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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
SciClone Pharmaceuticals, Inc.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
___________________________________________________________________________
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:
___________________________________________________________________________
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[SciClone LOGO]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 26, 1998
To Our Shareholders:
The 1998 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, June 26, 1998, at 9:00 a.m., local time. At the Annual Meeting,
shareholders will act on the following matters:
(1) Election of five (5) directors each for a term of one year;
(2) Approval of an amendment to the Company's 1995 Equity Incentive Plan to
increase by 1,500,000 the maximum number of shares of Common Stock that
may be issued under such plan;
(3) Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 1998; and
(4) Any other matter that 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.
Shareholders of record as of the close of business on April 28, 1998 are
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.
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit attendance to
shareholders. Admission to the meeting will be on a first-come, first-served
basis. Registration will begin at 8:00 a.m., and seating will be available at
approximately 9:00 a.m. "Street name" holders will need to bring a copy of a
brokerage statement reflecting stock ownership as of the record date.
By Order of the Board of Directors,
/s/ SHAWN K. SINGH
SHAWN K. SINGH
Assistant Secretary
San Mateo, California
May 29, 1998
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[SciClone LOGO]
901 MARINERS ISLAND BOULEVARD
SAN MATEO, CALIFORNIA 94404
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PROXY STATEMENT
------------------------
SOLICITATION AND VOTING OF PROXIES
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 1998 Annual Meeting of Shareholders (the "Annual Meeting") to
be held at the Hotel Sofitel, 233 Twin Dolphin Drive, Redwood City, California
94065, on Friday, June 26, 1998, 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 first being sent or given to shareholders on or about
May 29, 1998.
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:
Shawn K. Singh) 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 28, 1998 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 17,348,108 shares of Common Stock
outstanding and 661,157 shares of Preferred Stock outstanding.
VOTING AND SOLICITATION
Each outstanding share of Common Stock on the Record Date is entitled to
one vote on all matters to be acted upon at the Annual Meeting and is entitled
to cumulate votes for the election of directors, subject to the conditions
described below. Each outstanding share of Preferred Stock on the Record Date is
not entitled to vote on matters 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. 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 be treated as present and entitled to vote for
purposes of determining the presence of a quorum but will not be considered as
voting with respect to that matter.
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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.
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,
FOR the amendment of the Company's 1995 Equity Incentive Plan and 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.
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 (5) directors to
serve until the 1999 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 (5) 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
(5) 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.
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The names of the nominees, their ages as of April 1, 1998, and certain
other information about them are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
--------------- --- -------------------- --------------
<S> <C> <C> <C>
Jere E. Goyan, Ph.D. ........ 67 President and Chief Operating Officer 1992
of Alteon, Inc.
Donald R. Sellers............ 53 President and Chief Executive Officer 1996
of SciClone Pharmaceuticals, Inc.
John D. Baxter, M.D. ........ 57 Professor of Medicine at the 1991
University of California, San
Francisco
Edwin C. Cadman, M.D. ....... 52 Professor of Medicine at Yale 1991
University and Senior Vice President
of Medical Affairs and Chief of Staff
at Yale New Haven Hospital
Rolf H. Henel................ 60 Partner at Naimark & Associates, Inc. 1997
</TABLE>
Jere E. Goyan, Ph.D. has been a director of the Company since January 1992
and has been Chairman of the Board of Directors of the Company since July 1997.
Since July 1993, Dr. Goyan has been President and Chief Operating Officer and a
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 Ingelheim
Pharmaceuticals Corporation and Penwest Pharmaceuticals, a pharmaceutical
company which is a 100% owned subsidiary of Penford Corporation.
Donald R. Sellers has served as the Company's Chief Executive Officer since
April 1996 and as President and Director since January 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., a U.S.-based international
trading company, as well as President of one of their Japanese operations. From
1983 to 1990, Mr. Sellers was employed by Sterling Drug International, initially
as Vice President of Marketing and Operations in Asia and later 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.
John D. Baxter, M.D. has been a director of the Company and the Chairman of
its Scientific Advisory Board since June 1991. Dr. Baxter has been associated
with the University of California, San Francisco ("UCSF") since 1970. He has
been Professor of Medicine since 1979, Chief of the Endocrinology Section,
Parnassus Campus since 1980 and Director of UCSF's Metabolic Research Unit since
1981. Dr. Baxter was a founder and served as a director of California
Biotechnology, Inc. (now Scios, Inc.), a biotechnology company, from its
inception in 1982 to 1991.
Edwin C. Cadman, M.D. has been a director of the Company and a member of
its 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 UCSF. Dr. Cadman also currently serves as a
director of CytoTherapeutics, Inc., a biotechnology company.
Rolf H. Henel joined the Company as a director in July 1997. Mr. Henel has
been a partner at Naimark & Associates, Inc., a healthcare consulting firm,
since September 1993. Mr. Henel has been Executive Director of Performance
Effectiveness Corporation, Inc., a pharmaceutical consulting and education com-
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pany, since April 1993. From 1978 to 1993, Mr. Henel was with Cyanamid, a
chemical company, most recently as President of Cyanamid International Lederele
Division. Mr. Henel is also a director of Penwest Pharmaceuticals, a
pharmaceutical company which is a 100% owned subsidiary of Penford Corporation.
Directors serve one-year terms or until their successors are elected and
qualified. There are no family relationships among any of the directors or
executive officers of the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1997, the Board met five 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 the following three
committees: an Audit Committee, a Compensation Committee and 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 Shawn K. Singh, at the Company's
address set forth above.
Until October 1997, the Audit Committee consisted of Drs. Cadman and Goyan,
each a non-employee director. In October 1997, Mr. Henel replaced Dr. Goyan on
the Audit Committee. The Audit Committee recommends the engagement of the
Company's independent 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.
During 1997, the Compensation Committee, which consisted of Drs. Cadman and
Goyan, held seven meetings. Its functions are to establish and administer the
Company's policies regarding annual officer salaries and cash incentives and
long-term equity incentives. The Compensation Committee administers the
Company's equity compensation plans.
During 1997, the Nominating Committee, which consisted of Dr. Goyan and Mr.
Sellers, held no formal meetings. The Nominating Committee considers and
recommends action to the Board regarding nominations to the Board of Directors
of the Company. Shareholders may submit, with the nominees' permission, names of
prospective Board nominees which will be considered by the Nominating Committee
in light of the nominees' qualifications. Shareholder submissions to be
considered for the Company's 1999 Annual Meeting of Shareholders must be
received by Shawn K. Singh, SciClone Pharmaceuticals, Inc., 901 Mariners Island
Boulevard, San Mateo, California 94404, no later than January 8, 1999.
