<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 240.14a-12
</TABLE>
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 transaction applies:
- --------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined)
- --------------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5. Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
- --------------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3. Filing Party:
- --------------------------------------------------------------------------------
4. Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
ARADIGM CORPORATION
3929 POINT EDEN WAY
HAYWARD, CALIFORNIA 94545
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 2000
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 Friday,
May 19, 2000 at 9:00 a.m. local time at the Crowne Plaza, 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 approve the Company's Employee Stock Purchase Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 120,000.
3. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 2000.
4. 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 10, 2000,
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
[/s/ REID M. RUBSAMEN]
Reid M. Rubsamen
Secretary
Hayward, California
April 19, 2000
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> 3
ARADIGM CORPORATION
3939 POINT EDEN WAY
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 19, 2000, 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 Crowne Plaza, 1221 Chess Drive, Foster
City, California. The Company intends to mail this proxy statement and
accompanying proxy card on or about April 19, 2000, 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
10, 2000 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 10, 2000 the Company had outstanding and entitled to
vote 17,902,275 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
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 executive office, 3929 Point
Eden Way, Hayward, California 94545, 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.
<PAGE> 4
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the
Company's 2001 Annual Meeting of Shareholders must be received by the Company
not later than December 15, 2000 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 five nominees for the five 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.
The candidates receiving the highest number of affirmative votes of the
shares entitled to be voted will be elected directors of the Company. Shares
represented by executed proxies will be voted, if authority to do so is not
withheld, for the election of the five 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.
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:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION/POSITION
NAME AGE HELD WITH THE COMPANY
---- --- -----------------------------
<S> <C> <C>
Frank H. Barker........ 69 Chairman, U.S. Dermatologics, Inc.
Wayne I. Roe........... 49 Chairman, Covance Health Economics and
Outcomes Services, Inc.
Reid M. Rubsamen, 43 Vice President, Medical Affairs and Secretary
M.D. ................
Richard P. Thompson.... 48 President and Chief Executive Officer
Virgil D. Thompson..... 60 President, Chief Executive Officer and
Director of Bio-Technology General Corp.
</TABLE>
FRANK H. BARKER has been a director since May 1999. He has been the
Chairman of U.S. Dermatologics, Inc., an over-the-counter pharmaceutical
company, since February 1999, and was its President and Chief Executive Officer
from October 1997 to February 1999. From January 1989 to January 1996, Mr.
Barker served as a company group chairman of Johnson & Johnson. Mr. Barker holds
a B.A. in business administration from Rollins College, Winter Park, Florida.
Mr. Barker is a director of Catalina Marketing Corporation, a direct-to-consumer
marketing company.
WAYNE I. ROE has been a director since May 1999. He has been Senior Vice
President of United Therapeutics Corporation, a pharmaceutical manufacturer,
since October 1999. He has been the Chairman of Covance Health Economics and
Outcomes Services, Inc., a contract research and developmental services company
to the medical technology marketplace, since March 1996. From June 1988 to March
1996, Mr. Roe was the President of Health Technology Associates, a
pharmaceutical industry consulting firm. Mr. Roe received a B.A. from Union
College, an M.A. from the State University of New York at Albany and an M.A.
from the University of Maryland.
2
<PAGE> 5
REID M. RUBSAMEN, M.D., our founder, has been a director and has served as
our Vice President, 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 Aradigm. 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.
RICHARD P. THOMPSON has been a director and has served as our President and
Chief Executive Officer since 1994 and was Chief Financial Officer from April
1996 until December 1996. From 1991 to 1994, he was President of LifeScan, Inc.,
a Johnson & Johnson Company, a diversified health care company. In 1981, Mr.
Thompson founded LifeScan, which was sold to Johnson & Johnson in 1986. Mr.
Thompson holds a B.S. in biological sciences from the University of California
at Irvine and an MBA from California Lutheran College.
