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 Under Rule 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)
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(ATRIX LOGO)
ATRIX LABORATORIES, INC.
Dear Stockholder:
On behalf of the board of directors, I invite you to attend the Annual
Meeting of Stockholders of Atrix Laboratories, Inc. to be held on May 5, 2002 at
2:00 p.m. local time, at The Fort Collins Marriott, 350 East Horsetooth Road,
Fort Collins, Colorado.
The formal business to be conducted at the meeting is described in the
notice that follows this letter. We will also review 2001, discuss expectations
for the future and will be available to answer your questions during the meeting
and afterward.
We rely upon all stockholders to execute and return their proxies promptly
in order to avoid costly proxy solicitation. You may also vote your shares
electronically through the Internet or by telephone. This will eliminate the
need to return your proxy card. Instructions for Internet and telephone voting
are on your proxy card. 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.
Sincerely,
/s/ DAVID R. BETHUNE
David R. Bethune,
Chairman of the Board and
Chief Executive Officer
April 10, 2002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SUNDAY, MAY 5, 2002
---------------------
The Annual Meeting of Stockholders of Atrix Laboratories, Inc. will be held
at The Fort Collins Marriott, 350 East Horsetooth Road, Fort Collins, Colorado
80525 on Sunday, May 5, 2002 at 2:00 p.m. local time, for the following
purposes:
1. To elect directors.
2. To ratify the appointment of Deloitte & Touche LLP as our independent
auditors for the fiscal year ending December 31, 2002.
3. To transact such other business as may properly come before the meeting
or any postponements, continuations or adjournments thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice. Stockholders who owned shares of our common
stock at the close of business on March 22, 2002 are entitled to notice of, and
to vote at, the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to vote
your shares as soon as possible.
By Order of the Board of Directors
/s/ DAVID R. BETHUNE
David R. Bethune,
Chairman of the Board and
Chief Executive Officer
Fort Collins, Colorado
Dated: April 10, 2002
TO ENSURE THAT YOUR VOTE IS RECORDED PROMPTLY, PLEASE VOTE AS SOON AS POSSIBLE,
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. MOST STOCKHOLDERS HAVE THREE
OPTIONS FOR SUBMITTING THEIR VOTE: (1) VIA THE INTERNET AT WWW.VOTEPROXY.COM;
(2) BY PHONE (PLEASE SEE YOUR PROXY CARD FOR INSTRUCTIONS) OR (3) BY MAIL, USING
THE PAPER PROXY CARD.
TABLE OF CONTENTS
PAGE
----
INFORMATION CONCERNING SOLICITATION AND VOTING.............. 1
General................................................... 1
Record Date and Shares Outstanding........................ 1
Revoking Your Proxy....................................... 1
How Your Proxy Will Be Voted.............................. 1
Quorum.................................................... 2
Voting.................................................... 2
Solicitation of Proxies................................... 2
PROPOSAL NO. 1 ELECTION OF DIRECTORS........................ 3
Nominees for Election..................................... 3
Directors Whose Term of Office Will Continue After the
Meeting................................................ 4
Vote Required and Board of Directors' Recommendation...... 4
Board of Directors and Committee Meetings................. 5
Executive Officers........................................ 6
EXECUTIVE COMPENSATION...................................... 7
Summary Compensation Table................................ 7
Option Grants Table....................................... 8
Aggregated Option Exercises and Fiscal Year-End Option
Values................................................. 9
Employment Agreements..................................... 9
Compensation Pursuant to Plans............................ 10
Compensation of Directors................................. 10
REPORT OF THE COMPENSATION COMMITTEE........................ 11
Compensation Committee Interlocks and Insider
Participation.......................................... 13
PERFORMANCE GRAPH........................................... 14
AUDIT COMMITTEE REPORT...................................... 14
Audit Fees................................................ 16
PROPOSAL NO. 2 RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS.................................................. 16
Vote Required and Board of Directors' Recommendation...... 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 17
Section 16(a) Beneficial Ownership Reporting Compliance... 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 18
VOTING VIA THE INTERNET OR BY TELEPHONE..................... 18
For Shares Directly Registered in the Name of the
Stockholder............................................ 18
For Shares Registered in the Name of a Broker or a Bank... 18
DELIVERY OF VOTING MATERIALS................................ 18
ANNUAL REPORT............................................... 19
STOCKHOLDER PROPOSALS....................................... 19
i
[ATRIX LABORATORIES, INC. LOGO]
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the board of directors of
Atrix Laboratories, Inc., a Delaware corporation, for use at our Annual Meeting
of Stockholders to be held on May 5, 2002, and at any adjournment, continuation
or postponement of the meeting.
A number of abbreviations are used in the proxy statement. We refer to the
company as "Atrix" or "we," "us" or "our." The term "proxy solicitation
materials" includes this proxy statement, as well as the enclosed proxy card.
References to "fiscal 2001" mean our 2001 fiscal year which began on January 1,
2001 and ended on December 31, 2001. Our 2002 Annual Meeting of Stockholders is
simply referred to as the "annual meeting" or the "meeting."
Our principal executive office is located at 2579 Midpoint Drive, Fort
Collins, Colorado 80525. Our principal executive office telephone number is
(970) 482-5868.
These proxy solicitation materials were mailed on or about April 10, 2002
to all stockholders entitled to vote at the annual meeting.
RECORD DATE AND SHARES OUTSTANDING
Stockholders who owned shares of our common stock at the close of business
on March 22, 2002, referred to as the record date, are entitled to notice of,
and to vote at, the annual meeting. At the record date, we had 20,101,315 shares
of common stock issued and outstanding.
REVOKING YOUR PROXY
You may revoke your proxy at any time prior to the date of the annual
meeting by: (1) submitting a later-dated vote, in person at the annual meeting,
via the Internet, by telephone or by mail, or (2) delivering instructions to the
attention of Investor Relations at our principal executive office, 2579 Midpoint
Drive, Fort Collins, Colorado 80525. Any notice of revocation sent to us must
include the stockholder's name and must be received prior to the meeting to be
effective.
HOW YOUR PROXY WILL BE VOTED
All 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 election of all nominees for director; and
- FOR the ratification of the selection of Deloitte & Touche LLP as our
independent auditors for the calendar year ending December 31, 2002.
In addition, if any other matters properly come before the annual meeting,
it is the intention of the persons named in the enclosed proxy card to vote the
shares they represent as directed by the board of
directors. We have not received notice of any other matters that may properly be
presented at the annual meeting.
QUORUM
Each share of common stock outstanding on the record date is entitled to
one vote. Cumulative voting is not permitted. A quorum, which is a majority of
the outstanding shares as of the record date, must be present in order to hold
the meeting and to conduct business. Your shares will be counted as being
present at the meeting if you appear in person at the meeting, if you vote your
shares by telephone or over the Internet, or if you submit a properly executed
proxy card. Votes against a particular proposal will be counted both to
determine the presence or absence of a quorum and to determine whether the
requisite majority of voting shares has been obtained.
