<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A-1
<TABLE>
<CAPTION>
(Mark One)
<S> <C>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>
For the transition period from ________ to ________
Commission file number 0-15847
------------------------
LIPOSOME TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-3031834
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
960 HAMILTON COURT, MENLO PARK, CA 94025
(Address of principal executive (Zip Code)
offices)
</TABLE>
Registrant's telephone number, including area code: (415) 323-9011
------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of Class)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on the Nasdaq
National Market on March 31, 1995, was $125,165,563. Solely for the purposes of
this calculation, each officer and director of the registrant is deemed to be an
affiliate.
The number of shares of Common Stock outstanding as of March 31, 1995, was
19,146,132.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT FORM 10-K PART
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 10 is hereby amended and restated in its entirety as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information regarding directors and executive officers is
provided as of April 28, 1995 and supersedes, in its entirety, the information
previously provided by the Company in Part I of its Form 10-K for the fiscal
year ended December 31, 1994.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- -------------------------------------------- --- --------------------------------------------------------------
<S> <C> <C>
Nicolaos V. Arvanitidis, Ph.D............... 54 Chairman of the Board and Chief Executive Officer
Joseph M. Limber............................ 42 Executive Vice President and
Acting Chief Operating Officer
Joseph J. Vallner, Ph.D..................... 48 Senior Vice President, Research and Development
Sally A. Davenport.......................... 59 Secretary
Carl F. Grove............................... 41 Vice President for Regulatory Affairs
Marc J. Gurwith, M.D., J.D.................. 55 Vice President and Associate Medical Director
Anthony A. Huang, Ph.D...................... 43 Vice President of Product Development
Richard D. Mamelok, M.D..................... 46 Vice President and Medical Director
Francis J. Martin, Ph.D..................... 46 Vice President and Chief Scientist
Donald J. Stewart........................... 39 Vice President, Finance
Peter K. Working, Ph.D...................... 47 Vice President of Preclinical Research
Robert G. Faris (2)......................... 56 Director
I. Craig Henderson, M.D., F.A.C.P (1)....... 52 Director
Richard C.E. Morgan (1)(2).................. 50 Director
Robert B. Shapiro (1)....................... 55 Director
E. Donnall Thomas, M.D. (2)................. 74 Director
<FN>
- ------------------------
(1) Member of the Compensation and Plan Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
</TABLE>
The Company's By-laws authorize the Board of Directors to set the number of
directors, which is currently fixed at six.
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected. Officers are appointed to serve,
subject to the discretion of the Board of Directors, until their successors are
appointed.
NICOLAOS V. ARVANITIDIS, PH.D. is a founder of the Company and has been
Chief Executive Officer and a director since 1981 and was also Chief Financial
Officer from October 1987 until July 1992. Prior to founding the Company, he was
President and Chief Executive Officer of a consulting business he founded in
1969. Dr. Arvanitidis received a Ph.D. in Engineering-Economic Systems from
Stanford University. On April 3, 1995, LTI announced that Dr. Arvanitidis will
retire effective the earlier of the appointment of a successor chief executive
officer and July 1, 1995. Following his retirement, Dr. Arvanitidis will
continue to serve LTI as a consultant.
JOSEPH M. LIMBER was appointed Executive Vice President and Acting Chief
Operating Officer in April 1995. Mr. Limber joined the Company in June 1992 as
Vice President for Marketing and Sales. Prior to joining LTI, Mr. Limber was
employed by Syntex Corporation (Syntex), most recently as Director of Marketing
Planning, with responsibility for developing worldwide strategic plans for R&D
2
<PAGE>
compounds and product line extensions. Before joining Syntex in 1987, Mr. Limber
held various marketing and sales positions with Ciba-Geigy Corporation (1975 -
1987). Mr. Limber received a B.A. degree in Liberal Arts from Duquesne
University.
JOSEPH J. VALLNER, PH.D. was appointed Senior Vice President, Research and
Development in April 1995. Dr. Vallner joined LTI in February 1992 as Vice
President for Development and was appointed Vice President, Research and
Development in July 1994. From 1986 to 1992, Dr. Vallner was Director, Corporate
Technology Transfer, of Syntex. While at Syntex, he also performed various
pharmaceutical development functions ranging from drug design and development to
responsibility for regulatory filings with the FDA. Before joining Syntex, Dr.
