SCHEDULE 14A INFORMATION
(Rule 14a-101)
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Ligand Pharmaceuticals Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(3) Filing Party:
(4) Date Filed:
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
April 20, 2000
Dear Stockholder:
You are cordially invited to attend the annual meeting of the
stockholders of Ligand Pharmaceuticals Incorporated, to be held on Thursday, May
25, 2000 at 9:00 a.m. at the Hilton La Jolla Torrey Pines located at 10950
Torrey Pines Road, La Jolla, California.
Details of the business to be conducted at the annual meeting are
given in the attached Notice of Annual Meeting and Proxy Statement.
If you do not plan to attend the annual meeting, please sign,
date and return the enclosed proxy promptly in the accompanying reply envelope.
If you decide to attend the annual meeting and wish to change your proxy vote,
you may do so automatically by voting in person at the annual meeting.
We look forward to seeing you at the annual meeting.
San Diego, California
David E. Robinson
Chairman, President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy or vote by telephone as described in
the enclosed proxy materials as promptly as possible. If you are voting by mail,
please return it in the enclosed envelope. You do not need to add postage if
mailed in the United States.
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
10275 Science Center Drive
San Diego, California 92121
--------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 2000
Dear Stockholder:
The annual meeting of stockholders of Ligand Pharmaceuticals
Incorporated (the "Company") will be held at the Hilton La Jolla Torrey Pines
located at 10950 North Torrey Pines Road, La Jolla, California on Thursday, May
25, 2000 at 9:00 a.m., Pacific Standard Time, for the following purposes:
1. To elect a Board of Directors for the following year. Management
has nominated the following persons for election at the meeting: David E.
Robinson, Henry F. Blissenbach, Alexander D. Cross, John Groom, Irving S.
Johnson, Carl C. Peck and Michael A. Rocca.
2. To approve an amendment to the Company's 1992 Stock Option/Stock
Issuance Plan, to increase the number of shares of the Company's common
stock authorized for issuance from 9,073,457 to 9,573,457 shares.
3. To approve an amendment to the Company's 1992 Employee Stock
Purchase Plan, to increase the number of shares of the Company's common
stock available for purchase from 355,000 to 405,000 shares.
4. To approve the amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
common stock from 80,000,000 to 130,000,000 shares.
5. To ratify the selection of Ernst & Young LLP as independent
accountants for the fiscal year ending December 31, 2000.
6. To transact any other business as may properly come before the
meeting or any adjournment(s) thereof.
Stockholders of record at the close of business on March 31, 2000
will be entitled to vote at the annual meeting. The stock transfer books of the
Company will remain open between the record date and the date of the meeting. A
list of stockholders entitled to vote at the annual meeting will be available
for inspection at the offices of the Company. Whether or not you plan to attend
the annual meeting in person, please sign, date and return the enclosed proxy in
the envelope provided. If you attend the annual meeting and vote by ballot, your
proxy will be revoked automatically and only your vote at the annual meeting
will be counted. The prompt return of your proxy will assist us in preparing for
the annual meeting.
By Order of the Board of Directors
WILLIAM L. RESPESS
Secretary
San Diego, California
April 20, 2000
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
10275 Science Center Drive
San Diego, California 92121
PROXY STATEMENT
For the Annual Meeting of Stockholders
To Be Held
May 25, 2000
GENERAL
The enclosed proxy is solicited on behalf of the Board of
Directors of Ligand Pharmaceuticals Incorporated, a Delaware corporation (the
"Company"), for use at the annual meeting of stockholders to be held on May 25,
2000. The annual meeting will be held at 9:00 a.m. at the Hilton La Jolla Torrey
Pines located at 10950 North Torrey Pines Road, La Jolla, California.
Stockholders of record on March 31, 2000 will be entitled to notice of and to
vote at the annual meeting.
This proxy statement and accompanying proxy were first mailed to
stockholders on or about April 20, 2000.
PURPOSE OF THE MEETING
The specific proposals to be considered and acted upon at the
annual meeting are summarized in the accompanying notice and are described in
more detail in this proxy statement.
VOTING
On March 31, 2000, the record date for determination of
stockholders entitled to vote at the annual meeting, there were approximately
55,111,593 shares of common stock, par value $.001, outstanding. Each
stockholder is entitled to one vote for each share of common stock held by such
stockholder on March 31, 2000. Stockholders may not cumulate votes in the
election of directors.
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 and broker non-votes will
be counted for purposes of determining whether a quorum is present at the annual
meeting. With regard to the election of directors, votes may be cast in favor
of, or withheld from, each nominee. However, the directors will be elected by
plurality vote, and votes that are withheld will be excluded entirely from the
vote and will have no effect. All other matters to be acted upon by the
stockholders at the annual meeting will require the approval of the holders of a
majority of the outstanding common stock present in person or represented by
proxy and entitled to vote at the annual meeting. With respect to such matters,
abstentions will have the effect of negative votes, and broker non-votes will
not be counted for purposes of determining whether any of those proposals have
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy has the power to revoke it at any time
before its exercise. It may be revoked by filing with the Secretary of the
Company at the Company's principal executive office, 10275 Science Center Drive,
San Diego, California 92121, a notice of revocation or another signed proxy with
a later date. You may also revoke your proxy by attending the annual meeting and
voting in person.
1
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SOLICITATION
The Company will bear the entire cost of solicitation, including
the preparation, assembly, printing and mailing of this proxy statement, the
proxy and any additional solicitation material furnished to stockholders. Copies
of solicitation material will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram or other means by directors, officers, employees or agents
of the Company. To assist in the solicitation process, the Company has retained
ChaseMellon Shareholder Services. The fee for such services will be
approximately $5,000 plus reasonable expenses incurred to distribute
solicitation materials. No additional compensation will be paid to directors,
officers or employees of the Company for any such services. Except as described
above, the Company does not presently intend to solicit proxies other than by
mail.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The persons named below are nominees for director to serve until
the next annual meeting of stockholders and until their successors have been
elected and qualified. The Company's bylaws provide that the authorized number
of directors shall be determined by resolution of the Board of Directors or by
the stockholders at an annual meeting and shall be within the range of seven to
11 individuals. The authorized number of directors is currently eight. The Board
of Directors has selected seven nominees, all of whom are currently directors of
the Company. Each person nominated for election has agreed to serve if elected,
and management has no reason to believe that any nominee will be unavailable to
serve. Unless otherwise instructed, the proxyholders will vote the proxies
received by them for the nominees named below. The proxies received by the
proxyholders cannot be voted for more than seven directors and, unless otherwise
instructed, the proxyholders will vote such proxies for the nominees named
below. The seven candidates receiving the highest number of affirmative votes of
the shares entitled to vote at the annual meeting will be elected directors of
the Company. As of the date of this proxy statement, the Board of Directors is
not aware of any nominee who is unable to or will decline to serve as a
director.
NOMINEES
The following table sets forth information regarding the
nominees.
<TABLE>
<CAPTION>
Year First
Name Positions and Offices Held Elected Director Age
- ---- -------------------------- ---------------- ---
<S> <C> <C> <C>
David E. Robinson Chairman, President, Chief
Executive Officer and Director 1991 51
Henry F. Blissenbach (A) Director 1995 57
Alexander D. Cross, Ph.D. (B) Director 1991 68
John Groom (A)(B) Director 1995 61
Irving S. Johnson, Ph.D. Director 1989 74
Carl C. Peck, M.D. Director 1997 58
Michael A. Rocca (B) Director 1999 55
</TABLE>
- ------------------------------------------------
(A) Member of Compensation Committee.
(B) Member of Audit Committee.
BUSINESS EXPERIENCE OF DIRECTORS
David E. Robinson has served as President, Chief Executive
Officer and a Director since 1991. Since May 1996, Mr. Robinson has also served
as Chairman of the Company. Prior to joining Company, he was Chief Operating
Officer at Erbamont, a pharmaceutical company. Prior to that, Mr. Robinson was
President of Adria Laboratories, Erbamont's North American subsidiary. He also
was employed in various executive positions for more than 10 years by Abbott
Laboratories, most recently as Regional Director of Abbott Europe. Mr. Robinson
received his B.A. in political science and history from MacQuaire University and
his M.B.A. from the University of South Wales, Australia. Mr. Robinson is a
Director of the Pharmaceutical Research and Manufacturers of America, the
Biotechnology Industry Organization, BIOCOM San Diego, and the Cancer Center
Foundation of the University of California at San Diego.
Henry F. Blissenbach has served as a Director since May 1995 and
currently serves as a member of the Company's Compensation Committee. Dr.
Blissenbach is currently President and Chief Operating Officer of Chronimed,
Inc., a public medical product mail-order company ("Chronimed"), a position he
has held since May
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1997. Previously, Dr. Blissenbach served as President of Diversified
Pharmaceutical Services, a subsidiary of SmithKline Beecham Corp. ("SmithKline
Beecham"), from August 1986 until March 1997. He earned his Doctor of Pharmacy
(Pharm.D.) degree at the University of Minnesota, College of Pharmacy. He has
held an academic appointment in the College of Pharmacy, University of
Minnesota, since 1981. He has vast experience in managed health care, and has
served in numerous advisory capacities with pharmaceutical manufacturers and
managed care entities over the past many years. Dr. Blissenbach currently serves
on the Board of Directors of Chronimed.
Alexander D. Cross, Ph.D. has served as a Director of Company
since March 1991 and currently serves as a member of the Company's Audit
Committee. Dr. Cross has been an independent consultant in the fields of
pharmaceuticals and biotechnology since January 1986. Dr. Cross served as
President and Chief Executive Officer of Zoecon Corporation, a biotechnology
company, from April 1983 to December 1985, and Executive Vice President and
Chief Operating Officer from 1979 to 1983. Dr. Cross currently serves as
Chairman of the Board of Directors and Chief Executive Officer for Cytopharm,
Inc., a private company. He is a member of the Board of Directors of Myelos
Neurosciences, and Dermal Systems International Inc., private companies.
John Groom has served as a Director since May 1995 and currently
serves as a member of the Company's Audit and Compensation Committees. Mr. Groom
has served as President and Chief Operating Officer of Elan Corporation, plc
("Elan") and a director on the Board of Directors of Elan since January 1997,
having previously served from July 1996 to January 1997 as Chief Operating
Officer. Previously, he was President, Chief Executive Officer and a director on
the Board of Directors of Athena Neurosciences, Inc. from 1987 until its
acquisition by Elan in July 1996. From 1960 until 1985, Mr. Groom was employed
by Smith Kline & French Laboratories ("SK&F"), the pharmaceutical division of
the then - SmithKline Beechman. He held a number of positions at SK&F including
President of SK&F International, Vice President, Europe, and Managing Director,
United Kingdom. Mr. Groom has also served as Chairman of the International
Section of the Pharmaceutical Manufacturers Association. Mr. Groom also serves
as a public trustee on the Board of Trustees of the American Academy of
Neurology Education and Research Foundation. Mr. Groom is Fellow of the
Association of Certified Accountants (UK).
Irving S. Johnson, Ph.D. has served as a Director since March
1989. Dr. Johnson has been an independent consultant in biomedical research
since 1989. From 1953 until his retirement in November 1988, Dr. Johnson held
various positions with Eli Lilly & Company, a pharmaceutical company, including
Vice President of Research from 1973 until 1988. He has published almost 90
scientific articles, contributed to over 30 books and has served on numerous
editorial boards, society committees and advisory committees of the National
Academy of Sciences and the National Institutes of Health including the
Recombinant DNA Advisory Committee, and was the recipient of the First Annual
Congressional Award in Science and Technology. He currently serves on the
Scientific Advisory Boards of both the Company and Elan.
Carl C. Peck, M.D. has served as a Director since May 1997. Dr.
Peck has been Professor of Pharmacology and Medicine and Director of the Center
for Drug Development Science at Georgetown University Medical Center since
September 1994. Dr. Peck was Boerhaave Professor of Clinical Drug Research at
Leiden University from November 1993 to July 1995. From October 1987 to November
1993, Dr. Peck was Director, Center for Drug Evaluation and Research of the FDA.
He held many academic positions prior to October 1987, including Professor of
Medicine and Pharmacology, Uniformed Services University, from 1982 to October
1987. He is author of more than 100 original research papers, chapters and books
with regard to his area of expertise.
Michael A. Rocca has served as a Director since April 1999. Mr.
Rocca is currently Senior Vice President and Chief Financial Officer of
Mallinckrodt, Inc., a global manufacturer and marketer of specialty medical
products, a position he has held since April 1994. From 1966 until 1994, Mr.
Rocca was employed by Honeywell, Inc., a control technology company. He held a
number of positions at Honeywell which included Vice President and Treasurer,
Vice President of Finance, Europe, and Vice President and Controller
International. Mr. Rocca is a graduate of the University of Iowa and has a
strong background in finance and accounting.
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eight
meetings and acted by written consent three times during the fiscal year ended
December 31, 1999. During such year, each director attended at least 75% of the
aggregate number of meetings of the Board of Directors and of the Board
committees on which such director served which were held during the periods in
which he served.
The Company has an Audit Committee and a Compensation Committee
of the Board of Directors. The Company does not have a Nominating Committee or a
committee that performs the functions of a Nominating Committee.
The Audit Committee was established in March 1992 and is
primarily responsible for reviewing the Corporation's audit process, financial
reporting functions, systems of internal control, and compliance programs. This
Committee currently consists of Dr. Cross and Messrs. Groom and Rocca. The Audit
Committee held three meetings during 1999.
The Compensation Committee was established in March 1992 and
reviews and approves the Company's compensation policies and administers the
Company's stock option and stock purchase plans. This committee currently
consists of Messrs. Blissenbach and Groom. The Compensation Committee held four
meetings and acted by unanimous written consent one time during 1999.
DIRECTOR COMPENSATION
Non-employee Board members are paid fees for their Board service
and are reimbursed for expenses incurred in connection with such service. Drs.
Cross and Peck, and Messrs. Blissenbach, Groom and Rocca each receive a fee of
$2,000 for each Board meeting attended, $750 for each committee meeting attended
on non-Board meeting dates and $500 for each Board meeting in which he
participated by telephone. The Company also reimburses Drs. Cross and Peck, and
Messrs. Blissenbach and Rocca for all reasonable and necessary travel and other
incidental expenses in connection with the performance of his Board duties.
Under a commitment with Dr. Johnson, the Company pays him a fee of $2,000 for
each Board meeting attended, $500 for each Board meeting in which he
participates by telephone and $1,000 for each day of service in excess of four
days which he renders as a member of the Scientific Advisory Board. The Company
also reimburses Dr. Johnson for all reasonable and necessary travel and other
incidental expense incurred in connection with such duties.
In addition, non-employee Board members are also eligible to
participate in the Automatic Option Grant Program in effect under the 1992 Stock
Option/Stock Issuance Plan. At the 1999 annual meeting of stockholders, each of
Messrs. Blissenbach and Groom and Drs. Cross, Johnson and Peck received an
option to purchase 10,000 shares of common stock with an exercise price of
$11.06 per share, the fair market value per share of common stock on the date of
their re-election as a non-employee Board member at the 1999 annual meeting.
Upon his initial appointment to the Board on April 29, 1999, Mr. Rocca received
an option grant under the Automatic Option Grant Program to purchase 20,000
Shares of Common Stock at an exercise price of $9.94 per share, the fair market
value per share of common stock on the date of this election as a non-employee
Board member. Each of the options granted under the Automatic Option Grant
Program become exercisable for all the option shares upon completion of one year
of Board service. The option has a maximum term of 10 years measured from the
grant date, subject to earlier termination following the optionee's cessation of
Board service. Each non-employee Board member re-elected to the annual meeting
will receive an option for 10,000 shares of common stock under the Automatic
Option Grant Program. For further information concerning such automatic option
grants to directors, please see "Proposal 2-Amendment of the 1992 Stock
Option/Stock Issuance Plan--Automatic Option Grant Program" below.
5
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On January 3, 2000, the directors listed below, in connection
with their election to apply all or a portion of their $14,000 cash retainer fee
for the 2000 fiscal year to the acquisition of a special option grant under the
Director Fee Option Grant Program in effect under the 1992 Stock Option/Stock
Issuance Plan, were each granted an option for shares as set forth on the table
below.
<TABLE>
<CAPTION>
Options
Name (#)
- ----- -----
<S> <C>
Henry F. Blissenbach.......................................................... 756
John Groom.................................................................... 1,513
Carl C. Peck, M. D............................................................ 1,513
Michael A. Rocca.............................................................. 1,513
</TABLE>
Each option has an exercise price of $4.6245 per share, one-third of the fair
market value per share of common stock on the grant date ($13.875). Accordingly,
the fair market value of those shares less the aggregate exercise price was
equal to the cash retainer fee that such Board member elected to apply to the
grant. Each option will become exercisable for the option shares in a series of
12 successive equal monthly installments upon the optionee's completion of each
month of Board service during the 2000 calendar year. Each option has a maximum
term of 10 years measured from the grant date, subject to earlier termination
three years following the optionee's cessation of Board service.
Mr. Groom, a director of the Company, is the President and Chief
Operating Officer of Elan Corporation plc, a principal stockholder of the
Company. For further discussion about Elan's stockholdings in the Company and
transactions with Elan during 1999 and 2000, please see "Principal Stockholders"
and "Certain Relationships and Related Transactions."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the
nominees listed herein.
6
<PAGE>
PROPOSAL NO. 2
AMENDMENT OF THE 1992 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's stockholders are being asked to approve an
amendment to the Company's 1992 Stock Option/Stock Issuance Plan (the "1992
Plan") that will increase the number of shares issuable under the 1992 Plan by
an additional 500,000.
The share increase will assure that the Company will have a
sufficient reserve of common stock to provide a comprehensive equity incentive
program for the Company's officers, employees and non-employee Board members to
encourage these individuals to remain in the Company's service and to more
closely align their interests with those of the stockholders. The number of
shares for which options will be granted to each newly hired or continuing
employee will be based on both competitive market conditions and individuals
performance.
The 1992 Stock Option/Stock Issuance Plan was originally adopted
by the Board and was approved by the stockholders in 1992. The amendments to the
1992 Plan which are the subject of this Proposal were approved by the Board in
February 2000, subject to stockholder approval at the annual meeting.
The following is a summary of the principal features of the 1992
Plan, as amended. The summary, however, does not purport to be a complete
description of all the provisions of the 1992 Plan. Copies of the actual plan
document may be obtained by any stockholder upon written request to the
Corporate Secretary at the Company's principal executive offices in San Diego,
California.
PLAN STRUCTURE
The 1992 Plan contains four separate equity programs:
o the Discretionary Option Grant Program,
o the Automatic Option Grant Program,
o the Stock Issuance Program, and
o the Director Fee Option Grant Program.
The principal features of these programs are described below. The 1992 Plan is
administered by the Compensation Committee of the Board. This committee (the
"Plan Administrator") has complete discretion (subject to the provisions of the
1992 Plan) to authorize option grants and direct stock issuances under the 1992
Plan. However, the Plan Administrator will not exercise any administrative
discretion under the Automatic Option Grant or Director Fee Option Grant Program
for the non-employee Board members. All grants under those programs will be made
in strict compliance with the express provisions of each such program.
