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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 sec. 240.14a-11(c) or sec. 240.14a-12
ATRIX LABORATORIES, 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which 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:
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[ATRIX LOGO]
ATRIX LABORATORIES, INC.
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting of Shareholders of Atrix Laboratories, Inc. (the "Company") to be
held on April 27, 1997 at 6:00 p.m. local time, at The Fort Collins Marriott,
350 East Horsetooth Road, Fort Collins, Colorado.
At the meeting you are being asked (i) to elect directors, (ii) to approve
the Company's 1997 Employee Stock Purchase Plan, (iii) to approve an amendment
to the Company's Amended and Restated Performance Stock Option Plan, and (iv) to
ratify the Board of Directors' selection of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 1997.
You are urged to vote your Proxy even if you currently plan to attend the
Annual Meeting. Please remember to sign and date the Proxy card; otherwise, it
is invalid. Returning your Proxy will not prevent you from voting in person but
will assure that your vote is counted if you are unable to attend the meeting.
This has been an eventful year for our Company. At the meeting, we will
review the Company's activities over the past year and its plans for the future.
An opportunity will be provided for questions by shareholders. I hope you will
be able to join us.
Sincerely,
/s/ JOHN E. URHEIM
John E. Urheim
Vice Chairman and
Chief Executive Officer
March 27, 1997
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ATRIX LABORATORIES, INC.
2579 MIDPOINT DRIVE
FORT COLLINS, COLORADO 80525
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1997
---------------------
TO THE SHAREHOLDERS OF ATRIX LABORATORIES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders (the
"Meeting") of Atrix Laboratories, Inc. (the "Company") will be held at The Fort
Collins Marriott, 350 East Horsetooth Road, Fort Collins, Colorado 80525 on
April 27, 1997 at 6:00 p.m. Fort Collins time, for the following purposes:
1. To elect directors.
2. To approve the Company's 1997 Employee Stock Purchase Plan.
3. To approve an amendment to the Company's Amended and Restated
Performance Stock Option Plan.
4. To ratify the Board of Directors' selection of Deloitte & Touche LLP as
the Company's independent auditors for the year ending December 31,
1997.
5. To transact such other business as may properly come before the Meeting
and at any and all postponements, continuations or adjournments
thereof.
Only shareholders of record at the close of business on March 21, 1997 are
entitled to notice of and to vote at the Meeting or any postponements,
continuations and adjournments thereof.
You are cordially invited and urged to attend the Meeting. All
shareholders, whether or not they expect to attend the Meeting in person, are
requested to complete, date and sign the enclosed form of proxy and return it
promptly in the postage paid, return-addressed envelope provided for that
purpose. By returning your proxy promptly you can help the Company avoid the
expense of follow-up mailings to ensure a quorum so that the Meeting can be
held. Shareholders who attend the Meeting may revoke a prior proxy and vote
their proxy in person as set forth in the Proxy Statement.
THE ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSED ITEMS. YOUR VOTE IS IMPORTANT.
By Order of the Board of Directors
/s/ JOHN E. URHEIM
John E. Urheim,
Vice Chairman and
Chief Executive Officer
Fort Collins, Colorado
Dated: March 27, 1997
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ATRIX LABORATORIES, INC.
2579 MIDPOINT DRIVE
FORT COLLINS, COLORADO 80525
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1997
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors (the "Board") of Atrix
Laboratories, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Shareholders of the Company to be held at The Fort Collins
Marriott, 350 East Horsetooth Road, Fort Collins, Colorado, on April 27, 1997 at
6:00 p.m. Fort Collins time and at any postponements, continuations or
adjournments thereof (collectively the "Meeting"). This Proxy Statement, the
accompanying form of Proxy (the "Proxy") and the Notice of Annual Meeting will
be first mailed or given to the Company's shareholders on or about March 27,
1997.
All shares of the Company's $.001 par value common stock (the "Shares"),
represented by properly executed Proxies received in time for the Meeting will
be voted at the Meeting in accordance with the instructions marked thereon or
otherwise as provided therein, unless such Proxies have previously been revoked.
Unless instructions to the contrary are marked, or if no instructions are
specified, Shares represented by Proxies will be voted for the proposals set
forth on the Proxy, and in the discretion of the persons named as proxies, on
such other matters as may properly come before the Meeting. Any Proxy may be
revoked at any time prior to the exercise thereof by submitting another Proxy
bearing a later date or by giving written notice of revocation to the Company at
the address indicated above or by voting in person at the Meeting. Any notice of
revocation sent to the Company must include the shareholder's name and must be
received prior to the Meeting to be effective.
VOTING
Only holders of record of Shares at the close of business on March 21, 1997
(the "Record Date") will be entitled to receive notice of and to vote at the
Meeting. On the Record Date there were 11,114,324 Shares outstanding, each of
which will be entitled to one vote on each matter properly submitted for vote to
the shareholders at the Meeting. The presence, in person or by proxy, of holders
of a majority of Shares entitled to vote at the Meeting constitutes a quorum for
the transaction of business at the Meeting.
The election of each director nominee requires the affirmative vote of a
plurality of the Shares cast in the election of directors. An affirmative vote
of a majority of the votes cast at the Meeting is required to approve each other
proposal being presented to the shareholders for their approval at the Meeting.
Votes cast by proxy will be tabulated by an automated system administered
by the Company's transfer agent. Votes cast by proxy or in person at the Meeting
will be counted by the persons appointed by the Company to act as election
inspectors for the Meeting. Abstentions, broker non-votes and Shares as to which
authority to vote on any proposal is withheld, are each included in the
determination of the number of Shares present and voting at the Meeting for
purposes of obtaining a quorum. Each will be tabulated separately. Abstentions
are counted in tabulations of the votes cast on proposals presented to
shareholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a board of
directors made up of three classes. The members of each class serve three-year
staggered terms with one class to be elected at each annual meeting. As provided
in the Company's Bylaws, the Board has currently set the total number of
directors at nine, with four directors in Class A, two directors in Class B and
three directors in Class C. The current terms of the Class B and Class C
directors expire at the Company's Annual Meeting of Shareholders for the years
ended 1997 and 1998, respectively. The current term of the Class A directors
expires at the Meeting.
The Board has nominated Mr. John E. Urheim, Dr. D. Walter Cohen, Dr. Jere
E. Goyan and Dr. R. Bruce Merrifield for election as Class A directors to serve
for a three-year term expiring at the Annual Meeting of Shareholders for the
year ended 1999 and until their successors are elected and qualified.
Each director nominee is currently a Class A director. Each of the nominees
has consented to be a nominee and to serve as a director if elected, and it is
intended that the Shares represented by properly executed Proxies will be voted
for the election of the nominees except where authority to so vote is withheld.
The Board has no reason to believe that any of the director nominees will be
unable to serve as directors or become unavailable for any reason. If, at the
time of the Meeting, any of the director nominees shall become unavailable for
any reason, the persons entitled to vote the Proxy will vote for such
substituted nominee or nominees, if any, as such persons shall determine in his
or her discretion.
Information is set forth below regarding the director nominees and the
directors who will continue in office after the Meeting, including the name and
age of each director and nominee, his principal occupation and business
experience during the past five years and the commencement of his term as a
director of the Company.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO ELECT
MR. JOHN E. URHEIM, DR. D. WALTER COHEN, DR. JERE E. GOYAN AND DR. R. BRUCE
MERRIFIELD AS CLASS A DIRECTORS.
NOMINEES FOR ELECTION
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ ----------------------------------------- --------
John E. Urheim(1) Vice Chairman and Chief Executive Officer of the 1993
(56) Company since June 1993. Principal of Urheim
Consultants (a health care consulting firm) from April
1989 to June 1993.
Dr. D. Walter Cohen(1)(2) Chancellor of the Medical College of Pennsylvania since 1992
(70) July 1993 and President of the Medical College of
Pennsylvania from 1986 to 1993. Dr. Cohen also has had
a dental practice (specializing in periodontics) since
1950.
Dr. Jere E. Goyan(2) President and Chief Operating Officer of Alteon, Inc. 1986
(65) since May 1993, acting Chief Executive Officer from May
1993 to August 1993, Senior Vice President, Research
and Development from April 1, 1993 to May 14, 1993. Dr.
Goyan served as professor of Pharmacy and
Pharmaceutical Chemistry at, and Dean of, the School of
Pharmacy at the University of California, San
Francisco, from 1965 and 1967, respectively, to 1993,
and currently serves as Emeritus Dean of the School of
Pharmacy. Dr. Goyan also serves as a director of
Emisphere Technologies, Sciclone, Inc., and the
National Foundation of Medical Education.
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PRINCIPAL OCCUPATION OR EMPLOYMENT DURING DIRECTOR
NAME AND AGE THE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ ----------------------------------------- --------
Dr. R. Bruce Merrifield(2) Professor at Rockefeller University since 1949 and 1986
(75) associate editor for the International Journal of
Peptide and Protein Research and a member of the
Editorial Board of Analytical Biochemistry. Dr.
