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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 240.14a-11(c) or 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ALLIANCE PHARMACEUTICAL CORP.
3040 SCIENCE PARK ROAD
SAN DIEGO, CA 92121
---------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Alliance Pharmaceutical Corp. (the "Corporation") will be held at 10:00 a.m.
on Wednesday, November 13, 1996, at the Sheraton Grande Torrey Pines,
10950 N. Torrey Pines Road, San Diego, California 92037 for the following
purposes:
1. To elect eight directors of the Corporation.
2. To approve an increase in the number of shares authorized for
issuance under the 1991 Stock Option Plan of Alliance
Pharmaceutical Corp. by 1,500,000 shares.
3. To ratify the appointment by the Corporation's Board of Directors
of Ernst & Young LLP as independent auditors of the Corporation
for its fiscal year ending June 30, 1997.
4. To transact such other business as may properly come before the
annual meeting and any adjournments thereof.
Only holders of record of the Corporation's Common Stock at the close of
business on September 30, 1996, are entitled to notice of, and to vote at,
the meeting and any adjournments thereof. Such shareholders may vote in
person or by proxy. The stock transfer books of the Corporation will not be
closed.
Shareholders are urged to attend the meeting in person. If you are not
able to do so and wish that your shares be voted, please sign, date and
return the accompanying proxy in the enclosed envelope. No postage is
required if mailed in the United States.
By Order of the Board of Directors,
DUANE J. ROTH, CHAIRMAN
Dated: October 17, 1996
<PAGE>
ALLIANCE PHARMACEUTICAL CORP.
3040 SCIENCE PARK ROAD
SAN DIEGO, CA 92121
---------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
November 13, 1996
---------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Alliance Pharmaceutical Corp. (the
"Corporation") to be voted at the Annual Meeting of Shareholders to be held
on Wednesday, November 13, 1996, at 10:00 a.m. at the Sheraton Grande Torrey
Pines, 10950 N. Torrey Pines Road, San Diego, California 92037 and at any
adjournment or adjournments thereof (the "Meeting") for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders.
The mailing address of the principal executive offices of the
Corporation is 3040 Science Park Road, San Diego, CA 92121 (telephone number
619/558-4300). The enclosed Proxy and this Proxy Statement are being first
sent to shareholders of the Corporation on or about October 17, 1996.
The Board of Directors has fixed the close of business on September 30,
1996 as the record date for the determination of shareholders of the
Corporation entitled to receive notice of, and vote at, the Meeting. At the
close of business on the record date, an aggregate of 30,064,056 shares of
common stock, par value $.01 per share, of the Corporation (the "Common
Stock") were issued and outstanding, each of which is entitled to one vote on
each matter to be voted upon at the Meeting.
All votes will be tabulated by the inspector of election appointed for
the Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the shareholders and will
have the same effect as negative votes. Broker non-votes are not counted for
any purpose in determining whether a matter has been approved.
SOLICITATION AND REVOCATION
PROXIES IN THE FORM ENCLOSED ARE SOLICITED BY, OR ON BEHALF OF, THE
BOARD OF DIRECTORS OF THE CORPORATION. THE PERSONS NAMED IN THE PROXY HAVE
BEEN DESIGNATED AS PROXIES BY THE BOARD OF DIRECTORS. Shares represented by
properly executed proxies received by the Corporation will be voted at the
Meeting in the manner specified therein or, if no specification is made, will
be voted FOR the election of the eight directors listed herein, FOR an
increase in the number of shares authorized for issuance under the
Corporation's 1991 Stock Option Plan, and FOR the ratification of the
appointment by the Corporation's Board of Directors of Ernst & Young LLP as
independent auditors of the Corporation for its fiscal year ending June 30,
1997, all as described in this Proxy Statement.
Any proxy given by a shareholder pursuant to this solicitation may be
revoked by the shareholder at any time before it is exercised, by written
notification delivered to the Secretary of the Corporation, by voting in
person at the Meeting, or by executing another proxy bearing a later date.
Proxies will be solicited by mail. They may also be solicited by
officers and regular employees of the Corporation personally, by telephone or
otherwise, but such persons will not be specifically compensated for such
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<PAGE>
services. The Corporation may use the services of Shareholder Communications
Corporation to aid in the solicitation of proxies. The Corporation estimates
that the fee payable to Shareholder Communications Corporation for such
services should not exceed $5,000. Banks, brokers, nominees and other
custodians and fiduciaries will be reimbursed for their reasonable
out-of-pocket expenses in forwarding soliciting material to their principals,
the beneficial owners of Common Stock. The costs of soliciting proxies will
be borne by the Corporation.
1. ELECTION OF DIRECTORS
Eight directors are to be elected at the Meeting to hold office until
the next annual meeting of shareholders and until the election and
qualification of their respective successors. The Board of Directors has
nominated Duane J. Roth, Pedro Cuatrecasas, M.D., Carroll O. Johnson,
Stephen M. McGrath, Donald E. O'Neill, Helen M. Ranney, M.D., Jean G. Riess,
Ph.D., and Thomas F. Zuck, M.D., all of whom are currently directors of the
Corporation. Directors are elected by a plurality vote.
Unless otherwise specified in the accompanying proxy, the shares voted
pursuant thereto will be cast for these nominees. If, for any reason, any of
the nominees should be unable to accept nomination or election, it is
intended that such proxy will be voted for the election, in his or her place,
of a substituted nominee who would be recommended by management. Management,
however, has no reason to believe that any nominee will be unable to serve as
a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Set forth below is certain information with respect to each nominee as
of August 30, 1996:
DUANE J. ROTH. Mr. Roth is 46 and has served as a director of the
Corporation since 1985. He has served as President, Chief Operating Officer
and Chief Executive Officer of the Corporation since 1985 and has served as
Chairman since October 1989. Prior to joining the Corporation, Mr. Roth
served as President of Analytab Products, Inc., an American Home Products
company involved in manufacturing and marketing medical diagnostics,
pharmaceuticals and devices. For the previous ten years, he was employed in
various sales, marketing and general management capacities with Ortho
Diagnostic Systems, Inc., a Johnson & Johnson company, which is a
manufacturer of diagnostic and pharmaceutical products. Mr. Roth's brother,
Theodore D. Roth, is an Executive Vice President of the Corporation.
PEDRO CUATRECASAS, M.D. Dr. Cuatrecasas is 62 and was elected as a
director of the Corporation in August 1996. He has over twenty years
experience in the pharmaceutical industry. Dr. Cuatrecasas will retire from
the positions of Vice President of Warner-Lambert Company and President,
Parke-Davis Pharmaceutical Research, on December 31, 1996, where he has been
employed since 1989. For the previous ten years he was Vice President of
Research, Development and Medical at Burroughs Wellcome Company. Before
joining Burroughs Wellcome Company he was with Glaxo, Inc. Dr. Cuatrecasas
is a member of the National Academy of Sciences and the Institute of
Medicine. He is a director of Pioneer Hybrid International, Inc. and MDL
Information Systems, Inc. He received his M.D. from Washington University
School of Medicine.
CARROLL O. JOHNSON. Mr. Johnson is 63 and has served as a director of
the Corporation since 1989. He has been President of Research Management,
Inc. ("RMI") since 1985, an independent contract research organization which
provides services to the pharmaceutical industry in the implementation of
clinical trials. Previously, he served for 25 years in various research,
sales and marketing positions with several pharmaceutical companies,
including Pharmacia Laboratories, Inc., where he created a national sales
force which introduced three major products.
STEPHEN M. MCGRATH. Mr. McGrath is 60 and has served as a director of
the Corporation since 1989. He is an Executive Vice President of Oppenheimer
& Co., Inc. ("Oppenheimer") and serves as the Director of its Corporate
Finance Department. For the eleven years prior to his employment by
Oppenheimer in 1983, he held various executive positions with Warner-Lambert
Company. Before joining Warner-Lambert Company, Mr. McGrath was Controller
and Assistant Treasurer of Sterling Drug, Inc. and a certified public
accountant for Price Waterhouse & Co. He is a director of PetroCorp, Inc.
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DONALD E. O'NEILL. Mr. O'Neill is 70 and has served as a director of
the Corporation since 1991. He retired from Warner-Lambert Company in 1991
after 20 years of service. During his tenure, he held various managerial
positions, including President of the Parke-Davis Group, President of the
Health Technologies Group and President - International Operations. At the
time of his retirement from Warner-Lambert Company, he held the offices of
Executive Vice President of the corporation, and President and Chairman of
its International Operations. He is a director of New Jersey Resources
Corporation, Targeted Genetics Corp., Fuisz Technologies, MDL Information
Systems, Inc., Immunogen, Inc., and Cytogen Corp.