Stockholder approval of the 500,000-share increase subject to this proposal will
constitute pre-approval of all options grants subsequently made under the
express provisions of those programs on the basis of the share increase and the
subsequent exercise of those options in accordance with their terms.
ISSUABLE SHARES
A total of 9,573,457 shares of common stock has been reserved for
issuance over the 10 year term of the 1992 Plan, assuming stockholder approval
of the 500,000-share increase which forms part of this proposal. As of March 31,
2000, options for 5,749,284 shares of common stock were outstanding under the
1992 Plan, 1,052,776 shares remained available for future option grant or direct
issuance (assuming stockholder approval of the 500,000-share increase which
forms part of this Proposal), and 3,334,036 shares have been issued under the
1992 Plan. Without such increase, only 552,776 shares would be available for
future grant. In no event may any one participant in the 1992 Plan receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 1.0 million shares in the aggregate over the term of the
1992 Plan.
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Should an option expire or terminate for any reason prior to
exercise in full, the shares subject to the portion of the option not so
exercised will be available for subsequent option grants or stock issuances
under the 1992 Plan. In addition, unvested shares issued under the 1992 Plan and
subsequently repurchased by the Company, at the original exercise price or issue
price paid per share, will be added back to the number of shares of common stock
reserved for issuance under the 1992 Plan. Accordingly, such repurchased shares
will be available for reissuance through one or more subsequent option grants or
direct stock issuances under the 1992 Plan. However, shares subject to any
option surrendered or canceled in accordance with the stock appreciation right
provisions of the 1992 Plan will reduce on a share-for-share basis the number of
shares of common stock available for subsequent grants.
Should any change be made to the common stock issuable under the
1992 Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding common stock as a class without the Company's receipt of
consideration, then appropriate adjustments will be made to
o the maximum number and/or class of securities issuable under
the 1992 Plan;
o the number and/or class of securities for which any one
person may be granted options, separately exercisable stock
appreciation rights and direct stock issuances over the
remaining term of the 1992 Plan;
o the number and/or class of securities for which grants are
to be made under the Automatic Option Grant Program to new
or continuing non-employee Board members; and
o the number and/or class of securities and price per share in
effect under each outstanding option.
Such adjustments to the outstanding options will be effected in a manner which
will preclude the enlargement or dilution of rights and benefits under those
options.
ELIGIBILITY
Officers and other key employees of the Company and its parent or
subsidiaries (whether now existing or subsequently established), non-employee
members of the Board and consultants and independent contractors of the Company
and its parent and subsidiaries are eligible to participate in the 1992 Plan.
As of March 31, 2000, approximately 391 employees (including 11
executive officers) and six non-employee Board members were eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs. The
six non-employee Board members were also eligible to participate in the
Automatic Option Grant and Director Fee Option Grant Programs.
VALUATION
The fair market value per share of common stock on any relevant
date under the 1992 Plan will be deemed to be equal to the closing selling price
per share on that date on the Nasdaq National Market. If there is no reported
selling price for such date, then fair market value per share will be the
closing selling price on the next preceding date for which such quotation
exists. On March 31, 2000, the closing selling price per share was $17.75.
DISCRETIONARY GRANT PROGRAM
Option Price and Term. Options may be granted under the
Discretionary Option Grant program at an exercise price per share not less than
85% of the fair market value per share of common stock on the option grant date.
No option will have a term in excess of 10 years measured from the grant date.
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Vesting of Options. The vesting schedule for each granted option
will be determined by the 1992 Plan Administrator at the time of the grant. The
granted option may be
o immediately exercisable for vested shares,
o immediately exercisable for unvested shares subject to the
Company's repurchase rights or
o exercisable in installments for vested shares over the
optionee's period of service.
Payment. Upon exercise of the option, the option price for the
purchased shares will become immediately payable in cash or in shares of common
stock valued at fair market value on the exercise date. The option may also be
exercised through a cashless exercise procedure under which the optionee
provides irrevocable instructions to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Company, out of the sale
proceeds, an amount equal to the aggregate option price payable for the
purchased shares plus all applicable withholding taxes.
Termination of Service. Upon cessation of service, the optionee
will have a limited period of time in which to exercise any outstanding option
to the extent the option is exercisable for vested shares. The Plan
Administrator will have complete discretion to extend the period following the
optionee's cessation of service during which his or her outstanding options may
be exercised and/or to accelerate the exercisability or vesting of such options
in whole or in part. Such discretion may be exercised at any time while the
options remain outstanding.
Stockholder Rights and Option Assignability. No optionee is to
have any stockholder rights with respect to the option shares until such
optionee has exercised the option, paid the option price for the purchased
shares and been issued a stock certificate for such shares. Options are
generally not assignable or transferable other than by will or the laws of
inheritance and, during the optionee's lifetime, the option may be exercised
only by such optionee. However, the Plan Administrator may allow non-statutory
options to be transferred or assigned during the optionee's lifetime to one or
more members of the optionee's immediate family or to a trust established
exclusively for one or more such family members, to the extent such transfer or
assignment is in furtherance of the optionee's estate plan.
Stock Appreciation Rights. The Plan Administrator is authorized
to issue two types of stock appreciation rights in connection with option grants
made under the Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with
the right to surrender their options for an appreciation
distribution from the Company equal in amount to the excess of
o the fair market value of the vested shares of common
stock subject to the surrendered option over
o the aggregate exercise price payable for those shares.
Such appreciation distribution may, at the discretion of the
Plan Administrator, be made in cash or in shares of common stock.
Limited stock appreciation rights may be granted to officers
of the Company as part of their option grants. Any option with a
limited stock appreciation right will automatically be cancelled,
to the extent such option is at the time exercisable for
fully-vested shares of common stock, upon the occurrence of a
hostile take-over of the Company. Upon cancellation, the officer
will be entitled
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to a cash distribution from the Company in an amount per
vested option share equal to the excess of
o the take-over price over
o the exercise price payable for such share.
Cancellation/Regrant. The Plan Administrator will have the
authority to effect, on one or more separate occasions, the cancellation of
outstanding options under the Discretionary Grant Program which have exercise
prices in excess of the then current market price of the common stock and to
issue replacement options with an exercise price based on the lower market price
of the common stock at the time of grant.
AUTOMATIC GRANT PROGRAM
Each individual who first becomes a non-employee Board member on
or after the date of the annual meeting, whether through election by the
stockholders or appointment by the Board, will automatically be granted at the
time of such initial election or appointment a non-statutory stock option to
purchase 20,000 shares of common stock, provided such individual has not
otherwise been in the prior employ of the Company. In addition, at each annual
stockholders meeting, each individual who is at that time re-elected as a
non-employee Board member will automatically be granted a non-statutory stock
option to purchase 10,000 shares of common stock. There is no limit on the
number of such 10,000 share option grants a non-employee Board member may
receive over his or her period of Board service, and re-elected Board members
who have previously been in the Company's employ will be eligible to receive
such grants.
The provisions which will govern each such option grant may be
summarized as follows:
o The option will have an exercise price per share equal to
the fair market value per share of common stock on the grant
date.
o Each option will have a maximum term of 10 years measured
from the grant date.
o Each option will become exercisable for all the option
shares upon the optionee's completion of one year of Board
service measured from the grant date, subject to immediate
acceleration upon certain changes in control of the Company
if such option is not assumed not by the successor entity.
o The option will remain exercisable for a three-month period
following the optionee's cessation of Board service for any
reason other than death. Should the optionee die while any
option is still exercisable, then such option will remain
exercisable for a 36-month period following such optionee's
death and may be exercised by the personal representative of
the optionee's estate or the person to whom the grant is
transferred by the optionee's will or the laws of
inheritance. In no event, however, may the option be
exercised after the expiration date of the maximum option
term. During the applicable exercise period, the option may
not be exercised for more than the number of shares (if any)
for which it was exercisable at the time of the optionee's
cessation of Board service.
The remaining terms and conditions of the option will in general
conform to the terms described above for option grants made under the
Discretionary Grant Program and will be incorporated into the option agreement
evidencing the automatic grant.
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<PAGE>
STOCK ISSUANCE PROGRAM
Issue Price. Shares may be issued under the Stock Issuance
Program at a price per share not less than 85% of their fair market value,
payable in cash or through a promissory note payable to the Company. Shares may
also be issued as a bonus for past services.
Vesting of Shares. The vesting schedule for each share issued
will be determined by the Plan Administrator at the time of issuance. The shares
may be fully and immediately vested upon issuance or may vest in one or more
installments, subject to the Company's repurchase right, over the participant's
period of service.
Stockholder Rights. The recipient of the shares will have full
stockholder rights, including voting and dividend rights, whether or not the
shares are vested. However, the recipient may not sell, transfer or assign any
unvested shares issued under the 1992 Plan, except for certain limited family
transfers.
Repurchase Rights. Should the recipient of unvested shares cease
to remain in the Company's service before vesting in such shares, then those
unvested shares must be immediately surrendered to the Company for cancellation,
and the recipient will have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
recipient for consideration paid in cash or promissory note, the Company will
refund the cash consideration paid for the surrendered shares and cancel the
remaining principal balance of the note to the extent attributable to such
surrendered shares. The Plan Administrator, however, will have the discretion to
waive any such cancellation of unvested shares in whole or in part, thereby
vesting those shares on an accelerated basis under such circumstances as the
Plan Administrator may deem appropriate.
Payment. Upon issuance of the shares, the issue price for the
purchased shares will become immediately payable in cash, in shares of common
stock valued at fair market value on the date of issuance, or by promissory note
payable to the Company. The promissory note may, at the discretion of the Plan
Administrator, be subject to cancellation over the participant's period of
service. Shares may also be issued for past services, without any cash or other
payment required of the participant.
DIRECTOR FEE OPTION GRANT PROGRAM
Each non-employee Board member will have the right to apply all
or a portion of the fee otherwise payable to him in cash each year, $14,000 for
the 2000 year, to the acquisition of a special option grant under the Director
Fee Option Grant Program. The Board member must make his election to participate
in the program for a particular calendar year by December 31 of the immediately
preceding calendar year. The grant for each year of participation will
automatically be made on the first trading day in January of that year and will
have an exercise price per share equal to one-third of the fair market value of
the option shares on the grant date. The number of option shares will be
determined by dividing the total dollar amount of the fees subject to the Board
member's election by two-thirds of the fair market value per share of common
stock on the option grant date. As a result, the total spread on the option, or
the fair market value of the option shares on the grant date less the aggregate
exercise price payable for those shares, will be equal to the portion of the fee
subject to the Board member's election. Until the Company establishes an annual
retainer fee for the non-employee Board members, the dollar amount of the fee
subject to the Board member's election each year will be equal to the number of
regularly-scheduled Board meetings for that year multiplied by the per Board
meeting fee in effect for such year.
The option will become exercisable for the option shares in a
series of 12 successive equal monthly installments upon the optionee's
completion of each month of Board service during the calendar year of the option
grant. In the event the optionee ceases Board service for any reason other than
death or permanent disability, the unvested shares subject to the option at the
time of such cessation will immediately terminate; however, the option will
remain exercisable for the vested shares subject to the option until the earlier
of
o the expiration of the 10-year option term or
o the end of the three-year period measured from the date of
the optionee's cessation of Board service.
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<PAGE>
Should the optionee's service as a Board member cease by reason of death or
permanent disability, then the option will immediately become exercisable for
all the shares of common stock subject to the option and may be exercised for
such shares until the earlier of
o the expiration of the 10-year option term or
o the end of the three-year period measured from the date of
the optionee's cessation of Board service.
GENERAL PROVISIONS
Change in Control. In the event that the Company is acquired by
merger or asset sale, all outstanding options under the Discretionary Option
Grant, Automatic Option Grant and Director Fee Option Grant Programs will be
assumed by the successor corporation. If those options are not assumed, such
options will vest on an accelerated basis immediately prior to such acquisition
and will, to the extent not exercised for one or more option shares, terminate
immediately prior to such acquisition. All unvested shares under the
Discretionary Option Grant and Stock Issuance Programs will immediately vest
upon the consummation of such acquisition, except to the extent the Company's
repurchase rights with respect to those shares are assigned to the successor
corporation. All options outstanding under the Automatic Option Grant and
Director Fee Option Grant Programs at the time of such an acquisition will vest
in full immediately prior to the effective date of such acquisition, whether or
not assumed. Any options which are assumed in connection with such acquisition
will automatically be adjusted immediately following such transaction, to apply
and pertain to the number and class of securities that would be issuable to an
actual holder of the same number of shares of common stock as are subject to
such option immediately prior to the transaction.
Special Acceleration Agreements. The Company entered into an
agreement with each employee holding one or more outstanding options under the
1992 Plan (including each executive officer other than Mr. Robinson), pursuant
to which those options will automatically vest on an accelerated basis in the
event that such individual's employment is terminated following
o an acquisition of the Company by merger or asset sale in
which those options are assumed or
o a change in control of the Company effected through a
successful tender offer for more than 50% of the Company's
outstanding common stock or through a change in the majority
of the Board as a result of one or more contested elections
for Board membership.
These agreements assure such individuals that the economic benefit of their
outstanding options under the 1992 Plan will be preserved in the event of a
change in control or the subsequent termination of their employment by the
successor entity. Mr. Robinson has entered into an employment agreement with the
Company that provides for the immediate vesting of his options, except under
certain limited circumstances, upon his termination of employment in connection
with certain events, including a change in control of the Company. The terms of
this agreement are summarized below under "Executive Compensation And Other
Information-Employment Contracts, Severance Agreements and Change of Control
Arrangements."
The acceleration of options in the event of a change in control
may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
FINANCIAL ASSISTANCE
The Plan Administrator may institute a loan program to assist one
or more participants in financing the exercise of outstanding options or the
purchase of shares under the Discretionary Option Grant or Stock Issuance
Program. The Plan Administrator will have complete discretion to determine the
terms of any such
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<PAGE>
financial assistance. However, the maximum amount of financing provided any
individual may not exceed the cash consideration payable for the issued shares
plus all applicable taxes. Any such financing may be subject to forgiveness in
whole or in part, at the discretion of the Plan Administrator, over the
participant's period of service.
SPECIAL TAX WITHHOLDING ELECTION
The Plan Administrator may provide one or more participants in
the 1992 Plan with the election to have the Company withhold, from the shares of
common stock otherwise issuable upon the exercise of non-statutory options or
the vesting of unvested shares, a portion of those shares in satisfaction of the
tax liability incurred in connection with their acquisition or vesting. Any
election so made will be subject to the approval of the Plan Administrator, and
no shares will be accepted in satisfaction of such tax liability except to the
extent the Plan Administrator approves the election. Alternatively, one or more
participants may be granted the right, subject to Plan Administrator approval,
to deliver existing shares of common stock in satisfaction of such tax
liability. The withheld or delivered shares will be valued at their then current
fair market value.
AMENDMENT AND TERMINATION
The Board of Directors may amend or modify the 1992 Plan in any
or all respects whatsoever. However, no such amendment may adversely affect the
rights of existing optionees or participants without their consent. In addition,
certain amendments may require stockholder approval pursuant to applicable laws
or regulations.
The Board may terminate the 1992 Plan at any time, and the 1992
Plan will in all events terminate on November 16, 2002.
Each stock option outstanding at the time of such termination
will remain in force in accordance with the provisions of the documents
evidencing such grant.
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<PAGE>
STOCK AWARDS
The table below shows, as to the Company's Chief Executive
Officer and each of the other four most highly compensated executive officers of
Company (collectively, the "Named Executive Officers") and the various indicated
individuals and groups, the number of shares of common stock subject to options
granted under the 1992 Plan between January 1, 1999 and March 31, 2000, together
with the weighted average exercise price payable per share.
<TABLE>
<CAPTION>
Weighted
Average
Options Exercise
Name and Principal Position (#) Price
- --------------------------- ------- ---------
<S> <C> <C>
David E. Robinson............................................................. 100,000 $10.0625
Chairman of the Board, President, Chief Executive Officer and Director
William L. Respess............................................................ 0 0
Senior Vice President, General Counsel, Government Affairs and Secretary
Andres F. Negro-Vilar......................................................... 30,000 7.625
Senior Vice President, Research and Development and Chief Scientific Officer
Steven D. Reich............................................................... 0 0
Senior Vice President, Clinical Research
Paul V. Maier................................................................. 0 0
Senior Vice President, Chief Financial Officer
Henry F. Blissenbach.......................................................... 10,756 11.26
Director-Nominee
Alexander D. Cross, Ph.D...................................................... 10,000 11.0625
Director-Nominee
John Groom.................................................................... 11,513 11.43
Director-Nominee
Irving S. Johnson............................................................. 10,000 11.0625
Director-Nominee
Carl C. Peck, M.D............................................................. 11,513 11.43
Director-Nominee
Michael A. Rocca.............................................................. 21,513 10.21
Director-Nominee
All current directors who are not executive officers (6 persons).............. 75,295 10.96
All current executive officers as a group (11 persons)........................ 305,000 12.01
All employees who are not executive officers.................................. 755,456 11.39
</TABLE>
NEW PLAN BENEFITS
As of March 31, 2000, no options have been granted, and no direct
stock issuances have been made, on the basis of the 500,000-share increase which
forms part of this Proposal. Provided stockholders approve this proposal, each
of the following non-employee Board members will, upon his or her re-election to
the Board at
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<PAGE>
the annual meeting, receive an option grant under the Automatic Option
Grant Program for 10,000 shares of common stock: Messrs. Blissenbach, Groom, and
Rocca and Drs. Cross, Johnson and Peck. Each option will have an exercise price
per share equal to the fair market value per share of common stock on the grant
date.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the 1992 Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options which are not intended to meet such requirements.
The Federal income tax treatment for the two types of options differs as
follows:
Incentive Options. No taxable income is recognized by the
optionee at the time of the option grant, and no taxable income is generally
recognized at the time the option is exercised. However, the amount by which the
fair market value of the purchased shares at time of exercise exceeds the
exercise price may have an impact on taxes for purposes of the alternative
minimum tax. The optionee will recognize taxable income in the year in which the
purchased shares are sold or otherwise made the subject of a taxable
disposition. For Federal tax purposes, dispositions are divided into two
categories: qualifying and disqualifying. A qualifying disposition occurs if the
sale or other disposition is made more than two years after the option grant
date and more than one year after the date the option was exercised. If either
of these two holding periods is not satisfied, then a disqualifying disposition
will result.
Upon a qualifying disposition, the optionee will recognize
long-term capital gain in an amount equal to the excess of
o the amount realized upon the sale or other disposition of
the purchased shares over
o the exercise price paid for the shares.
If there is a disqualifying disposition of the shares, the optionee will
recognize taxable ordinary income for the amount equal to the excess of
o the fair market value of those shares on the exercise date
over
o the exercise price paid for the shares.
Any additional gain or loss recognized upon the disposition will be recognized
as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income tax deduction,
for the taxable year in which such disposition occurs, equal to the excess of
o the fair market value of such shares on the option exercise
date over
o the exercise price paid for the shares.