VOTING
TABULATION
If a quorum is present, the affirmative vote of (1) a plurality of the
shares of common stock voting at the annual meeting is required to elect
directors, and (2) a majority of the shares voted at the annual meeting is
required to ratify the appointment of Deloitte & Touche LLP as our independent
accountants for this fiscal year.
Our transfer agent will tabulate votes cast by proxy by an automated
system. Votes cast by proxy or in person at the meeting will be counted by the
persons appointed by us to act as election inspectors for the meeting.
Abstentions, broker non-votes, which are explained below, 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; BROKER NON-VOTES
In the absence of controlling precedent to the contrary, we intend to treat
abstentions and broker non-votes in the following manner. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have the discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner. Broker "non-votes" and shares as to which proxy authority has
been withheld with respect to any matter are not deemed to be entitled to vote
for purposes of determining whether stockholder approval of that matter has been
obtained. As a result, broker "non-votes" are not included in the tabulation of
the voting results on the election of directors or issues requiring the approval
of a majority of the shares of common stock present and entitled to vote and,
therefore, do not have the effect of votes in opposition for such proposals.
With respect to Proposal 1 requiring a plurality vote and Proposal 2 requiring
the affirmative vote of a majority of the common stock, present and entitled to
vote, broker "non-votes" have no effect. Because abstentions will be included in
tabulations of the shares of common stock entitled to vote for purposes of
determining whether a proposal has been approved, abstentions have the same
effect as a negative vote on Proposal 2.
SOLICITATION OF PROXIES
This solicitation is being made by mail on behalf of our board of
directors, but may also be made without additional remuneration by our officers
or employees by telephone, telegraph, facsimile transmission, e-mail or personal
interview. We will bear 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 that may be furnished to our
stockholders by our board subsequent to the furnishing of this proxy statement.
We 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 stockholders at the
meeting, supplementary solicitations may be
2
made by mail, telephone or interview by our officers or employees, without
additional compensation, or selected securities dealers. We anticipate that the
cost of such supplementary solicitations, if any, will not be material.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our amended and restated 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.
In accordance with our bylaws, the board of directors has currently set the
total number of directors at eight, with three directors in Class A, two
directors in Class B and three directors in Class C. The current terms of the
Class A and Class B directors expire at our annual meeting of stockholders for
the years ended 2003 and 2004, respectively. The current term of the Class C
directors expires at the meeting.
The board of directors has nominated Mr. H. Stuart Campbell, Mr. C. Rodney
O'Connor and Dr. George J. Vuturo for election as Class C directors to serve for
a three-year term expiring at the annual meeting of stockholders for the year
ended 2004 and until their successors are elected and qualified.
If any of the Class C nominees is unable or declines to serve as a director
at the time of the annual meeting, the proxies will be voted for any nominee who
is designated by the present board of directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a director.
The names of the Class C nominees, the directors who will continue in
office after the meeting and certain information about each of them is set forth
below. There is no family relationship between any of our directors or executive
officers.
NOMINEES FOR ELECTION
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING DIRECTOR
NAME AND AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ ----------------------------------------- --------
H. Stuart Campbell Owner and Vice-President of Highland Packaging Labs, Inc., 1995
(72) a specialty packaging company for the pharmaceutical
industry, since 1983. Mr. Campbell also serves as a
director of Mesa Laboratories, Inc. Mr. Campbell received a
B.S. in Agriculture from Cornell University.
C. Rodney O'Connor Chairman and Chief Executive Officer of Cameron Associates, 1987
(69) Inc., a financial communications firm, since 1976. Mr.
O'Connor also serves on the board of Streicker Mobile
Fueling, Inc. Mr. O'Connor received an M.B.A. in Finance
from the Wharton School of Finance.
Dr. George J. Vuturo Co-founder and Managing Partner, Designing Solutions, LLC, 2001
(52) a health care service company, since 1995. Dr. Vuturo
received his B.S. in Biology from Fairfield University, his
B.S. in Pharmacy and his Ph.D. degree in Health Care
Administration from the University of Florida.
3
DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE MEETING
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING DIRECTOR
NAME AND AGE PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
------------ ----------------------------------------- --------
Sander A. Flaum* Chief Executive Officer of Robert A. Becker, Inc. Euro 1999
(65) RSCG, a health care advertising, marketing and
communications company and a member of the Euro RSCG
Healthcare Global Network, since 1991. Mr. Flaum is also
adjunct professor at The Fordham University Graduate School
of Business in New York City and a member of the editorial
advisory board of Pharmaceutical Executive. He serves on
the board of Neopharm Corporation. Mr. Flaum received his
B.A. in Business from Ohio State University, an M.B.A. in
Business from Fairleigh Dickinson University and attended
the Columbia University Graduate School in advance
marketing studies.
Dr. D. Walter Cohen* Chancellor Emeritus of the Medical College of Pennsylvania 1992
(75) Hahnemann School of Medicine, since 1998, Chancellor from
1998 to 1993 and President from 1986 to 1993. Since 1950,
Dr. Cohen has had a dental practice specializing in
periodontics. Dr. Cohen received his DDS from the
University of Pennsylvania School of Dentistry and served
as its Dean from 1972 to 1983.
David R. Bethune** Chairman and Chief Executive Officer, since August 1999. 1995
(61) President and Chief Operating Officer of IVAX Corporation,
a pharmaceutical holding company, from 1997 to 1998.
Consultant to the pharmaceutical industry from 1996 to
1997. President and Chief Executive Officer of Aesgen,
Inc., a pharmaceutical company, from 1995 to 1996. Group
Vice President of American Cyanamid Company, a health care
business, from 1992 to 1995. Mr. Bethune also serves as a
director of Female Health Co. and Telik, Inc. Mr. Bethune
received his B.S. in Business from Lenoir Rhyne College and
an Executive Management degree from Columbia University
Graduate School.
Dr. Nicolas Bazan** Professor at Louisiana State University Medical Center and 2000
(59) Neuroscience Center of Excellence in the areas of
Ophthalmology, Biochemistry, Molecular Biology, and
Neurology since 1981 and since 1988 has served as the
Director, Neuroscience Training Program. Dr. Bazan is also
the Chairman and Chief Executive Officer of St. Charles
Pharmaceuticals. Dr. Bazan sits on the Scientific Advisory
Board of Centaur in Sunnyvale, California, and is the
founder and Chairman of the Board of St. Charles
Pharmaceuticals in New Orleans, Louisiana. Dr. Bazan
received his B.S. from Colegio Belgrtano, Argentina, his
M.D. from U. Tucuman, Argentina, and his Ph.D. from the
Medical School at U. Tucuman.
Warren L. Troupe* Attorney/Senior Partner, Morrison & Foerster LLP, Denver, 2001
(48) Colorado since 1997. Mr. Troupe received his B.A. in
Political Science from Colorado State University and his
J.D. from the University of Denver.
