April 13, 1998
TO: All Stockholders
You are cordially invited to attend the 1998 Annual Meeting of
the Stockholders of The Liposome Company, Inc., which will be
held at The Holiday Inn, 1053 Route #1, Princeton, New Jersey
08540, on May 14, 1998, at 10:15 a.m. Information about the
Annual Meeting, including a listing and discussion of the various
matters on which the stockholders will act, may be found in the
enclosed formal Notice of Annual Meeting of Stockholders and
Proxy Statement. The Company's Annual Report for the fiscal year
ended December 28, 1997 is also included.
At the Annual Meeting you will be asked to (1) elect the
members of the Board of Directors, and (2) ratify the appointment
of Coopers & Lybrand L.L.P. as the Company's independent
accountants for the 1998 fiscal year.
We plan to give a slide presentation at the Annual Meeting
highlighting the Company's recent progress and our future plans.
Upon adjournment of the meeting, the directors and officers of
the Company will be available to confer informally with
stockholders.
We hope that you will be able to attend the meeting. Whether
or not you plan to attend, please sign, date and return your
proxy promptly in the postage prepaid envelope provided.
Sincerely,
Charles A. Baker
Chairman, President and Chief
Executive Officer
THE LIPOSOME COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
The Annual Meeting of Stockholders of The Liposome Company,
Inc. (the "Company") will be held at The Holiday Inn, 1053 Route
#1, Princeton, New Jersey 08540, on May 14, 1998, at 10:15 a.m.
for the following purposes:
1. To elect nine directors to serve during the ensuing
year;
2. To ratify the appointment by the Board of
Directors of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the
fiscal year 1998; and
3. To transact such other business as may
properly come before the meeting and any
adjournment or postponement of the meeting.
The Board of Directors has fixed the close of business on March
27, 1998, as the record date for determining the stockholders
entitled to notice of, and to vote at the Annual Meeting and any
adjournment or postponement of the meeting.
All stockholders are cordially invited to attend the meeting.
WHETHER OR NOT YOU INTEND TO BE PRESENT, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE PREPAID
ENVELOPE ENCLOSED FOR YOUR CONVENIENCE. If you attend the
meeting, you can vote in person even if you have already returned
a proxy card. Stockholders can help the Company avoid
unnecessary expense and delay by promptly returning the enclosed
proxy card. The business of the meeting cannot be transacted
unless at least a majority of the outstanding shares are
represented at the meeting.
By Order of the Board of Directors
CAROL J. GILLESPIE
Secretary
Princeton, New Jersey
April 13, 1998
THE LIPOSOME COMPANY, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1998
--------------------------------------------------------------
GENERAL INFORMATION
This Proxy Statement is being sent by the Board of Directors of
The Liposome Company, Inc. (the "Company") to solicit proxies for
the Annual Meeting of Stockholders to be held on May 14, 1998
(the "Annual Meeting").
Each proxy will be voted as specified by the stockholder. Any
duly executed proxy not specifying the contrary will be voted FOR
(i) the nine directors nominated for election at the Annual
Meeting, and (ii) the ratification of Coopers & Lybrand L.L.P. as
the Company's independent accountants for the fiscal year 1998.
A stockholder giving a proxy may revoke it by written notice to
the Secretary of the Company that is received at any time before
it is voted. The address of the Company's principal executive
offices is One Research Way, Princeton Forrestal Center,
Princeton, New Jersey 08540.
At the close of business on March 27, 1998, the record date for
the Annual Meeting, there were outstanding and entitled to vote
37,964,331 shares of Common Stock. A quorum for purposes of the
Annual Meeting is fifty percent (50%) of the shares outstanding
on the record date, or 18,982,165 shares. Each share of Common
Stock entitles the holder to one vote, which the holder may cast
either in person or by proxy. Pursuant to Delaware General
Corporation Law, only votes cast "FOR" a matter constitute
affirmative votes. Votes "WITHHELD" or abstaining from voting on
one or more proposals are counted for purposes of determining
whether enough shares are present to make up a quorum. Because
votes "WITHHELD" from voting on a particular proposal are counted
in determining the number of shares voted on the proposal, a vote
"WITHHELD" will have the same effect as a vote cast "AGAINST" the
proposal. On ordinary proposals, brokers have the right to vote
shares that are held in their name or the name of a depository on
behalf of their clients if they do not receive voting
instructions from the client within a certain number of days
before the meeting. However, if the proposals to be voted on
include some that are considered "special," the brokers cannot
vote shares held for their clients on the special proposals. The
shares not voted, which are called "broker non-votes," are
counted for purposes of making up a quorum but are not counted in
determining the total number of votes cast on the proposal and
therefore do not have the effect of negative votes. Management
believes that both of the proposals to be voted on at the Annual
Meeting would be considered ordinary.
In the election of directors, the nine candidates receiving the
most votes will be elected. Approval of Proposal 2 will require
the affirmative vote of a majority of the shares voted on the
proposal. Votes will be tabulated preliminarily by the Company's
transfer agent, American Stock Transfer & Trust Co. Inspectors
of Election, appointed by the Board of Directors, will finally
count and tabulate the votes and determine and announce the
results.
A copy of the Annual Report of the Company, including financial
statements and a description of its operations for the fiscal
year 1997, accompanies this Proxy Statement. Such report is not
incorporated herein by reference.
Mailed to Stockholders on or about April 13, 1998
PROPOSAL 1. ELECTION OF DIRECTORS
Nine directors are to be elected at the Annual Meeting and will
serve until their successors are elected. All are currently
serving as directors.
It is intended that proxies received will be voted FOR the
election of the nominees named below unless marked to the
contrary. Each of the persons named has indicated that he is
willing and able to be nominated and, if elected, to serve as a
director. However, in the event that any of these persons is
unwilling or unable to serve at the time of the Annual Meeting,
the proxies may be voted either for the balance of the nominees
named, or for those persons and for substitute nominees
designated by the proxy holders or by the present Board of
Directors. Proxies cannot be voted for more than nine nominees.
Name Age Position with the Company
Charles A. Baker 65 Chairman of the Board,
President,
Chief Executive Officer and
Director
James G. Andress (2) 59 Director
Morton Collins, PhD (1) 62 Director
Stuart F. Feiner (1) 49 Director
Robert F. Hendrickson (2) 65 Director
Professor Bengt Samuelsson,MD(1) 64 Director
Joseph T. Stewart, Jr. (2) 68 Director
Gerald Weissmann, MD (1) 67 Director
Horst Witzel, Dr.-Ing (2) 70 Director
(1) Audit and Finance Committee member
(2) Nominating and Compensation Committee member
Nominees for Election as Directors
Charles A. Baker was named Chairman of the Board, President and
Chief Executive Officer of the Company in December 1989. Just
prior to joining the Company he was a business development and
licensing advisor to several small biotechnology companies. Mr.
Baker has served in several capacities in senior management at
Squibb Corporation (now Bristol-Myers Squibb Company), including
the positions of Group Vice President, Squibb Corporation and
President, Squibb International. He has also held various
executive positions at Abbott Laboratories and Pfizer Inc. Mr.
