<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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] No fee required.
[ ] 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 11, 1998
------------------------
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 11, 1998 at 3:00 p.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 transact such other business as properly may come before the meeting,
or any adjournments or postponements of the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 27, 1998 are
entitled to notice of, and to vote at, the meeting and any adjournments or
postponements of the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Any stockholder attending the
meeting may vote in person even if he or she returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS,
Sally A. Davenport,
Secretary
Menlo Park, California
May 8, 1998
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
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 2
PROPOSAL 1: ELECTION OF DIRECTORS........................... 3
Information Concerning The Nominees....................... 3
Board And Committee Meetings.............................. 4
Director Compensation..................................... 5
Executive Compensation.................................... 6
Report of the Board of Directors on Executive
Compensation........................................... 8
Compensation Committee Interlocks and Insider
Participation.......................................... 10
Employment and Severance Agreements....................... 10
Certain Transactions...................................... 11
Compliance with Section 16(a) of the Securities Exchange
Act of 1934............................................ 11
Stock Price Performance Graph............................. 12
INDEPENDENT AUDITORS........................................ 13
OTHER INFORMATION........................................... 13
STOCKHOLDER PROPOSALS....................................... 13
OTHER MATTERS............................................... 13
</TABLE>
i
<PAGE> 4
SEQUUS PHARMACEUTICALS, INC.
960 HAMILTON COURT
MENLO PARK, CALIFORNIA 94025
(650) 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 11, 1998 at 3:00 p.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 8, 1998.
INFORMATION CONCERNING SOLICITATION AND VOTING
Only stockholders of record at the close of business on April 27, 1998 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 31,497,785 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.
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.
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 ChaseMellon
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
$5,500 plus out-of-pocket expenses.
1
<PAGE> 5
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 April 27, 1998 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 executive 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, 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>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES(1) CLASS
---------------- ------------------- ----------
<S> <C> <C>
Amerindo Investment Advisors, Inc......................... 3,315,786(2) 10.5%
One Embarcadero Center, Suite 2300
San Francisco, CA 94111
The Capital Group Companies, Inc.......................... 1,595,950(3) 5.1%
333 South Hope Street
Los Angeles, CA 90071
Robin D. Campbell, Ph.D. ................................. 1,563 *
Kenneth D. Cunningham, M.D. .............................. 0 *
Robert G. Faris........................................... 80,066 *
I. Craig Henderson, M.D. ................................. 360,000 1.1%
Francis J. Martin, Ph.D. ................................. 127,580 *
Richard C.E. Morgan....................................... 673,190(4) 2.1%
L. Scott Minick........................................... 182,500 *
E. Donnall Thomas, M.D. .................................. 60,375 *
Joseph J. Vallner, Ph.D. ................................. 107,862 *
Peter K. Working, Ph.D. .................................. 72,721 *
All directors and executive officers as a group (15 1,835,247 5.6%
persons)................................................
</TABLE>
- ---------------
* Less than 1%
(1) Includes shares subject to warrants or options exercisable within 60 days
after April 27, 1998 as if such shares were outstanding on April 27, 1998
and assumes that no other person has exercised any outstanding warrants or
options.
(2) According to Schedule 13G filed by Amerindo Investment Advisors, Inc., a
California corporation, 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 13G filed by The Capital Group Companies, Inc., that
entity is the parent holding company of a group of investment management
companies that hold investment power, and in some cases, voting power over
the shares listed in the table. The Capital Group Companies, Inc. disclaims
beneficial ownership of the shares listed in the table.
(4) 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.
2
<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. As of the date of the Annual
Meeting, the size of the Board is 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. Dr.
Henderson, Mr. Faris, Mr. Morgan and Dr. Thomas were elected to their present
term by the stockholders of the Company, and Dr. Campbell was appointed by the
Board through the filling of a vacancy in February 1998.
