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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pursuant to Exchange Act Rule 0-11 (set forth the amount on
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was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
ACCESS PHARMACEUTICALS, INC.
2600 Stemmons Freeway, Suite 176
Dallas, Texas 75207
(214) 905-5100
April 14, 2004
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders of Access Pharmaceuticals, Inc. to be held on
Wednesday, May 19, 2004 at 10:00 a.m., local time, at the
offices of Bingham McCutchen LLP, 399 Park Avenue, 19th
Floor, New York, New York 10022, (212) 705-7000.
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, 2004
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders,
the Meeting, of Access Pharmaceuticals, Inc. will be held
at the offices of Bingham McCutchen LLP, 399 Park Avenue,
19th Floor, New York, New York, on Wednesday, May 19, 2004, at
10:00 a.m., local time, for the following purposes:
1. To elect three Class 3 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, 2004.
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
26, 2004, 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, 2003 accompanies the
Proxy Statement.
Information relating to the proposals is set forth in the
accompanying Proxy Statement dated April 14, 2004. 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
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Kerry P. Gray
President and CEO
Dallas, Texas
April 14, 2004
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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, 2004
This Proxy Statement is furnished by Access
Pharmaceuticals, Inc., a Delaware corporation, to holders
of its common stock, par value $.01 per share, or the
Common Stock, in connection with the solicitation of
proxies by our Board of Directors (the "Board") 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 Wednesday, May 19, 2004 at 10:00 a.m.,
local time, at the offices of Bingham McCutchen LLP, 399
Park Avenue, 19th Floor, 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 19, 2004.
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 26, 2004, the record date
for the Meeting, the number of our outstanding shares of
Common Stock that are entitled to vote was 15,384,035. 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 three (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 three nominees desired. The proxies submitted to
the Board in response to this solicitation may, at the
discretion of the proxy holder, cumulate the votes of the
shares they represent. However, the Board 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 in
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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,
2003 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 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 the
recommendations of the Board, or, if no such
recommendations are made, in accordance with their best
judgment.
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, 2003.
Corporate Governance Matters
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Corporate Governance Practices and Board Independence
The Board has undertaken a comprehensive review of the
Company's corporate governance practices, committee
charters and overall governance structure in light of the
Sarbanes-Oxley Act of 2002 and new rules and regulations
adopted by the Securities and Exchange Commission ("SEC")
and the American Stock Exchange ("AMEX"). In January 2004,
the Board approved a number of new or revised corporate
governance documents in order to ensure the Company's
continued compliance with applicable law, rules and
regulations. In particular, the Board amended and restated
its Audit and Finance Committee Charter, which is attached
hereto as Appendix A, and adopted charters for its
Compensation Committee and its Nominating and Corporate
Governance Committee, which committee it created in January
2004. The Board also adopted corporate governance
guidelines, a code of business conduct and ethics for
employees, executive officers and directors and a
whistleblower policy regarding the treatment of complaints
on accounting, internal accounting controls and auditing
matters. All of these documents are available on the
Company's website at www.accesspharma.com and a copy of any
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of them may be obtained upon written request to the
Company, c/o Investor Relations, 2600 Stemmons Freeway,
Suite 176, Dallas, Texas, 75207. The Board has determined
that a majority of its directors are independent under
applicable SEC and AMEX rules and regulations.
Stockholder Communications with the Board
The Board has established a process for stockholders to
send communications to it. Stockholders may send written
communications to the Board to Access Pharmaceuticals,
Inc., Board of Directors, c/o Chief Executive Officer, 2600
Stemmons Freeway, Suite 176, Dallas, Texas, 75207.
Stockholders also may send communications via email to
akc@accesspharma.com with the notation "Attention: Chief
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Executive Officer" in the Subject field. All communications
will be reviewed by the Chief Executive Officer of the
Company, who will review such communications, determine
whether such communications are relevant and/or for a
proper purpose and appropriate for Board review and, if
applicable, submit such communications to the Board on a
periodic basis.
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Attendance of Directors at Annual Stockholder Meetings
Prior to this year, the Company had no formal policy with
respect to director attendance at annual stockholder
meetings. All of the directors attended the 2003 annual
stockholder meeting. Although the Company currently does
not require directors to attend annual stockholder
meetings, it does encourage directors to do so and welcomes
their attendance. The Company has scheduled a Board meeting
in conjunction with our annual stockholder meeting this
year and plans to continue to do so in the future. The
Company expects that directors will attend annual
stockholder meetings absent a valid reason.