If the optionee makes a qualifying disposition, the Company will not be
entitled to any income tax deduction.
Non-Statutory Options. No taxable income is recognized by an
optionee upon the grant of a non-statutory option. The optionee will in general
recognize ordinary income in the year in which the option is exercised equal to
the excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option
are unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares,
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<PAGE>
then the optionee will not recognize any taxable income at the time of
exercise but will have to report as ordinary income, as and when the Company's
repurchase right lapses, an amount equal to the excess of
o the fair market value of the shares on the date the
repurchase right lapses over
o the exercise price paid for the shares.
The optionee may, however, elect under Section 83(b) of the Internal Revenue
Code to include as ordinary income in the year of exercise of the option an
amount equal to the excess of
o the fair market value of the purchased shares on the
exercise date over
o the exercise price paid for such shares.
If the Section 83(b) election is made, the optionee will not recognize any
additional income as and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to
the amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
Stock Appreciation Rights. An optionee who is granted a stock
appreciation right will recognize ordinary income in the year of exercise equal
to the amount of the appreciation distribution. The Company will be entitled to
an income tax deduction equal to such distribution for the taxable year in which
the ordinary income is recognized by the optionee.
Direct Stock Issuance. The tax principles applicable to direct
stock issuances under the 1992 Plan will be substantially the same as those
summarized above for the exercise of non-statutory option grants.
Deductibility of Executive Compensation. The Company anticipates
that any compensation deemed paid by it in connection with the disqualifying
disposition of incentive stock option shares or the exercise of non-statutory
options granted with exercise prices equal to the fair market value of the
shares on the grant date will qualify as performance-based compensation for
purposes of Code Section 162(m) and will not have to be taken into account for
purposes of the $1.0 million limitation per covered individual on the
deductibility of the compensation paid to certain executive officers of the
Company. Accordingly, all compensation deemed paid under the 1992 Plan will
remain deductible by the Company without limitation under Code Section 162(m).
ACCOUNTING TREATMENT
Under the current accounting principles in effect for equity incentive
programs such as the 1992 Plan, the option grants under the 1992 Plan to
employees and non-employee Board members will not result in any direct charge to
the Company's reported earnings. However, the fair value of those options is
required to be disclosed in the notes to the Company's financial statements, and
the Company must also disclose, in the footnotes to the Company's financial
statements, the pro-forma impact those options would have upon the Company's
reported earnings were the fair value of those options at the time of grant
treated as a compensation expense and amortized over the applicable vesting
period. In addition, the number of outstanding options may be a factor in
determining the Company's earnings per share on a fully-diluted basis.
However, option grants made to consultants result in a direct charge to the
Company's reported earnings based upon the fair value of the option measured on
the vesting date of each installment of the underlying option shares. Such
charge accordingly includes the appreciation in the value of the option shares
over the period between the grant date of the option and the vesting date of
each installment of the option shares.
16
<PAGE>
Should one or more individuals be granted tandem or stand-alone stock
appreciation rights under the 1992 Plan, then such rights would result in a
compensation expense to be charged against the Company's reported earnings.
Accordingly, at the end of each fiscal quarter, the amount (if any) by which the
fair market value of the shares of common stock subject to such outstanding
stock appreciation rights has increased from the prior quarter-end would be
accrued as compensation expense, to the extent such fair market value is in
excess of the aggregate exercise price in effect for those rights.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting
shares of the Company present or represented and entitled to vote at the annual
meeting is required for approval of the amendments to the 1992 Plan. Should such
stockholder approval not be obtained, then the 500,000-share increase to the
share reserve will not be implemented, any stock options granted on the basis of
the 500,000-share increase to the 1992 Plan will immediately terminate without
becoming exercisable for the shares of common stock subject to those options,
and no additional options will be granted on the basis of such share increase.
However, in the absence of such stockholder approval, the 1992 Plan will
continue to remain in effect, and option grants and direct stock issuances may
continue to be made pursuant to the provisions of the 1992 Plan in effect prior
to the amendment summarized in this Proposal, until the available reserve of
common stock as last approved by the stockholders has been issued pursuant to
the exercise of options granted or direct stock issuances made under the 1992
Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the
amendments to the 1992 Plan.
17
<PAGE>
PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
1992 EMPLOYEE STOCK PURCHASE PLAN
The Company's stockholders are being asked to approve an
amendment to the 1992 Employee Stock Purchase Plan which will increase the
maximum number of shares of Common Stock authorized for issuance over the term
of the Purchase Plan by an additional 50,000 shares.
The purpose of the share increase is to ensure that the Company
will continue to have a sufficient reserve of Common Stock available under the
purchase plan to provide eligible employees of the Company and its participating
affiliates with the opportunity to acquire a proprietary interest in the Company
through participation in a payroll-deduction based employee stock purchase plan
under Section 423 of the Internal Revenue Code.
The purchase plan was adopted by the Board of Directors and
approved by the stockholders in 1992. In February 2000, the Board approved the
increase in the share reserve of the purchase plan which is the subject of this
proposal.
The following is a summary of the principal features of the
purchase plan, as amended. This summary does not, however, purport to be a
complete description of all the provisions of the purchase plan. Any stockholder
who wishes to obtain a copy of the actual plan document may do so by written
request to the Corporate Secretary at the Company's principal executive offices
in San Diego, California.
SHARE RESERVE AND PLAN ADMINISTRATION
405,000 shares of common stock have been reserved for issuance
over the 10-year term of the purchase plan, including the 50,000-share increase
for which stockholder approval is sought under this proposal. As of March 31,
2000, 318,194 shares of Common Stock had been issued under the purchase plan,
and 86,806 shares will be available for future issuance, assuming stockholder
approval of the 50,000-share increase which is the subject of this proposal.
Without such increase, 36,806 shares would be available for future issuance.
Should any change be made to the outstanding common stock by
reason of any stock dividend, stock split, combination of shares or other
similar change affecting the outstanding common stock as a class without the
Company's receipt of consideration, appropriate adjustments will be made to
o the class and maximum number of securities issuable over the
term of the purchase plan,
o the class and maximum number of securities purchasable per
participant during any one offering period and
o the class and number of securities and the price per share
in effect under each outstanding purchase right.
Such adjustments are designed to preclude the dilution or enlargement of rights
and benefits under the purchase plan.
The purchase plan is administered by the Compensation Committee
of the Board of Directors. The committee as plan administrator has full
authority to administer the purchase plan, including the authority to interpret
and construe any provision of the purchase plan.
ELIGIBILITY
Any individual who is employed by either the Company or any
participating parent or subsidiary (including any corporation which subsequently
becomes such at any time during the term of the purchase plan) on a
18
<PAGE>
regularly-scheduled basis of more than 20 hours per week and more than five
months per calendar year is eligible to participate in the purchase plan. An
eligible employee may join an offering period on the first day of the first
calendar quarter within that period following his or her completion of at least
five months of employment with the Company.
As of March 31, 2000, approximately 332 employees (including 11
officers of the Company) were eligible to participate in the purchase plan.
PLAN OPERATION
Shares of common stock will be made available to participants
through a series of one-year offering periods, each coincidental with the
calendar year. Each participant will be granted a separate purchase right for
each offering period in which he or she participates. The purchase right will be
granted on the first day of the offering period (the first business day in
January) and will be automatically exercised in successive quarterly
installments on the last business day of March, June, September and December
during the offering period.
Each participant may, through authorized payroll deductions,
contribute up to 10% of his or her base salary (in 1% multiples) during each
offering period. However, no participant may purchase more than 1,330 shares of
common stock during any one offering period nor more than $25,000 worth of
common stock (based upon the value of the common stock at the time the offering
period begins) per calendar year.
The purchase price on each quarterly purchase date will be equal
to the lower of
o 85% of the fair market value per share of common stock on
the participant's entry date into the offering period or
o 85% of the fair market value per share of common stock on
the quarterly purchase date.
However, in no event will the fair market value in the first clause be less than
the fair market value per share of common stock on the start date of such
offering period.
The fair market value of the common stock on any relevant date
will be deemed to be equal to the closing selling price per share on such date
as reported on the Nasdaq National Market. As of March 31, 2000, the fair market
value per share of common stock determined on such basis was $17.75.
No participant will have any stockholder rights with respect to
the shares covered by his or her outstanding purchase right until the shares are
actually purchased on his or her behalf. No purchase right will be assignable or
transferable except by will or by the laws of descent and distribution following
the participant's death. Accordingly, during the participant's lifetime, the
purchase right will be exercisable only by the participant.
The purchase right of a participant will terminate upon his or
her cessation of employee status, and any payroll deductions collected from such
individual during the calendar quarter in which such termination occurs will, at
such participant's election, either
o be refunded to the participant or
o held for the purchase of shares on the next quarterly
purchase date.
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<PAGE>
CHANGE IN OWNERSHIP
In the event the Company is acquired by merger or asset sale, all
outstanding purchase rights will automatically be exercised immediately prior to
the effective date of such acquisition. The purchase price will be equal to 85%
of the lower of
o the fair market value per share of common stock on the participant's
entry date into the offering period in which such acquisition occurs
or
o the fair market value per share of common stock immediately prior to
the effective date of such acquisition, but in no event will the fair
market value on the participant's entry date be less than the fair
market value per share of common stock on the start date of the
offering period in which such acquisition occurs.
AMENDMENT AND TERMINATION
The purchase plan will terminate upon the earlier of
o December 31, 2002 or
o the date on which all shares available for issuance
thereunder are sold pursuant to exercised purchase rights.
However, the Company has specifically reserved the right, exercisable in the
sole discretion of the Plan Administrator, to terminate all outstanding purchase
rights under the purchase plan immediately following any quarterly purchase
date. If such right is exercised by the Company, then the purchase plan will
terminate in its entirety, and no further purchase rights will be granted or
exercised thereunder.
The Board may amend or modify the provisions of the purchase plan
at any time. However, the Board may not, without stockholder approval,
o increase the number of shares issuable under the purchase
plan or the maximum number of shares which any one
participant may purchase during a single offering period,
o alter the purchase price formula so as to reduce the
purchase price, or
o materially increase the benefits accruing to participants.
FEDERAL TAX CONSEQUENCES
The purchase plan is intended to be an employee stock purchase
plan within the meaning of Section 423 of the Internal Revenue Code. Under a
plan which so qualifies, no taxable income will be recognized by a participant,
and no deductions will be allowable to the Company, upon either the grant or the
exercise of the purchase rights. Taxable income will not be recognized until
there is a sale or other disposition of the shares acquired under the purchase
plan or in the event the participant should die while still owning the purchased
shares.
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<PAGE>
If the participant sells or otherwise disposes of the purchased
shares within two years after his or her entry date into the offering period in
which such shares were acquired or within one year after the quarterly purchase
date on which those shares were actually acquired, then the participant will
recognize ordinary income in the year of sale or disposition equal to the amount
by which the fair market value of the shares on the purchase date exceeded the
purchase price paid for those shares, and the Company will be entitled to an
income tax deduction, for the taxable year in which such disposition occurs,
equal in amount to such excess.
If the participant sells or disposes of the purchased shares more
than two years after his or her entry date into the offering period in which the
shares were acquired and more than one year after the quarterly purchase date of
those shares, then the participant will recognize ordinary income in the year of
sale or disposition equal to the lower of
o the amount by which the fair market value of the shares on
the sale or disposition date exceeded the purchase price
paid for those shares or
o 15% of the fair market value of the shares on the
participant's entry date into that offering period. Any
additional gain upon the disposition will be taxed as a
long-term capital gain.
The Company will not be entitled to an income tax deduction with respect to such
disposition.
If the participant still owns the purchased shares at the time of
death, his or her estate will recognize ordinary income in the year of death
equal to the lower of
o the amount by which the fair market value of the shares on
the date of death exceeds the purchase price or
o 15% of the fair market value of the shares on his or her
entry date into the offering period in which those shares
were acquired.
ACCOUNTING TREATMENT
The issuance of common stock under the purchase plan will not
result in a direct compensation expense chargeable against the Company's
reported earnings. However, the Company must disclose, in pro-forma statements
to the Company's financial statements, the impact the purchase rights granted
under the purchase plan would have upon the Company's reported earnings were the
value of those purchase rights treated as compensation expense.
STOCK ISSUANCES
The table below shows, as to the Named Executive Officers and as
to the various indicated groups, the number of shares of Common Stock and the
weighted average purchase price per share, with respect to transactions under
the purchase plan effected during the period from January 1, 1999 to March 31,
2000.
21
<PAGE>
Non-employee directors are not eligible to participate in the
purchase plan.
<TABLE>
<CAPTION>
Weighted
Average
Shares Purchase
(#) Price
------- ---------
<S> <C> <C>
David E. Robinson.................................................... 0 $0
Chairman of the Board, President and Chief Executive Officer
William L. Respess................................................... 0 0
Senior Vice President, General Counsel, Government Affairs and Secretary
Steven D. Reich...................................................... 0 0
Senior Vice President, Clinical Research
Andres F. Negro-Vilar................................................ 0 0
Senior Vice President, Research and Development and Chief
Scientific Officer
Paul V. Maier........................................................ 1,683 8.49
Senior Vice President, Chief Financial Officer
All current executive officers as a group (11 persons)............... 4,080 8.33
All employees who are not executive officers......................... 67,840 8.56
</TABLE>
NEW PURCHASE PLAN BENEFITS
No shares of Common Stock have been issued under the purchase
plan on the basis of the 50,000-share increase for which stockholder approval is
sought under this Proposal.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting
shares of the Company present or represented and entitled to vote at the annual
meeting is required for approval of the 50,000-share increase to the purchase
plan. Should such stockholder approval not be obtained, then the 50,000-share
increase will not be implemented, all purchase rights granted on the basis of
such share increase will be terminated, any payroll deductions collected in
connection with such purchase rights will be refunded to the employees, and the
purchase plan will terminate once the existing share reserve as previously
approved by the stockholders has been issued.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that the
stockholders vote FOR this proposal.
22
<PAGE>
PROPOSAL NO. 4
APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
On February 10, 2000, the Board of Directors approved, subject to
approval by the stockholders at the annual meeting, an increase in the number of
shares of authorized common stock from 80,000,000 shares to 130,000,000 shares.
This increase would be accomplished by adopting an amendment to the Certificate
of Incorporation of the Company. At March 31, 2000, 55,011,593 shares of Common
Stock were issued and outstanding. Of the remaining shares available, 19,491,107
shares are reserved for issuance under the Company's various stock option plans,
purchase plan, outstanding warrants and convertible debentures and notes,
therefore leaving only 5,397,300 shares unreserved and available for issuance.
The amendment would increase the number of authorized, unissued and unreserved
shares of common stock to 55,397,300. The text of the proposed amendment is set
forth on the attached Exhibit A.
The Board of Directors believes that it is in the best interest
of the Company and its stockholders that there be a sufficient reserve of
authorized but uncommitted shares of common stock so that the Company can
rapidly take advantage of opportunities that become available, including
acquisitions, financing and stock splits, among others.
The Company currently has no agreements or arrangements for the
issuance of shares of common stock other than the issuance of shares of common
stock pursuant to stock option plans, purchase plan, outstanding warrants and
convertible debentures and notes. Authorized shares of common stock in excess of
these shares outstanding (including, if approved, the additional shares of
common stock provided for in the amendment) will remain available for general
purposes, such as acquisitions, equity financings, stock splits, stock
dividends, management incentives and stock option and purchase plans. Such
issuances may not require stockholder approval. Under certain circumstances, the
Board of Directors could create impediments to, or frustrate persons seeking to
effect, a takeover or transfer of control of the Company by causing such shares
to be issued to a holder or holders who might side with the Board of Directors
in opposing a takeover bid that the Board of Directors determines is not in the
best interest of the Company and its stockholders. As of this date the Board of
Directors is unaware of any specific effort to accumulate the Company's shares
or to obtain control of the Company by means of a merger, tender offer,
solicitation in opposition to management or otherwise.
Approval of the proposed amendment will require the affirmative
vote of the holders of a majority of the outstanding shares of common stock. If
the proposal is adopted, the amendment will become effective upon the requisite
filing under the Delaware General Corporation Law. Abstention from voting on the
amendment and broker non-votes will have the practical effect of voting against
the amendment since the affirmative vote of a majority of the Company's
outstanding shares is required for the adoption of the amendment. If not
otherwise specified, proxies will be voted in favor of the amendment.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that the
stockholders vote FOR approval of the amendment.
23
<PAGE>
PROPOSAL NO. 5
RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the stockholders to ratify the selection of
Ernst & Young LLP as the Company's independent auditors for the year ending
December 31, 2000. Neither the firm nor any of its members has any relationship
with the Company or any of its affiliates, except in the firm's capacity as the
Company's auditor.
In the event the stockholders fail to ratify the selection, the
Board of Directors will reconsider its selection. Even if the selection is
ratified, the Board of Directors, in its discretion, may direct the appointment
of a different independent auditing firm at any time during the year if the
Board of Directors feels that such a change would be in the Company's and its
stockholders' best interests.
Representatives of Ernst & Young are expected to be present at
the Annual Meeting, will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions. The
affirmative vote of the holders of a majority of the shares represented and
voting at the annual meeting will be required to ratify the selection of Ernst &
Young.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that the
stockholders vote FOR the ratification of the selection of Ernst & Young to
serve as the Company's independent auditors for the year ending December 31,
2000.
24
<PAGE>
PRINCIPAL STOCKHOLDERS AND
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth certain information known to the
Company with respect to the beneficial ownership of the Company's common stock
as of March 31, 2000, by
o all persons who are beneficial owners of 5% or more of the
Company's common stock,
o each director and nominee for director,
o the Named Executive Officers and
o all current directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares beneficially owned, subject to
community property laws, where applicable. Percentage of ownership is based on
55,111,593 shares of common stock outstanding on March 31, 2000. Shares of
common stock underlying options and convertible notes includes options which are
currently exercisable or will become exercisable and convertible notes which are
currently convertible or will become convertible within 60 days after March 31,
2000, are deemed outstanding for computing the percentage of the person or group
holding such options, but are not deemed outstanding for computing the
percentage of any other person or group. The address for individuals for whom an
address is not otherwise indicated is 10275 Science Center Drive, San Diego, CA
92121.
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Underlying Percent
Beneficially Options/Convertible of Class
Beneficial Owner Owned Notes Owned
- ----------------- ----- ----- -----
<S> <C> <C> <C>
ELAN International Services, LTD(1) 6,730,263 4,851,426 19.3%
102 St. James Court
Flatts Smiths Parish
Bermuda, FL 04
Henry F. Blissenbach................................. 0 52,725 *
Alexander D. Cross................................... 20,258 52,473 *
John Groom........................................... 0 52,977 *
Irving S. Johnson.................................... 22,929 52,473 *
Carl C. Peck......................................... 0 36,741 *
Michael A. Rocca..................................... 3,000 20,504 *
David E. Robinson.................................... 278,635 424,290 1.3%
William L. Respess................................... 172,927 237,640 *
Andres F. Negro-Vilar................................ 5,013 124,097 *
Steven D. Reich...................................... 3,000 106,313 *
Paul V. Maier........................................ 31,026 207,489 *
Directors and executive officers
as a group (17 persons).............................. 543,963 1,735,351 4.0%
</TABLE>
- -----------------------
* Less than 1%
(1) Pursuant to a Schedule 13D (Amendment No. 4) filed with the SEC on December
17, 1999, Elan Corporation, plc reported that it had sole dispositive power
and sole voting power over 11,114,736 shares of common stock. Additional
shares have been issued to Elan since the filing of its Schedule 13D/A in
December 1999. For a description of these issuances, please see "Certain
Relationships and Related Transactions."