VIRGIL D. THOMPSON has been a director since June 1995. Since May 1999, he
has been the President, Chief Operating Officer and a director of Bio-Technology
General Corp., a pharmaceutical company. From January 1996 to April 1999, he was
the President and Chief Executive Officer and a director of Cytel Corporation, a
biopharmaceutical company. From 1994 to 1996, he was President and Chief
Executive Officer of Cibus Pharmaceuticals, Inc., a drug delivery device
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 Questcor Pharmaceutical Corporation.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1999, the Board of Directors held
six 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 three
non-employee directors: Frank H. Barker, Wayne I. Roe and Virgil D. Thompson.
The Audit Committee met twice during 1999.
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 Plan. The
Compensation Committee is composed of three non-employee directors: Frank H.
Barker, Wayne I. Roe and Virgil D. Thompson. The Compensation Committee met once
during 1999.
During the fiscal year ended December 31, 1999, all directors 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
APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In April 1996, the Board of Directors adopted, and the shareholders
subsequently approved, the Employee Stock Purchase Plan (the "Purchase Plan")
authorizing the issuance of 150,000 shares of the Company's Common Stock. An
amendment to the Company's Purchase Plan by the Board in April 1998, approved by
the shareholders in May 1998, increased the number of shares of the Company's
Common Stock authorized for issuance from 150,000 shares to 300,000 shares. An
amendment to the Company's Purchase Plan by the Board in February 1999, approved
by the shareholders in May 1999, increased the number of
3
<PAGE> 6
shares of the Company's Common Stock authorized for issuance from 300,000 shares
to 380,000 shares. At February 29, 2000, an aggregate of 209,059 shares had been
issued under the Purchase Plan and 170,941 shares remained for the grant of
future rights under the Purchase Plan. In April 2000, the Board of Directors of
the Company adopted an amendment to the Purchase Plan to increase the number of
shares authorized for issuance under the Purchase Plan to 500,000 shares. This
amendment is intended to afford the Company greater flexibility in providing
employees with stock incentives and ensures that the Company can continue to
provide such incentives at levels determined appropriate by the Board. During
the last fiscal year, shares were purchased at prices ranging from $6.17 to
$7.76 in the following amounts under the Purchase Plan: Mr. Thompson 3,400
shares, Mr. Beers 229 shares, Dr. Rubsamen 4,044 shares, Dr. Gonda 4,044 shares,
Dr. Otulana 917 shares, all current executive officers as a group 14,546 shares,
and all employees (excluding executive officers) as a group 83,950 shares.
Shareholders are requested in this Proposal 2 to approve the Purchase Plan,
as amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and voting at the meeting will be
required to approve the Purchase Plan, as amended. For purposes of this vote
abstentions and broker non-votes will not be counted for any purpose in
determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Purchase Plan, as amended, are outlined
below:
PURPOSE
The purpose of the Purchase Plan is to provide a means by which key
employees of the Company (and any parent or subsidiary of the Company designated
by the Board of Directors to participate in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll deductions,
to assist the Company in retaining the services of its employees, to secure and
retain the services of new employees, and to provide incentives for such persons
to exert maximum efforts for the success of the Company. At February 29, 2000
approximately 205 of the Company's approximately 208 employees were eligible to
participate in the Purchase Plan.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Internal Revenue Code (the
"Code").
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power, which it has not
exercised, to delegate administration of such plan to a committee of not less
than two Board members. The Board may abolish any such committee at any time and
revest in itself the administration of the Purchase Plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each such offering is two
years in duration.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the Purchase
Plan, provided
4
<PAGE> 7
such employee has been in the continuous employ of the Company for at least 10
days preceding the first day of the offering period.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company in any calendar
year.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering
to the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions of up to 15% of such
employees' total compensation during the purchase period.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan is the lower of (a) 85% of the fair market value of a share of
Common Stock on the date of commencement of the offering, or (b) 85% of the fair
market value of a share of Common Stock on any purchase date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. At any time during the purchase period, a participant may
reduce or terminate his or her payroll deductions. A participant may not
increase or begin such payroll deductions after the beginning of any purchase
period, except, if the Board provides, in the case of an employee who first
becomes eligible to participate as of a date specified during the purchase
period. All payroll deductions made for a participant are credited to his or her
account under the Purchase Plan and deposited with the general funds of the
Company. A participant may not make any additional payments into such account.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board specifies a maximum number of shares any
employee may be granted the right to purchase and the maximum aggregate number
of shares which may be purchased pursuant to such offering by all participants.