Baker received an undergraduate degree from Swarthmore College
and a J.D. degree from Columbia University. Mr. Baker also
serves as a director of Regeneron Pharmaceuticals, Inc. and
Progenics Pharmaceuticals, Inc., both biotechnology companies.
He is a member of the Council of Visitors of the Marine
Biological Laboratory, Woods Hole, Massachusetts, a not-for-
profit research organization.
James G. Andress has been a director since his appointment in
September 1990. Mr. Andress became the President and Chief
Executive Officer of Warner Chilcott, plc, a pharmaceutical
company, in November 1996, and Chairman in February 1998. From
1989 until 1995, he served as President, Co-Chief Executive
Officer and a director of Information Resources, Inc., a decision
support software and consumer packaged goods research company.
Mr. Andress is the former Chairman of the Pharmaceuticals Group,
Beecham Group, plc and the former President and Chief Operating
Officer of Sterling Drug, Inc. Mr. Andress is a director of XOMA
Corp. and NeoRx, Inc., which are biotechnology companies. He
also serves as a director of Sepracor, Inc., a separations
technology company; of O.P.T.I.O.N. Care, Inc., a home health
care company; of Favorite Brands, a consumer packaged goods
company; of Allstate Insurance Company; and of Information
Resources, Inc.
Morton Collins, Ph.D. has been a director since November 1982.
Dr. Collins has been a General Partner of DSV Partners III, a
venture capital limited partnership, since 1981 and a General
Partner of DSV Management, Ltd., since 1982. Since 1985, DSV
Management, Ltd. has been a General Partner of DSV Partners IV, a
venture capital limited partnership. Dr. Collins served as
interim Chairman of the Board and Chief Executive Officer of the
Company from June to December, 1989. He is also a director of
ThermoTrex Corporation, a laser and electro-optics company, and
of Kopin Corporation, a manufacturing company.
Stuart F. Feiner has been a director since February 1984. Mr.
Feiner has been Executive Vice President, General Counsel and
Secretary of Inco Limited, an international mining and metals
company, since August 1993 and served as Vice President, General
Counsel and Secretary of that company from April 1992 to August
1993. Mr. Feiner was President of Inco Venture Capital
Management, the venture capital unit of Inco Limited, from
January 1984 to April 1992. Mr. Feiner is also a director of
ImmunoGen, Inc., a biotechnology company.
Robert F. Hendrickson has been a director of the Company since
1992. Mr. Hendrickson was Senior Vice President, Manufacturing
and Technology for Merck & Co., Inc., a pharmaceutical company,
from 1985 to 1990. Since 1990, Mr. Hendrickson has been a
manufacturing consultant with a number of biotechnology and
pharmaceutical companies among his clients. He is currently a
director of Envirogen Inc., an environmental biotechnology
company, and of Cytogen Corporation and Unigene Laboratories,
Inc., both of which are biotechnology companies, and a trustee of
the Carrier Foundation.
Professor Bengt Samuelsson, M.D. has been a director of the
Company since January 1994. Dr. Samuelsson is Professor of
Physiological Chemistry of the Karolinska Institutet in
Stockholm, Sweden, a position that he has held since 1972. He
was one of three recipients who shared the 1982 Nobel Prize in
medicine for their work on prostaglandins, specifically the
discovery of prostanoids and leukotrienes. In addition to the
Nobel Prize, he has received a number of other prestigious
awards. He has been a member of the Company's Cell Adhesion
Scientific Advisory Board since May, 1991. Dr. Samuelsson is
Chairman of the Nobel Foundation, a member of the Board of
Directors of Pharmacia & Upjohn, a pharmaceutical company, and a
member of the Board of Directors of Handelsbanken, Stockholm,
Sweden, a Swedish bank.
Joseph T. Stewart, Jr. has been a director of the Company since
January 1995. Until 1989, he was associated for twenty-two years
with Squibb Corporation, where he held several positions of
increasing responsibility, including most recently Senior Vice
President, Corporate Affairs and previously Vice President,
Finance and Planning. He also served as a member of the Board of
Directors of Squibb Corporation. He is currently an executive
consultant to Johnson & Johnson, a director of General American
Investors Company, Inc., and a trustee of the Foundation of the
University of Medicine and Dentistry of New Jersey. He is also a
trustee of the New School University and is a member of the
Council of Visitors of the Marine Biological Laboratory, Woods
Hole, Massachusetts, a not-for-profit research organization.
Gerald Weissmann, M.D. has been a director of the Company since
1981. Dr. Weissmann has been a Professor of Medicine at the
Division of Rheumatology of the Department of Medicine at New
York University Medical Center since 1973. Dr. Weissmann is
Chairman of the Company's Cell Adhesion Scientific Advisory Board
and the Company's Cancer Scientific Advisory Board. He is also
on the Board of Trustees of the Marine Biological Laboratory,
Woods Hole, Massachusetts, a not-for-profit research
organization.
Dr. Horst Witzel has been a director of the Company since July
1990. Dr. Witzel is the former Chairman of the Board of
Executive Directors of Schering AG, Berlin, Germany. After his
retirement in 1989 he served as a member of the Supervisory Board
of Schering AG until May 1994. Dr. Witzel is a member of the
Supervisory Board of Brau und Brunnen AG, Berlin and Dortmund,
Germany. He is a director of Cephalon, Inc., a neuroscience
company, and Aastrom Biosciences, Inc., a cellular therapy
medical products company.
Committees of the Board of Directors
The Board of Directors has two standing committees: the Audit
and Finance Committee and the Nominating and Compensation
Committee. Stockholders desiring to submit recommendations for
nominees to the Board of Directors should address their
recommendations in writing to the Chairman of the Nominating and
Compensation Committee.
The Audit and Finance Committee consists of Dr. Morton Collins,
Mr. Stuart F. Feiner, Prof. Bengt Samuelsson, M.D., and Dr.
Gerald Weissmann. This committee provides advice and assistance
to the Company regarding accounting, auditing and financial
reporting. The Audit and Finance Committee also recommends a
firm of certified public accountants, whose duty it is to audit
the books and accounts of the Company for the fiscal year for
which they were appointed, and monitors the effectiveness of the
audit effort and the Company's financial and accounting
organization and financial reporting. The Audit and Finance
Committee held 3 meetings during the fiscal year ended December
28, 1997. No member of the Audit and Finance Committee is an
officer or employee of the Company.
The Nominating and Compensation Committee consists of Mr. James
G. Andress, Mr. Robert F. Hendrickson, Mr. Joseph T. Stewart and
Dr. Horst Witzel. Its functions are to propose and evaluate
nominees for the Board of Directors, to propose candidates to
serve as successor to the Chief Executive Officer, to review and
approve salaries and other matters relating to compensation of
all officers and employees of the Company above a specified
salary level, to review and make recommendations to the Board of
Directors for compensation and benefit plans and practices, and
to administer certain benefit plans of the Company. The
Nominating and Compensation Committee also reviews and approves
grants of options to employees and consultants who are not also
directors of the Company. Option grants to persons who are
directors of the Company are reviewed and approved by the Board
of Directors. The nominating function was added to the
committee's responsibilities and the composition of the committee
was changed in November 1997. The Compensation Committee held 6
meetings during the fiscal year ended December 28, 1997, and one
meeting was held by the Nominating and Compensation Committee.