25
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company as of March 31, 2000 are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David E. Robinson 51 Chairman of the Board, President, Chief Executive
Officer and Director
Paul V. Maier 52 Senior Vice President, Chief Financial Officer
Andres F. Negro-Vilar, M.D., Ph.D. 60 Senior Vice President, Research and Development and
Chief Scientific Officer
William A. Pettit 50 Senior Vice President, Human Resources and
Administration
Steven D. Reich, M.D. 54 Senior Vice President, Clinical Research
William L. Respess, J.D., Ph.D. 60 Senior Vice President, General Counsel, Government
Affairs and Secretary
Thomas H. Silberg 53 Senior Vice President, Global Commercial Operations
Russell L. Allen 53 Vice President, Corporate Development and Strategic
Planning
Phillip A. Duffy 56 Vice President, Technical Operations
Eric S. Groves, M.D., Ph.D. 57 Vice President, Project Management
Howard T. Holden, Ph.D. 55 Vice President, Regulatory Affairs and Compliance
</TABLE>
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
David E. Robinson is being considered for the position of
director of the Company. See "Election of Directors" for a discussion of Mr.
Robinson's business experience.
Paul V. Maier joined the Company in October 1992 as Vice
President, Chief Financial Officer and became Senior Vice President, Chief
Financial Officer in November 1996. Prior to joining the Company, Mr. Maier
served as Vice President, Finance at DFS West, a division of DFS Group, L.P., a
private multinational retailer from October 1990 to October 1992. From February
1990 to October 1990, Mr. Maier served as Vice President and Treasurer of ICN
Pharmaceuticals, Inc., a pharmaceutical and biotechnology research products
company. Mr. Maier held various positions in finance and administration at SPI
Pharmaceuticals, Inc., a publicly held subsidiary of ICN Pharmaceuticals Group,
from 1984 to 1988, including Vice President, Finance from February 1984 to
February 1987. Mr. Maier received an M.B.A. from Harvard Graduate School of
Business and a B.S. from Pennsylvania State University.
Andres F. Negro-Vilar, M.D., Ph.D. joined the Company in
September 1996 as Senior Vice President, Research, and Chief Scientific Officer
and became Senior Vice President, Research and Development and Chief Scientific
Officer in December, 1999. Prior to joining the Company, Dr. Negro-Vilar was
Vice President of Research and Head of the Women's Health Research Institute for
Wyeth-Ayerst Laboratories, a division of American Home Products, from 1993 to
1996. From 1983 to 1993, Dr. Negro-Vilar served at the National Institute of
Environmental Health Sciences of the National Institutes of Health as the
Director of Clinical Programs and Chief of the Laboratory of Molecular and
Integrative Neurosciences. Dr. Negro-Vilar received a Ph.D. in physiology from
the University of Sao Paulo, Brazil, an M.D. from the University of Buenos
Aires, Argentina, and a B.S. in science from Belgrano College.
William A. Pettit joined the Company in November 1996 as Senior
Vice President, Human Resources and Administration. Prior to joining the
Company, Mr. Pettit was Senior Vice President, Human Resources at Pharmacia &
Upjohn, Inc., a global pharmaceutical and healthcare company, where he was
employed from 1986 to 1996. From 1984 to 1986, Mr. Pettit served as Corporate
Director, Human Resources at Browning Ferris Industries, a waste services
company. From 1975 to 1984, Mr. Pettit served in various positions at
Bristol-Myers Company (now Bristol-Myers Squibb Company) including Director,
Human Resources. Mr. Pettit received a B.A. in English from Amherst College.
26
<PAGE>
Steven D. Reich, M.D. joined the Company in December 1995 as the
Senior Vice President, Clinical Research. Prior to joining the Company, Dr.
Reich was at the clinical contract research organization PAREXEL International
Corporation, a contract research and contract marketing company, from 1987 to
1995, where he served most recently as Senior Vice President, Medical Affairs
responsible for worldwide medical and clinical affairs services including
clinical trials management, medical consulting and medical writing. From 1986 to
1987, Dr. Reich served as worldwide Medical Research Director of Biogen, Inc., a
biopharmaceutical company ("Biogen"), and held various positions at Biogen from
1983 to 1986. Earlier in his career Dr. Reich served as Associate Director of
Clinical Cancer Research for Bristol Laboratories (1978-1979). He is a Board
certified Medical Oncologist and has held academic positions as a clinical
pharmacologist at Northwestern University, SUNY-Upstate Medical School, and
University of Massachusetts Medical Center. Dr. Reich received an M.D. from the
New Jersey College of Medicine and an A.B. from Princeton University.
William L. Respess, J.D., Ph.D. joined the Company in December
1988 as Vice President and General Counsel, became Senior Vice President and
General Counsel in August 1993 and assumed responsibility for Government Affairs
in March 1995. Prior to joining the Company, Dr. Respess was Vice President and
General Counsel at Gen-Probe, Inc., a biotechnology company, from 1987 to 1988.
From 1983 to 1986, he served as Vice President and General Counsel at Hybritech,
Inc., a biotechnology company. From 1974 to 1983, he was an attorney with the
patent law firm of Lyon & Lyon of Los Angeles, serving as Partner from 1980 to
1983. Dr. Respess received a J.D. from George Washington University, a Ph.D. in
organic chemistry from the Massachusetts Institute of Technology and a B.S. in
chemistry from the Virginia Military Institute.
Thomas H. Silberg joined Ligand in January 2000 as Senior Vice
President, Global Commercial Operations with overall responsibility for the
Company's global commercial functions including corporate development, strategic
planning, licensing and business development, marketing and sales, market
research and professional services. Prior to joining Ligand, Mr. Silberg spent
27 years with Hoffmann-La Roche Inc., where he held a number of sales and
marketing positions, most recently as Vice President of Business Operations. In
this position since 1994, he was responsible for all general management
activities relating to the sales and marketing of the entire Roche product line
in a 26-state geographic area, and for the national executive committee
activities for two major launch products. Mr. Silberg earned B.S. degrees in
marketing and advertising from the University of Minnesota.
Russell L. Allen joined the Company in February 1997 as Vice
President, Corporate Development and Strategic Planning. Prior to joining
Company, Mr. Allen was General Manager, Central America, Sanofi Winthrop Inc.
and previously served as Vice President, Business Development Strategic Analysis
at Sterling Winthrop Inc. where he was employed from 1985 to 1996. From 1980 to
1985, Mr. Allen served in various positions at Bristol-Myers Company (now
Bristol-Myers Squibb Company) and from 1973 to 1980, held various positions at
Procter & Gamble. Mr. Allen received an M.B.A. from Harvard Graduate School of
Business and a B.A. from Amherst College.
Philip A. Duffy joined Ligand as Vice President, Technical
Operations in January 1998 and oversees Ligand's chemical, formulations and
analytical development activities for commercial products, as well as
manufacturing, purchasing, and materials management functions. Prior to joining
Ligand, Mr. Duffy served as Vice President, Product Supply for Schein Bayer
Pharmaceutical Services, Inc., a position he held since 1994. From 1993 to 1994,
he was the principal of Philip A. Duffy & Associates, a New Jersey-based
pharmaceutical consulting practice. From 1992 to 1993, he was Corporate Vice
President, Materials Management at ICN Pharmaceuticals Inc. Mr. Duffy has held
management positions with a number of pharmaceutical companies during the past
20 years, including careers with Schering-Plough Inc., G.D. Searle & Co., and
Baxter International. Mr. Duffy earned a B.A. in economics from Marquette
University and an M.B.A. at George Williams College.
27
<PAGE>
Eric S. Groves, M.D., Ph.D., joined Ligand in August 1999 as Vice
President, Project Management. Prior to joining Ligand, Dr. Groves was Vice
President, Project Direction at Sanofi Pharmaceuticals, where he was responsible
for the worldwide strategy of and project direction for late-stage Sanofi
oncology projects since May 1995. He had previously served as Director, Clinical
Development for Sanofi since October 1994. From May 1991 through October 1994,
Dr. Groves had served as Senior Project Director for the research division of
Sterling Winthrop Corporation, and served as acting Vice President, Discovery
and Clinical Research, Immunoconjugate Division. He was Director, Clinical
Research and Development at CETUS Corporation from 1989 through 1991. Dr. Groves
received his B.S. degree from Massachusetts Institute of Technology and his
Ph.D. in physics from the University of Pennsylvania. He earned his M.D. at the
University of Miami, did his Ocology Fellowship at the National Cancer
Institute, and is a diplomate of the American Board of Internal Medicine and
American Board of Oncology.
Howard T. Holden, Ph.D. joined the Company in September 1992 as
Vice President, Regulatory Affairs and Compliance. Prior to joining the Company,
Dr. Holden was Senior Director, Worldwide Regulatory Affairs at Parke-Davis
Pharmaceutical Research Division of the Warner-Lambert Company. From 1986 to
1988, Dr. Holden served as Director, Regulatory Affairs and Compliance at
Centocor Inc., a pharmaceutical company. Dr. Holden received a Ph.D. in
microbiology from the University of Miami and a B.A. in zoology from Drew
University.
28
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information
concerning the compensation earned, by the Named Executive Officers, for
services rendered in all capacities to the Company and its subsidiaries for the
fiscal years ended December 31, 1999, 1998 and 1997, respectively.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
---------------------------------------------------------------------------------------
Other Annual Securities Underlying
Name and Principal Position Year Salary($) (1) Bonus($) (2) Compensation ($) (3) Options/ SARs(#)
- --------------------------- ---- ------------- ------------ -------------------- ----------------
<S> <C> <C> <C> <C> <C>
David E. Robinson.......................... 1999 540,225 0 62,995 100,000
Chairman of the Board, 1998 531,650 90,000 10,485 100,000
President and CEO 1997 511,832 85,000 58,448 100,000
William L. Respess........................ 1999 294,821 0 29,291 0
Senior Vice President, 1998 294,821 24,000 7,789 66,350
General Counsel, Government Affairs 1997 282,125 21,000 3,994 50,000
and Secretary
Andres F. Negro-Vilar .....................
Senior Vice President, 1999 288,864 0 97,204 30,000
Research and Development and Chief 1998 288,864 25,500 64,309 70,875
Scientific Officer 1997 274,410 24,000 92,236 0
Steven D. Reich............................ 1999 249,613 0 25,733 0
Senior Vice President, Clinical Research 1998 249,613 16,500 27,200 29,000
1997 240,013 18,000 47,600 0
Paul V. Maier............................. 1999 238,444 0 25,762 0
Senior Vice President, 1998 238,444 31,500 3,960 66,914
Chief Financial Officer 1997 226,550 28,500 19,040 0
</TABLE>
(1) Compensation deferred at the election of the executive, pursuant to the
Ligand Pharmaceuticals 401(k) Plan and Ligand Deferred Compensation Plan
are included in the year earned.
(2) Bonuses to be paid to the Named Executive Officers for services rendered
during 1999 will be determined following the mailing of this proxy
statement.
(3) Amounts which are not otherwise described in this note for the Named
Executive Officers represent the value of life insurance coverage. The
amounts for 1999 include the following: for Mr. Robinson, includes $61,078
of excess earnings on contributions to the Deferred Compensation Plan; for
Mr. Respess, includes $24,350 of excess earnings on contributions to the
Deferred Compensation Plan; for Dr. Negro-Vilar, includes $42,678 of excess
earnings on contributions to the Deferred Compensation Plan, $35,940 loan
forgiveness and $15,000 housing allowance; for Dr. Reich, includes $23,816
loan forgiveness; and for Mr. Maier, includes $23,943 of excess earnings on
contributions to the Deferred Compensation Plan. The amounts for 1998
include the following: for Mr. Robinson, includes $7,893 of excess earnings
on contributions to the Deferred Compensation Plan; for Mr. Respess,
includes $4,489 of excess earnings on contributions to the Deferred
Compensation Plan; for Dr. Negro-Vilar, includes $8,089 of excess earnings
on contributions to the Deferred Compensation Plan, $15,000 housing
allowance and $37,920 loan forgiveness; for Dr. Reich, includes $25,088
loan forgiveness; and for Mr. Maier, includes $1,936 of excess earnings on
contributions to the Deferred Compensation Plan. The amounts for 1997
include the following: for Mr. Robinson, includes $52,660 loan forgiveness
and $4,476 of excess earnings on contributions to the Deferred Compensation
Plan; for Mr. Respess, includes $1,195 of excess earnings on contributions
to the Deferred Compensation Plan; for Dr. Negro-Vilar includes, $2,887 of
excess earnings on contributions to the Deferred Compensation Plan, $15,000
housing allowance, $32,604 relocation reimbursements, and $39,900 loan
forgiveness; for Dr. Reich, includes $9,088 relocation reimbursements and
$11,000 housing allowance; and for Mr. Maier, includes $1,871 of excess
earnings on contributions to the Deferred Compensation Plan and $15,798
loan forgiveness.
29
<PAGE>
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table provides information on the option grants
made to the Named Executive Officers during the fiscal year ended December 31,
1999. No stock appreciation rights were granted to the Named Executive Officers
during that fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of
Securities Options/SARs Stock Price
Underlying Granted to Appreciation for
Options/SARs Employees in Exercise or Option Term
Granted Fiscal Base Price Expiration ----------------------
Name (#) Year ($/Sh) Date 5%($) 10%($)
- ---- --- ---- ------ ---- --------- --------
<S> <C> <C> <C> <C> <C> <C>
David E. Robinson 100,000 11.2% 10.0625 07/22/09 632,825 1,603,703
William L. Respess 0 N/A N/A N/A N/A N/A
Andres Negro-Vilar 30,000 3.4% 7.625 09/30/09 143,860 364,569
Steven D. Reich 0 N/A N/A N/A N/A N/A
Paul V. Maier 0 N/A N/A N/A N/A N/A
</TABLE>
Each option has a maximum term of 10 years measured from such
grant date, subject to earlier termination upon the optionee's cessation of
service with the Company. The shares subject to each option will vest in four
successive equal annual installments upon the optionee's completion of each year
of service with the Company over the four-year period measured from the option
grant date. The vesting of the shares subject to the options granted to Mr.
Robinson will accelerate in connection with his termination of employment under
certain circumstances, including a change in control of the Company. The shares
subject to the options granted to the other Named Executive Officers will
immediately vest in full in the event their employment were to terminate
following certain changes in control of the Company. These arrangements are
described below in "--Employment Contracts, Severance Agreements and Change of
Control Arrangements."
The plan administrator may grant tandem stock appreciation rights
in connection with option grants which require the holder to elect between the
exercise of the underlying option for shares of common stock and the surrender
of such option for a distribution from the Company, payable in cash or shares of
common stock, based upon the appreciated value of the option shares.
The exercise price may be paid in cash, in shares of common stock
valued at fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company may
also finance the option exercise by loaning the optionee sufficient funds to pay
the exercise price for the purchased shares and the federal and state tax
liability incurred in connection with such exercise. The optionee may be
permitted, subject to the approval of the plan administrator, to apply a portion
of the shares purchased under the option (or to deliver existing shares of
common stock) in satisfaction of such tax liability.
The Company does not provide assurance to any executive officer
or any other holder of the Company's securities that the actual stock price
appreciation over the 10-year option term will be at the assumed 5% and 10%
levels or at any other defined level. Unless the market price of the common
stock does in fact appreciate over the option term, no value will be realized
from the option grants made to the executive officers.
30
<PAGE>
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth certain information concerning
option exercises and holdings for the fiscal year ended December 31, 1999 with
respect to each of the Named Executive Officers. No stock appreciation rights
were exercised by the Named Executive Officers during such fiscal year, and no
stock appreciation rights were held by them at the end of such fiscal year. No
shares were acquired on the exercise of options during the fiscal year ended
December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs Options/SARs at December 31, 1999
at December 31, 1999 -----------------------------------
----------------------------------
Name Exercisable (#) Unexercisable (#) Exercisable ($) Unexercisable ($)
- ---- --------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
David E. Robinson 374,290 203,125 978,474 337,761
William L. Respess 225,520 61,581 779,181 167,430
Andres Negro-Vilar 101,922 98,953 134,581 350,411
Steven D. Reich 103,292 15,708 415,349 25,525
Paul V. Maier 194,790 61,147 627,384 179,164
- ---------------------------------------------------------------------------------------------------
</TABLE>
Value of unexercised in-the-money options is equal to the fair market value of
the securities underlying the option at fiscal year-end ($12.875 per share),
less the exercise price payable for those securities.
EMPLOYMENT CONTRACTS, SEVERANCE AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
In May 1996, the Company entered into an employment agreement
with Mr. Robinson pursuant to which he is to be employed as President and Chief
Executive Officer. In October 1998, this agreement was renewed through May 1,
2002. This agreement will automatically be renewed for successive additional
three year terms, unless earlier terminated by the Company or Mr. Robinson.
During the remainder of the employment term, Mr. Robinson will receive a base
salary of at least $540,225 per year and annual incentive bonuses based upon his
performance and the Company's attainment of designated performance goals. If Mr.
Robinson's employment is terminated without cause, or if he resigns for
specified reasons, such as
o a change in positions, duties and responsibilities without
consent,
o a reduction in salary or benefits, or
o certain events occurring upon a change in control of the
Company,
he will be entitled to a severance payment equal to 24 months of base salary (at
the rate in effect for him at the time of such termination), and all of his
outstanding options will (except under certain limited circumstances) vest and
become exercisable for all the option shares on an accelerated basis in
connection with his termination of employment, including a termination following
a change in control of the Company.
In September 1996, the Company entered into an employment
agreement with Dr. Negro-Vilar pursuant to which he is employed as Senior Vice
President, Research and Chief Scientific Officer for an unspecified term. The
agreement provides that Dr. Negro-Vilar is an at-will employee. In connection
with the agreement, the Company loaned Dr. Negro-Vilar the principal sum of
$150,000 with an interest rate of 6.6% per annum. The principal balance,
together with accrued interest, will be forgiven in five successive equal annual
installments upon his completion of each year of employment with the Company
over the five-year period measured from November 1996. Upon his termination of
employment, the entire unpaid balance will become immediately due and payable.
31
<PAGE>
In addition, Dr. Negro-Vilar was granted an option to purchase 100,000 shares of
the Common Stock at an exercise price of $12.13 per share. The shares will vest
in a series of four successive equal annual installments upon his completion of
each year of employment with the Company over the four-year period measured from
the grant date. In the event his employment is terminated without cause, he will
be entitled to 12 months of salary continuation payments, and all of his
outstanding options will immediately vest and become exercisable for all of the
option shares.
