<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Vical Incorporated
- --------------------------------------------------------------------------------
(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)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration 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>
[LOGO]
VICAL INCORPORATED
9373 Towne Centre Drive, Suite 100
San Diego, CA 92121
(619) 453-9900
April 13, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Vical Incorporated which will be held on Thursday, May 27, 1999, at 9:00 a.m.
(San Diego time), at the San Diego Marriott La Jolla, 4240 La Jolla Village
Drive, La Jolla, California.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return, at
an early date, the enclosed proxy in the prepaid envelope addressed to
ChaseMellon Shareholder Services, L.L.C., our agent, to ensure that your shares
will be represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND
RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING IN PERSON.
A copy of the Company's Annual Report to Stockholders is also enclosed.
The Board of Directors and Management look forward to seeing you
at the meeting.
Sincerely yours,
/s/ Alain B. Schreiber
Alain B. Schreiber, M.D.
President and Chief Executive Officer
<PAGE>
VICAL INCORPORATED
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1999
------------
To the Stockholders of Vical Incorporated:
The Annual Meeting of Stockholders of Vical Incorporated, a Delaware
corporation (the "Company") will be held at the San Diego Marriott La Jolla,
4240 La Jolla Village Drive, La Jolla, California, on Thursday, May 27, 1999, at
9:00 a.m. (San Diego time), for the following purposes:
1. To elect two Class I directors;
2. To consider and vote upon a proposal to amend the Company's Stock
Incentive Plan;
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors; and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournment of the Annual Meeting.
Stockholders of record as of the close of business on April 5, 1999, are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. A complete list of stockholders entitled to vote will be available at
the Secretary's office, 9373 Towne Centre Drive, Suite 100, San Diego, for ten
days before the meeting.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN IF
YOU PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR
VOTE AT THE MEETING.
By Order of the Board of Directors.
/s/ Martha J. Demski
Martha J. Demski
Vice President, Chief Financial Officer,
Secretary and Treasurer
San Diego, California
April 13, 1999
<PAGE>
VICAL INCORPORATED
------------
PROXY STATEMENT
------------
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Vical Incorporated, a Delaware corporation (the
"Company"), of proxies in the accompanying form to be used at the Annual Meeting
of Stockholders to be held at the San Diego Marriott La Jolla, 4240 La Jolla
Village Drive, La Jolla, California, on Thursday, May 27, 1999, and any
adjournment thereof (the "Annual Meeting"). The shares represented by the
proxies received in response to this solicitation and not revoked will be voted
at the Annual Meeting. A proxy may be revoked at any time before it is
exercised by filing with the Secretary of the Company a written revocation or a
duly executed proxy bearing a later date or by voting in person at the Annual
Meeting. On the matters coming before the Annual Meeting for which a choice has
been specified by a stockholder by means of the ballot on the proxy, the shares
will be voted accordingly. If no choice is specified, the shares will be voted
FOR the election of the nominees for directors listed in this Proxy Statement
and FOR approval of Proposals 2 and 3 described in the Notice of Annual Meeting
and in this Proxy Statement.
Stockholders of record at the close of business on April 5, 1999, are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, the Company had approximately 16,190,313 shares of Common
Stock outstanding and entitled to vote. Each holder of Common Stock is entitled
to one vote for each share held as of the record date.
Directors are elected by a plurality vote. The other matters submitted for
stockholder approval at this Annual Meeting will be decided by the affirmative
vote of a majority of shares present in person or represented by proxy and
entitled to vote on each such matter. Abstentions with respect to any matter
are treated as shares present or represented and entitled to vote on that matter
and thus have the same effect as negative votes. If shares are not voted by the
broker who is the record holder of the shares, or if shares are not voted in
other circumstances in which proxy authority is defective or has been withheld
with respect to any matter, these non-voted shares are not deemed to be present
or represented for purposes of determining whether stockholder approval of that
matter has been obtained.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may
be made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid to such persons for such solicitation. The Company will reimburse
brokerage firms and others for their reasonable expenses in forwarding
solicitation materials to beneficial owners of the Company's Common Stock. The
Company has retained Beacon Hill Partners, Inc. at a cost of approximately
$2,500 to assist in the solicitation of proxies.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Vical Incorporated, Investor
Relations, 9373 Towne Centre Drive, Suite 100, San Diego, California,
92121-3088; (619) 646-1127. To provide the Company sufficient time to arrange
for reasonable assistance or accommodation, please submit all requests by May 1,
1999.
<PAGE>
This Proxy Statement and the accompanying form of proxy are being mailed on
or about April 13, 1999, to all stockholders entitled to vote at the meeting.
IMPORTANT
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE
SO THAT, WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR
NOT, YOUR SHARES CAN BE VOTED. THIS WILL NOT LIMIT YOUR RIGHTS TO
ATTEND OR VOTE AT THE ANNUAL MEETING.
-2-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES
The Company has three classes of directors, with each class serving
staggered three-year terms. Two Class I directors are to be elected at the
Annual Meeting to serve until the 2002 Annual Meeting and until their respective
successors shall have been elected and qualified or until such directors'
earlier resignation, removal from office, death or incapacity. The terms of the
three Class II and three Class III directors expire in 2000 and 2001,
respectively.
Unless authority to vote for directors is withheld, it is intended that the
shares represented by the enclosed proxy will be voted for the election of Dr.
Alain B. Schreiber and Mr. Philip M. Young as Class I directors. Dr. Schreiber
and Mr. Young are currently members of the Board of Directors of the Company.
Each of the nominees has been nominated as a Class I director by the Company's
Board of Directors. In the event any of such nominees becomes unable or
unwilling to accept nomination or election, the shares represented by the
enclosed proxy will be voted for the election of the other nominees and such
other nominee as the Board of Directors may select. The Board of Directors has
no reason to believe that any such nominee will be unable or unwilling to serve.
There are no family relationships among executive officers or directors of
the Company.
Set forth below is information regarding the nominees for Class I directors
and the continuing directors of Class II and Class III.