---------------
* Class A director
** Class B director
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The three nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected as directors. OUR BOARD OF
DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO ELECT MR.
H. STUART CAMPBELL,
4
MR. C. RODNEY O'CONNOR AND DR. GEORGE J. VUTURO FOR ELECTION AS CLASS C
DIRECTORS.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The board of directors held six meetings during fiscal 2001. During fiscal
2001, no director attended fewer than 75% of the aggregate number of meetings of
the board of directors and meetings held by all committees of the board on which
such director served, with the exception of Mr. Flaum who participated in less
than 75% of the board meetings and the committee meetings on which he served.
The board of directors has standing executive, audit and compensation
committees. The board of directors does not presently have a separate nominating
committee, the function of which is performed by the board of directors as a
whole. The board of directors will consider nominees recommended by
stockholders. Recommendations for our annual meeting of stockholders to be held
in 2003 must be submitted in writing to our Corporate Secretary at 2579 Midpoint
Drive, Fort Collins, Colorado 80525. Such recommendations must include the name,
address and principal business occupation of the candidate for the last five
years and must be received by the Corporate Secretary after January 25, 2003 but
no later than February 24, 2003.
Executive Committee. The current members of the executive committee are
Mr. Bethune, Mr. Troupe and Dr. Vuturo. The executive committee has the
authority to conduct our business and affairs, except where action of the entire
board of directors is specified by statute. The executive committee did not meet
in 2001.
Audit Committee. The members of the audit committee during fiscal 2001
were Mr. H. Stuart Campbell, Chairman, Mr. C. Rodney O'Connor, and Mr. Flaum. In
February 2002, Dr. Vuturo replaced Mr. Flaum on the audit committee. During 2001
the audit committee met five times. The audit committee assists the board of
directors in its general oversight of our financial reporting, internal controls
and audit functions. For further information see "Audit Committee Report" on
page 14.
Compensation and Stock Committee. The members of the compensation
committee during 2001 were Mr. Flaum, Chairman, Mr. Urheim and Dr. Cohen. Mr.
Urheim resigned as a member of the board of directors and the compensation
committee in August of 2001. In February 2002, Dr. Bazan was added as a member
of the compensation committee. The compensation committee met one time during
2001 and all members were present at that time. The compensation committee
performs the following duties: (1) considers and makes recommendations to the
board with respect to our overall compensation policies; (2) approves the
compensation payable to all of our officers; (3) reviews proposed compensation
of executives as provided in our executive compensation plan; (4) advises
management on all other executive compensation matters as requested; (5)
construes and interprets our amended and restated stock option plan and, subject
to the express provisions of the stock option plan, determines 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 (6) reports to the board as
and when appropriate with respect to all of the foregoing.
5
EXECUTIVE OFFICERS
The names of each of our executive officers and certain information about
each of them is set forth below.
EXECUTIVE OFFICER OF
NAME AGE PRESENT EXECUTIVE OFFICE THE COMPANY SINCE
---- --- ------------------------ --------------------
David R. Bethune 61 Chairman and Chief Executive Officer since August 1999
1999. President and Chief Operating Officer of IVAX
Corporation from 1997 to 1998. Consultant to the
pharmaceutical industry from 1996 to 1997.
President and Chief Executive Officer of Aesgen,
Inc from 1995 to 1996. Group Vice President of
American Cyanamid Company from 1992 to 1995. Mr.
Bethune also serves as a director of Female Health
Co. and Telik, Inc.
Brian G. Richmond 50 Chief Financial Officer since June 2001, Vice 1997
President, Finance from December 1997 to June 2001,
Assistant Secretary since January 1997, Corporate
Controller from January 1997 to November 1997 and
Accounting Manager from 1991 to 1996.
Dr. J. Steven Garrett 57 President, Dental Division and Senior Vice 1995
President since December 2001, Vice President,
Clinical Research from April 1995 to December 2001.
Professor of Periodontics at Loma Linda University
from 1986 to 1995 and in private practice
specializing in periodontics since 1978.
Dr. Richard L. Dunn 61 Senior Vice President, Drug Delivery Research since 1987
January 1999; Vice President, Drug Delivery
Research from 1992 to January 1999 and Vice
President, Research and Development from 1987 to
1992.
Dr. Charles P. Cox 49 Senior Vice President of Corporate Development 1992
since April 2001, Vice President, New Business
Development from January 1996 to April 2001 and
Vice President, Product Development from September
1992 to January 1996.
Stephen L. Warren, M.D. 46 Vice President of Research and Development since 2002
February 1, 2002. Vice President, Research and
Development, IOMED, a medical service and
pharmaceutical company, from February 2001 to
November 2001. Director, Clinical Development,
Allos Therapeutics, a pharmaceutical company, from
July 2000 to January 2001. Associate Medical
Director, Gilead Sciences, a pharmaceutical
company, from October 1999 to July 2000. Director,
Drug Delivery, NeXstar Pharmaceuticals, from
February 1998 to October 1999. From July 1988 to
January 1998, Dr. Warren was an assistant professor
at Yale University.
6
Our officers serve at the discretion of the board of directors and are
elected at the first meeting of the board after each annual meeting of
stockholders.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the total compensation of our Chief
Executive Officer and our four other most highly compensated executive officers
in fiscal 2001 and the total compensation earned by each such individual for our
two previous fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL AWARD
COMPENSATION ------------
-------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- --------- -------- ------------ ---------------
Mr. David R. Bethune, 2001 $271,667 $-0- 200,503 $ 51,634(1)
Chairman and CEO 2000 255,000 -0- 260,000 101,901(2)
1999 94,808 -0- -0- 309,380(3)
Dr. Richard L. Jackson 2001 $260,000 $-0- 40,000 $ 22,663(4)
Former director and Senior Vice President, 2000 250,000 -0- 150,000 22,368(4)
Research and Development 1999 250,000 -0- -0- -0-
(Retired February 1, 2002)
Dr. J. Steven Garrett 2001 $202,500 $-0- 35,000 $ 5,250(5)
President, Dental Business Unit 2000 190,000 -0- 100,000 5,458(5)
1999 190,000 -0- 9,000 4,984(5)
Dr. Charles P. Cox, 2001 $170,000 $-0- 35,000 $ 15,153(6)
Senior Vice President, Corporate Development 2000 155,000 -0- 86,000 15,846(6)
1999 155,000 -0- 7,500 5,000(6)
Dr. Richard L. Dunn, 2001 $165,917 $-0- 40,000 $ 10,936(7)
Senior Vice President, Drug Delivery 2000 152,000 -0- 69,000 14,516(7)
Research 1999 152,000 -0- 6,500 4,567(7)
---------------
(1) Represents $51,634 housing and travel adjustment paid to Mr. Bethune.
(2) Under the arrangement described in footnote (3) below, Mr. Bethune acquired
an additional 10,000 shares of common stock in 2000 and we issued him an
additional 10,000 shares to match this corresponding stock purchase. We
recognized $75,062 of compensation related to this arrangement. The
remaining $25,839 represents a housing and travel adjustment for a total of
$101,901.