Merrifield also serves as a director of Profile
Diagnostic Sciences, Inc.
- ---------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE MEETING
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE
------------ -------------------------------------------- --------
Dr. G. Lee Southard(1)** President of the Company since 1987 and Chief 1986
(60) Scientific Officer of the Company since June 1993.
Chief Executive Officer from 1987 to 1993. Dr.
Southard also serves as a director of Mesa
Laboratories, Inc.
C. Rodney O'Connor** Chairman and Chief Executive Officer of Cameron 1987
(64) Associates, Inc. (a financial and investor
communications firm) since 1976.
H. Stuart Campbell(2)** Owner of Highland Packaging Labs, Inc. (a specialty 1995
(67) packaging company for the pharmaceutical industry)
since 1983. Mr. Campbell also serves as a director
for Biomatrix, Inc., Isomedix, Inc., and Mesa
Laboratories, Inc.
William C. O'Neil, Jr.(1)(2)* Chairman, President and Chief Executive Officer of 1988
(62) ClinTrials Research, Inc. (a contract research
services company) since 1989. Mr. O'Neil also
serves as a director of Sigma Aldrich Corp.,
American Healthcorp, Central Parking and Advocat.
David R. Bethune(2)* Consultant to the pharmaceutical industry since 1995
(56) 1996. President and Chief Executive Officer of
Aesgen, Inc. (a generic pharmaceutical company)
from 1995 to 1996. Group Vice President of American
Cyanamid Company from 1992 to 1995 and President of
the Lederle Laboratories Division of American
Cyanamid Company from 1988 to 1992. Mr. Bethune
also serves as a director of Elan Corp., Female
Healthcare Co., and is a founding trustee of the
American Cancer Society Foundation.
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(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
* Class B Director.
** Class C Director.
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BOARD MEETINGS
During 1996 the Board met four times. No director attended fewer than 75%
of the aggregate of (i) the total number of meetings of the Board during 1996;
and (ii) the total number of meetings held by all Committees of the Board on
which he served during 1996.
COMMITTEES OF THE BOARD
Executive Committee. The Board has an Executive Committee and during 1996
its members were Mr. O'Neil, Chairman of the Executive Committee, Mr. Urheim,
and Drs. Southard and Cohen. The Executive Committee has the authority to
conduct the business and affairs of the Company, except where action of the
entire Board is specified by statute. The Executive Committee did not meet
during 1996.
Audit Committee. The Board has an Audit Committee and during 1996 its
members were Dr. Goyan, Chairman of the Audit Committee, and Drs. Merrifield,
and Cohen. The Audit Committee's duties include the following: (i) making
recommendations to the Board as to the selection of the Company's independent
auditors; (ii) reviewing the results of the annual audit of the Company with the
independent auditors and appropriate management representatives; (iii) reviewing
with the independent auditors such major accounting policies of the Company as
are deemed appropriate for review by the Audit Committee; and (iv) reporting to
the Board at each meeting of the full Board following a meeting of the Audit
Committee concerning the Audit Committee's activities. The Audit Committee met
once during 1996.
Compensation Committee. The Board has a Compensation Committee and during
1996 its members were Mr. Bethune, Chairman of the Compensation Committee, and
Messrs. Campbell and O'Neil. The Compensation Committee performs the following
duties: (i) considering and making recommendations to the Board with respect to
the overall compensation policies of the Company; (ii) approving the
compensation payable to all officers of the Company; (iii) reviewing proposed
compensation of executives as provided in the Company's executive compensation
plan; (iv) advising management on all other executive compensation matters as
requested; (v) construe and interpret the Stock Option Plan (as defined herein)
and, subject to the express provisions of the Stock Option Plan, determine the
persons to whom options are granted, the number of Shares subject to options,
when options shall be granted, the exercise price of Shares subject to options,
the time during which options shall be exercisable and the duration of the
exercise period and other terms and provisions thereof; and (vi) reporting to
the Board as and when appropriate with respect to all of the foregoing. The
Compensation Committee met two times during 1996.
The Board does not presently have a separate nominating committee, the
function of which is performed by the Board as a whole.
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EXECUTIVE OFFICERS
Information is set forth below regarding the executive officers of the
Company, including their age, principal occupation during the last five years
and the date each first became an executive officer of the Company.
EXECUTIVE OFFICER
NAME AGE PRESENT EXECUTIVE OFFICE OF THE COMPANY SINCE
---- --- ------------------------ --------------------
John E. Urheim 56 Vice Chairman and Chief Executive Officer 1993
since June 1993. Principal of Urheim
Consultants from April 1989 to June 1993.
Dr. G. Lee Southard 60 President since 1987 and Chief Scientific 1987
Officer since June 1993. Chief Executive
Officer from 1987 to 1993.
Dr. Richard L. Dunn 56 Vice President, Drug Delivery Research 1987
since 1992 and Vice President, Research
and Development from 1987 to 1992.
Dr. Charles P. Cox 44 Vice President, New Business Development 1992
since January 1996 and Vice President,
Product Development from September 1992 to
January 1996. Project Director of Research
and Development, Project Planning and
Management for G.D. Searle & Company from
1987 to September 1992.
Brian G. Richmond 45 Corporate Controller and Assistant 1997
Secretary since January 1997 and
accounting manager from 1991 to 1996. Mr.
Richmond is a Certified Public Accountant
and a Certified Managerial Accountant.
Dr. J. Steven Garrett 52 Vice President, Dental Clinical Research 1995
since April 1995. Professor of
Periodontics at Loma Linda University from
1986 to 1995 and in private practice
specializing in periodontics since 1978.
Michael R. Duncan 34 Vice President, Manufacturing since 1995
October 1995. Director of Production
Operations and Packaging Manager for
Geneva Pharmaceuticals, Inc. from 1992 to
1995.
Rees M. Orland 52 Vice President, Marketing and Sales since 1996
January 1996. Owner of RMO Consulting
Group, (a healthcare marketing consulting
business) from 1992 to 1996. Corporate
Senior Vice President for Collagen
Corporation from 1991 to 1992.
Elaine M. Gazdeck 46 Vice President, Regulatory Affairs/Quality 1996
Assurance since June 1996, Director,
Regulatory Affairs from 1994 to 1996 and
Manager, Regulatory Affairs from 1992 to
1994.
Officers serve at the discretion of the Board and are elected at the first
meeting of the Board after each annual meeting of shareholders. There are no
family relationships among any directors and executive officers of the Company.
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PROPOSAL NO. 2
PROPOSAL TO APPROVE THE COMPANY'S 1997
EMPLOYEE STOCK PURCHASE PLAN
In March 1997, the Board adopted, subject to shareholder approval, the
Company's 1997 Employee Stock Purchase Plan (the "Plan"). If approved by the
shareholders, the Plan will provide eligible employees with an opportunity to
purchase Shares through payroll deductions. The Plan is intended to assist
eligible employees in acquiring a stock ownership interest in the Company
pursuant to a plan that is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code") to help eligible employees provide for their future security and to
encourage them to remain in the employment of the Company and its participating
subsidiaries.
The substance and effect of certain provisions of the Plan are described
below and the complete text of the proposed Plan is set forth in Appendix "A" to
this Proxy Statement. The following discussion is qualified in its entirety by
reference to the text of the proposed Plan.
SHARES RESERVED FOR THE PLAN
The aggregate number of Shares which may be purchased under the Plan shall
not exceed 300,000, subject to adjustment in the event of stock dividends, stock
splits, combination of Shares, recapitalizations, or other changes in the
outstanding common stock of the Company. Shares issued under the Plan may
consist, in whole or in part, of authorized and unissued Shares or treasury
Shares.
ELIGIBLE PARTICIPANTS
Employees of the Company (or a subsidiary designated by the Company) are
eligible to participate in the Plan if they meet certain conditions. To be
eligible the employee must have completed six months of employment and the
employee's customary employment must be 20 hours per week or greater.
Approximately 85 employees would have been eligible to participate as of
December 31, 1996.
MATERIAL FEATURES OF THE PLAN
Beginning July 1, 1997, the Company may make grants of options on January
1, April 1, July 1 and/or October 1 of each year the Plan is in effect or on
such other date as the Committee (as defined herein) shall designate. Each
option period shall last for three months ending on the March 31, June 30,
September 30 or December 31 immediately following the grant of options or on
such dates as the Committee determines.
Each eligible employee on a date of exercise shall be entitled to purchase
Shares at a purchase price equal to 85% of the average of the reported highest
and lowest sale prices of Shares on the Nasdaq National Market, or such other
exchange as the Shares are is listed, on the applicable date of exercise. Dates
of exercise shall take place on the last day of each month the Shares are traded
on the Nasdaq National Market, or such other exchange as the Shares are listed,
during the applicable option period.
