BioSante Proxy for 2007
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________________________
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed
by
the Registrant þ
Filed
by
a party other than the Registrant ¨
Check
the
appropriate box:
¨ Preliminary
Proxy Statement
¨ Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
¨ Definitive
Additional Materials
¨ Soliciting
Material Pursuant to § 240.14a-12
BioSante
Pharmaceuticals, Inc.
(NAME
OF
REGISTRANT AS SPECIFIED IN ITS CHARTER)
________________________________________________
(NAME
OF
PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment
of Filing Fee (Check the appropriate box):
þ No
fee
required.
¨ Fee
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:
.............................................................
|
(3)
|
Per
unit 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):
|
.............................................................
(4) Proposed
maximum aggregate value of transaction:
.............................................................
(5) Total
fee
paid:
.............................................................
¨ Fee
paid
previously with preliminary materials.
¨
|
Check
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.:
............................................................
(3) Filing
Party:
............................................................
(4) Date
Filed:
............................................................
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 14, 2007
_____________________
TO
THE
STOCKHOLDERS OF BIOSANTE PHARMACEUTICALS, INC.:
The
Annual Meeting of Stockholders of BioSante Pharmaceuticals, Inc., a Delaware
corporation, will be held on Thursday, June 14, 2007, at 10:00 a.m., local
time,
at the
O’Hare Hilton Hotel, O’Hare International Airport, Chicago, Illinois,
for the
following purposes:
1. |
To
elect six persons to serve as directors until our next annual meeting
of
stockholders or until their respective successors are elected and
qualified.
|
2. |
To
consider a proposal to ratify the selection of Deloitte & Touche LLP
as our independent registered public accounting firm for the fiscal
year
ending December 31, 2007.
|
3. |
To
transact such other business as may properly come before the meeting
or
any adjournment of the meeting.
|
Only
stockholders of record at the close of business on April 17, 2007 will be
entitled to notice of, and to vote at, the meeting and any adjournments thereof.
A stockholder list will be available at BioSante’s corporate offices beginning
June 4, 2007 during normal business hours for examination by any stockholder
registered on BioSante’s stock ledger as of the record date, April 17, 2007, for
any purpose germane to the annual meeting.
It
is
important that your shares be represented and voted at the meeting. Please
mark,
sign, date, and mail the enclosed proxy card in the postage-paid envelope
provided.
By
Order
of the Board of Directors,
/s/
Phillip B. Donenberg
Phillip
B. Donenberg
Secretary
April
30,
2007
Lincolnshire,
Illinois
Important:
The prompt return of your proxy card will save the company the expense
of
further requests for proxies to ensure a quorum at the meeting. A
self-addressed envelope is enclosed for your convenience. No postage
is
required if mailed within the United States.
|
TABLE
OF CONTENTS
|
|
_____________________
|
|
|
Page
|
|
|
INFORMATION
CONCERNING THE ANNUAL MEETING
|
1
|
Date,
Time, Place and Purposes
|
1
|
Who
Can Vote
|
1
|
How
You Can Vote
|
1
|
How
Does the Board of Directors Recommend that You Vote
|
2
|
How
You May Revoke or Change Your Vote
|
2
|
Quorum
Requirement
|
2
|
Vote
Required
|
3
|
Procedures
at the Annual Meeting
|
3
|
|
|
SECURITY
OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND
MANAGEMENT
|
4
|
|
|
ELECTION
OF DIRECTORS (Proposal 1)
|
6
|
Number
of Directors
|
6
|
Nominees
for Director
|
6
|
Vote
Required
|
6
|
Board
Recommendation
|
6
|
Information
About Board Nominees
|
7
|
Additional
Information About Board Nominees
|
7
|
|
|
CORPORATE
GOVERNANCE
|
9
|
Director
Independence
|
9
|
Board
of Directors and Committees of the Board
|
9
|
Audit
and Finance Committee
|
9
|
Audit
and Finance Committee Report
|
11
|
Compensation
Committee
|
12
|
Nominating
and Corporate Governance Committee
|
14
|
Scientific
Review Committee
|
15
|
Corporate
Governance Guidelines
|
15
|
Director
Nominations Process
|
16
|
Policy
Regarding Director Attendance at Annual Meetings of
Stockholders
|
18
|
Code
of Conduct and Ethics
|
18
|
Complaint
Procedures
|
18
|
Process
Regarding Stockholder Communications with Board of
Directors
|
18
|
|
|
DIRECTOR
COMPENSATION
|
19
|
Summary
of Cash and Other Compensation
|
19
|
Elements
of our Director Compensation Program
|
20
|
Annual
Cash Retainers, Meeting Fees and Reimbursement of Expenses
|
21
|
Stock
Options
|
21
|
|
|
COMPENSATION
DISCUSSION AND ANALYSIS
|
23
|
Overview
|
23
|
Role
of the Compensation Committee of the Board
|
23
|
Objectives
of Our Executive Compensation Program
|
23
|
Our
Philosophy
|
24
|
Determination
of Amount of Executive Compensation and Use of
Benchmarking
|
24
|
Determination
of Form of Executive Compensation and Total Compensation
Mix
|
25
|
Elements
of Our Executive Compensation Program
|
26
|
Analysis
of Named Executive Officer Compensation Arrangements for 2006 – Stephen M.
Simes
|
30
|
Analysis
of Named Executive Officer Compensation Arrangements for 2006 – Phillip B.
Donenberg
|
32
|
Change
in Control and Post-Termination Severance Arrangements
|
34
|
Accounting
and Tax Considerations
|
36
|
|
|
EXECUTIVE
COMPENSATION
|
37
|
Compensation
Committee Report
|
37
|
Compensation
Committee Interlocks and Insider Participation
|
37
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Summary
of Cash and Other Compensation
|
38
|
Grants
of Plan-Based Awards
|
40
|
Outstanding
Equity Awards at Fiscal Year End
|
42
|
Options
Exercised During Fiscal Year
|
43
|
Potential
Payments Upon Termination or Change in Control
|
43
|
|
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RELATED
PERSON RELATIONSHIPS AND TRANSACTIONS
|
48
|
Director
and Executive Officer Compensation
|
48
|
Policies
and Procedures Regarding Related Party Transactions
|
48
|
ratification
of selection of independent registered public accounting firm (Proposal
2)
|
50
|
Selection
of Independent Registered Public Accounting Firm
|
50
|
Audit,
Audit-Related, Tax and Other Fees
|
50
|
Pre-Approval
Policies and Procedures
|
51
|
Board
Recommendation
|
51
|
|
|
OTHER
MATTERS
|
52
|
Section
16(a) Beneficial Ownership Reporting Compliance
|
52
|
Stockholder
Proposals for 2007 Annual Meeting
|
52
|
Director
Nominations
|
52
|
Proxy
Solicitation Costs
|
53
|
Householding
of Annual Meeting Materials
|
53
|
Other
Business
|
53
|
Copies
of 2006 Annual Report
|
54
|
![](biosantelogo6.jpg)
111
Barclay Boulevard
Lincolnshire,
Illinois 60069
_____________________
PROXY
STATEMENT FOR
ANNUAL
MEETING OF STOCKHOLDERS
June
14,
2007
_____________________
INFORMATION
CONCERNING THE ANNUAL MEETING
The
Board
of Directors of BioSante Pharmaceuticals, Inc. is soliciting your proxy for
use
at the 2007 Annual Meeting of Stockholders on Thursday, June 14, 2007. The
Notice of Annual Meeting, this proxy statement and the enclosed form of proxy
are being mailed to stockholders beginning on or about April 30,
2007.
Date,
Time, Place and Purposes
The
Annual Meeting of Stockholders of BioSante Pharmaceuticals, Inc. will be held
on
Thursday, June 14, 2007, at 10:00 a.m., local time, at the O’Hare Hilton Hotel,
O’Hare International Airport, Chicago, Illinois, for the purposes set forth in
the Notice of Meeting.
Who
Can Vote
Stockholders
of record at the close of business on April 17, 2007 will be entitled to vote
at
the meeting. As of that date, there were 23,081,374 shares of our common stock
and 391,286 shares of our class C special stock outstanding. Each share of
our
common stock and class C special stock is entitled to one vote on each matter
to
be voted on at the Annual Meeting. Stockholders are not entitled to cumulate
voting rights.
How
You Can Vote
Your
vote
is important. If you are a stockholder whose shares are registered in your
name,
you may vote your shares by completing, signing, dating and mailing the enclosed
proxy card in the envelope provided. No postage is required if your proxy card
is mailed within the United States.
If
your
shares are held in “street name” (through a broker, bank or other nominee), you
may receive a separate voting instruction form with this proxy statement or
you
may need to contact your broker, bank or other nominee to determine how you
will
be able to vote your shares.
If
you
return your signed proxy card, the named proxies will vote your shares as you
direct. You have three choices on each matter to be voted on.
For
the
election of directors, you may vote:
· |
FOR
all of the nominees for director,
|
· |
WITHHOLD
your vote from all of the nominees for director
or
|
· |
WITHHOLD
your vote from one or more of the nominees for
director.
|
For
each
of the other proposals, you may vote:
· |
AGAINST
the proposal or
|
· |
ABSTAIN
from voting on the proposal.
|
If
you
send in your proxy card, but do not specify how you want to vote your shares,
the proxies will vote your shares FOR
all of
the nominees for director and FOR
all of
the other proposals set forth in the Notice of Annual Meeting.
How
Does the Board of Directors Recommend that You Vote
The
Board of Directors unanimously recommends that you vote FOR all of the nominees
for director and FOR the approval of all of the other proposals set forth in
the
Notice of Annual Meeting.
How
You May Revoke or Change Your Vote
If
you
are a stockholder whose shares are registered in your name, you may revoke
your
proxy at any time before it is voted at the meeting by one of the following
methods:
· |
Submitting
another proper proxy with a more recent date than that of the proxy
first
given by completing, signing, dating and returning a proxy card to
us.
|
· |
Sending
written notice of revocation to our Corporate
Secretary.
|
· |
Attending
the Annual Meeting and voting by
ballot.
|
Quorum
Requirement
The
presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of our common stock (11,540,688 shares)
and a
majority of the outstanding shares of our class C special stock (195,644 shares)
as of the record date will constitute a quorum for the transaction of business
at the Annual Meeting. In general, shares of our common stock and shares of
our
class C special stock represented by a properly signed and returned proxy card
will be counted as shares present and entitled to vote at the Annual Meeting
for
purposes of determining a quorum. Shares represented by proxies marked “Abstain”
or “Withheld” are counted in determining whether a quorum is present. In
addition, a “broker non-vote” is considered in determining whether a quorum is
present. A “broker non-vote” is a proxy returned by a broker on behalf of its
beneficial owner customer that is not voted on a particular matter because
voting instructions have not been received by the broker from the customer,
and
the broker does not have discretionary authority to vote on behalf of such
customer on such matter.
Vote
Required
Assuming
a quorum is represented at the Annual Meeting, either in person or by proxy,
(1)
the election of the six nominees for director requires the affirmative vote
of a
plurality of the shares of common stock and class C special stock, present
in
person or by proxy and entitled to vote, voting together as a single class,
and
(2) the approval of each of the other proposals described in this proxy
statement, requires the affirmative vote of the holders of a majority of the
shares of common stock and class C special stock, present in person or by proxy
and entitled to vote, voting together as a single class.
If
your
shares are held in “street name” and you do not indicate how you wish to vote,
your broker is permitted to exercise its discretion to vote your shares on
certain “routine” matters that include the election of directors (Proposal 1)
and the ratification of the selection of our independent registered public
accounting firm (Proposal 2). Abstentions and withheld votes will be counted,
and will have the effect of a negative vote.
Procedures
at the Annual Meeting
The
presiding officer at the Annual Meeting will determine how business at the
meeting will be conducted. Only matters brought before the Annual Meeting in
accordance with our bylaws will be considered.
Only
a
natural person present at the Annual Meeting who is either a BioSante
stockholder or is acting on behalf of one of our stockholders may make a motion
or second a motion. A person acting on behalf of a stockholder must present
a
written statement executed by the stockholder or the duly authorized
representative of the stockholder on whose behalf the person purports to
act.
SECURITY
OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND
MANAGEMENT
_____________________
The
following table sets forth information known to us with respect to the
beneficial ownership of each class of our capital stock as of April 17, 2007
for
(1) each person known by us to beneficially own more than five percent of any
class of our voting securities, (2) each of the executive officers named in
the
Summary Compensation Table under the heading “Executive Compensation,” (3) each
of our directors and (4) all of our executive officers and directors as a
group.
Shares
are deemed to be “beneficially owned” by a person if such person, directly or
indirectly, has sole or shared power to vote or to direct the voting of such
shares or sole or shared power to dispose or direct the disposition of such
shares. Except as otherwise indicated, we believe that each of the beneficial
owners of our capital stock listed below, based on information provided by
these
owners, has sole dispositive and voting power with respect to its shares,
subject to community property laws where applicable. Shares not outstanding
but
deemed beneficially owned by virtue of the right of a person or member of a
group to acquire them within 60 days are treated as outstanding only when
determining the amount and percent owned by such person or group.
|
|
Shares
Beneficially Owned
|
|
|
|
Common
Stock
|
|
Class
C Special Stock
|
Common
Stock and Common
|
Percent
of Total
|
|
Name
and Address of
Beneficial Owner(1)
|
|
Number
|
Percent
|
|
Number
|
|
Percent
|
|
Stock
Equivalents
|
Voting
Power(2)
|
Louis
W. Sullivan, M.D.
|
|
|
73,731(3)
|
|
*
|
|
|
100,000
|
|
|
25.6
|
%
|
|
173,731
|
|
|
*
|
|
Stephen
M. Simes
|
|
|
483,848(4)
|
|
2.1
|
%
|
|
—
|
|
|
—
|
|
|
483,848
|
|
|
2.0
|
%
|
Fred
Holubow
|
|
|
115,792(5)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
115,792
|
|
|
*
|
|
Peter
Kjaer
|
|
|
65,258(6)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
65,258
|
|
|
*
|
|
Ross
Mangano
|
|
|
2,121,249(7)
|
|
9.2
|
%
|
|
—
|
|
|
—
|
|
|
2,121,249
|
|
|
9.0
|
%
|
Victor
Morgenstern
|
|
|
711,185(8)
|
|
3.1
|
%
|
|
—
|
|
|
—
|
|
|
711,185
|
|
|
3.0
|
%
|
Edward
C. Rosenow, III, M.D.
|
|
|
63,373(9)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
63,373
|
|
|
*
|
|
Phillip
B. Donenberg
|
|
|
205,432(10)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
205,423
|
|
|
*
|
|
JO
& Co
|
|
|
1,759,661(11)
|
|
7.6
|
%
|
|
—
|
|
|
—
|
|
|
1,759,661
|
|
|
7.5
|
%
|
Hans
Michael Jebsen
|
|
|
425,000(12)
|
|
2.3
|
%
|
|
100,000
|
|
|
25.6
|
%
|
|
525,000
|
|
|
2.3
|
%
|
Marcus
Jebsen
|
|
|
125,000(12)
|
|
*
|
|
|
50,000
|
|
|
12.8
|
%
|
|
175,000
|
|
|
*
|
|
Angela
Ho
|
|
|
77,137(13)
|
|
*
|
|
|
100,000
|
|
|
25.6
|
%
|
|
177,137
|
|
|
*
|
|
All
executive officers and
directors
as a group (8 persons)
|
|
|
3,839,868(14)
|
|
16.0
|
%
|
|
100,000
|
|
|
25.6
|
%
|
|
3,939,868
|
|
|
16.2
|
%
|
_____________________
*
less
than one percent.
(1)
|
Unless
otherwise indicated in the footnotes below, the address for each
of the
stockholders in the table above is c/o BioSante Pharmaceuticals,
Inc., 111
Barclay Boulevard, Lincolnshire, IL
60069.
|
(2)
|
In
calculating the percent of total voting power, the voting power of
shares
of our common stock and shares of our class C special stock is
combined.
|
(3)
|
Dr.
Sullivan’s beneficial ownership includes 45,833 shares of common stock
issuable upon exercise of stock
options.
|
(4)
|
Mr.
Simes’ beneficial ownership includes (1) 306,581 shares of common stock
issuable upon exercise of stock options, (2) 500 shares of common
stock
issuable upon exercise of warrants and 176,567 shares of common stock
held
by Mr. Simes’ trust and (3) 200 shares of common stock held by Mr. Simes’
sons.
|
(5)
|
Mr.
Holubow’s beneficial ownership includes 45,833 shares of common stock
issuable upon exercise of stock
options.
|
(6)
|
Mr.
Kjaer’s beneficial ownership includes 45,833 shares of common stock
issuable upon exercise of stock
options.
|
(7)
|
Mr.
Mangano’s beneficial ownership includes: (1) 45,833 shares of common stock
issuable upon exercise of stock options, (2) 146,512 shares of common
stock issuable upon exercise of a warrant and 1,613,149 shares of
common
stock held by JO & Co., of which Mr. Mangano is President,
(3) 30,000 shares of common stock held by Oliver & Co., of which
Mr. Mangano is the trustee, and (4) an aggregate of 214,999 shares
of
common stock held in various accounts, of which Mr. Mangano is an
advisor
and/or a trustee. Mr. Mangano has sole voting and dispositive power
over
these shares. See note (11) below.
|
(8)
|
Mr.
Morgenstern’s beneficial ownership includes: (1) 45,833 shares of common
stock issuable upon exercise of stock options, (2) 76,500 shares
of common
stock issuable upon exercise of a warrant, (3) 70,000 shares of
common stock held by Mr. Morgenstern’s wife, as to which Mr.
Morgenstern disclaims control, direction or beneficial ownership,
and
(4) 63,281 shares of common stock held by Resolute Partners L.P.
Victor Morgenstern is managing director of Resolute Partners
L.P.
|
(9)
|
Dr.
Rosenow’s beneficial ownership includes 45,833 shares of common stock
issuable upon exercise of stock
options.
|
(10)
|
Mr.
Donenberg’s beneficial ownership includes 169,110 shares of common stock
issuable upon exercise of stock options and 500 shares of common
stock
issuable upon exercise of warrants.
|
(11)
|
Includes
146,512 shares of common stock issuable upon exercise of a warrant.
