ACCESS PHARMACEUTICALS, INC.
2600 Stemmons Freeway, Suite 176
Dallas, Texas 75207
(214) 905-5100
April 17, 2002
To Our Stockholders:
You are cordially invited to attend the Annual
Meeting of Stockholders of Access Pharmaceuticals,
Inc. to be held on Monday, May 20, 2002 at 10:00
a.m., local time, at the New York Athletic Club,
180 Central Park South, New York, New York 10019,
(212) 247-5100.
The Notice of Annual Meeting and the Proxy
Statement that follow describe the business to be
considered and acted upon by the Stockholders at
the Meeting. The Board of Directors unanimously
recommends that our Stockholders approve the
proposals. Please carefully review the information
contained in the Proxy Statement.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, IT
IS VERY IMPORTANT THAT YOU MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED AS SOON AS POSSIBLE. IF YOU ATTEND THE
MEETING, YOU MAY REVOKE THE PROXY AT THAT TIME BY
REQUESTING THE RIGHT TO VOTE IN PERSON.
Sincerely,
/s/ Kerry P. Gray
- -----------------
Kerry P. Gray
President and CEO
ACCESS PHARMACEUTICALS, INC.
2600 Stemmons Freeway, Suite 176
Dallas, Texas 75207
(214) 905-5100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on May 20, 2002
PLEASE TAKE NOTICE that the Annual Meeting of
Stockholders, the Meeting, of Access
Pharmaceuticals, Inc. will be held at the New York
Athletic Club, 180 Central Park South, New York,
New York, on Monday, May 20, 2002, at 10:00 a.m.,
local time, for the following purposes:
1. To elect two Class 1 Directors, to hold office
for a term of three years and until their
successors are elected and qualified.
2. To consider and act upon a proposal to ratify
the appointment of Grant Thornton LLP as our
independent accountants for the fiscal year ending
December 31, 2002.
3. To transact such other business as may properly
come before the meeting or any postponements or
adjournments thereof.
Stockholders of record at the close of business on
March 27, 2002, the record date for the Meeting,
are entitled to receive notice of, and to vote, at
the Meeting and any adjournment or postponement
thereof. Our Annual Report for the fiscal year
ended December 31, 2001 accompanies the Proxy
Statement.
Information relating to the proposals is set forth
in the accompanying Proxy Statement dated April 17,
2002. Please carefully review the information
contained in the Proxy Statement, which is
incorporated into this Notice.
By Order of the Board of Directors,
/s/ Kerry P. Gray
- -----------------
Kerry P. Gray
President and CEO
Dallas, Texas
April 17, 2002
- --------------------------------
Stockholders are cordially invited to attend the
Meeting in person. YOUR VOTE IS IMPORTANT. If you
do not expect to attend the Meeting, or if you do
plan to attend but wish to vote by proxy, please
complete, date, sign and mail the enclosed proxy
card in the return envelope provided addressed to
Access Pharmaceuticals, Inc., c/o American Stock
Transfer & Trust Co., 40 Wall Street, 46th Floor,
New York, New York 10005. Proxies will also be
accepted by transmission of a telegram, cablegram
or telecopy provided that such telegram, cablegram
or telecopy contains sufficient information from
which it can be determined that the transmission
was authorized by the Stockholder. American Stock
Transfer & Trust Company's fax number is (718) 234-
2287.
ACCESS PHARMACEUTICALS, INC.
2600 Stemmons Freeway, Suite 176
Dallas, Texas 75207
(214) 905-5100
__________________
PROXY STATEMENT
__________________
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 20, 2002
This Proxy Statement is furnished by Access
Pharmaceuticals, Inc., a Delaware corporation, to
holders of common stock, par value $.01 per share,
or the Common Stock, in connection with the
solicitation of proxies by our Board of Directors
for use at our Annual Meeting of Stockholders, or
the Meeting, and at any and all adjournments or
postponements thereof. The Meeting will be held on
Monday, May 20, 2002 at 10:00 a.m., local time, at
the New York Athletic Club, 180 Central Park South,
New York, New York. This Proxy Statement and the
accompanying form of proxy is first being sent to
holders of Common Stock on or about April 17, 2002.
Our mailing address and the location of our
principal executive offices are at 2600 Stemmons
Freeway, Suite 176, Dallas, Texas 75207, (214) 905-
5100.
A Stockholder signing and returning the enclosed
proxy may revoke it at any time before it is
exercised by voting in person at the Meeting, by
submitting another proxy bearing a later date or by
giving notice in writing to our Secretary not later
than the day prior to the Meeting. All proxies
returned prior to the Meeting will be voted in
accordance with instructions contained therein.
At the close of business on March 27, 2002, the
record date for the Meeting, the number of our
outstanding shares of Common Stock that are
entitled to vote was 12,877,561. We have no other
outstanding voting securities. Each outstanding
share of Common Stock is entitled to one vote. A
complete list of Stockholders entitled to vote at
the Meeting will be available for examination by
any Stockholder for any purpose germane to the
Meeting at our principal executive offices, during
normal business hours, at least ten business days
prior to the Meeting. Our Bylaws require that a
majority of the shares entitled to vote, present in
person or by proxy, shall constitute a quorum for
the conduct of business at the meeting. Abstentions
and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for
the transaction of business. Abstentions are
counted in tabulations of the votes cast on
proposals presented to the Stockholders, whereas
broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
Stockholders have the right to vote cumulatively
for the election of Directors. This means that in
voting at the Meeting, each Stockholder, or his
proxy, may multiply the number of his shares by two
(the number of directors to be elected) and then
cast the resulting total number for a single
nominee, or distribute such votes on the ballot
among the two nominees desired. The proxies
submitted to the Board of Directors in response to
this solicitation may, at the discretion of the
proxy holder, accumulate the votes of the shares
they represent. However, the Board of Directors
requires any Stockholder otherwise electing to
exercise his cumulative voting rights, if voting in
person, to so indicate prior to the beginning of
the Meeting or if voting by proxy given to someone
other than those designated by the Board of
Directors in the solicitation to so indicate on
said proxy.