If the aggregate number of shares to be purchased upon exercise of rights
granted in the offering would exceed the maximum aggregate number, the Board
would make a pro rata allocation of shares available in a uniform and equitable
manner. Unless the employee's participation is discontinued, his right to
purchase shares is exercised automatically at the end of the purchase period at
the applicable price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time prior to the end of the applicable offering period.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering.
5
<PAGE> 8
An employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, such plan will terminate in April 2006.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the shareholders within 12 months of its
adoption by the Board if the amendment would (a) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (b) modify the
requirements relating to eligibility for participation in the Purchase Plan, or
(c) modify any other provision of the Purchase Plan in a manner that would
materially increase the benefits accruing to participants under the Purchase
Plan, if such approval is required in order to comply with the requirements of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the 'Exchange
Act").
Rights granted before amendment or termination of the Purchase Plan will
not be altered or impaired by any amendment or termination of such plan without
consent of the person to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger of
the Company, the surviving corporation either will assume the rights under the
Purchase Plan or substitute similar rights, or the exercise date of any ongoing
offering will be accelerated such that the outstanding rights may be exercised
immediately prior to, or concurrent with, any such event.
STOCK SUBJECT TO PURCHASE PLAN
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as a capital gain or loss. Capital gains currently are generally subject to
lower tax rates than ordinary income.
6
<PAGE> 9
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness, the provisions of
Section 162(m) and the satisfaction of a tax reporting obligation).
1996 EQUITY INCENTIVE PLAN
In addition to the Employee Stock Purchase Plan, the Company has a 1996
Equity Incentive Plan (the "Incentive Plan") that provides for grants of
incentive and nonstatutory stock options. An aggregate of 4,800,000 shares of
common stock has been reserved for issuance under the Incentive Plan. As of
February 29, 2000, options to purchase 2,545,304 shares of Common Stock were
outstanding under the Incentive Plan, and 1,118,573 shares remained available
for grant. Incentive stock options may be granted to employees (including
officers) of the Company and any parent or subsidiary. The exercise price of
incentive stock options granted under the Incentive Plan may not be less than
100% of the fair market value of the Company's Common Stock on the date of grant
(110% for optionees deemed to own more than 10% of the outstanding voting power
of the Company), and the exercise price of nonstatutory stock options may not be
less than 85% of the fair market value of the Common Stock on the date of grant.
Options may be exercised prior to vesting, subject to repurchase rights in favor
of the Company that expire over the vesting period. The Incentive Plan may be
amended by the Board at any time or from time to time. Certain amendments
require stockholder approval, if necessary for the Incentive Plan to satisfy
Section 422 of the Code, Rule 16b-3 under the Exchange Act or Nasdaq or other
securities exchange listing requirements. The Incentive Plan contains adjustment
and change of control provisions similar to those described above with respect
to the Employee Stock Purchase Plan. The Incentive Plan will terminate on April
15, 2006.