Vallner was a Group Leader with G.D. Searle, where he supervised pharmaceutical
formulation development and development of new drug delivery systems. From 1974
to 1984, Dr. Vallner was Associate Professor of Pharmaceutics at the University
of Georgia. Dr. Vallner received a Ph.D. in Pharmaceutics from the University of
Wisconsin.
SALLY A. DAVENPORT is a Company founder and has served as the LTI's
Secretary since the Company's inception. She has been responsible for various
administrative and corporate functions since 1981. Ms. Davenport received a B.S.
degree in Technical Journalism from Iowa State University.
CARL F. GROVE was appointed Vice President for Regulatory Affairs in
January 1992, having served as Vice President for R&D Administration and
Planning since July 1989. Previously, he served the Company and a prior LTI
joint venture, Cooper-Lipotech, in various positions related to R&D project
administration and planning since 1982. Mr. Grove received an M.S. degree in
Urban Planning from the University of Oregon.
MARC J. GURWITH, M.D., J.D. joined LTI in January 1995 as Vice President
and Associate Medical Director. Prior to joining LTI, Dr. Gurwith was employed
by Boehringer Mannheim Pharmaceuticals, most recently as Vice President of
Medical and Scientific Affairs and previously as Senior Director of Clinical
Research. In addition to over 10 years of pharmaceutical industry experience,
Dr. Gurwith has over 20 years experience in teaching and consultation in the
area of infectious disease control and therapy. Dr. Gurwith received his M.D.
degree from Harvard Medical School and his J.D. degree from Temple University
School of Law.
ANTHONY A. HUANG, PH.D. was appointed Vice President of Product Development
in April 1995, having served as Senior Director, Formulations since July 1993.
From 1986 until July 1993, Dr. Huang was LTI's Director, Formulations, and from
1983 to 1986 he performed various research and development tasks with increasing
responsibility. Dr. Huang led the team effort in the development of
pharmaceutical formulations of DOXIL and AMPHOCIL and the related commercial
manufacturing processes and controls. Dr. Huang received his Ph.D. degree from
the University of California, San Francisco.
RICHARD M. MAMELOK, M.D. joined LTI in November 1992 as Vice President and
Medical Director. Prior to joining the Company, he was employed by ALZA
Corporation, where he served as Senior Director, Pharmacodynamic Research, with
responsibility for preclinical and clinical studies to determine biomedical and
physiological effects of new investigational drug products and their mechanisms
of action. Before joining ALZA Corporation in 1991, Dr. Mamelok served as
Director of Clinical Pharmacology and Medical Research Operations at Syntex. Dr.
Mamelok received an M.D. degree from Dartmouth Medical School. In April 1995,
LTI announced that Dr. Mamelok had stated his intention to resign from the
Company. Dr. Mamelok also stated that he will delay his effective date of
resignation in order to assist in identifying and recruiting his successor and
in preparing the NDA for AMPHOCIL.
FRANCIS J. MARTIN, PH.D. was appointed Vice President and Chief Scientist
in July 1994. From October 1986 he served as Vice President for Research and
Principal Scientist, with responsibility for guiding and coordinating LTI's
internal and extramural research activities for STEALTH liposome
3
<PAGE>
products. From 1981 to 1986, Dr. Martin served the Company in various
capacities, including Director of Liposome Research and Formulations and was the
Technical Director of LTI's former joint venture, Cooper-Lipotech. Dr. Martin
received a Ph.D. degree in Biochemistry from Northwestern University.
DONALD J. STEWART was appointed Vice President, Finance in April 1995. Mr.
Stewart joined the Company in 1984 as Treasurer and Controller. Previously, he
was Comptroller at Softcom, Inc. and a certified public accountant with Arthur
Young & Company. Mr. Stewart received a B.S. degree in Business Administration
from San Francisco State University and currently is enrolled in the M.B.A.
program at Santa Clara University.
PETER K. WORKING, PH.D. joined LTI in 1992, serving as Director,
Pharmacology/Toxicology until March 1994, when he was appointed Senior Director,
Pharmacology/Toxicology. In April 1995, Dr. Working was promoted to Vice
President of Preclinical Research. Prior to joining LTI, Dr. Working was a
Senior Experimental Toxicologist with Genentech, Inc. from 1988 to 1992. Dr.