In December 1996, the Company entered into an employment
agreement with Dr. Reich pursuant to which he is employed as Senior Vice
President, Clinical Research. In connection with the agreement, the Company
loaned Dr. Reich the principal sum of $100,000 with an interest rate of 6.36%
per annum. The principal balance, together with accrued interest, will be
forgiven in five successive equal annual installments upon his completion of
each year of employment with the Company over the five-year period measured from
May 1996. Upon his termination of employment, the entire unpaid balance will
become immediately due and payable. Dr. Reich was also granted an option to
purchase 90,000 shares of Common Stock at an exercise price of $8.50 per share.
If Dr. Reich's employment is terminated by the Company without cause, he will be
entitled to six months of salary continuation payments.
In September 1992, Ligand entered into an employment agreement
with Paul V. Maier pursuant to which Mr. Maier is employed as Senior Vice
President and Chief Financial Officer. In connection with the agreement, Ligand
loaned Mr. Maier $75,000 which, with the accrued interest, was forgiven in equal
annual installments over five years. In connection with the agreement, Mr. Maier
was granted an option to purchase 81,188 shares of Ligand Common Stock, which
shares vest over four years, at an average price of $8.87 per share. If Mr.
Maier's employment is terminated by the Company without cause, Ligand has agreed
to pay him six months base salary.
The Company has entered into an agreement with each employee
holding one or more outstanding options under the 1992 Plan (including each of
the Named Executive Officers other than Mr. Robinson), pursuant to which such
options will automatically vest on an accelerated basis in the event that such
individual's employment is terminated following
o an acquisition of the Company by merger or asset sale or
o a change in control of the Company effected through a
successful tender offer for more than 50% of the Company's
outstanding Common Stock or through a change in the majority
of the Board as a result of one or more contested elections
for Board membership.
As indicated above, all of Mr. Robinson's outstanding options will (except under
certain limited circumstances) vest and become exercisable for all the option
shares on an accelerated basis in connection with his termination of employment,
including a termination following a change in control of the Company.
Effective January 5, 1998, the Company entered into severance
agreements with each of the Named Executive Officers, other than Mr. Robinson,
and certain other executive officers pursuant to which such individuals will, in
the event their employment is involuntarily terminated in connection with a
change in control of the Company, receive a severance benefit equal to
o one times the annual rate of base salary in effect for such
officer at the time of involuntary termination plus
32
<PAGE>
o one times the average of bonuses paid to such officer for
services rendered in the two fiscal years immediately
preceding the fiscal year of involuntary termination. The
severance amount will be payable in 12 monthly installments
following the officer's termination of employment.
The following Board Compensation Committee Report on Executive
Compensation and Performance Graph should be not be considered to be part of
this proxy statement and any current or future cross references to this proxy
statement in filings with the SEC under either the Securities Act or the
Securities Exchange Act shall not include the Board Compensation Committee
Report on Executive Compensation or the Performance Graph reproduced below.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is the report delivered by the Compensation
Committee of the Company's Board of Directors with respect to the principal
factors considered by such Committee in determining the compensation of the
Company's executive officers.
As members of the Compensation Committee of the Board of
Directors, it is our duty to set the base salary of the Company's executive
officers and to administer the Company's 1992 Stock Option/Stock Issuance Plan
under which grants may be made to them and other key employees. In addition, we
approve the individual bonus programs to be effective for the executive officers
each fiscal year.
General Compensation Policy. Our fundamental policy is to offer
the Company's executive officers competitive compensation opportunities based
upon their contribution to the financial success of the Company and their
personal performance. It is our objective to have a substantial portion of each
officer's compensation contingent upon the Company's performance as well as upon
his or her own level of performance. Accordingly, each executive officer's
compensation package is comprised of three elements:
o base salary which reflects individual performance and is
designed primarily to be competitive with salary levels in
the industry,
o annual variable performance awards payable in cash and tied
to the achievement of financial performance goals
established by us, and
o long-term stock-based incentive awards which strengthen the
mutuality of interests between the executive officers and
the Company's stockholders.
As an officer's level of responsibility increases, it is our intent to have a
greater portion of his or her total compensation be dependent upon the Company's
performance and stock price appreciation rather than base salary.
Factors. The principal factors which we considered in
establishing the components of each executive officer's compensation package for
the 1999 fiscal year are summarized below. We may in our discretion apply
entirely different factors, particularly different measures of financial
performance, in setting executive compensation for future fiscal years, but all
compensation decisions will be designed to further the general compensation
policy indicated above.
Base Salary. The base salary for each officer is set on the basis
of:
o industry experience, knowledge and qualifications,
o the salary levels in effect for comparable positions within
the Company's principal industry marketplace competitors and
o internal comparability considerations.
33
<PAGE>
We did not rely upon any specific compensation surveys for comparative
compensation purposes. Instead, we made our decisions as to the appropriate
market level of base salary for each executive officer on the basis of our
understanding of the salary levels in effect for similar positions at those
companies with which the Company competes for executive talent. We estimate that
the salary levels of the Company's executive officers range from the 50th
percentile to the 90th percentile of the salary levels in effect for comparable
positions at those other companies.
Annual Incentive Compensation. Annual bonuses are earned by each
executive officer solely on the basis of the Company's achievement of the
corporate performance targets we establish at the start of the fiscal year. For
fiscal year 1999, the performance targets were based upon individual goals
supporting key corporate objectives, and each executive will be evaluated in
relation to his or her contribution to the attainment of those targets.
Accordingly, this element of executive compensation is earned solely on the
basis of the Company's success in achieving the corporate goals. This element of
compensation has not been determined as of the date of the mailing of this
proxy.
Long-Term Incentive Compensation. During 1999, we approved the
grant of stock options to certain executive officers under the 1992 Plan. The
grants are designed to align the interests of each executive officer with those
of the stockholders and provide each individual with a significant incentive to
manage the Company from the perspective of an owner with an equity stake in the
business. The number of shares subject to each option grant was based on the
officer's level of responsibilities and relative position in the Company.
However, we do not adhere to any specific set of guidelines and determine the
size of each grant as circumstances warrant.
Each grant allows the officer to acquire shares of Common Stock
the market price on the grant date over a specified period of time, up to 10
years. Accordingly, the option will provide a return to the executive officer
only if the market price of the shares appreciates over the option term.
CEO Compensation. In setting the compensation payable to the
Company's Chief Executive Officer, Mr. Robinson, we have sought to be
competitive with other companies in the industry, while at the same time tying a
significant percentage of such compensation to the Company's performance and
stock price appreciation. As described above under "Employment Contracts,
Severance Agreements and Change in Control Agreements," an employment agreement
between the Company and Mr. Robinson sets forth the terms and conditions,
including compensation, governing Mr. Robinson's employment.
We established Mr. Robinson's base salary upon our evaluation of
his personal performance and our objective to have his base salary keep pace
with salaries being paid to similarly situated chief executive officers. We
estimate that his base salary is at the 75th to 90th percentile of the salary
levels paid to such other chief executive officers.
The remaining components of Mr. Robinson's 1999 fiscal year
compensation, however, were entirely dependent upon financial performance and
provided no dollar guarantees. The cash bonus paid to him for the 1999 fiscal
year will be based entirely on the Company's attainment of certain objectives
based on key corporate goals. This cash bonus has not been determined as of the
date of the mailing of this proxy. It is our objective to have an increasing
percentage of Mr. Robinson's total compensation each year tied to the attainment
of performance targets and stock price appreciation on his option shares.
Compliance with Internal Revenue Code Section 162(m). Section
162(m) of the Internal Revenue Code disallows a tax deduction to publicly held
companies for compensation paid to certain of their executive officers, to the
extent that compensation exceeds $1.0 million per covered officer in any fiscal
year. The limitation applies only to compensation which is not considered to be
performance-based. The non-performance based compensation paid in cash to the
Company's executive officers for the 1999 fiscal year did not exceed the $1.0
million limit per officer, and the Compensation Committee does not anticipate
that the non-performance based compensation to be paid in cash to the Company's
executive officers for fiscal 2000 will exceed that limit. The 1992 Plan has
been structured so that any compensation paid in connection with the exercise of
options grants under that plan with an exercise price equal to the fair market
value of the option shares on the grant date will qualify as performance-based
compensation, and therefore not subject to the $1.0 million limitation.
34
<PAGE>
It is the opinion of the Compensation Committee that the
executive compensation policies and plans provide the necessary total
remuneration program to properly align the Company's performance and the
interests of the Company's stockholders through the use of competitive and
equitable executive compensations in a balanced and reasonable manner, for both
the short- and long-term.
We conclude our report with the acknowledgement that no member of
the Compensation Committee is a current officer or employee of the Company or
any of its subsidiaries.
COMPENSATION COMMITTEE
HENRY F. BLISSENBACH
JOHN GROOM
35
<PAGE>
PERFORMANCE GRAPH
The graph below shows the five-year cumulative total stockholder
return assuming the investment of $100 and the reinvestment of dividends,
although dividends have not been declared on the common stock, and is based on
the returns of the component companies weighted according to their market
capitalizations as of the end of each monthly period for which returns are
indicated in each of the common stock, and compares total stockholder returns of
common stock, the Nasdaq Composite Index, and the Nasdaq Pharmaceutical Index.
The Nasdaq Composite Index tracks the aggregate price performance of equity
securities of companies traded on the Nasdaq. The common stock is traded on the
Nasdaq National Market. The Nasdaq Pharmaceutical Index tracks approximately 25
domestic stocks in the biotechnology sector.
The stockholder return shown on the graph below is not
necessarily indicative of future performance and the Company will not make or
endorse any predictions as to future stockholder returns.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NASDAQ NASDAQ
LIGAND COMPOSITE INDEX PHARMACEUTICAL INDEX
------ --------------- --------------------
<S> <C> <C> <C>
12/31/1994 100 100 100
12/31/1995 130.303 141.335 183.412
12/31/1996 180.303 173.892 183.983
12/31/1997 156.061 213.073 189.979
12/31/1998 140.909 300.248 241.679
12/31/1999 156.061 542.43 451.62
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Messrs. Blissenbach and
Groom. No member of the Compensation Committee was at any time during the 1999
fiscal year or at any other time an officer or employee of the Company. No
executive officer of the Company served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as members of the Company's board of directors or Compensation
Committee.
36
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1999, the Company issued $40.0 million of zero coupon
convertible senior notes to an affiliate of Elan Corporation plc, convertible at
$14.00 per share. In August 1999, the Company issued another $20.0 million of
these notes to an affiliate of Elan, convertible at $9.15 per share. In December
1999, Elan converted the $20.0 million issue price notes, plus accrued interest,
into 2,244,460 shares of common stock. In connection with this conversion, the
Company provided Elan a $2.2 million conversion incentive through the issuance
of an additional 188,572 shares of common stock. In December 1999, the Company
also paid Elan a $5.0 million milestone payment through the issuance of 498,443
shares of common stock related to a license agreement with Elan related to the
development of Morphelan. In addition, in September 1999, the Company sold
52,742 shares of common stock and in August 1999 warrants to purchase 91,406
shares of common stock to Elan for an aggregate consideration of $839,000 in
connection with rights of first offer held by Elan under the note purchase
agreement. In March 2000, Elan converted an additional $20.0 million issue price
of notes, plus accrued interest, into 1,600,123 shares of common stock. In
connection with this conversion, the Company provided Elan with a $2.0 million
conversion incentive through the issuance of an additional 98,580 shares of
common stock. As of March 31, 2000, Elan beneficially held 6,730,263 shares of
common stock and $65.8 million issue price of the notes were outstanding.
Certain holders of the common stock, and the common stock
issuable upon exercise of warrants and other convertible securities, are
entitled to registration rights with respect to such stock.
The 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 the Delaware General Corporation 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 nonmonetary 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and the Nasdaq. Officers,
directors and greater than 10% shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to
the Company, or written representations that no Forms 5 were required, the
Company believes that, during the period from January 1999 through December
1999, all Section 16(a) filing requirements applicable to its officers,
directors and greater than
37
<PAGE>
10% beneficial owners were satisfied, with the exception of Michael A. Rocca
for which one transaction was inadvertently not filed on a timely basis.
STOCKHOLDER PROPOSALS FOR 2001 PROXY STATEMENT
Under the present rules of the SEC, the deadline for stockholders
to submit proposals to be considered for inclusion in the Company's proxy
statement for next year's annual meeting of stockholders is expected to be
December 21, 2000 (120 days prior to April 20, 2001). Such proposals may be
included in next year's Proxy Statement if they comply with certain rules and
regulations promulgated by the SEC and the procedure set forth in the Bylaws of
the Company, which requires notice to be delivered or mailed and received at the
Company's executive offices on or before December 21, 2000.
In addition, the proxy solicited by the Board of Directors for
the year 2001 annual meeting of stockholders will confer discretionary authority
to rate on any stockholder proposal presented at that meeting, unless the
Company receives notice of such proposal no later than March 6, 2001.
ANNUAL REPORT
A copy of the Annual Report of the Company for the 1999 Fiscal
Year has been mailed concurrently with this Proxy Statement to all stockholders
entitled to notice of and to vote at the annual meeting. The Annual Report is
not incorporated into this Proxy Statement and is not considered proxy
solicitation material.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A
COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO INVESTOR RELATIONS.
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors
knows of no other business that will be presented for consideration at the
annual meeting. If other matters are properly brought before the annual meeting,
however, it is the intention of the persons named in the accompanying proxy to
vote the shares represented thereby on such matters in accordance with their
best judgment.
Dated: April 20, 2000 William L. Respess
Secretary
<PAGE>
ATTACHMENT A
CERTIFICATE OF AMENDMENT
OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LIGAND PHARMACEUTICALS INCORPORATED
a Delaware Corporation
Ligand Pharmaceuticals Incorporated, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify:
FIRST: That resolutions were duly adopted by the Board of
Directors of the Corporation setting forth a proposed amendment to the Amended
and Restated Certificate of Incorporation of the Corporation, and declaring said
amendment to be advisable and recommended for approval by the stockholders of
the Corporation. The resolutions setting forth the proposed amendment are as
follows:
RESOLVED, that Paragraph (A) of ARTICLE IV of the Amended and
Restated Certificate of Incorporation of this Corporation is
hereby amended to read in its entirety as follows:
(A) Classes of Stock. This corporation is authorized
to issue two classes of stock to be designated,
respectively, "Common Stock" and "Preferred Stock." The
total number of shares of all classes of capital stock
which this corporation shall have authority to issue is
one hundred thirty-five million (135,000,000) of which one
hundred thirty million (130,000,000) shares of the par
value of one-tenth of one cent ($.001) each shall be
Common Stock and five million (5,000,000) shares of the
par value of one-tenth of one cent ($.001) each shall be
Preferred Stock. The number of authorized shares of Common
Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the
affirmative vote of the holders of the majority of the
shares of stock of this corporation entitled to vote in
the election of directors.
SECOND: That, thereafter, the stockholders of said Corporation
approved the amendment by vote of the outstanding shares in accordance with
Section 222 of the Delaware General Corporation Law.
<PAGE>
THIRD: That said amendment was duly adopted in accordance with
the provisions of Section 242 of the Delaware General Corporation Law.
FOURTH: That the capital of said Corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, this Certificate of Amendment of Amended and
Restated Certificate of Incorporation has been executed as of this ___ day of
_________, 2000.
LIGAND PHARMACEUTICALS INCORPORATED
By:________________________________
William L. Respess, Secretary
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
1992 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
AS AMENDED THROUGH MAY 20, 1999
-------------------------------
ARTICLE ONE
GENERAL
-------
I. PURPOSE OF THE PLAN
A. This 1992 Stock Option/Stock Issuance Plan ("Plan") is
intended to promote the interests of Ligand Pharmaceuticals Incorporated, a
Delaware corporation (the "Corporation"), by providing (i) key employees
(including officers) of the Corporation (or its parent or subsidiary
corporations) who are responsible for the management, growth and financial
success of the Corporation (or its parent or subsidiary corporations), (ii)
non-employee members of the Board of Directors and (iii) consultants and other
independent contractors who provide valuable services to the Corporation (or its
parent or subsidiary corporations) with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest in the Corporation as
an incentive for them to remain in the service of the Corporation (or its parent
or subsidiary corporations).
B. The Plan became effective on November 17, 1992, the date on
which the shares of the Corporation's common stock were first registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). Such date is hereby designated as the "Effective Date" of this Plan.
C. This Plan shall serve as the successor to the Corporation's
Restricted Stock Purchase Plan (the "Stock Plan") and 1988 Stock Option Plan
(the "Option Plan") (such Plans are hereinafter referred to as the "Predecessor
Plans"), and no further option grants or share issuances shall be made under the
Predecessor Plans from and after the Effective Date. Each outstanding option or
share issuance under the Predecessor Plans immediately prior to the Effective
Date were incorporated into this Plan and are to be treated as outstanding
options or stock issuances under this Plan. However, each such option or share
issuance shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant or issuance, and, except as otherwise expressly
provided herein, no provision of this Plan shall affect or otherwise modify the
rights or obligations of the holders of such incorporated options or shares with
respect to their acquisition of shares of the Corporation's common stock or
otherwise modify the rights or obligations of the holders of such options or
shares.
D. For purposes of this Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the
Corporation:
<PAGE>
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation
shall be considered to be a parent of the Corporation,
provided each such corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the
other corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation
shall be considered to be a subsidiary of the Corporation,
provided each such corporation (other than the last
corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one
of the other corporations in such chain.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate components: the
Discretionary Option Grant Program specified in Article Two, the Automatic
Option Grant Program specified in Article Three, the Stock Issuance Program
specified in Article Four, and the Director Fee Option Grant Program specified
in Article Five. Under the Discretionary Option Grant Program, eligible
individuals may be granted options to purchase shares of the Corporation's
common stock at not less than 85% of the Fair Market Value (as defined below) of
such shares on the grant date. Under the Automatic Option Grant Program,
eligible non-employee members of the Board of Directors will be granted options
to purchase shares of the Corporation's common stock at 100% of the Fair Market
Value of such shares on the grant date. Subject to the limitations contained in
this Plan, the Stock Issuance Program shall allow eligible individuals to
purchase shares of the Corporation's common stock at discounts from the Fair
Market Value of such shares of up to 15%. Such shares may be issued as
fully-vested shares or as shares to vest over time. Under the Director Fee
Option Grant Program, non-employee Board members may elect to apply all or a
portion of the fee otherwise payable in cash to him or her each year to the
acquisition of a special option grant.
B. The provisions of Articles One and Six of the Plan shall apply
to both the Discretionary Option Grant Program and the Stock Issuance Program
and shall accordingly govern the interests of all individuals in the Plan.
C. With respect to persons subject to Section 16 of the
Securities Exchange Act of 1934 ("1934 Act"), transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. To the extent any provision of the Plan or action
by the Committee (as defined below) fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. Plan Administrator. The Board shall appoint a committee of two
(2) or more non-employee Board members (the "Primary Committee") to have sole
and exclusive authority to administer the Discretionary Option Grant and Stock
Issuance Programs to administer the Plan with respect to officers and directors
subject to Section 16 of the 1934 Act ("Section 16 Insiders").
