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
THE LIPOSOME COMPANY, INC.
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 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:
April 16, 1999
TO: All Stockholders
You are cordially invited to attend the 1999 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 20, 1999, 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 January 3, 1999, is also included.
At the Annual Meeting you will be asked to (1) elect the
members of the Board of Directors, (2) approve the
amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of the
Company's Common Stock, and (3) ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent
accountants for the 1999 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 20,
1999
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
20, 1999, at 10:15 a.m. for the following purposes:
1. To elect nine directors to serve during the ensuing
year;
2. To approve the amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares
of the Company's Common Stock, $.01 par value per
share (the "Common Stock"), from 60,000,000 shares
to 120,000,000 shares of Common Stock;
3. To ratify the appointment by the Board of
Directors of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year 1999; and
4. 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 26, 1999, 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
MICHAEL MCGRANE
Secretary
Princeton, New Jersey
April 16, 1999
THE LIPOSOME COMPANY, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1999
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 20, 1999 (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, (ii) the proposal to
amend the Company's Certificate of Incorporation to
increase the number of authorized shares of the Company's
Common Stock to a total of 120,000,000 shares, and (iii)
the ratification of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year 1999.
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 26, 1999, the record
date for the Annual Meeting, there were outstanding and
entitled to vote 38,469,904 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
19,234,952 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,
except for the proposal to amend the Company's Certificate of
Incorporation.
In the election of directors, the nine candidates
receiving the most votes will be elected. Approval of
Proposal (ii) will require the affirmative vote of a
majority of all shares of Common Stock outstanding.
Approval of Proposal (iii) will require the affirmative vote
of a majority of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting. 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 1998, accompanies this Proxy
Statement. Such report is not incorporated herein by
reference.
Mailed to Stockholders on or about April 16, 1999.
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 66 Chairman of the Board,
President,
Chief Executive Officer
and Director
James G. Andress(2) 60 Director
Morton Collins, Ph.D.(1) 63 Director
Stuart F. Feiner(1) 50 Director
Robert F. Hendrickson(2) 66 Director
Professor Bengt
Samuelsson, M.D. (1) 65 Director
Joseph T. Stewart, Jr.(2) 69 Director
Gerald Weissmann, MD(1) 68 Director
Horst Witzel, Dr.-Ing(2) 71 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 of the Company since
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., a biotechnology company. He
also serves as a director of Sepracor, Inc., a
separations technology company, O.P.T.I.O.N. Care,
Inc., a home health care company, Favorite
Brands, a consumer packaged goods company,
Allstate Insurance Company, and Information
Resources, Inc.
Morton Collins, Ph.D. has been a director of the Company 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, of Kopin
Corporation, a manufacturing company, and
Thermedics Detection, Inc., a manufacturer of
industrial and laboratory processes.
Stuart F. Feiner has been a director of the Company 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. Dr. Samuelsson is Chairman of
the Nobel Foundation, a director of Pharmacia &
Upjohn, a pharmaceutical company, a director of
NicOx SA, Paris, France, a biotechnology company,
and a director 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. Mr.
Stewart is currently a director of General
American Investors Company, Inc., a trustee of
the Foundation of the University of Medicine and
Dentistry of New Jersey, and a member of the
Council of Visitors of the Marine Biological
Laboratory, Woods Hole, Massachusetts, a notfor-
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 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 director of Cephalon, Inc., a neuroscience
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 2 meetings during
the fiscal year ended January 3, 1999. 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 and Compensation Committee held 6
meetings during the fiscal year ended January 3,
1999. No member of the Nominating and Compensation
Committee is an officer or employee of the Company.
The Company's Board of Directors held 6 meetings
during the fiscal year ended January 3, 1999.
No director attended fewer
than 75 percent of the aggregate number of
meetings of the Board of Directors and of
committees on which he served, except Dr.
Samuelsson, who attended 63 percent of the
aggregate number of meetings of the Board of
Directors and 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 26, 1999, 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 Percent
of
Shares Total
Ross Financial Corporation(1)
POB 31363-SMB
Cayman Islands, BWI 9,353,346 24.42
Charles A. Baker (2)(3)(4)(6) 596,021 1.56
James G. Andress (2) 70,000 *
Morton Collins, Ph.D. (2) 70,000 *
Stuart F. Feiner(2) 41,000 *
Robert F. Hendrickson (2) 60,000 *
Professor Bengt
Samuelsson, M.D.(2) 60,000 *
Joseph T.
