscal year ended June 30, 1997 ("Fiscal 1997"), administers the
Company's stock option plans (the "Plans") and oversees the compensation of the
Company's officers. The members of the Stock Option and Compensation Committee
in Fiscal 1997 were Michael A. Pietrangelo and Joseph Salvani, until Mr. Salvani
voluntarily resigned from the Board and Mr. Knight was duly elected. The Audit
Committee, which met once in Fiscal 1997, reviews the work of the auditors and
the adequacy of the Company's internal accounting and financial control systems.
The members of the Audit Committee are Lottie Shackelford, Arthur G. Altschul,
Jr., Richard L. Dobson, M.D., and Philip S. Schein, M.D. The Executive
Committee, which met four times in Fiscal 1997, exercises the rights, power, and
authority of the Board of Directors in certain situations. The members of the
Executive Committee in Fiscal 1997 were Jonah Shacknai, Michael A. Pietrangelo
and Joseph Salvani until Mr. Salvani voluntarily resigned from the Board and Mr.
Knight was duly elected. The Company does not have a Nominating Committee.
The Board held four meetings in Fiscal 1997. Each member of the Board
of Directors attended at least 75% of the aggregate of (i) all Board meetings
and (ii) all meetings of committees of the Board of which such person was a
member.
Joseph Salvani resigned as a director of the Company and member of the
Stock Option and Compensation Committee and the Executive Committee effective
April 29, 1997, for personal reasons. There were no disagreements with Mr.
Salvani with respect to the Company's operations or policies.
DIRECTOR COMPENSATION
Since April 28, 1990, the Company has made available to each
non-employee director $1,000 plus reasonable expenses for each Board and
committee meeting attended, excluding telephonic meetings. Non-employee
directors of the Company are also entitled to automatic, annual grants of
non-qualified options to purchase 4,500 shares of Class A Common Stock. Under
the Plans, these options are granted on the last business day of September and
are exercisable at the fair market value of the Class A Common Stock on the one
year anniversary of the date of the grant. Each such option shall be exercisable
in whole or in part one year after the date of grant, provided such non-employee
director has continued as a non-employee director for one year.
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT
The information set forth below includes information as of September
16, 1997, regarding the shares of Capital Stock beneficially owned by (i) each
person who is known by the Company to own beneficially five percent (5%) or more
of the Capital Stock, (ii) each of the other present directors and executive
officers of the Company, and (iii) all directors and executive officers of the
Company as a group:
SHARES BENEFICIALLY OWNED
------------------------- PERCENTAGE
OF
CLASS A CLASS B OUTSTANDING PERCENTAGE
COMMON COMMON CAPITAL OF VOTING
NAME(1) STOCK STOCK STOCK POWER
--------------------------------- --------- --------- ----------- ----------
Jonah Shacknai(2) 637,691 252,677 6.10% 18.44%
Mark A. Prygocki, Sr.(3) 33,245 - * *
Arthur G. Altschul, Jr.(4) 12,673 - * *
Richard L. Dobson, M.D.(5) 26,914 - * *
Peter S. Knight, Esq. 3,437 - * *
Michael A. Pietrangelo(6) 41,276 - * *
Philip S. Schein, M.D.(7) 4,821 - * *
Lottie H. Shackelford(8) 17,673 - * *
All executive officers and directors 777,730 252,677 7.01% 19.14%
as a group (8 persons)(9)
Pilgrim, Baxter and Associates 1,443,949 10.3%
1255 Drummer's Lane, Suite 300
Wayne, PA 19087 (10)
Putnam Investments 1,442,994 10.3%
One Post Office Square
Boston, MA 02109 (10)
American Centry Companies 1,140,000 8.1%
4500 Main Street, 15th Floor
Kansas City, MO 64111 (10)
----------------------------
* Less than 1%.
(1) The address of each beneficial owner is c/o Medicis Pharmaceutical
Corporation, 4343 East Camelback Road, Suite 250, Phoenix, Arizona
85018-2700.
(2) Includes: 268,361 shares of Class A Common Stock subject to options
granted pursuant to the plans and were exercisable as of September 16,
1997, and become exercisable within 60 days thereafter (November 15,
1997); 15,397 shares of Class A Common Stock held in an IRA for Mr.
Shacknai.
(3) September 16, 1997, and become exercisable within 60 days thereafter
(November 15, 1997).