No member of the Nominating and Compensation Committee is an
officer or employee of the Company.
The Company's Board of Directors held 9 meetings during the
fiscal year ended December 28, 1997. No director attended fewer
than 75 percent of the aggregate number of meetings of the Board
of Directors or of Committees on which he served.
Stock Ownership
The following table sets forth certain information regarding
the beneficial ownership of the Company's Common Stock as of
February 25, 1998, by (i) each director and Named Executive
Officer of the Company (as defined under the section entitled
"Executive Compensation"), (ii) each stockholder known by the
Company to own more than five percent of the outstanding Common
Stock, and (iii) all directors and executive officers, including
the Named Executive Officers, as a group. Except as otherwise
indicated, the Company believes that the beneficial owners of the
securities listed below, based on information furnished by such
owners, have sole investment and voting power with respect to the
shares of Common Stock shown as being beneficially owned by them.
Beneficial Owner Number of Shares Percent of Total
Ross Financial Corporation(1)
POB 31363-SMB
Cayman Islands, BWI 9,353,346 24.83
Charles A. Baker (2)(3)(4)(6) 572,054 1.52
James G. Andress (2) 60,000 *
Morton Collins, PhD (2) 60,000 *
Stuart F. Feiner (2) 31,000 *
Robert F. Hendrickson (2) 50,000 *
Professor Bengt Samuelsson, MD (2) 48,000 *
Joseph T. Stewart, Jr. (2) 21,000 *
Gerald Weissmann, MD (2)(5) 58,334 *
Horst Witzel, Dr-Ing (2) 85,000 *
James A. Boyle, MD, PhD (2)(4)(6) 146,485 *
Ralph del Campo (2)(4)(6) 111,793 *
Andrew S. Janoff, PhD (2)(4)(6) 57,386 *
Donald D. Yarson (4)(6) 41,844 *
All Directors and Executive 1,548,384 4.11
Officers as a group (17 persons)
(2)(4)(6)
*Less than 1.0 percent
______________________________
(1) Based on information filed with the SEC on Schedule 13D
by Ross Financial Corporation for the year ended December 31,
1997. Mr. Kenneth B. Dart is the sole shareholder of STS
Inc., which is the sole shareholder of Ross Financial
Corporation. Mr. Dart may, therefore, be deemed to be the
beneficial owner of the shares held by Ross Financial
Corporation.
(2) Includes shares of Common Stock issuable upon the
exercise of outstanding options granted under the Company's
stock option plans which are exercisable within 60 days after
February 25, 1998, as follows: Mr. Baker, 234,836; Mr.
Andress, 60,000; Dr. Collins, 35,000; Mr. Feiner, 30,000; Mr.
Hendrickson, 30,000; Dr. Samuelsson, 48,000; Mr. Stewart,
17,000; Dr. Weissmann, 28,334; Dr. Witzel, 85,000; Dr. Boyle,
108,600; Mr. del Campo, 81,000; Dr. Janoff, 29,836; and all
executive officers and directors as a group (17 persons),
935,220.
(3) Includes 202,093 shares owned by the Baker Family Limited
Partnership, of which Mr. Baker is the General Partner.
(4) Includes shares held by Chemical Bank as trustee of the
Company's 401(k) plan as of December 31, 1997, in the
following amounts: Mr. Baker, 3,776; Dr. Boyle, 1,174;
Mr. del Campo, 2,575; Dr. Janoff, 3,534; Mr. Yarson, 1,870;
and all executive officers and directors as a group (17
persons), 21,461.
(5) Does not include 5,790 shares held in trust for the
estate of Dr. Weissmann's father-in-law, for which
Dr. Weissmann's wife serves as trustee. Dr. Weissmann
disclaims beneficial ownership of these shares.
(6) Includes shares of restricted stock granted on January
25, 1996, January 23, 1997, and January 22, 1998, under The
Liposome Company 1996 Equity Incentive Plan, in the following
aggregate amounts: Mr. Baker, 53,278; Dr. Boyle, 29,661;
Mr. del Campo, 28,518; Dr. Janoff, 24,125; Mr. Yarson,
40,199; all executive officers and directors as a group (17
persons), 225,242.
Executive Compensation
The following table shows, for the fiscal years ended December
28, 1997, December 29, 1996, and December 31, 1995, the annual
and long-term compensation awarded to, earned by or paid to
the Chief Executive Officer, and the four other most highly
compensated individuals who served as the Company's "executive
officers," as that term is defined in Rule 3b-7 adopted by the
United States Securities and Exchange Commission ("SEC") under
the Securities Exchange Act of 1934, as of December 28, 1997
(these individuals, together with the Chief Executive Officer,
are sometimes referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
AWARDS
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARD(S) STOCK COMPENSATION
NAME AND PRINCIPAL YEAR $ (1) (2) OPTIONS (4)
POSITION $ $ (NO. OF $
SHARES)
Charles A. Baker 1997 $375,000 $40,000 --- 281,000(3) $9,500
Chairman of the 1996 351,923 75,000 75,000 60,000 9,490
Board, President, 1995 321,847 90,000 --- 70,000 4,500
and Chief Executive
Officer
James A. Boyle, MD, 1997 252,253 12,500 12,500 48,800(3) 9,500
PhD, Senior Vice 1996 241,714 50,000 50,000 13,500 9,490
President, Medical 1995 225,394 30,000 29,993 22,500 35,000
and Regulatory
Affairs
Ralph del Campo 1997 193,889 11,000 11,000 44,800(3) 9,500
Vice President, 1996 183,796 40,000 40,000 13,500 9,490
Manufacturing 1995 172,745 20,000 19,869 17,500 4,500
Operations
Andrew S. Janoff, 1997 186,923 11,000 11,000 43,600(3) 9,500
PhD, Vice 1996 172,300 40,000 40,000 11,500 9,490
Research and 1995 147,416 11,250 11,250 13,000 4,422
Development
Donald D. Yarson(5) 1997 181,873 13,750 13,750 120,000 (3) 9,500
Vice President, 1996 139,330 65,000 50,000 19,000 8,634
Marketing, Sales 1995 121,829 15,000 15,000 57,500 3,655
and Business
Development
(1)Bonuses, all of which have been paid, are shown in the
year earned.
(2)All restricted stock grants were made on January 25, 1996,
January 23, 1997, and January 22, 1998, under The Liposome
Company 1996 Equity Incentive Plan. The aggregate number
of shares held by the Named Executive Officers at the end
of 1997 (and their market value as of December 28, 1997)
were: Mr. Baker, 3,278 ($14,652); Dr. Boyle, 3,533
($15,792); Mr. del Campo, 2,646 ($11,827); Dr. Janoff,
2,253 ($10,070); and Mr. Yarson, 2,859 ($12,779). All of
these grants vest in equal increments over a three-year
period. The number of shares awarded in 1998 as part of
the bonus for 1997 were: Dr. Boyle, 2,128; Mr. del
Campo, 1,872; Dr. Janoff, 1,872; and Mr. Yarson, 2,340.
