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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MOLECULAR BIOSYSTEMS, 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:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
[MBI LOGO]
MOLECULAR BIOSYSTEMS, INC.
10030 Barnes Canyon Road
San Diego, California 92121
NOTICE OF
1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 20, 1996
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of Molecular Biosystems, Inc. (the "Company"), which will be held on August 20,
1996, at 2:00 p.m. PDT at the Sheraton Grande Torrey Pines, 10950 North Torrey
Pines Road, La Jolla, CA 92037, for the following purposes:
1. ELECTION OF DIRECTORS. To elect a Board of Directors to serve for the
ensuing year.
2. AMENDMENT TO CERTIFICATE OF INCORPORATION. To act on a proposal to amend
the Certificate of Incorporation of the Company to increase the Company's
authorized number of shares of Common Stock from 20,000,000 shares to
40,000,000 shares.
3. AMENDMENT TO 1993 STOCK OPTION PLAN. To act on a proposal to amend the
Company's 1993 Stock Option Plan to increase the maximum number of shares
for which the Company is authorized to grant options from 2,500,000
shares to 3,250,000 shares.
4. RETENTION OF INDEPENDENT PUBLIC ACCOUNTANTS. To ratify the appointment
of Arthur Andersen LLP as the Company's independent public accountants
for the ensuing year.
5. OTHER BUSINESS. To transact any other business that properly comes
before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 25, 1996 are
entitled to notice of and to vote at the Annual Meeting and any adjournment.
Your proxy is enclosed. Whether or not you plan to attend the Annual Meeting
in person, PLEASE PROMPTLY COMPLETE, SIGN AND RETURN THE ENCLOSED MANAGEMENT
PROXY IN THE ENCLOSED RETURN ENVELOPE. If you do attend the Annual Meeting and
you have already submitted your proxy, you may still vote personally on each
matter brought before the meeting. Thank you.
For the Board of Directors,
/s/ Kenneth J. Widder
Kenneth J.Widder, M.D.
Chairman of the Board
Dated: July 3, 1996
San Diego, California
MOLECULAR BIOSYSTEMS, INC.
10030 Barnes Canyon Road
San Diego, California 92121
PROXY STATEMENT FOR
1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 20, 1996
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Molecular Biosystems, Inc. (the "Company")
for use at the 1996 Annual Meeting of Stockholders of the Company (the "Annual
Meeting") to be held on Tuesday, August 20, 1996 at 2:00 p.m. PDT at the
Sheraton Grande Torrey Pines, 10950 North Torrey Pines Road, La Jolla ,
California 92037, and at all adjournments of the meeting.
This Proxy Statement, the accompanying notice and proxy are being mailed
to stockholders on or about July 20, 1996.
The Company's 1996 Annual Report, including financial statements for the
year ended March 31, 1996, is being mailed to all stockholders concurrently with
this Proxy Statement. Stockholders are referred to the 1996 Annual Report for
financial and other information about the Company, but the report is not
incorporated in this Proxy Statement and is not a part of the proxy soliciting
material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED MARCH 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS
AVAILABLE TO EACH STOCKHOLDER WITHOUT CHARGE ON WRITTEN REQUEST TO GERARD A.
WILLS, CHIEF FINANCIAL OFFICER OF THE COMPANY, AT 10030 BARNES CANYON ROAD, SAN
DIEGO, CALIFORNIA 92121.
REVOCABILITY OF PROXIES
A proxy for use in connection with the Annual Meeting is enclosed. Any
stockholder who signs and delivers a proxy has the right to revoke it, at any
time before it is exercised, by filing a signed revocation with the Secretary of
the Company or by filing a duly signed proxy bearing a later date. In addition,
the powers of the proxyholders will be revoked if the person signing the proxy
is present at the Annual Meeting and elects to vote in person. Subject to these
rights of revocation, all shares represented by a properly signed proxy received
in time for the Annual Meeting will be voted by the proxyholders in accordance
with the instructions on the proxy. IF NO INSTRUCTION IS SPECIFIED WITH REGARD
TO A MATTER TO BE ACTED UPON, THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
SHARES OUTSTANDING AND VOTING RIGHTS
There were approximately 17,564,835 shares of the Company's Common Stock
outstanding on June 25, 1996, which has been fixed as the record date for the
purpose of determining the stockholders entitled to notice of and to vote at the
Annual Meeting. Each holder of shares of the Company's Common Stock will be
entitled to one vote, in person or by proxy, for each share of Common Stock held
of record as of the record date, on any matter submitted to a vote of the
stockholders at the Annual Meeting.
One-half of the outstanding shares of the Company's Common Stock,
represented in person or by proxy, will constitute a quorum at the Annual
Meeting. Shares with respect to which authority to vote is withheld,
abstentions and shares held of record by a broker or its nominee ("broker
shares") that are voted on any matter
-1-
will be included in determining the shares present. Broker shares that are not
voted on any matter will not be included in determining the shares present. The
election of each director and the approval of any other matter submitted to a
vote of the stockholders requires the affirmative vote of a majority of the
shares voting, with the exception of Item Two ("Amendment to Certificate of
Incorporation to increase authorized number of shares of Common Stock"), which
requires the affirmative vote of holders of a majority of the Company's
outstanding shares of Common Stock. Shares with respect to which authority is
withheld, abstentions and broker shares that are not voted will not be included
in determining the number of shares voting on the election of directors or any
other matter submitted to a vote of the stockholders.
ITEM ONE
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven members.
Seven directors are to be elected at the Annual Meeting, each of whom is to
serve until the next Annual Meeting. The seven nominees for election are now
serving as directors, and the proxyholders named in the accompanying proxy will
vote the shares represented by the proxy FOR the seven nominees unless authority
to vote has been withheld on the proxy returned by the stockholder. Directors
are elected by a majority of the shares voting.
There is set forth below for each of the seven nominees for election
as a director his principal occupation, age, the year that he became a director
of the Company and additional biographical data:
KENNETH J. WIDDER, M.D., 43
Chairman of the Board and Chief Executive Officer,
and a Member of the Executive Committee
Kenneth J. Widder, M.D., one of the Company's founders, has served as
a member of the Company's Board of Directors since the Company's formation in
April 1980. After receiving his medical degree from Northwestern University
Medical School in 1979, he was a resident in pathology at Duke University
Medical Center in Durham, North Carolina. Since July 1981, he has been the
Company's Chairman of the Board and Chief Executive Officer. Dr. Widder also
currently serves on the Board of Directors of Wilshire Technologies, Inc.
BOBBA VENKATADRI, 52
President and Chief Operating Officer
Bobba Venkatadri has served as the Company's President and Chief
Operating Officer since October 1995 and as a director of the Company since
November 1995. He served as Executive Vice President of the Pharmaceutical
Division of Centocor, Inc., from September 1992 until he joined the Company, and
as Vice President - Operations of Centocor's Pharmaceutical Division from March
1992 to September 1992. He was employed by Warner-Lambert Company from 1967
until February 1992, last serving as Senior Director, Pharmaceutical Operations,
at its manufacturing facility in Vegabaja, Puerto Rico.
