<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SEQUUS PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LOGO]
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 13, 1996
----------------------
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 June 13, 1996 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 certain amendments to the Company's 1990 Director Stock
Option Plan described in the accompanying Proxy Statement.
3. 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 May 3, 1996 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,
/s/ SALLY A. DAVENPORT
-----------------------------------
Sally A. Davenport,
Secretary
Menlo Park, California
May 9, 1996
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> 3
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 offices of the Company,
960 Hamilton Court, Menlo Park, California 94025, on June 13, 1996 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 May 9, 1996.
INFORMATION CONCERNING SOLICITATION AND VOTING
Only stockholders of record at the close of business on May 3, 1996 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 28,937,016 shares of Common Stock, par value $.0001 per share
("Common Stock"). Holders of Common Stock are entitled to one vote for each
share of Common 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 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 directors 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 shares of stock
having voting power present. 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> 4
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 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
$7,500 plus out-of-pocket expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the Company's
outstanding shares of Common Stock beneficially owned as of May 3, 1996 by: (i)
each person who, to the best knowledge of the Company, beneficially owns more
than five percent of the outstanding Common Stock; (ii) all directors; (iii) all
officers named in the Summary Compensation Table below; and (iv) all directors
and officers as this current 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, based on information supplied by
such owners, have sole investment and voting power with respect to the shares of
Common Stock shown as being beneficially owned by them, except as otherwise set
forth in the footnotes to the table.
<TABLE>
<CAPTION>
Number of Percent of
Name and Address Shares(1) Class
- --------------------------------------------------- ------------ ----------
<S> <C> <C>
Amerindo Investment Advisors, Inc. . . . . . . . . 2,171,786(2) 7.5%
One Embarcadero Center, Suite 2300
San Francisco, CA 94111
Morgan Investment Corporation . . . . . . . . . . . 1,500,000(3) 5.2%
902 Market Street
Wilmington, DE 19801
FMR Corp. . . . . . . . . . . . . . . . . . . . . . 1,823,900(4) 6.3%
82 Devonshire Street
Boston, MA 02109
Denver Investment Advisors LLC . . . . . . . . . . 1,451,400 5.0%
1225 17th Street
26th Floor
Denver, CO 80202
Nicolaos V. Arvanitidis, Ph.D(5). . . . . . . . . . 738,892(6) 2.5%
Robert G. Faris . . . . . . . . . . . . . . . . . . 55,691 *
I. Craig Henderson, M.D. . . . . . . . . . . . . . 200,000 *
Richard C.E. Morgan . . . . . . . . . . . . . . . . 643,815(7) 2.2%
L. Scott Minick . . . . . . . . . . . . . . . . . . 111,116 *
E. Donnall Thomas, M.D. . . . . . . . . . . . . . . 42,500 *
Joseph M. Limber. . . . . . . . . . . . . . . . . . 103,753 *
Joseph J. Vallner . . . . . . . . . . . . . . . . . 78,497 *
Marc J. Gurwith . . . . . . . . . . . . . . . . . . 2,215 *
Francis J. Martin . . . . . . . . . . . . . . . . . 118,454 *
All directors and executive officers as a group
(15 persons) . . . . . . . . . . . . . . . . . . . 2,387,276 7.9%
</TABLE>
- ------------------
* Less than 1%
2
<PAGE> 5
(1) Includes shares subject to warrants or options exercisable within 60 days
after May 3, 1996 as if such shares were outstanding on May 3, 1996 and
assumes that no other person has exercised any outstanding warrants or
options.
(2) According to Schedule 13D filed by Amerindo Investment Advisors, Inc., a
California corporation, Amerindo Advisors (U.K.) Limited, Amerindo
Investment Advisors, Inc., a Panama corporation, Alberto W. Vilar and Gary
A. Tanaka, all parties have shared voting and dispositive power with
respect to the shares listed in the table, and all parties disclaim
beneficial ownership of the shares listed in the table.
(3) 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. all parties have shared voting and dispositive power with
respect to the shares listed in the table.
(4) According to Schedule 13D filed by FMR Corp., Edward C. Johnson 3d and
Abigail P. Johnson, Edward C. Johnson 3d and FMR Corp. through its control
of Fidelity Management and Research Company each have sole power to dispose
of 1,756,800 shares. Fidelity Management Trust Company is the beneficial
owner of 67,100 shares, over which Edward C. Johnson 3d and FMR Corp.,
through its control of Fidelity Management Trust Company, have sole voting
and dispositive power.