Ross
Mangano, a director of BioSante, has sole voting and dispositive
power
over these shares. See note (7) above. The address for JO & Co. is 112
West Jefferson Boulevard, Suite 613, South Bend, IN
46634.
|
(12)
|
The
address of each of Hans Michael Jebsen and Marcus Jebsen is c/o Jebsen
& Co. Ltd., 28/F Caroline Center, 28 Yun Ping Road, Causeway Bay, Hong
Kong, China.
|
(13)
|
The
address of Angela Ho address is c/o Jet Asia Ltd., 39/F Shun Tak
Center,
200 Connaught Road Central, Hong Kong,
China.
|
(14)
|
The
amount beneficially owned by all current directors and executive
officers
as a group includes 828,189 shares issuable upon exercise of warrants
and
stock options held by these individuals, 146,512 shares issuable
upon
exercise of a warrant held by an entity affiliated with these individuals,
176,567 shares held in an individual’s trust and 200 shares held by an
individual’s sons. See notes (4), (7) and (11)
above.
|
ELECTION
OF DIRECTORS
(Proposal
1)
_____________________
Number
of Directors
Our
bylaws provide that the Board of Directors will consist of at least one member,
or such other number as may be determined by the Board of Directors or
stockholders at an annual meeting. The Board of Directors has fixed the number
of directors at six effective as of our next annual meeting of
stockholders.
Nominees
for Director
The
Board
of Directors has nominated the following six individuals to serve as our
directors until the next annual meeting of our stockholders or until their
successors are elected and qualified. All of the nominees named below are
current members of the Board of Directors.
· |
Louis
W. Sullivan, M.D.
|
· |
Edward
C. Rosenow III, M.D.
|
Under
an
employment letter agreement we entered into with Mr. Simes in January 1998
in
connection with his acceptance of our offer of employment as an executive
officer of our company, Mr. Simes agreed to serve as a director of our company
and we agreed to nominate him as a nominee for director and solicit proxies
for
his election so long as Mr. Simes is employed by us.
Victor
Morgenstern has chosen not to stand for re-election at the Annual Meeting in
light of his other responsibilities and obligations, including in particular
an
increased time commitment to Valor Equity Partners, LLC, a private equity fund,
in which Mr. Morgenstern serves as Chairman and a principal. The Board of
Directors thanks Mr. Morgenstern for his many years of service to BioSante.
Proxies
can only be voted for the number of persons named as nominees in this proxy
statement, which is six.
Vote
Required
Assuming
a quorum is represented at the Annual Meeting, either in person or by proxy,
the
election of a nominee for director requires the affirmative vote of a plurality
of the shares of common stock and class C special stock represented in person
or
by proxy at the Annual Meeting, voting together as a single class.
Board
Recommendation
The
Board
of Directors unanimously recommends a vote FOR
the
election of all of the six nominees named above.
If
prior
to the Annual Meeting, the Board of Directors should learn that any nominee
will
be unable to serve for any reason, the proxies that otherwise would have been
voted for this nominee will be voted for a substitute nominee as selected by
the
Board of Directors. Alternatively, the proxies, at the Board’s discretion, may
be voted for that fewer number of nominees as results from the inability of
any
nominee to serve. The Board of Directors has no reason to believe that any
of
the nominees will be unable to serve.
Information
About Board Nominees
The
following table sets forth certain information that has been furnished to us
by
each director who has been nominated by the Board of Directors to serve as
a
director of our company.
Name
of Nominee
|
Age
|
Principal
Occupation
|
Director
Since
|
|
|
|
|
Louis
W. Sullivan, M.D.(1)(2)(3)(4)
|
73
|
President
Emeritus of the Morehouse School of Medicine and Chairman of the
Board of
Directors of BioSante
|
1996
|
|
|
|
|
Stephen
M. Simes
|
55
|
Vice
Chairman, President and Chief Executive Officer of
BioSante
|
1998
|
|
|
|
|
Fred
Holubow
(1)(3)(4)
|
68
|
Vice
President of Pegasus Associates, an operating division of William
Harris
Investors
|
1999
|
|
|
|
|
Peter
Kjaer(1)(3)
|
46
|
President
and Chief Executive Officer of
Jet-Asia
Ltd.
|
1999
|
|
|
|
|
Ross
Mangano(2)(3)
|
61
|
President
of Oliver Estate, Inc.
|
1999
|
|
|
|
|
Edward
C. Rosenow III, M.D.(3)(4)
|
72
|
Master
Fellow of the American College of Physicians and the American College
of
Chest Physicians
|
1997
|
__________________
(1)
|
Member
of the Audit and Finance Committee
|
(2)
|
Member
of the Compensation Committee
|
(3)
|
Member
of the Nominating and Corporate Governance
Committee
|
(4)
|
Member
of the Scientific Review Committee
|
There
are
no family relationships among any of our directors.
Additional
Information About Board Nominees
The
Honorable Louis W. Sullivan, M.D.
has been
our Chairman of the Board of Directors since March 1998 and has been a director
of our company since its formation. Dr. Sullivan served as Secretary of Health
and Human Services in the cabinet of President George H.W. Bush from 1989 to
1993. Since retiring from the Bush Administration, Dr. Sullivan has been
associated with the Morehouse School of Medicine in Atlanta, Georgia. Currently,
he serves as President Emeritus and he previously served as President and Dean
of the School from 1981 to 1985 and as President from 1985 to 1989 and from
1993
to 2002. Dr. Sullivan serves on the board of directors of Henry Schein Inc.,
United Therapeutics Corporation and Inhibitex, Inc.
Stephen
M. Simes
has
served as our Vice Chairman, President and a director of our company since
January 1998 and Chief Executive Officer since March 1998. From October 1994
to
January 1997, Mr. Simes was President, Chief Executive Officer and a
director of Unimed Pharmaceuticals, Inc. (wholly-owned by Solvay Pharmaceuticals
Inc.), a company with a product focus on infectious diseases, AIDS,
endocrinology and oncology. From 1989 to 1993, Mr. Simes was Chairman, President
and Chief Executive Officer of Gynex Pharmaceuticals, Inc., a company which
concentrated on the AIDS, endocrinology, urology and growth disorders markets.
In 1993, Gynex was acquired by Savient Pharmaceuticals, Inc. (formerly
Bio-Technology General Corp.), and from 1993 to 1994, Mr. Simes served as Senior
Vice President and director of Savient Pharmaceuticals Inc. Mr. Simes’
career in the pharmaceutical industry started in 1974 with G.D. Searle & Co.
(now part of Pfizer Inc.).
Fred
Holubow
has been
a director of our company since July 1999. Mr. Holubow has been a Vice President
of Pegasus Associates since he founded Pegasus in 1982. Pegasus Associates
is
currently an operating division of William Harris Investors, a registered
investment advisory firm. He specializes in analyzing and investing in
pharmaceutical and biotechnology companies. Mr. Holubow currently serves on
the
board of directors of Micrus Endovascular Corporation, and in the past has
served on the boards of ThermoRetec Corporation, Savient Pharmaceuticals, Inc.
(formerly Bio-Technology General Corp.), Gynex Pharmaceuticals, Inc. and Unimed
Pharmaceuticals, Inc.
Peter
Kjaer
has been
a director of our company since July 1999. Mr. Kjaer has been President and
Chief Executive Officer of Jet-Asia Ltd., a Hong Kong-based aircraft and
management company, since April 1996.
Ross
Mangano
has been
a director of our company since July 1999. Mr. Mangano has been the President
and a director of Oliver Estate, Inc., a management company specializing in
investments in public and private companies, since 1971.
Edward
C. Rosenow, III, M.D.
has been
a director of our company since November 1997. Dr. Rosenow is a Master Fellow
of
the American College of Physicians as well as Master Fellow the American College
of Chest Physicians. Dr. Rosenow was the Arthur M. and Gladys D. Gray Professor
of Medicine at the Mayo Clinic from 1988 until his retirement in 1996. Beginning
with his residency in 1960, Dr. Rosenow has worked at the Mayo Clinic in many
professional capacities including as a Consultant in Internal Medicine (Thoracic
Diseases) from 1966 to 1996, an Assistant Professor, Associate Professor and
Professor of Medicine at the Mayo Clinic Medical School, President of the Mayo
Clinic Staff in 1986, and Chair of the Division of Pulmonary and Critical Care
Medicine from 1987 to 1994. Dr. Rosenow has also served as a consultant to
NASA,
space station FREEDOM at the Johnson Space Center in Houston, Texas from 1989
to
1990 and as the President of the American College of Chest Physicians from
1989
to 1990. In 1998, he received the Mayo Distinguished Alumnus Award. Dr. Rosenow
serves on the board of directors of BioVirex, Inc.
CORPORATE
GOVERNANCE
_____________________
Director
Independence
The
Board
of Directors has affirmatively determined that each of our directors, except
for
Mr. Simes, is an “independent director” as defined by the listing standards of
the American Stock Exchange. Under these standards, no director qualifies as
independent unless the Board of Directors affirmatively determines that the
director does not have a material relationship with the listed company that
would interfere with the exercise of independent judgment. The American Stock
Exchange’s listing standards provide a non-exclusive list of persons who are not
considered independent. In making an affirmative determination that each of
our
directors, except for Mr. Simes, is an “independent director,” the Board of
Directors reviewed and discussed information provided by the directors and
by us
with regard to each director’s business and personal activities as they may
relate to us and our management.
Board
of
Directors and Committees of the Board
The
Board
of Directors met nine times and took action by written consent three times
during 2006. At all of these board meetings, the independent directors of the
Board of Directors met in executive session without the presence of Mr. Simes
or
any of our other executive officers during a portion of the meeting. Other
than
Peter Kjaer, who attended 67 percent of the meetings, all of our directors
attended 75 percent or more of the aggregate meetings of the Board of Directors
and all committees on which they served during 2006.
The
Board
of Directors has a standing Audit and Finance Committee, Compensation Committee,
Nominating and Corporate Governance Committee and Scientific Review Committee,
each of which has the composition and responsibilities discussed below. The
Board of Directors may from time to time establish other committees to
facilitate the management of our company and may change the composition and
the
responsibilities of our existing committees.
Audit
and Finance Committee
Responsibilities.
The
Audit and Finance Committee provides assistance to the Board of Directors in
fulfilling its responsibilities for oversight, for quality and integrity of
the
accounting, auditing, reporting practices, systems of internal accounting and
financial controls, the annual independent audit of our financial statements,
and the legal compliance and ethics programs of BioSante as established by
management. The Audit and Finance Committee’s primary responsibilities
include:
· |
overseeing
our accounting and financial reporting processes, systems of internal
control over financial reporting and disclosure control and procedures
on
behalf of the Board of Directors and reporting the results or findings
of
its oversight activities to the
Board;
|
· |
having
sole authority to appoint, retain and oversee the work of our independent
registered public accounting firm and establishing the compensation
to be
paid to the independent registered public accounting
firm;
|
· |
establishing
procedures for the receipt, retention and treatment of complaints
regarding accounting, internal accounting controls and/or or auditing
matters and for the confidential, anonymous submission by our employees
of
concerns regarding questionable accounting or auditing
matters;
|
· |
reviewing
and pre-approving all audit services and permissible non-audit services
to
be performed for us by our independent registered public accounting
firm
as provided under the federal securities laws and rules and regulations
of
the Securities and Exchange Commission;
and
|
· |
overseeing
our system to monitor and manage risk, and legal and ethical compliance
programs, including the establishment and administration (including
the
grant of any waiver from) a written code of ethics applicable to
each of
our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions.
|
The
Audit
and Finance Committee operates under a written charter adopted by the Board
of
Directors, which can be found on the Investors—Corporate Governance—Board
Committees section of our corporate website at www.biosantepharma.com.
A
printed copy of such charter is also available to any stockholder upon request
to our Corporate Secretary at BioSante Pharmaceuticals, Inc., 111 Barclay
Boulevard, Lincolnshire, Illinois 60069, telephone: (847) 478-0500 ext.
120.
The
Audit
and Finance Committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its
duties and responsibilities.
Composition.
The
Audit and Finance Committee currently consists of Mr. Holubow, Mr. Kjaer and
Dr. Sullivan. Mr. Holubow is the current chair of the Audit and
Finance Committee.
Each
current member of the Audit and Finance Committee qualifies as “independent” for
purposes of membership on audit committees pursuant to the listing standards
of
the American Stock Exchange and the rules and regulations of the Securities
and
Exchange Commission and is “financially literate” as required by American Stock
Exchange’s listing standards. In addition, the Board of Directors has determined
that Mr. Holubow qualifies as an “audit committee financial expert” as
defined by the rules and regulations of the Securities and Exchange Commission
and meets the qualifications of “financial sophistication” under American Stock
Exchange’s listing standards as a result of his Masters in Business
Administration in Finance, and his experience as an investment analyst and
portfolio manager for over 39 years and as a member of an audit committee of
another public company. Stockholders should understand that these designations
related to our Audit and Finance Committee members’ experience and understanding
with respect to certain accounting and auditing matters do not impose upon
any
of them any duties, obligations or liabilities that are greater than those
generally imposed on a member of the Audit and Finance Committee or of the
Board
of Directors.
Meetings
and Other Information.
The
Audit and Finance Committee met five times and took action by written consent
once during 2006. At all of these meetings, the Audit and Finance Committee
met
in private session with our independent registered public accounting firm during
a portion of the meeting. Additional information regarding our Audit and Finance
Committee and our independent registered public accounting firm is disclosed
under the “—Audit and Finance Committee Report” and “Ratification of Selection
of Independent Registered Public Accounting Firm (Proposal 2)” sections of this
proxy statement.
Audit
and Finance Committee Report
This
report is furnished by the Audit and Finance Committee of the Board of Directors
with respect to BioSante’s financial statements for the year ended December 31,
2006.
One
of
the purposes of the Audit and Finance Committee is to oversee BioSante’s
accounting and financial reporting processes and the audit of BioSante’s annual
financial statements. BioSante’s management is responsible for the preparation
and presentation of complete and accurate financial statements. BioSante’s
independent registered public accounting firm, Deloitte & Touche LLP, is
responsible for performing an independent audit of BioSante’s financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and for issuing a report on their
audit.
The
Audit
and Finance Committee has reviewed and discussed BioSante’s audited financial
statements for the year ended December 31, 2006 with BioSante’s management.
Management represented to the Audit and Finance Committee that BioSante’s
financial statements were prepared in accordance with generally accepted
accounting principles. The Audit and Finance Committee has discussed with
Deloitte & Touche LLP, BioSante’s independent registered public accounting
firm, the matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). The Audit and Finance Committee
has received the written disclosures and the letter from Deloitte & Touche
LLP required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and the Audit and Finance Committee has
discussed the independence of Deloitte & Touche LLP with them.
Based
on
the review and discussions of the Audit and Finance Committee described above,
in reliance on the unqualified opinion of Deloitte & Touche LLP regarding
BioSante’s audited financial statements, and subject to the limitations on the
role and responsibilities of the Audit and Finance Committee discussed above
and
in the Audit and Finance Committee’s charter, the Audit and Finance Committee
recommended to the Board of Directors that BioSante’s audited financial
statements be included in BioSante’s Annual Report on Form 10-K for the year
ended December 31, 2006 for filing with the Securities and Exchange
Commission.
This
report is dated as of March 26, 2007.
Audit
and Finance Committee
Fred
Holubow, Chairman
Peter
Kjaer
Louis
W.
Sullivan, M.D.
The
foregoing Audit and Finance Committee Report shall not be deemed to be
“soliciting material” or to be “filed” with the Securities and Exchange
Commission or subject to Regulation 14A or 14C under the Securities Exchange
Act
of 1934, as amended, or to the liabilities of Section 18 of the Exchange Act.
Notwithstanding anything to the contrary set forth in any of our previous
filings under the Securities Act of 1933, as amended, or the Exchange Act,
that
might incorporate future filings, including this proxy statement, in whole
or in
part, the foregoing Audit and Finance Committee Report shall not be incorporated
by reference into any such filings.
Compensation
Committee
Responsibilities.
The
Compensation Committee discharges the responsibilities of the Board of Directors
relating to compensation of our executive officers and reviews, assesses and
approves overall company strategies for attracting, developing, retaining and
motivating management. The primary responsibilities of the Compensation
Committee include:
· |
recommending
to the Board of Directors for its determination the annual salaries,
incentive compensation, long-term incentive compensation, special
or
supplemental benefits or perquisites and any and all other compensation
applicable to our chief executive officer and other executive
officers;
|
· |
reviewing
and making recommendations to the Board of Directors regarding any
revisions to corporate goals and objectives with respect to compensation
for our chief executive officer and other executive officers and
establishing and leading a process for the full Board of Directors
to
evaluate the performance of our chief executive officer and other
executive officers in light of those goals and
objectives;
|
· |
administering
our equity compensation plans applicable to any employee of our company
and recommend to the Board of Directors specific grants of options
and
other awards for all executive officers and determining specific
grants of
options and other awards for all other employees, under our equity
compensation plans;
|
· |
making
recommendations to the Board of Directors regarding our incentive
compensation plans applicable to our executive officers, including
the
annual establishment of (i) eligible employees, (ii) performance
goals, and (iii) target incentive compensation levels;
and
|
· |
annually
reviewing and discussing with management the “Compensation Discussion and
Analysis” section of our proxy statement in connection with our annual
meeting of stockholders and based on such review and discussions
make a
recommendation to the Board of Directors as to whether the “Compensation
Discussion and Analysis” section should be included in our proxy statement
in accordance with applicable rules and regulations of the Securities
and
Exchange Commission and any other applicable regulatory
bodies.
|
The
Compensation Committee operates under a written charter adopted by the Board
of
Directors, which can be found on the Investors—Corporate Governance—Board
Committees section of our corporate website at www.biosantepharma.com.
A
printed copy of such charter is also available to any stockholder upon request
to our Corporate Secretary at BioSante Pharmaceuticals, Inc., 111 Barclay
Boulevard, Lincolnshire, Illinois 60069, telephone: (847) 478-0500 ext.
120.
Decisions
regarding executive compensation made by the Compensation Committee during
2006
were considered final and were not generally subject to review or ratification
by the Board of Directors. In March 2007, however, the Board of Directors,
upon
recommendation of the Compensation Committee, amended the Compensation
Committee’s formal written charter, to provide for decisions by the Compensation
Committee regarding executive compensation to be in the form of recommendations
to the Board of Directors, instead of final decisions, with the final decisions
on such matters being decided by the entire Board of Directors.
The
Compensation Committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its
duties and responsibilities.
Composition.
The
Compensation Committee currently consists of Dr. Sullivan, Mr. Mangano and
Mr. Morgenstern, each of whom is considered “independent” under the
American Stock Exchange listing standards, a “non-employee director” within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
and
an “outside director” within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended. Dr. Sullivan is the current chair of our
Compensation Committee.
Processes
and Procedures for Consideration and Determination of Executive
Compensation.