These grants vest in two equal annual installments. For
further information regarding restricted stock awards, see
the "Report of the Nominating and Compensation Committee
on Executive Compensation."
(3)The numbers shown for securities underlying options
awarded in 1997 include the number of shares underlying
options that were repriced in 1997, as well as shares
subject to new options awarded in 1997, in accordance with
the requirements of the SEC. In order to qualify for the
repricing, each optionee, including each Named Executive
Officer, was required to surrender 20% of the shares
covered by the options to be repriced. Since this
surrender reduced the total number of shares covered by
options held by the Named Executive Officers, the net
increase in the total number of shares covered by options
held by these individuals was actually less than the
number of shares underlying new options awarded in 1997.
See note 1 to the table entitled "Option Grants in 1997
Fiscal Year" and the table entitled "Ten-Year Option/SAR
Repricings."
(4)All other compensation represents amounts credited as
Company matching contributions under the Company's 401(k)
stock match (which began in the third quarter of 1991).
In the case of Dr. Boyle, the amount reported as "all
other compensation" for 1995 consists entirely of a
payment made at the end of his first year of employment
pursuant to an agreement entered into when he was hired.
(5)Mr. Yarson commenced employment with the Company on February
1, 1995.
Employment Agreements and Change of Control Arrangements
The Company entered into an employment agreement with Mr. Baker
which began in December 1989 and was renewed in 1995. The
renewed agreement terminates on May 31, 1998, and may be renewed
thereafter for one or more additional terms of one year. The
terms of the agreement relating to compensation are discussed in
the "Report of the Nominating and Compensation Committee on
Executive Compensation." Under the agreement, Mr. Baker has
agreed that he will not during his employment period and for a
period of two years after the termination of his employment,
without the prior approval of the Company's Board of Directors,
engage in any business involved in the research, development,
manufacture or sale of lipids or liposomes or products or
services which use natural or artificial lipids or liposomes to
encapsulate, enhance or deliver any product. If Mr. Baker
should be dismissed except for cause or should choose to resign
from his position with the Company during the first six months
following the effective date of a change of control, Mr. Baker
would be entitled to receive his then current monthly base
salary for a 12-month period from such effective date and for up
to an additional 12-month period if he does not obtain another
full-time position. In addition, all stock options granted to
Mr. Baker which would have vested during the remainder of his
employment term would automatically vest and would remain
exercisable for a period of 24 months following the termination
of his employment. A change of control is deemed to occur if
(i) the Company is not the surviving entity following a merger
or consolidation; (ii) a person acquires, directly or
indirectly, securities of the Company representing 35% or more
of the voting power of all then outstanding securities of the
Company having the right to elect the Board of Directors; or
(iii) the individuals who constitute the Board of Directors of
the Company at the time of the agreement or individuals who are
subsequently elected to the Board of Directors with the approval
of the incumbent Board cease to constitute a majority of the
members of such Board.
In January 1998, upon the recommendation of the Nominating and
Compensation Committee, the Board authorized the Company to
enter into agreements with certain officers and other key
employees, including the Named Executive Officers, that would
provide for a continuation of the officer's salary and benefits
if he or she were terminated following a change of control of
the Company. The agreements give an officer whose employment is
terminated involuntarily (except for cause), or who resigns with
good reason, within 18 months after a change of control the
right to receive his or her base salary, bonus, and benefits for
a period of 12 months following the termination of employment.
A "change of control" for purposes of these agreements is
substantially the same as described above with respect to the
Chief Executive Officer's employment agreement. The agreements
also provide outplacement assistance and reimbursement of any
federal excess parachute tax that might be imposed on the
officer.
Option Grants
The following table presents stock options granted for the
period from December 30, 1996, through December 28, 1997, to the
Named Executive Officers. All grants were made under The
Liposome Company 1996 Equity Compensation Plan.
OPTION GRANTS IN 1997 FISCAL YEAR
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK
PRICE
APPRECIATION
FOR OPTION
TERM (2)
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRA-
NAME GRANTED IN FISCAL ($ PER TION 5% 10%
(1) YEAR SHARE) DATE ($) ($)
(#) (%)
Charles A. Baker 24,000 .68 $8.0000 11/8/01 $120,576 $305,472
28,000 .80 8.0000 12/22/02 140,672 356,384
56,000 1.60 8.0000 11/8/05 281,344 712,768
48,000 1.37 8.0000 12/5/06 241,152 610,944
50,000 1.43 8.0000 7/10/07 251,200 636,400
75,000 2.15 4.9375 12/19/07 232,556 589,167
James A. Boyle, 18,000 .51 8.0000 11/8/05 90,432 229,104
MD, PhD 10,800 .30 8.0000 11/21/06 54,259 137,462
20,000 .57 8.0000 7/10/07 100,480 254,560
Ralph del Campo 14,000 .40 8.0000 11/8/05 70,336 178,192
10,800 .30 8.0000 11/21/06 54,259 137,462
20,000 .57 8.0000 7/10/07 100,480 254,560
Andrew S. Janoff, 4,000 .11 8.0000 11/19/02 20,096 50,912
PhD 10,400 .29 8.0000 11/8/05 52,249 132,371
9,200 .26 8.0000 11/21/06 46,220 117,097
20,000 .57 8.0000 7/10/07 100,480 254,560
Donald D. Yarson 28,800 .82 8.0000 2/1/05 144,691 366,566
6,000 .17 8.0000 11/8/05 30,144 76,368
15,200 .43 8.0000 11/21/06 76,364 193,465
20,000 .57 8.0000 7/10/07 100,480 254,560
50,000 1.43 8.0000 7/24/07 251,200 636,400
(1)The numbers shown for securities underlying options
awarded in 1997 include the number of shares underlying
options that were repriced in 1997, as well as shares
subject to new options awarded in 1997, in accordance with
the requirements of the SEC. In order to qualify for the
repricing, each optionee, including each Named Executive
Officer, was required to surrender 20% of the shares
covered by the options to be repriced. Since this
surrender reduced the total number of shares covered by
options held by the Named Executive Officers, the net
increase in the total number of shares covered by options
held by these individuals was actually less than the
number of shares underlying new options awarded in 1997.
The following table sets forth (a) the number of shares
surrendered by each Named Executive Officer in the
repricing, (b) the number of shares subject to new options
granted in 1997, and (c) the resulting net increase in the
number of shares subject to options held by each Named
Executive Officer (exclusive of other changes in holdings
due to option expirations and exercises, if any):
NET 1997 INCREASE IN OPTION SHARES
REPRICED OPTIONS
NUMBER OF
NUMBER NUMBER DECREASE SECURITIES NET
OF OF IN NUMBER UNDERLYING INCREASE IN
SECURITIES SECURITIES OF OTHER NUMBER
UNDERLYING UNDERLYING SECURITIES OPTIONS OF
OPTIONS OPTIONS UNDERLYING GRANTED SECURITIES
BEFORE AFTER OPTIONS DUE IN UNDERLYING
REPRICING REPRICING TO REPRICING 1997 OPTIONS
Charles A. Baker 195,000 156,000 39,000 125,000 86,000
James A. Boyle, 36,000 28,800 7,200 20,000 12,800
MD, PhD
Ralph del Campo 31,000 24,800 6,200 20,000 13,800
Andrew S. Janoff, 29,500 23,600 5,900 20,000 14,100
PhD
Donald D. Yarson 62,500 50,000 12,500 70,000 57,500
Additional information regarding the repricing is
contained in the table entitled "Ten-Year Option/SAR
Repricings."