7
<PAGE> 10
PROPOSAL 3
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, 2000 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 (which shares
voting affirmatively also constitute at least a majority of the required quorum)
will be required to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
8
<PAGE> 11
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 February 29, 2000 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table employed by the Company in that capacity on February 29,
2000; (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 5% of
its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES(#) TOTAL(%)
---------------- --------- ----------
<S> <C> <C>
Entities associated with Dr. Lindsay Rosenwald
787 Seventh Avenue, 48th Floor
New York, NY 10019(2)................................ 941,706 6.3%
Zesiger Capital Group
320 Park Avenue, 30th Floor
New York, NY 10022(3)................................ 758,300 5.1%
Richard P. Thompson(4)................................. 535,001 3.5%
Reid M. Rubsamen, M.D.(5).............................. 352,841 2.3%
Igor Gonda, Ph.D.(6)................................... 242,776 1.6%
R. Jerald Beers(7)..................................... 163,390 1.1%
Babatunde A. Otulana(8)................................ 136,634 *
John H. Parker, Ph.D.(9)............................... 9,282 *
Virgil D. Thompson(10)................................. 50,000 *
Wayne I. Roe(11)....................................... 22,712 *
Frank H. Barker(11).................................... 22,712 *
All executive officers and directors as a group (14
persons)(12)......................................... 3,148,794 19.5%
</TABLE>
- ---------------
* 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, we believe 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 14,891,088
shares outstanding on February 29, 2000, adjusted as required by rules
promulgated by the SEC.
(2) Represents 291,205 shares held by Aries Domestic Fund, L.P., 46,378 shares
held by Aries Domestic Fund II, L.P. and 604,123 shares held by The Aries
Master Fund. Dr. Rosenwald is the sole stockholder of Paramount Capital
Asset Management, Inc., the general partner of Aries Domestic Fund L.P. and
Aries Domestic Fund II, L.P. and the investment manager to Aries Master
Fund.
(3) Represents 758,300 shares held by Zesiger Capital Group LLC solely for
investment purposes on behalf of client discretionary investment advisory
accounts.
(4) Represents 245,874 shares held by Mr. Thompson, 100 shares held by a member
of Mr. Thompson's immediate family, 54,037 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 220,000 shares subject to options exercisable within 60 days of
February 29, 2000, subject to repurchase of unvested shares.
9
<PAGE> 12
(5) Includes 135,000 shares subject to options exercisable within 60 days of
February 29, 2000, subject to repurchase of unvested shares.
(6) Represents 126,976 shares held by Dr. Gonda and 800 shares held by members
of Dr. Gonda's immediate family. Dr. Gonda disclaims beneficial ownership
of such shares. Includes 115,000 shares subject to options exercisable
within 60 days of February 29, 2000, subject to repurchase of unvested
shares.
(7) Includes 160,000 shares subject to options exercisable within 60 days of
February 29, 2000, subject to repurchase of unvested shares.
(8) Includes 135,000 shares subject to options exercisable within 60 days of
February 29, 2000, subject to repurchase of unvested shares.
(9) Includes 9,282 shares subject to options exercisable within 60 days of
February 29, 2000, subject to repurchase of unvested shares. Dr. Parker is
a former executive officer, who continues to serve as a consultant to us.
(10) Includes 30,500 shares subject to options exercisable within 60 days of
February 29, 2000, subject to repurchase of unvested shares.
(11) Includes 22,712 shares subject to options exercisable within 60 days of
February 29, 2000, subject to repurchase of unvested shares.
(12) See footnotes (1) through (11) above, as applicable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% 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 10% 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 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with; except that one report
covering two transactions was filed late by Bikash Chatterjee, our Vice
President, Operations and one report covering one transaction was filed late by
three of our directors, Frank H. Barker, Wayne I. Roe and Virgil D. Thompson.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's directors do not currently receive any cash compensation for
their service as a member of the Board of Directors, although they are
reimbursed for certain expenses incurred in connection with their attendance at
Board of Directors and committee meetings in accordance with Company policy.
Each non-employee director also receives stock option grants under the
Company's Non-employee Directors' Stock Option Plan (the "Directors' Plan").