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 $30,000, payable at the rate of $7,500 per
quarter, 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. The
Company also has retained Dr. Cadman to perform consulting services. In 1997,
Drs. Baxter and Cadman received $36,000 and $71,700, respectively, for such
consulting services. 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 1997.
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<PAGE> 7
Directors Baxter, Cadman, Goyan and Henel will each automatically receive
options as of the date of the Annual Meeting 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 vest and become exercisable at the rate of one-twelfth of the
shares subject to the option at the end of each one-month period from the grant
date.
RECOMMENDATION OF THE BOARD
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
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<PAGE> 8
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 1,500,000 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
2,000,000 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, 1998, options to purchase an aggregate of 1,188,294 shares of Common
Stock were outstanding, at a weighted average exercise price of $4.52 per share,
and 2,194 shares had been issued upon the exercise of previously granted
options, leaving 809,512 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 shareholder approval, to
increase the maximum number of shares that may be issued under the Option Plan
by 1,500,000 to an aggregate of 3,500,000 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 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 progress. 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 and consultants and by motivating such persons to
contribute to the Company's progress. It provides for the grant of incentive
stock options within the meaning of section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and nonstatutory stock options. In addition, stock
purchase rights and stock bonus awards ("rights") may also be granted under the
Option Plan.
Shares Subject to Plan. The shareholders have previously authorized an
aggregate of 2,000,000 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
3,500,000. Appropriate adjustments will be made to the shares subject to the
Option Plan, to the Grant Limit (defined below) 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 or right granted 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 or right 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 or right, whether an option is to be an incentive stock option or a
nonstatutory stock option, the
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<PAGE> 9
timing and terms of exercisability and vesting of each option or right, the
exercise price of and the type of consideration to be paid to the Company upon
the exercise of each option and right, the duration of each option and right,
and all other terms and conditions of the options and rights. The Board will
interpret the Option Plan and options and rights 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 or right.
Eligibility. Options and rights 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,
1998, the Company had approximately 35 employees, including executive officers,
eligible to participate in the Plan. While any person eligible under the Option
Plan may be granted a nonstatutory stock option or a right, only employees may
be granted incentive stock options. The maximum number of shares which may be
subject to options and rights granted to an employee under the Option Plan
during any fiscal year of the Company is 1,250,000 shares (the "Grant Limit").
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 nonstatutory stock option
may not be less than 85% of 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,
1998, the closing price of the Company's Common Stock, as reported on the Nasdaq
National Market, was $3.97 per share.
In general, 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 or a loan with respect to some or all of
the shares of Common Stock being acquired upon the exercise of the option, by
means of a promissory note, by such other lawful form as may be approved by the
Board 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 vest and become exercisable at such
times and subject to such conditions as specified by the Board. The maximum term
of an incentive stock option granted under the Option Plan is ten years,
provided that an incentive stock 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. Nonstatutory stock options granted
under the Option Plan may be assigned or transferred to the extent permitted by
the Board and set forth in the option agreement. In general, 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 12 months following the
optionee's termination of service, provided that in any event the option must be
exercised no later than its expiration date.
Stock Purchase Rights. Stock purchase rights may be granted alone or in
tandem with other awards granted under the Option Plan. The purchase price per
share of each stock purchase right may not be less than 85% of the fair market
value of a share of the Company's Common Stock on the date of grant, and the
recipient must accept the offer of the stock purchase right within 30 days after
the date of grant. Shares acquired upon exercise of a stock purchase right are
generally subject to the Company's option to repurchase such shares at the
original purchase price if the purchaser terminates his or her employment or
service with
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<PAGE> 10
the Company prior to completion of a service requirement set forth in the
agreement evidencing the stock purchase right. Stock purchase rights may be
transferred to the extent permitted by the Board and set forth in the stock
purchase agreement.
Stock Bonus Awards. Stock bonus awards may be granted alone or in tandem
with other awards granted under the Option Plan. Shares subject to such awards
will be granted for no cash consideration. The number of shares subject to a
stock bonus award may be fixed at the time of grant or may vary in accordance
with performance (or other) criteria as may be determined by the Board. Shares
issued pursuant to a stock bonus award are generally subject to the Company's
option to reacquire the shares for no consideration if the recipient terminates
his or her employment or service with the Company prior to completion of a
service requirement set forth in the agreement evidencing the stock bonus award.
Stock bonus awards are nontransferable.
Change in Control. The Option Plan provides that in the event of (i) a
merger of the Company with and into another corporation, (ii) the sale 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 may assume the Company's rights and obligations under the
outstanding options or substitute new options for such corporation's stock.
Alternatively, the Board, in its sole discretion, may accelerate the vesting or
exercisability of shares subject to (or acquired upon exercise of) options and
rights granted under the Option Plan. To the extent that the options and rights
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 number of shares of
Common Stock issuable thereunder, change the class of persons eligible to
receive options or rights under the Option Plan, change the Grant Limit, or
approve any material increase in benefits accruing to participants under the
Option Plan. 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 with respect to stock
options granted under 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 mid-term or 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 "Nonstatutory 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 mid-term or 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.
8
<PAGE> 11
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 "Nonstatutory 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.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options. Nonstatutory 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
nonstatutory 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 nonstatutory 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 mid-term or 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 nonstatutory stock option or the sale of the stock acquired pursuant
to such grant. The Company 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 nonstatutory 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 shareholder
approval, to increase the maximum aggregate number of the Company's shares that
may be issued under the Option Plan from 2,000,000 shares of Common Stock to
3,500,000 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, 1997, (1) Donald R. Sellers,
President and Chief Executive Officer; Alfred R. Rudolph, M.D., Chief Operating
Officer; David A. Karlin, M.D., Vice President and Medical Director; Mark A.
Culhane, Vice President, Finance and Administration, Chief Financial Officer and
Secretary; and David L. Horwitz, M.D., Ph.D, Former Executive Vice President,
Medical and Regulatory Affairs received stock option grants to purchase 70,000,
105,000, 36,000, 45,000 and 11,000 shares, respectively, of Common Stock under
the Option Plan; (2) all current executive officers as a group received stock
option grants to purchase 284,000 shares of Common Stock under the Option Plan;
(3) all current directors who are not executive officers as a group received no
stock option grants to purchase shares of Common Stock under the Option Plan;
(4) nominees Jere E. Goyan, Ph.D, Donald R. Sellers, John D. Baxter, M.D., Edwin
C. Cadman, M.D. and Rolf H. Henel received stock option grants to purchase 0,
70,000, 0, 0, and 0 shares, respectively, of Common Stock, 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) Shawn K. Singh, Senior Vice President and Assistant Secretary,
received stock option grants to purchase 28,000 shares of Common Stock which
exceeded five percent of the total number of shares of
9
<PAGE> 12
Common Stock underlying options granted under the Option Plan in 1997; and (7)
all employees, including all current officers who are not executive officers as
a group received stock option grants to purchase 235,500 shares of Common Stock
under the Option Plan.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock
represented and voting at the Annual Meeting, assuming a quorum is present, 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 1,500,000
THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK ISSUABLE
UNDER THE OPTION PLAN.