(4) Includes 12,673 shares of Class A Common Stock subject to options
granted pursuant to the plans and were exercisable as of September 16,
1997, and become exercisable within 60 days thereafter (November 15,
1997).
(5) Includes 22,899 shares of Class A Common Stock subject to options
granted pursuant to the plans and were exercisable as of September 16,
1997, and become exercisable within 60 days thereafter (November 15,
1997). Does not include 159 shares of Class A Common Stock owned by Dr.
Dobson's spouse, as to which shares Dr. Dobson disclaims beneficial
ownership.
(6) Includes 17,673 shares of Class A common Stock subject to options
granted pursuant to the plans and were exercisable as of September 16,
1997, and become exercisable within 60 days thereafter (November 15,
1997).
(7) Includes 4,821 shares of Class A Common Stock subject to options
granted pursuant to the plans and were exercisable as of September 16,
1997, and become exercisable within 60 days thereafter (November 15,
1997).
(8) Includes 17,673 shares of Class A Common Stock subject to options
granted pursuant to the plans and were exercisable as of September 16,
1997, and become exercisable within 60 days thereafter (November 15,
1997).
(9) Includes an aggregate of 377,045 shares of Class A Common Stock subject
to options granted pursuant to the plans and were exercisable as of
September 16, 1997, and become exercisable within 60 days thereafter
(September 13, 1997), held by eight executive officers and directors.
(10) As reported to NASD on June 30, 1997.
EXECUTIVE COMPENSATION
The following table shows the annual compensation and long-term
compensation for each of the three most recent fiscal years for the Company's
Chief Executive Officer and the one other executive officer whose salary and
bonus for the most recent fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------- -----------------------------
OTHER ANNUAL NUMBER OF LTIP
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS
----------------------------------------------------------------------------------------------------------------------
Jonah Shacknai 1997 412,000 320,000 -- 78,751
Chairman of the Board 1996 310,000 240,000 -- 171,431(1)
and Chief Executive 1995 250,000 110,000 -- 117,857(2)
Officer
Mark A. Prygocki, Sr.(3) 1997 130,400 80,000 -- 22,500
Chief Financial Officer, 1996 94,600 50,000 -- 19,286(4)
Treasurer, and Secretary 1995 83,640 22,500 14,525(5) 6,429
(1) Includes repriced options approved by the Stock Option and Compensation
Committee of the Board of Directors upon an independent recommendation
and in accordance with the Plans and previously issued to Mr. Shacknai
for the purchase of 208,929 shares of Class A Common Stock. Such
options were repriced to market.
(2) 64,287 of these options were attributable to the issuance of options
following the expiration of a like number of options which had not been
exercised. The new options have a five-year term and are exercisable at
$6.85 per share, which is above the market price of the Class A Common
Stock ($1.75) on the date of grant of the new options. These options
were subsequently repriced. See note (1).
(3) Mr. Prygocki became an executive officer of the Company in May 1995
(fiscal 1995).
(4) Includes repriced options approved by the Stock Option and Compensation
Committee of the Board of Directors upon an independent recommendation
and in accordance with the Plans and previously issued to Mr. Prygocki
for the purchase of 18,483 shares of Class A Common Stock. Such options
were repriced to market.
(5) Represents $9,125 in expense related to the reimbursement of relocation
costs of the executive officer in conjunction with the Company's
relocation from New York to Arizona and $5,400 for car allowance.
The Company has no defined benefit or defined contribution retirement
plans other than the Medicis Pharmaceutical Corporation 401(k) Employee Savings
Plan (the "401(k) Plan") established under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Contributions to the 401(k) Plan
are voluntary and all full-time employees are eligible to participate. While the
401(k) Plan provides for the ability of the Company to match certain employee
contributions, the Company has not made any matching contributions.