Stewart, Jr. (2) 33,000 *
Gerald Weissmann, M.D.(2)(5) 68,334 *
Horst Witzel, Dr.-Ing (2) 95,000 *
James A. Boyle,
M.D., Ph.D.(2)(4)(6) 189,285 *
Ralph del Campo (4)(6) 52,560 *
Andrew S. Janoff, Ph.D.(4)(6) 39,186 *
Donald D. Yarson (4)(6) 73,740 *
All Directors and
Executive Officers
as a group (17 persons)
(2)(4)(6) 1,552,521 4.05
*Less than 1.0 percent
______________________________
(1) Based on information filed with the SEC on
Schedule 13D by Ross Financial Corporation dated
December 30, 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 26, 1999,
as follows: Mr. Baker, 192,336; Mr. Andress,
70,000; Dr. Collins, 45,000; Mr. Feiner, 40,000; Mr.
Hendrickson, 40,000; Dr. Samuelsson, 60,000; Mr.
Stewart, 29,000; Dr. Weissmann, 38,334; Dr.
Witzel, 95,000; Dr. Boyle, 140,000; and all executive
officers and directors as a group (17 persons),
803,670.
(3) Includes 228,186 shares owned by the Baker
Family Limited Partnership, of which Mr. Baker is the
General Partner.
(4) Includes shares held by Charles Schwab Trust Company as
trustee of the Company's 401(k) plan as of
December 31, 1998, in the following amounts: Mr.
Baker, 5,243; Dr. Boyle, 2,124; Mr. del Campo,
4,042; Dr. Janoff, 5,001; Mr. Yarson, 3,541; and all
executive officers and directors as a group (17
persons), 26,803.
(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, January 22,
1998, and September 10, 1998, under The Liposome
Company 1996 Equity Incentive Plan, in the
following aggregate amounts: Mr. Baker, 93,278; Dr.
Boyle, 39,661; Mr. del Campo, 48,518; Dr. Janoff,
34,125; Mr. Yarson, 70,199; and all executive officers
and directors as a group (17 persons), 329,324.
Executive Compensation
The following table shows, for the fiscal years
ended January 3, 1999, December 28, 1997, and
December 29, 1996, 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 January 3,
1999 (these individuals, together with the Chief
Executive Officer, are sometimes referred to as the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
NAME AND SALARY BONUS RESTRICTED SECURITIES ALL
PRINCIPAL YEAR $ (1)$ STOCK UNDERLYING OTHER
POSITION AWARD(S) STOCK COMPEN-
(2)$ OPTIONS SATION
(NO. OF (4)$
SHARES)
Charles A.
Baker 1998 $394,000 $200,000 $463,750 243,900(3) $10,000
Chairman of 1997 375,000 40,000 ---- 281,000 9,500
the Board 1996 351,923 75,000 75,000 60,000 9,490
President, and
Chief Executive
Officer
James A.
Boyle, 1998 262,692 75,000 196,002 49,320(3) 10,000
M.D., Ph.D. 1997 252,253 12,500 12,500 48,800 9,500
Senior Vice 1996 241,714 50,000 50,000 13,500 9,490
President, Medical
and Regulatory
Affairs
Ralph
del Campo 1998 203,692 115,600 236,998 134,820(3) 10,000
Vice
President, 1997 193,889 11,000 11,000 44,800 9,500
Manufacturing 1996 183,796 40,000 40,000 13,500 9,490
Operations
Andrew S.
Janoff, 1998 197,846 80,000 170,998 71,418(3) 10,000
Ph.D. 1997 186,923 11,000 11,000 43,600 9,500
Vice
President, 1996 172,300 40,000 40,000 11,500 9,490
Research and
Development
Donald D.
