SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed
by
the Registrant x
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by
a Party other than the Registrant o
Check
the
appropriate box:
o
Preliminary
Proxy Statement
o
Confidential,
for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
x
Definitive
Proxy Statement
o
Definitive
Additional Materials
o
Soliciting
Material Pursuant to Rule 14a-11(c) or Rule
14a-12
MANHATTAN
PHARMACEUTICALS, INC.
Payment
of Filing Fee (Check the appropriate box):
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fee
required.
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title
of
each class of securities to which transaction applies:
2) Aggregate
number of securities to which transaction applies:
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price or other underlying value of transaction computed pursuant to Exchange
Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated
and
state how it was determined):
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maximum aggregate value of transaction:
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fee
paid:
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previously with preliminary materials.
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box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting
fee was paid previously. Identify the previous filing by registration
statement
number, or the form or schedule and the date of its filing.
1) Amount
previously paid:
2) Form,
schedule or registration statement no.:
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party:
4) Date
filed:
MANHATTAN
PHARMACEUTICALS, INC.
810
Seventh Avenue, 4th Floor
New
York,
New York 10019
________________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER
18, 2005
________________________
TO
THE
STOCKHOLDERS OF MANHATTAN PHARMACEUTICALS, INC.:
Please
take notice that the Annual Meeting of Stockholders of Manhattan
Pharmaceuticals, Inc. (the “Company”) will be held, pursuant to due call by the
Board of Directors of the Company, at the Dream Hotel, 210 West 55th
Street,
New York, New York 10019, November 18, 2005, at 10:00 a.m. (EST), or at any
adjournment or adjournments thereof, for the purpose of considering and taking
appropriate action with respect to the following:
| 1. |
To
elect seven directors;
|
| 2. |
To
ratify and approve an amendment to the Company’s 2003 Stock Option Plan
increasing the number of shares of common stock available for issuance
thereunder from 5,400,000 to 7,400,000;
|
| 3. |
To
ratify the appointment of J.H. Cohn LLP as the Company’s independent
registered public accounting firm for fiscal 2005;
and
|
| 4. |
To
transact any other business as may properly come before the meeting
or any
adjournments thereof.
|
Pursuant
to due action of the Board of Directors, stockholders of record on September
20,
2005, will be entitled to vote at the meeting or any adjournments
thereof.
All
stockholders are cordially invited to attend the Annual Meeting in person.
Whether or not you plan to attend the meeting, please complete, date and
sign
the enclosed proxy and return it in the enclosed envelope, or vote by telephone,
as promptly as possible. If you attend the meeting, you may withdraw the
proxy
and vote in person.
By
Order
of the Board of Directors,
MANHATTAN
PHARMACEUTICALS, INC.
/s/
Nicholas J. Rossettos
Nicholas
J. Rossettos, Secretary
October
17, 2005
PROXY
STATEMENT
OF
MANHATTAN
PHARMACEUTICALS, INC.
___________________
ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD
NOVEMBER
18, 2005
___________________
The
enclosed proxy is solicited on behalf of the Board of Directors (the “Board”) of
Manhattan Pharmaceuticals, Inc., a Delaware corporation (“Manhattan” or the
“Company”), for use at the Annual Meeting of Stockholders to be held on November
18, 2005, at 10:00 a.m. EST (the “Annual Meeting”), or at any adjournment
or postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting. The Annual Meeting will be held at
the
Dream Hotel, 210 West 55th
Street,
New York, New York 10019. The Company intends to mail this proxy statement
and
accompanying proxy card on or about October 17, 2005, to all stockholders
entitled to vote at the Annual Meeting.
PROXIES
AND VOTING
Voting
Rights and Outstanding Shares
Only
holders of record of the Company’s common stock, par value $0.001 per share (the
“Common Stock”), at the close of business on September 20, 2005 (the “Record
Date”) will be entitled to notice of and to vote at the Annual Meeting. The
holders of Common Stock will vote on all the matters to be considered at
the
Annual Meeting. At the close of business on the Record Date, the Company
had
outstanding and entitled to vote 59,415,107 shares of Common Stock. Each
holder
of record of Common Stock on such date will be entitled to one vote for each
share held on all matters to be voted upon at the Annual Meeting.
A
quorum
of stockholders is necessary to hold a valid meeting. A quorum will be present
if at least a majority of the outstanding shares are represented by votes
at the
meeting or by proxy. Votes will be counted by the inspector of election
appointed for the meeting, who will separately count “For” and “Against” votes,
abstentions and broker non-votes. “Broker non-votes,” which occur when brokers
are prohibited from exercising discretionary voting authority for beneficial
owners who have not provided voting instructions, will not be counted for
the
purpose of determining the number of shares present in person or by proxy
on a
voting matter and will have no effect on the outcome of the vote. Brokers
who
hold shares in street name may vote on behalf of beneficial owners with respect
to Proposals 1 and 3.
Each
nominee to be elected as a director named in Proposal 1 must receive the
affirmative vote of a plurality of the votes present in person or represented
by
proxy at the meeting. The affirmative vote of the holders of a majority of
the
outstanding voting power of the Company present in person or represented
by
proxy at the meeting is required for ratification and approval of the proposed
amendment to the Company’s 2003 Stock Option Plan described in Proposal 2 and
ratification of the selection of J.H.Cohn LLP, as the independent registered
public accounting firm of the Company for the fiscal year 2005 described
in
Proposal 3. For purposes of the vote on Proposals 2 and 3, abstentions will
be
counted as votes entitled to be cast on these matters and will have the effect
of a vote against such matters. The approval of any other matters to be
considered at the Annual Meeting requires the affirmative vote of a majority
of
the eligible votes cast at the Annual Meeting on such matters.
Revocability
of Proxies
Any
person giving a proxy pursuant to this solicitation has the power to revoke
it
at any time before it is voted. It may be revoked by filing with the Secretary
of the Company at the Company’s principal executive office, 810 Seventh Avenue,
4th Floor, New York, New York 10019, a written notice of revocation or a
duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
PROPOSAL
NUMBER 1:
ELECTION
OF DIRECTORS
The
Board
of Directors currently consists of seven (7) directors, each of whom has
been
nominated by the Board of Directors for election by the Company’s stockholders.
If re-elected, each nominee has consented to serve as a director of the Company,
to hold office until the next Annual Meeting of the Shareholders, or until
his
successor is elected and shall have qualified. The name and age of each of
the
seven nominees, his position with the Company, his principal occupation,
and the
period during which such person has served as a director of the Company are
set
forth below.
Biographical
Summaries of Nominees for the Board of Directors
|
Name
|
Age
|
Position
|
Director
Since
|
|
Douglas
Abel
|
44
|
President,
Chief Executive Officer and Director
|
2005
|
|
Neil
Herskowitz
|
48
|
Director
|
2004
|
|
Malcolm
Hoenlein
|
61
|
Director
|
2004
|
|
Timothy
McInerney
|
44
|
Director
|
2004
|
|
Joan
Pons Gimbert
|
56
|
Director
|
2003
|
|
Richard
I. Steinhart
|
48
|
Director
|
2004
|
|
Michael
Weiser, M.D.
|
42
|
Director
|
2003
|
Douglas
Abel
was
appointed President and Chief Executive Officer in April 2005 and has been
a
director of the Company since April 2005. Mr. Abel was President and CEO
of
Tarpan Therapeutics, Inc., a privately-held biopharmaceutical company, from
November 2004 until April 2005, when Tarpan was acquired by the Company.
Prior
to becoming President and CEO of Tarpan, Mr. Abel served as Vice President
of
the Dermatology Business Unit at Biogen Idec where he worked from August
2000 to
November 2004. While at Biogen, he led the creation of the U.S. dermatology
commercial operation, building the team from two to more than 100 employees
to
support the launch of AMEVIVE®. Before that, Mr. Abel was at Allergan
Pharmaceuticals from December 1987 to August of 2000, with his most recent
position being Director of BOTOX® Marketing. Mr. Abel received his A.B. in
chemistry from Lafayette College and an M.B.A. from Temple
University.
Neil
Herskowitz
was
appointed to the Company’s Board of Directors in July 2004. Since 1998, Mr.
Herskowitz has been a Managing
Member of ReGen Partners LLC, an New York investment fund, and is also President
of its affiliate, Riverside Claims LLC. Mr. Herskowitz currently serves on
the
board of directors of Starting Point Services for Children a not-for-profit
corporation, and on the board of directors of Vacation Village, a 220-unit
development in Sullivan County, New York. Mr. Herskowitz holds a B.B.A. in
Finance from Bernard M. Baruch College.
Malcolm
Hoenlein
was
appointed to the Board of Directors in July 2004. Since January 2001, he
has
also served as a director of Keryx Biopharmaceuticals, Inc. (Nasdaq: KERX).
Mr.
Hoenlein currently serves as the Executive Vice Chairman of the Conference
of
Presidents of Major American Jewish Organizations, a position he has held
since
1986. He also serves as a director of Bank Leumi. Mr. Hoenlein received his
B.A.
from Temple University and his M.A. from the University of
Pennsylvania.
2
Timothy
McInerney
has been
a director of the Company since July 2004. Since 1992, Mr. McInerney has
been a
Managing Director of Paramount BioCapital, Inc. where he oversees the overall
distribution of Paramount’s private equity product. Prior to 1992, Mr. McInerney
was a research analyst focusing on the biotechnology industry at Ladenburg,
Thalman & Co. Prior to that, Mr. McInerney held equity sales positions at
Bear, Stearns & Co. and Shearson Lehman Brothers, Inc. Mr. McInerney also
has worked in sales and marketing for Bristol-Myers Squibb. He received his
B.S.
in pharmacy from St. John’s University at New York. He also completed a
post-graduate residency at the New York University Medical Center in drug
information systems.
Joan
Pons Gimbert
has been
a director of the Company since February 21, 2003, the date of its merger
with
Manhattan Research Development. Prior to the merger, he served as a director
of
Manhattan Research Development from 2002. Since 2002, Mr. Pons has served
chief
executive officer of Oleoyl-Estrone Developments S.L., a spin-off of the
University of Barcelona. Pursuant to a January 2002 license agreement, the
Company holds an exclusive worldwide license to several patents and patent
applications relating to oleoyl-estrone, which are owned by Oleoyl-Estrone
Developments. From 1999 until joining Oleoyl-Estrone Developments, Mr. Pons
served as Director of Franchising of Pans & Company, a fast-food company.
From 1972 until 1999, Mr. Pons was employed in various finance and sales
capacities by Gallina Blanca Purina S.A., a joint venture between St. Louis,
Missouri based Ralston Purina Co. and Spanish based Agrolimen S.A., most
recently serving as its National Sales & Marketing Director.
Richard
I. Steinhart
has been
a director of the Company since July 2004. Since May 1992, Mr. Steinhart
has
been principal of Forest Street Capital, a boutique investment banking, venture
capital, and management consulting firm. Prior to Forest Street Capital,
from
May 1991 to May 1992, he was the Vice President and Chief Financial Officer
of
Emisphere Technologies, Inc., a publicly held biopharmaceutical company that
is
working to develop and commercialize a proprietary oral drug delivery system.
Prior to joining Emisphere Technologies, Mr. Steinhart spent seven years
at CW
Group, Inc., a venture capital firm focused on medical and healthcare
investments, where he was a General Partner and Chief Financial Officer.
Mr.
Steinhart has previously served as a director of a number of privately-held
companies, including ARRIS Pharmaceuticals, Inc., a biotechnology company
involved with rational drug design; Membrex, Inc., a laboratory equipment
manu-facturing company; and, Photest, Inc., a diagnostics company. He began
his
career working as a certified public accountant and continues to be a New
York
State Certified Public Accountant. Mr. Steinhart holds a Bachelors of Business
Administration and Masters of Business Administration from Pace University.