10
<PAGE> 13
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, 1998. 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.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock
represented and voting at the Annual Meeting, assuming a quorum is present, 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 RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1998.
11
<PAGE> 14
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 March 31, 1998 for (i) each person who is known by the Company to
own beneficially more than 5% of the outstanding shares of the Company's Common
Stock, (ii) the Chief Executive Officer of the Company, the three other most
highly-compensated executive officers of the Company as of December 31, 1997
whose total salary and bonus for the fiscal year ended December 31, 1997
exceeded $100,000 for services in all capacities to the Company and one
additional individual who met such criteria but was not serving as an executive
officer of the Company as of December 31, 1997 (collectively, the "Named
Executive Officers"), (iii) each director of the Company and (iv) all directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
NAME NUMBER PERCENT
---- --------- -------
<S> <C> <C>
Thomas E. Moore(2).......................................... 3,306,797 18.84
Donald R. Sellers(3)........................................ 460,800 2.61
John D. Baxter, M.D.(4)..................................... 425,506 2.45
David L. Horwitz, M.D., Ph.D.(5)............................ 296,178 1.68
Mark A. Culhane(6).......................................... 282,666 1.61
Edwin C. Cadman, M.D.(7).................................... 60,480 *
Jere E. Goyan, Ph.D.(8)..................................... 60,000 *
David A. Karlin, M.D.(9).................................... 40,450 *
Alfred R. Rudolph, M.D.(10)................................. 25,108 *
Rolf H. Henel............................................... -0- *
All directors and executive officers as a group (9
persons)(11).............................................. 1,413,450 8.15
</TABLE>
- ---------------
* 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 2,166,967 shares held of record by Sand Hill Management Group, a
sole proprietorship of which Mr. Moore is the principal, 108,616 shares
held of record by the Grant Family Limited Partnership and 200,000 shares
issuable pursuant to options exercisable within 60 days of March 31, 1998.
(3) Includes 456,800 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(4) Includes 395,506 shares held by John D. Baxter and Ethelene D. Baxter as
Trustees, FBO The Baxter Family Revocable Trust UDT 11/8/95 and 30,000
shares issuable pursuant to options exercisable within 60 days of March 31,
1998.
(5) Includes 261,511 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(6) Includes 10,500 shares held by Mr. Culhane's three minor children who share
his household and 263,268 shares issuable pursuant to options exercisable
within 60 days of March 31, 1998. Mr. Culhane disclaims beneficial
ownership of all securities held by his children. Mr. Culhane has been on
an unpaid leave of absence from the Company since January 5, 1998.
(7) Consists of 60,480 shares issuable pursuant to options exercisable within
60 days of March 31, 1998.
(8) Consists of 60,000 shares issuable pursuant to options exercisable within
60 days of March 31, 1998.
(9) Includes 40,188 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(10) Includes 23,021 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(11) Includes 933,757 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
12
<PAGE> 15
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Named Executive Officers in 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
----------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- ------------ -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Sellers........... 1997 400,000 50,000 50,537(2) 70,000 5,191(3)
President and Chief 1996 400,000 150,000 * 400,000 8,524(3)
Executive Officer 1995 203,643 78,180 328,854(2) 60,000 13,522(3)
Alfred R. Rudolph,
M.D.(4)................... 1997 128,192 * 105,393(5) 105,000 2,376(6)
Chief Operating Officer 1996 -- -- -- -- --
1995 -- -- -- -- --
David A. Karlin, M.D.(7).... 1997 180,000 45,000 * 36,000 3,196(8)
Vice President and 1996 -- -- -- -- --
Medical Director 1995 -- -- -- -- --
Mark A. Culhane(9).......... 1997 211,152 29,694 72,000(10) 45,000 3,097(11)
Vice President, Finance 1996 205,000 81,000 72,000(10) 27,000 3,546(11)
and Administration, 1995 190,000 67,000 48,000(10) 67,500 1,848(11)
Chief Financial Officer
and Secretary
Former Executive Officer:
David L. Horwitz, M.D.,
Ph.D.(12)................. 1997 238,095 35,000 92,193(13) 11,000(14) 7,490(15)
Former Executive Vice 1996 234,000 81,800 92,193(13) 13,500 11,003(15)
President, Medical and 1995 218,795 76,639 67,028(13) 67,500 9,889(15)
Regulatory Affairs
</TABLE>
- ---------------
* No disclosure required under Securities and Exchange Commission rules.
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Consists of $40,337 in cost-of-living assistance payments and $10,200 in
car allowance payments in 1997 and includes $274,427 in cost-of-living
assistance payments under an expatriate benefit agreement in 1995.
(3) Consists of disability and life insurance premiums ($3,291 in 1997, $6,624
in 1996 and $7,182 in 1995), $6,340 in medical insurance premiums in 1995
and $1,900 in matching contributions under the Company's 401(k) plan in
1997 and 1996.
(4) Dr. Rudolph joined the Company on April 15, 1997.
(5) Consists of $10,000 in cost-of-living assistance payments and $95,393 in
moving expenses.
(6) Consists of $1,296 in life insurance premiums and $1,080 in matching
contributions under the Company's 401(k) plan.
(7) Dr. Karlin became an executive officer of the Company in May 1997 and has
been employed by the Company since January 1995.
(8) Consists of $1,296 in life insurance premiums and $1,900 in matching
contributions under the Company's 401(k) plan.
(9) Mr. Culhane has been on an unpaid leave of absence since January 5, 1998.
(10) Consists of cost-of-living assistance payments ($60,000 in 1997, $60,000 in
1996 and $36,000 in 1995) and $12,000 in car allowance payments in 1997,
1996 and 1995.
13
<PAGE> 16
(11) Consists of matching contributions under the Company's 401(k) plan ($1,900
in 1997, $1,900 in 1996 and $1,848 in 1995) and life insurance premiums
($1,197 in 1997 and $1,646 in 1996).
(12) Mr. Horwitz ceased to be an executive officer of the Company on August 29,
1997.
