SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. ______________)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Aradigm Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transactions applies:
----------------------------------------------------------------------------
2. Aggregate number of securities to which transactions applies:
----------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 set forth the amount on which the filing fee is
calculated and state how it was determined):
----------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
5. Total fee paid:
----------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount previously paid:
----------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------------
3. Filing party:
----------------------------------------------------------------------------
4. Date filed:
----------------------------------------------------------------------------
<PAGE>
ARADIGM CORPORATION
26219 Eden Landing Road
Hayward, California 94545
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1997
TO THE SHAREHOLDERS OF ARADIGM CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Aradigm
Corporation, a California corporation (the "Company"), will be held on Tuesday,
May 20, 1997 at 9:00 a.m. local time at the Holiday Inn at 1221 Chess Drive,
Foster City, California for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1997.
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 4, 1997,
as the record date for the determination of shareholders entitled to notice
of and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
Reid M. Rubsamen
Secretary
Hayward, California
April 15, 1997
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
ARADIGM CORPORATION
26219 Eden Landing Road
Hayward, California 94545
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Aradigm Corporation, a California corporation (the "Company"), for use at the
Annual Meeting of Shareholders to be held on May 20, 1997, at 9:00 a.m. local
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at the Holiday Inn at 1221 Chess Drive, Foster
City, California. The Company intends to mail this proxy statement and
accompanying proxy card on or about April 15, 1997, to all shareholders entitled
to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to shareholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April 4,
1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 4, 1997 the Company had outstanding and entitled to
vote 10,199,620 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon. With respect to the
election of directors, shareholders may exercise cumulative voting rights. Under
cumulative voting, each holder of Common Stock will be entitled to nine votes
for each share held. Each shareholder may give one candidate, who has been
nominated prior to voting, all the votes such shareholder is entitled to cast or
may distribute such votes among as many such candidates as such shareholder
chooses. However, no shareholder will be entitled to cumulative votes unless the
candidate's name has been placed in nomination prior to the voting and at least
one shareholder has given notice at the meeting, prior to the voting, of his or
her intention to cumulate votes. Unless the proxyholders are otherwise
instructed, shareholders, by means of the accompanying proxy, will grant the
proxyholders discretionary authority to cumulative votes.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non- votes are counted
towards a quorum but are not counted for any purpose in determining whether a
matter is approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal
<PAGE>
executive office, 26219 Eden Landing Road, Hayward, California, a written notice
of revocation or a duly executed proxy bearing a later date, or it may be
revoked by attending the meeting and voting in person. Attendance at the meeting
will not, by itself, revoke a proxy.
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the Company's
1998 Annual Meeting of Shareholders must be received by the Company not later
than December 17, 1997 in order to be included in the proxy statement and proxy
relating to that Annual Meeting. Shareholders are also advised to review the
Company's Bylaws, which contain additional requirements with respect to advance
notice of shareholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
There are nine nominees for the nine Board positions presently authorized in
the Company's Bylaws. Each director to be elected will hold office until the
next annual meeting of shareholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal. Each
nominee listed below is currently a director of the Company.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the nine nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected and management has no reason to believe that any nominee
will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
PRINCIPAL OCCUPATION/
NAME AGE POSITION HELD WITH THE COMPANY
- -------------------------- ----- -----------------------------------------------
Lester John Lloyd ......... 60 Chairman of the Board of Directors of Aradigm
Richard P. Thompson ....... 45 President and Chief Executive Officer of
Aradigm
Reid M. Rubsamen, M.D. ... 40 Vice President, Medical Affairs and Secretary
of Aradigm
Jared A. Anderson, Ph.D. .. 59 Investment Advisor to Electronic Investments
Ltd.
Ross A. Jaffe, M.D. ....... 38 General Partner, Brentwood Associates
Burton J. McMurtry, Ph.D. . 61 General Partner, Technology Venture Investors
Gordon W. Russell. ........ 63 General Partner, Sequoia Capital
Fred E. Silverstein, M.D. . 54 Professor at the University of Washington
Virgil D. Thompson ........ 57 President, Chief Executive Officer and
Director of Cytel Corporation
LESTER JOHN LLOYD has been a director of the Company since 1991 and Chairman
of the Board of Directors since 1992. Mr. Lloyd also served as the Company's
President from 1992 to 1994 and Chief Financial Officer from 1992 to April 1996.
Mr. Lloyd holds a B.S.M.E. from the University of California, Berkeley. Mr.
Lloyd is also a director of Molecular Dynamics.
2
<PAGE>
RICHARD P. THOMPSON has been a director of the Company and has served as the
Company's President and Chief Executive Officer since 1994. From April 1996 to
February 1997, Mr. Thompson served as the Company's Chief Financial Officer.
From 1991 to 1994, he was President of LifeScan, Inc., a medical device
manufacturing and development subsidiary of Johnson & Johnson. Mr. Thompson
holds a B.S. in biological sciences from the University of California at Irvine
and an M.B.A. from California Lutheran College.