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
NAME AGE POSITION WITH SEQUUS CONTINUOUSLY SINCE
---- --- -------------------- ------------------
<S> <C> <C> <C>
I. Craig Henderson, M.D. ....... 56 Chairman of the Board and Chief 1993
Executive Officer
Robin D. Campbell, Ph.D. ....... 43 Director 1998
Robert G. Faris(1)(2)........... 59 Director 1985
Richard C.E. Morgan(1)(2)....... 52 Director 1990
E. Donnall Thomas, M.D.(1)(2)... 77 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 Director of Clinical Cancer programs at the University of
California, San Francisco. From 1989 to 1992, he served as a member and, for
most of this time, as Chairman of the Oncologic Drugs Advisory Committee of the
FDA. 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.
ROBIN D. CAMPBELL, PH.D. was appointed director of the Company in February
1998. Dr. Campbell currently is Vice President of Asia-Pacific/Latin America
Operations at Amgen, Inc. where he is responsible for Amgen's marketing,
development and finance operations in Australia, Canada, China and Japan. Dr.
Campbell leads an initiative to open new markets in Mexico and Latin America in
the near future. Dr. Campbell is also responsible for managing the contracts and
relationships with corporate partners in the Asia-Pacific/Latin America region.
He has worked for Amgen since 1989, beginning as a Product Manager with Neupogen
Marketing and subsequently serving as Associate Director of International
Marketing, and Associate Director, Director and Senior Director of Product
Development. Prior to his tenure at Amgen,
3
<PAGE> 7
Dr. Campbell served in several positions at Ciba-Geigy Corporation, most notably
as Product Manager of Cardiovascular Products.
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 30,
1990. Since January 1998, Mr. Morgan has been Managing Partner of Amphion
Capital Management LLC, a private equity and venture capital firm. Between
January 1996 and January 1998, Mr. Morgan was a partner of Jackson Hole
Management, Inc., the successor company to the asset management division of
James D. Wolfensohn, Inc. Since 1986, he has been a Managing Member of Amphion
Partners LLC (formerly Wolfensohn Partners, 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 joined the Investment Division of
Schroders in 1970 and was Chairman of the Investment Committee from 1973 to
1977. He is a director of AXCESS, Inc., a digital security systems company,
Celgene Corporation, a biotechnology company, Quidel Corporation, a medical
diagnostics company and Indigo N.V., a printing systems company. Mr. Morgan also
serves as a director of Project ORBIS International, Inc., a non-profit
organization dedicated to fighting blindness worldwide.
E. DONNALL THOMAS, M.D. has served as a director of the Company since May
27, 1993. Dr. Thomas serves as Chairman of the Scientific Advisory Committee of
Cell Therapeutics, Inc. He is also 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 12 times during 1997. 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 1997. The function of
the Compensation and Plan Committee is to review and to recommend to the Board
management compensation, principally with respect to Dr. Henderson, and to
administer the Company's stock option plans. See "Report of Board of Directors
on Executive Compensation" below.
The Audit Committee met two times during 1997. 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, 1997, the
Company paid consulting fees of $10,000 to each of
4
<PAGE> 8
Messrs. Faris and Morgan 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 scientific consultant to the Company.