As
described in more detail above under the heading “—Responsibilities,” the Board
of Directors has delegated to the Compensation Committee the responsibility,
among other things, to make recommendations to the Board of Directors regarding
any and all compensation payable to our executive officers, including annual
salaries, incentive compensation, long-term incentive compensation and any
special or supplemental benefits or perquisites, and to administer our equity
compensation plans applicable to any employee of our company and recommend
to
the Board of Directors specific grants of options and other awards for all
executive officers and determine specific grants of options and other awards
for
all other employees, under our equity compensation plans. Decisions regarding
executive compensation made by the Compensation Committee during 2006 were
considered final and were not generally subject to review or ratification by
the
Board of Directors. In March 2007, however, the Board of Directors, upon
recommendation of the Compensation Committee, amended the Compensation
Committee’s formal written charter, to provide for decisions by the Compensation
Committee regarding executive compensation to be in the form of recommendations
to the Board of Directors, instead of final decisions, with the final decisions
on such matters being decided by the entire Board of Directors. Under the terms
of its formal written charter, the Compensation Committee has the power and
authority to delegate any of its duties and responsibilities to subcommittees
as
the Compensation Committee may deem appropriate in its sole discretion.
Historically, the Compensation Committee has not generally delegated any of
its
duties and responsibilities to subcommittees, but rather has taken such actions
as a committee, as a whole.
Our
President and Chief Executive Officer, Stephen M. Simes, assists the
Compensation Committee in gathering compensation related data regarding our
executive officers, including himself, and making recommendations to the
Compensation Committee regarding the form and amount of compensation to be
paid
to each executive officer, including himself. In making final decisions
regarding compensation to be paid to our executive officers, the Compensation
Committee considers the recommendations of our President and Chief Executive
Officer, but also considers other factors, such as its own views as to the
form
and amount of compensation to be paid, competitive compensation studies provided
by compensation consultants, the achievement by the company of performance
objectives and the achievement by the individual officers of individual goals,
the general performance of the company and the individual officers, the
performance of the company’s stock price and other factors that may be
relevant.
Historically,
our President and Chief Executive Officer has engaged a compensation consultant
on behalf of our company to gather competitive executive compensation data
to
assist the Compensation Committee in determining executive compensation. In
March 2006 and again in December 2006, our management engaged Top Five Data
Services, Inc., a compensation consulting firm, to conduct an executive
compensation competitive assessment to assist the Compensation Committee in
determining our executive officers’ base salaries, cash bonuses and stock option
grants. Each time, Top Five Data Services, Inc. conducted an assessment of
the
following pay elements: base salary, cash bonuses, stock options and total
direct compensation. Top Five Data Services, Inc. also reviewed the stock option
holdings of our executive officers in comparison to the market.
After
conducting a request for proposal process at the end of 2006 and the beginning
of 2007, the Compensation Committee engaged Top Five Data Services, Inc.
in
January 2007 to assist us in preparing our disclosures regarding executive
compensation in this proxy statement and to guide the Compensation Committee
going forward in gathering compensation data and developing recommendations
regarding the form and amount of compensation to be paid to our executive
officers. In March 2007, certain individuals of Top Five Data Services, Inc.
left Top Five Data Services, Inc. and formed their own compensation consulting
business named Remedy Compensation Consulting. The Compensation Committee
then
engaged Remedy Compensation Consulting to perform the services previously
assigned to Top Five Data Services, Inc. Remedy Compensation Consulting does
not
advise our management and only works with management with the express permission
of the Compensation Committee.
As
required by the rules of the American Stock Exchange, final deliberations and
decisions regarding compensation to be paid to our executive officers, including
our President and Chief Executive Officer, are made by the Compensation
Committee and the Board of Directors, without the presence of the President
and
Chief Executive Officer or any other executive officer of our
company.
Meetings
and Other Information.
The
Compensation Committee met twice and took action by written consent three times
during 2006. Additional information regarding the Compensation Committee is
disclosed under the “Compensation Discussion and Analysis” and “Executive
Compensation—Compensation Committee Report” sections of this proxy
statement.
Nominating
and Corporate Governance Committee
Responsibilities.
The
primary responsibilities of the Nominating and Corporate Governance Committee
are:
· |
identifying
individuals qualified to become Board
members;
|
· |
recommending
director nominees for each annual meeting of our stockholders and
director
nominees to fill any vacancies that may occur between meetings of
stockholders;
|
· |
being
aware of the best practices in corporate governance and developing
and
recommending to the Board of Directors a set of corporate governance
standards to govern the Board of Directors, its committees, the company
and its employees in the conduct of the business and affairs of the
company;
|
· |
developing
and overseeing the annual Board and Board Committee evaluation process;
and
|
· |
establishing
and leading a process for determination of the compensation applicable
to
the non-employee directors on the
Board.
|
The
Nominating and Corporate Governance Committee operates under a written charter
adopted by the Board of Directors, which can be found on the Investors—Corporate
Governance—Board Committees section of our corporate website at www.biosantepharma.com.
A
printed copy of such charter is also available to any stockholder upon request
to our Corporate Secretary at BioSante Pharmaceuticals, Inc., 111 Barclay
Boulevard, Lincolnshire, Illinois 60069, telephone: (847) 478-0500 ext.
120.
The
Nominating and Corporate Governance Committee has the authority to engage the
services of outside experts and advisors as it deems necessary or appropriate
to
carry out its duties and responsibilities.
Processes
and Procedures for Consideration and Determination of Director
Compensation.
As
described in more detail above under the heading “—Responsibilities,” the Board
of Directors has delegated to the Nominating and Corporate Governance Committee
the responsibility, among other things, to establish and lead a process for
determination of compensation payable to our non-employee directors. The
Nominating and Corporate Governance Committee makes recommendations regarding
compensation payable to our non-employee directors to the entire Board of
Directors, which then makes the final decisions. Under the terms of its formal
written charter, the Nominating and Corporate Governance Committee has the
power
and authority to delegate any of its duties and responsibilities to
subcommittees as the Nominating and Corporate Governance Committee may deem
appropriate in its sole discretion.
Our
President and Chief Executive Officer, Stephen M. Simes, has assisted the Board
of Directors in gathering competitive director compensation data to help
determine director compensation. In March 2006, our management engaged Top
Five
Data Services, Inc., a compensation consulting firm, to conduct a competitive
assessment to assist the Board of Directors in determining director
compensation. Top Five Data Services, Inc. conducted an assessment of the
following pay elements: cash compensation, including annual retainers and
meeting fees; equity grants, including stock options; and additional
compensation paid to Board committee chairs.
Composition.
The
Nominating and Corporate Governance Committee currently consists of Dr.
Sullivan, Mr. Holubow, Mr. Kjaer, Mr. Mangano, Mr. Morgenstern, and Dr. Rosenow,
each of whom is considered “independent” under the American Stock Exchange
listing standards. Dr. Sullivan is the current chair of our Nominating and
Corporate Governance Committee.
Meetings
and Other Information.
The
Nominating and Corporate Governance Committee did not meet but took action
by
written consent once during 2006. Additional information regarding the
Nominating and Corporate Governance Committee is disclosed under the “—Director
Nominations” and “Director Compensation—Elements of Our Director Compensation
Program” sections of this proxy statement.
Scientific
Review Committee
Responsibilities.
The
Scientific Review Committee assists the Board of Directors in evaluating
potential new licenses or new products and reviewing ongoing activities of
our
current products. The Scientific Review Committee operates under a written
charter adopted by the Board of Directors, which can be found on the
Investors—Corporate Governance section of our corporate website at www.biosantepharma.com.
The
Scientific Review Committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its
duties and responsibilities.
Composition.
The
Scientific Review Committee currently consists of Dr. Sullivan,
Mr. Holubow and Dr. Rosenow. Dr. Sullivan is the current chair of our
Scientific Review Committee.
Meetings
and Other Information.
The
Scientific Review Committee met once and took action by written consent once
during 2006.
Corporate
Governance
Guidelines
The
Board
of Directors has adopted Corporate Governance Guidelines that were originally
developed and recommended by the Nominating and Corporate Governance Committee.
A copy of these Corporate Governance Guidelines can be found on the
Investors—Corporate Governance—Corporate Governance Guidelines section of our
corporate website at www.biosantepharma.com.
A
printed copy of such Corporate Governance Guidelines is also available to any
stockholder upon request to our Corporate Secretary at BioSante Pharmaceuticals,
Inc., 111 Barclay Boulevard, Lincolnshire, Illinois 60069, telephone: (847)
478-0500 ext. 120. Among the topics addressed in our Corporate Governance
Guidelines are:
· |
Board
size, composition and
qualifications;
|
· |
Selection
of directors;
|
· |
Board
and committee meetings;
|
· |
Executive
sessions of outside directors;
|
· |
Meeting
attendance by directors and
non-directors;
|
· |
Appropriate
information and access;
|
· |
Ability
to retain advisors;
|
· |
Board
interaction with corporate
constituencies;
|
· |
Change
of principal occupation and board
memberships;
|
· |
Retirement
and term limits;
|
· |
Stock
ownership by directors and executive
officers;
|
· |
Loans
to directors and executive
officers;
|
· |
Director
continuing education; and
|
Director
Nominations Process
Pursuant
to a Director Nominations Process adopted by the Board of Directors, in
selecting nominees for the Board of Directors, the Nominating and Corporate
Governance Committee first determines whether the incumbent directors whose
terms expire at the meeting are qualified to serve, and wish to continue to
serve, on the Board. The Nominating and Corporate Governance Committee believes
that our company and its stockholders benefit from the continued service of
qualified incumbent directors because those directors have familiarity with
and
insight into our company’s affairs that they have accumulated during their
tenure with the company. Appropriate continuity of Board membership also
contributes to the Board’s ability to work as a collective body. Accordingly, it
is the practice of the Nominating and Corporate Governance Committee, in
general, to re-nominate an incumbent director whose term expires at the upcoming
annual meeting of stockholders if the director wishes to continue his or her
service with the Board, the director continues to satisfy the Nominating and
Corporate Governance Committee’s criteria for membership on the Board, the
Nominating and Corporate Governance Committee believes the director continues
to
make important contributions to the Board, and there are no special,
countervailing considerations against re-nomination of the
director.
Pursuant
to the Director Nominations Process adopted by the Board of Directors, in
identifying and evaluating new candidates for election to the Board, the
Nominating and Corporate Governance Committee intends to first solicit
recommendations for nominees from persons whom the Nominating and Corporate
Governance Committee believes are likely to be familiar qualified candidates
having the qualifications, skills and characteristics required for Board
nominees from time to time. Such persons may include members of the Board of
Directors and senior management of BioSante. In addition, the Nominating and
Corporate Governance Committee may engage a search firm to assist it in
identifying qualified candidates. The Nominating and Corporate Governance
Committee then intends to review and evaluate each candidate whom it believes
merits serious consideration, taking into account available information
concerning the candidate, any qualifications or criteria for Board membership
established by the Nominating and Corporate Governance Committee, the existing
composition of the Board, and other factors that it deems relevant. In
conducting its review and evaluation, the Nominating and Corporate Governance
Committee may solicit the views of our management, other Board members, and
any
other individuals it believes may have insight into a candidate. The Nominating
and Corporate Governance Committee may designate one or more of its members
and/or other Board members to interview any proposed candidate.
The
Nominating and Corporate Governance Committee will consider recommendations
for
the nomination of directors submitted by our stockholders. For more information,
see the information set forth under the heading “Other Matters ─ Director
Nominations.” The Nominating and Corporate Governance Committee will evaluate
candidates recommended by stockholders in the same manner as those recommended
as stated above.
There
are
no formal requirements or minimum qualifications that a candidate must meet
in
order for the Nominating and Corporate Governance Committee to recommend the
candidate to the Board of Directors. The Nominating and Corporate Governance
Committee believes that each nominee should be evaluated based on his or her
merits as an individual, taking into account the needs of our company and the
Board of Directors. However, in evaluating candidates, there are a number of
criteria that the Nominating and Corporate Governance Committee generally views
as relevant and is likely to consider. Some of these factors
include:
· |
whether
the candidate is an “independent director” under the rules and regulations
of the American Stock Exchange and meets any other applicable independence
tests under the federal securities laws and rules and regulations
of the
Securities and Exchange Commission;
|
· |
whether
the candidate is “financially sophisticated” and otherwise meets the
requirements for serving as a member of an audit committee under
the rules
and regulations of the American Stock
Exchange;
|
· |
whether
the candidate is an “audit committee financial expert” under the federal
securities laws and the rules and regulations of the Securities and
Exchange Commission;
|
· |
the
needs of our company with respect to the particular talents and experience
of its directors;
|
· |
the
personal and professional integrity and reputation of the
candidate;
|
· |
the
candidate’s level of education and business
experience;
|
· |
the
candidate’s broad-based business
acumen;
|
· |
the
candidate’s level of understanding of our business and its
industry;
|
· |
the
candidate’s ability and willingness to devote adequate time to work of the
Board of Directors and its
committees;
|
· |
the
fit of the candidate’s skills and personality with those of other
directors and potential directors in building a board that is effective,
collegial and responsive to the needs of our
company;
|
· |
whether
the candidate possesses strategic thinking and a willingness to share
ideas;
|
· |
the
candidate’s diversity of experiences, expertise and background;
and
|
· |
the
candidate’s ability to represent the interests of all stockholders and not
a particular interest group.
|
Policy
Regarding Director Attendance at Annual Meetings of
Stockholders
It
is the
policy of the Board of Directors that directors standing for re-election should
attend our annual meeting of stockholders, if their schedules permit. All of
the
directors attended our annual meeting of stockholders in June 2006, except
for
Mr. Kjaer.
Code
of Conduct and Ethics
Our
Code
of Conduct and Ethics applies to all of our directors, executive officers,
including our President and Chief Executive Officer and our Chief Financial
Officer, and other employees, and meets the requirements of the Securities
and
Exchange Commission and the American Stock Exchange. A copy of our Code of
Conduct and Ethics can be found on the Investors—Corporate Governance—Code of
Conduct and Ethics section of our corporate website at www.biosantepharma.com.
A
printed copy of such Code of Conduct and Ethics is also available to any
stockholder upon request to our Corporate Secretary at BioSante Pharmaceuticals,
Inc., 111 Barclay Boulevard, Lincolnshire, Illinois 60069, telephone:
(847) 478-0500 ext. 120.
Complaint
Procedures
The
Audit
and Finance Committee has established procedures for the receipt, retention,
and
treatment of complaints received by us regarding accounting, internal accounting
controls, or auditing matters, and the submission by our employees, on a
confidential and anonymous basis, of concerns regarding questionable accounting
or auditing matters. Our personnel with such concerns are encouraged to discuss
their concerns with their supervisor first, who in turn will be responsible
for
informing our Compliance Officer of any concerns raised. Our President and
Chief
Executive Officer, Stephen M. Simes, currently serves as our Compliance Officer.
If an employee prefers not to discuss a particular matter with his or her own
supervisor, the employee may instead discuss such matter with our Compliance
Officer. If an individual prefers not to discuss a matter with the Compliance
Officer or if the Compliance Officer is unavailable and the matter is urgent,
the individual is encouraged to contact the Chair of the Audit and Finance
Committee, Fred Holubow.
Process
Regarding
Stockholder Communications with Board of Directors
Stockholders
may communicate with the Board of Directors or any one particular director
by
sending correspondence, addressed to our Corporate Secretary, BioSante
Pharmaceuticals, Inc., 111 Barclay Boulevard, Suite 280, Lincolnshire, IL 60069,
with an instruction to forward the communication to the Board of Directors
or
one or more particular directors. Our Corporate Secretary will promptly forward
all such stockholder communications to the Board of Directors or the one or
more
particular directors, with the exception of any advertisements, solicitations
for periodical or other subscriptions and other similar
communications.
DIRECTOR
COMPENSATION
___________________
Summary
of Cash and Other Compensation
The
following table provides summary information concerning the compensation of
each
individual who served as a director of our company during the year ended
December 31, 2006, other than Stephen M. Simes, our President and Chief
Executive Officer. Mr. Simes is not compensated separately for serving on the
Board of Directors or any of the Board committees. His compensation for serving
as an executive officer of our company is set forth under the heading “Executive
Compensation.”
DIRECTOR
COMPENSATION - 2006
Name
|
|
Fees
Earned or Paid
in
Cash ($)
|
|
Option
Awards
($)(1)(2)(3)
|
|
All
Other
Compensation
($)(4)
|
|
Total
($)
|
|
Louis
W. Sullivan, M.D.
|
|
$
|
58,000
|
|
$
|
132,211
|
|
$
|
0
|
|
$
|
190,211
|
|
Fred
Holubow
|
|
|
33,500
|
|
|
132,211
|
|
|
0
|
|
|
165,711
|
|
Peter
Kjaer
|
|
|
26,500
|
|
|
132,211
|
|
|
0
|
|
|
158,711
|
|
Ross
Mangano
|
|
|
33,000
|
|
|
132,211
|
|
|
0
|
|
|
165,211
|
|
Victor
Morgenstern
|
|
|
32,500
|
|
|
132,211
|
|
|
0
|
|
|
164,711
|
|
Edward
C. Rosenow III, M.D.
|
|
|
26,500
|
|
|
132,211
|
|
|
0
|
|
|
158,711
|
|
(1)
|
Reflects
the dollar amount recognized for each director for financial statement
reporting purposes with respect to the year ended December 31,
2006 in
accordance with Statement of Financial Accounting Standards No.