(3) Upon becoming CEO on August 10, 1999, the board of directors provided Mr.
Bethune the right to purchase up to 50,000 shares of our common stock at the
market price on the date of purchase. Upon purchase, we agreed to match the
number of shares acquired for no additional consideration. During 1999, Mr.
Bethune acquired 40,000 shares and we issued to Mr. Bethune an additional
40,000 to match these corresponding stock purchases. We recognized $309,380
of compensation expense related to this arrangement.
(4) Includes a $17,663 and $17,368 housing and travel adjustment in fiscal 2001
and 2000, respectively, and a $5,000 matching contribution made by us under
our 401(k) plan in each of fiscal 2001 and 2000, respectively.
(5) Represents $5,250, $5,458 and $4,984 in matching contributions made by us
under our 401(k) plan in fiscal 2001, 2000 and 1999, respectively.
(6) Includes $10,053 and $10,698 of accumulated vacation paid out in fiscal 2001
and 2000, respectively, and $5,100, $5,148, and $5,000 in matching
contributions made by us under our 401(k) plan in fiscal 2001, 2000 and
1999, respectively.
7
(7) Includes $6,051 and $9,747 of accumulated vacation paid out in fiscal 2001
and 2000, respectively, and $4,885, $4,769 and $4,567 in matching
contributions made by us under our 401(k) plan in fiscal 2001, 2000 and
1999, respectively.
The foregoing compensation table does not include certain fringe benefits
made available on a non-discriminatory basis to all of our employees, such as
group health insurance, dental insurance, long-term disability insurance,
vacation and sick leave. In addition, we make available certain non-monetary
benefits to our executive officers with a view to acquiring and retaining
qualified personnel and facilitating job performance. We consider 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 the lesser of either (a) ten percent of the
salary and bonus paid to each such executive officer or to the group,
respectively, or (b) $50,000 is not included in such table.
OPTION GRANTS TABLE
The following table provides information relating to the grant of stock
options to the named executive officers during the 2001 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------------------------------------------- -----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS FAIR MARKET
UNDERLYING GRANTED TO VALUE ON DATE EXERCISE OR
OPTIONS EMPLOYEES IN OF GRANT BASE PRICE EXPIRATION
NAME GRANTED(#)(2) FISCAL YEAR ($/SH) ($/SH) DATE 5%($) 10%($)
---- ------------- ------------ ------------- ----------- ---------- ---------- ----------
Mr. David R. Bethune..... 100,000 7.4% $17.688 $17.688 1/2/2011 $1,112,389 $2,819,012
100,503(3) 7.4% 24.90 5.00 8/6/2011 3,573,847 5,988,283
Dr. Richard L. Jackson... 40,000 3.0% 25.99 25.99 9/6/2011 653,799 1,656,855
Dr. J. Steven Garrett.... 10,000 .7% 10.063 10.063 4/3/2011 63,286 160,378
25,000 1.8% 25.99 25.99 9/6/2011 408,624 1,035,534
Dr. Charles P. Cox....... 15,000 1.1% 10.063 10.063 4/3/2011 94,928 240,567
20,000 1.5% 23.95 23.95 10/9/2011 301,241 763,403
15,000 1.1% 10.063 10.063 4/3/2011 94,928 240,567
Dr. Richard L. Dunn...... 25,000 1.8% 25.99 25.99 9/6/2011 408,624 1,035,534
---------------
(1) Potential realizable value is based on an assumption that the stock price of
our common stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten-year option term. These
numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect our estimate of future
stock price growth.
(2) All options, with the exception of the options to purchase 100,503 shares
granted to Mr. Bethune, vest and become exercisable in three equal annual
installments commencing on the first anniversary of the grant date.
(3) These options became fully vested on the date of grant, August 6, 2001.
8
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides information relating to the exercise of stock
options during fiscal 2001 by each of the named executive officers and the 2001
fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FY-END AT FY-END
(#) ($)(1)
SHARES ACQUIRED --------------- ---------------------
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- --------------- ---------------------
Mr. David Bethune.......................... -- $ -- 258,503/228,000 $2,524,966/$2,227,020
Dr. Richard Jackson........................ 100,000 $1,446,000 57,750/132,250 $ 69,349/$158,926
Dr. J. Steven Garrett...................... 18,000 $ 250,996 119,042/95,127 $ 902,918/$721,526
Dr. Charles P. Cox......................... -- -- 125,068/84,940 $ 1,149,197/$780,475
Dr. Richard L. Dunn........................ -- -- 91,045/78,870 $ 744,373/$644,832
---------------
(1) The market value of underlying shares of common stock is equal to the fair
market value at December 31, 2001, $20.61 per share, less the option
exercise price, multiplied by the number of shares of common stock in the
money.
EMPLOYMENT AGREEMENTS
On April 17, 1995, we 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 receive a starting annual base salary of $150,000 (which at the
discretion of the board of directors, upon recommendation by our 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 $190,000 effective January 1, 1999, and to $215,000
effective September 1, 2001 with his promotion to President, Dental Business
Unit.
On August 3, 1999, we entered into an agreement with Mr. Bethune. Pursuant
to the terms of the agreement, Mr. Bethune's duties are to act as Chief
Executive Officer. The employment agreement provides that Mr. Bethune receive a
monthly base salary of $21,250, which was subsequently increased to $23,333
effective May 1, 2001. Mr. Bethune's agreement provides him the right to
purchase 50,000 shares of our common stock and receive an equivalent number of
matching shares of common stock.
On January 7, 2002, we entered into a letter agreement with Dr. Jackson in
connection with his pending retirement as our Senior Vice President, Research
and Development and as a director, which became effective on February 1, 2002.
Under the letter agreement, Dr. Jackson agreed to assist us in the transition of
his duties as Senior Vice President, Research and Development and in such other
matters as reasonably requested. As full payment for such services, we agreed to
accelerate the vesting of all of Dr. Jackson's unvested stock options,
representing the right to purchase 100,500 shares, effective as of January 31,
2002. In addition, the parties mutually agreed to terminate Mr. Jackson's
existing employment agreement; however, Mr. Jackson will continue to be bound by
the terms of our proprietary information and inventions agreement for a period
of five years after the expiration of the consulting period and the
non-competition provisions of the employment agreement will remain in effect for
a period of one year after the expiration of the consulting period.
On January 21, 2002, we entered into an agreement with Dr. Warren. Pursuant
to the terms of the agreement, Dr. Warren's duties are to act as Vice President
of Research and Development. The employment agreement provides that Dr. Warren
receive a monthly base salary of $16,250. Dr. Warren received options to
purchase 50,000 shares of common stock, which vest in three equal annual
installments.