REID M. RUBSAMEN, M.D., a founder of the Company, has been a director of the
Company and has served as the Company's Vice President of Medical Affairs and
Secretary since 1991. Dr. Rubsamen is a Board Certified anesthesiologist having
received his medical training at Pacific Medical Center, San Francisco and
Massachusetts General Hospital, where in 1989 he served as Chief Resident in
Anesthesia. He was also a doctoral candidate in the computer science department
at the Massachusetts Institute of Technology, leaving in 1990 to found the
Company. Dr. Rubsamen holds an A.B. in biochemistry and computer science from
the University of California, Berkeley, and an M.S. in computer science and an
M.D. from Stanford University.
JARED A. ANDERSON, PH.D. has been a director of the Company since 1992. Since
the early 1980s, Dr. Anderson has managed a small portfolio of high technology
investments and works closely with members of the investment banking and venture
capital industry. Dr. Anderson is also a director of Classifieds 2000, a company
providing classified advertising over the Internet. Dr. Anderson holds a B.S. in
physics from the University of Texas at Austin and a Ph.D. in physics from the
University of California, Berkeley.
ROSS A. JAFFE, M.D. has been a director of the Company since 1993. Since
April 1993, he has been a general partner of Brentwood Associates, a venture
capital investment firm, which he joined in August 1990. During the period of
1988 to 1995, Dr. Jaffe served part-time as a Clinical Instructor and Attending
Physician in various clinics of the University of California, San Francisco and
University of California, Irvine. Dr. Jaffe holds an A.B. in Policy Studies from
Dartmouth College, an M.D. from The Johns Hopkins University School of Medicine,
an M.B.A. from Stanford University and is Board Certified in internal medicine.
He is also a director of several privately-held companies.
BURTON J. MCMURTRY, PH.D. has been a director of the Company since 1992.
Since July 1980, he has been a general partner of various limited partnerships
that, in turn, are general partners of various Technology Venture Investors
venture capital partnerships. Mr. McMurtry holds a B.A. and a B.S. in electrical
engineering from Rice University and an M.S. and a Ph.D. in electrical
engineering from Stanford University. He is also a director of Intuit, Inc.,
Edify Corporation and SpectraLink Corp.
GORDON W. RUSSELL has been a director of the Company since 1992. He has been
a general partner of Sequoia Capital, a venture capital investment partnership,
since 1979. Mr. Russell holds an A.B. in history from Dartmouth College. Mr.
Russell is Chairman of the Board of Overseers of the Dartmouth Medical School
and is Chairman Emeritus of the Board of Trustees of the Palo Alto Medical
Foundation. Mr. Russell is also a director of SangStat Medical Corp., ChemTrak
Incorporated, Fusion Medical Corp. and several privately-held health care
companies.
FRED E. SILVERSTEIN, M.D. has been a director of the Company since 1996. Dr.
Silverstein is a Clinical Professor of Medicine at the University of Washington,
Seattle. Since 1994, he has been a partner of Frazier & Company L.P., an
investment partnership. He holds a B.S. from Alfred University and an M.D. from
Columbia University College of Physicians and Surgeons. He is Board Certified in
internal medicine and gastroenterology. Dr. Silverstein is also a director of
two medical device development companies, Vision Sciences Inc. and Diametrics
Medical Inc., and several privately-held companies. He holds more than 20 United
States patents on a variety of medical devices.
VIRGIL D. THOMPSON has been a director of the Company since 1995. Since
January 1996, he has been the President and Chief Executive Officer and a
director of Cytel Corporation, a biopharmaceutical company. From 1991 to 1993 he
was President of Syntex Laboratories, Inc. a pharmaceutical company. Mr.
Thompson holds a B.S. in Pharmacy from Kansas University and a J.D. from The
George Washington University Law School. He is also a director of two
pharmaceutical companies, Biotechnology General Corporation and Cypros
Pharmaceutical Corporation.
3
<PAGE>
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996 the Board of Directors held 11
meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee monitors the corporate financial reporting and the
internal and external audits of the Company, provides the Board of Directors the
results of its examinations and recommendations, outlines to the Board of
Directors the improvements made, or to be made, in internal accounting controls,
and nominates independent auditors. The Audit Committee is composed of two
non-employee directors: Burton J. McMurtry, Ph.D. and Gordon W. Russell. The
Audit Committee met once during the fiscal year ended December 31, 1996.
The Compensation Committee recommends to the Board of Directors compensation
levels for officers of the Company, establishes compensation levels for
non-officer employees of the Company, makes recommendations to the Board of
Directors regarding stock option grants under the Company's 1996 Equity
Incentive Plan (the "Incentive Plan"), and otherwise administers the Incentive
Plan. The Compensation Committee is composed of three non-employee directors:
Jared A. Anderson, Ph.D., Ross A. Jaffe, M.D. and Virgil D. Thompson. The
Compensation Committee met once during the fiscal year ending December 31, 1996.