DAVID W. BARRY, M.D., 52
Chairman and Chief Executive Officer
Triangle Pharmaceuticals, Inc.
David W. Barry, M.D., was elected to the Company's Board of Directors
in May 1996. He currently serves as Chairman and Chief Executive Officer of
Triangle Pharmaceuticals, Inc. Prior to joining Triangle Pharmaceuticals in
1995, Dr. Barry served for 18 years with Burroughs Wellcome and the Wellcome
Foundation in various positions, including Worldwide Group Director, Research,
Development & Medical Affairs of the Wellcome Foundation; President of the
Wellcome Research Laboratories; and a member of the Board of Directors
-2-
for the Wellcome Foundation and Wellcome PLC. He previously spent five years
with the U.S. Food and Drug Administration in various capacities. Dr. Barry
received his medical degree from Yale University School of Medicine.
ROBERT W. BRIGHTFELT, 53
Executive Vice President
Dade International
Robert W. Brightfelt has served as a director of the Company since
October 1987. Mr. Brightfelt received his B.S. and M.S. degrees in
mechanical engineering from the University of Nebraska in 1965 and 1967,
respectively, and his M.B.A. from the University of Georgia in 1970. He
joined E.I. du Pont de Nemours and Company in 1967 and held various
management positions in Du Pont's Medical Products Department. Mr. Brightfelt
retired from DuPont in May 1996 and currently serves as Executive Vice
President and as a member of the Board of Directors for Dade International.
CHARLES C. EDWARDS, M.D., 72
Charles C. Edwards, M. D., has served as a director of the Company
since March 1987. In 1969 he was appointed by President Nixon as Commissioner of
the U. S. Food and Drug Administration, and in 1973 he was appointed Assistant
Secretary for Health in the U.S. Department of Health, Education and Welfare. In
1991 he assumed to the position of President and Chief Executive Officer of
Scripps Institutes of Medicine and Science, from which he retired in July 1993.
Dr. Edwards currently serves as a director of Bergen Brunswig Corporation and as
a director of Northern Trust of California. In addition, Dr. Edwards serves on
the Board of Trustees of IDEC Pharmaceutical Corporation. He received his
medical degree from the University of Colorado in 1948, and received his
surgical training at the Mayo Clinic in Rochester, Minnesota.
GORDON C. LUCE, 70
Gordon C. Luce has served as a director of the Company since June
1989. Mr. Luce joined Great American First Savings Bank in San Diego,
California in 1969 as its President and Chief Executive Officer and served as
its Chairman of the Board from 1979 until his retirement in July 1990. During
1982, he was an Alternate Delegate to the United Nations and has served as
member of three Presidential commissions. He is a former Chairman of Scripps
Clinic and Research Foundation and is a director of the Scripps Institutes of
Medicine and Science, Scripps Health and the Scripps Research Institute. He is
also currently serving as a director of two other publicly held companies, PS
Group and All American Communications, Inc.
DAVID RUBINFIEN, 74
David Rubinfien has served as a director of the Company since December
1985. He served as President and Chief Executive Officer of Systemix, Inc. from
January 1989 until January 1991, and from 1985 to 1988 he was Chairman and Chief
Executive Officer of Microgenics Corporation in Concord, California. From 1973
to 1984, he served in several key positions at Syntex Corporation in Palo Alto,
California. Mr. Rubinfien also currently serves as a director of three other
publicly held companies: ChemTrak, Inc., Biocircuits Corporation and Matritech,
Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has standing Executive, Audit,
Compensation and Officer Options Committees. It does not have a standing
nominating committee.
-3-
The Executive Committee, composed of Dr. Widder and Mr. Venkatadri,
generally possesses the same powers as the full Board of Directors to manage the
affairs of the Company, but may not amend the Company's certificate of
incorporation or by-laws or make recommendations to the stockholders with
respect to the merger, consolidation or dissolution of the Company or the sale
of all or substantially all of the Company's assets.
The Audit Committee, composed of Messrs. Brightfelt, Luce and
Rubinfien, reviews the scope and results of the independent public accountants'
engagement, the Company's internal accounting controls and other pertinent
auditing and internal control matters.
The Compensation Committee, composed of Messrs. Brightfelt and
Rubinfien and Dr. Edwards, reviews and recommends to the Board of Directors the
compensation levels of the Company's executive officers. In addition, the
Compensation Committee reviews the procedures involved in setting management
compensation and employee benefits.
The Officer Options Committee, composed of the members of the
Compensation Committee, administers the Company's stock option plans as they
relate to the executive officers of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Compensation Committee interlocks, and there is no
insider participation requiring disclosure.
MEETINGS
During the fiscal year ended March 31, 1996, the Board of Directors
held six meetings. The Executive Committee met formally fourteen times during
the year and met informally on a number of additional occasions. The Audit
Committee met once during the year and the Compensation and Officer Options
Committees each met twice during the year. Dr. Widder and Messrs. Brightfelt,
Luce and Rubinfien each attended all six meetings of the Board; Dr. Edwards
attended three meetings and Mr. Venkatadri attended the one meeting held
following his election as a director. All of the respective members of the
Executive, Audit, Compensation and Officer Options Committees attended each of
the meetings of those committees during the year.
DIRECTORS' COMPENSATION
Directors receive $1,000 for each meeting of the Board that they
attend for their services as directors, and are also reimbursed for their
expenses in attending meetings of the Board. Under the Company's 1993 Outside
Directors Stock Option Plan, each director who is not an officer and who is not
serving as a director pursuant to a contractual arrangement between his employer
and the Company (an "outside director") is also granted an option for 5,000
shares of the Company's Common Stock at its closing price on the New York Stock
Exchange on the last business day in March of each year.
-4-
STOCK OWNERSHIP
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of each person (other than directors and executive officers
of the Company) known to the Company to own more than 5% of the Company's
outstanding Common Stock as of June 25, 1996:
Shares of Percent of
Name and Address of Common Stock Outstanding
Beneficial Owner Beneficially Owned Common Stock
------------------- ------------------ ------------
Mallinckrodt Group, Inc. 1,300,579 7.40%
675 McDonnell Blvd.
St. Louis, MO 63134
State of Wisconsin Investment Board 1,196,450 6.81%
P.O. Box 7842
Madison, WI 53707
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the
shares of the Company's Common Stock beneficially owned as of June 25, 1996 by
(i) each director and nominee for director, (ii) each executive officer and
former executive officer named in the Summary Compensation Table on page 6 and
(iii) all of the directors and executive officers of the Company as a group:
Shares of Percent of
Common Stock Outstanding
Name Beneficially Owned (1)(2) Common Stock (3)
---- ------------------------- ----------------
Kenneth J. Widder, M.D. 579,902 3.28%
Bobba Venkatadri 76,000
Robert W. Brightfelt 20,000 *
Charles C. Edwards, M.D. 21,000 *
Gordon C. Luce 21,500 *
David Rubinfien 30,000 *
James L. Barnhart, Ph.D. 64,921 *
Steven Lawson 97,950 *
Gerard A. Wills 23,078 *
Richard M. Stern 46,100 *
All directors and executive
officers as a
group (12 persons) 1,034,578 5.72%
_______________________________
* Represents less than 1% of the Company's outstanding Common Stock.
