SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AGOURON PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
AGOURON PHARMACEUTICALS, INC.
10350 NORTH TORREY PINES ROAD, SUITE 100
LA JOLLA, CALIFORNIA 92037-1020
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 2, 1995
The Annual Meeting of Shareholders ("Meeting") of Agouron Pharmaceuticals,
Inc., a California corporation (the "Company") will be held at the Sheraton
Grande Torrey Pines, 10950 North Torrey Pines Road, La Jolla, California 92037,
on Thursday, November 2, 1995, at 9:00 a.m. for the following purposes:
1. To elect nine directors of the Company, all of whom shall serve until
the 1996 Annual Meeting of Shareholders (and until the election and
qualification of their successors);
2. To consider and vote upon approval of an amendment to the Company's 1990
Stock Option Plan to increase the number of shares available for grant
by 1,000,000;
3. To ratify the selection of independent accountants; and
4. To consider and act upon such other business as may properly be
presented to the Meeting or any adjournments or postponements thereof.
Only shareholders of record as of the close of business on September 26, 1995
will be entitled to notice of and to vote at the Meeting or any adjournments or
postponements thereof. A list of shareholders entitled to vote at the Meeting
will be available for inspection at the offices of the Company for 10 days
before the Meeting.
All shareholders are cordially invited to attend the Annual Meeting of
Shareholders in person. Regardless of whether you plan to attend the Annual
Meeting of Shareholders, please sign and date the enclosed Proxy and return it
promptly in the accompanying envelope, postage for which has been provided if
mailed in the United States. The prompt return of Proxies will ensure a quorum
and save the Company the expense of further solicitation. Any shareholder
returning the enclosed Proxy may revoke it prior to its exercise by voting in
person at the Meeting or by filing with the Secretary of the Company a written
revocation or a duly executed Proxy bearing a later date.
By Order of the Board of Directors
Gary E. Friedman
Secretary
La Jolla, California
September 29, 1995
AGOURON PHARMACEUTICALS, INC.
10350 NORTH TORREY PINES ROAD, SUITE 100
LA JOLLA, CALIFORNIA 92037-1020
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 2, 1995
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by and on behalf of the Board of Directors ("Board") of Agouron
Pharmaceuticals, Inc., a California corporation (the "Company"), for use at the
Company's Annual Meeting of Shareholders for the fiscal year ended June 30, 1995
(the "Meeting") to be held at the Sheraton Grande Torrey Pines, 10950 North
Torrey Pines Road, La Jolla, California 92037, on Thursday, November 2, 1995 at
9:00 a.m., and at any adjournments or postponements thereof, for the purposes
set forth in the preceding notice. It is anticipated that this Proxy Statement
and the accompanying Proxy will be mailed to the Company's shareholders on or
about September 29, 1995.
Any shareholder returning the enclosed Proxy may revoke it prior to its
exercise by voting in person at the Meeting or by filing with the Secretary of
the Company a written revocation or a duly executed Proxy bearing a later date.
All shares represented by valid Proxies will be voted in accordance with the
directions specified thereon and otherwise in accordance with the judgment of
the proxyholders. Any duly executed Proxy on which no direction is specified
will be voted for the election of the nominees named herein to the Board and in
favor of Proposals 2 and 3 described in the Notice of Meeting and this Proxy
Statement.
The expense of printing and mailing Proxy material will be borne by the
Company. In addition to the solicitation of Proxies by mail, solicitation may
be made by certain directors, officers or other employees of the Company by
telephone, telegraph, facsimile or in person. No additional compensation will
be paid to such persons for such solicitation. No other individuals or entities
will receive compensation for the solicitation of Proxies. However, the Company
will request brokers, nominees, fiduciaries and custodians to forward Proxy
materials to the beneficial owners of the Company's shares and the Company will
reimburse such brokers or other persons for their reasonable out-of-pocket
expenses incurred in connection with forwarding such materials.
SHARES OUTSTANDING AND VOTING RIGHTS
Only shareholders of record as of the close of business on September 26, 1995
(the "Record Date") will be entitled to vote at the Meeting. As of September
20, 1995, there were outstanding 10,416,736 shares of common stock.
Holders of common stock are entitled to one vote per share on all matters
brought before the meeting and to cumulate votes for the election of the nine
directors. Therefore, in voting for directors, each outstanding share of common
stock is entitled to nine votes which may be cast for one candidate or
distributed in any manner among the nominees for director. However, the right
to cumulate votes in favor of one or more candidates may not be exercised until
the candidate or candidates have been nominated and the shareholder has given
notice at the Meeting of the intention to cumulate votes.
The persons authorized to vote shares represented by executed Proxies for
common stock in the enclosed form (if authority to vote for the election of
directors is not withheld) will have full discretion and authority to vote
cumulatively and to allocate votes among any or all of the nominees as they may
determine or, if authority to vote for a specified candidate or candidates had
been withheld, among those candidates for whom authority to vote has not been
withheld.
The required quorum for the Meeting shall consist of a majority of the
outstanding shares of common stock which are entitled to vote in person or by
proxy at the Meeting. Assuming that a quorum is present at the Meeting, the
nine persons receiving the highest number of votes will be elected to the Board.
The required vote for the approval of other business matters is set forth in the
discussion of such matters.
1
BOARD OF DIRECTORS
Under the bylaws of the Company, the number of directors is to be not less
than six nor more than eleven, with the actual number to be fixed from time to
time by resolution of the Board. The Board has fixed at nine the number of
directors to be elected at the 1995 Annual Meeting of Shareholders. Under the
terms of the Series A Preferred Stock Purchase Agreement, the Company has agreed
to nominate for election to the Board a designee (Ms. Cloherty) of a holder of
shares issued on conversion of the Series A preferred stock. See "CERTAIN
TRANSACTIONS."
Nine directors are to be elected at the Meeting, each to serve until the next
Annual Meeting of Shareholders and until their respective successors are elected
or appointed. Unless authority to vote for all directors is withheld, it is
intended that the shares represented by the enclosed Proxy will be voted for the
election of the nominees named. In the event any of them shall become unable or
unwilling to accept nomination or election, the shares represented by the
enclosed Proxy will be voted for the election of such other person as the Board
may recommend in his or her place. The Board has no reason to believe that any
such nominee will be unable or unwilling to serve.
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The nine nominees for election as directors, all of whom are members of the
present Board, are Peter Johnson, Gary E. Friedman, John N. Abelson, Patricia M.