HELEN M. RANNEY, M.D. Dr. Ranney is 76 and has served as a director of
the Corporation since 1991. She is Professor EMERITA, Department of
Medicine, University of California at San Diego, having served as Chairman of
the Department from 1973 through 1986. From 1986 through 1991, she was
Distinguished Physician of the U.S. Department of Veterans Affairs. She
formerly was Professor of Medicine at Albert Einstein College of Medicine
(New York) and at the State University of New York, Buffalo. Dr. Ranney is a
member of many professional societies, including the National Academy of
Sciences, the Institute of Medicine, the Association of American Physicians
(past President), and the American Society of Hematology (past President).
She has more than 150 publications, primarily relating to blood and blood
disorders. Dr. Ranney served on the Board of Directors of Squibb Corp. prior
to its merger with Bristol-Myers. She received her M.D. from the College of
Physicians and Surgeons, Columbia University.
JEAN G. RIESS, PH.D. Professor Riess is 59 and has served as a
director of the Corporation since 1989. He has been the Director of
Laboratoire de Chimie Moleculaire at the University of Nice for over 20
years. He has been an active researcher since receiving a Ph.D. from the
University of Strasbourg, with numerous patents and over 300 publications.
For more than 20 years Dr. Riess has focused on chemistry related to
perfluorochemical emulsions for medical application. In this field, his
research group has been active in synthesis of tailored perfluorochemicals,
in emulsion technology, in synthesis of fluorinated surfactants, in the
physical chemistry of emulsion stabilization, and in surfactant
self-aggregation. Dr. Riess is responsible for the Corporation's research
efforts at its affiliated company, Applications et Transferts de Technologies
Avancees in Nice, France.
THOMAS F. ZUCK, M.D. Dr. Zuck is 62 and has served as a director of the
Corporation since 1990. He is Professor of Transfusion Medicine and Director
of Hoxworth Blood Center at the University of Cincinnati Medical Center and
is President of Ohio Enterprises International, Inc. ("OEI"), a consulting
company. Dr. Zuck formerly was director of the Division of Blood and Blood
Products at the Office of Biologics Research & Review within the U.S. Food
and Drug Administration. He has served in numerous scientific professional
societies, including as President of the American Association of Blood Banks
and the Council of Community Blood Centers. He was Editor-in-Chief of the
journal TRANSFUSION and has more than 100 publications to his credit. Dr.
Zuck is a retired U.S. Army Colonel, where he was a Commander of the
Letterman Army Institute of Research and, for many years, involved with the
Army's blood substitute development program. Dr. Zuck received his LL.B.
from Yale Law School and his M.D. from Hahnemann Medical College.
COMPENSATION OF DIRECTORS
Directors do not receive cash compensation for attendance at Board of
Directors' meetings or committee meetings. Non-qualified stock options are
awarded to nonemployee directors of the Corporation pursuant to the Formula
Stock Option Plan for Nonemployee Directors of the Corporation (the
"Directors' Formula Option Plan"). Options under the Directors' Formula
Option Plan are granted under and subject to the Corporation's 1991 Stock
Option Plan. The options have a term of ten years from the date of grant and
are exercisable at a price per share equal to the fair market value of a
share of Common Stock on the date of grant. Each non-employee director (i)
upon his or her initial election, shall automatically be granted an option to
acquire 25,000 shares of Common Stock which shall be exercisable in four
installments of 6,250 shares each with the first installment being at his or
her initial election and the remaining installments becoming exercisable on
the date of each annual meeting of the Board of Directors of the Corporation
("Annual Meeting") thereafter that such person is a director, until fully
exercisable, and (ii) upon the third Annual Meeting following his or her
initial election and each Annual Meeting thereafter that such person remains
a nonemployee
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director, shall automatically be granted an option to acquire
7,500 shares of Common Stock. Except as otherwise described above, all
options are immediately exercisable in full on the date of grant.
4
<PAGE>
OTHER TRANSACTIONS
The following affiliations exist between the Corporation and certain
directors:
Mr. McGrath is an Executive Vice President of Oppenheimer, an investment
banking firm which renders financial advice to the Corporation from time to
time. In April 1996, the Corporation completed a public offering of newly
issued Common Stock in which Oppenheimer participated as a managing
underwriter. The Corporation has also retained Oppenheimer to provide
financial advice in connection with future collaborative agreements for
certain of the Corporation's products. Additionally, in September 1995, the
Board of Directors voted to extend by two years the maturity dates of certain
warrants for Common Stock initially issued to Oppenheimer in consideration of
financial services provided by Oppenheimer. Mr. McGrath abstained from
voting on such extension. Some of the warrants have been transferred by
Oppenheimer to various Oppenheimer employees and, using the Black Scholes
valuation model, the Corporation estimates that the value of the term
extension for the warrants held by Mr. McGrath is approximately $19,000.
In October 1995, the Corporation renewed a one-year research services
agreement with RMI for $2,000 per month. Mr. Johnson is the president and
owner of RMI.
In January 1996, the Corporation renewed a one-year consulting agreement
with OEI for $2,000 per month. Dr. Zuck is the president and owner of OEI.
Dr. Ranney receives $2,000 per month and office space for providing
consulting services to the Corporation.
In August 1996, the Board of Directors authorized the Corporation to
retain Dr. Riess as a consultant to the Corporation for one year, upon his
retirement from the University of Nice, which is expected to occur by
December 1996. The Corporation has agreed to pay Dr. Riess $100,000, and has
granted him an option to acquire 50,000 shares of Common Stock under the 1991
Stock Option Plan, at fair market value, such options to become exercisable
at the rate of twenty-five percent (25%) upon the beginning of his
consultancy and an additional twenty-five percent (25%) on the first, second,
and third anniversary thereafter.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The standing committees of the Board of Directors consist of an
Executive Committee, a Compensation Committee, a Nominating Committee, an
Audit Committee and a Stock Option Committee. The Executive Committee was
established to act when the full Board of Directors is unavailable. It has
all the authority of the Board between meetings of the entire Board as to
matters which have not been specifically delegated to other committees of the
Board, except the authority that by law cannot be delegated by the Board of
Directors. The members of the Executive Committee are Mr. Roth and Drs.
Ranney and Zuck. The Compensation Committee advises and makes
recommendations to the Board of Directors regarding matters relating to the
compensation of directors, officers and senior management. The members of
the Compensation Committee are Dr. Ranney and Messrs. McGrath and O'Neill.
The Audit Committee advises and makes recommendations to the Board concerning
the internal controls of the Corporation and the independent auditors to be
nominated for election by the shareholders and other matters relating to the
financial activities of the Corporation. The members of the Audit Committee
are Messrs. Johnson, McGrath and O'Neill. The Nominating Committee has the
authority to nominate members of the Board of Directors to the entire Board
for consideration. The Nominating Committee will not consider nominees
recommended by shareholders. The members of the Nominating Committee are Dr.
Riess and Messrs. Johnson and Roth. The Stock Option Committee has the
authority to administer the Corporation's stock option plans. The members of
the Stock Option Committee are Dr. Zuck , Dr. Cuatrecasas, and Mr. O'Neill.
During the fiscal year ended June 30, 1996, there were four meetings of
the Board of Directors. The Stock Option Committee held four meetings, the
Compensation Committee held two meetings, the Audit Committee held two
meetings, the Nominating Committee held two meetings, and the Executive
Committee did not meet. Each Board member attended all of the meetings of
the Board and all of the meetings of the committee(s) of which he or she is a
member.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
10% of a registered class of the Corporation's equity securities, to file
with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership of Common Stock and other
equity securities of the Corporation. Officers, directors and greater than
10% stockholders are required by SEC regulations to furnish the Corporation
with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely on a review of the copies
of such reports furnished to the Corporation during the fiscal year ended
June 30, 1996, one report, covering one transaction, was filed late on behalf
of Dr. Riess.
OWNERSHIP OF VOTING SECURITIES BY CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Corporation's voting securities as of August 30,
1996 as to (i) each of the directors and director nominees, (ii) each of the
executive officers listed in the Summary Compensation Table, (iii) each
person known by the Corporation to own more than 5% of any class of the
Corporation's outstanding voting securities, and (iv) all directors and
executive officers of the Corporation as a group.