(1) Each person named, with the exception of Dr. Barnhart, has voting and
investment power over the shares listed, and these powers are exercised
solely by the person named or shared with a spouse. Dr. Barnhart's shares
include 619 shares held in his wife's IRA, of which he disclaims beneficial
ownership.
-5-
(2) The shares listed for each person named or the group include shares of the
Company's Common Stock subject to stock options exercisable on or within 60
days after June 25, 1996. These shares are as follows: Dr. Widder,
118,750 shares; Mr. Venkatadri, 75,000 shares; Mr. Brightfelt, 20,000
shares; Dr. Edwards, 20,000 shares; Mr. Luce, 20,000 shares; Mr. Rubinfien,
20,000 shares; Dr. Barnhart, 49,000 shares; Mr. Lawson, 95,000 shares; Mr.
Wills, 21,250 shares; Mr. Stern, 46,000 shares; and the group of all
directors and executive officers, 537,000 shares.
(3) The percentage for each person named or the group has been determined by
including in the number of shares of the Company's outstanding Common Stock
the number of shares subject to stock options exercisable by that person or
group on or within 60 days after June 25, 1996.
-6-
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company
during the fiscal years ended March 31, 1996, 1995 and 1994 to (i) the Chief
Executive Officer and (ii) each of the other four most highly compensated
executive officers of the Company during the fiscal year ended March 31, 1996
(the "named executive officers"):
Long-Term
Annual Compensation Compensation
--------------------------------------- ------------
Other
Year Annual Securities All
Name and Principal Ended Compen- Underlying Other
Position March 31, Salary ($) Bonus ($) sation ($) Options (#) Compensation ($)
- ------------------ --------- ---------- --------- ---------- ------------ ----------------
Kenneth J. Widder, M.D. 1996 $240,905 $ - $ - 50,000 $ -
Chairman of the Board, 1995 $239,846 $590,000(1) $ - 60,000 $634,632(1)
Chief Executive Officer, 1994 $ 225,57 $ - $ - 70,000 $ -
and Member of the
Executive Committee
Bobba Venkatadri (2) 1996 $125,640 $ - $34,106(3) 335,000 $ -
President, Chief
Operating Officer
and Member of the
Executive Committee
James L. Barnhart, Ph.D. 1996 $130,572 $ 26,000(4) $ - 5,000 -
Vice President - Research 1995 $119,127 $ 24,960(1) $ - 58,000 $ -
and Development and Chief 1994 $101,019 $ - $ - 30,000 $ -
Operating Officer
Steven Lawson 1996 $130,070 $ 25,900(4) $ - - $ -
Vice President - Legal 1995 $129,415 $ 18,648(1) $ - 20,000 $ -
Affairs and General Counsel 1994 $121,615 $ - $ - 40,000 $ -
Gerard A. Wills 1996 $120,440 $ 30,000(4) $ - 20,000 $ -
Vice President - Finance and 1995 $100,693 $ 11,520(1) $ - 27,500 $ -
Chief Financial Officer 1994 $ 94,309 $ - $ - 10,000 $ -
Richard M. Stern 1996 $119,562 $ 17,100(4) $ - - $ 23,399(5)
Former Vice President - 1995 $113,939 $ 18,240(1) $ - 5,000 $ -
Marketing 1994 $107,885 $ - $ - 26,000 $ -
(1) In January 1995, following and attributable to receipt by the Company of
FDA approval to market ALBUNEX-Registered Trademark-, the Company received
a bonus payment of $3.1 million from Mallinckrodt Medical, Inc.
("Mallinckrodt") for distribution to "key employees" pursuant to the
Distribution Agreement dated December 7, 1988 between the Company and
Mallinckrodt. Dr. Widder received a cash bonus of $590,000 and
loan forgiveness of $634,632; Dr. Barnhart and Messrs. Lawson, Wills and
Stern received cash bonuses of $24,960, $18,648, $11,520 and $18,240,
respectively.
-7-
(2) Mr. Venkatadri became an employee and officer of the Company on October 30,
1995.
(3) Represents relocation expense payments made.
(4) Paid in respect of performance for the fiscal year ended March 31, 1995.
(5) Represents portion of a loan from the Company forgiven pursuant to Mr.
Stern's termination of employment with the Company in December 1995.
OPTION GRANTS IN LAST FISCAL YEAR
The Company granted stock options under the Company's 1993 Stock
Option Plan in February 1996, in respect of performance during the fiscal year
ended March 31, 1996. The following table sets forth each grant of stock
options made during the fiscal year ended March 31, 1996 to each of the named
executive officers:
Individual Grants (1) (2)
-------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual
Number of % of Total Exercise Rates of Stock Price
Securities Options Granted Price Appreciation for Option Term
Underlying to Employees Per Expiration ------------------------------
Name Options (#) in Fiscal Year Share Date 5% ($) 10% ($)
- ---- ----------- --------------- -------- ---------- ---------- ----------
Kenneth J. Widder, M.D. 50,000 (1) 6.9% $7.000 1/31/06 $ 220,113 $ 557,810
Bobba Venkatadri 35,000 (1) 4.8% $7.000 1/31/06 $ 154,079 $ 390,467
300,000 (2) 41.5% 7.000 11/1/05 $1,320,679 $3,346,859
James L. Barnhart, Ph.D. 5,000 (1) 0.7% $7.000 1/31/06 $ 22,011 $ 55,781
Gerard A. Wills 20,000 (1) 2.8% $7.000 1/31/06 $ 88,045 223,124
Richard M. Stern 10,000 (3) 1.4% $7.250 12/1/05 $ 45,595 $ 115,546
(1) These options were granted on February 29, 1996 under the Company's 1993
Stock Option Plan in respect of performance for the fiscal year ended March
31, 1996. The options granted to Dr. Widder and Messrs. Venkatadri and
Wills vest in four equal installments beginning on the first anniversary of
the date of grant; the option granted to Mr. Barnhart vests in annual
installments of 1,250, 1,500 and 2,250 shares, respectively, on the first
three anniversaries of the date of grant. Each option holder has the right
to pay the exercise price by delivering shares of Common Stock that the
holder previously acquired, and to have the Company withhold, from shares
otherwise issuable upon the exercise of the option, sufficient shares to
satisfy the Company's withholding liability in connection with the
exercise. Each option generally may be exercised only when vested and while
the holder is an employee of the Company or within 90 days following the
termination of his employment. In the discretion of the Compensation
Committee, which administers the 1993 Stock Option Plan as it relates to
the Company's executive officers, this 90-day period may be extended in the
case of nonstatutory stock options to any date ending on or before the
applicable expiration date of the option. No option may be transferred
except by will or applicable intestacy laws.
