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SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
NPS PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
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(2) Aggregate number of securities to which transaction applies:
Not Applicable
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which
the filing fee is calculated and state how it was determined):
Not Applicable
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
Not Applicable
-------------------------------------------------------------------------
(5) Total fee paid:
Not Applicable
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
Not Applicable
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(2) Form, Schedule or Registration Statement No.:
Not Applicable
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(3) Filing Party:
Not Applicable
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(4) Date Filed:
Not Applicable
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NPS PHARMACEUTICALS, INC.
420 CHIPETA WAY
SALT LAKE CITY, UTAH 84108-1256
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998 AT 3:00 P.M. (LOCAL TIME)
AT THE
UNIVERSITY PARK HOTEL
500 SOUTH WAKARA WAY
SALT LAKE CITY, UTAH 84108-1256
---------------------
TO THE STOCKHOLDERS OF NPS PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NPS
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, May 20, 1998, at 3:00 p.m., local time, at the University Park
Hotel, 500 South Wakara Way, Salt Lake City, Utah for the following purposes:
1. To elect eight members to the Board of Directors.
2. To approve the Company's 1998 Stock Option Plan and the issuance of
1,000,000 shares of the Company's Common Stock thereunder.
3. To ratify the selection of KPMG Peat Marwick LLP as independent auditors
of the Company for its fiscal year ending December 31, 1998.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 2, 1998, as
the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting of Stockholders and at any adjournment
thereof.
By Order of the Board of Directors
James U. Jensen
Secretary
Salt Lake City, Utah
April 9, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN,
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT
PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF
YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD
OF RECORD BY A BROKER, BANK, OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE
MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
NPS PHARMACEUTICALS, INC.
420 CHIPETA WAY
SALT LAKE CITY, UTAH 84108-1256
---------------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
(MAY 20, 1998)
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board of Directors" or the "Board") of NPS Pharmaceuticals, Inc., a Delaware
corporation ("NPS" or the "Company"), for use at the Annual Meeting of
Stockholders to be held on May 20, 1998, at 3:00 p.m., local time and at any
adjournment thereof (the "Annual Meeting" or the "Meeting"), for the purposes
set forth herein and in the accompanying Notice of Annual Meeting. The Annual
Meeting will be held at the University Park Hotel, 500 South Wakara Way, Salt
Lake City, Utah.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing, and mailing of this Proxy Statement, the
proxy card, and any additional information furnished to stockholders. Copies
of solicitation materials will be furnished to banks, brokerage houses,
fiduciaries, and custodians holding in their names shares of the Company's
common stock, par value $.001 (the "Common Stock") beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram, or personal
solicitation by directors, officers, or other regular employees of the
Company. No additional compensation will be paid to directors, officers, or
other regular employees for such services.
The Company intends to mail this Proxy Statement and accompanying proxy card
on or about April 9, 1998, to all stockholders entitled to vote at the Annual
Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
April 2, 1998 is the record date (the "Record Date") for determining those
stockholders of Common Stock of the Company entitled to notice of and to vote
at the Annual Meeting. On the Record Date, the Company had outstanding and
entitled to vote 12,266,850 shares of Common Stock. Stockholders will be
entitled to one vote for each share held on all matters to be voted upon at
the Annual Meeting.
All votes will be tabulated by the Inspector of Elections appointed for the
Meeting, who will separately tabulate affirmative and negative votes,
abstentions, and broker non-votes. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the stockholders, and will
have the same effect as negative votes. Broker non-votes are counted toward a
quorum, but are not counted for any purpose in determining whether a matter
has been approved.
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REVOCABILITY OF PROXIES
Any stockholder giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by filing with
the Secretary of the Company, at the Company's principal executive office, 420
Chipeta Way, Salt Lake City, Utah 84108-1256, a written notice of revocation
or a duly executed proxy bearing a later date, or it may be revoked by
attending the Meeting and voting in person. Attendance at the Meeting will
not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS FOR 1998
Proposals of stockholders that are intended to be presented at the Company's
1999 annual meeting of stockholders must be received by the Company not later
than December 10, 1998 in order to be included in the proxy statement relating
to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation
("Certificate of Incorporation") and the Amended and Restated Bylaws
("Bylaws") provide that directors are to be elected at the Annual Meeting to
serve for a term of one year and until their respective successors are duly
elected and qualified or until their respective death, resignation, or
removal. Vacancies on the Board resulting from death, resignation,
disqualification, removal, or other causes and any newly created directorships
resulting from any increase in the number of directors shall be filled by the
affirmative vote of a majority of the directors then in office, unless the
Board of Directors determines by resolution that any such vacancy shall be
filled by the stockholders. A director elected by the Board to fill a vacancy
(including a vacancy created by an increase in the Board of Directors) shall
serve for the remainder of the full term of the director for which the vacancy
was created or occurred and until such director's successor is elected and
qualified.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Meeting. Shares represented
by executed proxies will be voted, if authority to do so is not withheld, for
the election of the eight nominees below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such
shares will be voted for the election of such substitute nominee as the Board
may propose.
On April 2, 1998, the Board of Directors adopted a resolution to increase
the size of the Board from seven members to eight. As permitted by the
Company's Bylaws, the Board appointed Joseph "Skip" Klein, III to fill the
vacant seat on the Board and to serve until his successor is duly elected and
qualified. Each nominee is currently a director of the Company, and each
nominee agrees to serve if elected. The Board has no reason to believe that
any nominee will be unable to serve. If and when elected at the Annual
Meeting, each of the nominees will be elected to serve until the 1999 annual
meeting and until such elected nominee's successor is duly elected and
qualified, or until such elected nominee's earlier death, resignation, or
removal.
Set forth below, in alphabetical order, is biographical information for each
person nominated to serve on the Company's Board of Directors.
NOMINEES FOR ELECTION
SANTO J. COSTA, J.D.
Mr. Costa, 52, has served as a director since January 1995 and as a member
of the Compensation Committee since 1996. Mr. Costa has served as President,
Chief Operating Officer, and a director of Quintiles Transnational
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Corporation, a publicly held global contract research organization, since
April 1994. From July 1993 to April 1994, he ran his own consulting firm,
Santo J. Costa and Associates. From 1986 to 1993, he was employed by Glaxo,
Inc., a worldwide pharmaceutical company, where he served as Senior Vice
President, Administration and General Counsel and was a member of that
company's Board of Directors. From 1977 to 1986 he was employed by Merrell Dow
Pharmaceuticals (now Hoechst Marion Roussel) where he served as U.S. Area
Counsel, and from 1971 to 1977 as Food & Drug Counsel for Norwich/Eaton
Pharmaceuticals. Mr. Costa received his B.S. in Pharmacy and his J.D. from St.
John's University.
JAMES G. GRONINGER, M.B.A.
Mr. Groninger, 53, has served as a director since 1988 and as a member of
the Audit and Compensation Committees since 1994. Mr. Groninger founded in
January 1995 and is President of The Bay South Company, a Richmond, Virginia-
based provider of financial advisory and investment banking services. From
1988 through 1994, he served as a Managing Director, Investment Banking
Division, of PaineWebber Incorporated. Currently he serves on the Board of
Directors of Designs, Inc., a specialty retailer, Layton Bioscience, a
privately-owned biotechnology company, and Cygne Designs, Inc., a manufacturer
of apparel. Mr. Groninger received a B.S. in Industrial Administration from
Yale University and an M.B.A. from Harvard Business School.
HUNTER JACKSON, PH.D.
Dr. Jackson, 47, has been Chief Executive Officer and Chairman of the Board
since founding the Company in 1986 and a member of the Nominating Committee
since 1997. He was appointed to the additional position of President in
January 1994. Prior to founding the Company, he was an Associate Professor in
the Department of Anatomy at the University of Utah School of Medicine. Dr.
Jackson received a B.A. in English from the University of Illinois and a Ph.D.
in Psychobiology from Yale University. He received postdoctoral training in
the Department of Neurosurgery, University of Virginia Medical School.
JAMES U. JENSEN, J.D., M.B.A.
Mr. Jensen, 53, has been Vice President, Corporate Development and Legal
Affairs, since August 1991. He has been Secretary and a director of the
Company since 1987. From 1986 to July 1991 he was a partner in the law firm of
Woodbury, Jensen, Kesler & Swinton, P.C. (or its predecessor firm)
concentrating on technology transfer and licensing and corporate finance. From
July 1985 until October 1986, he served as Chief Financial Officer of Cericor,
a software company, and from 1983 to July 1985, as its outside general
counsel. From 1980 to 1983 he served as General Counsel and Secretary of
Dictaphone Corporation, a subsidiary of Pitney Bowes Inc. He serves as a
director of Wasatch Funds, Inc., a registered investment company, and of
InterWest Home Medical, Inc., a public home use medical equipment distributor.
Mr. Jensen received a B.A. in English/Linguistics from the University of Utah
and a J.D. and an M.B.A. from Columbia University.
JOSEPH "SKIP" KLEIN, III, M.B.A.
Mr. Klein, 37, was appointed to the Board of Directors of the Company in
April, 1998. Currently, Mr. Klein is the Managing Director of Millienium.HEW,
LLC, an advisory firm focusing on investments in health, education, and the
WorldWide Web. From December 1995 to February 1998, Mr. Klein was a Portfolio
Manager and Chairman of the Investment Advisory Committee of T. Rowe Price
Health Sciences Fund, Inc. From April 1990 to December 1995, Mr. Klein was
Vice President and Health Care Investment Analyst for T. Rowe Price
Associates, Inc., an investment management firm. Mr. Klein received an M.B.A.
with a concentration on finance and investments from Stanford Graduate School
of Business and a B.A. in economics from Yale University.
DONALD E. KUHLA, PH.D.
Dr. Kuhla, 55, has been a director of the Company since 1991 and as a member
of the Audit Committee since 1996 and the Nominating Committee since 1997. Dr.
Kuhla also serves as a scientific consultant to NPS. Since 1994, he has been
Vice President of Plexus Ventures, Inc., a biotechnology investment and
consulting firm.
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From 1990 to 1994 Dr. Kuhla held a senior management position with a venture
capital backed, medical device start-up company, Enzymatics, Inc. His early
career was spent in research and development and operations management
positions with Pfizer Inc. and Rorer Group, Inc., his last position at Rorer
being Senior Vice President of Operations. Dr. Kuhla received a B.A. in
Chemistry from New York University and a Ph.D. in Organic Chemistry from Ohio
State University.
THOMAS N. PARKS, PH.D.