Working is a member of the Board of Directors of the American Board of
Toxicology, a member, National Toxicology Program Board of Scientific
Counselors, NIEHS, and a member of the Editorial Board of Reproductive
Toxicology. He received his Ph.D. degree in Anatomy from the University of
California, Davis.
ROBERT G. FARIS has served as a director of the Company since March 1985.
Since 1990, he has been President, Chief Executive Officer and a director of the
Polish American Enterprise Fund, which invests U.S. government funds in Poland.
From 1971 to 1987, he served as President of Alan Patricof Associates, Inc., an
investment advisor to venture capital partnerships, and from 1987 to 1990, Mr.
Faris was a private investor.
I. CRAIG HENDERSON, M.D., F.A.C.P. has served as a director of LTI since
May 1993. Since 1992, he has been a Professor of Medicine, Chief of Medical
Oncology and Director of Clinical Cancer programs at the University of
California, San Francisco. From 1974 to 1992, Dr. Henderson held an academic
appointment at Harvard Medical School, most recently as Associate Professor of
Medicine. Dr. Henderson founded the Breast Evaluation Center at the Dana-Farber
Cancer Institute in 1980 and served as its director until 1992. He received an
M.D. degree from Columbia University.
RICHARD C.E. MORGAN has served as a director of LTI since May 30, 1990.
Since 1986, he has been a general partner of Wolfensohn Partners L.P., a venture
capital limited partnership, and the general partner of Wolfensohn Associates
L.P. From 1984 to 1986, he served as an executive of James D. Wolfensohn, Inc.,
and from 1977 to 1984, he served as General Manager of The Schroder Strategy
Group and director of J. Henry Schroder Wagg & Co. Ltd. (London). He is a
director of Lasertechnics, Inc., Celgene Corporation and Quidel Corporation.
ROBERT B. SHAPIRO has served as a director of LTI since March 1, 1988. In
April 1995, Mr. Shapiro was appointed Chairman and Chief Executive Officer of
Monsanto Company (Monsanto). From January 1993 to April 1995, Mr. Shapiro was
President and Chief Operating Officer of Monsanto, and he previously served as
President of Monsanto Agricultural Co. and Executive Vice President of Monsanto.
From 1986 to 1990, he served as Chairman and Chief Executive Officer of The
NutraSweet Company, a subsidiary of Monsanto. From 1982 to 1986, he served as
President of The NutraSweet Group of G.D. Searle & Co., and from 1979 to 1982,
he served as Vice President and General Counsel of G.D. Searle & Co.
E. DONNALL THOMAS, M.D. has served as a director of LTI since May 27, 1993.
Dr. Thomas currently is Professor Emeritus of Medicine, University of Washington
School of Medicine in Seattle and a member of the Fred Hutchinson Cancer
Research Center in Seattle. Dr. Thomas previously served, from 1974 to 1989, as
Director of Medical Oncology and Director of Clinical Research Programs at the
Fred Hutchinson Cancer Research Center and, from 1963 to 1985, he headed the
Division of Oncology at the University of Washington School of Medicine in
Seattle. Dr. Thomas received the Nobel Prize in Medicine and the Presidential
Medal of Science in 1990. He received an M.D. degree from Harvard Medical
School.
4
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than 10% of the outstanding Common Stock, to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of changes
in ownership of the Company's Common Stock. Officers, directors and greater than
ten percent stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to or maintained by the Company, during the fiscal year ended
December 31, 1994 all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% stockholders were complied with except
that the form for one transaction by Mr. Joseph M. Limber, an officer of the
Company, was filed late, and the form for one transaction by Dr. Francis J.
Martin, an officer of the Company, was filed late.
