<PAGE>
[SEQUUS LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 12, 1995
---------------------
TO THE STOCKHOLDERS OF SEQUUS PHARMACEUTICALS, INC.:
The Annual Meeting of Stockholders of SEQUUS Pharmaceuticals, Inc. ("SEQUUS"
or the "Company") will be held at the offices of the Company, 960 Hamilton
Court, Menlo Park, California 94025, on September 12, 1995 at 9:00 a.m. local
time, for the following purposes:
1. To elect five directors to hold office until the next annual meeting of
stockholders and until their successors are elected.
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 35,000,000
to 45,000,000.
3. To approve amendments to the Company's 1987 Employee Stock Option Plan
to increase the number of shares reserved for issuance from 3,350,000 to
5,000,000 and to impose an annual limit on the number of shares with
respect to which awards may be made to any one participant.
4. To approve an amendment to the Company's 1987 Consultant Stock Option
Plan to increase the number of shares reserved for issuance from 100,000
to 350,000.
5. To approve an amendment to the Company's 1990 Director Stock Option Plan
to increase the number of shares reserved for issuance from 350,000 to
600,000.
6. To approve an amendment to the Company's Employee Stock Purchase Plan to
increase the number of shares reserved for issuance from 150,000 to
250,000.
7. To transact such other business as properly may come before the meeting,
or any adjournments or postponements of the meeting.
The matters expected to be acted upon at the meeting are further described
in detail in the attached proxy statement. Only stockholders of record at the
close of business on July 21, 1995 are entitled to notice of, and to vote at,
the meeting and any adjournments or postponements of the meeting.
By Order of the Board of Directors,
Sally A. Davenport,
SECRETARY
Menlo Park, California
August , 1995
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POST-PAID
ENVELOPE. THANK YOU FOR ACTING PROMPTLY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INFORMATION CONCERNING SOLICITATION AND VOTING............................................................. 1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 3
Proposal 1 ELECTION OF DIRECTORS
Information Concerning the Nominees...................................................................... 5
Board and Committee Meetings............................................................................. 6
Director Compensation.................................................................................... 6
Executive Compensation................................................................................... 7
Report on Repricing of Stock Options..................................................................... 9
Report of the Board of Directors on Executive Compensation............................................... 10
Compensation Committee Interlocks and Insider Participation.............................................. 13
Employment and Severance Agreements...................................................................... 13
Certain Transactions..................................................................................... 14
Compliance With Section 16(a) of the Securities Exchange Act of 1934..................................... 14
Stock Price Performance Graph............................................................................ 14
Proposal 2 ADOPTION OF CERTIFICATE OF AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
Description of the Proposal.............................................................................. 15
Stockholder Vote......................................................................................... 15
Proposal 3 ADOPTION OF AMENDMENTS TO THE 1987 EMPLOYEE STOCK OPTION PLAN.............................. 15
Description of the Proposal.............................................................................. 16
Plan Description......................................................................................... 17
Federal Income Tax Consequences.......................................................................... 18
Stockholder Vote......................................................................................... 18
Proposal 4 ADOPTION OF AMENDMENT TO THE 1987 CONSULTANT STOCK OPTION PLAN............................. 18
Description of the Proposal.............................................................................. 18
Plan Description......................................................................................... 18
Federal Income Tax Consequences.......................................................................... 20
Stockholder Vote......................................................................................... 20
Proposal 5 ADOPTION OF AMENDMENT TO THE 1990 DIRECTOR STOCK OPTION PLAN............................... 20
Description of the Proposal.............................................................................. 20
Plan Description......................................................................................... 20
Federal Income Tax Consequences.......................................................................... 22
Stockholder Vote......................................................................................... 22
Proposal 6 ADOPTION OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.................................. 22
Description of the Proposal.............................................................................. 22
Plan Description......................................................................................... 23
Federal Income Tax Consequences.......................................................................... 24
Stockholder Vote......................................................................................... 24
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................................................... 24
Incentive Stock Options.................................................................................. 24
Nonqualified Stock Options............................................................................... 25
Purchase Plan............................................................................................ 26
Special Federal Income Tax Consideration Due to Short Swing Profit Rule.................................. 26
INDEPENDENT AUDITORS....................................................................................... 26
OTHER INFORMATION.......................................................................................... 26
STOCKHOLDER PROPOSALS...................................................................................... 27
OTHER MATTERS.............................................................................................. 27
</TABLE>
i
<PAGE>
SEQUUS PHARMACEUTICALS, INC.
960 HAMILTON COURT
MENLO PARK, CALIFORNIA 94025
(415) 323-9011
------------------------
PROXY STATEMENT
---------------------
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of SEQUUS Pharmaceuticals, Inc., a Delaware corporation ("SEQUUS" or
the "Company"). The proxy is solicited for use at the annual meeting of
stockholders (the "Annual Meeting") to be held at the principal executive
offices of the Company, 960 Hamilton Court, Menlo Park, California 94025, on
September 12, 1995 at 9:00 a.m., local time, and at any and all adjournments or
postponements thereof. The approximate date on which this proxy statement and
the accompanying notice and proxy are being mailed to stockholders is August ,
1995.
INFORMATION CONCERNING SOLICITATION AND VOTING
Only stockholders of record at the close of business on July 21, 1995 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
or postponements thereof. At the close of business on that date, the Company had
outstanding 21,518,519 shares of Common Stock, par value $.0001 per share
("Common Stock"), and 480,000 shares of Series A Convertible Reset Preferred
Stock, par value $0.01 per share ("Convertible Preferred Stock"). On all
proposals to be submitted to the stockholders at the Annual Meeting, the holders
of the Common Stock and Convertible Preferred Stock will vote together as a
single class. Holders of Common Stock are entitled to one vote for each share of
Common Stock held. Holders of Convertible Preferred Stock are entitled to 3.367
votes for each share of Convertible Preferred Stock held. In order to constitute
a quorum for the conduct of business at the Annual Meeting, a majority of the
outstanding shares of Common Stock and Convertible Preferred Stock (measured by
the number of votes that may be cast by the holders of such shares) entitled to
vote at the Annual Meeting must be represented at the Annual Meeting.
All shares represented by each properly executed, unrevoked proxy received
in time for the Annual Meeting will be voted in the manner specified therein. If
the manner of voting is not specified in an executed proxy received by the
Company, the proxy will be voted FOR the election of the five nominees listed in
the proxy for election to the Board and FOR approval of the other proposals
described in this proxy statement.
Shares represented by proxies that reflect abstentions or broker non-votes
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Directors will be elected by a favorable
vote of a plurality of the shares of voting stock present and entitled to vote,
in person or by proxy, at the Annual Meeting. Accordingly, abstentions or broker
non-votes as to the election of directors will not affect the election of the
candidates receiving the plurality of votes. All other proposals to come before
the Annual Meeting require the approval of a majority of the votes that could be
cast by stockholders who are present or represented at the Annual Meeting.
Abstentions as to a particular proposal will have the same effect as votes
against such proposal. Broker non-votes, however, will be treated as unvoted for
purposes of determining approval of such proposal and will not be counted as
votes for or against such proposal.
Any stockholder giving a proxy in the form accompanying this proxy statement
has the power to revoke the proxy prior to its exercise. A proxy can be revoked
by an instrument of revocation delivered prior to the Annual Meeting to the
Secretary of the Company, by presenting at the Annual Meeting a duly executed
proxy bearing a later date or time than the date or time of the proxy being
revoked, or at the Annual Meeting if the stockholder is present and elects to
vote in person. Mere attendance at the Annual Meeting will not serve to revoke a
proxy.
1
<PAGE>
The expense of soliciting proxies will be borne by the Company. The
solicitation will be by mail. Expenses include reimbursement paid to brokerage
firms and others for their expenses incurred in forwarding solicitation material
regarding the Annual Meeting to beneficial owners of the Company's stock.
Further solicitation of proxies may be made by telephone or oral communication
with stockholders by directors, officers and other employees of the Company who
will not receive additional compensation for the solicitation and by Chemical
Mellon Shareholder Services, whose services to the Company will include the
solicitation of proxies from brokers, banks and nominees for which it will
receive payment of $5,000 plus out-of-pocket expenses.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the Company's
outstanding shares of Common Stock and Convertible Preferred Stock beneficially
owned as of June 30, 1995 by: (i) each person who, to the best knowledge of the
Company, beneficially owns more than five percent of the outstanding Common
Stock or Convertible Preferred Stock; (ii) all directors; (iii) all officers
named in the Summary Compensation Table below; and (iv) all directors and
officers as a group. 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 and Convertible Preferred Stock listed
below, based on information supplied by such owners, have sole investment and
voting power with respect to the shares of Common Stock and Convertible
Preferred Stock shown as being beneficially owned by them, except as otherwise
set forth in the footnotes to the table.
<TABLE>
<CAPTION>
CONVERTIBLE
COMMON STOCK PREFERRED STOCK
--------------------------------- ----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES (1) CLASS (1) SHARES (1) CLASS (1)
- ---------------------------------------------------------------------- --------------- ---------- --------- ----------
<S> <C> <C> <C> <C>
2,316,786(2) 10.8% -- --
Amerindo Technology Growth Fund, Inc. ................................
780 Third Avenue, Suite 3204
New York, NY 10017
1,609,100 7.5 -- --
First Interstate Bancorp .............................................
633 West 5th Street
Los Angeles, CA 90074
1,500,000(3) 7.0 -- --
Morgan Investment Corporation ........................................
902 Market Street
Wilmington, DE 19801
-- -- 100,000 20.8%
BT Holdings ..........................................................
130 Liberty Street
New York, NY 10006
-- -- 48,000 10.0
SMALLCAP World Fund, Inc. ............................................
333 S. Hope Street
Los Angeles, CA 90071
-- -- 44,000 9.2
H&Q Healthcare Investors .............................................
50 Rowes Wharf
Boston, MA 02110
-- -- 36,000 7.5
H&Q Science Investors ................................................
50 Rowes Wharf
Boston, MA 02110
-- -- 30,800 6.4
West Highland Partners, L.P. .........................................
300 Drakes Landing Road
Greenbrae, CA 94957
-- -- 29,500 6.1
Oracle Partners, L.P. ................................................
135 East 57th Street
New York, NY 10022
738,892(5) 3.4 -- --
Nicolaos V. Arvanitidis, Ph.D. (4)....................................
55,691 * -- --
Robert G. Faris.......................................................
142,500 * -- --
I. Craig Henderson, M.D., F.A.C.P.....................................
643,815(6) 2.9 -- --
Richard C.E. Morgan...................................................
36,100 * -- --
Robert B. Shapiro (7).................................................
75,000 * -- --
L. Scott Minick.......................................................
42,500 * -- --
E. Donnall Thomas, M.D................................................
62,500 * -- --
Joseph M. Limber......................................................
68,750 * -- --
Richard D. Mamelok, M.D. (8)..........................................
23,336 * -- --
Joseph J. Vallner, Ph.D...............................................
62,501 * -- --
Peter V. Leigh (9)....................................................
1,951,585(5)(6) 8.7 -- --
All directors and executive officers as a group (11 persons)..........
<FN>
- ------------------------------
* Less than 1%
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
(1) Includes shares subject to warrants or options exercisable within 60 days
after August 29, 1995, as if such shares were outstanding on August 29,
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.
(4) Dr. Arvanitidis retired as Chairman of the Board and Chief Executive
Officer of the Company in June 1995.
(5) Includes 13,880 shares held for the benefit of Dr. Arvanitidis' children.
(6) 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.
(7) Mr. Shapiro is currently a director of the Company, but is not standing for
reelection at the Annual Meeting.
(8) In April 1995, Dr. Mamelok stated his intention to resign from the Company.
His resignation will not be effective until his successor is appointed.
(9) Mr. Leigh resigned as an officer of the Company in April 1995.
</TABLE>
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's bylaws provide for a Board of Directors consisting of that
number of directors as is authorized by the Board. Effective as of the date of
the Annual Meeting, the size of the Board will be set at five. The present term
of office of all directors will expire at the Annual Meeting.
Five directors are to be elected at the Annual Meeting to serve until the
next annual meeting of stockholders and until their respective successors have
been elected. The nominees securing the highest number of votes, up to the
number of directors to be elected, will be elected as directors. It is intended
that proxies received will be voted FOR the election of the nominees named below
unless marked to the contrary. In the event any such person is unable or
unwilling to serve as a director, proxies may be voted for substitute nominees
designated by the present Board. The Board has no reason to believe that any of
the persons named below will be unable or unwilling to serve as a director if
elected.
All five nominees are currently serving as directors of the Company. Four of
the Company's five nominees for election to the Board were elected to their
present term by the stockholders of the Company. Mr. Minick was elected to the
Board of Directors by the existing Board members in July 1995.
INFORMATION CONCERNING THE NOMINEES
The following table indicates the name and age of each nominee as of the
date of this proxy statement, all positions with the Company held by the
nominee, and the year during which the nominee first was elected or appointed a
director.
<TABLE>
<CAPTION>
DIRECTOR
CONTINUOUSLY
NAME AGE POSITION WITH SEQUUS SINCE
- ----------------------------------------- --- ----------------------------------------- ---------------
<S> <C> <C> <C>
I. Craig Henderson, M.D., F.A.C.P. 53 Chairman of the Board and Chief Executive 1993
Officer
L. Scott Minick 43 President, Chief Operating Officer and 1995
Director
Robert G. Faris (1)(2) 56 Director 1985
Richard C.E. Morgan (1)(2) 50 Director 1990
E. Donnall Thomas, M.D. 74 Director 1993
<FN>
- ------------------------
(1) Member of the Compensation and Plan Committee of the Board.
(2) Member of the Audit Committee of the Board.
</TABLE>
I. CRAIG HENDERSON, M.D., F.A.C.P. has been Chief Executive Officer of
SEQUUS since June 1995 and Chairman of the Board since July 1995 and has served
as a director of the Company since July 1993. Since July 1995, Dr. Henderson has
been an Adjunct Professor of Medicine at University of California, San
Francisco. From 1992 until July 1995, he served as 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.
L. SCOTT MINICK has been President and Chief Operating Officer of the
Company since June 1995 and a director of the Company since July 1995. From 1994
to 1995, he served as a director, Interim President and Chief Executive Officer
of Oncotherapeutics, Inc. Before that, Mr. Minick was a director, President and
Chief Executive Officer of LXR Biotechnology, Inc. From 1981 to 1993, he was an
executive of Baxter Healthcare, Inc., most recently as President of the Pacific
Rim/Latin America Division of Baxter Diagnostics.
5
<PAGE>
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.
RICHARD C.E. MORGAN has served as a director of the Company since May 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.
E. DONNALL THOMAS, M.D. has served as a director of SEQUUS since July 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.
The Company is not aware of any family relationships among any of the
foregoing directors and its executive officers.
BOARD AND COMMITTEE MEETINGS
The Board met four times during 1994. No incumbent director participated in
fewer than 75% of the total number of meetings of the Board and all committees
of the Board on which he served that were held during the period he served on
the Board or such committees.
The Compensation and Plan Committee did not meet during 1994. The function
of the Compensation and Plan Committee is to review and to recommend to the
Board management compensation and to administer the Company's stock option
plans. During 1994, the Board as a whole reviewed and approved management
compensation issues and administered the Company's stock option plans. Dr.
Nicolaos V. Arvanitidis, who was Chief Executive Officer and Chairman of the
Board until his retirement in June 1995, abstained with respect to the adoption
of resolutions pertaining to his compensation and stock option grants. See
"Report of Board of Directors on Executive Compensation" below.
The Audit Committee met twice during 1994. The function of the Audit
Committee is to recommend to the Board the firm of independent accountants to
serve the Company, to review the scope, fees and results of the audit by the
independent accountants and to review the internal control procedures of the
Company.
The Board does not have a nominating committee.
DIRECTOR COMPENSATION
The Company pays each non-employee director a consulting fee for serving 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 "1990 Director Plan"). Under the 1990 Director Plan, each non-employee
director of the Company is entitled to receive an automatic nondiscretionary
grant of nonqualified stock options to purchase 25,000 shares of Common Stock on
such director's first election to the Board. Each eligible director receives, in
each calendar year, an
6
<PAGE>
automatic nondiscretionary grant of nonqualified 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 in 1992 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. No eligible
director may receive stock options to purchase more than an aggregate of 50,000
shares under the 1990 Director Plan. Messrs. Faris, Morgan and Shapiro have each
received options to purchase 50,000 shares of Common Stock under the 1990
Director Plan. The exercise price for shares subject to stock options granted
under the 1990 Director Plan is equal to the fair market value on the grant
date. Stock options are exercisable immediately and generally expire ten years
from the date of grant. See "Proposal 5 -- Adoption of Amendment to the 1990
Director Stock Option Plan."
During 1994, Dr. Arvanitidis, who served as Chairman of the Board and Chief
Executive Officer until his retirement in June 1995, 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" below.