(2) These options were granted on November 2, 1995 under the Company's 1993
Stock Option Plan in connection with Mr. Venkatadri's employment agreement
dated November 1, 1995. The option granted vested immediately in respect of
75,000 shares and vests in respect of the remaining 225,000 shares in four
equal installments beginning on October 2, 1996. All other terms of the
options are similar to those described in note (1) above.
-8-
(3) This option was granted on December 1, 1995 pursuant to Mr. Stern's
termination of employment with the Company. The option vested in respect of
all 10,000 shares immediately upon grant. All other terms of the option are
similar to those described in note (1) above.
(4) The dollar amounts presented in these columns are the result of
calculations at the 5% and 10% annual rates of stock appreciation
prescribed by the Securities and Exchange Commission and are not intended
to forecast possible future appreciation, if any, of the Company's stock
price. No gain to the optionees is possible without an increase in the
price of the Company's stock, which will benefit all stockholders
commensurately. For options granted on February 1, 1996 (see note (1)) and
November 2, 1995 (see note (2)), assuming 5% and 10% compounded annual
appreciation of the stock price over the term of the options, the price of
a share of Common Stock would be $11.40 and $18.16, respectively, on
January 31, 2006 and November 1, 2005. For options granted on December 1,
1995 (see note (3)), assuming 5% and 10% compounded annual appreciation of
the stock price over the term of the options, the price of a share of
Common Stock would, be $11.81 and $18.80, respectively, on November 30,
2005. The share price of the Company's Common Stock on March 29, 1996 was
$8.62.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
None of the named executive officers exercised stock options during the
fiscal year ended March 31, 1996. The following table sets forth, for each of
the named executive officers, the fiscal year-end number and value of
unexercised options:
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at 3/31/96 (#) Options at 3/31/96($)(1)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Kenneth J. Widder, M.D. 102,500 127,500 $20,625 $161,875
Bobba Venkatadri 75,000 260,000 150,000 520,000
James L. Barnhart, Ph.D. 42,000 66,000 17,188 61,5632
Steven Lawson 52,500 42,500 6,875 20,625
Gerard A. Wills 19,375 48,125 6,875 60,625
Richard M. Stern 46,000 - 24,375 -
(1) Based on the $8.62 per share closing price of the Company's Common Stock on
March 29, 1996.
______________
On May 11, 1995, the Board of Directors voted to offer the Company's non-
executive employees the opportunity to reprice certain stock options to the
closing price on May 31, 1995. The Board approved this repricing because it
believes retaining key employees is in the best interests of the stockholders of
the Company. Officers and directors of the Company were not eligible for the
repricing.
-9-
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has employment contracts with all of its executive
officers. Under these contracts and as of April 1, 1995, Dr. Widder is paid an
annual salary of $240,000; Mr. Venkatadri is paid an annual salary of $285,000;
Dr. Barnhart is paid an annual salary of $130,000; Mr. Lawson is paid an annual
salary of $129,500; and Mr. Wills is paid an annual salary of $139,000. The
Company's employment contracts with its executive officers except Dr. Widder are
of indefinite duration, subject, however, to termination in certain events. Mr.
Lawson resigned as an employee effective May 31, 1996.
In May 1995, the Company entered into a new employment agreement with
Dr. Widder, replacing his prior agreement. Dr. Widder's new employment agreement
is for a six-year term, with an automatic renewal for successive one-year terms.
The agreement is divided into two periods, the "CEO period," which runs from the
start of the agreement until the earlier of March 31, 1998, or the appointment
of a new chief executive officer of the Company by its Board of Directors, and
the "advisor period," which beings immediately following the CEO period and
continues through March 31, 2001. Dr. Widder's employment agreement may be
terminated by the Company or Dr. Widder at any time prior to its expiration. If
the agreement is terminated by the Company at any time, or if the agreement is
terminated by Dr. Widder during the CEO period following a change in control or
at any time during the advisor period, Dr. Widder will be entitled to a
termination payment equal to three times the greater of $240,000 or his salary
at the time of the agreement's termination. If Dr. Widder terminates his
employment agreement during the CEO period prior to a change in control, Dr.
Widder will not be entitled to a termination payment. Dr. Widder's entitlement
to a termination payment is subject to forfeiture if he engages in competition
with the Company. Under the employment agreement, Dr. Widder's stock options
become immediately exercisable (i) upon the expiration of the CEO period or (ii)
if the Company terminates the agreement during the CEO period or if Dr. Widder
terminates the agreement during the CEO period following a change in control.
In November 1995, the Company entered into an agreement with Mr.
Venkatadri. Mr. Venkatadri's employment agreement may be terminated by the
Company or Mr. Venkatadri at any time for any reason, with or without cause.
If, and only if, the Company terminates Mr. Venkatadri without cause, Mr.
Venkatadri will be entitled to 12 months severance pay and an additional 12
months pay at the same rate if Mr. Venkatadri has not accepted new employment
in the meanwhile. If Mr. Venkatadri's employment is terminated without cause
within one year following a change in control, Mr. Venkatadri will be
entitled to two years severance pay. If Mr. Venkatadri terminates his
employment with the Company, he is not entitled to any severance payments.
Under the Company's respective employment contracts with Dr. Barnhart
and Messrs. Venkatadri, and Wills, the Company is required to give one year's
notice in the event that it elects to terminate the contract unilaterally
following a change in control of the Company. In such an event, the Company's
failure to do so entitles the terminated employee to the payment of one year's
salary.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is determined
generally by the Compensation Committee of the Company's Board of Directors. The
three members of the Compensation Committee, Messrs. Brightfelt and Rubinfien
and Dr. Edwards, are outside directors of the Company.
Decisions of the Compensation Committee relating to executive officers'
base salaries, cash bonuses and stock awards are reviewed by the full Board;
decisions of the Compensation Committee relating to executive officers' stock
options are not subject to the Board's review.
-10-
EXECUTIVE COMPENSATION POLICIES
The Company's executive compensation policies seek to coordinate
compensation with the Company's product development goals, performance
objectives and business strategy. These policies are intended to attract,
motivate and retain executive officers whose contributions are critical to the
Company's long-term success and to reward executive officers for attaining
individual and corporate objectives which enhance stockholder value.
The Company's compensation program for its executive officers consists of
cash compensation and long-term compensation. Cash compensation is paid in the
form of a base salary and a discretionary cash bonus, and long-term compensation
is paid in the form of stock options and stock awards. Bonuses are intended to
provide executive officers with an opportunity to earn additional cash
compensation through individual and Company performance. Stock options are
intended to focus executive officers on managing the Company from the
perspective of an owner with an equity interest and to align their long-term
compensation with the benefits realized by the Company's stockholders.
Similarly, stock awards, in the form of unregistered shares of the Company's
Common Stock, are intended to provide executive officers with additional
compensation which, because the stock cannot be sold immediately in the public
market, provide an incentive to manage the Company with a view to long-term
stock appreciation.