Michael
Weiser, M.D., Ph.D.,
has
been a director of the Company since the completion of the Company’s merger
transaction with Manhattan Research Development, Inc. in February 2003. He
served as a director of Manhattan Research Development since December 2001
and
as its Chief Medical Officer from its inception until August 2001. Dr. Weiser
is
currently also the Director of Research of Paramount BioCapital Asset
Management. Dr. Weiser is also a member of Orion Biomedical GP, LLC, and
serves
on the board of directors of several privately held companies. Dr. Weiser
also
serves as a director of VioQuest Pharmaceuticals, Inc. (OTCBB: VQPH) since
February 2003 and Hana Biosciences, Inc. (AMX: HBX) since July 2004. Dr.
Weiser
received an M.D. from New York University School of Medicine and a Ph.D.
in
Molecular Neurobiology from Cornell University Medical College. Dr. Weiser
completed a Postdoctoral Fellowship in the Department of Physiology and
Neuroscience at New York University School of Medicine and performed his
post-graduate medical training in the Department of Obstetrics and Gynecology
and Primary Care at New York University Medical Center.
Vote
Required
All
shares represented by proxies will be voted “FOR”
the
election of the foregoing nominees unless a contrary choice is specified.
If any
nominee should withdraw or otherwise become unavailable for reasons not
presently known, the proxies which would have otherwise been voted for such
nominee will be voted for such substitute nominee as may be selected by the
Board of Directors. In order to be elected as a director, each nominee named
in
Proposal 1 must receive the affirmative vote of a plurality of the votes
present
in person or represented by proxy at the meeting.
3
THE
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
ALL OF
THE NOMINEES LISTED ABOVE.
Communication
with the Board of Directors
Stockholder
may communicate directly with the Board of Directors. All communications
regarding general matters should be directed to the Secretary of the Company
at
the address below and should prominently indicate on the outside of the envelope
that it is intended for the complete Board of Directors or for any particular
director(s). If no designation is made, the communication will be forwarded
to
the entire board. Stockholder communications to the Board should be sent
to
Corporate
Secretary
Attention:
Board of Directors [or names of particular directors]
Manhattan
Pharmaceuticals, Inc.
810
Seventh Avenue, 4th Floor
New
York,
NY 10019
Board
Committees and Meetings
During
the fiscal year ended December 31, 2004, the Board held one meeting, which
was
attended by all of the directors who were then members of the Board. Directors
are expected to attend all meetings. In addition, the Board took action by
unanimous written consent five times during fiscal 2004. As described below,
the
Company also has standing Audit, Nominating and Compensation Committees of
the
Board of Directors.
Audit
Committee
The
Audit
Committee oversees the Company’s accounting and financial reporting process. For
these purposes, the Audit Committee performs several functions. For example,
the
Committee evaluates and assesses the qualifications of the independent
registered public accounting firm; determines the engagement of the independent
registered public accounting firm; determines whether to retain or terminate
the
existing independent registered public accounting firm; reviews and approves
the
retention of the independent registered public accounting firm to perform
any
non-audit services; reviews the financial statements to be included in the
Company’s Annual Report on Form 10-KSB; and discusses with management and the
independent registered public accounting firm the results of the annual audit
and the results of the Company’s quarterly financial statements. In July 2004,
the Board of Directors adopted a new Audit Committee Charter, which conforms
to
the requirements of the Sarbanes-Oxley Act of 2002 and the listing standards
of
AMEX.
Until
July 2004, the Audit Committee consisted of David M. Tanen, Joshua A. Kazam
(both of whom are no longer directors of the Company) and Dr. Weiser. Following
their appointment to the Board of Directors in July 2004, the Board appointed
Messrs. Steinhart, Herskowitz, and Hoenlein to the Audit Committee to replace
Messrs. Tanen and Kazam and Dr. Weiser. The Board has determined that each
of
Messrs. Steinhart, Hoenlein and Herskowitz meet the independence and other
requirements to serve on the Audit Committee under applicable securities
laws
and rules and listing standards of the American Stock Exchange, on which
the
Company’s common stock is listed. The Board has further determined that Mr.
Steinhart is an “audit committee financial expert,” as defined by applicable SEC
regulation. The Audit Committee met four times in fiscal 2004.
4
Nominating
Committee
In
July
2004, the Board created a Nominating Committee, comprised of Messrs. Herskowitz,
Hoenlein, Steinhart and David M. Tanen, who resigned from the Board in September
2005. The Nominating Committee considers and recommends to the Board persons
to
be nominated for election by the stockholders as directors. In addition to
nominees recommended by directors, the Nominating Committee will consider
nominees recommended by stockholders if submitted in writing to the Secretary
of
the Company at the address of Company’s principal offices. The Board believes
that any candidate for director, whether recommended by stockholders or by
the
Board, should be considered on the basis of all factors relevant to the needs
of
the Company and the credentials of the candidate at the time the candidate
is
proposed. Such factors include relevant business and industry experience
and
demonstrated character and judgment. The Nominating Committee does not have
a
written charter. The Nominating Committee did not meet in 2004.
Compensation
Committee
The
Compensation Committee, which was formed in July 2004, makes recommendations
concerning the salaries and incentive compensation of the Company’s executive
officers. Prior to July 2004, the entire Board participated in the determination
of executive compensation. The Compensation Committee is currently comprised
of
Messrs. Steinhart, Hoenlein, Herskowitz and Dr. Weiser. All of such persons
are
non-employee directors and satisfy the independence standards of the American
Stock Exchange, except for Dr. Weiser. The Compensation Committee did not
meet
in 2004.
Audit
Committee Report
Management
has primary responsibility for the Company's financial statements and the
overall reporting process, including the Company’s system of internal controls.
The independent registered public accounting firm audits the annual financial
statements prepared by management, expresses an opinion as to whether those
financial statements present fairly the financial position, results of
operations and cash flows of the Company in conformity with generally accepted
accounting principles and discusses with the Audit Committee any issues they
believe should be raised with the Audit Committee.
The
Audit
Committee reviews the Company's audited financial statements and meets with
both
management and the Company's independent registered public accounting firm,
to
discuss such audited financial statements. Management has represented to
the
Audit Committee that the financial statements have been prepared in accordance
with generally accepted accounting principles. The Audit Committee has received
from and discussed with J.H. Cohn LLP, the Company's independent registered
public accounting firm, the written disclosure and the letter required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit
Committees). These items relate to that firm’s independence from the Company.
The Audit Committee also discusses with the Company’s independent registered
public accounting firm, any matters required to be discussed by Statement
on
Auditing Standards No. 61 (Communication with Audit Committees). Based on
these
reviews and discussions, the Audit Committee recommended to the Board that
the
Company’s audited financial statements be included in the Company’s Annual
Report on Form 10-KSB for the fiscal year ending December 31, 2004.
Audit
Fees
For
the
year ended December 31, 2004, the Company incurred professional fees to its
independent auditors in the amount of $73,146 related to auditing
services.
5
All
Other Fees
For
the
year ended December 31, 2004, the Company incurred professional fees to its
independent registered public accounting firm in the amount of $59,142 related
to all other services, which consisted of $40,627 for audit-related services,
$17,832 for tax services and $683 for all other services. For the year ended
December 31, 2004, there were no fees billed by the Company's independent
registered public accounting firm for professional services rendered for
information technology services relating to financial information systems
design
and implementation.
The
Audit
Committee has the sole authority to pre-approve all audit and non-audit services
provided by the independent registered public accounting firm to the Company.
Richard
Steinhart
Neil
Herskowitz
Malcolm
Hoenlein
Compensation
of Directors
Non-employee
directors are eligible to participate in an automatic stock option grant
program
pursuant to the Company’s 2003 Stock Option Plan. Non-employee directors are
granted an option to purchase 50,000 shares of Common Stock upon their initial
election or appointment to the board. Thereafter on an annual basis, directors
are entitled to an option to purchase 25,000 shares of Common Stock, or 30,000
shares for directors who also serve on a committee of the Board. During 2004,
the Company’s board members did not receive any cash compensation for their
services as directors, although directors are reimbursed for reasonable expenses
incurred in connection with attending meetings of the Board and of committees
of
the board.
Executive
Officers
|
Name
|
Age
|
Position
|
|
Douglas
Abel
|
44
|
President
and Chief Executive Officer and Director
|
|
Nicholas
J. Rossettos
|
40
|
Chief
Financial Officer, Chief Operating Officer and
Secretary
|
The
Company’s executive officers consist of Douglas Abel, who has served as serves
as President and Chief Executive Officer, and Nicholas J. Rossettos, the
Company’s Chief Operating Officer, Chief Financial Officer and Secretary. Mr.
Abel’s biographical information is set forth above.
Nicholas
J. Rossettos
has been
the Company’s Chief Financial Officer and Treasurer since April 2000 and its
Chief Operating Officer since February 2003. From February 1999 until joining
the Company, Mr. Rossettos was Manager of Finance for Centerwatch,
a
pharmaceutical trade publisher headquartered in Boston, Massachusetts, that
is a
wholly owned subsidiary of Thomson Corporation of Toronto, Canada. Prior
to
that, from 1994, he was Director of Finance and Administration for
EnviroBusiness, Inc., an environmental and technical management-consulting
firm
headquartered in Cambridge, Massachusetts. Mr. Rossettos is a certified public
accountant and holds an M.S. in Accounting and M.B.A. from Northeastern
University.
Executive
Compensation
The
following table sets forth, for the last three fiscal years, the compensation
earned for services rendered in all capacities by the Company’s chief executive
officer and the other highest-paid executive officers serving as such at
the end
of 2004 whose compensation for that fiscal year was in excess of $100,000.
The
individuals named in the table will be hereinafter referred to as the “Named
Officers.” No other executive officer of the Company received compensation in
excess of $100,000 during fiscal year 2004.
6
|
Annual
Compensation
|
Long-Term
Compensation Awards
|
All
Other
Compensation ($) |
||||
|
Name
and Principal Position
|
Year
|
Salary($)
|
Bonus($)
|
Other
Annual Compensation ($)
|
Securities
Underlying Options/SARs(#)
|
|
|
Leonard
Firestone (1)
Former
Chief Executive Officer
and President
|
2004
2003
2002
|
325,000
250,000
--
|
73,750
200,000
--
|
12,300(3)
--
--
|
600,000
584,060
--
|
--
--
--
|
|
Nicholas
J. Rossettos
Chief
Operating Officer, Chief Financial Officer, Treasurer
& Secretary
|
2004
2003
2002
|
150,000
142,788
107,645
|
22,500
25,000
25,000
|
7,500(3)
22,397(2)
10,000(3)
|
150,000
292,030
55,000
|
--
--
--
|
_________________________
|
(1)
|
Dr.
Firestone became chief executive officer of Manhattan Research
Development, Inc. in January 2003 and, following the merger with
Atlantic
Technology Ventures, Inc. on February 21, 2003, he was appointed
chief
executive officer of the Company. The above table reflects Dr.
Firestone’s
combined compensation received from Manhattan Research Development
and our
company during fiscal 2003. Dr. Firestone’s employment with the Company
ended in January 2005.
|
| (2) |
Represents
salary deferred from the prior fiscal year and prior to February
24,
2003.
|
|
(3)
|
Represents
matching contributions by us pursuant to our company’s 401(k) and SAR-SEP
retirement plans.
|
7
Options
and Stock Appreciation Rights
The
following table contains information concerning the grant of stock options
under
our stock option plans and otherwise to the executive officers identified
below
during the 2004 fiscal year. No stock appreciation rights were granted during
the 2004 fiscal year.
Option
Grants in Last Fiscal Year (Individual Grants)
|
Name
|
Number
of Securities Underlying Options/SARs Granted (#)
|
Percent
of Total Options/SARs Granted to Employees in Fiscal
Year
|
Exercise
or Base Price ($/Share)(1)
|
Expiration
Date
|
||||
|
Dr.
Firestone
|
600,000
|
36
|
1.65
|
1/28/2014
|
||||
|
Mr.