STOCK OPTIONS
The Plans provide for the grant to key employees and key consultants of
the Company options which qualify as incentive stock options under the Code and
non-qualified stock options. The Plans are each administered by the Stock Option
and Compensation Committee appointed by the Board. The following table sets
forth certain information for the Company's last fiscal year with respect to
options to purchase shares of Class A Common Stock granted to certain executive
officers pursuant to the Plans:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZED VALUE AT
PERCENTAGE OF ASSUMED ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
NUMBER OF GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION -----------------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE($/sh) DATE 0%($) 5%($) 10%($)
- -------------------------------------------------------------------------------------------------------------------
Jonah Shacknai NQ 63,125 18.1% 18.16 7/22/06 -- 720,933 1,826,987
ISO 15,626 4.5% 18.16 7/22/06 -- 178,460 452,253
------ ------
78,751 22.6%
====== ======
Mark A. Prygocki, Sr. ISO 22,500 6.5% 18.16 7/22/06 -- 256,966 651,203
(1) Of Mr. Shacknai's ISOs noted above, 240 vest on July 22, 1997; 238 vest on
July 22, 1998; 4,140 vest on July 22, 1999; 5,504 vest on July 22, 2000;
and 5,504 vest on July 22, 2001. Of Mr. Shacknai's non-qualified options
noted above, 15,510 vest on July 22, 1997; 15,511 vest on July 22, 1998;
11,610 vest on July 22, 1999; 10,247 vest on July 22, 2000; and 10,247 vest
on July 22, 2001. Of Mr. Prygocki's ISO's noted above, 4,500 vest on July
22, 1997; 4,500 vest July 22, 1998; 4,500 vest on July 22, 1999; 4,500 vest
on July 22, 2000; and 4,500 vest on July 22, 2001.
(2) The potential realizable value portion of the foregoing table illustrates
amounts that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Class A Common Stock, over the life of the
options. This schedule does not take into account provisions of certain
options providing for termination of the option following termination of
employment, nontransferability or vesting schedules. The dollar amounts
under these columns are the result of calculations at the 5% and 10% rates
set by the Securities and Exchange Commission and therefore are not
intended to forecast possible future appreciation, if any, of the Company's
stock price. The column indicating 0% appreciation is included to reflect
the fact that a zero percent gain in stock price appreciation from the
market price of the Class A Common Stock on the date of grant will result
in zero dollars for the optionee. No gain to the optionees is possible
without an increase in stock price, which will benefit all stockholders
commensurately. Dollar amounts shown are not discounted to present value.
The following table sets forth the number and value of unexercised options held
by the named individuals as of the end of the Company's last fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
NUMBER OF VALUE OPTIONS AT FISCAL YEAR END AT FISCAL YEAR-END ($)(2)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(1) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------
Jonah Shacknai 62,826 0(2) 227,336 158,238 10,697,020 6,279,522
Mark A. Prygocki, Sr. 0 0 24,427 36,646 1,152,018 1,386,330
- ----------------
(1) The Company does not grant stock appreciation rights.
(2) Mr. Shacknai exercised 62,826 stock options granted under the Plans. All
shares exercised continue to be held by Mr. Shacknai; therefore, no value
was realized from the exercise of such options.
During the last fiscal year, 84 employees of the Company and six
non-employee directors of the Company were granted options to purchase an
aggregate of 384,865 shares of Common Stock under the Plans. As of June 30,
1997, 79 employees and all directors of the Company were participants in the
Plans. As of June 30, 1997, an aggregate of 448,920 options to purchase shares
of Class A Common Stock had been granted to a total of 105 optionees under the
Plans and were outstanding, 28,926 of which had been granted to non-employee
directors as annual grants in accordance with the Plans. Certain of such options
are vested and others vest at various times through May 19, 2007. Qualified and
non-qualified stock options vest over a period determined at the time the
options are granted, ranging from 1 year to 5 years. The options are generally
granted at the fair market value on the date of the grant and are exercisable at
prices ranging from $1.55 to $41.83.
In September 1995, the Stock Option and Compensation Committee,
comprised of non-employee directors, approved, in accordance with its authority
previously granted by the shareholders under the Plans, the repricing of certain
outstanding options granted to all employees and full-time consultants under the
Plans pursuant to an option exchange program in accordance with the Plans. Such
options were repriced to market. The Committee's decision to allow repricing of
options was based, in substantial part, upon the recommendation of William M.
Mercer, Inc., a nationally recognized independent compensation consulting firm,
that the repricing was necessary in order to retain adequate levels of incentive
compensation for the Company's employees given that a substantial number of
options issued were, at that time, of no value due to the price at which such
options were previously issued. See "Stock Option and Compensation Committee
Report." The following table sets forth information concerning the repricing of
shares held by all executive officers during the last ten completed fiscal
years.