Dr. Parks, 47, has been a director of the Company since its founding in 1986
and a member of the Audit Committee since 1996 and the Nominating Committee
since 1997. Dr. Parks also serves as a scientific consultant to NPS. He is
currently the George and Lorna Winder Professor of Neuroscience and Chairman
of the Department of Neurobiology and Anatomy at the University of Utah
Medical School. Dr. Parks joined the faculty at the University of Utah Medical
School in 1978 as an assistant professor. Dr. Parks received a B.S. in Biology
from the University of California at Irvine and a Ph.D. in Psychobiology from
Yale University. He was a postdoctoral fellow in Development Neurology at the
University of Virginia Medical School.
TIMOTHY J. RINK, M.D., SC.D.
Dr. Rink, 53, has been a director of the Company since 1991 and a member of
the Compensation Committee since 1994. Dr. Rink also serves as a scientific
consultant to the Company. Since February 1996 Dr. Rink has been Chairman,
Chief Executive Officer and President of Aurora Biosciences Corporation, a
biotechnology company focused on ultra high throughput drug screening. From
1990 through 1995 he was President, Chief Technical Officer and director of
Amylin Pharmaceuticals, Inc., a pharmaceutical company. From 1984 to January
1990 he served as Vice President, Research at SmithKline Beecham, plc. and
from 1988 to 1990, he was a founding member of the Emerging Technologies
Committee of the Prime Minister's Advisory Council on Science and Technology
in the United Kingdom. Dr. Rink is also a director of CoCensys, Inc., a
publicly held biotechnology company. Dr. Rink received an M.D. and an Sc.D.
from the University of Cambridge.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE
BOARD COMMITTEES AND MEETINGS
The Board has standing Audit, Compensation, and Nominating Committees. The
Audit Committee's functions include: meeting with the Company's independent
auditors at least annually to review the results of the annual audit and
discuss the financial results for the year as reported in the Company's
financial statements; recommending to the Board of Directors the independent
auditors to be retained for the ensuing year; and receiving and considering
the auditors' comments as to controls, adequacy of staff and management
performance and procedures in connection with audit and financial controls.
Currently, the Audit Committee is composed of three non-employee directors,
Mr. Groninger, Dr. Kuhla and Dr. Parks. The Audit Committee met two times
during the fiscal year ended December 31, 1997.
The Compensation Committee's functions include: establishing, reviewing, and
overseeing salaries, incentive compensation, and other forms of compensation
paid to officers and employees of the Company; administering the Company's
incentive compensation and benefit plans, including the 1998 Stock Option
Plan, 1994 Employee Stock Purchase Plan, the 1994 Equity Incentive Plan and
the 1987 Stock Option Plan; and performing such other functions regarding
compensation as the Board of Directors may delegate. Currently, the
Compensation Committee is composed of three non-employee directors, Mr. Costa,
Mr. Groninger and Dr. Rink. The Compensation Committee met two times during
the fiscal year ended December 31, 1997.
The Nominating Committee's functions include: evaluating Director
performance on at least an annual basis; providing information and materials
relating to the nomination of directors; interviewing, nominating, and
recommending individuals for membership on the Company's Board of Directors
and its committees; and
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performing such other functions as the Board of Directors may delegate. The
Nominating Committee will consider nominees for directors nominated by
stockholders upon submission in writing to the Secretary of the Company of the
names of such nominees, together with their qualifications for service as a
director of the Company. In order for any nominees for directors nominated by
stockholders to be considered by the Nominating Committee, such nominations
must be submitted no later than December 1st of the year preceding the Annual
Meeting. The Nominating Committee met one time during the fiscal year ended
December 31, 1997. Currently, the members of the Nominating Committee are Dr.
Kuhla, Dr. Jackson and Dr. Parks.
During the fiscal year ended December 31, 1997, the Board of Directors held
five meetings. Each Board member attended 75% or more of the aggregate of the
meetings held by the Board and by the respective committees on which such
Board member served during the period for which he was a director or a member
of such committee.
PROPOSAL 2
APPROVAL OF THE COMPANY'S 1998 STOCK OPTION PLAN
In March 1998, the Board of Directors adopted, subject to stockholder
approval, the NPS Pharmaceuticals, Inc. 1998 Stock Option Plan (the "1998
Option Plan") and authorized and reserved 1,000,000 shares of the Company's
Common Stock for issuance under the 1998 Option Plan. The 1998 Option Plan
provides for the grant of incentive and nonstatutory stock options. The Board
adopted the 1998 Option Plan as a means to retain the services of persons who
are current employees, directors, and consultants to the Company, to secure
and retain the services of new employees, directors, and consultants for the
Company, and to provide incentives for such persons to exert maximum efforts
on behalf of the Company. As of April 9, 1998, no options to purchase shares
of Common Stock had been granted under the 1998 Option Plan.
Stockholders are requested in this Proposal 2 to approve the 1998 Option
Plan and the setting aside of 1,000,000 shares of Common stock for issuance
under the 1998 Option Plan. The affirmative vote of the holders of a majority
of the shares present in person or represented by proxy and entitled to vote
at the meeting will be required to approve this Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
The terms and essential features of the Company's other stock plans remain
in effect, unaltered by the adoption of the 1998 Option Plan. The principal
features of the 1998 Option Plan are outlined below.
GENERAL
The 1998 Option Plan provides for the grant of incentive stock options
("ISOs") and nonstatutory stock options ("NSOs"). To date, no options have
been granted under the 1998 Option Plan. ISOs granted under the 1998 Option
Plan are intended to qualify as "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
NSOs granted under the 1998 Option Plan are intended not to qualify as
incentive stock options under the Code. See "Federal Income Tax Information"
for a discussion of the tax treatment of the various awards included in the
1998 Option Plan.
PURPOSE
The 1998 Option Plan was adopted to provide a means by which employees
(including officers), directors, and consultants to the Company and its
affiliates may be given an opportunity to benefit from increases in the value
of the stock of the Company, to secure and retain the services of persons
holding or capable of filling such positions, and to provide incentives for
such persons to exert maximum efforts on behalf of the Company and thereby
promote the long-term interest of the Company, including the growth in value
of the Company's equity and enhancement of long-term stockholder value.
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ADMINISTRATION
The 1998 Option Plan is administered by the Board. The Board has the power
to construe and interpret the 1998 Option Plan and, subject to the provisions
of the 1998 Option Plan, to determine the persons to whom and the dates on
which options will be granted, what type of option will be granted, the number
of shares to be subject to each option, the time or times during the term of
each option within which all or a portion of such option may be exercised, the
exercise price, the type of consideration, and other terms of the option. The
Board is authorized to delegate administration of the 1998 Option Plan to a
committee or committees composed of one or more members of the Board and has
delegated such administration to the Compensation Committee (the "Committee").
The Committee has the powers to administer the 1998 Option Plan subject to
such limitations as the Board provides. As used herein with respect to the
1998 Option Plan, where appropriate, the term "Board" refers to the
Compensation Committee.
In order to maximize the Company's ability to recognize a business expense
deduction under Section 162(m) of the Code in connection with compensation
recognized by "covered employees" (defined in Section 162(m) as the chief
executive officer and other four most highly compensated officers), the
regulations under Section 162(m) require that the directors who serve as
members of the Committee responsible for administering the 1998 Option Plan
with respect to these covered employees must be "outside directors." The 1998
Option Plan provides that in the discretion of the Board, a committee may
consist solely of two or more "outside directors," in accordance with Code
Section 162(m), or solely of two or more "non-employee directors," in
accordance with Rule 16b-3. The Committee composition as described above
currently consists of three outside, non-employee directors.
ELIGIBILITY
ISOs may be granted under the 1998 Option Plan to employees (including
officers) of the Company and any affiliates. Employees (including officers),
directors, and consultants of the Company are all eligible to receive NSO
awards under the 1998 Option Plan.
ISOs granted to a 10% shareholder (i.e. an employee who, at the time of the
grant, owns or is deemed to own, stock possessing more than 10% of the total
combined voting power of the Company or any affiliate of the Company) must
have an exercise price at least 110% of the fair market value of the stock
subject to the option on the date of grant, and the term of the option does
not exceed five years from the date of grant. For ISOs granted under the 1998
Option Plan, the aggregate fair market value determined at the time of grant
of the shares of Common Stock with respect to which such options are
exercisable for the first time by an optionee during any calendar year (under
all such plans of the Company and its affiliates), may not exceed $100,000.
In order to ensure that the Company will be able to deduct for tax purposes
the compensation attributable to the exercise of options granted under the
1998 Option Plan, the Company has included in the 1998 Option Plan a provision
limiting the maximum number of shares of Common Stock that may be covered by
stock options issued under the 1998 Option Plan to one individual for any
consecutive three calendar years to 750,000.
STOCK SUBJECT TO THE PLAN
The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the 1998 Option Plan is 1,000,000 shares. Any shares of
stock granted under the 1998 Option Plan that are forfeited because of the
failure to meet an option grant contingency or condition shall again be
available for delivery pursuant to new grants. To the extent any shares of
stock covered by a grant are not delivered to an optionee because the award is
forfeited or canceled, or the shares of stock are not delivered because the
award is settled in cash, such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of stock
available for delivery under the 1998 Option Plan. If the exercise price of
any option granted under the 1998 Option Plan is satisfied by tendering shares
of stock of the Company, only the number of
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shares of stock issued net of the shares of stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of stock
available for delivery under the 1998 Option Plan. Shares of stock delivered
under the 1998 Option Plan in settlement, assumption, or substitution of
outstanding awards (or obligations to grant future awards) under the plans or
arrangements of another entity shall not reduce the maximum number of shares
of stock available for delivery under the 1998 Option Plan, to the extent that
such settlement, assumption, or substitution is a result of the Company or an
affiliate acquiring another entity (or an interest in another entity).
TERMS OF THE OPTIONS
The following is a description of the permissible terms of options under the
1998 Option Plan. Individual option grants may be more restrictive as to any
or all of the permissible terms described below.
Exercise Price, Payment. The exercise price of ISOs and NSOs under the 1998
Option Plan may not be less than the fair market value of the Common Stock
subject to the option on the date of the option grant, and in some cases with
respect to ISOs (see "Eligibility" above) may not be less than 110% of such
fair market value.
The exercise price of options granted under the 1998 Option Plan may be paid
either:
(1) in cash at the time the option is exercised;
(2) by delivery of other Common Stock of the Company or a combination of
cash and already owned Common Stock;
(3) through surrender of shares of Common Stock available for exercise
under the Option;
(4) pursuant to a deferred payment arrangement;
(5) pursuant to a broker-assisted exercise same-day sales program; or
(6) in any other form of legal consideration acceptable to the Board; or
(7) any combination of the above.