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation for the
fiscal years ended December 31, 1992, 1993 and 1994 received by the Company's
Chief Executive Officer and the four other most highly paid executive officers
who served as executive officers at fiscal year end (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION ----------------------------------------------- AWARDS
AS OF OTHER ANNUAL ------------- ALL OTHER
DECEMBER 31, 1994 YEAR SALARY($) BONUS($)(1) COMPENSATION($) OPTIONS(#) COMPENSATION($)(2)
- ----------------------------- --------- ----------- ----------- --------------------- ------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, 1994 250,008 125,000 0 267,975(3) 3,750
Ph.D. 1993 240,504 93,753 0 89,325 4,497
Chairman of the Board 1992 219,420 142,065 0 0 2,182
and Chief Executive Officer
(4)(5)
Joseph M. Limber 1994 128,400 37,615 0 52,500 3,744
Executive Vice President 1993 121,637 20,865 0 0 3,121
1992 87,907 7,000 0 60,000 0
Richard Mamelok, M.D. 1994 184,056 47,866 0 37,500 3,750
Vice President and Medical 1993 177,624 29,909 0 0 4,451
Director (6) 1992 56,960 3,584 0 75,000 0
Peter V. Leigh 1994 135,192 21,416 0 37,500 3,750
Vice President and Chief 1993 132,600 23,139 0 0 3,315
Financial Officer (7) 1992 70,421 8,126 0 75,000 0
Joseph J. Vallner, Ph.D. 1994 142,392 39,456 0 90,000(3) 2,136
Senior Vice President for 1993 134,196 21,968 0 20,000 1,992
Research and Development 1992 113,000 12,600 0 60,000 0
<FN>
- ------------------------------
(1) The bonus amounts earned in 1993 were paid in February and March 1994. The
bonus amounts earned in 1994 were paid in April 1995.
(2) 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.
(3) The 267,975 options granted to Dr. Arvanitidis and 60,000 of the 90,000
options granted to Dr. Vallner represent options repriced in September
1994. See "Report on Repricing of Stock Options" below.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
(4) 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 $38,115 paid in December 1992.
(5) Dr. Arvanitidis retired as Chairman of the Board and Chief Executive
Officer of the Company in June 1995.
(6) In April 1995, Dr. Mamelok stated his intention to resign from the Company.
His resignation will not be effective until his successor is appointed.
(7) Mr. Leigh resigned as an officer of the Company in April 1995.
</TABLE>
The following table sets forth further information regarding the grants of
stock options during the fiscal year ended December 31, 1994 to the Named
Officers. Since inception, the Company has not granted any stock appreciation
rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
----------------------------------------------------- POTENTIAL REALIZABLE
PERCENTAGE OF VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATES OF STOCK
GRANTED TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN EXERCISE OR OPTION TERM(2)
GRANTED FISCAL 1994 BASE PRICE EXPIRATION ----------------------
NAME (#)(1) (%) ($/SHARE) DATE 5%($) 10%($)
- --------------------------------------------- ---------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, Ph.D. (4) 267,975(3) 17.13% $6.75 6/26/00 $ 499,747 $1,104,310
Joseph M. Limber 52,500 3.36 7.75 6/14/04 255,882 648,454
Richard Mamelok, M.D. (5) 37,500 2.40 6.75 10/21/96 25,945 53,156
Peter V. Leigh (6) 37,500 2.40 7.75 6/16/96 29,789 61,031
Joseph J. Vallner, Ph.D. 30,000 1.92 7.75 6/14/04 146,218 370,545
60,000(3) 3.84 6.75 9/13/04 254,702 645,466
<FN>
- ------------------------------
(1) Except as noted in footnote 3, options included in this table 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 (generally, four years with respect to initial grants and three
years with respect to subsequent grants). 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) Potential realizable value is based on the assumption that the market price
of the stock appreciates at the stated rate, compounded annually, from the
date of grant until the end of the option term. These values are calculated
based on requirements promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock price
appreciation.
(3) These represent options that were repriced in September 1994. The repriced
options vest over three years following the offer date, one third on the
first anniversary of the repricing date, with the remaining two-thirds
vesting ratably on a quarterly basis over the subsequent two years.
However, none of the repriced options is exercisable until the earlier of
(i) such date as the U.S. Food and Drug Administration ("FDA") approves the
New Drug Application ("NDA") filed by the Company for
DOXIL-Registered Trademark- (pegylated liposomal doxorubicin HCI) Injection
or (ii) September 12, 1999, and only if the employee has been employed
continuously by the Company at the time of such satisfaction of either such
requirement. See "Report on Repricing of Stock Options" below.
(4) Dr. Arvanitidis retired as Chairman of the Board and Chief Executive
Officer of the Company in June 1995. The options in this table originally
had an expiration date of September 13, 2004. As part of Dr. Arvanitidis'
severance arrangement, he has until June 26, 2000 to exercise these
options. See "Employment and Severance Agreements" below.
(5) In April 1995, Dr. Mamelok stated his intention to resign from the Company.
His resignation will not be effective until his successor is appointed. The
options in this table originally had an expiration date of September 13,
2004. As part of Dr. Mamelok's severance arrangement, he has until October
16, 1996 to exercise these options. See "Employment and Severance
Agreements" below.
(6) Mr. Leigh resigned as an officer of the Company in April 1995. The options
in this table originally had an expiration date of June 14, 2004. As part
of Mr. Leigh's severance arrangement, he has until June 16, 1996 to
exercise these options. See "Employment and Severance Agreements" below.
</TABLE>
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.
8
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES IN LAST FISCAL
YEAR
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS HELD AT FISCAL MONEY OPTIONS AT FISCAL YEAR
YEAR END(#) END($)(1)
-------------------------- --------------------------------
SHARES ACQUIRED VALUE UNEXERCISABLE UNEXERCISABLE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE (2) EXERCISABLE (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 difference between the exercise price and the per share
closing price of the Common Stock on the Nasdaq National Market on December
30, 1994 ($6.44).
(2) Generally, options granted to employees 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 repurchase. Options repriced in September 1994 are
subject to special restrictions on exercisability. See "Report on Repricing
of Stock Options" below.
(3) Dr. Arvanitidis retired as Chairman of the Board and Chief Executive
Officer of the Company in June 1995.
(4) In April 1995, Dr. Mamelok stated his intention to resign from the Company.
His resignation will not be effective until his successor is appointed.
(5) Mr. Leigh resigned as an officer of the Company in April 1995.
</TABLE>
REPORT ON REPRICING OF STOCK OPTIONS
In September 1994, the Board, with Dr. Arvanitidis abstaining, adopted a
"stock option swap" program, which the Board believed was necessary and prudent
in order to retain the long-term incentive associated with potential stock price
appreciation and thus value of stock options to all employees, including
executive officers of the Company.
The Company offered all employees, including executive officers, who held
options with an exercise price of $9.25 or greater the opportunity to exchange
those options for new options with an exercise price of $6.75 (the fair market
value on the date of repricing). Repriced options will "vest" one-third on
September 13, 1995 and the remaining two-thirds ratably on a quarterly basis
over the following two years, all based on continued employment by the Company
on such "vesting" date (where "vesting" is determined by the lapse of the
Company's right of repurchase). Notwithstanding the vesting requirement, no
repriced option may be exercised until the earlier of (i) such date as the FDA
approves the DOXIL NDA or (ii) September 12, 1999, as based on continued
employment by the Company at the time of satisfaction of either such
requirement.
9
<PAGE>
Options repriced from May 19, 1987, the date of the Company's initial public
offering, through the period ended December 31, 1994 for each of the Named
Officers and other executive officers employed by the Company on December 31,
1994 are listed in the following table:
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SECURITIES PRICE AT
UNDERLYING MARKET PRICE OF TIME OF LENGTH OF
OPTIONS STOCK AT TIME REPRICING ORIGINAL OPTION
REPRICED OR OF REPRICING OR OR NEW TERM REMAINING AT
AMENDED AMENDMENT AMENDMENT EXERCISE DATE OF REPRICING
NAME AND POSITION DATE (#) ($) ($) PRICE($) OR AMENDMENT
- --------------------------------- --------- ----------- --------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, Ph.D. 9/13/94 89,325 $ 6.75 $ 12.50 $ 6.75 9.23 years
Chairman of the Board and Chief 9/13/94 178,650 6.75 18.875 6.75 7.25 years
Executive Officer(1)
Joseph J. Vallner, Ph.D 9/13/94 60,000 6.75 12.00 6.75 7.57 years
Senior Vice President, Research
and Development
Sally A. Davenport 9/13/94 8,838 6.75 12.50 6.75 9.23 years
Secretary 9/13/94 17,675 6.75 18.875 6.75 7.25 years
Carl F. Grove 9/13/94 18,529 6.75 6.75 9.23 years
Vice President for Regulatory 9/13/94 35,618 6.75 12.50 6.75 7.25 years
Affairs 1/9/89 5,000 2.50 18.875 3.00 8.25 years
4.25
Anthony A. Huang, Ph.D. 9/13/94 10,581 6.75 12.50 6.75 9.23 years
Vice President of Product 9/13/94 15,873 6.75 9.25 6.75 7.25 years
Development
Francis J. Martin, Ph.D 9/13/94 23,121 6.75 12.50 6.75 9.23 years
Vice President and Chief 9/13/94 46,243 6.75 18.875 6.75 7.25 years
Scientist 1/9/89 5,000 2.50 4.25 3.00 8.25 years
Donald J. Stewart 9/13/94 13,640 6.75 12.50 6.75 9.23 years
Vice President, Finance 9/13/94 27,280 6.75 18.875 6.75 7.25 years
1/9/89 5,000 2.50 4.25 3.00 8.25 years
Peter K. Working, Ph.D. 9/13/94 33,750 6.75 9.25 6.75 7.32 years
Vice President of Preclinical
Research
<FN>
- ------------------------------
(1) Dr. Arvanitidis resigned as Chairman of the Board and Chief Executive
Officer in June 1995.
</TABLE>
Board of Directors (1)
-- Robert G. Faris
-- I. Craig Henderson, M.D.,
F.A.C.P.
-- Richard C.E. Morgan
-- Robert B. Shapiro
-- E. Donnall Thomas, M.D.
- ------------------------
(1) Mr. Shapiro is not standing for reelection at the Annual Meeting. Mr. Minick
was elected to the Board in July 1995, subsequent to the repricing of the
options.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
During fiscal 1994, management compensation issues were reviewed by the
Board as a whole, with Dr. Arvanitidis abstaining with respect to the adoption
of resolutions pertaining to his compensation. The Board has a Compensation and
Plan Committee, the function of which is to review and recommend to the Board
management compensation and to administer the Company's stock option plans. The
Committee did not meet during 1994.
10
<PAGE>
The Company believes that its ability to achieve the objectives of obtaining
regulatory approval for and commercializing its leading pharmaceutical products,
AMPHOTEC-TM- (amphotericin B colloidal dispersion) Injection and DOXIL, and
becoming profitable, is dependent in large part upon the ability to recruit and
retain qualified executives with substantive experience in the development,
regulatory approval, manufacture, marketing and sale of new pharmaceutical
products. The Company is competing for experienced executives within the San
Francisco Bay Area, where an estimated 85 to 100
biotechnology/biomedical/pharmaceutical companies are located. Due to the high
cost of housing relative to other parts of the country, and the correspondingly
substantial relocation expenses for out-of-state executives, the Company's
recruiting efforts have been focused on experienced personnel who are already
located in the Bay Area.
In 1988, the Board adopted a policy designed to control the base salaries of
its executives while providing sufficient incentives to attract and retain
qualified personnel. In accordance with this policy, the Company strives to set
executive base salaries by considering relative contribution of the position to
achievement of the Company's goals and objectives, "market value" as defined by
salaries of executives within the Bay Area with comparable experience in similar
positions, and job-related responsibilities with respect to size of budget,
number of subordinates and scope of activities. In general, the Company strives
to set base salaries of new executives at market, which is defined as the
average base salary of incumbents in comparable positions, and uses its 1987
Employee Stock Option Plan and its Executive Bonus Plan to facilitate recruiting
and to retain qualified executives by providing long-term incentives. Typically,
new executives are granted stock options as part of their initial employment
package.
During 1993, the Internal Revenue Code of 1986 was amended to include a
provision that denies a deduction to publicly held corporation for compensation
paid to "covered employees" (defined as the chief executive officer and the next
four most highly compensated officers as of the end of the taxable year) to the
extent that compensation paid to any "covered employee" exceeds $1 million in
any taxable year of the corporation beginning after 1993. Certain
"performance-based" compensation qualifies for an exemption from the limits on
deductions. It is the Company's policy to qualify compensation paid to its top
executives for deductibility in order to maximize the Company's income tax
deductions, to the extent that so qualifying the compensation is not
inconsistent with the Company's fundamental compensation policies. Based upon
the Internal Revenue Service's proposed regulations and compensation paid to the
Company's "covered employees" for the 1994 tax year, all compensation paid by
the Company in 1994 to such covered employees was deductible to the Company.
STOCK OPTIONS
The Company has determined that stock options are an important incentive for
attracting and retaining qualified personnel, including executive-level
personnel. Accordingly, all new employees may receive an initial stock option
grant upon employment by the Company. Each employee, including executive-level
employees, may receive a subsequent stock option grant two years following the
initial grant at the discretion of the Board. In 1994, three executive officers
received such stock options following stock options granted to them in 1992.
Generally, each option is immediately exercisable, but the shares issued upon
option exercise are subject to a right of repurchase by the Company which
generally expires over a period of four years with respect to initial grants and
three years with respect to subsequent grants. In 1994, the Company offered all
employees, including executive officers, the ability to exchange certain options
for options with a lower exercise price. See "Report on Repricing of Stock
Options" above.
CORPORATE PERFORMANCE CRITERIA
The Company presents to the Board a set of corporate goals for a succeeding
period, generally ranging from 12 to 18 months, as part of the annual plan and
budget process. These goals establish benchmarks for assessing overall corporate
performance. Given the dynamic nature of the new drug development process,
progress toward the achievement of corporate goals is reviewed with the Board
periodically together with a description of any change in circumstances that
management believes
11
<PAGE>
may warrant an update to or revisions of these goals. The principal corporate
goals for 1994 were related to the following: support of launch of AMPHOTEC in
the United Kingdom; filing of additional Marketing Approval Application ("MAA")
dossiers for AMPHOTEC throughout Western and Eastern Europe and in selected
South American countries; filing of the NDA with the FDA for DOXIL; filing of
MAA dossiers for DOXIL throughout the European Union countries; preparing for a
successful meeting with the FDA's Oncologic Drugs Advisory Committee ("ODAC") to
review the DOXIL NDA (subsequently, in February 1995, the Company received
ODAC's recommendation to the FDA for approval of DOXIL under accelerated
approval regulations); initiating additional dose-ranging clinical studies of
DOXIL in various solid tumors; and, identifying new product opportunities
utilizing the Company's proprietary platform long-circulating
STEALTH-Registered Trademark- liposome technology.
EXECUTIVE BONUS PLAN
Under the Executive Bonus Plan, each of the Chief Executive Officer,
President, Vice Presidents, Corporate Secretary and Treasurer of the Company is
eligible to receive a cash bonus ranging from 50% to 150% of the amounts set
forth below based on the Board's assessment of overall corporate performance.
The bonus amounts based upon corporate performance are as follows: Chief
Executive Officer -- 50% of base salary; President -- 50% of base salary; Vice
Presidents -- 15% of base salary; and Corporate Secretary and Treasurer -- 10%
of base salary. In April 1995, the Board awarded 100% of the bonus amounts set
forth above to eligible executive officers based on the Board's assessment of
corporate performance during fiscal 1994. In addition to the bonus awards based
upon corporate performance, each of the Vice Presidents, the Corporate Secretary
and the Treasurer is eligible to receive up to 10% of base salary based on
individual performance. For 1994, each eligible executive received a bonus of
10% of base salary, which was paid in April 1995.
PERIODIC SALARY ADJUSTMENTS
Generally, executive salaries are reviewed annually and salary adjustments
may be awarded on the basis of increased responsibilities of individual
executives over a period of time or the outstanding performance of individual
executives as exhibited by consistently high standards in the execution of
established duties, as described by the Chief Executive Officer to the Board.
Company performance as a whole is a major consideration in the Board's decision
to award any salary increases and, to a lesser extent, the Board also considers
general economic conditions and trends. In 1994, the base annual salaries of
eight Company executives were increased by 5.6%. These increases, which occurred
in April 1995 and were retroactive to July 1994, were considered and approved
solely by members of the Board of Directors who are not employees of the
Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
Generally, the non-employee members of the Board meet with the Chief
Executive Officer to discuss the performance of the other executive officers and
of the Company as a whole. The members of the Board then meet in the absence of
the Chief Executive Officer and other employee members of the Board, if any, to
discuss the performance of the Chief Executive Officer and the Company. Dr.
Arvanitidis received a bonus for 1994 of $125,000, or 50% of his base annual
salary, in accordance with the Executive Bonus Plan described above, which was
paid in April 1995.
