<PAGE>
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 Section 240.14a-11(c) or Section
240.14a-12
CHIRON 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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>
[LOGO] April 18, 1995
To the Stockholders of
CHIRON CORPORATION
You are cordially invited to attend the Annual Meeting of Stockholders of
Chiron Corporation ("Chiron" or the "Company") on May 18, 1995, at 10:00 a.m.,
which will be held at 1450 - 53rd Street, Emeryville, California 94608.
The attached Notice of Annual Meeting and Proxy Statement explain the
business to be conducted at the Annual Meeting.
Also included in this package is Chiron's 1994 Annual Report. The Annual
Report is in summary form, containing selected financial data, our letter to
stockholders, and highlights of operations. You will find the Company's audited
consolidated financial statements enclosed as a separate brochure in a pocket at
the back of the Annual Report.
Whether or not you plan to attend the Annual Meeting, please sign, date, and
return the enclosed proxy promptly in the accompanying reply envelope. If you
decide to attend the Annual Meeting and wish to change your proxy vote, you may
do so by giving notice and voting in person at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
EDWARD E. PENHOET
EDWARD E. PENHOET,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
CHIRON CORPORATION
4560 HORTON STREET
EMERYVILLE, CALIFORNIA 94608
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1995, AT 10:00 A.M.
You are hereby notified that the Annual Meeting of Stockholders of Chiron
Corporation ("Chiron" or the "Company") will be held at 1450 - 53rd Street,
Emeryville, California, on Thursday, May 18, 1995, at 10:00 a.m., for the
following purposes:
1. To elect four Class II directors to hold office for three years;
2. To consider and vote upon a proposal to approve the Company's
amended 1991 Stock Option Plan;
3. To consider and vote upon a proposal to adopt the Chiron Corporation
1995 Executive Officer Variable Cash Compensation Plan;
4. To ratify the selection of KPMG Peat Marwick LLP as independent
public accountants for the current fiscal year; and
5. To transact such other business that may properly come before the
Annual Meeting or any adjournments or postponements thereof.
Stockholders of record at the close of business on March 31, 1995, will be
entitled to vote at the Annual Meeting. A list of the stockholders entitled to
vote at the Annual Meeting will be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours for a
period of ten days prior to the meeting at the principal executive office of the
Company at 4560 Horton Street, Emeryville, California 94608.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE, AND
RETURN THE ENCLOSED PROXY IN THE REPLY ENVELOPE PROVIDED. The prompt return of
your proxy will assist us in preparing for the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
WILLIAM G. GREEN
WILLIAM G. GREEN,
SECRETARY
Emeryville, California
April 18, 1995
<PAGE>
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1995
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of CHIRON CORPORATION, a Delaware corporation
("Chiron" or the "Company"), for the Annual Meeting of Stockholders of Chiron
(the "Annual Meeting"), to be held at 1450 - 53rd Street, Emeryville, California
94608 at 10:00 a.m. on May 18, 1995, and at any adjournments or postponements of
the Annual Meeting. These proxy materials were first mailed to stockholders on
or about April 18, 1995.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice of Annual Meeting of Stockholders.
Each of these proposals is described in more detail in subsequent sections of
this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
The Company has one type of security entitled to vote at the Annual Meeting,
its Common Stock (the "Common Stock"). If you were a stockholder of record of
Common Stock at the close of business on March 31, 1995, you may vote at the
Annual Meeting. Each share entitles you to one vote on each matter to come
before the Annual Meeting. On March 31, 1995, there were 40,045,138 shares of
Common Stock issued and outstanding. The Certificate of Incorporation of the
Company does not provide for cumulative voting. If you were a stockholder of
record of Cetus Corporation common stock at the close of business on March 31,
1995, and have not exchanged your Cetus common stock for Chiron Common Stock,
you nevertheless may vote at the Annual Meeting. Each share of Cetus common
stock entitles you to 0.3 of one vote on each matter to come before the Annual
Meeting.
If you are unable to attend the Annual Meeting, you may vote by proxy. The
enclosed proxy is solicited by the Chiron Board of Directors and, when the proxy
card is returned properly completed, it will be voted as you direct on your
proxy card. You are urged to specify your choices on the enclosed proxy card. If
a proxy card is signed and returned without choices specified, in the absence of
contrary instructions, the shares of Common Stock represented by such proxy will
be voted "FOR" Proposals 1, 2, 3 and 4 and will be voted in the proxy holders'
discretion as to other matters that may properly come before the Annual Meeting.
You may revoke or change your proxy at any time before it is exercised at
the Annual Meeting. To do this, send a written notice of revocation or another
signed proxy with a later date than appears on the proxy you wish to revoke to
the Secretary of Chiron, William G. Green, at the Company's principal executive
office. You also may revoke your proxy by giving notice and voting in person at
the Annual Meeting.
The Company will pay the cost of soliciting these proxies, including the
printing, handling, and mailing of the proxies and related material, and the
actual expenses incurred by brokerage houses, custodians, nominees, and
fiduciaries in forwarding proxy material to the beneficial owners of stock. To
assure that holders of a majority of the stock will be present in person or by
proxy at the Annual Meeting, certain officers, directors, and regular employees
of Chiron may solicit proxies by telephone, telegraph, facsimile or in person.
These persons will receive no extra compensation for their services.
VOTING PROCEDURES
The four nominees for election as directors at the 1995 Annual Meeting of
Stockholders who receive the greatest number of votes cast for the election of
directors at that meeting by the holders of the Company's Common Stock, entitled
to vote at that meeting, a quorum being present, shall become directors at the
conclusion of the tabulation of votes.
1
<PAGE>
The affirmative vote of the majority of shares of Common Stock having voting
power present in person or represented by proxy at the Annual Meeting is
required to adopt the proposals relating to approval of the amended Chiron 1991
Stock Option Plan and adoption of the Chiron Corporation 1995 Executive Officer
Variable Cash Compensation Plan.
The Inspector of Elections will treat an abstention or withholding of
authority to vote on the election of directors by a stockholder present in
person or represented by proxy at the meeting as unvoted for such purposes. The
Inspector of Elections will treat an abstention as to the proposal relating to
approval of the amended Chiron 1991 Stock Option Plan or the proposal relating
to adoption of the Chiron Corporation 1995 Executive Officer Variable Cash
Compensation Plan by a stockholder present in person or represented by proxy at
the meeting as a vote "against" the matter for such purposes. However, pursuant
to Delaware law and the Company's Bylaws, broker non-votes as to the proposal
relating to approval of the amended Chiron 1991 Stock Option Plan or the
proposal relating to adoption of the Chiron Corporation 1995 Executive Officer
Variable Cash Compensation Plan are treated as shares of Common Stock not
present, or represented, and not entitled to vote on such proposals, will not be
counted as votes for or against and will not be included in calculating the
number of votes necessary for approval of such proposals.
CIBA-GEIGY TRANSACTION
Effective January 1, 1995, Ciba-Geigy Limited ("Ciba"), a Swiss corporation,
and the Company closed a transaction (the "Closing") previously announced on
November 21, 1994 to form a strategic partnership. Chiron and Ciba will
collaborate to discover, develop, manufacture and market biotechnology and other
healthcare products as the parties may agree from time to time on a global
scale. Under the terms of the agreement, Chiron and Ciba will be preferred
partners seeking to leverage the complementary strengths of the two companies
through cooperative approaches, but each will remain independent to pursue
projects outside of the partnership. As part of the transaction, Ciba purchased
through a partial tender offer 11,860,467 shares of the Company's outstanding
Common Stock from the stockholders at $117 per share. Ciba also acquired
6,600,000 new shares of Common Stock issued by Chiron in exchange for all the
outstanding stock of Ciba Corning Diagnostics Corp. and Ciba's interests in The
Biocine Company and JV Vax B.V. These newly acquired shares of Common Stock,
when combined with the approximately 1,367,372 shares that Ciba already held,
result in Ciba owning approximately 49.5 percent of the outstanding Common Stock
of the Company.
On November 20, 1994, Chiron and Ciba entered into an agreement (the
"Governance Agreement") which contains terms relating to the corporate
governance of the Company following the Closing and the acquisition and
disposition of securities of the Company by Ciba and its subsidiaries. The
Governance Agreement provides that, from and after the Closing, the Board of
Directors of the Company will be comprised of 11 directors (each, a "Director"),
and the number of directors may be increased only as described below. The
Nominating Committee of the Board of Directors (the "Nominating Committee") will
nominate persons to serve as Directors as described below and each person so
nominated will be included in management's slate of nominees for each annual
meeting of the stockholders of the Company. The Governance Agreement further
provides that the Nominating Committee will nominate three persons to serve as
management Directors (each a "Management Director"), two of whom will be the two
most senior executives of the Company and the third of whom will be an employee
of the Company (or a person otherwise designated as a Management Director by the
Nominating Committee). In addition, Ciba will have the right to designate three
persons to serve as Directors (each, an "Investor Director"), any of whom may be
officers or employees of Ciba or its affiliates. If, however, Ciba's Percentage
Interest (as defined below) for any period is less than 30 percent but at least
20 percent, during that period Ciba will instead have the right to designate for
nomination only two Investor Directors, and, if Ciba's Percentage Interest is
less than 20 percent for any period, during that period Ciba will instead have
the right to designate for nomination only one Investor Director. As used
herein, "Ciba's Percentage Interest" means the percentage of voting power,
determined on the basis of the number of shares of voting stock actually
outstanding, that is controlled directly or indirectly by Ciba or any subsidiary
of Ciba (other than the Company and its subsidiaries) including by beneficial
ownership. Finally, the Nominating Committee will nominate the
2
<PAGE>
remaining Directors (the "Independent Directors"), each of whom must have an
outstanding reputation for personal integrity and distinguished achievement in
areas relevant to the Company and, under the terms of the Governance Agreement,
must meet certain criteria demonstrating such person's independence from both
Ciba and the Company. Pursuant to the Governance Agreement, on January 4, 1995,
the Board of Directors elected three nominees of Ciba: Dr. Alex Krauer, Mr.
Pierre Douaze and Dr. Francois L'Eplattenier, to serve on the Board as
representatives of Ciba.
Under the terms of the Governance Agreement, Ciba agreed that in any
election of directors or any meeting of stockholders of the Company called
expressly for the removal of directors, so long as the Board of Directors
includes (and will include after any such removal) the number of Investor
Directors contemplated by the Governance Agreement, Ciba and its affiliates will
be present for purposes of establishing a quorum and will vote all their shares
of voting stock (i) in favor of any nominee or director selected or removed in
accordance with the terms of the Governance Agreement, (ii) in favor of removal
of any Director in circumstances where the number of Investor Directors is more
than required under the terms of that Agreement and (iii) otherwise against the
removal of any director designated in accordance with the Governance Agreement.
In any other matter submitted to a vote of the stockholders of the Company, Ciba
may vote any or all of its shares in its sole discretion unless such matter was
approved by Ciba or a majority of the Investor Directors in accordance with the
terms of the Governance Agreement, in which case Ciba and its affiliates will
cast all their votes in favor of such matter. Because a majority of the Investor
Directors have approved the amended 1991 Stock Option Plan and the adoption of
the Chiron Corporation 1995 Executive Officer Variable Cash Compensation Plan
which are the subjects of Proposals 2 and 3 of this Proxy Statement, the Company
anticipates that Ciba will cast all of its votes in favor of such matters at the
Annual Meeting.
STANDSTILL. Under the terms of the Governance Agreement, during the period
beginning at the Closing and terminating at January 15, 2000 (the "First
Standstill Period"), Ciba has agreed that it will not, directly or indirectly,
purchase or otherwise acquire any Equity Securities (as defined below) from any
person other than the Company unless (i) such acquisition is a Market Purchase
(as defined below) and (ii) immediately after such purchase or acquisition,
Ciba's Percentage Interest would not exceed the greatest of (A) 49.9 percent,
(B) the highest Ciba's Percentage Interest resulting from any acquisition by
Ciba or its affiliates of Equity Securities that has been approved by a majority
of the Independent Directors as described below and (C) the highest Ciba's
Percentage Interest immediately following any action by the Company (including a
purchase by the Company of outstanding Equity Securities or a sale of Equity
Securities to Ciba or its affiliates by the Company) that increases Ciba's
Percentage Interest.
As defined in the Governance Agreement, "Equity Securities" means (i) the
Common Stock and any other voting stock of the Company, (ii) any securities of
the Company convertible into or exchangeable for Common Stock or other voting
stock or (iii) any options, rights or warrants (or any similar securities)
issued by the Company to acquire Common Stock or other voting stock, and "Market
Purchase" means an acquisition of Equity Securities that is within the
definition of "Rule 10b-18 Purchase" under Rule 10b-18 under the Securities
Exchange Act of 1934 (the "Exchange Act") as in effect on November 20, 1994 that
satisfies the conditions of paragraph (b) of Rule 10b-18.
During the period beginning at the end of the First Standstill Period and
terminating at the date that Ciba and its affiliates become the beneficial
owners of all outstanding shares of Equity Securities, Ciba has further agreed
that it will not, directly or indirectly, purchase or otherwise acquire any
Equity Securities from any person other than the Company unless (i) such
acquisition is a Market Purchase and (ii) immediately after such purchase or
acquisition, Ciba's Percentage Interest would not exceed the greatest of (A) 55
percent, (B) the highest Ciba's Percentage Interest resulting from any
acquisition by Ciba or its affiliates of Equity Securities that has been
approved by a majority of the Independent Directors as described below and (C)
the highest Ciba's Percentage Interest immediately following any action by the
Company (including a purchase by the Company of outstanding Equity Securities or
a sale of Equity Securities to Ciba or its affiliates by the Company) that
increases Ciba's Percentage Interest.
3
<PAGE>
Except with respect to a Buyout Transaction (as defined below), the
Governance Agreement provides that any other purchase or acquisition of Equity
Securities by Ciba or its affiliates from any person other than the Company will
require the approval of a majority of the Independent Directors acting solely in
the interest of the unaffiliated stockholders and in granting such approval the
Independent Directors, unless a majority of them decide otherwise, will require
a purchase price for such Equity Securities reflecting a proportionate share of
then prevailing Third Party Sale Value (as defined below), except that no such
purchase may increase Ciba's Percentage Interest above 79.9 percent.
As defined in the Governance Agreement, "Third Party Sale Value" means the
value that an unaffiliated third party would be expected (based on financial
analyses generally used by investment bankers in the preparation of a fairness
opinion for an acquisition transaction) to pay for all the Equity Securities of
the Company in an arm's-length transaction negotiated by a willing seller and a
willing buyer.
BUYOUT TRANSACTION. The Governance Agreement provides that, notwithstanding
the standstill provisions described above, at any time after the sixth
anniversary of the Closing, but as early as the fifth anniversary of the Closing
if certain conditions exist, Ciba may propose and consummate a tender offer,
merger, sale of substantially all of the Company's assets or similar transaction
involving Ciba or one of its affiliates and the Company or the unaffiliated
stockholders that (1) offers each unaffiliated stockholder the opportunity to
dispose of all Equity Securities owned by such stockholder or otherwise provides
for the acquisition of all Equity Securities owned by such stockholder, in each
case for consideration reflecting such stockholder's proportionate share of
consideration at least equal to Third Party Sale Value (the "Third Party Sale
Value Consideration") and (2) for each class of Equity Securities, provides the
same consideration for each security within such class (any such transaction
being referred to herein as a "Buyout Transaction"). Under the terms of the
Governance Agreement, a Buyout Transaction may only be consummated pursuant to
certain procedures specified therein.
The Governance Agreement provides that until Ciba and its affiliates
beneficially own all outstanding shares of Equity Securities, Ciba and its
subsidiaries will not (i) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" to vote (as such terms are used
in the proxy rules of the Securities and Exchange Commission) or seek to advise,
encourage or influence any person or entity with respect to the voting of any
shares of capital stock of the Company, initiate, propose or otherwise solicit
stockholders of the Company for the approval of one or more stockholder
proposals or induce or attempt to induce any other individual, firm,
corporation, partnership or other entity to initiate any stockholder proposal;
or (ii) deposit any shares of voting stock into a voting trust or subject any
shares of voting stock to any arrangement or agreement with respect to the
voting of such securities or form, join or in any way participate in or
otherwise encourage the formation of, with respect to any shares of Common
Stock, any group of persons formed for the purpose of acquiring, holding, voting
or disposing of voting stock which would be required under Section 13(d) of the
Exchange Act, and the rules and regulations thereunder, to file a statement on
Schedule 13D with the Securities and Exchange Commission as a "person" within
the meaning of Section 13(d)(3) of the Exchange Act if such group beneficially
owned voting stock representing more than 5 percent of any class of voting stock
then outstanding.
4
<PAGE>
PRINCIPAL STOCKHOLDERS
The following is the only person known by Chiron to own beneficially, as of
March 31, 1995, 5 percent or more of the outstanding shares of its Common Stock.
On March 31, 1995, there were 40,045,138 shares of Chiron Common Stock
outstanding.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- - ------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Ciba-Geigy Limited ............................................................ 19,827,839 49.5%
Klybeckstrasse CH-4002
Basel, Switzerland
<FN>
- - ------------------------
(1) Under the terms of the Governance Agreement, Ciba is permitted to acquire
up to 49.9 percent of the Company's Common Stock through market purchases
and to participate pro rata in certain issuances of new securities by the
Company. In addition, in certain instances, under the terms of a Market
Price Option Agreement between Ciba and the Company, Ciba is permitted to
purchase Common Stock directly from the Company upon the satisfaction of
certain conditions. See "Related Transactions" below for a further
discussion of Chiron's relationships with Ciba.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
Chiron as of March 31, 1995, by each director and nominee to the Board of
Directors, the Chief Executive Officer and the four other most highly
compensated executive officers and, as a group, by such persons and other
executive officers of Chiron. All shares are subject to the named person's sole
voting and investment power.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP (1) OF CLASS (2)
- - ----------------------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Gilbert F. Amelio............................................................ 10,624 *
Lewis W. Coleman............................................................. 12,617 *
Pierre Douaze................................................................ 1,250 *
Donald A. Glaser............................................................. 102,338 *
William G. Green............................................................. 93,870 *
Alex Krauer.................................................................. 1,250 *
Francois L'Eplattenier....................................................... 1,250 *
David W. Martin.............................................................. 10,000 *
Edward E. Penhoet............................................................ 250,819 *
William J. Rutter............................................................ 640,851 1.6 %
Henri Schramek............................................................... 18,000 *
Jack W. Schuler.............................................................. 34,970 *
Pieter J. Strijkert.......................................................... 17,400 *
Dennis L. Winger............................................................. 102,306 *
All directors and executive officers as a group (28 persons)................. 1,793,367 4.5 %
(FOOTNOTES ON FOLLOWING
PAGE)
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
<FN>
- - ------------------------
(1) This disclosure is made pursuant to certain rules and regulations
promulgated by the Securities and Exchange Commission, and in certain
instances, the number of shares shown as being beneficially owned may not
be deemed to be beneficially owned for other purposes. Includes shares
which are subject to options or warrants exercisable on or before May 30,
1995, in the following amounts: Dr. Amelio, 10,500 shares; Mr. Coleman,
12,000 shares; Mr. Douaze, 1,250 shares; Dr. Glaser, 37,650 shares; Mr.
Green, 93,228 shares; Dr. Krauer, 1,250 shares; Dr. L'Eplattenier, 1,250
shares; Dr. Martin, 10,000 shares; Dr.Penhoet, 171,209 shares; Dr. Rutter,
226,209 shares; Dr. Schramek, 18,000 shares; Mr. Schuler, 34,167 shares;
Dr. Strijkert, 17,400 shares; Mr. Winger, 100,075 shares; and all directors
and executive officers as a group, 1,142,954 shares.
(2) Percentage of outstanding Common Stock and of Common Stock that may be
acquired upon exercise of outstanding options and warrants on or before May
30, 1995, by the persons named above and by all directors and executive
officers as a group. The asterisk (*) indicates that the shares
beneficially owned represent less than one percent of the shares
outstanding.
</TABLE>
PROPOSAL 1:
ELECTION OF DIRECTORS
Chiron has three classes of directors serving staggered three-year terms.
Three directors presently serve in Class I, four directors in Class II and four
directors in Class III. This year, the following four directors presently
serving in Class II are nominated to be reelected for three-year terms expiring
in 1998: Drs. Gilbert F. Amelio, Edward E. Penhoet and Henri Schramek and Mr.
Pierre Douaze. See "Ciba-Geigy Transaction" at pp. 2-4 for a discussion of
matters relating to Ciba's voting of shares held by it and its affiliates in any
election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE.
The persons named on the enclosed proxy (the "proxy holders") will vote for
election of the above-named nominees unless you have withheld authority for them
to do so on your proxy card. In the unanticipated event that a nominee is unable
to or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee named by the present Board of Directors to
fill the vacancy. As of the date of this Proxy Statement, the Board of Directors
is not aware of any nominee who is unable to or who will decline to serve as a
director. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them for the
nominees listed above.
6
<PAGE>
Information as to the nominees, and as to each other director whose term
will continue after the 1995 Annual Meeting of Stockholders, is given below.
