ATHEROGENICS, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
SCHEDULE 14A
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ATHEROGENICS,
INC.
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TABLE OF CONTENTS
April 25, 2007
Dear Shareholder:
You are cordially invited to attend the 2007 Annual Meeting of
Shareholders of AtheroGenics, Inc. to be held at the Westin
Buckhead Atlanta, 3391 Peachtree Road, Atlanta, Georgia 30326,
on Thursday, May 17, 2007, at 9:00 a.m., Eastern Time.
The attached Notice of Annual Meeting and proxy statement
describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of
AtheroGenics during the past year and our plans for the future.
Directors and officers of AtheroGenics, as well as
representatives from AtheroGenics independent registered
public accounting firm, Ernst & Young LLP, will be
present to respond to appropriate questions from shareholders.
Please mark, date, sign and return your proxy card in the
enclosed envelope or submit a proxy through the internet by
following the instructions on the proxy card at your earliest
convenience. This will assure that your shares will be
represented and voted at the meeting, even if you do not attend.
Sincerely,
MICHAEL A. HENOS
Chairman of the Board
AtheroGenics,
Inc.
8995 Westside Parkway
Alpharetta, Georgia 30004
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 17,
2007
NOTICE HEREBY IS GIVEN that the 2007 Annual Meeting of
Shareholders of AtheroGenics, Inc. will be held at the Westin
Buckhead Atlanta, 3391 Peachtree Road, Atlanta, Georgia 30326,
on Thursday, May 17, 2007 at 9:00 a.m., Eastern Time,
for the purposes of considering and voting upon:
1. A proposal to elect three Class I directors to
serve until the 2010 Annual Meeting of Shareholders;
2. A proposal to ratify the appointment of Ernst &
Young LLP as the independent registered public accounting firm
of AtheroGenics for the fiscal year ending December 31,
2007; and
3. Such other business as properly may come before the
annual meeting or any adjournments thereof. The board of
directors is not aware of any other business to be presented to
a vote of the shareholders at the annual meeting.
Information relating to the above matters is set forth in the
attached proxy statement. Shareholders of record at the close of
business on March 16, 2007 are entitled to receive notice
of and to vote at the annual meeting and any adjournments
thereof.
By Order of the Board of Directors.
MICHAEL A. HENOS
Chairman of the Board
Alpharetta, Georgia
April 25, 2007
PLEASE READ THE ATTACHED PROXY STATEMENT AND PROMPTLY
COMPLETE, EXECUTE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING POSTAGE-PAID ENVELOPE OR SUBMIT A PROXY THROUGH THE
INTERNET BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED
PROXY CARD. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE
YOUR PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
AtheroGenics,
Inc.
8995 Westside Parkway
Alpharetta, Georgia 30004
PROXY
STATEMENT
FOR THE ANNUAL MEETING OF
SHAREHOLDERS
To Be Held May 17,
2007
We are providing this proxy statement to the shareholders of
AtheroGenics, Inc. in connection with the solicitation of
proxies by AtheroGenics to be voted at the 2007 Annual Meeting
of Shareholders and at any adjournments of that meeting. The
annual meeting will be held at the Westin Buckhead Atlanta, 3391
Peachtree Road, Atlanta, Georgia 30326, on Thursday,
May 17, 2007, at 9:00 a.m., Eastern Time.
When used in this proxy statement, the terms we,
us, our and AtheroGenics
refer to AtheroGenics, Inc.
The approximate date on which we are first sending this proxy
statement and form of proxy card to shareholders is
April 25, 2007.
VOTING
General
The securities that can be voted at the annual meeting consist
of common stock of AtheroGenics, no par value per share, with
each share entitling its owner to one vote on each matter
submitted to the shareholders. The record date for determining
the holders of common stock who are entitled to receive notice
of and to vote at the annual meeting is March 16, 2007.
Quorum
and Vote Required
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of common stock of
AtheroGenics as of the record date is necessary to establish a
quorum at the annual meeting and conduct business. As of the
record date, 39,467,927 shares of common stock were
outstanding and eligible to vote. Accordingly,
19,733,965 shares must be present at the annual meeting
either in person or by proxy in order to hold the annual meeting
and conduct business. Your shares will be counted as present at
the annual meeting if you properly submit a proxy (even if you
do not provide voting instructions) or attend the annual meeting
and vote in person.
In voting on the proposal to elect three directors
(Proposal 1), shareholders may vote in favor of the
nominees, withhold their votes as to the nominees or withhold
their votes as to specific nominees. The vote required to
approve Proposal 1 is governed by Georgia law and is a
plurality of the votes cast by the holders of shares entitled to
vote, provided a quorum is present. This means the three
nominees receiving the greatest number of votes will be elected.
In accordance with Georgia law, votes that are withheld will be
counted in determining whether a quorum is present but will have
no other effect on the election of the directors.
In voting on the proposal to ratify the audit committees
appointment of the independent registered public accounting firm
(Proposal 2), shareholders may vote in favor of the
proposal, vote against the proposal or abstain from voting. The
vote required to approve Proposal 2 is governed by Georgia
law, which provides that the proposal is approved if the number
of votes cast for the proposal exceeds the number of votes cast
against the proposal, provided a quorum is present. As a result,
abstentions will be considered in determining whether a quorum
is present but will not be considered in determining the number
of votes required to obtain the necessary vote to approve the
proposal.
1
Under the rules that govern most domestic stock brokerage firms,
firms that hold shares in street name for beneficial owners may,
to the extent that such beneficial owners do not furnish voting
instructions with respect to any or all proposals submitted for
shareholder action, vote in their discretion upon proposals
which are considered discretionary proposals under
those rules. These votes are considered as votes cast in
determining the outcome of any discretionary proposal. Brokerage
firms that have received no instructions from their clients as
to non-discretionary proposals do not have
discretion to vote on these proposals. If the brokerage firm
returns a proxy card without voting on a non-discretionary
proposal because it received no instructions, this is referred
to as a broker non-vote on the proposal. Although
these broker non-votes will be considered in
determining whether a quorum exists at the annual meeting, they
will not be considered as votes cast in determining the outcome
of any proposal. AtheroGenics believes that Proposals 1 and
2 are discretionary.
As of March 16, 2007 (the record date for the annual
meeting), the directors and executive officers of AtheroGenics
beneficially owned or controlled approximately 1,366,322
outstanding shares of common stock of AtheroGenics, constituting
approximately 3.5% of the outstanding common stock. AtheroGenics
believes that these holders will vote all of their shares of
common stock in favor of each of the two proposals.
We will announce preliminary voting results at the meeting. We
will publish the final results in our quarterly report on
Form 10-Q
for the second quarter of 2007. We will file that report with
the Securities and Exchange Commission, or SEC, and you can get
a copy from:
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our website at www.atherogenics.com by clicking on the Investor
Relations link, followed by the SEC Filings link,
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the SECs website at www.sec.gov,
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the SEC at (800) SEC-0330, or
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Investor Relations of AtheroGenics, at 8995 Westside
Parkway, Alpharetta, GA 30004.
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Proxies
Shareholders should specify their choices with regard to each of
the proposals on the enclosed proxy card. All properly executed
proxy cards delivered by shareholders to AtheroGenics in time to
be voted at the annual meeting and not revoked will be voted at
the annual meeting in accordance with the specifications noted
on the proxy cards. In the absence of such specifications,
the shares represented by a signed and dated proxy card will be
voted FOR the election of the director nominees and
FOR the ratification of the appointment of the
independent registered public accounting firm. If any other
matters properly come before the annual meeting, the persons
named as proxies will vote upon these matters according to their
judgment.
Any shareholder delivering a proxy has the power to revoke it at
any time before it is voted: (1) by giving written notice
to the Corporate Secretary of AtheroGenics, at
8995 Westside Parkway, Alpharetta, GA 30004; (2) by
executing and delivering to the Corporate Secretary a proxy card
bearing a later date; or (3) by voting in person at the
annual meeting. However, under the rules of the national
securities exchanges, including he Nasdaq Global Market, or
Nasdaq, any beneficial owner of AtheroGenics common stock
whose shares are held in street name by a brokerage firm that is
a member of those organizations may revoke his or her proxy and
vote his or her shares in person at the annual meeting only in
accordance with applicable rules and procedures of those
organizations, as employed by the beneficial owners
brokerage firm.
In addition to soliciting proxies through the mail, we may
solicit proxies through our directors, officers and employees in
person and by telephone or facsimile. We may also request
brokerage firms, nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of shares held of
record by them. AtheroGenics will bear all expenses incurred in
connection with the solicitation of proxies.
2
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
Pursuant to our amended and restated articles of incorporation
and amended and restated bylaws, our board of directors is
divided into three classes, with each director serving a
three-year term. Directors are elected to serve until they
resign or are removed, or are otherwise disqualified to serve,
and until their successors are duly elected and qualified. The
directors in Class I, Mr. Bearman, Mr. Bryson and
Dr. Dagi, hold office until this annual meeting of
shareholders. The directors in Class II,
Dr. Alexander, Dr. Barker, Ms. Grayson and
Dr. Scott, hold office until the 2008 annual meeting of
shareholders. The directors in Class III, Mr. Henos,
Dr. Medford and Mr. Pappas, hold office until the 2009
annual meeting of shareholders. No family relationships exist
among any of our directors or executive officers.
The board of directors has nominated Mr. Bearman,
Mr. Bryson and Dr. Dagi for re-election as
Class I directors to serve until the 2010 annual meeting of
shareholders.
The nominees have consented to serve another term as directors
if re-elected. If the nominees should be unavailable to serve
for any reason (which is not anticipated), the board of
directors may designate substitute nominees (in which event the
persons named on the enclosed proxy card will vote the shares
represented by all valid proxy cards for the election of such
substitute nominee), allow the vacancies to remain open until a
suitable candidate is located, or by resolution provide for a
lesser number of directors.
The board of directors unanimously recommends that the
shareholders vote FOR the proposal to re-elect David
Bearman, Vaughn D. Bryson and T. Forcht Dagi, M.D. as
Class I directors for a three-year term expiring at the
2010 Annual Meeting of Shareholders and until their successors
have been duly elected and qualified.
Executive
Officers and Directors
The following table sets forth certain information regarding our
executive officers and directors as of March 1, 2007:
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Name
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Age
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Position
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Russell M.
Medford, M.D., Ph.D.
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President, Chief Executive Officer
and Director
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Mark P. Colonnese
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Executive Vice President,
Commercial Operations and Chief Financial Officer
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Robert A. D. Scott, M.D.
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53
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Executive Vice President, Research
and Development and Chief Medical Officer
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Joseph M. Gaynor, Jr.
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46
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Senior Vice President, General
Counsel and Corporate Secretary
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W. Charles Montgomery, Ph. D.
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60
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Senior Vice President, Business
Development and Alliance Management
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Michael A. Henos(1)(4)
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57
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Chairman of the Board of Directors
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R. Wayne
Alexander, M.D., Ph.D.(1)(2)
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65
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Director
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Samuel L. Barker, Ph.D.(2)
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64
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Director
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David Bearman(3)
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61
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Director
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Vaughn D. Bryson(1)
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68
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Director
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T. Forcht Dagi, M.D.(3)
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58
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Director
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Margaret E. Grayson(3)
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60
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Director
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Arthur M. Pappas(2)(3)
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59
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Director
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William A. Scott, Ph.D.(2)
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66
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Director
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Member of the compensation committee. |
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Member of the corporate governance and nominating committee. |
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Member of the audit committee. |
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Mr. Henos resigned from the compensation committee on
March 22, 2007 and the board of directors appointed
Dr. Barker to fill the position. |
Russell M. Medford, M.D., Ph.D. has served as a
member of AtheroGenics board of directors since our
inception in 1993. Dr. Medford has been the President and
Chief Executive Officer since 1995 after serving as Executive
Vice President from 1993 to 1995. Dr. Medford is a director
of Inhibitex, Inc., a clinical stage biopharmaceutical company.