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP (1) CLASS (2)
---------------- ------------------------ -------------
COMMON STOCK
------------
Duane J. Roth 399,626(3) 1.3%
Pedro Cuatrecasas, M.D. 6,250(4) *
Carroll O. Johnson 39,500(5) *
Stephen M. McGrath 81,326(6) *
Donald E. O'Neill 56,000(7) *
Helen M. Ranney, M.D. 47,300(8) *
Jean G. Riess, Ph.D. 94,733(9) *
Thomas F. Zuck, M.D. 48,000(10) *
Harold W. DeLong 97,650(11) *
Theodore D. Roth 117,017(12) *
N. Simon Faithfull, M.D., Ph.D. 68,400(13) *
Ronald M. Hopkins, Ph.D. 87,472(14) *
All directors and executive officers
as a group (17 persons) 1,431,396 4.6%
Wellington Management Company 2,624,088(15) 8.7
75 State Street
Boston, MA 02109
- ---------------
* Indicates ownership of less than 1% of outstanding shares.
(1) Each person listed or included in the group has sole voting power and sole
investment power with respect to the shares owned by such person, except
as indicated below.
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(2) Shares subject to options and warrants exercisable within 60 days have
been deemed to be outstanding for percentage calculations with respect
to the person holding such options and warrants.
(3) Consists of (i) 221,401 shares owned by Mr. Roth, (ii) 58,800 shares
subject to options granted by the Corporation under its 1983
Non-Qualified Stock Option Program ("the 1983 Program"), (iii) 118,400
shares subject to options granted by the Corporation under its 1991
Stock Option Plan ("the 1991 Plan"), and (iv) 1,025 shares owned by
Mr. Roth's spouse.
(4) Consists of shares subject to options granted by the Corporation under
the 1991 Plan.
(5) Consists of (i) 4,000 shares owned by Mr. Johnson and (ii) 35,500 shares
subject to options granted by the Corporation under the 1991 Plan.
(6) Consists of (i) 48,000 shares owned by Mr. McGrath, (ii) 15,326 shares
subject to warrants, and (iii) 18,000 shares subject to options granted
by the Corporation under the 1991 Plan.
(7) Consists of (i) 8,000 shares owned by Mr. O'Neill, (ii) 46,000 shares
subject to options granted by the Corporation under the 1991 Plan, and
(iii) 2,000 shares owned by Mr. O'Neill's spouse.
(8) Consists of (i) 1,300 shares owned by Dr. Ranney and (ii) 46,000 shares
subject to options granted by the Corporation under the 1991 Plan.
(9) Consists of (i) 76,733 shares owned by Dr. Riess and (ii) 18,000 shares
subject to options granted by the Corporation under the 1991 Plan.
(10) Consists of (i) 30,000 shares subject to options granted by the
Corporation under the 1983 Program and (ii) 18,000 shares subject to
options granted by the Corporation under the 1991 Plan.
(11) Consists of (i) 20,000 shares owned by Mr. DeLong, (ii) 76,850 shares
subject to options granted by the Corporation under the 1991 Plan, and
(iii) 800 shares owned by Mr. DeLong's minor children.
(12) Consists of (i) 20,500 shares owned by Mr. Roth, (ii) 19,667 shares
subject to options granted by the Corporation under the 1983 Program, and
(iii) 76,850 shares subject to options granted by the Corporation under
the 1991 Plan.
(13) Consists of (i) 7,000 shares owned by Dr. Faithfull, (ii) 43,000 shares
subject to options granted by the Corporation under the 1983 Program and
(iii) 18,400 shares subject to options granted by the Corporation under
the 1991 Plan.
(14) Consists of (i) 45,000 shares subject to options granted by the
Corporation under the 1983 Program, (ii) 18,400 shares subject to options
granted by the Corporation under the 1991 Plan, (iii) 297 shares owned by
Dr. Hopkins' spouse, and (iv) 23,775 shares subject to options granted by
the Corporation to Dr. Hopkins' spouse under the 1991 Plan.
(15) Wellington Management Company ("WMC") in its capacity as investment
advisor may be deemed beneficial owner of these shares which are owned by
many clients. WMC has sole voting power or sole dispositive power over
none of the shares, shared voting power over 1,034,300 shares, and shared
dispositive power over all such shares.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning annual and
long-term compensation for the Corporation's Chief Executive Officer and the
other four highest paid executive officers (collectively, the "Named
Executive Officers") for the year ended June 30, 1996, as well as the total
compensation paid to each individual for the Corporation's two previous
fiscal years:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPEN-
ANNUAL COMPENSATION SATION
---------
AWARDS
-------------------------------------------------------
NAME OTHER SECURITIES
AND ANNUAL UNDERLYING
PRINCIPAL SALARY BONUS(a) COMPEN- OPTIONS/
POSITION YEAR ($) ($) SATION ($)(b) SARS (#)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Duane J. Roth 1996 323,200 142,500 198,100(c) --
Chairman of the Board, President, Chief 1995 309,200 119,070 -- 132,500
Executive Officer, Chief Operating Officer 1994 291,000 89,000 -- 50,000
Harold W. DeLong 1996 177,700 59,300 -- --
Executive Vice President - Business 1995 169,700 49,350 -- 40,000
Development and Marketing 1994 161,700 30,375 -- 15,000
Theodore D. Roth 1996 179,000 70,000 41,800(d) --
Executive Vice President, Secretary, 1995 171,300 49,350 69,600(e) 40,000
Chief Financial Officer 1994 161,700 30,375 -- 15,000
N. Simon Faithfull 1996 177,800 44,500 -- --
Vice President - Medical Research 1995 174,500 32,550 -- 32,000
1994 167,100 22,500 -- 10,000
Ronald M. Hopkins 1996 168,800 42,250 -- --
Vice President - Research and Development 1995 161,500 31,500 -- 32,000
1994 153,000 22,500 -- 10,000
</TABLE>
(a) Bonuses for 1995 were not determined or paid until after January 1996.
(b) Perquisites and other personal benefits for specific officers are only
reported in specific years where such compensation exceeds the lower of
10% of annual salary and bonus, or $50,000.
(c) Includes forgiveness of $196,300 of principal on a loan made pursuant to
the 1983 Program.
(d) Includes forgiveness of $40,575 of principal and accrued interest on a
relocation loan.
(e) Includes forgiveness of $57,065 of principal and accrued interest on a
relocation loan
EMPLOYMENT ARRANGEMENTS
On October 20, 1994, in connection with the exercise of certain stock
options previously granted to Duane Roth, the Corporation loaned Mr. Roth
$196,330, in accordance with the terms of the 1983 Program. Interest was due
and payable quarterly and all outstanding principal was due and payable on
October 20, 1999. Interest accrued at the rate of seven and three quarters
percent per annum. The largest outstanding balance due since the beginning
of the last fiscal year was $200,165. The note was secured by the 29,000
shares of Common Stock of the Corporation obtained by Mr. Roth upon exercise
of the stock options. In February 1996, the Board of Directors authorized
the Corporation to forgive all outstanding principal and interest on the loan.
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During fiscal 1992, in connection with his relocation, the Corporation
loaned Theodore Roth $175,000, which was originally due on August 5, 1994.
The loan bears interest at the prime rate reported in THE WALL STREET JOURNAL
and had an outstanding principal balance of $150,000 as of that date. The
loan is evidenced by a promissory note secured by real estate and an
assignment of Mr. Roth's option to purchase stock of the Corporation. On
February 16, 1994, the Board of Directors authorized the Corporation to
forgive on December 1, 1994 and each December 1 thereafter, through December
1, 1998, $30,000 of principal and all accrued interest through such date;
provided Mr. Roth remains employed by the Corporation. If his termination is
without cause by the Corporation or as a result of a change in control of the
Corporation, the debt will be forgiven in full. Termination of his
employment for any other reason requires the debt to be paid three years from
the termination date, with interest. The balance outstanding as of September
30, 1996, is $90,000.
On June 1, 1995, the Corporation loaned Simon Faithfull $70,000. The
loan accrues interest at the rate of nine percent per annum. The loan is due
and payable on demand; provided that unless and until demand is made,
principal and interest shall be payable in biweekly installments of $500
each. The largest outstanding balance due since the beginning of the last
fiscal year was, and the current outstanding balance is, $71,025. The note
is secured by a lien on Dr. Faithfull's primary residence.