(13) Includes mortgage assistance payments of $92,193 in 1997 and 1996 and
$62,800 in 1995 under a housing relocation agreement.
(14) Such stock options were not vested on August 29, 1997, the date Dr.
Horwitz's employment with the Company terminated, and were cancelled.
(15) Consists of term life insurance premiums ($2,025 in 1997, $3,755 in 1996
and $2,693 in 1995), disability insurance premiums ($3,565 in 1997, $5,348
in 1996 and 1995) and matching contributions under the Company's 401(k)
plan ($1,900 in 1997 and 1996 and $1,848 in 1995).
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in 1997. In addition, as
required by Securities and Exchange Commission rules, the table sets forth the
hypothetical gains that would exist for the options based on assumed rates of
annual compound stock price appreciation during the option term.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED
--------------------------------------------------- VALUE AT
PERCENT OF ASSUMED ANNUAL
NUMBER OF TOTAL EXERCISE RATES OF STOCK
SECURITIES OPTIONS OR BASE PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION -------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Sellers............ 70,000(1) 9.0% 4.50 11/12/07 198,102 502,029
Alfred R. Rudolph, M.D....... 70,000(2) 9.0 5.00 4/24/07 220,113 557,810
15,000(2) 1.9 5.50 4/18/07 51,884 131,484
20,000(2) 2.6 4.50 11/12/07 56,601 143,437
David A. Karlin, M.D......... 21,000(2) 2.7 5.50 4/18/07 72,637 184,077
15,000(2) 1.9 4.50 11/12/07 42,450 107,578
Mark A. Culhane.............. 45,000(2) 5.8 5.50 4/18/07 155,651 394,451
David L. Horwitz, M.D.,
Ph.D....................... 11,000(2)(3) 1.4 5.50 4/18/07 38,048 96,421
</TABLE>
- ---------------
(1) Such options vest ratably on a monthly basis over 3.5 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) Such options vest with respect to 25% of the shares one year from date of
grant; thereafter, 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) Such options were not vested on August 29, 1997, the date Dr. Horwitz's
employment with the Company terminated, and were cancelled.
(4) 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.
14
<PAGE> 17
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during 1997. In addition, the
table sets forth the number of shares covered by stock options as of December
31, 1997, 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, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY
ACQUIRED YEAR END (#) OPTIONS AT
ON EXERCISE VALUE EXERCISABLE/ FISCAL YEAR END($)
NAME (#) REALIZED($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ----------- ----------- ----------------- ----------------------------
<S> <C> <C> <C> <C>
Donald R. Sellers................ -0- $0.00 398,956/247,044 $0.00/$0.00
Alfred R. Rudolph, M.D........... -0- $0.00 0/105,000 $0.00/$0.00
David A. Karlin, M.D............. -0- $0.00 29,084/58,916 $0.00/$0.00
Mark A. Culhane.................. -0- $0.00 228,154/95,179 $0.00/$0.00
David L. Horwitz, M.D., Ph.D..... -0- $0.00 261,511/0 $67,466.52/$0.00
</TABLE>
- ---------------
(1) Based on the $3.44 per share closing price of the Company's Common Stock as
reported by the Nasdaq National Market on December 31, 1997, less the
exercise prices.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1997, Drs. Cadman and Goyan served on
the Compensation Committee of the Board.
15
<PAGE> 18
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 Drs. 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
recommendations for other officers of the Company.
Compensation Policy
The overall objectives of the Company's compensation policy are as follows:
to (i) attract and retain executives of outstanding ability and potential; (ii)
motivate these individuals to achieve corporate goals to enhance long-term
shareholder value; (iii) link executive compensation and shareholder interests;
and (iv) 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 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 it considers a mix of factors and
evaluates the Company's CEO's and each individual executive officer's
performance against that mix.
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 publicly-held
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
16
<PAGE> 19
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
weight 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 Compensation Committee as well as the attainment of individual
performance objectives. Corporate performance goals for 1997 included the
following: to (i) achieve certain ZADAXIN(R) sales milestones; (ii) complete
Phase 1 and start Phase 2 trials of CPX for the treatment of cystic fibrosis;
(iii) complete Phase 1 and start Phase 3 trials of thymosin alpha 1 for the
treatment of hepatitis C in the United States and Europe; (iv) initiate a Phase
3 trial of ZADAXIN for the treatment of hepatitis B and start a Phase 2 trial of
ZADAXIN for the treatment of hepatitis C in Japan; and (v) add one or more
products consistent with the Company's screening process to evaluate new drug
candidates. At year end, the Compensation Committee reviewed the original plans
and goals. The Compensation 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 Compensation Committee were not achieved. As a result, the executive
officers received less than their targeted annual cash incentive and received
cash incentives ranging from 19% to 30% 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
additional options following a significant change in job responsibility, scope
or title or a particularly noteworthy corporate or individual achievement.
During 1997, certain executive officers and employees were granted stock options
based on their individual contribution to achievement of corporate performance
goals.
CEO Compensation
In 1997, Mr. Sellers received a base salary of $400,000 and an annual cash
incentive payment of $50,000. 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 biopharmaceutical companies. With respect to Mr. Sellers' cash incentive,
the Committee noted that although Mr. Sellers' individual performance objectives
were met, certain significant 1997 corporate performance objectives for the
Company were not achieved in full. Therefore, the Compensation Committee awarded
Mr. Sellers an actual bonus less than his targeted incentive resulting in a
bonus equal to 18.8% of his base salary.
17
<PAGE> 20
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
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 Drs. Cadman and Goyan.
18
<PAGE> 21
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 December
31, 1992, 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 December 31, 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.
<TABLE>
<CAPTION>
Measurement Period SciClone Common Nasdaq Stock Mkt. Nasdaq Pharm
(Fiscal Year Covered) Stock US & Frgn Com. SIC 283
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 133.33 115.76 89.13
12/30/94 39.13 112.28 67.08
12/29/95 29.71 157.69 122.72
12/31/96 46.37 193.10 123.08
12/31/97 19.93 236.26 127.09
</TABLE>
<TABLE>
<CAPTION>
COMPUTED INDEX
------------------------------------------
NASDAQ NASDAQ
SCICLONE STOCK PHARM.
PERFORMANCE COMMON MKT. COM.