TEN-YEAR OPTION/SAR REPRICINGS
NUMBER OF
SECURITIES MARKET PRICE
UNDERLYING OF STOCK AT EXERCISE LENGTH OF
OPTIONS/SARS TIME OF PRICE AT TIME NEW ORIGINAL OPTION
REPRICED OR REPRICING OR OF REPRICING EXERCISE TERM REMAINING AT
AMENDED AMENDMENT OR AMENDMENT PRICE DATE OF REPRICING
NAME DATE (#) ($) ($) ($) OR AMENDMENT
------------------------- ------- ------------ ------------ ------------ -------- -------------------
Jonah Shacknai 9/29/95 64,286 2.92 6.84 2.92 3 years 10 months
Chairman of the Board
and Chief Executive 9/29/95 48,214 2.92 6.84 2.92 10 months
Officer
9/29/95 48,214 2.92 11.57 2.92 1 year 10 months
9/29/95 48,215 2.92 4.72 2.92 2 years 10 months
Mark A. Prygocki, Sr. 9/29/95 4,017 2.92 6.22 2.92 10 months
Chief Financial Officer,
Treasurer, and Secretary 9/29/95 6,429 2.92 10.51 2.92 1 year 11 months
9/29/95 8,037 2.92 3.67 2.92 3 years
----------------------------
STOCK OPTION AND COMPENSATION COMMITTEE REPORT
The Stock Option and Compensation Committee (the "Committee") is
responsible for the oversight of the compensation of the Company's officers and
administration of the Plans.
Compensation of the Company's executive officers is composed of salary,
stock options and, in some cases, cash bonuses. Jonah Shacknai, Chairman and
Chief Executive Officer of the Company, recommends the annual salary and any
cash bonus for each executive officer other than himself. Currently, the Company
has only one other executive officer, Mr. Prygocki, the Company's Chief
Financial Officer, Treasurer, and Secretary. In the case of an increase in
salary or a substantial bonus to an executive officer, Mr. Shacknai makes
recommendations to the Committee to approve such increase. Mr. Shacknai and the
Committee apply the largely subjective and non-quantitative criteria discussed
below in evaluating compensation and have not assigned any particular numerical
weight to these factors.
The salary of an executive officer is determined based on the
significance of the position to the Company, individual experience, talents and
expertise, individual performance as it relates to effort and achievement of or
progress toward particular objectives for the executive officer and to the
Company's immediate and long-term goals and information gathered informally as
to comparable companies in the same geographic location as the Company. Due to
the Company's phase of growth and development, in addition to the Company's goal
of increasing profitability, other
elements of the Company's performance that are used in fixing executive
compensation levels are increases in revenues, new product introductions,
progress in research, capital formation, strategic alliances, customer service
values, cost-effective operation, and the personal commitment to the ideals and
mission of the Company. The Committee believes the compensation of the Company's
executive officers is generally in the middle section of the range of
compensation data obtained when the Company informally gathered data as to
comparable companies. However, this belief should be considered in light of the
facts that (i) the data gathered were not gathered with a statistically reliable
methodology and (ii) the elements of compensation of such comparable companies
are not necessarily directly comparable to those of the Company.
Although the Company does not have a formal bonus plan for its
executive officers, the Company from time to time awards cash bonuses to certain
executive officers after fiscal year end. The amount awarded to a particular
executive officer is based on the Company's overall performance as described
above, individual performance, the particular executive officer's base salary
level, and overall equity and fairness.
Stock options granted by the Company to its executive officers are
intended to link the interests and risks of the executive officers with those of
the stockholders. Stock options will provide value to the optionee only when the
price of the Company's stock increases. The Committee generally grants stock
options to executive officers with respect to each fiscal year after the close
of the fiscal year. The Committee bases its decisions on Company performance and
individual performance as discussed above, base salary and bonus levels, the
amount of prior option grants, length of service, and overall equity and
fairness.
For Fiscal 1997, Jonah Shacknai, Chairman and Chief Executive Officer,
received an annual salary of $412,000, was paid a bonus of $320,000, and was
granted options to purchase shares of Class A Common Stock (at an exercise price
of $18.16 per share). The Committee made these decisions based upon a subjective
analysis of his contributions to the Company's improved performance in the most
recent fiscal year, particularly in regard to the acquisition of the Syntex
dermatological assets, the successful completion of the Company's public
offering of approximately $96 million, achieving continued growth in sales and
profitability for the Company, significantly increasing market share for the
Company's DYNACIN(R) and TRIAZ(R) products, controlling expenses, and improving
the ratiO of current assets to current liabilities. The Committee did not assign
any particular numerical weight to any of these matters.