Exercise Price, No Repricing. Except for certain adjustments due to
corporate transactions (see "Adjustment Provisions" and "Effect of Certain
Corporate Events" below), the exercise price for any stock option (ISOs and
NSOs) under the 1998 Option Plan may not be decreased after the grant of such
stock option, and a stock option may not be surrendered as consideration in
exchange for the grant of a new stock option with a lower exercise price.
Option Exercise. Options granted under the 1998 Option Plan may become
exercisable ("vest") in cumulative increments as determined by the Board. The
Board has the power to accelerate the time during which an option may be
exercised, and options granted may contain provisions for accelerated vesting
upon specified events or conditions. In addition, options granted under the
1998 Option Plan may permit exercise prior to vesting, but in such event, the
optionee may be required to enter into an early exercise stock purchase
agreement that allows the Company to repurchase shares not yet vested at their
exercise price should the optionee leave the employ of the Company before
vesting.
Term. The maximum term of ISOs and NSOs under the 1998 Option Plan is ten
years, except that in certain cases (see "Eligibility") the maximum term of
ISOs is five years. ISO status terminates three months after termination of
the optionee's employment with the Company or association as director or
affiliate of the Company, unless (a) such termination is due to such person's
permanent and total disability (as defined in the Code), in which case the
option may, but need not, provide that it may be exercised at any time within
one year of such termination; (b) the optionee dies while serving, or within
in a three-month period of having served the Company or any affiliate of the
Company, in which case the option may, but need not, be exercisable (to the
extent that the option was exercisable at the time of the optionee's death)
within twelve months of the optionee's death by the person or persons to whom
the rights to such option pass by will or by the laws of descent and
distribution; or (c) the option by its terms specifically provide otherwise.
Individual options by their terms may
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provide for exercise within a longer period of time following termination of
employment or the consulting relationship.
Adjustment Provisions. If there is any change in the Common Stock subject to
the 1998 Option Plan or subject to any award granted under the 1998 Option
Plan (through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the 1998 Option Plan and awards outstanding
thereunder may be appropriately adjusted as to the type of security and the
maximum number of shares subject to such plan, the maximum number of shares
which may be granted to an employee during any calendar year, and the type of
security, number of shares and price per share of stock subject to such
outstanding awards in order to preserve (or prevent enlargement of) the
benefits or potential benefits intended at the time of the grant.
Effect of Certain Corporate Events. The 1998 Option Plan provides that, in
the event of a dissolution or liquidation of the Company, specified type of
merger or other corporate reorganization, to the extent permitted by law, any
surviving corporation will be required to either assume awards outstanding
under the 1998 Option Plan or substitute similar awards for those outstanding
under the 1998 Option Plan, or such outstanding awards will continue in full
force and effect. In the event that any surviving corporation declines to
assume or continue awards outstanding under the 1998 Option Plan, or to
substitute similar awards, then the time during which such awards may be
exercised may be accelerated and the awards terminated if not exercised during
such time. The acceleration of an award in the event of an acquisition or
similar corporate event may be viewed as an anti-takeover provision, which may
have the effect of discouraging a proposal to acquire or otherwise obtain
control of the Company.
Duration, Amendment, and Termination. The Board may suspend or terminate the
1998 Option Plan without stockholder approval or ratification at any time or
from time to time. The Board may also amend the 1998 Option Plan at any time
or from time to time. However, no such amendment will be effective unless
approved by the stockholders of the Company, to the extent stockholder
approval of such amendment is necessary in order for the Plan to satisfy or
continue to satisfy Sections 422 and/or 162(m) of the Code, if applicable,
Rule 16b-3, and/or Nasdaq or other securities exchange listing requirements,
or if such amendment would increase the number of shares issuable under the
1998 Option Plan or decrease the minimum stock option exercise price set forth
in the 1998 Option Plan or permit repricing outstanding options. The Board may
submit any other amendment to the 1998 Option Plan for stockholder approval,
including, but not limited to, amendments intended to satisfy the requirements
of Section 162(m) of the Code regarding the exclusion of performance-based
compensation from the limitation on the deductibility of compensation paid to
certain employees.
Restrictions on Transfer. Except as otherwise provided by the Board, awards
under the 1998 Option Plan are not transferable other than as designated by
the participant by will or by the laws of descent and distribution. In
general, ISOs may not be transferred by the optionee otherwise than by will or
by the laws of descent and distribution and, during the lifetime of the
optionee, may be exercised only by the optionee. NSOs may not be transferred
except when transfer to a family member or related trust or partnership is
authorized by express provision of the option grant agreement, by will or by
the laws of descent and distribution or pursuant to a domestic relations order
satisfying the requirements of Rule 16b-3 and, during the lifetime of the
optionee, may be exercised only by the optionee, a valid family member, or a
transferee pursuant to a domestic relations order.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. ISOs under the 1998 Option Plan are intended to be
eligible for the favorable federal income tax treatment accorded "incentive
stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an ISO. However, the
exercise of an ISO may increase the optionee's alternative minimum tax
liability, if any.
8
<PAGE>
If an optionee holds stock acquired through exercise of an ISO for at least
two years from the date on which the option is granted and at least one year
from the date of exercise of the option, any gain or loss on a disposition of
such stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain or any loss upon the disqualifying disposition will
be a capital gain or loss which will be long-term or short-term depending on
whether the stock was held for more than one year. Long-term capital gains
currently are generally subject to lower tax rates than ordinary income. The
capital gains rate for capital assets held for eighteen months or more for
federal income tax purposes is currently 20% while the maximum rate for
capital assets held for one year and less than eighteen months is 28%. The
maximum ordinary income rate is effectively 39.6% at the present time.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the
Code and the satisfaction of a tax reporting obligation) to a corresponding
business expense deduction in the tax year in which the disqualifying
disposition occurs.
Nonstatutory Stock Options. NSOs granted under the 1998 Option Plan
generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a NSO. Upon exercise of an NSO, the optionee normally will
recognize taxable ordinary income equal to the excess of the stock's fair
market value on the date of exercise over the option exercise price.
Generally, with respect to employees, the Company is required to withhold from
regular wages or supplemental wages an amount based on the ordinary income
recognized. Subject to the requirement of reasonableness, the provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation,
the Company will generally be entitled to a business expense deduction equal
to the taxable ordinary income realized by the optionee. Upon disposition of
the stock, the optionee will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock plus any amount recognized as ordinary income upon exercise of the
option. Such gain or loss will be long or short-term depending on whether the
stock was held for more than one year. Slightly different rules may apply to
optionees who acquire stock subject to certain repurchase options or who are
subject to Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. Section 162(m) of the Code
denies a deduction to any publicly held corporation for compensation paid to
certain employees in a taxable year to the extent that compensation exceeds
$1,000,000 for a covered employee. It is possible that compensation
attributable to awards under the 1998 Option Plan, when combined with all
other types of compensation received by a covered employee from the Company,
may cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m) of the Code,
compensation attributable to stock options will qualify as performance-based
compensation, provided that: (a) the stock award plan contains a per-employee
limitation on the number of shares for which stock options may be granted
during a specified period; (b) the per-employee limitation is approved by the
stockholders; (c) the award is granted by a compensation committee comprised
solely of "outside directors"; and (d) the exercise price of the award is no
less than the fair market value of the stock on the date of grant.
PLAN BENEFITS
No stock option grants have yet been made under the 1998 Option Plan.
9
<PAGE>
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG") as the
Company's independent auditors for the fiscal year ending December 31, 1998,
and has further directed that management submit the selection of independent
public auditors for ratification by the stockholders at the Annual Meeting.
KPMG has audited the Company's financial statements since the Company's
inception in 1986. Representatives of KPMG are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
Stockholder ratification of the selection of KPMG as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of KPMG to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail
to ratify the selection, the Board will reconsider whether or not to retain
that firm. Even if the selection is ratified, the Board in its discretion may
direct the appointment of a different independent accounting firm at any time
if the Board determines that such a change would be in the best interests of
the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 1998 by: (a) all those known by
the Company to be beneficial owners of more than five percent of the Company's
Common Stock; (b) each director and nominee for director; (c) each of the
executive officers named in the Summary Compensation Table; and (d) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP TOTAL
- ------------------------------------ -------------------- ----------
(UNLESS OTHERWISE NOTED)
<S> <C> <C>
T. Rowe Price Associates, Inc(1)............... 1,455,200 11.3%
100 E. Pratt Street
Baltimore, MD 21202
BVF Partners, L.P.(2).......................... 1,361,800 10.5%
333 West Wacker Drive, Suite 1600
Chicago, IL 60606
Wellington Management Company, LLP(3).......... 1,041,400 8.1%
75 State Street
Boston, MA 02109
Amgen Inc...................................... 1,000,000 7.7%
1840 DeHavilland Drive
Thousand Oaks, CA 91320
SmithKline Beecham Corporation(4).............. 877,601 6.8%
One Franklin Plaza
Philadelphia, PA 19101
S. R. One, Limited(5).......................... 877,601 6.8%
565 East Swedesford Road, Suite 315
Wayne, PA 08542
Dimensional Fund Advisors Inc.(6).............. 820,600 6.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Hunter Jackson, Ph.D.(7)....................... 574,600 4.4%
Thomas N. Parks, Ph.D.(8)...................... 360,160 2.8%
Edward F. Nemeth, Ph.D.(9)..................... 191,406 1.5%
James U. Jensen, J.D.(10)...................... 111,443 *
Thomas B. Marriott, Ph.D.(11).................. 104,269 *
Douglas Reed, M.D.(12)......................... 62,012 *
Donald E. Kuhla, Ph.D.(13)..................... 51,160 *
Timothy J. Rink, M.D., Sc.D.(14)............... 48,760 *
James G. Groninger, M.B.A.(15)................. 43,372 *
Santo J. Costa, J.D.(16)....................... 7,860 *
Skip Klein, M.B.A.(17)......................... 0 *
All directors and executive officers as a group
(includes 13 people)(18)...................... 1,642,557 12.7%
</TABLE>
11
<PAGE>
- --------
* Less than 1%.
(1) These securities are owned by various individual and institutional
investors including T. Rowe Price New Horizons Fund, Inc. which owns
900,000 shares, representing 7.34% of the shares outstanding, of which T.
Rowe Price Associates, Inc. ("Price Associates") serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, Price Associates is deemed to be a beneficial owner
of such securities; however, Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such securities.
(2) BVF Partners, L.P. shares voting and dispositive power with BVF, Inc. with
respect to all of these shares and with Biotechnology Value Fund, L.P.
with respect to 569,900 of the shares.