PERIOD STOCK US & FRGN SIC 283
- ----------------------------------- -------- --------- ---------
<S> <C> <C> <C>
12/31/92........................... 100.00 100.00 100.00
12/31/93........................... 133.33 115.76 89.13
12/30/94........................... 39.13 112.28 67.08
12/29/95........................... 29.71 157.69 122.72
12/31/96........................... 46.37 193.10 123.08
12/31/97........................... 19.93 236.26 127.09
</TABLE>
19
<PAGE> 22
TRANSACTIONS WITH MANAGEMENT
The Company entered into an employment agreement with Dr. Horwitz, the
former Executive Vice President, Medical and Regulatory Affairs of the Company,
in 1992. Under the agreement, Dr. Horwitz received an annual base salary of
$175,000 and was eligible for an annual cash incentive and other benefits that
are generally provided to the Company's executives. The agreement provided that
in the event the Company terminated its employment relationship with Dr. Horwitz
without cause, or if Dr. Horwitz's relationship or responsibilities changed
without his consent, the Company would be required to continue to pay Dr.
Horwitz's then current salary and benefits for six months. Pursuant to the
agreement, the Company also granted Dr. Horwitz options to purchase 200,000
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. See Summary Compensation Table. Dr. Horwitz's employment
with the Company was terminated on August 29, 1997. Pursuant to his employment
agreement Dr. Horwitz received his then current salary and benefits for six
months following his termination.
In June 1995, the Company extended a loan to Dr. 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 is 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 June 2000. As of December 31,
1997, $1,338,140 in principal and accrued interest was outstanding under the
loan. 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 Thomas E. Moore, the former
Chairman of the Board and one of the founders of the Company, in the principal
amount of $95,000 which bears interest at the rate of 7.375% per annum. In
December 1995, the Company extended an additional loan to Mr. Moore in the
principal amount of $600,000 which bears interest at the rate of 7.50% per
annum. The loans were due and payable in December 1997 after which they became
subject to 3.5% additional accelerated interest per year. The Company expects
the loans to be paid in full (both principal and accrued and additional
interest) in 1998. As of December 31, 1997, an aggregate of $803,530 in
principal and accrued interest was outstanding under the loans. The loans are
secured by a second deed of trust on residential property owned by Mr. Moore.
In July 1997, the Company loaned Mr. Moore $5,944,000 secured by
approximately 1.9 million shares of SciClone common stock owned by Mr. Moore.
The loan carries interest at 7%. During the period Mr. Moore's loan is
outstanding and immediately prior to the closing of any offering of the
Company's common stock, the Company may convert the loan, in a non-cash exchange
into Mr. Moore's SciClone common stock by retiring shares of his SciClone common
stock at a fixed discount rate from the offering price. To date, the Company has
not retired any of Mr. Moore's SciClone common stock. In connection with this
transaction, Mr. Moore resigned from the Company. On December 31, 1997, the
principal balance of the loan was $5,944,000 and was classified as an offset to
shareholders' equity.
The Company entered into an employment agreement with Mr. Sellers in
February 1996 for a term of one year, subject to renewal by the Company and Mr.
Sellers. Under the agreement, Mr. Sellers receives an annual base salary of
$400,000 and is eligible for an annual cash incentive up to $200,000 and other
benefits that are generally provided to the Company's executives. In the event
Mr. Sellers' employment relationship with the Company is terminated by the
Company without cause or as a result of a material diminution of Mr. Seller's
duties and responsibilities by the Company or as a result of Mr. Seller's death
or disability, the Company is required to pay Mr. Sellers a severance payment
equal to his then current annual salary and car allowance for twelve months and
any cash incentives as if Mr. Sellers has continued his employment through the
end of the calendar year, continue Mr. Seller's health-related benefits for
twelve months, 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. The agreement
was renewed in November 1997 for a term expiring in November 1998.
20
<PAGE> 23
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 is secured by a first deed of trust on the property, bears
interest at 8.0% per annum and is payable in July 2000, subject to renewal if
Mr. Sellers remains employed by the Company. As of December 31, 1997, $988,710
of principal and accrued interest was outstanding. In March 1998, Mr. Sellers
paid the Company $754,000 and reduced the Company loan to $236,500, including
accrued interest.
The Company entered into an employment agreement with Dr. Rudolph in April
1997. Under the agreement, Dr. Rudolph receives a monthly base salary of $15,000
and is eligible for an annual cash incentive and other benefits that are
generally provided to the Company's executives. The annual cash incentive is
targeted at 40%, and can range from 0% to 150%, of Dr. Rudolph's annual base
salary depending upon performance in relation to predetermined management
objectives. In the event the Company terminates Dr. Rudolph's employment without
cause, the Company is required to pay Dr. Rudolph a severance payment in
accordance with the Company's normal payroll policies equal to one month, up to
a maximum of six months, of his then current annual salary for every two months
he is employed by the Company. Pursuant to the agreement, the Company also
granted Dr. Rudolph options to purchase 70,000 shares of the Company's Common
Stock, reimbursed Dr. Rudolph for certain moving costs and agreed to defray
$30,000 per year of his housing expenses over a three-year period while he is
employed by the Company.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1999
Annual Meeting of Shareholders must be received by Shawn K. Singh, SciClone
Pharmaceuticals, Inc., 901 Mariners Island Boulevard, San Mateo, California
94404, no later than January 8, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1997, all Reporting Persons complied with all applicable
filing requirements, except that one initial statement of beneficial ownership
for Rolf H. Henel, a director of the Company, for one transaction was not timely
filed.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
at 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/ SHAWN K. SINGH
SHAWN K. SINGH
Assistant Secretary
May 29, 1998
San Mateo, California
21
<PAGE> 24
SCICLONE PHARMACEUTICALS, INC.
1995 EQUITY INCENTIVE PLAN
(AS AMENDED JUNE 26, 1998)
1. Purposes of the Plan.
The purposes of this Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to the Employees and Consultants of the Company and to promote the
success of the Company's business.
Options granted hereunder may be either Incentive Stock Options (as defined
under Section 422 of the Code) or Nonstatutory Stock Options, at the discretion
of the Board and as reflected in the terms of the written option agreement.
Stock Purchase Rights and Stock Bonus Awards may also be granted under the Plan.
2. Definitions.
As used herein, the following definitions shall apply:
(a) "Administrator" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" shall have the meaning set forth in Section 4(a)
below.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan, if one is appointed.
(f) "Common Stock" shall mean the Common Stock of the Company.
(g) "Company" shall mean SciClone Pharmaceuticals, Inc., a California
corporation.
(h) "Consultant" shall mean any person who is engaged by the Company
or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services; provided that the term Consultant
shall not include nonemployee directors.
(i) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Administrator; provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute. For purposes
of this Plan, a change in status from an Employee to a Consultant or from a
Consultant to an Employee will not constitute termination of Continuous
Status as an Employee or Consultant.
(j) "Director" shall mean a member of the Board.