Cloherty, A. E. Cohen, Michael E. Herman, Irving S. Johnson, Antonie T. Knoppers
and Melvin I. Simon. Their terms will last until the 1996 Annual Meeting of
Shareholders. Certain information concerning the nominees for directors is set
forth below.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE NOMINEES FOR DIRECTORS, AS SET
FORTH IN ITEM 1 ON THE PROXY CARD.
NOMINEES FOR ELECTION AS DIRECTORS
NAME AGE POSITION
---- --- --------
Peter Johnson 50 President, Chief Executive Officer and Director
Gary E. Friedman 48 Vice President, General Counsel, Secretary and Director
John N. Abelson, Ph.D./(1)//(3)/ 56 Director
Patricia M. Cloherty/(2)//(3)//(4)/ 53 Director
A.E. Cohen/(1)//(2)/ 59 Director
Michael E. Herman/(1)//(2)/ 54 Director
Irving S. Johnson, Ph.D./(2)/ 70 Director
Antonie T. Knoppers, M.D., Ph.D./(2)//(4)/ 80 Director
Melvin I. Simon, Ph.D./(3)//(4)/ 58 Director
/(1)/ Member of Directors Compensation Committee
/(2)/ Member of Disinterested Stock Option Committee (11/3/94 through 6/30/95)
/(3)/ Member of Disinterested Stock Option Committee (7/1/94 through 11/3/94)
/(4)/ Member of Audit Committee
2
PETER JOHNSON, a founder of the Company, has served as a director and as
president and chief executive officer of the Company since its inception in
1984. Through 1989, Mr. Johnson held various positions with The Agouron
Institute, including executive director. Mr. Johnson received a M.A. from the
University of California, San Diego.
GARY E. FRIEDMAN, a founder of the Company, has served as a director since its
inception, as the Secretary of the Company since May 1986 and as vice president
and general counsel since December 1991. Previously, from 1982 until December
1991, Mr. Friedman was a principal of the law firm of Friedman, Jay & Cramer, a
Professional Corporation. Mr. Friedman is a California Certified Specialist in
Taxation. Mr. Friedman received a J.D. and a M.B.A. from the University of
California, Berkeley and a L.L.M. in taxation from the University of San Diego.
JOHN N. ABELSON, a founder of the Company, has served as a director since its
inception. Dr. Abelson, a molecular biologist, is a member of the National
Academy of Sciences. Since 1982, Dr. Abelson has been a member of the faculty
of the Division of Biology at the California Institute of Technology where, from
October 1989 until June 1995, he served as chairman. Previously, Dr. Abelson
was a member of the faculty in the Department of Chemistry at the University of
California, San Diego. Dr. Abelson received a Ph.D. in biophysics from The
Johns Hopkins University and was a postdoctoral fellow at the Laboratory of
Molecular Biology in Cambridge, England. Dr. Abelson also serves as a director
of The Agouron Institute.
PATRICIA M. CLOHERTY joined the Board in December 1988. Since 1970, Ms.
Cloherty has been associated with Patricof & Co. Ventures, Inc. (formerly Alan
Patricof Associates, Inc.), a New York venture capital firm ("Patricof"), and
has been a general partner of its funds since 1973. In 1993, she was elected
president of Patricof. Ms. Cloherty also served as deputy administrator for the
U.S. Small Business Administration in 1977 and 1978. Ms. Cloherty also serves
on the board of directors of several private companies and is the chairman of
the National Venture Capital Association.
A.E. COHEN joined the Board in March 1992. Mr. Cohen is an independent
management consultant. From 1957 until his retirement in January 1992, Mr.
Cohen held various positions at Merck & Co., Inc., including senior vice
president and president of the Merck Sharp & Dohme International Division.
Currently, Mr. Cohen is the chairman of the board of Neurobiological
Technologies, Inc. and is a member of the board of directors of Akzo N.V.,
Immunomedics, Inc., Macrochem Corporation, Teva Pharmaceutical Industries Ltd.
and Vasomedical, Inc., all of which are public companies. Mr. Cohen also serves
on the board of directors of several private companies.
MICHAEL E. HERMAN joined the Board in October 1992. Mr. Herman is a private
investor, as well as president and chief operating officer of the Kansas City
Royals Baseball Team. From October 1974 until his retirement in 1990, Mr.
Herman held various positions at Marion Laboratories, Inc. (now Hoechst Marion
Roussel), including executive vice president and chief financial officer.
Currently, Mr. Herman serves as chairman of the finance committee of the Ewing
Marion Kauffman Foundation, a private foundation located in Kansas City where,
from 1985 through 1990, he was the president and chief operating officer. Mr.
Herman is also a member of the board of directors of Cerner Corporation and
Seafield Capital, both of which are public companies, and serves on the board of
directors of several private companies.
IRVING S. JOHNSON joined the Board in May 1989. Dr. Johnson is an independent
consultant in biomedical research working with numerous private companies. From
1953 until his retirement in November 1988, Dr. Johnson held various positions
at Eli Lilly and Company, including vice president of research from 1973 until
1988. Dr. Johnson also served on several committees of the National Academy of
Sciences, the Office of Technology Assessment and the National Institutes of
Health. Currently, he is a member of the board of directors of Allelix
Biopharmaceuticals Inc., Athena Neurosciences, Inc. and Ligand Pharmaceuticals
Incorporated, all of which are public companies. Dr. Johnson received a Ph.D.
in developmental biology from the University of Kansas.
ANTONIE T. KNOPPERS joined the Board in July 1991. Dr. Knoppers is an
independent management consultant. From 1952 until his retirement in 1975, Dr.
Knoppers held various positions at Merck & Co., Inc., including vice chairman of
the board and president and chief operating officer. Dr. Knoppers is a member
of the board of directors of Centocor, Inc., a public biotechnology company. In
addition, he is a member of the board of trustees of the Salk Institute, was the
former chairman of the U.S. Council of the International Chamber of Commerce and
a member of the advisory board of PaineWebber Development Corporation, an
affiliate of PaineWebber Incorporated. Dr. Knoppers received a M.D. from the
University of Amsterdam and a Ph.D. from the University of Leiden, The
Netherlands.
MELVIN I. SIMON, a founder of the Company, has served as a director since its
inception. Dr. Simon, a molecular geneticist, is a member of the National
Academy of Sciences. Currently, Dr. Simon is chairman of the Division of
Biology at the California Institute of Technology where he has been a member of
the faculty since 1982. Previously, Dr. Simon was a member of the faculty in
the Department of Biology at the University of California, San Diego. Dr. Simon
received a Ph.D. in biochemistry from Brandeis University. Dr. Simon also
serves as a director of The Agouron Institute.