Class I
ALAIN B. SCHREIBER, M.D., age 43, has been President, Chief Executive
Officer and a director of the Company since May 1992. Prior to joining the
Company, Dr. Schreiber held various executive level positions at Rhone-Poulenc
Rorer Inc. from July 1985 to April 1992, most recently as Senior Vice President
of Discovery Research. From October 1982 to June 1985, Dr. Schreiber served as
Biochemistry Department Head at Syntex Research. Dr. Schreiber is a director of
Spiros Development Corporation and one privately held company. Dr. Schreiber is
also an appointed Advisor for Foreign Trade for Belgium. He received his
undergraduate degree and M.D. from the Free University of Brussels, after which
he was awarded a research fellowship in immunology at the Weizmann Institute.
PHILIP M. YOUNG, age 59, has been a director of the Company since February
1992. He has been a general partner of U.S. Venture Partners, a venture capital
firm, since April 1990. Mr. Young is a director of The Immune Response
Corporation, Zoran Corporation, CardioThoracic Systems, Inc., 3Dfx Interactive,
Inc. and several privately held companies. He received a B.M.E. from Cornell
University, an M.S. from George Washington University and an M.B.A. from the
Harvard Business School.
-3-
<PAGE>
Class II
ROBERT C. BELLAS, JR., age 57, has been a director of the Company since
September 1988. Mr. Bellas has been a General Partner with Morgenthaler
Ventures since 1984, where he is responsible for the firm's investments in
healthcare services, medical devices and biomedical ventures. Morgenthaler
Ventures provided early venture capital financing to such companies as Arbor
Health Care Company, Athena Neurosciences, Inc., Cardiovascular Imaging Systems,
Inc., Cytel Corporation, Gliatech Inc., The Liposome Company, Medaphis
Corporation, Perclose, Inc., Ribozyme Pharmaceuticals, Inc., Sequana
Therapeutics, Inc. and Verifone, Inc. Mr. Bellas also serves as a director of
CardioThoracic Systems, Inc., as well as several privately held healthcare
companies. From 1980 to 1983, Mr. Bellas served as Vice President and General
Manager of the Crystal & Electronics Division of Harshaw Chemical Company, a
subsidiary of Gulf Oil Corporation. Between 1973 and 1980, he held marketing
and management positions with Acurex Corporation and EMI Therapy Systems.
Mr. Bellas has a B.S. in Engineering from the U.S. Naval Academy and an M.B.A.
from the Stanford University Graduate School of Business.
FRED A. MIDDLETON, age 49, has been a director of the Company since August
1990. Since 1987, he has been a General Partner of Sanderling Ventures, a
venture capital firm specializing in the development of early stage biomedical
companies. From 1978 to 1984, Mr. Middleton was a member of the start-up
management team of Genentech, Inc., where he served as Vice President, Finance
and Corporate Development and President of Genentech Development Corporation.
From 1984 to 1986, he was Managing General Partner of Morgan Stanley Ventures.
He also serves as a director of Regeneron Pharmaceuticals, Inc. and SkyePharma
PLC and as a director of several privately held biomedical companies. He
received his B.S. in Chemistry from the Massachusetts Institute of Technology
and an M.B.A. from the Harvard Business School.
M. BLAKE INGLE, age 56, has been a director of the Company since June 1996.
Dr. Ingle was from 1993 to 1996 Chief Executive Officer of Canji Inc., a
privately held gene therapy company acquired by Schering Plough in 1996, and
served from 1995 to 1996 as Acting Chief Executive Officer of Telios
Pharmaceuticals, Inc., a biotechnology company acquired by Integra Life Sciences
in 1996. Dr. Ingle previously worked with Bayer and from 1980 to 1993 Dr. Ingle
held a variety of positions with IMCERA Group, Inc. (subsequently Mallinckrodt,
Inc., a healthcare and chemical products company), including Chief Scientific
Officer, Chief Financial Officer and President of its Pittman Moore division and
most recently as President and Chief Executive Officer of IMCERA Group, Inc.
Dr. Ingle also serves as a member of the Board of Directors of Corvas
International, Inc. and Synbiotics Corporation. He received his B.S. degree
from Fort Lewis College and his M.S. and Ph.D. from Colorado State University.
Class III
PATRICK F. LATTERELL, age 40, has been a director of the Company since
February 1992. He has been a General Partner with Venrock Associates, a venture
capital firm, since 1989. From 1985 to 1989, he was a General Partner at
Rothschild Ventures Inc., a venture capital firm ("Rothschild"), where he was
responsible for Rothschild's healthcare ventures. Prior to joining Rothschild,
Mr. Latterell was Manager of Corporate Development with Syntex Corporation from
1983 through 1985. Mr. Latterell currently serves as a director of several
privately held biomedical companies. He received S.B. degrees in Biological
Sciences and Economics from the Massachusetts Institute of Technology and an
M.B.A. from the Stanford University Graduate School of Business.
-4-
<PAGE>
GARY A. LYONS, age 48, has been a director of the Company since March 1997.
He has been President, Chief Executive Officer and Director of Neurocrine
Biosciences, Inc., a neuroimmunology biopharmaceutical company, since 1993.
From 1983 to 1993, Mr. Lyons held various executive positions at Genentech,
Inc., including Vice President of Business Development, Vice President of Sales,
and Director of Sales and Marketing. From 1973 to 1983, Mr. Lyons worked with
American Critical Care, serving as Director of Sales from 1980 to 1983. Mr.
Lyons holds a B.A. in Marine Biology from the University of New Hampshire and an
M.B.A. from Northwestern University, JL Kellogg Graduate School of Management.
DALE A. SMITH, age 67, has been a director of the Company since August
1995. From 1979 until his retirement in July 1995, Mr. Smith was Group Vice
President of Baxter International Inc., where he was responsible for the
biotechnology group and various corporate research groups including applied
sciences, blood substitutes, venture technology and Baxter International Inc.'s
European research center. Currently he serves as a business advisor to several
companies and as a Board Member of Cerus Corporation in Concord, California.
Mr. Smith holds a B.A. in Business Administration from the University of
Washington, Seattle.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES FOR
CLASS I DIRECTOR SET FORTH ABOVE.