Item 11 is hereby amended and restated in its entirety as follows:
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation received
by the Company's Chief Executive Officer and the four remaining most highly paid
executive officers (the "Named Officers") for the three fiscal years ended
December 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------- -------------
NAME AND PRINCIPAL POSITION SALARY OTHER ANNUAL OPTIONS
AS OF DECEMBER 31, 1994 YEAR ($) BONUS ($) COMPENSATION ($) (#)
- -------------------------------------------------- --------- --------- --------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, Ph.D. (2)(3)(4)(5) 1994 250,008 125,000 0 0
Chairman of the Board and Chief Executive Officer 1993 240,504 93,753 0 89,325
1992 219,420 142,065 0 0
Joseph M. Limber (3)(4) 1994 128,400 37,615 0 52,500
Vice President for Marketing and Sales 1993 121,637 20,865 0 0
1992 87,907 7,000 0 60,000
Richard Mamelok (3)(4)(6) 1994 184,056 47,866 0 37,500
Vice President and Medical Director 1993 177,624 29,909 0 0
1992 56,960 3,584 0 75,000
Peter V. Leigh (3)(4)(7) 1994 135,192 21,416 0 37,500
Vice President and Chief Financial Officer 1993 132,600 23,139 0 0
1992 70,421 8,126 0 75,000
Joseph J. Vallner, Ph.D. (3)(4) 1994 142,392 39,456 0 0
Vice President for Development 1993 134,196 21,968 0 20,000
1992 113,000 12,600 0 60,000
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION
AS OF DECEMBER 31, 1994 ($)(1)
- -------------------------------------------------- ---------------
<S> <C>
Nicolaos V. Arvanitidis, Ph.D. (2)(3)(4)(5) 3,750
Chairman of the Board and Chief Executive Officer 4,497
2,182
Joseph M. Limber (3)(4) 3,744
Vice President for Marketing and Sales 3,121
0
Richard Mamelok (3)(4)(6) 3,750
Vice President and Medical Director 4,451
0
Peter V. Leigh (3)(4)(7) 3,750
Vice President and Chief Financial Officer 3,315
0
Joseph J. Vallner, Ph.D. (3)(4) 2,136
Vice President for Development 1,992
0
<FN>
- ------------------------
(1) The compensation shown in this column reflects the Company's matching
contributions for the employee to the Company's voluntary salary reduction
plan qualified under Section 401(k) of the Internal Revenue Code. Such
matching contributions consisted of Common Stock of the Company.
(2) The bonus amounts paid to Dr. Arvanitidis for 1992 include (a) a bonus
award for 1991 of $103,950 paid in January 1992 and (b) a bonus award for
1992 of $38,115 paid in December 1992.
(3) The bonus amounts earned in 1993 were paid in February and March 1994.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
(4) The bonus amounts earned in 1994 were paid in April 1995.
(5) Dr. Arvanitidis announced in April 1995 that he will retire as Chief
Executive Officer no later than July 1, 1995. See "Employment Agreements."
(6) In April 1995, Dr. Mamelok stated his intention to resign from the Company.
The Company and Dr. Mamelok are currently negotiating the terms of Dr.
Mamelok's severance.
(7) Mr. Leigh resigned from the Company in April 1995. The Company and Mr.
Leigh are currently negotiating the terms of Mr. Leigh's severance.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth further information regarding the grants of
stock options pursuant to the 1987 Employee Stock Option Plan (the "1987 Plan")
during the fiscal year ended December 31, 1994 to the Named Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
--------------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENTAGE OF AT ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME (1)(#) FISCAL 1994 (%) ($/SHARE) DATE 5% ($) 10% ($)
- -------------------------------------- ------------- ----------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, Ph.D. (3) 267,975(2) 17.13% $ 6.75 9/13/04 $ 1,137,564 $ 2,993,811
Joseph M. Limber 52,500 3.36% $ 7.75 6/14/04 $ 255,882 $ 648,454
Richard Mamelok, M.D. (4) 37,500 2.40% $ 6.75 9/13/04 $ 159,189 $ 403,416
Peter V. Leigh (5) 37,500 2.40% $ 7.75 6/14/04 $ 182,773 $ 463,181
Joseph J. Vallner, Ph.D. 30,000 1.92% $ 7.75 6/14/04 $ 146,218 $ 370,545
60,000(2) 3.84% $ 6.75 9/13/04 $ 254,702 $ 645,466
<FN>
- ------------------------
(1) Generally, options granted under the 1987 Plan are exercisable immediately
upon grant; however, the Company retains a right to repurchase shares
subject to such options at the exercise price in the event the employee
becomes no longer employed by the Company. Such right of repurchase lapses
over a designated period of the recipient's service to the Company. In the
event of the sale of the Company or substantially all of the assets or
stock thereof to another entity, or a merger in which the Company is not
the surviving entity, the Company's right of repurchase with respect to all
shares subject to then outstanding options shall expire at least 15 days
prior to the effectiveness of such transaction.