3
COMMITTEES AND MEETINGS OF THE BOARD
The Company has a Directors Compensation Committee, a Disinterested Stock
Option Committee and an Audit Committee. The Company does not have a Nominating
Committee. During the fiscal year ended June 30, 1995, the Board held six
meetings.
During the fiscal year ended June 30, 1995, members of the Audit Committee
consisted of Ms. Cloherty, Chairperson, Dr. Knoppers and Dr. Simon. The Audit
Committee oversees the Company's accounting and financial reporting policies,
makes recommendations to the Board regarding the appointment of independent
accountants, reviews with the independent accountants the accounting principles
and practices followed by the Company and the adequacy thereof, approves the
Company's annual audit and financial results and any material change in
accounting principles, policies and procedures and makes recommendations to the
Board with regard to any of the preceding. The Audit Committee held three
meetings in the fiscal year ended June 30, 1995.
During the fiscal year ended June 30 1995, members of the Directors
Compensation Committee consisted of Mr. Herman, Chairman, Dr. Abelson, and Mr.
Cohen. The Directors Compensation Committee recommends to the Board the
Company's overall compensation and the individual compensation elements for the
Company's executive officers and directors. The Directors Compensation
Committee does not approve grants of stock options to executive officers and
directors under the Company's stock option plans. The Directors Compensation
Committee held one meeting in the fiscal year ended June 30, 1995. The full
Board is responsible for approving grants of options to executive officers who
are not also directors. The Company's Disinterested Stock Option Committee
consisted of Dr. Abelson, Ms. Cloherty and Dr. Simon from July 1, 1994 through
November 3, 1994 and of Ms. Cloherty, Mr. Cohen, Mr. Herman, Dr. Johnson and Dr.
Knoppers from November 3, 1994 through June 30, 1995. The Disinterested Stock
Option Committee is responsible for approving grants of options to directors,
including directors who are also executive officers of the Company. The
Disinterested Stock Option Committee took action by unanimous written consent
without a meeting on two occasions during fiscal 1995.
No incumbent director attended fewer than 75% of the aggregate of the Board
and Committee meetings in which such director was entitled to participate,
except for Dr. Antonie Knoppers who attended 66% of such meetings and Dr. Irving
Johnson who attended 50% of such meetings.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of September 26, 1995 relating
to the beneficial ownership of the Company's common stock by (i) each person
known by the Company to beneficially own more than 5% of the outstanding shares
of the Company's common stock, (ii) each director, (iii) each of the executive
officers named in the Summary Compensation Table below, and (iv) all executive
officers and directors as a group.
Beneficial Ownership/(1)/
-------------------------
Number of Percentage of
Beneficial Owner Shares Total
- ---------------- --------- --------------
Peter Johnson/(2)/ 282,800 2.7%
Gary E. Friedman/(2)/ Family Trust 94,410 *
John N. Abelson/(2)//(3)//(7)/ 52,555 *
Patricia M. Cloherty/(2)//(4)/ 332,502 3.2
A. E. Cohen/(2)/ 24,166 *
Michael E. Herman/(2)//(5)/ 36,334 *
Irving S. Johnson/(2)/ 19,166 *
Antonie T. Knoppers/(2)/ 15,933 *
Melvin I. Simon/(2)/ and Linda F. Simon Living Trust/(3)//(6)/ 78,500 *
Neil J. Clendeninn 32,575 *
Robert C. Jackson 85,950 *
Barry D. Quart 27,452 *
R. Kent Snyder 54,346 *
The Agouron Institute 726,000 7.0
505 Coast Boulevard
La Jolla, CA 92037
All executive officers and directors as a group (15 persons) 1,216,279 11.0
* less than 1%.
/(1)/ Unless otherwise indicated, the persons named in the above table exercise
sole voting and investment powers with respect to all shares beneficially
owned by them, subject to applicable community property laws. The number
of shares beneficially owned includes the following number of shares
issuable upon exercise of stock options exercisable within 60 days of
September 26, 1995: Mr. Johnson, 205,300 shares; Mr. Friedman, 60,075
shares; Dr. Abelson, 2,500 shares; Mr. Cohen, 19,166 shares; Mr. Herman,
19,834 shares; Dr. Johnson, 19,016 shares; Dr. Knoppers, 15,833 shares;
Dr. Simon, 2,500 shares; Dr. Clendeninn, 32,575 shares; Dr. Jackson,
85,750 shares; Dr. Quart 27,200 shares; Mr. Snyder, 52,700 shares; and all
executive officers and directors as a group, 619,036 shares.
/(2)/ Director.
/(3)/ Does not include 726,000 shares held by The Agouron Institute, of which
Drs. Abelson and Simon are directors. As directors, they share voting and
investment powers as to the shares held by The Agouron Institute.
/(4)/ Includes 332,502 shares which are held by APA Excelsior II, L.P. ("APA")
and Excelsior Venture Capital Holdings (Jersey) Ltd., of which Ms.
Cloherty may be deemed to share beneficial ownership. Ms. Cloherty is a
general partner of a partnership which is the general partner of APA and,
as such, shares voting and investment powers with the other general
partners. Ms. Cloherty is also president of Patricof & Co. Ventures, Inc.
("Patricof"), investment advisor to Jersey and, as such, shares investment
power with the other officers of Patricof. However, Patricof does not have
power to vote the shares owned by Jersey but does make recommendations to
those entities. See "CERTAIN TRANSACTIONS."
/(5)/ Includes 10,000 shares held by the Herman Family Trading Company, a family
partnership of which Mr. Herman is the general partner, 5,000 shares held
by Vail Fishing Partners in which Mr. Herman has a 50% general partner
interest and 1,500 shares held by Mrs. Herman, of which Mr. Herman
disclaims any beneficial ownership.
/(6)/ Shared voting and investment power.
/(7)/ Includes 500 shares held by Dr. Abelson as custodian for his minor
children, of which Dr. Abelson disclaims any beneficial ownership.