LIMITS FOR DEDUCTIBLE COMPENSATION. Section 162(m) of the Internal Revenue
Code generally precludes a publicly traded corporation from taking a deduction
for federal income tax purposes for compensation paid to its chief executive
officer and four other highest paid executive officers to the extent that the
compensation paid exceeds $1 million per person. The Company attempts to
implement its compensation policies in a manner that will maximize the
deductibility of the compensation paid by the Company.
SALARIES. The Compensation Committee determines the salaries of executive
officers on the basis of (i) the individual officer's scope of responsibilities
and level of experience, (ii) the rate of inflation, (iii) the range of the
Company's merit increases for its employees generally and (iv) the salaries paid
to comparable officers in comparable companies. The Compensation Committee has
not commissioned a formal survey of executive officer compensation at comparable
companies, but has relied on published salary surveys for general indications of
salary trends and informal surveys by the Company of other biomedical and
biotechnology companies of roughly similar size.
In assessing the executive officers' performance for fiscal year 1996
(ended March 31, 1996), the Compensation Committee considered in particular
(i) the Company's successful expansion of the geographical scope and duration
of the distribution agreement with Mallinckrodt Medical, Inc., (ii) the
Company's progress in the development of its second-generation ultrasound
contrast imaging agent, FS069, (iii) the Company's successful staffing of the
position of President and Chief Operating Officer following the resignation
in May 1995 of the late Vincent A. Frank and (iv) the decline in product
revenues from fiscal year 1995 to fiscal year 1996. Applying the general
criteria for salary raises to individual executive officers in light of these
factors, Dr. Barnhart received a raise of $5,200, or 4.0%, Mr. Lawson
received a raise of $7,770, or 6.0%, and Mr. Wills received a raise of
$19,200, or 16.0%, for fiscal year 1997 (beginning April 1, 1996). In view of
the magnitude of the cash bonus paid to Dr. Widder during fiscal year 1995
and the fact that Mr. Venkatadri only started at the Company in October 1995,
Dr. Widder and Mr. Venkatadri did not receive salary increases.
CASH BONUSES, STOCK OPTIONS AND STOCK AWARDS. Cash bonuses, stock option
grants and stock awards to executive officers are based on a number of criteria.
These criteria consist of (i) the individual officer's performance, initiative
and contribution to the Company's success and criteria relating to the Company's
overall success: (ii) the Company's progress in commercializing its products
and, in particular, FS069; (iii) the Company's financial performance, as
measured by its earnings per share and the market price of the Company's Common
Stock; (iv) the Company's success in adding products to its product development
portfolio; (v) the Company's progress in developing its organizational
infrastructure; and (vi) the Company's success in achieving its other
performance objectives. In general, criterion (i) is assigned a weight of
approximately 20%, criterion (ii) is assigned a weight of approximately 40% and
criteria (iii), (iv), (v) and (vi) are each assigned weights of approximately
10%.
-11-
The Compensation Committee determined to provide long-term compensation
to the Company's executive officers for fiscal year 1996 to reward them for
their current efforts while maintaining incentives for achieving long-term
stock appreciation. For the first time, the Compensation Committee decided to
make outright stock awards as well as grants of stock options. The stock
awards to executive officers are taxable immediately to them at the fair
market value of the stock awarded, but the unregistered shares of the
Company's Common Stock that they received generally cannot be sold in the
public market for at least two years. The Compensation Committee recommended,
and the Board of Directors approved, awards to Dr. Widder, Mr. Wills and Dr.
Barnhart of 6,000, 3,000 and 1,000 shares, respectively. Net of shares
withheld in satisfaction of withholding requirements, Dr. Widder, Mr. Wills
and Dr. Barnhart received 4,220, 1,828 and 822 shares, respectively, in April
1996. In addition, the Compensation Committee awarded stock options to Dr.
Widder, Mr. Venkatadri, Mr. Wills and Dr. Barnhart for 50,000, 35,000, 20,000
and 5,000 shares, respectively. The stock option awarded to Dr. Widder was
for 10,000 fewer shares than the stock option that he was awarded for fiscal
year 1995; the stock option awarded to Mr. Wills was for the same number of
shares as the stock option that he was awarded for fiscal year 1995; and the
stock option awarded to Dr. Barnhart was for 45,000 fewer shares than the
stock option that he was awarded for fiscal year 1995.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee determines the compensation of the Company's
Chairman and Chief Executive Officer, Kenneth J. Widder, M.D., on the basis of
the criteria applicable to the Company's executive officers generally.
As noted, the Compensation Committee recommended, and the Board of
Directors approved, continuing Dr. Widder's salary of $240,000 for fiscal year
1997 (beginning April 1, 1996). The decision to continue Dr. Widder's salary at
its current level was determined largely on the basis of the rate of inflation
and the salaries of chief executive officers of comparable companies.
For fiscal year 1996, Dr. Widder received a stock award of 6,000 shares
and a stock option for 50,000 (which, as noted, was for 10,000 fewer shares
than the stock option that he was awarded for fiscal year 1995). The factors
most influencing these awards were Dr. Widder's significant role in
negotiating the expansion of the geographical scope and duration of the
Company's distribution agreement with Mallinckrodt Medical, Inc. and the
Company's progress in developing and commercializing the Company's
second-generation ultrasound contrast imaging agent, FS069.
Compensation Committee
Robert W. Brightfelt
Charles C. Edwards, M.D.
David Rubinfien
-12-
STOCK PERFORMANCE GRAPH
The graph set forth below compares cumulative total stockholder return on
the Company's Common Stock for the five years ended March 31, 1996, with the
cumulative total return over the same period of companies on the Standard &
Poor's Smallcap 600 Stock Total Return Index, and the NASDAQ Pharmaceutical
Index. The NASDAQ Pharmaceutical Index represents all companies trading on
NASDAQ under the Standard Industrial Classification (SIC) Code for
pharmaceuticals, including biotechnology companies. The graph assumes that $100
was invested on April 1, 1990 in the Company and each of the two indices and
that all dividends were reinvested. It should be noted that the Company has not
paid dividends on its Common Stock, and no dividends are included in the
representation of the Company's performance. The cumulative total shareholder
return on the Company's Common Stock shown on the graph below is not necessarily
indicative of future performance.
RESEARCH DATA GROUP TOTAL RETURN - DATA SUMMARY
MB
Cumulative Total Return
---------------------------------------
3/91 3/92 3/93 3/94 3/95 3/96
MOLECULAR BIOSYSTEMS INC MB 100 113 78 73 35 37
S & P SMALL CAP 600 1600 100 125 147 159 168 220
NASDAQ PHARMECEUTICAL INAP 100 138 95 96 96 169
-13-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal years ended March 31, 1993 and 1994, the Company extended
loans to certain officers to enable them to exercise stock options that were due
to lapse and/or to enable them to pay the income taxes attributable to those
option exercises. Each loan is or was evidenced by a note to the Company and is
or was secured by the stock purchased. During the fiscal year ended March 31,
1996, three of these loans remained outstanding. The Company has extended the
due dates of the two unpaid loans to January 31, 1998.