(k) "Employee" shall mean any person, including Named Executives,
Officers and Directors, employed by the Company or any Parent or Subsidiary
of the Company. The payment by the Company of a director's fee to a
Director shall not be sufficient to constitute "employment" of such
Director by the Company.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(m) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the Nasdaq
National Market ("NASDAQ") System, its Fair
-1-
<PAGE> 25
Market Value shall be the closing sales price for such stock as quoted
on such system on the date of determination (if for a given day no sales
were reported, the closing bid on that day shall be used), as such price
is reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on
the Nasdaq National Market) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the bid and asked prices for the Common
Stock or;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code,
as designated in the applicable written option agreement.
(o) "Named Executive" shall mean any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company
(or is acting in that capacity) or among the four highest compensated
officers of the Company (other than the chief executive officer). Such
officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(p) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable
written option agreement.
(q) "Officer" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" shall mean a stock option granted pursuant to the Plan.
(s) "Optioned Stock" shall mean the Common Stock subject to an Option
or a Stock Purchase Right.
(t) "Optionee" shall mean an Employee or Consultant who receives an
Option.
(u) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(v) "Plan" shall mean this 1995 Equity Incentive Plan.
(w) "Restricted Stock" shall mean shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below or a
Stock Bonus Award under Section 12 below.
(x) "Right" shall mean and include Stock Purchase Rights and Stock
Bonus Awards granted pursuant to the Plan.
(y) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
Act as the same may be amended from time to time, or any successor
provision.
(z) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 16 of the Plan.
(aa) "Stock Bonus Award" shall mean the grant of Common Stock for no
cash consideration pursuant to Section 12 below.
(bb) "Stock Purchase Right" shall mean the right to purchase Common
Stock pursuant to Section 11 below.
(cc) "Subsidiary" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
-2-
<PAGE> 26
3. Stock Subject to the Plan.
Subject to the provisions of Section 16 of the Plan, the maximum aggregate
number of Shares that may be optioned, sold or awarded under the Plan is
3,500,000 Shares of Common Stock. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right should expire or become unexercisable
for any reason without having been exercised in full, the unissued Shares that
were subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. Notwithstanding any other provision
of the Plan, Shares issued under the Plan and later repurchased by the Company
shall not become available for future grant or sale under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3 and
by the legal requirements relating to the administration of incentive
stock option plans, if any, of applicable securities laws and the Code
(collectively, the "Applicable Laws"), the Plan may (but need not) be
administered by different administrative bodies with respect to
Directors, Officers who are not Directors and Employees who are neither
Directors nor Officers.
(ii) Administration with Respect to Directors and Officers. With
respect to grants of Options or Rights to Employees or Consultants who
are also Officers of the Company, the Plan shall be administered by (A)
the Board, if the Board may administer the Plan in compliance with Rule
16b-3 as it applies to a plan intended to qualify thereunder as a
discretionary plan and Section 162(m) of the Code as it applies so as to
qualify grants of Options or Rights to Named Executives as
performance-based compensation, or (B) a Committee designated by the
Board to administer the Plan, which Committee shall be constituted in
such a manner as to permit the Plan to comply with Rule 16b-3 as it
applies to a plan intended to qualify thereunder as a discretionary plan
and otherwise so as to satisfy the Applicable Laws.
(iii) Administration with Respect to Other Persons. With respect to
grants of Options or Rights to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the
Applicable Laws.
(iv) General. If a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 4(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by
the Board. From time to time the Board may increase the size of any
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and remove all members of a Committee and
thereafter directly administer the Plan, all to the extent permitted by
the Applicable Laws and, in the case of a Committee appointed under
subsection (ii), to the extent permitted by Rule 16b-3 as it applies to
a plan intended to qualify thereunder as a discretionary plan.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;
(ii) to select the Employees and Consultants to whom Options and
Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Rights or
any combination thereof are granted hereunder;
-3-
<PAGE> 27
(iv) to determine the number of Shares to be covered by each such
award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but
not limited to, the share price and any restriction or limitation, or
any vesting acceleration or waiver of forfeiture restrictions regarding
any Option or Right and/or the shares of Common Stock relating thereto,
based in each case on such factors as the Administrator shall determine,
in its sole discretion);
(vii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an
award under this Plan shall be deferred either automatically or at the
election of the participant (including providing for and determining the
amount, if any, of any deemed earnings on any deferred amount during any
deferral period);
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Shares covered
by such Option shall have declined since the date the Option was
granted; and
(ix) to determine the terms and restrictions applicable to Stock
Purchase Rights or Stock Bonus Awards, and the Restricted Stock issued
upon exercise of the Stock Purchase Rights or grant of Stock Bonus
Awards, as the case may be.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
holders of Options and Rights.
5. Eligibility.
(a) Recipients of Grants. Nonstatutory Stock Options, Stock Purchase Rights
and Stock Bonus Awards may be granted to Employees and Consultants. Incentive
Stock Options may be granted only to Employees. An Employee or Consultant who
has been granted an Option, Stock Purchase Right or Stock Bonus Award may, if he
or she is otherwise eligible, be granted additional Options, Stock Purchase
Rights or Stock Bonus Awards.
(b) Type of Option. Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of shares with respect to which Incentive Stock Options are
exercisable for the first time by an Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
excess Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares shall
be determined as of the time the Option with respect to such Shares is granted.
(c) No Employment Rights. The Plan shall not confer upon any Optionee any
right with respect to continuation of employment or consulting relationship with
the Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan.
The Plan shall become effective upon the earlier to occur of its adoption
by the Board or its approval by the shareholders of the Company as described in
Section 22 of the Plan. The Plan shall terminate in January 2005, the tenth
anniversary of its adoption by the Board, unless sooner terminated under Section
18 of the Plan.
-4-
<PAGE> 28
7. Term of Option.
The term of each Option shall be the term stated in the written option
agreement; provided, however, that in the case of an Incentive Stock Option, the
term shall be no more than ten (10) years from the date of grant thereof or such
shorter term as may be provided in the written option agreement, and provided
further that, in the case of an Incentive Stock Option granted to an Optionee
who, at the time the Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary (including stock constructively owned through family
members or entities in accordance with Code Section 424(d)), the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the written option agreement.
8. Limitation on Grants to Employees.
Subject to adjustment as provided in this Plan, the maximum number of
Shares which may be subject to Options or Rights granted to any one Employee
under this Plan for any fiscal year of the Company shall be 1,250,000.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator and set forth in the applicable agreement, but shall be
subject to the following:
(i) In the case of an Option
(A) which is an Incentive Stock Option and is granted to a person
who, at the time of the grant of such Option, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock
of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on the
date of grant;
(B) which is an Incentive Stock Option and is granted to any
person, the per Share exercise price shall be no less than 100% of the
Fair Market Value per Share on the date of grant; and
(C) which is a Nonstatutory Stock Option, the per share exercise
price shall be no less than 85% of the Fair Market Value per share on
the date of grant.