Payment for Shares purchased under the Plan will be made by authorized
payroll deductions from an eligible employee's Eligible Compensation (as defined
herein) or, when authorized by the Committee, an eligible employee may pay an
equivalent amount for such Shares. "Eligible Compensation" means an eligible
employee's total regular compensation payable from the Company or a
participating subsidiary of the Company during an option period.
Eligible employees who elect to participate in the Plan will designate a
stated whole percentage equaling at least 1%, but no more than 10% of Eligible
Compensation, to be deposited into a periodic deposit account. On each date of
exercise, the entire periodic deposit account of each participant in the Plan
shall be used to purchase whole and/or fractional Shares. The Company shall
maintain a stock purchase account for each participant to reflect the Shares
purchased under the Plan by each participant. No participant in the Plan is
permitted to purchase Shares under the Plan at a rate that exceeds $25,000 in
fair market value of Shares, determined at the time options are granted, for
each calendar year.
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All funds received by the Company from the sale of Shares under the Plan
may be used for any corporate purpose.
NEW PLAN BENEFITS
It is not possible to determine how many eligible employees will
participate in the Plan in the future. Therefore, it is not possible to
determine with certainty the dollar value or number of Shares that will be
distributed under the Plan. The Company anticipates, however, that on the
average approximately 12,500 Shares will be distributed annually during the
five-year term of the Plan. Because participation in the Plan is optional, it is
not possible to determine the benefits or amounts that would have been received
by the CEO, Named Executive Officers, or any other directors or officers of the
Company under the Plan during 1996.
TAX TREATMENT
The Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Code, an employee who elects
to participate in an offering under the Plan will not realize income at the time
the offering commences or when the Shares purchased under the Plan are
transferred to him or her. If an employee disposes of such Shares after two
years from the date the offering of such Shares commences and after one year
from the date of the transfer of such shares to him or her, the employee will be
required to include in income as compensation for the year in which such
disposition occurs, an amount equal to the lesser of (a) the excess of the fair
market value of such Shares at the time of disposition over the purchase price,
or (b) 15% of the fair market value of such Shares at the time the offering
commenced. The employee's basis in the Shares disposed of will be increased by
an amount equal to the amount so includable in his or her income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of the disposition will be a capital gain
or loss, either short-term or long-term, depending on the holding period for
such Shares. In such event, the Company (or the subsidiary by which the employee
is employed) will not be entitled to any tax deduction from income.
If any employee disposes of the Shares purchased under the Plan within such
two-year or one-year period, the employee will be required to include in income,
as compensation for the year in which such disposition occurs, an amount equal
to the excess of the fair market value of such Shares on the date of purchase
over the purchase price. The employee's basis in such Shares disposed of will be
increased by an amount equal to the amount includable in his or her income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of disposition will be a capital gain or
loss, either short-term or long-term, depending on the holding period for such
shares. In the event of a disposition within such two-year or one-year period,
the Company (or the subsidiary by which the employee is employed) will be
entitled to a tax deduction from income equal to the amount the employee is
required to include in income as a result of such disposition.
An employee who is a nonresident of the United States will generally not be
subject to the U.S. federal income tax rules described above with respect to
Shares purchased under the Plan.
PLAN ADMINISTRATION AND TERMINATION
The Board, or its delegate, shall appoint a committee (the "Committee"),
which shall be composed of one or more employees, to administer the Plan on
behalf of the Company. The Committee may delegate any or all of the
administrative functions under the Plan to such individuals, subcommittees, or
entities as the Committee considers appropriate. The Committee may adopt rules
and procedures not inconsistent with the provisions of the Plan for its
administration. The Committee's interpretation and construction of the Plan is
final and conclusive.
The Board may at any time, or from time to time, alter or amend the Plan in
any respect, except that, without approval of the Company's shareholders, no
amendment may increase the number of Shares reserved for purchase, or reduce the
purchase price per Share under the Plan, other than as described above.
The Board shall have the right to terminate the Plan or any offering at any
time for any reason. The Plan is anticipated to continue in effect through June
30, 2002.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 2.
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PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED PERFORMANCE STOCK
OPTION PLAN
The Board has adopted, subject to shareholder approval, an amendment to the
Company's Amended and Restated Performance Stock Option Plan (the "Stock Option
Plan") to increase the maximum aggregate number of Shares issuable upon the
exercise of options granted under the Stock Option Plan from 1,500,000 Shares to
2,500,000 Shares.
The Board believes that the additional Shares available under the Stock
Option Plan will enable the Company to continue for the foreseeable future to
afford officers, directors and key employees of the Company and its subsidiaries
an opportunity to acquire a proprietary interest in the Company, and thus create
in those persons an increased interest in and greater concern for the welfare of
the Company. The additional Shares will also put the Company in a better
position to attract qualified individuals in the future as and when the need to
expand its management staff arises.
OPTIONS AVAILABLE UNDER THE STOCK OPTION PLAN
The maximum aggregate number of Shares that could be purchased upon the
exercise of options under the Stock Option Plan is currently 1,500,000. As of
the Record Date, options to purchase an aggregate of 1,438,007 Shares have been
granted and may be exercised under the Stock Option Plan, leaving 71,273 Shares
for future grants. If the proposed amendment to the Stock Option Plan is
approved by the requisite vote, the maximum aggregate number of Shares remaining
which could be granted will be 1,071,273, or an increase of 1,000,000 Shares.
TEXT OF PROPOSED AMENDMENT
The Board proposes to amend the first paragraph of Article III of the Stock
Option Plan in its entirety to read as follows:
The total number of shares of capital stock of the Company which may
be purchased pursuant to the exercise of the Options granted under the
Stock Option Plan shall not exceed, in the aggregate, 2,500,000 shares of
the authorized Common Stock, $.001 par value per share, of the Company (the
"Shares").
OTHER KEY PROVISIONS OF THE STOCK OPTION PLAN
Other key provisions of the Stock Option Plan are set forth below.
General. The purpose of the Stock Option Plan is to promote the growth of
the Company by providing performance-based compensation and an effective and
efficient means for attracting, retaining and motivating officers, directors and
key employees of the Company and its subsidiaries. Options granted under the
Stock Option Plan are intended to be incentive stock options under Section 422
of the Code, or non-qualified options that do not meet the requirements for
incentive stock options. Unless the context indicates to the contrary, the term
"option" used herein shall mean either an incentive stock option or a
non-qualified option.
Eligibility and Participation. Under the Stock Option Plan, options to
purchase Shares may be granted from time to time to certain officers, directors
and key employees of the Company or any subsidiary thereof.
Plan Administration. The Stock Option Plan provides for a committee (the
"Stock Option Committee") consisting of not less than two members, appointed by
the Board, each of whom, to the extent necessary to comply with Rule 16b-3 of
the Securities and Exchange Act of 1934, as amended, is a "disinterested person"
within the meaning of Rule 16b-3. The Stock Option Committee shall construe and
interpret the Stock Option Plan and, subject to the express provisions of the
Stock Option Plan, determine the persons to whom options are granted, the number
of shares subject to options, when options shall be granted, the exercise price
of shares subject to options, the time during which options shall be exercisable
and the duration of the exercise period and other terms and provisions thereof.
The options granted under the Stock Option Plan will be subject to various
service and performance criteria set by the Stock Option Committee. Subject to
the
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provisions of the Stock Option Plan, the Stock Option Committee shall have
authority to promulgate, amend and rescind rules and regulations relating to the
administration of the Stock Option Plan.
Terms and Conditions of Options; Payment. Incentive stock options granted
under the Stock Option Plan are exercisable for a period of not more than ten
(10) years from the date of the grant. Any non-qualified options granted under
the Stock Option Plan are exercisable at such times, in such amounts and during
such periods as the Stock Option Committee determines at the date of the grant.
If the optionee exercises the option, payment may be made either in cash,
certified check or other immediately available funds, with previously issued
Shares, valued as of the date of the option exercise, a combination of cash,
certified check or other immediately available funds and Shares or any other
consideration permitted under applicable law.
Option Price. The purchase price of each Share issued pursuant to the
exercise of an incentive stock option granted under the Stock Option Plan may
not be less than 100% of the fair market value per share on the date of the
grant. The purchase price of each Share issued pursuant to the exercise of a
non-qualified stock option granted under the Stock Option Plan shall be
determined by the Stock Option Committee.
Adjustments; Mergers and Consolidations. The Stock Option Plan provides
that in the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
split-up, split-off, spin-off, combination of shares, exchange of shares, or
other like change in capital structure of the Company, an adjustment will be
made to each outstanding option granted under the Stock Option Plan such that
each such option shall thereafter be exercisable for such securities, cash
and/or other property as would have been received in respect of the shares
subject to such option had the option been exercised in full immediately prior
to such change.
Acceleration of Vesting Provisions. The Stock Option Plan authorizes the
Stock Option Committee to accelerate the vesting of an outstanding option upon
written notice to the optionholder. An acceleration of the vesting period in
accordance with such authority would not affect the expiration date of the
option.