(2) The percentage rates of increase shown are assumed rates
established by the SEC for purposes of uniform compensation
reporting. Accordingly, they do not constitute predictions
or estimates by the Company of the future price appreciation
of its Common Stock or of the potential realizable value of
the options referred to in the table. These "potential
realizable values" are not discounted to present value, and
the present value of these assumed potential realizable
values would be less than the amounts indicated.
Option Exercises and Fiscal Year-End Values
The following table summarizes stock options exercised by the
Named Executive Officers in 1997, and the unexercised stock
options and the fiscal year-end values of all outstanding options
held by the Named Executive Officers as of December 28, 1997.
OPTION EXERCISES IN 1997 AND DECEMBER 28, 1997 OPTION VALUES
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
1997 OPTION OPTIONS IN-THE-MONEY
EXERCISES AT OPTIONS AT
DECEMBER 28, DECEMBER 28,
1997 1997 (1)
SHARES
ACQUIRED VALUE
NAME ON REALIZED EXERCIS- UNEXERCIS- EXERCIS- UNEXERCIS-
EXERCISE ($) ABLE ABLE ABLE ABLE
(#) (2) (#) (#) ($) ($)
Charles A. Baker 79,164 $254,938(3) 234,836 302,000 $514,991 ---
James A. Boyle, --- --- 108,600 121,200 --- ---
MD, PhD
Ralph del Campo --- --- 63,000 86,800 --- ---
Andrew S. --- --- 24,836 54,518 --- ---
Janoff, PhD
Donald D. 10,000 95,000 0 120,000 --- ---
Yarson
(1)Value of unexercised in-the-money options is equal to the fair
market value of $4.47 per share of Common Stock, the closing
price on the last trading day prior to December 28, 1997, as
quoted by the Nasdaq National Market, less the exercise price.
(2)"Value realized" represents the difference between the exercise
price and the closing price on the date of exercise, and does
not necessarily represent actual appreciation realized on sale
of the shares underlying the options, or even that the shares
were sold.
(3)Mr. Baker still holds the 79,164 shares that he purchased on
the exercise of his options and has therefore not actually
realized any gain from his option exercise.
Option/SAR Repricings
As discussed below in the "Report of the Nominating and
Compensation Committee on Stock Option Repricing," a number of
employee stock options were repriced in July 1997. In order to
obtain the lower exercise price, optionees were required to
surrender 20% of the shares covered by each option. The
following table shows the number of optioned shares that were
repriced for the Named Executive Officers, which represents 80%
of the number of shares that were covered by each option before
the repricing. This table is called a "Ten-Year Option/SAR
Repricings" table because SEC rules require the Company to report
all repricings of options held by the Named Executive Officers
during the past ten years, but in fact there were no other
repricings during that period.
TEN-YEAR OPTION/SAR REPRICINGS
LENGTH
OF
NUMBER OF ORIGINAL
SECURITIES MARKET OPTION
UNDERLYING PRICE OF EXERCISE TERM
OPTIONS/ STOCK AT PRICE AT REMAINING
SARS TIME OF TIME OF NEW AT DATE
REPRICED REPRICING REPRICING EXER- OF
OR OR OR CISE REPRICING
AMENDED AMENDMENT AMENDMENT PRICE OR
NAME DATE (#)(1) ($) ($) ($) AMENDMENT
Charles A. Baker 7/10/97 48,000 $8.00 $16.88 $8.00 9 years,
Chairman 5 months
of the Board, 7/10/97 56,000 8.00 13.38 8.00 8 years,
President, and 4 months
Chief 7/10/97 28,000 8.00 12.88 8.00 5 years,
Executive 5 months
Officer 7/10/97 24,000 8.00 11.75 8.00 4 years,
4 months
James A. Boyle 7/10/97 18,000 8.00 13.38 8.00 8 years,
MD, PhD 4 months
Senior Vice 7/10/97 10,800 8.00 17.00 8.00 9 years,
President, 4 months
Medical and
Regulatory
Affairs
Ralph del Campo 7/10/97 14,000 8.00 13.38 8.00 8 years,
Vice 4 months
President, 7/10/97 10,800 8.00 17.00 8.00 9 years,
Manufacturing 4 months
Operations
Andrew S.Janoff, 7/10/97 10,400 8.00 13.38 8.00 8 years,
PhD 4 months
Vice 7/10/97 4,000 8.00 14.00 8.00 5 years,
President, 4 months
Research and 7/10/97 9,200 8.00 17.00 8.00 9 years,
Development 4 months
Donald D.Yarson 7/10/97 28,800 8.00 12.00 8.00 7 years,
Vice 7 months
President 7/10/97 6,000 8.00 13.38 8.00 8 years,
Sales, 4 months
Marketing, 7/10/97 15,200 8.00 17.00 8.00 9 years,
and Business 4 months
Development
(1) Represents 80% of the number of shares subject to the listed
options before the repricing; the remaining shares were
canceled. Since these same options are reflected in the
tables entitled "Summary Compensation Table" and "Option
Grants in 1997 Fiscal Year," this information is repetitive.
Report of the Nominating and Compensation Committee on Stock
Option Repricing
A stock option is the right to buy stock at a future time for a
price fixed when the option is awarded. Having stock options
gives an employee a personal financial motivation to contribute
to the Company's success, and as the stock options become more
valuable, the stockholders also experience an increase in the
value of their investment so that the interests of the employees
and the stockholders are closely aligned. Because the stock
options awarded under the Company's plans become exercisable in
increments over a period of time, they also serve as an
inducement for the employee to stay with the Company until the
options become fully exercisable.
During 1997, the disappointing results of the VENTUS(TM) clinical
trial caused a decline in the Company's stock price to a level
that was significantly lower than the exercise price of a
majority of the Company's outstanding stock options. The
Committee determined that, in this instance, the stock option
plans could no longer serve the performance incentive and
employee retention purposes for which they were designed.
In order to assure employees that they would still be rewarded
if their efforts to bring new products to market and advance the
Company to profitability were successful, and to minimize
anticipated attrition, on July 10, 1997, the Committee
recommended, and the Board approved, the repricing of all
outstanding employee stock options having an exercise price above
$10.00 per share. This meant that the options would have an
exercise price equal to the market price on the date of the
repricing, which was $8.00 per share. In exchange for obtaining
a lower price, the option holders were required to surrender 20%
of the shares covered by their options and to wait a full year
before they could exercise any of the repriced options. The
repricing was effected either as an amendment of the existing
option or as the surrender of the existing option and issuance of
a new option, depending on the plan under which the option was
issued. The repricing did not affect the term of the options;
all repriced options expire ten years from their original date of
grant, and the normal vesting schedule will resume after the one-
year waiting period. Nearly all of the options eligible for
repricing were surrendered and repriced. Options held by non-
employee members of the Board of Directors were not eligible for
repricing.