Yarson 1998 207,692 130,000 346,872 108,000(3) 10,000
Vice
President, 1997 181,873 13,750 13,750 120,000 9,500
Sales, 1996 139,330 65,000 50,000 19,000 8,634
Marketing, 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, January 22, 1998 and
September 10, 1998, under The Liposome Company
1996 Equity Incentive Plan. The aggregate number
of shares held by the Named Executive Officers
at the end of 1998 (and their market value as of
January 3, 1999) were: Mr. Baker, 93,278
($1,440,212); Dr. Boyle, 39,661 ($612,366); Mr.
del Campo, 48,518 ($749,118); Dr. Janoff, 34,125
($526,890); and Mr. Yarson, 70,199 ($1,083,873).
The January 25, 1996 and January 23, 1997 grants
vest in equal increments over a three-year period from the date of grant.
A portion of the January 22, 1998 grant vests on
January 3, 2000, and the remaining portion vests in equal
increments over a two-year period from the date of
grant. The September 10, 1998 grant vests on
January 2, 2001. 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 1998 include only the number of
shares underlying options that were repriced in
1998 since there were no new options awarded to
the executive officers, including the Named
Executive Officers, in 1998. In addition, in
order to qualify for the repricing, each
optionee, including each Named Executive Officer,
was required to surrender 10% of the shares covered
by the options to be repriced. This surrender
actually reduced the total number of shares
covered by options held by the Named Executive
Officers. See note 1 to the table entitled
"Option Grants in 1998 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).
Employment Agreement
The Company entered into an employment
agreement with Mr. Baker, which
began in December 1989 and was renewed in 1995. The
renewed agreement terminated in accordance with its
terms on May 31, 1998; however, it was mutually
agreed that Mr. Baker would continue to serve as
Chief Executive Officer Chairman of the Board
and President, on the same terms and conditions, at
the pleasure of the Board. 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
that 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.
Option Grants
The following table presents stock options
granted for the period from December 29, 1997,
through January 3, 1999, to the Named Executive
Officers. All grants were made under The Liposome
Company 1996 Equity Incentive Plan.
OPTION GRANTS IN 1998 FISCAL YEAR
POTENTIAL
REALIZABLE
VALUE
AT ASSUMED
ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (2)
NUMBER OF PERCENT OF
SECURITIES TOTAL EXERCISE
UNDERLYING OPTIONS PRICE
OPTIONS GRANTED ($ PER EXPIRA-
GRANTED (1) TO SHARE) TION
(#) EMPLOYEES DATE 5% 10%
NAME IN FISCAL
YEAR (%)
Charles A.
Baker 21,600 .77 $4.25 11/8/01 $15,311 $32,283
25,200 .90 4.25 12/22/02 24,885 53,980
22,500 .81 4.25 12/6/03 27,847 61,919
36,000 1.29 4.25 12/6/04 54,432 124,277
50,400 1.81 4.25 11/8/05 89,589 209,700
43,200 1.54 4.25 12/1/06 90,650 218,481
45,000 1.61 4.25 7/10/07 102,993 252,465
James A.
Boyle, M.D.
Ph.D. 5,400 .19 4.25 11/10/04 8,057 18,360
16,200 .58 4.25 11/8/05 28,796 67,402
9,720 .35 4.25 11/21/06 20,314 48,922
18,000 .65 4.25 7/10/07 41,197 100,986
Ralph
del Campo 81,000 2.90 4.25 3/15/04 106,232 237,915
13,500 .48 4.25 11/10/04 20,142 45,900
12,600 .45 4.25 11/8/05 22,397 52,424
9,720 .35 4.25 11/21/06 20,314 48,922
18,000 .65 4.25 7/10/07 41,197 100,986
Andrew S.
Janoff,
Ph.D. 900 .03 4.25 11/15/01 642 1,355
7,200 .26 4.25 6/19/02 6,184 13,241
3,600 .13 4.25 11/19/02 3,472 7,514
10,800 .39 4.25 1/22/03 10,900 23,695
7,878 .28 4.25 11/11/03 9,606 21,321
5,400 .19 4.25 11/10/04 8,057 18,360
9,360 .34 4.25 11/8/05 16,637 38,944
8,280 .30 4.25 11/21/06 17,304 41,675
18,000 .65 4.25 7/10/07 41,197 100,986
Donald D.