-5-
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors held seven meetings during the year ended
December 31, 1998. The Board of Directors has appointed a Compensation
Committee, a Stock Plan Committee and an Audit Committee. The Board of
Directors has not appointed a Nominating Committee.
The members of the Compensation Committee are Mr. Bellas, Dr. Ingle and Mr.
Latterell. The Compensation Committee held four meetings during 1998. The
Compensation Committee's functions are to assist in the implementation of, and
provide recommendations with respect to general and specific compensation
policies and practices of the Company.
The members of the Stock Plan Committee are Mr. Bellas, Dr. Ingle and Mr.
Latterell. The Stock Plan Committee held five meetings during 1998. The Stock
Plan Committee's functions are to assist in the administration of, and grant
options under, the Stock Incentive Plan of Vical Incorporated (the "Stock
Incentive Plan") and to administer the 1992 Directors' Stock Option Plan of
Vical Incorporated (the "1992 Directors' Stock Plan").
The members of the Audit Committee are Mr. Middleton, Mr. Smith and Mr.
Young. The Audit Committee held one meeting during 1998. The Audit Committee's
functions are to review the scope of the annual audit, monitor the independent
auditor's relationship with the Company, advise and assist the Board of
Directors in evaluating the auditor's examination, supervise the Company's
financial and accounting organization and financial reporting, and nominate for
stockholder approval at the annual meeting, with the approval of the Board of
Directors, a firm of certified public accountants whose duty it is to audit the
financial records of the Company for the fiscal year for which it is appointed.
DIRECTORS' COMPENSATION
Non-employee directors receive an annual fee of $10,000 for service on the
Board of Directors and an additional annual fee of $4,000 for service on one or
more committees of the Board of Directors. All fees are paid on or about
February 15 following the year during which services were rendered. Directors
are reimbursed for their expenses for each meeting attended. Under the 1992
Directors' Stock Plan, options to purchase a total of 202,500 shares of Common
Stock were granted to non-employee directors. Under the Stock Incentive Plan,
as amended, each new non-employee director of the Company, on the date of his or
her election to the Board, will receive an option to purchase 20,000 shares of
Common Stock at the fair market value on the date of grant. These options will
generally vest 25% on the first anniversary of the date of grant, with the
remaining shares vesting quarterly over three years. Each non-employee director
who has served on the Board for at least six months on the date of each of the
Company's regular annual meetings also receives an annual grant of an option to
purchase 12,500 shares which shall become exercisable in full on the date of the
regular annual meeting of stockholders following the date of grant. Of the
shares available under the Stock Incentive Plan, no more than 30% in the
aggregate are available for grant to non-employee directors. The Board of
Directors may provide discretionary grants to non-employee directors. Under the
Stock Incentive Plan, options to purchase 105,000 shares of Common Stock were
granted in 1998.
-6-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Mr.
Bellas, Dr. Ingle and Mr. Latterell, who are non-employee directors. The Stock
Plan Committee of the Board of Directors also consists of Mr. Bellas, Dr. Ingle
and Mr. Latterell.
CERTAIN TRANSACTIONS
See "Executive Compensation" and "Employment Agreements."
-7-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 15, 1999, as
to shares of the Company's Common Stock beneficially owned by: (i) each person
who is known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each of the Company's directors, (iii) each of the Company's
officers named under "Executive Compensation--Summary Compensation Table," and
(iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Beneficially
Owned(1) Owned
------------ ------------
<S> <C> <C>
State of Wisconsin Investment Board(2)........ 1,433,600 8.85%
P.O. Box 7842, Madison, WI 53707
Alain B. Schreiber(3)......................... 553,375 3.38%
Deirdre Y. Gillespie(4)....................... 25,000 *
Martha J. Demski(5)........................... 128,257 *
Jon A. Norman(6).............................. 84,563 *
George J. Gray(7)............................. 83,625 *
Robert C. Bellas, Jr.(8)...................... 39,766 *
Patrick F. Latterell(9)....................... 79,201 *
Gary A. Lyons (10)............................ 10,000 *
Fred A. Middleton(11)......................... 168,664 1.04%
Philip M. Young(12)........................... 55,045 *
Dale A. Smith(13)............................. 34,063 *
M. Blake Ingle(14)............................ 22,813 *
All directors and executive officers as a
group (13 persons)(15)...................... 1,345,998 7.68%
</TABLE>
- ------------------
* Less than 1%.
(1) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
(2) Based on a Schedule 13G provided to the Company by the State of Wisconsin
Investment Board dated January 16, 1999.
(3) Includes 6,570 shares held in trust for the benefit of Dr. Schreiber's
children and 173,125 shares subject to stock options exercisable on March
15, 1999, or within 60 days thereafter.
(4) Includes 25,000 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter.
(5) Includes 2,300 shares held in trust for the benefit of Ms. Demski's child
and 45,375 shares subject to stock options exercisable on March 15, 1999,
or within 60 days thereafter.
-8-
<PAGE>
(6) Includes 84,563 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter.
(7) Includes 43,625 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter.
(8) Includes 20,000 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter. Also includes 4,225 shares held by the
Bellas Family Partnership. Mr. Bellas is the managing partner of the
Bellas Family Partnership and may be deemed to share voting and investment
power of such shares. Mr. Bellas disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(9) Includes 50,000 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter.
(10) Includes 10,000 shares subject to options exercisable on March 15, 1999 or
within 60 days thereafter.
(11) Includes 50,000 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter. Also includes 70,577 shares held by
Sanderling Venture Partners II, L.P., which is managed by Sanderling
Ventures, its general partner. Also includes 37,626 shares held by
Middleton-McNeil Associates. Mr. Middleton is a general partner of
Sanderling and of Middleton-McNeil Associates and may be deemed to share
voting and investment control of these shares. Mr. Middleton disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest therein. Also includes 3,000 shares held by trusts for the
benefit of Mr. Middleton's children.
(12) Includes 50,000 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter. Includes 45 shares held by BHMS
Partners III, L.P. in which Mr. Young is a general partner, and he may be
deemed to share voting and investment power with respect to such shares.
Mr. Young disclaims beneficial interest in such shares except to the extent
of his pecuniary interest therein.
