SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
ACCESS PHARMACEUTICALS, 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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/x/ No fee required
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4) Date Filed:
ACCESS PHARMACEUTICALS, INC.
2600 Stemmons Freeway, Suite 176
Dallas, Texas 75207
(214) 905-5100
April 11, 2003
To Our Stockholders:
You are cordially invited to attend the Annual
Meeting of Stockholders of Access Pharmaceuticals,
Inc. to be held on Monday, May 19, 2003 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 19, 2003
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 19, 2003, at 10:00 a.m.,
local time, for the following purposes:
1. To elect two Class 2 Directors to hold office
for a term of three years and until their
successors are elected and qualified.
2. To consider and vote upon a proposal to amend
our 1995 Stock Option Plan to increase the total
number of shares of our common stock authorized for
issuance under that plan to 2,500,000 shares.
3. 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, 2003.
4. 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 28, 2003, 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, 2002 accompanies the Proxy Statement.
Information relating to the proposals is set forth
in the accompanying Proxy Statement dated April 11,
2003. 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 11, 2003
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 19, 2003
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 19, 2003 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 16, 2003.
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 or,
if no choice is specified for one or more proposals
in a proxy submitted by or on behalf of a
stockholder, the shares represented by such proxy
will be voted in favor of such proposals and in the
discretion of the named proxies with respect to any
other matters which may properly come before the meeting.
At the close of business on March 28, 2003, the
record date for the Meeting, the number of our
outstanding shares of Common Stock that are
entitled to vote was 13,159,119. 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
1
designated by the Board of Directors in the
solicitation to so indicate on said proxy.
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, 2002
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, 2002.
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
seven 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.
Mr. Stuart M. Duty and Dr. Stephen B. Howell are
members of the Class 2 directors with their terms
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. Dr. Link and Mr. Meakem are members of the
Class 1 directors with their terms set to expire
upon the annual meeting of stockholders in 2005.
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 2003 (Class 2 Directors)
Mr. Duty and Dr. Howell are the members of the
Class 2 Directors. Mr. Duty has served as director
since November 2002 and Dr. Howell has served as a
Director since 1996. The terms of Mr. Duty and Dr.
Howell 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 2006. The terms of the other five
Directors will continue as indicated below.
Business and Experience of Nominees for Director
Stuart M. Duty has served as one of our directors since
November 2002. Mr. Duty is currently a Partner at
2
Oracle Partners, L.P. Prior to joining Oracle
Partners, L.P. he held senior healthcare investment
banking positions, most recently, from 1999 to
2001, as the Co-Head of Healthcare Investment
Banking at US Bancorp Piper Jaffray. From 1993 to
1999 he was Managing Director at NationsBank
Montgomery Securities. In addition to his
investment banking experience, Mr. Duty has worked
in the biotechnology industry in a business
development capacity. He serves as a board member
of Genomics Collaborative.
Stephen B. Howell, M.D. has served as one of our
directors since 1996. 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 the University of Chicago and
his MD from Harvard Medical School.
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 and the enclosed
proxy will be so voted unless a contrary vote is
indicated. 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
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, 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
3
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 and Compensation Committees 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.
Directors Whose Term Expires at the Annual Meeting
in 2005 (Class 3 Directors)
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, from May 1993 until June
1994, he served as Chief Executive Officer of
Corange Limited. Prior to joining Corange, Dr. Link
served in a number of 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
Centerpulse, Ltd. Dr. Link received his Ph.D. in
Economics from the University of St. Gallen in
1970.
Mr. John J. Meakem, Jr. has been one of our
directors since February 2001. 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.
Executive Officers
In addition to Mr. Gray, set forth below is the
business experience of our other executive
officers.
David P. Nowotnik, Ph.D. has been Senior Vice
President Research and Development since January
2003 and was Vice President Research and
Development from 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.
4
Mr. Stephen B. Thompson has been Vice President
since 2000 and our Chief Financial Officer since
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.
