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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
Amylin Pharmaceuticals, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
6. Amount Previously Paid:
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7. Form, Schedule or Registration Statement No.:
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9. Date Filed:
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AMYLIN PHARMACEUTICALS, INC.
9373 TOWNE CENTRE DRIVE
SAN DIEGO, CA 92121
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 1999
TO THE STOCKHOLDERS OF AMYLIN PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Amylin
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), will be held on
Monday, May 24, 1999 at 10:00 a.m. local time at the Hyatt Regency La Jolla,
located at 3777 La Jolla Village Drive, San Diego, California 92122, for the
following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve the Company's Employee Stock Purchase Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 100,000 shares.
3. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1999.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 26, 1999,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ JOSEPH C. COOK, JR.
JOSEPH C. COOK, JR.
Chairman of the Board and Chief
Executive Officer
San Diego, California
April 15, 1999
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
AMYLIN PHARMACEUTICALS, INC.
9373 TOWNE CENTRE DRIVE
SAN DIEGO, CA 92121
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 1999
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Amylin Pharmaceuticals, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on May 24, 1999, at 10:00 a.m.,
local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the Hyatt Regency La Jolla,
located at 3777 La Jolla Village Drive, San Diego, California 92122. The Company
intends to mail this proxy statement and accompanying proxy card on or about
April 15, 1999, to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company
or, at the Company's request, Beacon Hill Partners, Inc., a professional proxy
soliciter. No additional compensation will be paid to directors, officers or
other regular employees for such services, but Beacon Hill Partners, Inc. will
be paid its customary fee, estimated to be about $4,750 if it renders
solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March
26, 1999 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 26, 1999, the Company had outstanding and entitled to
vote 36,797,806 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 9373 Towne
Centre Drive, San Diego, California 92121, a written notice of revocation or a
duly
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executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2000 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is December 10, 1999. The deadline for submitting a stockholder
proposal or a nomination for director that is not to be included in such proxy
statement and proxy is also December 10, 1999. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
There are six nominees for the six Board positions presently authorized in
the Company's Bylaws. Each director to be elected will hold office until the
next annual meeting of stockholders and until a successor is elected and has
qualified, or until such director's earlier death, resignation or removal. Each
nominee listed below is currently a director of the Company, each having been
elected by the stockholders.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the six nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected and management has no reason to believe that any nominee
will be unable to serve. Directors are elected by a plurality of the votes
present in person or represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION/POSITION
NAME AGE HELD WITH THE COMPANY
---- --- -----------------------------
<S> <C> <C>
Joseph C. Cook, Jr............... 57 Chairman of the Board and Chief Executive Officer
James C. Blair, Ph.D.(1)......... 59 General Partner, Domain Associates, L.L.C.
James C. Gaither(1).............. 61 Partner, Cooley Godward LLP
Ginger L. Graham(2).............. 43 Vice President of Guidant Corporation
Howard E. Greene, Jr............. 56 Member, Board of Directors
Vaughn M. Kailian(2)............. 54 President and Chief Executive Officer of COR
Therapeutics, Inc.
</TABLE>
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
MR. COOK has been Chairman of the Board and Chief Executive Officer since
March 1998. Prior to such time, he had served as a Board member of, and a
consultant to, the Company since 1994. Mr. Cook is also a director of Dura
Pharmaceuticals, Inc., a specialty respiratory pharmaceutical and pulmonary drug
delivery company, and NABI, Inc., a research and development driven
biopharmaceutical company that makes and markets products for people with
life-threatening conditions. Mr. Cook is a founder and serves as Chairman of the
Board of Microbia, Inc., a privately held biotechnology company. Mr. Cook is
also a founder of Clinical Products, Ltd., Life Science Advisors, LLC, Cambrian
Associates, LLC, and Mountain Ventures, Inc.
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Mr. Cook retired as a Group Vice-President of Eli Lilly & Company in 1993 after
more than 28 years of service. Mr. Cook received a B.S. in Engineering from the
University of Tennessee.
DR. BLAIR has served as a director since December 1988 and serves on the
Compensation Committee. He has been a managing member of Domain Associates,
L.L.C., a venture capital investment firm, since 1985. Domain Associates manages
Domain Partners, L.P., Domain Partners II, L.P., Domain Partners III, L.P. and
Domain Partners IV, L.P. and is the U.S. venture capital advisor to
Biotechnology Investments, Ltd. From 1969 to 1985, Dr. Blair was an officer of
three investment banking and venture capital firms. Dr. Blair is a director of
Aurora Biosciences, Inc., CoCensys, Inc., Dura Pharmaceuticals, Inc., Trega
Biosciences, Inc. and Vista Medical Technologies, Inc. Dr. Blair received a
B.S.E. from Princeton University and the M.S.E. and Ph.D. degrees from the
University of Pennsylvania in electrical engineering.
MR. GAITHER has served as a director since November 1995 and serves on the
Compensation Committee. He has been a partner of the law firm Cooley Godward LLP
("Cooley Godward") since 1971 where he also served as managing partner from 1984
to 1990. Prior to joining Cooley Godward in 1969, Mr. Gaither served as Staff
Assistant to the President of the United States from July 1966 to January 1969.
He is a director of Basic American, Inc., Levi Strauss & Co., NVIDIA Corporation
and Siebel Systems, Inc. and serves on the executive committee of the Board of
Visitors at Stanford Law School. He previously served as President of the Board
of Trustees of Stanford University and as Chairman of its Investment Committee.
He is a trustee of the Carnegie Endowment for International Peace, The James
Irvine Foundation, RAND, and The William and Flora Hewlett Foundation. Mr.
Gaither received his J.D. from Stanford University.
MS. GRAHAM has served as a director since November 1995 and serves on the
Audit Committee. Since 1993, Ms. Graham has served as President of the Vascular
Intervention Group of Guidant Corporation, a medical device company, which
includes Advanced Cardiovascular Systems ("ACS") and Devices for Vascular
Intervention. She has also served as President and Chief Executive Officer of
ACS since January 1993. Prior to joining ACS, she held various positions with
Eli Lilly & Company from 1979 to 1992, including sales and strategic planning
positions. She serves on the Board of Directors and the Executive Committee for
the California Healthcare Institute and on the Advisory Board of the California
Institute for Federal Policy Research and is a HIMA special representative to
the Payment and Health Care Delivery Committee. She is also a member of the
Committee 200. Ms. Graham received an M.B.A. from Harvard University.
MR. GREENE has served as a director since September 1987 when he co-founded
the Company. Mr. Greene is an entrepreneur who has founded, managed, and
financed several medical technology companies. From September 1987 to July 1996
Mr. Greene served as Chief Executive Officer of the Company; he was a full time
employee of the Company from September 1989 until September 1996, and a
half-time employee and Chairman of the Executive Committee until March 1998.
From October 1986 until July 1993, Mr. Greene was a founding general partner of
Biovest Partners, a seed venture capital firm. He was Chief Executive Officer of
Hybritech from March 1979 until its acquisition by Eli Lilly & Company in March
1986, and he was co-inventor of Hybritech's patented monoclonal antibody assay
technology. Prior to joining Hybritech, he was an executive with the medical
diagnostics division of Baxter Healthcare Corporation from 1974 to 1979 and a
consultant with McKinsey & Company from 1967 to 1974. He is Chairman of the
Board of Cytel Corporation, and a director of Biosite Diagnostics, Inc. and The
International Biotechnology Trust plc, a British Investment company. Mr. Greene
received an M.B.A. from Harvard University.
MR. KAILIAN has served as a director since November 1995 and serves on the
Audit Committee. Mr. Kailian has served as President, Chief Executive Officer
and Director of COR Therapeutics, Inc. since March 1990. From 1967 to 1990, Mr.
Kailian was employed by Marion Merrell Dow, Inc., a pharmaceutical company, and
its predecessor companies, in various general management, product development,
marketing and sales positions. Among the positions held by Mr. Kailian were
President and General Manager, Merrell Dow USA and Corporate Vice President of
Global Commercial Development, Marion Merrell Dow, Inc. Mr. Kailian is also a
director of the Biotechnology Industry Organization and the California Health
Care Institute and is a director and serves on the compensation committee of
Axys Pharmaceuticals, Inc. Mr. Kailian holds a B.A. from Tufts University.
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BACKGROUND OF EXECUTIVES NOT DESCRIBED ABOVE
The names of and certain information regarding the Company's executives as
of March 31, 1999 are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION HELD WITH THE COMPANY
---- --- ------------------------------
<S> <C> <C>
Daniel M. Bradbury.................. 37 Senior Vice President of Corporate Development
Martin R. Brown..................... 52 Vice President of Operations
Nancy K. Dahl....................... 42 Vice President, General Counsel and Secretary
Richard A. Kenley, Ph.D............. 51 Senior Vice President of Product Development
Orville G. Kolterman, M.D........... 51 Senior Vice President of Clinical Affairs
Andrew A. Young, M.D., Ph.D......... 46 Vice President of Research
</TABLE>
MR. BRADBURY, an executive officer of the Company, has served as Senior
Vice President of Corporate Development since April 1998. Mr. Bradbury
previously served as Vice President of Marketing from June 1995 to April 1998.