During the fiscal year ended December 31, 1996, each director except Virgil
D. Thompson attended at least 75% of the aggregate of the meetings of the Board
and of the committees on which he served, held during the period for which he
was a director or committee member, respectively.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997 and has
further directed that management submit the selection of independent auditors
for ratification by the shareholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since 1995. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Shareholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the shareholders for ratification as a matter of good corporate practice. If
the shareholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its shareholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be required
to ratify the selection of Ernst & Young LLP.
At a meeting held on March 14, 1995, the Board of Directors of the Company
approved the engagement of Ernst & Young LLP as its independent auditors for the
fiscal year ended December 31, 1994. Prior to the engagement of Ernst & Young
LLP, Bregante + Company LLP served as independent auditors of the Company. The
Audit Committee of the Board of Directors approved the change in auditors on
that date.
The report of Bregante + Company LLP on the Company's financial statements
for the year ended December 31, 1993 did not contain an adverse opinion or a
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope, or accounting principles.
In connection with the audit of the Company's financial statements for the
fiscal year ended December 31, 1993, there were no disagreements with Bregante +
Company LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope and procedures which, if not resolved to
the satisfaction of Bregante + Company LLP, would have caused Bregante + Company
LLP to make reference to the matter in their report.
4
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
the Company's Common Stock as of January 31, 1997 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table who was employed by the Company in that capacity on January
31, 1997; (iii) all executive officers and directors of the Company as a group;
and (iv) all those known by the Company to be beneficial owners of more than
five percent of its Common Stock.
BENEFICIAL OWNERSHIP(1)
------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES(#) TOTAL(%)
- --------------------------------------------------------------------------------
Burton J. McMurtry, Ph.D. .............................1,217,010 11.9%
Technology Venture Investors-4, L.P.
2480 Sand Hill Road, Suite 101
Menlo Park, CA 94025(2)
Sprout Group ..........................................1,073,644 10.5
3000 Sand Hill Road
Menlo Park, CA 94025(3)
Building 4, Suite 270
Fred E. Silverstein, M.D. ............................. 636,363 6.2
Frazier & Company
Two Union Square
601 Union Street, Suite 2110
Seattle, WA 98101(4)
Ross A. Jaffe, M.D. ................................... 604,863 5.9
Brentwood Associates VI, L.P.
2730 Sand Hill Road, Suite 250
Menlo Park, CA 94025(5)
Jared A. Anderson, Ph.D. .............................. 430,207 4.2
Electronic Investments Ltd.
140 Sunrise Drive
Woodside, CA 94062(6)
Richard P. Thompson(7) ................................ 362,595 3.5
Reid M. Rubsamen, M.D.(8) ............................. 338,315 3.3
Gordon W. Russell(9) .................................. 291,133 2.9
Igor Gonda, Ph.D.(10) ................................. 171,000 1.7
Max D. Fiore(11) ...................................... 116,825 1.1
Lester John Lloyd(12) ................................. 104,231 1.0
R. Ray Cummings(13) ................................... 72,557 *
Virgil D. Thompson(14) ................................ 12,000 *
All executive officers and directors as
a group (13 persons) .................................4,422,099 42.6%
- ----------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the shareholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
10,214,057 shares outstanding on January 31, 1997, adjusted as required by
rules promulgated by the SEC.
(Footnotes continued on the next page.)
5
<PAGE>
(Footnotes continued from previous page.)
(2) Represents 1,217,010 shares held by Technology Venture Investors-IV, as
nominee for various TVI funds. Mr. McMurtry, a director of the Company, is
a general partner of TVI Management-4, L.P., the General Partner of
Technology Venture Investors-IV, and, as such, may be deemed to share
voting and investment power with respect to such shares. Mr. McMurtry
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest in such shares arising from his interest in the entities
referred to herein.
(3) Represents 640,823 shares held by Sprout Capital VII, L.P. ("Sprout VII"),
374,125 shares held by Sprout Capital VI, L.P. ("Sprout VI") and 58,696
shares held by DLJ Capital Corporation ("DLJCC"). DLJCC is the Managing
General Partner of Sprout VII and Sprout VI and, as such, may be deemed to
share voting and investment power with respect to the shares beneficially
owned by Sprout VII and Sprout VI. Donaldson, Lufkin & Jenrette, Inc.
("DLJ") directly owns all of the capital stock of DLJCC and, as such, may
be deemed to share voting and investment power with respect to the shares
held by DLJCC, Sprout VII and Sprout VI. As of February 3, 1997, The
Equitable Companies Incorporated ("Equitable") beneficially owns, directly
and indirectly, 78.2% of DLJ and, as such, may be deemed to share voting
and investment power with respect to the shares held by DLJCC, Sprout VII
and Sprout VI.
(4) Represents 636,363 shares held by Frazier Healthcare II, L.P. Dr.