B. Committees. Administration of the Discretionary Option Grant
and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, in the Board's discretion, be vested in the
Primary Committee or a committee of two (2) or more Board members appointed by
the Board (the "Secondary Committee"), or the Board may retain the power to
administer those programs with respect to all such persons.
C. Members of Committees. Members of the Primary Committee or any
Secondary Committee shall serve for such period of time as the Board may
determine and may be removed by the Board at any time. The Board may also at any
time terminate the functions of any Secondary Committee and assume all powers
and authority previously delegated to such committee.
D. Service as Committee Members. Service on the Primary Committee
or the Secondary Committee shall constitute service as a Board member, and
members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such
committee. No member of the Primary Committee or the Secondary Committee shall
be liable for any act or omission made in good faith with respect to the Plan or
any option grants or stock issuances under the Plan.
E. Authority. Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the
Discretionary Option Grant Program and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, such programs and any
outstanding option grants or stock issuances as it may deem necessary or
advisable. Decisions of each Plan Administrator shall be final and binding on
all parties who have an interest in the Discretionary Option Grant Program and
Stock Issuance Program or any outstanding option or stock issuance thereunder.
F. Restriction on Discretion. The administration of the Automatic
Option Grant Program under Article Three and the Director Fee Option Grant
Program under Article Five shall be self executing in accordance with the terms
and provisions of those programs, and no Plan Administrator shall exercise any
discretionary functions with respect to such programs.
<PAGE>
IV. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to receive stock issuances under the
Stock Issuance Program ("Participant") and/or option grants pursuant to the
Discretionary Option Grant Program ("Optionee") are as follows:
(i) officers and other key employees of the Corporation
(or its parent or subsidiary corporations) who render
services which contribute to the management, growth and
financial success of the Corporation (or its parent or
subsidiary corporations);
(ii) non-employee members of the Board of Directors;
and
(iii) those consultants or other independent
contractors who provide valuable services to the Corporation
(or its parent or subsidiary corporations).
B. Only non-employee members of the Board shall be eligible to
participate in the Automatic Option Grant Program and the Director Fee Option
Grant Program.
C. Each Plan Administrator shall have full authority to
determine, (i) with respect to the option grants made under the Discretionary
Option Grant Program, which eligible individuals are to receive option grants,
the time or times when such grants are to be made, the number of shares to be
covered by each such grant, whether the granted option is to be an incentive
stock option ("Incentive Option") which satisfies the requirements of Section
422 of the Internal Revenue Code or a non-statutory option not intended to meet
such requirements, the time or times at which each granted option is to become
exercisable and the maximum term for which the option may remain outstanding and
(ii) with respect to stock issuances under the Stock Issuance Program, the
number of shares to be issued to each Participant, the vesting schedule (if any)
to be applicable to the issued shares, and the consideration to be paid by the
individual for such shares.
D. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with Article Two of the Plan or to effect
stock issuances in accordance with Article Four of the Plan. The Plan
Administrator will have no discretion with respect to the grant of options under
the Automatic Option Grant Program and the Director Fee Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock (hereinafter referred
to as "Common Stock") shall be available for issuance under the Plan and shall
be drawn from either the Corporation's authorized but unissued shares of Common
Stock or from reacquired shares of Common Stock, including shares repurchased by
the Corporation on the open market. The maximum number of shares issuable under
the Plan is 9,573,457 shares of Common Stock. Such share reserve includes an
increase of 500,000 shares authorized by the Board effective as of February 10,
2000, subject to stockholder approval at the 2000 Annual Meeting.
<PAGE>
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 1,000,000 shares of Common Stock in the aggregate over the term of the
Plan.
C. Should one or more outstanding options under this Plan
(including outstanding options under the Predecessor Plans incorporated into
this Plan) expire or terminate for any reason prior to exercise in full
(including any option cancelled in accordance with the cancellation-regrant
provisions of Section IV of Article Two of the Plan), then the shares subject to
the portion of each option not so exercised shall be available for subsequent
option grant or share issuance under this Plan. Unvested shares issued under the
Plan and subsequently cancelled or repurchased by the Corporation, at the
original exercise or issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants or direct
stock issuances under the Plan. However, shares subject to any option or portion
thereof surrendered or cancelled in accordance with Section V of Article Two
shall reduce on a share-for-share basis the number of shares of the same class
of Common Stock available for subsequent option grant or stock issuance under
the Plan. In addition, should the exercise price of an outstanding option under
the Plan be paid with shares of Common Stock or should shares of Common Stock
otherwise issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of an
outstanding option under the Plan, then the number of shares of Common Stock of
the same class available for issuance under the Plan shall be reduced by the
gross number of shares for which the option is exercised, and not by the net
number of shares of Common Stock actually issued to the option holder.
D. In the event any change is made to the Common Stock issuable
under the Plan by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares, conversion or other change affecting
the outstanding Common Stock, or any class of Common Stock as a class, without
the Corporation's receipt of consideration, then appropriate adjustments shall
be made to (i) the number and/or class of shares issuable under the Plan, (ii)
the number and/or class of securities for which any one person may be granted
stock options, separately exercisable stock appreciation rights and direct stock
issuances over the term of the Plan, and (iii) the number and/or class of shares
and price per share in effect under each outstanding option under this Plan
(including outstanding options incorporated into this Plan from the Predecessor
Plans). Such adjustments to the outstanding options are to be effected in a
manner which shall preclude the enlargement or dilution of rights and benefits
under such options. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.
E. Common Stock issuable under the Discretionary Option Grant
Program or the Stock Issuance Program may be subject to such restrictions on
transfer, repurchase rights or other restrictions as determined by the Plan
Administrator.
VI. DETERMINATION OF FAIR MARKET VALUE
The "Fair Market Value" of a share of Common Stock shall be
determined in accordance with the following provisions:
<PAGE>
- If shares of Common Stock to be valued are not at
the time listed or admitted to trading on any national stock exchange
but is traded on the Nasdaq National Market, the Fair Market Value
shall be the closing selling price per share of a share of that class
on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market. If
there is no reported closing selling price for the series on the date
in question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of Fair Market
Value.
- If shares of the class of common stock to be valued
are at the time listed or admitted to trading on any national stock
exchange, then the Fair Market Value of a share of that class shall be
the closing selling price per share on the date in question on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
reported sale of a share of the class on such exchange on the date in
question, then the Fair Market Value shall be the closing selling price
on the exchange on the last preceding date for which such quotation
exists.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
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I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two shall be authorized
by action of the Plan Administrator and, at the Plan Administrator's discretion,
may be either Incentive Options or Non-Statutory Options. Individuals who are
not Employees of the Corporation or its parent or subsidiary corporations may
only be granted Non-Statutory Options. Each granted option shall be evidenced by
one or more instruments in the form approved by the Plan Administrator;
provided, however, that each such instrument shall comply with the terms and
conditions specified below. Each instrument evidencing an Incentive Option
shall, in addition, be subject to the applicable provisions of Section II of
this Article Two.
A. Option Price.
(1) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the price for any share be less than
eighty-five percent (85%) of the Fair Market Value of that share on the date of
the option grant.
(2) The option price shall become immediately due upon
exercise of the option and, subject to the provisions of Article Six, Section II
and the instrument evidencing the grant, shall be payable in one of the
following alternative forms specified below:
- full payment in cash or check drawn to the
Corporation's order;
- full payment in shares of Common Stock held for at
least six (6) months and valued at Fair Market Value on
the Exercise Date;
- full payment in a combination of shares of Common Stock
held for at least six (6) months and valued at Fair
Market Value on the Exercise Date and cash or check; or
- full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I)
shall provide irrevocable instructions to a designated
brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate option price
payable for the purchased shares plus all applicable
Federal and State income and employment taxes required
to be withheld by the Corporation in connection with
such purchase and (II) shall provide written directives
to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in
order to complete the sale transaction.
<PAGE>
For purposes of this subparagraph (2), the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the option price for
the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted under this
Article Two shall be exercisable at such time or times and during such period as
is determined by the Plan Administrator and set forth in the stock option
agreement evidencing the grant. No such option, however, shall have a maximum
term in excess of ten (10) years from the grant date.
C. Termination of Service.
(1) Except to the extent otherwise provided pursuant to
Section VI of this Article Two, the following provisions shall govern the
exercise period applicable to any outstanding options under this Article Two
which are held by the Optionee at the time of his or her cessation of Service
or death.
- Should an Optionee's Service terminate for any reason (including
death or permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code) while the holder of one or more outstanding options
under the Plan, then none of those options shall (except to the extent
otherwise provided pursuant to Section VI of this Article Two) remain
exercisable beyond the limited post-Service period designated by the Plan
Administrator at the time of the option grant and set forth in the option
agreement.
- Any option granted to an Optionee under this Article Two and
exercisable in whole or in part on the date of the Optionee's death may be
subsequently exercised, by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution, provided and only if such exercise occurs prior to the
earlier of (i) the third anniversary of the date of the Optionee's death or
(ii) the specified expiration date of the option term. Upon the occurrence
of the earlier event, the option shall terminate and cease to be
exercisable.
- Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
- During the limited post-Service period of exercisability, the option
may not be exercised in the aggregate for more than the number of shares
for which the option is exercisable on the date the Optionee's Service
terminates. Upon the expiration of such limited exercise period or (if
earlier) upon the expiration of the option term, the option shall terminate
and cease to be exercisable.
<PAGE>
(2) The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding:
- to permit one or more options held by the Optionee under this
Article Two to be exercised, during the limited period of post-Service
exercisability provided under subparagraph (1) above, not only with respect
to the number of shares for which each such option is exercisable at the
time of the Optionee's cessation of Service but also with respect to one or
more subsequent installments of purchasable shares for which the option
would otherwise have become exercisable had such cessation of Service not
occurred, and
- to extend the period of time for which any option granted under this
Article Two is to remain exercisable following the Optionee's cessation of
Service or death from the limited period in effect under subparagraph (1)
above to such greater period of time as the Plan Administrator shall deem
appropriate; provided, however, that in no event shall such option be
exercisable after the specified expiration date of the option term.
(3) For purposes of the foregoing provisions of this Section
I.C (and for all other purposes under the Plan):
- The Optionee shall (except to the extent otherwise specifically
provided in the applicable option or issuance agreement) be deemed to
remain in the Service of the Corporation for so long as such individual
renders services on a periodic basis to the Corporation (or any parent or
subsidiary corporation) in the capacity of an Employee, a non-employee
member of the Board or an independent consultant or advisor.
- The Optionee shall be considered to be an Employee for so long as he
or she remains in the employ of the Corporation or one or more parent or
subsidiary corporations, subject to the control and direction of the
employer entity not only as to the work to be performed but also as to the
manner and method of performance.
D. Stockholder Rights. An Optionee shall have no stockholder
rights with respect to any shares covered by the option until such individual
shall have exercised the option, paid the option price for the purchased shares
and been issued a stock certificate for such shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
<PAGE>
F. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. Non-Statutory Options may, to
the extent permitted by the Plan Administrator, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to
all Incentive Options granted under this Article Two. Incentive Options may only
be granted to individuals who are Employees of the Corporation. Options which
are specifically designated as "non-statutory" options when issued under the
Plan shall not be subject to such terms and conditions.
A. Option Price. The option price per share of any share of
Common Stock subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the Fair Market Value of such share of Common Stock on
the grant date.
B. Dollar Limitation. The aggregate Fair Market Value (determined
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee under this Plan (or any other option
plan of the Corporation or its parent or subsidiary corporations) may for the
first time become exercisable as incentive stock options under the Federal tax
laws during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two or more such
options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability of such options as Incentive
Options under the Federal tax laws shall be applied on the basis of the order in
which such options are granted.
C. 10% Stockholder. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
the Common Stock on the option grant date, and the option term shall not exceed
five (5) years measured from the option grant date.
Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Six of the Plan shall apply to all
Incentive Options granted hereunder.
III. CORPORATE TRANSACTIONS
A. For purposes of this Section III, a "Corporate Transaction"
shall mean any one of the following stockholder-approved transactions:
<PAGE>
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of
which is to change the State of the Corporation's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in liquidation or
dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to holders different from those
who held such securities immediately prior to such merger.
B. Each outstanding option which is assumed in connection with a
Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same. Appropriate adjustments shall also be
made to the class and number of securities available for issuance under the Plan
on both an aggregate and per participant basis following the consummation of
such Corporate Transaction.
C. The grant of options under this Article Two shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two (including
outstanding options under the Predecessor Plans incorporated into this Plan) and
to grant in substitution new options under this Article Two covering the same or
different numbers of shares of Common Stock but having an option price for each
share which is not less than (i) eighty-five percent (85%) of the Fair Market
Value of such share on the new grant date or (ii) one hundred percent (100%) of
such Fair Market Value in the case of an Incentive Option.
<PAGE>
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more Optionees under the Discretionary Option Grant Program may be
granted the right, exercisable upon such terms and conditions as the Plan
Administrator may establish, to surrender all or part of an unexercised option
under this Article Two in exchange for a distribution from the Corporation in an
amount equal to the excess of (i) the Fair Market Value (on the option surrender
date) of the number of shares in which the Optionee is at the time vested under
the surrendered option (or surrendered portion thereof) over (ii) the aggregate
option price payable for such vested shares.
B. No surrender of an option shall be effective hereunder unless
it is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled under
this Section V may be made in shares of any class of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. One or more officers of the Corporation subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under this Article Two. Upon the
occurrence of a Hostile Take-Over effected at any time when the Corporation's
outstanding Common Stock is registered under Section 12(g) of the 1934 Act, each
outstanding option with such a limited stock appreciation right shall
automatically be cancelled, to the extent such option is at the time exercisable
for fully-vested shares of Common Stock. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the vested shares of Common Stock at the
time subject to the cancelled option (or cancelled portion of such option) over
(ii) the aggregate exercise price payable for such shares. The cash distribution
payable upon such cancellation shall be made within five (5) days following the
consummation of the Hostile Take-Over. The Plan Administrator shall pre-approve,
at the time the limited right is granted, the subsequent exercise of that right
in accordance with the terms of the grant and the provisions of this Section
V.D. No additional approval of the Plan Administrator or the Board shall be
required at the time of the actual option cancellation and cash distribution.
The balance of the option (if any) shall continue to remain outstanding and
exercisable in accordance with the terms of the instrument evidencing such
grant.
<PAGE>
E. For purposes of Section V.D, the following definitions shall
be in effect:
A Hostile Take-Over shall be deemed to occur in the
event any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the
Corporation) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act)
of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept.
The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the Fair Market Value per share on
the date of cancellation, as determined pursuant to the
valuation provisions of Section VI of Article One, or (b) the
highest reported price per share paid in effecting such
Hostile Take-Over. However, if the cancelled option is an
Incentive Option, the Take-Over Price shall not exceed the
clause (a) price per share.
F. The shares of Common Stock subject to any option surrendered
or cancelled for an appreciation distribution pursuant to this Section V shall
not be available for subsequent option grant under the Plan.
<PAGE>
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants will be made under this Article
Three on the dates specified below:
(1) Each individual who first becomes a non-employee Board
member on or after the date of the 1998 Annual Meeting, whether
through election by the Corporation's stockholders or appointment
by the Board, shall automatically be granted, at the time of such
initial election or appointment, a Non-Statutory Option to
purchase 20,000 shares of Common Stock upon the terms and
conditions of this Article Three, provided such individual has
not otherwise been in the prior employ of the Corporation.
(2) On the date of each Annual Stockholders Meeting,
beginning with the 1998 Annual Meeting, each individual
re-elected as a non-employee Board member at such Annual Meeting
shall automatically be granted a Non-Statutory Option to purchase
10,000 shares of Common Stock upon the terms and conditions of
this Article Three. There shall be no limit on the number of
10,000-share option grants any one non-employee Board member may
receive over the period of Board service, and non-employee Board
members previously in the Corporation's employ shall be entitled
to one or more such annual option grants over his or her period
of Board service.
B. Exercise Price. The exercise price per share of each automatic
option grant made under this Article Three shall be equal to one hundred percent
(100%) of the Fair Market Value per share of the Common Stock on the date of
grant under this Automatic Option Grant Program.
C. Payment.
The exercise price shall be payable in one of the alternative
forms specified below:
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held for at
least six (6) months and valued at Fair Market Value on the
Exercise Date (as such term is defined below);
(iii) full payment in a combination of shares of Common
Stock held for at least six (6) months and valued at Fair Market
Value on the Exercise Date and cash or check; or
<PAGE>
(iv) full payment through a broker-dealer sale and
remittance procedure pursuant to which the non-employee Board
member (A) shall provide irrevocable instructions to a designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate option price payable for the purchased shares plus all
applicable Federal and state income taxes required to be withheld
by the Corporation in connection with such purchase and (B) shall
provide written directives to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction.
For purposes of this paragraph C, the Exercise Date shall be the
date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the option price for
the purchased shares must accompany such notice.
D. Option Term. Each automatic grant under this Article Three
shall have a term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each automatic grant shall become exercisable
in full one (1) year after the automatic grant date. The option shall not become
exercisable for any additional option shares after the optionee has ceased for
any reason to be a member of the Board.
F. Effect of Termination of Board Membership.
(1) Should the optionee cease to serve as a Board member for any
reason (other than death) while holding one or more automatic option grants
under this Article Three, then such optionee shall have a three (3) month period
following the date of such cessation of Board service in which to exercise each
such option for any or all of the shares of Common Stock for which the option
was exercisable at the time of such cessation of Board service. Each such option
shall immediately terminate and cease to be outstanding, at the time of such
cessation of Board service, with respect to any shares for which the option is
not otherwise at that time exercisable.
(2) Should the optionee die while serving as a Board member or
within three (3) months after cessation of Board service, then each outstanding
automatic option grant held by the optionee at the time of death may
subsequently be exercised, for any or all of the shares of Common Stock for
which the option was exercisable at the time of the optionee's cessation of
Board service (less any option shares subsequently purchased by the optionee
prior to death), by the personal representative of the optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and distribution. Any
such exercise must occur within thirty-six (36) months after the date of the
optionee's death. However, each such automatic option grant shall immediately
terminate and cease to be outstanding, at the time of the optionee's cessation
of Board service, with respect to any option shares for which it is not
otherwise at such time exercisable.
<PAGE>
(3) In no event shall any automatic grant under this Article
Three remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable exercise period in
accordance with subparagraphs (1) and (2) above or (if earlier) upon the
expiration of the ten (10)-year option term, the automatic grant shall terminate
and cease to be outstanding for any unexercised shares for which the option was
exercisable at the time of the optionee's cessation of Board service.
G. Stockholder Rights. The holder of an automatic option grant
under this Article Three shall have none of the rights of a stockholder with
respect to any shares subject to such option until such individual shall have
exercised the option, paid the exercise price for the purchased shares and been
issued a stock certificate for such shares.
II. CORPORATE TRANSACTION
A. For purposes of this Section II, a "Corporate Transaction"
shall be one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State of the Corporation's incorporation,
(ii) the sale, transfer or disposition of all or substantially all of
the assets of the Corporation in liquidation or dissolution of the
Corporation, or
(iii) any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to holders different from those who held such securities
immediately prior to such merger
B. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
<PAGE>
C. Each outstanding option which is assumed in connection with a
Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same.