SUMMARY
The Board believes that it has established a program for compensation of the
Company's executives which is fair and which aligns the financial incentives for
executives with the interests of the Company's stockholders.
12
<PAGE>
Board of Directors (1)
-- Nicolaos V. Arvanitidis, Ph.D.
-- Robert G. Faris
-- I. Craig Henderson, M.D.,
F.A.C.P.
-- Richard C.E. Morgan
-- Robert B. Shapiro
-- E. Donnall Thomas, M.D.
- ------------------------
(1) Dr. Arvanitidis retired from the Board in June 1995 and Mr. Shapiro is not
standing for reelection at the Annual Meeting. Both were members of the
Board when the compensation decisions described above were made. Mr. Minick
was elected to the Board in July 1995, subsequent to the compensation
decisions described above.
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 AND SEVERANCE AGREEMENTS
The Company is party to employment agreements with Dr. Henderson and Mr.
Minick and Ms. Davenport, a founder of the Company. The agreements with Dr.
Henderson and Mr. Minick each have a ten-year term and provide that if such
officer is terminated either without cause or upon a change in control of the
Company, he will receive compensation equal to 18 months of his then current
base salary if the termination occurs prior to June 27, 1996 or 12 months of his
then current base salary if the termination occurs thereafter. Dr. Henderson's
current base salary is $275,000. Mr. Minick's current base salary is $225,000.
The agreement with Ms. Davenport 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.
The Company and Dr. Arvanitidis are party to a memorandum of agreement dated
as of April 3, 1995, as amended, (the "MOA"). Dr. Arvanitidis retired from
serving as Chairman of the Board and Chief Executive Officer on June 26, 1995.
The MOA sets forth the essential terms of Dr. Arvanitidis' retirement. Under the
MOA, the Company is obligated to pay Dr. Arvanitidis his annual base salary of
$250,000 through December 31, 1995 and a bonus of $125,000. After his
retirement, Dr. Arvanitidis will provide up to 120 hours of consulting time to
the Company. The Company has agreed to pay an additional $671,245 of severance
pay to Dr. Arvanitidis. The Company's right of repurchase lapsed with respect to
all shares of Common Stock underlying Dr. Arvanitidis' stock options upon his
retirement and the exercise period of all but 102,392 of his stock options was
extended 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.
The Company also entered into severance arrangements with Mr. Leigh and Dr.
Mamelok relating to their resignations from the Company. The Company has agreed
to pay Mr. Leigh severance pay of $71,388, which is equal to six months of base
salary. The exercise period of Mr. Leigh's options has been extended until June
16, 1996, and the Company has agreed to accelerate the vesting of 62,500 shares
underlying Mr. Leigh's options. Vesting on the remaining shares will be
accelerated in the event of a sale of all or substantially all of the Company's
assets or stock, or a merger in which SEQUUS is not the surviving company, which
occurs before June 16, 1996. Dr. Mamelok's relationship with the Company will
end at the date determined by his successor. The Company has agreed to
13
<PAGE>
pay Dr. Mamelok $47,796 upon his termination, which is equal to three months of
base salary. Dr. Mamelok's stock options will continue to vest until October 21,
1995, and the exercise period for the options has been extended until October
21, 1996.
CERTAIN 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 Mr. Vallner remains a
full-time employee of the Company through the anniversary.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent 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 review of the copies of such
reports furnished to or maintained by the Company and written representations
that no other reports were required, during the fiscal year ended December 31,
1994, all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent 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.
STOCK PRICE PERFORMANCE GRAPH
The following line graph illustrates a five-year comparison of the
cumulative total stockholder return on the Common Stock against the cumulative
total return of the Nasdaq Stock Market (U.S.) Index and the Nasdaq
Pharmaceutical Stock Index, assuming $100 invested in the Common Stock and the
two indexes on December 31, 1989.
CUMULATIVE TOTAL STOCKHOLDER RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SEQUUS PHARMACEUTICALS, INC. (SEQU) NASDAQ STOCK MARKET (US) NASDAQ PHARMACEUTICAL STOCKS
<S> <C> <C> <C>
Dec-89 100 100 100
Dec-90 180 85 120
Dec-91 1480 136 319
Dec-92 800 159 266
Dec-93 720 181 212
Dec-94 516 177 178
</TABLE>
14
<PAGE>
PROPOSAL 2
ADOPTION OF CERTIFICATE OF AMENDMENT OF
THE COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors unanimously adopted, subject to stockholder approval,
a Certificate of Amendment of the Company's Certificate of Incorporation (the
"Certificate of Amendment") increasing the number of authorized shares of Common
Stock from 35,000,000 to 45,000,000. The stockholders are asked to approve the
adoption of the Certificate of Amendment, which is attached as Exhibit I to this
proxy statement.
DESCRIPTION OF THE PROPOSAL
As of June 30, 1995, the Company had 21,379,591 shares of Common Stock
outstanding and approximately 8,278,694 shares of Common Stock reserved for
issuance under the Company's stock purchase plan, stock option plans and
outstanding warrants and upon conversion of outstanding Convertible Preferred
Stock. As of June 30, 1995, the Company had approximately 5,341,715 shares of
Common Stock authorized but unissued and unreserved. If the Certificate of
Amendment is approved and if the proposed amendments to the 1987 Employee Stock
Option Plan, the 1987 Consultant Stock Option Plan, the 1990 Director Stock
Option Plan, and the Employee Stock Purchase Plan described below are approved,
the Company will have an additional 7,750,000 shares of Common Stock authorized
but unreserved. The Company intends to use the additional shares of Common Stock
for future financings, but does not at present have any specific plans or
arrangements which are expected to result in the issuance of any additional
shares of Common Stock that have not been previously reserved.
The Board is authorized to approve the issuance of additional Common Stock
at any time. Although the increase in the authorized number of shares is not
proposed for the purpose of any anti-takeover effect, the issuance of such
shares may have an anti-takeover effect, depending upon the identity of the
purchasers, the number of shares issued and the then current ownership of
outstanding shares of the Company. The purpose of the increase in the
authorization is the elimination of later delays associated with stockholder
votes on specific issuances. The Bylaws of the NASD generally require the
Company nevertheless to obtain the approval of stockholders holding at least a
majority of the shares of the Company voting for the issuance of Common Stock
(or securities convertible or exercisable for Common Stock) pursuant to any
stock option or purchase plan in which officers or directors may participate,
resulting in a change in control of the Company, in connection with certain
acquisitions of the stock or assets of another corporation, or in private
placements for a price less than the greater of book or market value involving
20% or more of the Common Stock outstanding before the issuance.
STOCKHOLDER VOTE
The affirmative vote of a majority of votes that could be cast by
stockholders who are present or represented at the Annual Meeting is required to
adopt the Certificate of Amendment. Properly executed, unrevoked proxies will be
voted FOR Proposal 2 unless a vote against Proposal 2 or abstention is
specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE CERTIFICATE OF
AMENDMENT.
PROPOSAL 3
ADOPTION OF AMENDMENTS TO
THE 1987 EMPLOYEE STOCK OPTION PLAN
The Board of Directors unanimously adopted, subject to stockholder approval,
amendments to the Company's 1987 Employee Stock Option Plan (the "1987 Employee
Plan") increasing the number
15
<PAGE>
of shares reserved for issuance thereunder and imposing an annual limit on the
number of shares of Common Stock with respect to which option awards may be made
to any one participant thereunder. The stockholders are asked to approve the
adoption of the amendments to the 1987 Employee Plan.
DESCRIPTION OF THE PROPOSAL
Currently, the 1987 Employee Plan provides that a total of 3,350,000 shares
of Common Stock may be issued thereunder. The proposed amendment to the 1987
Employee Plan increases the number of shares available for issuance thereunder
by 1,650,000 shares to a total of 5,000,000 shares, in order to ensure that
there will be a sufficient reserve of shares to permit further option grants to
existing and new employees of the Company. As of June 30, 1995, the Company had
granted options covering 553,277 shares of Common Stock in excess of the number
of shares available for grant under the 1987 Employee Plan prior to approval of
the amendments proposed hereby. If the proposed amendment to the 1987 Employee
Plan to increase the aggregate number of shares available for grant is approved
by the stockholders, the number of options available for grant will be 1,096,723
(assuming no options have been granted, been exercised or expired since June 30,
1995).
None of the Named Officers have been granted options under the 1987 Employee
Plan that are subject to the stockholders approving the proposed amendments to
the 1987 Employee Plan. The following table shows the number of options granted
under the 1987 Employee Plan that are subject to the stockholders approving the
proposed amendments to the 1987 Employee Plan to the named individuals and
groups.
PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION OPTIONS (1)
- --------------------------------------------------------------------------------- -----------
<S> <C>
I. Craig Henderson, M.D., F.A.C.P. .............................................. 350,000
Chairman of the Board and Chief Executive Officer
L. Scott Minick ................................................................. 275,000
President, Chief Operating Officer and Director
All executive officers as a group................................................ 625,000
All directors who are not executive officers as a group.......................... 0
All employees (other than executive officers) as a group......................... 0
<FN>
- ------------------------
(1) All options granted at fair market value as of the date of grant.
</TABLE>
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in August 1993, limits (subject to some exemptions) the
deductibility by public companies of compensation in excess of $1 million per
year (per executive) paid to certain executive officers (generally, the CEO and
the next four most highly compensated executive officers). As the limit applies
in the year in which the compensation is paid, it could apply to income derived
from the exercise of certain stock options, measured by the spread between the
exercise price and the fair market value at the time the option is exercised.
"Performance-based" compensation does not count toward the $1 million
deduction limit if certain conditions are met. Compensation resulting from the
exercise of stock options will be treated as "performance-based" and excluded
from the limit on deductibility if, among other things, the plan under which the
options are granted specifies limits on the number of shares issuable to
executive officers under the plan and these limits are approved by the issuer's
stockholders.
In order to exclude from the $1 million deduction limit compensation
resulting from the exercise of options granted under the 1987 Employee Plan, the
Board has adopted, subject to stockholder approval, an amendment to the 1987
Employee Plan to limit the number of shares with respect to which options may be
granted to no more than 400,000 shares to any one participant in any year.
16
<PAGE>
PLAN DESCRIPTION
The 1987 Employee Plan authorizes the granting of incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and non-qualified stock options ("NQOs"). The 1987
Employee Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended, and is not a qualified plan under Section
401(a) of the Code. Proceeds received by the Company from the sale of Common
Stock pursuant to the exercise of options under the 1987 Employee Plan will be
used for general corporate purposes.
The 1987 Employee Plan is administered by the Board or a committee
established by the Board (in either case, the "Administrator"). The
Administrator is authorized to select from among eligible employees the
individuals to whom options are granted, to determine the number of shares to be
subject to such options, to designate whether such options will be ISOs or NQOs
and to determine the terms and conditions of the options, consistent with the
1987 Employee Plan. No election by an employee is required to participate in the
1987 Employee Plan.
Any full-time employee (including officers) of the Company or the Company's
subsidiaries or parent corporation is eligible to be granted options under the
1987 Employee Plan. As of June 30, 1995, approximately 155 employees of the
Company were eligible to participate in the 1987 Employee Plan.
No options may be granted under the 1987 Employee Plan after December 10,
1997. Options granted before termination of the 1987 Employee Plan will remain
exercisable in accordance with their respective terms after termination of the
1987 Employee Plan.
The 1987 Employee Plan requires that the option price for NQOs granted
thereunder be not less than 85% of the fair market value of the Common Stock on
the date of grant and requires that ISOs granted thereunder be not less than
100% of the fair market value of the Common Stock on the date of grant (or 110%
of the fair market value in the case of an ISO granted to a person who owns,
directly or indirectly, more than 10% of the total combined voting power of all
classes of stock of the Company). On July 31, 1995, the closing sales price of a
share of the Common Stock on the Nasdaq National Market was .
No option may be exercised after the expiration of a period of ten years
from the date of grant in the case of ISOs and ten years and two days from the
date of grant in the case of NQOs, subject to the earlier expiration of an
option for the reasons described below.
Incentive stock options granted to persons then owning, directly or
indirectly, more than 10% of the total combined voting power of all classes of
stock of the Company, any subsidiary or parent corporation, may not be exercised
after the expiration of five years from the date of grant. Each option becomes
exercisable at such times and in such installments (which may be cumulative) as
the Administrator shall provide in the terms of each individual option.
Generally, each option granted under the 1987 Employee Plan is immediately
exercisable, but the shares issued upon option exercise may be subject to a
right of repurchase by the Company at the option exercise price upon termination
of employment, which right generally expires over a period of three or four
years. 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.
Under the 1987 Employee Plan, the right to exercise any option generally
expires three months after an optionee's termination of employment (or seven
months with respect to optionees subject to Section 16(b) of the Exchange Act),
but if the optionee dies or becomes disabled while employed by the Company, any
outstanding option will expire one year from the date of the optionee's death or
termination due to the disability.
17
<PAGE>
The 1987 Employee Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time by the Board. No such amendment,
suspension or termination may, however, alter or impair the rights or
obligations of the holders of outstanding options without the consent of such
holders. In addition, without the approval of the Company's stockholders, no
action of the Administrator may increase the limit on the maximum number of
shares which may be issued on exercise of options granted under the 1987
Employee Plan (except for anti-dilutive adjustments), modify the eligibility
requirements for the 1987 Employee Plan, or extend the duration of the 1987
Employee Plan.
No option granted under the 1987 Employee Plan is transferable, except by
will or by the applicable laws of descent and distribution.
FEDERAL INCOME TAX CONSEQUENCES
See "Certain Federal Income Tax Consequences" below for a discussion of the
federal income tax consequences relating to ISOs and NQOs granted pursuant to
the 1987 Employee Plan.
STOCKHOLDER VOTE
The affirmative vote of a majority of the votes that could be cast by
stockholders who are present or represented at the Annual Meeting is required to
adopt the proposed amendments to the 1987 Employee Plan. Properly executed,
unrevoked proxies will be voted FOR Proposal 3 unless a vote against Proposal 3
or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED
AMENDMENTS TO THE 1987 EMPLOYEE PLAN.
PROPOSAL 4
ADOPTION OF AMENDMENT TO
THE 1987 CONSULTANT STOCK OPTION PLAN
The Board of Directors unanimously adopted, subject to stockholder approval,
an amendment to the Company's 1987 Consultant Stock Option Plan (the "1987
Consultant Plan") increasing the number of shares reserved for issuance
thereunder. The stockholders are asked to approve the adoption of this amendment
to the 1987 Consultant Plan.
DESCRIPTION OF THE PROPOSAL
Currently, the 1987 Consultant Plan provides that a total of 100,000 shares
of Common Stock may be issued thereunder. The proposed amendment to the 1987
Consultant Plan increases the number of shares available for issuance thereunder
by 250,000 shares to a total of 350,000 shares, in order to ensure that there
will be a sufficient reserve of shares to permit further option grants to
existing and new consultants to the Company. Officers and directors of the
Company are not eligible to receive options under the 1987 Consultant Plan.
As of June 30, 1995, options covering 33,800 shares of the Company's Common
Stock were available for grant under the 1987 Consultant Plan. If the proposed
amendment to the 1987 Consultant Plan to increase the aggregate number of shares
available for grant is approved by the stockholders, the number of options
available for grant will be increased to 283,800 (assuming no options have been
granted, been exercised or expired since June 30, 1995).
PLAN DESCRIPTION
The 1987 Consultant Plan authorizes the granting of NQOs to eligible
consultants to the Company. The purpose of the 1987 Consultant Plan is to enable
the Company to encourage selected consultants to accept or continue consulting
arrangements with the Company or its affiliates and increase the interest of
selected consultants in the Company's welfare through their participation in the
growth and value of the Company. The 1987 Consultant Plan is not subject to the
provisions of the
18
<PAGE>
Employee Retirement Income Security Act of 1974, as amended, and is not a
qualified plan under Section 401(a) of the Code. Proceeds received by the
Company from the sale of Common Stock pursuant to the exercise of options will
be used for general corporate purposes.
Any consultant (including persons employed by, or otherwise affiliated with,
a consultant) to the Company or the Company's subsidiaries or parent corporation
is eligible to be granted NQOs under the 1987 Consultant Plan. As of June 30,
1995, approximately 12 consultants to the Company were eligible to participate
in the 1987 Consultant Plan.
The 1987 Consultant Plan is administered by the Board or a committee
established by the Board (in either case, the "Administrator"). The
Administrator is authorized to select from among the eligible consultants the
consultants to whom options are to be granted, to determine the number of shares
to be subject to such options and to determine the terms and conditions of the
options, consistent with the 1987 Consultant Plan. No election by any consultant
is required to participate in the 1987 Consultant Plan.
No options may be granted under the 1987 Consultant Plan after December 10,
1997. Options granted before termination of the 1987 Consultant Plan will remain
exercisable in accordance with their respective terms after termination of the
1987 Consultant Plan.
The 1987 Consultant Plan requires that the option price for options granted
be not less than 85% of the fair market value of the Common Stock on the date of
grant (or 110% of the fair market value in the case of any person who directly
or indirectly owns more than 10% of the total combined voting power of all
classes of stock of the Company).