Yarson 25,920 .93 4.25 2/1/05 40,334 92,473
5,400 .19 4.25 11/8/05 9,598 22,467
13,680 .49 4.25 11/21/06 28,590 68,854
18,000 .65 4.25 7/10/07 41,197 100,986
45,000 1.61 4.25 7/24/07 103,544 254,090
(1) The numbers shown for securities underlying
options awarded in 1998 include only the number
of shares underlying options that were repriced
in 1998 since there were no new options granted
in 1998. In addition, in order to
qualify for the
repricing, each optionee, including each
Named Executive Officer, was required to
surrender 10% of the shares covered by the
options to be repriced. This surrender
actually reduced the total number of shares
covered by options held by the Named Executive
Officers. The following table sets forth the
decrease in the number of shares covered by the
options held by each Named Executive Officer
(exclusive of other changes in holdings due to
option expirations and exercises, if any):
1998 DECREASE IN OPTION SHARES
DECREASE IN
NUMBER OF NUMBER OF NUMBER OF
SECURITIES SECURITIES SECURITIES
UNDERLYING UNDERLYING UNDERLYING
OPTIONS OPTIONS OPTIONS DUE
BEFORE AFTER TO
REPRICING REPRICING REPRICING
Charles A. Baker 271,000 243,900 27,100
James A. Boyle, 54,800 49,320 5,480
M.D., Ph.D.
Ralph del Campo 149,800 134,820 14,980
Andrew S. Janoff, 79,354 71,418 7,936
Ph.D.
Donald D. Yarson 120,000 108,000 12,000
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
There were no exercises of stock options by the
Named Executive Officers in 1998. The following
table summarizes the unexercised stock options and
the fiscal year-end values of all outstanding
options held by the Named Executive Officers as of
January 3, 1999.
JANUARY 3, 1999 OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT JANUARY 3, 1999 AT JANUARY 3, 1999 (1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
(#) (#) ($) ($)
Charles A.
Baker 205,836 303,901 $2,766,227 $3,359,397
James A.
Boyle, 140,000 84,320 1,409,095 904,163
M.D., Ph.D.
Ralph del
Campo 0 134,821 0 1,508,646
Andrew S.
Janoff,Ph.D. 0 71,418 0 799,166
Donald D.
Yarson 0 108,000 0 1,208,519
(1) Value of unexercised in-the-money options is
equal to the fair market value of $15.44 per
share of Common Stock, the closing price on the
last trading day prior to January 3, 1999, as quoted
by the Nasdaq National Market, less the exercise
price.
Option/SAR Repricings
As discussed below in the "Report of the
Nominating and Compensation Committee on Stock
Option Repricings," a number of employee stock
options were repriced in July 1997 and September
1998. In order to obtain the lower
exercise price, optionees were required to surrender 20% and 10%,
respectively, of the shares covered by each
option. The following table shows the number of
optioned shares that were repriced in 1997 and 1998
for the Named Executive Officers.
TEN-YEAR OPTION/SAR REPRICINGS
NUMBER OF MARKET EXERCISE LENGTH OF
SECURITIES PRICE PRICE AT ORIGINAL
UNDERLYING OF STOCK TIME OF NEW OPTION TERM
OPTIONS/SAR AT TIME OF REPRICING EXERCISE REMAINING
REPRICED OR REPRICING OR PRICE AT DATE OF
NAME DATE AMENDED OR AMENDMENT AMENDMENT ($) REPRICING OR
(#)(1) ($) ($) AMENDMENT
Charles A. 9/10/98 21,600 $4.25 $8.00 $4.25 3 years,2 months
Baker 9/10/98 25,200 4.25 8.00 4.25 4 years,3 months
Chairman 9/10/98 22,500 4.25 6.50 4.25 5 years,3 months
of the 9/10/98 36,000 4.25 8.69 4.25 6 years,3 months
Board 9/10/98 50,400 4.25 8.00 4.25 7 years,2 months
Chief 9/10/98 43,200 4.25 8.00 4.25 8 years,3 months
Executive 9/10/98 45,000 4.25 8.00 4.25 8 years,10 mos.