James Andress
Robert F. Hendrickson
Joseph T. Stewart, Jr.
Horst Witzel, Dr.-Ing
Members of the Nominating and Compensation Committee
March 12, 1998
Report of the Nominating and Compensation Committee on Executive
Compensation
The rules of the SEC require the Nominating and Compensation
Committee of the Board of Directors (the "Committee") to report
annually to the stockholders regarding the Company's compensation
policies for the Chief Executive Officer and the other executive
officers of the Company. The Committee's report regarding
compensation paid for 1997 is as follows:
Compensation Policies and Components of Compensation
The Company competes in the highly technical, research-driven
biopharmaceutical industry, where having the most qualified
management, technical and professional personnel is very
important to success. Although the Company has one marketed
product, ABELCET(R), which is the trademark for the Company's
antifungal product, amphotericin B lipid complex injection, it
continues to incur substantial expenses in developing other
products and has therefore not yet achieved profitability. This
means that the usual financial measurements of performance, such
as earnings per share and return on equity, are not easily
applied to determine the performance of the management team. The
lack of profit also means that the Company is less able to pay
the high levels of cash compensation that are common in the
pharmaceutical industry. Although we cannot offer the same job
security or cash compensation as a larger established company, we
are able to attract highly motivated, entrepreneurial executives
by means of our stock options and restricted stock programs. The
Committee tries to achieve the right combination of cash
compensation and stock-based incentives to enable it to attract
the caliber of highly educated, experienced personnel that it
needs and to reward these personnel for achieving results that
meet or exceed investors' expectations.
Stock Options
As stated above in the "Report of the Nominating and
Compensation Committee on Stock Option Repricing," the Committee
approved the repricing of options issued to all employees having
exercise prices above $10.00 per share on July 10, 1997. Also on
that date, the Committee reviewed plans for a restructuring to be
implemented effective August 1, 1997, in order align the
Company's organization with its new objective of building an
oncology franchise. The Committee agreed that an added incentive
would be useful to insure that all employees were motivated to
put forth the effort needed to bring the Company to
profitability. The Committee therefore approved the grant of
special "Performance Stock Options" to employees whose
contributions were considered essential to achieving this
success, which included the Chief Executive Officer and the other
Named Executive Officers. The exercise price of these options
was $8.00 per share, which was the market price on the date of
grant. One third of the options will vest on July 10, 2000, and
the remaining two-thirds will vest on July 10, 2001. However, if
the Company achieves two or more successive quarters of
profitability before the normal vesting dates, a portion of the
options will vest early, as follows: 2 consecutive quarters of
profitability - 25%; 3 consecutive quarters of profitability -
50%; 4 consecutive quarters of profitability - 100%. The options
will expire if not exercised in ten years, and become fully
vested upon a change of control of the Company.
In connection with the restructuring, the Company laid off
approximately 105 employees, and eliminated an additional 32
positions, in order to reduce costs. These measures, though
necessary to the Company's recovery, had the effect of further
demoralizing the remaining workforce, and turnover increased in
all areas. At the executive level, four vice presidents left the
Company in 1997, and no replacements were hired. By December,
the price of the stock had declined to just over $4.00 per share,
and it was clear that even the repriced options were of limited
value. However, rather than doing another repricing, the
Committee adopted an Employee Retention Program, which included
the grant of new stock options to all employees except executive
officers and the establishment of a pool of restricted stock to
be awarded to the executive officers. In order to offer the
opportunity for financial rewards over a shorter period than
under prior stock options, all option awards under the Employee
Retention Program were made to fully vest as of March 1, 1999.
Since the restricted stock awards under the Employee Retention
Program were made in January 1998, they are not reflected in the
1997 compensation reported for the Named Executive Officers in
the table entitled "Summary Compensation Table."
In prior years, the Committee granted options to the executive
officers and other eligible employees toward the end of each year
based on achievements made during the year and progress toward
long-term goals. No such grant was made in 1997 except to Mr.
Baker, as described below under "Chief Executive Officer
Compensation." In addition, Mr. Yarson received a special grant
of 50,000 options in late July, primarily in recognition of his
undertaking the additional responsibilities of international
marketing and corporate development. For Named Executive
Officers other than Mr. Yarson and Mr. Baker, there were no stock
options awarded in 1997 except in connection with the July
repricing and Performance Stock Option grant. As of December 28,
1997, the Company had outstanding grants covering in total
4,352,523 shares under all of its stock option plans
and had 3,845,271 shares available for future grants under its
two current plans, the 1996 Equity Incentive Plan and the 1992
Directors Nonqualified Plan. The 1996 Equity Incentive Plan is
administered by the Committee, which has the authority to
determine the grantees, the exercise price, the number of shares
subject to each option, the time or times during which all or a
portion of each option may be exercised, and the other provisions
of each option. Stock options are generally granted at the fair
market value of the Common Stock on the date of grant, and they
lapse if not exercised within ten years from the date of grant.
Options granted to employees typically vest ratably over a period
of five years, and options granted to non-employee directors vest
ratably over a five-year period in the case of the initial grant,
and over a one-year period for subsequent annual grants.
Base Salary
In setting the base salary levels for each executive officer,
the Committee refers to a survey of biotechnology and
biopharmaceutical companies (the "Peer Group"), as well as other
available information on the base salaries of executive officers
in Peer Group companies. The Hambrecht & Quist Healthcare Sector
Index, which is used in the Performance Graph following the
Committee's report, included 130 companies in 1997, more than 30
of which are in the Peer Group survey. Other factors considered
in establishing salaries include internal performance reviews,
the level of the executive's responsibilities and the value of
the executive's job in the marketplace, in combination with
overall compensation recommendations from management. To remain
competitive, the Company's base salary ranges and salaries
generally fall within the broad mid-range of the Peer Group.
Quantitative factors, such as length of service and the
Committee's review with management of an individual's
contribution toward the achievement of the Company's overall
annual strategic goals, are also taken into account in approving
specific base salaries.