(5) Reflects share ownership as of the date of Dr. Arvanitidis' retirement as
Chairman of the Board and Chief Executive Officer of the Company in June
1995.
(6) As of the date of his retirement, Dr. Arvanitidis held 13,880 shares for
the benefit of his children.
(7) Includes 591,815 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.
3
<PAGE> 6
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. All
five nominees for election to the Board were elected to their present term by
the stockholders of the Company.
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. 54 Chairman of the Board and Chief 1993
Executive Officer
L. Scott Minick 44 President, Chief Operating Officer 1995
and Director
Robert G. Faris(1)(2) 58 Director 1985
Richard C.E. Morgan(1)(2) 51 Director 1990
E. Donnall Thomas, M.D.(1)(2) 76 Director 1993
</TABLE>
- ----------------------
(1) Member of the Compensation and Plan Committee of the Board.
(2) Member of the Audit Committee of the Board.
I. CRAIG HENDERSON, M.D. 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
4
<PAGE> 7
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. Mr. Minick received a M.B.A.
degree from Northwestern University.
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., a laser systems company,
Celgene Corporation, a biotechnology company, Quidel Corporation, a medical
diagnostics company and MediSense, Inc., a blood glucose monitoring system
company.
E. DONNALL THOMAS, M.D. has served as a director of SEQUUS since May 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. The Restated Certificate of
Incorporation and bylaws of the Company contain provisions eliminating or
limiting the personal liability of directors for violations of a director's
fiduciary duty to the extent permitted by the Delaware General Corporation Law.
BOARD AND COMMITTEE MEETINGS
The Board met 11 times during 1995. 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 met once during 1995 in connection with
the compensation and stock option grants awarded to Dr. Henderson, Chairman of
the Board and Chief Executive Officer, and Mr. Minick, President and Chief
Operative Officer. 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. Other than the award made by the Compensation
and Plan Committee, during 1995 the Board as a whole generally 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
5
<PAGE> 8
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 once during 1995. 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, 1995, the
Company paid consulting fees of $10,000 and $15,000 to each of Messrs. Faris and
Morgan respectively in consideration of their services as directors of the
Company and $22,000 to Dr. Thomas in consideration of his services as a director
and a consultant to the Company and $60,000 to Dr. Henderson in consideration
for his services as a director and consultant to the Company prior to his
employment by the Company in June 1995. In addition, Messrs. Faris and Morgan
each received $50,000 in consideration for their assistance in recruiting a
replacement for Dr. Arvanitidis upon his retirement, which resulted in the
successful recruitment of Dr. Henderson and Mr. Minick.
The Company also 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 ("NQO") to
purchase 25,000 shares of Common Stock on the later of (a) the adoption of the
1990 Director Plan, or (b) such director's first election to the Board. Each
eligible director receives, in each calendar year, an automatic nondiscretionary
grant of NQOs 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. In addition, each non-employee director who was a
director on January 1, 1992 received a special one-time grant, on March 8,
1996, of options to purchase 12,500 shares. On March 8, 1996, and on each annual
grant date thereafter, each eligible director who is a member of a committee of
the Board shall receive a grant of options to purchase 2,500 shares. 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
granted before March 8, 1996 are exercisable immediately. Each initial grant of
25,000 options granted on or after March 8, 1996 shall become exercisable with
respect to 1/16th of the number of shares covered by such option for each three
month period that elapses after the date of grant, so that such option shall be
fully exercisable on the fourth anniversary of the date of grant. Each annual
grant granted on or after March 8, 1996 shall become exercisable with respect to
1/4 of the number of shares covered by such option for each three month period
that elapses after the date of grant, so that such option shall be fully
exercisable on the first anniversary of the date such option was granted. The
right to exercise any option generally expires upon the earlier of ten years
from the date of grant or one year after a non-employee director's termination
as a non-employee director. See "Proposal 2--Adoption of Amendments to the 1990
Director Stock Option Plan."