Officer 7/10/97 48,000 8.00 16.88 8.00 9 years,5 months
7/10/97 56,000 8.00 13.38 8.00 8 years,4 months
7/10/97 28,000 8.00 12.88 8.00 5 years,5 months
7/10/97 24,000 8.00 11.75 8.00 4 years,4 months
James A. 9/10/98 5,400 4.25 8.75 4.25 6 years,2 months
Boyle,MD, 9/10/98 16,200 4.25 8.00 4.25 7 years,2 months
Ph.D. 9/10/98 9,720 4.25 8.00 4.25 8 years,2 months
Senior 9/10/98 18,000 4.25 8.00 4.25 8 years,10 mos.
Vice 7/10/97 18,000 8.00 13.38 8.00 8 years,4 years
President, 7/10/97 10,800 8.00 17.00 8.00 9 years,4 months
Medical and
Regulatory Affairs
Ralph del 9/10/98 81,000 4.25 6.88 4.25 5 years,6 months
Campo 9/10/98 13,500 4.25 8.75 4.25 6 years,2 months
Vice 9/10/98 12,600 4.25 8.00 4.25 7 years,2 months
President 9/10/98 9,720 4.25 8.00 4.25 8 years,2 months
Manu- 9/10/98 18,000 4.25 8.00 4.25 8 years,10 mos.
Facturing 7/10/97 14,000 8.00 13.38 8.00 8 years,4 months
Operations 7/10/97 10,800 8.00 17.00 8.00 9 years,4 months
Andrew S. 9/10/98 900 4.25 9.75 4.25 3 years,2 months
Janoff, 9/10/98 7,200 4.25 8.25 4.25 3 years,9 months
Ph.D., 9/10/98 3,600 4.25 8.00 4.25 4 years,2 months
Vice 9/10/98 10,800 4.25 10.63 4.25 4 years,4 months
President, 9/10/98 7,878 4.25 8.13 4.25 5 years,2 months
Research 9/10/98 5,400 4.25 8.75 4.25 6 years,2 months
And 9/10/98 9,360 4.25 8.00 4.25 7 years,2 months
Develop- 9/10/98 8,280 4.25 8.00 4.25 8 years,2 months
Ment 9/10/98 18,000 4.25 8.00 4.25 8 years,10mos.
7/10/97 10,400 8.00 13.38 8.00 8 years,4 months
7/10/97 4,000 8.00 14.00 8.00 5 years,4 months
7/10/97 9,200 8.00 17.00 8.00 9 years,4 months
Donald D. 9/10/98 25,920 4.25 8.00 4.25 6 years,5 months
Yarson 9/10/98 5,400 4.25 8.00 4.25 7 years,2 months
Vice 9/10/98 13,680 4.25 8.00 4.25 8 years,2 months
President, 9/10/98 18,000 4.25 8.00 4.25 8 years,10 mos.
Sales, 9/10/98 45,000 4.25 8.00 4.25 7 years,10 mos.
Marketing, 7/10/97 28,800 8.00 12.00 8.00 7 years,7 months
and 7/10/97 6,000 8.00 13.38 8.00 8 years,4 months
Business 7/10/97 15,200 8.00 17.00 8.00 9 years,4 months
Development
(1) Represents the number of shares held after
each repricing; all remaining shares were canceled.
Report of the Nominating and Compensation
Committee on Stock Option Repricings
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.
In 1997, after the disappointing results of the
VENTUS(TM) clinical trial caused a decline in the
Company's stock price, 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, the Nominating and Compensation Committee
(the "Committee") recommended, and the Board approved, the repricing
of all outstanding employee stock options having
an exercise price of at least $10.00 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.
From July 1997 through early 1998, the Company
experienced a high attrition rate. Further, the
Company had set ambitious goals for itself for
1998, which included achieving profitability and
the filing of a New Drug Application for EVACET(TM),
the trademark for the Company's liposomal
doxorubicin product, with the Food and Drug
Administration. These circumstances, together with
the fact that the stock had continued to decline
in value, led the Committee to determine that a
second repricing was essential if the Company was to
retain the employees experienced and of the quality
necessary to meet its corporate objectives.