From July 1994 to May 1995, Mr. Bradbury held the position of Director of
Marketing, Amylin Europe Limited. Prior to joining the Company, Mr. Bradbury was
employed by SmithKline Beecham Pharmaceuticals from September 1984 to July 1994,
where he held a number of positions, most recently as Associate Director,
Anti-Infectives in the Worldwide Strategic Product Development Division. Mr.
Bradbury holds a B.Pharm. (Hons.) from Nottingham University and a Diploma in
Management Studies from Harrow and Ealing Colleges of Higher Education and is a
member of the Royal Pharmaceutical Society of Great Britain.
MR. BROWN, an executive officer of the Company, has served as Vice
President of Operations since October 1998. Mr. Brown previously served as
Senior Director, Information Technology from May 1994 to October 1998. Prior to
joining the Company, from 1989 to 1993, Mr. Brown was Director, Information
Systems, Europe, based in London, England for Eli Lilly & Company. From 1988 to
1989, Mr. Brown was Director, Information Systems for the Medial Devices and
Diagnostics Division of Eli Lilly & Company; he served as Director, Information
Systems of IVAC Corporation, one of the seven companies in that division, from
1983 to 1988. Mr. Brown received a B.S. in Commerce and Engineering and an
M.B.A. in Operations Research from Drexel University.
MS. DAHL, an executive officer of the Company, has served as Vice President
and General Counsel since January 1999. Ms. Dahl previously served as Vice
President and Associate General Counsel from November 1998 to December 1998.
From December 1996 to November 1998, Ms. Dahl held the position of Associate
General Counsel, and from May 1993 to December 1996, she served as Senior
Attorney. Prior to joining the Company, from 1989 to 1993, she was an attorney
in private practice with the law firm of Lyon & Lyon. From 1987 to 1989, Ms.
Dahl was in private practice with the law firm of Brobeck, Phleger & Harrison.
From 1986 to 1987, she served as a judicial clerk to the Honorable David R.
Thompson of the U.S. Court of Appeals for the Ninth Circuit. Ms. Dahl received a
J.D. degree from the University of Oregon and a B.S. degree in zoology from the
University of Wisconsin.
DR. KENLEY, an executive officer of the Company, has served as Senior Vice
President of Product Development since February 1997. From January 1994 to
February 1997, Dr. Kenley served as Vice President of Product Development.
Additionally since January 1999, Dr. Kenley has served as Managing Director of
the Company's Cabrillo Laboratories Division. Prior to joining the Company, from
1990 to 1994, he was Director of Pharmaceutical Sciences at Genetics Institute,
Inc. From 1986 to 1990, Dr. Kenley was Associate Director of Analytical
Chemistry at Baxter Healthcare Corporation, and from 1982 to 1986 he was
Department Head of Analytical Chemistry Development at Syntex Corporation. Dr.
Kenley earned a Ph.D. in chemistry from the University of California at San
Diego.
DR. KOLTERMAN, an executive officer of the Company, has served as Senior
Vice President of Clinical Affairs since February 1997. Dr. Kolterman previously
served as Vice President, Medical Affairs from July 1993 to February 1997 and
Director, Medical Affairs from May 1992 to July 1993. From 1983 to May 1992, he
was Program Director of the General Clinical Research Center and Medical
Director of the Diabetes Center, at the University of California, San Diego
Medical Center. Since 1989 he has been Adjunct Professor
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of Medicine at UCSD. From 1978 to 1983, he was Assistant Professor of Medicine
in the Endocrinology and Metabolism Division at the University of Colorado
School of Medicine, Denver. He was a member of the Diabetes Control and
Complications Trial (DCCT) Study Group at the time of its completion in 1993 and
presently serves as a member of the Epidemiology of Diabetes Intervention and
Complications (EDIC) Study. He is also a past-President of the California
Affiliate of the American Diabetes Association. Dr. Kolterman earned an M.D.
from Stanford University School of Medicine.
DR. YOUNG has served as Vice President of Research since October 1998 and
as Vice President of Physiology since January 1994. From 1989 to 1993 he held a
number of positions in the Company's Physiology Department, most recently as
Principal Scientist and Senior Director of Physiology. Prior to joining the
Company in 1989, Dr. Young was a lecturer in the Department of Physiology at the
University of Auckland, New Zealand and a part-time general medical
practitioner. From 1984 to 1987, Dr. Young was a Clinical Research Scientist at
the National Institutes of Health in Phoenix, Arizona, where he studied insulin
resistance and diabetes. He received his M.B., Ch.B. (M.D.) and his Ph.D. in
Physiology from the University of Auckland, New Zealand.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1998 the Board of Directors held
fourteen meetings. The Board has an Audit Committee and a Compensation
Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee was composed of two non-employee
directors: It was composed of Mr. Cook and Mr. Timothy Wollaeger until March
1998, when it was reconstituted to consist of Ms. Graham and Mr. Kailian. It met
once during such fiscal year.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, administers and awards stock options to employees and
consultants under the Company's 1991 Stock Option Plan, as amended, administers
and approves stock offerings under the Company's Employee Stock Purchase Plan,
administers the Company's Non-Employee Directors' Stock Option Plan and
otherwise determines compensation levels and performs such other functions
regarding compensation as the Board may delegate. The Compensation Committee was
composed of two non-employee directors. It was composed of Dr. Blair and Mr.
Timothy Wollaeger until March 1998, when it was reconstituted to consist of Dr.
Blair and Mr. Gaither. It met two times during such fiscal year.
The Board of Directors has delegated to the Company's Chief Executive
Officer the authority to grant stock options under the Company's 1991 Stock
Option Plan, as amended, to employees of the Company that are not executive
officers, directors or 10% stockholders of the Company, provided such grants are
in accordance with guidelines that have been approved in advance by the Board of
Directors.
During the fiscal year ended December 31, 1998, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he or she served, held during the period for which he or she was a
director or committee member, respectively.
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN,
AS AMENDED
In November 1991, the Board adopted, and the stockholders subsequently
approved, the Company's Employee Stock Purchase Plan (the "Purchase Plan"). As a
result of a series of amendments, as of January 31, 1999, there were 500,000
shares of Common Stock reserved for issuance under the Purchase Plan. In April
1999, the Board amended the Purchase Plan, subject to stockholder approval, to
increase the number
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of shares of Common Stock authorized for issuance under the Purchase Plan from a
total of 500,000 shares to a total of 600,000 shares. The Board adopted this
amendment in order to ensure that the Company can continue to grant purchase
rights at levels determined appropriate by the Board.
As of January 31, 1999, an aggregate of 458,276 shares of the Company's
Common Stock had been purchased under the Purchase Plan. Only 41,724 shares of
Common Stock remained available for future purchase under the Purchase Plan.
Stockholders are requested in this Proposal 2 to approve the amendment to
the Purchase Plan, as amended. The affirmative vote of the holders of a majority
of the shares present in person or represented by proxy and entitled to vote at
the meeting will be required to approve the amendment to the Purchase Plan.
Abstentions will be counted toward the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Purchase Plan, as amended, are outlined
below:
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees
of the Company (and any parent or subsidiary of the Company designated by the
Board to participate in the Purchase Plan) may be given an opportunity to
purchase Common Stock of the Company through payroll deductions, to assist the
Company in retaining the services of its employees, to secure and retain the
services of new employees, and to provide incentives for such persons to exert
maximum efforts for the success of the Company. As of March 31, 1999,
approximately 58 of the Company's approximately 65 employees are eligible to
participate in the Purchase Plan.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
ADMINISTRATION
The Board administers the Purchase Plan and has the final power to construe
and interpret both the Purchase Plan and the rights granted under it. The Board
has the power, subject to the provisions of the Purchase Plan, to determine when
and how rights to purchase Common Stock of the Company will be granted, the
provisions of each offering of such rights (which need not be identical), and
whether employees of any parent or subsidiary of the Company will be eligible to
participate in the Purchase Plan.
The Board has the power to delegate administration of the Purchase Plan to
a committee composed of not fewer than two members of the Board. The Board has
delegated administration of the Purchase Plan to the Compensation Committee of
the Board. As used herein with respect to the Purchase Plan, the "Board" refers
to any committee the Board appoints as well as to the Board itself.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Each offering is no more than
twenty-seven months long.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated by the Board) on the first day of an offering is eligible to
participate in that offering, provided such employee has been employed by the
Company or the designated affiliate for such continuous period preceding such
grant as the Board may require, but in no
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<PAGE> 9
event shall the required period of continuous employment be equal to or greater
than two years. Unless the Board provides otherwise, officers of the Company who
are "highly compensated" as defined in the Code are eligible to participate in
offerings under the Purchase Plan. However, no employee is eligible to
participate in the Purchase Plan if, immediately after the grant of purchase
rights, the employee would own, directly or indirectly, stock possessing 5% or
more of the total combined voting power or value of all classes of stock of the
Company or of any parent or subsidiary of the Company (including any stock which
such employee may purchase under all outstanding rights and options). In
addition, no employee may purchase more than $25,000 worth of Common Stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company and its
affiliates in any calendar year.