(13) Includes 34,063 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter.
(14) Includes 22,813 shares subject to stock options exercisable on March 15,
1999, or within 60 days thereafter.
(15) Includes all shares referenced in notes (3) through (15) including 637,690
shares subject to stock options exercisable on March 15, 1999, or within 60
days thereafter.
-9-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for services rendered in all
capacities to the Company for the fiscal years ended December 31, 1996, 1997 and
1998, of (i) the Company's Chief Executive Officer and (ii) the Company's four
most highly compensated executive officers whose total annual salary and bonus
for fiscal year 1998 exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------------- -----------------------
Restricted Securities
Name and Other Annual Stock Underlying All Other(3)
Principal Position Year Salary($) Bonus($) Compensation($) Awards($) Options(#) Compensation($)
- ------------------ ---- --------- -------- --------------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alain B. Schreiber 1998 315,000 80,000 34,400 4,410
President and Chief 1997 300,000 75,000 -- -- 40,000 4,200
Executive Officer 1996 290,000 75,000 -- -- 50,000 4,060
Deirdre Y. Gillespie 1998 179,167 45,000 -- -- 121,600 2,580
Executive Vice
President and
Chief Business
Officer(1)
Martha J. Demski 1998 173,000 27,000 -- -- 17,600 3,114
Vice President and 1997 165,000 25,000 -- -- 20,000 2,970
Chief Financial 1996 155,000 25,000 -- -- 20,000 2,790
Officer
Jon A. Norman 1998 179,000 27,000 -- -- 17,600 3,222
Vice President, 1997 170,000 30,000 -- -- 23,000 3,060
Research 1996 160,000 25,000 25,009(2) -- 20,000 2,880
George J. Gray 1998 168,000 27,000 19,800 3,024
Vice President, 1997 160,000 25,000 -- -- 20,000 2,880
Operations 1996 150,000 25,000 -- -- 20,000 2,700
</TABLE>
- -----------------------
(1) In connection with Dr. Gillespie's joining the Company in March 1998, the
Company loaned her $90,000 interest-free, which loan will be forgiven in
equal installments over three years.
(2) In connection with Dr. Norman's joining the Company in January 1993, the
Company loaned him $75,000 interest-free, which loan was forgiven in equal
installments over three years. Amount for 1996 includes $25,000
representing forgiveness of the last one-third of the loan principal and $9
of implied interest income relating to this loan for the year ended
December 31, 1996. See "--Employment Agreements."
(3) Represents matching contribution by the Company under the Company's 401(k)
plan.
-10-
<PAGE>
STOCK OPTION GRANTS IN 1998 FISCAL YEAR
The following tables summarize option grants to, and exercises by, the
Company's Chief Executive Officer and the Named Officers during fiscal 1998, and
the value of the options held by each such person at the end of fiscal 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual Rates
of Stock Appreciation
Individual Grants for Option Term(4)
---------------------------------------------------- ---------------------
Number of % of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(#)(1) Fiscal Year ($/Sh)(2) Date(3) 5%($) 10%($)
- ---- ------------- ----------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alain B. Schreiber 34,400 7.0 15.50 12/4/08 335,327 849,783
Deirdre Y. Gillespie 100,000 20.4 15.25 3/2/08 959,064 2,430,457
21,600 4.4 15.50 12/4/08 210,554 533,585
Martha J. Demski 17,600 3.6 15.50 12/4/08 171,562 434,773
Jon A. Norman 17,600 3.6 15.50 12/4/08 171,562 434,773
George J. Gray 19,800 4.0 15.50 12/4/08 193,008 489,120
</TABLE>
- ---------------
(1) Options granted in 1998 vest 25% on the first anniversary of the date of
grant, with the remaining shares vesting quarterly over three years. All
such options vest in the event of a change in control of the Company.
(2) The exercise price on the date of grant was equal to 100% of the fair
market value on the date of grant.
(3) The options have a term of 10 years, subject to earlier termination in
certain events related to termination of employment.
(4) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. The amounts
reflected in this table may not necessarily be achieved.
-11-
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND FISCAL YEAR END OPTION
VALUES
The following table contains information relating to the exercise of
options by the Company's Chief Executive Officer and the Named Officers during
fiscal 1998.
AGGREGATED OPTION EXERCISES IN 1998
AND 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Unexercised Securities Unexercised
Underlying Options at In-the-Money Options at
December 31, (#) December 31, ($)(1)
Shares Acquired Value --------------------------- ---------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alain B. Schreiber -- -- 165,000 99,400 532,187 49,061
Deirdre Y. Gillespie -- -- -- 121,600 -- --
Martha J. Demski 4,684 26,719 42,250 45,100 30,047 12,499
Jon A. Norman 20,000 304,100 81,250 47,350 651,348 12,569
George J. Gray -- -- 40,500 47,300 96,625 12,499
</TABLE>
____________
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1998 ($14.1875 per share), minus the exercise
price.
EMPLOYMENT AGREEMENTS
In 1992, the Company entered into an employment agreement with Alain B.
Schreiber pursuant to which Dr. Schreiber was employed as President and Chief
Executive Officer at an annual base salary of at least $225,000. Pursuant to
this agreement, Dr. Schreiber also purchased 412,500 shares of Common Stock for
$66,000, which vested over four years. This agreement expired on April 17,
1996.
In 1992, the Company entered into an employment agreement with Jon A.
Norman pursuant to which Dr. Norman joined the Company in January 1993 as Vice
President, Research at an annual base salary of at least $130,000. In
connection with the agreement, Dr. Norman received an option to purchase 80,000
shares of Common Stock at a per share exercise price of $.32, which option
vested over four years.
In 1992, the Company entered into an employment agreement with George J.
Gray pursuant to which Mr. Gray is employed as Vice President, Operations at an
annual base salary of at least $100,000. In connection with the agreement,
Mr. Gray received an option to purchase 40,000 shares of Common Stock at a per
share exercise price of $.16, which option vested over four years. If Mr. Gray
is terminated without cause or resigns for specified reasons, the Company has
agreed to pay him six months base salary.