STOCK OPTION GRANTS AND EXERCISES
The Corporation has granted options to its executive officers under its
1983 Incentive Stock Option Plan (which plan expired on October 1, 1993), its
1983 Non-Qualified Stock Option Program, and its 1991 Stock Option Plan. No
stock appreciation rights ("SARs") have been granted by the Corporation. No
options were granted during fiscal 1996 to the Named Executive Officers:
The following table summarizes options exercised during fiscal 1996 and
presents the value of unexercised options held by the Named Executive
Officers at fiscal year end:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
FISCAL YEAR END (#) AT FISCAL YEAR END ($)
SHARES ACQUIRED ON VALUE EXERCISABLE (E)/ EXERCISABLE (E)/
EXERCISE (#) REALIZED ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Duane J. Roth 35,000 274,000 177,200 E 1,769,000 E
125,000 U 1,228,000 U
Harold W. DeLong 8,600 189,000 76,850 E 261,000 E
37,650 U 370,000 U
Theodore D. Roth 0 0 96,517 E 586,000 E
37,650 U 370,000 U
N. Simon Faithfull 0 0 61,400 E 754,000 E
28,850 U 286,000 U
Ronald M. Hopkins 0 0 63,400 E 679,000 E
28,850 U 286,000 U
</TABLE>
9
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee")
has provided the following report:
The Committee is composed entirely of outside, nonemployee directors.
The Committee determines the base salaries and the amount of bonus awards to
be paid to the executive officers of the Corporation. In addition, the
Committee recommends the number of the Corporation's stock option grants
which should be made to executive officers and other employees of the
Corporation. The following is a summary of policies of the Committee that
affect the compensation paid to executive officers, as reflected in the
tables and text set forth elsewhere in the proxy statement.
EXECUTIVE COMPENSATION POLICY AND COMPONENTS OF COMPENSATION
The Committee's fundamental executive compensation philosophy is to
enable the Corporation to attract and retain key executive personnel and to
motivate those executives to achieve the Corporation's objectives. The
Corporation is still in its research and development phase and has not yet
achieved profitability. Therefore, traditional methods of evaluating
executive performance, such as sales and profit levels, return on equity, and
stock price, are inappropriate. Accordingly, assessment of each executive's
performance is based upon attainment of his or her specific objectives in
relation to the Corporation's overall annual strategic goals. The Committee
may in its discretion apply different measures of performance for future
fiscal years. However, it is presently contemplated that all compensation
decisions will be designed to further the fundamental executive compensation
philosophy described above.
Each executive officer's compensation package is reviewed annually and
is comprised of three components: base salary, bonus, and stock option
grants. In addition, executive officers of the Corporation are eligible to
participate in all benefit programs generally available to other employees.
BASE SALARY
In setting the base salary levels of each executive officer, the
Committee considers the base salaries of executive officers in comparable
positions in other similarly situated biotechnology/pharmaceutical
development companies. In setting levels, the Corporation currently targets
the 75th percentile of the relevant labor market. Factors considered include
company size, stage of development of a company's products, and geographical
location. The Committee also considers the individual experience level and
actual performance of each executive officer in view of the Corporation's
needs and objectives. Salary decisions are determined in a structured annual
review by the Committee with input from the Chief Executive Officer.
BONUS AWARDS
Annual bonuses, set as a targeted percentage of total cash compensation,
may be earned by each executive officer, based upon the achievement of
performance goals established at the beginning of the fiscal year and
reviewed at least twice during the year.
Performance goals for the Corporation are developed by management, and
reviewed and approved by the Committee and the Board of Directors.
Performance goals for individual executives are developed by the Chief
Executive Officer, and reviewed and approved by the Committee. Bonuses are
awarded to executives based upon the attainment of these goals during the
year, with the Corporation and the executives accomplishing minimum
objectives prior to being eligible to receive a bonus. The Committee
considers the amounts of bonuses it expects to pay to executives when it
compares its compensation practices with other companies similarly situated.
LONG-TERM STOCK-BASED INCENTIVE COMPENSATION
Generally, the Corporation's stock option committee approves annual
grants of stock options to each of the Corporation's executive officers under
the 1991 Plan based upon recommendations from the Committee. The grants are
designed to align the interest of each executive officer with those of the
shareholders and provide each individual with a significant incentive to
manage the Corporation from the perspective of an owner with an equity stake
in the business.
10
<PAGE>
Each grant generally allows the officer to acquire shares of the
Corporation's Common Stock at a fixed price per share (the market price on
the grant date) over a specified period of time (up to ten years), thus
providing a return to the executive officer only if the market price of the
shares appreciates over the option term. The size of the option grant to
each executive officer generally is set as the Committee deems appropriate in
order to retain and motivate key executive officers as well as to provide
them with the perspective of the Corporation's shareholders in assessing
corporate results. The grants also take into account comparable awards to
individuals in similar positions at biotechnology/pharmaceutical development
companies as reflected in external surveys, the individual's potential for
future responsibility and promotion over the option term, the individual's
personal performance in recent periods, and the risk attached to the future
growth of the pharmaceutical industry. In making comparisons in the
industry, the Corporation targets the 75th percentile of the relevant labor
market.
The Committee, at its discretion, has the authority to utilize
compensation consultants to assist in defining the relevant labor market for
executive compensation and to recommend annual salary and bonus increases.
Duane J. Roth, Chief Executive Officer, although not a member of the
Committee, assisted the Committee in developing the compensation packages
awarded to executive officers other than himself.
CEO COMPENSATION
In setting the compensation payable to the Corporation's Chief Executive
Officer, the Committee sought to be competitive with other
biotechnology/pharmaceutical development companies. In making comparisons,
the Corporation targets the 75th percentile of the relevant labor market.
The Committee established Duane Roth's base salary based on an evaluation of
his personal performance and the objective of having his base salary keep
pace with salaries being paid to similarly situated chief executive officers.
With respect to his base salary, it is the Committee's intent to provide him
with a level of stability and certainty each year and not have this
particular component of compensation affected to any significant degree by
Corporation performance factors. The remaining component of his 1996 fiscal
year compensation, however, was dependent upon performance and provided no
dollar guarantees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer
or employee of the Corporation or any of its subsidiaries.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Donald E. O'Neill, Chairman Dr. Helen M. Ranney
Stephen M. McGrath
Mr. McGrath is an Executive Vice President of Oppenheimer, an investment
banking firm which renders financial advice to the Corporation from time to
time. In April 1996, the Corporation completed a public offering of newly
issued Common Stock in which Oppenheimer participated as a managing
underwriter. The Corporation has also retained Oppenheimer to provide
financial advice in connection with future collaborative agreements for
certain of the Corporation's products. Additionally, in September 1995, the
Board of Directors voted to extend by two years the maturity dates of certain
warrants for Common Stock initially issued to Oppenheimer in consideration of
financial services provided by Oppenheimer. Mr. McGrath abstained from
voting on such extension. Some of the warrants have been transferred by
Oppenheimer to various Oppenheimer employees and, using the Black Scholes
valuation model, the Corporation estimates that the value of the term
extension for the warrants held by Mr. McGrath is approximately $19,000.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return to
the Corporation's shareholders during the five-year period ended June 30,
1996, as well as with that of an overall stock market index (NASDAQ) and a
published industry index (NASDAQ Pharmaceutical Stocks):
11
<PAGE>
[GRAPH]
2. PROPOSED AMENDMENT OF THE 1991 STOCK OPTION PLAN
Effective November 8, 1991, the Board of Directors and the shareholders
of the Corporation adopted the 1991 Non-Qualified Stock Option Program (the
"1991 Program") pursuant to which 1,000,000 shares of Common Stock were
reserved for issuance upon the exercise of options granted under the terms of
the 1991 Program. On November 19, 1994, the shareholders of the Corporation
approved the amendment and restatement of the 1991 Program (as amended and
restated, it is entitled the 1991 Stock Option Plan of Alliance
Pharmaceutical Corp., the "1991 Plan") pursuant to which an additional
1,000,000 shares of Common Stock were reserved for issuance upon the exercise
of options granted under the terms of the 1991 Plan. On November 16, 1995,
the shareholders of the Corporation approved an amendment to the 1991 Plan
pursuant to which an additional 1,200,000 shares of Common Stock were
reserved for issuance upon the exercise of options granted under terms of the
1991 Plan. As of August 30, 1996, 914,320 shares remained available for
issuance under the 1991 Plan. On September 30, 1996, the Board of Directors
approved an amendment to the 1991 Plan, subject to shareholder approval, to
increase the number of shares authorized for issuance under the 1991 Plan
from 3,200,000 to 4,700,000 shares.