PARTICIPATION IN THE PLAN
Eligible employees enroll in the Purchase Plan by delivering to the
Company, prior to the date selected by the Board as the offering date for the
offering, an agreement authorizing payroll deductions of up to 15% of such
employees' total compensation during the purchase period.
PURCHASE PRICE
The purchase price per share at which shares of Common Stock are sold in an
offering under the Purchase Plan is the lower of (i) 85% of the fair market
value of a share of Common Stock on first day of the offering or (ii) 85% of the
fair market value of a share of Common Stock on the exercise date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering. At any time during the offering, a participant may reduce or
terminate his or her payroll deductions as the Board provides in the offering.
Except as provided for in the offering, a participant may not increase or begin
such payroll deductions after the beginning of any purchase period. All payroll
deductions made for a participant are credited to his or her account under the
Purchase Plan and deposited with the general funds of the Company. A participant
may make additional payments into such account subject to certain conditions.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under the Purchase Plan. In connection with
offerings made under the Purchase Plan, the Board specifies a maximum number of
shares of Common Stock an employee may be granted the right to purchase and the
maximum aggregate number of shares of Common Stock that may be purchased
pursuant to such offering by all participants. If the aggregate number of shares
to be purchased upon exercise of rights granted in the offering would exceed the
maximum aggregate number of shares of Common Stock available, the Board would
make a pro rata allocation of available shares in a uniform and equitable
manner. Unless the employee's participation is discontinued, his or her right to
purchase shares is exercised automatically at the end of the purchase period at
the applicable price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time prior to the end of the applicable purchase period.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
shares of Common Stock on the employee's behalf during such offering, and such
employee's interest in the offering will be automatically terminated. The
employee is not entitled to again participate in that offering. However, an
employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
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TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, the Purchase Plan will terminate on November 19, 2001.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (i) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (ii) modify the
requirements relating to eligibility for participation in the Purchase Plan, or
(iii) modify any other provision of the Purchase Plan in a manner that would
materially increase the benefits accruing to participants under the Purchase
Plan, if such approval is required in order to comply with the requirements of
Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"), as
amended, or under Section 423 of the Code.
Rights granted before amendment or termination of the Purchase Plan will
not be altered or impaired by any amendment or termination of the Purchase Plan
without consent of the employee to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation or specified type of merger of
the Company, the surviving corporation may assume the rights under the Purchase
Plan or substitute similar rights, or such rights may continue in full force and
effect, or participant's accumulated payroll deductions may be used to purchase
Common Stock immediately prior to the transaction and the participant's rights
under the ongoing offering are terminated.
STOCK SUBJECT TO PURCHASE PLAN
Subject to stockholder approval of this Proposal, an aggregate of 600,000
shares of Common Stock will be reserved for issuance under the Purchase Plan. If
rights granted under the Purchase Plan expire, lapse or otherwise terminate
without being exercised, the shares of Common Stock not purchased under such
rights again becomes available for issuance under the Purchase Plan.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of shares
of Common Stock as if such amounts were actually received. Other than this, no
income will be taxable to a participant until disposition of the acquired
shares, and the method of taxation will depend upon the holding period of the
acquired shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (i) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (ii) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the
8
<PAGE> 11
offering period) will be treated as ordinary income. Any further gain or any
loss will be taxed as a long-term capital gain or loss. Such capital gains
currently are generally subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition. The balance of any gain will be treated
as capital gain. Even if the stock is later disposed of for less than its fair
market value on the exercise date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be short-term or long-term,
depending on how long the stock has been held.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness and the satisfaction
of tax reporting obligations).
The following table presents certain information with respect to shares
purchased in 1998 under the Purchase Plan by (i) the Named Executive Officers
(as defined in the Summary Compensation Table), (ii) all executive officers as a
group and (iv) all non-executive officer employees as a group. Non-employee
directors are not eligible to purchase shares under the Purchase Plan.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION DOLLAR VALUE($)(1) PURCHASED
----------------- ------------------ ----------------
<S> <C> <C>
Joseph C. Cook, Jr................................... 0 0
CEO and Chairman of the Board of Directors
Richard M. Haugen.................................... 0 0
Former President and CEO
Maurizio Denaro, M.D................................. 3,699 1,096
Former Executive Vice President and Chief Technical
Officer
Bradford J. Duft..................................... 0 0
Former Senior Vice President and General Counsel
Richard A. Kenley, Ph.D.............................. 4,207 972
Senior Vice President, Product Development
Orville G. Kolterman, M.D............................ 8,517 2,119
Senior Vice President of Clinical Affairs
All executive officers as a group(2)................. 30,837 7,503
All non-executive officer employees as a group(2).... 150,969 39,321
</TABLE>
- ---------------
(1) Fair market value on the date of purchase multiplied by the number of shares
purchased.
(2) Represents number of executive officers as a group and number of
non-executive officer employees as a group as of March 31, 1999.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1999 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since the Company's inception in
September 1987. Representatives of Ernst & Young LLP are expected to be present
at the Annual Meeting, will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
9
<PAGE> 12
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of December 31, 1998 by: (i) each nominee for
director; (ii) each of the executive officers named in the Summary Compensation
Table; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------------------
BENEFICIAL OWNER(1) NUMBER OF SHARES PERCENT OF TOTAL
------------------- ---------------- ----------------
<S> <C> <C>
James C. Blair(2)(3).................................... 711,616 1.94%
Joseph C. Cook, Jr.(2).................................. 873,157 2.35%
Maurizio Denaro(2)...................................... 135,980 *
Bradford J. Duft(2)..................................... 215,419 *
James C. Gaither(2)..................................... 50,350 *
Ginger L. Graham(2)..................................... 38,596 *
Howard E. Greene, Jr.(2)(4)............................. 1,744,180 4.75%
Richard M. Haugen(2).................................... 298,225 *
Vaughn M. Kailian(2).................................... 38,596 *
Richard A. Kenley(2).................................... 156,958 *
Orville G. Kolterman(2)................................. 184,659 *
Johnson & Johnson Development Corporation(5)............ 4,986,357 13.03%
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Wellington Management Company(6)........................ 2,277,500 6.20%
75 State Street
Boston, MA 02109
All executive officers and directors as a group (13
persons)(2)........................................... 4,512,665 11.87%
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "Commission"). Unless otherwise indicated in
the footnotes to this table and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 36,726,000 shares outstanding on
December 31, 1998, adjusted as required by rules promulgated by the
Securities
10
<PAGE> 13
and Exchange Commission ("SEC"). Except as shown otherwise in the table, the
address of each stockholder listed is in care of the Company at 9373 Towne
Centre Drive, San Diego, California 92121.
(2) Includes shares which certain current or former executive officers,
directors and principal stockholders of the Company have the right to
acquire within 60 days after the date of this table pursuant to outstanding
options and warrants, as follows: Dr. Blair, 13,898 shares; Mr. Cook,
388,157 shares; Dr. Denaro, 132,713 shares; Mr. Duft, 139,363 shares; Mr.
Gaither, 38,596 shares; Ms. Graham, 38,596 shares; Mr. Greene, 3,898 shares;
Mr. Haugen, 245,780 shares; Mr. Kailian, 38,596 shares; Dr. Kenley, 154,985
shares; Dr. Kolterman, 180,160 shares; and all executive officers and
directors as a group, 1,301,670 shares.
(3) Dr. Blair may be deemed to be the beneficial owner of 653,847 shares held of
record by Domain Partners II, L.P. Dr. Blair is a general partner of One
Palmer Square Associates II, L.P., the general partner of Domain Partners
II, and shares voting and investment power with respect to such shares.
(4) Includes 1,740,282 shares as to which Mr. Greene shares voting and
dispositive power with a family trust.
(5) Includes 1,530,950 shares Johnson & Johnson has the right to acquire
pursuant to an outstanding warrant.
(6) Includes 580,000 shares as to which Wellington Management Company ("WMC")
has shared voting power and 2,277,500 shares as to which WMC has shared
dispositive power.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that Mr.
Cook filed a late Form 5 which covered one transaction whereby Mr. Cook was
granted an option to purchase 15,000 shares of the Company's Common Stock, of
which options to purchase 12,676 shares were subsequently cancelled.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives $1,000 attendance fee
for each meeting of the Board such director attends, subject to the Directors'
Deferred Compensation Plan described below. In the fiscal year ended December
31, 1998, the total compensation paid to non-employee directors was $3,052,
subject to the Company's Directors' Deferred Compensation Plan described below.
The members of the Board of Directors are also eligible for reimbursement for
their expenses incurred in connection with attendance at Board meetings in
accordance with Company policy.
Each non-employee director of the Company also receives stock option grants
under the Company's Non-Employee Directors' Stock Option Plan, as amended (the
"Directors' Plan"). Only non-employee directors of the Company or an affiliate
of such directors (as defined in the Code) are eligible to receive options under
the Directors' Plan. Options granted under the Directors' Plan are intended by
the Company not to qualify as incentive stock options under the Code.