9
COMPENSATION PURSUANT TO PLANS
STOCK OPTION PLANS
We have four stock option plans under which options may currently be
granted, our amended and restated 1987 performance stock option plan, our 2000
stock incentive plan, our non-qualified stock option plan, and our non-employee
director stock incentive plan. The persons eligible to receive options, the
number of options authorized and outstanding, and the number of options granted
during the preceding fiscal year under each plan are as follows:
# OPTIONS
# OPTIONS # OPTIONS GRANTED IN
NAME OF PLAN PERSONS ELIGIBLE AUTHORIZED OUTSTANDING(1) 2001
------------ -------------------- ---------- -------------- -----------------
1987 Stock Option Plan......................... Employees and 2,500,000 1,114,657 86,390
directors
2000 Stock Incentive Plan...................... Employees, directors 2,750,000 1,916,369 1,047,238
and consultants
Non-Qualified Stock Option Plan................ Consultants 150,000 107,980 10,000
Non-Employee Director Stock Plan............... Non-employee 25,000 6,498 932
directors
---------------
(1) Any unexercised options that expire or terminate in accordance with the plan
become available again for issuance under the plan.
401(k) PLAN
We maintain a defined contribution savings plan, or 401(k) plan, to provide
retirement income to our employees, including all executive officers. All
employees who are over 21 years of age are eligible to participate in the 401(k)
plan. The 401(k) plan is funded by voluntary pre-tax contributions from
employees up to a maximum amount equal to 17% of annual compensation up to
$10,000. In addition, we provide 50% matching contributions up to 6% of annual
compensation. Employees who have completed one year of service are eligible for
matching contributions. Participants are fully vested in all pre-tax, after-tax
and matching contributions as soon as they are made.
EMPLOYEE STOCK PURCHASE PLAN
We maintain an employee stock purchase plan, or ESPP, that provides
eligible employees the opportunity to purchase shares of our common stock
through authorized payroll deductions at 85% of the average market price on the
last day of each quarter. All employees who have completed six months of
employment of 20 hours per week or greater are eligible to participate in our
ESPP. This plan qualifies as an "employee stock purchase plan" under Section 423
of the Internal Revenue Code. Currently, 279,741 shares of common stock are
available for purchase under the plan.
COMPENSATION OF DIRECTORS
Each non-employee director receives in lieu of an annual cash retainer, an
option to purchase 2,800 shares of common stock, granted in quarterly
installments, which vest in three equal annual installments. Each non-employee
director may elect to apply all or any portion of the annual retainer fee to the
acquisition of restricted shares or the receipt of stock options in accordance
with the terms of our non-employee director stock incentive plan. Under our
non-employee director stock incentive plan, immediately following each annual
meeting of the stockholders, each non-employee director is granted a
non-qualified stock option to purchase 4,000 shares (5,000 shares in the case of
a non-employee Chairman of the Board). The options vest in three equal annual
installments. We also reimburse expenses of directors for attending meetings. In
addition, each non-employee director receives $1,500 for each board meeting
attended, which the directors can elect to receive either in cash or in shares
of restricted stock. Our directors who are also officers do not receive any
additional compensation for their service as members of the board of directors.
10
REPORT OF THE COMPENSATION COMMITTEE
In fiscal 2001, the members of the compensation committee were Mr. Sander
A. Flaum, Mr. John E. Urheim, and Dr. D. Walter Cohen. Mr. Urheim resigned as
member of the board of directors and the compensation committee in August 2001.
Mr. Bazan was appointed as a member of the committee in February 2002.
Our compensation committee is currently comprised of three independent
outside directors and is responsible for establishing our compensation policy
and administering the compensation programs of our executive officers. The
compensation committee meets at least once a year to review our executive
compensation policies, the design of our compensation programs, and individual
salaries and awards for our executive officers based on performance criteria.
EXECUTIVE COMPENSATION PHILOSOPHY
The compensation committee applies a consistent philosophy of compensation
for all of our employees, including our executive officers. This philosophy is
based on the premise that our achievements result from the coordinated efforts
of all individuals working toward common objectives.
The goals of the executive compensation program are to align executive
compensation with our business objectives and performance, and to enable us to
attract, retain and reward executive officers who contribute to our long-term
success. Our compensation program for executive officers is based on the same
principles applicable to compensation decisions for all of our employees and
generally consists of two compensation elements: cash and equity. A large
percent of peer companies also incorporate performance bonus programs to enhance
the executive compensation package, whether they are profitable or not. We
believe the use of equity outperforms cash bonus programs as an incentive to our
employees. In determining executive officer compensation levels for each of
these components the compensation committee 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
our other executive officers. The compensation committee, however, makes the
final compensation decisions concerning such officers.
In making compensation decisions, the compensation committee considers
compensation practices and financial performance of our peer group. The peer
group is comprised of drug delivery and biotech companies that are among those
entities who participate in an annual biotechnological survey conducted by
Radford Associates in conjunction with Aon Consulting Group. The 2001 custom
survey included public and private companies considered to be similar to us or
to be our competitors.
The compensation committee uses this information as a guide, but 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 to use as a
guideline for compensation decisions. The specified weighted averages are
considered on both an absolute basis and a size-adjusted basis (i.e., reflecting
compensation levels that are commensurate with our 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 us, unrelated to compensation practices of the peer group.
COMPENSATION ELEMENTS
For fiscal 2001, our executive compensation program consisted of a base
salary and the grants of stock options.
BASE SALARY
The compensation committee determines salaries for our executive officers
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. In determining the base salaries
for
11
2001, the compensation committee reviewed the peer group data with our CEO for
each executive position. In addition, the compensation committee reviewed the
responsibility level of each position, together with the executive officer's
individual performance for the prior year and objectives for the current year.
In addition, our overall performance during the past year was compared to
objectives for the prior year and performance targets for the current year. In
general, during fiscal 2001, the cash, base salaries for our executive officers
were adjusted between 0 and 10% depending on performance, with the average
salary increase being approximately 5%.
STOCK OPTIONS
The long-term incentive component of our executive officers is stock
options. The compensation committee believes that providing executive officers
with opportunities to acquire significant equity positions in the company and
thus, the opportunity to share in our growth and prosperity, through the grant
of stock options will enable us to attract and retain qualified and experienced
executive officers. Stock options represent a valuable portion of the
compensation program for our executive officers. The exercise price of stock
options is generally the fair market value of the shares on the date of the
grant and generally only provide a benefit if the value of the shares increases.
Grants of stock options to executive officers are made by the compensation
committee upon the recommendation of the CEO, who comprises the stock option
committee, and are based upon a review of peer group and our relative size data
within the 2001 survey. Each executive officer's position is compared to grants
of officers in similar positions. We also evaluate the executive officer's past
and expected future performance, the number of outstanding and previously
granted options, and discussions with the executive officer when the options are
granted.