Highest Balance
Outstanding # of
During the Year Interest Shares
Name and Title Date of Loan Due Date Loan Amount Ended 3/31/96 Rate Purchased
- -------------- ------------ -------- ----------- --------------- -------- ---------
James L. Barnhart 12/31/93 01/31/98 213,482 242,293 6% 14,000
Vice President - Research
and Development
Richard M. Stern (1) 12/31/93 01/31/96 218,766 243,903 6% 15,000
Former Vice President -
Marketing
John Young 12/31/93 01/31/98 112,944 128,187 6% 7,500
Former Vice President - Operations
_______________________________________________
(1) In connection with Mr. Stern's termination of employment in December 1995,
he surrendered the 15,000 shares of Common Stock securing his loan and the
Company forgave the $23,399 balance of his loan.
ITEM TWO
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Board of Directors has unanimously approved, and recommends that
stockholders adopt, an amendment to Article 4a of the Company's Certificate of
Incorporation, as amended, to increase the authorized number of shares of Common
Stock from 20,000,000 shares to 40,000,000 shares. If the proposed amendment is
adopted, Article 4a will be amended to read as follows:
The Corporation shall have authority to issue a total of 40,000,000
shares of Common Stock, par value $.01 per share.
The Company is currently authorized to issue 20,000,000 shares of Common
Stock, of which 17,564,835 shares were issued and outstanding as of June 25,
1996. In addition, as of June 25, 1996, the Company had reserved for issuance
(i) 1,640,385 shares issuable upon the exercise of options granted or to be
granted under the Company's 1993 Stock Option Plan, (ii) 100,000 shares
issuable upon the exercise of options granted or to be granted under the
Company's 1993 Outside Directors Stock Option Plan, (iii) 548,600 shares
issuable upon the exercise of options granted under the Company's 1984
Incentive Stock Option Plan, 1984 Nonstatutory Stock Option Plan and Pre-1984
Nonstatutory Stock and (iv) 14,524 shares issuable upon the exercise of a
warrant which has since expired. There were also 18,970 shares held in the
Company's treasury. Accordingly, there were only 112,686 shares of Common
Stock available for issuance.
-14-
The additional shares of Common Stock which the proposed amendment would
authorize will have, if and when issued, the same rights and privileges as the
shares of Common Stock currently outstanding. Holders of the Company's Common
Stock do not have any pre-emptive or subscription rights to purchase any new or
additional shares of Common Stock that the Company may issue.
The Board of Directors believes that the proposed increase in the number of
authorized shares of Common Stock is in the best interests of the Company and
its stockholders. The purpose of increasing the number of authorized shares is
to enable the Company to have shares available for issuance for such corporate
purposes as the Company's Board of Directors, in its discretion, may determine,
including (but not limited to), future equity financings, business acquisitions,
increases in the number of shares authorized to be issued under existing stock
option plans and the adoption of new stock option plans. Except for (i) the
restoration of 850,000 shares to the maximum number of shares authorized to be
issued under the Company's 1993 Stock Option Plan, as described in the next
paragraph, and (ii) a proposed increase of 750,000 shares in the maximum number
of shares authorized to be issued under the Plan, as described in Item 3
("Amendment to 1993 Stock Option Plan To Increase Maximum Number of Shares for
Which Options May Be Granted"), the Company has no present plans, commitments or
agreements regarding the issuance of any of the additional shares of Common
Stock to be authorized.
In order to facilitate the Company's public offering in May 1996 of
4,140,00 shares of Common Stock, the Company's Board of Directors reduced to
1,650,000 shares from 2,500,000 shares the maximum number of shares for which
options could be granted under the Company's 1993 Stock Option Plan. If the
proposed amendment to the Company's Certificate of Incorporation is approved by
the Company's stockholders, the Board of Directors will restore these 850,000
shares to the Plan so that the maximum number of shares for which options can be
granted under the Plan is again 2,500,000 shares as approved by the Company's
stockholders in August 1993.
Under the Delaware General Corporation Law, a board of directors generally
may issue authorized but unissued shares of common stock without stockholder
approval. Having a substantial number of authorized but unissued shares of
Common Stock not reserved for specific purposes will allow the Company to take
prompt action in respect of corporate opportunities that develop without the
delay and expense of convening a special meeting of the Company's stockholders.
Depending upon the circumstances, the issuance of additional shares of Common
Stock may reduce stockholders' equity per share and may reduce the percentage
ownership of existing stockholders. The Company's Board of Directors does not
currently intend to seek stockholder approval prior to any issuance of
additional shares of Common Stock unless required by law or the rules of the New
York Stock Exchange or any other stock exchange on which the Common Stock may be
listed in the future.
Approval of the proposed amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
20,000,000 shares to 40,000,000 shares requires the affirmative vote of holders
of a majority of the Company's outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK FROM 20,000,000 SHARES TO 40,000,000
SHARES. The persons named in the accompanying form of proxy will vote for
approval of the proposed amendment unless a different choice is indicated.
ITEM THREE
AMENDMENT TO 1993 STOCK OPTION PLAN TO INCREASE
MAXIMUM NUMBER OF SHARES FOR WHICH OPTIONS MAY BE GRANTED
Subject to approval by the Company's stockholders, the Company's Board of
Directors has amended the Company's 1993 Stock Option Plan (the "Plan") to
increase the maximum number of shares of Common Stock for which options may be
granted under the Plan from 2,500,000 shares to 3,250,000 shares. The Plan was
adopted by the Board of Directors in May 1993 and approved by the Company's
stockholders in August 1993.
If approved by the Company's stockholders, as the Board of Directors
recommends, the first sentence of Paragraph 3.2 of the Plan ("Maximum Number of
Options") will be amended to read as follows:
-15-
The maximum number of shares of Common Stock for which Options
may be granted is 3,250,000 (subject to adjustment as provided in
Paragraph 8.1).
As of March 31, 1996, there were outstanding options under the Plan for
1,477,205 shares, and 1,022,795 shares were available for the grant of future
options. The Board of Directors subsequently reduced the number of shares
available for the grant of future options by 850,000 shares in order to
facilitate the Company's public offering in May 1996 of 4,140,00 shares of
Common Stock. If the proposed amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
20,000,000 shares to 40,000,000 shares is approved by the Company's
stockholders, the Board of Directors will restore these 850,000 shares to the
Plan. SEE Item Two ("Amendment to Certificate of Incorporation To Increase
Authorized Number of Shares of Common Stock").
The Board of Directors believes that an increase in the maximum number of
shares of Common Stock for which options may be granted under the Plan from
2,500,000 shares to 3,250,000 shares will enhance the Company's ability to
attract and retain qualified employees by rewarding them for their efforts and
motivating them to work for long-term appreciation in the value of the Company's
Common Stock.