(3) Wellington Management Company, LLP ("WMC"), a registered investment
adviser, is deemed to have beneficial ownership of 1,041,400 shares of NPS
common stock. Such shares are owned of record by clients of WMC. WMC
shares voting power with respect to 957,500 of such shares and dispositive
power with respect to all of such shares.
(4) Includes 717,601 shares held by S. R. One, Ltd. a wholly owned affiliate
SmithKline Beecham has sole voting and dispositive power with respect to
160,000 of these shares.
(5) Includes 160,000 shares held by SmithKline Beecham. Also includes 5,700
shares subject to options held by Dr. Douglas Reed pursuant to an
agreement between S. R. One and Dr. Reed. Dr. Reed was a Vice President of
S. R. One before becoming a full time employee of the Company on April 15,
1996. Upon exercise, such shares will be transferred to and held by S. R.
One. S. R. One has sole voting and dispositive power with respect to
717,601 of the shares.
(6) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 820,600 shares of NPS
common stock, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, all of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
(7) Includes 84,500 shares held in a trust and two shares held by Dr.
Jackson's children, of which he disclaims beneficial ownership. Also
includes 174,900 shares subject to options exercisable within 60 days of
March 31, 1998.
(8) Includes 12,660 shares subject to options exercisable within 60 days of
March 31, 1998.
(9) Includes 159,450 shares subject to options exercisable within 60 days of
March 31, 1998.
(10) Includes 500 shares held by children. Also includes 30,500 shares subject
to options exercisable within 60 days of March 31, 1998. Mr. Jensen
disclaims beneficial ownership of the 500 shares held by an adult child.
(11) Includes 241 shares held by spouse, 321 shares held by children, and
84,500 shares subject to options exercisable within 60 days of March 31,
1998.
(12) Includes 45,370 shares subject to options exercisable within 60 days of
March 31, 1998.
(13) Includes 29,160 shares subject to options exercisable within 60 days of
March 31, 1998.
(14) Includes 44,160 shares subject to options exercisable within 60 days of
March 31, 1998.
(15) Includes 17,450 shares held in trust, of which he disclaims beneficial
ownership. Also includes 3,840 shares subject to options exercisable
within 60 days of March 31, 1998.
(16) Includes 3,660 shares subject to options exercisable within 60 days of
March 31, 1998.
(17) On April 2, 1998, Mr. Klein was granted an option to purchase 15,000
shares of Common Stock under the Directors' Plan. No shares subject to
options are exercisable within 60 days of March 31, 1998. Mr. Klein
disclaims any beneficial ownership of any shares held by T. Rowe Price
Associates.
12
<PAGE>
(18) Includes an aggregate of 668,150 shares subject to options exercisable
within 60 days of March 31, 1998.
The above table is based upon information supplied by officers, directors,
and principal stockholders and Schedules 13D and 13G filed with the
Commission. Beneficial ownership is determined in accordance with the rules
of the Commission and generally includes voting or investment power with
respect to securities. Except as indicated by footnotes and subject to
community property laws, where applicable, the persons named above have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them. Beneficial ownership also includes
shares of stock subject to options and warrants exercisable or convertible
within 60 days. Applicable percentages are based on 12,935,000 shares of
Common Stock outstanding on March 31, 1998, adjusted as required by rules
promulgated by the Commission.
Except as set forth herein, the address of the persons set forth above is
the address of the Company appearing elsewhere in this Proxy Statement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities (collectively the
"Reporting Persons"), to file with the Commission reports of ownership and
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors, and greater than 10% stockholders are required
by the Commission to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, during the fiscal year ended December 31, 1997, the
Company believes that apart from Hunter Jackson and Thomas Marriott who
reported late through amended Form 5s with respect to gifts of shares of
common stock for the benefit of respective family members by each of them in
December 1997, all Reporting Persons complied with all applicable Section
16(a) filing requirements.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's directors do not currently receive any cash compensation for
service on the Board or any Committee thereof. Outside Directors are
reimbursed for certain expenses in connection with attendance at Board and
Committee meetings. Directors are eligible to receive stock options and stock
bonuses under the stock plans described below.
In January 1994, the Board adopted, and the stockholders subsequently
approved, the 1994 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). An amendment to increase from 90,000 to 160,000 the number of shares
available for grant under the Directors' Plan was approved by the stockholders
in July 1996. Under the Directors' Plan, non-employee directors of the Company
are eligible to receive options. Options granted under the Directors' Plan are
automatic and non-discretionary and do not qualify as ISOs under the Internal
Revenue Code of 1986, as amended (the "Code"). Pursuant to the terms of the
Directors' Plan, each person who is elected for the first time to be an
outside director of the Company and who is not otherwise employed by the
Company or an affiliate of the Company (a "Non-Employee Director") will
automatically be granted an option to purchase 15,000 shares of Common Stock
(subject to adjustment as provided in the Directors' Plan) upon the date of
his or her election to the Board. On December 1 of each year, each person who
is then a Non-Employee Director and has been a Non-Employee Director for at
least three months will automatically be granted an option to purchase 3,000
shares of Common Stock (subject to adjustment as provided in the Directors'
Plan) pursuant to the Directors' Plan.
13
<PAGE>
No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date such option was granted. Options granted
under the Directors' Plan vest at a rate of 28% of the shares subject to the
option one year after date of grant and 3% of the shares become exercisable
each month thereafter, so long as the optionee has, during the entire period
prior to such vesting date, continuously served as a Non-Employee Director. If
the optionee's service as a non-employee director terminates for any reason
other than death, the option will remain exercisable for twelve months after
the date of termination, or until the option's expiration date, if earlier. If
the optionee dies, the option will remain exercisable for eighteen months
following the date of death or until the expiration date of the option,
whichever is earlier. The exercise price of options granted under the
Directors' Plan is 100% of the fair market value of the Common Stock on the
date of grant. Options granted under the Directors' Plan are generally non-
transferable. Unless otherwise terminated by the Board, the Directors' Plan
automatically terminates in January 2004.
As of December 31, 1997, options to purchase a total of 84,000 shares of
Common Stock had been granted under the Directors' Plan at exercise prices
from $3.00 to $10.25 per share, and a weighted average exercise price of $6.82
per share. As of that date, options for 9,290 shares had been exercised since
the inception of the Directors' Plan. Prior to the adoption of the Directors'
Plan, the Company granted options to directors under the 1987 Stock Option
Plan.
In December 1994, the Board adopted the Non-Employee Directors' Stock Bonus
Program under the 1994 Equity Incentive Plan (the "Stock Bonus Program").
Under the Stock Bonus Program, non-employee directors are eligible to receive
grants of shares of Common Stock for attendance at Board and Committee
meetings. The Stock Bonus Program provides each Non-Employee Director of the
Company with a non-discretionary award of 200 shares of Common Stock for each
Board meeting attended and 200 shares of Common Stock per year for serving on
a Board Committee. A total of 7,400 shares was granted under the Stock Bonus
Program for meetings attended in 1997.
The right to receive awards under the Stock Bonus Program is generally non-
transferable. The stock awards are made at the end of each calendar year. Non-
Employee Directors entitled to stock bonus awards shall not possess any rights
of a stockholder of the Company until such shares are delivered to the Non-
Employee Director. Unless otherwise terminated by the Board, the Stock Bonus
Program terminates in January 2004.
14
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended December 31, 1997,
December 31, 1996 and December 31, 1995, certain compensation awarded, paid
to, or earned by, the Company's Chief Executive Officer and its other four
most highly compensated executive officers (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------- LONG-TERM COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) STOCK OPTIONS GRANTED(#)
- ---------------------------- ---- --------- -------- ------------------------
<S> <C> <C> <C> <C>
Hunter Jackson, Ph.D.......... 1997 235,846 40,000
Chief Executive Officer,
President and 1996 214,884 22,659 45,000
Chairman of the Board 1995 189,033 45,000
James U. Jensen, J.D.......... 1997 167,783 20,000
Vice President, Corporate
Development 1996 152,592 17,624 25,000
and Legal Affairs and
Secretary 1995 147,072 25,000
Thomas B. Marriott, Ph.D...... 1997 177,868 20,000
Vice President, Development
Research 1996 165,758 18,883 25,000
1995 157,629 25,000
Edward F. Nemeth, Ph.D........ 1997 159,832 20,000
Vice President, and Chief
Scientific Officer 1996 150,038 16,365 30,000
1995 136,603 30,000
Douglas Reed, M.D.(1)......... 1997 169,882 25,000
Vice President, Business
Development 1996 139,718 70,000
</TABLE>
- --------
(1) Dr. Reed was appointed as a Vice President of the Company in April 1996.
Dr. Reed was paid $32,900 in 1996 as "other" compensation for moving
expenses incurred in connection with commencing employment. Upon
commencement of employment with the Company, Dr. Reed was granted an
option to acquire 40,000 shares of Common Stock of the Company. He was
also granted 6,000 shares of NPS Common Stock (valued at $79,500 on the
date of grant) of which 2,000 shares vested immediately. The remaining
4,000 shares are restricted and are subject to vesting based upon Dr.
Reed's continued employment with the Company at the following rate: 2,000
shares upon completion of the first year of employment (April 15, 1997)
and the remaining 2,000 shares upon completion of the second year of
employment (April 15, 1998). All shares are eligible for dividends on the
same basis as all other outstanding shares of Common Stock. As of December
31, 1997, Dr. Reed held 2,000 restricted shares with an aggregate value on
that date of $15,500.
1987 STOCK OPTION PLAN
The 1987 Stock Option Plan (the "1987 Plan") was adopted in June 1987. The
purposes of the 1987 Plan were to attract and retain qualified personnel, to
provide additional incentives to employees, officers, advisors, directors, and
consultants of the Company, and to promote the success of the Company's
business. No options have been granted under the 1987 Plan since December
1993, and the Company will not make any future grants under the 1987 Plan. As
of December 31, 1997, options to purchase a total of 821,332 shares of Common
Stock had been exercised for cash and services under the 1987 Plan at a
weighted average exercise price of $0.79 per share. As of December 31, 1997,
options to purchase a total of 488,660 shares of Common Stock were
outstanding, with exercise prices ranging from $0.34 to $4.00 per share and a
weighted average exercise price per share of $1.43.