The Board believes that the increase is necessary to meet the
Corporation's objectives of motivating and retaining officers, employees, and
nonemployee consultants with appropriate experience and ability, and to
increase the grantees' alignment of interest with the Corporation's
shareholders. The increase of 1,500,000 shares represents 4.5 percent of the
Corporation's Common Stock on a fully diluted basis as of June 30, 1996.
DESCRIPTION OF THE PLAN
The following is a summary of the principal features of the 1991 Plan:
PURPOSE
The purpose of the 1991 Plan is to assist the Corporation in the
recruitment, retention and motivation of directors, officers, employees and
consultants who are providing, or who are expected to provide, services which
are deemed important to the Corporation, by enabling them to acquire the
Corporation's Common Stock, thereby increasing
12
<PAGE>their proprietary interest in and commitment to the growth and success
of the Corporation.
ADMINISTRATION
The 1991 Plan is administered by the Stock Option Committee of the Board
of Directors. The members of the Stock Option Committee are appointed by,
and serve at the pleasure of, the Board of Directors. The Stock Option
Committee, which will be referred to in this summary as the Plan
Administrator, has full authority, subject to the provisions of the 1991
Plan, to determine the eligible individuals who are to receive option grants
under the 1991 Plan, the type of option (incentive stock option or
non-qualified stock option) to be granted, the consideration for the granting
of such options, the number of shares to be covered by each granted option,
the date or dates on which the option is to become exercisable, and the
maximum term for which the option is to remain outstanding.
The Plan Administrator consists of two (2) or more non-employee
directors within the meaning of Rule 16b-3(b)(3)(i) under the Securities
Exchange Act of 1934, as amended from time to time.
ELIGIBILITY AND SHARES SUBJECT TO THE 1991 PLAN
Under the 1991 Plan, 4,700,000 shares of Common Stock have been reserved
for issuance (1,500,000 shares of which are subject to shareholder approval
at the Meeting) upon the exercise of options granted pursuant to the terms of
the 1991 Plan. The 1991 Plan provides for the grant of both incentive stock
options ("ISOs") intended to qualify as such under section 422 of the
Internal Revenue Code of 1986, as amended, and non-qualified stock options
("NSOs"). ISOs may be granted only to employees of the Corporation. NSOs may
be granted to employees, non-employee directors and consultants who provide
services which are deemed important to the Corporation. If any options
granted under the 1991 Plan shall for any reason expire or be canceled or
otherwise terminated without having been exercised in full, the shares
allocable to the unexercised portion of such options shall again become
available for the 1991 Plan. If options issued under the 1991 Plan are
canceled unexercised, they also become available for new grants. Options to
purchase more than 200,000 shares may not be granted to any individual in a
single calendar year under the 1991 Plan.
As of June 30, 1996, options to purchase an aggregate of 2,740,573
shares of Common Stock, at a weighted average exercise price of $9.53 per
share, were outstanding under all of the Corporation's stock option plans
(including options granted under the 1983 Incentive Stock Option Plan, which
plan expired on October 1, 1993). As of June 30, 1996, approximately 194
employees (including one director who is an employee) and seven non-employee
directors were eligible to participate in the 1991 Plan. On August 30, 1996,
the closing price for the Corporation's Common Stock on the NASDAQ National
Market was $14.00. All stock options granted since November 15, 1991 have
been granted with exercise prices equal to the closing price for the
Company's Common Stock on the NASDAQ National Market on the date of grant.
As of June 30, 1996, 2,200,653 stock options granted under all of the stock
option plans had been exercised, and stock options for a total of 2,589,780
shares of Common Stock were available for future grants (including those
available under the amendment to the 1991 Plan to be approved at the Meeting).
As of August 30, 1996, the following persons or groups had, in total,
received options to purchase shares of Common Stock under the 1991 Plan as
follows: (i) the Chief Executive Officer and the other Named Executive
Officers: Duane J. Roth, Chairman and Chief Executive Officer, 243,400
shares; Harold W. DeLong, Executive Vice President - Business Development,
114,500 shares; Theodore D. Roth, Executive Vice President, 114,500 shares;
N. Simon Faithfull, Vice President - Medical Research, 47,250 shares; Ronald
M. Hopkins, Vice President - Research and Development, 47,250 shares; (ii)
all current executive officers of the Corporation as a group: 757,050 shares;
(iii) all current directors who are not executive officers as a group:
256,500 shares; (iv) each nominee for election as a director (including
options granted pursuant to the Directors' Formula Option Plan described
below): Pedro Cuatrecasas 25,000, Carroll O. Johnson 35,500, Stephen M.
McGrath 18,000, Donald E. O'Neill 46,000, Helen M. Ranney 46,000, Jean G.
Riess 68,000, and Thomas F. Zuck 18,000; (v) each person who has received 5%
of options granted other than those named above: no shares; (vi) all
employees of the Corporation, including all current officers who are not
executive officers, as a group: 1,459,050 shares; and (vii) each associate of
any such directors, executive officers, or nominees: Carol Hopkins (Ronald
Hopkins' wife), 39,800 shares.
13
<PAGE>
TERMS OF OPTIONS
Each option granted under the 1991 Plan must be exercised within ten
years of the date of its grant unless the Plan Administrator specifies some
lesser time. Stock options granted under the 1991 Plan must be exercised by
the optionee before the earlier of the expiration of such option or the date
ten days after termination of the optionee's employment or service, except
that this period is extended to three months in the case of the optionee's
retirement at or after age 65 or termination of employment or service due to
disability, and to six months in the case of the optionee's death, in which
case the option is exercisable by the optionee's estate. Options granted
pursuant to the 1991 Plan, except for grants to nonemployee directors (which
vest in accordance with the Nonemployee Director Formula Plan), will vest at
the time or times determined by the Plan Administrator. Options become
immediately exercisable in full upon the optionee's retirement at or after
age 65 or termination of employment or service due to disability or death, or
upon the occurrence of such circumstance or event as in the opinion of the
Plan Administrator merits special consideration.
Options are subject to such terms and conditions, including price and
rate of exercise, as the Plan Administrator may determine. However, the
exercise price for ISOs will be no less than 100% of fair market value on the
date of grant. The exercise price for NSOs will be no less than either the
par value of said shares ($.01 per share) or eighty percent (80%) of the fair
market value of said shares on the date of grant.
Payment of the purchase price for shares purchased pursuant to the
exercise of an option may be made by cash or check, by a "cashless" exercise
method through a broker, by surrendering shares of Common Stock of the
Corporation in payment of the expense price and applicable withholding taxes,
or by such other methods as the Plan Administrator may permit from time to
time. A grantee who is an employee of or a consultant to the Corporation at
the time of exercise of an option may, if authorized by the Plan
Administrator, exercise his/her option by paying the Corporation at least the
par value of the shares of Common Stock being acquired and borrowing the
remainder of the exercise price from the Corporation. The 1991 Plan provides
that such loans shall mature within five years (or earlier, in the event of a
termination of employment or of a consultancy), shall be secured by the
shares of Common Stock purchased, shall provide for quarterly payments of
interest at such rate as the Plan Administrator may determine and shall be in
such form and contain such other provisions as the Plan Administrator may
determine from time to time.
DURATION, AMENDMENT AND TERMINATION
The 1991 Plan expires on November 7, 2001. The 1991 Plan may be
amended, suspended or terminated at any time by action of the Board of
Directors or the Plan Administrator, except that no such action may, without
shareholder approval, increase the maximum number of shares reserved for
options under the 1991 Plan or for any individual, change the class of
eligible persons or materially increase the benefits accruing to eligible
persons under the 1991 Plan. Furthermore, no action may, without the consent
of an optionee, adversely affect his/her rights under any option theretofore
granted.
FEDERAL INCOME TAX CONSEQUENCES
Neither the optionee nor the Corporation will incur any federal tax
consequences as a result of the grant of an option. The optionee will have
no taxable income upon exercising an ISO (except that the alternative minimum
tax may apply), and the Corporation will receive no deduction when an ISO is
exercised. Upon exercising an NSO, the optionee generally must recognize
ordinary income equal to the "spread" between the exercise price and the fair
market value of the Common Stock on the date of exercise; and the Corporation
will be entitled to a deduction for the same amount. In the case of an
employee, the option spread at the time an NSO is exercised is subject to
income tax withholding. The tax treatment of a disposition of option shares
acquired under the 1991 Plan depends on how long the shares have been held
and on whether such shares were acquired by exercising an ISO or NSO. The
Corporation will not be entitled to a deduction in connection with a
disposition of option shares, except in the case of a disposition of shares
acquired under an ISO before the applicable ISO holding periods have been
satisfied.