In addition to serving as Chairman of the Georgia Biomedical
Partnership, Dr. Medford serves on the Board of Directors
of Southeast BIO (SEBIO) and on BIO (Biotechnology Industry
Organization) Emerging Companies Section Governing Body and
Health Section Governing Body. He is an inaugural Fellow of
the Council on Basic Cardiovascular Sciences of the American
Heart Association and has held a number of academic appointments
at the Emory University School of Medicine, most recently as
Clinical Professor (adjunct) of Medicine. Dr. Medford is a
molecular cardiologist whose research has focused on the
molecular basis of cardiovascular disease. Dr. Medford
received a B.A. from Cornell University, and an M.D. with
Distinction and a Ph.D. in molecular and cell biology from the
Albert Einstein College of Medicine. Dr. Medford completed
his residency in internal medicine at the Beth Israel Hospital
and served as a fellow in cardiology at the Brigham and
Womens Hospital and Harvard Medical School, where he also
served on the faculty of Medicine.
Mark P. Colonnese has served as Executive Vice President,
Commercial Operations and Chief Financial Officer since May
2006. He had previously served as our Senior Vice President of
Finance and Administration and Chief Financial Officer since
2002, and as our Vice President of Finance and Administration
and Chief Financial Officer since 1999. Prior to joining us,
Mr. Colonnese was at Medaphis Corporation from 1997 to
1998, serving most recently as Senior Vice President and Chief
Financial Officer. Previously, Mr. Colonnese was Vice
President of Finance and Chief Financial Officer and a member of
the executive committee at AAIPharma Inc., a pharmaceutical
development company, from 1993 to 1997. Mr. Colonnese
served on the board of directors of Endeavor Pharmaceuticals,
Inc. from 1994 to 1997. From 1983 to 1993, Mr. Colonnese
held a number of executive and management positions at
Schering-Plough Corporation. Mr. Colonnese holds an M.B.A.
from Fairleigh Dickinson University and a B.S. magna cum laude
from Ithaca College.
Robert A. D. Scott, M.D. has served as Executive
Vice President, Research and Development and Chief Medical
Officer since May 2006. He had previously served as our Senior
Vice President of Clinical Development and Regulatory Affairs
and Chief Medical Officer since 2002. From 1992 until joining
AtheroGenics, Dr. Scott was with Pfizer Pharmaceutical
Group, where he most recently served as Vice President and
worldwide medical therapeutic head of the Cardiovascular and
Metabolic Group. During his tenure at Pfizer, Dr. Scott
also acted as Medical Director of Pfizers Cardiovascular
Risk Factors Group in the U.S., as well as Medical Director of
Pfizer Laboratories South Africa. Before joining Pfizer,
Dr. Scott served as medical advisor for Janssen
Pharmaceutica, where he managed the clinical trial department at
the companys South African affiliate. Dr. Scott holds
a B.S. and an M.B. Ch.B. from the University of Cape Town and a
Dip. Mid. COG from the University of South Africa.
Joseph M. Gaynor, Jr. has served as Senior Vice
President, General Counsel and Corporate Secretary since
July 2006. He had previously served as our Vice President,
General Counsel and Secretary since 2005. From 1995 until
joining AtheroGenics, Mr. Gaynor served as Vice President,
General Counsel and Secretary for all U.S. subsidiaries of
the Belgian pharmaceuticals group, UCB Pharma. In that role,
Mr. Gaynor directed a legal department responsible for
licensing and collaborations, mergers and acquisitions,
healthcare regulatory and corporate compliance matters, and the
strategic management of complex litigation. From 1989 to 1995,
Mr. Gaynor served as Legal Counsel at Lanier Worldwide,
Inc. and from 1986 to 1989 was an associate at the Atlanta law
firm of Powell, Goldstein, Frazer & Murphy.
Mr. Gaynor received a B.S. in Accounting and Finance from
Miami University and his law degree from Emory University School
of Law in Atlanta, Georgia.
W. Charles Montgomery, Ph.D. has served as
Senior Vice President, Business Development and Alliance
Management since May 2006. He had previously served as our Vice
President of Business Development since 2004. From 2002 until
joining AtheroGenics, Dr. Montgomery was Vice President of
Business Development and Portfolio Planning at Celera Genomics,
a business segment of Applera Corporation that was developing
4
new therapies to improve human health. From 1987 to 2001, he
served in various senior positions for the DuPont
Pharmaceuticals Company and the DuPont Merck Pharmaceutical
Company, most recently as Vice President and Co-Head of Business
Development and Strategic Planning. Dr. Montgomery has a
B.S. in Chemistry from the Southern Methodist University in
Dallas, Texas and received a Ph.D. in Organic Chemistry from the
University of Minnesota.
Michael A. Henos has served as chairman of our board of
directors since 1994 and was our Chief Financial Officer from
1994 to 1999. From 1993 to the present, Mr. Henos has
served as managing general partner of Alliance Technology
Ventures, L.P., a venture capital firm with $250 million
under management which principally invests in southeastern
technology startup companies. Mr. Henos served as a general
partner of Aspen Ventures, a $150 million early stage
venture capital partnership, from 1991 to 2001. Mr. Henos
previously served as a vice president of 3i Ventures
Corporation, the predecessor of Aspen Ventures, from 1986 to
1991. From 1984 to 1986, Mr. Henos served as a healthcare
consultant with Ernst & Young, specializing in venture
financing of startup medical technology companies. Before
joining Ernst & Young, Mr. Henos served in a
variety of operating management positions and co-founded and
served as Chief Executive Officer of ProMed Technologies, Inc.
Mr. Henos is the Chairman of the Board of Inhibitex, Inc.,
a clinical stage biopharmaceutical company.
R. Wayne Alexander, M.D., Ph.D. is our
scientific co-founder and has served as a member of our board of
directors since our inception in 1993. Dr. Alexander has
been a Professor of Medicine since 1988 and Chairman of the
Department of Medicine of Emory University School of Medicine
and Emory University Hospital since 1999. From 1988 to 1999,
Dr. Alexander served as the Director of the Division of
Cardiology at the Emory University School of Medicine and Emory
University Hospital. Prior to his appointment at Emory
University School of Medicine, Dr. Alexander served as
Associate Professor of Medicine at Harvard Medical School from
1982 to 1988. Dr. Alexander received his Ph.D. in
physiology from Emory University and his M.D. from Duke
University School of Medicine. Dr. Alexander completed his
residency in internal medicine at the University of Washington
and completed his fellowship in cardiology at Duke University.
Samuel L. Barker, Ph.D., was elected to the
AtheroGenics board of directors in July 2006. Dr. Barker
also serves on the Governance and Nominating Committee of the
Board. In 2001, he co-founded Clearview Projects, Inc., a
multi-disciplinary advisory firm specializing in strategic
thinking, corporate development transactions, product alliances,
product strategy/development and executive management, with a
focus on the global healthcare sector. He served as President
and CEO of Clearview Projects from
2003-2004.
From 1990 until his retirement in 1999, Dr. Barker held
several executive positions at Bristol Myers-Squibb. These
positions included serving as Executive Vice President,
Worldwide Franchise Management and Strategy from 1998 to 1999.
From 1992 through November 1997 he served as President, United
States Pharmaceuticals and from 1990 to 1992 as President,
Bristol Myers Squibb Intercontinental Commercial Operations.
Dr. Barker has been the Chairman of the Board of Lexicon
Genetics, Inc., since March 2005 and serves on the Board of
Directors of Cadence Pharmaceuticals, Inc. in San Diego,
California. He is an Advisor to Symphony Capital, a private
equity partnership. He is a member of the Board of Trustees, the
Cancer Institute of New Jersey. Dr. Barker received a B.S.
from Henderson State College, and holds graduate degrees from
the University of Arkansas and Purdue University.
David Bearman joined our board of directors in November
2002 and was also appointed to serve as the chairman of the
Audit Committee. Since March 2006, Mr. Bearman has been the
Senior Vice President and Chief Financial Officer of Home Depot
Supply, a distributor of construction, repair and maintenance
products. From March 2003 until March 2006, Mr. Bearman
served in a similar capacity with Hughes Supply Company, Inc.
before its acquisition by The Home Depot, Inc. From 1998 until
his retirement in 2001, Mr. Bearman served as the Senior
Vice President and Chief Financial Officer of NCR Corporation, a
global technology company, and as a member of the NCR Executive
Committee. From 1989 to 1998, Mr. Bearman served as the
Executive Vice President and Chief Financial Officer of Cardinal
Health, Inc., a provider of products and services to healthcare
providers and manufacturers.
Vaughn D. Bryson has served as a member of our board of
directors since February 2000. Mr. Bryson was a
32-year
employee of Eli Lilly & Company and served as President
and Chief Executive Officer of Eli
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Lilly from 1991 to 1993. Mr. Bryson was Executive Vice
President of Eli Lilly from 1986 until 1991 and served as a
member of Eli Lillys board of directors from 1984 until
his retirement in 1993. He serves as the President of Clinical
Products, Ltd., a medical foods company that he founded in 1999.
Mr. Bryson was Vice Chairman of Vector Securities
International from 1994 to 1996. He is also a director of Amylin
Pharmaceuticals Inc. Mr. Bryson received a B.S. degree in
Pharmacy from the University of North Carolina and completed the
Sloan Program at the Stanford University Graduate School of
Business.
T. Forcht Dagi, M.D., M.P.H., F.A.C.S., F.C.C.M.
has served as a member of our board of directors since 1999.
Dr. Dagi is a partner at HLM Venture Partners in Boston.
Previously, since 1996, he served as a Managing Partner of
Cordova Ventures, LLP, a venture firm with over
$250 million under management. Prior to joining Cordova,
Dr. Dagi served as director and principal of Access
Partners, an early stage biotechnology fund. Dr. Dagi
serves as a director of privately-held Encelle, Inc. He chairs
the New Technologies Committee of the American College of
Surgeons and the Ethics Committee of the American Association of
Neurological Surgeons. Dr. Dagi currently serves as
director of the Goergen Entrepreneurial Institute and of the
Alumni Advisory Board of the Wharton School. Dr. Dagi
teaches biomedical entrepreneurship at the Harvard-MIT
Department of Health Sciences and Technology, and serves as
Senior Advisor to the National Institutes of Health in the
Commercialization Assistance Program. Dr. Dagi holds an
A.B. from Columbia College, an M.D. and an M.P.H. from Johns
Hopkins, an M.T.S. from Harvard University, and an M.B.A. from
the Wharton School of the University of Pennsylvania.
Dr. Dagi trained in neurosurgery at the Massachusetts
General Hospital and Harvard University, where he was a
Neuroresearch Foundation Fellow and Joseph P. Kennedy, Jr.,
Fellow. He is a diplomat of the American Board of Neurological
Surgeons and a Fellow of the American College of Surgeons and
the College of Critical Care Medicine.
Margaret E. (Peg) Grayson was elected to the AtheroGenics
board of directors in July 2006. Ms. Grayson also serves on
the Audit Committee of the Board. She is the President of
Grayson & Associates, a management consulting and
advisory practice for audit, policy and regulatory compliance
and is an Assistant Professor of Finance and Accounting at
Hartwick College in New York. Ms. Grayson served as
President of AEP Government Solutions Group and Executive Vice
President of AEP Networks. She served as President and CEO of
V-ONE Corporation from 2000, before it combined with AEP
Networks in 2005. Prior to joining V-ONE, Ms. Grayson
served as Chief Financial Officer for SPACEHAB, Inc., and for
Sirius Satellite Radio, dba, CD Radio, Inc. in
Washington, D.C. She is a member of the National
Infrastructure Advisory Council (NIAC), serving at the request
of President George W. Bush, and provides advice to the
Secretary of Homeland Security and the President on the security
of our Nations critical infrastructure. Ms. Grayson
is a member of the Financial Executives Institute of Washington
D.C., the Potomac Officers Club and has been named to
Marylands Top 100 Women. She is a member of the
Deans Advisory Council for the School of Management at the
State University of New York, and the Advisory Board for the
Center of Excellence in Information Assurance at SUNY Buffalo.