Options granted under the 1987 Plan generally became exercisable at a rate
of one-third of the shares subject to the option on the first anniversary of
the option grant and one-third of the remaining shares subject to the
15
<PAGE>
option on each of the second and third anniversary of the option grant. The
maximum term of a stock option under the 1987 Plan was ten years; however, if
the optionee at the time of grant had voting power over more than ten percent
of the Company's outstanding capital stock (a "10% Holder"), the maximum term
of any ISO granted under the 1987 Plan was five years. The aggregate fair
market value of the stock with respect to which ISOs are exercisable for the
first time by an optionee in any calendar year may not exceed $100,000. The
exercise prices of ISOs granted under the 1987 Plan were at least equal to
100%, 110% with respect to 10% Holders, of the fair market value of the stock
subject to the option on the date of grant. Although no minimum exercise price
of NSOs was required under the 1987 Plan, the exercise price of NSOs
previously granted under the 1987 Plan generally has been at least equal to
the fair market value of the stock subject to the option on the date of the
grant. Any option that is exercisable at the time of grant and which expires
no sooner than three years from the grant date is subject to an option
exercise price equal to the fair market value of the option on the grant date.
1994 EQUITY INCENTIVE PLAN
In January 1994, the Board adopted the 1994 Equity Incentive Plan (the "1994
Plan"), which was subsequently approved by the stockholders in February 1994.
1,702,503 shares have been authorized for issuance under the 1994 Plan. The
purposes of the 1994 Plan are to attract and retain qualified personnel, to
provide additional incentives to employees, officers, directors, and
consultants of the Company and its affiliates and to promote the success of
the Company's business. Under the 1994 Plan, the Company may grant NSOs to
employees, officers, directors, and consultants to the Company and its
affiliates and may grant ISOs to employees of the Company and its affiliates.
As of December 31, 1997, options to purchase a total of 126,869 shares of
Common Stock had been exercised for cash and services under the 1994 Plan at a
weighted average exercise price of $6.23 per share. As of December 31, 1997,
options to purchase 1,498,936 shares of Common Stock with exercise prices
ranging from $3.00 to $16.63 per share, and a weighted average exercise price
per share of $8.85 were outstanding.
Options granted under the 1994 Plan prior to December 1, 1997, generally
become exercisable at a rate of 28% of the shares subject to the option at the
end of the first year and 3% of the shares subject to the option at the end of
each calendar month thereafter. Options granted under the 1994 Plan after
December 1, 1997 generally become exercisable at a rate of 28% of the shares
subject to the option at the end of the first year and 2% of the shares
subject to the options at the end of each calendar month thereafter. The
maximum term of a stock option under the 1994 Plan is ten years; however, if
the optionee who is granted an ISO at the time of grant is a 10% Holder, the
maximum term of any ISO granted under the 1994 Plan is five years. If an
optionee terminates his or her service to the Company, the optionee may
exercise only those option shares vested as of the date of termination and
must effect such exercise within three months of termination of service for
any reason other than death or disability, one year after termination due to
disability, and eighteen months after termination due to death. The aggregate
fair market value with respect to which ISOs are exercisable for the first
time by an optionee in any calendar year may not exceed $100,000. The exercise
price of ISOs granted under the 1994 Plan must be at least 100%, 110% with
respect to 10% Holders, of the fair market value of the Common Stock of the
Company on the date of grant. Upon completion of this Offering, no employee
will be a 10% Holder. The exercise price of NSOs granted under the 1994 Plan
is the fair market value of the Company's Common Stock on the date of grant or
such other exercise price as is set by the Board at the date of grant. Payment
of the exercise price may be made in cash or by shares of the Company's Common
Stock valued at the fair market value of such shares on the date of exercise
or in any other form acceptable to the Board. The 1994 Plan also allows the
Company to grant stock bonuses, reload options, rights to purchase restricted
stock, and stock appreciation rights.
The 1994 Plan may be amended at any time by the Board, although certain
amendments require stockholder approval. The 1994 Plan will terminate in
January 2004, unless earlier terminated by the Board.
16
<PAGE>
The following table sets forth each grant of options to purchase Common
Stock made during the year ended December 31, 1997 to each of the Named
Executive Officers. Grants of options to each of the Named Executive Officers
were made under the 1994 Plan:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
UNDERLYING % OF TOTAL VALUE AT ASSUMED ANNUAL
SECURITIES OPTIONS EXERCISE RATES OF STOCK PRICE
OPTIONS GRANTED IN OR BASE PRICE EXPIRATION APPRECIATION FOR
NAME GRANTED(#)(1) FISCAL YEAR(2) PER SHARE DATE(3) OPTION TERM($)(4)
- ---- ------------- -------------- ------------- ---------- ------------------------
5% 10%
----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Hunter Jackson.......... 40,000 8.43% $9.75 12/01/07 $245,569 $621,560
James U. Jensen......... 20,000 4.21 9.75 12/01/07 122,634 310,780
Thomas B. Marriott...... 20,000 4.21 9.75 12/01/07 122,634 310,780
Edward F. Nemeth........ 20,000 4.21 9.75 12/01/07 122,634 310,780
Douglas Reed............ 25,000 5.27 9.75 12/01/07 153,293 388,475
</TABLE>
- --------
(1) Options granted under the 1994 Plan prior to December 1, 1997 generally
become exercisable at the rate of 28% of the shares subject to the option
one year after the date of grant and 3% of the shares subject to the
option each month thereafter. Options granted after December 1, 1997
become exercisable at the rate of 28% of the shares subject to the option
one year after the date of the grant, and 2% of the shares subject to the
option each month thereafter.
(2) Based on an aggregate of 474,750 options granted under the 1994 Plan to
employees of the Company, including the Named Executive Officers.
(3) These options have a ten-year term, subject to earlier termination upon
death, disability, or termination of employment.
(4) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated by assuming that
the stock price on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the
appreciated stock price. No gain to the optionee is possible unless the
stock price increases over the option term, which will benefit all
stockholders.
The following table sets forth information with respect to (a) the exercise
of stock options by the Named Executive Officers during the fiscal year ended
December 31, 1997; (b) the number of unexercised options held by the Named
Executive Officers as of December 31, 1997; and (c) the value as of December
31, 1997 of unexercised in-the-money options.
OPTION EXERCISES IN 1997 AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS(#) OPTIONS($)(2)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Hunter Jackson.......... 37,000 $279,905 161,400/88,600 $645,000/$0
James U. Jensen......... 12,300 70,575 25,700/47,000 12,825/ 0
Thomas B. Marriott...... 25,397 222,364 77,000/47,000 288,060/ 0
Edward F. Nemeth........ -- -- 151,200/48,800 716,700/ 0
Douglas Reed............ -- -- 40,120/66,880 48,750/ 0
</TABLE>
- --------
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise (the closing sales price reported on the
Nasdaq National Market on such date) minus the exercise price, and does
not necessarily indicate that the optionee sold such stock.
(2) Represents the difference between the option exercise price and the
closing price of the Company's Common Stock as reported on the Nasdaq
National Market on December 31, 1997 ($7.75) times the corresponding
number of shares.
17
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has no employment agreements with any of its executive officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Kuhla, a director of the Company since 1991, is Vice President of Plexus
Ventures, Inc. ("Plexus"). The Company had a consulting agreement with Plexus
through December 31, 1995, whereunder Plexus assisted the Company with its
effort to establish a collaboration for the Company's hyperparathyroidism
program including NPS proprietary compound, NPS R-568. During the years ended
December 31, 1994, 1995 and 1996, the Company paid fees to Plexus totaling
$34,000, $84,500, and $400,000, respectively. No fees were paid to Plexus in
1997. Plexus may earn an additional $400,000 in fees as payments are received
from Amgen, Inc. ("Amgen"). The Company also granted Plexus an option to
purchase 20,000 shares of NPS Common Stock at $10.50 per share with vesting
contingent upon milestone payments from Amgen. The Company has also entered
into a Consultant Services Agreement with Dr. Kuhla, effective November 1,
1996, whereunder Dr. Kuhla will provide scientific consulting services to the
Company. In return for such services, Dr. Kuhla will receive from the
approximately 1,800 shares based on attendance at various company meetings. In
fiscal year 1997, Dr. Kuhla received 1,800 shares of NPS Common Stock for
services rendered as a consultant. The Company's policy is to enter into
agreements with each of its directors and executive officers providing for the
indemnification of such persons to the fullest extent permitted by law for any
liability they may incur by reason of their service as officers and/or
directors to the Company. The Company has entered into indemnity agreements
with each of its directors and executive officers.
The Company entered into a development and license agreement with Amgen
effective December 1995 which granted Amgen the exclusive right to develop and
commercialize drugs for the treatment of HPT (and other indications other than
osteoporosis) worldwide excluding Japan, China (including Hong Kong), North
and South Korea, and Taiwan. Under the terms of the agreement with Amgen, NPS
may receive from Amgen up to an aggregate of $43.5 million in license fees,
equity purchases, and milestone payments plus royalties from any future
product sales. Amgen paid NPS a license fee of $10.0 million and purchased one
million shares of Common Stock for an aggregate purchase price of $7.5
million. NPS has the option to participate with Amgen, under the direction of
Amgen, in the clinical development of a drug for primary HPT. Amgen is
required to reimburse NPS for such participation, limited to a total cost of
$400,000 per year for a maximum time period of five years.
In November 1993, NPS entered into a three-year collaborative research and
license agreement with SmithKline Beecham Corporation ("SmithKline Beecham")
to collaborate on the discovery, development, and marketing of drugs to treat
osteoporosis and other bone metabolism disorders. In 1992, S. R. One, Ltd. an
affiliate of SmithKline Beecham, purchased $2.0 million of the Company's
Preferred Stock. In 1993, at the time NPS entered into the agreement with
SmithKline Beecham, S. R. One purchased an additional $7.0 million in equity
of the Company and it acquired $495,000 of Common Stock in the Company's
initial public offering. All of the Preferred Stock was converted into Common
Stock upon the closing of the Company's initial public offering.
Under the terms of the agreement with SmithKline Beecham, in addition to the
$7.0 million equity purchase, SmithKline Beecham paid the Company a $6.0
million license fee and agreed to make additional payments to the Company upon
the achievement of specific milestones. A $3.0 million milestone payment was
made in January 1996. In July 1995, the Company began receiving payments from
SmithKline Beecham to support the Company's research efforts and has
recognized revenue of $6.2 million through 1997. In November 1997, the
research term of the agreement was extended for an additional period of up to
three years. Concurrently with the execution of the extension agreement,
SmithKline Beecham purchased 160,000 shares of Common Stock of the Company and
agreed to purchase an additional 453,000 shares of the Company's Common Stock
over the next two years if the agreement is not terminated earlier. Research
support payments are expected to be approximately $437,500 per quarter through
October 2000 unless terminated earlier by SmithKline Beecham. NPS is entitled
to royalties on sales of products for osteoporosis and other bone metabolism
disorders developed by SmithKline Beecham under the agreement and a share of
the profits from any copromotion of such products.