Silverstein, a director of the Company, is a member of Frazier Management,
L.L.C., the Managing Member of FHM II, L.L.C., the General Partner of
Frazier Healthcare II, L.P., and, as such, may be deemed to share voting
and investment power with respect to such shares. Dr. Silverstein disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest in such shares arising from his interest in Frazier Healthcare II,
L.P.
(5) Represents 604,863 shares held by Brentwood Associates VI, L.P. Dr. Jaffe,
a director of the Company, is a general partner of Brentwood VI Ventures,
L.P., the General Partner of Brentwood Associates VI, L.P., and, as such,
may be deemed to share voting and investment power with respect to such
shares. Dr. Jaffe disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest in such shares arising from his
interest in the entities referred to herein.
(6) Represents 430,207 shares held by Electronic Investments Ltd. Dr. Anderson,
a director of the Company, is the Attorney-in-Fact of Electronic
Investments Ltd., and, as such, may be deemed to share voting and
investment power with respect to such shares. Dr. Anderson disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest arising from his interest in Electronic Investments Ltd.
(7) Represents 233,158 shares held by Mr. Thompson, 400 shares held by members
of Mr. Thompson's immediate family, 74,037 shares held by the Thompson
Family Trust and 15,000 shares held by Thompson Family Partners. Mr.
Thompson is a Trustee of the Thompson Family Trust and a General Partner of
Thompson Family Partners and, as such, may be deemed to share voting and
investment power with respect to the shares held by the Thompson Family
Trust and Thompson Family Partners. Mr. Thompson disclaims beneficial
ownership of the shares held by his family members, the Thompson Family
Trust and Thompson Family Partnership except to the extent of his pecuniary
and proportionate partnership interest arising from his interest therein.
Includes 40,000 shares subject to an option exercisable within 60 days of
January 31, 1997.
(8) Includes 20,000 shares subject to an option exercisable within 60 days of
January 31, 1997.
(9) Represents 678 shares held by Mr. Russell, 250,478 shares held by Sequoia
Capital V, 7,120 shares held by Sequoia Technology Partners V, 13,792
shares held by Sequoia XXII, 8,332 shares held by Sequoia XXIIII and 10,733
shares held by Sequoia XXIV. Mr. Russell, a director of the Company, is a
general partner of Sequoia Technology Partners V and Sequoia Partners F.R.,
the General Partner of Sequoia Capital V, and an investment advisor of
Sequoia XXII, Sequoia XXIII and Sequoia XXIV, and, as such, may be deemed
to share voting and investment power with respect to such shares. Mr.
Russell disclaims beneficial ownership of the shares held by Sequoia
Capital V, Sequoia Technology Partners V, Sequoia XXII, Sequoia XXIII and
Sequoia XXIV except to the extent of his pecuniary and proportionate
partnership interest in such shares arising from his interest in the
entities referred to herein.
(10) Represents 150,200 shares held by Dr. Gonda. Also represents 800 shares
held by members of Dr. Gonda's immediate family. Dr. Gonda disclaims
beneficial ownership of such shares. Includes 20,000 shares subject to an
option exercisable within 60 days of January 31, 1997.
(11) Includes 10,000 shares subject to an option exercisable within 60 days of
January 31, 1997.
(Footnotes continued on the next page.)
6
<PAGE>
(Footnotes continued from previous page.)
(12) Represents 95,611 shares held by Mr. Lloyd and 8,620 shares held by The
Lloyd Trust. Mr. Lloyd, Chairman of the Board of Directors of the Company,
is Trustee of The Lloyd Trust and, as such, may be deemed to share voting
and investment power with respect to the shares held by The Lloyd Trust.
Mr. Lloyd disclaims beneficiary ownership of the shares held by The Lloyd
Trust except to the extent of his pecuniary interest arising from his
interest in such entity. Mr. Lloyd is an investment advisor of Farm Street
Investments Ltd. and disclaims beneficial ownership of the 293,823 shares
held by Farm Street Investments Ltd.
(13) Represents 71,857 shares held by Mr. Cummings and 700 shares held by Mr.
Cummings's spouse.
(14) Represents 12,000 shares subject to an option exercisable within 60 days of
January 31, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that one
report, each covering one transaction, was filed late by each of Richard P.
Thompson, Igor Gonda, Ph.D., R. Ray Cummings, Jared A. Anderson, Ph.D., Ross A.
Jaffe, M.D., Lester John Lloyd, Burton J. McMurtry, Ph.D. and Technology Venture
Investors-4, L.P.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors do not currently receive any cash compensation from the Company for
their service as members of the Board of Directors, although they are reimbursed
for certain expenses incurred in connection with attendance at Board meetings in
accordance with Company policy.
Each non-employee director of the Company also receives stock option grants
under the Non- Employee Directors' Stock Option Plan (the "Directors' Plan").
Only non-employee directors of the Company are eligible to receive options under
the Directors' Plan. Options granted under the Directors' Plan are intended by
the Company not to qualify as incentive stock options under the Code.