5
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Non-employee members of the Board receive cash compensation in the amount of
$250 per Board meeting for their services as Board members, and are eligible for
reimbursement of their expenses incurred to attend such meeting in accordance
with Company policy. In addition to meeting fees, certain non-employee
directors received consulting fees during fiscal 1995. For scientific
consultation, Dr. Abelson received $29,040; Dr. Knoppers, $5,000; Dr. Johnson,
$18,000 and Dr. Simon, $26,400. For special consultation concerning corporate
development issues, Mr. Cohen received $18,000 and Mr. Herman received $9,000.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the aggregate compensation paid or accrued by
the Company to the Chief Executive Officer and to the four other most highly
compensated executive officers whose annual compensation exceeded $100,000 for
the fiscal year ended June 30, 1995 (collectively the "named executive
officers") for service during the fiscal years ended June 30, 1995, 1994 and
1993:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards/(2)/
Name --------------------------------- ------------
Principal Stock All Other
Position Year Salary/(1)/ Bonus Options Compensation/(3)/
- -------------------------- ---- ----------- ------------ ------------ -----------------
Peter Johnson 1995 $253,500 $70,000/(6)/ 78,200 $ 948
President and Chief 1994 205,000 50,000 91,200 899
Executive Officer 1993 200,000 50,000 40,000 888
Neil J. Clendeninn/(4)/ 1995 187,900 88,309/(7)/ 10,000 131,619
Vice President, 1994 177,200 35,000 18,300 107,056
Clinical Affairs 1993 92,384 - - 50,000 262
Robert C. Jackson 1995 179,000 30,000/(6)/ 12,000 948
Vice President, 1994 156,600 35,000 33,000 899
Research & Development 1993 142,400 35,000 15,000 958
Barry D. Quart/(5)/ 1995 150,600 57,000/(6)/ 30,000 9,005
Vice President, 1994 142,000 32,500 26,800 68,453
Regulatory Affairs 1993 9,682 57,821/(8)/ 35,000 - -
R. Kent Snyder 1995 158,000 55,000/(6)/ 20,000 1,014
Vice President, 1994 149,000 53,000 40,800 720
Commercial Affairs 1993 141,800 48,000 15,000 18,753
- --------------
/(1)/ Includes amounts deferred out of compensation under the Company's 401(k)
Plan otherwise payable in cash during each fiscal year.
/(2)/ The Company has made no restricted stock awards, has not granted any stock
appreciation rights and has no other long-term incentive plans.
/(3)/ (a) During 1995, the Company made matching contributions to the Company's
401(k) Plan in the following amounts: Mr. Johnson, $948; Dr.
Clendeninn, $900; Dr. Jackson, $948; Dr. Quart, $557; and Mr. Snyder,
$1,014.
(b) During 1994, the Company made matching contributions to the Company's
401(k) Plan in the following amounts: Mr. Johnson, $899; Dr.
Clendeninn, $1,047; Dr. Jackson, $899; Dr. Quart, $1,047; and Mr.
Snyder, $720.
(c) During 1993, the Company made matching contributions to the Company's
401(k) Plan in the following amounts: Mr. Johnson, $888; Dr.
Clendeninn, $262; Dr. Jackson, $958; and Mr. Snyder, $363.
(d) During 1995, the Company reimbursed certain officers for relocation
costs as follows: Dr. Clendeninn, $130,719 and Dr. Quart, $8,448.
(e) During 1994, the Company reimbursed certain officers for relocation
costs as follows: Dr. Clendeninn, $106,009 and Dr. Quart, $67,406.
(f) During 1993, the Company reimbursed Mr. Snyder for relocation costs
in the amount of $18,390.
/(4)/ Dr. Clendeninn's employment commenced in February 1993.
/(5)/ Dr. Quart's employment commenced in June 1993.
/(6)/ Cash bonus shown in year earned; actually paid in fiscal 1996. For Dr.
Quart and Mr. Snyder, a portion of the bonus amount was subsequently used
to partially repay their outstanding relocation loans.
/(7)/ A portion of the bonus was used to partially repay an outstanding
relocation loan and $43,982 of the bonus was directly applied to the
reduction of such loan.
/(8)/ Initial hiring bonus.
6
The following table sets forth certain information with respect to individual
grants of stock options made during the fiscal year ended June 30, 1995, to each
of the named executive officers:
OPTION GRANTS IN FISCAL 1995
Potential
Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term/(2)/
- ----------------------------------------------------------------------- ------------------------
% of Total
Options
Granted to
Employees
Options in Fiscal Exercise Expiration
Name Granted/(1)/ Year Price Date 5% 10%
- ---------------------------- -------------- ---------- -------- ---------- -------- ----------
Peter Johnson 60,716# 7.8% $22.875 6/14/05 $873,500 $2,213,500
17,484* 2.3 22.875 6/14/05 251,500 637,400
Neil J. Clendeninn 10,000* 1.3 22.875 6/14/05 143,900 364,600
Robert C. Jackson 12,000* 1.6 22.875 6/14/05 172,600 437,500
Barry D. Quart 30,000* 3.9 22.875 6/14/05 431,600 1,093,700
R. Kent Snyder 20,000* 2.6 22.875 6/14/05 287,700 729,100
/(1)/ The Agouron Stock Option Plan ("Plan") for executive officers is
administered by the Board or by the Disinterested Stock Option Committee
of the Board if the grant is to an executive officer who is also a
director. The Board, based upon the recommendation of the Directors
Compensation Committee, determines the number of shares to be granted and
the term of such grants to each executive officer. The options granted in
fiscal 1995 were either incentive stock options(*) or non-statutory stock
options(#), have exercise prices equal to the fair market values on the
date of grant, vest over a period of four years and have a term of ten
years. Upon certain corporate events as defined in the Plan which result
in a change of control, the exercise date of all outstanding options for
all employees including executive officers may be accelerated. The Plan
also permits the Company to assist an employee in using a so-called
"cashless" exercise procedure to pay the option exercise price.
/(2)/ Potential realizable value is based on an assumption that the stock price
of the common stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten year option
term. These numbers are calculated based on the requirements promulgated
by the Securities and Exchange Commission and do not reflect the
Company's estimate of future stock price growth. Any such growth would
benefit all shareholders.
The following table sets forth certain information with respect to each
exercise of stock options during the fiscal year ended June 30, 1995, by each of
the named executive officers and the number and value of unexercised options
held by such named executive officers as of June 30, 1995:
OPTION EXERCISES IN FISCAL 1995
AND VALUE OF OPTIONS AT JUNE 30, 1995
Number of Value of Unexercised
Unexercised In-the-Money
Options at Options at
Shares June 30, 1995 June 30, 1995/(1)/
--------------------------- ---------------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- -------- ----------- ------------- ----------- -------------
Peter Johnson 0 $0 192,800 166,600 $2,137,600 $1,127,700
Neil J. Clendeninn 0 0 29,575 48,725 437,900 558,800
Robert C. Jackson 0 0 80,750 44,250 1,153,100 402,600
Barry D. Quart 0 0 24,200 67,600 344,200 525,800
R. Kent Snyder 0 0 40,200 65,600 443,700 545,300
/(1)/ Value calculated as market value of Company stock on June 30, 1995
($23.625), minus exercise price multiplied by the number of shares.