No option may be exercised in whole or in part, after the expiration of a
period of ten years and two days from the date of grant, subject to the earlier
expiration of an option for the reasons described below. Options granted to
persons then owning, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company, any subsidiary or parent
corporation, may not be exercised after the expiration of five years from the
date of grant. Each option becomes exercisable at such times and in such
installments (which may be cumulative) as the Administrator shall provide in the
terms of each individual option. Generally, each option granted under the 1987
Consultant Plan is immediately exercisable, but the shares issued upon exercise
may be subject to a right of repurchase by the Company at the option exercise
price upon termination of the consultancy, which right generally expires over a
period not exceeding two years. 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.
Under the 1987 Consultant Plan, the right to exercise any option generally
expires three months after an optionee's termination of consultancy (or seven
months with respect to optionees subject to Section 16(b) of the Exchange Act),
but if the optionee dies or becomes disabled while engaged as a consultant by
the Company, any outstanding option will expire one year from the date of
optionee's death or termination due to disability.
The stockholders of the Company must approve all amendments to the 1987
Consultant Plan which increase the number of shares which are authorized for
issuance upon exercise of options (except for anti-dilution adjustments), modify
the eligibility requirements, or extend the duration of the 1987 Consultant
Plan. In all other respects, the 1987 Consultant Plan may be amended, suspended,
or terminated by the Board. No such amendment, suspension, or termination may,
however, alter or impair the rights or obligations of the holders of outstanding
options without the consent of such holders.
No option granted under the 1987 Consultant Plan is transferable, except by
will or by the applicable laws of descent and distribution.
19
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
See "Certain Federal Income Tax Consequences" below for a discussion of the
federal income tax consequences relating to NQOs granted pursuant to the 1987
Consultant Plan.
STOCKHOLDER VOTE
The affirmative vote of a majority of the votes that could be cast by
stockholders who are present or represented at the Annual Meeting is required to
adopt the Second Amendment to the 1987 Consultant Plan. Properly executed,
unrevoked proxies will be voted FOR Proposal 4 unless a vote against Proposal 4
or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE AMENDMENT TO
THE 1987 CONSULTANT PLAN.
PROPOSAL 5
ADOPTION OF AMENDMENT TO
THE 1990 DIRECTOR STOCK OPTION PLAN
The Board of Directors unanimously adopted, subject to stockholder approval,
an amendment to the Company's 1990 Director Stock Option Plan (the "1990
Director Plan") increasing the number of shares reserved for issuance
thereunder. The stockholders are asked to approve the adoption of this amendment
to the 1990 Director Plan.
DESCRIPTION OF THE PROPOSAL
Currently, the 1990 Director Plan provides that a total of 350,000 shares of
Common Stock may be issued thereunder. The proposed amendment to the 1990
Director Plan increases the number of shares available for issuance thereunder
by 250,000 shares to a total of 600,000 shares, in order to ensure that there
will be a sufficient reserve of shares to attract new directors to the Company.
Executive officers of the Company are not eligible to receive NQOs under the
1990 Director Plan. The following table shows, assuming that all of the nominees
are elected at the Annual Meeting, the number of NQOs which will be granted to
the listed groups under the 1990 Director Plan in 1996.
<TABLE>
<CAPTION>
NUMBER OF
NQOS (1)
-----------
<S> <C>
All executive officers as a group................................................. 0
All directors who are not executive officers as a group........................... 5,000
All employees (other than executive officers) as a group.......................... 0
<FN>
- ------------------------
(1) All options granted at fair market value as of the date of grant.
</TABLE>
As of June 30, 1995, options covering 35,000 shares of Common Stock were
available for grant under the 1990 Director Plan. If the proposed amendment to
the 1990 Director Plan to increase the aggregate number of shares available for
grant is approved by the stockholders, the number of options available for grant
will be increased to 285,000.
PLAN DESCRIPTION
The 1990 Director Plan provides NQOs to eligible non-employee directors of
the Company at set times and in set amounts. However, to the extent
administration is required, it is provided by the Board of Directors. The
purpose of the 1990 Director Plan is to enable the Company to obtain and retain
the services of, and to motivate, experienced non-employee directors considered
essential to the long-range success of the Company, by providing and offering
them an opportunity to become owners of Common Stock of the Company pursuant to
the exercise of options granted under the 1990 Director Plan. The 1990 Director
Plan is not subject to the provisions of the Employee Retirement Income
20
<PAGE>
Security Act of 1974, as amended, and it is not a qualified plan under Section
401(a) of the Code. Proceeds received by the Company from the sale of Common
Stock pursuant to the exercise of NQOs will be used for general corporate
purposes.
Each member of the Board of Directors of the Company who is not also an
employee of the Company or any subsidiary or affiliate of the Company is
eligible to participate in the 1990 Director Plan upon his or her election or
appointment to the Board of Directors of the Company; provided, however, that
any nonemployee director who beneficially owns 10% or more of the Company's
outstanding shares of Common Stock is ineligible. After the Annual Meeting, the
Company will have one non-employee director eligible to participate under the
1990 Director Plan if the nominees named in this proxy statement are all
elected. No eligible director may receive NQOs to purchase more than 50,000
shares under the 1990 Director Plan.
All eligible non-employee directors of the Company who were directors on
January 31, 1990 were granted automatically, as of January 31, 1990, an initial
NQO to purchase 25,000 shares of Common Stock. Thereafter, each non-employee
director who was a director on January 31, 1990 has been and shall be granted
automatically an additional NQO covering 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 in 1992 each eligible incumbent
non-employee director received a one-time grant of an NQO to purchase 12,500
shares in lieu of the grant of an NQO to purchase 5,000 shares which he was
entitled to receive that year. A person who becomes a non-employee director is
granted automatically, as of the date of his or her election or appointment to
the Company's Board of Directors, an NQO to purchase 25,000 shares of Common
Stock, and thereafter shall be granted automatically an additional NQO covering
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
each new eligible non-employee director shall receive a one-time grant, on the
date of the first annual grant date following his or her election to the Board,
of an NQO to purchase 12,500 shares in lieu of the grant of an NQO to purchase
5,000 which such new director would be entitled to receive on the same date.
No NQOs may be granted under the 1990 Director Plan after January 31, 2000.
NQOs granted before termination of the 1990 Director Plan will remain
exercisable in accordance with their respective terms after termination of the
1990 Director Plan.
The price per share of the Common Stock subject to each option shall be the
closing sales price of the Common Stock, or the closing bid price if no sales
were reported, on the Nasdaq National Market, on the date of grant of such
option, or on the last preceding business day if the grant date is not a
business day. NQOs granted under the 1990 Director Plan are exercisable in full
upon grant. The right to exercise any NQO generally expires upon the earlier of
ten years from the date of grant or one year after a director's termination as a
director.
The 1990 Director Plan may be wholly or partially amended or otherwise
modified, suspended or terminated at any time by the Board of Directors of the
Company. However, without the approval of the Company's stockholders, no action
of the Board may increase the limit on the maximum number of shares which may be
issued on exercise of options granted under the 1990 Director Plan (except for
anti-dilutive adjustments), modify the eligibility requirements for the 1990
Director Plan, change the minimum option price, or materially increase the
benefits accruing under the 1990 Director Plan.
No option granted under the 1990 Director Plan is transferable, except by
will or by the applicable laws of descent and distribution.
As of April 28, 1995, NQOs to purchase 315,000 shares of Common Stock had
been granted and were outstanding under the 1990 Director Plan at exercise
prices ranging from $1.8125 to $18.6250 per share, including 10,000 shares
granted on the 1995 annual grant date.
21
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
See "Certain Federal Income Tax Consequences" below for a discussion of the
federal income tax consequences relating to NQOs granted pursuant to the 1990
Director Plan.
STOCKHOLDER VOTE
The affirmative vote of a majority of the votes that could be cast by
stockholders who are present or represented at the Annual Meeting is required to
adopt the proposed amendment to the 1990 Director Plan. Properly executed,
unrevoked proxies will be voted FOR Proposal 5 unless a vote against Proposal 5
or abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED
AMENDMENT TO THE 1990 DIRECTOR PLAN.
PROPOSAL 6
ADOPTION OF AMENDMENT TO
THE EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors unanimously adopted, subject to stockholder approval,
an amendment to the Company's Employee Stock Purchase Plan (the "Purchase Plan")
increasing the number of shares reserved for issuance thereunder. The
stockholders are asked to approve the adoption of this amendment to the Purchase
Plan.
DESCRIPTION OF THE PROPOSAL
Currently, the Purchase Plan provides that a total of 150,000 shares may be
issued thereunder. The proposed amendment to the Purchase Plan increases the
number of shares available for issuance thereunder to a total of 250,000 shares,
in order to ensure that there will be a sufficient reserve of shares to permit
further purchases by existing and new employees of the Company.
The following table shows the number of shares purchased by the Named
Officers and the identified groups under the Purchase Plan in 1994 and the
"Dollar Value" of those shares. The "Dollar Value" is the difference between the
fair market value of the Common Stock on the dates of purchase and the
participant's purchase price.
22
<PAGE>
PLAN BENEFITS
<TABLE>
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE ($) OF SHARES
- ---------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Nicolaos J. Arvanitidis, Ph.D. ................................................... 0 0
Chairman of the Board and
Chief Executive Officer (1)
Joseph M. Limber ................................................................. 1,133 1,117
Executive Vice President
Richard Mamelok, M.D. ............................................................ 2,435 2,441
Vice President and Medical Director (2)
Peter V. Leigh ................................................................... 0 0
Vice President and Chief Financial Officer (3)
Joseph J. Vallner, Ph.D. ......................................................... 503 507
Senior Vice President for
Research and Development
All executive officers as a group................................................. 4,071 4,065
All directors who are executive officers as a group............................... 0 0
All employees (other than executive officers) as a group.......................... 48,745 43,924
<FN>
- ------------------------
(1) Dr. Arvanitidis retired as Chairman of the Board and Chief Executive
Officer of the Company in June 1995.
(2) In April 1995, Dr. Mamelok stated his intention to resign from the Company.
His resignation will not be effective until his successor is appointed.
(3) Mr. Leigh resigned as an officer of the Company in April 1995.
</TABLE>
As of June 30, 1995, approximately 47,085 shares of the Company's Common
Stock were available for purchase under the Purchase Plan. If the proposed
amendment to the Purchase Plan is approved by the stockholders, the number of
shares available for purchase will be increased to approximately 147,085.
PLAN DESCRIPTION
All employees, including officers and directors who are also employees,
customarily employed 20 or more hours per week and five or more months each year
by the Company, are eligible to participate in the Purchase Plan as of the first
enrollment date following one year of employment by the Company; provided,
however, that any person who holds 5% or more of the Company's Common Stock is
prohibited from participating in the Purchase Plan. Any eligible employee may
enroll in the Purchase Plan as of the first trading day of January, April, July
or October of each year (or other enrollment dates established by the
administrator of the Purchase Plan). As of June 30, 1995, approximately 155
employees of the Company were eligible to participate in the Purchase Plan.
The Purchase Plan is administered by the Board of Directors of the Company
or a committee established by the Board. The Board may amend or terminate the
Purchase Plan at any time. However, amendments which would increase the number
of shares subject to the Purchase Plan, materially increase the benefits to the
participants or materially modify the requirements for participation require
stockholder approval.
Participating employees may elect to make contributions to the Purchase Plan
at a rate equal to any whole percentage, up to a maximum of 10% (or other
percentage set by the Board of Directors) of monthly base earnings from the
Company. On the last trading day of each quarter (or other purchase dates
established by the Board of Directors), the Company will apply the funds then in
the employee's
23
<PAGE>
account to the purchase of shares. The cost for each share purchased is 85% of
the lower of the closing prices for Common Stock on the first trading day in the
enrollment period in which the purchase is made and the purchase date. The
length of the enrollment period is established from time to time by the Board of
Directors but may not exceed 27 months. At any time before a scheduled purchase
date a participant may elect to withdraw funds contributed to the Purchase Plan.
No employee is permitted under the Purchase Plan to purchase Common Stock at a
rate which exceeds $25,000 of fair market value of Common Stock (determined as
of the first trading day in an enrollment period) in any year. The Board will
set the maximum number of shares that may be purchased by participating
employees during any enrollment period.
FEDERAL INCOME TAX CONSEQUENCES
See "Certain Federal Income Tax Consequences" below for a discussion of
federal income tax consequences relating to participation in the Purchase Plan.
STOCKHOLDER VOTE
The affirmative vote of a majority of the votes that could be cast by
stockholders who are present or represented at the Annual Meeting is required to
adopt the proposed amendment to the Purchase Plan. Properly executed, unrevoked
proxies will be voted FOR Proposal 6 unless a vote against Proposal 6 or
abstention is specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED
AMENDMENT TO THE PURCHASE PLAN.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS BASED UPON
EXISTING STATUTES, REGULATIONS AND INTERPRETATIONS THEREOF. THE APPLICABLE RULES
ARE COMPLEX, AND INCOME TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH PLAN PARTICIPANT. THIS PROXY STATEMENT DESCRIBES FEDERAL
INCOME TAX CONSEQUENCES OF GENERAL APPLICABILITY, BUT DOES NOT PURPORT TO
DESCRIBE PARTICULAR CONSEQUENCES TO EACH INDIVIDUAL PLAN PARTICIPANT OR FOREIGN,
STATE OR LOCAL INCOME TAX CONSEQUENCES, WHICH MAY DIFFER FROM THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES.
INCENTIVE STOCK OPTIONS
AWARD; EXERCISE. ISOs are intended to constitute "incentive stock options"
within the meaning of Section 422 of the Code. ISOs may be granted only to
employees of the Company (including directors who are also employees). An
optionee does not recognize taxable income upon either the grant or exercise of
an ISO. However, the excess of the fair market value of the shares purchased
upon exercise over the option exercise price (the "Option Spread") is includable
in the optionee's "alternative minimum taxable income" ("AMTI") for purposes of
the alternative minimum tax ("AMT"). The Option Spread is generally measured on
the date of exercise and is includable in AMTI in the year of exercise. Special
rules regarding the time of AMTI inclusion may apply for shares subject to a
repurchase right or other "substantial risk of forfeiture" (including, in the
case of each person subject to the reporting requirements of Section 16 of the
Exchange Act, limitations on resale of shares imposed under Section 16(b) of the
Exchange Act).
SALE OF OPTION SHARES. If an optionee holds the shares purchased under an
ISO for at least two years from the date the ISO was granted and for at least
one year from the date the ISO was exercised, any gain from a sale of the shares
other than to the Company is taxable as long-term capital gain. Under these
circumstances, the Company would not be entitled to a tax deduction at the time
the ISO is exercised or at the time the stock is sold. If an optionee were to
dispose of stock acquired pursuant to an ISO before the end of the required
holding periods (a "Disqualifying Disposition"), the amount by which the market
value of the stock at the time the ISO is exercised exceeds the exercise price
(or, if
24
<PAGE>
less, the amount of gain realized on the sale) is taxable as ordinary income,
and the Company is entitled to a corresponding tax deduction. Such income is
subject to information reporting requirements and may become subject to
withholding. Gain from a Disqualifying Disposition in excess of the amount
required to be recognized as ordinary income is capital gain. Optionees are
required to notify the Company immediately prior to making a Disqualifying
Disposition. If stock is sold to the Company rather than to a third party, the
sale may not produce capital gain or loss. A sale of shares to the Company will
constitute a redemption of such shares, which could be taxable as a dividend
unless the redemption is "not essentially equivalent to a dividend" within the
meaning of the Code. The timing and amount of income from a Disqualifying
Disposition and the beginning of the optionee's holding period for determining
whether capital gain or loss is long- or short-term may be affected if option
stock is acquired subject to a repurchase right or other "substantial risk of
forfeiture" (including in the case of each person subject to the reporting
requirements of Section 16 of the Exchange Act, limitations on resale of shares
imposed under Section 16(b) of the Exchange Act).
EXERCISE WITH STOCK. If an optionee pays for ISO shares with shares of the
Company acquired under an ISO or a qualified employee stock purchase plan
("statutory option stock"), the tender of shares is a Disqualifying Disposition
of the statutory option stock if the above described (or other applicable)
holding periods respecting those shares have not been satisfied. If the holding
periods with respect to the statutory option stock are satisfied, or the shares
were not acquired under a statutory stock option of the Company, then any
appreciation in value of the surrendered shares is not taxable upon surrender.
Special basis and holding period rules apply where previously owned stock is
used to exercise an ISO.
NONQUALIFIED STOCK OPTIONS
AWARD; EXERCISE. An optionee is not taxable upon the award of a NQO.