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation for the
fiscal years ended December 31, 1993, 1994 and 1995 received by the two
individuals who served as the Company's Chief Executive Officer during 1995 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
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- ------------
NAME AND PRINCIPAL POSITION AS OF OTHER ANNUAL ALL OTHER
DECEMBER 31, 1995 YEAR SALARY ($) BONUS($)(1) COMPENSATION ($) OPTIONS(#) COMPENSATION ($)(2)
- ------------------------------------ ---- ---------- ----------- ---------------- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, Ph.D. . . 1995 178,531 250,000 0 0 0
Chairman of the Board and Chief 1994 250,008 93,753 0 267,975 3,750
Executive Officer(3) 1993 240,504 0 0 89,325 4,497
I. Craig Henderson, M.D. . . . . . 1995 142,812 0 0 350,000 3,543
Chairman of the Board and Chief 1994 0 0 0 12,500 0
Executive Officer(4) 1993 0 0 0 25,000 0
Joseph M. Limber . . . . . . . . . 1995 168,097 37,615 0 26,250 3,750
Senior Vice President(5) 1994 128,400 20,865 0 52,500 3,744
1993 121,637 0 0 0 3,121
Joseph J. Vallner, Ph.D. . . . . . . 1995 167,873 39,456 0 5,500 2,772
Senior Vice President for 1994 142,392 23,139 0 90,000 14,136(6)
Research and Development 1993 134,196 0 0 20,000 1,992
Marc Joseph Gurwith, M.D., J.D. . . 1995 154,300 0 0 50,000 3,750
Vice President, Associate Medical 1994 0 0 0 0 0
Director 1993 0 0 0 0 0
Francis J. Martin, Ph.D. . . . . . 1995 146,636 34,961 0 0 3,750
Vice President, Chief Scientist 1994 128,808 20,930 0 69,364 3,750
1993 121,908 0 0 23,121 3,750
</TABLE>
- -----------------------
(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. The bonus
amounts earned in 1995 were paid in 1996.
(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) Dr. Arvanitidis retired as Chairman of the Board and Chief Executive
Officer of the Company in June 1995.
(4) Dr. Henderson accepted the position of Chairman of the Board and Chief
Executive Officer of the Company in June 1995. Excludes amounts paid
to him as a director. See "Director Compensation".
(5) Mr. Limber resigned as Senior Vice President effective April 30, 1996.
See "Employment and Severance Arrangements" below.
(6) Includes $12,000 principal amount of indebtedness to the Company
cancelled in 1994. See "Certain Transactions" below.
7
<PAGE> 10
The following table sets forth further information regarding the grants
of stock options during the fiscal year ended December 31, 1995 to the Named
Officers. Since inception, the Company has not granted any stock appreciation
rights.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANT
--------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
PERCENTAGE OF ASSUMED RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED (#)(1) FISCAL 1995(%) ($/SHARE) DATE 5% ($) 10% ($)
- ---------------------------------- -------------- -------------- --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, Ph.D. -- -- -- -- -- --
I. Craig Henderson, M.D. 350,000 24.5 8.56 6/27/05 1,884,719 4,776,247
Joseph M. Limber 26,250 1.8 6.81 4/17/05 112,464 285,005
Joseph J. Vallner, Ph.D. 5,500 0.4 6.81 4/17/05 23,564 59,716
Marc Joseph Gurwith, M.D., J.D. 50,000 3.5 8.06 1/27/05 253,523 642,477
Francis J. Martin, Ph.D. -- -- -- -- -- --
</TABLE>
- -----------
(1) 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 ten-year 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.
The following table sets forth information regarding options exercised
by the Named Officers during fiscal 1995 and the number and value of unexercised
options held at fiscal year-end.
8
<PAGE> 11
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES IN LAST FISCAL YEAR
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
------------------ ------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nicolaos V. Arvanitidis, Ph.D.(3) .. 126,392 1,074,001 318,882 -- 2,812,966 --
I. Craig Henderson, M.D............. -- -- 137,500 250,000 806,250 1,421,875
Joseph M. Limber ................... -- -- 76,260 62,500 420,625 415,859
Joseph J. Vallner, Ph.D............. -- -- 56,674 58,826 380,885 420,020
Marc Joseph Gurwith, M.D., J.D...... -- -- -- 50,000 -- 309,375
Francis J. Martin, Ph.D............. 7,857 83,519 83,537 40,456 915,144 303,420
</TABLE>
- -----------
(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 29, 1995 ($14.25).