Rossettos
|
150,000(2)
|
9
|
1.65
|
1/28/2014
|
__________________
|
(1)
|
Exercise
price is based on the closing sale price of our common stock on
the last
trading day preceding the grant
date.
|
|
(2)
|
Two-thirds
of the option vested as of January 2005; the remaining one-third
vests in
January 2006.
|
Option
Exercise and Holdings
The
following table provides information with respect to the executive officers
named below concerning the exercisability of options during the 2004 fiscal
year
and unexercisable options held as of the end of the 2004 fiscal year. No
stock
appreciation rights were exercised during the 2004 fiscal year, and no stock
appreciation rights were outstanding at the end of that fiscal
year.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
|
Shares
Acquired
on
Exercise
|
Value
Realized
(1)
|
No.
of Securities Underlying Unexercised Options/SARs at FY-End
(#)
|
Value
of Unexercised In-the-Money Options/SARs at FY-End (Market price
of shares
at FY-End less exercise price) ($)(2)
|
|||
|
Name
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
||
|
Dr.
Firestone (3)
|
--
|
--
|
584,060
|
600,000
|
379,639
|
--
|
|
Mr.
Rossettos
|
--
|
--
|
258,515
|
258,515
|
96,160
|
94,910
|
__________________
|
(1)
|
Equal
to the fair market value of the purchased shares at the time of
the option
exercise over the exercise price paid for those
shares.
|
|
(2)
|
Based
on the fair market value of our common stock on December 30, 2004,
the
last trading day of fiscal 2004, of $1.05 per share, the closing
sale
price per share on that date on the OTC Bulletin
Board.
|
|
(3)
|
Although
the presentation in the above table reflects options exercisable
as of the
end of fiscal 2004, 600,000 shares subject to an option held by
Dr.
Firestone became exercisable on January 1,
2005.
|
8
Equity
Compensation Plan Information
The
following table summarizes outstanding options under our 1995 Stock Option
Plan,
as amended and our 2003 Stock Option Plan, as well as outstanding options
that
we have issued to certain officers, directors and employees of our company
outside of any plan.
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
Weighted
average exercise price of outstanding options, warrants and
rights
(b)
|
Number
of securities remaining available for future issuance (excluding
securities reflected in column (a))
(c)
|
|||||||
|
Equity
compensation plans approved by stockholders (1)
|
1,652,500
|
$
|
1.44
|
3,747,500
|
||||||
|
Equity
compensation plans approved by stockholders (2)
|
32,400
|
$
|
8.28
|
489,991
|
||||||
|
Equity
compensation plans not approved by stockholders (3)
|
1,137,240
|
$
|
0.57
|
--
|
||||||
____________
|
(1)
|
Represent
shares of common stock issuable upon outstanding options issued
to
employees and directors under our 2003 Stock option
Plan.
|
|
(2)
|
Represent
shares of common stock issuable upon outstanding options issued
to
employees and directors under our 1995 Stock Option Plan, as
amended.
|
|
(3)
|
Represent
shares of common stock issuable upon outstanding options issued
to
employees and directors outside of any stock option
plan.
|
Employment
Agreements
Douglas
Abel
Mr.
Abel’s employment with the Company is governed by an employment agreement dated
April 1, 2005. This agreement has a three-year term commencing on April 1,
2005,
which may be extended for additional one year periods thereafter. Under the
agreement, Mr. Abel is entitled to an annual salary of $300,000, in addition
to
health, disability insurance and other benefits. The annual salary shall
be
increased to $325,000 at such time as the Company completes a financing
transaction that results in aggregate gross proceeds to the Company of at
least
$5,000,000, retroactive to the date of the employment agreement. The condition
relating to the retroactive increase was satisfied in August 2005. In addition,
the Company will pay Mr. Abel a cash bonus of $200,000 in the first year
and he
may receive a discretionary bonus in the first and subsequent years of up
to 50
percent of his base salary. Pursuant to his employment agreement, Mr. Abel
was
granted an option to purchase an aggregate of 2,923,900 shares of common
stock
at a price of $1.50 per share. The option vests in three equal installments,
on
November 1, 2005, November 1, 2006, and November 1, 2007.
In
the
event the Company terminates Mr. Abel’s employment upon a “change of control”
(as defined in the employment agreement) or for a reason other than for cause
or
as a result of disability, the Company is required to continue to pay to
Mr.
Abel his base salary and for a period of one year from the termination date,
provided that such obligation to continue paying his base salary will be
reduced
by amounts Mr. Abel earns from other employment during the 1-year
period.
9
Nicholas
J. Rossettos
Mr. Rossettos’
employment with us is pursuant to a January 2005 employment agreement. This
agreement has a two-year term ending on January 3, 2007, which may be extended
for additional one (1) year periods thereafter. Under the agreement, Mr.
Rossettos is entitled to an annual salary of $175,000 in addition to health,
disability insurance and other benefits. Pursuant to his employment agreement,
on January 3, 2005, Mr. Rossettos was granted an option to purchase an aggregate
of 50,000 shares of common stock at a price of $1.00 per share. The option
vests
in two equal installments on each of January 3, 2006 and January 3, 2007.
Mr. Rossettos and his dependents are eligible to receive paid medical
and
long term disability insurance and such other health benefits as we make
available to other senior officers and directors. Mr. Rossettos reports
to
the Board of Directors of the Company with primary direction being given
by the
Chief Executive Officer and President.
In
the
event the Company terminates Mr. Rossettos’ employment upon a “change of
control” (as defined in the employment agreement), the Company has agreed to
continue paying his base salary for a period of 6 months. In the event the
Company terminates Mr. Rossettos’ employment other than upon a change of control
or for a reason other than cause or as a result of a disability, the Company
is
required to continue paying his base salary until the first anniversary of
the
termination or the remaining term of the employment agreement, whichever
is
less, provided that the Company’s obligation will be reduced by amounts earned
by Mr. Rossettos from other employment during such period.
10
PROPOSAL
NUMBER 2:
APPROVAL
OF INCREASE IN SHARES RESERVED FOR ISSUANCE UNDER
THE
2003 STOCK OPTION PLAN
Proposed
Amendment
Stockholders
are requested in this Proposal 2 to ratify and approve a proposed amendment
to
the Company’s 2003 Stock Option Plan (the “2003 Plan”) increasing the number of
shares reserved for issuance thereunder from 5,400,000 to 7,400,000. The
affirmative vote of the holders of a majority of the shares present in person
or
represented by proxy and entitled to vote at the meeting will be required
to
ratify and approve the proposed amendment to the 2003 Plan. Abstentions will
be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
The
brief
summary of the 2003 Plan which follows is qualified in its entirety by reference
to the complete text, a copy of which is attached to this Proxy Statement
as
Appendix
A.
General
In
December 2003, the Board approved and adopted the Company’s 2003 Stock
Option Plan (the “2003 Plan”) in the form attached hereto as Appendix
A.
The
Company’s stockholders ratified and approved the 2003 Plan at the Company’s 2004
Annual Meeting held on August 20, 2004. The 2003 Plan currently authorizes
a
total of 5,400,000 shares of Common Stock for issuance, which represents
approximately 9.1 percent of the outstanding shares of Common Stock, on
September 20, 2005. If the proposed amendment to the 2003 Plan is approved,
the
total number of shares of Common Stock available for issuance thereunder
would
represent 12.5 percent of the outstanding shares of Common Stock as of such
date. As of the date of this Proxy Statement, stock options relating to an
aggregate of 4,957,014 shares of Common Stock had been granted at exercise
prices ranging from $0.97 to $1.65, leaving a total of 442,986 shares available
for issuance.
The
purpose of the Plan is to increase shareholder value and to advance the
interests of the Company by furnishing a variety of economic incentives
(“Incentives”) designed to attract, retain and motivate employees of and
consultants to the Company.
The
Plan
provides that a committee (the “Committee”) composed of at least two
disinterested members of the board of directors of the Company may grant
Incentives in the following forms: (a) stock options; (b) stock appreciation
rights (“SARs”); (c) stock awards; (d) restricted stock; (e) performance shares;
and (f) cash awards. Incentives may be granted to participants who are employees
of or consultants to the Company (including officers and directors of the
Company who are also employees of or consultants to the Company) selected
from
time to time by the Committee. In the event there is no Committee, then the
entire Board shall have responsibility for administering the 2003 Plan.
Types
of Incentives
Stock
Options
Under
the
2003 Plan, the Committee may grant non-qualified and incentive stock options
to
eligible participants to purchase shares of Common Stock from the Company.
The
2003 Plan confers on the Committee discretion, with respect to any such stock
option, to determine the number and purchase price of the shares subject
to the
option, the term of each option and the time or times during its term when
the
option becomes exercisable. The purchase price for incentive stock options
may
not be less than the fair market value of the shares subject to the option
on
the date of grant. The number of shares subject to an option will be reduced
proportionately to the extent that the optionee exercises a related SAR.
The
term of a non-qualified option may not exceed 10 years from the date of grant
and the term of an incentive stock option may not exceed 10 years from the
date
of grant. Any option shall become immediately exercisable in the event of
specified changes in corporate ownership or control. The Committee may
accelerate the exercisability of any option. The Committee may approve the
purchase by the Company of an unexercised stock option for the difference
between the exercise price and the fair market value of the shares covered
by
such option.
11
The
option price may be paid in cash, check, bank draft or by delivery of shares
of
Common Stock valued at their fair market value at the time of purchase or
by
withholding from the shares issuable upon exercise of the option shares of
Common Stock valued at their fair market value or as otherwise authorized
by the
Committee.
In
the
event that an optionee ceases to be an employee of or consultant to the Company
for any reason, including death, any stock option or unexercised portion
thereof
which was otherwise exercisable on the date of termination of employment
shall
expire at the time or times established by the Committee.
Stock
Appreciation Rights
A
stock
appreciation right or a “SAR” is a right to receive, without payment to the
Company, a number of shares, cash or any combination thereof, the amount
of
which is determined pursuant to the formula described below. A SAR may be
granted with respect to any stock option granted under the Plan, or alone,
without reference to any stock option. A SAR granted with respect to any
stock
option may be granted concurrently with the grant of such option or at such
later time as determined by the Committee and as to all or any portion of
the
shares subject to the option.
The
2003
Plan confers on the Committee discretion to determine the number of shares
as to
which a SAR will relate as well as the duration and exercisability of a SAR.
In
the case of a SAR granted with respect to a stock option, the number of shares
of Common Stock to which the SAR pertains will be reduced in the same proportion
that the holder exercises the related option. The term of a SAR may not exceed
ten years and one day from the date of grant. Unless otherwise provided by
the
Committee, a SAR will be exercisable for the same time period as the stock
option to which it relates is exercisable. Any SAR shall become immediately
exercisable in the event of specified changes in corporate ownership or control.
The Committee may accelerate the exercisability of any SAR.
Upon
exercise of a SAR, the holder is entitled to receive an amount which is equal
to
the aggregate amount of the appreciation in the shares of Common Stock as
to
which the SAR is exercised. For this purpose, the "appreciation" in the shares
consists of the amount by which the fair market value of the shares of Common
Stock on the exercise date exceeds (a) in the case of a SAR related to a
stock
option, the purchase price of the shares under the option or (b) in the case
of
a SAR granted alone, without reference to a related stock option, an amount
determined by the Committee at the time of grant. The Committee may pay the
amount of this appreciation to the holder of the SAR by the delivery of Common
Stock, cash, or any combination of Common Stock and cash.
12
Restricted
Stock
Restricted
stock consists of the sale or transfer by the Company to an eligible participant
of one or more shares of Common Stock which are subject to restrictions on
their
sale or other transfer by the employee. The price at which restricted stock
will
be sold will be determined by the Committee, and it may vary from time to
time
and among employees and may be less than the fair market value of the shares
at
the date of sale. All shares of restricted stock will be subject to such
restrictions as the Committee may determine. Subject to these restrictions
and
the other requirements of the 2003 Plan, a participant receiving restricted
stock shall have all of the rights of a shareholder as to those
shares.