Option grants under the Directors' Plan are non-discretionary. Under the
Directors' Plan, each person who is elected for the first time to be a director
of the Company after the Company's initial public offering and who is not an
employee of the Company is automatically granted, without further action by the
Company, the Board of Directors or the shareholders of the Company, an option to
purchase 7,500 shares of Common Stock of the Company. On June 19th of each year
(or the next business day should such date be a legal holiday) beginning with
June 19, 1997, each member of the Company's Board of Directors who is not an
employee of the Company is also automatically granted under the Directors' Plan,
without further action by the Company, the Board of Directors or the
shareholders of the Company, an option to purchase 7,500 shares of Common Stock
of the Company (pro-rated for non-employee directors with less than a full
year's tenure).
Options under the Directors' Plan will vest in four equal, quarterly
installments commencing on the date of the grant of the option. The exercise
price of the options granted under the Directors' Plan is the fair market value
of the Common Stock granted on the date of grant. No option granted under the
Directors' Plan may be exercised after the expiration of ten years from the date
it was granted. Options granted under the Directors' Plan are generally
non-transferable except pursuant to a qualified domestic relations order in
beneficiary descriptions. In the event of certain changes of control, options
outstanding
7
<PAGE>
under the Directors' Plan will automatically become fully vested and will
terminate if not exercised prior to such change of control. The Directors' Plan
will terminate at the direction of the Board. As of December 31, 1996, no
options to purchase Common Stock have been granted pursuant to the Director's
Plan.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended December 31, 1995 and
1996, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its other four most highly compensated executive officers
(the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
ANNUAL --------------
COMPENSATION SECURITIES
----------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1)
- --------------------------------- ------ --------- -------- --------------
Richard P. Thompson .............. 1996 185,000 62,221 106,596
President, Chief Executive 1995 150,000 30,000 --
Officer and Director
Reid M. Rubsamen, M.D. ........... 1996 132,000 35,592 28,065
Vice President, Medical Affairs, 1995 120,000 -- --
Secretary and Director
Max D. Fiore(4) .................. 1996 130,000 35,074 28,075
Vice President, Engineering 1995 115,000 15,000 --
Igor Gonda, Ph.D.(2) ............. 1996 144,000 39,012 --
Vice President, Research 1995 33,230 -- 150,000
and Development
R. Ray Cummings(3) ............... 1996 130,195 35,239 4,357
Vice President, Business 1995 61,200 -- 67,500
Development
- ----------
(1) The Company has not issued any stock appreciation rights (SARs).
(2) Dr. Gonda joined the Company as Vice President, Research & Development in
September 1995. The amounts for 1995 represent compensation from such date
to December 31, 1995.
(3) Mr. Cummings joined the Company as Vice President, Business Development in
April 1995. The amounts for 1995 represent compensation from such date to
December 31, 1995.
8
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its Incentive
Plan. As of January 31, 1997, options to purchase a total of 313,133 shares were
outstanding under the Incentive Plan and options to purchase 653,357 shares
remained available for grant thereunder.
The following tables show for the fiscal year ended December 31, 1996,
certain information regarding options granted to, exercised by, and held at year
end by, the Named Executive Officers:
<TABLE>
OPTION GRANTS IN FISCAL 1996
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------
PERCENTAGE
NUMBER OF OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE DEEMED PRICE APPRECIATION FOR OPTION
OPTIONS EMPLOYEES OR BASE VALUE OF TERM(5)
GRANTED IN FISCAL PRICE DATE OF EXPIRATION -----------------------------
NAME (#) 1996(%)(3) ($/SH) GRANT($)(4) DATE 0%($) 5%($) 10%($)
- ---------------------- ------------ ------------ ---------- ---------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RICHARD P. THOMPSON... 97,500(1) 19.1% $0.57 $1.57 1/22/06 $97,500 $193,937 $340,889
9,096(2) 1.8 0.57 1.57 1/22/06 9,096 18,093 31,802
REID M. RUBSAMEN, M.D. 22,500(1) 4.4 0.57 1.57 1/22/06 22,500 44,755 78,667
5,565(2) 1.1 0.57 1.57 1/22/06 5,565 11,069 19,457
MAX D. FIORE ......... 22,500(1) 4.4 0.57 1.57 1/22/06 22,500 44,755 78,667
5,575(2) 1.1 0.57 1.57 1/22/06 5,575 11,089 19,492
IGOR GONDA, PH.D...... -- -- -- -- -- -- -- --
R. RAY CUMMINGS ...... 4,357(2) 0.9 0.57 1.57 1/22/06 4,357 8,667 15,233
<FN>
- ----------
(1) Option vests quarterly over a four year period. The option will fully vest
upon a change of control, as defined in the Incentive Plan, unless the
acquiring company assumes the options or substitutes similar options. The
Board of Directors may reprice options under the terms of the Incentive
Plan.
(2) Option vests on date of grant. The Board of Directors may reprice options
under the terms of the Incentive Plan.
(3) Based on options to purchase 510,024 shares granted in 1996.