Only non-employee directors are eligible to receive options under the Directors'
Plan. Options granted under the Directors' Plan are intended not to qualify as
incentive stock options under the Code. Options granted under the Directors'
Plan are non-discretionary. On June 19 of each year, or the next business day,
each non-employee director is automatically granted under the Directors' Plan an
option to purchase 7,500 shares of common stock, or such pro-rated amount for
non-employee directors with less than a full year's tenure. Options under the
Directors' Plan vest in four equal, quarterly installments, commencing on the
date of grant of the option. The exercise price of the options granted under the
Directors' Plan is the fair market value of the Common Stock on the date of
grant. No option granted under the Directors' Plan may be exercised after the
expiration of 10 years from the date it was
10
<PAGE> 13
granted. Options granted under the Directors' Plan are generally
non-transferable except pursuant to a qualified domestic relations order. The
Directors' Plan will terminate at the discretion of the Board. In the event of
certain changes of control, options outstanding under the Directors' Plan will
automatically become fully vested and will terminate if not exercised prior to
such change of control.
During 1999, the Company granted 10,000 shares to two directors at an
exercise price of $8.25 and 11,568 shares to three directors at an exercise
price of $8.75. As of December 31, 1999, 36,568 options to purchase common stock
granted under the Directors' Plan were outstanding. In February 2000, the Board
of Directors terminated the Director's Plan and amended the Incentive Plan to
allow for options grants under that plan to non-employee directors.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table presents the compensation earned by the Company's chief
executive officer and other four most highly compensated executive officers
whose salary and bonus for the year ended December 31, 1999 were in excess of
$100,000 (the "Named Executive Officers"). In accordance with the rules of the
SEC, the compensation described in this table does not include medical, group
life insurance or other benefits received by the Named Executive Officers that
are available generally to all of the Company's salaried employees and certain
perquisites and other personal benefits received by the Named Executive
Officers, which do not exceed the lesser of $50,000 or 10% of any such officer's
salary and bonus contained in the table.
<TABLE>
<CAPTION>
LONG-TERM AND
ANNUAL COMPENSATION OTHER COMPENSATION
FISCAL -------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ------ --------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Richard P. Thompson.................. 1999 276,000 75,000 30,000 --
President, Chief Executive 1998 260,000 79,000 100,000 --
Officer and Director 1997 225,000 56,000 40,000 --
R. Jerald Beers...................... 1999 208,000 45,000 20,000 --
Executive Vice President 1998 208,000 49,000 120,000 --
Marketing and Business 1997 92,000 -- -- --
Development
Reid M. Rubsamen, M.D................ 1999 188,000 41,000 30,000 --
Vice President, Medical Affairs, 1998 180,000 44,000 55,000 --
Secretary and Director 1997 160,000 32,000 20,000 --
Igor Gonda, Ph.D..................... 1999 188,000 41,000 30,000 --
Vice President Research and 1998 180,000 32,000 35,000 --
Development 1997 160,000 39,000 20,000 --
John Parker, Ph.D.(1)................ 1999 190,000 41,000 -- --
Vice President Quality 1998 45,000 -- 100,000 15,000(2)
1997 -- -- -- --
Babatunde A. Otulana, M.D.(3)........ 1999 170,000 37,000 30,000 39,000(4)
Vice President Clinical and 1998 153,000 37,000 10,000 17,000(5)
Regulatory Affairs 1997 30,000 6,000 55,000 --
</TABLE>
- ---------------
(1) Mr. Parker commenced his employment with the Company in October 1998. As of
January 1, 2000, Mr. Parker terminated his employment with us as Vice
President, Quality.
(2) In 1998, Mr. Parker was reimbursed by the Company for moving expenses in the
amount of $15,000.
(3) Mr. Otulana commenced his employment with the Company in October 1997.
(4) In 1999, Mr. Otulana was reimbursed by the Company for moving expenses in
the amount of $39,000.
(5) In 1998, Mr. Otulana was reimbursed by the Company for moving expenses in
the amount of $17,000.