Officers and Directors
Our directors and executive officers are as follows:
Name Age Title
- ------------------------- ----- ----------------------
Herbert H. McDade, Jr. 76 Chairman of the Board
of Directors
Kerry P. Gray 50 President, Chief Executive
Officer, Director
Stuart M. Duty 38 Director
J. Michael Flinn 69 Director
Stephen B. Howell. M.D. 58 Director
Max Link, Ph.D. 62 Director
John J. Meakem, Jr. 66 Director
David P. Nowotnik, Ph.D. 54 Senior Vice President
Research & Development
Stephen B. Thompson 49 Vice President, Chief
Financial Officer, Treasurer
Meetings of The Board of Directors and Committees
Our Board of Directors held a total of six meetings
in 2002. 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 twice
during 2002 to review auditing and finance activities.
* Compensation Committee - comprised of Max Link,
J. Michael Flinn and Herbert H. McDade, Jr. The
Compensation Committee met twice in 2002.
During the fiscal year ended December 31, 2002 each
Director attended at least 75% of the aggregate of
the total number of formal meetings of the Board
and all meetings held by all committees on which
the individual director served, except for John
Meakem who attended one of the two Audit & Finance
Committee meetings.
5
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 $3,000 and $1,000 per quarter per
committee (aggregate for all committees) in which
he/she is a member. Each director will have $2,000
deducted from their fee if more than one Board
meeting is missed and $1,000 deducted per committee
meeting missed. 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 12,500 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.
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, 2002, all Section 16(a) filing
requirements applicable to our directors, executive
officers and 10% holders for such year were
complied with except for Mr. Gray, Dr. Howell, Dr.
Nowotnik and Mr. Thompson who each filed one late
Form 4 reporting one transaction each.
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 $100,000 for services rendered in all
capacities for the years ended December 31, 2002,
2001 and 2000.
The remainder of this page is intentionally left blank
6
Summary Compensation Table
--------------------------
Long-term
Annual Compensation Compensation Awards
---------------------------- -------------------------
Securities
Name and Restricted Underlying All Other (4)
Principal Position Year Salary (1) Bonus (2) Stock ($)(3) Options (#) Compensation
- ----------------------- ----- ----------- ---------- ------------- ----------- -------------
Kerry P. Gray
President and CEO 2002 $338,150 $ -(5) $105,000 160,000 $ 9,713
2001 307,449 105,000 100,000 - 8,591
2000 279,497 125,000 - 760,000 7,228
David P. Nowotnik, Ph.D.
Senior Vice President
Research and Development
(4) 2002 $212,001 $ 20,142 $ 19,960 50,000 $ 5,648
2001 196,254 19,960 24,280 - 5,333
2000 181,638 24,280 - 50,000 54,536
Stephen B. Thompson
Vice President, Chief
Financial Officer 2002 $129,501 $ 12,474 $ 12,176 30,000 $ 3,540
2001 119,502 12,176 14,700 - 3,340
2000 108,996 14,700 - 45,000 2,784
(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) The value of all restricted stock for each
named individual at December 31, 2002 is: Mr. Gray -
$79,261; Dr. Nowotnik - $17,019; and Mr. Thompson -
$10,341.
(4) Amounts reported for fiscal year 2002, 2001,
and 2000 consist of: (i) amounts we contributed to
our 401(k) Plan with respect to each named
individual, (ii) amounts we paid for group term
life insurance for each named individual, and (iii)
premiums paid for life insurance for Mr. Gray each
year. Amounts reported for fiscal year 2000 for Dr.
Nowotnik also include moving expenses.
(5) Mr. Gray's 2002 bonus of $110,000 was
deferred, by election of the Compensation Committee
and Mr. Gray, until certain performance goals are
met in 2003. The primary goal to be met is for the
Company to sign a licensing or equity agreement at
certain levels.