Nomination and Election of Directors
When seeking candidates for director, the Nominating and
Corporate Governance Committee may solicit suggestions from
incumbent directors, management or others. After conducting
an initial evaluation of a candidate, the committee will
interview that candidate if it believes the candidate might
be suitable to serve as a director. The committee may also
ask the candidate to meet with management. If the committee
believes a candidate would be a valuable addition to the
Board and there is either a vacancy on the Board or the
committee believes it is in the best interests of the
Company and our stockholders to increase the number of
Board members, it will recommend to the full Board that
candidate's election.
Before nominating a sitting director for re-election at an
annual stockholder meeting, the committee will consider the
director's performance on the Board and whether the
director's re-election would be consistent with the
Company's corporate governance guidelines and the Company's
continued compliance with applicable law, rules and
regulations.
The Board believes that it should be comprised of directors
with diverse and complementary backgrounds, and that
directors should have expertise that, at a minimum, may be
useful to the Company and may contribute to the success of
the Company's business. Directors also should possess the
highest personal and professional ethics and should be
willing and able to devote an amount of time sufficient to
effectively carry out their duties and contribute to the
success of the Company's business. When considering
candidates for director, the Committee takes into account
a number of factors, including the following:
* Independence from management;
* Age, gender and ethnic background;
* Relevant business experience;
* Judgment, skill and integrity;
* Existing commitments to other businesses;
* Potential conflicts of interest;
* Corporate governance background;
* Financial and accounting background;
* Executive compensation background; and
* Size and composition of the existing Board.
The Nominating and Corporate Governance Committee will
consider candidates for director suggested by stockholders
by considering the foregoing criteria and the additional
information referred to below. Stockholders wishing to
suggest a candidate for director should write to the
Company, c/o Investor Relations, and include the following:
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* The name and address of the stockholder and a statement
that he, she or it is a stockholder of the Company and is
proposing a candidate for consideration by the committee;
* The class and number of shares of Company capital stock,
if any, owned by the stockholder as of the record date for
the annual stockholder meeting (if such date has been
announced) and as of the date of the notice, and length of
time such stockholder has held such shares;
* The name, age and address of the candidate;
* A description of the candidate's business and educational
experience;
* The class and number of shares of Company capital stock,
if any, owned by the candidate, and length of time such
candidate has held such shares;
* Information regarding each of the foregoing criteria the
Board generally considers, other than the factor regarding
Board size and composition, sufficient to enable the
committee to evaluate the candidate;
* A description of any relationship between the candidate
and any customer, supplier or competitor of the Company or
any actual or potential conflict of interest;
* A description of any relationship or understanding
between the stockholder and the candidate; and
* A statement that the candidate is willing to be
considered and willing to serve as a director if nominated
and elected.
PROPOSAL 1
ELECTION OF DIRECTORS
Our Certificate of Incorporation and Bylaws presently
provide that our Board 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. Messrs. McDade, Gray and
Flinn are members of the 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. Mr. Duty and Dr. Howell
are members of the Class 2 Directors with their terms set
to expire upon the annual meeting of stockholders in 2006.
Each of our officers is selected by the Board 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 2004 (Class 3 Directors)
Messrs. McDade, Gray and Flinn are the members of the Class
3 Directors. Mr. McDade has served as director since 1988,
Mr. Gray has served as a Director since 1996 and Mr. Flinn
has served as director since 1983. The terms of Messrs.
McDade, Gray and Flinn expire at the Meeting. If elected at
the Meeting, all three will serve for a term of three years
expiring on the date of the annual meeting of Stockholders
in 2007. The terms of the other four Directors will
continue as indicated below.
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Business and Experience of Nominees for Director
Mr. Herbert H. McDade, Jr. was elected to be one of our
directors in 1988, and presently is Chairman of the Board.
He is also a member of the Compensation Committee of the
Board. In February 1989, he was elected Vice-Chairman of
the Board and Chief Executive Officer. In June 1989, he was
elected Chairman of the Board 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 board of
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 and Compensation Committees of the Board. 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.
The nominees have consented to serve as our Directors and
the Board has no reason to believe that any nominee will be
unavailable.
The Board recommends a vote "FOR" the proposed nominees to
the Board 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 IN THE
EVENT THE NOMINEES ARE UNABLE OR UNWILLING TO SERVE.
5
Information With Respect to Directors Whose Terms Continue
and Executive Officers
Directors Whose Term Expires at the Annual Meeting in 2005
(Class 1 Directors)
Max Link, Ph.D. has been one of our directors since 1996.