<TABLE>
<CAPTION>
SERVED AS
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- - --------------------------------------------- --- --------------------------------------------- ---------------
<S> <C> <C> <C>
CLASS II (1998 CLASS)
Gilbert F. Amelio.......................... 52 President and Chief Executive Officer, 1991
National Semiconductor Corporation
Pierre Douaze.............................. 55 Member of the Executive Committee of 1995
management, Ciba-Geigy Limited
Edward E. Penhoet.......................... 54 President and Chief Executive Officer, Chiron 1981
Corporation
Henri Schramek............................. 76 Retired; Former Member of the Board of 1989
Directors, Ciba-Geigy Limited
CLASS III (1996 CLASS)
Lewis W. Coleman........................... 53 Chief Financial Officer, 1991
BankAmerica Corp.
Francois L'Eplattenier..................... 56 Member of the Executive Committee of 1995
management, Ciba-Geigy Limited
William J. Rutter.......................... 66 Chairman, Chiron Corporation 1981
Jack W. Schuler............................ 54 Chairman, Stericycle Corporation 1991
CLASS I (1997 CLASS)
Donald A. Glaser........................... 68 Professor of Physics, of Molecular Biology, 1991
and of Neuroscience, University of
California, Berkeley
Alex Krauer................................ 64 Chairman of the Board and Chief Executive 1995
Officer, Ciba-Geigy Limited
Pieter J. Strijkert........................ 59 Advisor, Board of Management, 1987
Gist-brocades Holding
</TABLE>
CLASS II (1998 CLASS)
GILBERT F. AMELIO has been President, Chief Executive Officer and member of
the Board of Directors of National Semiconductor Corporation since joining that
company in 1991. From 1988 until joining National Semiconductor, he was
President of the Communications System Group at Rockwell International, and was
President of Rockwell's Semiconductor Products Division from 1983 to 1988.
Previously, he held management and research positions with Fairchild
Semiconductor Corporation and AT&T's Bell Laboratories. Dr. Amelio is a member
of the Boards of Directors of the Semiconductor Industry Association, Sematech
and Apple Computer.
PIERRE DOUAZE has been a member of the Executive Committee of management of
Ciba-Geigy Limited since 1991 and Head of the Pharma Division of Ciba since
1989.
EDWARD E. PENHOET, a cofounder of the Company and a director since 1981, has
served as Chief Executive Officer since the Company's inception. Dr. Penhoet has
been a faculty member of the Biochemistry Department at the University of
California, Berkeley, for 23 years. Since 1983, he has been an Adjunct Professor
at that university.
HENRI SCHRAMEK became a director of the Company in April 1989. He was with
Ciba-Geigy Limited for thirty-eight years, having retired from operations in
1983 and having served as a Member of the Board of Directors of that company
from 1983 to 1988 and as Vice Chairman of the Board of Directors from 1987 until
1988.
7
<PAGE>
CLASS III (1996 CLASS)
LEWIS W. COLEMAN is Vice Chairman of the Board of Directors and the Chief
Financial Officer of BankAmerica Corp. Mr. Coleman joined Bank of America in
1986 as Executive Vice President and Chief Credit Officer, World Banking Group.
He also has headed the Capital Markets Group and later served from 1990 to 1993
as Vice Chairman of the Board and Head of the World Banking Group at Bank of
America. Mr. Coleman served with Bank of California from 1963 to 1973 and with
Wells Fargo Bank from 1973 to 1986, in various positions.
FRANCOIS L'EPLATTENIER has been a Member of the Executive Committee of
management of Ciba-Geigy Limited since 1988.
WILLIAM J. RUTTER is a cofounder of the Company and has served as its
Chairman of the Board since the Company's inception. In 1969, Dr. Rutter joined
the faculty of the University of California, San Francisco ("UCSF"), as
Hertzstein Professor, and he served as Chairman of the Department of
Biochemistry and Biophysics at UCSF from 1969 to 1982. From August 1983 through
April 1989, in addition to his responsibilities at Chiron, Dr. Rutter was the
Director of the Hormone Research Institute at UCSF. In May 1989, Dr. Rutter
became a full-time employee of Chiron and consequently vacated the Directorship
of the Hormone Research Institute. He became Professor emeritus in 1991.
JACK W. SCHULER is Chairman of Stericycle Corporation, a company that
processes, sterilizes and recycles medical waste. Prior to joining Stericycle,
Mr. Schuler was President and Chief Operating Officer of Abbott Laboratories
("Abbott") from 1987 to 1989. He joined Abbott in 1972 as Director of Sales and
Marketing for the diagnostics division, and held a series of diagnostic sales
and management positions. He served on the Abbott Board of Directors from 1985
to 1989. Mr. Schuler is a member of the Boards of Directors of Somatogen and
Medtronic, Inc.
CLASS I (1997 CLASS)
DONALD A. GLASER was a founder of Cetus Corporation ("Cetus"), a member of
its Board of Directors from 1971 to 1991, and Chairman of the Board of
Scientific Advisors of Cetus. He has served on the faculty at the University of
California, Berkeley, since 1959. Dr. Glaser received a Nobel Prize in Physics
in 1960.
ALEX KRAUER has been the Chairman of the Board and Chief Executive Officer
of Ciba-Geigy Limited since 1987.
PIETER J. STRIJKERT was a member of the Management Board of Gist-brocades
N.V., a fermentation and pharmaceutical company headquartered in the
Netherlands, from 1985 until 1993, and was Chairman of the Supervisory Board of
International Bio-Synthetics BV, now called Bio-Specialties Division, originally
a joint venture and now a division of Gist-brocades N.V., which is active in the
areas of industrial enzymes, bio-fine chemicals, biopolymers, and biopesticides,
from 1987 until 1991. He is now an advisor to the board of management of
Gist-brocades Holding.
COMPENSATION OF DIRECTORS
The Company pays each nonemployee director a retainer fee of $16,000 per
year; an additional fee of $2,000 for each meeting of the Board of Directors
attended in person; an additional fee of $500 for each telephone meeting of the
Board of Directors; and a fee of $200 per hour, to a maximum of $1,000 per day,
for time spent on meetings of Committees of the Board of Directors on days when
no meeting of the Board of Directors is held. The Company also pays each
nonemployee director serving as chairman of one of the Board Committees an
additional retainer of $5,000 per year.
Under the Company's 1991 Stock Option Plan (the "Option Plan"), the
automatic option grant program provides that each nonemployee director will
automatically be granted a non-statutory stock option ("Automatic Option Grant")
to purchase 3,000 shares of the Company's Common Stock on the last day of the
second quarter of each fiscal year, with an option price per share equal to the
fair market value (as defined in the plan) of the Common Stock on that annual
grant date. The option exercise price is payable in cash, or in shares of Chiron
Common Stock held for at least six months, or with the proceeds of a same day
8
<PAGE>
sale of the option shares. Each person who is newly elected or appointed as a
nonemployee member of the Board of Directors after the effective date of the
Option Plan (other than on an automatic grant date) will receive, on the date of
such election or appointment, an Automatic Option Grant to purchase a pro rata
number of shares of Common Stock. The pro rata number will be determined by
multiplying 250 by the number of whole calendar months between the date of the
nonemployee director's election or appointment and the next automatic grant date
and the option price per share will be equal to the fair market value of a share
of Chiron Common Stock on the grant date. Each Automatic Option Grant will have
a term of ten years measured from its grant date and will be exercisable at any
time for all or any part of the number of granted shares. The shares purchased
under the options are subject to repurchase by Chiron at the original exercise
price in the event a nonemployee director ceases to provide service to Chiron or
its subsidiaries as a director, an employee, a consultant or an independent
contractor. Chiron's repurchase right will lapse (and the optionee's interest in
the purchased shares will vest) in a series of equal annual installments over a
five-year period measured from the date of the automatic grant, provided the
optionee continues to provide such services. Chiron's repurchase right will
lapse in its entirety, and full vesting will occur, if, while providing such
services, the optionee dies or is permanently disabled. In the event the
optionee ceases to provide services to Chiron or its subsidiaries as a director,
an employee, a consultant or an independent contractor, the option may be
exercised for a period of three months after the date of such cessation of
services (12 months in the case of cessation by reason of disability or death).
Discretionary provisions of the Option Plan are not applicable to the Automatic
Option Grants. On the effective date of the Option Plan, the terms and
conditions of outstanding automatic option grants under the Chiron 1982 Stock
Option Plan were conformed to the Automatic Option Grants under the Option Plan;
however, the term of the options was not extended.
Of the current directors, Dr. Penhoet and Dr. Rutter are not eligible to
receive Automatic Option Grants because they are employees of the Company. Mr.
Schuler has waived his right to receive these grants for so long as he serves as
consultant to the Company as described in the following paragraph.
In December 1991, the Company retained Mr. Schuler as a consultant. The
Company agreed to pay Mr. Schuler $200,000 per year of consulting, payable in
monthly increments, and granted Mr. Schuler options to acquire 40,000 shares of
Chiron Common Stock, vesting on a pro rata basis over four years.
In May 1992, the Company retained Dr. Donald Glaser to consult with and
advise the Company in the fields of general automation and technology and
neurobiology over a period of three years at an annual retainer of not less than
$45,000.
INFORMATION CONCERNING BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of thirteen meetings
during the fiscal year ended December 31, 1994. To assist in the discharge of
its responsibilities, the Board of Directors has designated four standing
committees. They are a Finance and Audit Committee (now called the "Audit
Committee"), a Compensation Committee, an Employee Stock Option Committee and a
Nominating Committee. The Governance Agreement provides that each such committee
will generally continue to have the same responsibilities as held before the
Ciba transaction. The number of Investor Directors on each committee (other than
the Nominating Committee) will generally be the same proportion of the total
membership of such committee as the number of Investor Directors is of the
entire Board of Directors.
The Audit Committee is responsible for finance, budget, audit, internal
control, accounting, and related matters. This Committee, which consisted of Mr.
Coleman, as Chairman, and Dr. Amelio, held five meetings in the Company's last
fiscal year. At the first Board meeting after the Ciba transaction, the Board
added Dr. Krauer to the Audit Committee and reappointed the Committee's other
members.
In May 1992, the Board of Directors consolidated its stock option committee,
compensation committee and employee stock purchase plan committee into a single
Compensation Committee. The members of the Compensation Committee are
nonemployee directors and are ineligible to participate in any of the plans or
programs which are administered by the Committee. The Committee's principal
functions are to evaluate the performance of the Company's executive officers,
to consider and plan for executive officer succession,
9
<PAGE>
to review and approve executive compensation, to review the design and
competitiveness of the Company's compensation plans generally and to administer
the Company's stock option and stock purchase plans pursuant to the terms of
those plans. This Committee, which consisted of Dr. Amelio, as Chairman, and
Drs. Strijkert and Schramek and Mr. Coleman prior to the Ciba transaction, held
four meetings in the Company's last fiscal year. At the first Board meeting
after the Ciba transaction, the Board added Dr. Krauer to the Committee and
reappointed the Committee's other members. The Board has also delegated to an
Employee Stock Option Committee, composed of Drs. Penhoet and Rutter, authority
to make routine stock option grants calculated according to the policies,
procedures and methodologies approved from time to time by the Compensation
Committee to any employee or consultant except executive officers and directors.
In February 1994, the Board of Directors established a Nominating Committee.
The Nominating Committee is responsible for matters relating to composition of
the Board of Directors including recruitment, nomination and succession. Under
the terms of the Governance Agreement, the Nominating Committee will initially
be comprised of two Independent Directors, one Management Director and one
Investor Director. After the fifth anniversary of the Closing, so long as Ciba's
Percentage Interest is at least 40 percent, an additional Investor Director will
serve on the Nominating Committee. While the Nominating Committee will act by
the vote of a majority of its members, the Governance Agreement provides that
after the fifth anniversary of the Closing, so long as Ciba's Percentage
Interest is at least 40 percent, the Management Director serving on the
Nominating Committee will not be able to break any tie vote between all the
Investor Director members, on the one hand, and all the Independent Director
members, on the other hand. In addition, after the eleventh anniversary of the
Closing, so long as Ciba's Percentage Interest is at least 49 percent, the
Governance Agreement provides that the Investor Director members of the
Nominating Committee will have a deciding vote to break any tie vote between all
the Investor Director members, on the one hand, and all the Independent Director
members, on the other hand (meaning that, with respect to any motion before the
committee, if the two Investor Director members vote one way and the two
Independent Director members vote the other way, the vote of the Investor
Directors will control). No procedure has been established by the Nominating
Committee for the consideration of nominees recommended by stockholders.
However, stockholders of Chiron are entitled to nominate candidates for director
at the Annual Meeting if they have complied with the advance notice procedures
contained in the Company's Bylaws. The Nominating Committee consisted of Dr.
Amelio, Mr. Coleman, Dr. Rutter and Mr. Schuler prior to the Ciba transaction.
At the first Board meeting after the Ciba transaction, the Board added Dr.
Krauer to the Committee, Mr. Schuler stepped down and the Board reappointed the
Committee's other members.
The Governance Agreement also contemplates the creation in the future of a
Strategic Planning Committee with certain responsibilities, described below. The
Governance Agreement provides that the Board of Directors will set and approve
measurement standards to evaluate the Company's performance for each fiscal year
of the Company. The Governance Agreement further provides that the Strategic
Planning Committee of the Board of Directors will function from and after any
fiscal year for which the Company fails to meet the applicable measurement
standards and will continue to function until the measurement standards for a
subsequent full fiscal year are fulfilled. The Strategic Planning Committee
will, under the terms of the Governance Agreement, prepare and recommend to the
Board of Directors a remedial plan intended to restore the Company to compliance
with applicable measurement standards. In the event the Company fails to meet
the measurement standards for two consecutive fiscal years, the Governance
Agreement provides that thereafter until the measurement standards for a
subsequent full fiscal year are fulfilled, in addition to the responsibilities
of the Strategic Planning Committee described above, the Strategic Planning
Committee will have the delegated power of the Board of Directors to set the
compensation and terminate the employment of the executive officers of the
Company. Under the terms of the Governance Agreement, the Strategic Planning
Committee will be comprised of the three Investor Directors, three Independent
Directors and one Management Director. While the Strategic Planning Committee
will act by the vote of a majority of its members, the Governance Agreement
provides that the Management Director serving on the Strategic Planning
Committee will not be able to break any tie vote between all the Investor
Director members, on the one hand, and all the Independent Director members, on
the other hand.
10
<PAGE>
Each director attended more than 75 percent of the combined total meetings
of the Board of Directors and its Committees on which the director served at any
time during the year.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information for the fiscal
years ended December 31, 1992, 1993 and 1994 concerning compensation paid to or
accrued by the Company on behalf of, those persons who were, at December 31,
1994, (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- ---------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINICPAL POSITION YEAR SALARY ($) BONUS ($) ($) OPTIONS (#) ($)(1)
- - -------------------------------------- --------- ----------- ----------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Edward E. Penhoet .................... 1994 $ 373,338 $ 300,000 $ -- 35,000 $ 4,500
President and Chief Executive Officer 1993 323,122 247,754 -- 32,000 7,075
1992 299,300 225,000 -- 25,000 6,866
William J. Rutter .................... 1994 373,334 300,000 -- 35,000 4,500
Chairman 1993 322,917 247,754 -- 32,000 7,075
1992 322,659 225,000 -- 25,000 6,866
William G. Green ..................... 1994 311,000 200,000 -- 10,000 4,500
Senior Vice President, Secretary and 1993 299,621 125,750 -- 17,400 7,075
General Counsel 1992 285,411 100,000 -- 0 6,866
Dennis L. Winger ..................... 1994 248,800 150,000 -- 10,000 4,500
Senior Vice President, Finance and 1993 238,750 124,860 -- 13,900 6,862
Administration, and Chief Financial 1992 222,083 140,000 -- 0 5,301
Officer
David W. Martin (2) .................. 1994 265,000 101,400 $ 81,852(3) 30,000 4,500
Senior Vice President; President,
Chiron Therapeutics
<FN>
- - ------------------------------
(1) "All Other Compensation" includes Company contributions under the Company's
401(k) Plan on behalf of each of the named executives to match pretax
elective deferral contributions (included under Salary) made by each named
executive to such plan.
(2) Dr. Martin was not employed by the Company until January 1994.
(3) In 1994, in connection with the recruitment and relocation of Dr. Martin,
the Company paid to and on behalf of Dr. Martin certain relocation expenses
totalling $81,852.
</TABLE>
11
<PAGE>
OPTION GRANTS
The following table sets forth certain information regarding grants of stock
options pursuant to the Company's 1991 Stock Option Plan during the fiscal year
ended December 31, 1994, to the named executive officers. No stock appreciation
rights were granted under that plan during fiscal year 1994.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------- POTENTIAL REALIZED VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES % OF TOTAL MARKET OF STOCK PRICE
UNDERLYING OPTIONS PRICE ON APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR DATE OF OPTION TERM (3)
GRANTED EMPLOYEES IN BASE PRICE GRANT EXPIRATION ----------------------------------
NAME (#)(1) FISCAL YEAR ($/SH)(2) ($/SH) DATE 0% ($)(4) 5% ($) 10% ($)
- - ------------------------- ---------- ------------- ----------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward E. Penhoet........ 35,000 3.05% $ 78.125 $78.125 2/18/04 $ 275,157 $1,719,634 $4,357,890
William J. Rutter........ 35,000 3.05% 78.125 78.125 2/18/04 275,157 1,719,634 4,357,890
William G. Green......... 10,000 0.87% 78.125 78.125 2/18/04 78,605 491,324 1,245,111
Dennis L. Winger......... 10,000 0.87% 78.125 78.125 2/18/04 78,605 491,324 1,245,111
David W. Martin.......... 30,000 2.62% 83.125 83.125 1/03/04 197,627 1,568,305 3,924,395
<FN>
- - ------------------------------
(1) The options become exercisable as to 25 percent of the granted shares on
the first anniversary of the date of grant and, for the balance, in equal
monthly installments over the 36-month period thereafter, so long as
service with the Company or one of its subsidiaries continues. To the
extent not already exercisable, the options generally become exercisable in
the event of an agreement to dispose of all or substantially all of the
assets or outstanding capital stock of the Company by means of sale,
merger, reorganization or liquidation. However, an outstanding option will
not be so accelerated if, in connection with such corporate transactions,
the option is either assumed or replaced with a comparable option to
purchase shares of capital stock of the successor corporation. With respect
to the shares of Common Stock subject to each such option with respect to
which the option first becomes exercisable after 1995, each optionee was
granted the right, subject to approval of stockholders, to surrender for
cancellation that portion of such option relating to 37.33 percent of such
shares in return for a cash payment from Ciba equal to (A) the difference
between $117 per share and the exercise price per share of such option
multiplied by (B) the number of shares with respect to which such option is
so surrendered and canceled. See "Proposal 2: Approval of Amended Stock
Option Plan."
(2) Upon exercise, the exercise price and any related tax withholding
obligations may generally be paid in cash, or, in the Compensation
Committee's discretion, in shares of Common Stock held by the optionee for
the requisite period to avoid a charge to Chiron's earnings and valued as
of the exercise date, or under certain conditions from the proceeds of a
same day sale of the shares acquired upon exercise of the option. The
Compensation Committee may also assist an optionee in the exercise of an
option by authorizing a loan from the Company for the purchase price and
related tax obligations.
(3) In accordance with Securities and Exchange Commission rules, there are
shown hypothetical gains or "option spreads" that would exist for the
respective options. These rules require that the gains be based on assumed
rates of annual compounded stock price appreciation of 5 percent and 10
percent from the date the options were granted over the full ten-year
option term. If these assumed rates of appreciation occur, the market price
of Chiron Common Stock in the year 2004 would be $127.26 and $202.64 per
share, respectively, at 5 percent and 10 percent annual compounded rates of
appreciation regarding option grants to Drs. Penhoet and Rutter, Mr. Green
and Mr. Winger and $135.40 and $213.94 per share, respectively, at 5
percent and 10 percent annual compounded rates of appreciation regarding
the option granted to Dr. Martin. There can be no assurance that these
assumed rates of appreciation or any appreciation will occur.
(4) The amounts shown in the table under the assumed annual rate of
appreciation of 0% for the option term are based upon the assumption that
each optionee will elect to surrender for cancellation the greatest
possible portion of the option grant in consideration for the special cash
payment from Ciba described in footnote 1 of this table. For the other
assumed annual rates of appreciation listed in the table, the disclosure
assumes that such option portion is not surrendered for cancellation, since
such a surrender would realize less gain than exercise of the option at
such assumed annual rates of appreciation.
</TABLE>
12
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides information with respect to the named executive
officers as to option exercises by them in fiscal year 1994 and the unexercised
options held by them at the end of fiscal year 1994. No stock appreciation
rights were exercised in fiscal year 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
VALUE OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(2)
SHARES ACQUIRED REALIZED ---------------------------- -------------------------
NAME ON EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------- ----------------- -------------- ----------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward E. Penhoet........ 25,000 $1,297,875 144,149 87,851 $8,095,750 $ 2,517,790
William J. Rutter........ -- -- 199,149 87,851 11,842,625 2,517,790
William G. Green......... -- -- 82,554 34,846 3,634,943 944,047
Dennis L. Winger......... -- -- 95,502 18,398 5,651,235 227,094
David W. Martin.......... -- -- 0 30,000 0 0
<FN>
- - ------------------------------
(1) Value realized is equal to market price of shares on date of exercise less
exercise price.