The remainder of this page is intentionally left blank
7
Option Grants in 2002
Individual Option Grants In Last Fiscal Year
Potential
Percent of realizable value at
Number of total options assumed annual rates
securities granted to of Stock Appreciation
underlying employees Exercise For Option Term (4)
options in fiscal price Expiration --------------------
Name granted # year(1) $/Sh(2) Date 5% 10%
- ----------------------- --------- ---------- --------- ---------- ---------- ---------
Kerry P. Gray (3) 160,000 36% $3.73 3/22/12 $376,000 $951,000
David P. Nowotnik (3) 50,000 11% $3.73 3/22/12 $117,000 $297,000
Stephen B. Thompson (3) 30,000 7% $3.73 3/22/12 $ 70,000 $178,000
(1) Based on an aggregate of 443,000 options
granted to employees in the fiscal year ended
December 31, 2002, including options granted to the
named individual.
(2) The exercise price of each grant on March 22,
2002 is the closing price as quoted on the American
Stock Exchange, or AMEX.
(3) Mr. Gray, Dr. Nowotnik and Mr. Thompson's
options vest 25% after twelve months and the
remaining 75% vest 2.083% monthly commencing twelve
months from the date of grant and are cumulatively
exercisable 48 months after the date of grant.
(4) Potential realizable value is based on the
assumption that the price per share of our common
stock appreciates at the assumed annual rate of
stock appreciation for the option term. There is no
assurance that the assumed 5% and 10% annual rates
of appreciation (compounded annually) will actually
be realized over the term of the option. The
assumed 5% and 10% annual rates are set forth in
accordance with the rules and regulations adopted
by the Securities and Exchange Commission and do
not represent our estimate of stock price appreciation.
Option Exercises and Year-End Value Table
This table includes the number of shares covered by
both exercisable and non-exercisable stock options
as of December 31, 2002. Also reported are the
values of "in-the-money" stock options which
represent the positive spread between the exercise
price of any such existing stock options and the
year-end price of our common stock.
8
Aggregated Option Exercises In Last Fiscal Year And
Fiscal Year-End Option Values
Number of Securities Value of
Underlying Unexercised Unexercised In-
Number of Options The-Money Options($)(1)
Shares At Fiscal Year End At Fiscal Year End
Acquired Value Exercisable/ Exercisable/
Name On Exercise # Realized ($) Unexercisable Unexercisable
- ------------------- ------------- ------------ ------------------- -----------------------
Kerry P. Gray - - 447,500 / 792,500 $0 / $0
David P. Nowotnik - - 60,412 / 139,588 $0 / $0
Stephen B. Thompson - - 40,412 / 74,588 $0 / $0
(1) On December 31, 2002, the closing price of our
stock on AMEX was $1.50.
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, 2004 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 $368,000 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 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, 2003
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 $230,000 subject
to adjustment by the Board of Directors. Dr.
Nowotnik is eligible to participate in all of our
employee benefit
9
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 $230,000.
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 six 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.
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 2002, 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 2003 was established at $368,000.
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
10
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 $110,000 bonus
from the Company in 2002 which the Compensation
Committee and Mr. Gray elected to defer until
certain performance goals are met in 2003. The
primary goal to be met is for the Company to
execute a licensing or equity agreement at certain levels.
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 2,500,000 shares
(subject to shareholder approval of Proposal 2) 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.
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. Flinn and
Mr. McDade. 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 entitled to receive
options to purchase 12,500 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 received option grants in 2002 of 160,000.
At December 31, 2002, we had granted to Mr. Gray
options under the 1995 Stock Awards Plan and the
2000 Plan to purchase an aggregate of 1,240,000
shares of Common Stock at a weighted average
exercise price per share of $3.47.
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, 2002 there were 94,857 shares granted
and 105,143 shares available for grant under the
2001 Restricted Stock Plan. Mr. Gray received a
grant of 28,150 shares of restricted stock in 2002
at a price of $3.73 per share. At December 31, 2002
we had granted to our President and CEO restricted
stock under the 2001 Restricted Stock Plan an
aggregate of 52,841 shares. None of the shares have
vested at December 31, 2002.
11
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.