(b) Permissible Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash, (2) check, (3) promissory note, (4) other Shares that (x) in the case
of Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six months on the date of surrender or were not acquired,
directly or indirectly, from the Company, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) authorization from the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds required to pay the exercise price, (7) delivery
of an irrevocable subscription agreement for the Shares that irrevocably
obligates the option holder to take and pay for the Shares not more than twelve
months after the date of delivery of the subscription agreement, (8) any
combination of the foregoing methods of payment, or (9) such other consideration
and method of payment for the issuance of Shares to the extent permitted under
Applicable Laws. In making its determination as to the type of consideration to
accept, the Administrator shall consider if acceptance of such consideration may
be reasonably expected to benefit the Company.
-5-
<PAGE> 29
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 16 of the Plan. Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Status as an Employee or Consultant. In the event of
termination of an Optionee's Continuous Status as an Employee or Consultant for
any reason, such Optionee may, but only within three (3) months (or such other
period of time not exceeding twelve (12) months, as determined by the
Administrator, with such determination made in the case of an Incentive Stock
Option at the time of grant of such Option) after the date of such termination
(but in no event later than the date of expiration of the term of such Option as
set forth in the written option agreement), exercise his or her Option to the
extent that he or she was entitled to exercise it at the date of such
termination, provided, however, that if the termination is for cause, the
Optionee may exercise such Option only within thirty (30) days after such
termination. To the extent that the Optionee was not entitled to exercise the
Option at the date of such termination, or if the Optionee does not exercise
such Option within the time specified herein, the Option shall terminate.
Notwithstanding the foregoing, if an Option which is an Incentive Stock Option
may be exercised more than three (3) months after termination of employment,
such Option shall cease to qualify as an Incentive Stock Option if not exercised
by Optionee within three (3) months following the date of such termination.
(c) Death or Disability of Optionee. Notwithstanding the provisions of
Section 10(b) above, in the event of the death or total and permanent disability
(as defined in Section 22(e)(3) of the Code) of an Optionee during the term of
the Option who at the time of his death or disability is an Employee or
Consultant of the Company and who shall have been in Continuous Status as an
Employee or Consultant since the date of grant of the Option, the Option may be
exercised at any time within twelve (12) months from the date of such death or
disability (but in no event later than the date of expiration of the term of
such Option as set forth in the written option agreement) by the Optionee or the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent the right to exercise had
accrued at the date of termination. To the extent that the Optionee was not
entitled to exercise the Option at the date of termination, or if the Option is
not exercised within the time specified herein, the Option shall terminate.
(d) Rule 16b-3. Options granted to persons subject to Section 16(b) of the
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the
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<PAGE> 30
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid (which price shall
not be less than 85% of the Fair Market Value of the Shares as of the date of
the offer), and the time within which such person must accept such offer, which
shall in no event exceed thirty (30) days from the date upon which the
Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in
the form determined by the Administrator. Shares purchased pursuant to the grant
of a Stock Purchase Right shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability) prior
to completion of a specified service requirement. The purchase price for Shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original purchase price.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion. In addition, the
provisions of Restricted Stock Purchase Agreements need not be the same with
respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 16 of the Plan.
12. Stock Bonus Awards.
(a) Administration. Stock Bonus Awards may be granted either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. Such awards shall be granted for no cash
consideration. The Administrator shall determine the performance or other
factors to be used in the determination of Stock Bonus Awards. Stock Bonus
Awards may vary from participant to participant and between groups of
participants and may be based upon the achievement of the Company and/or
individual performance factors or upon such other criteria as the Administrator
may deem appropriate. The Administrator may determine for each Stock Bonus Award
the number of shares of Common Stock to be awarded if, and to the extent that,
the relevant measures of performance or other criteria for such Stock Bonus
Award are met. Such number of shares of Common Stock may be fixed or may vary in
accordance with such performance or other criteria as may be determined by the
Administrator. The Administrator may adjust the factors applicable to the Stock
Bonus Awards to take into account changes in legal, accounting and tax rules and
to make such other adjustments as the Administrator deems necessary or
appropriate.
(b) Terms and Conditions. The Stock Bonus Awards will be granted pursuant
to a Restricted Stock Bonus Agreement in the form determined by the
Administrator. The Restricted Stock Bonus Agreement shall contain such terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator in its sole discretion, including without limitation, the
Company's option to reacquire the Shares for no consideration exercisable upon
the voluntary or involuntary termination of the recipient's employment with the
Company for any reason (including death or disability) prior to completion of a
specified service requirement. In addition, the provisions of Restricted Stock
Bonus Agreements need not be the same with respect to each recipient.
(c) Rights as a Shareholder. Once the Stock Bonus Award is granted, the
recipient shall have the rights equivalent to those of a shareholder, and shall
be a shareholder when his or her grant is entered upon the records of the duly
authorized transfer agent of the Company. No adjustment will be made for a
dividend or other right for which record date is prior to the date the Stock
Bonus Award is granted, except as provided in Section 16 of the Plan.
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<PAGE> 31
13. Withholding Taxes.
As a condition to the exercise of Options and Rights granted hereunder, the
participant shall make such arrangements as the Administrator may require for
the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise, receipt or vesting
of such Options or Rights. The Company shall not be required to issue any Shares
under the Plan until such obligations are satisfied.
14. Stock Withholding to Satisfy Withholding Tax Obligations.
At the discretion of the Administrator, a participant under the Plan may
satisfy withholding obligations as provided in this paragraph. When a
participant incurs tax liability in connection with an Option or Right which tax
liability is subject to tax withholding under applicable tax laws, and the
participant is obligated to pay the Company an amount required to be withheld
under applicable tax laws, the participant may satisfy the withholding tax
obligation by one or some combination of the following methods: (a) by cash
payment, (b) out of participant's current compensation, (c) if permitted by the
Administrator, in its discretion, by surrendering to the Company Shares that (i)
in the case of Shares previously acquired from the Company, have been owned by
the participant for more than six months on the date of surrender, and (ii) have
a Fair Market Value on the date of surrender equal to or less than participant's
marginal tax rate times the ordinary income recognized, or (d) by electing to
have the Company withhold from the Shares to be issued upon exercise of an
Option or Right that number of Shares having a Fair Market Value equal to the
amount required to be withheld. For this purpose, the Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined (the "Tax Date").