Federal income tax consequences upon exercise will depend upon whether the
shares thereby acquired are subject to a "substantial risk of forfeiture." If
the shares are NOT subject to a substantial risk of forfeiture, or if they are
so restricted and the optionee files an election under Section 83(b) of the Code
("Section 83(b) Election") with respect to the shares, the optionee will have
ordinary income at the time of exercise measured by the Option Spread on the
exercise date. The optionee's tax basis in the shares will be the fair market
value of the shares on the date of exercise, and the holding period for purposes
of determining whether capital gain or loss upon sale is long- or short-term
also will begin on that date. If the shares are subject to a substantial risk of
forfeiture and no Section 83(b) Election is filed, the optionee will not be
taxable upon exercise, but instead will have ordinary income, on the date the
restrictions lapse, in an amount equal to the difference between the amount paid
for the shares under the NQO and their fair market value as of the date of
lapse; in addition, the optionee's holding period will begin on the date of
lapse.
Whether or not the shares are subject to a substantial risk of forfeiture,
the amount of ordinary income taxable to an optionee who was an employee at the
time of grant constitutes "supplemental wages" subject to withholding of income
and employment taxes by the Company, and the Company receives a corresponding
income tax deduction.
SALE OF OPTION SHARES. Upon sale, other than to the Company, of shares
acquired under a NQO, an optionee generally will recognize capital gain or loss
to the extent of the difference between the sale price and the optionee's tax
basis in the shares, which will be long-term gain or loss if the employee's
holding period in the shares is more than one year. If stock is sold to the
Company rather than to a third party, the sale may not produce capital gain or
loss. A sale of shares to the Company will constitute a redemption of such
shares, which could be taxable as a dividend unless the redemption is "not
essentially equivalent to a dividend" within the meaning of the Code.
EXERCISE WITH STOCK. If an optionee tenders Common Stock to pay all or part
of the exercise price of a NQO, the optionee will not have a taxable gain or
deductible loss on the surrendered shares. Instead, shares acquired upon
exercise that are equal in value to the fair market value of the shares
25
<PAGE>
surrendered in payment are treated as if they had been substituted for the
surrendered shares, taking as their basis and holding period the basis and
holding period that the optionee had in the surrendered shares. The additional
shares are treated as newly acquired with a zero basis.
If the surrendered shares are statutory option stock as described above
under "Incentive Stock Options", with respect to which the applicable holding
period requirements for favorable income tax treatment have not expired, then
the newly acquired shares substituted for the statutory option shares should
remain subject to the federal income tax rules governing the surrendered shares,
but the surrender should not constitute a Disqualifying Disposition of the
surrendered stock.
PURCHASE PLAN
In general, participants will not have taxable income or loss under the
Purchase Plan until they sell or otherwise dispose of shares acquired under the
Purchase Plan (or die holding such shares). If the shares are held, as of the
date of sale or disposition, for longer than both: (i) two years after the
beginning of the enrollment period during which the shares were purchased; and
(ii) one year following purchase, a participant will have taxable ordinary
income equal to 15% of the fair market value of the shares on the first day of
the enrollment period (but not in excess of the gain on the sale). Any
additional gain from the sale will be long-term capital gain. The Company is not
entitled to an income tax deduction if the holding periods are satisfied.
If the shares are disposed of before the expiration of both of the foregoing
holding periods (a "disqualifying disposition"), a participant will have taxable
ordinary income equal to the excess of the fair market value of the shares on
the purchase date over the purchase price. In addition, the participant will
have taxable capital gain (or loss) measured by the difference between the sale
price and the participant's purchase price plus the amount of ordinary income
recognized, which gain (or loss) will be long-term if the shares have been held
as of the date of sale for more than one year. The Company is entitled to an
income tax deduction equal to the amount of ordinary income recognized by a
participant in a disqualifying disposition.
Special rules apply to participants who are directors or officers.
SPECIAL FEDERAL INCOME TAX CONSIDERATION DUE TO SHORT SWING PROFIT RULE
The potential liability of a person subject to Section 16 of the Exchange
Act to repay short-swing profits from the resale of shares acquired under a
Company plan constitutes a "substantial risk of forfeiture" within the meaning
of the above-described rules, which is generally treated as lapsing at such time
as the potential liability under Section 16 lapses. Persons subject to Section
16 who would be required by Section 16 to repay profits from the immediate
resale of stock acquired under a Company plan should consider whether to file a
Section 83(b) Election at the time they acquire stock under a Company plan in
order to avoid deferral of the date that they are deemed to acquire shares for
federal income tax purposes.
INDEPENDENT AUDITORS
The Board has selected the accounting firm of Ernst & Young LLP as
independent auditors to audit the financial statements of SEQUUS for the year
ending December 31, 1995. Ernst & Young LLP has been engaged as the Company's
auditors since 1983 and has audited the financial statements of the Company
since inception. A representative of Ernst & Young LLP will be present at the
Annual Meeting, will have an opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions.
OTHER INFORMATION
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as amended, may be obtained, without charge, by writing to
Secretary, SEQUUS Pharmaceuticals, Inc., 960 Hamilton Court, Menlo Park,
California 94025.
26
<PAGE>
STOCKHOLDER PROPOSALS
The Company will include in proxy statements of the Board stockholder
proposals complying with the applicable rules of the Securities and Exchange
Commission and any applicable state laws. In order for a proposal by a
stockholder to be included in the proxy statement of the Board relating to the
annual meeting of stockholders to be held in the Spring of 1996, that proposal
must be received in writing by the Secretary of the Company at the Company's
principal executive offices no later than February 15, 1996.
OTHER MATTERS
The Board knows of no other matters which will be presented to the Annual
Meeting. If, however, any other matter is properly presented at the Annual
Meeting, the proxy solicited by this Proxy Statement will be voted in accordance
with the judgment of the person or persons holding such proxy.
By Order of the Board of Directors,
Sally A. Davenport,
SECRETARY
Menlo Park, California
August , 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED POSTPAID ENVELOPE.
27
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EXHIBIT I
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF SEQUUS PHARMACEUTICALS, INC.
It is hereby certified that:
1. The name of the Corporation in SEQUUS Pharmaceuticals, Inc. (the
"Corporation").
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out the first sentence of Section 4 of the Certificate
of Incorporation and substituting in lieu of said sentence the following new
sentence:
"The total number of shares of all classes of capital stock which
the corporation shall have authority to issue is Forty-Nine Million
(49,000,000) shares comprised of Forty-Five Million (45,000,000) shares of
Common Stock with a par value of One One-Hundredth of One Cent ($.0001) per
share (the "Common Shares") and Four Million (4,000,000) shares of Preferred
Stock with a par value of One Cent ($.01) per share (the "Preferred
Shares")."
3. This Certificate of Amendment of Certificate of Incorporation was
duly adopted in accordance with the applicable provisions of Section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, SEQUUS Pharmaceuticals, Inc. has caused this certificate
to be signed by its officer duly authorized, this day of , 1995.
SEQUUS PHARMACEUTICALS, INC.
By: __________________________________
I. Craig Henderson
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
<PAGE>
SEQUUS PHARMACEUTICALS, INC.
1990 DIRECTOR STOCK OPTION PLAN
1. PURPOSE.
The purpose of the 1990 Director Stock Option Plan (the "Plan") of
SEQUUS Pharmaceuticals, Inc., a Delaware corporation (the "Company"), is to
compensate non-employee members of the Company's Board of Directors (the
"Board") and to provide a means for such directors to increase their holdings of
Company stock.
2. DEFINITIONS.
The following definitions shall apply to this Plan:
(a) "ANNUAL GRANT DATE" shall mean, for each calendar year, beginning
in 1991, the third business day following the release to the public of the
Company's annual financial results.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "ELIGIBLE DIRECTOR" shall mean any person who is a member of the
Board and who is not (i) a full or part-time employee of the Company or any
subsidiary or affiliate of the Company or (ii) a beneficial holder of 10% or
more of the outstanding shares of Common Stock of the Company.
(c) "GRANT DATE" shall mean the Initial Grant Date or the Annual
Grant Date, as appropriate.
(d) "INITIAL GRANT DATE" shall mean the later of (i) January 31,
1990; or (ii) with respect to a grant of an Option to an Eligible Director, the
date on which such Eligible Director is first elected to the Board.
(e) "OPTION" shall mean an option to purchase Shares granted under
this Plan.
(f) "OPTION AGREEMENT" shall mean the written agreement described in
Section 6.
(g) "SHARES" shall mean shares of common stock of the Company.
3. ADMINISTRATION.
(a) GENERAL. This Plan shall be administered by the Board in
accordance with the express provisions of this Plan.
(b) POWERS OF BOARD. The Board shall have full and complete
authority to adopt such rules and regulations and to make all such other
determinations not inconsistent with the Plan as may be necessary for the
administration of the Plan.
<PAGE>
4. SHARES SUBJECT TO PLAN.
(a) AGGREGATE NUMBER. Subject to adjustment in accordance with
Section 6(g), an aggregate of 600,000 Shares is reserved for issuance under this
Plan. Shares sold under this Plan may be unissued Shares or reacquired Shares.
If any Options shall for any reason terminate or expire without having been
exercised in full, Shares not purchased thereunder shall be available again for
grant under this Plan.
(b) RIGHTS AS STOCKHOLDER. An Eligible Director shall have no rights
as a stockholder with respect to Shares acquired by exercise of an Option until
the issuance (as evidenced by the appropriate entry on the books of the Company
or a duly authorized transfer agent) of a stock certificate evidencing the
Shares. Subject to Section 6(g), no adjustment shall be made for dividends or
other events for which the record date is prior to the date the certificate is
issued.
5. NONDISCRETIONARY GRANTS.
(a) INITIAL GRANT. On the Initial Grant Date, each Eligible Director
shall receive the grant of an Option to purchase 25,000 Shares.
(b) REGULAR ANNUAL GRANTS. (i) With respect to Eligible Directors
who are non-employee directors on January 1, 1992, on each Annual Grant Date,
such Eligible Director then in office shall receive the grant of an Option to
purchase 5,000 Shares (except for the 1992 Annual Grant Date, in which case such
grant shall be of an Option to purchase 12,500 Shares); and (ii) with respect to
Eligible Directors who are elected to the Board after January 1, 1992, on the
first Annual Grant Date after the Initial Grant Date, each Eligible Director
then in office shall receive the grant of an Option to purchase 12,500 Shares,
and on each Annual Grant Date thereafter, each Eligible Director then in office
shall receive the grant of an Option to purchase 5,000 shares; provided that in
the case of both (i) and (ii) above, no Eligible Director shall receive under
this Plan Options to purchase a total of more than 50,000 Shares.
(b) ADJUSTMENT. The number of Shares for which Options are granted
in accordance with this Section 5 and the number of Shares subject to any Option
shall be subject to adjustment in accordance with Section 6(g).
6. TERMS OF OPTION AGREEMENTS.
Upon the grant of each Option, the Company and the Eligible Director
shall enter into an Option Agreement which shall specify the Grant Date and the
exercise price, and shall include or incorporate by reference the substance of
all of the following provisions and such other provisions consistent with this
Plan as the Board may determine:
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(a) TERM. The term of the Option shall be ten years from its Grant
Date, subject to earlier termination in accordance with Sections 6(f) or 6(h).
(b) OPTION EXERCISE. Each Option held by an Eligible Director shall
become immediately exercisable in full or in part upon the grant of such Option;
provided that the Options granted on the Initial Grant Date shall not be
exercisable until the later of: (i) the approval by the Company's stockholders
of the adoption of this Plan in accordance with Section 11, and (ii) the
effectiveness of any registration statement or qualification required by
applicable law with respect to the issuance of the Shares reserved under the
Plan.
(c) PURCHASE PRICE. The purchase price of the Shares subject to each
Option shall be the closing sales price for Shares or the closing bid if no
sales were reported, as quoted on the National Market System of NASDAQ, on the
Grant Date of such Option, or on the last preceding business day if such Grant
Date is not a business day.
(d) PAYMENT OF PURCHASE PRICE. The purchase price of Shares acquired
pursuant to an Option shall be paid in full at the time the Option is exercised
in cash or by delivery of any property other than cash (including Shares, or
other securities of the Company), so long as such property constitutes valid
consideration for the Shares purchased under applicable law and is surrendered
in good form for transfer, or by some combination of cash and such other
property; provided, however, that Options may not be exercised by the delivery
of Shares more frequently than at six-month intervals.
(e) TRANSFERABILITY. No Option shall be transferable otherwise than
by will or the laws of descent and distribution, and an Option shall be
exercisable during the Eligible Director's lifetime only by the Eligible
Director.
(f) TERMINATION OF MEMBERSHIP ON THE BOARD. If an Eligible
Director's membership on the Board terminates for any reason, an Option held at
the date of termination may be exercised in whole or in part at any time within
one year after the date of such termination (but in no event after the term of
the Option expires) and shall thereafter terminate.
(g) CAPITALIZATION CHANGES. If any change is made in the Shares
subject to the Plan or subject to any Option granted under the Plan, through
merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
otherwise, the Board shall make appropriate adjustments as to the maximum number
of Shares subject to the Plan, the number of Shares covered by any Option grant,
the maximum number of Shares for which Options may be granted to any Eligible
Director, and the
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number of Shares and price per Share covered by outstanding Options.
(h) CHANGE OF OWNERSHIP. In the event of (x) a dissolution or
liquidation of the Company, (y) a merger or consolidation in which the Company
is not the surviving corporation, or (z) any other capital reorganization in
which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, the Company shall give to the Eligible Director, at the time
of adoption of the plan for liquidation, dissolution, merger, consolidation or
reorganization, either (i) a reasonable time thereafter within which to exercise
the Option, prior to the effectiveness of such liquidation, dissolution, merger,
consolidation or reorganization, at the end of which time the Option shall
terminate, or (ii) the right to exercise the Option as to an equivalent number
of shares of stock of the corporation succeeding the Company or acquiring its
business by reason of such liquidation, dissolution, merger, consolidation or
reorganization.
7. USE OF PROCEEDS.
Proceeds from the sale of Shares pursuant to this Plan shall be used
by the Company for general corporate purposes.
8. LEGAL REQUIREMENTS.
The Company shall not be obligated to offer or sell any Shares except
in compliance with all applicable federal and state securities laws and any
rules and regulations thereunder. Any certificates representing shares
purchased upon exercise of an Option shall bear appropriate legends.
9. AMENDMENT OF PLAN.
The Board may amend the Plan at any time. No amendment adopted
without stockholder approval may increase the number of shares as to which
Options may be granted, reduce the exercise price below the price provided in
the Plan, modify the requirements as to eligibility for participation, or
materially increase the benefits accruing under the Plan. No amendment shall
affect the rights of the holder of any Option, except with that holder's
consent.
10. TERMINATION OR SUSPENSION OF PLAN.
The Board at any time may suspend or terminate this Plan. This Plan,
unless sooner terminated, shall terminate on the tenth anniversary of its
adoption by the Board. No Option may be granted under this Plan while this Plan
is suspended or after it is terminated. Suspension or termination of this Plan
shall not affect the rights of the holder of any Option, except with that
holder's consent.
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11. STOCKHOLDER APPROVAL.
This Plan is subject to approval, at a duly held stockholders' meeting
within 12 months after the date the Board approves this Plan, by the affirmative
vote of a majority of the votes cast at which a quorum of the voting power of
the Company is represented in person or by proxy. Options may be granted, but
not exercised, before such stockholder approval. If the stockholders fail to
approve this Plan within the required time period, any Options granted under
this Plan shall be void, and no additional Options shall be granted.
* * * *
Adopted by the Board of Directors: January 31, 1990
Approved by the stockholders on May 30, 1990.
Amended by the Board of Directors on December 12, 1991.
Amendments approved by the stockholders on June 16, 1992.
Amended by the Board of Directors on June 14, 1995.
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<PAGE>
1987 EMPLOYEE STOCK OPTION PLAN
OF
SEQUUS PHARMACEUTICALS, INC.
1. PURPOSE OF THE PLAN
The purposes of the 1987 Employee Stock Option Plan (the "Plan") of
SEQUUS Pharmaceuticals, Inc., a Delaware corporation (the "Company") are to;
(a) Furnish incentive to individuals chosen to receive options
because they are considered capable of responding by improving operations and
increasing profits;
(b) Encourage selected employees to accept or continue employment
with the Company or its Affiliates; and
(c) Increase the interest of selected employees in the Company's
welfare through their participation in the growth in value of the Common Stock
of the Company (the "Common Stock").
To accomplish the foregoing objectives, this Plan provides a means
whereby employees of the Company and its Affiliates may receive options to
purchase Common Stock. Options granted under this Plan will be either incentive
stock options ("ISOs") intended to qualify as such under Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code") or nonqualified options
("NQOs") not intended to qualify as ISOs.
2. ELIGIBLE PERSONS
Every person who at the date of grant is a full-time employee of the
Company or of any Affiliate (as defined below) of the Company is eligible to
receive NQOs or ISOs under this Plan. The term "Affiliate" as used in the Plan
means a parent or subsidiary corporation as defined in the applicable provisions
(currently Section 425) of the Code. The term "employee" includes an officer or
director who is an employee, as well as a non-officer, non-director regular
employee of the Company.