Conclusion
The Compensation Committee believes these executive
compensation policies serve the interests of the
stockholders 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
J. Michael Flinn, Member
Herbert H. McDade, Jr., Member
REPORT OF THE AUDIT AND FINANCE COMMITTEE 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.
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.
12
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, 2002 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
Compensation Committee Interlocks And Insider
Participation
The members of the Compensation Committee of the
our Board of Directors are Dr. Link, Mr. Flinn and
Mr. McDade. 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.
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.
13
[ Performance Graph ]
Total Returns Index for 1997 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
------- -------- -------- -------- -------- --------
Access Pharmaceuticals, Inc.$100.00 20.46 18.18 45.46 40.36 13.64
NASDAQ Biotech Index $100.00 139.59 281.64 346.39 290.27 158.69
Russell 2000 Index $100.00 97.76 118.64 115.19 118.22 94.00
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. As of December 31,
2002, principal and interest on the notes was: Mr.
Gray - $625,000; Dr. Nowotnik - $313,000; and Mr.
Thompson - $188,000. As a result of new
regulations, we no longer make loans to our
executive officers.
14
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 2003 at a rate of $5,000 per month plus
expenses. Dr. Howell has also received an extension
on his warrants to purchase 30,000 shares of our
common stock at $3.00 per share, as partial
consideration for his consulting services, that can
be exercised until February 1, 2006. Previously,
Dr. Howell received warrants to purchase 10,000
shares of our common stock at $4.91 per share that
can be exercised until January 1, 2009; 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 2002, Dr. Howell was paid $55,000 in
consulting fees; during 2001 Dr. Howell was paid
$101,000 in consulting fees; and during 2000 Dr.
Howell was paid $66,000 in consulting fees. Dr.
Howell's agreement with us expires January 31, 2004
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 in 1995,
pursuant to which, among other things Mr. McDade
became a consultant to Access. This agreement was
terminated June 30, 2002. During 2002, we paid
Thoma Corporation, of which Mr. McDade is a
principal, $18,000 in consulting fees; during 2001
Thoma was paid $54,000 in consulting fees; and
during 2000 Thoma was paid $72,000 in consulting
fees.
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 10, 2003 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.
15
Common Stock Beneficially Owned
-------------------------------
Number of
Name Shares (1) % of Class
- --------------------------------- ---------- ----------
Herbert H. McDade. Jr. (2) 95,866 1.0%
Kerry P. Gray (3) 1,162,381 8.3%
Stuart M. Duty (4) 20,000 *
J. Michael Flinn (5) 125,475 1.0%
Stephen B. Howell (6) 147,750 1.1%
Max Link (7) 45,000 *
John J. Meakem, Jr. (8) 60,000 *
David P. Nowotnik (9) 234,579 1.8%
Stephen B. Thompson (10) 129,575 1.0%
Heartland Advisors, Inc. (11) 1,849,100 14.1%
Larry Feinberg (12) 1,954,200 14.1%
All Directors and Executive
Officers as a group
(consisting of 9 persons) (13) 2,020,626 14.1%
* - Less than 1%
(1) Includes our Common Stock held plus all
options and warrants exercisable within 60 days
after April 10, 2003
(2) Including presently exercisable options for
the purchase of 8,750 shares of our Common Stock
pursuant to the 1987 Stock Option Plan and
presently exercisable options for the purchase of
50,000 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 227,381
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
935,000 shares of our Common Stock pursuant to the
1995 Stock Option Plan and the 2000 Special Stock
Option Plan.
(4) Mr. Duty is a partner in Oracle Partners, L.P.
Oracle Partners, L.P. and affiliates (Oracle
Institutional Partners, L.P., Oracle Investment
Management, Inc., Sam Oracle Fund, Inc., and Larry
N. Feinberg) are known to be the beneficial owner
of more than five percent of our Common Stock. Mr.
Duty disclaims beneficial ownership of all such
shares.
(5) Including presently exercisable options for
the purchase of 1,000 and 45,000 shares of our
Common Stock pursuant to the 1987 Stock Option Plan
and 1995 Stock Option Plan, respectively.