(4) The deemed value for the date of grant was determined solely for financial
accounting purposes.
(5) The potential realizable value is based on the term of the option at its
time of grant (10 years). It is calculated by assuming that the stock price
on the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is exercised
and sold on the last day of its term for the appreciated stock price. These
amounts represent certain assumed rates of appreciation only, in accordance
with the rules of the SEC, and do not reflect the Company's estimate or
projection of future stock price performance. Actual gains, if any, are
dependent on the actual future performance of the Company's Common Stock
and no gain to the optionee is possible unless the stock price increases
over the option term, which will benefit all shareholders.
</FN>
</TABLE>
9
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1996, AND
VALUE OF OPTIONS AT END OF FISCAL 1996
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
- -------------------------- --------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Richard P. Thompson(2).... 106,596 $466,890 -- --
Reid M. Rubsamen, M.D.(3). 28,065 122,924 -- --
Max D. Fiore(4)........... 106,825 473,789 -- --
Igor Gonda, Ph.D.......... -- -- -- --
R. Ray Cummings .......... 4,357 19,084 -- --
- ----------
<FN>
(1) Value realized is based on the per share deemed values of the Company's
Common Stock on the date of exercise, determined after the date of grant
solely for financial accounting purposes, minus the exercise price without
taking into account any taxes that may be payable in connection with the
transaction.
(2) Options exercised pursuant to an Early Exercise Stock Purchase Agreement
executed by Mr. Thompson and the Company. As of December 31, 1996, 79,221
shares were subject to the Company's right of repurchase.
(3) Options exercised pursuant to an Early Exercise Stock Purchase Agreement
executed by Dr. Rubsamen and the Company. As of December 31, 1996, 18,284
shares were subject to the Company's right of repurchase.
(4) Options exercised pursuant to an Early Exercise Stock Purchase Agreement
executed by Mr. Fiore and the Company. As of December 31, 1996, 52,738
shares were subject to the Company's right of repurchase.
</FN>
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three non-employee directors. The Committee is responsible for
setting and administering the policies that govern annual executive salaries,
bonuses and stock option grants. The Committee annually evaluates the
performance, and determines the level of compensation, of the Chief Executive
Officer ("CEO"), and the other executive officers of the Company based upon a
mix of the achievement of the corporate goals, individual performance and
comparisons with other biotechnology companies. The CEO is not present during
the discussion of his compensation.
The policies of the Committee with respect to executive officers, including
the CEO, are to provide compensation sufficient to attract, motivate and retain
executives of outstanding ability and potential and to establish an appropriate
relationship between executive compensation and the creation of shareholder
value. To meet these goals, the Committee has adopted a mix among the
compensation elements of salary, bonus and stock options, with a bias toward
stock options to emphasize the link between executive incentives and the
creation of shareholder value as measured by the equity markets.
In general, the salaries of executive officers are based upon a review of
surveys of publicly-held biotechnology companies of a similar size to the
Company in terms of number of persons employed. Based upon such surveys, the
executive officers' salaries are set at the beginning of a fiscal year in the
low-
- ----------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
10
<PAGE>
to mid-range as compared to other biotechnology companies described above. The
salaries are adjusted at such time within such range based upon whether an
executive officer met specific individual performance goals. Such individual
performance goals are based upon the officer's contribution toward Company
goals. For the fiscal year ended December 31, 1996, the average increase in the
salaries of the executive officers, including the CEO, was 16%.
Target bonuses of executive officers are based upon the surveys of other
biotechnology companies described above and are set at the beginning of each
fiscal year as a percentage of base salary, which percentage is in the mid-range
as compared to such other biotechnology companies. Actual bonuses are paid at
the end of each fiscal year and may be above or below target depending on
whether certain corporate goals have been met during the year. The set of
corporate goals is the same for all executive officers. Because the Company is a
development stage company, the corporate goals are based upon product
development and financing objectives rather than the operating performance of
the Company. The Committee assigns a weight to each goal according to whether it
was attained or surpassed. The bonus is capped at 150% of the target percentage
based on maximum goal achievement.
For the fiscal year ended December 31, 1996, the target bonus for the CEO was
set at 30% of base salary while the target bonus for all other executive
officers was set at 24% of base salary. For the bonus for services rendered in
1996, the corporate performance goals related to: (i) the execution of AERxtm
feasibility and product development agreements, (ii) the execution of a key
product commercialization agreement with a partner, (iii) the completion of a
short term feasibility study demonstrating the effectiveness of a key product,
(iv) the development of stand-alone clinical supply capability, (v) the
completion of a program demonstrating the feasibility of a new product, (vi) the
completion of a study on the human bioavailability of insulin administered by
AERxtm and (vii) the completion of additional financing to fund additional
development. Because most of the corporate goals were either attained or
surpassed during 1996 according to information obtained by management and
approved by the Compensation Committee, the actual bonus awarded for each
executive officer, including the CEO, was 109% of the target.