(2) In September 1994, the Company offered all active employees (including
officers) holding options with exercise prices at $9.25 or more, the
opportunity to exchange these options (the "Old Options") for new options
priced at $6.75 per share, the fair market value on the offer date (the
"New Options"). The New Options vest over three years following the offer
date, one half on the first anniversary of the offer date, with the
remaining half vesting ratably over the subsequent two years. However, none
of the New Options are exercisable until the earlier of (i) such date as
the Food and Drug Administration approves the NDA filed by LTI for DOX-SL
or (ii) September 12, 1999. The New Options are also subject to the same
continuous employment and post-employment expiry conditions as the Old
Options issued under the 1987 Option Plan.
(3) Dr. Arvanitidis announced in April 1995 that he will retire as Chief
Executive Officer no later than July 1, 1995. See "Employment Agreements."
(4) In April 1995, Dr. Mamelok stated his intention to resign from the Company.
The Company and Dr. Mamelok are currently negotiating the terms of Dr.
Mamelok's severance.
(5) Mr. Leigh resigned from the Company in April 1995. The Company and Mr.
Leigh are currently negotiating the terms of Mr. Leigh's severance.
</TABLE>
6
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding options exercised by
the Named Officers during fiscal 1994 and the number and value of unexercised
options held at fiscal year-end.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED
HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1994 (#) AT DECEMBER 31, 1994 ($)(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE (2) EXERCISABLE UNEXERCISABLE (2)
- ----------------------------------- ----------- ----------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, Ph.D. (3) -- -- 177,299 267,975 $ 911,719 --
Joseph M. Limber -- -- 30,000 82,500 -- --
Richard D. Mamelok, M.D. (4) -- -- 50,000 62,500 -- --
Peter V. Leigh (5) -- -- 37,500 75,000 -- --
Joseph J. Vallner, Ph.D. -- -- 10,001 99,999 -- --
<FN>
- ------------------------
(1) Based on the per share closing price of the Common Stock on the Nasdaq
National Market on that date ($6.44).
(2) Generally, options granted under the 1987 Plan are exercisable immediately
upon grant; however, the Company retains a right to repurchase shares
subject to such options at the exercise price in the event the employee
becomes no longer employed by the Company. Such right of repurchase lapses
over a designated period of the recipient's service to the Company. The
shares listed in the columns labeled "unexercisable" are shares subject to
the Company's right of purchase.
(3) Dr. Arvanitidis announced in April 1995 that he will retire as Chief
Executive Officer no later than July 1, 1995. See "Employment Agreements."
(4) In April 1995, Dr. Mamelok stated his intention to resign from the Company.
The Company and Dr. Mamelok are currently negotiating the terms of Dr.
Mamelok's severance.
(5) Mr. Leigh resigned from the Company in April 1995. The Company and Mr.
Leigh are currently negotiating the terms of Mr. Leigh's severance.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1994, management compensation issues were reviewed and
approved by the Board of Directors as a whole, with Dr. Arvanitidis abstaining
with respect to the adoption of resolutions pertaining to his compensation. The
Compensation and Plan Committee during fiscal 1994 was composed of Messrs.
Morgan and Shapiro and Dr. Henderson. The function of the Committee is to review
and recommend to the Board management compensation and to administer the
Company's stock option plans. During fiscal 1994, no executive officer of the
Company served on the board of directors or compensation committee of another
company that had an executive officer serve on the Company's Board of Directors
or its Compensation and Plan Committee.
EMPLOYMENT AGREEMENTS
The Company and Dr. Arvanitidis, the Chairman of the Board and Chief
Executive Officer of the Company, are party to a memorandum of agreement dated
as of April 3, 1995 (the "MOA"). The MOA sets forth the essential terms of Dr.
Arvanitidis' retirement as Chief Executive Officer. Under the MOA, the
retirement of Dr. Arvanitidis will be effective upon the earlier of the
appointment of a successor chief executive officer and July 1, 1995. The Company
is obligated to pay Dr. Arvanitidis his annual base salary of $250,000 through
December 31, 1995. After his retirement, Dr. Arvanitidis will provide up to 120
hours of consulting time to the Company. The Company has agreed to pay $671,245
of severance pay to Dr. Arvanitidis which will be paid in a manner to be
determined by him. Upon his retirement, the Company's right of repurchase will
lapse with respect to all shares of Common Stock underlying Dr. Arvanitidis'
stock options and the exercise period of his stock options will be extended
7
<PAGE>
to the fifth anniversary of his retirement. In addition, Dr. Arvanitidis will
receive certain health and life insurance benefits and will be permitted to
retain his Company car. An agreement is currently being prepared to more fully
embody the terms of the MOA.