(6) Including presently exercisable options for
the purchase of 750 and 27,084 shares of our Common
Stock pursuant to the 1987 Stock Option Plan and
1995 Stock Option Plan, respectively, and warrants
to purchase 10,000 shares of our Common Stock at an
exercise price of $4.91 per share, 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 $2.00 per share and warrants to
purchase 30,000 shares of our Common Stock at an
exercise price of $3.00 per share.
(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 30,000 shares of our Common Stock
pursuant to the 1995 Stock Option Plan.
(9) Including presently exercisable options for
the purchase of 153,128 shares of our Common Stock
pursuant to the 1995 Stock Option Plan.
(10) Including presently exercisable options for
the purchase of 84,483 shares of our Common Stock
pursuant to the 1995 Stock Option Plan.
(11) Heartland Advisors, Inc., 789 North Water
Street, Milwaukee, WI 53202, beneficially owns
1,849,100 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
16
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 February 12, 2003.
(12) 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
November 13, 2002. Includes 730,000 shares of our
Common Stock which are from Convertible Notes
converted at $5.50 per share. Mr. Duty, our
director and Partner in Oracle Partners, L.P.,
disclaims beneficial ownership of such shares.
(13) Does not include Heartland Advisors, Inc. nor
Larry N. Feinberg and affiliates.
PROPOSAL 2
AMENDMENT OF 1995 STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES ISSUABLE UNDER THE PLAN TO 2,500,000 SHARES.
Our Board of Directors has authorized, subject to
Stockholder ratification, an amendment to the 1995
Stock Option Plan, as amended, or the Plan, which
would provide for the ability of the Compensation
Committee to issue options to officers, directors,
employees, consultants and advisors to purchase, in
the aggregate up to 2,500,000 shares of our Common
Stock. Currently, the Plan authorizes the issuance
of up to 2,000,000 shares of Common Stock.
The purpose of the Plan is to enable us to allow
grants of options for our Common Stock to officers,
directors, employees, consultants and advisors of
the Company thereby strengthening our ability to
attract, motivate and retain key officers,
directors, employees, consultants and advisors by
providing them with an opportunity to acquire
shares of Common Stock and thus participate in the
ownership of the Company, including the opportunity
to share in the appreciation in the value of such
shares of Common Stock. It is intended that the
Plan will strengthen the mutuality of interest
between such persons and the stockholders of the
Company and provide additional incentive to certain
officers, directors, employees, consultants and
advisors to contribute to the success of the Company.
As of April 2, 2003 there were options outstanding
under the Plan to purchase an aggregate of
1,873,156 shares of our Common Stock. The Plan was
adopted on January 25, 1996 and replaced the 1987
Stock Awards Plan. No further grants have been or
can be made under the 1987 Stock Awards Plan. There
are currently options outstanding under the our
1987 Stock Awards Plan to purchase an aggregate of
approximately 17,178 shares of our Common Stock.
The Board of Directors believes that the proposed
amendment to the Plan would put our Plan in line
with other biomedical companies at a similar stage
of development with respect to the number of
options issuable and outstanding under our stock
option plans and give us the ability to attract and
retain qualified employees.
General. The Plan authorizes the granting of
"incentive stock options" as defined in Section
422A of the Code and non-qualified stock options.
See "Administration."
Securities Subject to the Plan and Market Value.
Under the Plan, options currently may be granted
covering up to an aggregate of 2,000,000 shares of
Common Stock. The Plan provides for appropriate
adjustments in the number and kind of shares
subject to the Plan in the event of a stock split,
stock dividend, or certain other similar changes in
the Common Stock, and in the event of a
reorganization, merger, consolidation or certain
other types of recapitalization.
17
Eligibility to Participate. Any executive, other
key employee or director of, or advisor or
consultant to, us or of any of our subsidiaries or
parent corporation is eligible to be granted
options under the Plan. No election by any such
person is required to participate in the Plan.