Shareholders are requested in this Proposal 2 to approve the increase in
the number of shares authorized for issuance under the 1991 Plan from
3,200,000 to 4,700,000. Under New York law, the affirmative vote of the
holders of securities representing a majority of the voting power present in
person or represented by proxy at the Meeting is required to adopt the
proposed amendment of the 1991 Plan of the Corporation.
14
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE AMENDMENT
OF THE 1991 STOCK OPTION PLAN.
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP to
serve as the independent auditors for the Corporation for the fiscal year
ending June 30, 1997. Representatives of Ernst & Young LLP are expected to
be present at the Meeting, will have the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate
questions.
Shareholder ratification of the appointment of Ernst & Young LLP as the
Corporation's independent auditors is not required by the Corporation's Bylaws
or otherwise. If the shareholders fail to ratify the appointment, the Board
will reconsider whether or not to retain that firm. Even if the appointment is
ratified, the Board 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 interests of the Corporation and its
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
4. OTHER BUSINESS
Management knows of no other matters that may be presented to the
Meeting. However, if any other matter properly comes before the Meeting, it
is intended that proxies in the accompanying form will be voted in accordance
with the judgment of the persons named therein.
FUTURE PROPOSALS BY SHAREHOLDERS
Any proposal which a shareholder of the Corporation wishes to have
included in the proxy statement and proxy relating to the Corporation's 1997
Annual Meeting pursuant to the provisions of Rule 14a-8 under the Securities
Exchange Act of 1934 must be received by the Corporation at its executive
offices no later than June 19, 1997, and must otherwise comply with the
requirements of Rule 14a-8. The address of the Corporation's executive
office is 3040 Science Park Road, San Diego, CA 92121.
ANNUAL REPORT ON FORM 10-K
THE CORPORATION WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, TO EACH
PERSON SOLICITED HEREUNDER WHO MAILS A WRITTEN REQUEST THEREFOR TO ALLIANCE
PHARMACEUTICAL CORP., 3040 SCIENCE PARK ROAD, SAN DIEGO, CA 92121,
ATTENTION: LLOYD A. ROWLAND, GENERAL COUNSEL. THE CORPORATION WILL ALSO
FURNISH, UPON THE PAYMENT OF A REASONABLE FEE TO COVER REPRODUCTION AND
MAILING EXPENSES, A COPY OF ALL EXHIBITS TO SUCH ANNUAL REPORT ON FORM 10-K.
It is important that your shares be represented at the Meeting. If you
are unable to be present in person, you are respectfully requested to sign
the enclosed proxy and return it in the enclosed stamped, addressed envelope
as promptly as possible.
By Order of the Board of Directors,
Duane J. Roth, Chairman
Date: October 17, 1996
San Diego, California
15
<PAGE>
1991 STOCK OPTION PLAN
OF
ALLIANCE PHARMACEUTICAL CORP.
1. PURPOSE. The purpose of this Stock Option Plan (the "Plan") is to
provide an additional incentive to, and attract and hold in service, directors,
officers and other employees of, and consultants to, the Corporation, and any
future subsidiaries of the Corporation, who are providing, or who are expected
to provide, services which are deemed important to the Corporation.
Accordingly, these persons may be encouraged to acquire stock ownership in, and
increase their commitment to, the Corporation, thereby promoting the interests
of the Corporation and its shareholders. Options granted under the Plan may be
incentive stock options satisfying the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and
non-qualified stock options which are not intended to satisfy said Section 422.
2. DEFINITIONS. When used in this Plan, unless the context otherwise
requires:
(a) "Board of Directors" or "Board" shall mean the Board of
Directors of the Corporation, as constituted at any time.
(b) "Chairman of the Board" shall mean the person who at the time
shall be Chairman of the Board of Directors.
(c) "Committee" shall mean the Committee hereinafter described in
Section 3.
(d) "Corporation" shall mean Alliance Pharmaceutical Corp., a New
York corporation.
(e) "Eligible Persons" shall mean those persons described in
Section 4 who are potential recipients of Options.
(f) "Fair Market Value" on a specified date shall mean the closing
price at which a Share is traded on the stock exchange, if any, on which
Shares are primarily traded or, if the Shares are not then traded on a
stock exchange, the average of the closing bid and asked prices at which a
Share is traded on the over-the-counter market, as reported on the National
Association of Security Dealers Automated Quotation System, but if no
Shares were traded on such date, then on the last previous date on which a
Share was so traded, or, if none of the above are applicable, the value of
a Share as established by the Committee for such date using any reasonable
method of valuation.
(g) "Options" shall mean the Stock Options granted pursuant to this
Plan.
(h) "Plan" shall mean this 1991 Stock Option Plan of Alliance
Pharmaceutical Corp., as adopted by the Board of Directors on May 20, 1994,
as
<PAGE>
such Plan from time to time may be amended.
(i) "President" shall mean the person who at the time shall be the
President of the Corporation.
(j) "Share" shall mean a share of common stock, par value $.01 per
share, of the Corporation.
(k) "Subsidiary" shall mean any corporation 50% or more of whose
stock having general voting power is owned by the Corporation, or by
another Subsidiary as herein defined, of the Corporation.
3. COMMITTEE. The Plan shall be administered by a Committee of the Board
of Directors, which shall consist of two (2) or more non-employee directors
within the meaning of Rule 16b-3(b)(3)(i) under the Securities Exchange Act of
1934, as from time to time amended (the "Exchange Act").
4. PARTICIPANTS. The class of persons who are potential recipients of
Options granted under this Plan consist of directors and key employees of the
Corporation or a Subsidiary, and consultants to the Corporation or a Subsidiary
(hereinafter referred to as "Consultants"), as determined by the Committee. The
persons to whom Options are granted under this Plan, and the number of Shares
subject to each such Option, shall be determined by the Committee in its sole
discretion, subject, however, to the terms and conditions of this Plan.
5. SHARES. Subject to the provisions of Section 14 hereof, the Committee
may grant Options with respect to an aggregate of up to 3,200,000 Shares, all of
which Shares may be either Shares held in treasury or authorized but unissued
Shares. The maximum number of Shares which may be the subject of Options
granted to any individual in any calendar year shall not exceed 200,000 Shares.
If the Shares that would be issued or transferred pursuant to any Option are not
issued or transferred and cease to be issuable or transferable for any reason,
the number of Shares subject to such Option will no longer be charged against
the limitation provided for herein and may again be made subject to Options;
provided, that the counting of Shares subject to Options granted under the Plan
against the number of Shares available for further Options shall in all cases
conform to the requirements of Rule 16b-3 under the Exchange Act; and provided,
further, that with respect to any Option granted to any Eligible Person who is a
"covered employee" as defined in Section 162(m) of the Internal Revenue Code and
the regulations promulgated thereunder that is canceled, the number of Shares
subject to such Option shall continue to count against the maximum number of
Shares which may be the subject of Options granted to such Eligible Person.
6. GRANT OF OPTIONS. The number of any Options to be granted to any
Eligible Person shall be determined by the Committee in its sole discretion. At
the time an Option is granted, the Committee may, in its sole discretion,
designate whether such Option (a) is to be considered as an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code, or (b) is
not to be treated as an incentive stock option for purposes of this Plan and the
Internal Revenue Code. No option which is intended to qualify as an incentive
stock option shall be granted to any individual who, at the time of the grant,
is not an employee of the Corporation or a Subsidiary.
<PAGE>
Notwithstanding any other provision of this Plan to the contrary, to the
extent that the aggregate Fair Market Value (determined as of the date an Option
is granted) of the Shares with respect to which Options which are designated as
(or deemed to be) incentive stock options granted to an employee (and any
incentive stock options granted to such employee under any other incentive stock
option plan maintained by the Corporation or any Subsidiary that meets the
requirements of Section 422 of the Internal Revenue Code) first become
exercisable in any calendar year exceeds $100,000, such Options shall be treated
as Options which are not incentive stock options. Options with respect to which
no designation is made by the Committee shall be deemed to be incentive stock
options to the extent that the $100,000 limitation described in the preceding
sentence is met. This paragraph shall be applied by taking options into account
in the order in which they are granted.
Nothing herein contained shall be construed to prohibit the issuance of
Options at different times to the same person.
An Option shall be evidenced by a written Option agreement in a form
approved by the Committee. An Option agreement signed by the Chairman of the
Board or the President or a Vice President of the Corporation, and dated the day
of grant, or such later date as the Committee in its sole discretion, shall
determine, shall be tendered to each person to whom an Option is granted, except
that such Option agreement shall be deemed rescinded and have no effect if the
Option holder, within a specified period, does not sign an unqualified
acceptance, in such form as the Committee has prescribed, of such Option
agreement. The Option agreement for an Option shall indicate whether or not the
Option is an incentive stock option.