Stock
Awards
Stock
awards consist of the transfer by the Company to an eligible participant
of
shares of Common Stock, without payment, as additional compensation for services
to the Company. The number of shares transferred pursuant to any stock award
will be determined by the Committee.
Performance
Shares
Performance
shares consist of the grant by the Company to an eligible participant of
a
contingent right to receive cash or payment of shares of Common Stock. The
performance shares shall be paid in shares of Common Stock to the extent
performance objectives set forth in the grant are achieved. The number of
shares
granted and the performance criteria will be determined by the
Committee.
Non-Transferability
of Most Incentives
No
stock
option, SAR, performance share or restricted stock granted under the Plan
is
transferable by its holder, except in the event of the holder's death, by
will
or the laws of descent and distribution. During an employee's lifetime, an
Incentive may be exercised only by him or her or by his or her guardian or
legal
representative.
Amendment
to the Plan
The
Board
of Directors may amend or discontinue the Plan at any time. However, no such
amendment or discontinuance may, subject to adjustment in the event of a
merger,
recapitalization, or other corporate restructuring, (a) change or impair,
without the consent of the recipient thereof, an Incentive previously granted,
(b) materially increase the maximum number of shares of Common Stock which
may
be issued to all participants under the Plan, (c) materially change or expand
the types of Incentives that may be granted under the Plan, (d) materially
modify the requirements as to eligibility for participation in the Plan,
or (e)
materially increase the benefits accruing to participants. Certain Plan
amendments require shareholder approval, including amendments which would
materially increase benefits accruing to participants, increase the number
of
securities issuable under the Plan, or change the requirements for eligibility
under the Plan.
Federal
Income Tax Consequences
The
following discussion sets forth certain United States income tax considerations
concerning the ownership of Common Stock. These tax considerations are stated
in
general terms and are based on the Internal Revenue Code of 1986, as amended,
regulations thereunder and judicial and administrative interpretations thereof.
This discussion does not address state or local tax considerations with respect
to the ownership of Common Stock. Moreover, the tax considerations relevant
to
ownership of Common Stock may vary depending on a holder's particular
status.
Long-term
capital gains currently are generally subject to lower tax rates than ordinary
income or short-term capital gains. The maximum long-term capital gains rate
for
federal income tax purposes is currently 15% while the maximum ordinary income
rate and short-term capital gains rate is effectively 35%.
13
Incentive
Stock Options. Incentive
stock options under the 2003 Plan are intended to be eligible for the favorable
federal income tax treatment accorded “incentive stock options” under the Code.
There
generally are no federal income tax consequences to the option holder or
the
Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the option
holder’s alternative minimum tax liability, if any.
If
an
option holder holds stock acquired through exercise of an incentive stock
option
for at least two years from the date on which the option is granted and at
least
one year from the date on which the shares are transferred to the option
holder
upon exercise of the option, any gain or loss on a disposition of such stock
will be a long-term capital gain or loss.
Generally,
if the option holder disposes of the stock before the expiration of either
of
these holding periods (a “disqualifying disposition”), then at the time of
disposition the option holder will realize taxable ordinary income equal
to the
lesser of (i) the excess of the stock’s fair market value on the date of
exercise over the exercise price, or (ii) the option holder’s actual gain,
if any, on the purchase and sale. The option holder’s additional gain or any
loss upon the disqualifying disposition will be a capital gain or loss, which
will be long-term or short-term depending on whether the stock was held for
more
than one year.
To
the
extent the option holder recognizes ordinary income by reason of a disqualifying
disposition, the Company will generally be entitled (subject to the requirement
of reasonableness, the provisions of Section 162(m) of the Code and
the
satisfaction of a tax reporting obligation) to a corresponding business expense
deduction in the tax year in which the disqualifying disposition occurs.
Non-statutory
Stock Options. Non-statutory
stock options granted under the 2003 Plan generally have the following federal
income tax consequences:
There
are
no tax consequences to the option holder or the Company by reason of the
grant
of a non-statutory stock option. Upon exercise of a non-statutory stock option,
the option holder normally will recognize taxable ordinary income equal to
the
excess, if any, of the stock’s fair market value on the date of exercise over
the option exercise price. However, to the extent the stock is subject to
certain types of vesting restrictions, the taxable event will be delayed
until
the vesting restrictions lapse unless the participant elects to be taxed
on
receipt of the stock. With respect to employees, the Company is generally
required to withhold from regular wages or supplemental wage payments an
amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the option holder.
Upon
disposition of the stock, the option holder will recognize a capital gain
or
loss equal to the difference between the selling price and the sum of the
amount
paid for such stock plus any amount recognized as ordinary income upon exercise
of the option (or vesting of the stock). Such gain or loss will be long-term
or
short-term depending on whether the stock was held for more than one year.
Potential
Limitation on Company Deductions. Section 162(m)
of the Code denies a deduction to any publicly held corporation for compensation
paid to certain “covered employees” in a taxable year to the extent that
compensation to such covered employee exceeds $1 million. It is possible
that compensation attributable to stock options, when combined with all other
types of compensation received by a covered employee from the Company, may
cause
this limitation to be exceeded in any particular year.
Certain
kinds of compensation, including qualified “performance-based compensation,” are
disregarded for purposes of the deduction limitation. In accordance with
Department of Treasury regulations issued under Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation if the option is granted by a compensation committee comprised
solely of “outside directors” and either (i) the plan contains a
per-employee limitation on the number of shares for which options may be
granted
during a specified period, the per-employee limitation is approved by the
stockholders, and the exercise price of the option is no less than the fair
market value of the stock on the date of grant, or (ii) the option
is
granted (or exercisable) only upon the achievement (as certified in writing
by
the compensation committee) of an objective performance goal established
in
writing by the compensation committee while the outcome is substantially
uncertain, and the option is approved by stockholders. The 2003 Plan limits
the
number of shares relating to stock option grants awarded to an individual
in any
year to 2,000,000.
14
Vote
Required
Approval
of the 2003 Plan requires the affirmative vote of the holders of a majority
of
the voting power of the outstanding shares of Common Stock present and entitled
to vote at the Annual Meeting. A stockholder who abstains with respect to
this
proposal is considered to be present and entitled to vote on he proposal
at the
Meeting, and is in effect casting a negative vote, but a stockholder (including
a broker) who does not give authority to a proxy vote, or withholds authority
to
vote in this proposal, shall not be considered present and entitled to vote
on
this proposal.
THE
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
APPROVAL
OF THE AMENDMENT TO THE 2003 STOCK OPTION PLAN.
15
PROPOSAL
NO. 3:
TO
RATIFY THE APPOINTMENT OF
INDEPENDENT
REGISTRERED PUBLIC ACCOUNTING FIRM
Subject
to ratification by the stockholders, the Board of Directors has appointed
J.H.
Cohn LLP as the Company’s independent registered public accounting firm for
fiscal year 2005. J.H. Cohn has performed this function for the Company
commencing with the fiscal year ended December 31, 2002. The Company expects
that representatives of J.H. Cohn will be in attendance at the Meeting, will
have an opportunity to make a statement if they so desire, and will be available
to respond to appropriate questions.
Fees
Billed to the Company by Its Independent Registered Public Accounting
Firm
The
following is a summary of the fees billed to us by J.H. Cohn LLP, our
independent registered public accounting firm for professional services rendered
for fiscal years ended December 31, 2004 and 2003:
|
Fee
Category
|
2004
Fees
|
2003
Fees
|
|||||
|
Audit
Fees
|
$
|
73,146
|
$
|
88,400
|
|||
|
Audit-Related
Fees (1)
|
40,627
|
8,800
|
|||||
|
Tax
Fees (2)
|
17,832
|
5,400
|
|||||
|
All
Other Fees (3)
|
683
|
--
|
|||||
|
Total
Fees
|
$
|
132,288
|
$
|
102,600
|
|||
______________
|
(1)
|
Audit-Related
Fees consist principally of assurance and related services that
are
reasonably related to the performance of the audit or review of
the
Company’s financial statements but not reported under the caption “Audit
Fees.” These fees include review of registration statements and other
filings made with the SEC.
|
|
(2)
|
Tax
Fees consist of fees for tax compliance, tax advice and tax
planning.
|
|
(3)
|
All
Other Fees consist of aggregate fees billed for products and services
provided by the independent registered public accounting firm,
other than
those disclosed above.
|
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
of
Independent Auditors
At
present, the audit committee approves each engagement for audit or non-audit
services before the Company engages its independent public accountants to
provide those services. The audit committee has not established any pre-approval
policies or procedures that would allow the Company’s management to engage its
independent auditor to provide any specified services with only an obligation
to
notify the audit committee of the engagement for those services. None of
the
services provided by the Company’s independent auditors for fiscal 2004 was
obtained in reliance on the waiver of the pre-approval requirement afforded
in
SEC regulations.
16
Vote
Required
Ratification
of J.H. Cohn LLP’s appointment as the independent registered public accounting
firm of the Company for the fiscal year 2005 requires the affirmative vote
of
the holders of a majority of the voting power of the outstanding shares of
Common Stock, present and entitled to vote at the Meeting. A stockholder
who
abstains with respect to this proposal is considered to be present and entitled
to vote on this proposal at the Meeting, and is in effect casting a negative
vote, but a stockholder (including a broker) who does not give authority
to a
proxy to vote, or withholds authority to vote on this proposal, shall not
be
considered present and entitled to vote on this proposal.
THE
BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
17
VOTING
SECURITIES AND PRINCIPAL HOLDERS THEREOF
The
following table sets forth certain information regarding beneficial ownership
of
the our common stock as of
September 20, 2005,
by (i)
each person known by us to be the beneficial owner of more than 5 percent
of the
outstanding Common Stock, (ii) each director, (iii) each executive officer,
and
(iv) all executive officers and directors as a group. The
number of shares beneficially owned is determined under rules promulgated
by the
SEC, and the information is not necessarily indicative of beneficial ownership
for any other purpose. Under those rules, beneficial ownership includes any
shares as to which the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire within
60 days of the date hereof, through the exercise or conversion of any stock
option, convertible security, warrant or other right. Inclusion of shares
in the
table does not, however, constitute an admission that the named stockholder
is a
direct or indirect beneficial owner of those shares. Unless otherwise indicated,
each person or entity named in the table has sole voting power and investment
power (or shares that power with that person’s spouse) with respect to all
shares of capital stock listed as owned by that person or entity. Unless
otherwise indicated, the address of each of the following persons is 810
Seventh
Avenue, 4th Floor, New York, New York 10019.
|
Name
|
Shares
Beneficially
Owned
|
Percent
of Class
|
|||||
|
Douglas
Abel (1)
|
984,634
|
1.6
|
|||||
|
Nicholas
J. Rossettos(2)
|
457,030
|
*
|
|||||
|
Michael
Weiser(3)
|
2,371,993
|
4.0
|
|||||
|
Joan
Pons Gimbert(4)
|
4,015,371
|
6.8
|
|||||
|
Neil
Herskowitz (5)
|
108,675
|
*
|
|||||
|
Malcolm
Hoenlein (6)
|
57,003
|
*
|
|||||
|
Timothy
McInerney (7)
|
745,784
|
1.3
|
|||||
|
Richard
I. Steinhart (6)
|
57,003
|
*
|
|||||
|
All
directors and officers as a group (8)
|
8,797,493
|
14.3
|
|||||
|
Oleoylestrone
Developments, SL(9)
Josep
Samitier 1-5, Barcelona Science Park
08028
Barcelona Spain
|
3,957,037
|
6.7
|
|||||
|
Lester
E. Lipschutz(10)
1650
Arch Street - 22nd
Floor
Philadelphia,
PA 19103
|
8,918,839
|
21.9
|
|||||
|
Lindsay
A. Rosenwald(11)
787
Seventh Avenue, 48th
Floor
New
York, NY 10019
|
3,444,506
|
5.7
|
|||||
____________________
* Less
than
1.0%
|
(1)
|
Includes
974,634 shares issuable upon exercise of a portion of an option
which
vests November 1, 2005, but does not include the remaining 1,949,266
shares issuable upon the exercise of such option, which remaining
shares
vest in two equal installments of 974,633 shares on each of November
1,
2006 and November 1, 2007.
|
|
(2)
|
Includes
457,030 shares issuable upon the exercise of options that are currently
exercisable or will be exercisable within 60 days.
|
|
(3)
|
Includes
60,000 shares issuable upon the exercise of an option, and 103,655
shares
issuance upon exercise of a
warrant.
|
|
(4)
|
Includes
3,957,037 shares held by Oleoylestrone Developments, SL, of which
Mr. Pons
is chief executive officer, and 58,334 shares issuable upon the
exercise
of options.
|
18
|
(5)
|
Includes
30,337 shares issuable upon exercise of options and 7,500 shares
held by
Riverside Contracting, LLC, a limited liability company of which
Mr.