3. STOCK SUBJECT TO THIS PLAN
The total number of shares of stock which may be granted pursuant to
this Plan is 5,000,000 shares of Common Stock. Grants to the directors of the
Company of options under this Plan may not account for more than 250,000 shares
of Common Stock, UNLESS the Administrator (as defined in Section 4) determines
that the foregoing provision is not necessary to comply with the provisions of
Rule 16b-3 promulgated by the Securities and Exchange commission ("Rule 16b-3")
or that Rule 16b-3 is not applicable to the Plan. The Company may not issue
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options to purchase more than 400,000 shares of stock to any one participant in
any one year. The shares covered by the portion of any grant which expires
unexercised under the Plan shall become available again for grants under the
Plan. The number of shares reserved for purchase under the Plan is subject to
adjustment in accordance with the provisions for adjustment in the Plan.
4. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the
Company (the "Board") or by a committee appointed by the Board which shall not
have less than two Board members (in either case, the "Administrator"). No
option shall be granted to (a) a director of the Company except (i) by the Board
when a majority of the members of the Board, and a majority of the directors
acting in the matter, are disinterested persons, or (ii) by the Administrator
when the Administrator is composed of three or more persons having full
authority to act in the matter and each member of the Administrator is a
disinterested person, or (b) to an officer of the Company except (i) by the
Board, or (ii) by the Administrator when the Administrator is composed solely of
three or more directors, or is composed of three or more persons having full
authority to act in the matter and each member of the Administrator is a
disinterested person, UNLESS, in either case, the Administrator determines
that the foregoing provision is not necessary to comply with the provisions of
Rule 16b-3 or that Rule 16b-3 is not applicable to the Plan. "Disinterested
person," for this purpose, shall have the same meaning as in Rule 16b-3 or any
successor rule under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Administrator may delegate nondiscretionary administrative
duties to such employees of the Company as it deems proper. Subject to the
provisions of this Plan, the Administrator shall have the authority to select
the persons to receive options under this Plan, to fix the number of shares that
each optionee may purchase, to set the terms and conditions of each option
(including whether each option should be a NQO or an ISO), and to determine all
other matters relating to this Plan. No member of the Administrator shall be
liable for any act or omission on such member's own part, including but not
limited to the exercise of any power or discretion given to such member under
this Plan, except for those acts or omissions resulting from such member's own
gross negligence or willful misconduct. All questions of interpretation,
implementation, and application of this Plan shall be determined by the
Administrator. Such determinations shall be final and binding on all persons.
5. GRANTING OF OPTIONS
No options shall be granted under this Plan after ten years from the
date of adoption of this Plan by the Board of Directors.
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Each option shall be evidenced by a written stock option agreement,
in form satisfactory to the Company, executed by the Company and the person to
whom such option is granted; provided, however, that the failure by the Company,
the optionee, or both to execute such an agreement shall not invalidate the
granting of an option. The agreement shall specify whether each option it
evidences is a NQO or an ISO.
The Administrator may approve the grant of options under this Plan
to persons who are expected to become employees of the Company, but are not
employees at the date of approval. In such cases, the option shall be deemed
granted, without further approval, on the date the grantee becomes an employee
and must satisfy all requirements of this Plan for options granted on that date.
6. TERMS AND CONDITIONS OF OPTIONS
Each option granted under this Plan shall be designated as a NQO or
an ISO. Each option shall be subject to the terms and conditions set forth in
Section 6.1. NQOs shall be also subject to the terms and conditions set forth
in Section 6.2, but not those set forth in Section 6.3. ISOs shall also be
subject to the terms and conditions set forth in Section 6.3, but not those set
forth in Section 6.2.
6.1 TERMS AND CONDITIONS TO WHICH ALL OPTIONS ARE SUBJECT. All
options granted under this Plan shall be subject to the following terms and
conditions:
6.1.1 CHANGES IN CAPITAL STRUCTURE. Subject to Section
6.1.2, if the stock Of the Company is changed by reason of a stock split,
reverse stock split, stock dividend, or recapitalization, or converted into or
exchanged for other securities as a result of a merger, consolidation or
reorganization, appropriate adjustments shall be made in (a) the number and
class of shares of stock subject to this Plan and each option outstanding under
this Plan, and (b) the exercise price of each outstanding option; provided,
however, that the Company shall not be required to issue fractional shares as a
result of any such adjustments. Each such adjustment shall be subject to
approval by the Board of Directors in its sole discretion.
6.1.2 CORPORATE TRANSACTIONS. New option rights may be
substituted for the option rights granted under this Plan, or the Company's
obligations as to options outstanding under this Plan may be assumed, by an
employer corporation other than the Company, or by a parent or subsidiary of
such employer corporation, in connection with any merger, consolidation,
acquisition, separation, reorganization, liquidation or like occurrence in which
the Company is involved, in such manner that the then outstanding options which
are ISOs will continue to be "incentive stock options" within the meaning of
Section 422A of the Code to the full extent permitted thereby. Notwithstanding
the foregoing or the provisions of Section 6.1.1, if such
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employer corporation, or parent or subsidiary of such employer corporation, does
not substitute new and substantially equivalent option rights for the option
rights granted hereunder, or assume the option rights granted hereunder, the
option rights granted hereunder shall terminate (a) upon dissolution or
liquidation of the Company, or similar occurrence, or (b) upon any merger,
consolidation, acquisition, separation, or similar occurrence, where the Company
will not be a surviving corporation; provided, however, that each optionee shall
be mailed notice at least thirty-five (35) days prior to such dissolution,
liquidation, merger, consolidation, acquisition, separation, or similar
occurrence, and shall have at least thirty (30) days after the mailing of such
notice to exercise any unexpired option rights granted hereunder to the extent
exercisable on the date of such event.
6.1.3 TIME OF OPTION EXERCISE. Except as determined
otherwise by the Administrator, options granted under this Plan shall be
exercisable (a) immediately as of the effective date of the stock option
agreement granting the option, or (b) at such other times as are specified in
the written stock option agreement relating to such option.
6.1.4 OPTION GRANT DATE. Except in the case of advance
approvals described in Section 5, the date of grant of an option under this Plan
shall be the date as of which the Administrator approves the grant. No option
shall be exercisable, however, until a written stock option agreement in form
satisfactory to the Company is executed by the Company and the optionee.
6.1.5 NONASSIGNABILITY OF OPTION RIGHTS. No option granted
under this Plan shall be assignable or otherwise transferable by the optionee
except by will or by the laws of descent and distribution. During the life of
the optionee, an option shall be exercisable only by the optionee.
6.1.6 PAYMENT. Except at provided below, payment in full,
in cash, shall be made for all stock purchased at the time written notice of
exercise of an option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an option is granted or
exercised, the Administrator, in the exercise of its absolute discretion, may
authorize any one or more of the following additional methods of payment:
(a) Acceptance of the optionee's full recourse
promissory note for all or part of the option price (except for the aggregate
par value of the shares being acquired, which must be paid by means of
consideration lawful under applicable state law other than such promissory note)
payable on such terms and bearing such interest rate as determined by the
Administrator (but in no event less than the minimum interest rate specified by
federal tax law at which no additional interest would be imputed), which
promissory note may be either secured or
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unsecured in such manner as the Administrator shall approve (including, without
limitation, by a security interest in the shares of the Company); and
(b) Delivery by the optionee of Common Stock already
owned by the optionee for all or part of the option price, provided the value
(determined as set forth in Section 6.1.11) of such Common Stock is equal on the
date of exercise to the option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any option granted under this Plan by delivery of Common
Stock.
6.1.7 TERMINATION OF EMPLOYMENT. Unless determined
otherwise by the Administrator, in its absolute discretion, option rights
granted under this Plan, to the extent such rights have not then expired or been
exercised, shall terminate (a) three months, in the case of ISOs and for
optionees who are not subject to Section 16(b) of the Exchange Act, and (b)
seven months, in the case of NQOs held by an optionee subject to Section 16(b)
of the Exchange Act, after an optionee ceases, for any reason, to be an employee
or director of the Company or any Affiliate of the Company, and shall not be
exercisable on or after said date; provided, that such option rights are
exercisable after the date of such termination only to the extent they were
exercisable on the date of termination; and provided further, that if
termination of employment is due to the disability or death of the optionee, the
optionee, or the optionee's personal representative or any other person who
acquires the option rights from the optionee by will or the applicable laws of
descent and distribution, may within twelve months after the termination of
employment, exercise the rights to the extent they were exercisable on the date
of the termination. A transfer of an optionee from the Company to an Affiliate
or vice versa, or from one Affiliate to another, or a leave of absence duly
authorized by the Company, shall not be deemed a termination of employment or a
break in continuous employment.
6.1.8 REPURCHASE OF STOCK. At the option of the
Administrator, the stock to be delivered pursuant to the exercise of any option
granted to an employee under this Plan may be subject to a right of repurchase
(the "Right of Repurchase") in favor of the Company with respect to any employee
whose employment with the Company is terminated. Such Right of Repurchase shall
be at the option exercise price and shall expire in accordance with a schedule
related to the date of the grant of the option, the date of first employment, or
such other date as may be set by the Administrator (in any case, the "Vesting
Base Date") with respect to each option grant, as determined by the Board of
Directors; provided, that subject to section 6.1.2, in the event of a sale of
the Company or substantially all of the assets or stock of the Company to
another entity, or a merger in
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which the Company is not the surviving entity, the Board of Directors, in its
absolute discretion, may accelerate the expiration of the Right of Repurchase
with respect to all or any portion of the shares issuable upon exercise of any
outstanding option. Determination of the number of shares subject to such Right
of Repurchase shall be made as of the date the employee's employment by the
Company terminates, not as of the date that any option granted to such employee
is exercised.
6.1.9 WITHHOLDING AND EMPLOYMENT TAXES. At the time of
exercise of an option, the optionee shall remit to the Company in cash all
applicable federal and state withholding and employment taxes. The
Administrator may, in the exercise of the Administrator's sole discretion,
permit an optionee to pay some or all of such taxes by means of a promissory
note on such terms as the Administrator deems appropriate. If and to the extent
authorized by the Administrator in its absolute discretion after March 1, 1989,
an optionee may make an election, by means of a form of election to be
prescribed by the Administrator, to have shares of Common Stock which are
acquired upon exercise of the option or other securities of the Company withheld
by the Company or to tender to the Company other shares of Common Stock or other
securities of the Company owned by the optionee on the date of determination of
the amount of tax to be withheld as a result of exercise of such option (the
"Tax Date") to pay the amount of tax that is required by law to be withheld by
the Company as a result of the exercise of such option from amounts payable to
such person, subject to the following limitations (unless, except in the case of
subparagraphs (a) and (b), Rule 16b-3 is not applicable to Plan):
(a) such election shall be irrevocable;
(b) such election shall be subject to the disapproval
of the Administrator at any time;
(c) such election may not be made within six months of
the grant date of the option the exercise of which resulted in the tax
withholding obligation (except that this limitation shall not apply in the event
of death or disability of such person occurring prior to the expiration of the
six-month period); and
(d) such election must be made either (i) at least six
months prior to the Tax Date, or (ii) in any ten business-day period beginning
on the third business day following the date of release by the Company for
publication of quarterly or annual summary statements of sales or earnings of
the Company.
Any securities so withheld or tendered will be valued by the Company
as of the Tax Date.
6.1.10 OTHER PROVISIONS. Each option granted under this
Plan may contain such other terms, provisions, and conditions not inconsistent
with this Plan as may be determined
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by the Administrator, and each ISO granted under this Plan shall include such
provisions and conditions as are necessary to qualify the option as an
"incentive stock option" within the meaning of Section 422A of the Code.
6.1.11 DETERMINATION OF VALUE. For purposes of the Plan,
the value of Common Stock or other Securities of the Company shall be determined
as follows:
(a) if the stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System, its fair market value shall be the
closing sales price for such stock or the closing bid if no sales were reported,
as quoted on such system or exchange (or the largest such exchange) for the date
the value is to be determined (or if there are no sales for such date, then for
the last preceding business day on which there were sales), as reported in the
WALL STREET JOURNAL or similar publication.
(b) If the stock of the Company is regularly quoted by
a recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).
(c) In the absence of an established market for the
stock, the fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other corporations in the same or a similar line of business.
6.2 TERMS AND CONDITIONS TO WHICH ONLY NQOs ARE SUBJECT.
Options granted under this Plan which are designated as NQOs shall be subject to
the following terms and conditions:
6.2.1 EXERCISE PRICE. The exercise price of a NQO shall be
not less than 85 percent of the fair market value (determined in accordance with
Section 6.1.11) of the stock subject to the option on the date of grant, except
that the exercise price of a NQO granted to any person who owns, directly or
indirectly, (or is treated as owning by reason of attribution rules, currently
set forth in Code Section 425) stock of the Company constituting more than ten
percent of the total combined voting power of all classes of the outstanding
stock of the Company or of any Affiliate of the Company (a "Ten Percent
Stockholder"), shall in no event be less than 110 percent of such fair market
value.
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6.2.2 OPTION TERM. Unless an earlier expiration date is
specified by the Administrator at the time of grant, each NQO granted under this
Plan shall expire ten years and two days from the date of its grant, except that
a NQO granted to any Ten Percent Stockholder shall expire five years from the
date of its grant.
6.3 TERMS AND CONDITIONS TO WHICH ONLY ISOs ARE SUBJECT.
Options granted under this Plan which are designated as ISOs shall be subject to
the following terms and conditions:
6.3.1 EXERCISE PRICE. The exercise price of an ISO, which
shall be approved by the Board of Directors, shall be determined in accordance
with the applicable provisions of the Code and shall in no event be less than
the fair market value (determined as described in section 6.1.11) of the stock
covered by the option at the time the option is granted, except that the
exercise price of an ISO granted to any Ten Percent Stockholder shall in no
event be less than 110 percent of such fair market value.
6.3.2 EXPIRATION. Unless an earlier expiration date is
specified by the Administrator at the time of grant, each ISO granted under this
Plan shall expire ten years from the date of its grant, except that an ISO
granted to any Ten Percent Stockholder shall expire five years from the date of
its grant.
6.3.3 EXERCISE OF AN ISO BY AN EMPLOYEE WHO HOLDS OTHER
ISOs. An ISO granted under this Plan shall be exercisable in accordance with
Section 6.1.3, subject to the limitations set forth in Sections 5 and 6.3.5.
6.3.4 DISQUALIFYING DISPOSITIONS. If stock acquired by
exercise of an ISO granted pursuant to this Plan is disposed of within two years
from the date of grant of the option or within one year after the transfer of
the stock to the optionee, the holder of the stock immediately prior to the
disposition shall promptly notify the Company in writing of the date and terms
of the disposition and shall provide such other information regarding the
disposition as the Company may reasonably require.
7. MANNER OF EXERCISE
An optionee wishing to exercise an option shall give written notice
to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 6.1.6. The date the Company
receives written notice of an exercise hereunder accompanied by payment of the
exercise price, and, if required, by payment of any federal or state withholding
or employment taxes required to be withheld by virtue of the exercise of the
option, will be considered as the date such option was exercised.
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Promptly after receipt of written notice of exercise of an option,
the Company shall, without stock issue or transfer taxes to the optionee or
other person entitled to exercise the option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares of
stock. An optionee or transferee of an optionee shall not have any privileges
as a stockholder with respect to any stock covered by the option until the date
of issuance of a stock certificate.
8. EMPLOYMENT RELATIONSHIP
Nothing in this Plan or any option granted thereunder shall
interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate any optionee's employment at any time, nor confer upon
any optionee any right to continue in the employ of the Company or any of its
Affiliates.
9. AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN
The Board of Directors may at any time amend, alter, suspend or
discontinue this Plan, except to the extent that stockholder approval is
required by applicable law; provided, however, that no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
optionee under any option theretofore granted, without his consent, or that,
without the affirmative vote of a majority of the votes cast at a meeting at
which a quorum of the voting power of the Company is represented in person or by
proxy, would:
(a) Except as is provided in Section 6.1.1 of this Plan, increase
the total number of shares of stock reserved for the purposes of this Plan;
(b) Extend the duration of this Plan; or
(c) Change the class of persons eligible to receive options
granted hereunder.
The Board of Directors may, at any time without stockholder
approval, amend the Plan and the terms of any option outstanding under the Plan,
provided that such amendment is designed to maximize federal income tax benefits
accorded to employee stock options and provided further, that with respect to
outstanding options, the optionee consents to such amendment.
10. EFFECTIVE DATE OF THIS PLAN
This Plan shall become effective upon adoption by the Board of
Directors, provided, however, that no option shall be exercisable unless and
until written consent of the stockholders, of the Company, or approval by
stockholders of the Company voting at a validly called stockholders meeting and
holding a majority (or such greater number as may be required by law or
applicable governmental regulations or orders) of the shares entitled to vote,
is obtained within 12 months after adoption by the Board of
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<PAGE>
Directors. Options may be granted and exercised under this Plan only after
there has been compliance with all applicable federal and state securities laws.
Plan adopted by the Board of Directors on December 10, 1987.
Plan approved by stockholders on March 1, 1988.