7. PURCHASE PRICE. The purchase price per Share of the Shares to be
purchased pursuant to the exercise of an Option shall be fixed by the Committee
at the time of grant; provided however, that the purchase price per Share under
an incentive stock option shall not in any event be less than 100% of the Fair
Market Value of a Share on the date of grant of the Option and the purchase
price per Share under a non-qualified stock option shall not be less than either
the par value of said Shares or 80% of the Fair Market Value of said Shares on
the date of grant of the Option.
8. DURATION OF OPTIONS. The duration of any Option granted under this
Plan shall be for a period of ten years from the date upon which the Option is
granted or such lesser period as the Committee may determine at the time of
grant.
9. TEN PERCENT SHAREHOLDERS. Notwithstanding any other provision of this
Plan to the contrary, no Option which is intended to qualify as an incentive
stock option may be granted under this Plan to any employee who, at the time the
Option is granted, owns Shares possessing more than 10% of the total combined
voting power of all classes of stock of the Corporation or any Subsidiary,
unless the exercise price under such Option is at least 110% of the Fair Market
Value of a Share on the date such Option is granted and the duration of such
Option is no more than five years.
10. EXERCISE OF OPTIONS. Except as otherwise provided herein, Options,
after the grant thereof, shall be exercisable by the holder at such rate and
times as may be fixed by the Committee; provided, however, that no Options may
be exercised for less than 100 Shares at a time, unless the grant is for a
number of Shares not evenly
<PAGE>
divisible by 100, in which case the final exercise may be for the remaining
Shares; and provided, further, that no Option may be exercised prior to the
approval of the Plan by a majority vote of the shareholders.
Notwithstanding the foregoing, all or any part of any remaining unexercised
Options granted to any person may, after approval of the Plan by a majority vote
of the shareholders of the Corporation, be exercised in the following
circumstances: (a) subject to the provisions of Section 13 hereof, immediately
upon (but prior to the expiration of the term of the Option) the holder's
cessation of employment or service due to retirement from the Corporation and
all Subsidiaries on or after his 65th birthday, (b) subject to the provisions of
Section 13 hereof, upon the disability (to the extent and in a manner as shall
be determined by the Committee in its sole
discretion) or death of the holder, or (c) upon the occurrence of such special
circumstance or event as in the opinion of the Committee merits special
consideration; provided, however, that the estate of the deceased holder of an
Option may exercise it prior to the expiration of the six-month period described
above.
An Option shall be exercised by the delivery of a written notice duly
signed by the holder thereof to such effect ("Exercise Notice"), together with
the full purchase price of the Shares purchased pursuant to the exercise of the
Option, to the Chairman of the Board or an officer of the Corporation appointed
by the Chairman of the Board for the purpose of receiving the same. Payment of
the full purchase price shall be made as follows: (i) in cash or by check
payable to the order of the Corporation which amount payable includes all
applicable withholding taxes; (ii) by including in the Exercise Notice an order
to a designated broker to sell part or all of the Shares and to deliver
sufficient proceeds to the Corporation to pay the full purchase price of the
Shares and all applicable withholding taxes; (iii) if specifically authorized by
the Committee and the purchaser is an employee or Consultant at the time of
purchase, by payment in cash of at least $.01 per Share and all applicable
withholding taxes, with the remainder of the Option price being borrowed from
the Corporation as described below; or (iv) by such other methods as the
Committee may permit from time to time. In the case described in clause
(iii) bove, the Corporation, unless otherwise determined by the Committee, will
lend to such purchaser an amount up to the excess of the full Option price of
the Shares purchased over the cash payment, but not more than the excess of such
price over the par value of such Shares, such loan to be evidenced by the
purchaser's delivery to the Corporation of his or her unconditional promissory
note to pay the amount of the loan within five years in such manner as is
determined by the Committee. Any such note: (i) shall be dated the date of the
Exercise Notice of the Option, (ii) shall provide for the payment of equal
installments of principal, (iii) shall provide for quarterly payment of interest
on such indebtedness at such rate as the Committee may determine, which cannot
be less than the prime rate and (iv) shall be in such form and contain such
other provisions as the Committee may determine from time to time. In
connection with any such loan, the purchaser shall deposit with the pledge to
the Corporation the certificate or certificates evidencing all of the Shares so
purchased, to be held by the Corporation as collateral security for such loan.
If the employment or consulting arrangement of the purchaser is terminated by
reason of death, any unpaid balance of such indebtedness shall become due and
payable one year after the date of the death, but not later than
<PAGE>
five years after the date of purchase, unless otherwise determined by the
Committee. If the employment or consulting arrangement of the purchaser is
terminated for any reason other than death, any unpaid balance of such
indebtedness shall become immediately due and payable on such date of
termination, unless otherwise determined by the Committee. Cash dividends paid
on Shares held by the Corporation as security shall be paid to the purchaser.
Voting rights and other shareholder's rights with respect to all Shares shall
vest in the purchaser although the Shares are held by the Corporation as
security. Upon default in the payment of principal or interest on a loan
provided for in this paragraph, the Corporation, to the extent then permitted by
law and without demand or notice to the debtor, may sell any pledged Shares for
the benefit of the debtor and apply the net proceeds of such sale to the then
unpaid principal and interest on such loan, and any remainder of such proceeds
shall be paid to the debtor.
Within a reasonable time after the exercise of an Option, the Corporation
shall cause to be delivered to the person entitled thereto, a certificate for
the Shares purchased pursuant to the exercise of the Option, subject to the
deposit of such certificate as collateral security for a loan as described in
the preceding paragraph. If the Option shall have been exercised with respect
to less than all of the Shares subject to the Option, the Corporation shall
maintain records indicating the number of Shares with respect to which the
Option remains available for exercise and, absent manifest error, the
Corporation's records shall be determinative.
In lieu of the foregoing option exercise payment methods, the Option holder
may deliver with the Exercise Notice (A) shares of the Corporation's Common
Stock owned by the holder having a Fair Market Value calculated as of the date
of the Option exercise equal to the sum of (i) the aggregate Option exercise
price of the Shares with respect to which such Option or portion is being
exercised and (ii) applicable withholding taxes, duly endorsed for transfer to
the Corporation, or (B) written instructions to withhold shares of the
Corporation's Common Stock issuable to the holder upon exercise of the Option
being exercised, having a Fair Market Value calculated as of the date of the
Option exercise equal to the sum of (i) the aggregate Option exercise price of
the Shares with respect to which such Option or portion is being exercised
(including the Shares to be withheld) and (ii) applicable withholding taxes.
Notwithstanding the foregoing, Option holders may not utilize these alternative
methods of payment in connection with incentive stock options outstanding on
November 15, 1995.
Notwithstanding any other provision of the Plan or of any Option, no Option
granted pursuant to the Plan may be exercised at any time when the Option or the
granting or exercise thereof violates any law or governmental order or
regulation.
11. CONSIDERATION FOR OPTIONS. The Corporation shall obtain such
consideration for the grant of an Option as the Committee in its discretion may
determine.
12. NON-TRANSFERABILITY OF OPTIONS. Options and all other rights
thereunder shall be non-transferable or non-assignable by the holder thereof
except to the extent that the estate of a deceased holder of an Option may be
permitted to exercise them. Options may be exercised or surrendered during the
holder's lifetime only by the holder
<PAGE>
thereof.