(2) Generally, 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. The shares listed in the columns labeled "unexercisable" are
shares subject to the Company's right of repurchase.
(3) Dr. Arvanitidis retired as Chairman of the Board and Chief Executive
Officer of the Company in June 1995.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Board has a Compensation and Plan Committee (the "Committee"), the
function of which is to review and recommend to the Board management
compensation and to administer the Company's stock option plans. During fiscal
1995, management compensation issues generally were reviewed by the Board as a
whole, with Dr. Arvanitidis abstaining with respect to the adoption of
resolutions pertaining to his compensation and his retirement package prior to
his retirement in June 1995 and with Dr. Henderson and Mr. Minick abstaining
with respect to the adoption of resolutions pertaining to the bonus awards to
the management group based on corporate performance during 1995. However, the
Committee adopted the initial employment agreements with Dr. Henderson and Mr.
Minick which included base salary and bonus provisions and the grant of an
option to purchase the Company's Common Stock.
The Company believes that its ability to achieve the objectives of
obtaining regulatory approval in the United States and key foreign markets for
and commercializing its leading pharmaceutical products, AMPHOCIL(TM) and
DOXIL(R), 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 are 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
9
<PAGE> 12
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 which denies a deduction to any publicly held corporation for
compensation paid to any "covered employees" (which are defined as the most
highly compensated officers, as of the end of the taxable year) to the extent
that the compensation exceeds $1 million in any taxable year of the corporation
beginning after 1993. 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 1995 tax year, all compensation paid by
the Company in 1995 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 addition, in 1995, three
executive officers received a stock option upon their promotion. 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.
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 may warrant an update to or revisions of these goals.
The principal corporate goals for 1995 were related to the following: receipt of
marketing clearance in the United States for DOXIL; recruiting and training a
sales force for the U.S. launch of DOXIL in December 1995; developing and
implementing a registration strategy for DOXIL in solid tumors; filing of a new
drug application for AMPHOTEC as required to obtain marketing clearance in the
U.S.; preparing for and meeting with the European Committee on Proprietary
and Medicinal Products as required to obtain marketing clearance in the European
Union countries; and, developing and implementing successful strategies to
finance the Company. (During 1995, the Company raised approximately $73,000,000
through two private placements and a public offering.)
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
10
<PAGE> 13
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 -- 10% of base salary. In
December 1995, the Board awarded 150% of the bonus amounts set forth above to
eligible executive officers based on the Board's assessment of corporate
performance during fiscal 1995, which was paid in 1996. In addition to the bonus
awards based upon corporate performance, each of the Vice Presidents, and the
Corporate Secretary is eligible to receive up to 10% of base salary based on
individual performance. For 1995, each eligible executive received a bonus of
10% of base salary, which was paid in 1996.
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 April 1995, the
base annual salaries of six Company executives were increased by 5.6%. These
increases were retroactive to July 1994 and were considered and approved solely
by non-employee members of the Board of Directors. In addition, in April 1995,
the Board increased the base annual salaries of six Company executives by 2.2%.
Adoption of these increases, which were retroactive to March, was made 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 Compensation and Plan Committee then meets 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. Henderson received a bonus for 1995 of $103,646.66, or 75% of his
base annual salary, in accordance with the Executive Bonus Plan described above,
which was paid in January 1996.
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.
Board of Directors(1)
- Nicolaos V. Arvanitidis, Ph.D.
- Robert G. Faris
- I. Craig Henderson, M.D.
- L. Scott Minick
- Richard C.E. Morgan
- E. Donnall Thomas, M.D.
- --------------
(1) Dr. Arvanitidis retired from the Board in June 1995, but was a member of
the Board when certain of the compensation decisions described above
were made.
11
<PAGE> 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1995, management compensation issues generally 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 and his retirement package prior to his retirement in June 1995,
and with Dr. Henderson and Mr. Minick abstaining with respect to the adoption of
resolutions pertaining to the bonus awards of the executive group based on
corporate performance in 1995. The Compensation and Plan Committee adopted the
initial employment agreements with Dr. Henderson and Mr. Minick, which included
base salary and bonus provisions and the grant of an option to purchase the
Company's Common Stock. The Compensation and Plan Committee during fiscal 1995
was composed of Mr. Faris, Mr. Morgan and Dr. Thomas. 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 1995, 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 Ms. Davenport, a
founder of the Company, Dr. Henderson and Mr. Minick. 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 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 $305,000. Mr. Minick's current base
salary is $250,000.