123(R),
“Share-Based Payment” (SFAS 123(R)). The dollar amount reflected in the
“Option Awards” column above relates to the grant of an immediately vested
option to purchase 40,000 shares of our common stock ($124,436
recognized)
granted in March 2006 to each of our non-employee directors and
the grant
of a time vested option to purchase 10,000 shares of our common
stock
($7,775 recognized) granted in March 2006 to each of our non-employee
directors. We refer you to note 7 to our consolidated financial
statements
for the year ended December 31, 2006 for a discussion of the assumptions
made in calculating the dollar amount recognized for each director
for
financial statement reporting purposes with respect to the year
ended
December 31, 2006 in accordance with SFAS
123(R).
|
(2)
|
The
following table provides
information regarding each stock option grant to each director during
the
year ended December 31, 2006:
|
|
|
Grant
|
|
Number
of Securities
Underlying
Options
Granted
|
Exercise
Price
|
|
Expiration
|
|
Grant
Date
Fair
Value of
Option
Awards
|
|
Name
|
|
Date
|
|
(#)(a)
|
($/Share)
|
|
Date
|
|
($)(b)
|
|
Louis
W. Sullivan, M.D.
|
|
|
03/16/2006
03/16/2006
|
|
|
40,000(c)
10,000(d)
|
$
|
3.87
3.87
|
|
|
03/15/2016
03/15/2016
|
|
$
|
124,436
31,109
|
|
Fred
Holubow
|
|
|
03/16/2006
03/16/2006
|
|
|
40,000(c)
10,000(d)
|
|
3.87
3.87
|
|
|
03/15/2016
03/15/2016
|
|
|
124,436
31,109
|
|
Peter
Kjaer
|
|
|
03/16/2006
03/16/2006
|
|
|
40,000(c)
10,000(d)
|
|
3.87
3.87
|
|
|
03/15/2016
03/15/2016
|
|
|
124,436
31,109
|
|
Ross
Mangano
|
|
|
03/16/2006
03/16/2006
|
|
|
40,000(c)
10,000(d)
|
|
3.87
3.87
|
|
|
03/15/2016
03/15/2016
|
|
|
124,436
31,109
|
|
Victor
Morgenstern
|
|
|
03/16/2006
03/16/2006
|
|
|
40,000(c)
10,000(d)
|
|
3.87
3.87
|
|
|
03/15/2016
03/15/2016
|
|
|
124,436
31,109
|
|
Edward
C. Rosenow III, M.D.
|
|
|
03/16/2006
03/16/2006
|
|
|
40,000(c)
10,000(d)
|
|
3.87
3.87
|
|
|
03/15/2016
03/15/2016
|
|
|
124,436
31,109
|
|
(a) |
Represents
options granted under the BioSante Pharmaceuticals, Inc. Amended
and
Restated 1998 Stock Plan, the material terms of which are described
in
more detail below under the heading “Executive Compensation—Grants of
Plan-Based Awards—BioSante Pharmaceuticals, Inc. Amended and Restated 1998
Stock Plan.”
|
(b) |
We
refer you to note 7 to our consolidated financial statements for
the year
ended December 31, 2006 for a discussion of the assumptions made
in
calculating the grant date fair value of the option
awards.
|
(c) |
This
option was immediately exercisable upon its date of
grant.
|
(d) |
This
option vests with respect to one-third of the underlying shares of
our
common stock on each of the following dates, so long as the individual
remains a director of our company as of each such date: March 16,
2007,
March 16, 2008 and March 16, 2009.
|
(3)
|
The
following table provides
information regarding the aggregate number of options to purchase
shares
of our common stock outstanding at December 31, 2006 and held by
each of
the directors listed in the above
table:
|
Name
|
|
Aggregate
Number of Securities Underlying Options
|
|
Exercisable/
Unexercisable
|
|
Exercise
Price(s)
|
|
Expiration
Date(s)
|
|
Louis
W. Sullivan, M.D.
|
|
|
52,500
|
|
|
42,500/10,000
|
|
$
|
3.87
- 6.70
|
|
|
12/31/2010
- 03/15/2016
|
|
Fred
Holubow
|
|
|
52,500
|
|
|
42,500/10,000
|
|
|
3.87
- 6.70
|
|
|
12/31/2010
- 03/15/2016
|
|
Peter
Kjaer
|
|
|
52,500
|
|
|
42,500/10,000
|
|
|
3.87
- 6.70
|
|
|
12/31/2010
- 03/15/2016
|
|
Ross
Mangano
|
|
|
52,500
|
|
|
42,500/10,000
|
|
|
3.87
- 6.70
|
|
|
12/31/2010
- 03/15/2016
|
|
Victor
Morgenstern
|
|
|
52,500
|
|
|
42,500/10,000
|
|
|
3.87
- 6.70
|
|
|
12/31/2010
- 03/15/2016
|
|
Edward
C. Rosenow III, M.D.
|
|
|
52,500
|
|
|
42,500/10,000
|
|
|
3.87
- 6.70
|
|
|
12/31/2010
- 03/15/2016
|
|
(4)
|
We
do not provide perquisites or other personal benefits to our
directors.
|
Elements
of our Director Compensation Program
As
described in more detail under the heading “Corporate Governance—Nominating and
Corporate Governance Committee—Responsibilities” included elsewhere in this
proxy statement, the Board of Directors has delegated to the Nominating and
Corporate Governance Committee the responsibility, among other things, to
establish and lead a process for determination of compensation payable to our
non-employee directors. The Nominating and Corporate Governance Committee makes
recommendations regarding compensation payable to our non-employee directors
to
the entire Board of Directors, which then makes the final decisions. The
processes and procedures the Nominating and Corporate Governance Committee
and
the Board of Directors use to consider and determine director compensation
are
described under the heading “Corporate Governance— Nominating and Corporate
Governance Committee—Processes and Procedures for Determination of Director
Compensation” included elsewhere in this proxy statement.
The
principal elements of our director compensation program for 2006
included:
· |
reimbursement
of expenses; and
|
· |
long-term
equity-based incentive compensation, in the form of stock
options.
|
In
March
2006, we engaged Top Five Data Services, Inc., a compensation consulting firm,
to conduct a competitive assessment to assist the Board of Directors in
determining director compensation. Top Five Data Services, Inc. conducted an
assessment of the following pay elements: cash compensation, including annual
retainers and meeting fees; equity grants, including stock options; and
additional compensation paid to Board committee chairs. In determining director
compensation, we target total compensation and each element of compensation
at
the median of our industry sector. We have defined our industry sector as a
peer
group of 17 other publicly-held life science companies that have less than
$50
million in annual net sales, with most of such companies, like our company,
having either minimal or no net sales. We also chose these companies for
inclusion in our peer group based on other business characteristics similar
to
ours, including stage of development, types of products sold or developed,
employee headcount and market capitalization. We use the same peer group for
purposes of analyzing our executive compensation. We refer you to the
information under the heading “Compensation Discussion and
Analysis—Determination of Amount of Compensation and Use of Benchmarking” for
more information regarding the peer group.
Annual
Cash Retainers, Meeting Fees and Reimbursement of Expenses
We
pay
each of our non-employee directors, other than the Chairman of the Board and
the
Chairman of the Audit and Finance Committee, an annual cash retainer of $20,000,
paid on a quarterly basis. We pay the Chairman of the Board a $45,000 annual
retainer and the Chairman of the Audit and Finance Committee a $25,000 annual
retainer, also paid on a quarterly basis. In addition, we pay each of our
non-employee directors an additional cash fee of $1,000 for each Board or Board
committee meeting attended in person and $500 for each Board or Board committee
meeting attended via telephone.
We
do not
compensate Mr. Simes separately for serving on the Board of Directors or any
of
the Board committees. We do, however, reimburse each member of the Board of
Directors, including Mr. Simes, for out-of-pocket expenses incurred in
connection with attending Board and Board committee meetings.
Stock
Options
From
time
to time in the past, we have granted options to purchase shares of our common
stock to our non-employee directors. We have not historically had a consistent
policy of granting stock options to our non-employee directors and instead
have
granted options on a periodic basis every few years or so. Prior to 2006, we
had
not granted any stock options to our non-employee directors since January 2001.
In March 2006, we granted each non-employee director a “catch-up” option to
purchase 40,000 shares of our common stock, which options were immediately
exercisable on the date of grant. Also in March 2006, we granted each
non-employee director an option to purchase 10,000 shares of our common stock,
which options are exercisable in equal installments on an annual basis over
a
three-year vesting period, commencing in March 2007. The “date of grant” for
these purposes was the date on which the corporate approval for the option
grant
was obtained. During 2006, all option grants were approved by the Compensation
Committee. Going forward, all option grants to directors will be approved by
the
Board of Directors upon recommendation of the Nominating and Corporate
Governance Committee.
The
exercise price of each of these options was equal to the fair market value
of
our common stock on the date of grant, as determined under the BioSante
Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan. The purpose of
the
“catch-up” option grant to our non-employee directors was to bring our equity
compensation and our total direct compensation paid to our directors more in
line with the median amount of such compensation paid to directors by other
companies in our peer group.
We
refer
you to footnote 2 to the Director Compensation Table above for a summary of
all
grants of options to purchase shares of our common stock to our directors,
excluding Mr. Simes, during the year ended December 31, 2006. We refer you
to
footnote 3 to the Director Compensation Table above for a summary of all options
to purchase shares of our common stock held by our directors, excluding
Mr. Simes, as of December 31, 2006. Information regarding stock option
grants to Mr. Simes during the year ended December 31, 2006 is set forth under
the heading “Executive Compensation—Grants of Plan-Based Awards” and information
regarding all stock options held by Mr. Simes as of December 31, 2006 is set
forth under the heading “Executive Compensation—Outstanding Equity Awards at
Fiscal Year End.”
COMPENSATION
DISCUSSION AND ANALYSIS
___________________
Overview
The
purpose of this “Compensation Discussion and Analysis” section is to discuss the
material elements of the compensation awarded to, earned by or paid to our
two
executive officers who are considered “named executive officers” as a result of
their officer positions and the amount of compensation they earned during the
year ended December 31, 2006. We
have
only two named executive officers since our other executive officer positions
are currently unfilled. This discussion analyzes the information contained
in
the tables and related footnotes and narratives under the heading “Executive
Compensation” included elsewhere in this proxy statement. In so doing, this
discussion describes our compensation philosophy, policies and practices with
respect to our named executive officers. Although this discussion focuses
primarily on compensation awarded to, earned by and paid to our named executive
officers during 2006, this discussion also describes executive compensation
actions prior to 2006 and actions taken after 2006 to the extent it enhances
the
understanding of or gives context to our executive compensation disclosures
for
2006.
Role
of the Compensation Committee of the Board
As
described in more detail under the heading “Corporate Governance—Compensation
Committee—Responsibilities” and
“Corporate Governance—Compensation Committee—Processes and Procedures for
Consideration and Determination of Executive Compensation” included elsewhere in
this proxy statement, decisions regarding executive compensation made by the
Compensation Committee during 2006 were considered final and were not generally
subject to review or ratification by the Board of Directors. In March 2007,
however, the Board of Directors, upon recommendation of the Compensation
Committee, amended the Compensation Committee’s formal written charter, to
provide for decisions by the Compensation Committee regarding executive
compensation to be in the form of recommendations to the Board of Directors,
instead of final decisions, with the final decisions on such matters to be
decided by the entire Board of Directors. The processes and procedures the
Compensation Committee used to consider and determine executive compensation
for
2006 are described under the heading “Corporate Governance—Compensation
Committee—Processes and Procedures for Consideration and Determination of
Executive Compensation” included elsewhere in this proxy statement.
Objectives
of Our Executive Compensation Program
Our
executive compensation program is designed to:
· |
attract
and retain executives important to the success of our company and
the
creation of value for our stockholders;
|
· |
motivate
our executives to achieve company and individual performance objectives
and create stockholder value;
|
· |
reward
our executives for the achievement of company and individual performance
objectives, the creation of stockholder value in the short and long
term
and their contributions, in general, to the success of our company;
and
|
· |
impose
consequences for company, individual and stock price
underperformance.
|
Our
Philosophy
Our
executive compensation program and the decisions of the Compensation
Committee
and the
Board of Directors are based on the following philosophy and
principles:
· |
We
favor having a significant component of variable compensation tied
to
attainment of company objectives and achievement of individual goals
over
solely fixed compensation.
|
· |
We
seek to reward achievement of key company objectives, such as successful
clinical testing, obtaining regulatory approvals for our products,
executing in-licensing and out-licensing agreements, entering into
strategic relationships to market and sell our products and raising
additional financing on terms favorable to our company, that create
value
for our stockholders and ultimately should result in an increase
in our
stock price.
|
· |
A
greater percentage of total compensation should be tied to performance
and
stock price, and therefore at risk, as position and responsibility
increases. Individuals, such as our named executive officers, with
greater
roles and responsibilities associated with achieving our company’s
objectives should bear a greater proportion of the risk that those
objectives are not achieved and our stock price decreases than other
employees and should receive a greater proportion of the reward if
objectives are met or surpassed and our stock price
increases.
|
· |
We
seek to align the interests of our executives with the interests
of our
stockholders through the use of long-term, equity-based incentive
compensation, in the form of stock options, and further emphasized
through
stock ownership guidelines in our corporate governance standards
which
encourage our executives to maintain a financial stake in our
company.
|
Determination
of Amount of Executive Compensation and Use of
Benchmarking
In
determining the amount of compensation to pay our named executive officers,
the
Compensation Committee and
the
Board of Directors generally consider factors, such as:
· |
the
executive’s position within the company and the level of responsibility,
skills and experience required by the executive’s position;
|
· |
the
executive’s experience and qualifications;
|
· |
our
ability to replace such individual and the overall competitive environment
for executive talent;
|
· |
the
attainment of or failure to attain company objectives and the difficulty
in achieving desired company objectives;
|
· |
individual
performance of the executive as measured in isolation and in comparison
to
certain goals set by the Compensation Committee and the Board of
Directors
and the individual executive;
|
· |
current
and historical compensation levels;
|
· |
the
executive’s length of service to our company;
and
|
· |
other
considerations it deems relevant.
|
In
analyzing some of these factors, the Compensation Committee and
the
Board of Directors from time to time review competitive compensation data
gathered in comparative surveys and collected by independent
consultants.
During
the past several years, we have hired a compensation consulting firm, Top
Five Data Services, Inc., to conduct an annual executive compensation
competitive assessment of the base salaries, annual cash bonuses, stock options
and total direct compensation paid to our executive officers and to review
the
option holdings of our executive officers in comparison to similar executives
of
other companies in our industry sector. The Compensation Committee and the
Board
of Directors then uses such information to assist it in determining the amount
of base salary, annual incentive compensation, total compensation and the form
and amount of long-term equity-based incentive compensation to pay our named
executive officers.
Our
executive compensation program as a whole and each individual element of the
program is designed to be market competitive in order to attract, motivate
and
retain executives necessary to the achievement of our company objectives. We
generally target total compensation and each element of total compensation
at
the median of our industry sector. In 2006, we worked with Top Five Data
Services, Inc. to define our industry sector as a peer group of 17 other
publicly-held life science companies that have less than $50 million in annual
net sales, with most of such companies, like our company, having either minimal
or no net sales. We also chose these companies for inclusion in our peer group
based on other business characteristics similar to ours, including stage of
development, types of products sold or developed, employee headcount and market
capitalization, and finally, because we believe we compete with these or similar
companies for executive talent. The companies in our peer group include the
following:
Allos
Therapeutics, Inc.
|
Elite
Pharmaceuticals, Inc.
|
Antares
Pharma, Inc.
|
Genelabs
Technologies, Inc.
|
Auxilium
Pharmaceuticals, Inc.
|
Hollis-Eden
Pharmaceuticals, Inc.
|
Avant
Immunotherapeutics, Inc.
|
Introgen
Therapeutics, Inc.
|
Avigen,
Inc.
|
NovaDel
Pharma Inc.
|
BioCryst
Pharmaceuticals, Inc.
|
OXiGENE,
Inc.
|
Callisto
Pharmaceuticals
|
Palatin
Technologies, Inc.
|
CEL-SCI
Corporation
|
VIVUS,
Inc.
|
Columbia
Laboratories, Inc.
|
|
While
the
Compensation Committee and the Board of Directors recognize that benchmarking
may not always be appropriate as a stand-alone tool for setting compensation
due
to the aspects of our business and objectives that may be unique to our company,
the Compensation Committee and the Board of Directors, nonetheless, believe
that
gathering this information is an important part of its compensation-related
decision-making process.
Determination
of Form of Executive Compensation and Total Compensation
Mix
The
principal elements of our executive compensation program include base salary,
annual
incentive compensation, long-term equity-based incentive compensation, in the
form of stock options, and other compensation as described in more detail below
under the heading “—Elements of Our Executive Compensation Program.”
In
determining the form of compensation to pay our named executive officers, the
Compensation Committee and the Board of Directors view these elements of our
executive compensation program as related but distinct. Although the
Compensation Committee and the Board of Directors review total compensation,
they do not believe that significant compensation derived by an executive from
one element of our compensation program should necessarily negate or result
in a
reduction in the amount of compensation the executive receives from other
elements or that, on the flip side, minimal compensation derived from one
element of compensation should necessarily result in an increase in the amount
the executive should receive from one or more other elements of compensation.
Except
as
described below, neither the Compensation Committee nor the Board of Directors
has adopted any formal or informal policies or guidelines for allocating
compensation between long-term and currently paid out compensation, between
cash
and non-cash compensation, or among different forms of non-cash compensation.
However, the philosophy of the Compensation Committee and the Board of Directors
is to make a greater percentage of an executive’s compensation
performance-based, and therefore at risk, as the executive’s position and
responsibility increases given the influence that more senior level executives
generally have on company performance. It is also the view of the Compensation
Committee and the Board of Directors to keep cash compensation to the minimum
competitive level (which we define to be the median of the peer group) while
providing the opportunity to be appropriately rewarded through long-term
equity-based incentive compensation, in the form of stock options,
if the
company’s stock price performs well over time. Thus, individuals with greater
roles and responsibilities associated with achieving our company’s objectives
and thus presumably increasing our stock price should bear a greater proportion
of the risk that those goals are not achieved and our stock price decreases
than
other employees and
should receive a greater proportion of the reward if objectives are met or
surpassed and our stock price increases.
Elements
of Our Executive Compensation Program
The
principal elements of our executive compensation program for 2006
included:
· |
annual
incentive compensation;
|
· |
long-term
equity-based incentive compensation, in the form of stock options;
and
|
· |
all
other compensation.
|
In
addition, our executive compensation program also includes certain change in
control arrangements and post-termination severance arrangements, which are
described in more detail below under the heading “—Change in Control and
Post-Termination Severance Arrangements.”
Base
Salary.
We
provide a base salary for our named executive officers, which, unlike some
of
the other elements of our executive compensation program, is not subject to
company or individual performance risk. We recognize the need for most
executives to receive at least a portion of their total compensation in the
form
of a guaranteed base salary that is paid in cash regularly throughout the year
to support at least a reasonable standard of living.
We
initially fix base salaries for our executives at a level we believe enables
us
to hire and retain them in a competitive environment and to reward satisfactory
individual performance and a satisfactory level of contribution to our overall
business objectives. We also take into account the base compensation that is
payable by companies in our peer group.
The
Compensation Committee and the Board of Directors review base salaries for
our
named executive officers each year beginning in December and generally approve
any increases for the following year in January or as soon as practicable
thereafter. Regardless of when the final decision regarding base salaries for
a
calendar year is made, any increases in base salaries are effective as of
January 1 of that year, often resulting in a retroactive payment to the
executive shortly after the final decision is made.
In
determining the amount of base salaries for our named executive officers, the
Compensation Committee and the Board of Directors strive to target base salaries
at the median of the range of salaries for executives in similar positions
and
with similar responsibilities at companies in our peer group. The median was
selected to assure that we pay approximately the same for a given position
in
the marketplace, without over- or under-compensating an executive. Deviation
from the median may be determined to be appropriate based on the Compensation
Committee’s and the Board’s assessment of the responsibilities of the position,
and the executive’s performance and experience, recognizing that not all
positions are directly correlated at different companies and not all individuals
have the same talents amongst their peers.
The
determinations of the Compensation Committee and the Board of Directors
regarding the base salaries of our named executive officers are based on a
number of factors, including: the executive’s position within the company and
the level of responsibility, skills and experiences required by the executive’s
position; the executive’s experience and qualifications; our ability to replace
such individual and the overall competitive environment for executive talent;
the executive’s current base salary; the executive’s length of service to our
company, the executive’s past performance and the impact of such performance on
the attainment of company objectives; competitive compensation data; and other
considerations it deems relevant. The Compensation Committee and the Board
of
Directors also recognize that in addition to the typical responsibilities and
duties held by our executives by virtue of their positions, our
executives often possess additional responsibilities and perform additional
duties that would be typically delegated to others in most organizations with
additional personnel and resources due to the small number of our employees.