Herskowitz is a member holding 50%.
|
|
(6)
|
Represents
shares issuable upon exercise of
options.
|
|
(7)
|
Includes
41,667 shares issuable upon exercise of options; and 58,642 shares
issuable upon exercise of warrants.
|
|
(8)
|
Includes
1,027,838 shares issuable upon exercise of currently exercisable
options,
or options that will be exercisable within 60 days, and upon exercise
of
warrants.
|
|
(9)
|
Mr.
Pons Gimbert is the chief executive officer of Oleoylestrone Developments,
SL.
|
|
(10)
|
Includes
8,918,839
shares of Common Stock held by separate
trusts for
the benefit of Dr. Rosenwald or his family with
respect to which Mr. Lipschutz is either trustee or investment
manager and
in either case has investment and voting power.
Dr. Rosenwald disclaims beneficial ownership of these shares,
except as to any pecuniary interest therein.
|
|
(11)
|
Includes
80 shares owned by Dr. Rosenwald’s spouse, 33 shares owned by his
children, 76 shares held by corporations affiliated by Dr. Rosenwald,
and
516,885 shares issuable upon the exercise of warrants. Does not
include
8,918,354 shares held by Lester Lipschutz, as trustee of certain
trusts
established for the benefit of Dr. Rosenwald, as to which Dr. Rosenwald
disclaims beneficial ownership, except as to any pecuniary interest
therein.
|
OTHER
MATTERS
Certain
Transactions
Oleoylestrone
Developments, SL
Pursuant
to the terms of a license agreement dated February 15, 2002 by and between
Manhattan Research Development, Inc., the Company’s wholly owned subsidiary, and
Oleoylestrone Developments, SL, the Company has an exclusive, worldwide license
to U.S. and foreign patents and patent applications relating to oleoyestrone,
which the Company is developing as an anti-obesity drug. Although the Company
is
not obligated to pay royalties to Oleoylestrone Developments, the license
agreement requires the Company to make certain performance-based milestone
payments. Oleoylestrone Developments owns in excess of 5 percent of the
Company’s outstanding Common Stock. Additionally, Mr. Pons, a member of the
Board of Directors, is chief executive officer of Oleoylestrone Developments.
The Company believes that its agreement with Oleoylestrone Developments was
made
on terms no less favorable to it than could have been obtained from unaffiliated
third parties.
Paramount
BioCapital, Inc.
Two
members of our board of directors, Timothy McInerney and Michael Weiser,
are
also employees of Paramount BioCapital, Inc. or one of its affiliates. In
addition, two members of our former directors, Joshua Kazam and David Tanen,
were employed by Paramount BioCapital through August 2004. The sole shareholder
of Paramount BioCapital, Inc. is Lindsay A. Rosenwald, M.D. Dr. Rosenwald
beneficially owns more than 5 percent of our common stock. In November 2003,
we
paid to Paramount BioCapital approximately $460,000 as commissions earned
in
consideration for placement agent services rendered in connection with the
private placement of our Series A Convertible Preferred Stock, which amount
represented 7 percent of the shares sold by Paramount BioCapital in the
offering. In connection with the November 2003 private placement, we did
not
engage Paramount BioCapital directly, but rather Paramount BioCapital was
engaged as a sub-agent of Maxim Group, the broker-dealer we engaged for the
offering. In addition, in January 2004, we paid approximately $260,000 as
commissions earned in consideration for placement agent services rendered
by
Paramount BioCapital in connection with a private placement of our common
stock,
which amount represented 7 percent of the shares sold by Paramount BioCapital
in
the private placement. The engagement of Paramount BioCapital in connection
with
the January 2004 private placement was approved by all of our disinterested
directors. In connection with both private placements and as a result of
their
employment with Paramount BioCapital, Mr. Kazam, Mr. McInerney and Dr. Weiser
were allocated 5-year placement agent warrants to purchase 60,174, 58,642
and
103,655 shares of our common stock, respectively, at a price of $1.10 per
share.
19
In
connection with the Company’s August 2005 private placement, the Company paid
approximately $925,000 as commissions earned in consideration for placement
agent services rendered by Paramount BioCapital, which amount represented
7
percent of the securities sold by Paramount BioCapital in the private placement.
In addition, the Company also issued to Paramount BioCapital five-year warrants
to purchase an aggregate of 514,932 shares of Common Stock, of which warrants
to
purchase 459,932 shares are exercisable at a price of $1.44 per share and
warrants to purchase 55,000 common shares are exercisable at a price of $1.49
per share. The Company also reimbursed Paramount BioCapital $75,000 for expenses
incurred in connection with the Offering. The Company believes its engagements
of Paramount BioCapital were made on terms no less favorable to the Company
than
could have been obtained from unaffiliated third parties.
NovaDel
Pharma Inc.
Pursuant
to the terms of a license agreement dated April 4, 2003 by and between the
Company and NovaDel Pharma Inc., the Company holds the rights to develop
NovaDel’s proprietary lingual spray technology to deliver propofol for
preprocedural sedation. The license agreement with NovaDel requires the Company
to make certain license and milestone payments, as well as pay royalties.
During
2003, the Company paid aggregate license fees of $500,000 to NovaDel under
the
license agreement. Dr. Lindsay Rosenwald, who beneficially owns more than
five
percent of the Common Stock, also beneficially owns in excess of 20 percent
of
the common stock of NovaDel and may therefore be deemed to be an affiliate
of
that company.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our officers,
directors and persons who are the beneficial owners of more than 10% of our
common stock to file with the SEC initial reports of ownership and reports
of
changes in ownership of our common stock. Officers, directors and beneficial
owners of more than 10% of our common stock are required by SEC regulations
to
furnish us with copies of all Section 16(a) forms they file. Based solely
on a
review of the copies of the Forms 3, 4 and 5 and amendments that we received
with respect to transactions during 2004, we believe that all such forms
were
filed on a timely basis, except for those items listed in the table
below.
The
following table shows the transactions for 2004 that were not in
compliance.
|
Name
of Filer
|
Description
of Transaction
|
Transaction
Date
|
Filing
Date
|
|
Lindsay
A. Rosenwald, M.D.
|
Purchase
of shares between 8/17/04 and 9/3/04
|
8/17/04
- 9/3/04
|
9/10/04
|
|
Neil
Herskowitz
|
Initial
Form 3
|
7/21/04
|
9/8/04
|
|
Timothy
McInerney
|
Initial
Form 3
|
7/21/04
|
9/8/04
|
|
Richard
I. Steinhart
|
Initial
Form 3
|
7/21/04
|
9/2/04
|
|
Malcolm
Hoenlein
|
Initial
Form 3
|
7/21/04
|
9/2/04
|
|
Joan
Pons Gimbert
|
Sale
of shares by Company of which Mr. Gimbert is CEO
|
2/26/04
|
3/29/04
|
|
Michael
Weiser
|
Issued
Warrants and Options in a private placement
|
1/27/04
|
2/5/04
|
|
Nicholas
J. Rossettos
|
Grant
of options
|
1/28/04
|
2/4/04
|
|
Leonard
Firestone, M.D.
|
Grant
of options on 1/1/04 and 1/28/04
|
1/1/04
|
2/2/04
|
|
Joshua
A. Kazam
|
Issued
Warrants and Options in a private placement
|
1/27/04
|
2/4/04
|
|
Joan
Pons Gimbert
|
Grant
of options
|
1/28/04
|
2/2/04
|
20
Proposals
of Stockholders
All
proposals of stockholders intended to be included in the 2006 Proxy Statement
of
the Company and presented at the 2006 Annual Meeting of Stockholders of the
Company must be received by the Company at its executive offices on or before
June 19, 2006.
Code
of Business Conduct and Ethics
Our
Board
of Directors adopted a Code of Business Conduct and Ethics to be applicable
to
all officers, directors and employees. The Code of Business Conduct and Ethics
is intended to be designed to deter wrong-doing and promote honest and ethical
behavior, full, fair, timely, accurate and understandable disclosure, and
compliance with applicable laws. The Board adopted the Code of Business Conduct
and Ethics in July 2004. A copy of the Code of Business Conduct and Ethics
can
be obtained and will be provided to any person without charge upon written
request to our Secretary at our executive offices, 810 Seventh Avenue, 4th
Floor, New York, New York 10019.
Discretionary
Proxy Voting Authority / Untimely Stockholder Proposals
Rule
14a-4 promulgated under the Securities and Exchange Act of 1934 governs the
Company’s use of its discretionary proxy voting authority with respect to a
stockholder proposal that the stockholder has not sought to include in the
Company’s proxy statement. The Rule provides that if a proponent of a proposal
fails to notify the Company at least 45 days prior to the month and day of
mailing of the prior year’s proxy statement, management proxies will be allowed
to use their discretionary voting authority when the proposal is raised at
the
meeting, without any discussion of the matter.
With
respect to the Company’s 2006 Annual Meeting of Stockholders, if the Company is
not provided notice of a stockholder proposal, which the stockholder has
not
previously sought to include in the Company’s proxy statement, by September 2,
2006, the management proxies will be allowed to use their discretionary
authority as outlined above.
21
Solicitation
The
Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the
proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially
owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram,
the
Internet or personal solicitation by directors, officers, and/or other regular
employees of the Company. No additional compensation will be paid to directors,
officers or other regular employees for such services.
The
Board
of Directors does not intend to present to the meeting any other matter not
referred to above and does not presently know of any matters that may be
presented to the meeting by others. However, if other matters come before
the
meeting, it is the intent of the persons named in the enclosed proxy to vote
the
proxy in accordance with their best judgment.
By
Order
of the Board of Directors
MANHATTAN
PHARMACEUTICALS, INC.
/s/
Nicholas J. Rossettos
Nicholas
J. Rossettos, Secretary
22
Appendix
A
MANHATTAN
PHARMACEUTICALS, INC.
2003
Stock Option Plan
1. Purpose.
The
purpose of the 2003 Stock Option Plan (the “Plan”)
of
Manhattan Pharmaceuticals, Inc., a Delaware corporation (the “Company”),
is to
increase stockholder value and to advance the interests of the Company by
furnishing a variety of economic incentives (“Incentives”)
designed to attract, retain and motivate employees, directors and consultants.
Incentives may consist of opportunities to purchase or receive shares of
common
stock, $0.001 par value, of the Company (“Common
Stock”),
monetary payments or both on terms determined under this Plan.
2. Administration.
2.1 The
Plan
shall be administered by a committee (the “Committee”)
of the
Board of Directors of the Company (the “Board”).
The
Committee shall consist of not less than two directors of the Company who
shall
be appointed from time to time by the board of directors of the Company.
Each
member of the Committee shall be a “non-employee director” within the meaning of
Rule 16b-3 of the Exchange Act of 1934, as amended (together with the rules
and
regulations promulgated thereunder, the “Exchange
Act”),
and
an “outside director” as defined in Section 162(m) of the Internal Revenue Code
of 1986, as amended (the “Code”).