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 non-discretionary grant of non-qualified stock options ("NQO") to
purchase 25,000 shares of Common Stock. Each eligible director receives, in each
calendar year, an automatic non-discretionary 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.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation for the
fiscal years ended December 31, 1995, 1996 and 1997 received by the individual
who served as the Company's Chief Executive Officer during 1997, the four other
most highly paid executive officers who served as executive officers on December
31, 1997 and one individual who would have been included in such group but was
not serving as an executive officer on December 31, 1997 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
LONG TERM
COMPENSATION
AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION AS ------------ COMPENSATION
OF DECEMBER 31, 1997 YEAR SALARY($) BONUS($)(1) OPTIONS(#) ($)(2)
------------------------------ ---- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
I. Craig Henderson, M.D. .............. 1997 305,016 137,257 0 3,748
Chairman of the Board and 1996 300,016 103,647 40,000 3,750
Chief Executive Officer(3) 1995 142,812 0 355,000 3,543
L. Scott Minick........................ 1997 250,008 112,504 0 3,748
President and Chief 1996 245,840 84,797 30,000 3,750
Operating Officer(4) 1995 100,170 0 275,000 0
Joseph J. Vallner, Ph.D. .............. 1997 204,297 57,195 50,000 17,187
Senior Vice President for 1996 183,164 65,921 15,000 18,046
Research and Development 1995 167,873 39,456 5,500 17,906
Kenneth D. Cunningham, M.D. ........... 1997 173,242 46,215 43,000 0
Vice President of Clinical 1996 30,700 0 32,000 0
Development and Medical Director 1995 0 0 0 0
Francis J. Martin, M.D. ............... 1997 178,536 39,954 11,560 3,748
Vice President and Chief 1996 161,440 48,551 0 3,750
Scientific Officer 1995 146,686 34,961 0 3,750
Peter K. Working, Ph.D. ............... 1997 145,216 36,029 0 3,748
Vice President for Research and 1996 129,352 40,332 0 11,388
Development 1995 116,615 23,337 22,850 8,172
</TABLE>
- ---------------
(1) Bonus amounts are paid in the year following the year in which they are
earned. Bonus amounts are included in the table in the year in which they
are paid. Bonus amounts earned by Dr. Henderson, Dr. Vallner, and Dr.
Cunningham, Dr. Martin and Dr. Working in 1997 paid in 1998 are $99,131,
$78,928, $24,408, $35,598 and $29,242, respectively. Mr. Minick did not earn
a bonus in 1997. These amounts are not reflected in the above table. In
addition, the bonus shown for 1997 for Dr. Cunningham includes a bonus of
$6,215 for 1996 which was paid in 1997 and a bonus of $40,000 for 1997 which
was paid in 1997.
(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. The compensation for Dr.
Vallner also includes $15,134, $14,310 and $13,453 principal amount of
indebtedness plus interest to the Company canceled in each of the years
1995, 1996 and 1997, respectively. See "Certain Transactions." The
compensation for Dr. Working also includes $8,172 and $7,638 of principal
amount of indebtedness plus interest canceled in 1995 and 1996,
respectively, in connection with a mortgage loan made by the Company to Dr.
Working.
(3) Dr. Henderson accepted the position of Chairman of the Board and Chief
Executive Officer of the Company in June 1995. This rate excludes amounts
paid to him as a director for the 1995 fiscal year. See "Director
Compensation".
(4) Mr. Minick resigned from the Company effective as of January 1, 1998.
6
<PAGE> 10
The following table sets forth further information regarding the grants of
stock options during the fiscal year ended December 31, 1997 to the Named
Officers. Since inception, the Company has not granted any stock appreciation
rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANT VALUE AT ASSUMED
------------------------------------------------------- RATE OF STOCK PRICE
PERCENTAGE OF TOTAL EXERCISE APPRECIATION FOR
OPTIONS OPTIONS GRANTED TO OR OPTION TERM(3)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME (#)(1) FISCAL 1997(%)(2) ($/SHARE) DATE 5%($) 10%($)
---- ------- ------------------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
I. Craig Henderson, M.D...... 0 0 -- -- -- --
L. Scott Minick.............. 0 0 -- -- -- --
Joseph J. Vallner, Ph.D...... 50,000 4.04 7.47 9/08/07 234,892 595,263
Kenneth D. Cunningham,
M.D........................ 30,000 2.42 6.63 7/31/07 125,087 316,995
13,000 1.05 7.69 12/05/07 62,871 159,326
Francis J. Martin, M.D....... 11,560 0.93 7.47 9/08/07 54,307 137,625
Peter K. Working Ph.D........ 0 0 -- -- -- --
</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) A total of 1,237,209 stock options were granted to employees during fiscal
year ended December 31, 1997.