Dr. Link is also a member of the Audit & Finance and
Compensation Committees of the Board. He has held a number
of executive positions with pharmaceutical and health care
companies. Most recently, from March 2001 until August
2003, Dr. Link served as Chairman and CEO of Centerpulse,
Ltd. (now a part of Zimmer Holdings, Inc.). 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 six other
publicly-traded life science companies: Alexion
Pharmaceuticals, Inc., Cell Therapeutics, Inc., CytRx
Corporation, Discovery Laboratories, Inc., Human Genome
Sciences, Inc., and Protein Design Labs, Inc. 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.
Directors Whose Term Expires at the Annual Meeting in 2006
(Class 2 Directors)
Mr. Stuart M. Duty has served as one of our directors since
November 2002. Mr. Duty is currently a Partner at 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, Inc.
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.
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
6
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 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. 77 Chairman of the Board
Kerry P. Gray 51 President, Chief Executive
Officer, Director
Stuart M. Duty 39 Director
J. Michael Flinn 70 Director
Stephen B. Howell, M.D. 59 Director
Max Link, Ph.D. 63 Director
John J. Meakem, Jr. 67 Director
David P. Nowotnik, Ph.D. 55 Senior Vice President Research
& Development
Stephen B. Thompson 50 Vice President, Chief Financial
Officer, Treasurer
Meetings of the Board and Committees
The Board held a total of six meetings in 2003. The
standing committees of the Board are the Audit and Finance
Committee, the Compensation Committee and the Nominating
and Corporate Governance Committee. During the fiscal year
ended December 31, 2003, 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.
The Audit and Finance Committee presently is composed of
three directors, J. Michael Flinn, Max Link,
7
Ph.D. and John J. Meakem , Jr., each of whom the Board has
determined is independent under applicable SEC and AMEX
rules and regulations. The Board has determined that Dr.
Link is qualified to be an "audit committee financial
expert" under applicable rules and regulations of the SEC.
The Audit and Finance Committee is governed by a charter
which was amended and restated in January 2004 and is
attached hereto as Appendix A. The Charter delegates to the
Audit and Finance Committee the responsibility to engage
the independent auditors, review the audit fees, supervise
matters relating to audit functions and review and set
internal policies and procedure regarding audits,
accounting and other financial controls. During the 2003
fiscal year, the Audit and Finance Committee met two times.
The Compensation Committee presently is composed of three
directors, Max Link, Ph.D., J. Michael Flinn and Herbert H.
McDade, Jr., each of whom the Board has determined is
independent under applicable AMEX rules and regulations.
Responsibilities of this committee include approval of
remuneration arrangements for executive officers of the
Company, review and approval of compensation plans relating
to executive officers and directors, including grants of
stock options under the Company's 1995 Stock Awards Plan
and 2000 Special Stock Option Plan, and other benefits and
general review of the Company's employee compensation
policies. None of the members of the Compensation Committee
has any relationship with either the Company or the
Company's officers requiring disclosure under applicable
regulations of the SEC. The charter of the Compensation
Committee is available on the Company's website at
www.accesspharma.com. During the 2003 fiscal year, the
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Compensation Committee met two times.
The Nominating and Corporate Governance Committee was
formed in January 2004 and presently is composed of three
directors, Stuart M. Duty, John J. Meakem and Max Link,
Ph.D., each of whom the Board has determined is independent
under applicable AMEX rules and regulations. The Nominating
and Corporate Governance Committee is responsible for
considering potential Board members, making recommendations
to the full Board as to nominees for election to the Board,
assessing the effectiveness of the Board and implementing
the Company's corporate governance guidelines. The charter
of the Nominating and Corporate Governance Committee is
available on the Company's website at www.accesspharma.com.
--------------------
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.
Section 16(a) Beneficial Ownership Reporting Compliance
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
8
executive officers during the fiscal year ended December
31, 2003, all Section 16(a) filing requirements applicable
to our directors, executive officers and 10% holders for
such year were complied with except for Mr. Duty, who filed
one late Form 3 and 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 $100,000 for services
rendered in all capacities for the years ended December 31,
2003, 2002 and 2001.
Summary Compensation Table
--------------------------
Long-term
Annual Compensation Compensation Awards
---------------------------- -------------------------
Securities
Name and Restricted Underlying All Other (4)
Principal Position Year Salary (1) Bonus (2) Stock ($)(3) Options (#) Compensation
- ----------------------- ----- ----------- ---------- ------------- ----------- --------------
Kerry P. Gray
President and CEO 2003 $366,848 $130,000 $ - 140,000 $ 10,837
2002 338,150 110,000(5) 105,000 160,000 9,713
2001 307,449 105,000 100,000 - 8,591
David P. Nowotnik, Ph.D.