Approval of the amendment to the Plan to increase the maximum number of
shares of Common Stock for which options may be granted under the Plan from
2,500,000 shares to 3,250,000 shares requires the affirmative vote of holders of
a majority of the Company's outstanding shares of Common Stock voting on the
matter.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE COMPANY'S 1993 STOCK OPTION PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES OF
COMMON STOCK FOR WHICH OPTIONS MAY BE GRANTED UNDER THE PLAN FROM 2,500,000
SHARES TO 3,250,000 SHARES. The persons named in the accompanying form of proxy
will vote for approval of the proposed amendment unless a different choice is
indicated.
The following summary describes the principal terms of the Plan.
NUMBER OF SHARES. If the proposed amendment is approved by the Company's
stockholders, the Plan will authorize options to be granted for a maximum of
3,250,000 shares of the Company's Common Stock.
If an option expires unexercised or is surrendered prior to the expiration
of the Plan, the shares of Common Stock subject to the option once again become
available for option grants under the Plan. The number and class of shares
available under the Plan may be adjusted by the Board of Directors to prevent
dilution (or an enlargement of rights) in the event of various changes in the
Company's capitalization.
TERM. The Plan has a 10-year term which began on April 1, 1993. No option
may be granted under the Plan after March 31, 2003.
TYPES OF OPTIONS. The Plan permits two types of options to be granted: (i)
incentive stock options intended to satisfy the requirements of Section 422 of
the Internal Revenue Code ("ISOs") and (ii) nonstatutory stock options ("NSOs").
A "nonstatutory" stock option is the generic description of a stock option that
does not qualify for special treatment under the Internal Revenue Code.
ELIGIBILITY. ISOs may be granted to an employee of the Company or of any
subsidiary of the Company. NSOs may be granted to (i) any employee of the
Company or a subsidiary, (ii) any officer of the Company who is not an employee,
(iii) any consultant or advisor to the Company or (iv) any other person or
entity designated by the Board of Directors. No option under the Plan may be
granted to a director who is not an employee of the Company or a subsidiary.
Options to outside directors are only granted under the Company's 1993 Outside
Directors Stock Option Plan.
As of June 25, 1996, there were 138 employees eligible to be granted
options under the Plan and one officer who was not an employee eligible to be
granted NSOs under the Plan.
-16-
ADMINISTRATION. The Plan has a bifurcated administrative structure. In
respect of all eligible persons other than officers of the Company, the Plan is
administered by the Company's Board of Directors. The Board of Directors may
delegate its authority to administer the Plan to its Executive Committee or to
another committee of the Board consisting of at least two directors.
In respect of officers of the Company, the Plan is administered by the
Officer Options Committee. The Officer Options Committee consists of: (i) the
Compensation Committee of the Board of Directors, if all of the members of the
Compensation Committee are disinterested persons; or (ii) those members of the
Compensation Committee who are disinterested persons, if there are at least two
such members; or (iii) a committee appointed by the Board consisting of at least
two directors who are disinterested persons. A "disinterested person" is a
director who, during the one-year period prior to serving as a member of the
Officer Options Committee and while serving as a member, is not granted an
option under the Plan or any other stock option plan of the Company except as
permitted by the rules of the U.S. Securities and Exchange Commission (which
permit "disinterested" directors to be granted options under the Company's 1993
Outside Directors Stock Option Plan).
For convenience, the term "Plan Committee" is used in the balance of this
summary of the Plan to refer both to (i) the Company's Board of Directors (or
the committee to which the Board has delegated its authority) in the context of
the Plan's administration in respect of all eligible persons other than
officers, and to (ii) the Officer Options Committee in the context of the Plan's
administration in respect of officers.
Subject to the express provisions of the Plan, the Plan Committee has the
power in its discretion to select the eligible persons to whom options are to be
granted and to determine the terms and conditions of each option granted. The
Plan Committee also has authority to interpret the Plan, adopt and revise
policies and procedures to administer the Plan and take such other actions as it
considers necessary or appropriate for the Plan's administration.
EXERCISE PRICE. The Plan Committee determines the exercise price of each
option at the time of grant. The exercise price may not be less than 100% of the
fair market value of the Company's Common Stock at the time of grant.
The closing price of a share of the Company's Common Stock on the New York
Stock Exchange on June 25, 1996 was $9.13.
EXERCISABILITY. The Plan Committee determines at the time of grant the term
of each option and the time or times at which the option will become
exercisable. No option may have a term of more than 10 years. The Plan Committee
may accelerate the exercisability of any option at any time prior to its
expiration.
An unexercisable option held by an employee will expire on the termination
of his or her employment by the Company or a subsidiary. An exercisable option
held by an employee will not expire on the termination of his or her employment
but instead will expire on the earlier of (i) 90 days after termination or (ii)
the expiration of the option's term, unless the employee's employment terminated
as a result of his or her disability or death. In either of these cases, the
option will expire on the earlier of (i) the first anniversary of the employee's
termination or (ii) the expiration of the option's term. The Plan Committee may
extend the expiration date of an exercisable option held by an employee or
former employee to any date ending on or before the expiration of the option's
term.
EXERCISE OF OPTIONS. An exercisable option may be exercised by giving
written notice to the Plan Committee (or its designee) stating the number of
shares of the Company's Common Stock in respect of which the option is being
exercised and tendering payment in full of the exercise price of those shares.
If permitted by the Plan Committee (either in the applicable option agreement or
at the time), payment of the exercise price may be made by any one or
combination of the following methods: (i) delivering shares of the Company's
Common Stock having a fair market value on the date of exercise equal to the
exercise price; (ii) directing the Company to withhold, from the shares of the
Company's Common Stock otherwise issuable upon the option's exercise, a number
of shares having a fair market value on the date of exercise equal to the
exercise price; (iii) surrendering exercisable options under the Plan having a
fair market value on the date of exercise equal to the exercise price; or (iv)
any other method of payment authorized by the Plan Committee.
-17-
RELOAD OPTIONS. The Plan Committee may include in the option agreement for
any option (the "original option") a provision entitling the holder to an
additional option (a "reload option") if and to the extent that the holder
exercises the original option and pays the exercise price by delivering shares
of the Company's Common Stock that the holder previously acquired. The reload
option (i) shall be for the same number of shares of the Company's Common Stock
that the holder delivered in payment of the exercise price of the original
option; (ii) have an exercise price equal to the fair market value of the
Company's Common Stock on the date of exercise of the original option; and (iii)
have the same expiration date as the original option. No reload option may be
granted in respect of another reload option.
SPECIAL LIMITATIONS ON ISOS. ISOs are subject to certain special
limitations. No ISO may be granted to an employee who owns, at the time of
grant, stock representing more than 10% of the total voting power of all classes
of stock of the Company or any subsidiary unless (i) the exercise price of the
ISO is at least 110% of the fair market value of the Company's Common Stock at
the time of grant and (ii) the term of the ISO is not more than five years from
the date of grant. In addition, the total fair market value of shares of the
Company's Common Stock subject to ISOs which are exercisable for the first time
in any given calendar year by an employee may not exceed $100,000 (measured by
the value of the shares as of date of grant of each ISO).
TRANSFERABILITY. Options may not be transferred except by will or
applicable intestacy laws.