The Directors' Plan provides that, each person who is, immediately
following each annual meeting of stockholders of the Company that occurs in an
even year (i.e. 2000, 2002, 2004, etc.) (hereinafter, an "Even Year Annual
Meeting"), a non-employee director of the Company shall be granted, effective as
of the date of such Even Year Annual Meeting, an option to purchase 10,000
shares of Common Stock of the Company
11
<PAGE> 14
pursuant to the Directors' Plan ("Recurring Options"). The Directors' Plan also
provides that each person who is elected for the first time by the Board or
stockholders of the Company to serve as a non-employee director and who has not
previously served as a member of the Board, shall be granted, upon election, an
option to purchase 20,000 shares of Common Stock ("Initial Election Options").
The exercise price of options granted under the Directors' Plan is equal to the
fair market value of the Common Stock subject to the option on the date of the
grant. Recurring Options vest at a daily rate over two years following the date
of grant. Initial Election Options vest as to 25% of the total number of shares
subject to such options on the date that is one year from the date of grant and
thereafter at a daily rate over the remaining three years. The term of options
under the Directors' Plan is ten years. The Directors' Plan provides that in the
event of a dissolution or liquidation of the Company, a merger or consolidation
in which the Company is not the surviving corporation, a reverse merger in which
the Company is the surviving corporation but the shares of the Company's Common
Stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise or any other capital reorganization in which more than 50% of the
shares of the Company entitled to vote are exchanged, then to the extent
permitted by applicable law, the time during which such options may be exercised
will be accelerated and the options terminated if not exercised prior to such
event.
During the last fiscal year, the Company granted options covering 10,000
shares to each non-employee director of the Company (in one case to an affiliate
of a non-employee director), at an exercise price per share of $4.37. The fair
market value of such Common Stock on the date of grant was $4.37 per share
(based on the closing sales price reported on the Nasdaq National Market for the
date of grant). As of December 31, 1998, 21,424 options had been exercised under
the Directors' Plan.
Effective in September 1996, Mr. Greene entered into an agreement with the
Company pursuant to which he would continue to serve as Chairman of the Board
and he would serve as a part-time employee of the Company. Under his agreement
with the Company, Mr. Greene received an annual salary of $157,500 and his
outstanding options to purchase shares of the Company's stock under the
Company's 1991 Stock Option Plan continued to vest at one-half of the rate at
which such options vest for full-time employees of the Company, subject to the
terms and conditions of the 1991 Stock Option Plan. In March 1998, Mr. Greene
resigned as Chairman of the Board and an employee of the Company, but he remains
a director of the Company.
In August 1997, the Company adopted a Directors' Deferred Compensation Plan
that permits participating non-employee directors to elect, on an annual basis,
to defer all or a portion of their cash compensation as directors in a deferred
stock account pursuant to which the deferred fees are credited in the form of
shares of the Company's Common Stock, based on the market price of the stock at
the time the deferred fees are earned. Deferred amounts are, therefore, valued
according to fluctuations in the fair market value of the Company's Common
Stock. When a participant ceases serving as a director, the participant will be
entitled to receive the value of his or her account in cash and/or in the form
of the Company's Common Stock, either in a single lump sum payment or in equal
annual installments, as determined by the Company in its sole discretion. All
non-employee directors chose to defer all or a portion of their cash
compensation for the period January 1, 1998 through December 31, 1998.
12
<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended December 31, 1996,
1997 and 1998, compensation awarded or paid to, or earned by, each person who
served as the Company's Chief Executive Officer during the fiscal year ended
December 31, 1998, and the Company's other four most highly compensated
executive officers at December 31, 1998 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
-------------------------------------------- ------------
OTHER ANNUAL SHARES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) ($)(2)
------------------ ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Cook, Jr.(3).... 1998 234,054 -- 92,472(4) 765,000(5) 1,248
CEO and Chairman of
the Board of Directors
Richard M. Haugen(6)...... 1998 224,125 -- -- 35,000 4,998
Former President and 1997 350,000 -- -- -- 4,758
CEO 1996 168,068(7) 50,000 -- 500,000(8) --
Maurizio Denaro(9)........ 1998 243,963 42,093 -- 100,300 78,849(10)
Former Executive 1997 244,250 -- -- 12,500 4,764
Vice President and 1996 188,605(11) 26,000 78,824(12) 141,000 --
Chief Technical Officer
Bradford J. Duft(13)...... 1998 318,720 56,723 -- 38,000(14) 119,250(10)
Former Senior 1997 238,466 -- -- 10,000(15) --
Vice President and 1996 215,946 -- -- 20,000(16) --
General Counsel
Richard A. Kenley......... 1998 214,281 37,125 -- 50,700 3,721
Senior Vice President, 1997 218,307 -- -- 10,000 3,683
Product Development 1996 195,602 -- -- 25,000 --
Orville G. Kolterman...... 1998 232,535 36,323 -- 150,700 4,294
Senior Vice President 1997 213,517 -- -- 10,000 4,282
of Clinical Affairs 1996 195,567 -- -- 35,000 --
</TABLE>
- ---------------
(1) As permitted by rules promulgated by the SEC, no amounts are shown with
respect to certain "perquisites," where such amounts do not exceed the
lesser of 10% of bonus plus salary or $50,000.
(2) Except as otherwise noted, consists of matching contributions made by the
Company in Common Stock under its 401(k) plan and represents the fair
market value of the Company's Common Stock on the calculation date
multiplied by the number of shares.
(3) Mr. Cook became CEO and Chairman of the Board of Directors in March 1998.
(4) Represents cost of living and associated travel expenses and related tax
gross-up payments paid to Mr. Cook by the Company.
(5) Includes options to purchase 12,676 shares which have been cancelled.
(6) Mr. Haugen resigned as President, Chief Executive Officer and a director of
the Company in March 1998.
(7) Reflects salary payments from date of employment with the Company, July
1996, through December 31, 1996.
(8) Includes options to purchase 254,220 shares which have been cancelled.
(9) Dr. Denaro was serving as an executive officer as of December 31, 1998. His
employment with the Company has terminated. See "Employment Agreements."
13
<PAGE> 16
(10) Represents severance payments to Dr. Denaro and Mr. Duft of $75,682 and
$119,250, respectively. See "Employment Agreements."
(11) Reflects salary payments from date of employment with the Company, February
1996, through December 31, 1996.
(12) Includes relocation expenses and related tax gross-ups paid to Dr. Denaro
of $78,824 in 1996.
(13) Mr. Duft was serving as an executive officer as of December 31, 1998. His
employment with the Company has terminated. See "Employment Agreements."
(14) Includes options to purchase 38,000 shares which have been cancelled.
(15) Includes options to purchase 6,043 shares which have been cancelled.
(16) Includes options to purchase 9,594 shares which have been cancelled.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1991 Stock
Option Plan (the "Option Plan"). As of December 31, 1998, options to purchase a
total of 5,939,069 shares were outstanding under the Option Plan and options to
purchase 1,064,129 shares remained available for grant thereunder.
The following tables show for the fiscal year ended December 31, 1998,
certain information regarding options granted to, exercised by, and held at year
end by, the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------ ANNUAL RATES OF STOCK
SHARES % OF TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED OPTION TERM($)(3)
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION -----------------------
NAME GRANTED(#)(1) FISCAL YEAR(%)(2) PRICE($/SH) DATE 5% 10%
---- ------------- ------------------ ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Cook,
Jr................. 15,000(4) 0.44 $5.81 2/17/08 54,904 138,568
500,000 14.86 2.66 3/24/08 837,900 2,114,700
250,000 7.43 0.31 10/22/08 48,825 123,225
Richard M. Haugen.... 35,000 1.04 $2.91 3/12/08 64,165 161,941
Maurizio Denaro...... 25,300 0.75 $2.91 3/12/08 46,382 117,060
50,000 1.49 3.28 4/8/08 103,320 260,760
25,000 0.74 0.31 10/22/08 4,882 12,322
Bradford J. Duft..... 18,000(5) 0.53 $2.91 3/12/08 32,999 83,284
20,000(5) 0.59 3.28 4/8/08 41,328 104,304
Richard A. Kenley.... 20,700 0.61 $2.91 3/12/08 37,949 95,777
30,000 0.89 3.28 4/8/08 61,992 156,456
Orville G.
Kolterman.......... 20,700 0.61 $2.91 3/12/08 37,949 95,777
30,000 0.89 3.28 4/8/08 61,992 156,456
100,000 2.97 0.31 10/22/08 19,530 49,290
</TABLE>
- ---------------
(1) Except for those options granted in October 1998, such options generally
vest according to the following schedule: 25% vest one year from the date of
grant and the remainder vest daily over the following three years. Options
granted in October 1998 vest according to the following schedule: 25% vest
six months from the date of grant and the remainder vest daily over the
following 18 months. Certain options granted under the Option Plan are
immediately exercisable but are subject to the Company's right to repurchase
unvested shares on termination of employment.
(2) Based on options to purchase 3,364,337 shares of Common Stock granted to
employees, including Named Executive Officers, under the Option Plan during
the fiscal year ended December 31, 1998.