The Company and Dr. Arvanitidis, who retired as Chairman of the Board
and Chief Executive Officer on June 26, 1995, are party to a memorandum of
agreement dated as of April 3, 1995, as amended, (the "MOA"). The MOA sets forth
the essential terms of Dr. Arvanitidis' retirement. Under the MOA, the Company
was 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
agreed to provide up to 120 hours of consulting time to the Company. The Company
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 received certain
health and life insurance benefits and was permitted to retain his Company car.
In 1995 the Company also entered into severance arrangements with Mr.
Peter Leigh, who resigned as Vice President and Chief Financial Officer,Dr.
Richard Mamelok, who resigned as Vice President and Medical Director and Mr.
Limber, relating to their resignations from the Company. The Company 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 was extended until June 16,
1996, and the Company 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 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 resigned effective August 11, 1995. The
Company agreed to pay Dr. Mamelok $47,796 upon his termination, which is equal
to three months of base salary. Dr. Mamelok's stock options continued to vest
until October 21, 1995, and the exercise period for the options was extended
until October 21, 1996. Mr. Limber resigned effective April 30, 1996, but will
continue to work with the Company as a consultant for the period from April 1,
1996 to August 15, 1996. The Company will pay Mr. Limber a consulting fee of
$14,583.33 per month, forgive a loan balance of $15,000 and related interest
payments and will pay for certain outplacement services.
12
<PAGE> 15
CERTAIN TRANSACTIONS
On October 5, 1993, the Company agreed to make an unsecured loan of
$60,000 to Joseph Vallner, 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. On October 6, 1995,
the Company agreed to make an unsecured loan of $120,000 to Dr. Gurwith, Vice
President and Associate Medical Director, to facilitate his purchase of a new
residence. The loan has a term of five years and accrues interest at 8.75%. On
January 2 of each year of the loan take-down date, 20% of the loan principal
will be forgiven by the Company provided that Dr. Gurwith remains a full-time
employee of the Company through January 2, 2000. In the event of involuntary
termination of Dr. Gurwith's other than for cause, the loan shall be forgiven
in its entirety.
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,
1995, all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than ten percent stockholders were complied
with.
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, 1990.
CUMULATIVE TOTAL STOCKHOLDER RETURN
13
<PAGE> 16
<TABLE>
<CAPTION>
-----------------------------------------------------------------
SEQUUS NASDAQ
PHARMACEUTICALS, NASDAQ STOCK PHARMACEUTICAL
INC (SEQU) MARKET (US) STOCKS
-----------------------------------------------------------------
<S> <C> <C> <C>
Dec-90 100 100 100
Dec-91 822 161 266
Dec-92 444 187 221
Dec-93 400 215 197
Dec-94 286 210 148
Dec-95 633 296 271
-----------------------------------------------------------------
</TABLE>
<PAGE> 17
PROPOSAL 2
ADOPTION OF AMENDMENTS TO
THE 1990 DIRECTOR STOCK OPTION PLAN
The Company's 1990 Director Stock Option Plan (the "1990 Director
Plan") was amended by the Board of Directors on March 8, 1996, subject to
stockholder approval to: (a) remove the 50,000 share limit on the number of
shares that an eligible director may receive, (b) provide for the issuance of a
special, one-time grant of 12,500 options to eligible directors who were
non-employee directors on January 1, 1992, (c) grant, on the annual grant date,
2,500 options to each eligible director who serves as a member of a committee of
the Board of Directors, (d) provide that each initial grant of 25,000 options
granted after March 8, 1996 shall vest on a quarterly basis over a period of
four years, and (e) provide that all annual grants granted after March 8, 1996
shall vest on a quarterly basis over a period of one year. The stockholders are
asked to approve the adoption of the amendments to the 1990 Director Plan.
DESCRIPTION OF PROPOSAL
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.
Prior to adoption of the proposed amendments, the 1990 Director Plan
provided that no eligible director may receive NQOs to purchase more than 50,000
shares. In order to ensure the Company is able to retain qualified non-employee
directors, amendments eliminate the 50,000 share limit. In connection with the
elimination of the cap on the number of NQOs granted to any one non-employee
director, the 1990 Directors Plan has been amended to provide for the issuance
of a special, one-time grant of 12,500 options effective March 8, 1996 to each
director who was a director on January 1, 1992 in order to compensate them for
the NQOs to purchase 12,500 shares of Common Stock that they did not receive in
1994, 1995 and 1996, as a result of the cap.