In recommending stock options for executive officers, the Committee considers
individual performance, overall contribution to the Company and the total number
of stock options to be awarded. The level of stock option awards is also based
upon the surveys of other biotechnology companies described above. After
considering the criteria relating to awarding stock options, the Committee
determined that four executive officers, including the CEO, would receive option
grants in the fiscal year ended December 31, 1996.
The Committee uses the same procedures described above for the other
executive officers in setting the annual salary, bonus and stock option awards
for the CEO, except that the CEO's salary is adjusted according to whether
corporate rather than individual goals are met. The corporate goals used in
adjusting the salary of the CEO are the same as the corporate goals utilized in
adjusting the bonuses of all executive officers. The CEO's salary and bonus are
determined based on comparisons with other biotechnology companies and adjusted
according to corporate performance described above. Because most of the
corporate goals were met in 1996, the CEO received an increase in salary of 23%
and a bonus that was 109% of the target bonus. In awarding stock options, the
Committee considers the CEO's performance, overall contribution to the Company,
the total number of options awarded and the level of options granted by other
biotechnology companies described above. Based on such criteria, the CEO
received options to purchase an aggregate of 106,596 shares of the Company's
Common Stock during the fiscal year ended December 31, 1996. Compared to other
biotechnology companies described above, the CEO's salary and stock options are
in the low- to mid-range.
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than $1 million of
compensation paid to certain Named Executive Officers during a taxable year.
Compensation above $1 million may be deducted if it is "performance- based
compensation" within the meaning of the Code. The Compensation Committee
believes that at the present time it is unlikely that the compensation paid to
any Named Executive Officer in a taxable year which is subject to the deduction
limit will exceed $1 million. Therefore, the Committee has not yet
11
<PAGE>
established a policy for determining which forms of incentive compensation
awarded to its Named Executive Officers shall be designed to qualify as
"performance-based compensation." The Committee intends to continue to evaluate
the effects of the statute and any Treasury regulations and to comply with Code
Section 162(m) in the future to the extent consistent with the best interests of
the Company.
From the members of the Compensation Committee of Aradigm Corporation:
Jared A. Anderson, Ph.D.
Ross A. Jaffe, M.D.
Virgil D. Thompson
12
<PAGE>
<TABLE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph compares total stockholder returns of the Company since
its initial public offering of Common Stock on June 20, 1996 to two indices: the
Nasdaq CRSP Total Return Index for the Nasdaq Stock Market (U.S. companies) (the
"Nasdaq-US") and the Nasdaq Pharmaceutical Index (the "Nasdaq-Pharmaceutical").
The total return for the Company's stock and for each index assumes the
reinvestment of dividends, although dividends have never been declared on the
Company's stock, and is based on the returns of the component companies weighted
according to their capitalizations as of the end of each monthly period. The
Nasdaq-US tracks the aggregate price performance of equity securities of U.S.
companies traded on the Nasdaq National Market (the "NM"). The
Nasdaq-Pharmaceutical tracks the aggregate price performance of equity
securities of pharmaceutical companies traded on the NM. The Company's Common
Stock is traded on the NM and is a component of both the Nasdaq-US and the
Nasdaq-Pharmaceutical.
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT SINCE
THE COMPANY'S INITIAL PUBLIC OFFERING ON JUNE 20, 1996(2)
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<CAPTION>
6/28/96 7/21/96 8/30/96 9/30/96 10/31/96 11/29/96 12/31/96
------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Nasdaq US 100 91 96 104 102 109 109
Nasdaq Pharmaceutical 100 89 96 102 98 96 99
Aradigm 100 82 80 95 102 96 96
<FN>
- ----------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
(2) Shows the cumulative total return on investment assuming an investment of
$100 in each of the Company, the Nasdaq-US and the Nasdaq-Pharmaceutical on
June 20, 1996. The cumulative total return on the Company's stock has been
computed based on an initial price of $11.00 per share, the price at which
the Company's shares were sold in its initial public offering on June 20,
1996.
</FN>
</TABLE>
13
<PAGE>
CERTAIN TRANSACTIONS
In May 1994, the Company issued and sold to Richard P. Thompson, President,
Chief Executive Officer, Chief Financial Officer and a director of the Company,
an aggregate of 225,000 shares of its Common Stock for an aggregate purchase
price of $82,500, payable pursuant to a secured promissory note bearing interest
at the rate of 7% per annum, with accrued but unpaid interest due and payable
annually and the principal and remaining interest due and payable on July 1,
1999. In January 1996, the Company granted options to purchase an aggregate of
106,596 shares of the Company's Common Stock with an exercise price of $0.57 per
share to Mr. Thompson. In February 1996, Mr. Thompson exercised such options for
an aggregate exercise price of $60,404, with $6,040 paid in cash and the
remaining $54,364 payable pursuant to a secured promissory note bearing interest
at the rate of 5.45% per annum, with the principal and accrued but unpaid
interest due and payable on February 28, 2001. The largest aggregate amount of
Mr. Thompson's indebtedness to the Company during fiscal 1996 was $142,701. The
outstanding balance of the loans to Mr. Thompson was $142,701 as of December 31,
1996.