18
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Costa, Mr. Groninger and Dr. Rink served on the Compensation Committee
for fiscal year 1997. No officer or employee of the Company sits on the
Compensation Committee. No member of the Compensation Committee has at any
time been an officer or employee of the Company. Mr. Groninger is a brother-
in-law of Dr. Jackson, the Company's Chief Executive Officer, President and
Chairman of the Board. Mr. Groninger abstains from participating in the
determination of the proper compensation package for Dr. Jackson.
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION PHILOSOPHY
The Company's compensation policies and programs seek to achieve three
fundamental goals: (1) to enhance stockholder value by aligning compensation
of executive officers and employees with the Company's progress toward
achievement of its business objectives and performance, (2) to reward
executive officers and employees with compensation incentives adequate to
retain them in the future in the face of considerable competition for talent
within the pharmaceutical industry and their disciplines, and (3) to attract
and successfully recruit qualified, talented personnel essential to the
Company's achievement of its business objectives.
COMPENSATION COMMITTEE
To ensure clear and centralized focus on all aspects of compensation, the
Compensation Committee was formed by the Board of Directors in January 1994.
For 1997, the Compensation Committee was composed of Mr. Costa, Mr. Groninger
and Dr. Rink. The Compensation Committee operates under a Charter adopted by
the Board of Directors. Among other things, the Charter authorizes and directs
the Compensation Committee to establish and review annually the general
compensation policies applicable specifically to the Company's executive
officers and generally to the Company's employees (including the relationship
of Company performance to compensation) and the basis for the Chief Executive
Officer's compensation in particular. The Compensation Committee is also
authorized to review and approve the level of compensation paid to the Chief
Executive Officer and the Company's other executive officers during each
fiscal year. Finally, the Compensation Committee reviews and approves awards
made under the Company's incentive compensation and benefit plans, including
the 1994 Employee Stock Purchase Plan, the 1994 Equity Incentive Plan and the
1987 Stock Option Plan. The Committee is instructed to bring to the full Board
its recommendations for any changes. No member of the Compensation Committee
during fiscal year 1997 was a former or current officer or employee of the
Company.
COMPENSATION COMPONENTS
In order to link compensation of executive officers with the enhancement of
stockholder value, the Board has adopted a compensation package for each of
the Company's executive officers which consists of a base salary and long-term
incentive compensation in the form of stock option grants. In the past, during
the first part of December of each year, the Company's management has proposed
to the Compensation Committee specific compensation proposals, including
salary and long-term incentives, for each of the Company's officers and
employees. These proposals are based on, among other things, experience,
achievements, responsibilities, outside compensation surveys of other
biopharmaceutical companies, geographical economic indicators, and advice of
outside consultants. The Committee's deliberations in 1997 used this
information provided by management.
SALARY
Base salaries represent the fixed component of the Company's executive
compensation package. Generally, salary compensation is determined by
evaluating the compensation of executives in similar positions in other
19
<PAGE>
similar pharmaceutical companies, the experience of the particular executive
officer and the executive officer's specific responsibilities. The
Compensation Committee also evaluates the achievement of Company objectives in
determining base salaries for the executive officers. For use in part by the
Compensation Committee, in 1997 the Company engaged the assistance of outside
consultants to advise it with respect to compensation programs and
evaluations. The base salaries for executive officers were then set at levels
believed by the Committee to be competitive and supportive of the Company's
compensation philosophy.
LONG-TERM INCENTIVES
The purpose of long-term incentive compensation is to encourage employees to
remain in the long-term employ of the Company and to reward employees for
maximizing shareholder value. Long-term compensation awards are discretionary
and are primarily based on individual performance as well as Company
achievement of goals and objectives. In general, the performance factors
utilized by the Compensation Committee to evaluate the grant of stock options
to Company executive officers during the 1997 fiscal year were subjective and
included, but were not limited to, the following: progress in clinical trials
and regulatory matters; the planning of appropriate collaborative arrangements
and the procurement and performance of ongoing collaboration arrangements with
pharmaceutical and biotechnology companies; the officer's overall individual
performance in his or her position and relative contribution during the year;
and the Board of Directors' desire to retain the executive officer in face of
considerable competition for executive talent within his/her discipline and in
the industry. The Compensation Committee may modify the foregoing criteria or
select other performance factors with respect to other executive bonus awards
during a given fiscal year.
SUMMARY
The Compensation Committee believes that the Company's executive officers
are committed to achieving positive long-term performance and enhanced
stockholder value, and that the compensation policies and programs discussed
in this report have motivated the Company's executive officers to work toward
these goals.
CEO COMPENSATION
The Chief Executive Officer was a founder of the Company in 1986 and has
served in such capacity since that time. The Chief Executive Officer's
compensation package has traditionally been based below that of other chief
executive officers in comparable companies in the industry. In order to
determine the appropriate salary increase and stock option grant for the Chief
Executive Officer, the Compensation Committee considered the salaries of other
chief executive officers in the biotechnology industry and more specifically
the following accomplishments in 1997: commencement of a Phase I clinical
trial of NPS 1506; managing the Company's relationships with key strategic
partners including Amgen, SmithKline Beecham, and Kirin; the progress in
research and development which resulted in the receipt of a $2 million
milestone payment from Kirin for the commencement of Phase II clinical trials;
the extension of the SmithKline Beecham agreement for up to an additional
three years and the related sale to SmithKline Beecham of NPS common stock;
the Company's receipt of the "Utah Best Practices Award" for 1997 in the
category of "Motivating and Retaining Employees;" Dr. Jackson's leadership of
the Company's one-year and five-year planning; the initiation of good
corporate governance, training and practices; Dr. Jackson's continued
management responsibilities as President and Chief Executive Officer of a
public company with over 110 employees; and Dr. Jackson's overall performance
as President and Chief Executive Officer.
POLICY REGARDING DEDUCTIBILITY
The Company is required to disclose its policy regarding qualifying
executive compensation for deductibility under Section 162(m) of the Code
which provides that, for purposes of the regular income tax and the
alternative minimum tax, the otherwise allowable deduction for compensation
paid or accrued with respect to a covered employee of a publicly-held
corporation is limited to no more than $1 million per year. The
20
<PAGE>
Company does not anticipate that compensation payable to any executive officer
will exceed $1 million for fiscal 1997. The Committee will continue to evaluate
the advisability of qualifying the deductibility of such compensation in the
future.
Compensation Committee for fiscal
year 1997
Santo J. Costa, Chairman
James G. Groninger
Timothy J. Rink
March 1998
21
<PAGE>
[PERFORMANCE GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
NPS NASDAQ NASDAQ
PHARMACEUTICALS, INC. STOCK MARKET-US PHARMACEUTICALS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5/26/94 100 100 100
- --------------------------------------------------------------------------------
JUN-94 82 96 93
- --------------------------------------------------------------------------------
DEC-94 68 103 98
- --------------------------------------------------------------------------------
JUN-95 86 128 123
- --------------------------------------------------------------------------------
DEC-95 314 146 179
- --------------------------------------------------------------------------------
JUN-96 241 165 181
- --------------------------------------------------------------------------------
DEC-96 200 180 179
- --------------------------------------------------------------------------------
JUN-97 175 201 183
- --------------------------------------------------------------------------------
DEC-97 141 220 185
- --------------------------------------------------------------------------------
22
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
James U. Jensen,
Secretary
April 9, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO:
NPS PHARMACEUTICALS, INC.
ATTN: INVESTOR RELATIONS
420 CHIPETA WAY
SALT LAKE CITY, UTAH 84108
23
<PAGE>
NPS PHARMACEUTICALS, INC.
1998 STOCK OPTION PLAN
1. GENERAL.
1.1 Purpose. The 1998 Stock Option Plan has been established by the
-------
Company to provide a means by which employees, directors, and
consultants of the Company and its Affiliates may be given the
opportunity to benefit from increases in value of NPS stock through
the granting of Options. NPS seeks to (a) retain the services of
present employees, directors, and consultants; (b) secure and retain
the services of new employees, directors, and consultants; and (c)
provide incentives for such persons to exert maximum efforts for the
success of the Company and thereby promote the long-term interest of
the Company, including the growth in value of the Company's equity and
enhancement of long-term stockholder return.
1.2 Types of Options. The Company intends that the Options issued under
----------------
the Plan shall, in the discretion of the Board or any Board Committee
(see paragraph 3.2), be either Incentive Stock Options or Nonstatutory
Stock Options (defined below).
1.3 Definitions. Unless otherwise defined, capitalized terms shall have
-----------
the meaning set forth in Section 2.
2. DEFINITIONS.
2.1 Affiliate means any parent corporation or subsidiary corporation of
---------
the Company, whether now or hereafter existing, as those terms are
defined in Sections 424(e) and (f) respectively, of the Code.
2.2 Board means the Board of Directors of the Company.
-----
2.3 Code means the Internal Revenue Code of 1986, as amended.
----
2.4 Committee means a Committee appointed by the Board in accordance with
---------
paragraph 3.2 herein.
2.5 Company means NPS Pharmaceuticals, Inc., a Delaware corporation.
-------
2.6 Consultant means any person (including an advisor) engaged by the
----------
Company or an Affiliate to render consulting services under
arrangements intended to compensate such person for such services. The
term "Consultant" shall not include a Director who is paid only a
director's fee by the Company or who is not compensated by the Company
for services as a Director.
2.7 Continuous Status as an Employee, Director, or Consultant means the
---------------------------------------------------------
employment or relationship as an Employee, Director, or Consultant is
not interrupted or terminated by the Company or any Affiliate. The
Board, in its sole discretion, may determine whether Continuous Status
as an Employee, Director, or Consultant shall be considered
interrupted in the case of:
1
<PAGE>
2.7.1 any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; provided,
however, that for purposes of Incentive Stock Options, any such
leave may not exceed 90 days unless reemployment upon the
expiration of such leave is guaranteed by contract (including
certain Company policies) or statute; or
2.7.2 transfers between locations of the Company or between the
Company, Affiliates or its successor.
2.8 Day of Determination means the date of the occurrence of an event that
--------------------
requires the determination of the Fair Market Value of an award made
hereunder.
2.9 Director means a member of the Board.
--------
2.10 Disability means total and permanent disability as defined in Section
----------
22(e)(3) of the Code.