(3) 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 year ended December 31, 1997 and the number and
value of unexercised options held at fiscal year-end.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES IN LAST FISCAL
YEAR
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES VALUE FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
ACQUIRED ON REALIZED ------------------------------ ------------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
---- ------------ -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
I. Craig Henderson,
M.D.................. -- -- 290,834 141,666 -- --
L. Scott Minick........ -- -- 182,500 122,500(3) -- --
Joseph J. Vallner,
Ph.D................. -- -- 103,335 57,165 30,387 573
Kenneth D. Cunningham,
M.D.................. -- -- 0 75,000 -- 24,390
Francis J. Martin,
M.D.................. -- -- 108,279 11,560 274,643 --
Peter K. Working,
Ph.D................. -- -- 63,374 5,723 21,911 1,182
</TABLE>
- ---------------
(1) Based on the amount, if any, by which the per share closing price of the
Common Stock on the Nasdaq National Market on December 31, 1997 ($7.438)
exceeds the exercise price.
(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
7
<PAGE> 11
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) Mr. Minick resigned from the Company effective as of January 1, 1998.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Board has a Compensation and Plan Committee (the "Committee") comprised
of non-employee directors, the function of which is to review and recommend to
the Board management compensation, principally with respect to Dr. Henderson
and, until his resignation, Mr. Minick, and to administer the Company's stock
option plans. During fiscal 1997, management compensation issues generally were
reviewed by the by the Board as a whole. Dr. Henderson and Mr. Minick abstained
with respect to the adoption of resolutions pertaining to the bonus awards to
the management group based on corporate performance during 1997.
The Company believes that its ability to achieve the objectives of
realizing the commercial potential of its leading products, DOXIL(R) and
AMPHOTEC(R), in the United States and key foreign markets 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 with an estimated 85 to 100 biotechnology/biopharmaceutical
companies in the San Francisco Bay Area for experienced executives. Thus, there
is a need to maintain competitive executive compensation plans and policies
while simultaneously practicing fiscal prudence with the Company's resources.
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 1997
Equity Incentive Plan and its Executive Bonus Plan to facilitate recruiting, to
retain qualified executives by providing long-term incentives and to align
management incentives with those of the stockholders. Typically, new executives
are granted stock options as part of their initial employment package.
Compensation benefits, such as bonuses, increases in base salary and additional
awards of stock options for executive-level employees are based on corporate and
individual performance.
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 1997 tax year, the Company has concluded
that all compensation paid by the Company in 1997 to such covered employees was
deductible by 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 at the discretion of the Board, receive subsequent stock option
grants based on performance and other
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factors. 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 Company's business, 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 1997 were related to the following: achievement of specified
levels of product sales; through clinical trial data, establish DOXIL as a
viable drug candidate for treating ovarian cancer and as a potential drug
candidate for treating breast cancer; develop additional global alliances for
the marketing and distribution of AMPHOTEC; and expansion of the DOXIL and
SPI-077 clinical trial programs.
Executive Bonus Plan
Under the Executive Bonus Plan, each of the Chief Executive Officer, the
Executive Vice President, the Senior Vice Presidents, the Vice Presidents and
the Corporate Secretary of the Company is eligible to receive a cash bonus
ranging from 50% to 150% of the target bonus amount set for such executive
officer based on the Board's assessment of overall corporate performance. The
Board has set the target bonus amount for each executive officer at a specified
percentage of such officer's base salary. In March 1998, the Board awarded bonus
amounts to eligible executive officers based on the Board's assessment of
corporate performance during fiscal 1997. In addition to the bonus awards based
upon corporate performance, each of the Executive Vice President, the Senior
Vice Presidents, the Vice Presidents and the Corporate Secretary is eligible to
receive a target bonus of up to a specified percentage of such executive
officer's base salary as determined by the Board based on individual
performance. In the case of extraordinary achievement, these individual bonuses
may be higher than the target bonus. For 1997, each eligible executive received
a bonus ranging from 0.7% to 24.5% of base salary based on individual
performance, which was paid in March 1998.