Any surrender by an Officer or Director of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of an Option or Right
must comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
All elections by a participant to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the participant is an Officer or Director, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by a participant
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the participant shall receive the full
number of Shares with respect to which the Option or Right is exercised or the
Stock Bonus Award is granted but such participant shall be unconditionally
obligated to tender back to the Company the proper number of Shares on the Tax
Date.
15. Non-Transferability of Options, Rights and Restricted Stock.
Options or Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution or pursuant to a qualified domestic relations order (as
defined by the Code); provided, however, that with respect to Nonstatutory Stock
Options and Stock Purchase Rights, such Option or Right may be transferable to
the extent the Administration determines that transferability is permitted under
Rule 16b-3 of the Exchange Act, the Securities Act of 1933, as amended and other
Applicable Laws as then in effect. The designation of a beneficiary by an
Optionee or Rights holder
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<PAGE> 32
will not constitute a transfer. An Option or Right may be exercised, during the
lifetime of the Optionee or Rights holder, only by the Optionee or Rights holder
or a transferee permitted by this Section 15.
16. Adjustments Upon Changes in Capitalization or Merger.
(a) Adjustment. Subject to any required action by the shareholders of the
Company, the number of Shares covered by each outstanding Option or Right, the
number of Shares that have been authorized for issuance under the Plan but as to
which no Options or Right have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option or Right, the maximum
number of Shares which may be granted to any employee under Section 8 of the
Plan and the price per Share covered by each such outstanding Option or Right,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option
or Right.
(b) Corporate Transactions. In the event of the proposed dissolution or
liquidation of the Company, an Option or Right will terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Administrator. The Administrator may, in the exercise of its sole discretion in
such instances, declare that any Option or Right shall terminate as of a date
fixed by the Administrator and give each Optionee or Right holder the right to
exercise his or her Option or Right as to all or any part of the Optioned Stock
or Restricted Stock, including Shares as to which an Option or Right would not
otherwise be exercisable. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, an Option or Right may be assumed or an
equivalent option may be substituted by such successor corporation or a parent
or subsidiary of such successor corporation or the Administrator may determine,
in its sole discretion and in lieu of such assumption or substitution, that the
Optionee or Right holder shall have the right to exercise an Option or Right as
to some or all of the Optioned Stock or Restricted Stock, including Shares as to
which the Option or Right would not otherwise be exercisable, or that Restricted
Stock held by a participant shall be released from the Company's repurchase
option. If the Administrator makes an Option or Right exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee or Right holder that the Option or Right
shall be exercisable for a period of at least ten (10) days from the date of
such notice. Unless the Option or Right is assumed, substituted by an equivalent
option, or exercised in accordance with the preceding provisions of this Section
16(b), it shall terminate no later than consummation of such merger or sale.
17. Time of Granting Options and Stock Purchase Rights.
The date of grant of an Option or Right shall, for all purposes, be the
date on which the Administrator makes the determination granting such Option or
Right or such other date as is determined by the Administrator. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Right is so granted within a reasonable time after the date of such grant.
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<PAGE> 33
18. Amendment and Termination of the Plan.
(a) Authority to Amend or Terminate. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 22 of the
Plan:
(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 16 of the Plan;
(ii) any change in the designation of the class of persons eligible to
be granted Options or Rights;
(iii) any change in the limitation on grants to Employees as described
in Section 8 of the Plan or other changes which would require shareholder
approval to qualify options or rights granted hereunder as
performance-based compensation under Section 162(m) of the Code; or
(iv) if the Company has a class of equity securities registered under
Section 12 of the Exchange Act at the time of such revision or amendment,
any material increase in the benefits accruing to participants under the
Plan.
(b) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options or Rights already granted and such Options
or Rights shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee or
Right holder and the Board, which agreement must be in writing and signed by the
Optionee or Right holder and the Company.
19. Conditions Upon Issuance of Shares.
Shares shall not be issued pursuant to the exercise of an Option or Right
unless the exercise of such Option or Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Right, the Company may
require the person exercising such Option or Right to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.
20. Reservation of Shares.
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan. The inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not have
been obtained.
21. Agreements.
Options and Rights shall be evidenced by written agreements in such forms
as the Administrator shall approve.
22. Shareholder Approval.
Continuance of the Plan shall be subject to approval by the shareholders of
the Company within twelve (12) months before or after the date the Plan is
adopted. Such shareholder approval shall be obtained in the
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<PAGE> 34
manner and to the degree required under applicable federal and state law and the
rules of any stock exchange upon which the Shares are listed and, in particular,
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
23. Information to Optionees and Right Holders.
The Company shall provide to each Optionee and Right holder, during the
period for which such Optionee or holder has one or more Options or Rights
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company.
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<PAGE> 35
SCICLONE PHARMACEUTICALS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 26, 1998
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald R. Sellers and Shawn K. Singh, and
each of them, with full power of substitution to represent the undersigned and
to vote all shares of 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, June 26, 1998, 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 1997 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, 2 AND 3.
(continued and to be signed on reverse side)
<PAGE> 36
A vote FOR the following proposals is recommended by the Board of Directors:
PROPOSAL 1. To elect the following five (5) directors of the Company to serve
until the 1999 Annual Meeting of Shareholders or until their respective
successors are elected and qualified:
(INSTRUCTION: To withhold authority to vote for an individual nominee, strike a
line through that nominee's name in the list below.)
Jere E. Goyan, Ph.D. Donald R. Sellers John D. Baxter, M.D. Edwin C.
Cadman, M.D. Rolf H. Henel
FOR all nominees listed (except as marked to the contrary) [ ]
WITHHOLD AUTHORITY to vote for all nominees listed [ ]
PROPOSAL 2. To approve an amendment to the Company's 1995 Equity Incentive Plan
to increase by 1,500,000 the maximum number of shares of Common Stock that may
be issued under such plan.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>
PROPOSAL 3. To ratify the appointment of Ernst & Young LLP as the independent
auditors for the Company for the year ending December 31, 1998.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>
Sign exactly as your
name(s) appears on your
stock certificate. If
shares of stock are held
jointly, both or all of
such persons should sign.
Corporate or partnership
proxies should be signed in
full corporate or
partnership name by an
authorized person. Persons
signing in a fiduciary
capacity should indicate
their full titles in such
capacity. Executors or
administrators or other
fiduciaries who execute the
above Proxy for a deceased
shareholder should give
their full title. Please
date the Proxy.
Date:
---------------------------
---------------------------
[signature]
Date:
---------------------------
---------------------------
[signature]