Reduction of Vesting Period. The Stock Option Plan provides that the Stock
Option Committee may, in its discretion, reduce the vesting period by the
occurrence of certain events as follows: (a) any person becomes the beneficial
owner of 25% or more of the total number of the shares of the Company then
outstanding; (b) as a result of, or in connection with, any cash tender offer,
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing, the persons who were
directors of the Company just prior to such event cease to constitute a majority
of the Board of the Company; (c) the shareholders of the Company approve an
agreement providing for either a transaction in which the Company will cease to
be an independent publicly owned corporation or for a sale or other disposition
of all or substantially all of the assets of the Company; or (d) a tender offer
or exchange offer is made for Shares (other than one made by the Company) and
Shares are acquired thereunder.
Cancellation and Regrant of Options. The plan allows the Stock Option
Committee to modify, extend or renew outstanding options granted under the Stock
Option Plan, or accept the surrender of options outstanding under the Stock
Option Plan (to the extent not theretofore exercised), and authorize the
granting of a like number of new options under the Stock Option Plan in
substitution for the original options, regardless of whether the vesting
schedules or exercise prices are the same or different from the original options
being surrendered. The granting of new options would be subject to the terms and
conditions of and within the limitations of the Stock Option Plan.
Amendments. The Board may from time to time, insofar as permitted by law,
revise or amend the Stock Option Plan in any way, except that no amendments may
be made without the approval of the shareholders if such amendments (i) increase
the total number of Shares reserved for options under the Stock Option Plan,
except as otherwise provided therein, (ii) reduce the exercise price of any
option granted under the Stock Option Plan below the price required by Article
VI thereof, (iii) modify the provisions of the Stock Option Plan relating to
eligibility, or (iv) materially increase the benefits accruing to participants
under the Stock Option Plan.
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FEDERAL INCOME TAX CONSEQUENCES
Under current federal income tax laws, neither the grant nor the exercise
of an option that qualifies for treatment as an incentive stock option plan will
result in the recognition of income by the optionee. To qualify for treatment as
an incentive stock option, the optionee must hold Shares acquired through the
exercise of an incentive stock option for at least two years subsequent to its
exercise. If an optionee satisfies the holding period requirements, the sale of
the shares acquired through the exercise of the incentive stock option will
result in long-term capital gain (or loss) to the optionee. If an optionee does
not satisfy the holding requirements, the optionee will recognize, at the time
of the disposition of the shares, ordinary income equal to the amount by which
the lesser of (i) the fair market value of the shares on the date of the
exercise and (ii) the fair market value of the shares on the date of disposition
exceeds the exercise price of the incentive stock option. Any gain realized in
excess of such ordinary income will be either long-term or short-term capital
gain depending on the optionee's holding period for the shares.
In the event an optionee recognizes ordinary income for federal tax
purposes in connection with the disposition of shares acquired through exercise
of an incentive stock option under the circumstances discussed above, the
Company will generally be entitled to a deduction for federal income tax
purposes equal to the amount of ordinary income recognized by the optionee. No
deduction will be allowable by the Company in connection with the issuance of
shares upon the exercise thereof if the optionee is not deemed to recognize
income at such time.
A grantee of a non-qualified stock option will not recognize taxable income
and the Company will not receive a deduction upon the grant of such option. Upon
an optionee's exercise of a non-qualified stock option, (i) the optionee will
recognize ordinary income in an amount equal to the difference between the fair
market value on the exercise date and the exercise price of the shares; and (ii)
the Company will be entitled to a tax deduction in an amount equal to the amount
of income realized by the optionee. Following exercise, the optionee will
realize gain or loss at disposition in an amount equal to the difference between
the disposition price and the basis of the shares.
The federal tax law is subject to changes in the Code and the regulations
promulgated by the Internal Revenue Service, and in court and administrative
interpretation.
NEW PLAN BENEFITS
There is no present plan to grant additional options pursuant to the Stock
Option Plan to any particular individuals or entities. The closing sale price of
the Shares as quoted on the Nasdaq National Market on March 21, 1997 was
$11 3/8.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 3.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid by
the Company for each of the last three fiscal years to (i) the Company's Chief
Executive Officer and (ii) the Company's other five most highly compensated
executive officers whose total annual compensation exceeded $100,000 during 1996
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- ----------------------------------------- ---- --------- --------------- ------------ ---------------
Mr. John E. Urheim, 1996 $204,000 $15,000(2) 5,100 $ 3,293(1)
Vice Chairman and CEO 1995 195,912 -0- 7,308 2,970(1)
1994 183,000 40,180(4) -0- 2,020(1)
Dr. G. Lee Southard, 1996 $158,025 $15,000(2) 4,000 $ 4,511(1)
President and Chief Scientific Officer 1995 153,689 -0- 5,788 4,489(1)
1994 147,000 -0- -0- 4,620(1)
Dr. J. Steven Garrett 1996 $156,000 $13,000(2) 3,900 $ 2,118(1)
Vice President, Dental Clinical 1995(3) 106,304
Research 35,690(7) 55,769 -0-
Mr. Rees M. Orland, 1996(6) $150,000 $35,628(5) 3,800 -0-
Vice President, Sales & Marketing
Dr. Charles P. Cox, 1996 $123,000 $13,000(2) 3,100 $ 3,676(1)
Vice President, New Business 1995 116,637 -0- 19,308 3,220(1)
Development 1994 106,000 -0- -0- 3,185(1)
Dr. Richard L. Dunn, 1996 $125,804 $10,000(2) 3,200 $ 3,768(1)
Vice President, Drug Delivery Research 1995 121,054 -0- 4,615 3,450(1)
1994 117,000 -0- -0- 3,500(1)
- ---------------
(1) Includes the Company's 50% matching contribution up to 6% of annual
compensation under the Company's 401(k) Plan.
(2) Performance bonus.
(3) Dr. Garrett became an officer of the Company in April 1995.
(4) Moving and relocation reimbursement paid to Mr. Urheim.
(5) Mr. Orland received a $10,000 performance bonus and $25,628 in relocation
reimbursement.
(6) Mr. Orland joined the Company on January 1, 1996.
(7) Moving and relocation reimbursement paid to Dr. Garrett.
The foregoing compensation table does not include certain fringe benefits
made available on a nondiscriminatory basis to all Company employees such as
group health insurance, dental insurance, long-term disability insurance,
vacation and sick leave. In addition, the Company makes available certain non-
monetary benefits to its executive officers with a view to acquiring and
retaining qualified personnel and facilitating job performance. The Company
considers such benefits to be ordinary and incidental business costs and
expenses. The aggregate value of such benefits in the case of the executive
officers, which cannot be precisely ascertained but which is less than the
lesser of (a) ten percent of the cash compensation paid to each such executive
officer or to the group, respectively, or (b) $50,000 or $50,000 times the
number of individuals in the group, as the case may be, is not included in such
table.
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OPTION GRANTS TABLE
The following table provides information relating to the grant of stock
options to the Company's CEO and the Named Executive Officers during the fiscal
year ended December 31, 1996 under the Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
--------------------------------------------------------------- ----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED(#)(3) FISCAL YEAR PRICE ($/SH)(3) DATE 5% ($) 10% ($)
---- ------------- ------------ ---------------- ---------- --------- ---------
Mr. John E. Urheim 5,100 .8% $ 9.63 11/18/06 30,871 78,233
200,000 33.2% $ 8.50 06/16/03(4) 1,069,121 2,709,362
Dr. G. Lee Southard 7,500 1.2% $11.63 08/05/06 54,855 139,014
4,000 .7% $ 9.63 11/18/06 24,212 61,359
10,000 1.7% $ 9.38 01/04/03(4) 58,990 149,493
Dr. J. Steven Garrett 3,900 .6% $ 9.63 11/18/06 23,607 59,825
Mr. Rees M. Orland 40,000 6.6% $ 7.63 01/01/06 191,813 486,091
3,800 .6% $ 9.63 11/18/06 23,002 58,291
1,120 .2% $ 6.63 02/12/06 4,666 11,826
Dr. Charles P. Cox 3,100 .5% $ 9.63 11/18/06 18,765 47,553
20,000 3.3% $ 6.75 09/08/02(4) 84,901 215,155
5,000 .8% $ 7.50 09/01/03(4) 23,584 59,765
11,600 1.9% $ 5.88 11/22/03(4) 42,896 108,706
Dr. Richard L. Dunn 5,000 .8% $11.63 08/05/06 36,570 92,676
3,200 .5% $ 9.63 11/18/06 19,370 49,087
5,000 .8% $ 7.25 08/03/02(4) 22,797 57,773
6,000 1.0% $ 7.75 08/02/03(4) 29,244 74,109
13,100 2.2% $ 5.88 11/22/03(4) 48,442 122,763
- ---------------
(1) 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.
(2) Vest and become exercisable at the rate of one-third on the first, second
and third anniversaries of the grant date.