Ms. Grayson holds an M.B.A. from the University of South
Florida and a B.S. in Accounting from the State University of
New York at Buffalo.
Arthur M. Pappas has served as a member of our board of
directors since June 1995. Mr. Pappas is Managing Partner
of A. M. Pappas & Associates, LLC, a life science
venture capital firm. Prior to founding the firm in 1994,
Mr. Pappas held senior level positions at several
multinational pharmaceutical companies. He was an executive
member of the board of directors of Glaxo Holdings plc, now
GlaxoSmithKline, for which he was responsible for international
operations including research, development and manufacturing.
Mr. Pappas has held various senior executive positions with
Abbott Laboratories International, Merrell Dow Pharmaceuticals
and the Dow Chemical Company, in the United States and
internationally. Mr. Pappas is a director of privately held
Genstruct, Inc., BrainCells, Inc. and CoLucid Pharmaceuticals.
Mr. Pappas received a B.S. in biology from Ohio State
University and an M.B.A. in finance from Xavier University.
William A. Scott, Ph.D. has served as a member of
our board of directors since 1997. Dr. Scott served as
Chief Executive Officer and a member of the board of directors
of Physiome Sciences, Inc., a company that specializes in the
design of computer models of human organs, from 1997 to 1999.
From 1983 to 1996, Dr. Scott held numerous positions at the
Bristol-Myers Squibb Research Institute, most recently as Senior
Vice President of Drug Discovery from 1990 until 1996.
Dr. Scott has served as an Adjunct Professor at the
Rockefeller University since 1983 and as an Associate Dean and
Associate Professor at Rockefeller University.
6
Dr. Scott has been a director of Avalon Pharmaceuticals,
Inc., a clinical stage biopharmaceutical company, since 1999 and
Deltagen, Inc., a provider of drug discovery tools, since 2001.
Board
Meetings and Committees
During the year ended December 31, 2006, the board of
directors held five meetings. The board has also established
three committees: an audit committee, a compensation committee
and a corporate governance and nominating committee. During the
year ended December 31, 2006, the audit committee held
eight meetings, the compensation committee held four meetings
and corporate governance and nominating committee held four
meetings. Each director attended at least 75% of the aggregate
meetings of the board of directors and any committee on which he
or she served. Our board of directors has determined that,
except for Dr. Medford, all of our directors are
independent as defined by the listing standards of Nasdaq.
All members of the board of directors are strongly encouraged,
but not required, to attend AtheroGenics annual meetings
of shareholders. At our 2006 Annual Meeting of Shareholders, all
of the directors then in office were in attendance.
Audit Committee. The audit committee, which
consists of Mr. Bearman, Chairman, Dr. Dagi,
Ms. Grayson and Mr. Pappas, is responsible for
appointing and overseeing the performance of our independent
registered public accounting firm, overseeing our accounting and
financial reporting process and reviewing the scope, results and
costs of the audits and other services provided by our
independent registered public accounting firm. The audit
committee has been established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
as amended, or the Exchange Act. The audit committee members are
independent directors and meet applicable audit committee
independence requirements of Nasdaq listing standards and SEC
regulations. The board of directors has determined that
Mr. Bearman is an audit committee financial expert.
Compensation Committee. The compensation
committee, which consists of Mr. Bryson, Chairman,
Dr. Alexander and Mr. Henos, reviews and approves the
compensation and benefits for our executive officers,
administers our equity ownership plans, and makes
recommendations to the board of directors regarding these
matters. The members of the compensation committee are
independent under Nasdaq listing standards.
Corporate Governance and Nominating
Committee. The corporate governance and
nominating committee, which consists of Dr. Alexander,
Chairman, Dr. Barker, Mr. Pappas and Dr. Scott,
oversees all aspects of our corporate governance functions on
behalf of the board, including identifying and reviewing the
qualifications of candidates to recommend for nomination to the
board of directors, reviewing the composition of the board and
its committees, monitoring board effectiveness, ensuring
compliance with applicable Nasdaq and SEC requirements and
making other recommendations to the board regarding matters
related to our directors. The corporate governance and
nominating committee members are independent directors under
Nasdaq listing standards. A copy of the corporate governance and
nominating committee charter and our corporate governance
guidelines are available on our website at www.atherogenics.com.
The corporate governance and nominating committee has not
established any specific minimum qualifications that must be met
for recommendation for a position on the board of directors. In
considering potential candidates, the committee will include in
their assessment attributes that they believe will be most
beneficial to the functioning of the board. These attributes, as
well as others that are deemed necessary or appropriate, include
fulfillment of necessary independence requirements, the highest
ethical standards and integrity, an ability to provide wise,
informed and thoughtful counsel to senior management on a range
of issues and individual backgrounds that provide a diverse
experience and knowledge commensurate with our needs.
The corporate governance and nominating committee will use its
network of contacts and may also engage a consulting or
professional search firm to assist in locating qualified
candidates for the board of directors. In 2006, a third-party
search firm was contracted to assist in finding qualified
candidates to fill the vacancies on the board of directors. The
committee will also consider nominations submitted by the
7
shareholders using the procedures set forth in our bylaws. To
recommend a nominee, a shareholder must submit the following
information to the committee:
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the nominees name, age, business address and residence
address;
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the nominees principal occupation or employment;
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the shareholders name and address;
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the number of shares of our common stock beneficially owned by
the nominee and by the shareholder; and
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any other information that would be required to be disclosed in
the proxy statement pursuant to Regulation 14A under the
Exchange Act.
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This information must be received by the corporate governance
and nominating committee at least 120 days prior to the
anniversary of the date on which AtheroGenics first mailed its
proxy materials for the prior years annual meeting of
shareholders. For the proxy materials relating to the 2008
annual meeting, this date would be December 27, 2007. All
notices should be sent to AtheroGenics, Inc., c/o Corporate
Secretary, 8995 Westside Parkway, Alpharetta, Georgia
30004. The corporate governance and nominating committee may
request other information from the nominee or shareholder to
evaluate the nominee or comply with Regulation 14A or other
applicable rules and regulations, including Nasdaq requirements,
which information must be provided within the time frame
provided by the committee for the nominee to be considered.
Nominees recommended by a shareholder will be evaluated on the
same basis as other nominees.
Communication
with the Board of Directors
Shareholders and other interested parties may communicate with
the board by writing to the attention of the Board of Directors
c/o Corporate Secretary, AtheroGenics, Inc.,
8995 Westside Parkway, Alpharetta, Georgia 30004.
Compensation
Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board
of directors or compensation committee of any entity that has
one or more of its executive officers serving as a member of our
board of directors or compensation committee.
Director
Compensation
Prior to September 2006, non-employee directors each received
$30,000 in base annual compensation payable in equal quarterly
installments, plus $5,000 for each additional committee
membership unless serving as the chairman of the applicable
committee, $10,000 for the chairman of the compensation
committee and the corporate governance and nominating committee,
$15,000 for the chairman of the audit committee and $40,000 for
the chairman of the board of directors. Upon initial election to
the board of directors, each non-employee director was granted a
non-qualified stock option to acquire 24,000 shares of
common stock. The exercise price was equal to the fair market
value of our common stock on the date of grant and the options
vested one-third at the time of election and one-third on each
of the first and second anniversaries of election. The chairman
and non-employee directors also received annually 36,000 and
16,000, respectively, non-qualified stock options. The exercise
price is equal to the fair market value of our common stock on
the date of grant and the options vest monthly over one year. In
addition, we reimbursed all of our directors for ordinary and
necessary travel expenses to attend board and committee meetings.
After September 2006, non-employee directors each receive
$40,000 in base annual compensation payable in equal quarterly
installments, plus $10,000 for each additional committee
membership unless serving as the chairman of the applicable
committee, $15,000 for the chairman of the compensation
committee, $10,000 for the corporate governance and nominating
committee, $20,000 for the chairman of the audit committee and
$55,000 for the chairman of the board of directors. Upon initial
election to the board of directors, each non-employee director
is granted a non-qualified stock option to acquire
24,000 shares of common stock. The
8
exercise price is equal to the fair market value of our common
stock on the date of grant and the option vests one-third at the
time of election and one-third on each of the first and second
anniversaries of election. The chairman and non-employee
directors also receive annually 40,000 and 20,000, respectively,
non-qualified stock options. The exercise price is equal to the
fair market value of our common stock on the date of grant and
the options vest monthly over one year. In addition, we
reimburse all of our directors for ordinary and necessary travel
expenses to attend board and committee meetings.
The following table sets forth all of the compensation awarded
to, earned by or paid to AtheroGenics non-employee
directors during 2006.
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Fees Earned
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or Paid in Cash
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Option Awards
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Total
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Name
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($)
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($)(1)
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($)
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Michael A. Henos
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$
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82,500
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$
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295,725
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$
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378,225
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R. Wayne Alexander
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41,250
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131,433
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172,683
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Samuel L. Barker
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20,204
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26,608
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46,812
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David Bearman
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48,750
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131,433
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180,183
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Vaughn D. Bryson
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47,500
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131,433
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178,933
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T. Forcht Dagi
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38,750
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131,433
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170,183
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Margaret E. Grayson
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20,204
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26,608
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46,812
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Arthur M. Pappas
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45,000
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131,433
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176,433
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William A. Scott
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42,500
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131,433
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173,933
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(1) |
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Represents the compensation costs recognized for financial
reporting purposes for the year ended December 31, 2006,
excluding estimated forfeitures, in accordance with Statement of
Financial Accounting Standards No. 123(R), Share-Based
Payment, or FAS 123(R). See Note 1 Description
of Business and Significant Accounting Policies
Stock-Based Compensation in our Annual Report on
Form 10-K
filed March 7, 2007 for a discussion of all assumptions
made by AtheroGenics in determining the FAS 123(R) value of
its option awards. |
At December 31, 2006, the aggregate number of option awards
outstanding was: Mr. Henos 123,300 shares;
Dr. Alexander 104,900 shares;
Dr. Barker 24,000 shares;
Mr. Bearman 28,000 shares;
Mr. Bryson 44,000 shares;
Dr. Dagi 72,800 shares;
Ms. Grayson 24,000 shares;
Mr. Pappas 54,200 shares; and
Dr. Scott 56,100 shares.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information provided to
us by each of the following as of March 1, 2007 (unless
otherwise indicated) regarding their beneficial ownership of our
common stock:
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each person who is known by us to beneficially own more than 5%
of our common stock;
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our Chief Executive Officer and each of the executive officers
named in the Summary Compensation Table in this proxy statement;
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each of our directors; and
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all of our directors and executive officers as a group.
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Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission, or SEC, and includes
voting and investment power with respect to the securities.
Except as indicated by footnote, and subject to applicable
community property laws, the persons and entities named in the
table below have sole voting and sole investment power with
respect to the shares set forth opposite each persons or
entitys name.
9
Shares of common stock subject to options or warrants currently
exercisable or exercisable within 60 days after
April 13, 2007 are deemed outstanding for purposes of
computing the percentage ownership of the person holding such
options or warrants, but are not deemed outstanding for purposes
of computing the percentage ownership of any other person.