In addition, in order to encourage service on Board committees, the
Board has proposed to amend the 1990 Director Plan to grant, on each annual
grant date, 2,500 options to each eligible director who serves as a member of a
committee or committees, except that in 1996 the grant shall be effective as of
March 8, 1996.
Finally, prior to amendment of the 1990 Directors Plan, NQOs were
exercisable immediately and not subject to vesting. The proposed amendments
impose a vesting requirement that directors earn their options through continued
service on the Board. Each initial grant of 25,000 options granted after March
8, 1996 shall become exercisable with respect to 1/16th of the number of shares
of Common Stock covered by such option for each three month period that elapses
after the date of the grant, so that such option shall be fully exercisable on
the fourth anniversary of the date the option was granted. Each annual grant
granted after March 8, 1996 shall become exercisable with respect to 1/4 of the
number of shares of Common Stock covered by such option for each three month
period that elapses after the date of grant, so that such option shall be fully
exercisable on the first anniversary of the date the option was granted.
The essential features of the 1990 Director Plan are outlined below. The
description below assumes that the amendments to the 1990 Director Plan are
approved by the stockholders.
14
<PAGE> 18
PLAN DESCRIPTION
The 1990 Director Plan provides NQOs to eligible non-employee directors
of the Company at set times and in set amounts. To the extent administration of
the 1990 Director Plan is required, it is provided by the Board of Directors.
The 1990 Director Plan is not subject to the provisions of the Employee
Retirement Income 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. The Company has three
non-employee directors eligible to participate 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, and on March 8, 1996 received a special one-time
grant of an NQO to purchase 12,500 shares. A person who became or first becomes
a non-employee director after January 31, 1990 has been and shall be 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.
Notwithstanding the foregoing, no NQOs may be granted to a person who is not a
non-employee director of the Company at the time of the proposed grant. On March
8, 1996, and on each annual grant date thereafter, each eligible director who is
a member of a committee of the Board shall receive a grant of 2,500 NQOs.
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. Each NQO held by an eligible director granted before March 8, 1996
shall become immediately exercisable in full or in part upon the grant of such
NQO. Each initial grant of 25,000 options granted on or after March 8, 1996
shall become exercisable with respect to 1/16th of the number of shares covered
by such NQO for each three month period that elapses after the date of grant, so
that such option shall be fully exercisable on the fourth anniversary of the
date such NQO was granted. Each annual grant granted on or after March 8, 1996
shall become
15
<PAGE> 19
exercisable with respect to 1/4 of the number of shares covered by such option
for each three month period that elapses after the date of grant, so that such
option shall be fully exercisable on the first anniversary of the date such
option was granted. The right to exercise any NQO generally expires upon the
earlier of ten years from the date of grant or one year after a non-employee
director's termination as a non-employee 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, modify the number of shares which may be granted under the 1990
Director Plan, change the minimum option price, or materially increase the
benefits accruing under the 1990 Director Plan.
No option shall be transferable; provided, however, that nothing
prevents transfers by will or by the applicable laws of descent and
distribution.
As of April 24, 1996, NQOs to purchase 272,500 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 5,000 shares
granted on the 1996 annual grant date and 32,500 shares granted by the Board on
March 8, 1996.
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 and each year thereafter, assuming
that each non-employee director serves on a committee of the Board and assuming
that there are three non-employee directors during 1996 and each year
thereafter.
<TABLE>
<CAPTION>
Each Year
1996(1) Thereafter(1)
-------- -------------
<S> <C> <C>
All executive officers as a group ......................... 0 0
All directors who are not employees as a group ............ 37,500 22,500
All employees (other than executive officers) as a group .. 0 0
</TABLE>
- ----------------
(1) All options granted at fair market value as of the date of grant.
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.
16
<PAGE> 20
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 a 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 their fair market value 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
necessarily equivalent to a dividend" within the meaning of the Code.
Exercise with Stock. If an optionee tenders Common Stock (other than
statutory option stock -- see above) 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 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.
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 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.