2
All expenses in connection with solicitation of
proxies will be borne by us. We will also request
brokers, dealers, banks and voting trustees, and
their nominees, to forward this Proxy Statement,
the accompanying form of proxy and our Annual
Report for the fiscal year ended December 31, 2001
to beneficial owners and will reimburse such record
holders for their expense in forwarding
solicitation material. We expect to solicit proxies
primarily by mail, but Directors, officers and our
regular employees may also solicit in person, by
telephone or by fax.
The Board of Directors does not know of any matters
which will be brought before the Meeting other than
those matters specifically set forth in the Notice
of Annual Meeting. However, if any other matter
properly comes before the Meeting, it is intended
that the persons named in the enclosed form of
proxy, or their substitutes acting thereunder, will
vote on such matter in accordance with their best
judgement.
This proxy statement should be read in conjunction
with our Annual Report, including the financial
statements and management's discussion and analysis
of financial condition and results of operations
for the fiscal year ended December 31, 2001.
PROPOSAL 1
Election of Directors
Our Certificate of Incorporation and Bylaws
presently provide that our Board of Directors shall
consist of three to fifteen members, shall be
divided into three classes as nearly equal in
number as possible, and that each Director shall
serve for a term of three years and until his
successor is elected and qualified or until his
earlier resignation, death or removal. By
resolution, the Board has set the number of its
members at seven. The term of office of one class
of Directors expires each year in rotation so that
one class is elected at each annual meeting for a
three-year term. The Board presently consists of
six members.
Members of each class serve a term of three years
until the respective annual meeting of stockholders
and election and qualification of their successors.
Dr. Max Link and Mr. John J. Meakem, Jr. are
members of the Class 1 directors with their terms
set to expire upon the annual meeting of
stockholders in 2002. Dr. Howell is the only Class
2 director with his term set to expire upon the
annual meeting of stockholders in 2003. Messrs.
McDade, Gray and Flinn are Class 3 directors with
their terms set to expire upon the annual meeting
of stockholders in 2004. Each of our officers is
selected by the Board of Directors for a term of
one year. There is no family relationship among any
of the directors or executive officers.
Nominees for Term Expiring at the Annual Meeting of
Stockholders in 2002 (Class 1 Directors)
Dr. Link and Mr. Meakem are the members of the
Class 1 Directors. Dr. Link has served as director
since 1996 and Mr. Meakem has served as a Director
since 2001. The terms of Dr. Link and Mr. Meakem
expire at the Meeting. If elected at the Meeting,
both will serve for a term of three years expiring
on the date of the annual meeting of Stockholders
in 2005. The terms of the other four Directors will
continue as indicated below.
Business and Experience of Nominees for Director
Max Link, Ph.D. has been one of our directors since
1996. Dr. Link is also a member of the Compensation
and Audit & Finance Committees of the Board of
Directors. He has held a number of executive
positions with pharmaceutical and health care
companies. Most recently, he served as Chief
Executive Officer of Corange Limited, from May 1993
until June 1994. Prior to joining Corange, Dr. Link
served in a number of
3
positions with Sandoz Pharma Ltd., including Chief
Executive Officer, from 1987 until April 1992, and
Chairman, from April 1992 until May 1993. Dr. Link
currently serves on the board of directors of seven
other publicly-traded life science companies:
Alexion Pharmaceuticals, Inc., Cell Therapeutics,
Inc., CytRx Corporation, Discovery Laboratories,
Inc., Human Genome Sciences, Inc., Protein Design
Labs, Inc. and Sulzer Medica, Ltd. Dr. Link
received his Ph.D. in Economics from the University
of St. Gallen in 1970.
Mr. John J. Meakem, Jr. was appointed as a director
at the February 16, 2001 board meeting. Mr. Meakem
is also a member of the Audit & Finance Committee.
Mr. Meakem is a private investor with portfolio
holdings in innovative companies with a particular
focus on healthcare. Most recently Mr. Meakem
served as Chairman of the Board, President and
Chief Executive Officer of Advanced Polymer
Systems, Inc. from 1991 to 2000. Prior to 1991, he
was Corporate Executive Vice President of Combe,
Inc. and President of Combe North America. Prior to
1970, Mr. Meakem was with Vick Chemical Company, a
division of Richardson Merrell Drug Corporation for
ten years as Vice President of Marketing, New
Products & Acquisitions.
The nominees have consented to serve as our
Directors and the Board of Directors has no reason
to believe that any nominee will be unavailable.
The Board recommends a vote "FOR" the proposed
nominees to the Board of Directors. Each Director
shall be elected by a plurality of the votes cast
by the holders of Common Stock entitled to vote at
the Meeting.
UNLESS OTHERWISE INDICATED THEREON, THE ACCOMPANYING
PROXY WILL BE VOTED FOR THE NOMINEES NAMED ABOVE.
HOWEVER, THE PERSONS DESIGNATED AS PROXIES RESERVE
THE RIGHT TO CAST VOTES FOR ANOTHER PERSON
DESIGNATED BY THE BOARD OF DIRECTORS IN THE EVENT
THE NOMINEES ARE UNABLE OR UNWILLING TO SERVE.
Information With Respect to Directors Whose Terms
Continue and Executive Officers
Director Whose Term Expires at the Annual Meeting
in 2003 (Class 2 Director)
Stephen B. Howell, M.D. has served as one of our
directors since 1996. Dr. Howell is also a member
of the Compensation Committee. Dr. Howell is a
Professor of Medicine at the University of
California, San Diego, and director of the Cancer
Pharmacology Program of the UCSD Cancer Center. Dr.