September 22, 1997 Stock Option and Compensation Committee
Michael A. Pietrangelo, Chairman
Peter S. Knight, Esq.
----------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No Compensation Committee interlocks were present at June 30, 1997.
EMPLOYMENT AGREEMENT
In July 1996, the Company entered into an employment agreement (the
"Employment Agreement") with Mr. Shacknai, effective July 1, 1996, to continue
to serve as Chairman of the Board and Chief Executive Officer of the Company.
The Employment Agreement expires on June 30, 2001, and automatically renews for
successive periods of five years, unless either party gives timely notice of an
intention not to renew. Mr. Shacknai also may terminate the Employment Agreement
prior to the end of the term. Under the Employment Agreement, Mr. Shacknai
agreed that, during his employment by the Company and for a period of one year
following termination for reasons other than a change in ownership or control of
the Company, he will not engage in, consult with or be employed by any Competing
Business (as defined in the Employment Agreement). The Employment Agreement
contains customary non-solicitation provisions and provides for the transfer to
the Company of any intellectual property relating to the business of the
Company.
Under the Employment Agreement, Mr. Shacknai receives an annual base
salary of $400,000, effective July 1996, plus certain benefits and an annual
grant of options to purchase shares of Common Stock representing a minimum
specified percentage of the fully diluted capitalization of the Company. Mr.
Shacknai is also eligible for annual cash bonuses and increases in his base
compensation.
The Employment Agreement provides that, if Mr. Shacknai's employment is
terminated as a result of a change in control of the Company, the Company is
obligated to pay Mr. Shacknai a lump sum amount equal to four times the sum of
(i) his base salary at the highest rate in effect during the proceeding 12
months and (ii) the average annual bonus, if any, paid during the proceeding
three years. If Mr. Shacknai's employment is terminated without cause or by his
Resignation for Good Reason (as defined in the Employment Agreement) the Company
is obligated to pay him a lump sum equal to the sum of (i) the amount he would
have collected in salary for the unexpired term of the Employment Agreement,
were he paid at the highest salary rate in effect for the 12 months preceding
his termination and (ii) his average annual bonus for the preceding three years
multiplied by the number of years remaining in the Employment Agreement. In no
event, however, will Mr. Shacknai's severance payment for termination without
cause be less than twice the sum of (i) his highest effective salary and (ii)
the average annual bonus for the preceding three years, plus 1/24 of such lump
sum for each full year of Mr. Shacknai's service with the Company. If Mr.
Shacknai's employment is terminated by his death, the Employment Agreement
provides that the Company will continue to pay his salary, at the then-current
rate, to his estate for 12 months. If Mr. Shacknai is terminated pursuant to his
Disability (as defined in the Employment Agreement), the Employment Agreement
provides that the Company will pay him 100% of his base salary for twelve
months, and 50% of that base salary for the remainder of the term of the
Employment Agreement, but in no event for less than an additional 12 months of
his base salary. Finally, the Employment Agreement provides that, if it is not
renewed by the Company for at least three years after its initial expiration,
the Company must pay Mr. Shacknai a lump sum equal to twice the sum of (i) his
annual base salary at the highest rate in effect during his last 12 months of
employment with the Company and (ii) the annual average of bonus payments made
to him over the preceding three years, plus 1/24 of such lump sum for each full
year of Mr. Shacknai's service with the Company.
Upon the termination of Mr. Shacknai's employment, all options
previously granted to him will automatically vest, and will remain exercisable
for the full terms thereof. After termination, Mr. Shacknai will also receive
the employee benefits he was eligible to participate in for four years unless
the Employment Agreement is not renewed, in which event Mr. Shacknai will
receive such employee benefits for two years. Under certain circumstances, the
Employment Agreement may require the Company to make payments that would
constitute excess parachute payments under the Internal Revenue Code of 1986, as
amended. In the event that the Company were required to make payments
constituting excess parachute payments, payments to Mr. Shacknai would not be
deductible by the Company for tax purposes, and Mr. Shacknai would be required
to pay an excise tax.