Unless otherwise indicated, the address for each of the
individuals listed in the table is
c/o AtheroGenics,
Inc., 8995 Westside Parkway, Alpharetta, Georgia 30004.
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Common Stock
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Beneficially Owned
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Percent
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Number of
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of
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Beneficial Owner
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Shares
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Class
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OppenheimerFunds, Inc.
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5,700,500
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(1)
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14.4
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%
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Two World Financial Center
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225 Liberty Street, 11th Floor
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New York, New York 10281
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Atticus Capital, LP
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5,577,060
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(2)
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14.1
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%
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152 West 57th Street,
45th Floor
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New York, New York 10019
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Wellington Management Company, LLP
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5,523,359
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(3)
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14.0
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%
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75 State Street
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Boston, Massachusetts 02109
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Eastbourne Capital Management,
LLC.
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4,501,455
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(4)
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11.4
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%
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1101 Fifth Avenue, Suite 160
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San Rafael, California 94901
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Meditor Group Ltd.
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3,739,600
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(5)
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9.5
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%
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79 Front Street
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Hamilton, Bermuda DO HM11
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Bank of America Corporation.
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2,397,789
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(6)
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6.1
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%
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100 North Tryon Street, Floor 25
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Bank of America Corporate Center
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Charlotte, North Carolina 28255
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D.E. Shaw Valence Portfolios, LLC.
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2,236,083
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(7)
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5.7
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%
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120 W. 45th Street, Tower 45,
39th Floor
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New York, New York 10036
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Barclays Global Investors, NA
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2,088,121
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(8)
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5.3
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%
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1101 Fifth Avenue, Suite 160
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San Rafael, California 94901
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Russell M.
Medford, M.D., Ph.D.
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1,809,341
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(9)
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4.6
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%
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R. Wayne
Alexander, M.D., Ph.D.
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540,800
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(10)
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1.4
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%
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Mark P. Colonnese
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368,650
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(11)
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*
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Michael A. Henos
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253,300
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(12)
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*
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Vaughn D. Bryson
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213,832
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(13)
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*
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Robert A. D. Scott, M.D.
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209,700
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(14)
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*
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T. Forcht Dagi, M.D.
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99,145
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(15)
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*
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William A. Scott, Ph.D.
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97,900
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(16)
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*
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W. Charles Montgomery, Ph. D.
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88,500
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(17)
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David Bearman
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73,600
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(18)
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*
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Arthur M. Pappas
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69,200
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(19)
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*
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Joseph M. Gaynor, Jr.
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32,800
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(20)
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*
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Samuel L. Barker, Ph.D.
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9,000
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(21)
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*
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Margaret E. Grayson
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8,000
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(22)
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All directors and executive
officers as a group (14 persons)
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3,873,768
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(23)
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9.7
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%
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10
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* |
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Less than one percent (1%) of outstanding shares. |
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(1) |
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The amount shown and the following information was provided by
OppenheimerFunds, Inc. pursuant to correspondence dated
April 10, 2007, indicating beneficial ownership as of
April 9, 2007. The correspondence indicates that
OppenheimerFunds, Inc. has shared voting and dispositive power
with respect to 5,700,500 shares, and that Oppenheimer
Global Fund has shared voting and dispositive power with respect
to 3,500,000. |
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(2) |
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The amount shown and the following information was provided by
Atticus Capital, LP pursuant to a Schedule 13G/A dated
February 14, 2007, indicating beneficial ownership as of
December 31, 2006. The Schedule 13G/A indicates that
Atticus Management, LLC has sole voting and dispositive power
with respect to 5,577,060 shares, Atticus Capital LP has
sole voting and dispositive power with respect to
5,577,060 shares and Timothy Barakett has sole voting and
dispositive power with respect to 5,577,060 shares. |
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(3) |
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The amount shown and the following information was provided by
Wellington Management Company, LLP pursuant to a
Schedule 13G/A dated February 14, 2007, indicating
beneficial ownership as of December 31, 2006. The
Schedule 13G/A indicates that Wellington Management
Company, LLP is an investment advisor registered under
Section 203 of the Investment Advisor Act of 1940 and has
indicated that it has shared voting power with respect to
5,137,416 shares and shared dispositive power with respect
to 5,487,359 shares. |
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(4) |
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The amount shown and the following information was provided by
Eastbourne Capital Management, LLC pursuant to a
Schedule 13G filed on January 9, 2007, indicating
beneficial ownership as of December 6, 2006. The
Schedule 13G indicates that Eastbourne Capital Management,
LLC has shared voting and dispositive power with respect to
4,501,455 shares, Richard Jon Barry has shared voting and
dispositive power with respect to 4,501,455 shares and
Black Bear Offshore Master Fund, L.P., has shared voting and
dispositive power with respect to 2,963,369 shares. |
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(5) |
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The amount shown and the following information was provided by
Meditor Group Ltd. pursuant to a Schedule 13G filed on
March 30, 2007, indicating beneficial ownership as of
March 19, 2007. The Schedule 13G indicates that
Meditor Group Ltd. has shared voting and dispositive power with
respect to 3,739,600 shares. |
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(6) |
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The amount shown and the following information was provided by
Bank of America Corp. pursuant to a Schedule 13G filed
February 14, 2007, indicating beneficial ownership as of
December 31, 2006. The Schedule 13G indicates that
Bank of America Corp. had shared voting power with respect to
2,397,789 shares and shared dispositive power with respect
to 2,397,442 shares, NB Holdings Corp. had shared voting
power with respect to 2,397,789 shares and shared
dispositive power with respect to 2,397,442 shares, Bank of
America, NA had sole voting power with respect to
7,343 shares, shared voting power with respect to
6,156 shares, sole dispositive power with respect to
7,343 shares and shared dispositive power with respect to
5,809 shares, Banc of America Securities Holdings Corp. had
shared voting and dispositive power with respect to
2,384,290 shares, Banc of America Securities LLC had sole
voting and dispositive power with respect to
2,384,290 shares, Columbia Management Group, LLC had shared
voting and dispositive power with respect to 5,523 shares,
Columbia Management Advisors, LLC had sole voting and
dispositive power with respect to 5,523 shares and Banc of
America Investment Advisors, Inc. had shared voting and
dispositive power with respect to
286 shares . |
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(7) |
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The amount shown and the following information was provided by
D.E. Shaw Valence Portfolios, LLC pursuant to a
Schedule 13G/A filed on February 14, 2007, indicating
beneficial ownership as of December 31, 2006. The
Schedule 13G/A indicates that D.E. Shaw Valence Portfolios,
LLC has shared voting and dispositive power with respect to
2,236,083 shares, D.E. Shaw & Co., LP has shared
voting and dispositive power with respect to
2,236,083 shares and David E. Shaw has shared voting and
dispositive power with respect to 2,236,083 shares. |
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(8) |
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The amount shown and the following information was provided by
Barclays Global Investors, NA. pursuant to a Schedule 13G
filed on January 23, 2007, indicating beneficial ownership
as of December 31, 2006. The Schedule 13G indicates
that Barclays Global Investors, NA., an investment advisor
registered |
11
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under Section 203 of the Investment Advisor Act of 1940,
had sole voting power with respect to 807,052 shares and
sole dispositive power with respect to 947,645 shares and
Barclays Global Fund Advisors had sole voting and dispositive
power with respect to 1,140,476 shares. |
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(9) |
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Includes 1,334,700 shares subject to options exercisable
within 60 days and 100,000 shares owned by Medford
Future Fund, LLLP, a family limited liability limited
partnership of which Dr. Medford is the general partner. As
the general partner, Dr. Medford exercises voting and
investment power over these shares. |
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(10) |
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Includes 104,900 shares subject to options exercisable
within 60 days and 100,000 shares owned by Jane
Alexander, Dr. Alexanders spouse. |
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(11) |
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Includes 343,650 shares subject to options exercisable
within 60 days. |
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(12) |
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Includes 123,300 shares subject to options exercisable
within 60 days. |
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(13) |
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Includes 44,000 shares subject to options exercisable
within 60 days. |
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(14) |
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Includes 159,496 shares subject to options exercisable
within 60 days. |
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(15) |
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Includes 60,800 shares subject to options exercisable
within 60 days. |
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(16) |
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Includes 56,100 shares subject to options exercisable
within 60 days. |
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(17) |
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Includes 88,500 shares subject to options exercisable
within 60 days. |
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(18) |
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Includes 28,000 shares subject to options exercisable
within 60 days. |
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(19) |
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Includes 54,200 shares subject to options exercisable
within 60 days. |
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(20) |
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Includes 32,800 shares subject to options exercisable
within 60 days. |
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(21) |
|
Includes 8,000 shares subject to options exercisable within
60 days. |
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(22) |
|
Includes 8,000 shares subject to options exercisable within
60 days. |
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(23) |
|
Includes 2,446,446 shares subject to options exercisable
within 60 days. |
RELATED
PERSON TRANSACTIONS
In accordance with our audit committee charter, our audit
committee is responsible for reviewing the terms, conditions and
arrangements involving any related party or potential conflict
of interest transaction and for overseeing our code of business
conduct and ethics, which includes disclosure requirements
applicable to our employees and our directors relating to
conflicts of interest. Accordingly, our audit committee is
responsible for reviewing and approving the terms and conditions
of all transactions that involve AtheroGenics, one of our
directors or executive officers or any of their immediate family
members. Other than as described below we have not entered into
any such transactions since January 1, 2006 that meet the
requirements for disclosure in this proxy statement. If there
were to be such a transaction, we would need the approval of our
audit committee prior to entering into such transaction.
Emory
University License Agreement
In January 1995, we entered into a license agreement with Emory
University. Under the terms of the Emory license agreement,
Emory granted to us an exclusive right and license to make, use
and sell products utilizing inventions claimed in several
patents developed by employees of Emory. The Emory employees who
developed the licensed patents include Russell M. Medford,
M.D., Ph.D., our President, Chief Executive Officer and
director, and R. Wayne Alexander, M.D., Ph.D., a
member of our board of directors. The Emory license agreement
required us to make royalty payments to Emory based on certain
percentages of net revenue we derive from sales of products
utilizing inventions claimed in the licensed patents and from
sublicensing of the licensed patents. The Emory license
agreement also provided for milestone payments to Emory upon the
occurrence of certain events relating to the development of
products utilizing the licensed patents. Drs. Alexander,
Medford
and/or
Margaret K. Offermann, M.D., Ph.D.,
Dr. Medfords wife, will receive a portion of our
payments to Emory under the Emory license agreement. We paid a
signing fee to Emory upon the execution of the Emory license
agreement and an additional amount for achievement of the first
and second milestone under the agreement. The Emory license
agreement was amended in August 2005 to eliminate any further
12
milestone payments and to provide that Emory will receive a
percentage of any milestone payments or royalties received by
AtheroGenics related to the development and sale of products
utilizing the Emory patents. In December 2005, under the terms
of our collaboration agreement with AstraZeneca, all amounts due
under the Emory license agreement became the responsibility of
AstraZeneca.
COMPENSATION
DISCUSSION AND ANALYSIS
The
Compensation Committee
The compensation committee is responsible for setting the
overall compensation strategy and compensation policies for our
senior executive officers and directors, including determining
the forms and amount of compensation appropriate to achieve our
strategic objectives. The compensation committees
functions are more fully described in its charter which can be
viewed at the investor relations page on our website at
www.atherogenics.com. The charter of the compensation committee
requires that the compensation committee be comprised of at
least three members of the board of directors, and the
compensation committee currently consists of Mr. Bryson, as
Chairman, Dr. Alexander and Mr. Henos. As required by
the charter, the board of directors has determined that each
member of the compensation committee is independent
as that term is defined under the rules and regulations of the
Securities and Exchange Commission, or SEC, and the applicable
listing standards of Nasdaq.