D. The grant of options under this Article Three shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for options made
under the Discretionary Option Grant Program.
<PAGE>
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
----------------------
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate purchases without any intervening stock
option grants. The issued shares shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") that complies with the terms and conditions of
this Article Four.
A. CONSIDERATION
(1) Shares of Common Stock drawn from the Corporation's
authorized but unissued shares of Common Stock ("Newly Issued Shares") shall be
issued under the Plan for one or more of the following items of consideration
which the Plan Administrator may deem appropriate in each individual instance:
(i) cash or cash equivalents (such as a personal check or
bank draft) paid the Corporation;
(ii) a promissory note payable to the Corporation's order in
one or more installments, which may be subject to cancellation in
whole or in part upon terms and conditions established by the
Plan Administrator; or
(iii) past services rendered to the Corporation or any
parent or subsidiary corporation.
(2) Newly Issued Shares may, in the absolute discretion of the
Plan Administrator, be issued for consideration with a value less than
one-hundred percent (100%) of the Fair Market Value of such shares, but in no
event less than eighty-five percent (85%) of such Fair Market Value.
(3) Shares of Common Stock reacquired by the Corporation and held
as treasury shares ("Treasury Shares") may be issued under this Article Four for
such consideration (in whatever form) as the Plan Administrator may deem
appropriate. Accordingly, such Treasury Shares may, in lieu of any cash
consideration, be issued subject to such vesting requirements tied to the
Participant's period of future Service or the Corporation's attainment of
specified performance objectives as the Plan Administrator may establish at the
time of issuance.
<PAGE>
B. VESTING PROVISIONS
(1) Shares of Common Stock issued under this Article Four may, in
the absolute discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service (as such term is defined in Section I.C.(3) of
Article Two). The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Plan, namely:
(i) the Service period to be completed by the Participant or the
performance objectives to be achieved by the Corporation,
(ii) the number of installments in which the shares are to vest,
(iii) the interval or intervals (if any) which are to lapse between
installments, and
(iv) the effect which death, disability or other event designated by
the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.
(2) The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under this Article
Four, whether or not his or her interest in those shares is vested. Accordingly,
the Participant shall have the right to vote such shares and to receive any
regular cash dividends paid on such shares. Any new, additional or different
shares of stock or other property (including money paid other than as a regular
cash dividend) which the Participant may have the right to receive with respect
to his or her unvested shares by reason of any stock dividend, stock split,
reclassification of Common Stock or other similar change in the Corporation's
capital structure shall be issued, subject to (i) the same vesting requirements
applicable to his or her unvested shares and (ii) such escrow arrangements as
the Plan Administrator shall deem appropriate.
(3) Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under this Article Four,
then those shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder rights with
respect to those shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money promissory note), the Corporation
shall repay to the Participant the cash consideration paid for the surrendered
shares and shall cancel the principal balance of any outstanding purchase-money
note of the Participant to the extent attributable to such surrendered shares.
The surrendered shares may, at the Plan Administrator's discretion, be retained
by the Corporation as Treasury Shares or may be retired to authorized but
unissued share status.
(4) The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets
<PAGE>
attributable thereto) which would otherwise occur upon the non-completion of the
vesting schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant's cessation of Service or the attainment or
non-attainment of the applicable performance objectives.
II. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares under this Article Four may, in the Plan
Administrator's discretion, be held in escrow by the Corporation until the
Participant's interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing such
unvested shares. To the extent an escrow arrangement is utilized, the unvested
shares and any securities or other assets issued with respect to such shares
(other than regular cash dividends) shall be delivered in escrow to the
Corporation to be held until the Participant's interest in such shares (or other
securities or assets) vests. Alternatively, if the unvested shares are issued
directly to the Participant, the restrictive legend on the certificates for such
shares shall read substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND
ARE ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS
AND TO (II) CANCELLATION OR REPURCHASE IN THE EVENT THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES
TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER
RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION
OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED , 19 , A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under this Article Four. For
purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be cancelled, and
neither the Participant nor the proposed transferee shall have any rights with
respect to those shares. However, the Participant shall have the right to make a
gift of unvested shares acquired under the Plan to his or her spouse or issue,
including adopted children, or to a trust established for such spouse or issue,
provided the donee of such shares delivers to the Corporation a written
agreement to be bound by all the provisions of the Plan and the Issuance
Agreement applicable to the gifted shares.
<PAGE>
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
---------------------------------
I. OPTION GRANTS
Each non-employee Board member may, commencing with the 1999
calendar year, elect to apply all or any portion of the fee otherwise payable to
him or her in cash each year for his or her Board service to the acquisition of
a special option grant under this Director Fee Option Grant Program. Such
election must be filed with the Corporation's Chief Financial Officer prior to
last day of December in the calendar year immediately preceding the calendar
year for which the fee subject of that election is otherwise payable. Each
non-employee Board member who files such a timely election shall automatically
be granted an option under this Director Fee Option Grant Program on the first
trading day in January in the calendar year for which the fee subject of that
election would otherwise be payable. Until the Corporation establishes an annual
retainer fee for the non-employee Board members, the dollar amount of the fee
subject to the Board member's election each year shall be equal to the number of
regularly-scheduled Board meetings for that year multiplied by the per Board
meeting fee in effect for such year. Stockholder approval of the 1998
Restatement at the 1998 Annual Stockholders Meeting constitutes pre-approval of
each option subsequently granted pursuant to the express terms of this Director
Fee Option Grant Program and the subsequent exercise of that option in
accordance with its terms.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms
and conditions specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
<PAGE>
A is the portion of the annual retainer fee subject to
the non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock on
the option grant date.
C. Exercise and Term of Options. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Board service in the
calendar year for which the annual retainer fee which is the subject of his or
her election under this Article Five would otherwise be payable. Each option
shall have a maximum term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the optionee cease
Board service for any reason (other than death or permanent disability as
defined in Section 22(e)(3) of the Internal Revenue Code) while holding one or
more options under this Article Five, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable at
the time of such cessation of Board service, until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of such cessation of Board service.
However, each option held by the optionee under this Article Five at the time of
his or her cessation of Board service shall immediately terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.
E. Death or Permanent Disability. Should the Optionee's service
as a Board member cease by reason of death or permanent disability as defined in
Section 22(e)(3) of the Internal Revenue Code, then each option held by such
optionee under this Article Five shall immediately become exercisable for all
the shares of Common Stock at the time subject to that option, and the option
may, during the three (3)-year period following such cessation of Board service,
be exercised for any or all of those shares as fully-vested shares.
Should the optionee die while holding one or more options under
this Article Five, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the optionee's
cessation of Board service (less any shares subsequently purchased by optionee
prior to death), by the personal representative of the optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and distribution. Such
right of exercise shall lapse, and the option shall terminate, upon the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the optionee's cessation of Board
service.
III. CORPORATE TRANSACTION
A. For purposes of this Section III, a "Corporate Transaction"
shall be one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State of the Corporation's incorporation,
<PAGE>
(ii) the sale, transfer or disposition of all or substantially all of
the assets of the Corporation in liquidation or dissolution of the
Corporation, or
(iii) any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to holders different from those who held such securities
immediately prior to such merger
B. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
C. Each outstanding option which is assumed in connection with a
Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
and pertain to the number and class of securities which would be issuable, in
consummation of such Corporate Transaction, to an actual holder of the same
number of shares of Common Stock as are subject to such option immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made to
the option price payable per share, provided the aggregate option price payable
for such securities shall remain the same.
D. The grant of options under this Article Five shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director
Fee Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
<PAGE>
ARTICLE SIX
MISCELLANEOUS
-------------
I. EFFECT OF TRANSACTIONS ON OUTSTANDING OPTIONS
A. Prior to the Effective Date of the Plan, the Company's
outstanding common stock was reclassified as Series B Common Stock and subjected
to a 3 for 4 reverse stock split. As part of the same transaction, one-third of
a share of newly authorized Series A Common Stock was distributed with respect
to each outstanding share of Series B Common Stock. Under the Company's 1988
Stock Option Plan and each of the options outstanding as of the record date for
such dividend ("Affected Option"), which options are incorporated under this
Plan, appropriate adjustment must be made to the outstanding options to reflect
such reverse stock split and stock dividend. Such appropriate adjustments were
as follows:
1. The aggregate number of shares of Common Stock available under
any Affected Option shall be unchanged by the reverse stock split and stock
dividend, but 75% of such total number shares of Common Stock available under
such options shall be Class B Common Stock and 25% of such total number shall be
Class A Common Stock.
2. The option price per share for each share of stock available
under an Affected Option will remain unchanged, and the aggregate option price
for all shares available under the option will remain unchanged.
3. Any vesting schedule imposed under an Affected Option will be
applied separately to the total Class A and Class B Common Stock so that on each
vesting date the holder will vest in one Class A share for every three shares of
Class B Common Stock vesting on such date.
4. Option holders may separately exercise all or any portion of
the vested options of either Class of Common Stock.
B. As a result of a Conversion pursuant to the terms of the
Company's Certificate of Incorporation, all outstanding shares of Class A Common
Stock of the Corporation were converted into 1.33 shares of Class B Common Stock
(which became the only outstanding class of Common Stock of the Corporation).
Under this Plan, each outstanding option to purchase shares of Class A Common
Stock must be adjusted to reflect such conversion. Such adjustments are as
follows:
1. Each option to purchase a share of Class A Common Stock (a
"Converted Option") is automatically converted into an option to purchase 1.33
shares of Common Stock.
<PAGE>
2. The aggregate option price per share for each Converted Option
will remain unchanged, but the price per share for each share of Common Stock
under a Converted Option will equal the purchase price payable for a share of
Class A Common Stock divided by 1.33.
3. Any remaining vesting schedule imposed under a Converted
Option will apply to the Common Stock available under such Option.
II. LOANS
A. The Plan Administrator may, in its discretion, assist any
Optionee or Participant (including an Optionee or Participant who is an officer
of the Corporation) in the exercise of one or more options granted to such
Optionee under the Article Two Discretionary Option Grant Program or the
purchase of one or more shares issued to such Participant under the Article Four
Stock Issuance Program, including the satisfaction of any Federal and State
income and employment tax obligations arising therefrom by (i) authorizing the
extension of a loan from the Corporation to such Optionee or Participant or (ii)
permitting the Optionee or Participant to pay the option price or purchase price
for the purchased Common Stock in installments over a period of years. The terms
of any loan or installment method of payment (including the interest rate and
terms of repayment) will be upon such terms as the Plan Administrator specifies
in the applicable option or issuance agreement or otherwise deems appropriate
under the circumstances. Loans and installment payments may be granted with or
without security or collateral (other than to individuals who are consultants or
independent contractors, in which event the loan must be adequately secured by
collateral other than the purchased shares). However, the maximum credit
available to the Optionee or Participant may not exceed the option or purchase
price of the acquired shares (less the par value of such shares) plus any
Federal and State income and employment tax liability incurred by the Optionee
or Participant in connection with the acquisition of such shares.
B. The Plan Administrator may, in its absolute discretion,
determine that one or more loans extended under this financial assistance
program shall be subject to forgiveness by the Corporation in whole or in part
upon such terms and conditions as the Plan Administrator may deem appropriate.
III. TAX WITHHOLDING
A. The Company's obligation to deliver shares or cash upon the
exercise of stock options or stock appreciation rights granted under the
Discretionary Option Grant Program or upon direct issuance under the Stock
Issuance Program shall be subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and upon such
terms and conditions as it may deem appropriate provide any or all holders of
outstanding option grants under the Discretionary Option Grant Program with the
election to have the Company withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such options, a portion of such shares with an
aggregate Fair Market Value equal to the designated percentage (up to 100% as
specified by the optionee) of the Federal and State income taxes ("Taxes")
<PAGE>
incurred in connection with the acquisition of such shares. In lieu of such
direct withholding, one or more option holders may also be granted the right to
deliver shares of Common Stock to the Company in satisfaction of such Taxes. The
withheld or delivered shares shall be valued at the Fair Market Value on the
applicable determination date for such Taxes.
IV. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to
amend or modify the Plan (or any component thereof) in any or all respects
whatsoever. No amendment or modification may adversely affect the rights and
obligations of an Optionee with respect to options at the time outstanding under
the Plan, nor adversely affect the rights of any Participant with respect to
Common Stock issued under the Plan prior to such action, unless the Optionee or
Participant consents to such amendment or modification. In addition, certain
amendments may require stockholder approval if so determined by the Board or
pursuant to applicable laws or regulations.
B. (i) Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program or the Automatic Option Grant
Program and (ii) shares of Common Stock may be issued under the Stock Issuance
Program, which are in both instances in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued under the Option Grant Program, the Automatic Option Grant Program or the
Stock Issuance Program are held in escrow until stockholder approval is obtained
for a sufficient increase in the number of shares available for issuance under
the Plan. If such stockholder approval is not obtained within twelve (12) months
after the date the first such excess option grants or excess share issuances are
made, then (I) any unexercised excess options shall terminate and cease to be
exercisable and (II) the Corporation shall promptly refund the purchase price
paid for any excess shares actually issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow.
C. Effective as of February 10, 2000, the Board amended and
restated the Plan to increase the maximum number of shares of Common Stock
authorized for issuance over the term of the Plan from 9,073,457 shares to
9,573,457 shares. This amendment is subject to stockholder approval at the 2000
Annual Meeting. Until such stockholder approval is obtained, any options granted
on the basis of the amendment shall not become exercisable in whole or in part,
and those options shall terminate without ever becoming exercisable for the
option shares. All option grants and direct stock issuances made prior to the
amendment shall remain outstanding in accordance with the terms and conditions
of the respective instruments evidencing those options or issuances, and nothing
in the amendment shall be deemed to modify or in any way affect those
outstanding options or issuances. The Plan Administrator may make option grants
and direct stock issuances under the Plan at any time before the date fixed
herein for the termination of the Plan.
V. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Company's Predecessor Plans,
became effective as of the Effective Date, and no further option grants shall be
made under the Option
<PAGE>
Plan nor shall any further shares be issued under the Stock Plan from and after
such Effective Date.
B. Each outstanding option and share issuance under the
Predecessor Plans immediately prior to the Effective Date of this Plan are
hereby incorporated into this Plan and shall accordingly be treated as an
outstanding option or share issuance under this Plan. Each such option or share
issuance shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant or issuance, and except as otherwise expressly
provided in this Plan, no provision of this Plan shall affect or otherwise
modify the rights or obligations of the holders of such options or shares with
respect to their acquisition of shares of Common Stock, or otherwise modify the
rights or obligations of the holders of such options or shares.
C. The sale and remittance procedure authorized for the exercise
of outstanding options under this Plan shall be available for all options
granted under this Plan on or after the Effective Date and for all Non-Statutory
Options outstanding under the Option Plan and incorporated into this Plan. The
Plan Administrator may also allow such procedure to be utilized in connection
with one or more disqualifying dispositions of Incentive Option shares effected
after the Effective Date, whether such Incentive Options were granted under this
Plan or the Option Plan.
D. The Plan shall terminate upon the earlier of (i) November 16,
2002, or (ii) the date on which all shares available for issuance under the Plan
shall have been issued or cancelled pursuant to the exercise, surrender or
cash-out of the options granted under the Discretionary Option Grant Program or
the issuance of shares (whether vested or unvested) under the Stock Issuance
Program. If the date of termination is determined under clause (i) above, then
all option grants and unvested stock issuances outstanding on such date shall
thereafter continue to have force and effect in accordance with the provisions
of the instruments evidencing such grants or issuances.
<PAGE>
VI. USE OF PROCEEDS
Cash proceeds received by the Company from the sale of shares
under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
under the Discretionary Option Grant Program, the issuance of any shares under
the Stock Issuance Program, and the issuance of Common Stock upon the exercise
or surrender of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it, and
the Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of Federal and State securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which stock of the same class is then listed.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan,
nor any action taken by the Plan Administrator hereunder, nor any provision of
the Plan shall be construed so as to grant any individual the right to remain in
the employ or service of the Corporation (or any parent or subsidiary
corporation) for any period of specific duration, and the Corporation (or any
parent or subsidiary corporation retaining the services of such individual) may
terminate such individual's employment or service at any time and for any
reason, with or without cause.
IX. MISCELLANEOUS PROVISIONS
The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
<PAGE>
LIGAND PHARMACEUTICALS INCORPORATED
1992 EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED THROUGH MAY 20, 1999
I. PURPOSE
The Ligand Pharmaceuticals Incorporated 1992 Employee Stock
Purchase Plan (the "Plan") is intended to provide eligible employees of the
Company and one or more of its Corporate Affiliates with the opportunity to
acquire a proprietary interest in the Company through the periodic application
of their payroll deductions to the purchase of shares of the Company's common
stock.
II. DEFINITIONS
For purposes of plan administration, the following terms shall
have the meanings indicated:
Base Salary means the regular basic earnings paid to a
Participant by one or more Participating Companies before deduction for any
pre-tax contributions made by the Participant to any Code Section 401(k) salary
deferral plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Company or any Corporate Affiliate. There shall be excluded
from the calculation of Base Salary (i) all overtime payments, bonuses,
commissions, profit-sharing distributions and other incentive-type payments and
(ii) all contributions (other than Code Section 401(k) or Code Section 125
contributions) made on the Participant's behalf by the Company or one or more
Corporate Affiliates under any employee benefit or welfare plan now or hereafter
established.
Board means the Company's Board of Directors.
Code means the Internal Revenue Code of 1986, as amended from
time to time.
Common Stock means shares of the Company's common stock.
Company means Ligand Pharmaceuticals Incorporated, a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Ligand Pharmaceuticals Incorporated which shall by
appropriate action adopt the Plan.
Corporate Affiliate means any company which is a parent or
subsidiary corporation of the Company (as determined in accordance with Code
Section 424), including any parent or subsidiary corporation which becomes such
after the Effective Date.
Effective Date meaning November 17, 1992, the start date of the
initial offering period under the Plan. However, for any Corporate Affiliate
which becomes a Participating Company in the Plan after such start date, a
subsequent Effective Date shall be designated with respect to participation by
its Eligible Employees.
<PAGE>
Eligible Employee means any person who is engaged, on a
regularly-scheduled basis of more than twenty (20) hours per week and more than
five (5) months per calendar year, in the rendition of personal services to the
Company or any other Participating Company for earnings considered wages under
Section 3121(a) of the Code.
Entry Date means the date an Eligible Employee first joins the
offering period in effect under the Plan. The earliest Entry Date under the Plan
shall be the Effective Date.
Participant means any Eligible Employee of a Participating
Company who is actively participating in the Plan.
Participating Company means the Company and such Corporate
Affiliate or Affiliates as may be designated from time to time by the Board.
Quarterly Entry Date means the first business day of January, the
first business day of April, the first business day of July and the first
business day of October during each offering period in effect under the Plan.
The earliest Quarterly Entry Date for an individual who is not otherwise
eligible to join the Plan on the Effective Date shall be January 1, 1993.