Finally, in determining base salaries each year, the Compensation Committee
and
the Board of Directors take into consideration employment letter agreements
with
our named executive officers, which obligate our company absent any consent
by
the executive officer to increase the base salaries of our named executive
officers each year, at a minimum rate consistent with any increase in the
Consumer Price Index.
Annual
Incentive Compensation.
We
provide our named executive officers the opportunity for annual incentive
compensation, which is designed to provide a direct financial incentive to our
executives for the achievement of annual performance objectives of our company
and individual goals of the executives. As required under the terms of letter
agreements we entered into in connection with offering them employment, we
provide Stephen M. Simes, our President and Chief Executive Officer, the
opportunity to earn up to 50 percent of his base salary and Phillip B.
Donenberg, our Chief Financial Officer, Treasurer and Secretary, the opportunity
to earn up to 30 percent of his base salary, each year in the form of a
performance bonus. In addition, the Compensation Committee has the discretion
to
pay a bonus in excess of these percentages.
The
Compensation Committee in its discretion has determined the amount of the bonus
each year for each executive based on, among other things, the achievement
of
performance objectives of our company and individual goals by the executive.
As
a result of recent changes in the Compensation Committee’s formal written
charter, in the future, the Board of Directors, upon recommendation of the
Compensation Committee, will determine, the amount of the bonus each year for
each executive. The performance objectives and individual goals for each
executive have been established by the Compensation Committee, and in the
future, will be established by the Board of Directors upon recommendation of
the
Compensation Committee, preferably, although not always, in the beginning of
each year, after first receiving input from such executive. In addition, in
the
case of Mr. Donenberg, input is also received from Mr. Simes. After the
completion of each year, the Compensation Committee has determined, and in
the
future, the Board of Directors, upon recommendation of the Compensation
Committee, will determine, in its discretion the amount of annual performance
bonus to be paid to each executive. Such determination is made after first
receiving input from Mr. Simes as to his views of the amount of bonus each
executive should receive based on the achievement by the company of the
performance objectives, the achievement by the individual executives of their
individual goals and other relevant factors. In determining the final amount
of
annual performance bonus to be paid to each executive, the Compensation
Committee has considered, and in the future, the Board of Directors, upon
recommendation of the Compensation Committee, will consider, the input received
from Mr. Simes, its own views as to the achievement by the company of the
performance objectives and the achievement by the individual executives of
their
individual goals, the general performance of the company and the executives
during the year regardless of the specific objectives, the performance of the
company’s stock price during the year and other factors that may be relevant
during any given year. The amount of annual cash bonuses paid to our named
executive officers is highly discretionary and has been highly variable from
year to year.
During
2006, specific performance objectives for our company and specific individual
goals were not established in advance by the Compensation Committee and instead
were determined on an after-the-fact basis at the end of 2006 and in the
beginning of 2007 while determining the amount of annual performance bonus
to be
paid to each executive for 2006 performance. As described in more detail under
the headings “Analysis of Named Executive Officer Compensation Arrangements for
2006 - Stephen M. Simes” and “Analysis of Named Executive Officer Compensation
Arrangements for 2006 - Phillip B. Donenberg,” the company performance
objectives that were taken into consideration by the Compensation Committee
in
the beginning of 2007 in determining the amount of the 2006 performance bonus
for each executive included: the regulatory status of our hormone therapy
products, the licensing opportunities associated with our hormone therapy
products, the licensing opportunities associated with our calcium phosphate
technology and the amount of our cash resources.
Although
for the past few years, the annual performance bonus has been paid entirely
in
cash, it has also in the past been paid one-half in cash and one-half in shares
of our common stock. In addition, although the annual performance bonus for
2005
performance was paid to executives in one lump sum in the beginning of 2006,
the
annual performance bonus for 2006 performance will be paid to executives in
two
installments: one-half in January 2007 and the remaining amount on December
31,
2007 so long as the executive remains an employee of our company as of such
date
or if not employed as of such date was terminated by us without cause. In
addition, the second installment payment would be made to the executives
immediately upon any change of control of our company, including a merger or
acquisition of our company. The Compensation Committee decided to defer the
payment of the second half of the 2006 discretionary cash bonus to conserve
cash
resources and add a retention value to the second payment. The Compensation
Committee has in the past structured the payment of the annual performance
bonus
in two installments, including most recently the annual performance bonus for
2004.
Long-Term
Equity-Based Incentive Compensation.
Although we do not have any detailed stock retention or ownership guidelines,
the Board of Directors has adopted Corporate Governance Standards that address
ownership of our common stock by our named executive officers and which
encourage our executives to have a financial stake in our company in order
to
align the interests of our stockholders and management. We, therefore, provide
long-term equity-based incentive compensation to our named executive officers,
as well as to all of our employees, in the form of stock options. Although,
as
mentioned above, we have paid in the past a portion of the annual performance
bonus in shares of our common stock through stock grants, we have not done
so
for the past four years and thus have used stock options as the method of
long-term equity-based incentive compensation.
We
believe that stock options are an important part of our overall compensation
program. Through the grant of stock options, we seek to align the long-term
interests of our executives and other employees with the long-term interests
of
our stockholders by creating a strong and direct linkage between compensation
and long-term stockholder return. When our executives deliver returns to our
stockholders, in the form of increases in our stock price or otherwise, stock
options permit an increase in their compensation. Thus, stock options also
may
enable us to attract, retain and motivate executives and other employees by
maintaining competitive levels of total compensation. However, unless our stock
price increases after the grants are made, the stock options deliver no value
to
the option holders.
All
of
our stock options have been granted under the BioSante Pharmaceuticals, Inc.
Amended and Restated 1998 Stock Plan, which has been approved by our
stockholders. Under the plan, we have the ability to grant stock options, stock
awards and stock units. To date, only incentive and non-statutory stock options
and stock awards have been granted. The plan contains both an overall limit
on
the number of shares of our common stock that may be issued, as well as
individual and other grant limits. For more information regarding the terms
of
our stock plan, we refer you to “Executive Compensation—Grants of Plan-Based
Awards—BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock
Plan.”
In
March
2007, we adopted a Policy and Procedures Regarding the Grant of Stock Options
and Other Equity-Based Incentive Awards. Under the policy, the Board of
Directors, upon recommendation of the Nominating and Corporate Governance
Committee, has the authority to grant options to directors, and upon
recommendation of the Compensation Committee, has the authority to grant options
to executive officers. Grants to be made in connection with new hires and
promotions of executive officers will be recommended by our President and Chief
Executive Officer and will be considered and acted upon by the Board of
Directors, upon recommendation of the Compensation Committee, at the next Board
of Directors meeting or by unanimous written consent resolutions, or in the
case
of executive officers, as part of their compensation package at the time of
hire
or promotion. Current executive officers and other employees are eligible for
option grants thereafter on a periodic basis. We do not have, nor have we ever
had, a program, plan or practice to time stock option grants to executives
in
coordination with the release of material nonpublic information.
The
policy also sets forth the general terms and conditions of our stock option
grants. We generally grant “incentive stock options” within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, in order to
provide our executives and other employees the additional tax benefit associated
with incentive stock options, which we believe at this time outweighs our
interest in obtaining the tax deduction which would be available if we granted
non-statutory stock options. The stock options granted to our executives and
other employees typically vest or become exercisable over a period of three
years from the date of grant, with one-third of the underlying shares vesting
in
each year on the anniversary of the date of grant. Stock options typically
remain exercisable for a period of 10 years from the date of grant, so long
as
the optionee continues to be employed by us. We have also in the past and may
in
the future grant performance-based stock options that vest upon the attainment
of certain performance milestones.
It
is our
policy to set the per share exercise price of all stock options granted under
the plan at an amount equal to the fair market value of a share of our common
stock on the date of grant. The “date of grant” for these purposes means the
date on which the corporate approval for the option grant was obtained, which
during 2006 means the date on which the Compensation Committee met and approved
the option grant. For purposes of our stock plan, the fair market value of
our
common stock is the mean between the reported high and low sale price of our
common stock, as reported by the American Stock Exchange. We believe the use
of
the average of the high and low sale price of our common stock on the date
of
grant removes potential same day stock volatility from the determination of
the
exercise price. We may not under the terms of our stock plan, without prior
approval of our stockholders, seek to effect any re-pricing of any previously
granted “underwater” option. For purposes of the plan, an option is deemed to be
“underwater” at any time when the fair market value of our common stock is less
than the exercise price. Other typical terms of the stock options we grant
to
our executives and other employees are described elsewhere in this proxy
statement under the heading “Executive Compensation—Grants of Plan-Based
Awards—BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock
Plan.”
We
review
the long-term equity-based incentives for our named executive officers, on
an
individual basis and on an aggregate basis, at least once each year at the
time
we determine performance bonuses for the previous year and base salaries for
the
current year. The determinations of the Compensation Committee and the Board
of
Directors regarding the number of stock options to grant our named executive
officers are based on a number of factors, including: the executive’s position
within the company and the level of responsibility, skills and experiences
required by the executive’s position; the executive’s experience and
qualifications; our ability to replace such individual and the overall
competitive environment for executive talent; the attainment of or failure
to
attain company objectives and the difficulty in achieving desired company
objectives; individual performance of the executive as measured in isolation
and
in comparison to certain goals set by the Compensation Committee and the Board
of Directors and the individual executive; the executive’s length of service to
our company; the executive’s percentage ownership of our common equity
outstanding, including stock options, and competitive compensation data,
including outstanding options held by an executive as a percentage of our common
equity outstanding.
All
Other Compensation.
It is
generally our policy not to extend perquisites to our executives that are not
available to our employees generally. The only perquisites that we provide
to
our named executive officers are those that are required under the terms of
their employment letter agreements and other minor perks, such as cell phone
usage. Both of our named executive officers receive a monthly auto allowance
and
Stephen M. Simes, our President and Chief Executive Officer, receives
reimbursement for excess long-term disability and excess term life insurance
premiums and taxes associated with the premiums. Our executives also receive
benefits, which are also received by our other employees, including 401(k)
matching contributions, health, dental and life insurance benefits, and
reimbursement for certain health club costs. We do not provide pension
arrangements or post-retirement health coverage for our executives or employees.
We also do not provide any nonqualified defined contribution or other deferred
compensation plans.
Analysis
of Named Executive Officer Compensation Arrangements for 2006 - Stephen M.
Simes
Overview.
As
President and Chief Executive Officer, Stephen M. Simes has overall
responsibility for the execution of our annual and long-term company objectives
and strategy. Under Mr. Simes’ leadership, we made significant progress towards
our goals in 2006. Specifically, Mr. Simes at the end of 2005 and beginning
of
2006 was able to provide “hands-on” direction to new independent consultants and
other company personnel in advancing the regulatory status of our hormone
therapy products. In February 2006, under Mr. Simes’ management and direction, a
new drug application, or NDA, for Elestrin™
(formerly known as Bio-E-Gel®)
was
submitted to the U.S. Food and Drug Administration, or FDA. Mr. Simes
remained actively involved in responding to questions by the FDA regarding
the
NDA and in December 2006, the FDA approved the NDA without any conditions or
post-approval Phase IV commitments. Mr. Simes was instrumental in arranging
our
initial contact with Bradley Pharmaceuticals, Inc. and negotiating the license
agreement with Bradley Pharmaceuticals to market and sell Elestrin. Also during
2006, Mr. Simes directed LibiGel®
activities, culminating in the initiation of a Phase III clinical trial of
LibiGel at the end of 2006. Mr. Simes also in 2006 re-negotiated our license
agreement with the Regents of the University of California, Los Angeles for
our
calcium phosphate, or CaP, technology saving the company approximately $3
million in future license fees and led our efforts to continue to raise
necessary funds for our ongoing operations, which resulted in the completion
of
our $7.6 million financing transaction in July 2006.
The
total
compensation awarded to, earned by or paid to Mr. Simes for 2006 amounted to
$555,136 and, as indicated in more detail in the Summary Compensation Table
included elsewhere in this proxy statement under the heading “Executive
Compensation—Summary of Cash and Other Compensation,” consisted of the following
elements:
Elements
of 2006
Compensation
Program
|
|
Amount
|
|
Percentage
of 2006 Total Compensation
|
|
Base
Salary
|
|
$
|
374,400
|
|
|
67.4
|
%
|
Annual
Incentive Compensation
|
|
|
140,400
|
|
|
25.3
|
%
|
Long-Term
Equity-Based Incentive Compensation
|
|
|
0
|
|
|
0.0
|
%
|
All
Other Compensation
|
|
|
40,336
|
|
|
7.3
|
%
|
Total
|
|
$
|
555,136
|
|
|
100.0
|
%
|
Base
Salary.
Mr.
Simes’ base salary for 2006 was $374,400, which represented a zero percent
increase over his base salary for 2005. In establishing Mr. Simes’ base salary
for 2006 and specifically approving a zero percent increase over his base salary
for 2005, the Compensation Committee decided that despite the company’s
obligation under Mr. Simes’ employment letter agreement to increase his base
salary each year at minimum rate consistent with any increase in the Consumer
Price Index, Mr. Simes’ base salary would not be increased in 2006 since
competitive market data gathered by Top Five Data Services, Inc. indicated
that
Mr. Simes’ base salary was competitive with the base salaries of other chief
executive officers of companies in our peer group and the Compensation Committee
did not believe based on the company’s and Mr. Simes’ performance during 2005
that an increase in Mr. Simes base salary for 2006 was warranted.
The
Compensation Committee recently established Mr. Simes’ 2007 base salary at
$394,000, which represents approximately a five percent increase over his base
salary for 2006. In establishing Mr. Simes’ base salary for 2007 and
specifically approving an approximate five percent increase over his base salary
for 2006, the Compensation Committee believed that although competitive market
data gathered by Top Five Data Services, Inc. indicated that Mr. Simes’ base
salary was still competitive with the base salaries of other chief executive
officers of companies in our peer group, Mr. Simes, nonetheless, deserved a
base
salary increase in light of: (1) the company’s and his individual performance
during 2006; and (2) the fact that he had not received a base salary increase
in
2006.
Annual
Incentive Compensation.
Mr.
Simes received a discretionary cash bonus of $140,400 for his 2006 performance,
which represents 37.5 percent of his base salary for 2006 and 25.3 percent
of
his total compensation for 2006. In approving Mr. Simes’ discretionary cash
bonus for 2006, the Compensation Committee recognized, among other achievements
by our company in 2006, the following: the execution of the license agreement
with Bradley Pharmaceuticals, Inc., the FDA approval of Elestrin, the initiation
of a Phase III clinical trial of LibiGel, the re-negotiation of our license
agreement with the Regents of the University of California, Los Angeles and
the
completion of our July 2006 financing. The Compensation Committee also
recognized certain individual contributions by Mr. Simes during 2006, including
his ability to provide “hands-on” direction to new independent consultants and
other company personnel in advancing the regulatory status of our hormone
therapy products. The Compensation Committee also noted, however, the price
of
our common stock, which despite these accomplishments, decreased over 20 percent
during 2006. The Compensation Committee recognized that had the price of our
common stock appreciated during 2006, the Compensation Committee likely would
have approved a higher discretionary bonus for Mr. Simes, which thereby would
have represented a higher percentage of his base salary and total
compensation.
In
approving Mr. Simes’ discretionary cash bonus for 2006, the Compensation
Committee specifically approved the payment of one-half of the bonus in January
2007 and the remaining one-half of the bonus on December 31, 2007, so long
as
Mr. Simes remains an employee of our company as of such date or if not employed
as of such date was terminated by us without cause. In addition, the second
installment payment would be made to Mr. Simes immediately upon any change
of
control of our company, including a merger or acquisition of our company. The
Compensation Committee decided to defer the payment of the second half of Mr.
Simes’ discretionary cash bonus to conserve cash resources and add a retention
value to the second payment.
Long-Term
Equity-Based Incentive Compensation.
Mr.
Simes did not receive any stock option grants or any other equity-based
incentive awards during 2006. In deciding not to grant Mr. Simes any stock
options during 2006, the Compensation Committee reasoned that based on the
company’s and Mr. Simes’ performance during 2005 and Mr. Simes existing
ownership of our common stock and stock options a stock option grant was not
appropriate at that time.
In
January 2007, the Compensation Committee granted Mr. Simes an option to purchase
250,000 shares of our common stock at an exercise price of $2.775 per share,
which represented the fair market value of our common stock, as determined
under
our stock plan, on the date of grant. The “date of grant” was the date on which
the Compensation Committee met and approved the option grant. In granting Mr.
Simes the stock option in January 2007, the Compensation Committee recognized
that Mr. Simes had not received any stock option grants since May 2003 and
that
all of his then current stock option holdings were immediately exercisable
and
fully vested. In determining the number of stock options to grant Mr. Simes
in January 2007, the Compensation Committee took into consideration: (1) the
fact that Mr. Simes had not received any stock option grants since May
2003; (2) the fact that all of his then current stock option holdings were
immediately exercisable and vested; (3) the company’s and Mr. Simes’
individual performance during 2006; (4) the fact that according to competitive
data gathered by Top Five Data Services, Inc., most companies in our company’s
peer group grant equity awards, such as stock options and restricted stock,
on
an annual basis, to their executive officers; and (5) the fact that according
to
competitive data gathered by Top Five Data Services, Inc., Mr. Simes option
holdings expressed as a percentage of our common equity outstanding were
significantly below the median of our peer group.
All
Other Compensation.
All
other compensation paid to Mr. Simes during 2006 amounted to $40,336, which
represented 10.8 percent of his base salary for 2006 and 7.3 percent of his
total compensation for 2006. All other compensation paid to Mr. Simes during
2006 consisted of a car allowance in the amount of $12,000, reimbursement of
premiums for supplemental term life and long-term disability insurance in the
amount of approximately $11,580 and taxes associated with such premiums in
the
amount of approximately $6,756 and a 401(k) matching contribution in the amount
of $10,000, which match is available to all employees. We are required under
the
terms of our employment letter agreement with Mr. Simes to provide the
$1,000 per month car allowance, which amount has not changed since the execution
of his agreement in January 1998, and
to
provide Mr. Simes supplemental term life and long-term disability
insurance.
Analysis
of Named Executive Officer Compensation Arrangements for 2006 - Phillip B.
Donenberg
Overview.
As
Chief Financial Officer, Treasurer and Secretary, Phillip B. Donenberg has
overall responsibility for our company’s financial and accounting matters,
Securities and Exchange Commission filings, corporate governance matters and
investor relations. Due to his position and responsibilities, Mr. Donenberg
also played a significant role in connection with the completion of our July
2006 financing transaction and the negotiation of our license agreement with
Bradley Pharmaceuticals. In addition, Mr. Donenberg achieved significant fee
waivers and cost savings on behalf of the company during 2006.