Administration. The Plan is administered by a
committee (the "Committee") consisting of two or
more directors appointed by the Board. The
Committee is authorized to determine which of our
employees are to be granted options, to determine
the number of shares to be subject to such options
and to determine the terms and conditions of the
options, all consistent with the terms of the Plan.
Stock Options. The Committee in its discretion may
issue stock options which qualify as incentive
stock options under the Code nor non-qualified
stock options. The Committee will determine the
time or times when each stock option becomes
exercisable, the period within which it remains
exercisable and the price per share at which it is
exercisable, provided that no incentive stock
option shall be exercised more than ten years after
it is granted and no other options shall be
exercised more than ten years and one day after it
is granted, and further provided that the exercise
price of incentive stock options shall not be less
than 100% of the fair market value of the Common
Stock on the date of the grant. The reported
closing price of the Common Stock on the American
Stock Exchange, or AMEX, on April 10, 2003 was
$2.28 per share.
Payment for shares purchased upon exercise of an
option must be made in full in cash or by check,
when the option is exercised. No option is
transferable except by will or the laws of descent
and distribution or pursuant to a qualified
domestic relations order; provided that the
Committee may grant options that are transferable
without payment of consideration to immediate
family members of the optionee or to trusts or
partnerships for such family members. The Committee
may also amend outstanding options to provide for
such transferability.
All options granted under the Plan terminate on the
earliest of (a) the expiration of the term
specified in the option document, which may not
exceed ten years from the date of grant; (b) the
expiration of three months from the date an option
holder's employment or service with us or our
subsidiaries or parent terminates for any reason
other than disability or death; (c) the expiration
of one year from the date an option holder's
employment or service with us, our subsidiaries or
our parent terminates by reason of such option
holder's disability or death. The Committee, in its
discretion, may provide for additional limitations
or provisions relating to the term of any option.
Tax Aspects of the Plan. The following discussion
is intended to briefly summarize the general
principles of federal income tax law applicable to
options granted under the Plan. A recipient of an
incentive stock option will not recognize taxable
income under either the grant or exercise of an
incentive stock option. The option holder will
recognize long-term capital gain or loss on a
disposition of the shares acquired upon exercise of
an incentive stock option, provided the option
holder does not dispose of those shares within two
years from the date the incentive stock option was
granted or within one year after the shares were
transferred to such option holder. Currently, for
regular federal income tax purposes, long-term
capital gain on a sale of stock generally is taxed
at a maximum rate of 20% or 28%, depending on the
holding period. If the option holder satisfies
requirements for capital gain treatment, then we
will not be allowed a deduction by reason of the
grant or exercise of an incentive stock option.
As a general rule, if the option holder disposes of
the shares before satisfying both holding period
requirements (a "disqualifying disposition"), the
gain recognized by the option holder on the
disqualifying disposition will be taxed as ordinary
income to the extent of the difference between (i)
the lesser of the fair
18
market value of the shares on the date of exercise
or the amount received for the shares in the
disqualifying disposition, and (ii) the adjusted
basis of the shares, and we will be entitled to a
deduction in that amount. The gain (if any) in
excess of the amount recognized as ordinary income
on a disqualifying disposition will be long-term or
short-term capital gain, depending on the length of
time the option holder held the shares prior to the
disposition.
The amount by which the fair market value of a
share at the time of exercise exceeds the option
price will be included in the computation of such
option holder's "alternative minimum taxable
income" in the year the option holder exercises the
incentive stock option. If an option holder pays
alternative minimum tax with respect to the
exercise of an incentive stock option, then the
amount of such tax paid will be allowed as a credit
against regular liability in a subsequent year to
the extent that the regular liability exceeds the
alternative minimum tax liability for such
subsequent year. The option holder's basis in the
shares for purposes of the alternative minimum tax
will be adjusted when income is included in
alternative minimum taxable income.