The Company is party to an employment agreement with Ms. Davenport, a
founder of the Company. The agreement provides for an automatically renewable
one-year term of employment terminable by either party upon 90 days' notice
prior to the end of each term.
NON-EMPLOYEE DIRECTOR COMPENSATION
The Company pays to each non-employee director a consulting fee for
director's services as a director of the Company. During the fiscal year ended
December 31, 1994, the Company paid consulting fees of $10,000 to each of
Messrs. Faris, Morgan and Shapiro in consideration of their services as
directors of the Company and $22,000 to Dr. Thomas and $78,750 to Dr. Henderson
in consideration of their services as directors and consultants to the Company.
In addition, the Company grants non-employee directors stock options under its
1990 Director Stock Option Plan (the "Director Plan").
The Board adopted the Director Plan in January 1990, and the stockholders
approved the Director Plan on May 30, 1990 and an amendment to the Director Plan
on June 16, 1992. An aggregate of 350,000 shares of Common Stock are reserved
for issuance under the Director Plan. As of April 28, 1995, options to purchase
315,000 shares of Common Stock had been granted and were outstanding under the
Director Plan at exercise prices ranging from $1.8125 to $18.6250 per share,
including 10,000 shares granted on the 1995 annual grant date. Under the
Director Plan, each non-employee director of the Company is entitled to receive
an automatic nondiscretionary grant of non-qualified stock options to purchase
25,000 shares of Common Stock on the later of (a) January 31, 1990, or (b) such
director's first election to the Board. Each such eligible director receives, in
each calendar year, an automatic nondiscretionary grant of non-qualified stock
options to purchase an additional 5,000 shares of Common Stock on the third
business day following the release to the public of the Company's annual
financial results; provided, however, that a one-time grant of options to
purchase 12,500 shares rather than 5,000 shares was made retroactive to the 1992
annual grant date for eligible incumbent non-employee directors and will be made
to eligible newly elected non-employee directors on the date of the first annual
grant date following his or her election to the Board in accordance with the
amendment approved by the stockholders in June 1992. No eligible director may
receive stock options to purchase more than an aggregate of 50,000 shares under
the Director Plan, and any non-employee director who is the beneficial owner of
10% or more of the outstanding shares of Common Stock is ineligible to
participate in the Director Plan. The exercise price for shares subject to stock
options granted under the Director Plan is the closing sales price of the
Company's Common Stock, or the closing bid if no sales are reported, as quoted
on the Nasdaq National Market on the grant date. Stock options are exercisable
from and after the date of grant and generally expire ten years form the date of
grant. The Director Plan expires on January 31, 2000, unless terminated earlier
by the Board.
During 1994, the Company's employee director, Dr. Arvanitidis, did not
receive any compensation from the Company for services rendered as a director
beyond what he received for services as an officer of the Company. The cash and
other compensation paid by the Company to Dr. Arvanitidis for services as an
officer of the Company during the fiscal year ended December 31, 1994 is set
forth under the caption "Executive Compensation" above.
8
<PAGE>
Item 12 is hereby amended and restated in its entirety as follows:
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 1995: (i) the name and
address of each person who, to the best knowledge of the Company, beneficially
owns more than five percent of the outstanding Common Stock; (ii) the total
number of shares beneficially owned by such person; and (iii) the percentage of
outstanding Common Stock so owned, to the best knowledge of the Company. The
information relating to ownership of shares is based upon information furnished
to the Company. The Company believes that the beneficial owners of the Common
Stock listed below, based on information supplied by such owners, have sole
investment and voting power with respect to the shares of Common Stock shown as
being beneficially owned by them, except as otherwise set forth in the footnotes
to the table.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES(1) CLASS(1)
- ----------------------------------------------------------------- --------------- -------------
<S> <C> <C>
Amerindo Technology Growth Fund, Inc. 2,316,786(2) 12.1%
780 Third Avenue, Suite 3204
New York, NY 10017
FMR Corporation 979,500 5.1%
82 Devonshire Street
Boston, MA 02109
First Interstate Bancorp 1,609,000 8.4%
633 West 5th Street
Los Angeles, CA 90074
Morgan Investment Corporation 1,500,000(3) 7.8%
902 Market Street
Wilmington, DE 19801
<FN>
- ------------------------
(1) Includes shares subject to warrants or options exercisable within 60 days
after March 31, 1995, as if such shares were outstanding on March 31, 1995,
and assumes that no other person has exercised any outstanding warrants or
options.