7
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION/(1)/
OVERVIEW AND PHILOSOPHY
The Directors Compensation Committee (the "Committee") is composed entirely of
outside directors and is responsible for developing and making recommendations
to the Board with respect to the Company's executive compensation policies and
practices, including the establishment of the annual total compensation for the
chief executive officer (the "CEO") and all executive officers. The Committee
has available to it an outside compensation consultant and access to independent
compensation data. The Board is responsible for approving and implementing the
compensation recommendations of the Committee. The recommendations made by the
Committee to the Board during 1995 were approved without any significant
modification.
The objectives of the Company's executive compensation program are to attract,
retain and motivate highly qualified executive personnel. These objectives are
satisfied through the use of three principal compensation elements: base
salary, cash bonus payments and stock options.
BASE SALARY
Base salary levels for the Company's executive officers are based on the
concept of pay for performance and are competitively set relative to the
compensation of other executives in the biotechnology industry. Extensive
salary survey data is available on the industry (notably, the annual
"Biotechnology Compensation and Benefits Survey" conducted by Radford Associates
and Alexander & Alexander Consulting Group) and is utilized by the Committee in
establishing annual base salaries. In determining base salaries, the Committee
also considers corporate performance and progress in the immediately-preceding
fiscal year, individual experience and performance, specific issues which are
relevant to the Company and general economic conditions. The base salary of the
CEO and all other executive officers is reviewed annually. During fiscal year
1995, the base salaries paid to the executive officers other than the CEO
approximated the 75th percentile of the above-noted industry survey data.
BONUS PAYMENTS
Annual cash bonus payments are discretionary unless otherwise required
pursuant to an employment agreement. Only one executive officer has such an
agreement: Dr. Jackson is to receive a minimum annual bonus payment of $30,000.
Bonus payments, if any, to other executive officers, including the CEO, or
payments above the required annual minimum, are based on two principal factors:
corporate performance as compared to the Company's annual goals and objectives
and individual performance relative to corporate performance and individual
goals and objectives. The bonus payments to Dr. Quart and Dr. Clendeninn in
1994 were pursuant to their employment agreements and mandatory for only their
first year of employment.
Bonus payments in 1995 were generally in recognition of the satisfaction of
several significant corporate objectives, including the establishment of a major
corporate collaboration during the year and the continued preclinical and
clinical development of the Company's leading cancer and anti-viral agents.
Bonus payment recommendations for executive officers other than the CEO are
initiated by the CEO and submitted to the Committee for review and subsequent
submission to the Board. Bonus payment recommendations for the CEO are
initiated by the Committee and submitted to the Board.
Total base salary and any bonus payments are compared to "total compensation"
as reported by the previously noted industry survey. Such total compensation
for the executive officers of the Company is at or above the averages of such
data, which reflects the Committee's belief that the relative levels of
corporate performance and increase in shareholder value during the period were
also above average.
/(1)/ The material in this report is not soliciting material, is not deemed
filed with the SEC, and is not incorporated by reference in any filing of
the Company under the Securities Act of 1933 (the "Securities Act"), as
amended, or the Securities Exchange Act of 1934 (the "Exchange Act"), as
amended, whether made before or after the date of this Proxy Statement and
irrespective of any general incorporation language in such filing.
8
STOCK OPTIONS
To conserve its cash resources, the Company places special emphasis on equity-
based incentives to attract, retain and motivate executive officers as well as
other employees. Under the Company's stock option plans, grants are generally
priced at the fair market value on the date of grant, vest over a period of four
years and have a term of ten years. Grants are made to all employees on their
date of hire based on salary level and position. All employees, including
executive officers, are eligible for subsequent, discretionary grants which are
generally based on either individual or corporate performance. It is the
Committee's intent that the interests of the Company shareholders and the
executive officers be closely aligned through the use of stock options. Option
grants recommended by the Committee are submitted to the Board for approval. If
a recommendation relates to any director, including an executive officer who is
also a director, such recommendation is submitted to the Disinterested Stock
Option Committee of the Board for approval. Based on recent peer-company proxy
data compiled by the Company, the level of option grants to each executive
officer in 1995 remains competitive, and the resultant total option position as
a percent of total shares outstanding represents approximately the 75th to 95th
percentile of such positions.
CHIEF EXECUTIVE OFFICER COMPENSATION
During 1995, Mr. Johnson's base salary of $253,500 was based on individual and
corporate performance, and was between the 50th and 75th percentile of the
updated industry data for base salaries of CEOs.
During 1995, Mr. Johnson was awarded a bonus of $70,000 in recognition of the
satisfaction of several significant corporate objectives, including the
continued preclinical and clinical development of three product candidates and
the creation of a significant corporate alliance. The Committee believes that
Mr. Johnson has made a significant contribution during 1995 in establishing a
sound base for enhancing shareholder value through his managerial and
entrepreneurial efforts.
The stock options awarded to Mr. Johnson during fiscal 1995 are competitive
and consistent with the purpose of the stock option plans. The resultant total
option position as a percent of total shares outstanding represents
approximately the 85th percentile for peer CEO positions.
EXECUTIVE COMPENSATION DEDUCTION LIMITATIONS
In 1993, Section 162(m) of the Internal Revenue Code ("Section 162(m)") was
enacted which disallows the deductibility by the Company of any compensation
over $1 million per year paid to each of the chief executive officer and the
four other most highly compensated executive officers, unless certain
performance-based compensation criteria are satisfied. While it is the
Committee's firm belief and intent that compensation from base salary and cash
bonus payments will not approach the annual Section 162(m) limitation in the
foreseeable future, additional "compensation" from the exercise of option grants
pursuant to the Company's stock option plans could result in the annual
limitation being exceeded. Accordingly, in 1994, the Committee recommended and
the Board and the shareholders approved an amendment to the 1990 Stock Option
Plan which qualifies any "compensation" resulting from an option grant under the
Plan for an exemption from the $1 million limitation. The Committee will
continue to monitor all forms of compensation to its executive officers to
ensure that the Company may maximize the tax benefits of such compensation.
Directors Compensation Committee
Michael E. Herman, Chairman
John N. Abelson, Ph.D.
A. E. Cohen
DIRECTORS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Directors Compensation Committee is composed exclusively of three outside
directors: Mr. Herman, Mr. Cohen and Dr. Abelson. The Company is not aware of
any Committee interlocks.
9
PERFORMANCE MEASUREMENT COMPARISON/(1)/
The chart set forth below shows the value of an investment of $100 on June 30,
1990 in the Company's common stock, The Nasdaq Stock Market Index (U.S.