(3) All options were granted at the fair market value of the Shares on the date
of grant based on the closing bid price for the Shares except as noted in
(4).
(4) Options were regrants from cancellation of incentive options and issuance of
non-qualified stock options to extend the option period from 5 years to 10
years and were issued at the same exercise price as the original incentive
options.
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AGGREGATED OPTION EXERCISE AND FISCAL YEAR-END OPTION TABLE
The following table provides information relating to the exercise of stock
options during the year ended December 31, 1996 by the CEO and each of the Named
Executive Officers and the 1996 fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS
FY-END AT FY-END
(#) ($)(1)
SHARES ACQUIRED ------------- ----------------
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- ------------- ----------------
Mr. John E. Urheim............................ -0- $ -0- 202,436/9,972 $460,049/25,835
Dr. G. Lee Southard........................... 10,000 $11,250 71,929/15,359 $636,647/$20,399
Dr. J. Steven Garrett......................... -0- $ -0- 18,590/41,079 $74,591/$153,565
Mr. Rees M. Orland............................ -0- $ -0- 4,480/43,800 $18,474/$139,275
Dr. Charles P. Cox............................ -0- $ -0- 43,036/15,972 $178,008/$54,020
Dr. Richard L. Dunn........................... -0- $ -0- 25,638/11,277 $105,634/$16,277
- ---------------
(1) Market value of underlying Shares is (i) fair market value at December 31,
1996 ($10.75 per share) less the option exercise price, multiplied by (ii)
the number of Shares in the money.
EMPLOYMENT AGREEMENTS
On June 4, 1993, the Company entered into an employment agreement with Mr.
Urheim. Pursuant to the terms of the employment agreement, Mr. Urheim's duties
are to act as Vice Chairman of the Board and Chief Executive Officer. The
employment agreement provides that Mr. Urheim receive a starting annual base
salary of $175,000 (which at the discretion of the Board, upon recommendation by
the Compensation Committee, may be increased annually). Mr. Urheim's agreement
provides for severance pay at full salary and benefits until the earlier of one
year from the date of termination or until re-employment; and, for the immediate
vesting of all unvested options, in the case of termination other than for
cause. Mr. Urheim's base salary was increased to $215,000 effective January 1,
1997.
On April 17, 1995, the Company entered into an employment agreement with
Dr. Garrett. Pursuant to the terms of the agreement, Dr. Garrett's duties are to
act as Vice President of Dental Clinical Research. The employment agreement
provides that Dr. Garrett will receive a starting annual base salary of $150,000
(which at the discretion of the Board, upon recommendation by the Compensation
Committee, may be increased annually). Dr. Garrett's agreement provides for
severance pay at full salary and benefits until the earlier of one year from the
date of termination or until re-employment; and, for the immediate vesting of
all unvested options, in case of termination other than for cause. Dr. Garrett's
base salary was increased to $165,000 effective January 1, 1997.
On January 1, 1996, the Company entered into an employment agreement with
Mr. Orland. Pursuant to the terms of the agreement, Mr. Orland's duties are to
act as Vice President of Marketing and Sales. The employment agreement provides
that Mr. Orland will receive a starting annual base salary of $150,000 (which at
the discretion of the Board, upon recommendation by the Compensation Committee,
may be increased annually). Mr. Orland's agreement includes severance pay at
full salary and benefits until the earlier of nine months from the date of
termination or until re-employment; and, for the immediate vesting of all
unvested options, in case of termination other than for cause. Mr. Orland's base
salary was increased to $160,000 effective January 1, 1997.
COMPENSATION PURSUANT TO PLANS
Stock Option Plans. The Company has two stock option plans under which
options may currently be granted, the Stock Option Plan and the Non-Qualified
Stock Option Plan ("NQSOP"). All employees and
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directors are eligible to receive options under the Stock Option Plan. The
Company granted 487,065 options under the Stock Option Plan to directors or
executive officers and an aggregate of 9,120 options to two consultants under
the NQSOP during the year ended December 31, 1996.
401(k) Plan. The Company maintains a defined contribution savings plan (the
"401(k) Plan") to provide retirement income to employees of the Company,
including all executive officers. All employees who are over 21 years of age are
eligible to participate in the 401(k) Plan. It is funded by voluntary pre-tax
contributions from employees up to a maximum amount equal to 17% of annual
compensation and by 50% matching contributions by the Company up to 6% of annual
compensation. Employees who have completed one year of service are eligible for
the 50% Company match. Participants are fully vested in all pre-tax, after-tax
and matching contributions as soon as they are made.
COMPENSATION OF DIRECTORS
Directors' fees are paid only to non-employee directors for meetings
attended at the rate of $1,500 per meeting ($2,000 per meeting attended for the
Chairman of the Board), plus reimbursement of the directors' travel expenses
relating to attendance at the meeting.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Compensation Committee") of the Board is
responsible for establishing compensation policy and administering the
compensation programs of the Company's executive officers. The Compensation
Committee is currently comprised of three independent outside directors. The
Compensation Committee meets at least once a year to review executive
compensation policies, design of compensation programs, and individual salaries
and awards for the executive officers based on performance criteria.
Pursuant to the rules regarding disclosure of Company polices concerning
executive compensation, this report is submitted by Messrs. Bethune, O'Neil and
Campbell in their capacity as members of the Compensation Committee for the year
ended December 31, 1996 and addresses the Company's compensation policies as
they affected Mr. Urheim, the CEO, and the Company's other executive officers,
including the Named Executive Officers.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company applies a consistent philosophy to compensation for all
employees, including executive officers. This philosophy is based on the premise
that the achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives.
The goals of the executive compensation program are to align compensation
with business objectives and performance, and to enable the Company to attract,
retain and reward executive officers who contribute to the long-term success of
the Company. The Company's compensation program for executive officers is based
on the same principles applicable to compensation decisions for all employees of
the Company and generally consists of two compensation elements: cash and
equity. The process used by the Compensation Committee in determining executive
officer compensation levels for each of these components takes into account both
qualitative and quantitative factors. Among the factors considered by the
Compensation Committee are the recommendations of the CEO with respect to the
compensation of the Company's other key executive officers. However, the
Compensation Committee makes the final compensation decisions concerning such
officers.
In making compensation decisions, the Compensation Committee considers
compensation practices and financial performance of the Peer Group (as defined
below). This information provides guidance to the Compensation Committee, but
the Compensation Committee does not target total executive compensation or any
component thereof to any particular point within, or outside, the range of Peer
Group results. However, the Compensation Committee believes that compensation at
or near the weighted average of the Peer Group for base salaries is generally
appropriate for the Compensation Committee to use as a guideline for
compensation decisions. The specified weighted averages are considered on both
an absolute basis and a size-
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18
adjusted basis (i.e., reflecting compensation levels that are commensurate with
the Company's size relative to the sizes of the Peer Group companies). Specific
compensation for individual executive officers will vary from these levels as
the result of other factors considered by the Compensation Committee unrelated
to compensation practices of the Peer Group.
The Peer Group is comprised of biotech and pharmaceutical companies that
are among those entities who participate in an annual biotechnological survey
(the "Survey") conducted by Radford Associates in conjunction with Alexander &
Alexander Consulting Group. The 1996 Survey included information on 292 public
and private companies of varying size. Approximately 30% of these companies are
included in the performance peer group (i.e., the companies covered by the
Nasdaq Pharmaceutical Index) used for the shareholder return performance graph
set forth below.
The Compensation Committee does not believe that Internal Revenue Code
Section 162(m), which denies a deduction for compensation payments in excess of
$1,000,000 to the CEO or a Named Executive Officer, is likely to be applicable
to the Company in the near future but will reconsider the implication of Section
162(m) if and when it appears that the section may become applicable.
COMPENSATION ELEMENTS
For the year ended December 31, 1996 the Company's executive compensation
program included a base salary, performance bonus, and grants of stock options.
Base Salary. Salaries for executive officers are determined by evaluating
subjectively the responsibilities of the position held and the experience and
performance of the individual and comparing base salaries for comparable
positions at Peer Group entities. Subject to an executive officer's individual
performance, the Compensation Committee sets salaries at or about the median as
reflected by such information. The Compensation Committee believes that such
salaries were competitive within a range that the Compensation Committee
believes to be reasonable and necessary to accomplish the Company's compensation
objectives.
In determining the base salaries for 1997, the Peer Group data was reviewed
with the CEO for each executive position. In addition, the responsibility level
of each position was reviewed, together with the executive officer's individual
performance for the prior year and objectives for the current year. In addition,
the Company's performance was compared to objectives for the prior year and
performance targets for the current year. Based on these criteria, the CEO
recommended to the Compensation Committee a percentage range increase to the
base salary for the current year for each executive level position.
In determining the CEO's base salary for 1997, the Compensation Committee
reviewed Peer Group data from the Survey concerning the salary of chief
executive officers at companies of similar size and in a similar industry. In
addition the Compensation Committee reviewed the CEO's performance during the
previous year.