Plan amended by the Board of Directors on January 25, 1990.
Amendments approved by stockholders on May 30, 1990.
Plan amended by Board of Directors on December 12, 1991.
Amendments approved by stockholders on June 16, 1992.
Plan amended by Board of Directors on June 14, 1995.
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<PAGE>
1987 CONSULTANT STOCK OPTION PLAN
OF
SEQUUS PHARMACEUTICALS, INC.
1. PURPOSE OF THE PLAN
The purposes of the 1987 Consultant Stock Option Plan (the "Plan")
of SEQUUS Pharmaceuticals, Inc., a Delaware corporation (the "Company") are to:
(a) Furnish incentive to individuals chosen to receive options
because they are considered capable of responding by improving operations and
increasing profits;
(b) Encourage selected consultants to accept or continue
employment with the Company or its Affiliates; and
(c) Increase the interest of selected consultants in the Company's
welfare through their participation in the growth in value of the Common Stock
of the Company (the "Common Stock").
To accomplish the foregoing objectives, this Plan provides a means
whereby consultants to the Company and its Affiliates may receive options to
purchase Common Stock. Options granted under this Plan will be nonqualified
options ("NQOs") subject to federal income taxation upon exercise.
2. ELIGIBLE PERSONS
Every person who at the date of grant is a consultant to the Company
or to any Affiliate (as defined below) of the Company, other than a consultant
who is also a director of the Company or of any Affiliate, is eligible to
receive NQOs under this Plan. The term "Affiliate" as used in the Plan means a
parent or subsidiary corporation as defined in the applicable provisions
(currently Section 425) of the Internal Revenue Code of 1986, as amended, or any
successor statute (the "Code"). The term "consultant" includes persons employed
by, or otherwise affiliated with, a consultant.
3. STOCK SUBJECT TO THIS PLAN
The total number of shares of stock which may be granted pursuant to
this Plan is 350,000 shares of Common Stock. The shares covered by the portion
of any grant which expires unexercised under the Plan and the share repurchased
by the Company in accordance with the terms of the Plan shall become available
again for grants under the Plan. The number of shares reserved for purchase
under the Plan is subject to adjustment in accordance with the provisions for
adjustment in the Plan.
<PAGE>
4. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the
Company (the "Board") or by a committee appointed by the Board which shall not
have less than two Board members (in either case, the "Administrator"). No
option shall be granted to a director of the Company except (a) by the Board
when a majority of the members of the Board, and a majority of the directors
acting in the matter, are disinterested persons, or (b) by the Administrator
when the Administrator is composed of three or more persons having full
authority to act in the matter and each member of the Administrator is a
disinterested person, UNLESS the Administrator determines that the foregoing
provision is not necessary to comply with the provisions of Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b-3") or that
Rule 16b-3 is not applicable to the Plan. "Disinterested person," for this
purpose, shall have the same meaning as in Rule 16b-3 or any successor rule
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Administrator may delegate nondiscretionary administrative duties to such
employees of the Company as it deems proper. Subject to the provisions of this
Plan, the Administrator shall have the authority to select the persons to
receive options under this Plan, to fix the number of shares that each optionee
may purchase, to set the terms and conditions of each option, and to determine
all other matters relating to this Plan. No member of the Administrator shall
be liable for any act or omission on such member's own part, including but not
limited to the exercise of any power or discretion given to such member under
this Plan, except for those acts or omissions resulting from such member's own
gross negligence or willful misconduct. All questions of interpretation,
implementation, and application of this Plan shall be determined by the
Administrator. Such determinations shall be final and binding on all persons.
5. GRANTING OF OPTIONS
No options shall be granted under this Plan after ten years from the
date of adoption of this Plan by the Board of Directors.
Each option shall be evidenced by a written stock option agreement,
in form satisfactory to the Company, executed by the Company and the person to
whom such option is granted; provided, however, that the failure by the Company,
the optionee, or both to execute such an agreement shall not invalidate the
granting of an Option.
The Administrator may approve the grant of options under this Plan
to persons who are expected to become consultants to the Company, but are not
consultants at the date of approval. In such cases, the option shall be deemed
granted, without further approval, on the date the grantee becomes a consultant
and must satisfy all requirements of this Plan for options granted on that date.
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<PAGE>
6. TERMS AND CONDITIONS OF OPTIONS
Each option shall be subject to the terms and conditions set forth
in this Section 6.
6.1 CHANGES IN CAPITAL STRUCTURE. Subject to Section 6.2, if
the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, or recapitalization, or converted into or exchanged for
other securities as a result of a merger, consolidation or reorganization,
appropriate adjustments shall be made in (a) the number and class of shares of
stock subject to this Plan and each option outstanding under this Plan, and (b)
the exercise price of each outstanding option; provided, however, that the
Company shall not be required to issue fractional shares as a result of any such
adjustments. Each such adjustment shall be subject to approval by the Board of
Directors in its sole discretion.
6.2 CORPORATE TRANSACTIONS. New option rights may be
substituted for the option rights granted under this Plan, or the Company's
obligations as to options outstanding under this Plan may be assumed, by an
employer corporation other than the Company, or by a parent or subsidiary of
such employer corporation, in connection with any merger, consolidation,
acquisition, separation, reorganization, liquidation or like occurrence in which
the Company is involved. Notwithstanding the foregoing or the provisions of
Section 6.1, if such employer corporation, or parent or subsidiary of such
employer corporation, does not substitute new and substantially equivalent
option rights for the option rights granted hereunder, or assume the option
rights granted hereunder, the option rights granted hereunder shall terminate
(a) upon dissolution or liquidation of the Company, or similar occurrence, or
(b) upon any merger, consolidation, acquisition, separation, or similar
occurrence, where the Company will not be a surviving corporation; provided,
however, that each optionee shall be mailed notice at least thirty-five (35)
days prior to such dissolution, liquidation, merger, consolidation, acquisition,
separation, or similar occurrence, and shall have at least thirty (30) days
after the mailing of such notice to exercise any unexpired option rights granted
hereunder to the extent exercisable on the date of such event.
6.3 TIME OF OPTION EXERCISE. Options granted under this Plan
shall be exercisable (a) immediately as of the effective date of the stock
option agreement granting the option, or (b) at such other times as are
specified in the written stock option agreement relating to such option.
6.4 OPTION GRANT DATE. Except in the case of advance approvals
described in Section 5, the date of grant of an option under this Plan shall be
the date as of which the Administrator approves the grant. No option shall be
exercisable, however,
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<PAGE>
until a written stock option agreement in form satisfactory to the Company is
executed by the Company and the optionee.
6.5 NONASSIGNABILITY OF OPTION RIGHTS. No option granted under
this Plan shall be assignable or otherwise transferable by the optionee except
by will or by the laws of descent and distribution. During the life of the
optionee, an option shall be exercisable only by the optionee.
6.6 PAYMENT. Except as provided below, payment in full, in
cash, shall be made for all stock purchased at the time written notice of
exercise of an option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an option is granted or
exercised, the Administrator, in the exercise of its absolute discretion, may
authorize any one or more of the following additional methods of payment:
(a) Acceptance of the optionee's full recourse promissory
note for all or part of the option price (except for the aggregate par value of
the shares being acquired, which must be paid by means of consideration lawful
under applicable state law other than such promissory note), payable on such
terms and bearing such interest rate as determined by the Administrator (but in
no event less than the minimum interest rate specified by federal tax law at
which no additional interest would be imputed), which promissory note may be
either secured or unsecured in such manner as the Administrator shall approve
(including, without limitation, by a security interest in the shares of the
Company); and
(b) Delivery by the optionee of Common Stock already owned
by the optionee for all or part of the option price, provided the value
(determined as set forth in Section 6.11) of such Common Stock is equal on the
date of exercise to the option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any option granted under this Plan by delivery of Common
Stock.
6.7 TERMINATION OF CONSULTANCY. Unless determined otherwise by
the Administrator, in its absolute discretion, option rights granted under this
Plan, to the extent such rights have not then expired or been exercised, shall
terminate (a) three months for optionees who are not subject to Section 16(b) of
the Exchange Act, and (b) seven months for optionees subject to Section 16(b) of
the Exchange Act, after an optionee ceases, for any reason, to be a consultant
to the Company or any Affiliate of the Company, and shall not be exercisable on
or after said date; provided, that such option rights are exercisable after the
date of such termination only to the extent they were exercisable on the date of
termination; and provided further, that if termination of consultancy is due to
the
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<PAGE>
disability or death of the optionee, the optionee, or the optionee's personal
representative or any other person who acquires the option rights from the
optionee by will or the applicable laws of descent and distribution, may within
twelve months after the termination of consultancy, exercise the rights to the
extent they were exercisable on the date of the termination. A transfer of an
optionee from the Company to an Affiliate or vice versa, or from one Affiliate
to another, or a leave of absence duly authorized by the Company, shall not be
deemed a termination of consultancy or a break in continuous consulting
relationship.
6.8 REPURCHASE OF STOCK. At the option of the Administrator,
the stock to be delivered pursuant to the exercise of any option granted to a
consultant under this Plan may be subject to a right of repurchase in favor of
the Company with respect to any consultant whose consultancy to the Company is
terminated. Such right of repurchase shall be at the option exercise price and
shall expire on a schedule related to the date of grant of the option, the date
of commencement of the consulting relationship, or such other date as may be set
by the Administrator (in any case, the "Vesting Base Date") with respect to each
option grant, as determined by the Board of Directors. Determination of the
number of shares subject to such right of repurchase shall be made as of the
date the consultant's consulting relationship with the Company terminates, not
as of the date that any option granted to such consultant is exercised.
6.9 WITHHOLDING AND EMPLOYMENT TAXES. At the time of exercise
of an option, the optionee shall remit to the Company in cash all applicable
federal and state withholding and employment taxes. The Administrator may, in
the exercise of the Administrator's sole discretion, permit an optionee to pay
some or all of such taxes by means of a promissory note on such terms as the
Administrator deems appropriate. If and to the extent authorized by the
Administrator in its absolute discretion after March 1, 1989, an optionee may
make an election, by means of a form of election to be prescribed by the
Administrator, to have shares of Common Stock or other securities of the Company
withheld by the Company or to tender to the Company other shares of Common Stock
or other securities of the Company owned by the optionee on the date of
determination of the amount of tax to be withheld as a result of exercise of
such option (the "Tax Date") to pay the amount of tax that is required by law to
be withheld by the Company as a result of the exercise of such option from
amounts payable to such person, subject to the following limitations (unless,
except in the case of subparagraphs (a) and (b), the Administrator determines
that such limitations are not necessary to comply with the provisions of Rule
16b-3 or that Rule 16b-3 is not applicable to Plan);
(a) such election shall be irrevocable;
(b) such election shall be subject to the disapproval of the
Administrator at any time;
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<PAGE>
(c) such election may not be made within six months of the
grant date of the option the exercise of which resulted in the tax Withholding
obligation (except that this limitation shall not apply in the event of death or
disability of such person occurring prior to the expiration of the six-month
period); and
(d) such election must be made either (i) at least six
months prior to the Tax Date, or (ii) in any ten business-day period beginning
on the third business day following the date of release by the Company for
publication of quarterly or annual summary statements of sales or earnings of
the Company.
Any securities so withheld or tendered will be valued by the Company
as of the Tax Date.
6.10 OTHER PROVISIONS. Each option granted under this Plan may
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator.
6.11 DETERMINATION OF VALUE. For purposes of the Plan, the
value of Common Stock or other securities of the Company shall be determined as
follows:
(a) If the stock of the Company is listed on any established
stock exchange or a national market system, including without limitation the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation System, its fair market value shall be the closing sales
price for such stock or the closing bid if no sales were reported, as quoted on
such system or exchange (or the largest such exchange) for the date the value is
to be determined (or if there are no sales for such date, then for the last
preceding business day on which there were sales), as reported in the WALL
STREET JOURNAL or similar publication.
(b) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).
(c) In the absence of an established market for the stock,
the fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other corporations in the same or a similar line of business.
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<PAGE>
6.12 EXERCISE PRICE. The exercise price of an option shall be
not less than 85 percent of the fair market value (determined in accordance with
Section 6.11) of the stock subject to the option on the date of grant, except
that the exercise price of an option granted to any person who owns, directly or
indirectly, (or is treated as owning by reason of attribution rules, currently
set forth in Code Section 425) stock of the Company constituting more than ten
percent of the total combined voting power of all classes of the outstanding
stock of the Company or of any Affiliate of the Company (a "Ten Percent
Stockholder"), shall in no event be less than 110 percent of such fair market
value.
6.13 OPTION TERM. Unless an earlier expiration date is
specified by the Administrator at the time of grant, each option granted under
this Plan shall expire ten years and two days from the date of its grant, except
that an option granted to any Ten Percent Stockholder shall expire five years
from the date of its grant.
7. MANNER OF EXERCISE
An optionee wishing to exercise an option shall give written notice
to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 6.6. The date the Company receives
written notice of an exercise hereunder accompanied by payment of the exercise
price and, if required, by payment of any federal or state withholding or
employment taxes required to be withheld by virtue of exercise of the option,
will be considered as the date such option was exercised.
Promptly after receipt of written notice of exercise of an option,
the Company shall, without stock issue or transfer taxes to the optionee or
other person entitled to exercise the option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares of
stock. An optionee or transferee of an optionee shall not have any privileges
as a stockholder with respect to any stock covered by the option until the date
of issuance of a stock certificate.
8. CONSULTING RELATIONSHIP
Nothing in this Plan or any option granted thereunder shall
interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate any optionee's consulting relationship with the Company
at any time, nor confer upon any optionee any right to continue to consult to
the Company or to any of its Affiliates.
9. FINANCIAL INFORMATION
The Company shall provide during the period an option is outstanding
to each holder of such option a copy of the
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<PAGE>
financial statements of the Company as prepared either by the Company or
independent certified public accountants of the Company. Such financial
statements shall be delivered as soon as practicable following the end of the
Company's fiscal year during the period options are outstanding.
10. AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN
The Board of Directors may at any time amend, alter, suspend or
discontinue this Plan, except to the extent that stockholder approval is
required by applicable law; provided, however, that no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
optionee under any option theretofore granted, without his consent, or that,
without the approval of the holders of a majority of the outstanding shares of
the Company, would:
(a) Except as is provided in Section 6.1 of this Plan, increase
the total number of shares of stock reserved for the purposes of this Plan;
(b) Extend the duration of this Plan; or
(c) Change the class of persons eligible to receive options
granted hereunder.
The Board of Directors may, at any time without stockholder
approval, amend the Plan and the terms of any option outstanding under the Plan,
provided that such amendment is designed to maximize federal income tax benefits
accorded to stock options and provided further, that with respect to outstanding
options, the optionee consents to such amendment.
11. EFFECTIVE DATE OF THIS PLAN
This Plan shall become effective upon adoption by the Board of
Directors, provided, however, that no option shall be exercisable unless and
until written consent of the stockholders of the Company, or approval by
stockholders of the Company voting at a validly called stockholders meeting and
holding a majority (or such greater number as may be required by law or
applicable governmental regulations or orders) of the shares entitled to vote,
is obtained within 12 months after adoption by the Board of Directors. Options
may be granted and exercised under this Plan only after there has been
compliance with all applicable federal and state securities laws.
Plan adopted by the Board of Directors on December 10, 1987.
Plan approved by the stockholders on March 1, 1988.
Plan amended by the Board of Directors on December 12, 1991.
Amendments approved by the stockholders on June 16, 1992.
Plan amended by the Board of Directors on June 14, 1995.
-8-
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SEQUUS PHARMACEUTICALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The Employee Stock Purchase Plan (the "Plan") is designed to
encourage and assist employees of SEQUUS Pharmaceuticals, Inc., its parent and
participating subsidiaries, if any (collectively, the "Company") to acquire an
equity interest in the Company through the purchase of shares of Common Stock.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors (or a
committee of two or more "disinterested" directors, which in either case is
referred to as the "Board") in accordance with Rule 16b-3 of the Securities and
Exchange Commission, as in effect from time to time. Any committee or persons
as the Board may from time to time select (the "Administrator") shall be
responsible for any matters for which a "disinterested administrator" is not
required by Rule 16b-3. Subject to the express provisions of the Plan, to the
overall supervision of the Board, and to the limitations of Section 423 or any
successor provision of the Internal Revenue Code of 1986, as amended (the
"Code"), the Administrator may administer and interpret the Plan in any manner
it believes to be desirable, and any such interpretation shall be conclusive and
binding on the Company and all participants.
3. NUMBER OF SHARES
The Company has reserved for sale under the Plan 250,000 shares of
Common Stock. Shares sold under the Plan may be newly issued shares or shares
reacquired in private transactions or open market purchases, but all shares sold
under the Plan regardless of source shall be counted against the 250,000-share
limitation.
In the event of any reorganization, recapitalization, stock split,
reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights, or other similar change in the capital
structure of the Company, the Administrator may make such adjustment, if any, as
it deems appropriate in the number, kind, and purchase price of the shares
available for purchase under the Plan and in the maximum number of shares
subject to any option under the Plan.