2.11 Employee means any person, including Officers and Directors, employed
--------
by the Company or any Affiliate. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
2.12 Exchange Act means the Securities Exchange Act of 1934, as amended.
------------
2.13 Fair Market Value means, as of any date, the value of the common stock
-----------------
of the Company as determined as follows:
2.13.1 If the common stock is listed on any established stock
exchange or a national market system, including without
limitation, the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System, the Fair Market Value of a share of common
stock shall be the closing price for such stock on the Day of
Determination as quoted on such system as reported in the Wall
Street Journal or such other source as the Board deems
reliable. In the event the Day of Determination falls on a
date that the Nasdaq system is closed, then the Fair Market
Value shall be the closing sales price for such stock on the
last market trading day prior to the Day of Determination as
quoted on such system as reported in the Wall Street Journal
or such other source as the Board deems reliable.
2.13.2 If the common stock is quoted on Nasdaq (but not on the
National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not
reported, the Fair Market Value of a share of common stock
shall be the mean between the bid and asked prices for the
common stock on the last market trading day prior to the day
of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
2.13.3 In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the
Board.
2.14 Incentive Stock Option (or "ISO") means an Option intended to qualify
---------------------------------
as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
2
<PAGE>
2.15 Non-Employee Director means a Director who is considered to be a "Non-
---------------------
Employee Director" in accordance with Rule 16b-3(b)(3), or any other
applicable rules, regulations or interpretations of the Securities and
Exchange Commission.
2.16 Nonstatutory Stock Option (or "NSO") means an Option not intended to
------------------------------------
qualify or not eligible to qualify as an ISO or an ISO which,
subsequent to its date of grant, no longer qualifies as an ISO under
Section 422 of the Code.
2.17 Officer means a person who is an officer of the Company within the
-------
meaning of Section 16a-1(f) of the Exchange Act and the rules and
regulations promulgated thereunder.
2.18 Option means a stock option granted pursuant to the Plan.
------
2.19 Option Agreement means a written agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option
grant.
2.20 Optionee means an Employee, Director, or Consultant who holds an
--------
outstanding Option.
2.21 Outside Director means a Director who is considered to be an "Outside
----------------
Director" in accordance with Section 162(m) of the Code, or any other
applicable Code sections, regulations, or interpretations of the IRS.
2.22 Plan means this 1998 Stock Option Plan.
----
2.23 Rule 16b-3 means Rule 16b-3 of the Exchange Act or any successor to
----------
Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
2.24 Securities Act means the Securities Act of 1933, as amended.
--------------
3. ADMINISTRATION.
3.1 Powers and Authority. The Plan shall be administered by or under the
--------------------
direction of the Board unless and until the Board delegates
administration to a Committee, as provided in paragraph 3.2. The Board
shall have the power subject to and within the limitations of the
express provisions of the Plan:
3.1.1 To determine from time to time: (a) which of the persons
eligible under the Plan shall be granted Options; (b) when and
how Options shall be granted; (c) whether an Option shall be
intended to qualify as an ISO; (d) the provisions of each
Option granted (which need not be identical) including the time
or times when a person shall be permitted to receive stock
pursuant to the exercise of such Option; (e) whether a person
shall be permitted to exercise such Option; and (f) the number
of shares with respect to which Options shall be granted to
each such person.
3.1.2 To construe and interpret the Plan and Options granted under
it, and to establish, amend, and revoke rules and regulations
for its administration. The Board, in the exercise of this
power, may correct any defect, omission, or inconsistency in
the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan
fully effective.
3
<PAGE>
3.1.3 To amend the Plan as provided in Section 12.
3.1.4 Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best
interests of the Company.
3.2 Delegation. The Board may delegate administration of the Plan to a
----------
Board committee composed of not fewer than two members (the
"Committee"). All members of the Committee shall be Outside Directors
or Non-Employee Directors, to the extent necessary to comply with the
applicable provisions of Rule 16b-3 and Section 162(m). If
administration is delegated to a Committee, the Committee shall have,
in connection with the administration of the Plan, the powers
theretofore possessed by the Board (and references in this Plan to the
Board shall in such event, be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as
may be adopted from time to time by the Board. The Board may abolish
the Committee at any time and revest in the Board the administration
of the Plan.
3.3 Director Status. Any requirement that an administrator of the Plan be
---------------
a Non-Employee Director or an Outside Director shall not apply if the
Board or the Committee expressly declares that such requirement shall
not apply.
4. SHARES SUBJECT TO THE PLAN.
4.1 Available Shares. Subject to the provisions of Section 11, the number
----------------
of shares that may be issued pursuant to Options granted hereunder
shall not exceed in the aggregate 1,000,000 shares of the Company's
common stock.
4.2 Forfeited or Canceled Shares. Any shares of stock for which an Option
----------------------------
has been granted under the Plan that are forfeited because of the
failure to meet an Option grant contingency or condition shall again
be available for delivery pursuant to new grants under the Plan. To
the extent any shares of stock covered by an Option are not delivered
to an Optionee or beneficiary because the award is forfeited or
canceled, or the shares of stock are not delivered because the award
is settled in cash, such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of
stock available for delivery under the Plan.
4.3 Payment with Shares. If the exercise price of any Option granted under
-------------------
the Plan is satisfied by tendering shares of stock to the Company (by
either actual delivery or by attestation), only the number of shares
of stock issued net of the shares of stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of
stock available for delivery under the Plan.
4.4 Plan Limits. Shares of stock delivered under the Plan in settlement,
-----------
assumption, or substitution of outstanding awards (or obligations to
grant future awards) under the plans or arrangements of another entity
shall not reduce the maximum number of shares of stock available for
delivery under the Plan, to the extent that such settlement,
assumption, or substitution is a result of the Company or Affiliate
acquiring another entity (or an interest in another entity). Subject
to the provisions of Section 11, the maximum number of shares that may
be covered by grants to any one individual shall be 750,000 shares
during any three consecutive calendar years.
5. ELIGIBILITY.
4
<PAGE>
5.1 Option Type. ISOs may be granted only to Employees. NSOs may be
-----------
granted to Employees, Directors, or Consultants.
5.2 Section 16 Compliance. No Officer or Director shall be eligible for
---------------------
the benefits of the Plan unless at the time discretion is exercised in
the selection of an Officer or Director as a person to whom Options
may be granted, or in the determination of the number of shares which
may be covered by Options granted to the Officer or Director, the Plan
otherwise complies with the requirements of Rule 16b-3. This paragraph
5.2 shall not apply if the Board or Committee expressly declares that
it shall not apply.
6. OPTION PROVISIONS. Each Option shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. The provisions of
separate Options need not be identical, but each Option shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:
6.1 Term. No Option shall be exercisable after the expiration of ten years
----
from the date it was granted.
6.2 Price. The exercise price of each Option shall be not less than 100%
-----
of the Fair Market Value of the stock subject to the Option on the
date the Option is granted.
6.3 Consideration. The purchase price of stock acquired pursuant to an
-------------
Option shall be paid, to the extent permitted by applicable statutes
and regulations:
6.3.1 in cash; or
6.3.2 by delivery of already-owned shares of common stock of the
Company or a combination of cash and already-owned shares of
common stock of the Company; or
6.3.3 through surrender of shares of common stock available for
exercise under the Option, valued at their Fair Market Value on
the date of exercise and owned free and clear of any liens,
claims, encumbrances, or security interests; or
6.3.4 according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the
use of other common stock of the Company) with the person to
whom the Option is granted or to whom the Option is transferred
pursuant to paragraph 6.4; or
6.3.5 pursuant to a broker assisted exercise same-day sales program;
or
6.3.6 as required in the discretion of the Board or the Committee,
either at the time of the grant or exercise of the Option; or
6.3.7 any combination of 6.3.1 through 6.3.6 above.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
5
<PAGE>
6.4 Transferability.
---------------
6.4.1 Incentive Stock Options. In order for an Option to qualify for
treatment as an ISO, it may not be transferable except by will
or by the laws of descent and distribution. In the event an
Optionee transfers such Option, such transfer shall constitute
a disqualifying event and the Option shall no longer qualify as
an ISO but shall be considered a NSO under the terms of this
Plan.
6.4.2 Nonstatutory Stock Option. The Board or Committee may, in its
discretion, authorize all or a portion of the NSOs to be
granted to an Optionee to be on terms that permit transfer by
such Optionee to (a) the spouse, children, or grandchildren of
the Optionee ("Immediate Family Members"), (b) a trust or
trusts for the exclusive benefit of such Immediate Family
Members, or (c) a partnership in which such Immediate Family
Members are the only partners, provided that (i) there may be
no consideration for any such transfer, (ii) the Option
Agreement pursuant to which such Options are granted must
expressly provide for transferability in a manner consistent
with this Section, (iii) subsequent transfers of transferred
Options shall be prohibited except those occurring by will or
the laws of descent and distribution, and (iv) the Options
shall continue to be subject to all the terms and conditions
that applied prior to transfer in the same manner and to the
same extent as non-transferred Options, including paragraphs
6.5 through 6.9. The Options shall be exercisable by the
transferee only to the extent, and for the periods specified in
such sections. The Company expressly disclaims any obligation
to provide notice to a transferee of the termination of the
Option.
6.4.3 Unless transfer by an Optionee is specifically provided for in
an Option Agreement, a NSO shall not be transferable except by
will or by the laws of descent and distribution or pursuant to
a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the
rules thereunder (a "QDRO"), and shall be exercisable during
the lifetime of the person to whom the NSO is granted only by
such person or any transferee pursuant to a QDRO.
6.5 Vesting. The total number of shares of stock subject to an Option may,
-------
but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time
to time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or
all of the shares allotted to such period and/or any prior period as
to which the Option became vested but was not fully exercised. The
Option may be subject to such other terms and conditions on the time
or times when it may be exercised (which may be based on performance
criteria) as the Board may deem appropriate. The provisions of this
paragraph 6.5 are subject to any Option provisions governing the
minimum number of shares as to which an Option may be exercised.
6.6 Securities Law Compliance. The Company may require any Optionee, or
-------------------------
any person to whom an Option is transferred under paragraph 6.4, as a
condition of exercising any such Option, (a) to give written
assurances satisfactory to the Company as to the Optionee's knowledge
and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and
that he or she is capable of evaluating,
6
<PAGE>
alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (b) to give written assurances
satisfactory to the Company stating that such person is acquiring the
stock subject to the Option for such person's own account and not with
any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares
upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act,
or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.