The
total
compensation awarded to, earned by or paid to Mr. Donenberg for 2006 amounted
to
$459,417 and, as indicated in more detail in the Summary Compensation Table
included elsewhere in this proxy statement under the heading “Executive
Compensation—Summary of Cash and Other Compensation,” consisted of the following
elements:
Elements
of 2006
Compensation
Program
|
|
Amount
|
|
Percentage
of 2006 Total Compensation
|
|
Base
Salary
|
|
$
|
208,572
|
|
|
45.4
|
%
|
Annual
Incentive Compensation
|
|
|
41,714
|
|
|
9.1
|
%
|
Long-Term
Equity-Based Incentive Compensation
|
|
|
194,431
|
|
|
42.3
|
%
|
All
Other Compensation
|
|
|
14,700
|
|
|
3.2
|
%
|
Total
|
|
$
|
459,417
|
|
|
100.0
|
%
|
Base
Salary.
Mr.
Donenberg’s base salary for 2006 was $208,572, which represented a five percent
increase over his base salary for 2005. In establishing Mr. Donenberg’s base
salary for 2006 and specifically approving a five percent increase over his
base
salary for 2005, the Compensation Committee considered the fact that Mr.
Donenberg’s base salary was significantly below the median of base salaries of
other chief financial officers of companies in our peer group and recognized
Mr.
Donenberg’s strong individual performance during 2005.
The
Compensation Committee recently established Mr. Donenberg’s 2007 base salary at
$219,000, which represents a five percent increase over his base salary for
2006. In establishing Mr. Donenberg’s base salary for 2007 and specifically
approving another five percent increase over his base salary for 2006, the
Compensation Committee again considered the fact that Mr. Donenberg’s base
salary was still significantly below the median of base salaries of other chief
financial officers of companies in our peer group and again recognized Mr.
Donenberg’s strong individual performance during 2006.
Annual
Incentive Compensation.
Mr.
Donenberg received a discretionary cash bonus of $41,714 for his 2006
performance, which represents 20.0 percent of his base salary for 2006 and
9.1
percent of his total compensation for 2006. In approving Mr. Donenberg’s
discretionary cash bonus for 2006, the Compensation Committee recognized, among
other achievements by our company in 2006, the following: the execution of
the
license agreement with Bradley Pharmaceuticals, Inc., the FDA approval of
Elestrin, the initiation of a Phase III clinical trial of LibiGel, the
completion of our July 2006 financing and the re-negotiation of our license
agreement with the Regents of the University of California, Los Angeles. The
Compensation Committee also recognized certain individual contributions by
Mr. Donenberg during 2006, including: timely and efficient financial
statement audits and reviews, timely and efficient SEC filings, successful
negotiation of significant fee waivers and fee savings on behalf of the company,
investor relations and improved corporate governance efforts. In determining
Mr. Donenberg’s discretionary cash bonus for 2006, the Compensation
Committee also noted, however, the price of our common stock, which despite
these accomplishments, decreased over 20 percent during 2006 and recognized
that
had the price of our common stock appreciated during 2006, the Compensation
Committee likely would have approved a higher discretionary bonus for Mr.
Donenberg, which thereby would have represented a higher percentage of his
base
salary and total compensation.
As
with
Mr. Simes’ discretionary bonus, in approving Mr. Donenberg’s discretionary cash
bonus for 2006, the Compensation Committee specifically approved the payment
of
the bonus in two installments under the same conditions and for the same reasons
as explained above.
Long-Term
Equity-Based Incentive Compensation.
In
March 2006, Mr. Donenberg was granted an option to purchase 62,500 shares of
our
common stock at an exercise price of $3.87 per share, which represented the
fair
market value of our common stock, as determined under our stock plan, on the
date of grant. The “date of grant” was the date on which the Compensation
Committee met and approved the option grant. In January 2007, the Compensation
Committee granted Mr. Donenberg an option to purchase 50,000 shares of our
common stock at an exercise price of $2.775 per share, which represented the
fair market value of our common stock on the date of grant as determined under
our stock plan. The “date of grant” was the date on which the Compensation
Committee met and approved the option grant. In determining the number of stock
options to grant Mr. Donenberg in March 2006 and in January 2007, the
Compensation Committee took into consideration: (1) Mr. Donenberg’s strong
individual performance during the prior year; (2) with respect to the
January 2007 grant, the company’s performance during 2006; and (3) the fact that
according to competitive data gathered by Top Five Data Services, Inc., most
companies in our company’s peer group grant equity awards, such as stock options
and restricted stock, on an annual basis, to their executive
officers.
In
July
2005, Mr. Donenberg was granted a stock option to purchase 25,000 shares of
our
common stock, which option was to vest upon the achievement of certain
performance goals. In February 2007, the Compensation Committee determined
that
certain performance goals had been achieved, thereby resulting in the vesting
of
20,000 shares underlying the option. The performance goals that had been
achieved or partially achieved included (1) outlicensing a product, (2) becoming
a leader and working on employee relations, (3) the initiation of coverage
by an
investment bank or third party and (4) the involvement in activities to enhance
investor/public relations. The remaining 5,000 shares underlying the option
remain unvested and subject to certain performance criteria.
All
Other Compensation.
All
other compensation paid to Mr. Donenberg during 2006 amounted to $14,700, which
represented 7.0 percent of his base salary for 2006 and 3.2 percent of his
total
compensation for 2006. All other compensation paid to Mr. Donenberg during
2006
consisted of a car allowance in the amount of $7,200 and a 401(k) matching
contribution in the amount of $7,500. We are required under the terms of our
employment letter agreement with Mr. Donenberg to provide the $600 per month
car
allowance, which amount has not changed since the execution of his agreement
in
April 1998. Unlike in the case of Mr. Simes, however, we are not required to
provide Mr. Donenberg supplemental term life and long-term disability insurance
under his agreement.
Change
in Control and Post-Termination Severance Arrangements
The
BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan and the
individual agreements entered into in connection with the grant of stock options
under our stock plan provide for the immediate vesting of all stock options
then
held by our named executive officers, as well as all other employees, upon
the
completion of a change in control of our company. In addition, our named
executive officers have employment letter agreements with us that provide for
the immediate vesting of all stock options then held by our named executive
officers upon the completion of a change in control of our company.
These
agreements also provide for certain severance payments and benefits upon the
termination of their employment with us under certain circumstances, including
upon a change in control of our company. These payments and benefits include
a
lump sum cash payment, in the case of Mr. Simes, or installment cash
payments, in the case of Mr. Donenberg, equal to one year’s total compensation,
in the case of Mr. Simes, and one year’s base salary, in the case of Mr.
Donenberg, as well as continued benefits for a certain minimum time period.
These arrangements, including the quantification of the payment and benefits
provided under these arrangements, are described in more detail elsewhere in
this proxy statement under the heading “Executive Compensation—Potential
Payments Upon Termination or Change in Control.”
The
employment letter agreements with our named executive officers which provide
for
these severance and change in control arrangements were entered into in
connection with our hiring them as executive officers, which in the case of
Mr.
Simes was in January 1998, and in the case of Mr. Donenberg was in June 1998.
These agreements have not been materially amended since April 1999. Nonetheless,
we still believe that the severance and change in control protections provided
in the agreements are relevant and an important part of our executive
compensation program. We believe such protections continue to provide important
retention value, especially during critical time periods of our company’s
development and life cycle. We also believe similar protections are typically
provided by other companies, including companies with which we compete for
executive talent, and thus believe we must continue to offer such protections
in
order to be competitive.
We
believe the change in control provisions in our stock plan and the employment
letter agreements are particularly important. Pursuant to the terms of our
stock
plan and the employment letter agreements, all stock options held by our named
executive officers (as well as all other optionees) become immediately vested
and exercisable upon the completion of a change in control of our company.
Thus,
the immediate vesting of stock options is triggered by the change in control
and
thus is known as a “single trigger” change in control arrangement. While “single
trigger” change in control arrangements are often criticized as creating a
“windfall” for optionees, we, nonetheless, believe such arrangements are
appropriate since they provide important retention value during what can often
be an uncertain time for employees and provide executives additional monetary
motivation to complete a transaction that the Board of Directors believes is
in
the best interests of our stockholders.
In
order
for our named executive officers to receive any other payments or benefits
as a
result of a change in control of our company, however, there must be a
termination event, such as a termination of the executive’s employment by us
without cause or a termination of the executive’s employment by the executive
for good reason. There is no requirement in the employment letter agreements
that the termination event occur within a certain time period of the change
in
control event for the severance payment to be triggered. The termination of
the
executive’s employment by the executive without good reason will not give rise
to additional payments or benefits either in a change in control situation
or
otherwise. Thus, these additional payments and benefits will not just be
triggered by a change in control, but will also require a termination event
not
within the control of the executive, and thus are known as “double trigger”
change in control arrangements. We believe these “double trigger” change in
control arrangements are also important since they too provide important
retention value and because they are not “single trigger” arrangements which
prevent the executive from receiving what could be considered by some
stockholders as too significant a windfall upon a change in control. If any
payments to a named executive officer under the employment letter agreements
or
otherwise are considered contingent upon a “change in control” for purposes of
Section 280G of the Internal Revenue Code of 1986, as amended, and would
therefore constitute a “parachute payment” under the Internal Revenue Code, then
such payments would be reduced to the largest amount as will result in no
portion of such payments being subject to the tax imposed by Section 4999 of
the
Internal Revenue Code.
We
believe our change in control arrangements mitigate some of the risk that exists
for executives working in a small company where there is a meaningful
likelihood that the company may be acquired. These arrangements are also
intended to attract and retain qualified executives that have alternatives
that
may appear to them to be less risky absent these arrangements, and mitigate
a
potential disincentive to consideration and execution of such an acquisition,
particularly where the services of these executive officers may not be required
by the acquirer.
We
believe our change in control and severance arrangements are an important part
of our compensation program due to the important retention and motivational
value. We also believe the change in control provision in our stock plan and
the
severance and change in control arrangements provided in the employment letter
agreements with our named executive officers are consistent with the design
provisions and benefit levels of other companies disclosing such protections,
as
provided in public Securities and Exchange Commission filings and as
periodically published in various surveys and research reports.
Accounting
and Tax Considerations
We
account for equity compensation paid to our employees under the rules of SFAS
No. 123R, which requires us to estimate and record an expense over the service
period of the award. Accounting
rules also require us to record cash compensation as an expense at the time
the
obligation is accrued. Although we were profitable for the fiscal year ended
December 31, 2006, unless and until we achieve sustained profitability, the
availability to us of a tax deduction for compensation expense will not be
material to our financial position. We structure cash bonus compensation so
that
it is taxable to our executives at the time it becomes available to them. We
currently intend that all cash compensation paid will be tax deductible for
us.
However, with respect to equity compensation awards, all of our named executive
officers have received equity compensation awards in the form of incentive
stock
options, which would not entitle us to any related tax deduction if there is
no
disqualifying disposition by the optionee. However, some of the incentive stock
options that were issued exceeded the $100,000 per year dollar limitation (with
respect to exercisability) set forth in Section 422 of the Internal Revenue
Code. Accordingly, the incentive stock options issued in excess of this $100,000
per year limitation will be treated as non-qualified stock options for tax
purposes. We will, therefore, be entitled to a tax deduction in the year in
which the non-qualified stock option is exercised in an amount equal to the
amount by which the fair market value of the shares underlying the non-qualified
stock options on the date of exercise exceeds the option exercise
price.
Section
162(m) of the Internal Revenue Code requires that we meet specific criteria,
including stockholder approval of certain stock and incentive plans, in order
to
deduct, for federal income tax purposes, compensation over $1 million per
individual paid to our named executive officers. Since none of our named
executive officers received compensation over $1 million during 2006, we will
not be affected by the limitations of Section 162(m) of the Internal Revenue
Code. We intend generally to structure our executive compensation arrangements,
where feasible, so as to minimize or eliminate the impact of the limitations
of
Section 162(m) of the Internal Revenue Code; however, we do reserve the right
to
offer compensation arrangements as may from time to time be necessary to attract
and retain top-quality management.
EXECUTIVE
COMPENSATION
___________________
Compensation
Committee Report
This
report is furnished by the Compensation Committee of the Board of Directors
with
respect to the “Compensation Discussion and Analysis” section of this proxy
statement.
The
primary purpose of the Compensation Committee is to assist the Board of
Directors in discharging its responsibilities relating to the compensation
of
our executive officers. In
performing its oversight role, the Compensation Committee has reviewed and
discussed the “Compensation Discussion and Analysis” section of this proxy
statement with our management.
Based
on
the review and discussions of the Compensation Committee described above, and
subject to the limitations on the role and responsibilities of the Compensation
Committee in its charter, the Compensation Committee recommended to the Board
of
Directors that the “Compensation Discussion and Analysis” section be included in
this proxy statement for filing with the Securities and Exchange
Commission.
This
report is dated as of April 26, 2007.
Compensation
Committee
Louis
W.
Sullivan, M.D., Chairman
Ross
Mangano
Victor
Morgenstern
The
foregoing Compensation Committee Report shall not be deemed to be “soliciting
material” or to be “filed” with the Securities and Exchange Commission or
subject to Regulation 14A or 14C under the Securities Exchange Act of 1934,
as
amended, or to the liabilities of Section 18 of the Exchange Act.
Notwithstanding anything to the contrary set forth in any of our previous
filings under the Securities Act of 1933, as amended, or the Exchange Act,
that
might incorporate future filings, including this proxy statement, in whole
or in
part, the foregoing Compensation Committee Report shall not be incorporated
by
reference into any such filings.
Compensation
Committee Interlocks and Insider Participation
Dr.
Sullivan, Mr. Mangano and Mr. Morgenstern served as members of the
Compensation Committee during 2006. None of these individuals has been an
officer or employee of our company or one of our subsidiaries. None of our
executive officers serve as a member of the Board of Directors or compensation
committee of any entity that has one or more executive officers who serve on
the
Board of Directors or the Compensation Committee.
Summary
of Cash and Other Compensation
The
following table provides summary information concerning all compensation awarded
to, earned by or paid to our principal executive officer and our principal
financial officer during the year ended December 31, 2006. We did not have
any
other executive officers as of December 31, 2006. We refer to these individuals
in this proxy statement as our “named executive officers.”
SUMMARY
COMPENSATION TABLE
- 2006
Name
and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus(1)
|
|
Option
Awards(2)(3)
|
|
All
Other
Compensation(4)
|
|
Total
|
|
Stephen
M. Simes
Vice
Chairman, President and Chief Executive Officer
|
|
|
2006
|
|
$
|
374,400
|
|
$
|
140,400
|
|
$
|
86,030
|
|
$
|
40,336
|
|
$
|
641,166
|
|
Phillip
B. Donenberg
Chief
Financial Officer, Treasurer and Secretary
|
|
|
2006
|
|
|
208,572
|
|
|
41,714
|
|
|
127,622
|
|
|
14,700
|
|
|
392,608
|
|
(1)
|
Represents
discretionary cash bonus earned in year as indicated, but actually
paid to
named executive officer in the following year. We refer you to the
information under the headings “— Annual Performance Bonus” and
“Compensation Discussion and Analysis” for a discussion of the factors
taken into consideration by the Compensation Committee in determining
the
amount of bonus paid to each named executive
officer.
|
(2)
|
Reflects
the dollar amount recognized for each named executive officer for
financial statement reporting purposes with respect to the year ended
December 31, 2006 in accordance with SFAS 123(R). We refer you to
note 7
to our consolidated financial statements for the year ended December
31,
2006 for a discussion of the assumptions made in calculating the
dollar
amount recognized for each named executive officer for financial
statement
reporting purposes with respect to the year ended December 31, 2006
in
accordance with SFAS 123(R). The following table provides additional
information regarding the dollar amount recognized during the year
ended
December 31, 2006 for each stock option held by each named executive
officer:
|
Name
|
|
Option
Date of Grant
|
|
Number
of Underlying Option Shares
|
|
Dollar
Amount Recognized
|
|
Stephen
M. Simes
|
|
|
3/22/04
|
|
|
126,667
|
|
$
|
86,030
|
|
Phillip
B. Donenberg
|
|
|
3/22/04
|
|
|
79,166
|
|
|
53,766
|
|
|
|
|
7/19/05
|
|
|
25,000
|
|
|
25,249
|
|
|
|
|
3/16/06
|
|
|
62,500
|
|
|
48,607
|
|
(3)
|
Represents
options granted under the BioSante Pharmaceuticals, Inc. Amended
and
Restated 1998 Stock Plan, the material terms of which are described
in
more detail below under the heading “Executive Compensation—Grants of
Plan-Based Awards—BioSante Pharmaceuticals, Inc. Amended and Restated 1998
Stock Plan.”
|
(4)
|
The
amounts shown in this column include the following with respect to
each
named executive officer:
|
Name
|
|
401(k)
Match(a)
|
|
Insurance
Premiums(b)
|
|
Tax
Gross-Up(c)
|
|
Auto
Allowance
|
|
Stephen
M. Simes
|
|
$
|
10,000
|
|
$
|
11,581
|
|
$
|
6,756
|
|
$
|
12,000
|
|
Phillip
B. Donenberg
|
|
|
7,500
|
|
|
—
|
|
|
—
|
|
|
7,200
|
|
(a) Based
on
50 percent of amount the executive officer voluntarily contributed to
plan.
(b) Includes
reimbursement for premiums paid by Mr. Simes for supplemental term life and
long-term disability insurance.
(c) Based
on
the executive officer’s tax rate at the time the premium was paid.
Simes
Employment Letter Agreement. In
January 1998, we entered into an employment letter agreement with Stephen M.
Simes pursuant to which Mr. Simes serves as our Vice Chairman, President and
Chief Executive Officer and a member of the Board of Directors. The term of
this
agreement continues until December 31, 2009. On January 1 of each year, the
term
is automatically extended for an additional one year unless on or before October
1 immediately preceding the extension, either party gives written notice to
the
other of the termination of the agreement or cessation of further extensions.
Under the agreement, Mr. Simes is entitled to a base salary in an amount
determined by the Board of Directors, which base salary, however, must be
adjusted upward each year at a minimum equal to changes in the Consumer Price
Index. Mr. Simes is entitled to receive an annual performance bonus of up
50 percent of his then base salary. The amount of the bonus will be determined
in the sole discretion of the Compensation Committee. Mr. Simes is also
entitled to a monthly stipend of $1,000 for automobile use and four weeks paid
vacation each year. If Mr. Simes is terminated without cause or upon a
change in control or if he terminates his employment for good reason, he will
be
entitled to certain payments and benefits as described in more detail under
the
heading “—Potential Payments Upon Termination or Change in Control.” Under the
agreement, Mr. Simes is subject to customary assignment of inventions,
confidentiality and non-competition provisions.