Howell is a recipient of the Milken Foundation
prize for his contributions to the field of cancer
chemotherapy. He has served on the National
Research Council of the American Cancer Society and
is on the editorial boards of multiple medical
journals. Dr. Howell founded DepoTech, Inc. and
served as a member of its board of directors from
1989 to 1999. Dr. Howell served on the board of
directors of Matrix Pharmaceuticals from 2000 to
2002. Dr. Howell received his AB at University of
Chicago and his MD from Harvard Medical School.
Directors Whose Term Expires at the Annual Meeting
in 2004 (Class 3 Directors)
Mr. Herbert H. McDade, Jr. was elected to be one of
our directors in 1988, and presently is Chairman of
the Board of Directors. He is also a member of the
Compensation Committee of the Board of Directors.
In February 1989, he was elected Vice-Chairman of
the Board of Directors and Chief Executive Officer.
In June 1989, he was elected Chairman of the Board
of Directors and Treasurer in addition to his
responsibilities as Chief Executive Officer, and
from 1990 to January 1996 he was our President. Mr.
McDade served in such capacities until January
1996. He is currently President and Chief Executive
Officer of the Thoma Corporation,
4
a closely-held health care consulting company. In
addition, he also serves on the boards of CytRx
Corporation and Discovery Laboratories, Inc. From
1986 to 1987 he served as Chairman of the board of
directors and President of Armour Pharmaceutical
Co., a wholly-owned subsidiary of Rorer Group, Inc.
Prior to 1986 he served for approximately 13 years
in various executive positions at Revlon, Inc.,
including from 1979 to 1986, as President of the
International Division of the Revlon Health Care
Group. He was also previously associated for twenty
years in various executive capacities with The
Upjohn Company.
Mr. Kerry P. Gray has been our President and Chief
Executive Officer and a director since January
1996. Prior to such time, from June 1993, Mr. Gray
served as President and Chief Executive Officer of
Access Pharmaceuticals, Inc., a private Texas
corporation. Previously, Mr. Gray served as Vice
President and Chief Financial Officer of
PharmaSciences, Inc., a company he co-founded to
acquire technologies in the drug delivery area.
From May 1990 to August 1991, Mr. Gray was Senior
Vice President, Americas, Australia and New Zealand
of Rhone-Poulenc Rorer, Inc. Prior to the
Rorer/Rhone Poulenc merger, he had been Area Vice
President Americas of Rorer International
Pharmaceuticals. Previously, from January 1986 to
May 1988, he was Vice President, Finance of Rorer
International Pharmaceuticals, having served in
that same capacity for the Revlon Health Care Group
of companies before their acquisition by Rorer
Group. Between 1975 and 1985, he held various
senior financial positions with the Revlon Health
Care Group.
Mr. J. Michael Flinn has served as one of our
directors since 1983. Mr. Flinn is also a member of
the Audit & Finance Committee of the Board of
Directors. Since 1970, he has been an investment
counselor and was a consultant to the Operations
Group of United Asset Management. From 1970 to 1996
he was a principal with the investment counseling
firm of Sirach Capital Management, Inc. He assisted
in the management of pension, profit sharing,
individual, corporate and foundation accounts
totaling over $7.0 billion. He serves as a board
member of Lonesome Dove Petroleum.
Executive Officers
In addition to our executive officers who are also
directors, set forth below is the business
experience of our other executive officers.
David P. Nowotnik, Ph.D. has been Vice President
Research and Development since November 1998. From
1994 until 1998, Dr. Nowotnik had been with
Guilford Pharmaceuticals, Inc. in the position of
Senior Director, Product Development and was
responsible for a team of scientists developing
polymeric controlled-release drug delivery systems.
From 1988 to 1994 he was with Bristol-Myers Squibb
researching and developing technetium
radiopharmaceuticals and MRI contrast agents. From
1977 to 1988 he was with Amersham International
leading the project which resulted in the discovery
and development of Ceretec.
Mr. Stephen B. Thompson has been Vice President
since April 2000 and our Chief Financial Officer
since January 1996. From 1990 to 1996, he was
Controller and Administration Manager of Access
Pharmaceuticals, Inc., a private Texas corporation.
Previously, from 1989 to 1990, Mr. Thompson was
Controller of Robert E. Woolley, Inc. a hotel real
estate company where he was responsible for
accounting, finances and investor relations. From
1985 to 1989, he was Controller of OKC Limited
Partnership, an oil and gas company where he was
responsible for accounting, finances and SEC
reporting. Between 1975 and 1985 he held various
accounting and finance positions with Santa Fe
International Corporation.
5
Officers and Directors
Our directors and executive officers are as
follows:
Name Age Title
- ------------------------- ----- -----------------------
Herbert H. McDade, Jr. 75 Chairman of the Board
of Directors
Kerry P. Gray 49 President, Chief Executive
Officer, Director
J. Michael Flinn 68 Director
Stephen B. Howell. M.D. 57 Director
Max Link, Ph.D. 61 Director
John J. Meakem, Jr. 65 Director
David P. Nowotnik, Ph.D. 53 Vice President
Research & Development
Stephen B. Thompson 48 Vice President, Chief
Financial Officer, Treasurer
Meetings of The Board of Directors and Committees
Our Board of Directors held a total of four
meetings in 2001. We have the following
committees:
* Nominating Committee - comprised of J. Michael
Flinn and Max Link.
* Audit & Finance Committee - comprised of J.
Michael Flinn, Max Link and John J Meakem , Jr. The
members of the Audit & Finance committee met once
during 2001 to review auditing activities.
* Compensation Committee - comprised of Max Link,
Stephen B. Howell and Herbert H. McDade, Jr. The
Compensation Committee met once in 2001.
During the fiscal year ended December 31, 2001 each
Director attended at least 75% of the aggregate of
the total number of formal meetings of the Board,
except for Max Link who attended 50% of the
meetings, and all meetings held by all committees
on which the individual director served. Generally,
the Nominating Committee does not consider nominees
to our Board recommended by our shareholders.