11
<PAGE> 14
STOCK OPTION GRANTS AND EXERCISES
The following table presents each grant of stock options made to each of
the Named Executive Officers during the year ended December 31, 1999. The
Company grants options to it executive officers under its Incentive Plan. These
options vest quarterly over a four-year period. The options will fully vest upon
a change of control, as defined in the Incentive Plan, unless the acquiring
company assumes the options or substitutes similar options. The Board of
Directors may reprice options under the terms of the Incentive Plan. In the year
ended December 31, 1999, the Company granted to its employees options to
purchase a total of 475,347 shares of its common stock.
Potential realizable value is calculated assuming that the stock price on
the date of grant appreciates at the indicated rate compounded annually until
the option is exercised and sold on the last day of its term for the appreciated
stock price. The 5% and 10% assumed rates of appreciation are required by the
rules of the SEC and do not represent the Company's estimate or projection of
the future common stock price.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER VALUE AT ASSUMED
OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
---- ---------- ------------ -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard P. Thompson................. 15,000 3.16 12.00 2/1/09 113,000 287,000
15,000 3.16 7.00 5/20/09 66,000 167,000
R. Jerald Beers..................... 10,000 2.10 12.00 2/1/09 75,000 191,000
10,000 2.10 7.00 5/20/09 44,000 112,000
Reid M. Rubsamen, M.D............... 15,000 3.16 12.00 2/1/09 113,000 287,000
15,000 3.16 7.00 5/20/09 66,000 167,000
Igor Gonda, Ph.D.................... 15,000 3.16 12.00 2/1/09 113,000 287,000
15,000 3.16 7.00 5/20/09 66,000 167,000
John Parker, Ph.D. ................. -- -- -- -- -- --
Babatunde A. Otulana, M.D........... 15,000 3.16 12.00 2/1/09 113,000 287,000
15,000 3.16 7.00 5/20/09 66,000 167,000
</TABLE>
OPTION EXERCISES AND YEAR END OPTION VALUES
No Named Executive Officers exercised any options during 1999. Options
granted under the Incentive Plan are immediately exercisable, but are subject to
the Company's right to repurchase unvested shares at the original exercise price
paid per share upon termination of employment. The value of in-the-money options
is based on the fair market value of the Company's Common Stock at December 31,
1999 ($9.50) minus the exercise price payable of the options.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard P. Thompson.............. 170,000 -- 68,000 --
R. Jerald Beers.................. 140,000 -- 325,000 --
Reid M. Rubsamen, M.D............ 105,000 -- 53,000 --
Igor Gonda, Ph.D................. 85,000 -- 53,000 --
John Parker, Ph.D. .............. 100,000 -- 37,000 --
Babatunde A. Otulana, M.D........ 95,000 -- 38,000 --
</TABLE>
12
<PAGE> 15
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- 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, 1999, the average increase in the
salaries of the executive officers, including the CEO, was 5.7%.
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.
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 nine executive officers, including the CEO, would receive option
grants in the fiscal year ended December 31, 1999.
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 as described above. Because most of the
corporate goals were met in 1999, the CEO received an increase in salary of 7.9%
and a bonus that was 90% 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 as described above. Based on such criteria, the CEO
received options to purchase an aggregate of 30,000 shares of the Company's
Common Stock for the fiscal year ended December 31, 1999. Compared to other
biotechnology companies as described above, the CEO's salary and stock options
are in the low- to mid-range.
13
<PAGE> 16
Section 162(m) 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 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 United State Treasury
regulations and to comply with 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:
Frank H. Barker
Wayne I. Roe
Virgil D. Thompson
- ---------------
(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 Securities Act of 1933, as amended (the "Securities Act") or the
Exchange Act whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
14
<PAGE> 17
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph compares total shareholder 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 quarterly 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 QUARTER ENDING JUNE 20, 1996(2)
<TABLE>
<CAPTION>
ARDM NASDAQ-US NASDAQ-PHARM
---- --------- ------------
<S> <C> <C> <C>
6/28/96 100.00 100.00 100.00
12/31/96 89.77 108.68 99.24
12/31/97 77.27 133.16 102.50
12/31/98 113.64 187.77 130.39
12/31/99 86.36 347.48 242.62
</TABLE>
- ---------------
(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 Securities Act or the Exchange 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.