(2) Value is calculated based on market price of shares at fiscal year-end
($80.125), less exercise price. With respect to the shares of Common Stock
subject to each such option with respect to which such option first becomes
exercisable before or after 1995, each optionee was granted the right,
subject to approval of stockholders, to surrender for cancellation, that
portion of such option relating to 37.33 percent of such shares in return
for a cash payment from Ciba equal to (A) the difference between $117 per
share and the exercise price per share of such option multiplied by (B) the
number of shares with respect to which such option is so surrendered and
canceled. See "Proposal 2: Approval of Amended Stock Option Plan."
Including the amount that could be realized upon the exercise of such
right, the fiscal year-end value would be as follows for each of the named
executive officers: Edward E. Penhoet: Exercisable -- $10,080,178,
Unexercisable -- $3,008,117; William J. Rutter: Exercisable -- $14,584,207,
Unexercisable -- $3,008,117; William G. Green: Exercisable -- $4,771,468,
Unexercisable -- $1,103,420; Dennis L. Winger: Exercisable -- $6,065,976,
Unexercisable -- 369,421; David W. Martin: Exercisable -- $0, Unexercisable
-- $197,627.
</TABLE>
PENSION AGREEMENTS
The Company has entered into supplemental pension agreements with two named
executives: William G. Green and Dr. William J. Rutter.
Mr. Green's supplemental pension agreement is a monthly benefit for life
beginning at age 60. The benefit is based on an initial contribution of
$110,000, plus an annual contribution for each year of service until Mr. Green
is age 60, such that the annual contribution when added to the maximum employee
and Company matching contribution under the Company's 401(k) Plan and any future
retirement benefit shall not be less than $20,000. This amount shall be
increased by an assumed 7 percent interest rate compounded annually. Taking into
account certain assumptions about Internal Revenue Code limitations, and
assuming Mr. Green makes the maximum 401(k) contribution under the Chiron 401(k)
Plan, and receives the maximum matching contribution each year, the actuarial
equivalent of Mr. Green's benefit at age 65 would be $48,921 annually for life.
Dr. Rutter's benefit is meant to indemnify Dr. Rutter, up to an amount of
$10,000 in any twelve-month period, for any University of California pension
benefits he loses by reason of his change in status with the University from
full-time to part-time. From age 65, Dr. Rutter would receive annual payments
for life of approximately $6,084, increased each year by a 2.5 percent annual
cost of living adjustment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, during 1994, Chiron's Compensation Committee consisted of
Drs. Amelio, Strijkert and Schramek and Mr. Coleman.
Under the Governance Agreement, subject to certain conditions, Ciba has
agreed to nominate (and, at the end of each term, renominate) Dr. Rutter,
Chairman of the Company, for election to Ciba's Board of Directors. Dr. Krauer
has been the Chairman of the Board and Chief Executive Officer of Ciba-Geigy
13
<PAGE>
Limited since 1987. Under the terms of the Governance Agreement, Dr. Krauer is
serving on Chiron's Compensation Committee as a designee of Ciba. See
"Ciba-Geigy Transaction" above at p. 2 and "Related Transactions" below at p. 18
for a further description of Chiron's relationships with Ciba.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
Decisions on compensation of the Company's executive officers are made by
the Compensation Committee of the Board of Directors. The members of the
Compensation Committee during 1994 were all nonemployee directors. Pursuant to
Securities and Exchange Commission rules, the Compensation Committee is required
to report its rationale and the considerations that led to fundamental executive
compensation decisions as to Dr. Edward Penhoet, the Chief Executive Officer,
and Dr. William Rutter, Mr. William Green, Mr. Dennis Winger and Dr. David
Martin, the four executive officers other than Dr. Penhoet who, for 1994, were
the Company's most highly paid executives (collectively with Dr. Penhoet, the
"Senior Executives").
Chiron's executive compensation program seeks to accomplish several major
goals:
- to motivate executives to achieve important business and
individual performance objectives and to reward them when such
objectives are met;
- to recruit and subsequently retain highly qualified executive
officers by offering overall compensation which is competitive
with that offered for comparable positions in other
biotechnology and pharmaceutical companies; and
- to align the interests of executive officers with the long-term
interests of stockholders through participation in the
Company's stock option plan.
The Compensation Committee administers executive compensation to support
Chiron's business mission of becoming a leading biotechnology company. In
general, compensation and stock option awards of executive officers are not
determined by the Company's achievement of specific corporate performance
criteria. Rather, the Committee has based its decisions regarding compensation
for fiscal year 1994 for Dr. Penhoet and executive officers as a group on (i) a
qualitative evaluation of the Company's overall performance in 1994, including
the accomplishment of the strategic partnership with Ciba, the value realized by
stockholders in the related tender offer, the enhanced prospects for realizing
sustainable long-term appreciation in stockholder value through further
investment in the Company's research and development and through partnership
with and support of Ciba; (ii) analysis of compensation programs and amounts
paid for comparable benchmark positions in other biotechnology and
pharmaceutical companies and (iii) subjective assessment of each executive
officer's individual performance and, where relevant, the performance of that
officer's business unit or functional area of responsibility.
Currently, the Company's executive compensation program consists of the
following components: base salary, annual variable cash compensation and
long-term incentive opportunities in the form of stock options.
CASH COMPENSATION (SALARY AND VARIABLE COMPENSATION)
For 1994, the Compensation Committee continued the Company's approach that
base salaries for executive officers should be measured by reference to the
median (50th percentile) of salaries for benchmark positions in comparable
companies. Further, the Compensation Committee provided that a significant
- - ------------------------
(1) The material in this report and under the caption "Common Stock Price
Performance Graph" are not "soliciting material," are not deemed filed with
the Securities and Exchange Commission and are not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended, or the Exchange Act whether made before or after the date of this
Proxy Statement and irrespective of any general incorporation language
therein.
14
<PAGE>
portion of total cash compensation (salary plus variable compensation) should be
in the form of annual variable cash compensation that is "at risk", dependent on
individual, business unit and overall Company performance.
The Company has retained an independent executive compensation firm in order
to evaluate the appropriateness of the Company's executive compensation program.
That firm has provided the Compensation Committee with annual survey data
including analyses of comparable positions from a group of biotechnology and
pharmaceutical companies. The survey information serves as a general reference
for the Company and the Compensation Committee. In addition, survey information
(i) regarding the base salaries of comparable positions in the survey group at
approximately the 50th percentile level is used as a reference to assess whether
executive officer salary levels generally are competitive and (ii) regarding
aggregate cash compensation of comparable positions in the survey group at
approximately the 75th percentile level is a factor considered in establishing
the upper end of the range of potential aggregate cash compensation for
executive officers. However, because of many other factors, including those
described above and the inherent lack of comparability between any individual
officer's responsibilities, performance, and value to the Company and the
average information from the survey group, no element of any executive officer's
compensation is determined solely or principally by reference to the survey
information. The survey group included biotechnology and pharmaceutical
companies with median sales for 1994 of approximately $800 million and executive
positions comparable in level and scope of responsibility to the executive
positions within the Company. The Common Stock Performance Graph on p. 18 of
this Proxy Statement provides stock performance information for groups of
companies that include some, but not all, of the companies included in the
survey data. For 1994, the average of all Company executive officer base
salaries was slightly below the median of base salaries for comparable positions
in the survey group and the average of total cash compensation (salary and
variable compensation) for all Company executive officers was approximately at
the median for total cash compensation for comparable positions in the survey
group.
LONG-TERM INCENTIVES -- STOCK OPTIONS
The Compensation Committee believes that stock option awards under the
Company's 1991 Stock Option Plan serve to align the long-term interests of the
Company's executive officers with those of its stockholders and assist in
retention of executives.
Under the Company's 1991 Stock Option Plan, the Company's executive officers
are eligible to receive grants of options to purchase shares of the Company's
Common Stock. The options are generally granted upon initial employment and
annually thereafter with exercise prices generally equal to prevailing market
price on the date of grant and, therefore, will have value to the executive only
to the extent that the market price for the Company's stock increases. Stock
options generally become exercisable or "vest" in increments over four (4)
years, so long as service with the Company continues.
COMMITTEE PROCEDURES AND CONSIDERATIONS REGARDING 1994 EXECUTIVE COMPENSATION
Annually, in the early part of each fiscal year, the Compensation Committee
meets to consider Company performance and the performance of each executive
officer. For 1994, this meeting occurred on February 23 and 24, 1995. The
Committee reviewed the performance of the Company and the executive officers,
other than the Senior Executives, and approved the base salary for 1995 and the
variable compensation for performance in 1994 for each of them. The Committee
then sought input from Drs. Penhoet and Rutter, the Chief Executive Officer and
the Chairman of the Board, and other officers of the Company, as to performance
evaluations and compensation for each Senior Executive other than Drs. Penhoet
and Rutter. The Committee met in executive session to consider the performance
of Dr. Penhoet and each of the Senior Executives. The Committee also met with
the remaining members of the Board on February 24, 1995 to consider further the
performance of Drs. Rutter and Penhoet. The Committee then approved the base
salary for 1995 and the variable compensation for performance in 1994 for each
of the Senior Executives. Similar meetings occurred in February 1994 to review
performance for 1993 and determine each executive officer's base salary for
1994.
15
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Base salaries for executive officers, including the Senior Executives, were
established by the Compensation Committee after considering the survey
information concerning corresponding elements of compensation for comparable
positions from the survey group of companies, as described above, as well as
subjective criteria as to individual, business unit and Company performance.
For 1994, the Compensation Committee concluded that the Company's overall
performance in 1994 justified the favorable consideration of all executive
officers, including Dr. Penhoet, for the awards of variable compensation. The
principal factors which were then used to fix each officer's individual award
were a subjective analysis of that individual's performance and the survey
information concerning corresponding elements of compensation for comparable
positions from the survey group of companies, as described above.
The Compensation Committee, acting on the recommendation of an independent
compensation consulting firm, granted options to executive officers, including
the Senior Executives, in 1994. The amounts of such option grants to the Senior
Executives are set out in the option grant table on page 12. In making annual
grants for 1994 to executive officers, the Committee took into account a
subjective evaluation of individual and business unit performance by each
executive officer and the expected future contributions of each executive
officer. The Committee did not consider, in determining the size of the option
awards, the amounts of options already outstanding or previously granted and the
aggregate size of the current awards.
CHIEF EXECUTIVE OFFICER COMPENSATION
While Dr. Penhoet has the title President and Chief Executive Officer, many
senior managerial responsibilities are shared between Drs. Penhoet and Rutter.
Effective February 1, 1994, the Compensation Committee had approved for Dr.
Penhoet a salary for 1994 of $375,000, representing an increase of approximately
15 percent and, on February 24, 1995, the Committee approved a variable
compensation award for 1994 for Dr. Penhoet of $300,000. The Committee fixed the
base salary and variable compensation of Dr. Penhoet after considering (i) his
steady and dedicated work in building long-term stockholder value through
employee development and skillful management of valuable technologies, (ii) his
outstanding management guidance during an especially busy year, in particular in
forming the Ciba alliance and (iii) his ability to work effectively and
harmoniously with the Chairman and the Board and many external and internal
constituencies. Effective February 1, 1994, the Compensation Committee approved
for Dr. Rutter a salary for 1994 of $375,000, representing an increase of
approximately 15 percent and, on February 24, 1995, the Committee approved a
variable compensation award for 1994 for Dr. Rutter of $300,000. The
Compensation Committee's decisions regarding Dr. Rutter's compensation were
based upon his strategic vision and leadership of the Company. The Committee
also considered corresponding elements of compensation for comparable positions
from the survey group of companies. The base salary and total compensation of
each of Drs. Rutter and Penhoet were below the median of such group.
As described above, the Compensation Committee, acting on the recommendation
of an independent compensation consulting firm, granted options to Dr. Penhoet
and other Senior Executives in 1994, in the amounts set out in the option grant
table on p. 12. The award to Dr. Penhoet was based on, among other things,
information on his total compensation as well as a subjective assessment of his
past performance and his anticipated future contributions to the Company's
attainment of its long-term business goals.
As indicated in the option exercise table on p. 13 above, in 1994, Dr.
Penhoet exercised stock options that were granted to him in 1987 and which
expire in 1997. The options had an exercise price per share equal to the market
price of a share of the Company's Common Stock on the date the options were
granted, and became exercisable or "vested" in increments with Dr. Penhoet's
continued employment with the Company. Thus, the amount realized by Dr. Penhoet
through exercise of the options resulted directly and solely from appreciation
in the Company's stock price during his tenure as the chief executive officer of
the Company.
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DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION
Recently enacted Section 162(m) of the Internal Revenue Code ["Section
162(m)"] limits federal income tax deductions for compensation paid to each of
the Chief Executive Officer and the four other most highly compensated officers
of a public company to $1 million per year, but contains an exception for
performance-based compensation that satisfies certain conditions.
The Company is proposing a 1995 Executive Officer Variable Cash Compensation
Plan for the approval of stockholders at the Annual Meeting (see "Proposal 3:
Approval of 1995 Executive Officer Variable Cash Compensation Plan" at p. 33
below) which it believes will permit variable cash compensation awards in the
future to qualify for the performance-based exception to the deduction limit.
The Company also believes that stock options granted to its executives qualify
for the performance-based exception to the deduction limit. However, because
final regulations have not been issued under Section 162(m), there can be no
assurance that the variable cash compensation or the options will so qualify.
Based on proposed regulations and commentary thereto, final regulations issued
under Section 162(m) might require, as a condition to continuing exemption,
certain changes to the composition of the Compensation Committee that may not be
acceptable to the Board of Directors, because they would exclude representation
of Ciba. If such regulations do require such changes and such changes are not
made, compensation paid to named executive officers under such stock options and
awards would generally cease to be exempt from the limitation of Section 162(m)
on and after the first annual meeting of stockholders at which directors are to
be elected that is held on or after January 1, 1996. However, compensation paid
under stock options that were granted on or before February 17, 1993 would
continue to be exempt.
Certain cash payments to be made by Ciba to holders of Chiron stock options
on November 20, 1994, including executive officers, are being specifically
considered by stockholders for approval at the Annual Meeting (see "Proposal 2:
Approval of Amended Stock Option Plan -- Special Cash Payments Related to Ciba
Transaction" at pp. 29-30 below), but, under proposed regulations issued by the
Internal Revenue Service, will not be exempt from application of Section 162(m)
even if specifically approved by the stockholders.
COMPENSATION COMMITTEE
Gilbert F. Amelio, CHAIRMAN
Lewis W. Coleman
Alex Krauer
Henri Schramek
Pieter J. Strijkert
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COMMON STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total stockholder return on the Common
Stock of Chiron for the five years ended December 31, 1994, with the cumulative
total return on the NASDAQ Global Stock Index, the NASDAQ Pharmaceuticals Stock
Index and the Hambrecht & Quist Health Care Stock Index over the same period.
The graph assumes $100 were invested on December 31, 1989, in Chiron, and each
of the three indices, and that dividends were reinvested. On November 21, 1994,
Chiron and Ciba announced a series of transactions through which, among other
things, Ciba would acquire approximately 49.9 percent of the outstanding Common
Stock of the Company, including the purchase of up to 11,860,467 shares of
Chiron Common Stock at $117 per share through a partial tender offer. On
December 31, 1994, the tender offer was still outstanding. The tender offer
closed on January 4, 1995 (effective January 1, 1995). The comparisons in the
graph are required by the Securities and Exchange Commission and are not
intended to forecast or be indicative of possible future performance of the
Company's Common Stock.
12/31/89 = 100
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Chiron Stock 100.0000 154.3860 244.7368 198.2456 294.7368 282.0175
NASDAQ - Global Stock Index 100.0000 85.0171 135.7082 157.3592 181.1530 175.2528
NASDAQ Pharmaceuticals 100.0000 119.9468 318.7806 265.5303 236.6343 178.3964
H&Q Health Care 100.0000 144.0185 349.9190 300.0694 233.1971 235.1870
</TABLE>
RELATED TRANSACTIONS
From April 1987 through December 31, 1994, Chiron and an affiliate of Ciba
each owned a 50 percent equity interest in The Biocine Company, a joint venture
partnership formed for vaccine research. This joint venture contributed 9
percent of Chiron's 1994 revenues. In 1994, Ciba funded, at Chiron's request,
Ciba's 50 percent share of the venture's expenses as well as $15 million of
Chiron's share of the venture's expenses and assumed related losses in exchange
for a preferred interest in future profits and cash flow from The Biocine
Company. In 1992, Chiron and Ciba acquired the vaccine business of Sclavo SpA of
Siena, Italy and renamed this business Biocine SpA. Through December 31, 1994,
Chiron and Ciba each owned 50 percent of Biocine SpA and shared equally in its
management, profits and losses and capital funding requirements.
In November 1994, Chiron and Ciba entered into an Investment Agreement (the
"Investment Agreement") which provided for the creation of a strategic
partnership between the two companies and a partial tender offer by Ciba to
purchase approximately 38 percent of the Company's outstanding Common Stock and
the sale by Ciba to Chiron of its interests in The Biocine Company and J.V. Vax
B.V. as well as all of the
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issued and outstanding shares of Ciba Corning Diagnostics Corp. ("the Ciba
Biocine Business" and "CCD Shares"), in consideration for which Chiron sold to
Ciba 6,600,000 shares of Chiron Common Stock and made a cash payment to Ciba of
$24 million. The partial tender offer by Ciba and sale to Chiron of the Ciba
Biocine Business and CCD Shares were completed on January 4, 1995 (effective
January 1, 1995) (the "Closing").
The Investment Agreement provides that, after the Closing, Ciba shall issue
to a bank selected by Ciba and reasonably acceptable to the Company (the
"Selected Bank") a guarantee for the benefit of the Company (the "Ciba
Guarantee") pursuant to which Ciba will guarantee for the benefit of the Company
a credit facility provided by the Selected Bank. The principal amount of the
Credit Facility that may be outstanding at any time is $425 million (the
"Maximum Borrowing Amount"), except that the Maximum Borrowing Amount shall be
reduced by $1.50 for each $1.00 in additional funding (up to $50 million in such
additional funding) requested by the Company under the Research and Development
Support Agreement described below. The Company shall repay any outstanding
amounts under the Credit Facility to the extent such amounts exceed the Maximum
Borrowing Amount. The Company may not borrow or reborrow any amounts under the
Credit Facility after the fifth anniversary of the Closing unless Ciba and the
Company otherwise agree.
The Investment Agreement provides further that simultaneously with the
issuance of the Ciba Guarantee, the Company shall execute and deliver a
reimbursement agreement (the "Reimbursement Agreement") pursuant to which the
Company will agree to reimburse Ciba for any payments made by Ciba pursuant to
the Ciba Guarantee as well as all reasonable out-of-pocket costs and expenses
incurred by Ciba in connection with the Ciba Guarantee. The Company's
obligations under the Reimbursement Agreement will be fully collateralized by
any collateral, including equity securities of the Company, that is reasonably
acceptable to Ciba. The Reimbursement Agreement also will contain a negative
pledge covenant with respect to the collateral and such other terms and
conditions as are customary to reimbursement agreements of its type.
Pursuant to the Investment Agreement, as soon as practicable after the
Closing, Ciba and the Company shall negotiate in good faith the terms of a
Research and Development Support Agreement, which shall contain the following
terms: (i) during the period commencing on January 1, 1995 and ending on
December 31, 1999 (the "Funding Period"), the Company shall be entitled to
present from time to time proposals for research and development programs ("R&D
Ventures") that the Company shall desire Ciba to fund or partially fund; (ii)
subject to the limitations set forth below, Ciba will fund its share of all
development costs of R&D Ventures, which shall be 100 percent, or such lesser
amount as the parties may agree (but not in excess of the maximum funding
provided for in the Investment Agreement); (iii) the obligation of Ciba to fund
R&D Ventures shall be subject to the following limitations: (a) in no event
shall Ciba be obligated to provide funding to the Company in any calendar year
during the Funding Period for R&D Ventures in an amount in excess of (x) $75
million in 1995 and (y) for calendar years thereafter, in equal annual portions
of the remaining unexpended aggregate amount under (b) below; and (b) in no
event shall (x) the aggregate amount of funding provided to the Company by Ciba
LESS (y) the aggregate amount of any payments to or profits paid or earned by
Ciba in connection with any product or products developed in any R&D Venture at
any time during the Funding Period exceed $250 million; provided, however, that
such amount may be increased, at the Company's request, to up to $300 million in
consideration of a reduction in the Maximum Borrowing Amount (as defined above)
at the rate of $1.00 of increased research and development funding for each
$1.50 reduction of the Credit Facility; (iv) in consideration of the funding
provided by Ciba for the R&D Ventures, and subject to the Company's buy-out
right described below, but without thereby guaranteeing the successful
conclusion of any project included in the R&D Ventures, the Company shall offer
Ciba the opportunity to share in the market opportunities with respect to any
product or products resulting from the R&D Ventures, which may be in the form of
royalties, profit sharing or participation in distribution or sales activities
in selected geographic markets or otherwise; and (v) the Company shall have the
right, but not the obligation, with respect to R&D Ventures to repurchase all of
the rights granted to Ciba upon tender by the Company to Ciba of payment in the
amount of the Buyout Amount (as described below) in effect at the time of such
payment for R&D Ventures; provided that such right shall expire if such tender
is not made prior to January 1, 2002. The "Buyout Amount" means, as of any time,
the amount equal to (i) the sum of all R&D
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funding payments made by Ciba to the Company prior to such time, PLUS (ii) a
reasonable return on such payments which shall be agreed to by the parties upon
commencement of the research and development program and which shall represent
the time of value of money, LESS (iii) the aggregate amount of all payments or
profits received by Ciba in connection with R&D Ventures, LESS (iv) a reasonable
return on such payments which shall represent the time value of money. The
Company shall be entitled to make the payment of the Buyout Amount in the form
of cash or Common Stock, or a combination of the two.