Compensation of Directors
Each director who is not our employee receives a
quarterly fee of $1,250, plus $1,000 for each board
meeting which he attends and $500 for each
committee meeting he attends as a member of the
Audit and Finance and/or Compensation Committees.
Each committee Chairman also receives $250 for each
meeting he attends. In addition, we reimbursed each
director, whether an employee or not, the expenses
of attending board and committee meetings. Each
non-employee director is also entitled to receive
options to purchase 10,000 shares of our common
stock on the date of each annual meeting of
stockholders and options to purchase 20,000 shares
of common stock when he/she is first appointed as a
director.
6
Compliance with Section 16(a) of the Securities Act of 1934
Section 16(a) of the Securities Exchange Act of
1934 requires our directors, executive officers and
persons who own more than ten percent of a
registered class of our equity securities to file
with the Securities and Exchange Commission initial
reports of ownership and reports of changes in
ownership of our common stock and other equity
securities. Directors, officers and 10% holders are
required by SEC regulation to furnish us with
copies of all of the Section 16(a) reports they
file.
Based solely on a review of reports furnished to us
or written representatives from our directors and
executive officers during the fiscal year ended
December 31, 2001, all Section 16(a) filing
requirements applicable to our directors, executive
officers and 10% holders for such year were
complied with except Mr. Meakem who filed a late
Form 3 and Form 4.
Executive Compensation
The following table sets forth the aggregate
compensation paid to our CEO and each of our
executive officers whose aggregate salary and bonus
exceeded $100,000 for services rendered in all
capacities for the years ended December 31, 2001,
2000 and 1999.
Summary Compensation Table
Long-term
Annual Compensation Compensation Awards
----------------------------- ----------------------
Name and Underlying Restricted All Other (3)
Principal Position Year Salary (1) Bonus (2) Options (#) Stock (#) Compensation
- ------------------------- ------ ----------- ---------- ----------- ---------- ------------
Kerry P. Gray
President and CEO 2001 $307,449 $105,000 - 24,691 $ 6,941
2000 279,497 125,000 760,000 - 6,328
1999 255,107 100,000 160,000 - 4,150
David P. Nowotnik, Ph.D.
Vice President Research
and Development (4) 2001 $196,254 $ 19,960 - 5,995 $ 3,925
2000 181,638 24,280 50,000 - 53,633
1999 171,155 19,000 50,000 - 2,287
Stephen B. Thompson
Vice President, Chief
Financial Officer 2001 $119,502 $ 12,176 - 3,630 $ 2,390
2000 108,996 14,700 45,000 - 2,179
1999 98,367 11,000 20,000 - 1,333
(1) Includes amounts deferred under our 401(k) Plan.
(2) Includes bonuses earned in the reported year
but paid in the following year with the exception
of $25,000 of the $125,000 reported for Mr. Gray
which was earned and paid in 2000.
(3) Amounts reported for fiscal year 2001, 2000,
and 1999 consist of: (i) amounts we contributed to
our 401(k) Plan with respect to each named
individual and (ii) premiums paid for life
insurance for Mr. Gray each year. Amounts reported
for fiscal year 2000 for Dr. Nowotnik also include
moving expenses.
7
Option Grants in 2001
No grants were made to our executive officers in 2001.
Option Exercises and Year-End Value Table
This table includes the number of shares covered by
both exercisable and non-exercisable stock options
as of December 31, 2001. Also reported are the
values of "in-the-money" stock options which
represent the positive spread between the exercise
price of any such existing stock options and the
year-end price of our common stock.
Aggregated Option Exercises In Last Fiscal Year And
Fiscal Year-End Option Values
Number of Securities Value of
Underlying Unexercised Unexercised In-
Number of Options The-Money Options ($)(1)
Shares At Fiscal Year End At Fiscal Year End
Acquired Value Exercisable/ Exercisable/
Name On Exercise # Realized ($) Unexercisable Unexercisable
- ------------------- ------------- ------------ ------------------- -----------------------
Kerry P. Gray - - 580,000 / 500,000 $976,000 / $614,000
David P. Nowotnik - - 90,630 / 59,370 $172,000 / $119,000
Stephen B. Thompson - - 49,279 / 35,721 $ 93,000 / $ 72,000
(1) On December 31, 2001, the closing price of our
stock on AMEX was $4.44.
Compensation Pursuant to Agreements and Plans
Employment Agreements
We are party to an employment agreement with Kerry
P. Gray, our President and Chief Executive Officer,
which expires March 31, 2003 and which thereafter
may be automatically renewed for successive one-
year periods. Under this agreement, Mr. Gray is
currently entitled to receive an annual base salary
of $346,000 subject to adjustment by the Board of
Directors. Mr. Gray is eligible to participate in
all of our employee benefit programs available to
executives. Mr. Gray is also eligible to receive:
* a bonus payable in cash and common stock related
to the attainment of reasonable performance goals
specified by the Board of Directors;
* stock options at the discretion of the Board of
Directors;
* long-term disability insurance to provide
compensation equal to at least 60% of his annual
base salary; and
* term life insurance coverage of $400,000.
Mr. Gray is entitled to certain severance benefits
in the event that we terminate his employment
without cause or if Mr. Gray terminates his
employment following a change of control. In the
event that we terminate the employment agreement
for any reason, other than for cause, Mr. Gray
would receive the salary due for the
8
remaining term of the agreement or 18 months,
whichever is longer. We will also continue benefits
for such period. In the event that Mr. Gray's
employment is terminated within six months
following a change in control or by Mr. Gray upon
the occurrence of certain events following a change
in control, Mr. Gray would receive two years
salary, his target bonus and his stock options
shall become immediately exercisable. We will also
continue payment of benefits for such period. The
employment agreement contains a covenant not to
compete with us for up to 18 months following the
termination date.
We are party to an employment agreement with David
P. Nowotnik, Ph.D. which expires November 16, 2002
and which thereafter may be automatically renewed
for successive one-year periods. Under this
agreement, Dr. Nowotnik is currently entitled to
receive an annual base salary of $216,000 subject
to adjustment by the Board of Directors. Dr.