Bonus Awards and Restricted Stock
The Company awards bonuses to certain executive officers under
annual Management Incentive Plans ("MIPs"), which include
performance goals approved by the Committee. The amount of these
bonuses is determined by the Committee depending upon whether the
Company has met or exceeded these goals. The Committee also
retains the discretion to consider other criteria and
achievements in determining the range of any bonuses to be
awarded. The 1997 MIP was approved by the Committee in March
1997 and provided specific corporate goals, as well as weighting
for group and individual performance. For 1997, as reflected in
the table entitled "Summary Compensation Table," the Company paid
year-end bonuses to executive officers, including the Named
Executive Officers, based on the Company's performance against
its 1997 goals and each individual's contribution to that
performance. The Company's achievements for 1997, which were
also considered in determining the Chairman and Chief Executive
Officer's bonus, included that the VENTUS(TM) Phase III trial had
been completed and analyzed according to schedule; that
additional European approvals had been received for ABELCET(R);
that unit sales of ABELCET(R) had continued to grow despite the
introduction of competing products in the US market and that
total revenues from ABELCET(R) had continued to grow, though at a
slower rate due to the price reduction made in response to
competitive pressures; that the Company had successfully
negotiated an alliance with Wyeth-Ayerst International for the
distribution of ABELCET(R) in major European countries; that the
Company had regained the rights to EVACET(TM) from Pfizer and had
expeditiously assumed responsibility for completion and data
management of the ongoing clinical trials; and that the Company
had protected its cash position by obtaining additional capital
from Ross Financial, as well as lines of credit from Pfizer and
GE Capital. However, the amount of the 1997 bonuses to Mr. Baker
and the other Named Executive Officers was less than in the prior
year due primarily to the failure to achieve revenue goals for
ABELCET(R). The bonuses paid to the executive officers under the
1997 MIP, which were paid partly in cash and partly in restricted
Common Stock, averaged 11% of the recipient's year-end base
salary.
Awards covering a total of 14,750 shares of restricted Common
Stock were granted to executive officers of the Company under the
1997 MIP. The granting of restricted stock awards was authorized
by the Company's 1996 Equity Incentive Plan (the "1996 Plan"),
which was approved by the stockholders in May 1996. The shares
of restricted stock are not transferable and are subject to
forfeiture if the executive leaves the Company except due to
retirement or death before the restrictions lapse. For
restricted stock granted under the 1995 and 1996 MIPs, the
restrictions lapse as to one-third of the shares granted on each
of the first three anniversaries of the date of grant. For
restricted shares granted under the 1997 MIP, the restrictions
lapse as to one-half of the shares granted on the first
anniversary of the date of grant, and as to the remainder of the
shares on the second anniversary of the date of grant. The owner
of restricted shares has the right to vote these shares, and is
entitled to receive any distributions made to holders of shares
of Common Stock.
As noted above, additional restricted stock awards were made in
1998 under the Employee Retention Program, but since these were
not based on performance goals for 1997, they are not reported in
this Proxy Statement as 1997 compensation. However, they are
included in the shareholdings reported as of February 25, 1998,
in the "Stock Ownership" section of this Proxy Statement.
The Company does not currently have specific target ownership
levels for equity holding in the Company by executive officers
and other key employees, although increasing share ownership by
executive officers is an additional advantage of stock options
and restricted stock over some other forms of incentive
compensation.
Chief Executive Officer Compensation
The Committee determines Mr. Baker's salary and stock options
based on an annual review conducted in the last quarter of each
year. When Mr. Baker joined the Company in December 1989, the
Company entered into an employment agreement with him, which was
renewed on June 1, 1995. The agreement provides that Mr. Baker
will receive a designated annual base salary, which may be
increased from time to time by the Committee. During 1997, Mr.
Baker's base salary was $375,000, which represented an increase
of $25,000 over his base salary in effect as of the end of 1996.
This increase reflected a review of salary data for chief
executive officers of various companies in the Peer Group and was
in recognition of Mr. Baker's contribution to the Company's
continued success in commercializing ABELCET(R), regaining rights
to EVACET(TM), advancing the Company's other development programs
and maintaining its financial strength in 1997. Based on these
same considerations, and to provide added potential rewards for
increasing stockholder value, the Committee also awarded Mr.
Baker 75,000 stock options. This was larger than his option award
in the prior year as an acknowledgment of the key roll played by
Mr. Baker in redirecting the Company's efforts after the
announcement of the VENTUS(TM) results, and as an added inducement
for him to remain in his position after expiration of his
employment agreement in May 1998.
Mr. Baker's employment agreement provides that, upon the
achievement of certain objectives to be set by the Committee
annually, he is entitled to receive a cash bonus. For 1997, Mr.
Baker's bonus, like the bonuses paid to other executive officers,
was determined under the 1997 MIP after the end of the year. The
1997 objectives were the same as those discussed under "Bonus
Awards and Restricted Stock" above. Based upon the partial
achievement of these objectives, among others, the Committee
awarded Mr. Baker a cash bonus of $40,000, which represented a
portion of his target bonus for the 1997 fiscal year. Mr. Baker
did not receive any portion of his 1997 bonus in restricted
stock. In addition, Mr. Baker is entitled to receive the same
standard benefits other Company executives receive.
Other aspects of Mr. Baker's employment agreement are discussed
in the section of this Proxy Statement entitled "Employment
Agreements."
Deductibility Cap on Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Section 162(m)"), disallows corporate deductibility for certain
compensation paid in excess of $1 million to the chief executive
officer and the four other most highly paid executive officers.
"Performance-based compensation," as defined in the tax law, is
not subject to the deductibility limitation, provided certain
stockholder approval and other requirements are met. The
Committee believes that awards designated as "Section 162(m)
Awards" and stock options granted under the 1996 Plan will
qualify for this exemption. The Committee anticipates that
amounts paid as cash compensation will continue to be fully
deductible because the amounts are expected to be less than the
$1 million threshold.
Summary
In summary, the Committee believes that the option repricing and
other special measures taken in 1997 to maintain the stability of
the Company's management team were in the best interests of the
Company and its stockholders. Through stock-based incentives,
and cash compensation, the Committee has succeeded in maintaining
a well-qualified, highly motivated management team to provide the
continuing leadership needed for the Company to achieve its
future goals.
James Andress
Robert F. Hendrickson
Joseph T. Stewart, Jr.
Horst Witzel, Dr.-Ing
Members of the Nominating and Compensation Committee
March 12, 1998
Compensation Committee Interlocks and Insider Participation
No person who served on the Compensation Committee or the
Nominating and Compensating Committee during 1997 was an officer
or employee or former officer or employee of the Company, and
there were no other relationships requiring disclosure under
applicable SEC rules.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, that
might incorporate future filings, including this Proxy Statement,
in whole or in part, the following Performance Graph, the Report
of the Nominating and Compensation Committee on Option Repricing,
and the Report of the Nominating and Compensation Committee on
Executive Compensation shall not be incorporated by reference
into any such filings.
Performance Graph
The graph below summarizes the total cumulative return
experienced by the Company's stockholders from 1992 through
1997, compared to the Nasdaq Total Return Index of U.S.
Companies (the "Nasdaq U.S. Stock Index") and the Hambrecht &
Quist LLC Healthcare Sector Index (the "H & Q Healthcare Sector
Index"). As stated in prior proxy statements, the Company
believes that the Nasdaq U.S. Stock Index is an appropriate
index to use as a broad based comparative measure of the
Company's performance, as it incorporates the stocks of many
companies whose size and stage of development are similar to
those of the Company.