(3) Calculated on the assumption that the market value of the underlying stock
increases at the stated values, compounded annually. The total appreciation
of the options over their 10-year terms at 5% and 10% is 63% and 159%,
respectively.
(4) Includes options to purchase 12,676 shares which have been cancelled.
(5) Includes options to purchase 18,000 shares and 20,000 shares which have been
cancelled.
14
<PAGE> 17
AGGREGATED OPTION EXERCISES IN 1998 FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS IN-THE-MONEY OPTIONS
SHARES AS OF FY-END(#)(1) AS OF FY-END($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph C. Cook, Jr....... -- -- 367,324 600,000 -- $47,500
Richard M. Haugen........ -- -- 245,780 35,000 -- --
Maurizio Denaro.......... -- -- 103,929 149,871 -- $ 4,750
Bradford J. Duft......... -- -- 139,363 0 -- --
Richard A. Kenley........ -- -- 147,425 71,406 -- --
Orville G. Kolterman..... -- -- 172,523 173,321 -- $19,000
</TABLE>
- ---------------
(1) Includes both in-the-money and out-of-the-money options. Certain options
granted under the Option Plan are immediately exercisable but are subject to
the Company's right to repurchase unvested shares on termination of
employment.
(2) The fair market value of the Company's Common Stock on December 31, 1998
($0.50) less the exercise or base price. Excludes out-of-the-money options.
EMPLOYMENT AGREEMENTS
Since 1994, Joseph C. Cook, Jr. has served as a consultant to the Company
under various consulting agreements. In June 1995, the Company and Mr. Cook
entered into a consulting agreement (the "Consulting Agreement"), which became
effective in September 1995. Pursuant to the Consulting Agreement, Mr. Cook
agreed to provide certain consulting services, including assistance in
implementing the Company's business strategy. As part of Mr. Cook's compensation
as a consultant, to date, Mr. Cook has been granted nonqualified stock options
under the Company's Option Plan to purchase an aggregate of 270,000 shares of
Common Stock. In connection with an earlier consulting agreement between the
Company and Mr. Cook, in January 1995, the Company also entered into a phantom
stock unit agreement with Farview Management Co., L.P. ("Farview"), a consulting
firm of which Mr. Cook is a general partner (the "Phantom Stock Agreement").
Pursuant to the agreement, Farview received 9,000 phantom stock units,
representing the right to receive cash or shares of the Company's Common Stock
("Phantom Stock Units"). The Phantom Stock Agreement provides that on the date
Mr. Cook ceases to be a consultant to or director of the Company (the
"Termination Date"), the Company will pay Farview the fair market value of the
Phantom Stock Units in cash or shares of the Company's Common Stock, at the
election of the Company. The fair market value of each Phantom Stock Unit is to
be determined based on the closing price of a share of the Company's Common
Stock as quoted on the Nasdaq National Market on the last trading day prior to
the Termination Date.
In addition, in February 1998, Mr. Cook was granted an option to purchase
15,000 shares of Common Stock, including options to purchase 12,676 shares that
have been cancelled. Pursuant to the Consulting Agreement, as amended, Mr.
Cook's consulting fees and the vesting of his options were determined based on
hours of service performed. Mr. Cook was also reimbursed for any reasonable
travel, living and business expenses incurred in connection with the performance
of his consulting services.
In March 1998, Mr. Cook accepted a position as Chairman of the Board of
Directors and Chief Executive Officer of the Company. In connection with his
appointment, Mr. Cook entered into an agreement with the Company pursuant to
which his annual salary was set at $375,000. Under the terms of his agreement,
Mr. Cook is eligible to receive an annual merit bonus of up to $250,000, payable
upon the achievement of goals and milestones to be set by the Compensation
Committee. In addition, Mr. Cook's agreement provides that the Company will
reimburse Mr. Cook or pay for certain living expenses, associated travel
expenses and tax gross-up payments related thereto. Mr. Cook was also granted an
option to purchase an aggregate of 500,000 shares of the Company's Common Stock
under the Company's Option Plan at an exercise price of
15
<PAGE> 18
$2.656 per share. The option vests as follows: 200,000 of the option shares will
vest in equal monthly installments over the twelve months following Mr. Cook's
employment start date; and the remaining 300,000 option shares will vest in
equal monthly installments over the following thirty-six months. In addition,
Mr. Cook's agreement provides that vesting of the option will be accelerated in
full upon a change in control of the Company in accordance with the Company's
standard vesting acceleration provisions.
In accordance with the provisions of Mr. Cook's employment agreement, his
Consulting Agreement with the Company was terminated as of the day prior to the
date he commenced employment with the Company. Mr. Cook's employment agreement
also provides that the portion of the outstanding options granted to Mr. Cook in
connection with the Consulting Agreement which were vested as of his employment
start date will remain outstanding and exercisable in accordance with their
terms for so long as Mr. Cook remains employed by the Company and for twelve
months thereafter, or for such longer period as is provided under the terms of
those options.
In October 1998, Mr. Cook was granted an option to purchase an aggregate of
250,000 shares of the Company's Common Stock under the Company's Option Plan at
an exercise price of $0.313 per share. The option vests as follows: 62,500
shares will vest as of April 23, 1999 and the remaining shares will vest daily
over the following 18 months. In addition, Mr. Cook's agreement provides that
vesting of the option will be accelerated in full upon a change in control of
the Company in accordance with the Company's standard vesting acceleration
provisions.
In July 1996, Mr. Richard Haugen accepted a position as President and Chief
Executive Officer of the Company. In connection with Mr. Haugen's hiring he
entered into an agreement with the Company pursuant to which his annual salary
was set at $350,000, subject to future adjustment due to possible merit
increases and annual merit bonuses. Mr. Haugen was also granted an option to
purchase an aggregate of 500,000 shares of the Company's Common Stock under the
Company's Option Plan at an exercise price of $8.50 per share. Effective March
1998, Mr. Haugen's annual salary was increased to $385,000.
In March 1998, Mr. Haugen entered into an agreement with the Company
pursuant to which he resigned as Chief Executive Officer, President and a
director of the Company effective as of March 26, 1998 and agreed to serve as a
full-time employee of the Company at his then-current base salary through June
30, 1998. In addition, Mr. Haugen agreed to serve as a consultant to the Company
from July 1, 1998 through June 30, 1999 at the rate of $20,000 per month. His
monthly time commitment as a consultant and the services to be performed are
mutually agreed to by Mr. Haugen and the Company's Chief Executive Officer. In
addition, under the terms of the agreement, the vesting of an option to purchase
35,000 shares of Common Stock which was granted to Mr. Haugen on March 13, 1998
accelerated in full effective as of March 26, 1998, and such option will remain
outstanding and exercisable in accordance with its terms through June 30, 1999.
Mr. Haugen's other outstanding options to purchase Common Stock continued to
vest in accordance with their terms through June 30, 1998, and to the extent
such options were vested as of such date, they will remain outstanding and
exercisable in accordance with their terms through June 30, 1999.
In December 1997, Bradford J. Duft entered into an agreement with the
Company pursuant to which the Company delivered the sum of $124,000 (the "Amylin
Funds") to BT Alex Brown Incorporated ("BTAB") to be held by BTAB in an
interest-bearing account as collateral for Mr. Duft's obligations relating to
his account with BTAB (the "BTAB Agreement"). In March 1998, the amount of the
Amylin Funds was deemed to be a loan by the company to Mr. Duft made as of March
19, 1998 (the "Loan"). The Loan bears interest at an annual rate of 8.875%, is
due and payable at any time following March 19, 1998 on demand by the Company
and is secured by all shares of the Company's Common Stock and options to
purchase shares of the Company's Common Stock owned beneficially or of record by
Mr. Duft at any time prior to repayment of the Loan in full. In connection with
the Company's reduction in force during 1998, Mr. Duft's employment with the
Company was terminated in December 1998, at which time he was paid a total
severance payment of $119,250, of which $100,000 was applied to partially repay
the Loan and the remaining $19,250 was paid to Mr. Duft.
In February 1999, Dr. Maurizio Denaro's employment with the Company was
terminated in connection with the Company's reduction in force, and he was paid
a severance payment in the amount of $75,681.78.
16
<PAGE> 19
In December 1996, Daniel M. Bradbury entered into an agreement with the
Company pursuant to which the Company made an interest-free loan to Mr. Bradbury
in the principal amount of $36,000 to assist Mr. Bradbury with relocation
expenses. The principal amount of the loan will become due and repayable on the
earlier of (a) the 45th day after termination of Mr. Bradbury's employment with
the Company, (b) the sale of the property securing the loan or (c) December 10,
2000. The terms of the loan agreement also restrict Mr. Bradbury's ability to
exercise stock options and to make withdrawals of, or take loans against, his
contributed funds under the Company's 401(k) plan.