Nowotnik is eligible to participate in all of our
employee benefit programs available to executives.
Dr. Nowotnik is also eligible to receive:
* a bonus payable in cash and common stock related
to the attainment of reasonable performance goals
specified by the Board of Directors;
* stock options at the discretion of the Board of
Directors;
* long-term disability insurance to provide
compensation equal to at least $60,000 annually; and
* term life insurance coverage of $216,000.
Dr. Nowotnik is entitled to certain severance
benefits in the event that we terminate his
employment without cause or if Dr. Nowotnik
terminates his employment following a change of
control. In the event that we terminate the
employment agreement for any reason, other than for
cause, Dr. Nowotnik would receive the salary due
for 12 months. We will also continue benefits for
such period. In the event that Dr. Nowotnik's
employment is terminated within six months
following a change in control or by Dr. Nowotnik
upon the occurrence of certain events following a
change in control, Dr. Nowotnik would receive
twelve months salary and his stock options shall
become immediately exercisable. We will also
continue payment of benefits for such period.
The remainder of this page is intentionally left blank
9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for
making all compensation decisions for the named
executives including determining base salary and
annual incentive compensation amounts and
recommending stock option grants and other stock-
based compensation under our equity incentive plans.
Overall Objectives of the Executive Compensation
Program
The purpose of our compensation plan is to attract,
retain and motivate key management employees. It is
our philosophy to pay our executives at levels
commensurate with both industry levels and
individual experience and performance. A primary
consideration in developing our executive
compensation programs is to link the long-term
financial interests of executives with those of the
Company and our stockholders. Throughout 2001, the
Compensation Committee reviewed compensation for
comparable organizations in order to establish our
total compensation program and to recommend awards
under our equity incentive plans.
Base Salary Program
It is our policy to establish salaries at a level
approximating the average of the competitive levels
in comparable companies in the bio-medical industry
and to provide annual salary increases reflective
of the executive's performance, level of
responsibility and position with the Company. Based
on a review of comparable organizations, Mr. Gray's
base annual salary for 2001 was established at
$315,000.
Annual Incentive
Each year, the Compensation Committee evaluates the
performance of the Company as a whole, as well as
the performance of each individual executive.
Factors considered include corporate development,
performance against objectives, advancement of our
research and development programs, commercial
operations, product acquisition, and in-licensing
and out-licensing agreements. The Compensation
Committee does not utilize formalized mathematical
formulas, nor does it assign weightings to these
factors. The Compensation Committee, in its sole
discretion, determines the amount, if any, of
incentive payments to each executive based on an
individual's targeted incentive payment. The
Compensation Committee believes that analysis of
our corporate growth requires subjectivity on the
part of the Compensation Committee when determining
incentive payments. The Compensation Committee
believes that specific formulas restrict
flexibility. Based on this criteria, Mr. Gray
earned a $105,000 bonus from the Company in 2001.
Stock Option Plans
In 1995, our Board of Directors adopted and our
stockholders approved our 1995 Stock Awards Plan,
as amended. The 1995 Stock Awards Plan provides for
the issuance of up to a maximum of 2,000,000 shares
of our Common Stock to our employees, directors and
consultants or any of our subsidiaries. Options
granted under the 1995 Stock Awards Plan may be
either incentive stock options or options which do
not qualify as incentive stock options. In 2000,
our Board of Directors adopted the 2000 Special
Stock Option Plan and Agreement, or the 2000 Plan.
The 2000 Plan provides for the award of options to
purchase 500,000 shares of the authorized but
unissued shares of our Common Stock.
10
The stock option plans are administered by a
committee of at least three non-employee members of
the Board of Directors, chosen by the Board of
Directors, and is currently administered by the
Compensation Committee. The current members of the
Compensation Committee are Dr. Link, Mr. McDade and
Dr. Howell. The Compensation Committee has the
authority to determine those individuals to whom
stock options should be granted, the number of
shares to be covered by each option, the option
price, the type of option, the option period, the
vesting restrictions, if any, with respect to
exercise of the option, the terms for payment of
the option price and other terms and conditions.
Our non-employee directors, which include members
of the Compensation Committee, are eligible to
receive options under the 1995 Stock Awards Plan.
Each non-employee director is also entitled to
receive options to purchase 10,000 shares of our
common stock on the date of each annual meeting of
stockholders and options to purchase 20,000 shares
of common stock when he/she is first appointed as a
director.
Mr. Gray did not receive any option grants in 2001.
At December 31, 2001, we had granted to our
President and CEO options under the 1995 Stock
Awards Plan and the 2000 Plan to purchase an
aggregate of 1,080,000 shares of Common Stock at a
weighted average exercise price per share of $3.43.
We also have a restricted stock plan, the 2001
Restricted Stock Plan, under which 200,000 shares
of our authorized but unissued common stock were
reserved for issuance to certain employees,
directors, consultants and advisors. The restricted
stock granted under the plan generally vests over
five years, 25% two years after the grant date with
an additional 25% vesting on every anniversary
date. All stock is vested after five years. At
December 31, 2001 there were 44,639 shares granted
and 155,361 shares available for grant under the
2001 Restricted Stock Plan. Mr. Gray received a
grant of 24,691 shares of restricted stock in 2001
at a price of $4.05 per share. None of the shares
have vested.
Section 162(m)
Section 162(m) of the Code currently imposes a $1
million limitation on the deductibility of certain
compensation paid to each of our five highest paid
executives. Excluded from this limitation is
compensation that is "performance based." For
compensation to be performance based it must meet
certain criteria, including being based on
predetermined objective standards approved by
stockholders. In general, we believe that
compensation relating to options granted under the
1995 Stock Awards Plan and 2000 Plan should be
excluded from the $1 million limitation
calculation. Compensation relating to our incentive
compensation awards do not currently qualify for
exclusion from the limitation, given the discretion
that is provided to the Compensation Committee in
establishing the performance goals for such awards.