CEO COMPENSATION
In determining the base salary for Mr. Bethune in fiscal 2001, the
compensation committee reviewed the peer group data and reviewed the CEO
Compensation Review report prepared by an outside consultant. With respect to
both total cash compensation and other compensation the report indicated that
for fiscal 2000 Mr. Bethune was paid below the mean compensation paid to
executives in the peer group and slightly above the mean with respect to
long-term compensation. The committee also compared our performance to our
stated objectives in 2001, and considered performance targets for 2002, and
based on this review elected to increase Mr. Bethune's base salary to $23,333
per month.
2001 EXECUTIVE LONG TERM INCENTIVE COMPENSATION PROGRAM
On August 5, 2001, the board of directors approved the 2001 executive long
term incentive compensation program. The purpose of program is to enhance our
ability to retain Mr. Bethune and provide Mr. Bethune with incentive
compensation based on the achievement of certain performance goals. The program
was adopted under our 2000 stock incentive plan and is subject to the terms and
provisions thereof. Only our Chief Executive Officer and Chairman of the Board
are eligible to participate in the program.
The program has a term of three years, during which time awards may be
made. Awards may consist of the issuance of shares of common stock, restricted
stock or options with a fixed or variable exercise price, or any combination of
the above. Under the program, the aggregate value of all awards granted under
the program, determined on the date of grant, cannot exceed $7,000,000. With
respect to any options granted under the program, the options will be valued
based on the Black-Scholes option pricing model.
The compensation committee may determine that the grant or vesting of an
award shall be dependent on the satisfaction of performance criteria or other
conditions, but is not required to make such determination. The relevant
criteria may include, product development, corporate partnering, strategic
planning, capital or fund raising, success in clinical trials, establishment of
manufacturing capabilities, regulatory approvals, attracting and retaining
senior management, financial objectives, strategic alliances and other factors
or matters. As soon as practicable after the end of any designated performance
period
12
the compensation committee will certify in writing our attainment or
non-attainment of the performance goals and criteria.
In recognition of Mr. Bethune's achievements and our performance under his
leadership, and to further align his interest with those of our stockholders, on
August 6, 2001 the compensation committee granted Mr. Bethune an option to
purchase 100,583 shares of our common stock under the program. The options have
an exercise price of $5.00 per share and were fully vested on the grant date.
The primary factor considered by the compensation committee in determining the
terms of the award was Mr. Bethune's significant contributions to the overall
performance of our business during the past two years as evidenced, in part, by
the following achievements:
- a total stockholder return of 20.79% and 228.89% for 2001 and 2000,
respectively;
- the fact that over the same period our total shareholder return over the
two year period of 297.26% outperformed the total returns of the Nasdaq
Pharmaceutical Index -- (14.78%) and 39.85% for 2001 and 2000,
respectively; and the Nasdaq Index -- (20.65%) and 39.85% for 2001 and
2000, respectively;
- the fact that over the past two fiscal years we have entered into seven
major strategic alliances;
- the significant clinical advances in our Eligard(TM) and Atrisone(TM)
products;
- the expansion of our product pipeline; and
- Mr. Bethune's overall leadership.
In addition, the Compensation Committee determined the terms of the award
based on its review of the CEO Compensation Review report.
OTHER COMPENSATION CONSIDERATIONS
Under Section 162(m) of the Internal Revenue Code we may not receive a
federal income tax deduction for compensation paid to our Chief Executive
Officer or any of the four most highly compensated executive officers to the
extent that any of the persons receive more than $1,000,000 in compensation in
any one year. However, if we pay compensation that is "performance-based" under
Section 162(m) we can receive a federal income tax deduction for the
compensation paid even if such compensation exceeds $1,000,000 in a single year.
Our 1987 performance stock option plan and our 2000 stock incentive plan have
been designed to qualify as "performance-based" plans and therefore compensation
realized in connection with exercise of options granted under these plans is
fully tax deductible on our federal income tax return. To maintain flexibility
in compensating executive officers in a manner designed to promote varying
corporate goals, the compensation committee has not adopted a policy that all
compensation must be deductible on our federal income tax returns.
Sander A. Flaum, Chairman
Dr. D. Walter Cohen
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the compensation committee was at any time during fiscal 2001
an officer or employee of the company. In addition, none of our executive
officers serves as a member of the board of directors or compensation committee
of any company that has one or more executive officers serving as a member of
our board of directors or compensation committee.
13
PERFORMANCE GRAPH
The following graph and table provide a comparison from December 31, 1996
through December 31, 2001 of the cumulative stockholder return (assuming
reinvestment of dividends) among our common stock, the Nasdaq Pharmaceutical
Index and the Nasdaq Index. The graph assumes $100 invested on January 1, 1997
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.
[PERFORMANCE GRAPH]
----------------------------------------------------------------------------------------------------------------------------
Date 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
----------------------------------------------------------------------------------------------------------------------------
Atrix 100.00 137.21 82.56 48.26 158.72 191.72
Nasdaq Pharmaceutical 100.00 103.05 130.81 246.64 307.65 262.88
Nasdaq Index 100.00 122.48 172.68 320.83 192.98 153.12
AUDIT COMMITTEE REPORT
The following is a report of the audit committee with respect to our
audited financial statements for the fiscal year ended December 31, 2001, which
include our consolidated balance sheets as of December 31, 2001 and 2000, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 2001, and the notes thereto.
The audit committee is comprised solely of independent directors, as
defined in the Marketplace Rules of The Nasdaq Stock Market, and operates under
a written charter adopted by the board of directors. The composition of the
audit committee, the attributes of its members, and the responsibilities of the
committee, as reflected in its charter, are intended to be in accordance with
applicable requirements for corporate audit committees.
In general, the audit committee charter sets forth:
- the scope of the audit committee's responsibilities and the means by
which it carries out these responsibilities;
- the outside auditor's accountability to the board of directors and the
audit committee; and
14
- the audit committee's responsibility to assist the board of directors in
determining the independence of the outside auditor.
As described more fully in its charter, the purpose of the audit committee
is to assist the board of directors in its general oversight of our financial
reporting, internal control, and audit functions. Management is responsible for
the preparation, presentation, and integrity of our financial statements;
selection of accounting and financial reporting principles; and maintaining
internal controls and procedures designed to ensure compliance with accounting
standards, applicable laws, and regulations. Deloitte & Touche LLP, our
independent auditing firm, is responsible for performing an independent audit of
the consolidated financial statements in accordance with generally accepted
auditing standards.
The audit committee members are not professional accountants or auditors,
and their functions are not intended to duplicate or to certify the activities
of management and the independent auditor. The committee serves a board-level
oversight role, in which it provides advice, counsel, and direction to
management and the auditors on the basis of the information it receives,
discussions with management and the auditors, and the experience of the
committee's members in business, financial, and accounting matters.
The audit committee members have relied, without independent verification,
on management's representation that the financial statements have been prepared
with integrity and objectivity and in conformity with accounting principles
generally accepted in the United States of America and on the representations of
our independent auditors included in their report on our financial statements.