Senior Vice President
Research and Development 2003 $226,530 $ 24,154 $ 20,412 35,000 $ 6,042
(4) 2002 212,001 20,142 19,960 50,000 5,648
2001 196,254 19,960 24,280 - 5,333
Stephen B. Thompson
Vice President, Chief
Financial Officer 2003 $138,030 $ 14,704 $ 12,474 20,000 $ 3,918
2002 129,501 12,474 12,176 30,000 3,540
2001 119,502 12,176 14,700 - 3,340
(1) Includes amounts deferred under our 401(k) Plan.
(2) Includes bonuses earned in the reported year but paid
in the following year.
(3) The value of all restricted stock for each named
individual at December 31, 2003 is: Mr. Gray - $244,546;
Dr. Nowotnik - $104,554; and Mr. Thompson - $63,729.
(4) Amounts reported for fiscal year 2003, 2002, and 2001
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.
(5) Mr. Gray's 2002 bonus of $110,000 was deferred, by
election of the Compensation Committee and Mr. Gray, until
certain performance goals were met. The primary goal of the
Company's signing a licensing or equity agreement at
certain levels was met and the bonus was paid in 2004.
April 13, 2004
9
Option Grants in 2003
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 (3)
options in fiscal price Expiration ---------------------
Name granted (#) year (1) $/Sh (2) Date 5% 10%
- ----------------------- ----------- ------------ ---------- ---------- ---------- ----------
Kerry P. Gray (4) 140,000 45% $2.30 5/19/13 $203,000 $513,000
David P. Nowotnik (4) 35,000 11% $2.02 1/30/13 $ 44,000 $113,000
Stephen B. Thompson (4) 20,000 6% $2.02 1/30/13 $ 25,000 $ 64,000
(1) Based on an aggregate of 312,000 options granted to
employees in the fiscal year ended December 31, 2003,
including options granted to the named individual.
(2) The exercise price of each grant on the date of grant
is the closing price as quoted on AMEX.
(3) 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.
(4) 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.
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, 2003. 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.
The remainder of this page is intentionally left blank.
10
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 - - 1,061,250 / 318,750 $2,267,000 / $633,000
David P. Nowotnik,
Ph.D. - - 168,750 / 81,250 $435,000 / $212,000
Stephen B. Thompson - - 95,313 / 49,688 $245,000 / $130,000
(1) On December 31, 2003, the closing price of our stock on
AMEX was $5.24.
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, 2005 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 $390,000, subject to adjustment by
the Board. 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;
* stock options at the discretion of the Board;
* 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, 2004 and which
thereafter may be automatically renewed for successive one-
year periods. Under this
11
agreement, Dr. Nowotnik is currently entitled to receive an
annual base salary of $241,980, subject to adjustment by
the Board. 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;
* stock options at the discretion of the Board;
* long-term disability insurance to provide compensation
equal to at least $60,000 annually; and
* term life insurance coverage of $242,000.
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
This report is not deemed to be "soliciting material" or to
be "filed" with the Securities and Exchange Commission or
subject to the Securities and Exchange Commission's proxy
rules or to the liabilities of Section 18 of the Securities
Exchange Act of 1934 (the "1934 Act") and the report shall
not be deemed to be incorporated by reference into any
prior or subsequent filing by the company under the
Securities Act of 1933 (the "1933 Act") or the 1934 Act.
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 2003, 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
12
comparable organizations, Mr. Gray's base annual salary for
2004 was established at $390,000.
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 $130,000.
Stock Option Plans
In 1995, the Board 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 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, the Board
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, chosen by
the Board, 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 2003 of 140,000. At
December 31, 2003, we had granted to Mr. Gray options under
the 1995 Stock Awards Plan and the 2000 Plan to purchase an
aggregate of 1,380,000 shares of Common Stock at a weighted
average exercise price per share of $3.52.
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, 2003 there were
149,376 shares granted and 50,624 shares available for
grant under the 2001
13
Restricted Stock Plan. At December 31, 2003 we had granted
to our President and CEO restricted stock under the 2001
Restricted Stock Plan an aggregate of 52,841 shares of
which 6,172 shares had vested at December 31, 2003.
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 effectively serve the interests of
the stockholders. 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, Ph.D., Chairman and Member
J. Michael Flinn, Member
Herbert H. McDade, Jr., Member
REPORT OF THE AUDIT AND FINANCE COMMITTEE TO STOCKHOLDERS
This report is not deemed to be "soliciting material" or to
be "filed" with the SEC or subject to the SECs proxy rules
or to the liabilities of Section 18 of the 1934 Act and the
report shall not be deemed to be incorporated by reference
into any prior or subsequent filing by the company under
the 1933 or the 1934 Act.