Named
Executive Officers for 2006
The compensation committee reviews, analyzes and approves the
compensation of our senior executive officers, including the
Named Executive Officers or NEOs included in the
tables set forth following this compensation discussion and
analysis. The NEOs for 2006 include our chief executive officer,
our chief financial officer, and the three other executive
officers that had the highest total compensation for 2006,
calculated in accordance with the rules and regulations of the
SEC. Our NEOs are:
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Dr. Medford, President and Chief Executive Officer;
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Mr. Colonnese, Executive Vice President, Commercial
Operations and Chief Financial Officer;
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Dr. Scott, Executive Vice President, Research &
Development and Chief Medical Officer;
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Mr. Gaynor, Senior Vice President, General Counsel and
Corporate Secretary; and
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Dr. Montgomery, Senior Vice President, Business
Development & Alliance Management.
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Compensation
Philosophy, Policies and Principles
As a research-based pharmaceutical company focused on the
discovery, development and commercialization of novel drugs for
the treatment of chronic inflammatory diseases, our long-term
success depends on our ability to discover, develop and market
innovative medicines. To be successful, we must attract,
motivate and retain highly talented individuals within all
levels of our company who are committed to our long-term
success. To this end, the compensation committees
philosophy is to implement programs that are designed to:
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Provide competitive compensation that will attract, retain and
reward highly qualified executives who contribute to our
long-term success. The compensation committee believes
compensation should reflect the value of the job in the
marketplace and views this as a key to attracting and retaining
a highly skilled work force.
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Align managements interests with shareholders by including
long-term equity incentives in executive compensation.
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Provide compensation that rewards performance. Our programs
should deliver compensation reflective of individual and company
performance. Where individual
and/or
company performance exceeds expectations or falls short of
expectations, compensation should reflect these results.
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Provide compensation that encourages the long-term focus
required for success in the pharmaceutical industry. To this
end, all employees receive a mix of base salary, short-term
incentive compensation (in the form of an annual cash bonus) and
long-term equity based compensation; however, employees at
higher levels have an increasing proportion of their
compensation tied to longer-term performance because they are in
a position to have greater influence on long-term results.
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Provide compensation and benefit programs that are fair and
equitable. While programs and individual pay levels will always
reflect differences in job responsibilities, geographies and
marketplace considerations, the overall structure of
compensation and benefit programs should be broadly similar
across the organization.
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Orchestrate compensation and benefit programs to motivate and
inspire employee behavior that fosters a high-performance
culture that maximizes the opportunity for achievement of our
business goals and objectives.
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Process
Determining
Compensation
The compensation committee believes that a successful
compensation program requires analysis and review of both
overall company performance and individual contributions and
accomplishments. With regard to overall company performance,
senior management recommends operating objectives to the
compensation committee for consideration and approval. The
compensation committee then selects operating objectives which
it believes strongly correlate to key goals and enhanced
shareholder value over time. These overall company goals are
then sent to the full Board for final approval at the beginning
of each year. Individual performance for each NEO (other than
the Chief Executive Officer) is evaluated by the Chief Executive
Officer and communicated to the compensation committee as a
basis for determining compensation for each such NEO. The
compensation committee separately evaluates the individual
performance of our Chief Executive Officer in connection with
determining the appropriate level of compensation for the Chief
Executive Officer. The performance of each NEO is evaluated
based on his or her contribution to our overall company
performance, including the achievement of the overall Company
objectives and other individual accomplishments.
Role
of Executives in Establishing Compensation
Generally, the Chief Executive Officer makes recommendations to
the compensation committee in connection with the establishment
of base salary and bonus compensation amounts for other senior
executives. The compensation committee establishes the Chief
Executive Officers base salary and bonus compensation
without input from management. Also, as discussed above,
management recommends to the compensation committee the
operating criteria for performance-based bonuses applicable to
our senior executives; however, the compensation committee makes
the final determinations regarding the appropriate criteria for
these awards. The compensation committee regularly invites the
Chief Executive Officer, the Chief Financial Officer and other
senior executives to attend compensation committee meetings in
order to receive operating information from these officers and
to discuss goals, objectives and performance. The compensation
committee does not delegate any of its duties to management and
holds executive sessions without the members of management
present.
Role
of Compensation Consultants and Benchmarking
To meet its compensation objectives discussed above, the
compensation committee seeks to achieve an appropriate balance
of (1) the compensation paid to a particular individual and
the compensation paid to other executives at comparable
companies and (2) salary and incentive compensation. In an
attempt to attain these goals, the compensation committee
regularly reviews competitive data on executive compensation. To
this end, the compensation committee has authority to retain and
terminate any compensation consultant to be used to assist in
the evaluation of our compensation practices. For 2006, the
compensation committee engaged James F. Reda &
Associates, LLC to serve as its compensation consultant and to
compile data for a group of competitive companies. These
companies were identified by James F. Reda & Associates
with input from management and approved by the compensation
committee. The competitive market group included pharmaceutical
companies similarly-situated to us with at least one
pharmaceutical product in development. Annual revenue levels and
market capitalization were also used in formulating the market
group.
14
Components
of Executive Compensation
Our executive compensation program consists of the following
primary components:
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base salary;
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annual cash bonus; and
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long-term incentives in the form of stock options.
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In addition, our compensation program includes certain health
and welfare benefits. Each component is described in more detail
below. In determining compensation for our senior executive
officers, we use the competitive data discussed above to ensure
that these officers receive a level of compensation and a mix of
compensation components that is fair and competitive; however,
we do not target our overall compensation package or mix of
compensation components to meet any specified ranges within this
competitive data.
Base
Salary
Our base salary program is designed to provide competitive base
cash compensation. The compensation committee, in connection
with recommendations from the Chief Executive Officer, annually
reviews and approves base salaries for our senior executive
officers. The compensation committee considers factors which
include a review of the competitive data described above,
individual performance over time and each individuals role
and responsibilities within our organization when setting base
salaries. The compensation committee sets base salaries that are
appropriate given the performance, experience and credentials of
the relevant officer.
The compensation committee approved the base salaries for the
NEOs, as set forth in the following table:
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2005 Base
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2006 Base
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Name
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Salary ($)
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Salary ($)
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Russell M.
Medford, M.D., Ph.D.
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$
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368,706
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$
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383,454
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Mark P. Colonnese
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283,820
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309,058
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Robert A.D. Scott, M.D.
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286,741
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310,324
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Joseph M. Gaynor, Jr.(1)
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125,000
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265,000
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W. Charles
Montgomery, Ph.D.
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260,000
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280,134
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(1) |
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Mr. Gaynor joined us effective June 30, 2005.
Accordingly, this amount reflects only six months of
compensation for 2005. |
Historically, the only annual base salary increases approved by
the compensation committee have been cost of living increases
and those increases are effective January 1st of each
year. The compensation committee does, however, increase base
salaries in connection with promotions as the compensation
committee believes that additional base compensation is
appropriate as the senior executive officer incurs additional
responsibilities and obligations within our organization. The
increases in the base salaries of Mr. Colonnese,
Dr. Scott and Dr. Montgomery are attributable to their
respective promotions that were effective May 1, 2006. The
increase in the base salary of Mr. Gaynor is attributable
to his promotion that was effective July 1, 2006.
Annual
Cash Bonuses
Annual cash bonus payments are designed to motivate and retain
senior executive officers by providing at-risk compensation
contingent upon achieving certain company objectives, which are
in turn key objectives related to increasing shareholder value.
Typically, management recommends to the compensation committee
the target ranges of bonus payouts under our annual cash bonus
program (expressed as a percentage of the applicable
officers base salary) and the appropriate objectives upon
which payment of the annual cash bonus is to be determined. The
compensation committee takes into account managements
recommendations with respect to these items, but the
compensation committee makes the final determinations as to the
appropriate target bonus levels and performance objectives. The
compensation committee generally acts with respect to these
matters at the beginning of our fiscal year. Our performance
objectives have historically been operating
15
in nature and focused on overall company performance as opposed
to any specific individual objectives. The compensation
committee does have the discretion, however, to take into
account individual contributions to company performance and
achievement of overall company objectives when awarding annual
cash bonus compensation. For 2006, our performance objectives
included, among others, completion of our ARISE study within
certain time parameters, management of our commercial
partnerships and certain research and discovery objectives. Our
bonus targets typically range between 25% to 38% of the
applicable officers base salary. The 2006 bonus targets
for our named executive officers can be seen below in the Grant
of Plan-Based Awards table set forth in the section entitled
Executive Compensation.
In the interest of shareholder value, we proposed, and
management agreed, to forego the annual cash bonuses to our
named executive officers for 2006 because as of the end of our
2006 fiscal year we had not yet received the results of our
ARISE Study. We may make special bonus payments to our named
executive officers during 2007 depending on the results of this
study. Additionally, the compensation committee is waiting for
these results to determine the performance objectives for our
2007 annual bonus program.
Long-Term
Incentives
The compensation committee believes equity-based compensation
performs an essential role in retaining and motivating our
executive officers by providing them incentives that are linked
to our long-term success and maximizing shareholder value. The
compensation committee believes the grant of such equity-based
compensation further aligns the interests of our executive
officers with those of its shareholders. The compensation
committee determines the appropriate level of equity-based
compensation by reference to the competitive data discussed
above, the executives position and role within our
organization and historical grants to the applicable executive.
Individual contributions to overall company performance and
achievement of company objectives may also be taken into account.
Historically, the granting of stock options to executive
officers has been a major component of executive compensation.
The compensation committee believes that stock option awards
provide a significant link to company performance and maximizing
shareholder value as the award will have value only if the
market value of the companys common stock increases above
the exercise price of the option and the individual remains
employed with the company over the vesting period. Stock options
are granted to employees annually, typically in December of each
year. These option awards are approved by the compensation
committee and have a grant date as of the last business day of
the year in which the grant occurs. The grants do not fall
within a period of 30 days before the release of company
earnings. Grants are not issued until approved by the
compensation committee. These awards are issued at the fair
market value of a share of our common stock as of the last
business day of the year, which value is determined by reference
to the closing price of a share of our common stock on Nasdaq on
such date. The awards generally vest four years from the date of
the grant and expire ten years from the date of the grant.
In light of the recent publicity surrounding the back-dating of
stock options, we reviewed our option grant history and grant
procedures and did not find any material issues with respect to
our historical or current practices. We have implemented
policies and procedures designed to safeguard against this
issue. For example, grants of options to an employee are
approved by the compensation committee (or the full board of
directors in the absence of compensation committee approval)
with such action occurring on or prior to the date of grant. In
addition, grants made to newly hired employees are effective as
of the last business day of the month in which the employee is
hired.
Employee
Benefits
We provide employee benefits to our senior executive officers
that are offered to all of our employees. These include matching
contributions in connection with our 401(k) Plan, the payment of
premiums for long-term disability and life insurance policies,
and other health-related benefits including medical, dental,
life and accidental death or disability insurance plans. The
compensation committee has reviewed the benefits provided to the
senior executive officers in 2006 and believes that they are
reasonable and appropriate. Additional information on the
aggregate incremental cost to us of providing these benefits to
the NEOs in 2006 is shown in the Summary Compensation Table. We
do not provide our senior executive officers with any
perquisites.
16
Change
of Control and Severance Arrangements
We have entered into employment agreements with our NEOs which
provide for the payment of severance to these employees in
connection with certain terminations of their employment,
including terminations in connection with a change of control.
These severance and change of control provisions are discussed
below.