Therefore, on September 10, 1998, the Committee
recommended, and the Board approved, the repricing
of all outstanding employee stock options having an
exercise price of at least $6.00 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 $4.25 per share. In exchange
for obtaining a lower price, the option holders
were required to surrender 10% of the shares
covered by their options and to wait a full year
before they could exercise any of the repriced
options. (In the case of options previously
repriced in 1997, for which 20% of the shares were
surrendered, the 1998 repricing required the
surrender of an additional 10% of the remaining
shares.) 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 terms 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 and non-employee consultants were not
eligible for either repricing.
James G. Andress Robert F. Hendrickson Joseph T.
Stewart, Jr. Horst Witzel, Dr.-Ing
Members of the Nominating and Compensation Committee
March 11, 1999
Report of the Nominating and Compensation Committee
on Executive Compensation
The rules of the SEC require 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 1998 is as follows:
Compensation Policies and Components of Compensation
The Company competes in the highly technical,
researchdriven biopharmaceutical industry, where
having the most qualified management, technical
and professional personnel is very important to
success. The Company has one marketed product,
ABELCET(R), which is the trademark for the
Company's antifungal product, amphotericin B lipid
complex injection. Although the Company has
recently achieved profitability, it continues to
incur substantial expenses in the further
development of EVACET(TM) and in developing TLC ELL-
12 and other products. 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
Repricings," the Committee recommended, and the Board
approved, the repricing of options issued to all
employees having an exercise price of at least $6.00 per
share on September 10, 1998. Also on that date the
Committee recommended, as part of its Employee
Retention Program, a grant of stock options to all
employees except executive officers as an added
incentive to put forth the effort needed for the
Company to achieve its goals. The exercise price of
these options was $4.25, which was the market price
on the date of grant. All of the options will vest
on March 1, 2000. The options will expire if not
exercised in ten years.
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 1998.
As of January 3, 1999, the Company had outstanding
grants covering in total 4,799,837 shares under
all of its stock option plans and had 6,774,452
shares available for future grants under its two
current plans, the 1996 Equity Incentive Plan
and the 1991 Directors' Nonqualified Stock
Option 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 Nasdaq Pharmaceutical Company
Index (which the Company believes is more
representative of the Company's size, corporate
structure, and business than the Hambrecht & Quist LLC
Healthcare Sector Index used in prior years) used
in the Performance Graph following the
Committee's report, included 252 companies in 1998,
more than 110 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 upper mid-range of the Peer Group. 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 Executive Incentive Plans ("EIPs;"
formerly Management Incentive Plans), 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 1998 EIP was approved by
the Committee in March 1998 and provided specific
corporate goals, as well as weighting for group
and individual performance. For 1998, as reflected
in the table entitled "Summary Compensation Table,"
the Company paid
bonuses to executive officers, including the Named
Executive Officers, based on the Company's
performance against its 1998 goals and each
individual's contribution to that performance. The
Company's achievements for 1998, which were also
considered in determining the Chairman and Chief
Executive Officer's bonus, included that additional
European approvals had been received for ABELCET(R);
that total revenues from ABELCET(R) had continued to
grow; that the Company had achieved profitability
in the fourth quarter; that the Company had
strengthened its alliance with Wyeth-Ayerst
International for the distribution of ABELCET(R) in
major European countries; that the Company had
prepared and filed its New Drug Application for
EVACET(TM); and that the Company had initiated a
Phase I clinical trial with TLC ELL-12, a novel
anticancer agent. The bonuses paid to the executive
officers under the 1998 EIP, which were paid in
cash, averaged 41% of the recipient's yearend base
salary.
Awards of restricted stock covering a total of
293,000 shares were granted to executive officers
of the Company in 1998 under the Employee
Retention Program. These grants to Named Executive
Officers are included in the table entitled
"Summary Compensation Table" above.
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. In May 1998 it was
mutually agreed that Mr. Baker would continue to
serve as Chairman, Chief Executive Officer and
President, on the same
terms and conditions, at the pleasure of the Board.
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 1998, Mr. Baker's base salary was $394,000,
which represented an increase of $19,000 over his
base salary in effect as of the end of 1997. 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 the increased worldwide revenues of
ABELCET(R), regaining rights to EVACET(TM), lower
manufacturing costs and increased manufacturing
efficiencies, successful alliances with marketing
and distribution partners, advancing the
Company's other development programs and achieving
profitability in 1998. As an incentive for Mr. Baker
to remain as Chairman, Chief Executive Officer and
President, the Committee also awarded Mr. Baker
40,000 shares of restricted stock.