Performance Bonus. The Compensation Committee awarded a bonus for the
members of the executive management group based on the numerous corporate goals
which were met during the 1996 calendar year. Peer Group data indicated that
over 70% of companies use a bonus plan to compensate executive level management
in addition to base salary and stock options.
Stock Options. The long-term incentive component of the CEO's and the
executive officers' compensation is stock options. The Company believes that
providing executive officers with opportunities to acquire significant equity
positions in the Company and thus, the opportunity to share in its growth and
prosperity, through the grant of stock options will enable the Company to
attract and retain qualified and experienced executive officers. Stock options
represent a valuable portion of the compensation program for the Company's
executive officers. The exercise price of stock options is the fair market value
of the Company's Shares on the date of the grant based on the closing bid price
of the Company's Shares on the date of grant, and will only provide a benefit if
the value of the Company's Shares increases. Grants of stock options to
executive officers are made by the Compensation Committee upon the
recommendation of the CEO and are based upon a percentage of each executive
officer's annualized salary, an evaluation of the executive officer's past and
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expected future performance, the number of outstanding and previously granted
options, and discussions with the executive officer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1996, the members of the Compensation Committee were David R.
Bethune, William C. O'Neil, Jr. and H. Stuart Campbell. No member of the
Compensation Committee was previously an officer or an employee of the Company
or any of its subsidiaries.
COMPENSATION COMMITTEE
David R. Bethune, Chairman
William C. O'Neil, Jr.
H. Stuart Campbell
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PERFORMANCE GRAPH
The graph and table below compare the total shareholder returns (assuming
reinvestment of dividends) of the Shares, the Nasdaq Pharmaceutical Index and
the Nasdaq Index. The graph assumes $100 invested on September 30, 1991 in the
Shares and each of the indices. The stock price performance shown on the graph
below is not necessarily indicative of the future price performance.
MEASUREMENT PERIOD NASDAQ
(FISCAL YEAR COVERED) COMPANY INDEX PHARMACEUTICAL NASDAQ TOTAL
9/30/91 100.00 100.00 100.00
9/30/92 43.28 84.92 112.07
9/30/93 39.55 84.99 146.79
12/31/94 34.33 69.32 146.30
12/31/95 46.27 126.83 206.90
12/31/96 64.18 126.97 254.50
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE PRECEDING REPORT OF THE
COMPENSATION COMMITTEE AND PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS.
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board, upon the recommendation of the Audit Committee, has selected
Deloitte & Touche LLP as independent auditors of the Company for the year ending
December 31, 1997. Representatives of Deloitte & Touche LLP will be present at
the Meeting and will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
Shareholders.
Although it is not required to do so, the Board is submitting its selection
of the Company's independent auditors for ratification by the Shareholders at
the Meeting in order to ascertain the views of shareholders regarding such
selection. A majority of the votes cast at the Meeting, if a quorum is present,
will be sufficient to ratify the selection of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 1997. Whether
the proposal is approved or defeated, the Board may reconsider its selection.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 4.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of outstanding Shares as of the Record Date, by (i) each person who is
known by the Company to own beneficially five percent or more of the outstanding
Shares, (ii) each director of the Company, (iii) the CEO and each Named
Executive Officer, and (iv) all directors and executive officers as a group.
SHARES PERCENT
BENEFICIALLY OF
NAME OWNED(1) CLASS
---- ------------ -------
Mr. David R. Bethune........................................ 8,000 *
Mr. H. Stuart Campbell...................................... 4,114 *
Dr. D. Walter Cohen......................................... 20,018 *
Dr. Charles P. Cox.......................................... 48,036 *
Dr. Richard L. Dunn......................................... 97,754 *
Dr. J. Steven Garrett....................................... 37,256 *
Dr. Jere E. Goyan........................................... 67,583 *
Dr. R. Bruce Merrifield..................................... 64,000 *
Mr. C. Rodney O'Connor ..................................... 77,000 *
Mr. William C. O'Neil, Jr................................... 91,088 *
Mr. Rees M. Orland.......................................... 20,813 *
Dr. G. Lee Southard......................................... 318,659 2.75%
Mr. John E. Urheim.......................................... 220,436 1.90%
All executive officers and directors as a group (16
persons).................................................. 1,104,072 9.53%
- ---------------
* Less than 1%
(1) Shares are considered beneficially owned, for purposes of this table, only
if held by the person indicated, or if such person, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise
has or shares the power to vote, to direct the voting of and/or to dispose
of or to direct the disposition of such security, or if the person has the
right to acquire beneficial ownership within 60 days, unless otherwise
indicated. The foregoing share amounts include the following number of
Shares of the Company's common stock which may be acquired pursuant to stock
options exercisable within 60 days of the Record Date: Mr. Urheim, 202,436
Shares; Dr. Southard, 71,929 Shares; Mr. O'Neil, Jr., 15,000 Shares; Mr.
Bethune, 8,000 Shares; Dr. Cohen, 8,000 Shares; Dr. Dunn, 25,638 Shares; Dr.
Cox, 48,036 Shares; Dr. Garrett, 35,256 Shares; Mr. Orland, 17,813 Shares;
and all executive officers and directors as a group, 468,923 Shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the
rules thereunder require the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
(i) the Securities and Exchange Commission, (ii) the NASD, and (iii) the
Company.
Based solely on its review of Section 16(a) forms received by it and
written representations that no other reports were required, the Company
believes that, during the last fiscal year, all Section 16(a) filing
requirements applicable to its executive officers, directors and ten-percent
beneficial owners, were complied with, except as follows: on one occasion each
of Messrs. Bethune and Campbell, and Drs. Goyan and Merrifield was inadvertently
late in reporting a transaction on Form 4; on two occasions each of Messrs.
Duncan, O'Connor, O'Neil and Richmond and Dr. Cox was inadvertently late in
reporting transactions on Form 4 and Form 5; on three occasions, each of Dr.
Dunn and Ms. Gazdeck was inadvertently late in reporting transactions on Form 4
and Form 5; on four occasions each of Dr. Garrett and Messrs. Orland and Urheim
was inadvertently late in reporting transactions on Form 4 and Form 5; and on
five occasions, Dr. Southard was inadvertently late in reporting transactions on
Form 4 and Form 5.
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SOLICITATION OF PROXIES
This solicitation is being made by mail on behalf of the Board, but may
also be made without additional remuneration by officers or employees of the
Company by telephone, telegraph, facsimile transmission or personal interview.
The expense of the preparation, printing and mailing of the enclosed form of
Proxy, Notice of Annual Meeting and this Proxy Statement and any additional
material relating to the Meeting which may be furnished to shareholders by the
Board subsequent to the furnishing of this Proxy Statement has been or will be
borne by the Company. The Company will reimburse banks and brokers who hold
Shares in their name or custody, or in the name of nominees for others, for
their out-of-pocket expenses incurred in forwarding copies of the Proxy
materials to those persons for whom they hold such Shares. To obtain the
necessary representation of shareholders at the Meeting, supplementary
solicitations may be made by mail, telephone or interview by officers of the
Company or selected securities dealers. It is anticipated that the cost of such
supplementary solicitations, if any, will not be material.
ANNUAL REPORT
The Annual Report of the Company for 1996 has been mailed to shareholders
along with this Proxy Statement. THE COMPANY WILL, UPON WRITTEN REQUEST AND
WITHOUT CHARGE, PROVIDE TO ANY PERSON SOLICITED HEREUNDER A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996,
INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. Requests should be addressed to Investor
Relations, 2579 Midpoint Drive, Fort Collins, Colorado 80525.
OTHER MATTERS
The Company is not aware of any business to be presented for consideration
at the Meeting, other than those specified in the Notice of Annual Meeting. If
any other matters are properly presented at the Meeting, it is the intention of
the persons named in the enclosed Proxy to vote in accordance with their best
judgment.
SHAREHOLDER PROPOSALS
Any Shareholder who intends to submit a proposal at the Annual Meeting of
Shareholders for the year ended 1997 and who wishes to have the proposal
considered for inclusion in the proxy statement and form of proxy for that
meeting must, in addition to complying with the applicable laws and regulations
governing submission of such proposals, deliver the proposal to the Company for
consideration no later than November 25, 1997. Such proposal should be sent to
the Corporate Secretary of the Company at 2579 Midpoint Drive, Fort Collins,
Colorado 80525.
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NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Company whether other persons are the beneficial owners
of the Shares for which proxies are being solicited from you, and, if so, the
number of copies of this Proxy Statement and other soliciting materials you wish
to receive in order to supply copies to the beneficial owners of the Shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS,
WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING IN PERSON, ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED FOR THAT PURPOSE. BY RETURNING YOUR PROXY PROMPTLY YOU CAN
HELP THE COMPANY AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO
THAT THE MEETING CAN BE HELD. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE A
PRIOR PROXY AND VOTE THEIR PROXY IN PERSON AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors
/s/ JOHN E. URHEIM
John E. Urheim
Vice Chairman and
Chief Executive Officer
Fort Collins, Colorado
March 27, 1997
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ATRIX LABORATORIES, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
Atrix Laboratories, Inc., a Delaware corporation, hereby adopts this Atrix
Laboratories, Inc. 1997 Employee Stock Purchase Plan (the "Plan"') as of the
Effective Date. The purposes of this Plan are as follows:
(1) To assist employees of the Company and its Participating
Subsidiaries in acquiring a stock ownership interest in the Company
pursuant to a plan which is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended.