The Company currently has no employment agreements with other
employees.
STOCK PRICE PERFORMANCE
The graph set forth below provides a comparison of the cumulative total
stockholder return for the Company, the NASDAQ Stock Market (U.S. Companies)
Total Return Index, and the NASDAQ Pharmaceutical Stocks Total Return Index for
the period commencing March 28, 1991, the date the Company completed its initial
public offering, through June 30, 1997. The NASDAQ Stock Market Total Return
Index comprises all domestic common shares traded on the NASDAQ National Market
System and the NASDAQ Small-Cap MarketSM. The NASDAQ Pharmaceutical Stocks Index
represents all companies, including biotechnology companies, trading on NASDAQ
classified under the Standard Industrial Classification Code for
pharmaceuticals.
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH
Company Index: Cusip Ticker Class Sic Exchange
58469030 MDRX A 2834 NASDAQ
58469020 MDRXU 2830 NASDAQ
Fiscal Year-end is 06/30/97
Market Index: Nasdaq Stock Market (US Companies)
Peer Index Nasdaq Pharmaceuticals Stocks
SIC 2830-2839 US & Foreign
[PLOT POINTS GRAPH]
Date Company Index Market Index Peer Index
06/30/92 100.00 100.000 100.000
07/31/92 87.097 103.541 105.415
08/31/92 93.548 100.377 95.956
09/30/92 70.968 104.108 94.169
10/30/92 80.645 108.208 100.347
11/30/92 83.871 116.819 115.739
12/31/92 87.097 121.120 114.592
01/29/93 80.645 124.568 106.511
02/26/93 61.290 119.921 81.752
03/31/93 54.839 123.392 82.488
04/30/93 54.839 118.126 83.354
05/28/93 54.839 125.182 86.769
06/30/93 38.710 125.761 86.929
07/30/93 25.806 125.909 84.436
08/31/93 38.710 132.417 88.934
09/30/93 30.645 136.361 94.244
10/29/93 38.710 139.426 102.578
11/30/93 30.645 135.267 100.327
12/31/93 25.806 139.038 102.138
01/31/94 32.258 143.259 105.244
02/28/94 27.419 141.922 95.770
03/31/94 24.194 133.195 83.306
04/29/94 20.968 131.467 79.955
05/31/94 14.516 131.788 78.875
06/30/94 14.516 126.968 72.715
07/29/94 19.355 129.572 74.914
08/31/94 20.968 137.832 83.044
09/30/94 24.194 137.480 81.898
10/31/94 20.968 140.182 79.099
11/30/94 20.968 135.532 79.448
12/30/94 17.742 135.912 76.873
01/31/95 19.355 136.674 81.129
02/28/95 16.129 143.902 84.194
03/31/95 11.290 148.167 82.990
04/28/95 11.290 152.831 85.321
05/31/95 17.742 156.773 86.397
06/30/95 17.742 169.477 96.519
07/31/95 14.516 181.934 104.830
08/31/95 27.419 185.621 117.228
09/29/95 29.032 189.890 120.601
10/31/95 38.244 188.802 116.084
11/30/95 35.019 193.235 121.909
12/29/95 51.146 192.207 140.630
01/31/96 105.057 193.154 152.926
02/29/96 102.292 200.508 149.971
03/29/96 88.469 201.172 146.317
04/30/96 106.900 217.861 153.871
05/31/96 121.644 227.865 159.081
06/28/96 152.055 217.593 142.128
07/31/96 173.251 198.213 126.702
08/30/96 226.096 209.318 135.884
09/30/96 266.788 225.329 145.378
10/31/96 277.847 222.840 138.816
11/29/96 242.598 236.617 136.836
12/31/96 243.289 236.402 141.039
01/31/97 353.875 253.201 152.898
02/28/97 237.414 239.221 153.881
03/31/97 246.745 223.610 133.940
04/30/97 203.201 230.607 126.004
05/30/97 284.067 256.750 144.988
06/30/97 413.660 264.615 144.588
(1) The lines represent monthly index levels derived from compound daily returns
that include all dividends. If the end of the monthly interval, based on the
fiscal year-end, is not a trading day, the preceding day is used. The index
level for all indices was set to 100.0 on June 30, 1992.