(2) Includes 314,286 shares issuable upon exercise of warrants.
(3) Includes 500,000 shares issuable upon exercise of warrants. According to
Schedule 13D filed by J.P. Morgan & Co., Incorporated, J.P. Morgan & Co.
Incorporated, Morgan Investment Corporation and J.P. Morgan Holdings, Inc.
have shared voting and dispositive power with respect to all shares listed
in the table.
</TABLE>
9
<PAGE>
The following table sets forth information as of March 31, 1995 concerning
beneficial ownership of Common Stock by: (i) all directors; (ii) the Chief
Executive Officer and the four Named Officers in 1994 (see "Executive
Compensation" above); and (iii) all directors and executive officers as of March
31, 1995 as a group. Each person listed has sole investment and voting power
with respect to the shares indicated, subject to community property laws where
applicable and except as otherwise set forth in the footnotes to the table.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME SHARES (1) CLASS (1)
- ---------------------------------------------------------------------------- --------------- -----------
<S> <C> <C>
Nicolaos V. Arvanitidis, Ph.D. (2) 474,321(3) 2.5%
Robert G. Faris 50,000 *
I. Craig Henderson, M.D., F.A.C.P. 37,500 *
Richard C.E. Morgan 615,565(4) 3.2%
Robert B. Shapiro 35,000 *
E. Donnall Thomas, M.D. 37,500 *
Joseph M. Limber 42,285 *
Richard D. Mamelok (5) 67,816 *
Joseph J. Vallner, Ph.D. 14,244 *
Peter V. Leigh (6) 49,118 *
All directors and executive officers as a group (15 persons) 1,640,604(7) 8.6%
<FN>
- ------------------------
* Less than 1%
(1) Includes shares subject to warrants or options exercisable within 60 days
after March 31, 1995 and assumes that no other person has exercised any
outstanding warrants or options.
(2) Dr. Arvanitidis announced in April 1995 that he will retire as Chief
Executive Officer no later than July 1, 1995. See "Employment Agreements."
(3) Includes 13,880 shares held for the benefit of Dr. Arvanitidis' children.
(4) Includes 565,565 shares held by Wolfensohn Associates, L.P. Mr. Morgan is a
general partner of the general partner of Wolfensohn Associates, L.P. and
therefore may be deemed to beneficially own such shares. Mr. Morgan
disclaims beneficial ownership of such shares. Mr. Morgan shares voting and
dispositive control of such shares with the other general partners of the
general partner of Wolfensohn Associates, L.P.
(5) In April, 1995, Dr. Mamelok stated his intention to resign from the
Company. The Company and Dr. Mamelok are currently negotiating the terms of
Dr. Mamelok's severance.
(6) Mr. Leigh resigned from the Company in April 1995. The Company and Mr.
Leigh are currently negotiating the terms of Mr. Leigh's severance.
(7) Includes shares which may be deemed to be beneficially owned by Dr.
Arvanitidis and Mr. Morgan. See Notes (3) and (4).
</TABLE>
Item 13 is hereby amended and restated in its entirety as follows:
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 5, 1993, the Company agreed to make an unsecured loan of $60,000
to Joseph Vallner, Senior Vice President for Research and Development, to
facilitate his purchase of a new residence. The loan has a term of five years
and accrues interest at the prime rate, as published by the Wall Street Journal,
plus 1%. On each annual anniversary of the loan take-down date, 20% of the loan
principal will be forgiven by the Company provided that Dr. Vallner remains a
full-time employee of LTI through the anniversary.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following exhibit is hereby added to the list of exhibits in Part IV,
Item 14(a)(3) and as an exhibit to the Form 10-K:
10.3.2* Memorandum of Agreement between the Company and Nick Arvanitidis
dated April 3, 1995.
- ------------------------
* Management compensatory plan or arrangement.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LIPOSOME TECHNOLOGY, INC.