Ciba and the Company have also entered into the Cooperation and
Collaboration Agreement regarding research and development collaborations,
marketing and manufacturing arrangements, access of each party to the other
party's technology and reciprocal most favored nation rights regarding certain
licenses. Each party will be the preferred collaborator of the other with
respect to research and development projects and activities in specific areas of
identified interest. Under the Cooperation and Collaboration Agreement, each
party has a right of first negotiation with respect to collaborations with the
other party regarding certain research and development projects. The first such
collaboration project contemplated by the parties is in the field of
combinatorial chemistry. Neither party to such agreement, has the right to enter
into any material research and development collaboration related to the
Company's strategic mission with any third party if such third party's only
material contribution to the collaboration is expected to be funding, unless
such party has first offered the other party hereto the opportunity to enter
into such collaboration on the same terms as such third party, provided that
such restrictions shall not apply to collaborations with non-commercial sources
of funding, including grants, or to financing arrangements with third parties in
which the consideration to the third party is the return on financing. In
addition, under the Cooperation and Collaboration Agreement, the parties have
(x) a reciprocal right of first refusal with respect to marketing certain
products developed by the other party or with respect to which the other party
has the right to market and (y) a reciprocal right of first negotiation with
respect to manufacturing certain products developed by the other party or with
respect to which the other party has the right to manufacture.
Under the Governance Agreement, so long as Ciba has the right to designate
for nomination at least one Investor Director, subject to certain exceptions, if
the Board of Directors authorizes the issuance of any Equity Securities after
the Closing, Ciba will have the right to purchase its Pro Rata Share of such
securities. As used herein, "Pro Rata Share" means the fraction of an entire
issuance of securities, the numerator of which shall be the number of shares of
Common Stock owned by Ciba and its affiliates (other than the Company and its
subsidiaries) immediately prior to such issuance of such securities and the
denominator of which shall be the aggregate number of shares of Common Stock
outstanding immediately prior to such issuance of such securities. If Ciba shall
elect to purchase any such securities, such securities will be issued and sold
to Ciba by the Company at the same time and on the same terms and conditions as
the new securities are issued and sold to third parties (except that, if such
securities are issued for consideration other than cash, Ciba shall pay the fair
market value thereof, as determined in accordance with the Governance Agreement.
Ciba and the Company have also entered into the Market Price Option
Agreement pursuant to which Ciba shall have the right to purchase shares
directly from the Company under the circumstances described below. Pursuant to
the Market Price Option Agreement, the Company granted to Ciba Biotech
Partnership, Inc. (hereinafter "Ciba Biotech") an irrevocable option (the
"Option") to purchase on each exercise closing date, on the terms and subject to
the conditions set forth therein, up to the number of newly-issued shares (the
"Option Shares") equal, as of the related Exercise Date (as defined below), to
the number of Shares that Ciba would be permitted to purchase from persons other
than the Company as of such Exercise Date under the Governance Agreement.
The Market Price Option Agreement provides that the Option may be exercised
by Ciba Biotech (or its designee, which designee must be Ciba or a direct or
indirect wholly owned subsidiary of Ciba), in whole or in part, at any time, or
from time to time (the date of any such exercise being referred to as an
"Exercise Date"), during the period beginning upon the Closing and ending on the
date that Ciba and its affiliates become the beneficial owners of all
outstanding shares of Equity Securities, so long as an Exercise Condition (as
defined below) shall exist on such Exercise Date; provided, however, that Ciba
Biotech may not exercise the Option at any time unless it owns Equity Securities
representing at least 30 percent of the aggregate
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<PAGE>
number of votes entitled to be voted in an election of directors of the Company
by all the outstanding voting stock. The Option may be repeatedly exercised by
Ciba Biotech; provided, however, that each exercise of the Option for fewer than
the maximum number of Shares then issuable pursuant to an exercise of the Option
shall be for at least that number of shares that results in a purchase price of
$1 million.
Pursuant to the Market Price Option Agreement an "Exercise Condition" shall
exist if any of the following conditions are satisfied: (i) Ciba Biotech
concludes that it is in any way legally (including as a result of any
regulation) restricted from purchasing or otherwise acquiring any Equity
Securities from any person other than the Company, including any restriction
resulting from Ciba Biotech's possession of any non-public material information
regarding the Company; (ii) Ciba Biotech concludes that there is insufficient
liquidity in the open market to permit it to (A) purchase on the open market the
amount of Equity Securities it desires to purchase within the time period during
which it desires to make such purchases or (B) make such purchases within such
time period without such purchases unduly affecting the price of any of such
Equity Securities, in which case the Option may be exercised to the extent of
such insufficient liquidity as determined by Ciba Biotech, or (iii) Ciba's
Percentage Interest is below 50 percent and Ciba Biotech desires, and is
permitted under the Governance Agreement, to increase Ciba's Percentage Interest
to a percentage exceeding 50 percent; provided that if as of any Exercise Date
the only existing Exercise Condition is the condition specified in clause (iii)
above, then Ciba Biotech shall not purchase through the exercise of the Option
on such date any Shares that would increase Ciba's Percentage Interest to
greater than 51 percent. The purchase price for any Shares purchased pursuant to
an exercise of the Option shall be the Fair Market Value of such shares as
defined in the Market Price Option Agreement.
Ciba and the Company have also entered into the Subscription Agreement
pursuant to which the Company shall have the right, exercisable at any time and
from time to time during the eleven year period following the Closing, to
require Ciba Biotech to acquire Common Stock of the Company directly from the
Company at Fair Market Value (as defined below) up to the Subscription Amount.
"Subscription Amount" means, initially $500 million, and thereafter, such amount
as reduced by the aggregate price paid from time to time after the Closing by
Ciba Biotech or any of its affiliates to the Company or any subsidiary of the
Company for each purchase from the Company or any subsidiary of the Company of
any Equity Securities of the Company by any of them, whether pursuant to the
Market Price Option Agreement, the Governance Agreement, the Subscription
Agreement or otherwise except for (i) purchases by Ciba Biotech or its
affiliates in connection with collaborations entered into by Ciba Biotech or its
affiliates and the Company in accordance with the terms of the Cooperation and
Collaboration Agreement or (ii) Equity Securities issued to Ciba or its
affiliates in accordance with the terms of the Research and Development Support
Agreement. Ciba Biotech's obligation to purchase any shares pursuant to the
Subscription Agreement will be subject to the satisfaction as of the applicable
closing date of certain conditions.
The Governance Agreement provides that the Company will not enter into any
material transaction with Ciba or any of its affiliates after the Closing (other
than those expressly contemplated by the Investment Agreement, the Governance
Agreement or any other ancillary agreement) unless a majority of the Independent
Directors or holders of a majority of the voting power of the voting stock which
is held by unaffiliated stockholders approve such transaction.
Under the terms of the Investment Agreement, all holders of options to
acquire shares of Common Stock under Chiron's 1991 Stock Option Plan on November
20, 1994, including executive officers and directors of the Company, were
granted certain cash payment rights in connection with the Ciba transaction.
These cash payment rights are discussed below under "Proposal 2: Approval of
Amended Stock Option Plan -- Special Cash Payments Related to Ciba-Geigy
Transaction" at pp. 29-31 and incorporated into this section of the Company's
Proxy Statement by reference. The Company agreed that if any such cash payments
by Ciba to Chiron executive officers, alone or when aggregated with other
compensation payable to any such executive officers, constitute an "excess
parachute payment" within the meaning of Section 280G of the Internal Revenue
Code and/or would subject such individuals to a tax under Section 4999 of the
Internal Revenue Code, the Company may pay such executive officers such
additional amount or amounts as shall be necessary to assure that, on any date,
the net after-tax amount realized by such executive officers from the
compensation paid as a result of such cash payments from Ciba plus such
additional amount shall equal the
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net after-tax amount that such individuals would have realized from the cash
payment from Ciba if such additional tax were not imposed. The Internal Revenue
Code's excess parachute provisions generally provide that if parachute payments
exceed three times an individual's average compensation for the five tax years
preceding the triggering event, the Company loses its deduction and the
recipient is subject to a 20 percent excise tax for the amount of the parachute
payments in excess of such average compensation. Although the Company does not
believe that any such cash payment by Ciba would constitute an "excess parachute
payment", it nevertheless has agreed to so indemnify its executive officers in
the event that such additional tax is imposed.
In 1990, the Company entered into agreements with Bios Chile ("Bios"), a
Chilean biotechnology company in which Dr. Pablo Valenzuela, Senior Vice
President, holds an ownership interest. Dr. Bernardita Mendez, Vice President,
Regulatory and Quality Affairs, who is married to Dr. Valenzuela, is the
daughter of the general manager of Bios. Under the agreements, as amended: (a)
Dr. Valenzuela will be permitted to contribute up to 20 percent of his work time
in any year to Bios; (b) Chiron acquired 19 percent of the outstanding stock of
Bios upon payment of $100,000, plus an option to acquire up to 50 percent of the
outstanding stock upon payment of an additional $100,000; (c) Chiron will
contribute equipment to Bios with a value of $250,000 in the first year of the
agreement and $50,000 a year for ten years thereafter; (d) Chiron will pay a
maximum of $25,000 per year for each of the next ten years for reasonable costs
and expenses incurred by Dr. Valenzuela while performing services for Bios. In
return, Bios will perform research services for Chiron valued at not less than
$200,000 in the first year of the agreement and $50,000 a year for ten years
thereafter. Chiron will have the right to commercialize, outside Latin America,
any product of Bios and Bios will have the right to sell certain Chiron reagents
for research purposes. In fiscal year 1994, the Company paid to Bios a total of
$228,480 under various provisions of the above-mentioned agreements.
Mr. Lewis Coleman, a director of the Company, is Chief Financial Officer of
BankAmerica Corp. During fiscal year 1994, the Company paid $90,000 to a
BankAmerica Corp. subsidiary in fees incurred in the ordinary course of business
in connection with the management of a portion of Chiron's investment portfolio.
The Company also maintains routine banking relationships with Bank of America
N.T. & S.A., a subsidiary of BankAmerica Corp. The Company believes that fees
and costs associated with all of these services are customary and reasonable in
relation to the services rendered.
In September 1990, Mr. William Green, Senior Vice President, Secretary and
General Counsel, entered into an agreement with the Company which provides that
the Company will maintain life insurance for him in the amount of $500,000 and
that in the event Mr. Green's contributions or premiums associated with health
or dental insurance exceed $4,500 in any year, the Company will pay the excess.
Mr. Green's agreement with the Company further provides that in the event the
Company terminates his employment without cause, all options to purchase shares
of Common Stock of the Company granted to Mr. Green on his date of hire will
immediately vest.
In March 1993, the Company provided a loan of $1,000,000 to Dr. William J.
Rutter, Chairman of the Board, to assist him in the renovation of a residence.
The loan bore an interest rate equal to the average yield on the Company's
aggregate investment portfolio adjusted quarterly and was due in full on or
prior to March 3, 1998. The loan was secured by a second deed of trust on the
property and a pledge of stock whereby Dr. Rutter granted Chiron a security
interest in 45,000 shares of Chiron Common Stock owned by him. On December 30,
1994, Dr. Rutter repaid in full the amount outstanding on the loan. During the
fiscal year ended December 31, 1994, the largest aggregate amount of
indebtedness outstanding on the loan was $1,032,031.
The Company has made several loans to Dr. Dino Dina, Vice President,
Vaccines Research, and President, The Biocine Company, to assist him in the
rebuilding of his residence following its destruction in the October 1991
Oakland/Berkeley fire and pending resolution of insurance coverage disputes. The
first loan, made in 1992, was for $400,000 at a variable prime interest rate and
was due in full on or prior to September 11, 1995. The second loan, made in
December 1992 and January 1993, was for a total of $200,000 at a variable prime
interest rate and was due in full on or prior to December 8, 1995. On April 1,
1993, the
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Company loaned Dr. Dina an additional $200,000 at a variable prime interest
rate. The loan was due in full on or prior to April 1, 1996. The loans were
secured by a second deed of trust on the property and a pledge of stock whereby
Dr. Dina granted Chiron a security interest in 10,000 shares of Chiron Common
Stock owned by him. On April 12, 1994, Dr. Dina repaid in full the amount
outstanding on the first loan made in 1992 and partially repaid the second loan.
As of December 31, 1994, the amount outstanding on the remaining loans to Dr.
Dina, including interest, was $294,387. The largest aggregate amount of
indebtedness outstanding during the fiscal year ended December 31, 1994 on the
three loans to Dr. Dina was $864,186. On January 31, 1995, Dr. Dina repaid in
full the amounts outstanding on the two remaining loans.
Pursuant to the provisions of an executive loan program adopted by the Board
of Directors to promote stock ownership by executive officers, in December 1993,
the Company provided a loan of $408,000 to Dr. Dina to enable him to purchase
34,000 shares of Chiron Common Stock through the exercise of a stock option.
Under the terms of the program, Dr. Dina agreed: (1) to pledge to the Company
34,000 shares of Chiron Common Stock acquired by him as security for the loan;
(2) that the shares will be subject to an additional restriction on transfer
which will lapse as to fifty percent (50 percent) of the shares after one year
and the remainder after two years and (3) that in the event he leaves the employ
of the Company prior to the lapse of the transfer restriction, for any reason
other than death or permanent disability, the shares then subject to a
restriction on transfer will be subject to repurchase by the Company at the
original stock option exercise price. The loan bore an interest rate equal to
the average yield on the Company's aggregate investment portfolio adjusted
quarterly and was due in full on or prior to December 8, 1998. As of December
31, 1994, the amount outstanding on the loan to Dr. Dina, including interest,
was $426,571. During the fiscal year ended December 31, 1994, the largest amount
of indebtedness outstanding on the loan was $426,571. On January 31, 1995, Dr.
Dina repaid in full the amount outstanding on this loan.
In October 1993, the Company provided a loan of $1,000,000 to Dr. Edward E.
Penhoet, President and Chief Executive Officer, to assist him in the purchase of
a parcel of real property. The loan bore an interest rate equal to the average
yield on the Company's aggregate investment portfolio adjusted quarterly and was
due in full on or prior to October 21, 1998. The loan was secured by a second
deed of trust on the property. As additional security for the loan, Dr. Penhoet
agreed to transfer to the Company, when acquired, stock underlying vested stock
options to purchase 30,651 shares of Chiron Common Stock held by him. On
December 29, 1994, Dr. Penhoet repaid in full the amount outstanding on the
loan. During the fiscal year ended December 31, 1994, the largest aggregate
amount of indebtedness outstanding on the loan was $1,051,262.
In September 1994, the Company provided a loan of $200,000 to Dr. William J.
Link, Vice President of the Company and Chief Executive Officer of Chiron Vision
Corporation, to assist him in financing his principal residence. The loan has a
fixed interest rate of 7.75 percent and is due in full on or prior to September
2, 1999. The loan is secured by a second deed of trust on the property. As of
December 31, 1994, the amount outstanding on the loan to Dr. Link, including
interest, was $203,884. The largest aggregate amount of indebtedness outstanding
during the fiscal year ended December 31, 1994 on the loan to Dr. Link was
$203,884.
In October 1993, the Company provided a loan of $400,000 to Dr. Mickey S.
Urdea, Vice President, Nucleic Acid Systems Research and Development, to assist
him in the renovation of a residence. The loan bears an interest rate equal to
the average yield on the Company's aggregate investment portfolio adjusted
quarterly and is due in full on or prior to October 11, 1995. The loan is
secured by a second deed of trust on the property and a pledge of stock whereby
Dr. Urdea granted Chiron a security interest in 3,105 shares of Chiron Common
Stock held by him. As of December 31, 1994, the amount outstanding on the loan
to Dr. Urdea, including interest, was $391,368. The largest aggregate amount of
indebtedness outstanding during the fiscal year ended December 31, 1994 on the
loan to Dr. Urdea was $399,288.
In February 1994, in connection with his recruitment and relocation, the
Company provided a loan of $450,000 to Dr. David Martin, Senior Vice President,
and President, Chiron Therapeutics, to assist him in the purchase of a
residence. The loan bears a variable prime interest rate and is due in full on
or prior to February 9, 1999. The loan is secured by a second deed of trust on
Dr. Martin's property in Pennsylvania. As
23
<PAGE>
of December 31, 1994, the amount outstanding on the loan to Dr. Martin,
including interest, was $458,790. The largest aggregate amount of indebtedness
outstanding during the fiscal year ended December 31, 1994 on the loan to Dr.
Martin was $461,185. In 1994, in connection with the recruitment and relocation
of Dr. Martin, the Company paid to and on behalf of Dr. Martin certain
relocation expenses totalling $81,852.
In August 1994, the Company provided a loan of $200,000 to Mr. Dennis L.
Winger, Senior Vice President and Chief Financial Officer, to assist him in the
purchase of real property. The loan bears an interest rate of 7.25 percent and
is due in full on or prior to June 1, 1996. The loan is secured by a second deed
of trust on Mr. Winger's residence. As of December 31, 1994, the amount
outstanding on the loan to Mr. Winger, including interest, was $200,000. The
largest aggregate amount of indebtedness outstanding during the fiscal year
ended December 31, 1994 on the loan to Mr. Winger was $200,358.
The Company has indemnification agreements with directors that (i) confirm
the present indemnity provided to them by the Company's Bylaws and give them
assurances that this indemnity will continue to be provided despite future
changes in the Bylaws and (ii) provide that, in addition, the directors shall be
indemnified to the maximum extent permitted by law against all expenses
(including attorneys' fees), judgments, fines, and settlement amounts incurred
or paid by them in any action or proceeding, including any action by or in the
right of the Company, on account of their service as a director, officer or
similar official of any other company or enterprise when they are serving in
such capacities at the request of the Company. The indemnification agreements
further provide that expenses incurred by a director in such cases shall be paid
by the Company in advance, subject to the director's obligation to reimburse the
Company in the event it is ultimately determined that the director is not
entitled to be indemnified for such expenses under any of the provisions of the
indemnification agreement. However, no indemnity will be provided to any
director under the agreements as described in clause (ii) of the first sentence
of this paragraph on account of conduct which is finally adjudged to be
knowingly fraudulent, deliberately dishonest, or to constitute willful
misconduct. In addition, no indemnification will be provided if a final court
adjudication shall determine that such indemnification is not lawful, or in
respect of any suit in which judgment is rendered against a director for an
accounting of profits made from a purchase or sale of securities of the Company
in violation of Section 16(b) of the Exchange Act, as amended, or of any similar
statutory provision, or on account of any remuneration paid to a director which
is finally adjudged to have been paid in violation of law. The indemnification
agreements also contain provisions designed to protect the Company from
unreasonable settlements or redundant legal expenditures.
PROPOSAL 2:
APPROVAL OF AMENDED STOCK OPTION PLAN
GENERAL
The Board of Directors has adopted, subject to stockholder approval, an
amended Chiron 1991 Stock Option Plan ("Plan" or "1991 Plan"), amended to
include:
(1) A limit to the number of shares with respect to which awards may be made
under the Plan to a single individual during the term of the Plan to 1 million
shares. The limit on the number of shares with respect to which awards may be
made under the Plan to a single individual is intended to assure that, if
certain other conditions are satisfied, stock options and stock appreciation
rights and certain other awards granted under the Plan will not be subject to
the $1 million annual deduction limit on executive compensation imposed by
Section 162(m) of the Internal Revenue Code, enacted in 1993.
(2) The provisions required to implement the Investment Agreement to permit
Ciba to make certain cash payments to employees and directors who held stock
options on November 20, 1994. The cash payment rights allow holders of stock
options to participate in the value inherent in the Ciba tender offer without
requiring immediate exercise of their options. These payment rights are
described under "Special Cash Payments Related to Ciba-Geigy Transaction".