We have included provisions regarding change of control in our
employment agreements because we want our senior executives to
act in the best interest of our company in the event of a
potential change of control and to remove any potential
influence of personal financial concerns. Further, we believe
these provisions are consistent with market practices for
similarly situated executives and assist us in retaining highly
talented individuals. In addition, the trigger requiring the
payment of severance is that there be both a change of control
and a termination of the current level of employment. This is
often referred to as a double trigger. The
double-trigger largely ensures that we will become obligated to
make payments under these provisions only if the applicable
executives employment terminates following a change of
control and further supports our goal of aligning the interests
of our executives with those of our shareholders. In addition,
our 1997, 2001 and 2004 Equity Ownership Plans generally provide
for accelerated vesting if, within 24 months of a change of
control, the grantees employment is terminated through a
constructive discharge or involuntary termination. For
additional detail regarding these severance payments, see the
section below entitled Potential Payments Upon
Termination or Change in Control.
These agreements also provide for severance payments in
connection with a termination of the NEO without cause,
non-renewal of the executives employment agreement or a
constructive termination. We believe the severance amounts
provided under these circumstances are appropriate, taking into
account the time it is expected for one of these NEOs to find
another job in the event of such a separation. The payments and
other benefits are provided because we consider these
separations to be initiated by us and to be typically beyond the
control of the individual NEO. Separation benefits are intended
to ease the consequences to an employee of an unexpected
termination of employment. We benefit by requiring a general
release from the separated employee. For additional detail
regarding these severance payments, see the section below
entitled Potential Payments Upon Termination or Change
in Control.
Insider
Trading Policy
We have implemented a written insider trading compliance policy
which includes our policies with respect to stock ownership,
retention, shorting, hedging, derivatives and margin
transactions. We expect our employees, officers and directors
not to engage in speculative transactions that are designed to
result in profit based on either short-term fluctuations or
negative movement in the price of our securities.
Tax
Implications of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as
amended, limits the amount of individual compensation for
certain executives that may be deducted by the employer for
federal income tax purposes in any one fiscal year to
$1 million unless such compensation is
performance-based. The determination of whether
compensation is performance-based depends upon a number of
factors, including shareholder approval of the plan under which
the compensation is paid, the exercise price at which
equity-based awards are granted, the disclosure to and approval
by the shareholders of applicable performance standards, the
composition of the compensation committee, and certification by
the compensation committee that performance standards were
satisfied. Historically, annual incentive compensation for our
NEOs has not been structured to qualify under
Section 162(m) as our compensation packages for these
executive officers have not exceeded the thresholds established
by Section 162(m). The compensation committee will have the
discretion on a go-forward basis to structure compensation in a
manner that does not meet the requirements of
Section 162(m) because we believe that Section 162(m)
considerations represent only one of many factors that should be
taken into account in determining overall compensation.
17
Summary/Conclusion
The compensation committee believes that our compensation
programs achieve their desired goals of providing senior
executives with a pay opportunity that is competitive within our
industry and among companies of comparable size and complexity
and, as a result, successfully attracts and retains highly
qualified key executives. The compensation committee continues
to monitor competitive industry compensation practices and our
operating goals and may adopt certain changes to its philosophy
and policies in response to changes in industry practice or
company goals as it deems desirable or necessary in future years.
COMPENSATION
COMMITTEE REPORT
The compensation committee, comprised of independent directors,
reviewed and discussed the above Compensation Discussion and
Analysis, or CD&A, with AtheroGenics management. Based
on the review and discussions, the compensation committee
recommended to our board of directors that the CD&A be
included in this proxy statement.
Compensation Committee:
Vaughn D. Bryson
R. Wayne Alexander, M.D.
Michael A. Henos
EXECUTIVE
COMPENSATION
The following table summarizes the compensation paid to or
earned during the years ended December 31, 2006 by our
Chief Executive Officer and each of our four most highly
compensated executive officers whose total salary and bonus
exceeded $100,000 for services rendered to us in all capacities
during 2006. The executive officers listed in the table below
are referred to as the named executive officers.
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Fiscal
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Option
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All Other
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Name and Principal Position
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Year
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Salary
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Awards(1)
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Compensation(2)
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Total
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Russell M.
Medford, M.D., Ph.D.
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2006
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$
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383,454
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$
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1,278,907
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$
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15,446
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$
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1,677,807
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President and Chief Executive
Officer
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Mark P. Colonnese
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2006
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309,058
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607,235
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12,413
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928,706
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Executive Vice President,
Commercial Operations and Chief Financial Officer
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Robert A. D. Scott, M.D.
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2006
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310,324
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641,434
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12,888
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964,646
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Executive Vice President, Research
and Development and Chief Medical Officer
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Joseph M. Gaynor, Jr.
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2006
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265,000
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201,341
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11,811
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478,152
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Senior Vice President, General
Counsel and Corporate Secretary
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W. Charles Montgomery, Ph. D.
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2006
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280,134
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469,225
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13,517
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762,876
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Senior Vice President, Business
Development and Alliance Management
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Represents the compensation costs recognized for financial
reporting purposes for the year ended December 31, 2006,
excluding estimated forfeitures, in accordance with
FAS 123(R). See Note 1 Description of Business and
Significant Accounting Policies Stock-Based
Compensation in our Annual Report on
Form 10-K
filed March 7, 2007 for a discussion of all assumptions
made by AtheroGenics in determining the FAS 123(R) value of
its option awards. |
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Represents a 401(k) plan matching contribution and premiums for
long-term disability insurance and term life insurance paid by
us for 2006. |
18
Grant of
Plan-Based Awards
The following table sets forth information concerning the
individual grants of stock options to each of the named
executive officers during the fiscal year ended
December 31, 2006. All options were granted under our 2004
Equity Ownership Plan. Each option has a ten-year term, subject
to earlier termination if the optionees service with us
terminates. Options vest at the rate of 25% on the first
anniversary of the vesting commencement date. Following that
date, the remaining options vest over three-consecutive twelve
month periods at a rate of two percent per month during the
initial eleven months of each period and three percent in the
final month of each such period. All options were granted with
exercise prices equal to the fair market value on the date of
the grant.
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Estimated Future
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All Other Option
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Exercise of
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Payouts Under
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Awards: Number
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Base Price
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Grant Date
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Non-Equity
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of Securities
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of Option
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Fair Value
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Incentive Plan
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Underlying
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Awards
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of Option
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Name
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Grant Date
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Awards Target(1)
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Options(2)
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($/Share)
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Awards(3)
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Russell M.
Medford, M.D., Ph.D.
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12/29/2006
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140,000
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$
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9.91
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$
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761,866
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2/21/2006
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120,000
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15.78
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1,170,312
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9/25/2006
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$
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145,713
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Mark P. Colonnese
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12/29/2006
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72,000
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9.91
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391,817
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5/31/2006
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12,000
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13.29
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95,927
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|
|
2/21/2006
|
|
|
|
|
|
|
|
60,000
|
|
|
|
15.78
|
|
|
|
585,156
|
|
|
|
|
9/25/2006
|
|
|
|
94,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. D. Scott, M.D.
|
|
|
12/29/2006
|
|
|
|
|
|
|
|
72,000
|
|
|
|
9.91
|
|
|
|
391,817
|
|
|
|
|
5/31/2006
|
|
|
|
|
|
|
|
12,000
|
|
|
|
13.29
|
|
|
|
95,927
|
|
|
|
|
2/21/2006
|
|
|
|
|
|
|
|
60,000
|
|
|
|
15.78
|
|
|
|
585,156
|
|
|
|
|
9/25/2006
|
|
|
|
94,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph M. Gaynor, Jr.
|
|
|
12/29/2006
|
|
|
|
|
|
|
|
60,000
|
|
|
|
9.91
|
|
|
|
326,514
|
|
|
|
|
7/31/2006
|
|
|
|
|
|
|
|
10,000
|
|
|
|
13.18
|
|
|
|
79,037
|
|
|
|
|
2/21/2006
|
|
|
|
|
|
|
|
30,000
|
|
|
|
15.78
|
|
|
|
292,578
|
|
|
|
|
9/25/2006
|
|
|
|
77,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Charles
Montgomery, Ph.D.
|
|
|
12/29/2006
|
|
|
|
|
|
|
|
60,000
|
|
|
|
9.91
|
|
|
|
326,514
|
|
|
|
|
5/31/2006
|
|
|
|
|
|
|
|
10,000
|
|
|
|
13.29
|
|
|
|
79,939
|
|
|
|
|
2/21/2006
|
|
|
|
|
|
|
|
50,000
|
|
|
|
15.78
|
|
|
|
487,630
|
|
|
|
|
9/25/2006
|
|
|
|
79,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In the interest of shareholder value, the compensation committee
proposed, and management agreed, to forego the annual cash
bonuses to our senior executive officers for 2006 because as of
the end of our 2006 fiscal year we had not yet received the
results of our ARISE Study. |
|
(2) |
|
Options related to performance in 2005 were granted in February
2006. |
|
(3) |
|
Represents the fair value of the option award in accordance with
FAS 123(R). See Note 1 Description of Business and
Significant Accounting Policies Stock-Based
Compensation in our Annual Report on
Form 10-K
filed March 7, 2007 for a discussion of all assumptions
made by AtheroGenics in determining the FAS 123(R) value of
its option awards. |
19
Outstanding
Equity Awards at Fiscal Year End
The following table sets forth information regarding each
unexercised option and all unvested stock held by each of our
named executive officers as of December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Option
|
|
|
|
Option #
|
|
|
Option #
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Grant
|
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
Options
|
|
|
Price
|
|
|
Date
|
|
|
Date
|
|
|
Russell M. Medford
|
|
|
|
|
|
|
140,000
|
|
|
|
|
|
|
$
|
9.91
|
|
|
|
12/29/2006
|
|
|
|
12/29/2016
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
15.78
|
|
|
|
2/21/2006
|
|
|
|
2/21/2016
|
|
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
|
|
|
|
23.56
|
|
|
|
12/31/2004
|
|
|
|
12/31/2014
|
|
|
|
|
90,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
14.86
|
|
|
|
12/31/2003
|
|
|
|
12/31/2013
|
|
|
|
|
144,000
|
|
|
|
|
|
|
|
|
|
|
|
7.41
|
|
|
|
12/31/2002
|
|
|
|
12/31/2012
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
|
6.05
|
|
|
|
12/31/2001
|
|
|
|
12/31/2011
|
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
5.00
|
|
|
|
12/29/2000
|
|
|
|
12/29/2010
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
0.38
|
|
|
|
1/28/2000
|
|
|
|
1/28/2010
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
0.31
|
|
|
|
12/8/1999
|
|
|
|
12/8/2009
|
|
|
|
|
157,500
|
|
|
|
|
|
|
|
|
|
|
|
0.30
|
|
|
|
4/28/1999
|
|
|
|
4/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark P. Colonnese
|
|
|
|
|
|
|
72,000
|
|
|
|
|
|
|
|
9.91
|
|
|
|
12/29/2006
|
|
|
|
12/29/2016
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
13.29
|
|
|
|
5/31/2006
|
|
|
|
5/31/2016
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
15.78
|
|
|
|
2/21/2006
|
|
|
|
2/21/2016
|
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
23.56
|
|
|
|
12/31/2004
|
|
|
|
12/31/2014
|
|
|
|
|
42,750
|
|
|
|
14,250
|
|
|
|
|
|
|
|
14.86
|
|
|
|
12/31/2003
|
|
|
|
12/31/2013
|
|
|
|
|
72,000
|
|
|
|
|
|
|
|
|
|
|
|
7.41
|
|
|
|
12/31/2002
|
|
|
|
12/31/2012
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
6.05
|
|
|
|
12/31/2001
|
|
|
|
12/31/2011
|
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
5.00
|
|
|
|
12/29/2000
|
|
|
|
12/29/2010
|
|
|
|
|
95,600
|
|
|
|
|
|
|
|
|
|
|
|
0.38
|
|
|
|
1/28/2000
|
|
|
|
1/28/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. D. Scott, M.D.
|
|
|
|
|
|
|
72,000
|
|
|
|
|
|
|
|
9.91
|
|
|
|
12/29/2006
|
|
|
|
12/29/2016
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
13.29
|
|
|
|
5/31/2006
|
|
|
|
5/31/2016
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
15.78
|
|
|
|
2/21/2006
|
|
|
|
2/21/2016
|
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
23.56
|
|
|
|
12/31/2004
|
|
|
|
12/31/2014
|
|
|
|
|
49,500
|
|
|
|
16,500
|
|
|
|
|
|
|
|
14.86
|
|
|
|
12/31/2003
|
|
|
|
12/31/2013
|
|
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
7.41
|
|
|
|
12/31/2002
|
|
|
|
12/31/2012
|
|
|
|
|
23,296
|
|
|
|
|
|
|
|
|
|
|
|
7.04
|
|
|
|
8/30/2002
|
|
|
|
8/30/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph M. Gaynor, Jr.