-12-
<PAGE>
In 1994, the Company entered into an employment agreement with Martha J.
Demski pursuant to which Ms. Demski was employed as Vice-President and Chief
Financial Officer at an annual base salary of at least $140,000. This agreement
expired on February 21, 1998.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
-13-
<PAGE>
REPORT OF THE COMPENSATION AND STOCK PLAN COMMITTEES
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
COMMITTEE REPORT TO STOCKHOLDERS
THIS REPORT SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO
ANY FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY
INCORPORATES THIS REPORT BY REFERENCE, AND SHALL NOT OTHERWISE BE
DEEMED FILED UNDER SUCH ACTS.
INTRODUCTION
The Compensation and Stock Plan Committees of the Board of Directors of the
Company (the "Committees") are pleased to present their report on executive
compensation. The report's objective is to assist stockholders in understanding
the Committees' objectives and procedures in establishing the compensation of
the Company's executive officers and describes the basis on which compensation
determinations for 1998 were made by the Committees. In making their
determinations, the Committees have relied, in part, on geographic and
competitive considerations, independent surveys of compensation of management of
companies in the biotechnology and pharmaceutical industries, including
companies included in the Nasdaq Pharmaceutical Stock Index used in the
Company's Stock Price Performance Graph set forth in this proxy statement, and
recommendations of management.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committees believe that a well-designed compensation program for the
Company's executive officers should:
Align the goals of the executive with the goals of the stockholder by
creating and enhancing stockholder value through the accomplishment of
strategic corporate objectives and by providing management with longer
term incentives through equity ownership by management.
Recognize individual initiative, effort, and achievement.
Provide total compensation that enables the Company to compete with
companies in the pharmaceutical and biotechnology industries, in order
to attract and retain high-caliber candidates on a long-term basis.
Align compensation with the Company's short-term and long-term
corporate objectives and strategy, focusing executive behavior on the
fulfillment of those objectives.
-14-
<PAGE>
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Because the Company is still in the process of developing its
proprietary products and so has not yet brought any such products to market, the
use of traditional performance standards, such as profit levels and return on
equity, are not appropriate in the evaluation of executive officer performance.
Therefore, executive officer compensation is based primarily on the Company's
achievement of certain business objectives, including the completion of
financings, the achievement of product development milestones, the initiation
and continuation of corporate collaborations, and the issuance of patents
relating to the Company's proprietary technology, as well as individual
contribution and achievement of individual business objectives by each of such
officers. Corporate and individual objectives are established at the beginning
of each fiscal year. Performance by the Company and executive officers is
measured by reviewing and determining if the corporate and individual objectives
have been accomplished. Currently, the Company's compensation structure for
executive officers includes a combination of base salary, bonus and stock
options.
BASE SALARY AND BONUS. Cash compensation amounts are based primarily upon
the competitive market for the executive officers' services determined through
comparisons with companies of similar size and/or complexity in the
pharmaceutical and biotechnology industries. Compensation of the Company's
officers is intended to fall at the median point of the range of compensation
for officers of comparable companies. Such compensation is tailored to
executive officers based on individual performance in the achievement of the
individual's and Company's objectives. This performance is compared to these
objectives annually.
LONG-TERM INCENTIVES. Long-term incentives are provided by means of
periodic grants of stock options. The Stock Incentive Plan is administered by
the Company's Stock Plan Committee, a committee of non-employee directors of the
Company. The Stock Plan Committee believes that by granting executive officers
an opportunity to obtain and increase their personal ownership of Company stock,
the best interests of stockholders and executives will be more closely
integrated. The options have exercise prices equal to fair market value on the
date of grant, vest over a four-year period, and expire ten years from the date
of grant. Vesting ceases should the executive leave the Company's employ.
These vesting provisions of the option plan serve to retain qualified employees,
providing continuing benefits to the Company beyond those achieved in the year
of grant. Therefore, executive officers, as well as all full-time employees,
are eligible to receive stock options periodically at the discretion of the
Committee. Consideration is given to the executive officer's performance
against the accomplishment of corporate objectives, to comparisons with other
biotechnology companies at similar stages of development, to the number of
options previously granted to each executive officer and to the extent of
vesting of options and/or restricted stock previously awarded to each executive
officer. The Company targets its awards to be at the median point of the range
for awards made to executive officers of comparable companies.
CEO COMPENSATION
The annual salary of Alain B. Schreiber, M.D., the Company's President and
Chief Executive Officer was $315,000 at the end of fiscal year 1998; a $15,000
increase over his 1997 salary. Additionally, Dr. Schreiber was granted a cash
bonus of $80,000 and incentive stock options for 34,400 shares in December 1998.
In establishing Dr. Schreiber's salary base and increase for 1998 and the
granting of the incentive stock options, the Committees recognized Dr.
Schreiber's efforts in advancing the development and growth of the Company and
the corporate objectives achieved in 1998. Specifically, corporate objectives
achieved included the expansion of its patent portfolio,
-15-
<PAGE>
including a key patent covering lipid-mediated naked DNA immunization in any
tissue, and advancements in clinical trials. These advancements included the
following:
- initiation of Phase III and Phase II registration trials with
ALLOVECTIN-7 in patients with advanced metastatic melanoma;
- initiation of Phase II efficacy trial with LEUVECTIN in patients with
advanced metastatic kidney cancer;
- demonstration of potent T-cell immune response with naked DNA malaria
vaccine in man; and
- initiation of Phase I/II safety and efficacy trial with naked DNA
melanoma vaccine in collaboration with National Cancer Institute.
Additional achievements included the Company's receiving $1 million from Merial
for the extension of the option agreement for animal health vaccines. The
Company also entered into new license and option agreements with Centocor, Inc.
for new cancer vaccine targets and with Boston Scientific Corporation for
catheter-based gene delivery technology, resulting in payments to Vical in 1998
of $2.2 million and $1.1 million, respectively. The Company signed an agreement
with the Office of Naval Research which may provide up to $2.7 million of
funding for the development of a potential DNA vaccine against malaria. The
Committees determined that these accomplishments were critical to the Company's
future growth and enhancement of stockholder value and, accordingly, determined
to reward Dr. Schreiber for his efforts on behalf of the Company.