The
Committee shall have complete authority to determine all provisions of all
Incentives awarded under the Plan (as consistent with the terms of the Plan),
to
interpret the Plan, and to make any other determination which it believes
necessary and advisable for the proper administration of the Plan. The
Committee’s decisions and matters relating to the Plan shall be final and
conclusive on the Company and its participants. No member of the Committee
will
be liable for any action or determination made in good faith with respect
to the
Plan or any Incentives granted under the Plan. The Committee will also have
the
authority under the Plan to amend or modify the terms of any outstanding
Incentives in any manner; provided,
however,
that
the amended or modified terms are permitted by the Plan as then in effect
and
that any recipient on an Incentive adversely affected by such amended or
modified terms has consented to such amendment or modification. No amendment
or
modification to an Incentive, however, whether pursuant to this Section 2
or any
other provisions of the Plan, will be deemed to be a re-grant of such Incentive
for purposes of this Plan. If at any time there is no Committee, then for
purposes of the Plan the term “Committee” shall mean the entire
Board.
2.2 In
the
event of (i) any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, extraordinary dividend or divestiture (including
a
spin-off) or any other similar change in corporate structure or shares,
(ii) any purchase, acquisition, sale or disposition of a significant
amount
of assets or a significant business, (iii) any change in accounting
principles or practices, or (iv) any other similar change, in each
case
with respect to the Company or any other entity whose performance is relevant
to
the grant or vesting of an Incentive, the Committee (or, if the Company is
not
the surviving corporation in any such transaction, the board of directors
of the
surviving corporation) may, without the consent of any affected participant,
amend or modify the vesting criteria of any outstanding Incentive that is
based
in whole or in part on the financial performance of the Company (or any
subsidiary or division thereof) or such other entity so as equitably to reflect
such event, with the desired result that the criteria for evaluating such
financial performance of the Company or such other entity will be substantially
the same (in the sole discretion of the Committee or the board of directors
of
the surviving corporation) following such event as prior to such event;
provided, however, that the amended or modified terms are permitted by the
Plan
as then in effect.
3. Eligible
Participants.
Employees of the Company or its subsidiaries (including officers and employees
of the Company or its subsidiaries), directors and consultants, advisors
or
other independent contractors who provide services to the Company or its
subsidiaries (including members of the Company’s scientific advisory board)
shall become eligible to receive Incentives under the Plan when designated
by
the Committee. Participants may be designated individually or by groups or
categories (for example, by pay grade) as the Committee deems appropriate.
Participation by officers of the Company or its subsidiaries and any performance
objectives relating to such officers must be approved by the Committee;
provided,
however,
that if
the entire Board is serving as the Committee, then any Incentive awarded
to an
officer shall be approved by a majority of the “non-employee directors” (within
the meaning of Rule 16b-3 of the Exchange Act). Participation by others and
any
performance objectives relating to others may be approved by groups or
categories (for example, by pay grade) and authority to designate participants
who are not officers and to set or modify such targets may be delegated.
A-1
4. Types
of Incentives.
Incentives under the Plan may be granted in any one or a combination of the
following forms: (a) incentive stock options and non-statutory stock options
(Section 6); (b) stock appreciation rights (“SARs”)
(Section 7); (c) stock awards (Section 8); (d) restricted stock (Section
8); and
(e) performance shares (Section 9).
5. Shares
Subject to the Plan.
5.1. Number
of Shares.
Subject
to adjustment as provided in Section 11.6, the number of shares of Common
Stock
which may be issued under the Plan shall not exceed 5,400,000 shares of Common
Stock. Shares of Common Stock that are issued under the Plan or that are
subject
to outstanding Incentives will be applied to reduce the maximum number of
shares
of Common Stock remaining available for issuance under the Plan.
5.2. Cancellation.
To the
extent that cash in lieu of shares of Common Stock is delivered upon the
exercise of an SAR pursuant to Section 7.4, the Company shall be deemed,
for
purposes of applying the limitation on the number of shares, to have issued
the
greater of the number of shares of Common Stock which it was entitled to
issue
upon such exercise or on the exercise of any related option. In the event
that a
stock option or SAR granted hereunder expires or is terminated or canceled
unexercised or unvested as to any shares of Common Stock, such shares may
again
be issued under the Plan either pursuant to stock options, SARs or otherwise.
In
the event that shares of Common Stock are issued as restricted stock or pursuant
to a stock award and thereafter are forfeited or reacquired by the Company
pursuant to rights reserved upon issuance thereof, such forfeited and reacquired
shares may again be issued under the Plan, either as restricted stock, pursuant
to stock awards or otherwise. The Committee may also determine to cancel,
and
agree to the cancellation of, stock options in order to make a participant
eligible for the grant of a stock option at a lower price than the option
to be
canceled.
6. Stock
Options.
A stock
option is a right to purchase shares of Common Stock from the Company. The
Committee may designate whether an option is to be considered an incentive
stock
option or a non-statutory stock option. To the extent that any incentive
stock
option granted under the Plan ceases for any reason to qualify as an “incentive
stock option” for purposes of Section 422 of the Code, such incentive stock
option will continue to be outstanding for purposes of the Plan but will
thereafter be deemed to be a non-statutory stock option. Each stock option
granted by the Committee under this Plan shall be subject to the following
terms
and conditions:
6.1. Price.
The
option price per share shall be determined by the Committee, subject to
adjustment under Section 11.6.
6.2. Number.
The
number of shares of Common Stock subject to the option shall be determined
by
the Committee, subject to adjustment as provided in Section 11.6. The number
of
shares of Common Stock subject to a stock option shall be reduced in the
same
proportion that the holder thereof exercises a SAR if any SAR is granted
in
conjunction with or related to the stock option. No individual may receive
options to purchase more than 2,000,000 shares in any year.
A-2
6.3. Duration
and Time for Exercise.
Subject
to earlier termination as provided in Section 11.4, the term of each stock
option shall be determined by the Committee but in no event shall be more
than
ten years from the date of grant. Each stock option, or portion thereof,
shall
become exercisable at such time or times as may be designated by the Committee
at the time of the stock option grant. The Committee may accelerate the vesting
of any stock option.
6.4. Manner
of Exercise.
Subject
to the conditions contained in this Plan and in the agreement with the recipient
evidencing such option, a stock option may be exercised, in whole or in part,
by
giving written notice to the Company, specifying the number of shares of
Common
Stock to be purchased and accompanied by the full purchase price for such
shares. The exercise price shall be payable (a) in United States dollars
upon
exercise of the option and may be paid by cash; uncertified or certified
check;
bank draft; (b) by delivery of shares of Common Stock that are already owned
by
the participant in payment of all or any part of the exercise price, which
shares shall be valued for this purpose at the Fair Market Value on the date
such option is exercised; or (c) at the discretion of the Committee, by
instructing the Company to withhold from the shares of Common Stock issuable
upon exercise of the stock option shares of Common Stock in payment of all
or
any part of the exercise price and/or any related withholding tax obligations,
which shares shall be valued for this purpose at the Fair Market Value. The
shares of Common Stock delivered by the participant pursuant to Section 6.4(b)
must have been held by the participant for a period of not less than six
months
prior to the exercise of the option, unless otherwise determined by the
Committee. Prior to the issuance of shares of Common Stock upon the exercise
of
a stock option, a participant shall have no rights as a stockholder. Except
as
otherwise provided in the Plan, no adjustment will be made for dividends
or
distributions with respect to such stock options as to which there is a record
date preceding the date the participant becomes the holder of record of such
shares, except as the Committee may determine in its discretion.
6.5. Incentive
Stock Options.
Notwithstanding anything in the Plan to the contrary, the following additional
provisions shall apply to the grant of stock options which are intended to
qualify as Incentive Stock Options (as such term is defined in Section 422
of
the Code):
(a) The
aggregate Fair Market Value (determined as of the time the option is granted)
of
the shares of Common Stock with respect to which Incentive Stock Options
are
exercisable for the first time by any participant during any calendar year
(under the Plan and any other incentive stock option plans of the Company
or any
subsidiary or parent corporation of the Company) shall not exceed $100,000.
The
determination will be made by taking incentive stock options into account
in the
order in which they were granted.
(b) Any
Incentive Stock Option certificate authorized under the Plan shall contain
such
other provisions as the Committee shall deem advisable, but shall in all
events
be consistent with and contain all provisions required in order to qualify
the
options as Incentive Stock Options.
(c) All
Incentive Stock Options must be granted within ten years from the earlier
of the
date on which this Plan was adopted by board of directors or the date this
Plan
was approved by the Company’s stockholders.
(d) Unless
sooner exercised, all Incentive Stock Options shall expire no later than
10
years after the date of grant. No Incentive Stock Option may be exercisable
after ten (10) years from its date of grant (five (5) years from its date
of
grant if, at the time the Incentive Stock Option is granted, the Participant
owns, directly or indirectly, more than 10% of the total combined voting
power
of all classes of stock of the Company or any parent or subsidiary corporation
of the Company).
A-3
(e) The
exercise price for Incentive Stock Options shall be not less than 100% of
the
Fair Market Value of one share of Common Stock on the date of grant with
respect
to an Incentive Stock Option; provided that the exercise price shall be 110%
of
the Fair Market Value if, at the time the Incentive Stock Option is granted,
the
participant owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company.
7. Stock
Appreciation Rights.
An SAR
is a right to receive, without payment to the Company, a number of shares
of
Common Stock, cash or any combination thereof, the amount of which is determined
pursuant to the formula set forth in Section 7.4. An SAR may be granted (a)
with
respect to any stock option granted under this Plan, either concurrently
with
the grant of such stock option or at such later time as determined by the
Committee (as to all or any portion of the shares of Common Stock subject
to the
stock option), or (b) alone, without reference to any related stock option.
Each
SAR granted by the Committee under this Plan shall be subject to the following
terms and conditions:
7.1. Number;
Exercise Price.
Each
SAR granted to any participant shall relate to such number of shares of Common
Stock as shall be determined by the Committee, subject to adjustment as provided
in Section 11.6. In the case of an SAR granted with respect to a stock option,
the number of shares of Common Stock to which the SAR pertains shall be reduced
in the same proportion that the holder of the option exercises the related
stock
option. The exercise price of an SAR will be determined by the Committee,
in its
discretion, at the date of grant but may not be less than 100% of the Fair
Market Value of one share of Common Stock on the date of grant.
7.2. Duration.
Subject
to earlier termination as provided in Section 11.4, the term of each SAR
shall
be determined by the Committee but shall not exceed ten years and one day
from
the date of grant. Unless otherwise provided by the Committee, each SAR shall
become exercisable at such time or times, to such extent and upon such
conditions as the stock option, if any, to which it relates is exercisable.
The
Committee may in its discretion accelerate the exercisability of any
SAR.
7.3. Exercise.
An SAR
may be exercised, in whole or in part, by giving written notice to the Company,
specifying the number of SARs which the holder wishes to exercise. Upon receipt
of such written notice, the Company shall, within 90 days thereafter, deliver
to
the exercising holder certificates for the shares of Common Stock or cash
or
both, as determined by the Committee, to which the holder is entitled pursuant
to Section 7.4.
7.4. Payment.
Subject
to the right of the Committee to deliver cash in lieu of shares of Common
Stock
(which, as it pertains to officers and directors of the Company, shall comply
with all requirements of the Exchange Act), the number of shares of Common
Stock
which shall be issuable upon the exercise of an SAR shall be determined by
dividing:
(a) the
number of shares of Common Stock as to which the SAR is exercised multiplied
by
the amount of the appreciation in such shares (for this purpose, the
“appreciation” shall be the amount by which the Fair Market Value of the shares
of Common Stock subject to the SAR on the exercise date exceeds (1) in the
case
of an SAR related to a stock option, the exercise price of the shares of
Common
Stock under the stock option or (2) in the case of an SAR granted alone,
without
reference to a related stock option, an amount which shall be determined
by the
Committee at the time of grant, subject to adjustment under Section 11.6);
by
(b) the
Fair
Market Value of a share of Common Stock on the exercise date.