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 1998, Mr. Baker's bonus,
like the bonuses paid to other executive officers,
was determined under the 1998 EIP after the end of
the year. The 1998 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 $200,000.
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 Agreement."
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 Equity Incentive 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 1998 to maintain
the stability of the Company's management team
were in the best interests of the Company and its
stockholders. Through stockbased 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 G. Andress Robert F. Hendrickson Joseph T.
Stewart, Jr. Horst Witzel, Dr.-Ing
Members of the Nominating and Compensation Committee
March 11, 1999
Compensation Committee Interlocks and Insider
Participation
No person who served on the Nominating and Compensation Committee during
1998 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 Stock Option Repricings, 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 1993 through 1998, compared to the Nasdaq
Total Return Index of U.S. Companies (the "Nasdaq
US Stock Index"), the Hambrecht & Quist LLC
Healthcare Sector Index (the "H&Q Healthcare
Index") and the Nasdaq Pharmaceutical Company Index
(the "Nasdaq Pharmaceutical Index"). As stated in
prior years, the Company believes that the Nasdaq US
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. The Company
believes, however, that the Nasdaq Pharmaceutical
Index is more representative of the Company's size,
corporate structure, and business than the H&Q
Healthcare Index used in prior years. In
accordance with SEC rules, the graph includes both
the Nasdaq Pharmaceutical Index and the H&Q
Healthcare Index.
1993 1994 1995 1996 1997 1998
The Liposome Company, Inc. 100 126 302 289 70 233
Nasdaq US Stock Index 100 98 138 170 209 293
Nasdaq Pharmaceutical Index 100 75 138 138 143 183
H&Q Healthcare Index 100 101 169 175 203 258
Directors' Compensation
Directors who are not employees of the Company
receive an
annual retainer of $1,000 per quarter. In
addition, during 1998, 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. For a Board
committee 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 is a consultant to the Company. In
the fiscal year ended January 3, 1999, the Company
paid $20,000 in fees to Dr. Weissmann for his
services as Chairman of the Company's Cancer
Scientific Advisory Board.
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 26, 1999, 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 1998 under
the Directors' Plan at an exercise price of $5.44 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 or 1998
option repricings due to limitations contained in
the Directors' Plan.
PROPOSAL 2. AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
On March 11, 1999, the Board of Directors approved,
subject to approval by the stockholders at the
Annual Meeting, an increase in the number of
shares of authorized Common Stock from 60,000,000
shares to 120,000,000 shares. This increase would
be accomplished by adopting an amendment (the
"Common Stock Amendment") to the Certificate of
Incorporation of the Company. At February 26, 1999,
38,362,021 shares of Common Stock were issued and
outstanding. Of the remaining 21,637,979 shares
available, 7,824,452 shares are reserved for
issuance under the Company's various stock option
plans and outstanding warrants, therefore leaving
only 13,813,527 shares unreserved and available for
issuance. The Common Stock Amendment would increase
the number of authorized, unissued and unreserved
shares of Common Stock to 73,813,527. The text of
the Common Stock Amendment is set forth on the
attached Exhibit A.
The Board of Directors believes that it is in the
best interest of the Company and its stockholders
that there be a sufficient reserve of authorized but
uncommitted shares of Common Stock, so that the
Company can rapidly take advantage of
opportunities that become available, including
acquisitions, financing and stock splits, among
others.
The Company currently has no agreements or
arrangements for the issuance of shares of Common
Stock other than the issuance of shares of Common
Stock pursuant to stock option plans, outstanding
warrants and the Company's 401(k) plan. Authorized
shares of Common Stock in excess of these shares
outstanding (including, if approved, the additional
shares of Common Stock provided for in the Common
Stock Amendment) will remain
available for general purposes, such as
acquisitions, equity financings, stock splits,
stock dividends, management incentives and stock
option plans. Such issuances may not require
stockholder approval. Under certain circumstances,
the Board of Directors could create impediments to,
or frustrate persons seeking to effect, a takeover
or transfer of control of the Company by causing such
shares to be issued to a holder or holders who might
side with the Board of Directors in opposing a
takeover bid that the Board of Directors determines
is not in the best interest of the Company and
its stockholders. As of this date the Board of
Directors is unaware of any specific effort to
accumulate the Company's shares or to obtain control
of the Company by means of a merger, tender offer,
solicitation in opposition to management or
otherwise.