In May 1998, as part of its efforts to conserve cash resources, the Company
adopted an Employee Phantom Stock Salary Deferral Plan (the "Phantom Stock
Plan") that permits participating eligible employees, including executive
officers, to elect to defer up to 25% of their cash compensation as employees
from May 1, 1998 to May 15, 1999 in a deferred stock account pursuant to which
the deferred fees are credited in the form of shares of the Company's Common
Stock, based on the market price of the stock as of May 1, 1998, which was
$5.375. Deferred amounts are, therefore, valued according to fluctuations in the
fair market value of the Company's Common Stock. If a participant ceases serving
as an employee of the Company prior to May 31, 1999 (other than by such
employee's voluntary termination of employment or such employee's death or
permanent disability), the participant will be entitled to receive the value of
his or her account in cash and/or in the form of the Company's Common Stock in a
single lump sum payment, in the form determined by the Company in its sole
discretion. In the event that a participant voluntarily terminates his or her
employment with the Company prior to May 31, 1999, then such participant's
deferred compensation account with the Company will have no value and such
participant will have no right to receive any amounts from the Company, in any
form, based on his or her compensation reductions in connection with the Phantom
Stock Plan. In the event that a participant dies or becomes permanently disabled
prior to May 31, 1999, the participant will be entitled to receive the value of
his or her account in cash and/or in the form of the Company's Common Stock in a
single lump sum payment, in the form determined by the Company in its sole
discretion. Thirty-four employees chose to defer a portion of their cash
compensation under the Phantom Stock Plan, which in the aggregate, totaled
approximately $430,000 of deferred compensation. As of December 31, 1999, the
value of this deferred compensation was approximately $40,000. Employee
contributions to the Phantom Stock Plan were discontinued as of December 1,
1998.
In February 1998, the Company adopted a Supplemental Incentive Bonus
Program (the "Supplemental Bonus Program") for certain employees considered
important to the Company's success during the subsequent two years. Under the
Supplemental Bonus Program, each of the employees specifically designated by the
Compensation Committee to participate in the program is eligible to receive a
cash bonus equal to 50% of his or her base salary on March 1, 2000, less
applicable payroll taxes and benefit contributions (the "Supplemental Bonus"),
if he or she meets the following criteria: (i) the employee must be continuously
employed by the Company or an affiliate of the Company on a full-time basis
through March 1, 2000 (the "Bonus Date"); and (ii) the employee must retain a
performance rating of "good" or better from March 1, 1998 through the Bonus
Date. In addition, in the event of a change in control of the Company prior to
March 1, 2000, participating employees may also be eligible to receive a portion
of such bonus under specified circumstances. The Named Executive Officers
designated by the Compensation Committee as eligible to participate in the
Supplemental Incentive Bonus Program were Dr. Kolterman, Dr. Kenley, Mr. Duft
and Dr. Denaro.
EMPLOYEE BENEFIT PLANS
In addition to the Purchase Plan described under the caption "Proposal 2",
the Phantom Stock Plan and the Supplemental Bonus Program described under the
caption "Employment Agreements" and the 401(k) Plan described under the caption
"Report of the Compensation Committee of the Board of Directors on Executive
Compensation -- 401(k) Matching Contribution", the Company maintains the
following employee benefit plan.
1991 STOCK OPTION PLAN
In October 1991, the Company adopted the Option Plan and it was
subsequently amended by the Company in May 1998. The purpose of the Option Plan
is to assist the Company in attracting the services of
17
<PAGE> 20
new officers, employees and consultants and retaining the services of current
officers, employees and consultants. The Option Plan provides a means by which
selected officers, employees and consultants of the Company and its affiliates
are given an opportunity to purchase stock in the Company. The Option Plan
provides for the grant of both incentive and nonqualified stock options.
Incentive stock options are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Code. Nonqualified stock options
granted under the Option Plan are intended not to qualify as incentive stock
options under the Code. The maximum number of shares of Common Stock that may be
issued under the Option Plan is 7,800,000. As of January 31, 1999, approximately
56 of the Company's employees were eligible to participate in the Option Plan.
Under the Option Plan, the Board or Compensation Committee may provide for
the grant of stock options to eligible employees. The Board or Compensation
Committee determines certain provisions of each option granted, including the
number of shares to be granted to each person and the time such option may be
exercised. The exercise price of incentive stock options may not be less than
the fair market value of the Common Stock on the date of the option grant. The
exercise price of nonqualified stock options may not be less than 50% of the
fair market value of the Common Stock on the date of grant. Such options
generally vest according to the following schedule: 25% vest one year from the
date of grant and the remainder vest daily over the following three years.
Certain options granted under the Option Plan also are immediately exercisable
but are subject to the Company's right to repurchase unvested shares on
termination of employment. However, in October 1998 the Company granted certain
options that vest according to the following alternative schedule: 25% vest six
months from the date of grant and the remainder vest daily over the following 18
months. As of January 31, 1999, options to purchase a total of 5,162,121 shares
of Common Stock were outstanding under the Option Plan.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors (the "Committee") is
composed of Directors who are not employees of the Company. The Committee is
responsible for establishing and administering the Company's executive
compensation arrangements.
COMPENSATION OBJECTIVES AND IMPLEMENTATION
The objectives of the Company's executive compensation arrangements are to
attract and retain the services of key management and to align the interests of
its executives with those of the Company's stockholders. The Committee endeavors
to accomplish these by:
- Establishing compensation arrangements that are adequate to attract and
retain the services of key management personnel and that deliver
compensation commensurate with the Company's performance, as measured
against the achievement of operating, financial and strategic objectives
and taking into account competitive compensation practices in the
industry.
- Providing significant equity-based incentives for executives to ensure
that they are motivated over the long term to respond to the Company's
business challenges and opportunities as owners rather than solely as
employees.
- Rewarding executives if stockholders receive an above-average return on
their investment over the long term.
- ---------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended (the "1933 Act")
or the Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language in any such filing.
18
<PAGE> 21
COMPENSATION MIX AND MEASUREMENT
A significant portion of the Company's annual executive compensation
program is determined on the basis of corporate performance. The Company's
executive compensation mix generally consists of a salary which in the
Committee's opinion is adequate under the circumstances to retain the services
of the executive, a cash bonus based on Company and individual performance and
stock options that are intended to provide long-term incentives tied to
increases in the value of the Company's Common Stock.
SALARY. Salary is targeted at competitive levels within the biotechnology
industry. For the purpose of establishing these levels, the Company compares
itself to a self selected group of biotechnology companies in stages of
development similar to that of the Company. The companies included in the survey
are not necessarily the same as the companies included in the market indices
included in the performance graph in this Proxy Statement.
Although the compensation (salary and bonus) surveys referred to above and
the market indices included in the performance graph are broad and include
companies in related industries, the surveys and indices were created for
different purposes and accordingly are not comparable.
For fiscal 1998, the Committee established target total compensation levels
applicable to each executive officer based on data generated in the surveys. The
Committee made its target salary determinations subjectively after considering
the competitive nature of the biotechnology industry and the Company's need to
attract and retain talented executive officers.
The Committee then considers the level of responsibility, experience and
contributions of each executive officer and sets each officer's salary taking
into account the target compensation, recent corporate performance (based on the
factors discussed above) and the Committee's evaluation of individual
performance. For fiscal 1998, the salary of each executive officer was generally
at or near the median target total compensation levels determined through the
surveys.
ANNUAL CASH BONUS. The Committee, as frequently as circumstances warrant,
evaluates the Company's corporate performance based on achievement of
established strategic, scientific and financial goals. In 1997, the Company
implemented a cash bonus program for officers and full-time non-officer
employees based on corporate and individual performance. A bonus was not paid in
1997. A bonus was paid in early 1998 based on corporate and individual
performance against the Company's key objectives during 1997. The Company does
not plan to pay a bonus for corporate and individual performance for 1998.
LONG-TERM INCENTIVES. Long-term incentives are provided to executives
through the Company's Phantom Stock Plan and Supplemental Bonus Program as
described under the caption "Employment Agreements", its Purchase Plan as
described under the caption "Proposal 2" and its equity incentive program, which
consists primarily of its Option Plan. Grants under the Option Plan have a term
of 10 years and are generally tied to the market valuation of the Company's
Common Stock, thereby providing an additional incentive for executives to build
stockholder value. In addition, grants are generally subject to vesting over
four years, with vesting tied to continued employment. Executives receive value
from this plan only if strategic goals are achieved and the Company's Common
Stock appreciates accordingly. This component is intended to retain and motivate
executives to improve long-term stock market performance. Additional long-term
incentives are provided through the Company's Employee Stock Purchase Plan in
which all eligible employees may participate up to 15% of their annual
compensation.
Option grant levels to executive officers are subjectively determined by
the Committee after considering stock option grant data taken from the
compensation surveys referred to above, as well as the level of responsibility,
experience and contributions of each executive officer. Generally, the Committee
expects to grant options to executive officers annually as part of the
performance review process for each officer. In determining the size of
individual grants, the Committee also considers the number of shares subject to
options previously granted to each executive officer, including the number of
such shares that have vested and that remain unvested.
19
<PAGE> 22
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Committee has determined that stock options granted under the
Company's Option Plan with an exercise price at least equal to the fair market
value of the Company's Common Stock on the date of grant shall be treated as
"performance-based compensation."
