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 |_| Confidential, For use of the
|X| Definitive proxy statement Commission only (as permitted
|_| Definitive additional materials by Rule 14a-6(e)(2))
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Titan Pharmaceuticals, Inc.
(Name of Registrant as Specified in Its Charter)
Titan Pharmaceuticals, Inc.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
--------------------------------------------------------------------------------
(1) Set forth the amount on which the filing fee is calculated and
state how it was determined.
<PAGE>
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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ii
<PAGE>
TITAN PHARMACEUTICALS, INC.
400 Oyster Point Boulevard
Suite 505
South San Francisco, California 94080
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held August 28, 2000
To the Shareholders of
Titan Pharmaceuticals, Inc.
Notice is hereby given that the Annual Meeting of the Shareholders of
Titan Pharmaceuticals, Inc. (the "Company") will be held on August 28, 2000 at
9:00 a.m. local time at the offices of the Company, 400 Oyster Point Boulevard,
Suite 505, South San Francisco, California 94080. The meeting is called for the
following purpose:
1. To elect a board of eight directors;
2. To approve an amendment to the Company's 1998 Stock Option
Plan to (i) increase the number of shares available thereunder
from 1,000,000 to 2,500,000 and (ii) modify the provisions for
automatic grants to directors.
3. To approve the appointment of Ernst & Young LLP as the
independent auditors of the Company; and
4. To consider and take action upon such other matters as may
properly come before the meeting or any adjournment or
adjournments thereof.
The close of business on July 14, 2000 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
meeting. The stock transfer books of the Company will not be closed. A list of
the shareholders entitled to vote at the meeting may be examined at the
Company's offices during the ten-day period preceding the meeting.
All shareholders are cordially invited to attend the meeting. Whether or
not you expect to attend, you are respectfully requested by the Board of
Directors to sign, date and return the enclosed proxy promptly. Shareholders who
execute proxies retain the right to revoke them at any time prior to the voting
thereof. A return envelope which requires no postage if mailed in the United
States is enclosed for your convenience.
By Order of the Board of Directors,
Louis R. Bucalo, M.D.
Chairman, President and Chief Executive Officer
Dated: July 31, 2000
<PAGE>
TITAN PHARMACEUTICALS, INC.
400 Oyster Point Boulevard
Suite 505
South San Francisco, California 94080
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Titan Pharmaceuticals, Inc. (the "Company")
for the Annual Meeting of Shareholders to be held at the offices of the Company,
400 Oyster Point Boulevard, Suite 505, South San Francisco, California 94080 on
August 28, 2000, at 9:00 a.m. and for any adjournment or adjournments thereof,
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. Any shareholder giving such a proxy has the power to revoke it at
any time before it is voted. Written notice of such revocation should be
forwarded directly to the Secretary of the Company, at the above stated address.
If the enclosed proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the directions thereon and
otherwise in accordance with the judgment of the persons designated as proxies.
Any proxy on which no direction is specified will be voted in favor of the
actions described in this Proxy Statement and for the election of the nominees
set forth under the caption "Election of Directors."
The approximate date on which this Proxy Statement and the accompanying
form of proxy will first be mailed or given to the Company's shareholders is
July 31, 2000.
Your vote is important. Accordingly, you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the meeting. If you do
attend, you may vote by ballot at the meeting, thereby canceling any proxy
previously given.
VOTING SECURITIES
Only holders of shares of Common Stock, $.001 par value per share (the
"Shares") of record at the close of business on July 14, 2000 are entitled to
vote at the meeting. On the record date, the Company had outstanding and
entitled to vote 25,835,136 Shares. For purposes of voting at the meeting, each
Share is entitled to one vote upon all matters to be acted upon at the meeting.