MISCELLANEOUS
Section 162(m) of the Internal Revenue Code disallows the deductibility by
the Company of any compensation over $1 million per year paid to each of the
chief executive officer and four other most highly compensated executive
officers, unless certain criteria are satisfied. The Stock Incentive Plan
qualifies for exemption from the $1 million limit on deductions under Section
162(m) with respect to option grants under the Stock Incentive Plan.
This Compensation Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this report by reference and shall not otherwise be deemed filed
under such Acts.
COMPENSATION COMMITTEE STOCK PLAN COMMITTEE
Robert C. Bellas, Jr. Robert C. Bellas, Jr.
Patrick F. Latterell Patrick F. Latterell
M. Blake Ingle M. Blake Ingle
-16-
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of the
Company's Common Stock with the Center for Research in Securities Prices
("CRSP") Total Return Index for the Nasdaq Stock Market (U.S. and Foreign)
(the "Nasdaq Composite Index") and the CRSP Total Return Index for the Nasdaq
Pharmaceutical Stocks (the "Nasdaq Pharmaceutical Index").(1) The
comparisons in the graph are required by the Securities and Exchange
Commission and are not intended to forecast or be indicative of possible
future performance of the Company's Common Stock.
[GRAPH]
<TABLE>
<CAPTION>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Vical Incorporated....... $100.00 $61.11 $89.82 $122.22 $88.89 $105.10
Nasdaq Composite......... 100.00 97.00 136.23 166.79 203.98 281.69
Nasdaq Pharmaceutical.... 100.00 75.26 138.04 138.47 142.98 183.02
</TABLE>
Assumes a $100 investment on December 31, 1993, in each of the Company's
Common Stock, the securities comprising the Nasdaq Composite Index, and the
securities comprising the Nasdaq Pharmaceutical Index.
(1) The Nasdaq Pharmaceutical Index includes all companies listed on the Nasdaq
Stock Market under the SIC Code 283.
-17-
<PAGE>
PROPOSAL 2
AMENDMENT OF THE STOCK INCENTIVE PLAN
The Stock Incentive Plan of Vical Incorporated was adopted by the Company's
Board of Directors in October 1992, and the most recent amendment and
restatement approved by the Company's stockholders was effective as of May 28,
1998. This proposed amendment of the Stock Incentive Plan will be effective as
of March 2, 1999, if approved by the Company's stockholders at the Annual
Meeting.
SUMMARY OF AMENDMENTS
The amendment to the Stock Incentive Plan approved by the Board of
Directors and submitted for stockholder approval would increase the number of
shares of Common Stock reserved for issuance under the Stock Incentive Plan by
750,000 shares.
DESCRIPTION OF AMENDED STOCK INCENTIVE PLAN
The following description of the Stock Incentive Plan is a summary only.
It is subject to, and qualified in its entirety by the full text of the Stock
Incentive Plan, substantially in the form in which it will take effect if
Proposal 2 is approved by the stockholders. Any stockholder who wishes to
review the text of the Stock Incentive Plan can obtain a copy by writing to the
Company, Attention: Investor Relations.
PURPOSE
The purpose of the Stock Incentive Plan is to offer employees and
non-employee directors an opportunity to acquire a proprietary interest in the
success of the Company, or to increase such interest, by purchasing Shares of
the Company's Stock. The Plan provides both for the direct award or sale of
Shares and for the grant of Options to purchase Shares. Options granted under
the Plan may include NSOs as well as ISOs intended to qualify under Section 422
of the Internal Revenue Code ("Code").
ADMINISTRATION
The Stock Incentive Plan is administered by a committee of the Board (the
"Stock Plan Committee") consisting exclusively of non-employee directors of the
Company, who are appointed by the Board. The Board may act on its own behalf
with respect to non-employee directors and may also appoint one or more separate
committees consisting of one or more officers of the Company, who need not be
directors of the Company and who need not satisfy the foregoing requirements,
who may administer the Plan with respect to employees who are not "covered
employees" under Section 162(m)(3) of the Code and who are not required to
report pursuant to Section 16(a) of the Securities Exchange Act of 1934.
Subject to the limitations set forth in the Stock Incentive Plan, the Stock Plan
Committee has discretion to determine to whom options will be granted, the type,
number and vesting requirements of the shares to be granted, and to interpret
the Stock Incentive Plan and adopt rules thereunder and to make all other
decisions relating to the operation of the Stock Incentive Plan.
-18-
<PAGE>
ELIGIBILITY AND SHARES SUBJECT TO THE STOCK INCENTIVE PLAN
Under the Stock Incentive Plan, 3,200,000 shares of Common Stock have been
reserved for issuance (750,000 shares of which are subject to stockholder
approval at the Annual Meeting) either by direct award or sale or upon exercise
of options granted to employees (including officers and directors who are also
employees), non-employee directors and their affiliates, and consultants and
advisors of the Company who are not directors. The Stock Incentive Plan
provides for the grant of both incentive stock options ("ISOs") intended to
qualify as such under section 422 of the Code, and nonstatutory stock options
("NSOs"). ISOs may be granted only to common-law employees of the Company or a
subsidiary. NSOs may be granted to non-employee directors or to affiliates of
such non-employee directors.
The Stock Incentive Plan provides that options granted to any optionee in a
single calendar year may not cover more than 300,000 shares. In addition, of
the shares available under the Stock Incentive Plan, no more than 30% in the
aggregate are available for grant to non-employee directors. If any options
granted under the Stock Incentive Plan expire or are canceled without having
been exercised in full, the shares allocable to the unexercised portion of such
options shall again become available for grant under the Stock Incentive Plan.
If shares issued under the Stock Incentive Plan are forfeited, they also become
available for new grants.