6.7 Termination of Employment or Relationship as an Employee, Director, or
----------------------------------------------------------------------
Consultant. In the event an Optionee's Continuous Status as an
----------
Employee, Director, or Consultant terminates (other than upon the
Optionee's death or Disability), the Optionee may exercise his or her
Option, but only within such period of time as is determined by the
Board, and only to the extent that the Optionee was entitled to
exercise at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option
Agreement). In the case of an ISO, the Board shall determine such
period of time (in no event to exceed three months from the date of
termination) when the Option is granted. If, at the date of
termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the
Option shall revert to the Plan. If, after termination, the Optionee
does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered
by such Option shall revert to the Plan.
6.8 Disability of Optionee. In the event an Optionee's Continuous Status
----------------------
as an Employee, Director, or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option,
but only within twelve months from the date of such termination (or
such shorter period specified in the Option Agreement), and only to
the extent that the Optionee was entitled to exercise at the date of
such termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). If, at the
date of termination, the Optionee is not entitled to exercise his or
her entire Option, the shares covered by the unexercisable portion of
the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such
Option shall revert to the Plan.
6.9 Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised, at any time within eighteen months following
the date of death (or such shorter period specified in the Option
Agreement, but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent the Optionee was
entitled to exercise the Option at the date of death. If, at the time
of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after death, the Optionee's estate or a
person who acquired the right to exercise the Option by bequest or
inheritance, or by assignment as provided herein, does not exercise
the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the
Plan.
7
<PAGE>
6.10 Early Exercise. The Option Agreement may, but need not, include a
--------------
provision whereby the Optionee may elect at any time while an
Employee, Director, or Consultant to exercise the Option as to any
part or all of the shares subject to the Option prior to the full
vesting of the Option. Any nonvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.
6.11 Withholding. To the extent provided by the terms of an Option
-----------
Agreement, the Optionee may satisfy any federal, state, or local tax
withholding obligation relating to the exercise of such Option by any
of the following means or by a combination of such means:
6.11.1 cash payment; or
6.11.2 authorizing the Company to withhold shares from the shares of
the common stock otherwise issuable to the participant as a
result of the exercise of the Option; or
6.11.3 delivering to the Company owned and unencumbered shares of the
common stock of the Company.
7. NO REPRICING, CANCELLATION, OR RE-GRANT OF OPTIONS. Except for certain
adjustments due to corporate transactions described in Section 11, the
exercise price for any outstanding Option granted under the Plan may not be
decreased after the Day of Determination for such Option grant nor may an
outstanding Option granted under the Plan be surrendered to the Company as
consideration in exchange for the grant of a new Option with a lower
exercise price.
8. COVENANTS OF THE COMPANY.
8.1 Stock Availability. During the terms of the Option granted under the
------------------
Plan, the Company shall keep available at all times the number of
shares of stock required to satisfy such grants up to the number of
shares of stock authorized under the Plan.
8.2 Authority. The Company shall seek to obtain from each regulatory
---------
commission or agency having jurisdiction over the Plan such authority
as may be required to issue and sell shares of stock acquired under
the grants, provided, however, that this undertaking shall not require
the Company to register under the Securities Act either the Plan or
any stock issued or issuable pursuant to any such Option. If, after
reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency, the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock
under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock under such Options unless and until
such authority is obtained.
9. USE OF PROCEEDS FROM STOCK. Proceeds from the exercise of Options under
the Plan shall constitute general funds of the Company.
10. MISCELLANEOUS.
10.1 Acceleration. The Board or the Committee shall have the power to
------------
accelerate the time at which an Option may first be exercised or the
time during which an Option or any part thereof will vest,
notwithstanding the provisions in the Option Agreement stating the
time at which it may first be exercised or the time during which it
will vest.
8
<PAGE>
10.2 Ownership Rights. Neither an Optionee nor any person to whom an Option
----------------
is transferred under paragraph 6.4 shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to any
shares subject to such Option unless and until such person has
satisfied all requirements for exercise of the Option pursuant to its
terms.
10.3 Employment Rights. Nothing in the Plan or any instrument executed
-----------------
pursuant thereto shall confer upon any Employee, Director, Consultant,
Optionee, or other holder of Options any right to continue in the
employ of the Company or any Affiliate (or to continue acting as a
Director or Consultant) or shall affect the right of the Company or
any Affiliate to terminate the employment or relationship as a
Director or Consultant of any Employee, Director, Consultant, or
Optionee with or without cause.
10.4 ISO Value Limit. To the extent that the aggregate Fair Market Value
---------------
(determined at the time of grant) of stock with respect to which ISOs
granted after 1998 are exercisable for the first time by any Optionee
during any calendar year under all plans of the Company and its
Affiliates exceeds $100,000, the Options or portions thereof which
exceed such limit (according to the order in which they were granted)
shall be treated as NSOs.
11. ADJUSTMENTS UPON CHANGES IN STOCK AND CORPORATE TRANSACTIONS.
11.1 Stock Adjustments. If any change is made in the stock subject to the
-----------------
Plan, or subject to any Option (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property
other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or
otherwise), the Plan and outstanding Options will be appropriately
adjusted in the class(es) and maximum number of shares subject to the
Plan and the class(es) and number of shares and price per share of
stock subject to outstanding Options.
11.2 Corporate Transactions. In the event of: (a) a dissolution or
----------------------
liquidation or sale of all or substantially all of the assets of the
Company; (b) a merger or consolidation in which the Company is not the
surviving corporation; or (c) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue
of the merger into other property, whether in the form of securities,
cash, or otherwise, then, the Board in its sole discretion and to the
extent permitted by applicable law may direct as to all or any of the
Option(s) outstanding under the Plan that: (i) any surviving
corporation shall assume such Options or shall substitute similar
Options; (ii) such Options shall continue in full force and effect; or
(iii) the duration of time during which such Options become vested or
may be exercised shall be accelerated and any outstanding unexercised
rights under any such Options terminated, if not exercised prior to
such event.
12. AMENDMENT OF THE PLAN.
12.1 Amendments. The Board at any time, and from time to time, may amend
----------
the Plan. However, as provided in Section 11, no amendment shall be
effective unless approved by the stockholders of the Company within
twelve months before or after the adoption of the amendment, where the
amendment will:
12.1.1 Increase the number of shares reserved for Options under the
Plan;
9
<PAGE>
12.1.2 Modify the requirements as to eligibility for participation in
the Plan to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of
Sections 162(m) and 422 of the Code;
12.1.3 Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the
requirements of Rule 16b-3 or Nasdaq or other applicable
securities exchange listing requirements;
12.1.4 Decrease the minimum exercise price set forth in paragraph
6.2; or
12.1.5 Remove the limitation provided in Section 7.
12.2 Compliance. It is expressly contemplated that the Board may amend the
----------
Plan in any respect the Board deems necessary or advisable to provide
under the provisions of the Code and the regulations promulgated
thereunder relating to ISOs and/or to bring the Plan and/or ISOs
granted under it into compliance therewith.
12.3 Consent. Rights and obligations under any Option granted before
-------
amendment of the Plan shall not be altered or impaired by any
amendment of the Plan unless (a) the Company requests the consent of
the person to whom the Option was granted and (b) such person consents
in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
13.1 Termination. The Board may suspend or terminate the Plan at any time.
-----------
Unless sooner terminated, the Plan shall terminate on midnight, May
31, 2008. No Options may be granted under the Plan while the Plan is
suspended or after it is terminated.
13.2 Rights and Obligations. Any Options granted while the Plan is in
----------------------
effect shall not be altered or impaired by suspension or termination
of the Plan, except with the consent of the holder of the Options.
14. EFFECTIVE DATE OF PLAN. The Plan shall become effective as determined by
the Board, but no Options granted under the Plan shall be exercisable
unless and until the Plan has been approved by the stockholders of the
Company.
10
<PAGE>
NPS PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitutes and appoints Hunter Jackson and James U. Jensen
and each of them (acting jointly or, if one be present, then by that one
alone), his attorneys and proxies, with full power of substitution and
revocation to each, for and in the name, place and stead of the undersigned, to
vote, and act with respect to all shares of Common Stock, par value $.001 per
share of NPS Pharmaceuticals, Inc. (the "Company") standing in the name of the
undersigned or with respect to which the undersigned is entitled to vote and to
act at the Annual Meeting of Stockholders to be held at the University Park
Hotel located at 500 South Wakara Way, Salt Lake City, Utah on May 20, 1998 at
3:00 p.m. Mountain Time, and at any adjournment(s) thereof, and especially to
vote as follows:
1. In the election of eight (8) directors as set forth in the Proxy Statement:
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as indicated to the contrary to vote for all
below) nominees listed below
Santo J. Costa, James G. Groninger, Hunter Jackson, James U. Jensen, Skip
Klein, Donald E. Kuhla, Thomas N. Parks, Timothy J. Rink
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below)
-----------------------------------------------------------------------------
2. With respect to the approval of the 1998 Stock Option Plan covering the
issuance of up to 1,000,000 shares of the Company's Common Stock thereunder:
[_] FOR [_] AGAINST [_] ABSTAIN
3. With respect to the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the 1998 fiscal year:
[_] FOR [_] AGAINST [_] ABSTAIN
4. In their discretion in any other matters as may properly come before the
meeting or any adjournment(s) hereof.
<PAGE>
LOGO
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED ABOVE. IF NO
DIRECTION IS INDICATED, IT WILL BE VOTED FOR THE ELECTION OF THE EIGHT (8)
DIRECTORS; FOR THE APPROVAL OF THE 1998 STOCK OPTION PLAN ALONG WITH THE
ISSUANCE OF 1,000,000 SHARES OF COMMON STOCK THEREUNDER AS SET FORTH IN THE
PROXY STATEMENT; AND, TO RATIFY THE BOARD'S APPOINTMENT OF KPMG PEAT MARWICK
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE 1998 FISCAL YEAR.
Dated ______________________________
____________________________________
____________________________________
PLEASE SIGN HERE
Do you plan to attend the Annual
Meeting?
[_] Yes [_] No
PLEASE DATE THIS PROXY AND SIGN
YOUR NAME EXACTLY AS IT APPEARS
HEREON. WHEN THERE IS MORE THAN ONE
OWNER, EACH SHOULD SIGN. WHEN SIGN-
ING AS AN AGENT, ATTORNEY, ADMINIS-
TRATOR, EXECUTOR, GUARDIAN, OR
TRUSTEE, PLEASE INDICATE YOUR TITLE
AS SUCH. IF EXECUTED BY A CORPORA-
TION, THE PROXY SHOULD BE SIGNED IN
THE CORPORATE NAME BY A DULY AUTHO-
RIZED OFFICER WHO SHOULD INDICATE
HIS TITLE. PLEASE DATE, SIGN, AND
MAIL THIS PROXY CARD IN THE EN-
CLOSED ENVELOPE.