17
<PAGE> 21
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 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 PROPOSED
AMENDMENTS TO THE 1990 DIRECTOR PLAN.
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, 1996. 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, 1995 may be obtained, without charge, by writing to
Secretary, SEQUUS Pharmaceuticals, Inc., 960 Hamilton Court, Menlo Park,
California 94025.
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 1997, that proposal
must be received in writing by the Secretary of the Company at the Company's
principal executive offices no later than January 9, 1997.
18
<PAGE> 22
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,
/s/ SALLY A. DAVENPORT
----------------------------------
Sally A. Davenport,
Secretary
Menlo Park, California
May 9, 1996
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.
19
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TABLE OF CONTENTS
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ................ 2
PROPOSAL 1 ELECTION OF DIRECTORS .............................................. 4
Information Concerning the Nominees ...................................... 4
Board and Committee Meetings ............................................. 5
Director Compensation .................................................... 6
Executive Compensation ................................................... 7
Report of the Board of Directors on Executive Compensation ............... 9
Compensation Committee Interlocks and Insider Participation .............. 12
Employment and Severance Agreements ...................................... 12
Certain Transactions ..................................................... 13
Compliance With Section 16(a) of the Securities Exchange Act of 1934 ..... 13
PROPOSAL 2 ADOPTION OF AMENDMENTS TO THE 1990 DIRECTOR STOCK OPTION PLAN ...... 14
Description of Proposal .................................................. 14
Plan Description ......................................................... 15
Certain Federal Income Tax Consequences ....................................... 16
Nonqualified Stock Options ............................................... 17
Special Federal Income Tax Consideration Due to Short Swing Profit Rule .. 17
Stockholder Vote .............................................................. 18
INDEPENDENT AUDITORS .......................................................... 18
OTHER INFORMATION ............................................................. 18
STOCKHOLDER PROPOSALS ......................................................... 18
OTHER MATTERS ................................................................. 19
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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.
(h) "1996 Plan Amendment Date" shall mean March 8, 1996.
3. Administration.
(a) General. This Plan shall be administered by the Board in
accordance with the express provisions of this Plan.
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(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.
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 on the 1996 Plan
Amendment Date shall receive the Option to purchase 12,500 Shares.
(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.
(iii) On the 1996 Plan Amendment Date and on each Annual
Grant Date thereafter, each Eligible Director who is a member of a committee of
the Board shall receive the grant of an Option to purchase 2,500 Shares.
(c) Adjustment. The number of Shares for which Options are
granted in accordance with this Section 5 and the
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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:
(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 granted before the 1996 Plan Amendment Date 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. Each Option granted under
Section 5(a) on or after the 1996 Plan Amendment Date shall become exercisable
with respect to 1/16th of the number of Shares covered by such Option for each
three month period that elapses after the date of grant, so that such Option
shall be fully exercisable on the fourth anniversary of the date such Option was
granted. Each Option granted under Section 5(b) on or after the 1996 Plan
Amendment Date shall become exercisable with respect to 1/4 of the number of
Shares covered by such Option for each three month period that elapses after the
date of grant, so that such Option shall be fully exercisable on the first
anniversary of the date such Option was granted.
(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.
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(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 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.
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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.
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.
Approved by the stockholders on September 12, 1995.
Amended by the Board of Directors on March 8, 1996.
Approved by the stockholders on ________, 1996.
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PROXY
SEQUUS PHARMACEUTICALS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) I. CRAIG HENDERSON, M.D., ROBERT G. FARIS
AND SALLY A. DAVENPORT, or any 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 SEQUUS PHARMACEUTICALS, INC. (the
"Company") which the undersigned shall be entitled to vote at the Annual Meeting
of Stockholders to be held on June 13, 1996 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.
FOLD AND DETACH HERE
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THE BOARD RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
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Proposal 1. To elect as directors Robert G. INSTRUCTION: To withhold authority to vote Proposal 2. To approve the proposed
Faris, I. Craig Henderson, for any individual nominee, amendment to the Company's
L. Scott Minick, Richard C. E. write that nominee's name on 1990 Director Stock Option
Morgan and E. Donnall Thomas. the line provided below: Plan.
WITHHOLD FOR AGAINST ABSTAIN
FOR ALL FOR ALL _____________________________
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Signature(s)_________________________________________________________________________________ Date _____________________, 1996
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.
- FOLD AND DETACH HERE -
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