In addition, in August 1993, the Board adopted an amendment to the Plan
which did not require stockholder approval to provide that, except for
Substitute Options as defined in the 1991 Plan, Fair Market
24
<PAGE>
Value of a share of Common Stock on any relevant date will be the average
between the reported high and reported low price on the date in question of one
share of Common Stock on the NASDAQ National Marketing System, rather than being
based on a ten (10) day average as had previously been used to determine Fair
Market Value under the 1991 Plan.
The 1991 Plan was adopted originally by the Board of Directors ("Board") on
June 14, 1991 and, as subsequently amended, was approved by stockholders on
December 10, 1991 and May 13, 1993. As of January 1, 1995, approximately 1,639
employees (including officers and directors), 63 independent contractors and
consultants, and 9 nonemployee directors are eligible to participate in the
Plan. The Plan, as proposed to be amended ("Amended Plan"), is attached as Annex
1, to which reference is made for a complete statement of the Plan provisions.
The market price of Chiron Common Stock on December 31, 1994 was $80.125. The
following summary of certain amended Plan provisions is qualified, in its
entirety, by reference to the Amended Plan.
GENERAL DESCRIPTION OF CHIRON 1991 STOCK OPTION PLAN AS AMENDED
Pursuant to Securities and Exchange Commission rules, the Plan is described
below in its entirety, incorporating the proposed amendments.
PURPOSE
The purpose of the Plan is to enable Chiron to attract and retain employees,
including officers and directors, nonemployee directors, independent contractors
and consultants and to offer incentives and rewards that will encourage such
individuals to acquire a proprietary interest in the Company, and to continue in
the service of the Company and its subsidiaries.
ADMINISTRATION
The Plan is administered by a committee or committees (the "Committee")
appointed by the Board from among its members. Administration of the Plan with
respect to officers subject to Section 16 of the Exchange Act will be by members
who are "disinterested persons" as that term is defined in Rule 16b-3 under that
Act. The Committee is generally authorized to construe and interpret the Plan,
to establish appropriate rules and regulations, to select employees, independent
contractors and consultants of the Company and its subsidiaries for
participation and to specify the terms of awards granted under the Plan. Members
of the Committee may be removed by the Board. In determining the terms,
conditions and amount of each award, the Committee may take into account various
criteria, including, among others, salary grade and performance of individuals.
Chiron will pay all costs of administration of the Plan. The cash proceeds
received by Chiron from the issuance of shares pursuant to the Plan will be used
for general purposes.
SHARES AND TERM
The stock subject to awards granted under the Plan is Chiron's authorized
but unissued or reacquired Common Stock ("Common Stock") or shares of one or
more series of Chiron's authorized but unissued or reacquired Restricted Common
Stock (in the aggregate, "Company Stock"). The rights, preferences and
privileges, together with restrictions and limitations, and the number of shares
of each series of Restricted Common Stock issuable under the Plan, will be set
forth in Chiron's Certificate of Determination of Preferences of Common Stock as
in effect from time to time during the term of the Plan. The Company may
repurchase shares in the open market or otherwise.
Initially, the stockholders approved for issuance under the Plan, 4,500,000
shares of Company Stock in addition to the shares of Company Stock previously
authorized by stockholders and remaining for issuance under the Chiron
Corporation 1982 Stock Option Plan ("1982 Plan") and the Chiron Corporation 1984
Non-Qualified Plan ("Non-Qualified Plan") on December 10, 1991 (897,204 shares).
Except as otherwise limited by the terms of this Plan, this amount will be
subject to adjustment annually, without further stockholder approval, commencing
on January 1, 1992, to authorize the grant of awards upon that number of
additional shares of Company Stock equal to 1.50 percent of the number of Chiron
Common Equivalent Shares outstanding as of the end of the preceding fiscal year.
"Chiron Common Equivalent Shares" are the
25
<PAGE>
total number of shares of Common Stock outstanding plus the total number of
shares of Common Stock issuable upon conversion or exercise of outstanding
warrants, options and convertible securities. Not more than 4,500,000 shares of
Company Stock, plus the number of shares of Company Stock remaining for issuance
under Chiron's 1982 Plan and Chiron's Non-Qualified Plan on the effective date
of this Plan may be subject to Incentive Stock Options ("ISO") granted under
this Plan. In no event will more than 500,000 shares of Restricted Common Stock
be issued under this Plan.
To the extent that an option expires or is terminated, or is canceled or
forfeited for any reason (other than surrendered for a cash appreciation
payment) without having been exercised in full, any remaining shares allocable
to the unexercised portion of such option shall again become available for
subsequent grants under the Plan. To the extent that a share right or share unit
expires or is terminated, or is canceled or forfeited for any reason without
being paid in cash or shares of Company Stock, any remaining shares allocable to
the unpaid portion of such share right or share unit shall become available
again for subsequent grants under the Plan. Restricted shares that have been
issued but forfeited or repurchased by the Company shall not be available for
the grant of new awards under the Plan. Shares attributable to the payment of a
share unit in cash, and the payment of cash or a cash appreciation distribution
upon the surrender or exercise of a stock option, or the payment of cash in lieu
of shares under a restricted share or a share right, and shares forfeited or
repurchased by Chiron pursuant to its forfeiture and repurchase rights under the
Plan will not be available for subsequent grants under the Plan.
Pursuant to one of the amendments that is the subject of this proposal, no
individual may receive awards under the Plan over its term with respect to more
than 1 million shares of Common Stock.
ELIGIBILITY
Employees, including officers and directors, nonemployee directors,
consultants and independent contractors of the Company or its subsidiaries, are
eligible to receive awards under the Plan either as a reward for services
rendered or as an incentive to continue in the Company's employ. Nonemployee
directors are eligible only for automatic option grants, as described below.
GRANTS TO AWARD HOLDERS OF STOCK OPTIONS, RESTRICTED SHARES, SHARE RIGHTS AND
SHARE UNITS
The Committee may, from time to time, grant awards to one or more award
holders that it determines is eligible to participate in the Plan. An award
shall consist of either a stock option, a restricted share, a share right or a
share unit.
In order to assist an award holder in the acquisition of Company Stock
pursuant to an award, the Committee may authorize the Company to extend secured
or unsecured credit to the award holder (other than pursuant to the automatic
option grant provisions of the Plan). The Committee may also permit an award
holder to elect to have shares of the Company's Common Stock held by the award
holder for the requisite period to avoid a charge to the Company's earnings
("Previously Owned Shares") applied to satisfy any withholding tax obligation
incurred in connection with the award and may require or permit a portion of any
Common Stock otherwise issuable under an award to be paid in cash instead of
stock and applied to such a withholding tax obligation.
STOCK OPTIONS
Under the terms of the Plan, the Committee may grant an ISO, which satisfies
the requirements of Section 422 of the Internal Revenue Code ("Code"), or a
non-statutory option ("NSO"), which is not intended to satisfy the requirements
of Section 422 of the Code.
The Committee may determine the number of shares of Company Stock issuable
under an option as well as the exercise date, the exercise price, and the
exercise period of an option. However, the exercise price of an option may not
be less than eighty-five percent (85 percent) of the fair market value (as
defined in the Plan) of the option shares on the date of the grant of the
option, or in the case of an ISO, one-hundred percent (100 percent) of the fair
market value of the option shares on the date of the option grant. The duration
of an option may not exceed ten years. Notwithstanding the foregoing, substitute
options (defined below) will have exercise prices, terms and conditions
determined in accordance with the relevant option
26
<PAGE>
agreements and adjusted, where applicable, for their conversion to options on
Chiron Common Stock, and the terms of automatic option grants will be as
described under "Automatic Option Grants to Nonemployee Directors."
Following stockholder approval of the 1991 Plan and upon consummation of the
mergers between Chiron and Cetus, Protos, and Chiron Ophthalmics, outstanding
options under those companies' stock option plans and Chiron's prior option
plans (including related limited stock appreciation rights) were converted, in
the manner and at the exchange ratio specified in the merger agreements, into
options to acquire Common Stock under this Plan. On the Effective Date of the
Plan, outstanding automatic option grants under the Chiron 1982 Plan were
conformed, other than to extend the term, to the automatic option grants under
the Plan. Collectively, these options will be known as "substitute options."
The exercise price is generally payable in full in cash or, in the
Committee's discretion, in Previously Owned Shares or, under certain conditions,
the proceeds of a same day sale of the award shares, or by means of the
extension of secured or unsecured credit to the optionee.
RESTRICTED SHARES, SHARE RIGHTS, AND SHARE UNITS
Restricted shares, share rights and share units may be granted independently
of other compensation or in lieu of compensation that would otherwise be paid in
cash or stock options, whether at the election of the award holder or otherwise.
The number of restricted shares, share rights or share units to be awarded in
lieu of any cash compensation amount or number of stock options shall be
determined by the Committee in its sole discretion and need not be equal to such
foregone compensation in fair market value. Restricted shares, share rights and
share units may be awarded in tandem with stock options, so that a portion of
such award becomes payable or becomes free of restrictions only if and to the
extent that the tandem options are not exercised or are forfeited, subject to
such terms and conditions as the Committee may specify. The terms, conditions
and restrictions to which restricted shares, share rights, and share units are
subject will be determined in the sole discretion of the Committee, and may vary
from grant to grant. The Committee shall determine whether any consideration is
to be received by the Company or its subsidiaries as a condition precedent to
the issuance of restricted shares or shares issued pursuant to share rights.
With respect to restricted shares and share rights, the Committee may
provide award holders with an election to receive a percentage of the total
value of the Company Stock subject to their restricted shares or share rights in
the form of a cash payment, subject to such terms, conditions and restrictions
as the Committee shall specify.
A. Restricted Shares
Restricted shares are shares of Company Stock, the retention and transfer of
which is subject to terms and conditions (based on performance standards,
periods of service or otherwise) determined by the Committee. At the time the
restricted share award is made, the Committee will establish a restriction
period applicable to such award. Generally, the award holder will have the right
to enjoy all stockholder rights during the restriction period, except that a
breach of the terms and conditions established by the Committee pursuant to the
restricted share award will cause a repurchase or forfeiture of the restricted
share award.
B. Share Rights
A share right consists of the right, subject to terms and conditions (based
on performance standards, periods of service or otherwise) as the Committee
shall establish, to receive shares of Company Stock, and if determined by the
Committee, cash dividend equivalents.
C. Share Units
A share unit consists of the right to receive an amount in cash equal to the
fair market value of one share of Company Stock on the date of valuation of the
unit, including, if determined by the Committee, a cash dividend equivalent,
less such amount, if any, as the Committee shall specify. The Committee shall
determine the terms and conditions (based on performance standards, periods of
service or otherwise), if any, to which any such payment will be subject. The
award holder shall not be entitled to any interest in or to any dividend,
voting, or other rights of a stockholder.
27
<PAGE>
CORPORATE TRANSACTIONS
In the event of an agreement to dispose of all or substantially all of the
assets or outstanding capital stock of the Company by means of a sale, merger,
reorganization, or liquidation ("Corporate Transaction"), each award will be
automatically accelerated so that (1) options become fully exercisable with
respect to the total number of shares purchasable under the options, (2)
restrictions on restricted shares will be eliminated, and the shares will
immediately vest, and (3) share rights and share units will immediately vest and
become payable. The Committee may also provide for the automatic termination of
repurchase rights upon the occurrence of a Corporate Transaction.
However, the terms and conditions of any outstanding award will not be
changed if the award is either assumed by the successor corporation, or replaced
with a comparable award by the successor corporation.
AUTOMATIC OPTION GRANTS TO NONEMPLOYEE DIRECTORS
On the last business day of the second quarter of each fiscal year of the
Company after December 10, 1991, each incumbent, continuing nonemployee director
will receive an NSO to purchase 3,000 shares of Common Stock ("automatic option
grants") with an option price per share equal to the fair market value (as
defined in the Plan) of one share of Common Stock on that grant date, payable in
cash, or in shares of Common Stock held at least six months, or with the
proceeds of a same day sale of the option shares. Each person who is newly
elected or appointed as a nonemployee director after December 10, 1991 (other
than on an automatic grant date) will receive, on the date of such election or
appointment, an automatic option grant to purchase a pro rata number of shares
of Common Stock. The pro rata number will be determined by multiplying 250 by
the number of whole calendar months between the date of the nonemployee
director's election or appointment and the next automatic grant date.
Each automatic option grant will have the following terms: (1) the exercise
price will be equal to the fair market value (as defined in the Plan) of the
Common Stock on the date of grant, (2) the term of the option will be ten years,
(3) the option will expire if not exercised within ninety days after the
optionee ceases to serve as a director, an employee, a consultant, or an
independent contractor, or within twelve months after the optionee ceases to
provide such services due to disability or death, (4) each automatic option
grant will be exercisable at any time for all or any part of the number of
granted shares, and (5) the shares will be subject to repurchase by the Company
at the original exercise price if a nonemployee director ceases to provide
services to Chiron or its subsidiaries as a director, an employee, a consultant
or an independent contractor. The Company's repurchase rights will lapse and the
optionee's interest in the purchased shares will vest in equal annual
installments over five years from the date of grant, provided the optionee
continues to provide services to the Company. However, the optionee will be
immediately and fully vested upon death or disability.
Nonemployee members of the Board who were newly elected or appointed between
July 1, 1990 and December 10, 1991 received grants on that date for a pro rata
number of shares calculated as though the grant were made on the date that the
nonemployee Board member was newly elected or appointed and as though the date
that the nonemployee Board member received an automatic option grant (if any)
under the Chiron 1982 Plan was an automatic grant date under this Plan.
ADJUSTMENTS
Options, restricted shares, share rights, share units, and any agreements
evidencing such awards shall be subject to adjustment by the Committee as to the
number and, if applicable, price of shares of stock or other consideration
obligation subject to such awards in the event of changes in the outstanding
stock due to a change in the corporate or capital structure of the Company. In
the event of any such change in the outstanding stock, the aggregate number of
shares available under the Plan may be appropriately adjusted by the Committee,
whose determination shall be conclusive.
CANCELLATION AND REGRANT OF OPTIONS
Under the Plan, the Committee has the authority to effect at any time, with
the consent of the affected option holders, the cancellation of any or all
options outstanding under this Plan, the prior Cetus Stock Option Plans, the
Protos Corporation 1988 Stock Option Plan, the Chiron Ophthalmics, Inc. 1986
Stock
28
<PAGE>
Option Plan, the 1982 Plan and the Non-Qualified Plan (the "Prior Plans") (other
than options granted under the automatic option grant provisions of these plans)
and to grant in substitution therefor new options for the same or different
number of shares with an exercise price not less than 85 percent of fair market
value (as defined in the Plan) on the new grant date or 100 percent of fair
market value if the new option is to be an ISO.
SURRENDER OF OPTIONS FOR CASH OR STOCK
The Committee in its discretion may implement an option surrender program
under the Plan through which one or more optionees may, under the terms and
conditions established by the Committee, be granted the right to surrender all
or part of an unexercised option for an appreciation distribution equal to the
difference between the fair market value of the shares at the surrender date and
the option price payable thereon. Such distribution may be made in shares of
Company Stock valued at fair market value on the date of surrender, in cash, or
partly in shares and partly in cash, as the Committee, in its sole discretion,
may decide. The option surrender provisions are not applicable to the automatic
option grant provisions of the Plan.
REPURCHASE RIGHTS
The Committee in its discretion may establish as a term of one or more
awards granted under the Plan that the Company (or its assigns) will have
repurchase rights, exercisable upon the award holder's termination of employment
with, or cessation of services for, the Company and its subsidiaries. The
Committee will also have the authority to provide for the automatic termination
of the Company's repurchase rights, in whole or in part, thereby accelerating
the vesting of any or all of the purchased shares (other than purchased shares
obtained pursuant to the automatic option grant provisions of this Plan) upon
the occurrence of a Corporate Transaction.
RIGHT OF FIRST REFUSAL
The Committee in its discretion may establish as a term of one or more
awards granted under the Plan that the Company has a right of first refusal with
respect to the proposed disposition by the award holder (or any successor in
interest by reason of purchase, gift or other mode of transfer) of any shares of
Company Stock acquired by the award holder. The instrument evidencing such right
of first refusal will specify the terms and conditions of that right.
SPECIAL CASH PAYMENTS RELATED TO CIBA-GEIGY TRANSACTION
Pursuant to one of the amendments that is the subject of this proposal, all
holders of options to acquire shares of Common Stock under the 1991 Plan on
November 20, 1994 were granted certain cash payment rights in connection with
the Ciba transaction.
Each optionee was granted the right to receive a cash payment from Ciba with
respect to options outstanding on November 20, 1994 equal to (A) 37.33 percent
of the number of shares of Common Stock with respect to which each such option
would first become exercisable in calendar year 1995 multiplied by (B) the
difference between $117 per share and the exercise price per share of such
option with respect to such shares. The portion of each option which underlies
each such cash payment is not canceled upon the optionee's receipt of the
payment from Ciba.
With respect to the remaining shares of Common Stock subject to each such
option (i.e., those shares with respect to which the option first becomes
exercisable before or after 1995), each optionee was granted the right,
exercisable at any time during which such option remains outstanding and is
exercisable with respect to such shares, to surrender for cancellation that
portion of such option relating to 37.33 percent of such shares in return for a
cash payment from Ciba equal to (A) the difference between $117 per share and
the exercise price per share of such option multiplied by (B) the number of
shares with respect to which such option is so surrendered and canceled.
29
<PAGE>
However, the grant and exercise of any such right with respect to any
executive officer (i.e., an officer subject to Section 16 of the Exchange Act)
or director of the Company was approved by the Compensation Committee and was
made subject to stockholder approval of the grant of such right at the Company's
1995 stockholder meeting.
The grant of such rights, which are made with respect to 1,858,776 optioned
shares is in addition to, and does not count against, the limits on the number
of shares with respect to which other awards under the Plan may be made to all
individuals and/or a single individual. All payments in respect of such rights
are to be made by Ciba. The Company has agreed that if the payment under any
right would subject a recipient to an excise tax on excess parachute payments
under Section 4999 of the Internal Revenue Code ("Section 4999"), the Company
will make such further cash payment to the recipient as may be necessary to
provide the recipient with the same after-tax amount that he or she would have
received in the absence of such excise tax. The Company does not believe that
any payments under the rights constitute excess parachute payments. However,
because neither final regulations nor other definitive guidance has been issued
under Section 4999 relating to the type of transaction that triggers the
application of that provision and the type and value of rights that constitute
excess parachute payments, there can be no assurance that payments to certain
officers and one-percent stockholders of the Company will not constitute excess
parachute payments.
NEW PLAN BENEFITS
The following tables contain information about (i) stock options granted
under the Plan for the Company's fiscal year January 1, 1994 through December
31, 1994, and (ii) special cash rights granted in connection with the Ciba
transaction to the named executive officers and directors and groups indicated.
STOCK OPTIONS GRANTED UNDER THE PLAN IN 1994
<TABLE>
<CAPTION>
NUMBER OF SHARES AVERAGE EXERCISE
SUBJECT TO OPTIONS PRICE
NAME AND POSITION (#) OF OPTIONS ($)
- - -------------------------------------------------------------------- --------------------- --------------------
<S> <C> <C>
Edward E. Penhoet................................................... 35,000 $ 78.125
President and Chief Executive Officer
William J. Rutter................................................... 35,000 78.125
Chairman
William G. Green.................................................... 10,000 78.125
Senior Vice President, Secretary and General Counsel
Dennis L. Winger.................................................... 10,000 78.125
Senior Vice President, Finance & Administration, and
Chief Financial Officer
David W. Martin..................................................... 30,000 83.125
Senior Vice President; President, Chiron Therapeutics
Current executive officers as a group (19 persons).................. 231,300 72.524
Non-Executive Director Group (9 persons)............................ 15,000 55.500
All employees, including all current officers who are not executive
officers, as a group (1683 employees).............................. 900,521 70.442
</TABLE>
30
<PAGE>
SPECIAL CASH RIGHTS GRANTED UNDER THE PLAN
<TABLE>
<CAPTION>
AGGREGATE NUMBER
DOLLAR VALUE OF RIGHTS
NAME AND POSITION ($)(1) (#)(2)
- - ----------------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Edward E. Penhoet............................................................ $ 7,156,223 86,613
President and Chief Executive Officer
William J. Rutter............................................................ 9,312,818 107,146
Chairman
William G. Green............................................................. 3,325,765 43,830
Senior Vice President, Secretary and General Counsel
Dennis L. Winger............................................................. 3,762,567 45,522
Senior Vice President, Finance & Administration, and Chief Financial
Officer
David W. Martin.............................................................. 379,434 11,201
Senior Vice President; President, Chiron Therapeutics
Current executive officers as a group (19 persons)........................... 40,043,463 513,108
Non-Executive Director Group (9 persons)..................................... 3,185,962 48,158
All employees, including current officers who are not
executive officers, as a group (1683 persons)............................... 78,892,317 1,297,510
<FN>
- - ------------------------
(1) Based upon difference between $117 per share and exercise price of option
to which each right relates.