Quarterly Period of Participation means each quarterly period for
which the Participant actually participates in an offering period in effect
under the Plan. Except as otherwise designated by the Plan Administrator, each
quarterly period shall begin on the first business day of each calendar quarter
and shall end on the last business day of such quarter.
Quarterly Purchase Date means the last business day of March,
June, September and December each year on which shares of Common Stock are
automatically purchased for Participants under the Plan.
Service means the period during which an individual remains in
the employ of the Company or any Corporate Affiliate, whether or not in Eligible
Employee status, and shall be measured from such individual's most recent date
of hire by the Company or such Corporate Affiliate.
III. ADMINISTRATION
The Plan shall be administered by a committee (the "Plan
Administrator") comprised of two or more non-employee Board members appointed
from time to time by the Board. The Plan Administrator shall have full authority
to administer the Plan, including authority to interpret and construe any
provision of the Plan. Decisions of the Plan Administrator shall be final and
binding on all parties who have an interest in the Plan.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated in
accordance with Article X.
2.
<PAGE>
B. The initial offering period began on November 17, 1992, and
ended on the last business day in December 1993. Subsequent offering periods
shall be coincidental with the calendar year and shall accordingly commence on
the first business day in January each year.
D. The Participant shall be granted a separate purchase right for
each offering period in which he/she participates. The purchase right shall be
granted on the Entry Date on which such individual first joins the offering
period in effect under the Plan and shall be automatically exercised in
successive installments on each Quarterly Purchase Date within the offering
period.
E. The acquisition of Common Stock through participation in the
Plan for any offering period shall neither limit nor require the acquisition of
Common Stock by the Participant in any subsequent offering period.
V. ELIGIBILITY AND PARTICIPATION
A. Each Eligible Employee of a Participating Company shall be
eligible to participate in the Plan in accordance with the following provisions:
- An Eligible Employee with at least five (5) months
of Service on the start date of the offering period may enter that
offering period on such start date, provided such individual enrolls in
the offering period on or before such date in accordance with Section
V.B below. That start date shall then become such individual's Entry
Date for the offering period, and on that date such individual shall be
granted his/her purchase right for the offering period. Should such
Eligible Employee not enter the offering period on the start date, then
he/she may not subsequently join that particular offering period on any
later date.
- An individual who is not an Eligible Employee with
at least five (5) months of Service on the start date of the offering
period may subsequently enter that offering period on the first
Quarterly Entry Date on which he/she is an Eligible Employee with at
least five (5) months of Service, provided he/she enrolls in the
offering period on or before such date in accordance with Section V.B
below. That Quarterly Entry Date shall then become such individual's
Entry Date for the offering period, and on that date such individual
shall be granted his/her purchase right for the offering period. Should
such Eligible Employee not enter the offering period on the first
Quarterly Entry Date on which he/she is first eligible to join the
offering period, then he/she may not subsequently join that particular
offering period on any later date.
B. To participate for a particular offering period, the Eligible
Employee must complete the enrollment forms prescribed by the Plan Administrator
(including the purchase agreement and payroll deduction authorization) and file
such forms with the Plan Administrator on or before his/her scheduled Entry
Date.
C. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any multiple
of one percent (1%) of the Base Salary paid to the Participant during each
Quarterly Period of Participation within the
3.
<PAGE>
offering period, up to a maximum of ten percent (10%). The deduction rate
so authorized shall continue in effect for the remainder of the offering period,
except to the extent such rate is changed in accordance with the following
guidelines:
- The Participant may, at any time during the Quarterly Period
of Participation, reduce his/her rate of payroll deduction.
Such reduction shall become effective as soon as possible
after filing of the requisite reduction form with the Plan
Administrator (or its designate), but the Participant may not
effect more than one such reduction during the same Quarterly
Period of Participation.
- The Participant may, prior to the commencement of any new
Quarterly Period of Participation within the offering period,
increase or decrease the rate of his/her payroll deduction by
filing the appropriate form with the Plan Administrator (or
its designate). The new rate (which may not exceed the ten
percent (10%) maximum) shall become effective as of the first
date of the first Quarterly Period of Participation following
the filing of such form.
- Payroll deductions will automatically cease upon the
termination of the Participant's purchase right in accordance
with the applicable provisions of Section VII below.
VI. STOCK SUBJECT TO PLAN
A. The Common Stock purchasable by Participants under the Plan
shall, solely in the discretion of the Plan Administrator, be made available
from either authorized but unissued shares of Common Stock or from shares of
Common Stock reacquired by the Company, including shares of Common Stock
purchased on the open market. The total number of shares which may be issued
under the Plan shall not exceed 405,000 shares of Common Stock (provided that,
for this purpose, each issuance of Class A Common Stock occurring prior to
November 24, 1994 shall be treated as if it were an issuance of 1.33 shares of
Common Stock). Such share increase includes the 50,000-share increase approved
by the Board, effective as of February 10, 2000, subject to approval by the
stockholders at the 2000 Annual Meeting. The number of shares of Common Stock
issuable under the Plan shall be adjusted from time to time in accordance with
Section VI.B hereof.
B. In the event any change is made to the Company's outstanding
Common Stock by reason of any stock dividend, stock split, combination of shares
or other change affecting such outstanding Common Stock as a class without
receipt of consideration, then appropriate adjustments shall be made by the Plan
Administrator to (i) the class and maximum number of shares issuable over the
term of the Plan, (ii) the class and maximum number of shares purchasable per
Participant during any one offering period and (iii) the class and number of
shares and the price per share in effect under each purchase right at the time
outstanding under the Plan. Such adjustments shall be designed to preclude the
dilution or enlargement of rights and benefits under the Plan.
4.
<PAGE>
VII. PURCHASE RIGHTS
An Employee who participates in the Plan for a particular
offering period shall have the right to purchase shares of Common Stock, in a
series of successive quarterly installments during such offering period, upon
the terms and conditions set forth below and shall execute a purchase agreement
embodying such terms and conditions and such other provisions (not inconsistent
with the Plan) as the Plan Administrator may deem advisable.
Purchase Price. Common Stock shall be issuable at the end of each
Quarterly Period of Participation at a purchase price equal to eighty-five
percent (85%) of the lower of (i) the fair market value per share on the
Participant's Entry Date into the offering period or (ii) the fair market value
per share on the Quarterly Purchase Date on which such Quarterly Period of
Participation ends. However, for each Participant whose Entry Date is other than
the start date of the offering period in effect under the Plan, the clause (i)
amount shall in no event be less than the fair market value of the Common Stock
on the start date of such offering period.
Valuation. For purposes of determining the fair market value per
share of Common Stock on any relevant date the fair market value shall be the
closing selling price on that date, as officially quoted on the Nasdaq National
Market. If there is no quoted selling price for such date, then the closing
selling price on the next preceding day for which there does exist such a
quotation shall be determinative of fair market value.
Number of Purchasable Shares. The number of shares purchasable
per Participant for each Quarterly Period of Participation shall be the number
of whole shares obtained by dividing the amount collected from the Participant
through payroll deductions during such Quarterly Period of Participation by the
purchase price in effect for the Quarterly Purchase Date on which such Quarterly
Period of Participation ends. However, no Participant may, during any one
offering period, purchase more than 1,330 shares of Common Stock, subject to
periodic adjustment under Section VI.B.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or any of its Corporate Affiliates.
Payment. Payment for the Common Stock purchased under the Plan
shall be effected by means of the Participant's authorized payroll deductions.
Such deductions shall begin on the first pay day coincident with or immediately
following the Participant's Entry Date into the offering period and shall
(unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of the offering period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from a Participant may be
commingled with the general assets of the Company and may be used for general
corporate purposes.
5.
<PAGE>
Termination of Purchase Right. The following provisions shall
govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the last
five (5) business days of the Quarterly Period of Participation,
terminate his/her outstanding purchase right under the Plan by filing
the prescribed notification form with the Plan Administrator (or its
designate). No further payroll deductions shall be collected from the
Participant with respect to the terminated purchase right, and any
payroll deductions collected for the Quarterly Period of Participation
in which such termination occurs shall, at the Participant's election,
be immediately refunded or held for the purchase of shares on the next
Quarterly Purchase Date. If no such election is made, then such funds
shall be refunded as soon as possible after the close of such Quarterly
Period of Participation.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
offering period for which such terminated purchase right was granted.
In order to resume participation in any subsequent offering period,
such individual must re-enroll in the Plan (by making a timely filing
of a new purchase agreement and payroll deduction authorization) during
the applicable enrollment period for the new offering.
(iii) If the Participant ceases to remain an Eligible
Employee while his/her purchase right remains outstanding, then such
individual (or the personal representative of the estate of a deceased
Participant) shall have the following election, exercisable up until
the end of the Quarterly Period of Participation in which the
Participant ceases Eligible Employee status:
- to withdraw all of the Participant's payroll deductions for
such Quarterly Period of Participation, or
- to have such funds held for the purchase of shares on the
Quarterly Purchase Date immediately following such cessation of
Eligible Employee status.
If no such election is made, then such funds shall be refunded as
soon as possible after the close of such Quarterly Period of
Participation. In no event, however, may any payroll deductions be
made on the Participant's behalf following his/her cessation of
Eligible Employee status.
Stock Purchase. Shares of Common Stock shall automatically be
purchased on behalf of each Participant (other than Participants whose payroll
deductions have previously been refunded in accordance with the Termination of
Purchase Right provisions above) on each Quarterly Purchase Date. The purchase
shall be effected by applying each Participant's payroll deductions for the
Quarterly Period of Participation ending on such Quarterly Purchase Date
(together with any carryover deductions from the preceding Quarterly Period of
Participation) to the purchase of whole shares of Common Stock (subject to the
limitation on the maximum number of purchasable shares set forth above) at the
purchase price in effect for such Quarterly Period of Participation. Any payroll
deductions not applied to such purchase because they are not sufficient to
purchase a whole share shall be held for the purchase of Common Stock in the
next Quarterly
6.
<PAGE>
Period of Participation. However, any payroll deductions not applied to the
purchase of Common Stock by reason of the limitation on the maximum number of
shares purchasable by the Participant for that offering period shall be promptly
refunded to the Participant.
Proration of Purchase Rights. Should the total number of shares
of Common Stock which are to be purchased pursuant to outstanding purchase
rights on any particular date exceed the number of shares then available for
issuance under the Plan, the Plan Administrator shall make a pro-rata allocation
of the available shares on a uniform and nondiscriminatory basis, and the
payroll deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded to such Participant.
Rights as Stockholder. A Participant shall have no stockholder
rights with respect to the shares subject to his/her outstanding purchase right
until the shares are actually purchased on the Participant's behalf in
accordance with the applicable provisions of the Plan. No adjustments shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as
practicable after each Quarterly Purchase Date, a stock certificate for the
number of shares purchased on the Participant's behalf. Such certificate may,
upon the Participant's request, be issued in the names of the Participant and
his/her spouse as community property or as joint tenants with right of
survivorship.
Assignability. No purchase right granted under the Plan shall be
assignable or transferable by the Participant other than by will or by the laws
of descent and distribution following the Participant's death, and during the
Participant's lifetime the purchase right shall be exercisable only by the
Participant.
Change in Ownership. Should the Company or its stockholders enter
into an agreement to dispose of all or substantially all of the assets or
outstanding capital stock of the Company by means of:
(i) a sale, merger or other reorganization in which
the Company will not be the surviving corporation (other than a
reorganization effected primarily to change the State in which the
Company is incorporated), or
(ii) a reverse merger in which the Company is the
surviving corporation but in which more than 50% of the Company's
outstanding voting stock is transferred to holders different from those
who held the stock immediately prior to the reverse merger,
then all outstanding purchase rights under the Plan shall
automatically be exercised immediately prior to the consummation of such sale,
merger, reorganization or reverse merger by applying the payroll deductions of
each Participant for the Quarterly Period of Participation in which such
transaction occurs to the purchase of whole shares of Common Stock
7.
<PAGE>
at eighty-five percent (85%) of the lower of (i) the fair market value of
the Common Stock on the Participant's Entry Date into the offering period in
which such transaction occurs or (ii) the fair market value of the Common Stock
immediately prior to the consummation of such transaction. However, the
applicable share limitations of Articles VII and VIII shall continue to apply to
any such purchase, and the clause (i) amount above shall not, for any
Participant whose Entry Date for the offering period is other than the start
date of such offering period, be less than the fair market value of the Common
Stock on such start date.
The Company shall use its best efforts to provide at least ten
(10)-days advance written notice of the occurrence of any such sale, merger,
reorganization or reverse merger, and Participants shall, following the receipt
of such notice, have the right to terminate their outstanding purchase rights in
accordance with the applicable provisions of this Article VII.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (I) rights to purchase Common
Stock accrued under any other purchase right outstanding under this Plan and
(II) similar rights accrued under other employee stock purchase plans (within
the meaning of Section 423 of the Code) of the Company or its Corporate
Affiliates, would otherwise permit such Participant to purchase more than
$25,000 worth of stock of the Company or any Corporate Affiliate (determined on
the basis of the fair market value of such stock on the date or dates such
rights are granted to the Participant) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations the right to
acquire Common Stock pursuant to each purchase right outstanding under the Plan
shall accrue as follows:
(i) The right to admire (Common Stock under each such
purchase right shall accrue in a series of successive quarterly
installments as and when the purchase right first becomes exercisable
for each quarterly installment on the last business day of each
Quarterly Period of Participation for which the right remains
outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
$25,000 worth of Common Stock (determined on the basis of the fair
market value on the date or dates of grant) pursuant to one or more
purchase rights held by the Participant during such calendar year.
(iii) If by reason of such accrual limitations any
purchase right of a Participant does not accrue for a particular
Quarterly Period of Participation? then the payroll deductions which
the Participant made during that Quarterly Period of Participation with
respect to such purchase right shall be promptly refunded.
8.
<PAGE>
C. In the event there is any conflict between the provisions of
this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. STATUS OF PLAN UNDER FEDERAL TAX LAWS
The Plan is designed to qualify as an employee stock purchase
plan under Code Section 423. Accordingly, the Participant will not recognize any
taxable income at the time one or more shares of Common Stock are purchased on
his/her behalf on any Quarterly Purchase Date under the Plan.
X. AMENDMENT AND TERMINATION
A. The Board may alter, amend, suspend or discontinue the Plan
following the close of any Quarterly Period of Participation. However, the Board
may not, without the approval of the Company's stockholders:
(i) increase the number of shares issuable under the
Plan or the maximum number of shares which may be purchased per
Participant during any one offering period under the Plan, except that
the Plan Administrator shall have the authority, exercisable without
such stockholder approval, to effect adjustments to the extent
necessary to reflect changes in the Company's capital structure
pursuant to Section VI.B;
(ii) alter the purchase price formula so as to reduce
the purchase price payable for the shares issuable under the Plan; or
(iii) materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility to participate in the Plan.
B. The Company shall have the right, exercisable in the sole
discretion of the Plan Administrator, to terminate all outstanding purchase
rights under the Plan immediately following the close of any Quarterly Period of
Participation. Should the Company elect to exercise such right, then the Plan
shall terminate in its entirety. No further purchase rights shall thereafter be
granted or exercised, and no further payroll deductions shall thereafter be
collected, under the Plan.
C. On February 10 2000, the Board amended the Plan to increase
the maximum number of shares of Common Stock authorized for issuance over the
term of the Plan from 355,000 shares to 405,000 shares. This amendment to the
Plan was approved by the stockholders at the 2000 Annual Meeting on
_____________, 2000.
XI. GENERAL PROVISIONS
A. The Plan shall terminate upon the earlier of (i) December 31,
2002 or (ii) the date on which all shares available for issuance under the Plan
shall have been sold pursuant to purchase rights exercised under the Plan.
9.
<PAGE>
B. All costs and expenses incurred in the administration of the
Plan shall be paid by the Company.
C. Neither the action of the Company in establishing the Plan,
nor any action taken under the Plan by the Board or the Plan Administrator, nor
any provision of the Plan itself shall be construed so as to grant any person
the right to remain in the employ of the Company or any of its Corporate
Affiliates for any period of specific duration, and such person's employment may
be terminated at any time, with or without cause.
10.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
LIGAND PHARMACEUTICALS INCORPORATED
The undersigned hereby appoints David E. Robinson and William L. Respess,
as proxies, jointly and severally, with full power of substitution to vote all
shares of stock which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of Ligand Pharmaceuticals Incorporated to be held on Thursday,
May 25, 2000, or at any postponements of adjournments thereof, as specified
below, and to vote in their discretion on such other business as may properly
come before the Meeting and any adjournments thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
<PAGE>
Please mark
your votes as [X]
indicated in
this example
The Board of Directors recommends a vote FOR Items 1, 2, 3, 4, and 5
<TABLE>
<CAPTION>
ITEM 1-ELECTION OF DIRECTORS FOR WITHHELD FOR AGAINST ABSTAIN
FOR ALL
<S> <C> <C> <C> <C> <C> <C>
Nominees:
Henry F. Blissenbach Carl Peck [ ] [ ] ITEM 2 - APPROVAL OF AN AMENDMENT TO [ ] [ ] [ ]
Alexander D. Cross David E. Robinson CERTIFICATE OF INCORPORATION
John Groom Michael A. Rocca
Irving S. Johnson ITEM 3 - APPROVAL OF AN AMENDMENT TO [ ] [ ] [ ]
STOCK OPTION/STOCK ISSUANCE PLAN
ITEM 4 - APPROVAL OF AN AMENDMENT TO [ ] [ ] [ ]
EMPLOYEE STOCK PURCHASE PLAN
WITHHELD FOR: (Write that nominee's name
in the space provided below): ITEM 5 - APPOINTMENT OF INDEPENDENT [ ] [ ] [ ]
AUDITORS
_____________________________________________
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ]
</TABLE>
***IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW***
Signature(s)____________________________________ Date_______________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. Please give full title as such, and, if signing for a
corporation, give your title. When shares are in the names of more than one
person, each should sign.
*FOLD AND DETACH HERE*
---------------------------------------------------------------
VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
---------------------------------------------------------------
Your telephone vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, and returned your proxy card.
Call our toll free number 1-800-840-1208 on a touch tone telephone at any time
of the day or night. There is NO CHARGE to you for this call.
You will be asked to enter the 11-digit Control Number located in the box in the
lower right hand corner of this form.
- --------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL proposals, press
1.
- --------------------------------------------------------------------------------
When asked, please confirm by pressing 1.
- --------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each Proposal separately, press 0. You will
hear these instructions:
- --------------------------------------------------------------------------------
o Proposal 1: to vote FOR ALL nominees, press 1;
to WITHHOLD AUTHORITY for all nominees, press 9;
to WITHHOLD AUTHORITY for an individual nominee, press
0 and listen to the instructions.
o Proposal 2, 3, 4, & 5: to vote AGAINST, press 9; to vote FOR; press 1; to
ABSTAIN, press 0.
When asked, please confirm your vote by pressing 1.
-----------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY
CARD IF YOU HAVE VOTED BY TELEPHONE
-----------------------------------------------------