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
9.91
|
|
|
|
12/29/2006
|
|
|
|
12/29/2016
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
13.18
|
|
|
|
7/31/2006
|
|
|
|
7/31/2016
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
15.78
|
|
|
|
2/21/2006
|
|
|
|
2/21/2016
|
|
|
|
|
18,500
|
|
|
|
31,500
|
|
|
|
|
|
|
|
15.98
|
|
|
|
6/30/2005
|
|
|
|
6/30/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Charles Montgomery
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
9.91
|
|
|
|
12/29/2006
|
|
|
|
12/29/2016
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
13.29
|
|
|
|
5/31/2006
|
|
|
|
5/31/2016
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
15.78
|
|
|
|
2/21/2006
|
|
|
|
2/21/2016
|
|
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
23.56
|
|
|
|
12/31/2004
|
|
|
|
12/31/2014
|
|
|
|
|
35,000
|
|
|
|
15,000
|
|
|
|
|
|
|
|
19.20
|
|
|
|
2/27/2004
|
|
|
|
2/27/2014
|
|
|
|
|
(1) |
|
Twenty five percent of these options will vest on the first
anniversary date of the grant. Following that date, the
remaining options vest over three-consecutive twelve month
periods at a rate of two percent per month during the initial
eleven months of each period and three percent in the final
month of each such period. |
20
Aggregate
Option Exercises
The following table sets forth number of shares acquired upon
option exercises by the named executive officers during the 2006
fiscal year.
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
Name
|
|
Exercise
|
|
|
Exercise(1)
|
|
|
Russell M.
Medford, M.D., Ph.D.
|
|
|
2,500
|
|
|
$
|
39,200
|
|
Mark P. Colonnese
|
|
|
|
|
|
|
|
|
Robert A. D. Scott, M.D.
|
|
|
14,204
|
|
|
|
89,627
|
|
Joseph M. Gaynor, Jr.
|
|
|
|
|
|
|
|
|
W. Charles
Montgomery, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Value realized as a calculation based on the fair market value
of our common stock on the date of exercise minus the option
price and does not necessarily reflect proceeds actually
received by the officer. |
Employment
Agreements
Overview
AtheroGenics entered into individual Employment Agreements,
effective September 25, 2006, with each of Russell M.
Medford, M.D., Ph.D., our President and Chief
Executive Officer, Mark P. Colonnese, our Executive Vice
President, Commercial Operations and Chief Financial Officer,
Robert A. D. Scott, M.D., our Executive Vice President,
Research and Development and Chief Medical Officer, Joseph M.
Gaynor, Jr., our Senior Vice President, General Counsel and
Secretary and W. Charles Montgomery, Ph.D., our Senior Vice
President, Business Development and Alliance Management (each an
executive).
Each agreement is effective for an initial term of one
(1) year, with automatic extensions for successive one-year
terms with the exception of Dr. Medfords which has an
initial term of two (2) years. Each agreement provides for
an annual base salary as follows: Dr. Medford: $383,454;
Mr. Colonnese: $316,000; Dr. Scott: $316,000;
Mr. Gaynor: $275,000 and Dr. Montgomery: $285,000. The
annual salaries may be increased from time to time at
AtheroGenics discretion. In addition, each executive is
entitled to cash incentive compensation awards each year,
subject to achievement of company and personal performance
goals. For 2006, the target incentive compensation is 38% of
base salary for Dr. Medford, 30% of base salary for
Mr. Colonnese and Dr. Scott, and 28% for
Mr. Gaynor and Dr. Montgomery. The executives are also
entitled to receive stock awards and options as determined by
our board of directors, and to receive employee benefits and
perquisites as provided to all of our executive management
personnel.
Upon termination of the executives employment by
AtheroGenics other than due to death, disability, mandatory
retirement or cause (as defined below), each agreement provides
for severance benefits to be paid to the executive including:
(1) one to two times annual base salary, (2) up to
100% to 200% of the target annual incentive, and (3) up to
12 months to 24 months acceleration of stock
option vesting. The amount of each item listed above is based on
the affected executives level and term of employment. The
executive must sign a general release of claims in favor of
AtheroGenics in order to receive the salary and annual incentive
severance payment.
Upon a change of control (as defined below), each agreement
provides that 18 to 36 months of vesting for unvested stock
options will be accelerated. If within 24 months of a
change of control there is a termination of employment that
would entitle the executive to severance (as described above),
this entitles the executive to the following benefits (in lieu
of the above): (1) a salary severance payment of two to
three times annual base salary, (2) 100% to 300% of target
annual incentive for the year of termination, (3) immediate
vesting for all unvested stock options, and (4) an
additional excise tax
gross-up
payment, if applicable. The amount of each item listed above is
based on the affected executives level and term of
employment.
21
Under the agreements, the executives agree not to compete with
AtheroGenics, to provide a one-year non-solicitation obligation,
and to maintain the confidentiality of company information.
These agreements supersede and replace any and all previous
employment agreements with these executives.
Definitions
Termination for cause means the termination of the
executives employment as a result of conduct by the
executive amounting to (1) fraud or dishonesty against
AtheroGenics, (2) willful misconduct, or repeated refusal
to follow the reasonable directions of our board of directors or
chief executive officer, (3) knowing violation of law in
the course of performance of the duties of executives
employment with AtheroGenics, (4) any violation of our
formal policies regarding nondiscrimination and equal employment
opportunity, sexual harassment and other forms of unlawful
workplace harassment, or insider trading of our securities
(whether directly or indirectly), (5) repeated and frequent
absences from work without a reasonable excuse,
(6) intoxication with alcohol or drugs while on
AtheroGenics premises during regular business hours,
(7) a conviction or plea of guilty or nolo contendere to a
felony or other crime of moral turpitude in the course of his
employment (e.g., fraud, theft, embezzlement and the like),
(8) gross negligence in the performance of executives
duties; or (9) a breach or violation of the terms of the
respective employment agreement.
A change of control shall be deemed to have occurred if:
(1) a tender offer shall be made and consummated for the
ownership of 50% or more of our outstanding voting securities,
(2) AtheroGenics shall be merged or consolidated with
another corporation and as a result of such merger or
consolidation less than 50% of the outstanding voting securities
of the surviving or resulting corporation shall be owned in the
aggregate by our former shareholders, (3) AtheroGenics
shall sell all or substantially all of its assets to another
corporation which corporation is not wholly owned by us,
(4) a person or other legal entity shall acquire 50% or
more of our outstanding voting securities (whether directly,
indirectly, beneficially or of record), or (5) individuals
who, as of the date hereof, together with those directors
(x) for whose election proxies shall have been solicited by
the board and (y) who are then serving as directors
appointed by the board to fill pre-existing vacancies on the
board or vacancies caused by death or resignation, but not by
either removal or to fill newly created directorships,
constitute our board of directors, or the incumbent board, cease
to constitute at least a majority of our board of directors as a
result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf
of a person other than the incumbent board.
Potential
Payments Upon Termination or Change in Control
We have entered into employment agreements and maintain certain
plans that may require us to make certain payments
and/or
provide certain benefits to the named executive officers in the
Summary Compensation Table in the event of a termination of
employment or change in control. See Employment
Agreements above for a description of the severance and
change of control arrangements for the named executive officers.
The following assumptions were used in calculating the amounts
shown in the table:
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The termination or change in control occurs on December 29,
2006 the last business day of the calendar year.
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We used the executive officers base salary as of
December 29, 2006.
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Involuntary termination is the executives
(1) involuntary separation from service other than as a
result of death, disability, mandatory retirement or termination
for cause or (2) receipt of notice of our intent not to
extend the period of employment.
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Involuntary termination after change in control must occur
within 24 months of the change in control.
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In the event of voluntary termination the executive will receive
any base salary earned through that date and shall be entitled
to any benefits that have accrued and vested under any of our
benefit plans.
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The closing price of our stock on December 29, 2006 was
$9.91 per share. The value of the vesting acceleration is
calculated by multiplying the number of unvested options as
December 29, 2006, by the
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22
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difference between the closing price of our stock and the
exercise price of the unvested options. Since the closing price
was lower than the price of the unvested options, no
compensation for accelerated vesting is recognized.
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Health insurance amount represents insurance premiums at a rate
paid by us at December 29, 2006. Payments will be paid
through COBRA.
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Payment of the termination amount is contingent upon the
executive signing (and not revoking) a general release of all
claims.
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Severance
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Incentive
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Stock Option
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Excise Tax
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Health
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Name
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Payment
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Payment
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Acceleration
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Gross-up
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Insurance
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Total
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Russell M.
Medford, M.D., Ph.D.(1)
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Involuntary termination
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$
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766,908
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$
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291,426
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$
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$
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$
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25,558
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$
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1,083,892
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Involuntary termination after
change in control
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1,150,362
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437,139
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25,558
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1,613,059
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Mark P. Colonnese(2)
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Involuntary termination
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474,000
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142,200
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19,169
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635,369
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Involuntary termination after
change in control
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632,000
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|
189,600
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19,169
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840,769
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Robert A. D. Scott, M.D.(2)
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Involuntary termination
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474,000
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|
142,200
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6,184
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|
622,384
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Involuntary termination after
change in control
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632,000
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|
189,600
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6,184
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827,784
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Joseph M. Gaynor, Jr.(3)
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Involuntary termination
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275,000
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38,500
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12,779
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326,279
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Involuntary termination after
change in control
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550,000
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77,000
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12,779
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639,779
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W. Charles
Montgomery, Ph.D.(4)
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Involuntary termination
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285,000
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|
79,800
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8,244
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|
373,044
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Involuntary termination after
change in control
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570,000
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|
79,800
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8,244
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658,044
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(1) |
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The involuntary termination severance payment is based on two
times the annual salary on the date of termination and the
incentive payment is two times the target incentive
compensation. The involuntary termination after change in
control severance payment is based on three times the annual
salary on the date of termination and the incentive payment is
three times the target incentive compensation. In the event of
death Dr. Medford will receive $145,713, the pro rata
portion of the target incentive compensation. In the event of
disability Dr. Medford will receive $414,131, which
includes 70% of the annual salary and the pro rata portion of
the target incentive compensation. |
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(2) |
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The involuntary termination severance payment is based on one
and a half times the annual salary on the date of termination
and the incentive payment is one and a half times the target
incentive compensation. The involuntary termination after change
of control severance payment is based on two times the annual
salary on the date of termination and the incentive payment is
two times the target incentive compensation. In the event of
death Mr. Colonnese and Dr. Scott will each receive
$94,800, the pro rata portion of the target incentive
compensation. In the event of disability Mr. Colonnese and
Dr. Scott will each receive $316,020, which includes 70% of
the annual salary and the pro rata portion of the target
incentive compensation. |
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(3) |
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The involuntary termination severance payment is based on one
times the annual salary on the date of the termination and the
incentive payment is two times the target incentive
compensation. The involuntary termination severance payment is
based on one times the annual salary on the date of the
termination and the incentive payment is one times the target
incentive compensation. In the event of death Mr. Gaynor
will receive $77,000, the pro rata portion of the target
incentive compensation. In the event of disability
Mr. Gaynor will receive $269,500, which includes 70% of the
annual salary and the pro rata portion of the target incentive
compensation. |
23
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(4) |
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Involuntary termination severance payment is based on one times
the annual salary on the date of the termination and the
incentive payment is one times the target incentive
compensation. The involuntary termination severance payment is
based on two times the annual salary on the date of the
termination and the incentive payment is one times the target
incentive compensation In the event of death Dr. Montgomery
will receive $79,800, the pro rata portion of the target
incentive compensation. In the event of disability
Dr. Montgomery will receive $279,300, which includes 70% of
the annual salary and the pro rata portion of the target
incentive compensation. |
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth certain information with respect
to securities authorized for issuance under our equity
compensation plans as of December 31, 2006.