(2) Of the rights in the table granted to the named executive officers and
directors and groups indicated, the following number of rights at the
dollar value indicated applicable to options which would first become
exercisable in calendar year 1995 do not require that the optionee
surrender for cancellation the portion of each option underlying each such
right: Edward E. Penhoet -- 19,501 rights ($1,422,029); William J. Rutter
-- 19,501 rights ($1,422,029); William G. Green -- 8,687 rights ($611,812);
Dennis L. Winger -- 3,008 rights ($146,819); David W. Martin -- 5,367
rights ($181,807); current executive officers as a group -- 95,602 rights
($6,026,338); non-executive director group -- 8,325 rights ($500,383); all
employees, including all current officers who are not executive officers,
as a group -- 303,758 rights ($16,869,834).
</TABLE>
AMENDMENT OR TERMINATION
The Board may amend, suspend or discontinue the Plan at any time. Generally,
the provisions of the Plan concerning automatic option grants may only be
amended once every six months unless necessary to comply with the Internal
Revenue Code. Without stockholder approval, the Board may not (1) materially
modify the requirements for eligibility and participation in the Plan, (2)
materially increase the number of shares which may be subject to awards granted
under the Plan (except as provided above), or (3) make any other change with
respect to which the Board determines that stockholder approval is required by
applicable law or regulatory standards.
To the extent not inconsistent with the Plan, the Committee may modify or
waive the terms of any outstanding award.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of certain federal income tax
consequences of the Plan. This description does not purport to be complete.
The Company will be entitled to a business expense deduction equal to the
ordinary income recognized by an optionee on exercise of an NSO. The ordinary
income recognized will be equal to the excess of the fair market value of the
purchased shares on the date of recognition over the exercise price. Generally,
the date of recognition will be the date the option is exercised or, if later,
the first date shares acquired on exercise are not subject to a substantial risk
of forfeiture.
The Company will also be entitled to a business expense deduction equal to
the ordinary income recognized by an optionee due to a "disqualifying
disposition" of stock acquired pursuant to an ISO. A disqualifying disposition
occurs if an optionee disposes of the acquired shares within two years of the
date of the option grant, or within one year of the date the shares are acquired
by the optionee. In the case of a disqualifying disposition, the optionee will
generally recognize ordinary income in the year of disposition, in an amount
equal to the amount of ordinary income the optionee would have recognized from
the exercise of the option had the option been an NSO at the time of exercise.
To the extent that the aggregate fair market value (determined as of the
respective date or dates of grant) of shares with respect to which options that
would otherwise be ISOs are exercisable for the first time by any individual
during any calendar year exceeds the sum of $100,000, such options will be
treated as NSOs. To the extent that an option may be surrendered for a special
cash payment from Ciba, it will generally not qualify as an ISO.
A recipient of restricted shares may be taxed in one of two ways: (1) the
award holder pays tax when the restrictions lapse, or (2) makes a special
election to pay tax in the year the grant is made. The value of the award for
tax purposes is the fair market value of the shares at the applicable time, less
any consideration paid by the award holder for the shares. This value is taxed
as ordinary income. When the award holder is taxed, the Company receives a tax
deduction at the same time and for the same amount. If an award holder elects to
be taxed at grant, when the restrictions lapse, there will be no further tax
consequences attributable to the awarded stock until sale or other disposition
of the stock. However, dividends in cash and stock will be treated as follows:
a. if the above special tax election has been made, cash dividends paid
to the award holder will be taxable dividend income to the award holder when
paid, but the Company will not be entitled to any corresponding deduction;
and
b. if such election has not been made, the award holder will have
taxable compensation income and the Company a corresponding deduction when
the dividends are paid.
A recipient of share rights recognizes no taxable income at the time of
grant. However, when the conditions precedent to the issuance of shares pursuant
to such share rights are satisfied, the award holder would recognize ordinary
income equal to the fair market value on the date of issuance of the shares less
any consideration paid by the award holder. Any cash dividend equivalent paid to
holders of share rights is ordinary income. The Company will be entitled to a
deduction equal to the award holder's ordinary income recognized pursuant to the
issuance of shares under the award in the year recognized by the award holder.
A recipient of a share unit recognizes no taxable income at the time of
grant. Whether a share unit award is paid in cash or shares of Company Stock,
the award holder will have ordinary income and the Company will have a
corresponding deduction when the award is paid. The measure of such income and
deduction will be the fair market value of the shares at the time of payment.
If an award is accelerated as a result of a Corporate Transaction, all or a
portion of the value of the award at that time may be a parachute payment for
purposes of the Internal Revenue Code's excess parachute provisions. Those
provisions generally provide that if parachute payments exceed three times an
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award holder's average compensation for the five tax years preceding the
Corporate Transaction, the Company loses its deduction and the recipient is
subject to a 20 percent excise tax for the amount of the parachute payments in
excess of such average compensation.
A special cash payment from Ciba will constitute taxable income to the
recipient at the time of payment. The Company believes that, subject to the
limits of Section 162(m) of the Internal Revenue Code (applicable to certain
officers of the Company, as discussed below), the Company will be entitled to a
deduction for the amount of each such payment.
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION
Recently enacted Section 162(m) of the Internal Revenue Code limits federal
income tax deductions for compensation paid after 1993 to the chief executive
officer and the four other most highly compensated officers of a public company
to $1 million per year, but contains an exception for performance-based
compensation that satisfies certain conditions.
The Company believes that stock options granted to its executives with an
exercise price equal to or greater than the fair market value of Common Stock on
the date of grant will qualify for the performance based-compensation exception
to the deduction limit, assuming that the amended Plan is approved by
stockholders. However, because final regulations have not been issued under
Section 162(m), there can be no assurance that the options will so qualify.
Based on proposed regulations and commentary thereto, final regulations issued
under Section 162(m) might require, as a condition to continuing exemption,
certain changes to the composition of the Compensation Committee that may not be
acceptable to the Board of Directors, because they would exclude representation
of Ciba. If such regulations do require such changes and such changes are not
made, compensation paid to named executive officers under such stock options
would generally cease to be exempt from the limitation of Section 162(m) on and
after the first annual meeting of stockholders at which directors are to be
elected that is held on or after January 1, 1996. However, compensation paid
under stock options that were granted on or before February 17, 1993 would
continue to be exempt.
The cash payments to be made by Ciba are being specifically considered by
stockholders at the Annual Meeting (see "Proposal 2: Approval of Amended Stock
Option Plan -- Special Cash Payments Related to Ciba Transaction" at pp. 29-30
above), but, under proposed regulations issued by the Internal Revenue Service,
will not be exempt from application of Section 162(m) even if specifically
approved by the stockholders. As a result, if the amount of any such payment to
any of the five executive officers of the Company subject to Section 162(m) in
any fiscal year, together with other compensation paid to such officer in such
fiscal year that is not exempt from the limitations of Section 162(m), exceeds
$1 million, the Company will not be entitled to a deduction for the amount of
such excess.
VOTE REQUIRED FOR APPROVAL OF THE AMENDED CHIRON 1991 STOCK OPTION PLAN
The affirmative vote of a majority of the shares of Common Stock having
voting power present in person or represented by proxy, a quorum being present,
is necessary to approve the amended Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDED PLAN TO
LIMIT THE NUMBER OF SHARES WITH RESPECT TO WHICH AWARDS MAY BE MADE UNDER THE
PLAN TO A SINGLE INDIVIDUAL AND TO PROVIDE CERTAIN CASH PAYMENT RIGHTS IN
CONNECTION WITH THE CIBA TRANSACTION.
PROPOSAL 3:
APPROVAL OF 1995 EXECUTIVE OFFICER VARIABLE CASH COMPENSATION PLAN
Chiron Corporation's 1995 Executive Officer Variable Cash Compensation Plan
(the "1995 Plan") was adopted by the Board of Directors on February 24, 1995,
subject to approval by the stockholders at the Annual Meeting. The 1995 Plan as
adopted by the Board of Directors was named the Chiron Corporation Executive
Bonus Plan and was later renamed. For the officers eligible to participate in
the new 1995 Plan, it will supersede the discretionary variable cash plan
previously in effect. As of January 1, 1995, approximately
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19 officers are eligible to be designated to participate in the 1995 Plan. A
copy of the new 1995 Plan is attached as Annex 2 to this Proxy Statement. The
following description of the 1995 Plan is a summary and does not purport to be
fully descriptive. Reference is made to Annex 2 for more detailed information.
INTRODUCTION
The 1995 Plan was established by the Company for the following purposes: (1)
to promote the interests of the Company; (2) to provide incentives and rewards
to senior executives, as a group and individually, who are largely responsible
for the management, growth and profitability of the Company and (3) to focus
incentives upon building value for stockholders by linking senior executive
compensation to the Company's performance as measured by net income or the
market value of the Company's stock.
Section 162(m) of the Internal Revenue Code was signed into law on August
10, 1993, and provides that, effective January 1, 1994, publicly owned
corporations like the Company may not deduct compensation in excess of $1
million per year paid to each of the Chief Executive Officer and the four other
most highly paid executive officers unless the compensation is performance-based
and paid under a stockholder-approved plan that satisfies certain conditions of
Section 162(m). The new 1995 Plan provides for the award of annual variable cash
compensation for each year through 1999 to the officers of the Company at the
level of Vice-President and above if one or more performance targets set for
each year is met. The 1995 Plan is intended to promote the interests of the
Company by providing incentives and rewards to its most senior executive
officers and by qualifying such compensation as performance-based within the
meaning of Section 162(m). Because final regulations have not been issued under
Section 162(m), however, there can be no assurance that such compensation will
so qualify. The 1995 Plan is administered by the Compensation Committee of the
Board of Directors or a subcommittee that currently meets the requirements of
Section 162(m) (the "Committee"). However, based on proposed regulations and
commentary thereto, final regulations issued under Section 162(m) might require,
as a condition to continuing exemption, certain changes to the composition of
the Compensation Committee that may not be acceptable to the Board of Directors,
because they would exclude representation of Ciba. If such regulations do
require such changes and such changes are not made, compensation paid to named
executive officers under the 1995 Plan would generally cease to be exempt from
the limitation of Section 162(m) on and after the first annual meeting of
stockholders at which directors are to be elected that is held on or after
January 1, 1996. The 1995 Plan is not a guarantee to any participant of any
bonus or continued employment.
ELIGIBILITY
To participate in the 1995 Plan, an officer of the company at the level of
Vice-President or above must be designated by name or position as eligible by
the Committee no later than March 31 during a year the 1995 Plan is in effect or
by such earlier date as may be required by Section 162(m). Absent special
circumstances, no executive may participate in the 1995 Plan for any year in
which he or she terminates employment for any reason other than normal
retirement (after attainment of age 65), death, disability or involuntary
termination without cause. In the event a participant's employment is terminated
for any of such reasons, the Committee may reduce or cancel the participation of
the executive. No executive subject to the 1995 Plan may participate in any
other Company incentive or bonus plan unless approved by the Committee.
DETERMINATION OF AWARDS UNDER 1995 PLAN
For each fiscal year, the Committee will establish a cash target for each
eligible participant, either by name or position, which is payable only if a
specified Company performance goal is satisfied for such fiscal year. A
participant's cash target for any fiscal year is a specified percentage (not to
exceed 150 percent) of that participant's salary for the fiscal year. However,
in no event may a cash target exceed $1 million. Both the specified percentage
and the Company performance goal for a fiscal year will be determined by the
Committee within the first ninety (90) days of such fiscal year of the Company
(or within such earlier period as shall be required under Section 162(m)).
The performance goal of each fiscal year must be based on a specific measure
of Company performance based upon either stock price or earnings or both. These
measures could include the achievement of a specified closing or average closing
price of Company common stock, the absolute or percentage increase in the
closing or average closing price of Company common stock, one or more of the
following measures of the
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Company's net income for such fiscal year determined in accordance with
generally accepted accounting principles as consistently applied by the Company:
absolute net income or a percentage or absolute dollar increase in net income,
earnings per share or a percentage or absolute dollar increase in earnings per
share, or return on equity or a percentage or absolute dollar increase in return
on equity. The Committee may provide for alternative levels of bonus depending
on relative performance toward a performance goal. The Committee may establish a
goal based on one or more measures of stock price or net income or may establish
multiple goals based on more than one measure, but any cash amount payable must
be based on the satisfaction of at least one goal.
For purposes of the 1995 Plan, net income means net income of the Company
and its consolidated subsidiaries as reported by the Company and certified by
its independent public accountants. However, in fixing any goal, the Committee
may exclude any or all of the following if they have a material effect on annual
net income: events or transactions that are either unusual in nature or
infrequent in occurrence (such as restructuring/organization charges,
acquisitions of businesses or technologies, the sale or discontinuance of a
business segment, the sale of investment securities, losses from litigation, the
cumulative effect of changes in accounting principles, and natural disasters),
depreciation, interest or taxes.
Final payouts are subject to the approval of the Committee and will be made
as soon as practical after the close of the Company's financial books for the
fiscal year. The Committee has the right to reduce or cancel any payout based on
other circumstances relating to the performance of the Company or the
participant.
NEW PLAN BENEFITS
Because the amount payable to an executive under the 1995 Plan is subject to
discretion as to the target amount, the performance goal selected and whether
the amount resulting from achievement of such goal will actually be paid,
neither the amount that will be paid in the future to any eligible executive nor
the amount that would have been paid last year had the 1995 Plan been in effect
is presently determinable.
DEFERRAL
All or part of an award made under the 1995 Plan may be deferred with the
approval of the Committee. Any amounts deferred will accrue earnings based on a
reasonable rate of interest or on one or more predetermined actual investments
(whether or not assets associated with the amount originally owed are actually
invested therein) such that the amount payable by the employer at the later date
will be based on the actual rate of return of a specific investment (including
any decrease as well as any increase in the value of an investment). Amounts
deferred and earnings thereon will be distributed to the executive at such time
or times and in such manner as he or she may specify, subject, however, to any
restrictions imposed by the Committee. Amounts deferred and interest accrued
thereon are unfunded and unsecured obligations of the Company. A participant may
not assign, pledge or otherwise encumber his or her interest in any deferred
bonus but may designate a beneficiary to receive it in the event of the
participant's death.
AMENDMENT AND TERMINATION
The Company may amend, discontinue or terminate the 1995 Plan in whole or in
part at any time, except that any amendment to the 1995 Plan that would change
the class of executives eligible to receive awards, the permissible amount of
such awards or any other amendment required to be made by the stockholders under
Section 162(m) must receive stockholder approval. No awards may be made for
fiscal years beginning after 1999.
VOTE REQUIRED FOR APPROVAL OF NEW 1995 PLAN
The affirmative vote of a majority of the shares of Common Stock having
voting power present in person or represented by proxy, a quorum being present,
is necessary to approve the 1995 Plan. If not approved, the 1995 Plan will not
be implemented.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1995 PLAN.
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PROPOSAL 4:
RATIFICATION OF SELECTION
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG Peat
Marwick") to serve as independent public accountants for Chiron for the current
fiscal year. Ratification by the stockholders will be sought for the selection
by the Board of Directors of KPMG Peat Marwick as independent public accountants
to audit the accounts and records of Chiron for the fiscal year ending December
31, 1995, and to perform other appropriate services. Representatives of KPMG
Peat Marwick are expected to be present at the Annual Meeting to respond to
appropriate questions and to make a statement if the representatives so desire.
In the event that a majority of the shares voting on the matter at the Annual
Meeting does not vote for ratification of the selection of KPMG Peat Marwick,
the Board of Directors will reconsider such selection. Even if the selection is
ratified, the Board of Directors in its discretion may direct the appointment of
a different independent accounting firm at any time during the year if the Board
determines that such a change would be in the best interest of the Company.
On March 7, 1994, the Finance and Audit Committee of the Company's Board of
Directors, by delegated authority of the Board of Directors, approved the
engagement of the independent certified public accounting firm of KPMG Peat
Marwick to audit the consolidated financial statements of the Company for the
year ended December 31, 1994. Accordingly, the engagement of Ernst & Young LLP
("Ernst & Young") as the Company's independent auditors was discontinued
effective upon conclusion of the audit of the Company's consolidated financial
statements for the year ended December 31, 1993. The audit of the Company's
consolidated financial statements for the year ended December 31, 1993 was
completed on February 25, 1994.
The reports of Ernst & Young on the Company's consolidated financial
statements for each of the two fiscal years in the period ended December 31,
1993 did not contain an adverse opinion or a disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the audits of the Company's consolidated financial
statements for each of the two fiscal years ended December 31, 1992 and 1993 and
the subsequent interim period prior to March 7, 1994, there were no
disagreements between the Company and Ernst & Young on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope and
procedures which, if not resolved to the satisfaction of Ernst & Young, would
have caused Ernst & Young to make reference to the matter in their reports.
There were no reportable events (as defined in Regulation S-K Item
304(a)(1)(v)) during the two fiscal years ended December 31, 1992 and 1993 and
the subsequent interim period prior to March 7, 1994.
The Company did not consult with KPMG Peat Marwick during the last two years
or subsequent interim period prior to March 7, 1994 on either the application of
accounting principles or type of opinion KPMG Peat Marwick might issue on the
Company's financial statements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY KPMG
PEAT MARWICK AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1995.
The affirmative vote of the holders of a majority of the shares represented
and voting on the matter will be required to ratify the selection of KPMG Peat
Marwick.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10 percent of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission.
Officers, directors and greater than 10 percent stockholders are required by
Securities and Exchange Commission regulation to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
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Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for fiscal year 1994, the Company believes
that all its officers and directors complied with all filing requirements
applicable to them with respect to transactions during fiscal year 1994. Mr.
Schuler filed late an amended Form 3 to reflect indirect ownership of 500 shares
of the Company's stock held by his wife in December 1991 when he became a
director.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered for inclusion in the
Company's Proxy Statement for next year's Annual Meeting of Stockholders must be
received at the Company's principal executive office by December 10, 1995. Such
proposals may be included in next year's Proxy Statement if they comply with
certain rules and regulations promulgated by the Securities and Exchange
Commission.
OTHER BUSINESS
The Board of Directors is not aware of any other matter that may be
presented for action at the Annual Meeting. Should any other matter requiring a
vote of the stockholders arise, the enclosed proxy card gives authority to the
persons listed on the card to vote at their discretion in the best interest of
the Company.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company has chosen again this year to print summary financial
information for the fiscal year ended December 31, 1994 in its 1994 Annual
Report, a copy of which is enclosed with this proxy material. The full audited
consolidated financial statements of the Company and its subsidiaries and other
required financial disclosures appear in a brochure enclosed inside the back
cover of the Annual Report.
Dated: April 18, 1995 BY ORDER OF THE BOARD OF DIRECTORS
WILLIAM G. GREEN
William G. Green,
SECRETARY
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ANNEX 1
CHIRON 1991 STOCK OPTION PLAN
[AS AMENDED AUGUST 14, 1993, APRIL 11, 1994 AND FEBRUARY 24, 1995]
I. PURPOSES
This Chiron 1991 Stock Option Plan ("Plan") is intended to enable Chiron
Corporation ("Corporation") to attract and retain the following individuals by
offering them incentives and rewards, in the form of options, restricted shares,
share rights, and share units ("awards") which will encourage them to acquire a
proprietary interest in the Corporation and to continue in the service of the
Corporation or its subsidiaries: (a) employees (including officers and
directors) of the Corporation and its subsidiaries, (b) non-employee members of
the Board of Directors of the Corporation ("Board"), and (c) consultants and
independent contractors who perform valuable services for the Corporation and
its subsidiaries.
In addition, the Plan is intended to permit the Corporation to satisfy its
obligations in connection with options it will assume pursuant to the terms of
the Agreement and Plan of Merger dated as of July 21, 1991 by and among the
Corporation, Chiron Acquisition Subsidiary, Inc., and Cetus Corporation
("Agreement"). Upon consummation of the transactions described in the Agreement
("Merger"), the Plan will supersede Cetus Corporation's Amended and Restated
Common Stock Option Plan and Cetus Corporation's Non-Employee Directors' Stock
Option Plan ("Cetus Prior Plans"). Upon stockholder approval, this Plan will
also supersede the following Chiron prior plans: the Protos Corporation 1988
Stock Option Plan (upon the merger of Protos into Chiron), the Chiron
Ophthalmics, Inc. 1986 Stock Option Plan (upon the merger of Chiron Ophthalmics
into a wholly owned subsidiary of Chiron), the Corporation's 1982 Stock Option
Plan and the Corporation's 1984 Non-Qualified Stock Option Plan (collectively,
"Chiron Prior Plans").
II. ADMINISTRATION
The Plan will be administered by a committee or committees appointed by the
Board and consisting of one or more members of the Board. The Board may delegate
the responsibility for administration of the Plan with respect to designated
classes of award holders to different committees, subject to such limitations as
the Board deems appropriate. With respect to any matter, the term "Committee,"
when used in this Plan, will refer to the committee that has been delegated
authority with respect to such matter. Members of a committee will serve for
such term as the Board may determine, and will be subject to removal by the
Board at any time.
(a) 16(B). The composition of any committee responsible for administration
of the Plan with respect to award holders who are subject to the trading
restrictions of Section 16(b) of the Securities Exchange Act of 1934 ("1934
Act") with respect to securities of the Corporation will comply with the
applicable requirements of Rule 16b-3 of the Securities and Exchange Commission.