REPORT ON REPRICING OF OPTIONS. In April 1998, the Compensation Committee
approved, and the Board ratified, an employee option exchange program (the "1998
Repricing") applicable to employees of the Company who were not executive
officers. The 1998 Repricing was approved by the Company's stockholders at the
1998 Annual Meeting. Under the 1998 Repricing, outstanding options held by
qualifying non-officer employees with an exercise price greater than $4.938 per
share, the closing price of the Company's Common Stock on the date of the
exchange (the "1998 Exchange Price"), were eligible to be exchanged for new
options to purchase the same number of shares at an exercise price equal to the
1998 Exchange Price. Subject to certain exceptions, the new options are not
exercisable until one year after the date of issuance, at which time they will
continue to vest to the same extent as the old options surrendered therefor. At
the time the program was implemented, substantially all of the options then
outstanding under the Option Plan had exercise prices significantly above the
then-current market price of the Company's Common Stock. In light of the decline
in the Company's Common Stock price and because options are a key component of
the Company's long-term incentive program, the Committee determined that the
program was necessary to retain such employees. The 1998 Repricing was
implemented prior to the time that Nancy K. Dahl and Daniel M. Bradbury, who
participated in the 1998 Repricing as qualifying non-officer employees, were
appointed as executive officers of the Company.
401(k) MATCHING CONTRIBUTION. In 1997, the Board of Directors approved a
401(k) matching contribution for all 401(k) plan participants. The match is
equal to 50% of the first 6% of a participant's contributions to the plan each
year. The match is made in the form of Common Stock of the Company. Matching
contributions are subject to a vesting schedule based on years of service with
the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
Effective July 12, 1996, Mr. Richard Haugen was hired as President and
Chief Executive Officer of the Company. At that time the Committee reviewed
salary surveys to determine the level of total compensation at which Chief
Executive Officers of similar experience in the biotechnology industry were
compensated. Following such evaluation, the Company and Mr. Haugen entered into
an agreement pursuant to which his annual salary was set at $350,000, subject to
periodic increases as determined by the Committee. Mr. Haugen was also granted
an option to purchase an aggregate of 500,000 shares of the Company's Common
Stock under the Company's Option Plan with an exercise price of $8.50, per share
which was the closing price of the Company's Common Stock as of July 12, 1996,
the date of grant. Effective March 1, 1998, Mr. Haugen's annual salary was
increased to $385,000, equivalent to a 5.5% increase. The salary increase was
based on the Committee's evaluation of Mr. Haugen's performance during 1997
against objectives specified at the beginning of the year. Mr. Haugen did not
receive cash bonuses in the fiscal years 1997 and 1998.
In March 1998, Mr. Haugen resigned as Chief Executive Officer, President
and a director of the Company, and Joseph C. Cook, Jr. accepted a position as
Chairman of the Board of Directors and Chief Executive Officer of the Company.
At that time the Committee reviewed salary surveys to determine the level of
total compensation at which Chief Executive Officers of similar experience in
the biotechnology industry were compensated. The Committee also considered Mr.
Cook's unique and extensive knowledge of the pharmaceutical industry and his
prior experience with the Company. Following such evaluation, the Company and
Mr. Cook entered into an agreement pursuant to which his annual salary was set
at $375,000. Mr. Cook's agreement also provides that the Company will reimburse
Mr. Cook or pay for certain living expenses, associated travel expenses and tax
gross-up payments related thereto. Mr. Cook was also granted an option to
purchase an aggregate of 500,000 shares of the Company's Common Stock under the
Company's Option Plan. Under the terms of his agreement, Mr. Cook is eligible to
receive an annual merit bonus of up to $250,000, payable upon achievement of
goals and milestones set by the Committee. Mr. Cook did not receive a cash
20
<PAGE> 23
bonus for the fiscal year 1998. In October 1998, Mr. Cook was granted an option
to purchase an aggregate of 250,000 shares of the Company's Common Stock under
the Company's Option Plan. Mr. Cook's salary for 1999 was not increased. In
February 1999, he was granted an option to purchase an aggregate of 150,000
shares of the Company's Common Stock under the Company's Option Plan.
April 15, 1999 COMPENSATION COMMITTEE
James C. Blair
James C. Gaither
OPTION REPRICING INFORMATION
In April 1998, the Company implemented the 1998 Repricing applicable to
employees of the Company who were not executive officers. Under the program,
which was approved by the Company's stockholders, outstanding options held by
qualifying non-officer employees with an exercise price greater than $4.938 per
share, the closing price of the Company's Common Stock on the date of the
exchange (the "1998 Exchange Price"), were exchanged for new options to purchase
the same number of shares at an exercise price equal to the 1998 Exchange Price.
Subject to certain exceptions, the new options are not exercisable until one
year after the date of issuance, at which time they will continue to vest to the
same extent as the old options surrendered therefor. The 1998 Repricing was
implemented prior to the time that Nancy K. Dahl and Daniel M. Bradbury, who
participated in the 1998 Repricing as qualifying non-officer employees, were
appointed as executive officers of the Company.
In April 1995, the Company implemented an option exchange program (the
"1995 Repricing") applicable to all employees of the Company, including
executive officers but excluding the Chief Executive Officer. Under the 1995
Repricing, outstanding options held by qualifying employees with an exercise
price greater than $4.50 per share, the closing price of the Company's Common
Stock on the date of the exchange (the "1995 Exchange Price"), were exchanged
for new options to purchase the same number of shares at an exercise price equal
to the 1995 Exchange Price. Subject to certain exceptions, the new options were
not exercisable until one year after the date of issuance, at which time they
continued to vest to the same extent as the old options surrendered therefor.
21
<PAGE> 24
The following table shows certain information concerning all repricings of
options held by any executive officer during the last ten years.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE EXERCISE ORIGINAL
SECURITIES OF STOCK AT PRICE AT OPTION TERM
UNDERLYING TIME OF TIME OF REMAINING AT
OPTIONS REPRICING OR REPRICING OR DATE OF
REPRICED OR AMENDMENT AMENDMENT NEW EXERCISE REPRICING OR
NAME DATE AMENDED (#) ($) ($) PRICE ($) AMENDMENT
---- ------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Daniel M. Bradbury......... 4/24/98 20,000 4.938 12.375 4.938 7.75 years
Senior Vice President of 4/24/98 15,000 4.938 12.000 4.938 8.75 years
Corporate Development 4/3/95 20,000 4.500 6.500 4.500 9.25 years
4/3/95 5,153 4.500 6.250 4.500 9.75 years
Nancy K. Dahl.............. 4/24/98 25,000 4.938 12.000 4.938 5.25 years
Vice President, General 4/24/98 450 4.938 12.375 4.938 8.75 years
Counsel and Secretary 4/3/95 25,000 4.500 8.500 4.500 8.25 years
4/3/95 3,000 4.500 6.000 4.500 9.75 years
4/3/95 5,454 4.500 6.000 4.500 9.75 years
8/26/94 25,000(1) 8.500 9.250 8.500 8.75 years
Bradford J. Duft........... 4/3/95 15,000 4.500 7.500 4.500 7.25 years
Former Senior Vice 4/3/95 20,000 4.500 9.000 4.500 8.25 years
President and General 4/3/95 50,000 4.500 6.875 4.500 9.25 years
Counsel 4/3/95 30,000 4.500 6.250 4.500 9.75 years
Richard A. Kenley.......... 4/3/95 90,000 4.500 8.500 4.500 8.75 years
Senior Vice President of 4/3/95 20,000 4.500 6.250 4.500 9.75 years
Product Development 8/26/94 90,000(1) 8.500 13.000 8.500 9.50 years
Orville G. Kolterman....... 4/3/95 25,000 4.500 8.750 4.500 7.25 years
Senior Vice President of 4/3/95 15,000 4.500 9.250 4.500 8.00 years
Clinical Affairs 4/3/95 40,000 4.500 13.750 4.500 8.50 years
4/3/95 25,000 4.500 10.750 4.500 9.00 years
4/3/95 25,000 4.500 11.000 4.500 9.25 years
4/3/95 5,144 4.500 6.250 4.500 9.75 years
John F. Mullane............ 4/3/95 150,000(1) 4.500 8.750 4.500 9.00 years
Former Executive Vice 4/3/95 25,000(1) 4.500 8.500 4.500 9.25 years
President of Development 4/3/95 5,000(1) 4.500 6.250 4.500 9.75 years
Majorie T. Sennett......... 4/3/95 25,000(1) 4.500 12.000 4.500 7.75 years
Former Senior Vice 4/3/95 45,000(1) 4.500 14.250 4.500 8.75 years
President, CFO and
Assistant Secretary
</TABLE>
- ---------------
(1) These options are no longer outstanding.
22
<PAGE> 25
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph compares total stockholder returns of the Company for
the past 5 years to two indices: the Nasdaq CRSP Total Return Index for the
Nasdaq Stock Market (U.S. companies) (the "Nasdaq-US") and the Nasdaq
Pharmaceutical Index (the "Nasdaq-Pharmaceutical"). The total return for the
Company's stock and for each index assumes the reinvestment of dividends,
although dividends have never been declared on the Company's stock, and is based
on the returns of the component companies weighted according to their
capitalizations as of the end of each monthly period. The Nasdaq-US tracks the
aggregate price performance of equity securities of U.S. companies traded on the
Nasdaq National Market System (the "NMS"). The Nasdaq-Pharmaceutical tracks the
aggregate price performance of equity securities of pharmaceutical companies
traded on the NMS. In 1998, the Company's Common Stock was traded on the NMS and
was a component of both the Nasdaq-US and the Nasdaq-Pharmaceutical. Since
February 1, 1999, the Company's Common Stock has been traded on the Nasdaq
SmallCap Market.