WITHHOLDING. Each employee or other person exercising an option must
satisfy the Company's withholding tax obligation in respect of the exercise by
payment to the Company of the amount required to be withheld. If permitted by
the Plan Committee (either in the applicable option agreement or at the time),
payment may be made by either one or both of the following methods: (i)
delivering shares of the Company's Common Stock having a fair market value equal
to the Company's withholding tax obligation; or (ii) directing the Company to
withhold, from the shares of the Company's Common Stock otherwise issuable upon
the option exercise, a number of shares having a fair market value equal to the
Company's withholding tax obligation.
AMENDMENT AND TERMINATION. The Company's Board of Directors may amend,
suspend or terminate the Plan at any time. The Company's stockholders are
required to approve any amendment that would: (i) materially increase the number
of shares of the Company's Common Stock for which options can be granted under
the Plan, (ii) materially increase the benefits under the Plan or (iii)
materially change the Plan's eligibility requirements.
FEDERAL INCOME TAX CONSEQUENCES. The grant of an ISO or NSO under the Plan
does not result in any federal income tax consequences to the holder of the
option or the Company.
The exercise of an ISO does not result in any regular income tax to the
holder of the option or any income tax consequences to the Company. The exercise
of an ISO, however, may affect the holder's alternative minimum tax liability.
Unless the shares acquired upon exercise of the ISO are disposed of in the same
year, the holder's alternative minimum taxable income will be increased in an
amount equal to the excess of the fair market on the date of exercise of the
shares acquired over the exercise price of the ISO.
The exercise of a NSO results in ordinary income to the holder in an amount
equal to the excess of the fair market value on the date of exercise of the
shares acquired over the exercise price of the NSO. The Company is entitled to
an income tax deduction in the same amount as long as it withholds or collects
the appropriate withholding tax.
Gain on the sale of shares acquired upon exercise of an ISO is measured by
the excess of the amount realized on the sale of the shares over the exercise
price of the ISO. If the shares acquired upon exercise of an ISO are not sold
within one year from the date of exercise or two years from the date of grant of
the ISO, the holder's gain on the sale of the shares is treated as long-term
capital gain. If the shares are sold within these periods, a portion of the
holder's gain is treated as ordinary income and the balance, if any, is treated
as short-term or long-term capital gain (depending upon whether the shares were
held for more than one year). The portion treated as ordinary income is equal to
the excess of the lesser of (i) the fair market value on the date of exercise of
the shares sold or (ii) the amount realized on the sale of the shares, over the
exercise price of the ISO.
-18-
The Company is entitled to an income tax deduction in the year of sale in an
amount equal to the portion of the holder's gain treated as ordinary income.
Gain on the sale of shares acquired upon exercise of a NSO is measured by
the excess of the amount realized on the sale of the shares over the holder's
adjusted basis in those shares. The holder's adjusted basis is the sum of the
exercise price of the NSO and the ordinary income realized upon exercise of the
NSO. The holder's gain on the sale of the shares is treated as long-term or
short-term capital gain (depending upon whether the shares were held for more
than one year).
ITEM FOUR
APPROVAL OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has appointed the firm of Arthur
Andersen LLP as independent public accountants for the Company for the fiscal
year ending March 31, 1997. Arthur Andersen LLP has served as the Company's
independent public accountants since January 1981. The proxyholders named in the
accompanying proxy will vote the shares represented by the proxy FOR approval of
the appointment of Arthur Andersen LLP for the year ending March 31, 1997. If
the appointment of Arthur Andersen LLP is not approved, the Board of Directors
may reconsider the appointment.
Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting to respond to appropriate questions and to make a statement
if they desire to do so.
COMPLIANCE WITH REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and any persons holding more than ten
percent of the Company's stock to report their initial ownership of the
Company's stock and any subsequent changes in ownership to the Securities and
Exchange Commission. Reports of changes in ownership generally are required to
be filed by the tenth day of the month following the transaction.
Based solely on its review of copies of such reports, the Company
believes that during the fiscal year ended March 31, 1996, all filing
requirements applicable to its directors and executive officers were satisfied.
The Company is not aware of any beneficial owner of more than ten percent of the
Company's common stock.
OTHER MATTERS
The Board of Directors has no knowledge of any other business to come
before the Annual Meeting and does not intend to present any other matters.
However, if any other business properly comes before the meeting or any
adjournment of the meeting, the persons named as proxies will have discretionary
authority to vote the shares represented by the accompanying proxy in accordance
with their best judgment.
The cost of this solicitation of proxies will be borne by the Company.
Some officers and regular employees of the Company may solicit proxies in person
or by mail, telephone or telecopier, but will not receive any additional
compensation for their services. The Company may also request brokerage firms,
banks and other custodians, nominees and fiduciaries to forward soliciting
material to the persons for whom they hold shares of the Company's Common Stock,
and may reimburse their reasonable expenses in doing so.
-19-
STOCKHOLDER PROPOSALS
Any stockholder of the Company who wishes to present a proposal to be
considered at the 1997 Annual Meeting of the Stockholders, and who wishes to
have the proposal included in the Company's proxy statement and form of proxy
relating to that meeting, must deliver the proposal in writing to the Company at
10030 Barnes Canyon Road, San Diego, California 92121, no later than February
20, 1997.
For the Board of Directors,
Kenneth J. Widder, M.D.
Chairman of the Board
Dated: July 3, 1996
San Diego, California
-20-
PROXY MOLECULAR BIOSYSTEMS, INC. PROXY
10030 BARNES CANYON ROAD
SAN DIEGO, CA 92121
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth J. Widder, with the power to appoint
his substitute, and hereby authorizes him to represent and vote as designated
below all of the shares of Common Stock of Molecular Biosystems, Inc. held of
record by the undersigned on June 25, 1996, at the 1996 Annual Meeting of
Stockholders to be held on August 20, 1996, or any adjournments thereof.
------------------------------
Please mark your votes in connection with the following proposals:
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
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME BELOW.)
David W. Barry, Robert W. Brightfelt, Charles C. Edwards,
Gordon C. Luce, David Rubinfien, Kenneth J. Widder
2. To approve the proposal to amend the Certificate of Incorporation of the Company to increase the Company's
authorized number of shares of Common Stock from 20,000,000 shares to 40,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve the proposal to amend the Company's 1993 Stock Option Plan to increase the maximum number of shares
for which the Company is authorized to grant options from 2,500,000 shares to 3,250,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
4. To approve the appointment of Arthur Andersen LLP as the independent public accountants of the Company for the
fiscal year ending March 31, 1997.
/ / FOR / / AGAINST / / ABSTAIN
SEE REVERSE SIDE
IN HIS DISCRETION, THE PROXY IS EACH AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES FOR DIRECTOR (PROPOSAL 1) AND FOR PROPOSALS 2 THROUGH
4, AND AS TO ANY OTHER ITEM OF BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING,
THIS PROXY WILL BE VOTED IN THE BEST JUDGMENT OF THE PROXIES.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as an attorney, as 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.
DATED: ____________________________
___________________________________
Signature
___________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.