The committee's oversight role does not provide it with an independent basis to
determine that management has maintained appropriate accounting and financial
reporting principles or policies, or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the committee's considerations and
discussions with management and the independent auditors do not assure that our
financial statements are presented in accordance with generally accepted
accounting principles, that the audit of our financial statements has been
carried out in accordance with generally accepted auditing standards, or that
our independent auditors are in fact "independent."
Among other matters, the audit committee monitors the activities and
performance of our external auditors, including the audit scope, external audit
fees, auditor independence matters, and the extent to which the independent
auditor may be retained to perform non-audit services. The audit committee and
the board have ultimate authority and responsibility to select, evaluate, and,
when appropriate, replace our independent auditors. The audit committee also
reviews the results of the external audit work with regard to the adequacy and
appropriateness of our financial, accounting, and internal controls. Management
and independent auditor presentations to and discussions with the audit
committee also cover various topics and events that may have significant
financial impact or are the subject of discussions between management and the
independent auditors. In addition, the audit committee generally oversees our
internal compliance programs.
REVIEW WITH MANAGEMENT
The audit committee has reviewed and discussed our audited financial
statements with management. Management represented to the committee that our
consolidated financial statements were prepared in accordance with generally
accepted accounting principles.
REVIEW AND DISCUSSIONS WITH INDEPENDENT AUDITORS
During 2001, the audit committee held meetings with management and the
independent auditors to discuss the overall scope and plans for the audit. We
also met with the independent auditors, with and without management present, to
discuss the results of their examinations and their evaluations of our internal
controls. In addition, the committee has reviewed and discussed the audited
consolidated financial statements for the year ended December 31, 2001 and held
discussions with management and Deloitte & Touche LLP on the quality, not just
the acceptability, of our accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the financial
statements.
15
The audit committee has also discussed with Deloitte & Touche the matters
required to be discussed by SAS 61 (Codification of Statements on Accounting
Standards), which includes, among other items, matters related to the conduct of
the audit of our financial statements.
The audit committee has also received written disclosures and the letter
from Deloitte & Touche LLP required by Independence Standards Board Standard No.
1 (which relates to the auditors' independence from us and our related entities)
and has discussed with Deloitte & Touche LLP their independence from Atrix. In
addition, the audit committee has also considered whether the provision of those
services set forth in the table below is compatible with Deloitte & Touche LLP
maintaining its independence from Atrix.
In reliance on the reviews and the meetings, discussions and reports noted
above, the committee recommended to our board of directors that our audited
financial statements be included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2001.
H. Stuart Campbell, Chairman
C. Rodney O'Connor
Sander A. Flaum
Dr. George J. Vuturo
AUDIT FEES
The following table sets forth the aggregate fees billed by Deloitte &
Touche LLP for the following services during fiscal 2001:
DESCRIPTION OF SERVICES FEE AMOUNT
----------------------- ----------
Audit fees(1)........................................... $151,315
All other fees(2)....................................... $174,818
--------
Total......................................... $326,033
========
---------------
(1) Represents the aggregate fees billed for professional services rendered for
the audit of our annual financial statements during fiscal 2001 and for the
review of the financial statements included in our quarterly reports during
such period.
(2) Represents the aggregate fees billed in 2001 for services other than the
audit and review of our 2001 financial statements, but includes, for
example, fees for separate audits of our subsidiaries, fees related to the
filing of our registration statements and fees for tax-related services.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our board of directors, upon the recommendation by our audit committee, has
selected Deloitte & Touche LLP as our independent auditors for the year ending
December 31, 2002. Representatives of Deloitte & Touche 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 stockholders.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Although it is not required to do so, the board of directors is submitting
its selection of our independent auditors for ratification by the stockholders
at the annual meeting in order to ascertain the view of the stockholders
regarding such selection. The affirmative vote of the holders of a majority of
the shares of our common stock present or represented and voting at the annual
meeting will be required to approve this proposal. Whether the proposal is
approved or defeated, the board of directors may reconsider its selection.
OUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP.
16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of outstanding shares of common stock as of the record date, by (1)
each person who is known by us to own beneficially five percent or more of the
outstanding shares, (2) each of our directors, (3) our CEO and each of the named
executive officers, and (4) all directors and executive officers as a group.
SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS
---- ------------ --------
FMR Corp.(2)................................................ 2,477,600 11.86%
Elan International Services, Ltd.(3)........................ 1,442,478 6.91%
Mr. Nicolas Bazan........................................... 13,536 *
Mr. David R. Bethune........................................ 373,980 1.79%
Mr. H. Stuart Campbell(4)................................... 56,216 *
Dr. D. Walter Cohen......................................... 29,371 *
Dr. Charles P. Cox.......................................... 125,368 *
Dr. Richard L. Dunn......................................... 149,961 *
Mr. Sander Flaum............................................ 17,960 *
Dr. J. Steven Garrett....................................... 124,462 *
Mr. C. Rodney O'Connor...................................... 103,884 *
Mr. Brian G. Richmond....................................... 80,330 *
Mr. Warren L. Troupe........................................ 2,907 *
Dr. George J. Vuturo........................................ 12,057 *
Stephen L. Warren, M.D. .................................... -0- *
All executive officers and directors as a group (13
persons).................................................. 1,090,032 5.22%
---------------
* Less than 1%
(1) Shares of our common stock 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 which may be acquired pursuant to
stock options exercisable within 60 days of the record date: Dr. Bazan,
6,732 shares, Mr. Bethune, 258,503 shares, Mr. Campbell, 30,884 shares; Dr.
Cohen, 22,884 shares; Dr. Cox, 125,068 shares; Dr. Dunn, 91,045 shares; Mr.
Flaum, 14,784 shares, Dr. Garrett, 119,042 shares; Mr. O'Connor, 30,884
shares; Mr. Troupe 1,650 and all executive officers and directors as a
group, 780,706 shares.
(2) Based on a filing with the Securities and Exchange Commission on February
13, 2002, indicating beneficial ownership as of December 31, 2001. This
filing was made with respect to 2,477,600 shares of our common stock by FMR
Corp., which indirectly holds such shares on behalf of its direct and
indirect subsidiaries. Fidelity Management & Research Company ("Fidelity"),
a wholly-owned subsidiary of FMR and a registered investment adviser, is the
beneficial owner of 2,076,600 shares of our common stock as a result of
acting as investment adviser to various investment companies. Edward C.
Johnson 3rd, Chairman of FMR, and FMR, through its control of Fidelity, have
sole power to dispose of 2,477,600 shares of our common stock (including the
2,076,600 shares deemed beneficially owned by Fidelity) and sole power to
vote or direct the voting of 402,000 shares of our common stock. The
business address for each such reporting person is 82 Devonshire Street,
Boston, Massachusetts 02109.
(3) Information is based upon the Schedule 13D filed by Elan International
Services, Ltd., on August 7, 2000. Elan International's business address is
102 St. James Court, Flatts, Smiths Parish, FL 04, Bermuda. The shares
beneficially owned include 1,000,000 shares of our common stock that may be
acquired pursuant to the exercise of warrants.
