The Company does not have any annuity, retirement, pension, deferred or
incentive compensation plan or arrangement under which any executive officer is
entitled to benefits, nor does the Company have any long-term incentive plan
pursuant to which performance units or other forms of compensation are paid.
Executive officers who qualify will be permitted to participate in the Company's
1992, 1997 and 1998 Stock Option Plans which were adopted in May 1992, February
1997 and June 1998, respectively. In September 1998 the Board of Directors
adopted a 401(k) Plan in which all employees of the Company are eligible to
participate. Executive officers may participate in group life, health and
hospitalization plans, if and when such plans are available generally to all
employees. The Compensation Committee is satisfied that the compensation and
stock option plans provided to the officers of the Company are structured and
operated to create strong alignment with the long-term best interests of the
Company and its stockholders.
The compensation of the Company's Chief Executive Officer, Mr. Dugger,
for fiscal 1998 consisted of base salary and stock options. The determination by
the Compensation Committee of Mr. Dugger's remuneration is based upon methods
consistent with those used for other senior executives. The Committee considers
certain quantitative factors, including the Company's financial, strategic and
operating performance for the year. The qualitative criteria include Mr.
Dugger's leadership qualities and management skills, as exhibited by his
innovations, time and effort devoted to the Company, and other general
considerations. The Compensation Committee also takes note of comparable
remuneration of other CEOs at similar companies. Based on the performance of the
Company, the Compensation Committee believes that Mr. Dugger's compensation was
appropriate.
Compensation Committee:
Harry A. Dugger, III, Ph.D
John J. Moroney
Employment Agreements and Change in Control Arrangements
Dr. Dugger and Mr. Moroney. Effective as of November 19, 1997, the
Company entered into employment agreements with each of Harry A. Dugger, III,
for his services as President, and John J. Moroney, for his services as Chairman
(the "Dugger and Moroney Agreements"). Each agreement is for a base term of
three (3) years and is thereafter renewable for additional periods of one (1)
year, unless the Company gives notice to the contrary. The Dugger and Moroney
Agreements provide for a base salary of $200,000 and $150,000, respectively, and
annual cost of living adjustments equal to the greater of the increase in the
Consumer Price Index or 7.5%, with additional increases and bonuses as shall be
approved by the Board. Dr. Dugger will also receive an additional cash bonus of
$10,000 for each New Drug Application relating to the Company's products that is
accepted for filing by the U.S. Food and Drug Administration, as well as the use
of a Company-owned or leased and insured automobile chosen by the Company.
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