(2) To help employees provide for their future security and to
encourage them to remain in the employment of the Company and its
Participating Subsidiaries.
1. DEFINITIONS.
Whenever any of the following terms is used in the Plan with the first
letter or letters capitalized, it shall have the following meaning unless the
context clearly indicates to the contrary (such definitions to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Code" means the Internal Revenue Code of 1986, as amended.
(b) "Committee" means the committee appointed to administer the Plan
pursuant to paragraph 10.
(c) "Company" means Atrix Laboratories, Inc., a Delaware corporation.
(d) "Dates of Exercise" means the dates as of which an Option is
exercised and the Stock subject to that Option is purchased. With respect
to any Option, the Dates of Exercise are the last day of each month on
which Stock is traded on the Nasdaq National Market, or such other exchange
on which the Stock is listed, during the Option Period in which that Option
was granted.
(e) "Date of Grant" means the date as of which an Option is granted,
as set forth in paragraph 3(a).
(f) "Eligible Compensation" means total cash compensation received
from the Company or a Participating Subsidiary as regular compensation
during an Option Period. By way of illustration, and not by way of
limitation, Eligible Compensation includes regular compensation such as
salary, wages, overtime, shift differentials, bonuses, commissions, and
incentive compensation, but excludes relocation expense reimbursements,
foreign service premiums, tuition or other reimbursements, income realized
as a result of participation in any stock option, stock purchase, or
similar plan of the Company or any Participating Subsidiary.
(g) "Effective Date" means March 20, 1997.
(h) "Eligible Employee" means any employee of the Company or a
Participating Subsidiary who meets the following criteria:
(1) the employee does not, immediately after the Option is granted,
own (within the meaning of Section 423(b)(3) and 424(d) of the Code)
stock possessing five percent or more of the total combined voting power
or value of all classes of stock of the Company or of a Subsidiary;
(2) the employee has completed six months of employment for the
Company or a Subsidiary; and
(3) the employee's customary employment is 20 hours or more a week.
(i) "Option" means an option granted under the Plan to an Eligible
Employee to purchase shares of Stock.
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(j) "Option Period" means with respect to any Option the period
beginning upon the Date of Grant and ending on the March 31, June 30,
September 31 or December 31 immediately following the Date of Grant,
whichever is earlier, or ending on such other date as the Committee shall
determine. No Option Period may exceed 5 years from the Date of Grant.
(k) "Option Price" with respect to any Option has the meaning set
forth in paragraph 4(b).
(l) "Participant" means an Eligible Employee who has complied with the
provisions of paragraph 3(b).
(m) "Participating Subsidiary" means any present or future Subsidiary
that the Committee designates to be eligible to participate in the Plan,
and that elects to participate in the Plan.
(n) "Periodic Deposit Account" means the account established and
maintained by the Company to which shall be credited pursuant to Section
3(c) amounts received from Participants for the purchase of Stock under the
Plan.
(o) "Plan" means this Atrix Laboratories, Inc. 1997 Employee Stock
Purchase Plan.
(p) "Plan Year" means the calendar year.
(q) "Stock" means shares of common stock, par value $.001 per share,
of the Company.
(r) "Stock Purchase Account" means the account established and
maintained by the Company to which shall be credited pursuant to Section
4(c) Stock purchased upon exercise of an Option under the Plan.
(s) "Subsidiary" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company, if at the time
of the granting of the Option, each of the corporations, other than the
last corporation, in the unbroken chain owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
2. STOCK SUBJECT TO PLAN.
Subject to the provisions of paragraph 8 (relating to adjustment upon
changes in the Stock), the Stock which may be sold pursuant to Options granted
under the Plan shall not exceed in the aggregate 300,000 shares, and may be
newly issued shares or treasury shares or shares bought in the market, or
otherwise, for purposes of the Plan.
3. GRANT OF OPTIONS.
(a) General Statement. The Company may grant Options under the Plan to
all Eligible Employees on January 1, April 1, July 1 and/or October 1 of
each Plan Year or on such other date as the Committee shall designate. The
term of each Option shall end on the last day of the Option Period with
respect to which the Option is granted. With respect to each Offering
Period, each Eligible Employee shall be granted an Option, on the Date of
Grant, for as many full and fractional shares of Stock as the Eligible
Employee may purchase with up to 10% of the Compensation he or she receives
during the Option Period (or during any portion of the Option Period as the
Eligible Employee may elect to participate).
(b) Election to Participate. Each Eligible Employee who elects to
participate in the Plan shall communicate to the Company, in accordance
with procedures established by the Committee, an election to participate in
the Plan whereby the Eligible Employee designates a stated whole percentage
equaling at least 1%, but no more than 10%, of his or her Eligible
Compensation during the Option Period to be deposited periodically in his
or her Periodic Deposit Account under subparagraph (c). The cumulative
amount deposited in the Periodic Deposit Account during a Plan Year with
respect to any Eligible Employee may not exceed the limitation stated in
subparagraph (d). A Participant's election to participate in the Plan shall
continue in effect during the current and subsequent Option Periods until
changed pursuant to subparagraph 3(c).
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(c) Periodic Deposit Accounts. The Company shall maintain a Periodic
Deposit Account for each Participant and shall credit to that account in
U.S. dollars all amounts received under the Plan from the Participant. No
interest will be paid to any Participant or credited to his or her Periodic
Deposit Account under the Plan with respect to such funds. All amounts
credited to a Participant's Periodic Deposit Account shall be used to
purchase Stock under subparagraph 4(c) and no portion of a Participant's
Periodic Deposit Account shall be refunded to him or her.
Credits to an Eligible Employee's Periodic Deposit Account shall be
made by payroll deduction or by other alternate payment arrangements, in
accordance with rules and procedures established by the Committee. An
Eligible Employee may increase, decrease or eliminate the periodic credits
to his or her Periodic Deposit Account for future periods by filing a new
election amount at any time during an Option Period. The change shall
become effective in accordance with the Committee's rules and procedures as
soon as practicable after the Company receives the election, but the change
will not affect the amounts deposited with respect to Eligible Compensation
sooner than the Eligible Compensation payable with respect to the next pay
period after the Company receives the authorization.
(d) $25,000 Limitation. No Eligible Employee shall be permitted to
purchase Stock under the Plan or under any other employee stock purchase
plan of the Company or of any Subsidiary which is intended to qualify under
Section 423 of the Code, at a rate which exceeds $25,000 in fair market
value of Stock (determined at the time the Option is granted) for each
calendar year in which any such Option granted to such Participant is
outstanding at any time.
4. EXERCISE OF OPTIONS.
(a) General Statement. On each Date of Exercise, the entire Periodic
Deposit Account of each Participant shall be used to purchase at the Option
Price whole and/or fractional shares of Stock subject to the Option. Each
Participant automatically and without any act on his or her part will be
deemed to have exercised his or her Option on each such Date of Exercise to
the extent that the amounts then credited to the Participant's Periodic
Deposit Account under the Plan are used to purchase Stock.
(b) Option Price Defined. The Option Price per share of Stock to be
paid by each Participant on each exercise of his or her Option shall be an
amount in U.S. dollars equal to 85% of the fair market value of a share of
Stock as of the applicable Date of Exercise. The fair market value of a
share of Stock as of an applicable Date of Exercise shall be the average of
the high and low price of a share of Stock on the Nasdaq National Market,
or such other exchange on which the Stock is listed, on such date.
(c) Stock Purchase Accounts; Stock Certificates. The Company shall
maintain a Stock Purchase Account for each Participant to reflect the Stock
purchased under the Plan by the Participant. Upon exercise of an Option by
a Participant pursuant to subparagraph 4(a), the Company shall credit to
the Participant's Stock Purchase Account the whole or fractional shares of
Stock purchased at that time.
Except as provided in paragraph 5, certificates with respect to Stock
credited to a Participant's Stock Purchase Account shall be issued only on
request by the Participant for a distribution of whole shares or when
necessary to comply with the transaction requirements outside the United
States. Upon issuance of such a Stock certificate to a Participant, the
Participant's Stock Purchase Account shall be adjusted to reflect the
number of shares of Stock distributed to the Participant.