Companies) ("Nasdaq Market (US)") and the Nasdaq Pharmaceutical Index ("Nasdaq
Pharmaceuticals"). The total returns assume the reinvestment of dividends,
although dividends have not been declared on the Company's common stock. The
Company's common stock is traded on The Nasdaq Stock Market and is a component
of both the Nasdaq Market (US) and the Nasdaq Pharmaceutical Index. The
comparisons in the chart are required by the Securities and Exchange Commission
and are not intended to forecast or be an indicator of possible future
performance of the Company's common stock.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG AGOURON COMMON STOCK, NASDAQ MARKET (US) AND NASDAQ PHARMACEUTICALS
PERFORMANCE GRAPH APPEARS HERE
Measurement Period AGOURON NASDAQ NASDAQ
(Fiscal Year Covered) COMMON STOCK MARKET (US) PHARMACEUTICALS
- ------------------- ------------ ----------- ---------------
Measurement Pt- 1990 $100 $100 $100
FYE 1991 $155.56 $105.89 $159.66
FYE 1992 $130.56 $127.25 $198.79
FYE 1993 $111.11 $159.99 $172.80
FYE 1994 $125.00 $161.61 $144.55
FYE 1995 $262.50 $215.33 $193.60
/(1)/ This section is not "soliciting material," is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act or the
Exchange Act.
10
CERTAIN TRANSACTIONS
The Agouron Institute ("Institute") is a holder of 726,000 shares of common
stock. Material business transactions between the Company and the Institute
require approval by a majority of the disinterested directors of the Company.
The Company and the Institute have two common directors (Drs. Abelson and Simon)
and no common officers.
As part of its employment agreement with Mr. Snyder, the Company provided him
with a six-year, non-interest bearing $85,000 employee relocation loan. The
loan is secured by real property. At July 5, 1995, the principal balance of the
loan outstanding was $28,538.
As part of its employment agreement with Dr. Clendeninn, the Company provided
him with a four-year, non-interest bearing $150,000 employee relocation loan.
The loan was secured by real property. At June 30, 1995, the principal balance
of the loan outstanding was $0.
As part of its employment agreement with Dr. Quart, the Company provided him
with a four year, non-interest bearing $60,000 employee relocation loan. The
loan is secured by real property. At July 5, 1995, the principal balance of the
loan outstanding was $45,799.
All transactions with affiliates have been and will continue to be on terms no
less favorable to the Company than could be obtained from unaffiliated parties.
Furthermore, all transactions with affiliates and any loans to Company officers,
affiliates or shareholders must be approved by a majority of the disinterested
directors.
In connection with its Series A preferred stock purchase (converted in October
1990 to common stock), APA Excelsior II, L.P. was contractually granted the
right to designate a nominee (Ms. Cloherty) for election to the Board. The
Company will use its best efforts to encourage its shareholders to elect Ms.
Cloherty to the Board.
As permitted by California law, the articles of incorporation and bylaws of
the Company currently provide for the limitation of director liability for
monetary damages for breach of duty to the Company and for indemnification of
agents (including officers and directors) to the full extent permitted under the
California General Corporations Law. The Company has entered into
Indemnification Agreements with all of its directors and officers.
Additionally, the Company has in effect a directors and officers liability
insurance policy which insures directors and officers of the Company against
loss arising from claims made against them due to wrongful acts while acting in
their individual and collective capacities as directors and officers.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the 1996 Annual Meeting of Shareholders must be received by the
Company on or before May 31, 1996 to be included in the Proxy materials for the
1996 Annual Meeting. It is recommended that shareholders submitting proposals
direct them to the Secretary of the Company and utilize Certified Mail-Return
Receipt Requested.
FINANCIAL STATEMENTS AVAILABLE
Financial statements for the Company are included in the Company's Annual
Report to Shareholders for the fiscal year ended June 30, 1995. Additional
copies of these statements and the Annual Report to the Securities and Exchange
Commission on Form 10-K (excluding exhibits, unless such exhibits have been
specifically incorporated by reference therein) may be obtained without charge
upon written request to: Investor Relations, Agouron Pharmaceuticals, Inc.,
10350 North Torrey Pines Road, Suite 100, La Jolla, California 92037-1020 or by
calling (619) 622-3000.
11
APPROVAL OF AMENDMENT TO THE COMPANY'S 1990 STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR GRANT BY 1,000,000
(Item 2 on the Proxy Card)
The Company has two stock option plans ("Plans"): (1) the 1985 Stock Option
Plan and (2) the 1990 Stock Option Plan (the "1990 Plan"). As of June 30, 1995,
there were 2,585,692 outstanding stock options under the Plans (of which
1,107,922 were exercisable) with an aggregate total exercise price of
approximately $33,510,000; the average per share exercise price of these
outstanding stock options was $12.96. During fiscal 1995, options for 773,275
shares were granted at an average exercise price of $17.27 per share. At June
30, 1995, only 340,672 stock options remained available for grant under the
Plans.
The Board approved in September 1995, subject to shareholder approval, an
amendment to the 1990 Plan to increase by 1,000,000 shares (to a total of
3,500,000 shares) the aggregate number of shares available for grant under the
1990 Plan. As of June 30, 1995, prior to the adoption of the proposed
amendment, 338,247 shares remained available for grant under the 1990 Plan. The
Board believes that the Company's stock option programs have created significant
incentives for its employees, officers, directors and consultants. The Board
considers it important for the future success of the Company to continue to
grant stock options on a basis comparable with those granted by other companies
with which it competes in attracting, retaining and motivating qualified
personnel. The Board is requesting approval of the amendment of the 1990 Plan
in order to satisfy the requirements of Rule 16b-3 of the Securities and
Exchange Act of 1934 ("Rule 16b-3"). If shareholders elect not to approve the
amendment, the Board, using its general authority to issue stock options, will
grant non-statutory stock options to purchase the Company's common stock.
AMENDMENT
Pursuant to Paragraph 8 of the 1990 Plan, the 1990 Plan is hereby amended as
follows:
1. The number of Shares of Common Stock which may be issued under the
1990 Plan, as specified in the second sentence of Paragraph 5 of the
1990 Plan, is hereby amended and increased to 3,500,000 Shares.
REQUIRED VOTE
Approval by the holders of a majority of the shares of the Company's common
stock represented and voting at the Meeting on this matter (which shares
constitute at least a majority of the required quorum for the Meeting) is
required for the adoption of this proposal. For purposes of calculating the
vote necessary for approval, abstentions and non-votes are not counted.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THIS PROPOSAL, WHICH IS
SET FORTH AS ITEM 2 ON THE PROXY CARD.