A recipient of a non-qualified stock option
generally will not recognize taxable income at the
time of grant, and we will not be allowed a
deduction by reason of the grant. Such an option
holder will recognize ordinary income in the
taxable year in which the option holder exercises
the non-qualified stock option, in an amount equal
to the excess of the fair market value of the
shares received upon exercise, at the time of
exercise of such options, over the exercise price
of the option, and we will be allowed a deduction
in that amount. Upon disposition of the shares
subject to the option, an option holder will
recognize long-term or short-term capital gain or
loss, depending upon the length of time the shares
were held prior to disposition, equal to the
difference between the amount realized on
disposition and the option holder's basis in a
share subject to the option (which basis ordinarily
is the fair market value of the shares subject to
the option on the date the option was exercised).
Equity Compensation Plan Information
The following table provides certain information
with respect to all of our equity compensation
plans in effect as of December 31, 2002:
Number of securities
remaining available for
Number of securities future issuance under
to be issued Weighted-average equity compensation
upon exercise of exercise price of plans (excluding
outstanding options, outstanding options securities reflected
Plan Category warrants and rights warrants and rights in column (a))
- --------------------- ------------------- ------------------- --------------
Equity compensation
plans approved by
security holders (1) 2,217,178 $3.78 343,643
Equity compensation
plans not approved by
security holders (2) 500,000 $2.50 -
---------- --------
Total 2,717,178 $3.49 343,643
========== ========
(1) Includes equity compensation plans approved by
our stockholders: the 1995 Stock Awards Plan and
the 1987 Stock Awards Plan and approximately
105,000 shares issuable under the Company's 2001
Restricted Stock Plan.
19
(2) The equity compensation plan not approved by
our stockholders is the 2000 Special Stock Option
Plan. The plan provides for the award of options to
purchase 500,000 shares of authorized but unissued
shares of common stock of the Company. All such
options have been granted.
UNLESS OTHERWISE INDICATED THEREON, THE ACCOMPANYING PROXY
WILL BE VOTED FOR THE APPROVAL TO AMEND THE OUR 1995 STOCK
OPTION PLAN AS DESCRIBED ABOVE. YOUR BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT.
PROPOSAL 3
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, 2003. 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, 2002 and the reviews of the
financial statements included in the Company's
Forms 10-Q for such fiscal year totaled $41,000.
All Other Fees
The aggregate fees billed for all other services
rendered by Grant Thornton LLP for the fiscal year
ended December 31, 2002 totaled $8,000.
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.
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, 2003.
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
20
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 2004 ANNUAL MEETING
The annual meeting of Stockholders in 2003 is
expected to be held on or about May 18, 2004. The
Board will make provisions for the presentation of
proposals submitted by eligible stockholders who
have complied with the relevant regulations of the
Securities and Exchange Commission. We must receive
such proposals, other than nominations for
directors, no later than December 13, 2003 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
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 11, 2003, 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 19, 2003 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.
(continued and to be signed on the reverse side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
DIRECTORS AND "FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN
BLUE OR BLACK INK AS SHOWN /x/
WITHHOLD FOR ALL EXCEPT
1. Election of Directors FOR ALL AUTHORITY (See instructions
NOMINEES FOR ALL NOMINEES below)
[ ] [ ] [ ]
Cumulative Votes for one or more nominees as follows:
[ ] Stuart M. Duty ______ Class 2 - 3 Year Term
[ ] Stephen B. Howell, MD ______ Class 2 - 3 Year Term
INSTRUCTION: To withhold authority to vote for any
individual nominee(s), mark "FOR ALL EXCEPT"
and fill in the circle next to each nominee
you wish to withhold, as shown here: /x/
2. Proposal to amend our 1995 Stock Option Plan
to increase the number of shares of our common
stock authorized for issuance under the Plan
to 2,500,000 shares FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to ratify and approve the appointment
of Grant Thornton LLP as our independent
accountants for the year ending
December 31, 2003 FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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.
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 of Stockholder ____________________________ ________
Date
Signature of Stockholder ____________________________ ________
Date
NOTE: This Proxy must be signed exactly as name appears hereon.
When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If signor is a corporation, please sign full corporate name
by duly other authorized officer, giving full title as such. If signor is a
partnership, please sign in partnership name by authorized person.