The Compensation Committee believes that
maintaining the discretion to evaluate the
performance of our management is an important part
of its responsibilities and inures to the benefit
of our stockholders. The Compensation Committee,
however, intends to take into account the potential
application of Section 162(m) with respect to
incentive compensation awards and other
compensation decisions made by it in the future.
11
Conclusion
The Compensation Committee believes these executive
compensation policies serve the interests of the
stockholders and us effectively. The Compensation
Committee believes that the various pay vehicles
offered are appropriately balanced to provide
increased motivation for executives to contribute
to our overall future successes, thereby enhancing
the value of the Company for the stockholders'
benefit.
Max Link, Chairman and Member
Herbert H. McDade, Jr., Member
Stephen B. Howell, Member
Compensation Committee Interlocks And Insider
Participation
The members of the Compensation Committee of the
our Board of Directors are Dr. Link, Mr. McDade and
Dr. Howell. The Compensation Committee makes
recommendations to the Board of Directors regarding
executive compensation matters, including decisions
relating to salary and bonus and grants of stock
options. Mr. McDade and Dr. Howell have consulting
agreements with us that are discussed below in
"Certain Relationships and Related Transactions."
Stockholder Return Performance Presentation
Set forth below is a line graph comparing our
cumulative stockholder return on our Common Stock
with the cumulative total return of the NASDAQ
Biotech Index and the Russell 2000 Index for the
five fiscal years commencing January 1, 1997. The
graph assumes and investment of $100 at the
beginning of the period.
[ Performance Graph ]
12
Total Returns Index for 1996 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
------- -------- -------- -------- -------- --------
Access Pharmaceuticals, Inc.$100.00 73.33 15.00 13.33 33.33 29.60
NASDAQ Biotech Index $100.00 99.93 144.18 290.72 357.56 299.63
Russell 2000 Index $100.00 122.23 119.49 145.02 140.80 144.50
The foregoing graph is based on historical data and is not
necessarily indicative of future performance. This graph
shall not be deemed to be "soliciting material" or to be
"filed" with the Commission or subject to Regulations 14A
and 14C under the Exchange Act or to the liabilities of
Section 18 under the Exchange Act.
Certain Relationships and Related Transactions
On October 12, 2000, the Board of Directors
authorized a restricted stock purchase program.
Under the program, our executive officers were
given the opportunity to purchase shares of common
stock in an individually designated amount per
participant determined by our Compensation
Committee. A total of 180,000 shares were purchased
by such officers at $5.50 per share, the fair
market value of the common stock on October 12,
2000, for an aggregate consideration of $990,000.
The purchase price was paid through the
participant's delivery of a 50%-recourse promissory
note payable to us. Each note bears interest at
5.87% compounded semi-annually and has a maximum
term of ten years. The notes are secured by a
pledge of the purchased shares to us. We recorded
the notes receivable from participants in this
Program for $990,000 as a reduction of equity in
the Consolidated Balance Sheet. The notes
receivable recorded are: Mr. Gray - $550,000; Dr.
Nowotnik - $275,000; and Mr. Thompson - $165,000.
Stephen B. Howell, MD. Dr. Howell, one of our
directors, also serves as a scientific consultant
pursuant to a consulting agreement with us that
provides for a minimum of twenty days consulting
during 2002 at a rate of $5,000 per month plus
expenses. Dr. Howell has also received warrants to
purchase 10,000 shares of our common stock at $4.91
per share, as partial consideration for his
consulting services, that can be exercised until
February 1, 2009. Previously, Dr. Howell received
warrants to purchase 15,000 shares of our common
stock at $3.00 per share that can be exercised
until January 1, 2008; warrants to purchase 30,000
shares of our common stock at $2.00 per share that
can be exercised until January 1, 2007; and
warrants to purchase 30,000 shares of our common
stock at $3.00 per share that can be exercised
until January 1, 2003. During 2001, Dr. Howell was
paid $101,000 in consulting fees; during 2000 Dr.
Howell was paid $66,000 in consulting fees; and
during 1999 Dr. Howell was paid $62,000 in
consulting fees. Dr. Howell's agreement with us
expires January 31, 2003 and can be renewed.
Herbert H. McDade, Jr. Mr. McDade is Chairman of
the Board of Directors. In consideration for the
termination of his employment with us, Mr. McDade
and Access entered into an agreement on October 4,
1995, pursuant to which, among other things:
* Mr. McDade became a consultant to Access,
providing consulting services to Access at least
four days each month;
* Mr. McDade is paid a base of $1,500 per day of
consulting; and
* the period for exercise of all options owned by
Mr. McDade was extended from three months after the
termination of his employment with Access to the
expiration of the option.
13
During 2001, we paid Thoma Corporation, of which
Mr. McDade is a principal, $54,000 in consulting
fees; during 2000 Thoma was paid $72,000 in
consulting fees; and during 1999 Thoma was paid
$72,000 in consulting fees. Mr. McDade's agreement
expires June 30, 2002.
Security Ownership of Certain Beneficial Owners and Management
Based solely upon information made available to us,
the following table sets forth certain information
with respect to the beneficial ownership of our
Common Stock as of April 9, 2002 by (i) each person
who is known by us to beneficially own more than
five percent of our common stock; (ii) each of our
directors; (iii) each of our executive officers;
and (iv) all our executive officers and directors
as a group. Except as otherwise indicated, the
holders listed below have sole voting and
investment power with respect to all shares of our
common stock beneficially owned by them.