1992 1993 1994 1995 1996 1997
The Liposome Company, Inc. 100 56 71 170 169 39
Nasdaq U.S. Stock Index 100 115 112 159 195 240
H&Q Healthcare Sector Index 100 78 78 132 136 158
Directors' Compensation
Directors who are not employees of the Company receive an annual
retainer of $1,000 per quarter. In addition, during 1997, such
directors received $2,000 for each Board meeting attended in
person, and $500 for each telephonic Board meeting attended. A
director who participates in a regular Board meeting by telephone
receives $1,000. In November 1997, the Company approved the
payment of fees for attendance at meetings of committees of the
Board of Directors other than those that are held on the same day
as a Board meeting. For a meeting held the day before a Board
meeting, committee members receive $500 if they attend in person,
and for meetings held at other times (except the day of a Board
meeting), the fee is $1,000 for attendance in person. For
telephonic meetings of Board committees, and for participation by
telephone in a regular meeting, members receive a fee of $500.
Dr. Weissmann and Dr. Samuelsson are consultants to the Company.
In the fiscal year ended December 28, 1997, the Company paid
$47,500 in fees to Dr. Weissmann for his services as Chairman of
the Company's Cell Adhesion Scientific Advisory Board and Cancer
Scientific Advisory Board and for consulting services related to
patent litigation. Dr. Samuelsson received $8,000 in fees for
his services as a member of the Company's Cell Adhesion
Scientific Advisory Board and a $10,000 honorarium as the keynote
speaker at the opening ceremony for the Indianapolis
manufacturing plant.
The Company believes that it is very important that it be able
to continue to attract the highest caliber of persons to serve as
non-employee directors. To do so, the Company must be able
adequately to compensate the directors for the responsibility and
risk they assume. Since the Company does not offer directors the
levels of cash compensation they would normally receive for a
directorship of a larger pharmaceutical or other industrial
company, stock options offer an appropriate way to partially
compensate directors and allow them to share as stockholders in
the ultimate success of the Company. The 1991 Directors'
Nonqualified Stock Option Plan (the "Directors' Plan"), which was
adopted by the stockholders in 1992, constitutes a key element of
the Company's long-term program to attract and compensate non-
employee directors.
The Directors' Plan provides that options to purchase 10,000
shares of Common Stock are automatically granted on July 1 of
each year from 1991 until 2001 to each non-employee director.
These grants are fully vested on the first anniversary of the
date of grant. In addition, each new director receives an
initial grant of 10,000 shares, which vests in equal installments
over a five-year period.
As of February 25, 1998, there were eight non-employee directors
participating in the Directors' Plan. There were eight grants of
options to acquire an aggregate of 80,000 shares of the Company's
Common Stock during fiscal year 1997 under the Directors' Plan at
an exercise price of $8.560 per share. Although the exercise
prices of options granted to directors in recent years are
significantly above the current market price, these options were
not included in the 1997 option repricing due to limitations
contained in the Directors' Plan.
PROPOSAL 2. APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company proposes that its
appointment of the firm of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the fiscal year ending
December 27, 1998, be ratified by the stockholders. If not
otherwise specified, proxies will be voted in favor of the
ratification of the appointment. Representatives of Coopers &
Lybrand L.L.P. are expected to be present at the Company's
Annual Meeting with the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF COOPERS & LYBRAND L.L.P.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Pursuant to Section 16(a) of the Securities Exchange Act of
1934, as amended, directors and executive officers of the
Company are required to file reports with the SEC indicating
their holdings of and transactions in the Company's equity
securities. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company
and written representations that no other reports were required,
during the fiscal year ended December 28, 1997, all current
directors and executive officers filed all required reports on a
timely basis, except that Mr. Feiner filed one late report
regarding the purchase of 500 shares of Common Stock for his
daughter.
EXPENSE OF SOLICITATION
The Company expects to solicit proxies by mail and by telephone,
and it has retained Corporate Investor Communications to provide
proxy solicitation services, at a cost of approximately $4,000.
In addition, directors, officers and regular employees of the
Company may also solicit in person, by telephone or telegram.
All expenses in connection with the solicitation of proxies will
be borne by the Company. Arrangements will be made by the
Company for the forwarding, at the Company's expense, of
soliciting materials by brokers, nominees, fiduciaries and
other custodians to their principals.
STOCKHOLDER PROPOSALS
To be considered for presentation to the Annual Meeting of
Stockholders to be held in 1999, a stockholder proposal must be
received by Carol J. Gillespie, Vice President, General Counsel
and Secretary, The Liposome Company, Inc., One Research Way,
Princeton Forrestal Center, Princeton, New Jersey 08540, not
later than December 14, 1998.
OTHER MATTERS
The Board of Directors knows of no other business which will be
presented at the Annual Meeting. If any other business is
properly brought before the Annual Meeting, it is intended that
proxies in the enclosed form will be voted in respect thereof in
accordance with the judgments of the persons voting the proxies.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING,
YOUR VOTE IS IMPORTANT. ACCORDINGLY, PLEASE COMPLETE, SIGN AND
RETURN YOUR PROXY PROMPTLY.
THE LIPOSOME COMPANY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
Annual Meeting of Stockholders,
May 14, 1998
The Holiday Inn, 1053 Route #1,
Princeton, New Jersey 08540
P The undersigned hereby appoints Charles A. Baker
and Carol J. Gillespie, and
each of them, as proxies of the undersigned,
each with full power to act
R without the other and with full power of
substitution, to vote all the shares
of Common Stock of THE LIPOSOME COMPANY, INC.
held in the name of the
O undersigned at the close of business on March 27,
1998 at the Annual Meeting of
Stockholders to be held on May 14, 1998, at 10:15
A.M. and at any adjournment
X thereof, with all the powers the undersigned would
have if personally present.
The undersigned hereby revokes any and all
proxies heretofore given with
Y respect to such meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE.
The Board of Directors recommends a vote FOR the
following items:
1) Election of Directors
FOR all nominees listed below (except
as marked to the contrary below).
WITHHOLD AUTHORITY to vote for all
nominees listed below.
Charles A. Baker
James G. Andress
Morton Collins, Ph.D.
Stuart F. Feiner
Robert F. Hendrickson
Professor Bengt Samuelsson, M.D.
Joseph T. Stewart
Gerald Weissmann, M.D.
Horst Witzel, Dr.-Ing
To withhold authority to vote for any
individual nominee, write that name
on the line below.
_________________________________
2) Ratification of the appointment by the
Board of Directors
of Coopers & Lybrand L.L.P. as independent accountants for the
1998 fiscal year.
FOR _______ AGAINST _______ ABSTAIN _________
3) In their discretion, upon such other
matters as may properly
come before the meeting, all
in accordance
with the
accompanying Notice and Proxy
Statement,
receipt of which is
acknowledged.
IF THIS PROXY
IS PROPERLY EXECUTED AND
RETURNED, THE
SHARES REPRESENTED THEREBY WILL
BE VOTED. IF A
CHOICE IS SPECIFIED BY THE
STOCKHOLDER,
THE SHARES WILL BE VOTED
ACCORDINGLY.
IF NOT
OTHERWISE
SPECIFIED, THE SHARES REPRESENTED BY
THIS PROXY WILL
BE VOTED FOR THE ELECTION OF
DIRECTORS AND
FOR PROPOSAL 2.
SIGNATURE(S)_________________________________DATE________
SIGNATURE(S)______________________________DATE_________
Please sign your name exactly as it appears hereon. In the
case of joint
owners, each should sign. If signing in a representative
capacity, please give
title.
