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 Sec. 240.14a-11(c) or Sec. 240.14a-12
SCICLONE PHARMACEUTICALS, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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SCICLONE PHARMACEUTICALS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 16, 1997
The Annual Meeting of Shareholders (the "Annual Meeting") of SciClone
Pharmaceuticals, Inc., a California corporation (the "Company"), will be held at
the Hotel Sofitel, 233 Twin Dolphin Drive, Redwood City, California 94065, on
Friday, May 16, 1997, at 9:00 a.m., local time, for the following purposes:
1. To elect five (5) directors of the Company to serve until the 1997
Annual Meeting of Shareholders or until their respective successors are
elected and qualified;
2. To approve an amendment to the Company's 1995 Equity Incentive Plan to
increase by 750,000 the maximum number of shares of Common Stock that may be
issued under such plan.
3. To ratify the appointment of Ernst & Young LLP as the independent
auditors for the Company for the year ending December 31, 1997; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part of
this Notice.
The Board of Directors has fixed the close of business on April 14, 1997 as
the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, sign, date and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors,
/s/ Mark A. Culhane
MARK A. CULHANE
Secretary
San Mateo, California
April 18, 1997
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SCICLONE PHARMACEUTICALS, INC.
901 MARINERS ISLAND BOULEVARD
SAN MATEO, CALIFORNIA 94404
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of SciClone Pharmaceuticals, Inc., a California
corporation (the "Company"), of proxies in the enclosed form for use in voting
at the Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
Hotel Sofitel, 233 Twin Dolphin Drive, Redwood City, California 94065, on
Friday, May 16, 1997, at 9:00 a.m., local time, and any adjournment or
postponement thereof.
This Proxy Statement, the enclosed proxy card and the Company's Annual Report
to Shareholders are being mailed to shareholders on or about April 18, 1997.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Mark A. Culhane) a written notice of revocation or a duly executed proxy bearing
a later date, or by attending the Annual Meeting and voting in person.
RECORD DATE
The close of business on April 14, 1997 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of the
Company entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had approximately 17,498,970 shares of
Common Stock outstanding.
VOTING AND SOLICITATION
Each outstanding share of Common Stock on the Record Date is entitled to one
vote on all matters and is entitled to cumulate votes for the election of
directors, subject to the conditions described below.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
The Inspector of Elections will also determine whether or not a quorum is
present. Except with respect to the election of directors and except in certain
other specific circumstances, the affirmative vote of a majority of shares
represented and voting at a duly held meeting at which a quorum is present
(which shares voting affirmatively also constitute at least a majority of the
required quorum) is required under California law for approval of proposals
presented to shareholders. In general, California law also provides that a
quorum consists of a majority of the shares entitled to vote, represented either
in person or by proxy. The Inspector of Elections will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as not voting for purposes of determining the approval
of any matter submitted to the shareholders for a vote.
The shares represented by the proxies received, properly marked, signed,
dated and not revoked will be voted at the Annual Meeting. Where such proxies
specify a choice with respect to any matter to be acted upon, the shares will be
voted in accordance with the specifications made. Any proxy in the enclosed form
which is returned but is not marked will be voted FOR the election of directors,
the FOR amendment of the Option Plan, FOR ratification of the appointment of the
designated independent auditors and as the proxy holders deem advisable on other
matters that may come before the meeting, as the case may be with respect to the
item not marked. If a broker indicates on the enclosed proxy or its substitute
that it does not have discretionary authority as to certain shares to vote on a
particular matter ("broker non-votes"), those shares will not be considered as
voting with respect to that matter. While there is no definitive specific
statutory or case law authority in California concerning the proper treatment of
abstentions and broker non-votes, the Company believes that the tabulation
procedures to be followed by the Inspector of Elections are consistent with the
general statutory requirements in California concerning voting of shares and
determination of a quorum.
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The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy solicitation materials for the Annual Meeting and reimbursements
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation materials regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and employees,
none of whom will receive additional compensation for assisting with the
solicitation.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
At the Annual Meeting, the shareholders will elect five directors to serve
until the 1997 Annual Meeting of Shareholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the proxies
may be voted for the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy, or for the balance of the nominees named without nomination of a
substitute, or the Board may be reduced in accordance with the Bylaws of the
Company. The Board has no reason to believe that any of the persons named below
will be unable or unwilling to serve as a nominee or as a director if elected.
In voting for directors, each shareholder is entitled to cast that number of
votes equal to the number of directors to be elected multiplied by the number of
shares of Common Stock held by such shareholder. Such votes may be cast for one
candidate or distributed in any manner among the nominees for directors.
However, the right to cumulate votes in favor of one or more candidates may not
be exercised unless the candidate or candidates have been nominated prior to the
voting, and a shareholder has given notice at the Annual Meeting, prior to the
voting, of the shareholder's intention to cumulate such shareholder's votes. If
any one shareholder gives such notice, all shareholders may cumulate their votes
for candidates in nomination. The persons authorized to vote shares represented
by executed proxies in the enclosed form (if authority to vote for the election
of directors is not withheld) will have full discretion and authority to vote
cumulatively and to allocate votes among any or all of the nominees as they may
determine or, if authority to vote for a specified candidate or candidates has
been withheld, among those candidates for whom authority to vote has not been
withheld.
Assuming a quorum is present, the five nominees receiving the highest number
of affirmative votes of shares entitled to be voted for them will be elected as
directors of the Company for the ensuing year. Unless marked otherwise, proxies
received will be voted FOR the election of each of the five nominees named
below. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner in accordance with cumulative voting as will ensure the election of as
many of the nominees listed below as possible, and, in such event, the specific
nominees to be voted for will be determined by the proxy holders.
The names of the nominees, their ages as of April 1, 1997, and certain other
information about them are set forth below:
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ------------------------- ----- ---------------------------------- ----------
Donald R. Sellers ...... 52 President, Chief Executive Officer 1996
and Director
Thomas E. Moore ......... 53 Chairman of the Board of Directors 1990
of the Company
John D. Baxter, M.D...... 56 Professor of Medicine 1991
Edwin C. Cadman, M.D..... 51 Professor of Medicine 1991
Jere E. Goyan, Ph.D...... 66 President and Chief Operating 1992
Officer of Alteon, Inc.