4. ELIGIBILITY REQUIREMENTS
Each employee, except those described in the next paragraph, shall
become eligible to participate in the Plan in
<PAGE>
accordance with Section 5 on the first Enrollment Date following employment by
the Company. Participation in the Plan is entirely voluntary.
The following employees are not eligible to participate in the Plan:
(i) employees who would, immediately upon enrollment in the Plan,
own directly or indirectly (including options or rights to acquire), an
aggregate of more than five percent of the total combined voting power or value
of all outstanding shares of all classes of the Company or any subsidiary; and
(ii) employees who are customarily employed by the Company less
than 20 hours per week or less than five months in any calendar year.
"Employee" shall mean any individual who performs services for Sequus
Pharmaceuticals, Inc. or any participating subsidiary pursuant to an employment
relationship described in Treasury Regulations Section 31.3401(c)-l or any
successor provision. "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with Sequus Pharmaceuticals, Inc. if, as of the
applicable Enrollment Date, each of the corporations other than the last
corporation in the chain owns stock possessing 50% or more of the combined
voting power of all classes of stock in one of the other corporations in the
chain. A "participating subsidiary" shall mean a subsidiary which has been
designated by the Administrator as covered by the Plan.
5. ENROLLMENT
Any eligible employee may enroll or re-enroll in the Plan as of the
first trading day of any January, April, July, and October, or such other
specific trading days established by the Administrator from time to time
("Enrollment Dates"). In order to enroll an eligible employee must complete,
sign, and submit to the Company an enrollment form. Any enrollment form
received by the Company before the 15th day of the month preceding an Enrollment
Date, or such other date established by the Administrator from time to time
("Cut-Off Date"), will be effective on that Enrollment Date. As a condition to
participation, each enrollee agrees to inform the Company promptly of the sale
or other disposition of shares acquired under the Plan within either of the
periods specified in Section 423(a)(1) of the Code (currently, two years from
the date of grant of the option pursuant to which such shares were acquired and
one year after the Purchase Date for such shares).
6. GRANT OF OPTIONS ON ENROLLMENT
Enrollment by a participant in the Plan on an Enrollment Date will
constitute the grant by the Company to the participant of options to purchase
shares of Common Stock from the Company under the Plan. The number of options
granted will
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equal the number of percentage points of salary that the participant elects to
have withheld. An increase (but not a decrease) in the level of payroll
withholding also constitutes the grant of new options for the incremental change
in the percentage withheld but does not cancel outstanding options. Any
participant whose options expire and who has not withdrawn from the Plan will
automatically be re-enrolled in the Plan and granted new options (equal in
number to the number of expiring options) on the Enrollment Date immediately
following the Purchase Date on which his then-current options expire. Any date
on which a participant is granted options under the Plan is referred to as a
"Grant Date."
Each option granted under the Plan shall have the following terms:
(i) whether or not all shares have been purchased thereunder, the
option will expire on the earlier to occur of (a) the completion of the purchase
of shares on the last Purchase Date occurring within 27 months of the Grant Date
for such option, or such shorter option period as may be established by the
Board from time to time prior to an Enrollment Date for all options to be
granted on such Enrollment Date, or (b) the date on which participation of such
participant in the Plan terminates for any reason;
(ii) payment for shares purchased under the option will be made
only through payroll withholding in accordance with Section 7;
(iii) purchase of shares upon exercise of the option will be
accomplished only in installments in accordance with Section 8;
(iv) the price per share under the option will be determined as
provided in Section 8;
(v) unless otherwise established by the Board from time to time
prior to an Enrollment Date, the number of shares available for purchase under
each option will be the quotient of (a) 75,000, divided by (b) the then fair
market value of the Common Stock subject to option for all options to be granted
on such Enrollment Date; provided, however, that in no event shall an option
give the participant the right to purchase shares at a rate which accrues in
excess of $75,000 of fair market value of such shares (determined at the Grant
Date of such option) in any calendar year during which the option is
outstanding;
(vi) notwithstanding clause (v), the option (taken together with
all other options then outstanding under this Plan and under all other similar
stock purchase plans of Sequus Pharmaceuticals, Inc. or any parent or
subsidiary) will in no event give the participant the right to purchase shares
at a rate which accrues in excess of $25,000 of fair market value of such
shares (determined in accordance with Section 423(b)(8) of the Code at
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<PAGE>
the applicable grant dates) in any calendar year during which such participant
is enrolled in the Plan at any time; and
(vii) the option will in all respects be subject to the terms and
conditions of the Plan, as interpreted by the Administrator from time to time.
7. PAYROLL WITHHOLDING
Each participant may elect to make contributions at a rate equal to
any whole percentage up to a maximum of 10%, or such other maximum percentage as
the Board may establish from time to time before an Enrollment Date for all
options to be granted on such Enrollment Date, of his or her monthly earnings
from the Company. The rate of contribution shall be designated by the
participant in the enrollment form. A participant may change the contribution
rate effective as of any Enrollment Date by delivery to the Company not later
than the related Cut-Off Date of a new enrollment form indicating the revised
rate. An increase (but not a decrease) in the contribution rate constitutes the
grant of new options. If the rate is decreased and there is more than one
option outstanding, the participant may specify the option to which such
decrease should apply.
Contributions shall be credited to a participant's account as soon
as administratively feasible after payroll withholding. The Company shall be
entitled to use of the contributions immediately after payroll withholding and
shall have no obligation to pay interest on the contributions to any
participant.
8. PURCHASE OF SHARES
On the last trading day of each March, June, September, and
December, or on such other specific trading days as may be established by the
Board from time to time prior to an Enrollment Date for all options to be
granted on such Enrollment Date ("Purchase Dates"), the Company shall apply the
funds then credited to each participant's account to the purchase of whole and
fractional shares of Common Stock. The cost to the participant for the shares
purchased under any option shall be 85% of the lower of:
(i) the closing price of Common Stock on the NASDAQ National
Market System on the Grant Date for such option;
(ii) the closing price of Common Stock on the NASDAQ National
Market System on that Purchase Date; or
(iii) if no closing price is reported on either of such dates, the
closing price of the Common Stock on the NASDAQ National Market System on the
date next preceding such Grant Date or such Purchase Date, as the case may be,
on which a closing price is reported.
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Certificates evidencing shares purchased on any Purchase Date shall be delivered
as soon as administratively feasible, but participants shall be treated as the
owners of their shares effective as of the Purchase Date. Any cash equal to
less than the price of the smallest fractional share of Common Stock which may
be purchased under the Plan left in a participant's payroll deduction account on
a Purchase Date shall be carried forward in such participant's account for
application on the next Purchase Date.
9. WITHDRAWAL FROM THE PLAN
A participant may withdraw from the Plan in full (but not in part)
at any time. All funds credited to a participant's payroll deduction account
shall be distributed to the participant without interest as soon as
administratively feasible after the Company receives the withdrawal notice. An
employee who has withdrawn may not return funds to the Company and require the
Company to apply those funds to the purchase of shares. Any eligible employee
who has withdrawn from the Plan may, however, enroll in the Plan again on any
subsequent Enrollment Date in accordance with Section 5.
10. TERMINATION OF EMPLOYMENT
Participation in the Plan terminates immediately when a participant
ceases to be employed by the Company for any reason whatsoever (including death
or disability) or otherwise becomes ineligible to participate in the Plan. As
soon as administratively feasible after termination, the Company shall pay to
the participant or his or her beneficiary or legal representative all amounts
credited to the participant's payroll deduction account.
11. LEAVE OF ABSENCE
Unless a participant has voluntarily withdrawn from the Plan, shares
will be purchased for his or her account on the Purchase Date next following
commencement of a leave of absence of such participant. Participation in the
Plan will terminate immediately after the purchase of shares on such Purchase
Date, however, unless:
(i) the leave of absence is of less than 90 days' duration and is
due to illness, injury, or other cause approved by the Administrator; or
(ii) the participant's right to reemployment after such leave is
guaranteed by contract or statute.
12. DESIGNATION OF BENEFICIARY
Each participant may designate one or more beneficiaries in the
event of death and may, in his or her sole discretion, change such designation
at any time. Any such
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designation shall be effective upon receipt by the Company and shall control
over any disposition by will or otherwise.
As soon as administratively feasible after the death of a
participant, amounts credited to the participant's payroll deduction account
shall be paid in cash to the designated beneficiaries or, in the absence of a
designation, to the executor, administrator, or other legal representative of
his or her estate. Such payment shall relieve the Company of further liability
with respect to the Plan on account of the deceased participant. If more than
one beneficiary is designated, each beneficiary shall receive an equal portion
of the account unless the participant has given express contrary instructions.
13. ASSIGNMENT
No participant may assign his or her rights under the Plan by
operation of law or otherwise. No participant may create a lien on any funds,
securities, rights, or other property held by the Company for the account of the
participant under the Plan, except to the extent that there has been a
designation of beneficiaries in accordance with the Plan, and except to the
extent permitted by the laws of descent and distribution if beneficiaries have
not been designated.
A participant's right to purchase shares under the Plan shall be
exercisable only during the participant's lifetime and only by him or her,
except that a participant may direct the Company in the enrollment form to issue
share certificates to the participant jointly with one or more other persons
with right of survivorship, in spousal community property, or to certain forms
of trusts approved by the Administrator.
14. ADMINISTRATIVE ASSISTANCE
If the Administrator in its discretion so elects, it may retain a
brokerage firm, bank, or other financial institution to assist in the purchase
of shares, delivery of reports, or other administrative aspects of the Plan. If
the Administrator so elects, each participant shall be deemed upon enrollment in
the Plan to have authorized the establishment of an account on his or her behalf
at such institution. Shares purchased by a participant under the Plan shall be
held in the account in the participant's name, or if the participant so
indicates in the enrollment form, in the participant's name together with the
name of one or more other persons, in joint tenancy with right of survivorship,
in spousal community property, or in certain forms of trusts approved by the
Administrator.
15. COSTS
The Company shall pay all costs and expenses incurred in
administering the Plan excepting stamp duties or transfer taxes applicable to
participation in the Plan, which it may charge to the participant's account.
The Company shall pay
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brokerage fees for the purchase of shares by a participant, but brokerage fees
for the resale of shares by a participant shall be borne by the participant.
16. REPORTS
The Company shall provide or cause to be provided to each
participant a report of his or her contributions and the shares purchased by the
participant on each Purchase Date.
17. EQUAL RIGHTS AND PRIVILEGES
All eligible employees shall have equal rights and privileges with
respect to the Plan so that the Plan qualifies as an "employee stock purchase
plan" within the meaning of Section 423 of the Code and the Treasury Regulations
thereunder. Any provision of the Plan which is inconsistent with Section 423 of
the Code shall without further act or amendment by the Company or the Board be
reformed to comply with the requirements of Section 423 of the Code. This
Section 17 shall take precedence over all other provisions in the Plan.
18. APPLICABLE LAW
The Plan shall be governed by the substantive laws (excluding the
conflict of laws rules) of the State of California.
19. NO RIGHT OF EMPLOYMENT
Neither the grant nor the exercise of any right to purchase shares
under this Plan nor anything in this Plan shall impose upon the Company or any
subsidiary any obligation to employ or continue to employ any participant. The
right of the Company and any subsidiary to terminate any employee shall not be
diminished or affected because any right to purchase shares has been granted to
such employee.
20. REQUIREMENTS OF LAW
(a) The Company shall not be required to sell, issue or deliver
any shares of Common Stock under this Plan if such sale, issuance or delivery
might constitute a violation by the Company or the participant of any provision
of law. Unless a registration statement under the Securities Act of 1933 (the
"Act") is in effect with respect to the shares of Common Stock proposed to be
delivered under the Plan, the Company shall not be required to issue such shares
if, in the opinion of the Company or its counsel, such issuance would violate
the Act. Regardless of whether such shares of Common Stock have been registered
under the Act or registered or qualified under the securities laws of any state,
the Company may impose restrictions upon the hypothecation or further sale or
transfer of such shares (including the placement of appropriate legends on stock
certificates) if, in the judgment of the Company or its counsel,
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<PAGE>
such restrictions are necessary or desirable to achieve compliance with the
provisions of the Act, the securities laws of any state, or any other law,
including the Internal Revenue Code. As a condition precedent to the issuance
of any shares of Common Stock under the plan, the Company may require evidence
satisfactory to it or its counsel to the effect that the purchase of such shares
is acquiring the shares for investment and not with a view to their
distribution. Any determination by the Company or its counsel in connection
with any of the foregoing shall be final and binding on all parties.
(b) If, in the opinion of the Company and its counsel, any legend
placed on a stock certificate representing shares of Common Stock issued under
the plan is no longer required or desirable in order to comply with applicable
securities or other laws, the holder of such certificate shall be entitled to
exchange such certificate for a certificate representing a like number of shares
lacking such legend.
(c) The Company may, but shall not be obligated to, register or
qualify any securities covered by the Plan. The Company shall not be obligated
to take any other affirmative action in order to cause the grant or exercise of
any right or the issuance, sale, or delivery of shares pursuant to the exercise
of any right to comply with any law.
21. CORPORATE TRANSACTIONS
New option rights may be substituted for the option rights under the
Plan, or the Company's outstanding obligations under the Plan may be assumed, by
an employer corporation other than the Company, or by a parent or subsidiary
corporation of such employer corporation, in connection with any merger,
consolidation, acquisition, separation, reorganization or liquidation, or like
occurrence in which the Company is involved.
22. MODIFICATION, TERM, AND TERMINATION
The Board may amend, alter, or terminate the Plan or any option at
any time. No amendment shall be effective unless within 12 months after it is
adopted by the Board it is approved by the holders of a majority of the voting
power of the Company's outstanding shares, if such amendment would:
(i) increase the number of shares reserved for purchase under the
Plan;
(ii) materially increase the benefits to participants; or
(iii) modify the requirements for participation.
In the event the Plan is terminated, the Board may elect to
terminate all outstanding options immediately or upon completion of the purchase
of shares on the next Purchase Date,
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or may elect to permit options to expire in accordance with their terms (and
participation to continue through such expiration dates). If the options are
terminated prior to expiration, all funds contributed to the Plan that have not
been used to purchase shares shall be returned to the participants as soon as
administratively feasible.
23. BOARD AND STOCKHOLDER APPROVAL
This Plan was approved by the Board of Directors on March 20, 1990.
This Plan shall be subject to and conditioned upon approval of the Plan by the
affirmative vote of the holders of a majority of the outstanding shares of
Common stock of the Company within 12 months of the date the Plan is approved by
the Board. No right to purchase shares may be exercised in whole or in part
unless and until such stockholder approval is obtained.
Plan approved by the stockholders on May 30, 1990.
Plan amended by the Board of Directors on June 14, 1995.
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/X/ PLEASE MARK YOUR CHOICES LIKE THIS
---------- -------------------
Common Preferred
- --------------------------------------------------------------------------------
THE BOARD RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
- --------------------------------------------------------------------------------
FOR ALL WITHHOLD FOR ALL
Proposal 1. To elect as directors
Robert G. Faris,
I. Craig Henderson, L.
Scott Minick, Richard / / / /
C.E. Morgan and E.
Donnall Thomas.
INSTRUCTION: To withhold authority to
vote for any individual
nominee, write that
nominee's name on the
line provided below:
------------------------
FOR AGAINST ABSTAIN
Proposal 2. To approve the proposed
Certificate of
Amendment of the / / / / / /
Company's Certificate of
Incorporation
Proposal 3. To approve the proposed
amendments to the 1987 / / / / / /
Company's Employee Stock
Option Plan.
Proposal 4. To approve the proposed
amendment to the
Company's 1987 / / / / / /
Consultant Stock Option
Plan.
Proposal 5. To approve the proposed
amendment to the
Company's 1990 Director / / / / / /
Stock Oprion Plan.
Proposal 6. To approve the proposed
amendment to the / / / / / /
Company's Employee Stock
Purchase Plan.
Signature(s) Date, 1995
---------------------------------------------- ----------
Please date and sign exactly as name(s) appear(s) hereon. If shares are held
jointly, each holder should sign. Please give full title and capacity in which
signing if not signing as an individual.
<PAGE>
PROXY
SEQUIS PHARMACEUTICALS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) ROBERT G. FARIS AND SALLY A.
DAVENPORT, or either one of them, each with full power of substitution, as the
lawful attorneys and proxies of the undersigned to vote as designated below,
and in their discretion, upon such other business as may properly be
presented to the meeting, all of the shares of SEQUIS PHARMACEUTICALS, INC.
(the "Company") which the undersigned shall be entitled to vote at the Annual
Meeting of Stockholders to be held on September 12, 1995 at the offices of
the Company at 960 Hamilton Court, Menlo Park, California, and at any
adjournments or postponements thereof.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned stockholder. WHEN NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED FOR THE NOMINEES AND THE PROPOSALS LISTED ON THE REVERSE. This proxy may
be revoked at any time prior to the time it is voted by any means described in
the accompanying Proxy Statement.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