Common Stock Beneficially Owned
-------------------------------
Number of
Name Shares (1) % of Class
- --------------------------------- ---------- ----------
Herbert H. McDade. Jr. (2) 89,116 *
Kerry P. Gray (3) 810,790 6.0%
J. Michael Flinn (4) 116,975 *
Stephen B. Howell (5) 147,644 1.0%
Max Link (6) 35,000 *
John J. Meakem, Jr. (7) 50,000 *
David P. Nowotnik (8) 167,298 1.3%
Stephen B. Thompson (9) 91,092 *
Heartland Advisors, Inc. (10) 1,708,500 13.3%
Larry Feinberg (11) 1,217,500 9.5%
Howard P. Milstein (12) 750,140 5.8%
All Directors and Executive
Officers as a group
(consisting of 8 persons) (12) 1,507,915 11.1%
* - Less than 1%
(1) Includes our Common Stock held plus all
options and warrants exercisable within 60 days
after April 9, 2002.
(2) Including presently exercisable options for
the purchase of 12,000 shares of our Common Stock
pursuant to the 1987 Stock Option Plan and
presently exercisable options for the purchase of
40,000 shares of our Common Stock pursuant to the
1995 Stock Option Plan. Also includes 1,000 shares
of our Common Stock owned by Thoma Corporation of
which Mr. McDade is the beneficial owner.
(3) Kerry P. Gray, 2600 Stemmons Freeway, Suite
176, Dallas, Texas 75207, beneficially owns 810,790
shares of our Common Stock. Mr. Gray is known to be
the beneficial owner of more than five percent of
our Common Stock. Mr. Gray's ownership includes
presently exercisable options for the purchase of
636,250 shares of our Common Stock pursuant to the
1995 Stock Option Plan.
(4) Including presently exercisable options for
the purchase of 2,500 and 35,000 shares of our
Common Stock pursuant to the 1987 Stock Option Plan
and 1995 Stock Option Plan, respectively.
(5) Including presently exercisable options for
the purchase of 750 and 16,978 shares of our Common
Stock pursuant to the 1987 Stock Option Plan and
1995 Stock Option Plan, respectively, and warrants
to purchase 15,000 shares of our Common Stock at an
exercise price of $3.00 per share, warrants to
purchase 30,000 shares of our Common Stock at an
exercise price of $3.00 per
14
share, warrants to purchase 30,000 shares of our
Common Stock at an exercise price of $2.50 per
share and warrants to purchase 10,000 shares of our
Common Stock at an exercise price of $4.91 per share.
(6) Including presently exercisable options for
the purchase of 10,000 shares of our Common Stock
pursuant to the 1995 Stock Option Plan.
(7) Including presently exercisable options for
the purchase of 20,000 shares of our Common Stock
pursuant to the 1995 Stock Option Plan.
(8) Including presently exercisable options for
the purchase of 107,298 shares of our Common Stock
pursuant to the 1995 Stock Option Plan.
(9) Including presently exercisable options for
the purchase of 59,069 shares of our Common Stock
pursuant to the 1995 Stock Option Plan.
(10) Heartland Advisors, Inc., 789 North Water
Street, Milwaukee, WI 53202, beneficially owns
1,708,500 shares of our Common Stock. Heartland is
known to be the beneficial owner of more than ten
percent of our Common Stock, William J. Nasqovitz,
as a result of his position with stock ownership of
Heartland which could be deemed to confer upon him
voting and/or investment power over the shares
Heartland beneficially owns. The information set
forth in this footnote is based on a schedule 13 G
filed by Heartland on January 8, 2002.
(11) Larry N. Feinberg and affiliates, Oracle
Partners, L.P., Oracle Institutional Partners,
L.P., Oracle Investment Management, Inc., and Sam
Oracle Fund, Inc., 712 Fifth Avenue, 45th Floor,
New York, NY 10019 is known to be the beneficial
owner of more than five percent of our Common
Stock. The information set forth in this footnote
is based on a Schedule 13G filed by Mr. Feinberg on
August 10, 2001.
(12) Mr. Howard P. Milstein, c/o Douglas Elliman,
575 Madison Avenue, New York, NY 10022,
beneficially owns 738,588 shares of our Common
Stock and has warrants to purchase 11,552 shares of
our Common Stock at $12.98 per share with an
expiration date of April 30, 2002. Mr. Milstein is
known to be the beneficial owner of more than five
percent of our Common Stock. The information set
forth in this footnote is based on a Schedule 13D
filed by Mr. Milstein on October 5, 1999.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed, subject to
ratification by the Stockholders at the Meeting,
the accounting firm of Grant Thornton LLP as our
principal independent public accountants for the
fiscal year ending December 31, 2002. Grant
Thornton LLP has served in this capacity since
December 1998.
Representatives of Grant Thornton LLP are expected
to be present at the Meeting and will have the
opportunity to make a statement if he or she
desires to do so and will be available to respond
to appropriate questions.
Audit Fees
The aggregate fees billed for professional services
rendered by Grant Thornton LLP for the audit of the
Company's annual financial statement for the fiscal
year ended December 31, 2001 and the reviews of the
financial statements included in the Company's
Forms 10-Q for such fiscal year totaled $37,000.
All Other Fees
The aggregate fees billed for all other services
rendered by Grant Thornton LLP for the fiscal year
ended December 31, 2001 totaled $6,000.
Auditor Independence
The Audit Committee considered and determined that
the provision of services covered under "All Other
Fees" is compatible with maintaining Grant Thornton
LLP's independence in determining whether to
appoint Grant Thornton LLP as the Company's
independent auditors.
15
UNLESS OTHERWISE INDICATED THEREON, THE
ACCOMPANYING PROXY WILL BE VOTED FOR THE APPROVAL
OF GRANT THORNTON LLP. YOUR BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS PRINCIPAL
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2002.
REPORT OF THE AUDIT COMMITTEE REPORT TO STOCKHOLDERS
This Report shall not be deemed incorporated by
reference by any general statement incorporating by
reference this proxy statement into any filing
under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this
report by reference, and shall not otherwise be
deemed filed under such Acts.