The Audit and Finance Committee of the Board operates under
a written charter adopted by the Board in May 2001 and
amended and restated by the Board in January 2004. The
members of the Audit and Finance Committee are Messrs.
Flinn and Meakem and Dr. Link. The Company believes that
all members of the Audit and Finance Committee meet the
independence standards of Section 121(A) of the AMEX
listing standards. In accordance with its written charter,
the Audit and Finance Committee assists the Board 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 and Finance 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
14
Standards Board Standard No. 1, "Independence Discussions
with Audit Committees." The Audit and Finance 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 and Finance 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 and Finance 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 and Finance Committee's discussion
with management and the independent accountants and the
Audit and Finance Committee's review of the representation
of management and the report of the independent accountants
to the Audit and Finance Committee, the Audit and Finance
Committee recommended to the Board that the Company include
the audited consolidated financial statements in its Annual
Report on Form 10-K for the year ended December 31, 2003
for filing with the Securities and Exchange Commission. The
Audit and Finance Committee also recommended the
reappointment, subject to stockholder approval, of the
independent accountants and the Board concurred with such
recommendation.
J. Michael Flinn, Chairman and Member
Max Link, Ph.D., Member
John J. Meakem, Jr., Member
Compensation Committee Interlocks And Insider Participation
The members of the Compensation Committee of the Board are
Dr. Link, Mr. Flinn and Mr. McDade. The Compensation
Committee makes recommendations to the Board regarding executive
compensation matters, including decisions relating to
salary and bonus and grants of stock options. No member of
the Compensation Committee serves as a member of the board
of directors or compensation committee of any entity that
has one or more executive officers serving as members of
our board of directors or compensation committee.
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,
1998. The graph assumes an investment of $100 at the
beginning of the period.
The remainder of this page is intentionally left blank.
15
Insert Graph
Total Returns Index for 1998 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
------- -------- -------- -------- -------- --------
Access Pharmaceuticals, Inc.$100.00 88.89 222.22 197.33 66.67 232.89
NASDAQ Biotech Index $100.00 201.76 248.16 207.96 113.69 165.71
Russell 2000 Index $100.00 121.36 117.83 120.93 96.15 141.60
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 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, 2003,
principal and interest on the notes was: Mr. Gray -
$660,000; Dr. Nowotnik - $330,000; and Mr. Thompson -
$198,000. As a result of new regulations, we no longer make
loans to our executive officers.
16
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 2004 at a rate of $5,000 per
month plus expenses. Previously, Dr. Howell 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. Dr. Howell also 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; and,
warrants to purchase 30,000 shares of our common stock at
$2.00 per share that can be exercised until January 1,
2007. During 2003, Dr. Howell was paid $60,000 in
consulting fees; during 2002 Dr. Howell was paid $55,000 in
consulting fees; and during 2001 Dr. Howell was paid
$101,000 in consulting fees. Dr. Howell's agreement with us
expires January 31, 2005 and can be renewed.
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
14, 2004 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. Beneficial ownership as reported in
the following table has been determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. 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.
The address of each holder listed below, except as
otherwise indicated, is c/o Access Pharmaceuticals, Inc.,
2600 Stemmons Freeway, Suite 176, Dallas, Texas 75207.
Common Stock Beneficially Owned
-------------------------------
Number of
Name Shares (1) % of Class
- -------------------------------- ---------- ----------
Herbert H. McDade, Jr. (2) 81,007 1.0%
Kerry P. Gray (3) 1,398,631 8.5%
Stuart M. Duty (4) 20,000 *
J. Michael Flinn (5) 137,975 1.0%
Stephen B. Howell, M.D. (6) 169,500 1.0%
Max Link, Ph.D. (7) 59,500 *
John J. Meakem, Jr. (8) 72,500 *
David P. Nowotnik, Ph.D. (9) 279,329 1.8%
Stephen B. Thompson (10) 158,855 1.0%
Heartland Advisors, Inc. (11) 1,806,100 11.7%
Larry Feinberg (12) 1,954,200 12.1%
All Directors and Executive
Officers as a group
(consisting of 9 persons) (13) 2,377,297 13.9%
* - Less than 1%
17
(1) Includes our Common Stock held plus all options
exercisable within 60 days after April 14, 2003
(2) Including presently exercisable options for the
purchase of 6,250 shares of our Common Stock pursuant to
the 1987 Stock Option Plan and presently exercisable
options for the purchase of 37,500 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 1,171,250 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
beneficially own an aggregate of 1,945,200 shares 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 57,500 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 39,584 shares of our Common Stock pursuant to
the 1995 Stock Option Plan and a warrant to purchase 30,000
shares of our Common Stock at an exercise price of $3.00
per share, a warrant to purchase 10,000 shares of our
Common Stock at an exercise price of $4.91 per share, a
warrant to purchase 15,000 shares of our Common Stock at an
exercise price of $3.00 per share, and a warrant to
purchase 30,000 shares of our Common Stock at an exercise
price of $2.00 per share.