Donenberg
Employment Letter Agreement. In
June
1998, we entered into an employment letter agreement with Phillip B. Donenberg
pursuant to which Mr. Donenberg serves as our Chief Financial Officer. The
term of this agreement continues until either party gives 30 days written notice
to the other of the termination of the agreement. Under the agreement, Mr.
Donenberg is entitled to a base salary in an amount determined by the Board
of
Directors, which base salary, however, must be adjusted upward each year at
a
minimum equal to changes in the Consumer Price Index. Mr. Donenberg is entitled
to receive an annual performance bonus of up to 30 percent of his then base
salary. The amount of the bonus will be determined in the sole discretion of
the
Compensation Committee. Mr. Donenberg is also entitled to a monthly stipend
of
$600 for automobile use and three weeks paid vacation each year. If
Mr. Donenberg is terminated without cause or upon a change in control or if
he terminates his employment for good reason, he will be entitled to certain
payments and benefits as described in more detail under the heading “—Potential
Payments Upon Termination or Change in Control.” Under the agreement, Mr.
Donenberg is subject to customary assignment of inventions, confidentiality
and
non-competition provisions.
Annual
Performance Bonus.
As
required under the terms of their employment letter agreements, we provide
Messrs. Simes and Donenberg the opportunity to earn an annual performance bonus
each year in an amount equal to up to 50 percent of Mr. Simes’ base salary and
up 30 percent of Mr. Donenberg’s base salary. The Compensation Committee
has the ability to award a higher bonus if it believes a higher bonus is
warranted. The Compensation Committee determines the amount of the bonus each
year for each executive based on, among other things, input received from Mr.
Simes, its own views as to the achievement by the company of performance
objectives and the achievement by the individual executives of individual goals,
the general performance of the company and the executives during the year,
the
performance of the company’s stock price during the year and other factors that
may be relevant during any given year. For 2006 performance, Mr. Simes received
an annual performance bonus in the amount of $140,400, representing
approximately 37.5 percent of his base salary for 2006, and Mr. Donenberg
received an annual performance bonus in the amount of $41,714, representing
approximately 20 percent of his base salary for 2006. The annual performance
bonus for 2006 will be paid entirely in cash in two installments: one-half
in
January 2007 and the remaining amount on December 31, 2007 so long as the
executive remains an employee of our company as of such date or if not employed
as of such date was terminated by us without cause. In addition, the second
installment payment would be made to the executive immediately upon any change
of control of our company, including a merger or acquisition of our company.
The
annual performance bonus in the past has been paid either entirely in cash
or
one-half in cash and one-half in shares of our common stock. For more
information regarding the annual performance bonuses received by our named
executive officers for 2006 performance, we refer you to the “Compensation
Discussion and Analysis” section of this proxy statement.
BioSante
401(k) Savings Plan. We
maintain the BioSante 401(k) Savings Plan under which all participants,
including executive officers, may voluntarily request that we reduce their
pre-tax compensation by up to 100 percent (subject to certain special
limitations). We contributed an amount equal to 50 percent of the amount that
each participant contributed under this plan, up to a maximum amount allowed
by
law.
Grants
of
Plan-Based Awards
The
following table provides information concerning grants of plan-based awards
to
each of our named executive officers during the year ended December 31, 2006.
Plan-based awards were granted to our named executive officers during 2006
under
the BioSante Pharmaceuticals, Inc.
Amended
and Restated 1998 Stock Plan. The material terms of these awards and the
material plan provisions relevant to these awards are described in the footnotes
to the table below or in the narrative following the table below. Option were
granted to the named executive officers subsequent to December 31, 2006 in
January 2007. These options are described in more detail in the “Compensation
Discussion and Analysis” section of this proxy statement.
GRANTS
OF PLAN-BASED AWARDS - 2006
Name
|
|
Grant
Date(1)
|
|
All
Other Option Awards:
Number of Securities Underlying
Options(#)(2)
|
|
Exercise
or Base
Price
of Option Awards ($/Sh)
(3)
|
|
Closing
Market Price on Date of Grant
|
|
Grant
Date Fair
Value Stock
and Option Awards ($)(4)
|
|
Stephen
M. Simes
|
|
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Phillip
B. Donenberg
|
|
|
03/16/06
|
|
|
62,500
|
|
|
3.87
|
|
|
3.93
|
|
|
194,431
|
|
(1) The
grant
date is the date on which the Compensation Committee met to approve the option
grant.
(2) Represents
an incentive stock option granted under the BioSante Pharmaceuticals, Inc.
Amended and Restated 1998 Stock Plan, the material terms of which are described
in more detail below under the heading “—BioSante Pharmaceuticals, Inc. Amended
and Restated 1998 Stock Plan.” The option has a ten-year term and vests over a
three-year period, with one-third of the underlying shares vesting on each
of
March 16, 2007, March 16, 2008 and March 16, 2009, so long as the individual
remains an employee of our company as of such date.
(3) We
generally set the per share exercise price of stock options granted under the
BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan at an amount
equal to 100 percent of the fair market value of a share of our common stock
on
the date of grant, which under our plan is defined as the mean between the
reported high and low sale prices of our common stock, as reported on the
American Stock Exchange.
(4) We
refer
you to note 7 to our consolidated financial statements for the year ended
December 31, 2006 for a discussion of the assumptions made in calculating the
grant date fair value of the option awards.
BioSante
Pharmaceuticals, Inc.
Amended and Restated 1998 Stock Plan. Under
the terms of the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock
Plan, our named executive officers, in addition to other employees and
individuals, are eligible to receive equity compensation awards, such as stock
options, stock awards and stock units. To date, only incentive and non-statutory
stock options and stock awards have been granted under the plan. The plan
contains both an overall limit on the number of shares of our common stock
that
may be issued, as well as individual and other grant limits.
Incentive
stock options must be granted with a per share exercise price equal to at least
the fair market value of a share of our common stock on the date of grant.
For
purposes of the plan, the fair market value of our common stock is the mean
between the reported high and low sale prices of our common stock, as reported
by the American Stock Exchange. We generally set the per share exercise price
of
all stock options granted under the plan at an amount equal to the fair market
value of a share of our common stock on the date of grant.
Except
in
connection with certain specified changes in our corporate structure or shares,
the Compensation Committee may not, without prior approval of our stockholders,
seek to effect any re-pricing of any previously granted, “underwater” option by
amending or modifying the terms of the underwater option to lower the exercise
price, canceling the underwater option and granting replacement options having
a
lower exercise price, or other incentive award in exchange, or repurchasing
the
underwater options and granting new incentive awards under the plan. For
purposes of the plan, an option is deemed to be “underwater” at any time when
the fair market value of our common stock is less than the exercise
price.
Options
will become exercisable at such times and in such installments as may be
determined by the Compensation Committee, provided that options may not be
exercisable after 10 years from their date of grant. We generally provide for
the vesting of stock options in equal annual installments over a three-year
period commencing on the one-year anniversary of the date of grant.
Optionees
may pay the exercise price of stock options in cash, except that the
Compensation Committee may allow payment to be made (in whole or in part) by
(1)
using a broker-assisted cashless exercise procedure pursuant to which the
optionee, upon exercise of an option, irrevocably instructs a broker or dealer
to sell a sufficient number of shares of our common stock or loan a sufficient
amount of money to pay all or a portion of the exercise price of the option
and/or any related withholding tax obligations and remit such sums to us and
directs us to deliver stock certificates to be issued upon such exercise
directly to such broker or dealer; or (2) using a cashless exercise procedure
pursuant to which the optionee surrenders to us shares of our common stock
either underlying the option or that are otherwise held by the optionee.
Under
the
terms of the plan, unless otherwise provided in a separate agreement, if a
named
executive officer’s employment or service with our company terminates for any
reason, the unvested portion of the option will immediately terminate and the
executive’s right to exercise the then vested portion of the option
will:
· |
immediately
terminate if the executive’s employment or service relationship with our
company terminated for “cause”;
|
· |
continue
for a period of six months if the executive’s employment or service
relationship with our company terminates as a result of the executive’s
death or disability; or
|
· |
continue
for a period of 90 days if the executive’s employment or service
relationship with our company terminates for any reason, other than
for
cause or upon death or disability.
|
As
set
forth in the plan, the term “cause” will be as defined in any employment or
other agreement or policy applicable to the named executive officer or, if
no
such agreement or policy exists, will mean (i) dishonesty, fraud,
misrepresentation, embezzlement or deliberate injury or attempted injury, in
each case related to us or any subsidiary, (ii) any unlawful or criminal
activity of a serious nature, (iii) any intentional and deliberate breach of
a
duty or duties that, individually or in the aggregate, are material in relation
to the overall duties, or (iv) any material breach of any employment, service,
confidentiality or non-compete agreement entered into with us or any
subsidiary.
As
described in more detail under the heading “—Potential Payments Upon Termination
or Change in Control,” if there is a change in control of our company, then,
under the terms of the plan, unless otherwise provided by the Compensation
Committee in its sole discretion either in the agreement evidencing an option
or
stock award at the time of grant or at any time after the grant of an option
or
stock award, all outstanding options will become immediately exercisable in
full
and will remain exercisable for the remainder of their terms, regardless of
whether the executive to whom such options have been granted remains in the
employ or service of us or any of our subsidiaries and all outstanding stock
awards then held by the executive will, to the extent applicable, vest and/or
continue to vest in the manner determined by the Compensation Committee and
set
forth in any agreement evidencing such stock award.
Other
Information Regarding Plan-Based Awards.
Under a
provision contained in Mr. Simes’ employment letter agreement, upon his
termination of employment by us without cause, all stock options then held
by
him would be accelerated and all such options would become fully vested and
immediately exercisable for a period of one year after his termination date,
as
described in more detail under the heading “—Potential Payments Upon Termination
or Change in Control.” In addition, under provisions contained in Mr. Simes’ and
Mr. Donenberg’s employment letter agreements, upon the occurrence of a change in
control, all stock options then held by such executive would be accelerated
and
all such options would become fully vested and immediately exercisable, as
described in more detail under the heading “—Potential Payments Upon Termination
or Change in Control.”
Outstanding
Equity Awards at Fiscal Year End
The
following table provides information regarding unexercised stock options and
equity incentive plan awards that have not vested for each of our named
executive officers that remained outstanding at December 31, 2006. We did not
have any stock awards outstanding at December 31, 2006.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END - 2006
|
|
Option
Awards
|
|
Name
|
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable(1)
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#)
|
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
|
Stephen
M. Simes
|
|
|
71,407
|
|
—
|
|
—
|
|
$
|
4.00
|
|
04/06/2011
|
|
|
|
|
108,507
|
|
—
|
|
—
|
|
|
3.40
|
|
09/26/2012
|
|
|
|
|
126,667
|
|
—
|
|
—
|
|
|
2.10
|
|
05/29/2013
|
|
Phillip
B. Donenberg
|
|
|
21,547
|
|
—
|
|
—
|
|
|
4.00
|
|
04/06/2011
|
|
|
|
|
37,564
|
|
—
|
|
—
|
|
|
3.40
|
|
09/26/2012
|
|
|
|
|
79,166
|
|
—
|
|
—
|
|
|
2.10
|
|
05/29/2013
|
|
|
|
|
—
|
|
—
|
|
25,000(2)
|
|
|
3.715
|
|
07/18/2015
|
|
|
|
|
10,000
|
|
15,000(3)
|
|
—
|
|
|
3.715
|
|
07/18/2015
|
|
|
|
|
—
|
|
62,500(4)
|
|
—
|
|
|
3.87
|
|
03/15/2016
|
|
(1)
|
Upon
the occurrence of a change in control, the unvested and unexercisable
options described in this table will be accelerated and become fully
vested and immediately exercisable as of the date of the change in
control. For more information, we refer you to the discussion under
the
headings “—Grants of Plan-Based Awards—BioSante Pharmaceuticals, Inc.
Amended and Restated 1998 Stock Plan, ” “—Grants of Plan-Based
Awards—Other Information Regarding Plan-Based Awards ” and “—Potential
Payments Upon Termination or Change in Control.”
|
(2)
|
This
option vests upon the achievement of certain performance criteria.
In
February 2007, the Compensation Committee determined that some of
the
performance goals had been achieved, thereby resulting in the vesting
of
20,000 of the 25,000 shares underlying the option. The performance
goals
that had been achieved or partially achieved included (1) outlicensing
a
product, (2) becoming a leader and working on employee relations,
(3) the
initiation of coverage by an investment bank or third party and (4)
the
involvement in activities to enhance investor/public relations. The
remaining 5,000 shares underlying the option remain unvested and
subject
to certain performance criteria. We refer you to the discussion under
the
heading “Compensation Discussion and Analysis.”
|
(3)
|
This
option vests over a four-year period, with 7,500 of the remaining
shares
vesting on each of July 19, 2007 and July 19, 2008, so long as Mr.
Donenberg remains an employee or consultant of our company as of
such
date.
|
(4)
|
This
option vests over a three-year period, with one-third of the underlying
shares vesting on each of March 16, 2007, March 16, 2008 and March
16,
2009, so long as Mr. Donenberg remains an employee or consultant
of our
company as of such date.
|
Options
Exercised During Fiscal Year
The
following table provides information regarding the exercise of stock options
during the year ended December 31, 2006 for each of our named executive officers
on an aggregated basis. We do not have any outstanding stock awards and thus
did
not have any stock awards vest during the year ended December 31,
2006.
OPTIONS
EXERCISES AND STOCK VESTED - 2006
|
|
Option
Awards
|
|
Name
|
|
Number
of Shares
Acquired
on Exercise (#)
|
|
Value
Realized on Exercise ($)(1)
|
|
Stephen
M. Simes
|
|
|
100,625
|
|
$
|
153,956
|
|
Phillip
B. Donenberg
|
|
|
52,188
|
|
|
79,848
|
|
(1)
|
The
aggregate dollar value realized upon exercise is the difference between
the market price of the underlying shares of our common stock on
the date
of exercise, based on the closing sale price of our common stock
on the
date of exercise, and the exercise price of the
options.
|
Potential
Payments Upon Termination or Change
in Control
General.
We have
entered into employment letter agreements with each of our two named executive
officers, Stephen M. Simes and Phillip B. Donenberg, which may require us to
provide certain payments to the executive upon a termination of his employment
or change in control of our company. Whether a named executive officer receives
a payment and the amount of such payment, if applicable, depends upon the
triggering event. For more information regarding these agreements, we refer
you
the discussion under the headings “—Summary of Cash and Other Compensation—Simes
Employment Letter Agreement” and “—Summary of Cash and Other
Compensation—Donenberg Employment Letter Agreement.”
Potential
Payments to Named Executive Officers.
The
following table describes the potential payments to each of our named executive
officers in the event of a termination of his employment by us without cause,
by
him for good reason or upon his death or disability on December 31, 2006 or
a
change in control of our company on December 31, 2006:
Name
|
|
Executive
Benefits
and
Payments
|
Termination
by BioSante Without Cause or By Executive for Good
Reason
|
|
Termination
For Cause
|
Termination
Upon Death or Disability
|
|
Change
in Control
|
|
Stephen
M. Simes
|
|
|
Base
Salary
|
$
|
526,800
|
|
0
|
|
0
|
|
$
|
526,800
|
|
|
|
|
Unvested
and Accelerated Stock Options(1)(2)
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
|
|
|
Term
Life Insurance(3)
|
|
18,588
|
|
0
|
|
0
|
|
|
18,588
|
|
|
|
|
Group
Health Plan Benefits(4)
|
|
28,518
|
|
0
|
|
0
|
|
|
28,518
|
|
|
|
|
Outplacement
Services(5)
|
|
8,400
|
|
0
|
|
0
|
|
|
8,400
|
|
|
|
|
Office
Space and Administrative Services(6)
|
|
3,600
|
|
0
|
|
0
|
|
|
3,600
|
|
|
|
|
Total:
|
$
|
585,906
|
|
0
|
|
0
|
|
$
|
585,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip
B. Donenberg
|
|
|
Base
Salary
|
$
|
208,572
|
|
0
|
|
0
|
|
$
|
208,572
|
|
|
|
|
Unvested
and Accelerated Stock Options(1)(2)
|
|
267,033
|
|
0
|
|
0
|
|
|
267,033
|
|
|
|
|
Term
Life Insurance(3)
|
|
252
|
|
0
|
|
0
|
|
|
252
|
|
|
|
|
Group
Health Plan Benefits(4)
|
|
23,957
|
|
0
|
|
0
|
|
|
23,957
|
|
|
|
|
Total:
|
$
|
499,814
|
|
0
|
|
0
|
|
$
|
499,814
|
|
(1) The
value
of the automatic acceleration of the vesting of unvested stock options held
by a
named executive officer is based on the difference between: (i) the market
price
of the shares of our common stock underlying the unvested stock options held
by
such officer as of December 31, 2006, which is based on the closing sale price
of our common stock on December 29, 2006 ($2.77), the last trading day prior
to
December 31, 2006, and (ii) the exercise price of the options.
(2) Subsequent
to December 31, 2006, Mr. Simes was granted an option to purchase 250,000 shares
of our common stock and Mr. Donenberg was granted an option to purchase 50,000
shares of our common stock, which options vest in equal annual installments
over
a three-year period. The value of the automatic acceleration of the vesting
of
these stock options is not included in the above table.
(3) The
value
of the term life insurance is based on our current group plan and any applicable
additional insurance at the 2006 rate actually paid.
(4) The
value
of the group health plan benefits is based on premium rates in effect in
December 2006.
(5) The
value
of outplacement services is based on information we received from a third party
placement service company.
(6) The
value
of office space and administration services is based on current market
information for the Chicago, Illinois area received from a third
party.
Termination
by BioSante for Cause.
Under
the terms of both employment letter agreements, if Mr. Simes’ or Mr. Donenberg’s
employment is terminated by us for “cause,” the executive would be entitled to
be paid his annual base salary, car allowance and any out-of-pocket expenses
incurred through the date of his termination and any amounts the executive
would
be entitled to under any company benefit plan. For purposes of the agreements,
“cause” means any of the following: (i) fraud, (ii) theft or embezzlement of our
assets, (iii) a violation of law involving moral turpitude, (iv) repeated and
willful failure to follow instructions of our Board of Directors provided that
the conduct has not ceased or the offense cure within 30 days following written
warning from us. The agreements also provide that the executive must abide
by
certain non-competition and non-solicitation provisions for one year after
termination for cause. Under the terms of the BioSante Pharmaceuticals, Inc.
Amended and Restated 1998 Stock Plan, if Mr. Simes’ or Mr. Donenberg’s
employment is terminated by us for “cause,” the executive’s outstanding stock
options will
immediately terminate and may not then be exercisable.
Termination
by BioSante Without Cause.
Under
the terms of both employment letter agreements, if Mr. Simes’ or Mr.