Audit Committee Report
The Audit Committee of the Board of Directors of
the Company operates under a written charter
adopted by the Board of Directors in May 2001. The
members of the Audit Committee are Messrs. Flinn
and Meakem and Dr. Link. All members of the Audit
Committee meet the independence standards of
Section 121(A) of the AMEX listing standards. In
accordance with its written charter, the Audit
Committee assists the Board of Directors in
fulfilling its responsibility for oversight of the
quality and integrity of the accounting, auditing
and financial reporting practices of the Company.
In discharging its oversight responsibility as to
the audit process, the Audit Committee obtained
from the independent accountants a formal written
statement describing all relationships between the
accountants and the Company that might bear on the
accountants' independence consistent with
Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees."
The Audit Committee discussed with the independent
accountants any relationships that may impact their
objectivity and independence and satisfied itself
as to that firm's independence.
The Audit Committee discussed and reviewed with the
independent accountants all communications required
by generally accepted accounting standards,
including those described in Statement on Auditing
Standards No. 61, as amended, "Communication with
Audit Committees." In addition, the Audit
Committee, met with and without management present,
and discussed and reviewed the results of the
independent accountants' examination of the
financial statements.
Based upon the Audit Committee's discussion with
management and the independent accountants and the
Audit Committee's review of the representation of
management and the report of the independent
accountants to the Audit Committee, the Audit
Committee recommended to the Board of Directors
that the Company include the audited consolidated
financial statements in its Annual Report on Form
10-K for the year ended December 31, 2001 for
filing with the Securities and Exchange Commission.
The Audit Committee also recommended the
reappointment, subject to stockholder approval, of
the independent accountants and the Board of
Directors concurred with such recommendation.
J. Michael Flinn, Chairman and Member
Max Link, Member
John J. Meakem, Member
16
OTHER MATTERS
As of the date of this Proxy Statement, our Board
of Directors has no knowledge of any matters to be
presented for consideration at the Annual Meeting
other than those referred to above. If (i) any
matters not within the knowledge of the Board of
Directors as of the date of this Proxy Statement
should properly come before the meeting; (ii) a
person not named herein is nominated at the meeting
for election as a Director because a nominee named
herein is unable to serve or for good cause will
not serve; (iii) any proposals properly omitted
from this Proxy Statement and the form of proxy,
subject to applicable laws and our Charter and
Bylaws, should come before the meeting; or (iv) any
matters should arise incident to the conduct of the
meeting, then the proxies will be voted in
accordance with the recommendations of our Board of
Directors.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
The annual meeting of Stockholders in 2003 is
expected to be held on or about May 19, 2003. We
must receive Stockholder proposals, other than
nominations for directors, no later than December
18, 2002 to be considered for inclusion in our
proxy materials agenda relating to that meeting.
Nominations for election as director must be made
by written notice to us not later than one hundred
and twenty days in advance of the meeting.
EACH STOCKHOLDER IS URGED TO COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE PROVIDED FOR THAT PURPOSE AND ADDRESSED TO
ACCESS PHARMACEUTICALS, INC. c/o AMERICAN STOCK
TRANSFER & TRUST CO., 40 WALL STREET, 46TH FLOOR,
NEW YORK, NEW YORK 10005, A PROMPT RESPONSE IS
HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED.
By Order of the Board of Directors,
/s/ Kerry P. Gray
- -----------------
Kerry P. Gray
President and CEO
17
ACCESS PHARMACEUTICALS, INC.
2600 Stemmons Freeway, Suite 176, Dallas, Texas 75207
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned having received the Notice of
Annual Meeting of Stockholders and Proxy Statement
dated April 17, 2002, and revoking any proxy
heretofore given, hereby appoints each of Herbert
H. McDade, Jr. and Kerry P. Gray or either of them,
proxies of the undersigned with full power of
substitution, to cumulate votes and to vote all
shares of common stock of Access Pharmaceuticals,
Inc. which the undersigned is entitled to vote at a
Annual Meeting of Stockholders to be held Monday,
May 20, 2002 at 10:00 a.m., local time, at the New
York Athletic Club, 180 Central Park South, New
York, New York 10019, (212) 247-5100, or any
adjournment thereof.
This proxy when properly executed will be voted in
the manner directed herein by the undersigned
stockholder. If no direction is made, this Proxy
will be voted FOR the Proposal.
In their discretion, the Proxies are authorized to
vote on any other matters which may properly come
before the Annual Meeting or any adjournment
thereof as set forth in the Proxy Statement.
SEE REVERSE SIDE
(continued, and to be signed on other side)
/X/ Please mark your votes as in this example.
WITHHOLD
1. Election of Directors FOR AUTHORITY
[ ] [ ]
Cumulative Votes for one or more nominees as follows:
Nominees: ____ Max Link Class 1 - 3 Year Term
____ John J. Meakem, Jr. Class 1 - 3 Year Term
(INSTRUCTION: To withhold authority to vote for any
individual nominee, check the box "FOR" all
nominees and strike a line through the nominee's
name at right.)
2. Proposal to ratify and approve the appointment
of Grant Thornton LLP as our independent
accountants for the year ending FOR AGAINST ABSTAIN
December 31, 2002. [ ] [ ] [ ]
PLEASE MARK, SIGN AND DATE BELOW AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Proxies will also be accepted by transmission of a
telegram, cablegram or telecopy provided that such
telegram, cablegram or telecopy contains sufficient
information from which it can be determined that
the transmission was authorized by the Stockholder.
Telegrams or cablegrams may be addressed to
American Stock Transfer & Trust Co. ("American
Stock Transfer") at the address appearing on the
attached envelope. American Stock Transfer's
telecopy number is (718) 234-2287.
Shares Held: ___________
THIS PROXY IS SOLICITED ON BEHALF OF ACCESS
PHARMACEUTICALS, INC.'S BOARD OF DIRECTORS AND MAY
BE REVOKED BY THE STOCKHOLDER PRIOR TO EXERCISE.
Signature ____________________________ ________
Date
_________________________ ________
Signature if held jointly Date
NOTE: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such. If a
corporation, please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.