In
lieu
of issuing shares of Common Stock upon the exercise of a SAR, the Committee
may
elect to pay the holder of the SAR cash equal to the Fair Market Value on
the
exercise date of any or all of the shares which would otherwise be issuable.
No
fractional shares of Common Stock shall be issued upon the exercise of an
SAR;
instead, the holder of the SAR shall be entitled to receive a cash adjustment
equal to the same fraction of the Fair Market Value of a share of Common
Stock
on the exercise date or to purchase the portion necessary to make a whole
share
at its Fair Market Value on the date of exercise.
A-4
8. Stock
Awards and Restricted Stock.
A stock
award consists of the transfer by the Company to a participant of shares
of
Common Stock, without other payment therefor, as additional compensation
for
services to the Company. The participant receiving a stock award will have
all
voting, dividend, liquidation and other rights with respect to the shares
of
Common Stock issued to a participant as a stock award under this Section
8 upon
the participant becoming the holder of record of such shares. A share of
restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required
by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant, which
restrictions and conditions may be determined by the Committee as long as
such
restrictions and conditions are not inconsistent with the terms of the Plan.
The
transfer of Common Stock pursuant to stock awards and the transfer and sale
of
restricted stock shall be subject to the following terms and
conditions:
8.1. Number
of Shares.
The
number of shares to be transferred or sold by the Company to a participant
pursuant to a stock award or as restricted stock shall be determined by the
Committee.
8.2. Sale
Price.
The
Committee shall determine the price, if any, at which shares of restricted
stock
shall be sold or granted to a participant, which may vary from time to time
and
among participants and which may be below the Fair Market Value of such shares
of Common Stock at the date of sale.
8.3. Restrictions.
All
shares of restricted stock transferred or sold hereunder shall be subject
to
such restrictions as the Committee may determine, including, without limitation
any or all of the following:
(a) a
prohibition against the sale, transfer, pledge or other encumbrance of the
shares of restricted stock, such prohibition to lapse at such time or times
as
the Committee shall determine (whether in annual or more frequent installments,
at the time of the death, Disability or retirement of the holder of such
shares,
or otherwise);
(b) a
requirement that the holder of shares of restricted stock forfeit, or (in
the
case of shares sold to a participant) resell back to the Company at his or
her
cost, all or a part of such shares in the event of termination of his or
her
employment or consulting engagement during any period in which such shares
are
subject to restrictions; or
(c) such
other conditions or restrictions as the Committee may deem
advisable.
8.4. Escrow.
In
order to enforce the restrictions imposed by the Committee pursuant to Section
8.3, the participant receiving restricted stock shall enter into an agreement
with the Company setting forth the conditions of the grant. Shares of restricted
stock shall be registered in the name of the participant and deposited, together
with a stock power endorsed in blank, with the Company. Each such certificate
shall bear a legend in substantially the following form:
The
transferability of this certificate and the shares of Common Stock represented
by it are subject to the terms and conditions (including conditions of
forfeiture) contained in the 2003 Stock Option Plan of Manhattan
Pharmaceuticals, Inc. (the “Company”), and an agreement entered into between the
registered owner and the Company. A copy of the 2003 Stock Option Plan and
the
agreement is on file in the office of the secretary of the Company.
A-5
8.5. End
of
Restrictions.
Subject
to Section 11.5, at the end of any time period during which the shares of
restricted stock are subject to forfeiture and restrictions on transfer,
such
shares will be delivered free of all restrictions to the participant or to
the
participant’s legal representative, beneficiary or heir.
8.6. Stockholder.
Subject
to the terms and conditions of the Plan, each participant receiving restricted
stock shall have all the rights of a stockholder with respect to shares of
stock
during any period in which such shares are subject to forfeiture and
restrictions on transfer, including without limitation, the right to vote
such
shares. Dividends paid in cash or property other than Common Stock with respect
to shares of restricted stock shall be paid to the participant currently.
Unless
the Committee determines otherwise in its sole discretion, any dividends
or
distributions (including regular quarterly cash dividends) paid with respect
to
shares of Common Stock subject to the restrictions set forth above will be
subject to the same restrictions as the shares to which such dividends or
distributions relate. In the event the Committee determines not to pay dividends
or distributions currently, the Committee will determine in its sole discretion
whether any interest will be paid on such dividends or distributions. In
addition, the Committee in its sole discretion may require such dividends
and
distributions to be reinvested (and in such case the participant consents
to
such reinvestment) in shares of Common Stock that will be subject to the
same
restrictions as the shares to which such dividends or distributions
relate.
9. Performance
Shares.
A
performance share consists of an award which shall be paid in shares of Common
Stock, as described below. The grant of a performance share shall be subject
to
such terms and conditions as the Committee deems appropriate, including the
following:
9.1. Performance
Objectives.
Each
performance share will be subject to performance objectives for the Company
or
one of its operating units to be achieved by the participant before the end
of a
specified period. The number of performance shares granted shall be determined
by the Committee and may be subject to such terms and conditions, as the
Committee shall determine. If the performance objectives are achieved, each
participant will be paid in shares of Common Stock or cash as determined
by the
Committee. If such objectives are not met, each grant of performance shares
may
provide for lesser payments in accordance with formulas established in the
award.
9.2. Not
Stockholder.
The
grant of performance shares to a participant shall not create any rights
in such
participant as a stockholder of the Company, until the payment of shares
of
Common Stock with respect to an award.
9.3. No
Adjustments.
No
adjustment shall be made in performance shares granted on account of cash
dividends which may be paid or other rights which may be issued to the holders
of Common Stock prior to the end of any period for which performance objectives
were established.
9.4. Expiration
of Performance Share.
If any
participant’s employment or consulting engagement with the Company is terminated
for any reason other than normal retirement, death or Disability prior to
the
achievement of the participant’s stated performance objectives, all the
participant’s rights on the performance shares shall expire and terminate unless
otherwise determined by the Committee. In the event of termination of employment
or consulting by reason of death, Disability, or normal retirement, the
Committee, in its own discretion may determine what portions, if any, of
the
performance shares should be paid to the participant.
A-6
10. Change
of Control.
10.1 Change
in Control.
For
purposes of this Section 10, a “Change
in Control”
of the
Company will mean the following:
(a) the
sale,
lease, exchange or other transfer, directly or indirectly, of all or
substantially all of the assets of the Company (in one transaction or in
a
series of related transactions) to a person or entity that is not controlled
by
the Company;
(b) the
approval by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company;
(c) any
person becomes after the effective date of the Plan the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
(i)
20% or more, but not 50% or more, of the combined voting power of the Company’s
outstanding securities ordinarily having the right to vote at elections of
directors, unless the transaction resulting in such ownership has been approved
in advance by the Continuing Directors (as defined below), or (ii) 50% or
more
of the combined voting power of the Company’s outstanding securities ordinarily
having the right to vote at elections of directors (regardless of any approval
by the Continuing Directors); provided that a traditional institution or
venture
capital financing transaction shall be excluded from this
definition;
(d) a
merger
or consolidation to which the Company is a party if the stockholders of the
Company immediately prior to effective date of such merger or consolidation
have
“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act),
immediately following the effective date of such merger or consolidation,
of
securities of the surviving corporation representing (i) 50% or more, but
less
than 80%, of the combined voting power of the surviving corporation’s then
outstanding securities ordinarily having the right to vote at elections of
directors, unless such merger or consolidation has been approved in advance
by
the Continuing Directors, or (ii) less than 50% of the combined voting
power of the surviving corporation’s then outstanding securities ordinarily
having the right to vote at elections of directors (regardless of any approval
by the Continuing Directors).
10.2 Continuing
Directors.
For
purposes of this Section 10, “Continuing Directors” of the Company will mean any
individuals who are members of the Board on the effective date of the Plan
and
any individual who subsequently becomes a member of the Board whose election,
or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the Continuing Directors (either by specific vote
or by
approval of the Company’s proxy statement in which such individual is named as a
nominee for director without objection to such nomination).
10.3 Acceleration
of Incentives.
Without
limiting the authority of the Committee under the Plan, if a Change of Control
of the Company occurs whereby the acquiring entity or successor to the Company
does not assume the Incentives or replace them with substantially equivalent
incentive awards, then upon the effective date of any such Change in Control
(a)
all outstanding options and SARs will vest and will become immediately
exercisable in full and will remain exercisable for the remainder of their
terms, regardless of whether the participant to whom such options or SARs
have
been granted remains in the employ or service of the Company or any subsidiary
of the Company or any acquiring entity or successor to the Company; (b) the
restrictions on all shares of restricted stock awards shall lapse immediately;
and (c) all performance shares shall be deemed to be met and payment made
immediately.
10.4 Cash
Payment for Options.
If a
Change in Control of the Company occurs, then the Committee, if approved
by the
Committee in its sole discretion either in an agreement evidencing an option
at
the time of grant or at any time after the grant of an option, and without
the
consent of any participant affected thereby, may determine that:
A-7
(a) some
or
all participants holding outstanding options will receive, with respect to
some
or all of the shares of Common Stock subject to such options, as of the
effective date of any such Change in Control of the Company, cash in an amount
equal to the excess of the Fair Market Value of such shares immediately prior
to
the effective date of such Change in Control of the Company over the exercise
price per share of such options; and
(b) any
options as to which, as of the effective date of any such Change in Control,
the
Fair Market Value of the shares of Common Stock subject to such options is
less
than or equal to the exercise price per share of such options, shall terminate
as of the effective date of any such Change in Control.
|
If
the Committee makes a determination as set forth in subparagraph
(a) of
this Section 10.4, then as of the effective date of any such Change
in
Control of the Company, such options will terminate as to such
shares and
the participants formerly holding such options will only have the
right to
receive such cash payment(s). If the Committee makes a determination
as
set forth in subparagraph (b) of this Section 10.4, then as of
the
effective date of any such Change in Control of the Company such
options
will terminate, become void and expire as to all unexercised shares
of
Common Stock subject to such options on such date, and the participants
formerly holding such options will have no further rights with
respect to
such options.
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11. General.
11.1. Effective
Date.
The
Plan will become effective upon approval by the Board.
11.2. Duration.
The
Plan shall remain in effect until all Incentives granted under the Plan have
either been satisfied by the issuance of shares of Common Stock or the payment
of cash or been terminated under the terms of the Plan and all restrictions
imposed on shares of Common Stock in connection with their issuance under
the
Plan have lapsed. No Incentives may be granted under the Plan after the tenth
anniversary of the date the Plan is approved by the stockholders of the
Company.
11.3. Non-transferability
of Incentives.
Except,
in the event of the holder’s death, by will or the laws of descent and
distribution to the limited extent provided in the Plan or the Incentive,
unless
approved by the Committee, no stock option, SAR, restricted stock or performance
award may be transferred, pledged or assigned by the holder thereof, either
voluntarily or involuntarily, directly or indirectly, by operation of law
or
otherwise, and the Company shall not be required to recognize any attempted
assignment of such rights by any participant. During a participant’s lifetime,
an Incentive may be exercised only by him or her or by his or her guardian
or
legal representative.
11.4. Effect
of Termination, Death or Disability.