DESCRIPTION OF THE 1990 STOCK OPTION PLAN
THE ESSENTIAL FEATURES OF THE 1990 PLAN ARE OUTLINED BELOW. COPIES OF THE
1990 PLAN ARE AVAILABLE UPON REQUEST TO THE INVESTOR RELATIONS DEPARTMENT OF THE
COMPANY.
The purpose of the 1990 Plan is to encourage officers, directors, employees
and consultants of the Company to acquire or increase their proprietary interest
in the success of the Company and to continue their affiliation with the
Company. The 1990 Plan allows the Board more flexibility in determining the
conditions under which options are issued compared to the 1985 Stock Option
Plan. Eligible employees may be granted either "incentive stock options" or
"non-statutory stock options" under the 1990 Plan. Subject to certain
conditions, officers, directors and consultants who are not employees may be
granted "non-statutory stock options" under the 1990 Plan. An incentive stock
option is an option which qualifies for certain favorable income tax treatment
under the Internal Revenue Code. A non-statutory stock option is an option
which is not an incentive stock option for federal income tax purposes.
Previously, shareholders have authorized 2,500,000 shares to be eligible for
grant under the 1990 Plan. In September 1995, the Board, subject to shareholder
approval, authorized an additional 1,000,000 shares to be eligible for grant
under the 1990 Plan. The total number of shares available under the 1990 Plan,
the number of shares subject to outstanding options and the exercise price per
share of outstanding options will be subject to adjustment upon the occurrence
of stock dividends, recapitalizations, consolidations, stock splits,
combinations or exchange of shares of stock or other increases or decreases in
the number of shares of the Company's common stock effected without receipt of
consideration by the Company, in order to preclude the dilution or enlargement
of benefits under the 1990 Plan. The Board may also make such equitable
adjustments to the 1990 Plan and outstanding options as it deems appropriate in
12
order to preclude the dilution or enlargement of benefits under the 1990 Plan
upon exchange of all of the outstanding common stock of the Company for a
different class or series of capital stock or the separation of assets of the
Company, including a spin-off or other distribution of stock or property by the
Company. If any option under the 1990 Plan terminates or expires, the shares
allocable to the unexercised portion of the option will again be available for
purposes of the 1990 Plan. Where an optionee, other than a reporting person,
uses stock to exercise an option, only the net shares issued to the optionee are
counted against the number of shares issued under the 1990 Plan. Certain stock
issuances which are later forfeited by the optionee do not count as grants under
the 1990 Plan.
ADMINISTRATION OF THE 1990 PLAN
The 1990 Plan is administered by the Board, except that the Board may delegate
all or any part of its authority to administer the 1990 Plan with respect to any
group or groups of persons eligible to receive options to such persons or
committee as the Board may determine. However, certain limitations apply with
regard to the administration of the 1990 Plan in the case of persons required to
file statements of beneficial ownership under Section 16(a) of the Securities
Exchange Act of 1934. The Board has currently delegated to a committee,
composed of certain of the Company's executive officers, the authority to
administer the 1990 Plan with respect to persons who are neither officers nor
directors of the Company. In addition, the Board has also delegated to the
Disinterested Stock Option Committee of the Board (whose members consist solely
of "disinterested persons" as defined by Rule 16b-3) the authority to administer
the 1990 Plan with respect to persons who are either directors or officers and
directors of the Company. Further references herein to the administration of
the 1990 Plan by the Board refer to the Board or its delegates, unless the
context otherwise indicates. Whether or not the Board has delegated
administrative authority, the Board has final power to determine all questions
of policy or expediency that may arise in the administration of the 1990 Plan.
The Board has the power to make all determinations necessary or advisable for
the administration of the 1990 Plan. The Board also has the final power to
construe and interpret the 1990 Plan and the options granted under it. The
Company's current form of stock option agreement provides that an option vests
25% per year commencing one year after the date of grant. Subject to the terms
and conditions of the 1990 Plan, the Board may modify an outstanding option
(including lowering the option price or changing incentive stock options into
non-statutory stock options), change the vesting schedule, extend or renew
outstanding options granted under the 1990 Plan or accept the surrender of
outstanding options (to the extent not previously exercised) and authorize the
granting of new options in substitution therefor. The Board may permit an
option to be exercised before it is vested, subject to repurchase rights which
terminate on a vesting schedule identical to the vesting schedule of the option.
The Board may also establish other limitations or restrictions upon exercise of
options.
GRANT AND EXERCISE OF INCENTIVE STOCK OPTIONS AND NON-STATUTORY STOCK OPTIONS
All employees of the Company are eligible to receive incentive stock options
and non-statutory stock options under the 1990 Plan. Subject to certain
conditions, officers, directors and consultants of the Company who are not
employees are eligible to receive non-statutory stock options but not incentive
stock options. A director can decline to participate in the 1990 Plan to permit
the director to comply with the requirements of Rule 16b-3 to be a
"disinterested person." To the extent required by Section 162(m), options to
purchase more than 750,000 shares may not be granted in a fiscal year to any
individual participant in the 1990 Plan.
Incentive stock options may be granted by the Board at any time prior to
October 16, 2000. Options shall be evidenced by agreements in such form as the
Board shall from time to time determine, consistent with the terms of the 1990
Plan. The price per share under each incentive stock option must be at least
100% of the fair market value of the common stock on the date the option is
granted. The Board can set any price it wishes for shares granted under non-
statutory stock options.
Except as otherwise provided in the option agreement between the Company and
the optionee, each option expires on the date set forth in such agreement. The
term of each incentive stock option cannot be more than ten years from the date
on which the option is granted.
To the extent required by Internal Revenue Code Section 422 and Rule 16b-3,
options granted under the 1990 Plan may not be transferred other than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order, and may be exercised during the holder's lifetime only by the
holder. However, non-statutory stock options can be transferred to a trust for
the benefit of the optionee, or members of his family, provided such transfer
does not violate the requirements of Rule 16b-3.
13
AMENDMENT AND TERMINATION
The Board may at any time revise, amend, suspend or terminate the 1990 Plan.
No amendment shall, without the approval of the shareholders, change the number
of shares for which incentive stock options may be granted under the 1990 Plan,
reduce the price per share at which incentive stock options may be offered under
the 1990 Plan below 100% of the fair market value on the date of grant, or
modify the eligibility requirements for the class of employees eligible to
receive incentive stock options.
FEDERAL INCOME TAX CONSEQUENCES
The principal tax consequences of the grant and exercise of incentive stock
options and non-statutory stock options under current provisions of the federal
income tax laws may be summarized as follows:
1. Incentive Stock Options. The grant of an incentive stock option does not
-----------------------
produce taxable income for the employee or a tax deduction for the Company.