15
<PAGE> 18
CERTAIN TRANSACTIONS
In May 1994, the Company issued and sold to Richard P. Thompson, President,
Chief Executive 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 February
1996, the Company issued and sold to Mr. Thompson an aggregate of 106,596 shares
of its Common Stock for an aggregate purchase price of $60,404, $54,364 of which
was paid 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 1999 was $129,058. The outstanding
balance of the loans to Mr. Thompson was $34,656 as of February 29, 2000.
In December 1995, the Company issued and sold to Dr. Gonda, Vice President
of Research and Development of the Company, 150,000 shares of its Common Stock
for an aggregate purchase price of $65,000, $58,500 of which was paid 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 in October
2000. The largest aggregate amount of Dr. Gonda's indebtedness to the Company
during fiscal 1999 was $46,850. The aggregate outstanding balance of the loans
to Dr. Gonda was $46,850 as of February 29, 2000.
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, will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
and will be in connection with bona fide business purposes of the Company.
16
<PAGE> 19
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
[/s/ REID M. RUBSAMEN]
Secretary
April 19, 2000
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, 1999 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, ARADIGM
CORPORATION, 3929 POINT EDEN WAY, HAYWARD, CA 94545. COPIES MAY ALSO BE OBTAINED
WITHOUT CHARGE THROUGH THE SEC'S WORLD WIDE WEB ADDRESS AT HTTP://WWW.SEC.GOV.
17
<PAGE> 20
ARADIGM CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED APRIL 16, 1996
APPROVED BY THE SHAREHOLDERS ON JUNE 5, 1996
AMENDED BY THE BOARD OF DIRECTORS ON APRIL 7, 1998
APPROVED BY THE SHAREHOLDERS ON MAY 15, 1998
AMENDED BY THE BOARD OF DIRECTORS ON FEBRUARY 2, 1999
APPROVED BY THE SHAREHOLDERS ON MAY 21, 1999
AMENDED BY THE BOARD OF DIRECTORS ON APRIL 3, 2000
APPROVED BY THE SHAREHOLDERS ON MAY , 2000
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Aradigm Corporation, a California
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which
need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully
effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be
treated as an "employee stock purchase plan" within the meaning of Section
423 of the Code.
[1]
<PAGE> 21
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee")
constituted in accordance with the requirements of Rule 16b-3 under the Exchange
Act. If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate five hundred thousand (500,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be equal to or greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the
exercise price of such right;
[2]
<PAGE> 22
(ii) the period of the Offering with respect to such right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that
Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined by the Board or the Committee in each Offering)
during the period which begins on the Offering Date (or such later date as the
Board or the Committee determines for a particular Offering) and ends on the
date stated in the Offering, which date shall be no later than the end of the
Offering. The Board or the Committee shall establish one or more dates during an
Offering (the "Purchase Date(s)") on which rights granted under the Plan shall
be exercised and purchases of Common Stock carried out in accordance with such
Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
[3]
<PAGE> 23
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering (as defined by the Board or Committee in each Offering). The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of the
Company. A participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee) under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the
[4]
<PAGE> 24
Plan. If on a Purchase Date in any Offering hereunder the Plan is not so
registered or in such compliance, no rights granted under the Plan or any
Offering shall be exercised on such Purchase Date, and the Purchase Date shall
be delayed until the Plan is subject to such an effective registration statement
and such compliance, except that the Purchase Date shall not be delayed more
than twelve (12) months and the Purchase Date shall in no event be more than
twenty-seven (27) months from the Offering Date. If on the Purchase Date of any
Offering hereunder, as delayed to the maximum extent permissible, the Plan is
not registered and in such compliance, no rights granted under the Plan or any
Offering shall be exercised and all payroll deductions accumulated during the
Offering (reduced to the extent, if any, such deductions have been used to