17
(4) Includes 57 shares held by Mr. Campbell's wife in which Mr. Campbell
disclaims any beneficial interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who own more than 10% of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission, the NASD, and us.
Based solely on our review of Section 16(a) forms received by us and
written representations that no other reports were required, we believe that,
during the last fiscal year, all Section 16(a) filing requirements applicable to
our executive officers, directors and 10% beneficial owners were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into various employment agreements with our executive
officers, which are discussed under "Executive Compensation-Employment
Agreements" on page 9.
On July 18, 2000, we formed a joint venture with Elan International
Services, Ltd., a wholly owned subsidiary of Elan Corporation, plc. The joint
venture is a Bermuda limited company and is initially owned 80.1% by us and
19.9% by Elan. Its purpose is to develop and commercialize oncology and pain
management products. In a related transaction, Elan purchased 12,015 shares of
our Series A convertible exchangeable preferred stock on July 18, 2000 for
$12,015,000. We used the proceeds of the preferred stock sale to purchase 6,000
shares of the joint venture's common stock and 3,612 shares of its preferred
stock to fund our share of the joint venture's initial capitalization. Elan may
also loan us up to $8,010,000 to support our share of the joint venture's
research and development costs pursuant to a convertible promissory note issued
by us to Elan. Elan purchased 442,478 shares of our common stock for $5,000,000
and we issued Elan a five-year warrant to purchase up to 1,000,000 shares of our
common stock for $18 per share in conjunction with the formation of the joint
venture.
Mr. Troupe, one of our directors, is a senior partner in the law firm of
Morrison & Foerster LLP, Denver, Colorado, which law firm serves as our primary
outside counsel.
VOTING VIA THE INTERNET OR BY TELEPHONE
FOR SHARES DIRECTLY REGISTERED IN THE NAME OF THE STOCKHOLDER
Stockholders with shares registered directly with American Stock Transfer
and Trust Company, or AST, may vote those shares telephonically by calling AST
at (800) 776-9437 (within the U.S. and Canada only, toll-free), or via the
Internet at AST's voting Web site (www.voteproxy.com).
FOR SHARES REGISTERED IN THE NAME OF A BROKER OR A BANK
A number of brokers and banks are participating in a program provided
through ADP Investor Communication Services that offers telephone and Internet
voting options. This program is different from the program provided by AST for
shares registered directly in the name of the stockholder. If your shares are
held in an account with a broker or a bank participating in the ADP Investor
Communication Services program, you may vote those shares telephonically by
calling the telephone number shown on the voting form received from your broker
or bank, or via the Internet at ADP Investor Communication Services' voting Web
site (www.proxyvote.com).
DELIVERY OF VOTING MATERIALS
To reduce the expenses of delivering duplicate voting materials to our
stockholders, we are taking advantage of new householding rules that permit us
to deliver only one set of voting materials, meaning the proxy statement and our
2001 annual report, to stockholders who share the same address unless otherwise
requested. Each stockholder will receive a separate proxy card or voting
instruction form and will therefore retain a separate right to vote on all
matters presented at the meeting.
If you share an address with another stockholder and have received only one
set of voting materials, you may write or call us to request a separate copy of
these materials at no cost to you. For future annual
18
meetings, you may request separate voting materials or request that we only send
one set of voting materials to you if you are receiving multiple copies by
calling us at: (970) 482-5868 or by writing us at: Atrix Laboratories, Inc.,
2579 Midpoint Drive, Fort Collins, Colorado 80525, Attn: Investor Relations.
ANNUAL REPORT
Our 2001 annual report, which includes our Annual Report on Form 10-K for
the year ended December 31, 2001, has been mailed to stockholders along with
this proxy statement. If you have not received or had access to our annual
report, please call Investor Relations at (970) 482-5868, and a copy will be
sent to you.
STOCKHOLDER PROPOSALS
In accordance with Rule 14a-8 under the Exchange Act, any stockholder who
intends to submit a proposal at our 2003 annual meeting of stockholders 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 us for consideration no later than December 11, 2002. Such
proposal should be sent to our Corporate Secretary at 2579 Midpoint Drive, Fort
Collins, Colorado 80525.
In addition, our bylaws establish an advance notice procedure with regard
to certain matters, including stockholder proposals not included in our proxy
statement, to be brought before an annual meeting of stockholders. In general,
notice must be received by our Corporate Secretary not less than 45 days nor
more than 75 days prior to the first anniversary of the date on which we first
mailed our proxy materials for the previous year's annual meeting, and the
notice must contain specified information concerning the matters to be brought
before the meeting and the stockholder proposing such matters. Therefore, to be
presented at our 2003 Annual Meeting, a proposal must be received by our
Corporate Secretary after January 25, 2003 but no later than February 24, 2003.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS,
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 US AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO THAT THE
MEETING CAN BE HELD. STOCKHOLDERS 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/ DAVID R. BETHUNE
David R. Bethune
Chairman of the Board and Chief
Executive
Officer
Fort Collins, Colorado
April 10, 2002
19
PROXY
ATRIX LABORATORIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD MAY 5, 2002
The undersigned stockholder of Atrix Laboratories, Inc. hereby constitutes and
appoints Desiree Calvelage 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 22, 2002, and as
fully as the undersigned would be entitled to vote if personally present at the
company's Annual Meeting of Stockholders to be held at The Fort Collins
Marriott, 350 East Horsetooth Road, Fort Collins, Colorado on May 5, 2002 at
2:00 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 THE PROPOSED NOMINEES TO THE BOARD OF DIRECTORS AND
FOR EACH OTHER PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 1 AND 2.
-------
SEE
REVERSE
SIDE
-------
TO VOTE BY MAIL
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
PLEASE CALL TOLL-FREE 1-800-PROXIES AND FOLLOW THE INSTRUCTIONS. HAVE YOUR
CONTROL NUMBER AND THE PROXY CARD AVAILABLE WHEN YOU CALL.
TO VOTE BY INTERNET
PLEASE ACCESS THE WEB PAGE AT "WWW.VOTEPROXY.COM" AND FOLLOW THE ON-SCREEN
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
YOUR CONTROL NUMBER IS
--------------------------
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
* PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED *
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
WITHHOLD
FOR AUTHORITY
all nominees listed below to vote all nominees
(except as marked to the listed below
contrary below)
1. Proposal to [ ] [ ] NOMINEES: Mr. H. Stuart Campbell
elect the follow- Mr. C. Rodney O'Connor
ing nominees to Dr. George J. Vuturo
the board of
directors:
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided below:)
----------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 2002. [ ] [ ] [ ]
3. 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 Stockholders dated
April 10, 2002 and the proxy statement furnished
therewith.
PLEASE MARK BOXES [X] IN INK. SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Dated , 2002 Authorized Signature Title
------------------- -------------------------------------------- --------------------------
Authorized Signature Title
-------------------------------------------- --------------------------
NOTE: 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.