By: ______/s/ Sally A. Davenport______
Sally A. Davenport
SECRETARY
Date: April 28, 1995
11
<PAGE>
EXHIBIT 10.3.2
MEMORANDUM OF AGREEMENT
<TABLE>
<S> <C>
TO: Bob Shapiro
FROM: Nick Arvanitidis
RE: Separation and Consulting Agreement
DATE: April 3, 1995
</TABLE>
As we have discussed today, I have prepared this memorandum to summarize the
following essential terms we have agreed upon as of April 3, 1995 regarding my
desire to resign as Chief Executive Officer of Liposome Technology Inc. and my
commitment to assist the Company during a transition period:
1. RESIGNATION AND INTERIM DUTIES. I will resign effective the earlier of
(a) June 30, 1995; or (b) the date when my successor is hired (the
"Interim Period"). During the Interim Period, my duties shall primarily
focus upon finance activities, finding a successor as CEO, and working
with the management team to achieve an orderly transition.
2. SALARY CONTINUATION AND CONSULTING. My base salary will continue at the
rate of $250,000 per year until December 31, 1995. I will make myself
available for consulting after my resignation at mutually agreed times
for up to 120 hours until December 31, 1995 (the "Consulting Period").
In the event that I am not available for that amount of consulting, my
consulting fees shall be reduced on a pro rata basis; provided that
there shall be no such reduction if I make myself available for all
consulting reasonably requested by the Company (e.g., if the Company
only requests 100 hours of consulting and I provide such services, then
I shall receive the full consulting fee). The Company will reimburse all
documented and reasonable expenses incurred in connection with
performing the requested consulting services. Details as to the manner
and scope of the consulting services will be mutually agreed upon with
the new CEO.
3. SEVERANCE PAYMENTS. Upon my resignation, the Company shall make
available a total severance amount of $671,245, which shall be paid to
me in a manner to be determined solely in my discretion, within seven
(7) business days of the Company's receipt of written payment
instructions from me.
4. ADMINISTRATIVE ALLOWANCE. During the Consulting Period, the Company
will provide me $4,000 per month, up to a maximum total amount of
$25,000 for administrative support.
5. STOCK OPTIONS. The vesting on all of my unvested stock options will be
accelerated to vest upon the resignation date. The exercise period on
all of my stock options will be extended for five years after the
resignation date.
6. AUTOMOBILE. I will be permitted to retain my Company car at no charge.
The Company will continue to pay for maintenance and insurance until
December 31, 1995. The Company will transfer legal title to the
automobile to me at no charge on January 1, 1996.
7. OTHER BENEFITS. For a period of 18 months after the resignation date,
the Company shall pay my health insurance premiums and I will elect
continued coverage under the Company's group health plan pursuant to the
COBRA law. The Company will pay for my life insurance and disability
insurance through July 1, 1996. The Company will make its ordinary
contribution to my 401(k) plan through the resignation date.
8. NONDISPARAGEMENT. We will agree to a mutual nondisparagement provision.
9. PUBLIC STATEMENTS. Mutually agreed press release, announcement within
the Company, and statements to the media.
10. RELEASES. I will release the Company from all claims, known and
unknown, as of the effective date of the agreement. The Company will
release me from all known claims as of the effective date of the
agreement. The Company will indemnify me in accordance with the
certificate of incorporation and the bylaws of the corporation.
12
<PAGE>
11. ARBITRATION. All disputes regarding enforcement, interpretation,
breach, or performance of this agreement shall be resolved by Judicial
Arbitration and Mediation Services/Endispute, Inc., with attorneys fees
awarded to the prevailing party.
12. LEGAL FEES. The Company shall pay my reasonable legal fees and costs
in connection with my separation and the preparation of the agreement.
13. ACCRUED COMPENSATION. Upon resignation, the Company will pay all my
accrued salary, bonus, vacation, and sabbatical.
14. DETAILED AGREEMENT. A more detailed agreement will be prepared as soon
as possible to embody the terms set forth in this memorandum. However,
this memorandum constitutes the agreement of the parties with respect
to the subject matter hereof.
Agreed by:
LIPOSOME TECHNOLOGY INC.
<TABLE>
<CAPTION>
By: /s/Robert G. Faris By: /s/Nick Arvanitidis
<S> <C>
Robert G. Faris Nick Arvanitidis
</TABLE>
13