acquire stock) shall be distributed to the participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A SHAREHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act
or any comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or any Affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors, then, as determined by the
Board in its sole discretion (i) any surviving or
[5]
<PAGE> 25
acquiring corporation may assume outstanding rights or substitute similar rights
for those under the Plan, (ii) such rights may continue in full force and
effect, or (iii) participants' accumulated payroll deductions may be used to
purchase Common Stock immediately prior to the transaction described above and
the participants' rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires shareholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification requires
shareholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental
[6]
<PAGE> 26
regulation, or except as necessary to ensure that the Plan and/or rights granted
under the Plan comply with the requirements of Section 423 of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's initial
public offering of shares of common stock becomes effective (the "Effective
Date"), but no rights granted under the Plan shall be exercised unless and until
the Plan has been approved by the shareholders of the Company within twelve (12)
months before or after the date the Plan is adopted by the Board or the
Committee, which date may be prior to the Effective Date.
[7]
<PAGE> 27
DETACH HERE
PROXY
ARADIGM CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 2000
The undersigned hereby appoints RICHARD P. THOMPSON, REID M. RUBSAMEN and NORMAN
HALLEEN, and each of them, as attorneys and proxies of the undersigned, with
full power of substitution, to vote all shares of stock of Aradigm Corporation
which the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of Aradigm Corporation to be held at the Crowne Plaza, 1221 Chess
Drive, Foster City, California on Friday, May 19, 2000 at 9:00 a.m. local time,
and at any and all postponements, continuations and adjournments thereof, with
all powers that the undersigned would possess if personally present, upon and in
respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE> 28
ARADIGM CORPORATION
c/o EquiServe
P.O. Box 9398
Boston, MA 02205-9398
Dear Fellow Aradigm Shareholder,
This last year we continued to expand our company's development program with the
addition of a collaboration with Genentech to develop dornase alfa, the active
ingredient in their marketed drug Pulmozyme(R), in the AERx(R) Pulmonary Drug
Delivery System. This important drug for patients with Cystic Fibrosis
demonstrates our capabilities in delivering biotech drugs, an important source
of future business for Aradigm. Both of our existing programs, the AERx Pain
Management System being developed with SmithKline Beecham and the AERx Diabetes
Management System being developed with Novo Nordisk made progress in clinical
development. In addition we have begun construction of our commercial scale
manufacturing facility to support all of our products under development.
We are looking forward to another year of good progress in 2000.
Very truly yours,
Richard P. Thompson
President and Chief Executive Officer
Aradigm Corporation
DETACH HERE
[X] Please mark
votes as in
this example.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW AND FOR
PROPOSALS 2 AND 3.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3, AS MORE SPECIFICALLY
DESCRIBED ON THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
1. To elect (01) Frank H. Barker, (02) Wayne I. Roe, (03) Reid M. Rubsamen,
(04) Richard P. Thompson and (05) Virgil D. Thompson, directors to hold
office until the next Annual Meeting of Shareholders and until their
successors are elected.
FOR [ ] [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ] --------------------------------------
For all nominees except as noted above
2. To approve the Company's Employee Stock Purchase Plan, as amended to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 120,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States. Please sign exactly as
your name appears hereon. If stock is registered in the names of two or more
persons, each should sign. Executors, administrators, trustees, guardians and
attorneys-in-fact should add their titles. If signer is a corporation, please
give full corporate name and have a duly authorized officer sign, stating title.
If signer is a partnership, please sign in partnership name by authorized
person.
Signature: _________________________________ Date: _________
Signature: _________________________________ Date: _________