Approval of the Common Stock Amendment will require
the affirmative vote of the holders of a majority
of the outstanding shares of Common Stock. If
the proposal is adopted, the Common Stock
Amendment will become effective upon the requisite
filing under the Delaware General Corporation Law.
Abstention from voting on the Common Stock
Amendment and broker non-votes will have the
practical effect of voting against the Common
Stock Amendment since the affirmative vote of a
majority of the Company's outstanding shares is
required for the adoption of the Common Stock
Amendment.
If not otherwise specified, proxies will be voted
in favor of the Common Stock Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF THE COMMON STOCK AMENDMENT.
PROPOSAL 3. APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company
proposes that its appointment of the firm of
PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year
ending January 2, 2000, be ratified by the
stockholders. If not otherwise specified, proxies
will be voted in favor of the ratification of the
appointment. Representatives of
PricewaterhouseCoopers LLP 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 PRICEWATERHOUSECOOPERS LLP.
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 January 3, 1999, all current
directors and executive officers filed all required
reports on a timely basis, except that, upon his
appointment as an executive officer, Dennis Rodrigues
filed Form 3 late.
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. The Company will make
arrangements 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 2000, a
stockholder proposal must
be received by Michael McGrane, Vice President,
General Counsel and Secretary, The Liposome Company,
Inc., One Research Way, Princeton Forrestal Center,
Princeton, New Jersey 08540, not later than
December 18, 1999.
OTHER MATTERS
The Board of Directors knows of no other business
that 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. SEC Rule 14a4(c)(1) provides that, if
the proponent of a stockholder proposal fails to
notify the Company at least 45
days prior to the month and day of mailing the prior
year's proxy statement, the proxies of the Company's
management would be permitted to use their
discretionary authority at the Company's next annual
meeting of stockholders if the proposal were raised
at the meeting without any discussion of the matter
in the proxy statement. For purposes of the
Company's Annual Meeting of stockholders to be held
in the year 2000, this deadline is March 2, 2000.
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.
Exhibit A
TEXT OF PROPOSED COMMON STOCK AMENDMENT
The first paragraph and section (i) of Article
FOURTH of the Company's Certificate of Incorporation
are proposed to be amended. Section (ii) of Article
FOURTH, relating to the Company's authorized
Serial Preferred Stock, will remain unchanged. If
the proposed amendment is approved by stockholders,
the first paragraph and section (i) of Article FOURTH
will read as follows:
"FOURTH. The total number of shares of stock
that the Corporation shall have the authority to
issue is 122,400,000 shares, which shares shall
be classified as follows:
(i) 120,000,000 shares of Common Stock, par value
$0.01 per share (hereinafter called the
"Common Stock");"
PROXY
THE LIPOSOME COMPANY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders, May 20, 1999
The Holiday Inn, 1053 Route #1, Princeton, New Jersey 08540
The undersigned hereby appoints Charles A. Baker and Michael
McGrane, and each of them, as proxies of the undersigned,
each with full power to act 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
undersigned at the close of business on March 26, 1999 at
the Annual Meeting of Stockholders to be held on May 20,
1999, at 10:15 A.M. and at any adjournment thereof, with all
the powers the undersigned would have if personally present.
The undersigned hereby revokes any and all proxies
heretofore given with 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 at right (except as
marked to the contrary below).
WITHHOLD AUTHORITY to vote for all
nominees
listed at right.
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) Approval of the Amendment to the
Company's Certificate of
Incorporation to increase the number
of
authorized shares of Common Stock.
FOR AGAINST ABSTAIN
3) Ratification of the appointment by the
Board of Directors of
PricewaterhouseCoopers LLP as
independent accountants for the 1999
fiscal year.
FOR AGAINST ABSTAIN
4) 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 PROPOSALS 2 AND 3.
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.