(7) Including presently exercisable options for the
purchase of 10,000 shares of our Common Stock pursuant to
the 1995 Stock Option Plan.
(8) Including presently exercisable options for the
purchase of 42,500 shares of our Common Stock pursuant to
the 1995 Stock Option Plan.
(9) Including presently exercisable options for the
purchase of 193,750 shares of our Common Stock pursuant to
the 1995 Stock Option Plan.
(10) Including presently exercisable options for the
purchase of 111,250 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 1,806,000 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 stock ownership of
Heartland, could be deemed to have voting and/or investment
power over the shares Heartland beneficially owns. The
information set forth in this footnote is based on a
Schedule 13G filed by Heartland on February 12, 2004.
(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 are known to
beneficially own more than five percent of our Common
Stock. The information set forth in this footnote is based
on a Schedule 13D 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. or Larry N.
Feinberg and affiliates.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board 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, 2004.
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 they desire to do so and will be
available to respond to appropriate questions.
18
Audit Fees
The aggregate fees billed for professional services
rendered by Grant Thornton LLP for the audit of the
Company's annual financial statements for the fiscal years
ended December 31, 2003 and 2002 and the reviews of the
financial statements included in the Company's reports on
Form 10-Q for such fiscal years totaled $49,000 and
$41,000, respectively.
All Other Fees
The aggregate fees billed for all other services rendered
by Grant Thornton LLP for the fiscal years ended December
31, 2003 and 2002 totaled $9,000 and $8,000,
respectively. Such services consisted of reviewing the
Form S-3 and attending the Annual Shareholders meeting and
Audit Committee meeting.
Auditor Independence
The Audit and Finance 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.
Policy on Audit and Finance Committee Pre-Approval of Audit
and Permissible Non-Audit Services of Independent
Accountants
The Audit and Finance Committee pre-approves all audit and
non-audit services provided by the independent accountants
prior to the engagement of the independent accountants with
respect to such services. The Chairman of the Audit and
Finance Committee has been delegated the authority by the
Audit and Finance Committee to pre-approve the engagement
of the independent accountants when the entire committee is
unable to do so. The Chairman must report all such pre-
approvals to the entire Audit and Finance Committee at the
next committee meeting. The Audit and Finance Committee
approved 100% of the services listed under the preceding
captions "Audit-Related Fees," "Tax Fees" and "All Other Fees."
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, 2004.
Proposal 2 will be approved upon the affirmative vote of a
majority of shares present in person or represented by
proxy at the Meeting and entitled to vote on each such proposal.
OTHER MATTERS
As of the date of this Proxy Statement, the Board 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 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 by the persons named in the enclosed form of
proxy, or their substitutes acting thereunder, in
accordance
19
with the recommendations of the Board, or, if no such
recommendations are made, in accordance with their best
judgment.
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
The annual meeting of Stockholders in 2005 is expected to
be held on or about May 17, 2005. The Board will make
provisions for the presentation of proposals submitted by
eligible stockholders who have complied with the relevant
regulations of the SEC. We must receive such proposals,
other than nominations for directors, no later than
December 11, 2004 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 Proxy Statement date for the previous
year's annual meeting.
FORM 10-K
Our Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 is available without charge to each
stockholder, upon written request to the Company, c/o
Investor Relations, at our principal executive offices at
2600 Stemmons Freeway, Suite 176, Dallas, Texas 75207 and
is also available on our website at http://www.accesspharma.com.
----------------------------
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
20
APPENDIX A
ACCESS PHARMACEUTICALS, INC.
AUDIT AND FINANCE COMMITTEE CHARTER
Charter
This charter governs the operations of the Audit and
Finance Committee (the "Committee") of the Board of
Directors (the "Board") of Access Pharmaceuticals, Inc.
(the "Company"). At least annually, the Committee shall
review and reassess the adequacy of this charter and
recommend any proposed changes to the Board for its
approval. The Company shall make this charter available on
its website at www.accesspharma.com.