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT FOR PREVIOUS 5 YEARS,
1994-1998(2)
<TABLE>
<CAPTION>
AMLN NASDAQ US NASDAQ PHARMACEUTICAL
---- --------- ---------------------
<S> <C> <C> <C>
'12/31/93' 100 100 100
'3/31/94' 82.692 95.797 81.562
'6/30/94' 46.154 91.318 71.191
'9/30/94' 59.615 98.881 80.181
'12/30/94' 46.154 97.752 75.262
'3/31/95' 35.577 106.578 81.484
'6/30/95' 60.577 121.911 94.768
'9/29/95' 55.769 136.596 118.413
'12/29/95' 73.077 138.256 138.04
'3/31/96' 75.962 144.699 143.63
'6/28/96' 82.692 156.508 139.526
'9/30/96' 87.5 162.052 142.729
'12/31/96' 100 170.015 138.469
'3/31/97' 93.269 160.793 131.507
'6/30/97' 105.769 190.266 141.97
'9/30/97' 64.908 222.44 159.253
'12/31/97' 41.831 208.58 142.976
'3/31/98' 21.154 244.052 157.167
'6/30/98' 29.085 251.119 145.667
'9/30/98' 24.523 227.341 137.843
'12/31/98' 3.846 293.209 183.019
</TABLE>
- ---------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended, or the Exchange
Act, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
(2) Shows the cumulative total return on investment assuming an investment of
$100 in each of the Company, the Nasdaq-US and the Nasdaq-Pharmaceutical on
December 31, 1993.
CERTAIN TRANSACTIONS
The Company has entered into certain transactions with its directors, as
described under the caption "Executive Compensation -- Compensation of
Directors."
The Company has also entered into certain agreements with its current Chief
Executive Officer and Chairman of the Board, its former President and Chief
Executive Officer and certain of its other current and
23
<PAGE> 26
former executive officers, as described under the caption "Executive
Compensation-Employment Agreements."
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent permitted by Delaware law. The Company is also
empowered under its Bylaws to enter into indemnification contracts with its
directors and officers and to purchase insurance on behalf of any person whom it
is required or permitted to indemnify. Pursuant to this provision, the Company
has entered into indemnity agreements with each of its directors and officers.
In addition, the Company's Certificate of Incorporation provides that to
the fullest extent permitted by Delaware law, the Company's directors will not
be liable for monetary damages for breach of the directors' fiduciary duty of
care to the Company and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under Delaware law. Each director
will continue to be subject to liability for breach of the director's duty of
loyalty to the Company, for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, for acts or omissions that
the director believes to be contrary to the best interests of the Company or its
stockholders, for any transaction from which the director derived an improper
personal benefit, for acts or omissions involving a reckless disregard for the
director's duty to the Company or its stockholders when the director was aware
or should have been aware of a risk of serious injury to the Company or its
stockholders, for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the Company
or its stockholders, for improper transactions between the director and the
Company, and for improper distributions to stockholders and loans to directors
and officers. This provision also does not affect a director's responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ JOSEPH C. COOK, JR.
Joseph C. Cook, Jr.
Chairman of the Board and Chief
Executive Officer
April 15, 1999
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, AMYLIN
PHARMACEUTICALS, INC., 9373 TOWNE CENTRE DRIVE, SAN DIEGO, CALIFORNIA 92121.
24
<PAGE> 27
AMYLIN PHARMACEUTICALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
Adopted November 20, 1991
Amended by the Board of Directors on May 29, 1997 and April 2, 1999
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Amylin Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the
1.
<PAGE> 28
exercise of this power, may correct any defect, omission or inconsistency in the
Plan, in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate six hundred thousand (600,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
2.
<PAGE> 29
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the Purchase Period (as defined below) for such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Purchase Period (as defined below) for such Offering, he or she will
not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at
3.
<PAGE> 30
the time such rights are granted) for each calendar year in which such rights
are outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in Section 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no more than twenty-seven (27) months after the
Offering Date (the "Purchase Period"). In connection with each Offering made
under this Plan, the Board or the Committee shall specify a maximum number of
shares which may be purchased by any employee as well as a maximum aggregate
number of shares which may be purchased by all eligible employees pursuant to
such Offering. In addition, in connection with each Offering which contains more
than one Exercise Date (as defined in the Offering), the Board or the Committee
may specify a maximum aggregate number of shares which may be purchased by all
eligible employees on any given Exercise Date under the Offering. If the
aggregate purchase of shares upon exercise of rights granted under the Offering
would exceed any such maximum aggregate number, the Board or the Committee shall
make a pro rata allocation of the shares available in as nearly a uniform manner
as shall be practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Exercise Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time specified in
the Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to the maximum percentage specified by the
Board or the Committee of such employee's Earnings during the Purchase Period.
"Earnings" is defined as the total compensation paid to an employee, including
all salary, wages (including amounts elected to be deferred by the employee,
that would otherwise have been paid, under any cash or deferred arrangement
established by the Company), overtime pay, commissions, bonuses, and other
remuneration paid
4.
<PAGE> 31
directly to the employee, but excluding profit sharing, the cost of employee
benefits paid for by the Company, education or tuition reimbursements, imputed
income arising under any Company group insurance or benefit program, traveling
expenses, business and moving expense reimbursements, income received in
connection with stock options, contributions made by the Company under any
employee benefit plan, and similar items of compensation, or such other
inclusions or exclusions as the Board or the Committee may determine for one or
more specified Offerings. The payroll deductions made for each participant shall
be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero), increase or begin such payroll deductions after the
beginning of any Purchase Period only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Purchase Period.
(b) At any time during a Purchase Period a participant may terminate his
or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Purchase Period except as provided by the Board or the Committee in the
Offering. Upon such withdrawal from the Offering by a participant, the Company
shall distribute to such participant all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the participant) under the Offering, without interest, and
such participant's interest in that Offering shall be automatically terminated.
A participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable, and shall
be exercisable only by the person to whom such rights are granted.
8. EXERCISE.
(a) On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of shares
which is less than the amount required to purchase one share of stock on the
final Exercise Date of an Offering shall be held in each such
5.
<PAGE> 32
participant's account for the purchase of shares under the next Offering under
the Plan, unless such participant withdraws from such next Offering, as provided
in subparagraph 7(b), or is no longer eligible to be granted rights under the
Plan, as provided in paragraph 5, in which case such amount shall be distributed
to the participant after said final Exercise Date, without interest. The amount,
if any, of accumulated payroll deductions remaining in any participant's account
after the purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Exercise Date of an Offering shall be
distributed in full to the participant after such Exercise Date, without
interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If on an Exercise Date of any Offering hereunder the Plan is
not so registered, no rights granted under the Plan or any Offering shall be
exercised on said Exercise Date and the Exercise Date shall be delayed until the
Plan is subject to such an effective registration statement, except that the
Exercise Date shall not be delayed more than two (2) months and the Exercise
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Exercise Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered, no rights granted under
the Plan or any Offering shall be exercised and all payroll deductions
accumulated during the purchase period (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under
the Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to rights
granted under the Plan unless and until certificates representing such shares
shall have been issued.
6.
<PAGE> 33
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion (i) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code; or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person
7.
<PAGE> 34
to whom such rights were granted or except as necessary to comply with any laws
or governmental regulation.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on November 19, 2001. No rights may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom such rights were granted or except as
necessary to comply with any laws or governmental regulation.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company.
8.
<PAGE> 35
AMYLIN PHARMACEUTICALS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 1999
The undersigned hereby appoints Joseph C. Cook, Jr. and Nancy K. Dahl,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of Amylin Pharmaceuticals,
Inc. which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Amylin Pharmaceuticals, Inc. to be held at the Hyatt Regency La
Jolla, located at 3777 La Jolla Village Drive, San Diego, California 92122, on
Monday, May 24, 1999 at 10:00 a.m. (local time), and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect directors to hold office until the next Annual
Meeting of Stockholders and until their successors are elected.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below). listed below.
NOMINEES: James C. Blair, Ph.D., Joseph C. Cook, Jr., James C. Gaither,
Ginger L. Graham, Howard E. Greene, Jr., Vaughn M. Kailian
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(s), WRITE SUCH NOMINEE(s)' NAME(s)
BELOW :
(Continued on other side)
<PAGE> 36
(Continued from other side)
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
PROPOSAL 2: To approve the Company's Employee Stock Purchase Plan, as amended,
to increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 100,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3: To ratify selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DATED _________________ ____________________________________
____________________________________
SIGNATURE(S)
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators, trustees,
guardians and attorneys-in-fact
should add their titles. If signer
is a corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If signer is a partnership,
please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
April 15, 1999