In the
event that a participant ceases to be an employee of or consultant to the
Company, or the participants other service with the Company is terminated,
for
any reason, including death, but excluding “Disability,” any Incentives may be
exercised or shall expire at such times as may be determined by the Committee
in
its sole discretion in the agreement evidencing an Incentive. Notwithstanding
any provision to the contrary contained in the Plan, in the event that a
participant ceases to be employed or engaged by the Company, or is otherwise
unable to render services to the Company, as a result of a Disability, any
portion of a stock option Incentive that has vested as of the date of such
Disability shall remain exercisable for the remaining term of such stock
option,
or such lesser period as provided in the agreement evidencing the terms of
such
stock option; provided,
however,
that
all portions of a stock option Incentive that have not yet vested or are
scheduled to vest in the future shall not vest and the employee’s rights to such
portion of the stock option shall terminate. Notwithstanding the other
provisions of this Section 11.4, upon a participant’s termination of
employment or other service with the Company and all subsidiaries (other
than as
a result of a Disability), the Committee may, in its sole discretion (which
may
be exercised at any time on or after the date of grant, including following
such
termination), cause options and SARs (or any part thereof) then held by such
participant to become or continue to become exercisable and/or remain
exercisable following such termination of employment or service and Restricted
Stock Awards, Performance Shares and Stock Awards then held by such participant
to vest and/or continue to vest or become free of transfer restrictions,
as the
case may be, following such termination of employment or service, in each
case
in the manner determined by the Committee; provided, however, that no Incentive
may remain exercisable or continue to vest beyond its expiration date. Any
Incentive Stock Option that remains unexercised more than one (1) year following
termination of employment by reason of death or Disability or more than three
(3) months following termination for any reason other than death or Disability
will thereafter be deemed to be a Non-Statutory Stock Option. The term
“Disability” shall mean, with respect to a participant, that such participant is
unable to perform a significant part of his or her duties and responsibilities
as an employee, director, consultant or other advisor to the Company by reason
of such participant’s physical or mental injury or illness, and such inability
lasts for a period of at least 180 consecutive days.
A-8
11.5. Additional
Conditions.
Notwithstanding anything in this Plan to the contrary: (a) the Company may,
if
it shall determine it necessary or desirable for any reason, at the time
of
award of any Incentive or the issuance of any shares of Common Stock pursuant
to
any Incentive, require the recipient of the Incentive, as a condition to
the
receipt thereof or to the receipt of shares of Common Stock issued pursuant
thereto, to deliver to the Company a written representation of present intention
to acquire the Incentive or the shares of Common Stock issued pursuant thereto
for his or her own account for investment and not for distribution; and (b)
if
at any time the Company further determines, in its sole discretion, that
the
listing, registration or qualification (or any updating of any such document)
of
any Incentive or the shares of Common Stock issuable pursuant thereto is
necessary on any securities exchange or under any federal or state securities
or
blue sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with the
award of any Incentive, the issuance of shares of Common Stock pursuant thereto,
or the removal of any restrictions imposed on such shares, such Incentive
shall
not be awarded or such shares of Common Stock shall not be issued or such
restrictions shall not be removed, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent or approval shall
have
been effected or obtained free of any conditions not acceptable to the Company.
Notwithstanding any other provision of the Plan or any agreements entered
into
pursuant to the Plan, the Company will not be required to issue any shares
of
Common Stock under this Plan, and a participant may not sell, assign, transfer
or otherwise dispose of shares of Common Stock issued pursuant to any Incentives
granted under the Plan, unless (a) there is in effect with respect
to such
shares a registration statement under the Securities Act of 1933, as amended
(the “Securities
Act”),
and
any applicable state or foreign securities laws or an exemption from such
registration under the Securities Act and applicable state or foreign securities
laws, and (b) there has been obtained any other consent, approval
or permit
from any other regulatory body which the Committee, in its sole discretion,
deems necessary or advisable. The Company may condition such issuance, sale
or
transfer upon the receipt of any representations or agreements from the parties
involved, and the placement of any legends on certificates representing shares
of Common Stock, as may be deemed necessary or advisable by the Company in
order
to comply with such securities law or other restrictions.
11.6. Adjustment.
In the
event of any merger, consolidation or reorganization of the Company with
any
other corporation or corporations, there shall be substituted for each of
the
shares of Common Stock then subject to the Plan, including shares subject
to
restrictions, options, or achievement of performance share objectives, the
number and kind of shares of stock or other securities to which the holders
of
the shares of Common Stock will be entitled pursuant to the transaction.
In the
event of any recapitalization, reclassification, stock dividend, stock split,
combination of shares or other similar change in the corporate structure
of the
Company or shares of the Company, the exercise price of an outstanding Incentive
and the number of shares of Common Stock then subject to the Plan, including
shares subject to restrictions, options or achievements of performance shares,
shall be adjusted in proportion to the change in outstanding shares of Common
Stock in order to prevent dilution or enlargement of the rights of the
participants. In the event of any such adjustments, the purchase price of
any
option, the performance objectives of any Incentive, and the shares of Common
Stock issuable pursuant to any Incentive shall be adjusted as and to the
extent
appropriate, in the discretion of the Committee, to provide participants
with
the same relative rights before and after such adjustment.
A-9
11.7. Incentive
Plans and Agreements.
Except
in the case of stock awards or cash awards, the terms of each Incentive shall
be
stated in a plan or agreement approved by the Committee. The Committee may
also
determine to enter into agreements with holders of options to reclassify
or
convert certain outstanding options, within the terms of the Plan, as Incentive
Stock Options or as non-statutory stock options and in order to eliminate
SARs
with respect to all or part of such options and any other previously issued
options.
11.8. Withholding.
(a) The
Company shall have the right to (i) withhold and deduct from any payments
made
under the Plan or from future wages of the participant (or from other amounts
that may be due and owing to the participant from the Company or a subsidiary
of
the Company), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any and all foreign, federal, state
and
local withholding and employment-related tax requirements attributable to
an
Incentive, or (ii) require the participant promptly to remit the amount of
such
withholding to the Company before taking any action, including issuing any
shares of Common Stock, with respect to an Incentive. At any time when a
participant is required to pay to the Company an amount required to be withheld
under applicable income tax laws in connection with a distribution of Common
Stock or upon exercise of an option or SAR, the participant may satisfy this
obligation in whole or in part by electing (the “Election”)
to
have the Company withhold from the distribution shares of Common Stock having
a
value up to the amount required to be withheld. The value of the shares to
be
withheld shall be based on the Fair Market Value of the Common Stock on the
date
that the amount of tax to be withheld shall be determined (“Tax
Date”).
(b) Each
Election must be made prior to the Tax Date. The Committee may disapprove
of any
Election, may suspend or terminate the right to make Elections, or may provide
with respect to any Incentive that the right to make Elections shall not
apply
to such Incentive. An Election is irrevocable.
(c) If
a
participant is an officer or director of the Company within the meaning of
Section 16 of the Exchange Act, then an Election is subject to the following
additional restrictions:
(1) No
Election shall be effective for a Tax Date which occurs within six months
of the
grant or exercise of the award, except that this limitation shall not apply
in
the event death or Disability of the participant occurs prior to the expiration
of the six-month period.
(2) The
Election must be made either six months prior to the Tax Date or must be
made
during a period beginning on the third business day following the date of
release for publication of the Company’s quarterly or annual summary statements
of sales and earnings and ending on the twelfth business day following such
date.
A-10
11.9. No
Continued Employment, Engagement or Right to Corporate Assets.
No
participant under the Plan shall have any right, because of his or her
participation, to continue in the employ of the Company for any period of
time
or to any right to continue his or her present or any other rate of
compensation. Nothing contained in the Plan shall be construed as giving
an
employee, a consultant, such persons’ beneficiaries or any other person any
equity or interests of any kind in the assets of the Company or creating
a trust
of any kind or a fiduciary relationship of any kind between the Company and
any
such person.
11.10. Deferral
Permitted.
Payment
of cash or distribution of any shares of Common Stock to which a participant
is
entitled under any Incentive shall be made as provided in the Incentive.
Payment
may be deferred at the option of the participant if provided in the
Incentive.
11.11. Amendment
of the Plan.
The
Board may amend, suspend or discontinue the Plan at any time; provided, however,
that no amendments to the Plan will be effective without approval of the
stockholders of the Company if stockholder approval of the amendment is then
required pursuant to Section 422 of the Code or the rules of any stock exchange
or Nasdaq or similar regulatory body. No termination, suspension or amendment
of
the Plan may adversely affect any outstanding Incentive without the consent
of
the affected participant; provided, however, that this sentence will not
impair
the right of the Committee to take whatever action it deems appropriate under
Section 11.6 of the Plan.
11.13 Breach
of Confidentiality, Assignment of Inventions, or Non-Compete
Agreements.
Notwithstanding anything in the Plan to the contrary, in the event that a
participant materially breaches the terms of any confidentiality, assignment
of
inventions, or non-compete agreement entered into with the Company or any
subsidiary of the Company, whether such breach occurs before or after
termination of such participant’s employment or other service with the Company
or any subsidiary, the Committee in its sole discretion may immediately
terminate all rights of the participant under the Plan and any agreements
evidencing an Incentive then held by the participant without notice of any
kind.
11.14 Governing
Law.
The
validity, construction, interpretation, administration and effect of the
Plan
and any rules, regulations and actions relating to the Plan will be governed
by
and construed exclusively in accordance with the laws of the State of Delaware,
notwithstanding the conflicts of laws principles of any
jurisdictions.
11.15 Successors
and Assigns.
The
Plan will be binding upon and inure to the benefit of the successors and
permitted assigns of the Company and the participants in the Plan.
A-11
PROXY
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MANHATTAN
PHARMACEUTICALS, INC.
The
undersigned, a stockholder of Manhattan Pharmaceuticals, Inc., hereby appoints
Douglas Abel and Nicholas J. Rossettos, and each of them, as proxies, with
full
power of substitution, to vote on behalf of the undersigned the number of
shares
which the undersigned is then entitled to vote, at the Annual Meeting of
Stockholders of Manhattan Pharmaceuticals, Inc. to be held at the Dream Hotel,
210 West 55th
Street,
New York, New York 10019 at 10:00 a.m. (EST), on November 18, 2005, and at
any
and all adjournments thereof, with all the powers which the undersigned would
possess if personally present, in the manner directed herein.
(Continued,
and to be marked, dated and signed, on the other side)
Manhattan
Pharmaceuticals, Inc.
Voting
by telephone is quick, easy and immediate.
As a
stockholder of Manhattan Pharmaceuticals, Inc., you have the option of voting
your shares electronically via the telephone, eliminating the need to return
your proxy card. Your electronic vote authorizes the named proxies to vote
your
shares in the same manner as if you marked, signed, dated and returned the
proxy
card. Votes submitted electronically by telephone must be received by 6:00
p.m.
(EST) on November 17, 2005.
To
Vote Your Proxy by Phone
1-800-293-8533
Use
any
touch-tone telephone to vote your proxy. Have you proxy card available when
you
call. Follow the voting instructions to vote your shares.
Please
do not return the above card if you are voting electronically or by
phone.
To
Vote Your Proxy by Mail
Mark,
sign and date your proxy card above, detach it and return it in the postage-paid
envelope provided.
Please
detach here
______________________________________
PROXY
THIS
PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED
“FOR” THE PROPOSALS. THIS PROXY IS SOLICITED IN BEHALF OF THE BOARD OF
DIRECTORS.
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FOR
|
WITHHOLD
AUTHORITY
|
FOR
|
AGAINST
|
ABSTAIN
|
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|
1.
ELECTION OF DIRECTORS:
|
o
|
o
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2.
PROPOSAL TO RATIFY AND APPROVE A PROPOSED AMENDMENT TO THE 2003
STOCK
OPTION PLAN.
|
o
|
o
|
o
|
|
(To
withhold authority to vote for any individual nominee, strike
a line
through that nominee’s name in this list below)
DOUGLAS
ABEL
NEIL
HERSKOWITZ
MALCOLM
HOENLEIN
TIMOTHY
McINERNEY
JOAN
PONS GIMBERT
RICHARD
I. STEINHART
MICHAEL
WEISER, M.D.
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3.
PROPOSAL TO RATIFY APPOINTMENT OF J.H. COHN LLP AS INDEPENDENT
AUDITORS
FOR 2005.
|
o
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o
|
o
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4.
In their discretion, the Proxies are authorized to vote upon
such other
business as may come before the Meeting.
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COMPANY
NO.:
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PROXY
NUMBER:
ACCOUNT
NUMBER:
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Signature Signature Date