As of March 15, 1999, there were 101 employees, seven non-employee
directors and two consultants eligible to participate in the Stock Incentive
Plan. As of March 15, 1999, the Company's Chief Executive Officer, each of the
Named Officers, all current executive officers of the Company as a group, all
current directors who are not executive officers as a group, each nominee for
election as a director, all current employees of the Company as a group
(excluding all current executive officers), and all consultants of the Company
as a group had received options to purchase shares of the Company's Common Stock
under the Stock Incentive Plan as follows: Alain B. Schreiber, President and
Chief Executive Officer, 273,000 shares; Deirdre Y. Gillespie, Executive Vice
President and Chief Business Officer, 127,000 shares; Martha J. Demski, Vice
President and Chief Financial Officer, 100,132 shares; Jon A. Norman, Vice
President, Research, 173,000 shares; and George J. Gray, Vice President,
Operations 90,000 shares; all current executive officers of the Company as a
group, 824,132 shares; all current directors who are not executive officers as a
group, 165,000 shares; Philip M. Young, 25,000 shares; all current employees of
the Company as a group (excluding all current executive officers) 901,086
shares; and all consultants of the Company as a group, 35,000 shares. As of
March 15, 1999, options to purchase an aggregate of 1,668,372 shares of Common
Stock at an average exercise price of $13.70 per share were outstanding under
the Stock Incentive Plan. To date, all stock options have been granted with
exercise prices equal to the fair market value of the Company's Common Stock on
the date of grant. As of March 15, 1999, no shares of Common Stock have been
issued for direct sale under the Stock Incentive Plan. As of March 15, 1999, a
total of 1,274,782 shares of Common Stock (750,000 shares of which are subject
to stockholder approval at the Annual Meeting) are available for future options,
grants or direct sales under the Stock Incentive Plan. On March 15, 1999, the
closing price for the Company's Common Stock on the Nasdaq National Market was
$10.75.
The allocation of the additional shares of stock which the stockholders are
being asked to approve hereby has not been determined. Pursuant to the terms of
the Stock Incentive Plan, the Stock Plan Committee will determine the number of
options (and any other awards) to be allocated to employees and non-employee
directors under the Stock Incentive Plan in the future, and such allocations may
only be made in accordance with the provisions of the Stock Incentive Plan as
described herein.
-19-
<PAGE>
TERMS OF OPTIONS
Stock options granted pursuant to the Stock Incentive Plan will vest at the
time or times determined by the Stock Plan Committee and must be exercised by
the optionee within a term determined by the Committee. The maximum term of
each option granted under the Stock Incentive Plan is 10 years (5 years in the
case of an ISO granted to a 10% stockholder).
The exercise price of ISOs and NSOs must not be less than 100% of the fair
market value of the Common Stock on the date of the grant (110% in the case of
an ISO grant to a 10% stockholder). Under the Stock Incentive Plan, the
exercise price is payable in cash or Common Stock or by full-recourse promissory
note. The Stock Incentive Plan also permits an optionee to pay the exercise
price of an option by delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell the
optionee's shares and deliver all or a part of the sale proceeds to the Company
in payment of all or part of the exercise price and any withholding taxes or by
delivery of an irrevocable direction to pledge the optionee's shares to a
securities broker or lender approved by the Company as security for a loan and
to deliver all or part of the loan proceeds to the Company in payment of all or
part of the exercise price and any withholding taxes.
TERMS OF SHARES OFFERED FOR SALE
The terms of any sale of shares of Common Stock under the Stock Incentive
Plan will be set forth in a Common Stock purchase agreement to be entered into
between the Company and each purchaser. The terms of the stock purchase
agreements entered into under the Stock Incentive Plan need not be identical,
and the Stock Plan Committee determines all terms and conditions of each such
agreement, consistent with the Stock Incentive Plan. The purchase price for
shares sold under the Stock Incentive Plan may not be less than the par value of
such shares. The purchase price may be paid, at the Stock Plan Committee's
discretion, with a full-recourse promissory note secured by the shares, except
that the par value of the shares must be paid in cash. Shares may also be
awarded under the Stock Incentive Plan in consideration of services rendered
prior to the award, without a cash payment by the recipient.
Shares sold under the Stock Incentive Plan vest upon satisfaction of the
conditions specified in the stock purchase agreement. Vesting conditions are
determined by the Stock Plan Committee and may be based on the recipient's
service, individual performance, the Company's performance or such other
criteria as the Stock Plan Committee may adopt. Shares may be subject to
repurchase by the Company at their original purchase price in the event that any
applicable vesting conditions are not satisfied. Shares sold under the Stock
Incentive Plan will be subject to restrictions on resale or transfer until they
have vested. Any right to acquire shares under the Stock Incentive Plan (other
than an option) will automatically expire if not exercised within 30 days after
the grant of such right was communicated by the Stock Plan Committee. A holder
of shares sold under the Stock Incentive Plan has the same voting, dividend and
other rights as the Company's other stockholders.
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate the Stock Incentive
Plan at any time, except that any such amendment, suspension or termination
shall not affect any option previously granted. Any amendment of the Stock
Incentive Plan is subject to approval of the Company's stockholders only to the
extent required by applicable law. Unless sooner terminated by
-20-
<PAGE>
the Board of Directors, the Stock Incentive Plan will terminate on March 2,
2009, and no further options may be granted or stock sold pursuant to such plan
following the termination date.
EFFECT OF CERTAIN CORPORATE EVENTS
Outstanding awards under the Stock Incentive Plan provide for the automatic
vesting of employee stock options and (in the case of Common Stock purchase
agreements) the automatic termination of the Company's right of repurchase upon
a change of control. Future employee stock option agreements and common stock
purchase agreements entered into pursuant to the Stock Incentive Plan will
contain similar provisions, unless otherwise determined by the Stock Plan
Committee.
For purposes of the Stock Incentive Plan, the term "change in control"
means either of the following events: (1) a change in the composition of the
Board of Directors after which fewer than one-half of the incumbent directors
either had been directors of the Company 24 months prior to such change or were
elected or nominated for election to the Board of Directors with the approval of
a majority of the directors who had been directors of the Company 24 months
prior to such change and who were still in office at the time of the election or
nomination; or (2) any person becomes, by acquisition or aggregation of
securities, the beneficial owner of securities representing 50% or more of the
combined voting power of the Company's then outstanding securities. A change in
the relative beneficial ownership under (2) above by reason of a reduction in
the number of outstanding securities of the Company will be disregarded.
In the event of a subdivision of the outstanding Common Stock, a
combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise) into a lesser number of shares, a declaration of
a dividend payable in Common Stock or in a form other than Common Stock in an
amount that has a material effect on the price of the shares, a
recapitalization, spinoff, reclassification, or a similar occurrence, the Stock
Plan Committee will make adjustments in the number and/or exercise price of
options and/or the number of shares available under the Stock Incentive Plan, as
appropriate.
In the event of a merger or other reorganization, outstanding options will
be subject to the agreement of merger or reorganization. Such agreement may
provide for the assumption of outstanding options by the surviving corporation
or its parent, for their continuation by the Company (if the Company is the
surviving corporation), for payment of a cash settlement equal to the difference
between the amount to be paid for one share under the agreement of merger or
reorganization and the exercise price for each option, or for the acceleration
of the exercisability of each option followed by the cancellation of options not
exercised or settled, in all cases without the optionee's consent.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS UNDER THE STOCK INCENTIVE PLAN
Neither the optionee nor the Company will incur any federal tax
consequences as a result of the grant of an option. The optionee will have no
taxable income upon exercising an ISO (except that the alternative minimum tax
may apply), and the Company will receive no deduction when an ISO is exercised.
Upon exercising an NSO, the optionee generally must recognize ordinary income
equal to the "spread" between the exercise price and the fair market value of
Common Stock on the date of exercise; the Company generally will be entitled to
a deduction for the same amount. In the case of an employee, the option spread
at the time an NSO is exercised is subject to income tax withholding, but the
optionee generally may elect to satisfy the withholding tax obligation by having
-21-
<PAGE>
shares of Common Stock withheld from those purchased under the NSO. The tax
treatment of a disposition of option shares acquired under the Stock Incentive
Plan depends on how long the shares have been held and on whether such shares
were acquired by exercising an ISO or by exercising an NSO. The Company will
not be entitled to a deduction in connection with a disposition of option
shares, except in the case of a disposition of shares acquired under an ISO
before the applicable ISO holding periods have been satisfied.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE COMPANY'S AMENDMENT TO THE AMENDED AND RESTATED STOCK INCENTIVE PLAN.
-22-
<PAGE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Arthur Andersen LLP as the Company's independent auditors
for the fiscal year ended December 31, 1999, subject to ratification by the
stockholders. Arthur Andersen LLP has audited the Company's financial
statements since 1990. Representatives of Arthur Andersen LLP are expected to
be present at the Company's Annual Meeting. They will have an opportunity to
make a statement, if they desire to do so, and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
If a stockholder wishes to have a stockholder proposal considered at the
Company's 2000 Annual Meeting, the stockholder must have given timely notice of
the proposal in writing to the Secretary of the Company. To be timely, a
stockholder's notice of the proposal must be delivered to or mailed and received
at the executive offices of the Company not less than 50 days nor more than 75
days prior to the date of the 2000 Annual Meeting. However, if less than 65
days notice (including notice by prior public disclosure) of the 2000 Annual
Meeting date is provided to stockholders, notice of a stockholder proposal will
be timely if it is received no later than the close of business on the 15th day
following the date on which the notice of the 2000 Annual Meeting date was
mailed or public disclosure of such date was made.
Proposals of stockholders of the Company that are intended by a stockholder
to be included in the Company's proxy statement and form of proxy for the 2000
Annual Meeting must be received by the Secretary of the Company no later than
December 13, 1999.
OTHER MATTERS
The Company knows of no other business that will be presented at the Annual
Meeting. If any other business is properly brought before the Annual Meeting,
it is intended that proxies in the enclosed form will be voted in accordance
with the judgment of the persons voting the proxies.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers and any persons holding more than 10% of the Company's Common
Stock are required to report their initial ownership of the Company's Common
Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established
and the Company is required to identify in this Proxy Statement those persons
who failed to file timely these reports.
-23-
<PAGE>
All of the filing requirements were timely satisfied. In making this
disclosure, the Company has relied solely on written representations of its
directors and executive officers and copies of the reports that have been filed
with the Commission.
Whether you intend to be present at the Annual Meeting or not, we urge you
to return your signed proxy promptly.
By order of the Board of Directors.
/s/ Martha J. Demski
Martha J. Demski
Vice President, Chief Financial Officer,
Secretary and Treasurer
San Diego, California
April 13, 1999
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<PAGE>
VICAL INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON MAY 27, 1999
The undersigned stockholder of Vical Incorporated (the "Company")
acknowledges receipt of Notice of the Annual Meeting of Stockholders and Proxy
Statement, each dated April 13, 1999, and the undersigned revokes all prior
proxies and appoints Alain B. Schreiber, M.D. and Martha J. Demski, or each of
them, proxies for the undersigned to vote all shares of Common Stock of the
Company which the undersigned would be entitled to vote at the Annual Meeting of
Stockholders to be held at the San Diego Marriott La Jolla, 4240 La Jolla
Village Drive, La Jolla, California, at 9:00 a.m. (San Diego time) on May 27,
1999, and any postponement or adjournment thereof, and instructs said proxies to
vote as follows:
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE TWO
NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2 AND 3.
- --------------------------------------------------------------------------------
-TRIANGLE- FOLD AND DETACH HERE -TRIANGLE-
<PAGE>
PLEASE MARK /X/
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
1. ELECTION OF DIRECTORS:
FOR each of the nominees WITHHOLD AUTHORITY to vote
listed below (except as for the nominees for class I
marked to the contrary below) director listed below
/ / / /
Alain B. Schreiber, M.D.,
Philip M. Young
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
------------------------------------------------------------------------
2. TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S STOCK INCENTIVE
PLAN:
FOR AGAINST ABSTAIN
/ / / / / /
3. TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY:
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
VICAL INCORPORATED BOARD OF DIRECTORS PROXY
ANNUAL MEETING OF STOCKHOLDERS MAY 27, 1999
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
______________________________________ _______________________________________
(Signature of Stockholder) (Signature of Stockholder)
Dated this ________ day of ________, 1999
Please sign exactly as your name or names appear hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If shares are held jointly, each holder must sign.