In May 1995, the Company issued and sold to R. Ray Cummings, Vice President
of Business Development of the Company, an aggregate of 67,500 shares of its
Common Stock for an aggregate purchase price of $29,250, payable pursuant to a
secured promissory note bearing interest at the rate of 7.12% per annum, with
accrued but unpaid interest due and payable annually and the principal and
remaining interest due and payable on July 1, 2000. In May 1995, the Company
loaned Mr. Cummings $53,235 pursuant to a Promissory Note Secured by Deed of
Trust, with the principal and 6% interest due and payable on February 7, 2001.
In January 1996, the Company granted an option to purchase 4,357 shares of the
Company's Common Stock with an exercise price of $0.57 per share to Mr.
Cummings. In March 1996, Mr. Cummings exercised such option for an exercise
price of $2,469, with $247 paid in cash and the remaining $2,222 payable
pursuant to a secured promissory note bearing interest at the rate of 5.45% per
annum, with the principal and accrued but unpaid interest due and payable on
March 10, 2001. The largest aggregate amount of Mr. Cummings' indebtedness to
the Company during fiscal 1996 was $91,357. The aggregate outstanding balance of
the loans to Mr. Cummings was $91,357 as of December 31, 1996.
In September 1995, the Company granted an option to purchase 150,000 shares
of the Company's Common Stock with an exercise price of $0.43 per share to Igor
Gonda, Ph.D., Vice President of Research and Development of the Company. In
December 1995, Dr. Gonda exercised such option for an aggregate exercise price
of $65,000, with $6,500 paid in cash and the remaining $58,500 payable pursuant
to a secured promissory note bearing interest at the rate of 5.91% per annum,
with the principal and accrued but unpaid interest due and payable on December
27, 2000. In October 1995, the Company loaned Dr. Gonda $90,000 pursuant to an
interest-free promissory note, with the principal amount due and payable in
October 1998. The largest aggregate amount of Dr. Gonda's indebtedness to the
Company during fiscal 1996 was $152,595. The aggregate outstanding balance of
the loans to Dr. Gonda was $152,595 as of December 31, 1996.
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party be
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under California law and the Company's
Bylaws.
The Company believes that the foregoing transactions were in its best
interests. As a matter of policy these transactions were, and all future
transactions between the Company and any of its officers, directors or principal
shareholders will be, approved by a majority of the independent and
disinterested members of the Board of Directors, and will be in connection with
bona fide business purposes of the Company.
14
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
REID M. RUBSAMEN
Secretary
April 15, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, ARADIGM
CORPORATION, 26219 EDEN LANDING ROAD, HAYWARD, CA 94545.
15
<PAGE>
APPENDIX A
Aradigm Corporation
P
R 26219 Eden Landing Road
O Hayward, California 94545
X
Y SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Lester John Lloyd, Richard P. Thompson and
Mark A. Olbert, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side, all
shares of common stock of Aradigm Corporation (the "Company") held of record by
the undersigned on April 4th, 1997 at the Annual Meeting of Shareholders to be
held on May 20th, 1997 and any adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
Dear Fellow Aradigm Shareholder:
Accompanying this proxy card is Aradigm's 1996 Annual Report and its 1997 Proxy
Statement. As you will see when you read the Annual Report, we achieved a number
of important goals in 1996, and are working hard to make 1997 an equally
important year for your company.
I would appreciate your taking a minute to review the important information
enclosed with this Proxy. There are a number of issues related to Aradigm's
operation that require your prompt attention. Your vote counts, and I strongly
encourage you to exercise your right to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted, sign the card, detach it and return your proxy in the enclosed postage
paid envelope.
Sincerely,
/s/ Richard P. Thompson
- ------------------------
Richard P. Thompson
President and Chief Executive Officer
Aradigm Corporation
<TABLE>
<CAPTION>
<S> <C>
[X] Please mark
votes as in
this example.
1. Election of Directors
Elect the Lester John Lloyd, Jared A. Anderson,
following Ross A. Jaffe, Burton J. McMurtry,
nominees Reid M. Rubsamen, FOR AGAINST ABSTAIN
whether by Gordon W. Russell, 2. Ratify the appointment of Ernst & [ ] [ ] [ ]
cumulative Fred E. Silverstein, Young LLP as independent auditors
voting or Richard P. Thompson for 1997.
otherwise: and Virgil D. Thompson
[ ] FOR [ ] WITHHELD
[ ] ______________________________________
For all nominees except as noted above MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears hereon. Joint owners should
each sign. Executors, administrators, trustees, guardians or other
fiduciaries should give full title as such. If signing for a corporation,
please sign in full corporate name by a duly authorized officer.
Signature:_______________________________ Date __________________ Signature ______________________________ Date ___________________
</TABLE>