(b) AUTHORITY. Any committee appointed by the Board will have full
authority to administer the Plan within the scope of its delegated
responsibilities, including authority to interpret and construe any relevant
provision of the Plan, to adopt such rules and regulations as it may deem
necessary, and to determine the terms and conditions of awards made under the
Plan (which need not be identical). Decisions of a committee made within the
discretion delegated to it by the Board will be final and binding on all persons
who have an interest in the Plan.
III. ELIGIBILITY FOR AWARDS
(a) DISCRETIONARY AWARDS. From time to time the Committee may, in its
discretion, select individuals from among the following categories to receive
awards under the Plan:
(1) EMPLOYEES. The Committee may select employees of the Corporation
or its subsidiaries (including officers, whether or not they are also
members of the Board).
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(2) CONSULTANTS AND INDEPENDENT CONTRACTORS. The Committee may select
consultants and independent contractors whose services tend to contribute
materially to the success of the Corporation or its subsidiaries or whose
services may reasonably be anticipated to so contribute.
(b) AUTOMATIC GRANTS. Members of the Board who are not employees of the
Corporation or its subsidiaries will receive options in accordance with, and
only in accordance with, the Plan's automatic grant provisions.
(c) SUBSTITUTE OPTIONS. Upon consummation of the Merger, outstanding
options under the Cetus Prior Plans (including related Limited Stock
Appreciation Rights) will be converted, in the manner and at the exchange ratio
specified in the Agreement, into substitute options under this Plan to acquire
Common Stock (as defined below). Upon stockholder approval and, with regard to
the Protos prior plan options and the Chiron Ophthalmics prior plan options,
consummation of the relevant mergers, outstanding options under the Chiron Prior
Plans will be converted into options under this Plan. These options will
preserve the exercise price of the outstanding options as adjusted, in the case
of options under the Protos Corporation 1988 Stock Option Plan and the Chiron
Ophthalmics, Inc. 1986 Stock Option Plan, to reflect the substitution of Common
Stock. These options will also preserve the other terms and conditions of the
outstanding options; provided, however, that on the Effective Date of this Plan,
outstanding automatic option grants under the Corporation's 1982 Stock Option
Plan will be conformed, other than to extend the term, to the Automatic Option
Grants under this Plan. Collectively, these options will be known as "Substitute
Options."
IV. STOCK SUBJECT TO THE PLAN
(a) CLASS. The stock subject to awards under the Plan is (i) the
Corporation's authorized but unissued or reacquired Common Stock ("Common
Stock"), or (ii) shares of one or more series of the Corporation's authorized
but unissued or reacquired Restricted Common Stock, in the aggregate, "Company
Stock." In connection with the grant of awards under the Plan, the Corporation
may repurchase shares in the open market or otherwise.
(b) AGGREGATE AMOUNT
(1) SHARES. Subject to adjustment under Sections IV(c) and IV(b)(3),
the aggregate maximum number of shares of Company Stock that may be subject
to awards under the Plan is 4,500,000 plus the number of shares of Company
Stock remaining for issuance on the Effective Date of this Plan under the
Corporation's 1982 Stock Option Plan and the Corporation's 1984
Non-Qualified Stock Option Plan. Notwithstanding the foregoing, as of
January 1 of each fiscal year after 1991, the aggregate number of shares of
Company Stock that may be subject to awards under the Plan will be increased
by 1.50% of the number of Chiron Common Equivalent Shares outstanding as of
December 31 of the preceding fiscal year. The maximum number of shares of
Company Stock with respect to which options may be granted to any employee
during the term of the Plan is 1,000,000 shares. Subject to adjustment under
Sections IV(c) and IV(b)(3), not more than 4,500,000 shares of Company Stock
plus the number of shares of Company Stock remaining for issuance on the
Effective Date of this Plan under the Corporation's 1982 Stock Option Plan
and the Corporation's 1984 Non-Qualified Stock Option Plan may be subject to
Incentive Options (as defined below) granted under the Plan after the
Effective Date. "Chiron Common Equivalent Shares" are the total number of
outstanding shares of Common Stock plus the total number of shares of Common
Stock issuable upon conversion or exercise of outstanding warrants, options
and convertible securities. In no event will more than 500,000 shares of
Restricted Common Stock, whether in a single series or in multiple series,
be subject to award under the Plan.
(2) RESTRICTED COMMON STOCK. Shares of Restricted Common Stock may be
issued under the Plan in one or more separate series. The rights,
preferences and privileges, together with the restrictions and limitations
and the number of shares, of each series of Restricted Common Stock issuable
under the Plan will be set forth in the Corporation's Certificate of
Determination of Preferences of Common Stock ("Certificate") as in effect
from time to time during the term of the Plan. Shares of each series of
Restricted Common Stock will be convertible or exchangeable into shares of
Common Stock in accordance with the terms and provisions of the Certificate
applicable to that series.
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(3) REUSE OF SHARES. If any outstanding option under the Chiron Prior
Plans, the Cetus Prior Plans or this Plan (including the Substitute Options)
expires or is terminated or cancelled for any reason (including pursuant to
Section X of the Plan but other than pursuant to surrender of the option for
a cash payment in accordance with Section XIII of the Plan) before being
exercised for the full number of shares to which it applies, then the shares
allocable to the unexercised portion of such option will not be charged
against the limitations of Section IV(b)(1) and will become available for
subsequent grants under the Plan. To the extent that a share right or share
unit expires or is terminated, or is canceled or forfeited for any reason
without being paid in cash or shares of Company Stock, any remaining shares
allocable to the unpaid portion of such share right or share unit shall not
be charged against the limitations of Section IV(b)(1) and will become
available again for subsequent grants under the Plan. Shares subject to any
option or portion of an option surrendered in accordance with the "Surrender
of Options for Cash or Stock" provisions of this Plan, shares for which a
cash payment is made in lieu thereof under a restricted share, share unit or
share right, and shares forfeited to or repurchased by the Corporation
pursuant to its forfeiture and repurchase rights under this Plan will not be
available for subsequent awards under the Plan.
(c) ADJUSTMENTS. In the event any change is made to the Company Stock
subject to the Plan (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, or other change in corporate or capital structure of the Corporation)
then, unless such change results in the termination of all awards, the Committee
will make appropriate adjustments to the kind and maximum number of shares
subject to the Plan, the kind and maximum number of shares for which options are
to be granted to non-employee directors, and the kind and number of shares and,
where applicable, price per share of stock subject to outstanding awards.
V. TERMS AND CONDITIONS OF OPTIONS
Stock options granted under the Plan may, in the Committee's discretion, be
either incentive stock options ("Incentive Options") qualifying under Section
422 of the Internal Revenue Code of 1986, as amended ("Internal Revenue Code"),
or nonstatutory options. Individuals who are not employees of the Corporation or
its subsidiaries may only be granted nonstatutory options. Options will be
evidenced by instruments in such form as the Committee may from time to time
approve. These instruments will conform to the following terms and conditions
and, in the discretion of the Committee, may contain such other terms,
conditions and restrictions as are not inconsistent with the following:
(a) OPTION PRICE. The option price per share will be fixed by the
Committee, but in no event will the option price per share be less than
eighty-five percent (85%) of the Fair Market Value of the option shares on the
date of the option grant; provided, however, that in no event will the option
price per share of an Incentive Option be less than one-hundred percent (100%)
of the Fair Market Value of the option shares on the date of the option grant.
Notwithstanding the foregoing, Substitute Options will have an option price per
share determined pursuant to Section III(c) of this Plan and interim Automatic
Option Grants will have an option price per share determined pursuant to Section
VII(a)(3) of the Plan.
(b) NUMBER OF SHARES, TERM AND EXERCISE
(1) TERM AND NUMBER. Each option granted under the Plan will be
exercisable on such date or dates, during such period, and for such number
of shares of Company Stock as the Committee determines and sets forth in the
instrument evidencing the option. No option granted under the Plan will have
an expiration date that is more than 10 years after the date of the option
grant.
(2) EXERCISE. After any option granted under the Plan becomes
exercisable, it may be exercised by notice to the Corporation at any time
prior to the termination of such option. Except as authorized by the
Committee in accordance with Section VIII, the option price for the number
of shares for which the option is exercised will become due and payable upon
exercise.
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(3) PAYMENT. The option price will be payable in full in cash
(including cash equivalents); provided, however, that the Committee may,
either at the time the option is granted or at the time it is exercised and
subject to such limitations as it may determine, authorize payment of all or
a portion of the option price in one or a combination of the following
alternative forms:
(i) a promissory note authorized pursuant to Section VIII;
(ii) full payment in shares of Common Stock valued as of the exercise
date and held for the requisite period to avoid a charge to the
Corporation's earnings; or
(iii) by delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the
Corporation the amount of sale or loan proceeds to pay the option price.
(c) TERMINATION OF SERVICES. The Committee will determine and set forth in
each option whether the option will continue to be exercisable, and the terms
and conditions of such exercise, on and after the date that an optionee ceases
to be employed by, or to provide services to, the Corporation or its
subsidiaries. The date of termination of an optionee's employment or services
will be determined by the Committee, which determination will be final.
(d) INCENTIVE OPTIONS. Options granted under the Plan that are intended to
be Incentive Options will be subject to the following additional terms and
conditions:
(1) DOLLAR LIMITATION. To the extent that the aggregate Fair Market
Value (determined as of the respective date or dates of grant) of shares
with respect to which options that are granted after 1986 and that would
otherwise be Incentive Options are exercisable for the first time by any
individual during any calendar year under the Plan (or any other plan of the
Corporation, a parent or subsidiary corporation or predecessor thereof)
exceeds the sum of $100,000 (or such greater amount as may be permitted
under the Internal Revenue Code), whether by reason of acceleration or
otherwise, such options will not be treated as Incentive Options. In making
such a determination, options will be taken into account in the order in
which they were granted. The aggregate fair market value (as of the
respective date or dates of grant) of shares of the Company (or parent or
subsidiary corporation) for which Incentive Options could be granted to any
one individual in a single calendar year before 1987 could not exceed
$100,000 at the time of grant, plus unused carryovers from the immediately
preceding three calendar years.
(2) 10% STOCKHOLDER. If any employee to whom an Incentive Option is to
be granted pursuant to the provisions of the Plan is, on the date of grant,
the owner of stock (determined with application of the ownership attribution
rules of Section 424(d) of the Internal Revenue Code) possessing more than
ten percent (10%) of the total combined voting power of all classes of stock
of his or her employer corporation or of its parent or subsidiary
corporation ("10% Stockholder"), then the following special provisions will
apply to the option granted to such individual:
(i) The option price per share of the stock subject to such Incentive
Option will not be less than one hundred ten percent (110%) of the Fair
Market Value of the option shares on the date of grant; and
(ii) The option will not have a term in excess of five (5) years from
the date of grant.
(3) SEQUENTIAL EXERCISE. No Incentive Option granted before January 1,
1987 may be exercised while there remains outstanding any other Incentive
Option to purchase shares of the Company (or its parent or subsidiary
corporation) which was granted at an earlier date to the optionee.
(4) PARENT AND SUBSIDIARY. For purposes of this Section V(d) "parent
corporation" and "subsidiary corporation" will have the meaning attributed
to those terms, as they are used in Section 422(b) of the Internal Revenue
Code.
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(e) WITHHOLDING
(1) OBLIGATION. The Corporation's obligation to deliver stock
certificates upon the exercise of an option will be subject to the option
holder's satisfaction of all applicable federal, state and local income and
employment tax withholding requirements.
(2) PAYMENT. In the event that an option holder is required to pay to
the Corporation an amount with respect to income and employment tax
withholding obligations in connection with exercise of an option, the
Committee may, in its discretion and subject to such limitations and rules
as it may adopt, permit the option holder to satisfy the obligation, in
whole or in part, by delivering shares of Common Stock already held by the
option holder or by making an irrevocable election that a portion of the
total value of the shares subject to the option be paid in the form of cash
in lieu of the issuance of Company Stock, and that such cash payment be
applied to the satisfaction of the withholding obligations.
VI. RESTRICTED SHARES, SHARE RIGHTS AND SHARE UNITS
(a) NATURE OF AWARDS
(1) RESTRICTED SHARES. A restricted share granted under the Plan shall
consist of shares of Company Stock, the retention and transfer of which is
subject to such terms, conditions and restrictions (whether based on
performance standards or periods of service or otherwise and including
repurchase and/or forfeiture rights in favor of the Corporation) as the
Committee shall determine. The terms, conditions and restrictions to which
restricted shares are subject shall be evidenced by instruments in such form
as the Committee may from time to time approve and may vary from grant to
grant. The Committee shall have the absolute discretion to determine whether
any consideration (other than the services of the potential award holder) is
to be received by the Corporation or its subsidiaries as a condition
precedent to the issuance of restricted shares.
(2) SHARE RIGHTS. A share right granted under the Plan shall consist
of the right, subject to such terms, conditions and restrictions (whether
based on performance standards or periods of service or otherwise), to
receive a share of Company Stock (together with cash dividend equivalents if
so determined by the Committee) as the Committee shall determine and shall
be evidenced by instruments in such form as the Committee may from time to
time approve. The Committee shall have the absolute discretion to determine
whether any consideration (other than the services of the potential award
holder) is to be received by the Corporation or its subsidiaries as a
condition precedent to the issuance of shares pursuant to share rights. The
terms, conditions and restrictions to which share rights are subject may
vary from grant to grant.
(3) SHARE UNITS. A share unit granted under the Plan shall consist of
the right to receive an amount in cash equal to the fair market value of one
share of Company Stock on the date of valuation of the unit (together with
cash dividend equivalents if so determined by the Committee) less such
amount, if any, as the Committee shall specify. The date of valuation and
payment of cash under a share unit and the conditions, if any, to which such
payment will be subject (whether based on performance standards or periods
of service or otherwise) shall be determined by the Committee. The terms,
conditions and restrictions to which share units are subject may vary from
grant to grant.
(b) WITHHOLDING. The Committee may require, or permit an award holder to
elect, that a portion of the total value of the shares of Common Stock subject
to restricted shares or share rights held by one or more award holders be paid
in the form of cash in lieu of the issuance of Company Stock and that such cash
payment be applied to the satisfaction of the federal, state and local income
and employment tax withholding obligations that arise at the time the restricted
shares and share rights become free of all restrictions under the Plan.
(c) CASH PAYMENTS. The Committee may provide award holders with an
election to receive a percentage of the total value of the Company Stock subject
to restricted shares or share rights in the form of a cash payment, subject to
such terms, conditions and restrictions as the Committee shall specify.
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(d) ELECTIVE AND TANDEM AWARDS. The Committee may award restricted shares,
share rights and share units independently of other compensation or in lieu of
compensation that would otherwise be paid in cash or stock options, whether at
the election of the potential award holder or otherwise. The number of
restricted shares, share rights or share units to be awarded in lieu of any cash
compensation amount or number of stock options shall be determined by the
Committee in its sole discretion and need not be equal to such foregone
compensation in fair market value. In addition, restricted shares, share rights
and share units may be awarded in tandem with stock options, so that a portion
of such award becomes payable or becomes free of restrictions only if and to the
extent that the tandem options are not exercised or are forfeited, subject to
such terms and conditions as the Committee may specify.
(e) MODIFICATION OF AWARDS. The Committee may, in its sole discretion,
modify or waive any or all of the terms, conditions or restrictions applicable
to any outstanding restricted share, share right or share unit; provided,
however, that no such modification or waiver shall, without the consent of the
holder of an outstanding award, adversely affect the holder's rights thereunder.
VII. AUTOMATIC OPTION GRANTS TO DIRECTORS
(a) GRANTS. Non-employee members of the Board will automatically be
granted nonstatutory options ("Automatic Option Grants") to purchase the number
of shares of Common Stock set forth below (subject to adjustment under Section
IV(c) hereof) on the dates and terms set forth below:
(1) CONTINUING DIRECTORS. On the last business day of the second
quarter of each fiscal year of the Corporation after the Effective Date of
this Plan ("Automatic Grant Date"), each continuing non-employee member of
the Board will receive an Automatic Option Grant to purchase 3,000 shares of
Common Stock.
(2) NEW DIRECTORS. Each person who is newly elected or appointed as a
non-employee member of the Board after the Effective Date of this Plan
(other than on an Automatic Grant Date) will receive, on the date of such
election or appointment, an Automatic Option Grant to purchase a pro rata
number of shares of Common Stock. The pro rata number will be determined by
multiplying 250 by the number of whole calendar months between the date of
the non-employee director's election or appointment and the next Automatic
Grant Date.
(3) INTERIM GRANTS. Non-employee members of the Board who were newly
elected or appointed between July 1, 1990 and the Effective Date of this
Plan received grants under this Section VII(a) on the Effective Date of this
Plan for a pro rata number of shares calculated as though the grant were
made on the date that the non-employee member of the Board was newly elected
or appointed ("Interim Grants"). The terms and conditions of these Interim
Grants will be determined under Section VII(b) below, as though the date
that the non-employee member was elected or appointed was the grant date and
as though the date that the non-employee member of the Board received an
automatic grant (if any) under the Corporation's 1982 Stock Option Plan was
an Automatic Grant Date under this Plan.
(4) ADVISORY COUNSELLORS. Advisory Counsellors of Cetus will not
qualify for Automatic Option Grants.
(b) TERMS AND CONDITIONS. The terms and conditions applicable to each
Automatic Option Grant will be as follows:
(1) PRICE. The option price per share will be equal to one hundred
percent (100%) of the Fair Market Value of one share of Common Stock on the
date of grant;
(2) TERM. The options will have terms of (10) years, measured from the
date of grant, and will be exercisable at any time during their term for all
or any part of the covered shares; provided, however, that no options may be
exercised prior to approval of the Plan by the Corporation's stockholders.
(3) REPURCHASE. The shares purchased under the options will be subject
to repurchase by the Corporation at the original exercise price in the event
an optionee ceases to provide services to the Corporation or its
subsidiaries as a director, an employee, a consultant or an independent
contractor.
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The Corporation's repurchase rights will lapse, and the optionee's interest
in the purchased shares will vest, in a series of equal annual installments
over the five-year period measured from the date of grant; provided the
optionee continues to provide such services. In addition, the Corporation's
repurchase right will lapse in its entirety, and full vesting will occur,
should one or more of the following events occur while the optionee is
providing such services: (A) the optionee's death, or (B) the optionee's
permanent disability.
(4) PAYMENT. Upon exercise of the option, the option price for the
purchased shares will become payable immediately in cash or in shares of
Common Stock that the optionee has held for at least six (6) months. Payment
may also be made by delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the
Corporation the amount of sale or loan proceeds to pay the option price.
(5) CESSATION. In the event the optionee ceases to provide services to
the Corporation or its subsidiaries as a director, an employee, a consultant
or an independent contractor, the option may be exercised, within the term
of the option, for a period of three (3) months after the date of such
cessation (twelve (12) months in the case of cessation by reason of
disability or death). In the case of death, the option may be exercised
within such period by the estate or heirs of the optionee.
VIII. LOANS AND INSTALLMENT PAYMENTS
In order to assist an award holder (including an employee who is an officer
or director of the Corporation) in the acquisition of shares of Company Stock
pursuant to an award granted under the Plan (other than pursuant to the
Automatic Option Grant provisions of this Plan), the Committee may authorize, at
either the time of the grant of an award or the time of the acquisition of
Company Stock pursuant to the award (i) the extension of a loan to the award
holder by the Corporation, (ii) the payment by the award holder of the purchase
price, if any, of the Company Stock in installments, or (iii) the guarantee by
the Corporation of a loan obtained by the award holder from a third party. The
terms of any loans, guarantees or installment payments, including the interest
rate and terms of repayment, will be subject to the discretion of the Committee.
Loans, installment payments and guarantees may be granted without security, the
maximum credit available being the purchase price, if any, of the Company Stock
acquired plus the maximum federal and state income and employment tax liability
that may be incurred in connection with the acquisition.
IX. ASSIGNABILITY
No award granted under the Plan is assignable or transferable by the award
holder other than by Will or by the laws of descent and distribution, and during
the lifetime of the award holder, only the award holder may exercise options or
exercise the rights provided under awards granted under the Plan.
X. CANCELLATION AND NEW GRANT OF OPTIONS
The Committee will have the authority to effect, at any time and from time
to time, with the consent of the affected option holders, the cancellation of
any or all outstanding options under the Plan, a Cetus Prior Plan or a Chiron
Prior Plan (other than options granted under automatic option grant provisions
of these plans) and to grant in substitution therefor new options under the Plan
covering the same or different numbers of shares, but having an option price per
share not less than eighty-five percent (85%) of the Fair Market Value on the
new grant date or, in the case of an Incentive Option, one hundred percent
(100%) of the Fair Market Value on the new grant date (or, in the case of an
Incentive Option granted to a 10% Stockholder, one hundred ten percent (110%) of
such Fair Market Value). If one or more of the cancelled options is an Incentive
Option granted before 1987 under a Cetus Prior Plan or a Chiron Prior Plan, then
such option will, solely for purposes of the "sequential exercise" rule
applicable to outstanding Incentive Options granted before 1987, be considered
to be outstanding until the expiration date initially specified for the option
term of such option.