Upon exercise of an incentive stock option, the excess of the fair market value
of the shares acquired over the amount paid by the employee for the shares will
be an item of tax preference to the employee, which may be subject to the
alternative minimum tax for the taxable year of exercise. If no disposition of
the stock is made within two years from the date of grant of the incentive stock
option nor within one year after the transfer of the shares to the employee, the
employee will not realize ordinary income as a result of the exercise and
subsequent sale of the incentive stock option. Any gain or loss realized on the
ultimate sale of the shares must be reported by the employee as long-term
capital gain or loss. The Company is not entitled to any deduction as a result
of the exercise of the incentive stock option.
If the employee disposes of the shares within the two-year or one-year periods
referred to above, the excess of the fair market value of the shares at the time
of exercise (or the proceeds of disposition, if less) over the amount paid by
the employee for the shares will at that time be taxable to the employee as
ordinary income. The same amount will be deductible by the Company, subject to
the general rules relating to the reasonableness of compensation. The excess
(if any) of the proceeds of disposition over the fair market value of the shares
on the date of exercise must be reported by the employee as a long-term capital
gain if the shares have been held for more than one year, or as a short-term
capital gain if the shares have been held for one year or less. If no gain is
realized, there will be no ordinary income and any loss will be long-term or
short-term capital loss.
2. Non-Statutory Stock Options. The grant of a non-statutory stock option
---------------------------
under the 1990 Plan does not produce taxable income for the optionee or a tax
deduction for the Company. Except as described below, upon exercise of a non-
statutory stock option, the excess of the fair market value of the shares
acquired over the amount paid by the optionee will be taxable to the optionee as
ordinary income.
Under current law, if the optionee is an officer, director or more than 10%
beneficial owner of the Company's common stock, income may be recognized by such
optionee subsequent to the date the non-statutory stock option is exercised.
The Company will be entitled to a deduction for income tax purposes in an
amount equal to the ordinary income taxable to the optionee in the year in which
such ordinary income is recognized. Any additional profit or loss realized by
an optionee on disposition of the shares will not result in any additional tax
deduction to the Company.
Similar rules apply if the Company permits the exercise of an "unvested"
option with the issued stock being subject to certain repurchase rights or other
substantial risks of forfeiture.
ACCOUNTING TREATMENT
Under the present financial accounting rules, neither the grant nor the
exercise of options issued to employees at fair market value will result in any
charge to the Company's earnings. However, the grant of options with exercise
prices less than the fair market value of the shares at the time of grant will
result in a compensation expense equal to the discount from market at the time
of grant. The Company will have to report such expense pro rata as the shares
underlying the option become exercisable. Accordingly, the grant of discounted
options under the 1990 Plan would result in a charge to reported earnings. In
all events, the number of dilutive options outstanding under the 1990 Plan will
be a factor in determining the Company's reported earnings per share. As the
existing accounting rules for stock compensation plans are subject to change,
the accounting treatment for stock options summarized above may change in the
future.
14
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(Item 3 on the Proxy Card)
The Board has selected the firm of Price Waterhouse LLP as independent
accountants for the Company for the fiscal year ending June 30, 1996, it being
intended that such selection would be proposed for ratification by the
affirmative vote of a majority of the shares of the Company's common stock
represented and voting at the Meeting on this matter (which shares constitute at
least a majority of the required quorum for the Meeting). For purposes of
calculating the vote necessary for ratification of the selection of independent
accountants, abstentions and non-votes are not counted. One or more members of
Price Waterhouse LLP are expected to be present at the Meeting and will be
available to respond to questions and make a statement if they desire to do so.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE SELECTION OF
PRICE WATERHOUSE LLP, WHICH IS SET FORTH AS ITEM 3 ON THE PROXY CARD.
OTHER MATTERS
The Company's Annual Report for the fiscal year ended June 30, 1995
accompanies this Proxy Statement.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and The Nasdaq Stock Market. Executive officers, directors and greater than 10%
shareholders are required by Securities and Exchange Commission regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on review of the copies of such forms furnished to the Company, or
written representations that no Forms 5 were required, the Company believes
that, during the applicable reporting period ending June 30, 1995, all Section
16(a) filing requirements applicable to its executive officers, directors and
greater than 10% beneficial owners were satisfied, except during fiscal 1995,
late Form 4 filings were made by Melvin Simon, a director of the Company (one
filing) and The Agouron Institute, previously a holder of over ten percent of
the common stock of the Company (two filings).
The Company's Board does not know of any other matters to be presented at the
Meeting. However, if any other business is properly presented at the Meeting
for action, the persons named in the enclosed form of Proxy will vote such Proxy
according to their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
Gary E. Friedman, Secretary
September 29, 1995
15
AGOURON PHARMACEUTICALS, INC.
10350 NORTH TORREY PINES ROAD, SUITE 100
LA JOLLA, CALIFORNIA 92037-1020
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter Johnson and Gary E. Friedman, and each
of them, with full power of substitution, as proxies to represent and to vote,
as designated below, all the shares of common stock of Agouron Pharmaceuticals,
Inc., held of record by the undersigned on September 26, 1995, at the Annual
Meeting of Shareholders to be held on November 2, 1995 and at any adjournments
or postponements thereof.
1. PROPOSAL 1--Election of Directors
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
Peter Johnson, Gary E. Friedman, John N. Abelson,
Patricia M. Cloherty, A. E. Cohen, Michael E. Herman,
Irving S. Johnson, Antonie T. Knoppers and Melvin I. Simon.
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. PROPOSAL 2--Amendment to the Company's 1990 Stock Option Plan to increase
the number of shares available for grant by 1,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL 3--Ratification of the selection of independent accountants.
[_] FOR [_] AGAINST [_] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
(continued on reverse side)
(continued from reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO OTHER DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES LISTED ON THE
OTHER SIDE AND FOR PROPOSALS 2 AND 3. IF CUMULATIVE VOTING PROCEDURES ARE
INVOKED AT THE MEETING AND THIS PROXY CARD INDICATES "FOR" OR GIVES NO DIRECTION
ON PROPOSAL 1, THE DESIGNATED PROXIES ARE AUTHORIZED TO DISTRIBUTE THE VOTES
REPRESENTED BY THIS PROXY IN THEIR DISCRETION SO AS TO ELECT THE MAXIMUM NUMBER
OF MANAGEMENT NOMINEES WHICH MAY BE ELECTED BY CUMULATIVE VOTING.
Dated: 1995
--------------------------
------------------------------------
SIGNATURE
------------------------------------
IF HELD JOINTLY
PLEASE SIGN EXACTLY AS NAME APPEARS IN TYPE.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.