5. RIGHTS ON RETIREMENT, DEATH, TERMINATION OF EMPLOYMENT.
If a Participant retires, dies, or otherwise terminates employment, or if
the corporation that employs a participant ceases to be a Participating
Subsidiary, then to the extent practicable, no further amounts shall be credited
to the Participant's Periodic Deposit Account from any pay due and owing with
respect to the Participant after such retirement, death, or other termination of
employment. All amounts credited to such a Participant's Periodic Deposit
Account shall be used on the next Date of Exercise in that Option Period to
purchase Stock under paragraph 4. Such a Participant's Stock Purchase Account
shall be terminated, and
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Stock certificates with respect to whole shares of Stock and cash with respect
to fractional shares of Stock shall be distributed as soon as practicable after
such Date of Exercise.
Notwithstanding anything in this Plan to the contrary and except to the
extent permitted under Section 423(a) of the Code, a Participant's Option shall
not be exercisable more than three months after the Participant retires or
otherwise ceases to be employed by the Company or a Participating Subsidiary,
including as a result of the corporation ceasing to be a Participating
Subsidiary.
6. RESTRICTION UPON ASSIGNMENT.
An Option granted under the Plan shall not be transferable otherwise than
by will or the laws of descent and distribution, and is exercisable during the
Participant's lifetime only by the Participant. The Company will not recognize
and shall be under no duty to recognize any assignment or purported assignment
by a Participant, other than by will or the laws of descent and distribution, of
the Participant's interest in the Plan or of his or her Option or of any rights
under his or her Option.
7. NO RIGHTS OF SHAREHOLDER UNTIL EXERCISE OF OPTION.
A Participant shall not be deemed to be a shareholder of the Company, nor
have any rights or privileges of a shareholder, with respect to the number of
shares of Stock subject to an Option. A Participant shall have the rights and
privileges of a shareholder of the Company when, but not until, the
Participant's Option is exercised pursuant to paragraph 4(a) and the Stock
purchased by the Participant at that time has been credited to the Participant's
Stock Purchase Account.
8. CHANGES IN THE STOCK; ADJUSTMENTS OF AN OPTION.
If, while any Options are outstanding, the outstanding shares of Stock have
increased, decreased, changed into, or been exchanged for a different number or
kind of shares or securities of the Company, or there has been any other change
in the capitalization of the Company, through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split, spinoff or
similar transaction, appropriate and proportionate adjustments may be made by
the Committee in the number and/or kind of shares which are subject to purchase
under outstanding Options and to the Option Exercise Price or prices applicable
to such outstanding Options, including, if the Committee deems appropriate, the
substitution of similar options to purchase shares of another company (with such
other company's consent). In addition, in any such event, the number and/or kind
of shares which may be offered in the Options shall also be proportionately
adjusted. No adjustments to outstanding Options shall be made for dividends paid
in the form of stock.
9. USE OF FUNDS; REPURCHASE OF STOCK.
All funds received or held by the Company under the Plan will be included
in the general funds of the Company free of any trust or other restriction and
may be used for any corporate purpose. The Company shall not be required to
repurchase from any Eligible Employee shares of Stock which such Eligible
Employee acquires under the Plan.
10. ADMINISTRATION BY COMMITTEE.
(a) Appointment of Committee. The board of directors of the Company,
or its delegate, shall appoint a Committee, which shall be composed of one
or more members, to administer the Plan on behalf of the Company. Each
member of the Committee shall serve for a term commencing on the date
specified by the board of directors of the Company, or its delegate, and
continuing until he or she dies or resigns or is removed from office by
such board of directors, or its delegate.
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(b) Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance
with its provisions. The Committee shall have the power to:
(1) determine when the initial and subsequent Option Periods will
commence;
(2) interpret the Plan and the Options;
(3) adopt such rules for the administration, interpretation, and
application of the Plan as are consistent with the Plan and Section 423
of the Code; and
(4) interpret, amend, or revoke any such rules.
In its absolute discretion, the Board of Directors of the Company may at
any time and from time to time exercise any and all rights and duties of the
Committee under the Plan. The Committee may delegate any of its responsibilities
under the Plan by designating in writing other persons who carry out any or all
of such responsibilities.
(c) Majority Rule. The Committee shall act by a majority of its
members in office. The Committee may act either by vote at a meeting or by
a memorandum or other written instrument signed by a majority of the
Committee.
(d) Compensation; Professional Assistance; Good Faith Actions. Each
member of the Committee who is an employee of the Company or a Subsidiary
shall receive no additional compensation for his or her services under the
Plan. Each Committee member who is not an employee of the Company or a
Subsidiary shall receive such compensation for his or her services under
the Plan as may be determined by the Board of Directors of the Company, or
its delegate. All expenses and liabilities incurred by members of the
Committee in connection with the administration of the Plan shall be borne
by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers, or other persons. The Committee, the
Company, and its officers and directors shall be entitled to rely upon the
advice, opinions, or valuations of any such persons. All actions taken and
all interpretations and determinations made by the Committee in good faith
shall be final and binding upon all Participants, the Company and all other
interested persons. No member of the Committee shall be personally liable
for any action, determination or interpretation made in good faith with
respect to the Plan or the Options, and all members of the Committee shall
be fully protected by the Company in respect to any such action,
determination or interpretation.
11. NO RIGHTS AS AN EMPLOYEE.
Nothing in the Plan nor any Option shall be construed to give any person
(including any Eligible Employee or Participant) the right to remain in the
employ of the Company or a Subsidiary or to affect the right of the Company and
Subsidiaries to terminate the employment of any person (including any Eligible
Employee or Participant) at any time with or without cause, to the extent
otherwise permitted under law.
12. TERM OF PLAN.
No Option may be granted during any period of suspension of the Plan or
after termination of the Plan, and in no event may any Option be granted under
the Plan after five years from the commencement of the initial Option Period.
13. AMENDMENT OF THE PLAN.
The Board of Directors of the Company, or its delegate, may amend, suspend,
or terminate the Plan at any time; provided that approval by the vote of the
holders of more than 50% of the outstanding shares of the Stock entitled to vote
shall be required to amend the Plan to reduce the Exercise Price or increase the
number of shares of Stock reserved for the Options under the Plan.
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14. EFFECT UPON OTHER PLANS.
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary, except to the
extent required by law. Nothing in this Plan shall be construed to limit the
right of the Company or any Subsidiary (a) to establish any other forms of
incentives or compensation for employees of the Company or any Subsidiary or (b)
to grant or assume options otherwise than under this Plan in connection with any
proper corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition, by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
15. NOTICES.
Any notice to be given under the terms of the Plan to the Company shall be
addressed to the Company in care of the Committee and any notice to be given to
the Eligible Employee shall be addressed to the Eligible Employee at his or her
last address as reflected in the Company's records. By a notice given pursuant
to this paragraph, either party may hereafter designate a different address for
notices to be given to it or the Eligible Employee. Any notice which is required
to be given to the Eligible Employee shall, if the Eligible Employee is then
deceased, be given to the Eligible Employee's personal representative if such
representative has previously informed the Company of his or her status and
address by written notice under this paragraph. Any notice shall have been
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office,
branch post office, or other depository regularly maintained by the United
States Postal Services.
16. TITLES.
Titles are provided herein for convenience only and are not no serve as a
basis for interpretation or construction of the Plan.
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PROXY ATRIX LABORATORIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 27, 1997
The undersigned shareholder of Atrix Laboratories, Inc., a Delaware
corporation (the "Company") hereby constitutes and appoints Laurie Friehauf and
Brian G. Richmond, and each of them, proxies, with full power of substitution,
for and on behalf of the undersigned to vote, as designated below, according to
the number of shares of the Company's $.001 par value common stock held of
record by the undersigned on March 21, 1997, and as fully as the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of the Company to be held at The Fort Collins Marriott, 350 East
Horsetooth Road, Fort Collins, Colorado on April 27, 1997 at 6:00 p.m. local
time, and at any and all postponements, continuations and adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF PROPERLY EXECUTED AND NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL LISTED NOMINEES TO THE BOARD OF
DIRECTORS OF THE COMPANY AND FOR EACH OTHER PROPOSAL.
1. Proposal to elect the following nominees to the Board of
Directors:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote all nominees listed below
Mr. John E. Urheim Dr. D. Walter Cohen Dr. Jere E. Goyan Dr. R. Bruce
Merrifield
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below:)
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2. Proposal to approve the Company's 1997 Employee Stock Purchase Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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3. Proposal to approve an amendment to the Company's Amended and Restated
Performance Stock Option Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal for ratification of selection of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 1997:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In the discretion of such proxies, upon such other business as may properly
come before the Meeting or any and all postponements, continuations or
adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders dated March 27, 1997 and the Proxy Statement furnished therewith.
Please sign exactly as your name appears hereon. When shares are held by joint
tenants, both should sign. Executors, administrators, trustees and other
fiduciaries, and persons signing on behalf of corporations or partnerships,
should so indicate.
Dated , 1997
Authorized Signature
Title
Authorized Signature
Title
Please mark boxes [X] in ink.
Sign, date and return this
Proxy Card promptly using the
enclosed envelope.
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