XI. ACCELERATION AND TERMINATION OF AWARDS
(a) ACCELERATION. In the event of an agreement to dispose of all or
substantially all of the assets or outstanding capital stock of the Corporation
by means of a sale, merger, reorganization, or liquidation, each award will be
automatically accelerated so that (1) options become fully exercisable with
respect to the total
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number of shares purchasable under the options, provided, however, that the
exercise of accelerated Incentive Options granted prior to 1987 will remain
subject to any limitations imposed by the Internal Revenue Code's sequential
exercise rule, (2) restrictions on restricted shares will be eliminated, and the
shares will immediately vest, and (3) share rights and share units will
immediately vest and become payable. The Committee may also provide for the
automatic termination of repurchase rights upon the occurrence of such an event.
(b) NO ACCELERATION. No acceleration of awards will occur if the terms of
the agreement require as a prerequisite to the consummation of any such sale,
merger, reorganization or liquidation that each such award will be either
assumed by the successor corporation or parent thereof or be replaced with a
comparable award subject to shares of the successor corporation or parent
thereof. The determination of such comparability will be made by the Committee,
and its determination will be final, binding and conclusive. Upon consummation
of the sale, merger, reorganization or liquidation contemplated by the
agreement, all awards, whether or not accelerated, will terminate unless assumed
pursuant to a written agreement by the successor corporation or parent thereof.
(c) CORPORATE STRUCTURE. The grant of awards under this Plan will in no
way affect the right of the Corporation to adjust, reclassify, reorganize, or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
XII. VALUATION
With regard to all Substitute Options, Fair Market Value will be determined
in accordance with the relevant option plan documents on the date that the
outstanding options were granted. With regard to awards granted under this Plan,
for all valuation purposes under the Plan, the Fair Market Value of a share of
Common Stock or Restricted Common Stock (as the case may be) on any relevant
date will be determined in accordance with the following provisions:
(a) If the Common Stock or Restricted Common Stock is not at the time listed
or admitted to trading on any stock exchange, but is traded in the
over-the-counter market, the Fair Market Value will be the average between the
reported high price and the reported low price of one share of Common Stock or
Restricted Common Stock (as the case may be) on the date in question in the
over-the-counter market, as such prices are reported by the National Association
of Securities Dealers through its NASDAQ system or any successor system.
(b) If the Common Stock or Restricted Common Stock is at the time listed or
admitted to trading on any stock exchange, then the Fair Market Value will be
the average between the reported high price and the reported low price of one
share of Common Stock or Restricted Common Stock (as the case may be) on the
date in question on the stock exchange that is the primary market for the stock,
as such prices are officially quoted on such exchange.
(c) If the Common Stock or Restricted Common Stock (as the case may be) is
at the time neither listed nor admitted to trading on any stock exchange nor
traded in the over-the-counter market, or if the Committee determines that
neither subparagraph (a) nor subparagraph (b) above reflects Fair Market Value
of the stock and the award was not granted pursuant to the Plan's Automatic
Option Grant provisions, then the Fair Market Value will be determined by the
Committee after taking into account such factors as the Committee deems
appropriate, or in the case of Automatic Option Grants, by an independent third
party valuation.
XIII. SURRENDER OF OPTIONS FOR CASH OR STOCK
(a) STOCK APPRECIATION RIGHTS. If, and only if the Committee, in its
discretion, elects to implement an option surrender program under the Plan, one
or more option holders may, upon such terms and conditions as the Committee may
establish at the time of the option grant or at any time thereafter, be granted
the right to surrender all or part of an unexercised option in exchange for a
distribution equal in amount to the difference between (i) the Fair Market Value
(at date of surrender) of the shares for which the surrendered option or portion
thereof is at the time exercisable and (ii) the aggregate option price payable
for such shares. The distribution to which an option holder becomes entitled
under this Section may be made in
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shares of Common Stock or Restricted Common Stock, valued at Fair Market Value
at the date of surrender, in cash, or partly in shares and partly in cash, as
the Committee, in its sole discretion, deems appropriate. The option surrender
provisions of this Section will not apply to options granted pursuant to the
Automatic Option Grant provisions of this Plan.
(b) LIMITED STOCK APPRECIATION RIGHTS. If outstanding options of Cetus for
which Substitute Options are issued pursuant to Section III(c) have Limited
Stock Appreciation Rights ("LSARs") attached thereto, then each such LSAR shall
be honored by the Corporation in accordance with its terms and remain
exercisable for a period of 60 days following the date that stockholders of
Cetus approve the Merger; provided, however, that if the LSAR was originally
granted within 6 months of the date that Cetus stockholders approve the Merger,
then the LSAR will be exercisable for a period of 60 days following expiration
of such 6-month period. Upon expiration of the applicable 60 day period, each
such LSAR not previously exercised shall expire. Upon exercise of an LSAR, the
related option will be cancelled, and Chiron will pay to the LSAR holder an
amount in cash for each share with respect to which the LSAR is exercised
determined in accordance with the terms of the Cetus Prior Plans.
XIV. REPURCHASE RIGHTS
The Committee may, in its discretion, establish as a term of one or more
awards granted under the Plan that the Corporation (or its assigns) will have
the right, exercisable upon the award holder's termination of employment with,
or cessation of services for, the Corporation and its subsidiaries, to
repurchase at the original price paid, if any, for such shares of (1) Company
Stock acquired by the award holder pursuant to the granted award, or (2) Common
Stock into which acquired Restricted Common Stock may have been converted or for
which Restricted Common Stock may have been exchanged. Any such repurchase right
will be exercisable by the Corporation (or its assigns) upon such terms and
conditions (including provisions for the expiration of such right in one or more
installments) as the Committee may specify in the instrument evidencing such
right. The Committee will also have full power and authority to provide for the
automatic termination of the Corporation's repurchase rights, in whole or in
part, thereby accelerating the vesting of any or all of the purchased shares
(other than purchased shares obtained pursuant to the Automatic Option Grant
provisions of this Plan) upon the occurrence of any change in control specified
in Article XI.
XV. RIGHT OF FIRST REFUSAL
The Committee may, in its discretion, establish as a term of one or more
awards granted under the Plan that the Corporation has a right of first refusal
with respect to the proposed disposition by the award holder (or any successor
in interest by reason of purchase, gift or other mode of transfer) of any shares
of (1) Company Stock acquired by the award holder pursuant to the granted award,
or (2) Common Stock into which purchased Restricted Common Stock may have been
converted or for which acquired Restricted Common Stock may have been exchanged.
Any such right of first refusal will be exercisable by the Corporation or its
assigns in accordance with the terms and conditions specified in the instrument
evidencing such right.
XVI. EFFECTIVE DATE AND TERM OF PLAN
(a) EFFECTIVE DATE. The Plan is effective on the date that it is approved
by the Corporation's stockholders.
(b) TERM. Incentive Options may be granted under the Plan only within ten
years of the Effective Date of the Plan. Subject to this limitation, the
Committee may grant awards under the Plan at any time after the Effective Date
of the Plan and before the Plan is terminated by the Board.
XVII. AMENDMENT OR DISCONTINUANCE
(a) BOARD. The Board may amend, suspend or discontinue the Plan in whole
or in part at any time; provided, however, that (a) except to the extent
necessary to qualify as Incentive Options any or all options granted under the
Plan that are intended to so qualify, such action may not, without the consent
of the award holder, adversely affect rights and obligations with respect to
awards outstanding under the Plan; (b) the provisions of the Plan concerning the
eligibility of non-employee members of the Board for awards and the amount,
price and timing of Automatic Option Grants under this Plan may not be amended
more than once
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every six months, other than to comport with changes in the Internal Revenue
Code or rules thereunder; and (c) the Board may not, without the approval of the
Corporation's stockholders (1) materially increase the number of shares of
Company Stock subject to awards under the Plan (unless necessary to effect the
adjustments required under Section IV(c)), (2) materially modify the eligibility
requirements for awards under the Plan, or (3) make any other change with
respect to which the Board determines that stockholder approval is required by
applicable law or regulatory standards.
(b) COMMITTEE. The Committee will have full power and authority to modify
or waive any or all of the terms, conditions or restrictions applicable to any
outstanding award (other than Automatic Option Grants), to the extent not
inconsistent with the Plan.
(c) SUBSTITUTE OPTIONS. Substitute Options will be subject to amendment in
accordance with the terms of this Plan.
XVIII. NO OBLIGATION
Nothing contained in the Plan (or in any award granted under this Plan, a
Chiron Prior Plan or a Cetus Prior Plan) shall confer upon any employee,
consultant, or independent contractor any right to continue in the employ of, or
to provide services to, the Corporation or any affiliate or constitute a
contract or agreement of employment or for the provision of services, or
interfere in any way with the right of the Corporation or an affiliate to reduce
such employee's, consultant's or independent contractor's compensation from the
rate in existence at the time of the granting of an award or to terminate such
employee's, consultant's or independent contractor's employment or services at
any time, with or without cause; but nothing contained in the Plan or in any
award granted under this Plan shall affect any contractual rights of an employee
pursuant to a written employment agreement.
XIX. USE OF PROCEEDS
The cash proceeds received by the Corporation pursuant to awards granted
under the Plan will be used for general corporate purposes.
XX. COMPLIANCE
(a) FEDERAL AND STATE LAWS. No option may be exercised, and the
Corporation will not be obligated to issue stock under any award unless, in the
opinion of counsel for the Corporation, such exercise and issuance is in
compliance with all applicable federal and state securities laws. As a condition
to the grant of any award, or to the issuance of stock under any award, the
Committee may require that the award holder agree to comply with such provisions
of federal and state securities laws as may be applicable to such grant, or to
the sale of stock acquired pursuant to the Plan, and that the award holder
deliver to the Corporation a written agreement, in form and substance
satisfactory to the Corporation and its counsel, implementing such agreement.
(b) INFORMATION. The Corporation will furnish to each award holder
participating in the Plan (other than a key employee or a director) a copy of
the Corporation's Annual Report to Stockholders for the most recent fiscal year,
and additional copies will be furnished, without charge, to such award holders
upon request to the Secretary of the Corporation.
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APPENDIX A
SPECIAL PROVISIONS RELATED TO 1995 CIBA-GEIGY TRANSACTION
Those persons holding options to acquire shares of Common Stock under the
Corporation's 1991 Stock Option Plan on November 20, 1994 are granted the
following rights ("Rights") with respect to each such option:
(i) the right to receive upon the closing of the tender offer contemplated
under the Investment Agreement entered into on such date among the Corporation
and Ciba-Geigy Limited, Ciba-Geigy Corporation and Ciba Biotech Partnership,
Inc. (the "Closing") a cash payment equal to (A) 37.33% of the number of shares
of Common Stock with respect to which each such option would first become
exercisable in calendar year 1995 multiplied by (B) the difference between $117
per share and the exercise price per share of such option with respect to such
shares and
(ii) with respect to the remaining shares of Common Stock subject to each
such option, the right, exercisable at any time after the later of the Closing
or the date that such an option first becomes exercisable with respect to such
shares, to surrender that portion of such option relating to 37.33% of such
shares in return for a cash payment equal (A) to the difference between $117 per
share and the exercise price per share of such option multiplied by (B) the
number of shares with respect to which such option is so surrendered. However,
the grant and exercise of any such right with respect to any officer or director
subject to Section 16 of the Securities Exchange Act of 1934 shall be subject to
stockholder approval of the grant of such rights at the Corporation's 1995
stockholder meeting. The grant of such rights, which are made with respect to
1,858,776 optioned shares shall be in addition to, and shall not count against,
the aggregate and annual limits on the number of shares with respect to which
other awards under the Plan may be made to all individuals and/or a single
individual.
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ANNEX 2
CHIRON CORPORATION
1995 EXECUTIVE OFFICER VARIABLE CASH COMPENSATION PLAN
This 1995 Executive Officer Variable Cash Compensation Plan (the "Plan") is
established by Chiron Corporation (the "Company") effective for fiscal years
beginning after December 31, 1994.
1. PURPOSE
The purposes of the Plan are to:
(A) Promote the interests of the Company.
(B) Provide incentives and rewards to senior executives, as a group and
individually, who are largely responsible for the management, growth and
profitability of the Company.
(C) Focus incentives upon building value for stockholders by linking senior
executive compensation to the Company's performance as measured by net
income and the market value of the Company's stock.
2. ADMINISTRATION
The Plan will be administered by the Company's Compensation Committee (the
"Committee") or a subcommittee thereof that satisfies the requirements of
Section 162(m) of the Internal Revenue Code of 1986 or successor provision
("Section 162(m)"). The Committee will have full authority to administer the
Plan, including authority to interpret and construe any relevant provision of
the Plan, determine eligibility for an award and to adopt such rules and
regulations as it may deem necessary. Decisions of the Committee are final and
binding on all persons who have an interest in the Plan. Should any further
limitation on bonuses payable under the Plan be necessary to satisfy the
requirements of Section 162(m) under final regulations thereunder in order that
compensation paid under the Plan be performance-based, such limitations shall
apply.
3. ELIGIBILITY AND PARTICIPATION
(A) The executives eligible to participate in the Plan for any fiscal year
shall be each officer of the Company at the level of Vice President or
above.
(B) Participants are approved for each fiscal year by the Committee by name
or position and will not be eligible for an award for any fiscal year
unless explicitly approved for such fiscal year. Participants may, at the
discretion of the Committee, be approved for participation for part of a
fiscal year on a pro-rata basis.
(C) No executive shall participate in the Plan for any fiscal year if he/she
participates in any other Company- sponsored incentive, sales or bonus
plan for that fiscal year, unless such participation is approved by the
Committee.
(D) If an executive's employment is terminated during a fiscal year, the
Committee may, in its sole discretion, reduce or cancel the participation
of such executive for that year. Absent special circumstances, no
participant may receive any award under the Plan for any fiscal year if
he/she terminates employment before the end of that fiscal year for any
reason other than Company-approved retirement after attaining age 65,
death, disability or involuntary termination without cause.
4. DETERMINATION OF BONUSES
(A) The Committee shall establish a target bonus for each eligible
participant, either by name or position, for such fiscal year, payable if
a specified Company performance goal is satisfied for such fiscal year.
The target bonus payable to any Participant for any fiscal year shall be
a specified percentage (not to exceed 150%) of that participant's salary
for the fiscal year, but in no event shall exceed $1,000,000. Both the
specified percentage and the Company performance goal for a fiscal
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year shall be determined by the Committee within the first ninety (90)
days of such fiscal year of the Company (or within such earlier period as
shall be required under Section 162(m)).
(B) The performance goal for each fiscal year shall be based on one of the
following measures of the Company's performance: (i) the achievement of a
specified closing or average closing price of Company common stock, (ii)
the absolute or percentage increase in the closing or average closing
price of Company common stock and/or one or more of the following
measures of the Company's net income for such fiscal year determined in
accordance with generally accepted accounting principles as consistently
applied by the Company: absolute net income or a percentage or absolute
dollar increase in net income, earnings per share or a percentage or
absolute dollar increase in earnings per share, or return on equity or a
percentage or absolute dollar increase in return on equity. The Committee
may provide for alternative levels of bonus depending on relative
performance toward a performance goal. The Committee may establish a goal
based on one or more measures of net income or may establish multiple
goals based on more than one measure, but any bonus payable must be based
on the satisfaction of at least one goal.
(C) For purposes of this Plan, net income shall be net income of the Company
and its consolidated subsidiaries as reported by the Company and
certified by its independent public accountants, but the Committee in
fixing any goal may exclude any or all of the following if they have a
material effect on annual net income: events or transactions that are
either unusual in nature or infrequent in occurrence (such as
restructuring\reorganization charges, the sale or discontinuance of a
business segment, the sale of investment securities, losses from
litigation, the cumulative effect of changes in accounting principles,
and natural disasters), depreciation, interest or taxes.
(D) Final payouts are subject to the approval of the Committee and shall
occur as soon as practical after the close of the Company's financial
books for the fiscal year. The Committee reserves the right to reduce or
cancel any payout that would otherwise be due to a participant if, in its
sole discretion, the Committee deems such action warranted based on other
circumstances relating to the performance of the Company or the
participant.
5. DEFERRAL OF BONUSES
(A) The Committee may, subject to such limits as the Committee may specify,
permit a participant in the Plan to defer all or part of the bonus
awarded to him/her with respect to any fiscal year by executing and
delivering to the Company a deferral election form provided by the
Committee no later than the date specified in the notification to the
participant of his/her participation for such fiscal year.
(B) The deferred bonus will be credited to a special book account maintained
for each participant and will accrue earnings based on a reasonable rate
of interest or on one or more predetermined actual investments (whether
or not assets associated with the amount originally owed are actually
invested therein) such that the amount payable by the employer at the
later date will be based on the actual rate of return of a specific
investment (including any decrease as well as any increase in the value
of an investment). Distribution of the deferred bonus plus accrued
interest will be made at such time or times and in such manner as the
participant shall specify at the time he/she files the deferral election
forms, subject, however, to such restrictions and limitations as the
Committee may from time to time impose.
(C) The obligation to pay a deferred bonus plus earnings shall at all times
be an unfunded and unsecured obligation of the Company. The participant
and his/her beneficiary(ies) shall look exclusively to the general assets
of the Company, as general creditors of the Company. The Plan is intended
to be unfunded for purposes of the Employee Retirement Income Security
Act of 1974 and the Internal Revenue Code of 1986. The participant shall
have no right to assign, pledge or encumber his/her interest in the
amount credited to the deferred bonus account. The participant may,
however, designate one or more beneficiaries to receive the account
balance in the event of his/her death.
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6. AMENDMENT/TERMINATION
The Company hereby reserves the right, exercisable by the Committee, to
amend the Plan at any time and in any respect or to discontinue and terminate
the Plan in whole or in part at any time, subject to Section 7. Amendment or
termination may be effective with respect to any amount which has not yet been
paid out, except that amounts which have been credited to a deferred bonus
account shall be paid out in accordance with the applicable deferral election
or, if the Committee so determines upon termination of the Plan, distributed to
such participant as soon as practicable after termination of the Plan. In no
event shall any award be increased, other than pursuant to Section 4(C), after
the last day that an award must be specified for qualification as
performance-based compensation under Section 162(m).
No provision of the Plan shall be deemed to constitute a commitment of the
Company to pay, or to confer any contractual or other rights upon a participant
to receive a bonus award for any one or more fiscal years or to confer upon any
participant any right to continue in the employ of the Company or to constitute
any contract or agreement of employment or to interfere in any way with the
right of the Company to terminate a participant's employment at any time, with
or without cause, but nothing contained herein shall affect any contractual
right of a participant pursuant to a written employment agreement.
7. TERM AND SHAREHOLDER APPROVAL
In no event shall any award be made under the Plan for any fiscal year after
the fiscal year beginning in calendar year 1999. The Plan, awards under the
Plan, and any amendment to the Plan which would change the class of executives
who are eligible to receive awards under the Plan or the permissible amount of
such awards shall be subject to approval of the Company's shareholders in such
manner and with such frequency as shall be required under Section 162(m).
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CHIRON CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dr. William J. Rutter and Dr. Edward E.
Penhoet, and each of them, with full power of substitution, the proxies of the
undersigned to vote all shares of Common Stock of Chiron Corporation (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at 1450 53rd Street, Emeryville,
California, on May 18, 1995 at 10:00 a.m., and at any adjournments or
postponements thereof, with the same force and effect as the undersigned might
or could do if personally present thereat:
I PLAN TO ATTEND
THE MEETING
/ /
1. ELECTION OF DIRECTORS / / FOR all nominees / / WITHHOLD AUTHORITY
(THE BOARD OF DIRECTORS listed below to vote for all
RECOMMENDS A VOTE FOR.) (except as marked to nominees listed below.
the contrary below).
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE INDIVIDUAL
NOMINEES, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.
Dr. Gilbert F. Amelio - Dr. Edward E. Penhoet - Dr. Henri Schramek - Mr. Pierre
Douaze
2. Proposal to approve amended Chiron 1991 Stock Option Plan as set forth in
the Chiron Corporation Proxy Statement for the Annual Meeting of
Stockholders to be held May 18, 1995. (The Board of Directors recommends a
vote FOR.)
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to adopt the Chiron Corporation 1995 Executive Officer Variable
Cash Compensation Plan as set forth in the Chiron Corporation Proxy
Statement for the Annual Meeting of Stockholders to be held May 18, 1995.
(The Board of Directors recommends a vote FOR.)
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
<PAGE>
4. Proposal to ratify the selection of KPMG Peat Marwick as independent public
accountants for the Company for the fiscal year ending December 31, 1995.
(The Board of Directors recommends a vote FOR.)
/ / FOR / / AGAINST / / ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
Dated ___________________, 1995
(Be Sure to Date Proxy)
_______________________________
Signature
_______________________________
Signature
Please sign exactly as name
appears at left. When shares
are held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee, or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
person. If a partnership,
please sign in full partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE