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There are no family relationships among any of the directors or executive
officers of the Company.
Donald Sellers has served as the Company's President and Director since
January 1996 and its Chief Executive Officer since April 1996. From May 1993 to
present, he has also served as Managing Director, SciClone Pharmaceuticals
International Ltd., the international arm of the Company. From 1990 to 1993, Mr.
Sellers was Corporate Vice President of Getz Bros., an Asian trading company, as
well as President of their Japanese operation. From 1983 to 1990, Mr. Sellers
was employed by Sterling Drug International, initially as Vice President of
Marketing and Operations in Asia and beginning in 1985 as Vice President of
Business Development for Latin America and in 1987 as President of their Latin
American Andina Group. Mr. Sellers began his pharmaceutical career in 1973 with
Pfizer as Country Manager, Vietnam and Hong Kong, and he later worked with the
Revlon Healthcare Group as Director of Worldwide Exports and Pacific Area
Director.
Thomas E. Moore, a founder of the Company, has served as a director and
Chairman of the Board of Directors of the Company since its inception and as
Chief Executive Officer of the Company from August 1991 to April 1, 1996. Since
February 1995, Mr. Moore has also served as Chairman of the Board of Cord Blood
Registry, Inc., a cord blood banking company. Since 1988, Mr. Moore has also
served as a principal in Sand Hill Management Group, a private investment and
management firm specializing in the computer software, medical and biotechnology
industries. From 1982 to 1988, Mr. Moore was the Chairman of the Board of
Directors of Synercom Technology, Inc. ("Synercom"), a software company. Prior
to Synercom, Mr. Moore was Vice President of Pacific Operations and Vice
President of Strategic Planning at Honeywell, Inc., an electronics company.
John D. Baxter, M.D. has been a director and Chairman of its Scientific
Advisory Board in June 1991. Dr. Baxter has been associated with the University
of California, San Francisco since 1970. He has been Professor of Medicine since
1979, Chief of the Endocrinology Section, Parnassus Campus since 1980 and
Director of the Metabolic Research Unit since 1981. Dr. Baxter was a founder and
served as a director of Scios Nova Inc., a biotechnology company, from its
inception in 1982 to 1991.
Edwin C. Cadman, M.D. has been a director and member of the Company's
Scientific Advisory Board since November 1991. Since January 1994, Dr. Cadman
has been Senior Vice President of Medical Affairs and Chief of Staff at Yale New
Haven Hospital, where he was Chief of the Medical Service from 1987 through
December 1993. Since 1987, Dr. Cadman has also been Professor of Medicine at
Yale University, where he was Chairman of the Department of Medicine from 1987
through December 1993. Prior to these positions, he was Director of the Cancer
Research Institute at the University of California, San Francisco. Dr. Cadman
also currently serves as a director of CytoTherapeutics, Inc., a biotechnology
company.
Jere E. Goyan, Ph.D. has been a director of the Company since January 1992.
Since July 1993, Dr. Goyan has been President and Chief Operating Officer and
director of Alteon, Inc., a biotechnology company where he served as Senior Vice
President for Research and Development from January 1993 through July 1993 and
as Acting Chief Executive Officer from July 1993 through May 1994. Dr. Goyan was
Dean of the School of Pharmacy and Professor of Pharmacy and Pharmaceutical
Chemistry at the University of California, San Francisco from 1967 through 1992,
and was a Professor there from 1965 through 1992. From 1979 to 1981, Dr. Goyan
was the Commissioner of the United States Food and Drug Administration. Dr.
Goyan also currently serves as a director of Emisphere Technologies, Inc. and
Atrix Laboratories, both biotechnology companies, and Boehringer Mannheim
Pharmaceuticals Corporation.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1996, the Board met four times and no director attended fewer than 75%
of the aggregate number of meetings of the Board and meetings of the committees
of the Board on which he serves. The Board has two committees: the Audit
Committee and the Compensation Committee. The Board does not have a nominating
committee or a committee performing the functions of a nominating committee.
Although there are no formal procedures for shareholders to nominate persons to
serve as directors, the Board will consider nominations from shareholders, which
should be addressed to Mark A. Culhane, at the Company's address set forth
above.
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The Audit Committee consists of directors Cadman and Goyan, the Company's two
non-employee directors, and held one meeting during 1996. The Audit Committee
recommends the engagement of the firm of certified public accountants to audit
the financial statements of the Company, and monitors the effectiveness of the
audit effort, the Company's financial and accounting organization and its system
of internal accounting controls.
The Compensation Committee, which also consists of directors Cadman and
Goyan, held three meeting(s) during 1996. Its functions are to establish and
administer the Company's policies regarding annual executive salaries and cash
incentives and long-term equity incentives. The Compensation Committee
administers the Company's 1991 and 1992 Stock Plans, the Company's 1995 Equity
Incentive Plan and the Company's 1995 Nonemployee Director Stock Option Plan.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive any compensation
for their services as directors. Directors who are not employees of the Company
receive an annual retainer of $12,000, payable at the rate of $1,000 per month,
plus payment of out-of-pocket expenses relating to their service as Board
members.
The Company has entered into a consulting agreement with Dr. Baxter pursuant
to which Dr. Baxter serves as Chairman of the Company's Scientific Advisory
Board and performs consulting services as requested by the Company. Under the
agreement, Dr. Baxter receives a fee of $6,000 per month. Dr. Baxter received
$72,000 under this agreement in 1996. The Company has retained Dr. Cadman to
perform consulting services, principally analysis of drug candidates for
licensing or acquisition. Dr. Cadman receives a fee of $6,250 per month for
these services. Dr. Cadman received $75,000 in such fees in 1996. From time to
time, Dr. Goyan performs consulting services for the Company. The Company
compensates Dr. Goyan for these services at his then-effective rate for
consulting services. Dr. Goyan did not receive any consulting fees from the
Company in 1996.
Messrs. Baxter, Cadman and Goyan will each receive options to purchase 10,000
shares of the Company's Common Stock under the Company's 1995 Nonemployee
Director Stock Option Plan if they are reelected to the Board at the Annual
Meeting. Each such option shall be exercisable in full or part to the extent of
one-twelfth of the shares subject to the option at the end of each one-month
period thereafter.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
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PROPOSAL NO. 2
AMENDMENT OF THE 1995 EQUITY INCENTIVE PLAN
GENERAL
At the Annual Meeting, the shareholders will be asked to approve an amendment
to the Company's 1995 Equity Incentive Plan (the "Option Plan") to increase by
750,000 the maximum number of shares of Common Stock that may be issued under
the Option Plan.
The Company's shareholders have previously approved the reservation of
1,250,000 shares of the Company's Common Stock (subject to adjustment upon
certain changes in the capital structure of the Company) for issuance to
employees (including officers)and consultants under the Option Plan. As of March
31, 1997, options to purchase an aggregate of 674,900 shares of Common Stock
were outstanding, at a weighted average exercise price of $7.13 per share, and
2,194 shares had been issued upon the exercise of previously granted options,
leaving 572,906 shares available for future option grants. To enable the Company
to continue to provide long-term equity incentives, the Board of Directors has
amended the Option Plan, subject to approval by the shareholders, to increase
the maximum number of shares that may be issued under the Option Plan by 750,000
to an aggregate of 2,000,000 shares.
The Board of Directors believes that the Company's stock option program is an
important factor in attracting and retaining the high caliber employees,
directors and consultants essential to the success of the Company and in
aligning their long-term interests with those of the shareholders. Because
competition for highly qualified individuals in the Company's industry is
intense, management believes that to successfully attract the best candidates,
the Company must offer a competitive stock option program as an essential
component of its compensation packages. The Board of Directors further believes
that stock options serve an important role in motivating their holders to
contribute to the Company's continued growth and profitability. The proposed
amendment is intended to ensure that the Option Plan will continue to have
available a reasonable number of shares to meet these needs.
SUMMARY OF THE OPTION PLAN, AS AMENDED
The following summary of the Option Plan, as amended, is qualified in its
entirety by the specific language of the Option Plan, a copy of which is
available to any shareholder upon request.
General. The purpose of the Option Plan is to advance the interests of the
Company and its shareholders by providing an incentive to attract, retain and
reward the Company's employees, directors and consultants and by motivating such
persons to contribute to the Company's growth and profitability. It provides for
the grant of incentive stock options within the meaning of section 422 of the
Code and nonqualified stock options.
Shares Subject to Plan. The shareholders have previously authorized an
aggregate of 1,250,000 shares of the Company's Common Stock for issuance upon
the exercise of options granted under the Option Plan. As amended, the Option
Plan would provide that the maximum aggregate number of authorized but unissued
or reacquired shares of Common Stock that may be issued under the plan is
2,000,000. Appropriate adjustments will be made to the shares subject to the
Option Plan, and to outstanding options upon any stock dividend, stock split,
reverse stock split, combination, reclassification, or similar change in the
capital structure of the Company. To the extent that any outstanding option
under the Option Plan expires or terminates prior to exercise in full or if
shares issued upon exercise of an option are repurchased by the Company, the
shares of Common Stock for which such option is not exercised or the repurchased
shares are returned to the Option Plan and become available for future grant.
Administration. The Option Plan is administered by the Board of Directors or
a duly appointed committee of the Board (hereinafter referred to as the
"Board"). Subject to the provisions of the Option Plan, the Board determines the
persons to whom options are to be granted, the number of shares to be covered by
each option, whether an option is to be an incentive stock option or a
nonqualified stock option, the timing and terms of exercisability and vesting of
each option, the exercise price of and the type of consideration to be paid to
the Company upon the exercise of each option, the duration of each option, and
all other terms and conditions of the options. The Board will interpret the
Option Plan and options granted thereunder, and all determinations of the Board
will be final and binding on all persons having an interest in the Option Plan
or any option.
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Eligibility. Options may be granted under the Option Plan to employees
(including officers), and consultants of the Company or of any present or future
parent or subsidiary corporations of the Company. As of March 31, 1997, the
Company had approximately 38 employees, including 3 executive officers. While
any person eligible under the Option Plan may be granted a nonqualified stock
option, only employees may be granted incentive stock options.
Terms and Conditions of Options. Each option granted under the Option Plan is
evidenced by a written agreement between the Company and the optionee specifying
the number of shares subject to the option and the other terms and conditions of
the option, consistent with the requirements of the plan. The exercise price of
each incentive stock option granted under the Option Plan may not be less than
the fair market value of a share of the Company's Common Stock on the date of
grant, while the exercise price of a nonqualified stock option may be greater
than, equal to or less than such fair market value. However, any incentive stock
option granted to a person who at the time of grant owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company (a "Ten Percent
Shareholder") must have an exercise price equal to at least 110% of the fair
market value of a share of Common Stock on the date of grant. As of March 31,
1997, the closing price of the Company's Common Stock, as reported on the Nasdaq
National Market, was $6.563 per share.
The option exercise price may be paid in cash, by check, or in cash
equivalent, by tender of shares of the Company's Common Stock owned by the
optionee having a fair market value not less than the exercise price, by the
assignment of the proceeds of a sale of some or all of the shares of Common
Stock being acquired upon the exercise of the option, by means of a promissory
note, or by any combination of these. The Board may nevertheless restrict the
forms of payment permitted in connection with any option grant. No option may be
exercised until the optionee has made adequate provision for federal, state and
foreign taxes, if any, relating to the exercise of the option.
Options granted under the Option Plan become exercisable and vested at such
times and subject to such conditions as specified by the Board. The maximum term
of an option granted under the Option Plan is ten years, provided that an option
granted to a Ten Percent Shareholder must have a term not exceeding five years.
Generally, options granted under the Option Plan become exercisable in full four
years after the date of grant, subject to the optionee's continued service with
the Company, and have a term of ten years.
Incentive stock options are nontransferable by the optionee other than by
will or by the laws of descent and distribution, and are exercisable during the
optionee's lifetime only by the optionee. Nonqualified stock option granted
under the Option Plan may be assigned or transferred to the extent permitted by
the Board and set forth in the option agreement. Options remain exercisable for
three months following an optionee's termination of service, unless such
termination results from the optionee's death or disability, in which case the
option will remain exercisable for twelve months following the optionee's
termination of service, provided that in any event the option must be exercised
no later than its expiration date.
Change in Control. The Option Plan provides that in the event of (i) a merger
or consolidation in which the Company is a party or the direct or indirect sale
or exchange by the shareholders of all or substantially all of the Company's
stock wherein, upon any such event, the shareholders of the Company immediately
before such event do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Company or its successor,
(ii) the sale, exchange or transfer of all or substantially all of the assets of
the Company, or (iii) a liquidation or dissolution of the Company (a "Change in
Control"), the acquiring or successor corporation must assume the Company's
rights and obligations under the outstanding options or substitute new options
for such corporation's stock. To the extent that the options outstanding under
the Option Plan are not assumed, replaced, or exercised prior to the Change in
Control, they will terminate.
Termination or Amendment. The Option Plan will continue in effect until
January __, 2005 unless earlier terminated by the Board. The Board may terminate
or amend the Option Plan at any time. However, without shareholder approval, the
Board may not amend the Option Plan to increase the total
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number of shares of Common Stock issuable thereunder or change the class of
persons eligible to receive options. No termination or amendment may adversely
affect an outstanding option without the consent of the optionee, unless the
amendment is required to preserve the option's status as an incentive stock
option.
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
Option Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
Incentive Stock Options. An optionee recognizes no taxable income for regular
income tax purposes as the result of the grant or exercise of an incentive stock
option qualifying under section 422 of the Code. Optionees who do not dispose of
their shares for two years following the date the option was granted nor within
one year following the exercise of the option will normally recognize a
long-term capital gain or loss equal to the difference, if any, between the sale
price and the purchase price of the shares. If an optionee satisfies such
holding periods upon a sale of the shares, the Company will not be entitled to
any deduction for federal income tax purposes. If an optionee disposes of shares
within two years after the date of grant or within one year from the date of
exercise (a "disqualifying disposition"), the difference between the fair market
value of the shares on the determination date (see discussion under
"Nonqualified Stock Options" below) and the option exercise price (not to exceed
the gain realized on the sale if the disposition is a transaction with respect
to which a loss, if sustained, would be recognized) will be taxed as ordinary
income at the time of disposition. Any gain in excess of that amount will be a
capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. A capital gain or loss will be long-term if
the optionee's holding period is more than 12 months. Any ordinary income
recognized by the optionee upon the disqualifying disposition of the shares
generally should be deductible by the Company for federal income tax purposes,
except to the extent such deduction is limited by applicable provisions of the
Code or the regulations thereunder.
The difference between the option exercise price and the fair market value of
the shares on the determination date of an incentive stock option (see
discussion under "Nonqualified Stock Options" below) is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain subsequent sales
of the shares in a disqualifying disposition, certain basis adjustments for
purposes of computing the alternative minimum taxable income on a subsequent
sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
Nonqualified Stock Options. Options not designated or qualifying as incentive
stock options will be nonqualified stock options. Nonqualified stock options
have no special tax status. An optionee generally recognizes no taxable income
as the result of the grant of such an option. Upon exercise of a nonqualified
stock option, the optionee normally recognizes ordinary income in the amount of
the difference between the option exercise price and the fair market value of
the shares on the determination date (as defined below). If the optionee is an
employee, such ordinary income generally is subject to withholding of income and
employment taxes. The "determination date" is the date on which the option is
exercised unless the shares are subject to a substantial risk of forfeiture and
are not transferable, in which case the determination date is the earlier of (i)
the date on which the shares are transferable or (ii) the date on which the
shares are not subject to a substantial risk of forfeiture. If the determination
date is after the exercise date, the optionee may elect, pursuant to section
83(b) of the Code, to have the exercise date be the determination date by filing
an election with the Internal Revenue Service not later than 30 days after the
date the option is exercised. Upon the sale of stock acquired by the exercise of
a nonqualified stock option, any gain or loss, based on the difference between
the sale price and the fair market value on the determination date, will be
taxed as capital gain or loss. A capital gain or loss will be long-term if the
optionee's holding period is more than 12 months. No tax deduction is available
to the Company with respect to the grant of a nonqualified stock option or the
sale of the stock acquired pursuant to such grant. The Company
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generally should be entitled to a deduction equal to the amount of ordinary
income recognized by the optionee as a result of the exercise of a nonqualified
stock option, except to the extent such deduction is limited by applicable
provisions of the Code or the regulations thereunder.
CHANGES TO BENEFIT PLAN
The Board of Directors has amended the Option Plan, subject to stockholder
approval, to increase the maximum aggregate number of the Company's shares that
may be issued under the Option Plan from 1,250,000 shares of common stock to
2,000,000 shares. No option grants have been made under the Option Plan
following this amendment. Future grants under the Option Plan will be made at
the discretion of the Board, and, accordingly, are not yet determinable. In
addition, benefits under the Option Plan will depend on a number of factors,
including the fair market value of the Company's common stock on future dates
and, in the case of stock options, the exercise decisions made by the optionees.
Consequently it is not possible to determine the benefits that might be received
by participants in the Option Plan.
During the fiscal year ended December 31, 1996, (1) the Company's Chief
Executive Officers and two other executive officers whose total salary and bonus
for the fiscal year ended December 31, 1996 exceeded $100,000 received stock
option grants to purchase 440,500 shares of common stock under the Option Plan;
(2) all current executive officers as a group received stock option grants to
purchase 440,500 shares of common stock under the Option Plan; (3) all current
directors who are not executive officers as a group received stock option grants
to purchase 30,000 shares of common stock under this Option Plan; (4) Donald
Sellers, Thomas E. Moore, John D. Baxter, Edwin C. Cadman and Jere E. Goyan
received stock option grants to purchase 400,000, 0, 10,000, 10,000 and 10,000
shares of common stock, respectively, under the Option Plan; (5) no associate of
any director, executive officer or nominee received any stock option grants to
purchase shares of common stock under the Option Plan; (6) Donald R. Sellers
received a grant to purchase 400,000 shares of common stock under the Option
Plan, or 45.9% of all options granted under the Option Plan; and (7) all
employees, including all current officers who are not executive officers as a
group received stock option grants to purchase 231,350 shares of common stock
under the Option Plan.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast at the Annual Meeting of
Shareholders, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present and voting, either in person or
by proxy, is required for approval of this proposal. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum, but will not be counted as having been voted on the
proposal.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
AMENDMENT OF THE OPTION PLAN TO INCREASE BY 750,000 THE
MAXIMUM NUMBER OF SHARES OF COMMON STOCK
ISSUABLE UNDER THE OPTION PLAN.
8
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Ernst & Young LLP has served as the Company's independent auditors since 1991
and has been appointed by the Board to continue as the Company's independent
auditors for the year ending December 31, 1997. In the event that ratification
of this selection of auditors is not approved by a majority of the shares of
Common Stock voting at the Annual Meeting in person or by proxy, management will
review its future selection of auditors.
A representative of Ernst & Young LLP is expected to be present at the Annual
Meeting. This representative will have an opportunity to make a statement and
will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1997
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information that has been provided to the
Company with respect to beneficial ownership of shares of the Company's Common
Stock as of the March 31, 1997 for (i) each person who is known by the Company
to own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each of the Named Executive Officers, (iii) each director of the Company and
(iv) all directors and executive officers of the Company as a group.
SHARES BENEFICIALLY
OWNED(1)
---------------------
NAME NUMBER PERCENT
- ----------------------------------------------- ----------- ---------
Thomas E. Moore(2) ............................. 3,317,381 18.7%
John D. Baxter, M.D.(3) ........................ 413,839 2.4%
Donald R. Sellers(4) ........................... 301,933 1.7%
David L. Horwitz, M.D., Ph.D.(5) ............... 289,721 1.6%
Mark A. Culhane(6) ............................. 204,692 1.2%
Edwin C. Cadman, M.D.(7) ....................... 49,813 *
Jere E. Goyan, Ph.D.(8) ........................ 48,333 *
All directors and executive officers as a group
(7 persons)(9) ................................ 4,625,712 24.8%
- -------------------
* Less than 1%.
(1) Except pursuant to applicable community property laws, the Company believes
the persons named in the table have sole voting and investment power with
respect to all shares.
(2) Includes 2,243,167 shares held of record by Sand Hill Management Group, a
sole proprietorship of which Mr. Moore is the principal, 308,616 shares
held of record by Moore Family Limited Partnership and 200,000 shares
issuable pursuant to options exercisable within 60 days of March 31, 1997.
(3) Includes 18,333 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(4) Includes 297,933 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(5) Includes 252,054 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(6) Includes 189,227 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(7) Consists of 48,813 shares issuable pursuant to options exercisable within
60 days of March 31, 1997.
(8) Includes 48,333 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(9) Includes 1,054,693 shares issuable pursuant to options exercisable within
60 days of March 31, 1997.
9
<PAGE>
EXECUTIVE COMPENSATION
<TABLE>
The following table sets forth certain information concerning compensation of
(i) the Company's Chief Executive Officer and (ii) the two other executive
officers of the Company serving at December 31, 1996 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- --------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(2) BONUS ($) ($) (#) ($)
- ----------------------------- ------ ----------- --------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Sellers(1) 1996 400,000 150,000 * 400,000 8,524 (6)
President and Chief 1995 203,643 78,180 328,854 (3) 60,000 13,522 (6)
Executive Officer 1994 194,506 120,000 306,927 (3) 40,000 10,428 (6)
David L. Horwitz, M.D., Ph.D. 1996 234,000 81,800 92,193 (4) 13,500 11,003 (7)
Executive Vice President, 1995 218,795 76,639 67,028 (4) 67,500 9,889 (7)
Medical and Regulatory 1994 205,056 120,000 36,190 (4) 40,000 9,397 (7)
Affairs
Mark A. Culhane 1996 205,000 81,000 72,000 (5) 27,000 3,546 (8)
Vice President, Finance 1995 190,000 67,000 48,000 (5) 67,500 1,848 (8)
and Administration, 1994 175,000 75,000 * 125,000 1,720 (8)
Chief Financial Officer
and Secretary
Former Executive Officer:
Thomas E. Moore 1996 300,000 0 0 0 6,796 (9)
Chairman of the Board of 1995 367,500 206,719 * 0 1,848 (9)
Directors and Former 1994 350,000 87,500 * 200,000 1,848 (9)
Chief Executive Officer
<FN>
- -------------
* No disclosure required under Securities and Exchange Commission rules.
(1) Mr. Sellers was appointed to serve as the Company's President and as a
director of the Company in January 1996 and its Chief Executive Officer in
April 1996.
(2) Includes amounts deferred under the Company's 401(k) plan.
(3) Includes $274,427 in 1995 and $252,429 in 1994 in cost-of-living assistance
payments under an expatriate benefit agreement.
(4) Includes mortgage assistance payments of $92,193 in 1996, $62,800 in 1995
and $36,190 in 1994 under a housing relocation agreement.
(5) Consists of $60,000 in 1996 and $36,000 in 1995 in cost-of-living
assistance payments.
(6) Consists of disability and life insurance premiums ($6,624 in 1996, $7,182
in 1995, and $3,131 in 1994), medical insurance premiums ($6,340 in 1995
and $7,297 in 1994) and $1,900 in matching contributions under the
Company's 401(k) plan in 1996.
(7) Consists of term life insurance premiums ($3,755 in 1996, $2,693 in 1995
and $2,202 in 1994), disability insurance premiums ($5,348 in 1996 and 1995
and $5,347 in 1994) and matching contributions under the Company's 401(k)
Plan ($1,900 in 1996, $1,848 in 1995 and 1994).
(8) Consists of matching contributions under the Company's 401(k) plan ($1,900
in 1996, $1,848 in 1995 and $1,720 in 1994) and $1,646 in term life
insurance premiums in 1996.
(9) Consists of $1,900 in matching contributions under the Company's 401(k)
plan and $4,896 in term life insurance premiums in 1996 and $1,848 in
matching contributions under the Company's 401(k) plan in each of 1995 and
1994.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in 1996. In addition, as
required by Securities and Exchange Commission rules, the table set forth the
hypothetical gains that would exist for the options based on assumed rates of
annual compound stock price appreciation during the option term.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE
VALUE
AT ASSUMED
NUMBER OF PERCENT OF TOTAL EXERCISE ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS OR BASE PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN PER SHARE EXPIRATION -------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------------ -------------- ---------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Sellers ............. 400,000 (1) 45.9% $5.375 1/5/2006 $1,354,000 $3,426,000
David L. Horwitz, M.D., Ph.D... 13,500 (2) 1.6% $ 5.25 1/4/2006 $ 44,550 $ 112,995
Mark A. Culhane ............... 27,000 (2) 3.10% $ 5.25 1/4/2006 $ 89,100 $ 225,990
Former Executive Officer:
Thomas E. Moore ............... -0- N/A N/A N/A N/A N/A
<FN>
- ------------------
(1) Options vest ratably on a monthly basis over three years. The options
become fully exercisable without regard to vesting in the event the Company
is not the surviving corporation in any merger or consolidation. The
options have a ten-year term, but are subject to earlier termination in
connection with termination of employment.
(2) Options with respect to 25% of the shares covered become exercisable one
year from date of grant; thereafter, options with respect to the remaining
shares vest ratably on a monthly basis over three years. The options become
fully exercisable without regard to vesting in the event the Company is not
the surviving corporation in any merger or consolidation. The options have
a ten-year term, but are subject to earlier termination in connection with
termination of employment.
(3) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their terms, assuming the specified compounded rates
of appreciation of the market price per share from the date of grant to the
end of the option term. Actual gains, if any, on stock option exercise are
dependent upon a number of factors, including the future performance of the
Common Stock and the timing of option exercises, as well as the optionees
continued employment through the vesting period. There can be no assurance
that the amounts reflected in this table will be achieved.
</FN>
</TABLE>
11
<PAGE>
<TABLE>
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during 1996. In addition, the
table sets forth the number of shares covered by stock options as of December
31, 1996, and the value of "in-the-money" stock options, which represents the
positive spread between the exercise price of a stock option and the market
price of the shares subject to such option on December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
FISCAL YEAR END OPTIONS/SARS AT
SHARES (#) FISCAL YEAR END ($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/UNEXERCISABLE
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE (1)
- ------------------------------ --------------- ------------ ----------------- ---------------------------
<S> <C> <C> <C> <C>
Donald R. Sellers ............. -0- -- 225,580/350,420 $430,425/$844,575
David L. Horwitz, M.D., Ph.D... -0- -- 219,850/92,633 $817,143/$230,398
Mark A. Culhane ............... -0- -- 154,601/123,732 $454,440/$359,351
Former Executive Officer:
Thomas E. Moore ............... -0- -- 200,000/0 $ 400,000/0
<FN>
- ------------------
(1) Based on the $8.00 per share closing price of the Company's Common Stock on
the Nasdaq National Market on December 31, 1996, less the exercise prices.
</FN>
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in the Company's previous
filings under the Securities Act of 1933 or the Securities Exchange Act of 1934
that might incorporate future filings, including this Proxy Statement, in whole
or in part, the following report and the Stock Performance Graph which follows
shall not be deemed to be incorporated by reference into any such filings.
The Compensation Committee of the Board is composed of Messrs. Cadman and
Goyan, both of whom are nonemployee directors. The Compensation Committee is
responsible for establishing and administering the Company's policies regarding
compensation and stock ownership programs. The Committee annually evaluates the
performance, and determines compensation and long-term equity incentives, of the
Chief Executive Officer ("CEO"), and reviews and approves the CEO's compensation
recommendation for other executive officers of the Company, including the
Chairman of the Board.
Compensation Policy
The overall objectives of the Company's compensation policy are to attract
and retain executives of outstanding ability and potential, to motivate these
individuals to achieve corporate goals to enhance long-term shareholder value,
to link executive compensation and shareholder interests, and to provide a
compensation package that recognizes individual contributions as well as overall
corporate results and is competitive with leading biopharmaceutical companies
with which the Company competes for talent.
In the biopharmaceutical industry, traditional measures of corporate
performance, such as earnings per share and sales growth, may not apply in
reviewing the performance of executive officers. At the Company's current stage
of development, in evaluating and determining the compensation of the Company's
CEO and other executive officers, the Compensation Committee looks to other
performance criteria, such as progress of the Company's clinical and regulatory
programs and corporate commercialization and development activities, as well as
the Company's success in securing capital resources that are necessary for the
Company to complete clinical, regulatory and commercialization programs and
achieve product revenues. As a result, in many instances these qualitative
factors involve a subjective assessment of corporate performance by the
Compensation Committee. The Compensation Committee does not base its
considerations on any single performance factor nor does it specifically assign
relative weights to factors, but rather considers a mix of factors and evaluates
the Company's and individual performance against that mix.
12
<PAGE>
Compensation for individual executive officers is targeted to be comparable
to compensation packages paid to other executives of other biopharmaceutical
companies of comparable or larger size with which the Company competes for
talent. The Compensation Committee reviews from time to time independent survey
data regarding compensation and benefits in the biopharmaceutical industry as
well as compensation and benefits in a comparative group of public
biopharmaceutical companies that represent a number of the Company's most direct
competitors for executive talent. The companies selected for comparison are
biopharmaceutical firms with market capitalizations comparable to or larger than
the Company's, several of which companies are included in the NASDAQ
Pharmaceutical/Biotechnology Index used in the Stock Performance Graph contained
herein. The Compensation Committee believes that inclusion of companies with
larger market capitalizations is necessary because the talent pool from which
the Company recruits is composed largely of executives employed by such
companies.
The key elements of the Company's executive compensation program consist of
base salary, annual cash incentives and long-term equity incentives.
Base Salary
Base salaries for executive officers are initially determined by evaluating
the responsibilities of the position held and the base salaries paid by
biopharmaceutical companies generally and companies in the comparative group
described above. The Compensation Committee initially sets base salaries in the
mid to upper range of base salaries at other companies in such comparative
group. In certain cases, minimum base salaries are established by employment
agreements between the Company and its executive officers. Using this general
guideline, the Compensation Committee then considers other factors such as the
individual's contribution to achievement of corporate goals, the attainment of
specific individual objectives and the assumption of new responsibilities. From
year to year, the relative weighting of the individual factors may differ from
officer to officer, and can be expected to change over time in response to the
Company's development stage and the evolution of the biopharmaceutical industry.
Annual Cash Incentives
The Company's annual cash incentives account for a significant percentage of
each executive officer's potential compensation. The Compensation Committee
establishes annual cash incentive targets for executive officers based upon cash
incentive programs of biopharmaceutical companies generally and companies in the
comparative group described above. The Compensation Committee generally sets
such targets in the mid to upper range of cash incentives paid by other
companies in such comparative group. The actual cash incentive award earned
depends upon the attainment of corporate performance goals established for the
year by the Committee as well as the attainment of individual performance
objectives. Corporate performance goals for 1996 were (i) registration of
thymosin alpha 1 in at least one additional Asian country and at least one
Middle Eastern country, (ii) submission of thymosin alpha 1 registration
applications in at least eight additional countries, (iii) conclusions of
thymosin alpha 1 trial in Taiwan, and (iv) creation and implementation of
thymosin alpha 1 and CPX development plans. At year end, the Compensation
Committee reviewed the original plans and goals. The Committee determined that,
due to the significant efforts and accomplishments of the Company's executive
officers, many of the original goals had been achieved; however, certain goals
deemed significant by the Committee were not achieved. As a result, the
executive officers received less than their targeted annual cash incentive and
received cash incentives ranging from 35% to 40% of base salary.
Long-Term Equity Incentives
The Company's long-term equity incentives currently consist of the Company's
1991 and 1992 Stock Plans and the Company's 1995 Equity Incentive Plan
(collectively, the "Plans"), pursuant to which the Company grants options and
other rights to purchase shares of its Common Stock. The objective of each of
the Plans is to advance the long-term interests of the Company and its
shareholders and to complement incentives tied to annual performance. Stock
options granted under the Plans generally vest over a four year period,
providing incentive to create value for the Company's shareholders over the
long-term since the full benefit of the compensation package cannot be realized
unless the employee remains with the Company and stock price appreciation occurs
over a number of years. The Compensation Committee has typically granted options
to employees upon commencement of employment and has occasionally granted
13
<PAGE>
additional options following a significant change in job responsibility, scope
or title or a particularly noteworthy corporate or individual achievement.
During 1996, certain executive officers and employees were granted stock options
based on their individual contribution to achievement of corporate performance
goals. In January 1996, the Compensation Committee granted option to Mr.
Sellers, in connection with his assuming the role of Chief Executive Officer, to
acquire 400,000 shares of Common Stock at a price per share of $5.375, the fair
market value on the date of grant. The shares vest monthly over 36 months.
CEO Compensation
In 1996, Mr. Sellers received a base salary of $400,000 and an annual cash
incentive payment of $150,000. In determining Mr. Sellers' base salary, the
Compensation Committee considered Mr. Seller's current compensation, his
expected role with the Company and data with respect to compensation levels at
other biotechnology Companies, along with certain tax effects of his relocation
to the United States. With respect to Mr. Sellers' cash incentive, the Committee
noted that the corporate performance objectives for the Company were met and
that, with one exception Mr. Sellers' individual performance objectives were
achieved; however, the Company had not achieved the targeted increase in its
stock price which was a significant performance objective. Therefore, the
Compensation Committee awarded Mr. Sellers an actual bonus less than his
targeted incentive resulting in a bonus equal to 37.5% of his base salary.
In 1996, Mr. Moore received a base salary of $300,000 and no annual cash
incentive payment. In reducing Mr. Moore's base salary and cash incentive from
fiscal 1995, the Compensation Committee noted that the reduction was reflective
of Mr. Moore's changing role in the Company.
Special Deduction Limit
The Compensation Committee has considered the impact of Section 162(m) of the
Code adopted under the Omnibus Budget Reconciliation Act of 1993, which section
disallows a deduction for any publicly-held corporation for individual
compensation exceeding $1.0 million in any taxable year for the CEO and four
other most highly compensated executive officers, unless such compensation meets
the requirements for the "performance-based" exception to the general rule.
Since the cash compensation paid by the Company to each of its executive
officers is expected to be well below $1.0 million, and the Committee believes
that options granted under the 1995 Equity Incentive Plan prior to the Company's
Annual Meeting in 1996 will meet the requirements for performance-based
compensation under Section 162(m), the Compensation Committee believes that this
section will not affect the tax deductions available to the Company with respect
to such options. However, because a transition rule which permits the
Compensation Committee to qualify as a committee which may award
performance-based compensation expired upon the Company's Annual Meeting in 1996
and the Compensation Committee may not so qualify, the Company can provide no
assurance that options granted under the 1995 Equity Incentive Plan after that
date will meet the requirements for performance-based compensation.
The foregoing report has been provided by Messrs. Cadman and Goyan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1996, Messrs. Cadman and Goyan served on
the Compensation Committee of the Board.
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the annual percentage change in (i) the
cumulative total shareholder return on the Company's Common Stock since March
17, 1992, the effective date of the Company's initial public offering, with (ii)
the cumulative total return on (a) The Nasdaq Stock Market (U.S. and Foreign
Companies) and (b) the NASDAQ Pharmaceutical/Biotechnology Index. The comparison
assumes (i) an investment of $100 on March 17, 1992 in each of the foregoing
indices and (ii) reinvestment of dividends, if any. The stock price performance
shown on the graph below is not necessarily indicative of future stock price
performance.S
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
COMPUTER INDEX
-----------------------------------------------------
SciClone NASDAQ NASDAQ
Performance Common Stock Mkt. Parm. Com.
Period Stock US & Frgn SIC 283
------ ----- --------- -------
03/17/92 100.000 100.000 100.000
12/31/92 197.143 108.894 092.495
12/31/93 262.857 123.713 083.673
12/30/94 077.143 119.674 062.372
12/29/95 058.571 170.014 113.660
12/31/96 091.429 211.232 113.947
15
<PAGE>
TRANSACTIONS WITH MANAGEMENT
The Company has entered into an employment agreement with Dr. Horwitz. Under
the agreement, Dr. Horwitz receives an annual salary and is eligible for an
annual cash incentive and other benefits that are generally provided to the
Company's executives. In the event the Company terminates its employment
relationship with Dr. Horwitz without cause, or if Dr. Horwitz's relationship or
responsibilities change without his consent, the Company will be required to
continue to pay Dr. Horwitz's normal salary and benefits for six months.
Pursuant to the agreement, the Company also granted Dr. Horwitz options to
purchase shares of the Company's Common Stock and reimbursed Dr. Horwitz for
certain moving costs and agreed to make certain cash payments to Dr. Horwitz
upon exercise of options granted pursuant to the agreement and to defray a
portion of his housing expenses.
The Company has entered into an employment agreement with Mr. Culhane. Under
the agreement, Mr. Culhane receives an annual salary and is eligible for an
annual cash incentive and other benefits that are generally provided to the
Company's executives. In the event the Company terminates its employment
relationship with Mr. Culhane without cause, the Company will continue to pay
Mr. Culhane's annual salary and benefits for twelve months, pay any cash
incentives as if Mr. Culhane had continued his employment through the end of the
calendar year, accelerate the vesting of all of Mr. Culhane's outstanding stock
options so they become fully vested, and extend the exercise period for such
options for one year, but within the original term of the option. The Company
has also agreed to make certain cash payments to Mr. Culhane upon exercise of
stock options granted to Mr. Culhane prior to 1994.
The Company has entered into an employment agreement with Mr. Sellers. Under
the agreement, Mr. Sellers receives an annual salary and is eligible for an
annual cash incentive and other benefits that are generally provided to the
Company's executives. In the event the Company terminates its employment
relationship with Mr. Sellers without cause, the Company will pay Mr. Sellers a
severance payment equal to his annual salary and benefits for twelve months and
any cash incentives as if Mr. Sellers has continued his employment through the
end of the calendar year, accelerate the vesting of all of Mr. Sellers'
outstanding stock options so they become fully vested, and extend the exercise
period for such options for one year, but within the original term of the
option.
In June 1995, the Company extended a loan to Dr. David Horwitz with an
aggregate principal amount of $1,365,000 to be used to finance the purchase and
renovation of Dr. Horwitz's primary residence. The loan was secured by a first
deed of trust on the property and 20,000 shares of SciClone Common stock owned
by Dr. Horwitz, bears interest at 7.5% per annum and is payable in five years,
subject to renewal if Dr. Horwitz remains employed by the Company. Pursuant to
Dr. Horwitz's employment agreement, the Company will defray a portion of Dr.
Horwitz's monthly mortgage expenses over a five-year period.
In July 1995, the Company extended a loan to Mr. Moore in the principal
amount of $95,000 which carries an interest rate of 7.375%. In December 1995,
the Company extended an additional loan to Mr. Moore in the principal amount of
$600,000 which carries an interest rate of 7.50%. The loans are due and payable
in December 1997, are currently unsecured and are in the process of being
secured by a second deed of trust on residential property owned by Mr.
Moore.
In August 1996, the Company extended a loan to Mr. Sellers in the principal
amount of $1,000,000 which was used to finance the purchase of his primary
residence. The loan was secured by a first deed of trust on the property, bears
interest at 8.0% per annum and is payable in five years, subject to renewal if
Mr. Sellers remains employed by the Company.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1997
Annual Meeting of Shareholders must be received by Mark A. Culhane, SciClone
Pharmaceuticals, Inc., 901 Mariners Island Boulevard, San Mateo, California
94404, no later than January 8, 1998.
16
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors, executive
officers and persons who own more than 10% of the Company's Common Stock
(collectively, "Reporting Persons") to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and changes in ownership of the
Company's Common Stock. Reporting Persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on its review of the copies of such
reports received or written representations from certain Reporting Persons that
no other reports were required, the Company believes that during its fiscal year
ended December 31, 1996, all Reporting Persons complied with all applicable
filing requirements, except that one statement of changes in beneficial
ownership for David L. Horowitz, M.D., Ph.D., an officer of the Company,
reporting one transaction, was not timely filed.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented to
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares be
represented. Shareholders are urged to mark, date, execute and promptly return
the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ Mark A. Culhane
MARK A. CULHANE
Secretary
April 18, 1997
San Mateo, California
17
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
PROXY SCICLONE PHARMACEUTICALS, INC. PROXY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby appoints Donald R. Sellers and Mark A. Culhane, and
each of them, with full power of substitution to represent the undersigned and
to vote all the shares of the stock of SciClone Pharmaceuticals, Inc. (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held at the Hotel Sofitel, 233 Twin Dolphin
Drive, Redwood City, California 94065, on Friday, May 16, 1997, at 9:00 a.m.
local time, and at any adjournment thereof (1) as hereinafter specified upon the
proposals listed below and as more particularly described in the Company's Proxy
Statement, receipt of which is hereby acknowledged, and (2) in their discretion
upon such other matters as may properly come before the meeting. The undersigned
hereby acknowledges receipt of the Company's 1996 Annual Report to Shareholders.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY
BE REPRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED IN FAVOR OF PROPOSALS 1
THROUGH 3.
(Continued, and to be signed on the other side)
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[X] Please mark
your votes
as this
1. Election of Directors WITHHOLD FOR AGAINST ABSTAIN
(INSTRUCTION: TO WITHHOLD FOR FOR ALL 2. To approve an amendment to the Company's [ ] [ ] [ ]
AUTHORITY TO VOTE FOR ANY [ ] [ ] 1995 Equity Incentive Plan to increase by
INDIVIDUAL NOMINEE, STRIKE 750,000 the maximum number of shares of
A LINE THROUGH THAT NOMINEE'S Common Stock that may be issued under such
NAME IN THE LIST BELOW.) plan.
Donald R. Sellers, Thomas E. Moore, John D. Baxter, M.D. 3. To ratify the appointment of Ernst & Young [ ] [ ] [ ]
Edwin C. Cadman, M.D., Jere E. Goyan, Ph.D. LLP as the independent auditors for the
Company for the year ending December 31,
_________________________________________________________ 1997.
I PLAN TO ATTEND THE MEETING [ ] A VOTE FOR THE PRECEDING PROPOSALS IS
RECOMMENDED BY THE BOARD OF DIRECTORS.
Signature(s)___________________________________________________________________ Dated __________________________, 1997
Sign exactly as your name(s) appears on your stock certificate. If shares of stock stand of record in the names of two or more
persons or in the name of husband and wife, whether as joint tenants or otherwise, both or all of such should sign the above Proxy.
If shares of stock are held of record by a corporation, the Proxy should be executed by the President or Vice President and the
Secretary or Assistant Secretary, and the corporate seal should be affixed thereto. Executors or administrators or other fiduciaries
who execute the above Proxy for a decreased shareholder should give their full title. Please date the Proxy.
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