13. TERMINATION OF EMPLOYMENT. All or any part of any Option, to the
extent unexercised, shall terminate immediately: (i) in the case of an employee,
upon the cessation or termination for any reason of the holder's employment by
the Corporation or any Subsidiary, or (ii) in the case of a director or
Consultant who is not an employee, upon the holder's ceasing to serve as a
director or Consultant of the Corporation or any Subsidiary, except that the
holder shall have until the end of the tenth business day following the
cessation of his employment with the Corporation or its Subsidiaries or his
service as a director or Consultant of the Corporation or its Subsidiaries, and
no longer, to exercise any unexercised Option that he could have exercised on
the day on which such employment or service terminated; provided, that such
exercise must be accomplished prior to the expiration of the term of such
Option. Notwithstanding the foregoing, if the cessation of employment or service
is due to retirement on or after attaining the age of sixty-five (65) years, or
to disability (to an extent and in a manner as shall be determined in each case
by the Committee in its sole discretion) or to death, the holder or the
representative of the estate of a deceased holder shall have the privilege of
exercising the Options which are unexercised at the time of such retirement, or
of such disability or death; provided, however, that such exercise must be
accomplished prior to the expiration of the term of such Option and (a) within
three months of the holder's retirement or disability, or (b) within six months
of the holder's death, as the case may be. If the employment or service of any
Option holder with the Corporation or its Subsidiaries shall be terminated
because of the Option holder's violation of the duties of such employment or
service with the Corporation or its Subsidiaries as he may from time to time
have, the existence of which violation shall be determined by the Board in its
sole discretion (which determination by the Board shall be conclusive), all
unexercised Options of such Option holder shall terminate immediately upon such
termination of the holder's employment or service with the Corporation or its
Subsidiaries, and an Option holder whose employment or service with the
Corporation or its Subsidiaries is so terminated, shall have no right after such
termination to exercise any unexercised Option he might have exercised prior to
the termination of his employment or service with the Corporation or its
Subsidiaries.
14. ADJUSTMENT PROVISION. If prior to the complete exercise of any Option
there shall be declared and paid a stock dividend upon the Shares or if the
Shares shall be split up, converted, exchanged, reclassified, or in any way
substituted for, then the Option, to the extent that it has not been exercised,
shall entitle the holder thereof upon the future exercise of the Option to such
number and kind of securities or cash or other property subject to the terms of
the Option to which he would have been entitled had he actually owned the Shares
subject to the unexercised portion of the Option at the time of the occurrence
of such stock dividend, split-up, conversion, exchange, reclassification or
substitution, and the aggregate purchase price upon the future exercise of the
Option shall be the same as if the originally optioned Shares were being
purchased thereunder.
Any fractional shares or securities issuable upon the exercise of the
Option as a result of such adjustment shall be payable in cash based upon the
Fair Market Value of such shares or securities at the time of such exercise. If
any such event should occur, the number of Shares with respect to which Options
remain to be issued, or with respect
<PAGE>
to which Options may be reissued, shall be adjusted in a similar manner.
Notwithstanding any other provision of this Plan, in the event of a
recapitalization, merger, consolidation, rights offering, reorganization,
liquidation, or other change in the Corporation's corporate structure or
outstanding Shares, the Committee may make such equitable adjustments to the
number of Shares and class of shares available hereunder as it shall deem
appropriate to prevent dilution or enlargement of rights.
15. ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES ACT. The
Corporation may postpone the issuance and delivery of Shares pursuant to the
grant or exercise of any Option until (a) the admission of such Shares to
listing on any stock exchange on which Shares of the Corporation of the same
class are then listed, and (b) the completion of such registration or other
qualification of such Shares under any State or Federal law, rule or regulation
as the Corporation shall determine to be necessary or advisable. Any holder of
an Option shall make such representations and furnish such information as may,
in the opinion of counsel for the Corporation, be appropriate to permit the
Corporation, in the light of the then existence or non-existence with respect to
such Shares of an effective time to time amended (the "Securities Act"), to
issue the Shares in compliance with the provisions of the Securities Act or any
comparable act. The Corporation shall have the right, in its sole discretion,
to legend any Shares which may be issued pursuant to the grant or exercise of
any Option, or may issue stop transfer orders in respect thereof.
16. INCOME TAX WITHHOLDING. If the Corporation or a Subsidiary shall be
required to withhold any amounts by reason of any Federal, State or local tax
rules or regulations in respect of the issuance of Shares pursuant to the
exercise of any Option, the Corporation or the Subsidiary shall be entitled to
deduct and withhold such amounts from any cash payments to be made to the holder
of such Option. In any event, the holder shall make available to the
Corporation or Subsidiary, promptly when requested by the Corporation or such
Subsidiary, sufficient funds to meet the requirements of such withholding; and
the Corporation or Subsidiary shall be entitled to take and authorize such steps
as it may deem advisable in order to have such funds made available to the
Corporation or Subsidiary out of any funds or property due or to become due to
the holder of such Option.
17. ADMINISTRATION AND AMENDMENT OF THE PLAN. Except as hereinafter
provided, the Board of Directors or the Committee may at any time withdraw or
from time to time amend the Plan as it relates to, and the terms and conditions
of, any Option not theretofore granted, and the Board of Directors or the
Committee, with the consent of the affected holder of an Option, may at any time
withdraw or from time to time amend the Plan as it relates to, and the terms and
conditions of, any outstanding Option. Notwithstanding the foregoing, any
amendment by the Board of Directors or the Committee which would (i) increase
the number of Shares issuable under the Plan or to any individual, (ii)
materially increase the benefits accruing to Eligible Persons under the Plan, or
(iii) change the class of Eligible Persons, shall be subject to the approval of
the shareholders of the Corporation within one year of such amendment.
Determinations of the Committee as to any question which may arise with
respect to the interpretation of the provisions of the Plan and Options shall be
final. The
<PAGE>
Committee may authorize and establish such rules, regulations and revisions
thereof not inconsistent with the provisions of the Plan, as it may deem
advisable to make the Plan and Options effective or provide for their
administration, and may take such other action with regard to the Plan and
Options as it shall deem desirable to effectuate their purpose.
The Plan is intended to comply with Rule l6b-3 under the Exchange Act. Any
provision inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
18. NO RIGHT OF EMPLOYMENT OR SERVICE. Nothing contained herein or in an
Option shall be construed to confer on any Eligible Person any right to be
continued in the employ or service of the Corporation or any Subsidiary or
derogate from any right of the Corporation and any Subsidiary to retire, request
the resignation of or discharge such Eligible Person (without or with pay), at
any time, with or without cause.
19. FINAL ISSUANCE DATE. No Option shall be granted under the Plan after
November 7, 2001.
<PAGE>
<TABLE>
<S><C>
ALLIANCE PHARMACEUTICAL CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - NOVEMBER 13, 1996
The undersigned, revoking any proxy heretofore given, hereby appoints Carroll O. Johnson, Stephen M. McGrath and Duane J. Roth or
any one of them, proxies of the undersigned with full power of substitution, with respect to all of the shares of the Common
Stock which the undersigned is entitled to vote at the Annual Meeting of Shareholders of Alliance Pharmaceutical Corp. (the
"Corporation") to be held on November 13, 1996, at Sheraton Grande Torrey Pines, 10950 N. Torrey Pines Road, La Jolla, CA 92037
at 9:00 a.m., San Diego time, or any adjournment thereof.
Unless a contrary direction is indicated, this Proxy will be voted FOR all nominees listed for election as directors, FOR
authorization of additional shares of Common Stock under the 1991 Stock Option Plan and FOR ratification of Ernst & Young LLP as
independent auditors for the fiscal year ending June 30, 1997. If specific instructions are indicated, this Proxy will be voted
in accordance therewith.
In their discretion, the Proxies are authorized to transact such other business as may properly come before the meeting or any
adjournment thereof.
The Board of Directors has proposed all matters to be voted upon and recommends a vote FOR all nominees for election as
directors, FOR authorization of additional shares under the 1991 Stock Option Plan and FOR ratification of Ernst & Young LLP as
independent auditors for the fiscal year ending June 30, 1997. Approval of any matter is this proxy is not related to or
conditioned on the approval of any other matter.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. Election of Directors FOR all nominees listed below (except as marked to the contrary) WITHHELD AUTHORITY
to vote for all nominees listed
below
(Instruction: To withhold authority to vote for any individual nominee, strike a line through the nominee's name in the list below.)
Dr. Pedro Cuatrecasas Carroll O. Johnson Stephen M. McGrath Donald E. O'Neill
Dr. Helen M. Ranney Dr. Jean G. Riess Duane J. Roth Dr. Thomas F. Zuck
2. Authorization of Additional Shares of Common Stock under the 1991 Stock Option Plan
FOR AGAINST ABSTAIN
3. Ratification of Ernst & Young LLP as independent auditors
FOR AGAINST ABSTAIN
(To be completed and signed on reverse side)
</TABLE>
<PAGE>
<TABLE>
<S><C>
Dated: , 1996
-----------------------------
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-------------------------------------------
Please sign exactly as name appears
hereon. If the shares are registered in
the names of two or more persons, each
should sign. Executors, administrators,
trustees, guardians, attorneys-in-fact,
corporate officers, general partners and
other persons acting in a representative
capacity should add their titles.
The above signed hereby acknowledges
receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement
furnished herewith. PLEASE FILL IN, DATE,
SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POST-PAID RETURN ENVELOPE.
</TABLE>