---------------
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
The Board has chosen to reappoint Ernst & Young LLP, independent auditors,
to audit the accounts of the Company and its subsidiaries for the fiscal year
ending June 30, 1998. The Company has been advised by Ernst & Young LLP that no
member of that firm to the best of its knowledge and belief has any direct or
any material indirect financial interest in the Company or its subsidiaries, nor
during the past three fiscal years has any member of the firm had any connection
with the Company or its subsidiaries in the capacity of promoter, underwriter,
voting trustee, director, officer or employee. A representative of Ernst & Young
LLP is expected to be present at the Meeting, will have an opportunity to make a
statement should he or she desire to do so, and is expected to be available to
respond to appropriate questions.
REQUIRED VOTE
The proposal to ratify the appointment of Ernst & Young LLP as the
Company's independent auditors requires an affirmative vote of a majority of the
voting power of the Capital Stock present at the meeting in person or
represented by proxy. Notwithstanding ratification of the appointment of Ernst &
Young LLP as the Company's auditors for the fiscal year ending June 30, 1998,
the Board of Directors may select other auditors for such year without any vote
of the stockholders. If the stockholders do not ratify such appointment, the
matter of the appointment of independent auditors will be considered by the
Board.
BOARD RECOMMENDATION
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2 TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS.
------------------
OTHER MATTERS
STOCKHOLDER PROPOSALS
Any stockholder proposal that is intended to be presented at the 1998
Annual Meeting of Stockholders and included in the Company's Proxy Statement and
Proxy relating to that meeting, must be received at the Company's principal
offices no later than June 26, 1998.
ANNUAL REPORT
The Annual Report of the Company for Fiscal 1997 is being mailed to
stockholders together with this Proxy Statement.
SECTION 16(a) - BENEFICIAL REPORTING COMPLIANCE
Based solely on a review of reports submitted to the Company, the Company
believes that the following director failed to file on a timely basis with the
Securities and Exchange Commission reports of beneficial ownership of the
Company's securities required by Section 16(a) of the Securities Exchange Act of
1934 during the most recent fiscal year: Michael A. Pietrangelo was one day late
in disclosing a disposition of shares of Class A Common Stock.
OTHER MATTERS
The Board does not know of any other matters that are to be presented for
action at the Meeting. Should any other matters come before the Meeting or any
adjournments thereof, the persons named in the enclosed proxy will have the
discretionary authority to vote all proxies received with regard to such matters
in accordance with their respective judgments.
MEDICIS PHARMACEUTICAL CORPORATION
/s/ Mark A. Prygocki, Sr.
Mark A. Prygocki, Sr.
Chief Financial Officer,
Treasurer, and Secretary
September 23, 1997
STOCKHOLDERS ARE URGED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN
THE ENCLOSED ENVELOPE.
MEDICIS PHARMACEUTICAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
NOVEMBER 21, 1997
The undersigned hereby appoints Jonah Shacknai and Mark A. Prygocki, Sr.,
or either of them, as proxies, with full power of substitution, to vote all
shares of stock of MEDICIS PHARMACEUTICAL CORPORATION held of record in the name
of the undersigned at the close of business on September 22, 1997 at the Annual
Meeting of Stockholders to be held in Scottsdale, Arizona on November 21, 1997
or at any adjournment or adjournments, hereby revoking all earlier proxies.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1) AND (2)
IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" ALL NOMINEES LISTED IN THE
PROXY STATEMENT AND "FOR" PROPOSAL (2) IF NO SPECIFICATION IS MADE AND IN THE
DISCRETION OF THE PERSONS NAMED ON ALL OTHER MATTERS THAT COME BEFORE THE
MEETING.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY TO VOTE FOR ALL NOMINEES LISTED
BELOW) BELOW
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
ARTHUR G. ALTSCHUL, JR. PHILIP S. SCHEIN, M.D.
(CONTINUED, AND TO BE SIGNED AND DATED, ON OTHER SIDE.)
(CONTINUED FROM OTHER SIDE)
2. PROPOSAL TO APPROVE THE REAPPOINTMENT OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
MATTERS TO COME BEFORE THE MEETING.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY
Date: ____________________________, 1997
Signed: ________________________________
(Signature)
________________________________________
(Signature if held jointly)
NOTE: Please sign exactly as name(s) are
shown at left. When signing as executor,
administrator, trustee or guardian, give
full title as such; when shares have
been issued in the names of two or more
persons, all should sign.