Membership of Committee
The Committee shall be composed of at least three
directors, each of whom is independent of management and
the Company. Members of the Committee shall be considered
independent if, in the affirmative determination of the
Board, they have no material relationship that would
interfere with the exercise of independent judgment and
otherwise satisfy the independence requirements of American
Stock Exchange LLC ("AMEX") and the rules and regulations
of the Securities and Exchange Commission (the "Commission").
All Committee members shall be able to read and understand
fundamental financial statements, including the Company's
balance sheet, income statement, and cash flow statement,
and at least one member shall have past employment
experience in finance or accounting, requisite professional
certification in accounting, or any other comparable
experience or background which result's in the individual's
financial sophistication sufficient to satisfy the
requirements of AMEX.
The Committee shall be appointed by the Board, upon
recommendation of the Nominating and Corporate Governance
Committee of the Board, if one exists. The chairman of the
Committee shall be designated by a majority vote of the
full Committee. Committee members shall serve until their
successors are duly appointed and qualified or until their
earlier removal by the Board at any time.
Meetings
The Committee shall meet as often as it shall determine,
but not less frequently than as required by the Commission,
AMEX or other applicable rule or regulation. The Committee
may request any officer or employee of the Company or the
Company's outside counsel or independent auditor to attend
a meeting of the Committee or to meet with any members of,
or any consultant to, the Committee.
Except as otherwise provided by the Certificate of
Incorporation or By-Laws of the Company, the frequency,
location and operation of meetings and similar procedural
matters relating to the Committee shall, to the extent
applicable, be the same as those that relate to meetings
of, and procedural matters concerning, the Board.
Purposes of the Committee
The Committee shall assist the Board in overseeing the
integrity of the Company's financial statements, the
Company's compliance with legal and regulatory
requirements, the independent auditor's qualifications and
independence and the performance of the Company's
independent auditors. In doing so, it is the goal of the
Committee to maintain free and open communication among the
Committee, independent auditor and management of the
Company. In discharging its oversight role, the Committee
is empowered to investigate any matter brought to its
attention with full access to all books, records,
facilities and personnel of the Company.
Responsibilities and Processes
The primary responsibility of the Committee is to select,
and ensure the independence of the independent auditor,
oversee the Company's financial reporting process on behalf
of the Board and report the results of its activities to
the Board. Management is responsible for preparing the
Company's financial statements, and the independent auditor
is responsible for auditing those financial statements.
The Committee, in carrying out its responsibilities,
believes its policies and procedures should remain
flexible, in order to best react to changing conditions and
circumstances. The Committee should take the appropriate
actions to set the overall corporate "tone" for quality
financial reporting, sound business risk practices and
ethical behavior.
The Committee may form and delegate authority to
subcommittees consisting of one or more members when
appropriate. In addition, the Committee is authorized to
engage, and the Company shall provide funding for, such
independent counsel and other advisors as the Committee may
deem necessary or advisable to retain to assist the
Committee in carrying out its duties. The Company shall
provide appropriate funding, as determined by the
Committee, for payment of compensation to any such counsel
or other advisors and to any registered public accounting
firm engaged for the purpose of preparing or issuing an
audit report or performing other audit, review or
attestation services for the Company. The Company shall
also provide appropriate funding, as determined by the
Committee, for payment of ordinary administrative expenses
of the Committee that are necessary or appropriate in
carrying out its duties.
The following shall be the principal recurring processes of
the Committee in carrying out its oversight
responsibilities. The processes are set forth as a guide
with the understanding that the Committee may supplement
them as appropriate.
Relating to the Independent Auditor
* The Committee shall have a clear understanding with
management and the independent auditor that the independent
auditor is ultimately accountable, and must report
directly, to the Committee, as representatives of the
Company's stockholders. The Committee shall have the sole
authority to appoint (subject, if applicable, to
ratification by the stockholders of the Company), terminate
and replace the independent auditor. The Committee may
receive input from management on these matters but shall
not delegate these responsibilities. The Committee shall
be responsible for the oversight of the independent
auditor, including the resolution of any disagreements
between management and the independent auditor regarding
financial reporting or other matters.
* The Committee shall have the sole authority to approve
the scope, fees and terms of all audit engagements, as well
as all permissible non-audit engagements of the independent
auditor. The Committee shall pre-
approve all audit and permissible non-audit services to be
performed for the Company by the independent auditor,
giving effect to the "de minimus" exception for
ratification of certain non-audit services set forth in
Section 10A(a)(i)(1)(B) of the Exchange Act. On an annual
basis, the Committee shall consider whether the provision
of non-audit services by the independent auditor, on an
overall basis, is compatible with maintaining the
independent auditor's independence from management.
* The Committee shall ensure that it receives from the
auditors a formal written statement delineating all
relationships between the auditor and the Company,
consistent with Independence Standards Board Standard 1.
The Committee shall discuss with the auditor any disclosed
relationships or services that may impact the objectivity
and independence of the auditor and shall take, or
recommend that the Board take, appropriate action to
oversee the independence of the auditor. The Committee
shall ensure the rotation of the lead (or coordinating)
audit partner having primary responsibility for the audit
and the audit partner responsible for reviewing the audit,
to the extent required by law.
Relating to Audits and Financial Statements
* The Committee shall discuss with the independent auditor
the overall scope and plans for the annual audit. In
addition, the Committee shall discuss with management and
the independent auditor the adequacy and effectiveness of
the accounting and financial controls, including the
Company's system to monitor and manage business risk, and
legal and ethical compliance programs.
* The Committee shall review with management and the
independent auditor the audited financial statements
(including management's discussion and analysis contained
therein) to be included in the Company's Annual Report on
Form 10-K, including its judgment as to the quality, and
not only the acceptability, of accounting principles, the
reasonableness of significant judgments and the clarity of
the disclosures in the financial statements. The Committee
also shall discuss the results of the annual audit and any
other matters required to be communicated to the Committee
by the independent auditor under generally accepted
accounting principles. Based on the foregoing and on review
of other information made available to the Committee, the
Committee shall recommend to the Board whether the audited
financial statements should be included in the Company's
Form 10-K. In addition, the Committee shall prepare
annually a report to the stockholders of the Company, as
required by the rules of the Commission.
* The Committee shall similarly review the interim
financial statements with management and the independent
auditor prior to the filing of each of the Company's
Quarterly Reports on Form 10-Q. The Committee also shall
discuss the results of the quarterly review and any other
matters required to be communicated to the Committee by the
independent auditor under generally accepted accounting
standards. The chairman of the Committee may represent the
entire Committee for the purposes of this review.
* The Committee shall discuss with the independent auditor
the matters required to be discussed by Statement on
Auditing Standards No. 61 relating to the conduct of the
audit, including any difficulties encountered in the course
of the audit work, any restrictions on the scope of
activities or access to requested information, and any
significant disagreements with management. The Committee
also shall obtain from the independent auditor assurance
that Section 10A(b) of the Exchange Act (including auditor
discovery that illegal acts may have occurred) has not been
implicated.
* The Committee shall review each report of the independent
auditor, delivered to the Committee pursuant
to Section 10A(k) under the Exchange Act, concerning:
(a) all critical accounting policies and practices to be
used, (b) all alternative treatments of financial
information within generally accepted accounting principles
that have been discussed with management, ramifications of
the use of such alternative disclosures and treatments and
the treatment preferred by the independent auditor and
(c) other material written communications between the
independent auditor and management, such as any management
letter or schedule of unadjusted differences.
* The Committee shall review the disclosures made by
officers of the Company in the certification required to be
filed (a) as part of the Company's Annual Reports on Form
10-K and Quarterly Reports on Form 10-Q, regarding any
significant deficiencies in the design or operation of
internal controls or material weaknesses therein and any
fraud involving management or other employees who have a
significant role in the Company's internal controls and
(b) pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, regarding the compliance of periodic reports and
their fair presentation of the Company's financial
statements and results of operations.
Relating to Other Compliance Matters
* The Committee shall establish procedures for the receipt,
retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls
or auditing matters, and the confidential, anonymous
submission by Company employees of concerns regarding
questionable accounting or auditing matters and shall
monitor ongoing compliance with those provisions.
* The review and approval of the Committee shall be
required prior to the Company entering into any
transactions with a related party.
* The Committee shall review such other reports, adopt such
other policies and implement such other procedures as shall
be necessary to comply with the rules and regulations that,
from time to time, may be established by AMEX or the
Commission.
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 14,
2004, 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 Wednesday, May 19, 2004
at 10:00 a.m., local time, at the offices of Bingham
McCutchen LLP, 399 Park Avenue, 19th Floor, New York, New
York 10022, (212) 705-7000, 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: ____ Herbert H. McDade, Jr. Class 3 - 3 Year Term
____ Kerry P. Gray Class 3 - 3 Year Term
____ J. Michael Flinn Class 3 - 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, 2004. [ ] [ ] [ ]
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.