Equity
Compensation Plan Information
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Number of Securities
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|
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|
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Remaining Available for
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Future Issuance Under
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Number of Securities to
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Weighted-Average
|
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Equity Compensation
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be Issued upon Exercise
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Exercise Price of
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Plans (Excluding
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|
|
of Outstanding Options,
|
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|
Outstanding Options,
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|
Securities Reflected
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|
|
Warrants and Rights
|
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|
Warrants and Rights
|
|
|
in Column (a))
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Plan Category
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(a)
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(b)
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(c)
|
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Equity compensation plans approved
by shareholders
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|
6,521,524
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|
$
|
11.73
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|
|
|
1,009,067
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Equity compensation plans not
approved by shareholders(1)
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|
|
82,436
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|
|
|
5.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total
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|
|
6,603,960
|
|
|
$
|
11.65
|
|
|
|
1,009,067
|
|
|
|
|
|
|
|
|
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|
|
|
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(1) |
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Includes 56,000 warrants issued in connection with a licensing
agreement dated June 29, 2001 and 26,436 warrants issued
for non-employee contractual agreements made prior to being a
public or a listed company. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors
and executive officers to file reports of holdings and
transactions in AtheroGenics stock with the SEC. Based solely on
a review of copies of reports and certain written
representations from our executive officers and directors, we
believe that all Section 16(a) filing requirements were met
during 2006 except for late Form 4 filings reporting an
option grant for Mr. Colonnese, Dr. Scott and
Dr. Montgomery and a Form 3 filing reporting initial
beneficial ownership for Dr. Barker.
24
REPORT OF
THE AUDIT COMMITTEE
The audit committee operates in accordance with its written
charter, which sets forth the responsibilities of the audit
committee. The audit committee oversees our financial reporting
process on behalf of the board of directors. Management has the
primary responsibility for the financial statements and the
reporting process, including the systems of internal controls.
In fulfilling its oversight responsibilities, the committee
reviewed the audited financial statements as of and for the
period ended December 31, 2006 with management, including a
discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial
statements. The committee also reviewed with management their
evaluation of the systems of internal controls and procedures
for financial reporting, and disclosure controls and procedures.
The committee reviewed with the independent registered public
accounting firm, or independent auditors, who are responsible
for expressing an opinion on the conformity of those audited
financial statements with U.S. generally accepted
accounting principles, their judgments as to the quality, not
just the acceptability, of our accounting principles, the
adequacy of the controls and procedures for financial reporting
and such other matters as are required to be discussed with the
committee under generally accepted auditing standards. In
addition, the committee has discussed with the independent
auditors the auditors independence from management and
AtheroGenics, including the matters identified in the written
disclosures delivered to the committee by the independent
auditors as required by the Independence Standards Board.
The committee discussed with the independent auditors the
overall scope and plans for their respective audits. The
committee met with independent auditors, with and without
management present, to discuss the results of their
examinations, their evaluations of our internal controls, and
the overall quality of our financial reporting.
Based on the reviews and discussions referred to above, the
committee recommended to the board of directors (and the board
has approved) that the audited financial statements be included
in the Annual Report on
Form 10-K
for the year ended December 31, 2006 for filing with the
Securities and Exchange Commission. The board of directors, upon
the recommendation of the audit committee, has also appointed
Ernst & Young LLP as AtheroGenics independent
auditors for fiscal 2007, subject to shareholder ratification at
the annual meeting.
Audit Committee:
David Bearman, Chairman
Margaret E. Grayson
T. Forcht Dagi, M.D.
Arthur M. Pappas
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of AtheroGenics has appointed the firm of
Ernst & Young LLP to serve as the independent
registered public accounting firm of AtheroGenics for the fiscal
year ending December 31, 2007, and has directed that such
appointment be submitted to the shareholders of AtheroGenics for
ratification at the annual meeting. Ernst & Young LLP
has served as the independent registered public accounting firm
of AtheroGenics since 1994, and is considered by management of
AtheroGenics to be well qualified. If the shareholders do not
ratify the appointment of Ernst & Young LLP, the audit
committee will reconsider the appointment.
Representatives of Ernst & Young LLP will be present at
the annual meeting and will have an opportunity to make a
statement if they desire to do so. They also will be available
to respond to appropriate questions from shareholders.
25
The audit committee and board of directors unanimously
recommend that the shareholders vote FOR the
proposal to ratify the appointment of Ernst & Young LLP
as the independent registered public accounting firm of
AtheroGenics for fiscal 2007.
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Audit and
Non-Audit Fees
The following table shows the fees paid by AtheroGenics for the
audit and other services provided by Ernst & Young LLP
for fiscal years ended December 31, 2006 and 2005.
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2006
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2005
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Audit Fees
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$
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302,800
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$
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327,156
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Audit-Related Fees
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15,000
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Tax Fees
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All Other Fees
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Total
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$
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317,800
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$
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327,156
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Audit Fees. Audit fees for the fiscal years
ended December 31, 2006 and 2005 were for professional
services rendered for the audits of our annual financial
statements, quarterly review of the financial statements
included in our Quarterly Reports on
Form 10-Q
and in 2005 a review of our regulatory filings for our
convertible debt offering. In addition, in 2006 and 2005, audit
fees included the audit of our internal control over financial
reporting.
Audit-Related Fees. Audit-related fees for the
fiscal year ended December 31, 2006 were for accounting
consultations.
The audit committee of the board of directors has determined
that the provision of these services is compatible with the
maintenance of the independence of Ernst & Young LLP.
Pre-approval
Policies and Procedures
The audit committee has adopted a policy to pre-approve all
audit and permissible non-audit services provided by the
independent registered public accounting firm. The pre-approval
policy is detailed as to the particular service or category of
services and is subject to a specific budget. The services
include the engagement of the independent registered public
accounting firm for audit services, audit-related services, and
tax services.
If AtheroGenics has a need to engage the independent registered
public accounting firm for other services, which are not
considered subject to the general pre-approval as described
above, then the audit committee must approve each such specific
engagement as well as the projected fees. If the timing of the
project requires an expedited decision, then the audit committee
has delegated to the Chairman of the committee the authority to
pre-approve such engagement, subject to fee limitations. The
Chairman must report all such pre-approvals to the entire audit
committee for ratification at the next committee meeting.
26
SHAREHOLDER
PROPOSALS
Shareholders proposals intended to be included in our
proxy statement and presented at the 2008 Annual Meeting of
Shareholders must be delivered to our offices at
8995 Westside Parkway, Alpharetta, GA 30004, addressed to
the Corporate Secretary, no later than December 27, 2007.
In accordance with Article I, Section 1 of our bylaws,
any proposals presented by a shareholder must satisfy all of the
conditions set forth in
Rule 14a-8
under the Exchange Act.
HOUSEHOLDING
As permitted by the Exchange Act, only one copy of this proxy
statement is being delivered to shareholders residing at the
same address, unless such shareholders have notified us of their
desire to receive multiple copies of the proxy statement. Upon
oral or written request, we will promptly deliver a separate
copy of the proxy statement to any shareholder residing at an
address to which only one copy was mailed. Shareholders who
participate in householding will continue to receive separate
proxy cards.
Shareholders residing at the same address and currently
receiving only one copy of the proxy statement may contact us to
request multiple copies in the future, and shareholders residing
at the same address and currently receiving multiple copies of
the Proxy Statement may contact us to request a single copy in
the future. All such requests should be directed to our offices
at 8995 Westside Parkway, Alpharetta, GA 30004, addressed to
Investor Relations.
OTHER
MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The board of directors of AtheroGenics knows of no matters other
than those referred to in the accompanying Notice of Annual
Meeting of Shareholders which may properly come before the
annual meeting. However, if any other matter should be properly
presented for consideration and voting at the annual meeting or
any adjournments thereof, it is the intention of the persons
named as proxies on the enclosed form of proxy card to vote the
shares represented by all valid proxy cards in accordance with
their judgment of what is in the best interest of AtheroGenics.
By Order of the Board of Directors.
MICHAEL A. HENOS
Chairman of the Board
Alpharetta, Georgia
April 25, 2007
AtheroGenics is mailing its 2006 Annual Report to its
shareholders with these proxy materials. The Annual Report does
not form any part of the material for the solicitation of
proxies.
27
REVOCABLE PROXY
ATHEROGENICS, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 17, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Russell M. Medford, Mark P. Colonnese and
Joseph M. Gaynor, Jr., and each or any of them, proxies of the undersigned, or Proxy
Representatives, with full power of substitution, to vote all of the shares of AtheroGenics, Inc.,
a Georgia corporation, which the undersigned may be entitled to vote at the Annual Meeting to be
held at the Westin Buckhead Atlanta, 3391 Peachtree Road, Atlanta, Georgia 30326, on Thursday, May
17, 2007, at 9:00 a.m. (Eastern Time) or at any adjournment or postponement thereof, as shown on
the voting side of this card.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
ANNUAL MEETING OF SHAREHOLDERS OF.
ATHEROGENICS, INC.
May 17, 2007
PROXY VOTING INSTRUCTIONS
MAIL Date, sign and mail your proxy card in the
envelope provided as soon as possible.
- OR -
INTERNET Access www.voteproxy.com and follow
the on-screen instructions. Have your proxy card
available when you access the web page.
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COMPANY NUMBER
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ACCOUNT NUMBER |
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You may enter your voting instructions at www.voteproxy.com up until 11:59 PM Eastern Time the day before the cut-off or meeting date. |
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â Please detach along perforated line and mail in the envelope provided IF you are not voting via the internet. â
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF DIRECTORS AND FOR PROPOSALS 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE:
x
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1. |
Proposal to elect three Class I directors to serve until the 2010 Annual Meeting of Shareholders. |
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2. |
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A proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of AtheroGenics for the fiscal year ending December 31, 2007.
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FOR o |
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AGAINST o |
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ABSTAIN o |
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FOR ALL NOMINEES |
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NOMINEES |
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¡ |
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David Bearman
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o |
WITHHOLD AUTHORITY FOR ALL NOMINEES
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¡
¡
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Vaughn D. Bryson T. Forcht Dagi
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o |
FOR ALL EXCEPT (See instructions below) |
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INSTRUCTION:
To withhold authority to vote for any individual
nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: l |
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3. |
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In their discretion, the Proxy Representatives are authorized to vote upon such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
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To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
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o |
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THIS PROXY WILL BE VOTED AS SPECIFIED. IF A CHOICE IS NOT SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR CLASS I DIRECTORS AND FOR PROPOSAL 2. |
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Signature of
Shareholder: |
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Date: |
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Signature of Shareholder:
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Date: |
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Note: |
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Please sign exactly as your name or
names appear on this Proxy. When shares are held jointly, each holder
should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
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