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.
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 Committee then meets to discuss the performance
of the Chief Executive Officer, the President and the Company. In June 1995, the
Company entered into an employment agreement with Dr. Henderson in which his
base annual salary was set at $275,000. Any adjustments to his base salary are
made at the discretion of the Committee. Dr. Henderson did not receive an
adjustment in base salary in 1997. Dr. Henderson received a bonus for 1997 of
$99,131, or 32.5% of his base annual salary, in accordance with the Executive
Bonus Plan described above, which was paid in March 1998.
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<PAGE> 13
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
-- Robert G. Faris
-- I. Craig Henderson, M.D.
-- Robin D. Campbell, Ph.D.
-- Richard C.E. Morgan
-- E. Donnall Thomas, M.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, management compensation issues generally were reviewed and
approved by the Compensation and Plan Committee, which was composed of Mr.
Faris, Mr. Morgan and Dr. Thomas, all of whom are non-employee directors. 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
1997, 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, and Dr. Henderson. 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 agreement with Dr.
Henderson has a ten-year term and provides that if Dr. Henderson is terminated
either without cause or upon a change in control of the Company, he will receive
compensation equal to 12 months of his then current base salary. Dr. Henderson's
current base salary (effective March 1, 1998) is $350,016.
Under an employment agreement negotiated between the Company and Mr. Minick
at the time of his employment in 1995, Mr. Minick was paid $250,008 in 1998 in
connection with his resignation from the Company.
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 fifth anniversary. On October 6, 1995, the
Company agreed to make a secured loan of $120,000 to Dr. Gurwith, the former
Vice President and Associate Medical Director, to facilitate his purchase of a
new residence. At the time of Dr. Gurwith's resignation from the Company in
August 1997, the principal amount of $48,000 plus interest was forgiven and the
remaining principal amount of $72,000 was repaid by Dr. Gurwith to the Company.
On February 12, 1998, the Company agreed to make a secured loan of $300,000
to Mr. Jacobs, the Senior Vice President of Commercial Operations, to facilitate
his purchase of a new residence. The loan has a term of five years and accrues
interest at 8%. Provided that Mr. Jacobs remains a full-time employee of the
Company, the interest accruing on the loan will be forgiven on November 10 of
each year and the principal will be forgiven on November 10, 2002.
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<PAGE> 14
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,
1997, 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, 1992.
<TABLE>
<CAPTION>
'SEQUUS NASDAQ
Measurement Period Pharmaceuticals, NASDAQ Stock Pharmaceuticals
(Fiscal Year Covered) Inc. (SEQU)' Market (US) Stock
<S> <C> <C> <C>
Dec-92 100 100 100
Dec-93 90 115 89
Dec-94 64 112 67
Dec-95 143 159 123
Dec-96 160 195 123
Dec-97 74 240 127
</TABLE>
11
<PAGE> 15
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, 1998. 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, 1997 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 1999, that proposal
must be received in writing by the Secretary of the Company at the Company's
principal executive offices no later than January 8, 1999.
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
May 8, 1998
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.
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<PAGE> 16
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. and SALLY A.
DAVENPORT, or either 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 on June 11, 1998 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
<PAGE> 17
PLEASE MARK
YOUR CHOICES [X]
LIKE THIS
THE BOARD RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
Proposal 1. To elect as directors FOR ALL WITHHOLD FOR ALL
Robin D. Campbell
Robert G. Faris [ ] [ ]
I. Craig Henderson
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:
---------------------------------------------------------------
Signature(s) Date , 1998
---------------------------------------------- -----------
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