Donenberg’s employment is terminated by us without cause, the executive would be
entitled to be paid his annual base salary, car allowance and any out-of-pocket
expenses incurred through the date of termination. Additionally, the executive
would be entitled to receive:
·
|
a
severance payment, which would be paid in one lump sum in the case
of Mr.
Simes and would be paid in 12 equal monthly installments in the case
of
Mr. Donenberg, equal to, in the case of Mr. Simes, his total compensation
over the previous 12 months, including his car allowance, and in
the case
of Mr. Donenberg, his base salary at the time of
termination;
|
· |
continued
term life insurance at our expense, which, in the case of Mr. Simes,
would
be for a period of one year from the date of his termination or the
remaining term of his agreement, whichever is longer, and in the
case of
Mr. Donenberg, would be for a period of one year from the date of
his
termination, unless in either case the executive obtains full-time
employment;
|
· |
continued
participation by the executive and his family at our expense in our
group
hospitalization health, dental and disability insurance programs,
which in
the case of Mr. Simes, would be for a period of one year from the
date of his termination or the remaining term of his agreement, whichever
is longer, and in the case of Mr. Donenberg, would be for a period
of one
year from the date of his termination, unless in either case the
executive
becomes eligible to participate in another employer’s corresponding group
insurance and disability plans;
|
· |
in
the case of Mr. Simes, provision of outplacement services and use
of an
office and reasonable secretarial support for one year, unless Mr.
Simes
becomes otherwise employed within such
period;
|
· |
reimbursement
for out-of-pocket expenses incurred by the executive on behalf of
our
company; and
|
· |
reimbursement
for any and all unused vacation days accrued to the date of
termination.
|
In
addition, in the event we terminate Mr. Simes’ employment without cause, all
outstanding stock options held by Mr. Simes at such time will become immediately
exercisable and he will have one year from the date following his termination
of
employment to exercise such options. In the event we terminate Mr. Donenberg’s
employment without cause, all outstanding stock options held by
Mr. Donenberg at such time will remain exercisable to the extent
exercisable as of such termination for a period of three months.
Termination
by Executive for Good Reason.
Under
the terms of both employment letter agreements, Mr. Simes or Mr. Donenberg
may terminate his agreement upon 30 days written notice to us for “good reason.”
For purposes of the agreements, “good reason” means (i) assignment of duties
inconsistent with his position or a change in responsibilities, title or office,
(ii) the failure of us to continue, or the taking of action by us that could
adversely affect, benefits plans in which the executive is participating (with
some exceptions), (iii) reduction of salary or car allowance or failure to
increase salary as provided in the agreement, (iv) in the case of Mr. Simes,
any
other breach by us of the agreement; or (v) the occurrence of a change in
control. If Mr. Simes or Mr. Donenberg terminates his agreement for good reason,
then we must provide him the payments and benefits described above under
“Termination by BioSante Without Cause.”
Termination
in the Event of Death or Permanent Disability.
Under
the terms of both employment letter agreements, the agreements terminate in
the
event of the executive’s death or permanent disability. In the event of death,
the executive’s base salary, and in the case of Mr. Simes, his car allowance
will be terminated as of the end of the month in which the executive’s death
occurs. Upon an executive’s “disability,” we can terminate the executive’s
employment upon 30 days written notice. For purposes of the agreements,
“disability” means an inability, due to illness, accident or any other physical
or mental incapacity, to substantially perform the executive’s duties for a
period of four consecutive months or for a total of six months in any 12 month
period. Upon termination of an executive’s employment due to disability, the
executive will be entitled to receive compensation until the later of (i) the
date of termination of employment for disability or (ii) the date upon which
the
executive begins to receive long-term disability insurance benefits. Under
the
terms of the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock
Plan, in the event the executive’s employment is terminated as a result of the
executive’s death or permanent disability, all outstanding stock options then
held by the executive at such time will remain exercisable to the extent then
exercisable for a period of six months.
Change
in Control.
Under
the terms of both employment letter agreements, upon a “change in control” of
our company, any stock options held by Mr. Simes and Mr. Donenberg would become
immediately exercisable for the remainder of their terms, regardless of whether
the executives remain in the employ or service of our company. For
purposes of the agreements, a “change in control” means:
· |
the
sale, lease, exchange or other transfer, directly or indirectly,
of all or
substantially all of our assets, in one transaction or in a series
of
related transactions, to a third
party;
|
· |
the
approval by our stockholders of any plan or proposal for the liquidation
or dissolution of our company; or
|
· |
a
change in control of our company of a nature that would be required
to be
reported under the federal securities laws, provided a change in
control
will be deemed to have occurred if (1) any person is or becomes the
beneficial owner, directly or indirectly, of 30 percent or more of
our
outstanding securities; or (2) during any consecutive 24 month period,
individuals who at the beginning of such period constitute the entire
Board of Directors shall cease for any reason to constitute a majority
of
the Board of Directors unless the election, or the nomination for
election
by our stockholders, of each new director was approved by a vote
of at
least two-thirds of the directors then still in office who were directors
at the beginning of the period.
|
Additionally,
our named executive officers have received stock options granted under the
BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan. Under
the
terms of the plan, such stock options become fully exercisable following a
“change in control” of our company, which is defined under the plan
as:
· |
the
sale, lease, exchange or other transfer of all or substantially all
of the
assets of our company to a corporation that is not controlled by
us;
|
· |
the
approval by our stockholders of any plan or proposal for the liquidation
or dissolution of our company;
|
· |
certain
merger or business combination
transactions;
|
· |
more
than 50 percent of our outstanding voting shares are acquired by
any
person or group of persons who did not own any shares of common stock
on
the effective date of the plan; or
|
· |
certain
changes in the composition of the Board of
Directors.
|
In
order
for our named executive officers to receive any other payments or benefits
as a
result of a change in control of our company, there must be a termination event,
such as a termination by us without cause or a termination by the executive
for
good reason, in which case, then, the executive would receive the payments
and
benefits described above. There is no requirement in the employment letter
agreements that the termination event occur within a certain time period of
the
change in control event for the severance payment to be triggered.
In
any
event, if any payments to a named executive officer under the employment letter
agreements or otherwise are considered contingent upon a “change in control” for
purposes of Section 280G of the Internal Revenue Code of 1986, as amended,
and
would therefore constitute a “parachute payment” under the Code, then such
payments would be reduced to the largest amount as will result in no portion
of
such payments being subject to the tax imposed by Section 4999 of the Internal
Revenue Code.
Required
Resignations; Confidentiality and Other Provisions.
Pursuant to the terms of the employment letter agreements, Mr. Simes and Mr.
Donenberg have agreed upon any termination of their employment to resign from
any and all director, officer, trustee, agent and any other positions with
our
company or our affiliates, such as our employee benefit plans. In addition,
certain terms of their agreements will survive any termination of their
employment, including the assignment of inventions and confidentiality
provisions and in the event of certain terminations, portions of the
non-competition provisions.
RELATED
PERSON RELATIONSHIPS AND TRANSACTIONS
___________________
Director
and Executive Officer Compensation
Please
see “Director Compensation” and “Executive Compensation” for information
regarding the compensation of our directors and executive officers and for
information regarding employment and other agreements we have entered into
with
our directors and executive officers.
Policies
and Procedures Regarding Related Party Transactions
The
Board
of Directors has delegated to the Audit and Finance Committee, pursuant to
the
terms of a written policy, the authority to review, approve and ratify related
party transactions. If it is not feasible for the Audit and Finance Committee
to
take an action with respect to a proposed related party transaction, the Board
of Directors or another committee of the Board of Directors, may approve or
ratify it. No member of the Board of Directors or any committee may participate
in any review, consideration or approval of any related party transaction with
respect to which such member or any of his or her immediate family members
is
the related party.
Our
policy defines a “related party transaction” as a transaction, arrangement or
relationship (or any series of similar transactions, arrangements or
relationships) in which we (including any of our subsidiaries) were, are or
will
be a participant and in which any related party had, has or will have a direct
or indirect interest.
Prior
to
entering into or amending any related party transaction, the party involved
must
provide notice to our finance department of the facts and circumstances of
the
proposed transaction, including:
· |
the
related party’s relationship to us and his or her interest in the
transaction;
|
· |
the
material facts of the proposed related party transaction, including
the
proposed aggregate value of such transaction or, in the case of
indebtedness, the amount of principal that would be
involved;
|
· |
the
purpose and benefits of the proposed related party transaction with
respect to us;
|
· |
if
applicable, the availability of other sources of comparable products
or
services; and
|
· |
an
assessment of whether the proposed related party transaction is on
terms
that are comparable to the terms available to an unrelated third
party or
to employees generally.
|
If
our
finance department determines the proposed transaction is a related party
transaction and the amount involved will or may be expected to exceed
$10,000 in
any
calendar year, the proposed transaction will be submitted to the Audit and
Finance Committee for its prior review and approval or ratification. In
determining whether to approve or ratify a proposed related party transaction,
the Audit and Finance Committee will consider, among other things, the
following:
· |
the
purpose of the transaction;
|
· |
the
benefits of the transaction to us;
|
· |
the
impact on a director’s independence in the event the related party is a
non-employee director, an immediate family member of a non-employee
director or an entity in which a non-employee director is a partner,
shareholder or executive officer;
|
· |
the
availability of other sources for comparable products or
services;
|
· |
the
terms of the transaction; and
|
· |
the
terms available to unrelated third parties or to employees
generally.
|
Related
party transactions that involve $10,000 or less must be disclosed to the Audit
and Finance Committee but are not required to be approved or ratified by the
Audit and Finance Committee.
We
also
produce quarterly reports to the Audit and Finance Committee of any amounts
paid
or payable to, or received or receivable from, any related party. These reports
allow us to identify any related party transactions that were not previously
approved or ratified. In that event, the transaction will be promptly submitted
to the Audit and Finance Committee for consideration of all the relevant facts
and circumstances, including those considered when a transaction is submitted
for pre-approval. Under our policy, certain related party transactions as
defined under our policy, such as certain transactions not requiring disclosure
under the rules of the Securities and Exchange Commission, will be deemed to
be
pre-approved by the Audit and Finance Committee and will not be subject to
these
procedures.
RATIFICATION
OF SELECTION OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
(Proposal
2)
_____________________
Selection
of Independent Registered Public Accounting Firm
The
Audit
and Finance Committee of the Board of Directors has selected Deloitte &
Touche LLP to serve as our independent registered public accounting firm for
the
year ending December 31, 2007. Deloitte & Touche LLP has acted as our
independent registered public accounting firm since January 1999. Prior to
that
date, Deloitte & Touche, C.A. in Canada acted as our independent registered
public accounting firm since our inception in August 1996.
Although
it is not required to do so, the Audit and Finance Committee of the Board of
Directors wishes to submit the selection of Deloitte & Touche LLP to our
stockholders for ratification. If our stockholders do not ratify the selection
of Deloitte & Touche LLP, another independent registered public accounting
firm will be considered by the Audit and Finance Committee of the Board of
Directors. Even if the selection is ratified by our stockholders, the Audit
and
Finance Committee may in its discretion change the selection at any time during
the year, if it determines that such a change would be in the best interests
of
BioSante and its stockholders.
Representatives
of Deloitte & Touche LLP will be available via telephone at the Annual
Meeting, and will have an opportunity to make a statement if they so desire
and
will be available to respond to appropriate questions.
Audit,
Audit-Related, Tax and Other Fees
The
following table presents fees billed to BioSante for professional services
rendered by Deloitte & Touche LLP for the fiscal years ended December 31,
2006 and December 31, 2005.
|
|
Aggregate
Amount Billed
by
Deloitte & Touche LLP
|
|
|
|
2006
|
|
2005
|
|
Audit
Fees(1)
|
|
$
|
69,135
|
|
$
|
50,000
|
|
Audit-Related
Fees(2)
|
|
|
15,735
|
|
|
28,500
|
|
Tax
Fees
|
|
|
0
|
|
|
0
|
|
All
Other Fees
|
|
|
0
|
|
|
0
|
|
__________________________
(1)
|
These
fees consisted of the audit of our annual financial statements by
year,
review of financial statements included in our quarterly reports
on Form
10-Q and other services normally provided in connection with statutory
and
regulatory filings or engagements.
|
(2)
|
These
fees consisted of review of registration statements and the issuance
of
consents. The Audit and Finance Committee has considered whether
the
provision of these services is compatible with maintaining Deloitte’s
independence and has determined that it
is.
|
Pre-Approval
Policies and Procedures
Our
Audit
and Finance Committee has adopted procedures pursuant to which all audit,
audit-related and tax services, and all permissible non-audit services provided
by Deloitte & Touche LLP to BioSante, are pre-approved by our Audit and
Finance Committee. All services rendered by Deloitte & Touche LLP to
BioSante during 2006 were permissible under applicable laws and regulations,
and
all such services provided by Deloitte & Touche LLP to BioSante, other than
de minimis non-audit services allowed under applicable law, were approved in
advance by the Audit and Finance Committee in accordance with the rules adopted
by the Securities and Exchange Commission in order to implement requirements
of
the Sarbanes-Oxley Act of 2002.
Board
Recommendation
The
Board
of Directors unanimously recommends a vote FOR
ratification of the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for the year ending December 31, 2007. Unless
a contrary choice is specified on the proxy card, proxies solicited by the
Board
of Directors will be voted FOR
ratification of the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for the year ending December 31,
2007.
OTHER
MATTERS
_____________________
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers and all persons who beneficially own more than 10 percent
of the outstanding shares of our common stock to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of our common stock. Executive officers, directors and greater than
10
percent beneficial owners are also required to furnish us with copies of all
Section 16(a) forms they file.
To
our
knowledge, based on review of the copies of such reports furnished to us during
the year ended December 31, 2006, and based on representations by our directors
and executive officers, all required Section 16 reports under the Securities
Exchange Act of 1934, as amended, for our directors, executive officers and
beneficial owners of greater than 10 percent of our common stock were filed
on a
timely basis during the year ended December 31, 2006.
Stockholder
Proposals for
2007 Annual Meeting
Stockholder
proposals intended to be presented in the proxy materials relating to the next
Annual Meeting of Stockholders must be received by us on or before December
31,
2007, unless the date of the meeting is delayed by more than 30 calendar days,
and must satisfy the requirements of the proxy rules promulgated by the
Securities and Exchange Commission.
Any
other
stockholder proposals to be presented at the next Annual Meeting of Stockholders
must be given in writing to our Corporate Secretary and received at our
principal executive offices not later than January 30, 2008 nor earlier than
December 31, 2007. The proposal must contain specific information required
by
our Bylaws, a copy of which may be obtained by writing to our Corporate
Secretary or accessing the SEC’s EDGAR filing database at www.sec.gov.
If a
proposal is not timely and properly made in accordance with the procedures
set
forth in our Bylaws, it will be defective and may not be brought before the
meeting. If the proposal is nonetheless brought before the meeting and the
Chairman of the meeting does not exercise the power and duty to declare the
proposal defective, the persons named in the proxy may use their discretionary
voting with respect to the proposal.
Director
Nominations
In
accordance with procedures set forth in our Bylaws, our stockholders may propose
nominees for election to the Board of Directors only after providing timely
written notice to our Corporate Secretary. To be timely, a stockholder’s notice
to our Corporate Secretary must be delivered to or mailed and received at our
principal executive offices not less than 90 days nor more than 120 days prior
to the first anniversary of the date that we first released or mailed our proxy
statement to stockholders in connection with the immediately preceding annual
meeting of stockholders; provided, however, that in the event that the annual
meeting is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting of stockholders,
notice by the stockholder in order to be timely must be so received not later
than the close of business on the 10th
day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
The
notice must set forth, among other things:
· |
the
nominee’s name, age, business address and residence
address;
|
· |
the
nominee’s principal occupation or
employment;
|
· |
the
class and number of shares of our capital stock which are beneficially
owned by the nominee; and
|
· |
any
other information concerning the nominee required under the rules
of the
Securities and Exchange Commission in a proxy statement soliciting
proxies
for the election of directors.
|
Submissions
must be made by mail, courier or personal delivery. E-mailed submissions will
not be considered. The Nominating and Corporate Governance Committee will
consider only those stockholder recommendations whose submissions comply with
these procedural requirements. The Nominating and Corporate Governance Committee
will evaluate candidates recommended by stockholders in the same manner as
those
recommended by others.
Proxy
Solicitation Costs
The
cost
of soliciting proxies, including the preparation, assembly and mailing of
proxies and soliciting material, as well as the cost of forwarding this material
to the beneficial owners of our capital stock will be borne by us. Our
directors, officers and regular employees may, without compensation other than
their regular compensation, solicit proxies by telephone, facsimile or personal
conversation. We may reimburse brokerage firms and others for expenses in
forwarding proxy materials to the beneficial owners of our capital
stock.
Householding
of Annual Meeting Materials
Some
banks, brokers and other nominee record holders may be participating in the
practice of “householding” proxy statements and annual reports. This means that
only one copy of our Proxy Statement or Annual Report to Stockholders may have
been sent to multiple stockholders in each household. We will promptly deliver
a
separate copy of either document to any stockholder upon written or oral request
to our Investor Relations Department, BioSante Pharmaceuticals, Inc., 111
Barclay Boulevard, Lincolnshire, Illinois 60069, telephone: (847) 478-0500
ext.
120. Any stockholder who wants to receive separate copies of our Proxy Statement
or Annual Report to Stockholders in the future, or any stockholder who is
receiving multiple copies and would like to receive only one copy per household,
should contact the stockholder’s bank, broker, or other nominee record holder,
or the stockholder may contact us at the above address and phone
number.
Other
Business
Our
management does not intend to present other items of business and knows of
no
items of business that are likely to be brought before the Annual Meeting,
except those described in this proxy statement. However, if any other matters
should properly come before the Annual Meeting, the persons named in the
enclosed proxy will have discretionary authority to vote such proxy in
accordance with their best judgment on the matters.
Copies
of 2006 Annual Report
We
have
sent to each of our stockholders a copy of our Annual Report on Form 10-K
(without exhibits) for the year ended December 31, 2006. The exhibits to our
Form 10-K are available by accessing the SEC’s EDGAR filing database at
www.sec.gov. We will furnish a copy of any exhibit to our Form 10-K upon receipt
from any such person of a written request for such exhibits upon the payment
of
our reasonable expenses in furnishing the exhibits. This request should be
sent
to: BioSante Pharmaceuticals, Inc., 111 Barclay Boulevard, Lincolnshire, IL
60069, Attn: Stockholder Information.
_____________________
Your
vote
is important. Whether or not you plan to attend the Annual Meeting, please
vote
your shares of common stock and class C special stock by marking, signing,
dating and promptly returning the enclosed proxy card in the envelope provided.
No postage is required for mailing in the United States.
By
Order
of the Board of Directors,
/s/
Stephen M. Simes
Stephen
M. Simes
Vice
Chairman, President and
Chief
Executive Officer
April
30,
2007