A majority in interest of the outstanding Shares represented at the meeting in
person or by proxy shall constitute a quorum. The affirmative vote of a
plurality of the Shares so represented is necessary to elect the nominees for
election as directors and the affirmative vote of a majority of the Shares so
represented, excluding broker non-votes, is necessary to approve and ratify the
amendment to the 1998 Stock Option Plan and the appointment of Ernst & Young
LLP, independent certified public accountants as the independent auditors of the
Company. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
If a shareholder, present in person or by proxy, abstains on any matter, the
shareholder's shares will not be voted on such matter. Thus, an abstention from
voting on any matter has the same legal effect as a vote "against" the matter
even though the shareholder may interpret such action differently. Except for
determining the presence or absence of a quorum for the transaction of business,
broker non-votes are not counted for any purpose in determining whether a matter
has been approved.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of July 14, 2000, certain information
concerning the beneficial ownership of the Shares by (i) each shareholder known
by the Company to own beneficially five percent or more of the outstanding
Shares; (ii) each director and each nominee for director of the Company; (iii)
each executive officer of the Company; and (iv) all executive officers and
directors of the Company as a group, and their percentage ownership and voting
power.
--------------------------------------------------------------------------------
Percent of
Shares
Shares Beneficially Beneficially
Name and Address of Beneficial Owner (1) Owned (2) Owned
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Louis R. Bucalo, M.D........................ 1,226,905(3) 4.7%
--------------------------------------------------------------------------------
Ernst-Gunter Afting, M.D., Ph.D............. 29,000(4) *
--------------------------------------------------------------------------------
Richard C. Allen, Ph.D...................... 367,684(5) 1.4%
--------------------------------------------------------------------------------
Victor J. Bauer, Ph.D....................... 73,894(6) *
--------------------------------------------------------------------------------
Sunil Bhonsle............................... 512,368(7) 2.0%
--------------------------------------------------------------------------------
Eurelio M. Cavalier......................... 12,500(4) *
--------------------------------------------------------------------------------
Robert E. Farrell........................... 246,700(8) *
--------------------------------------------------------------------------------
Michael K. Hsu.............................. 52,167(9) *
--------------------------------------------------------------------------------
Hubert Huckel, M.D.......................... 141,500(10) *
--------------------------------------------------------------------------------
Ley S. Smith................................ -- *
--------------------------------------------------------------------------------
Jan Wallace, M.D............................ -- *
--------------------------------------------------------------------------------
Konrad M. Weis, Ph.D........................ 103,401(11) *
--------------------------------------------------------------------------------
Lindsay A. Rosenwald, M.D.
787 Seventh Avenue, 48th Floor
New York, NY 10019 1,527,255(12) 5.9%
--------------------------------------------------------------------------------
All executive officers and directors as a 2,771,119 10.7%
group (12) persons........................
--------------------------------------------------------------------------------
---------------------------
*Less than one percent.
(1) Unless otherwise indicated, the address of such individual is c/o Titan
Pharmaceuticals, Inc., 400 Oyster Point Boulevard, Suite 505, South San
Francisco, California 94080.
(2) In computing the number of shares beneficially owned by a person and the
percentage ownership of a person, shares of common stock of the Company subject
to options held by that person that are currently exercisable or exercisable
within 60 days are deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing the percentage ownership of each other
person. Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock.
(3) Includes 926,674 shares issuable upon exercise of outstanding options.
(4) Represents shares issuable upon exercise of outstanding options.
(5) Includes 362,684 shares issuable upon exercise of outstanding options.
(6) Includes 68,894 shares issuable upon exercise of outstanding options.
(7) Includes 495,368 shares issuable upon exercise of outstanding options.
2
<PAGE>
(8) Includes 170,614 shares issuable upon exercise of outstanding options.
(9) Includes 37,166 shares issuable upon exercise of outstanding options.
(10) Includes (i) 5,000 shares issuable upon exercise of outstanding options and
(ii) 100,000 shares held by a family partnership for which Dr. Huckel serves as
general partner.
(11) Includes 36,617 shares issuable upon exercise of warrants and outstanding
options.
(12) Includes (i) 45,042 shares held by each of June Street Corporation and
Huntington Street Corporation, companies wholly-owned by Dr. Rosenwald; (ii)
580,853 shares held by a fund for which a wholly-owned company of Dr.
Rosenwald's serves as investment manager; (iii) an aggregate of 296,377 shares
held by two funds for which the same wholly-owned company serves as general
partner; and (iv) 17,961 shares issuable upon exercise of warrants. Does not
include shares owned by Dr. Rosenwald's wife and his children's trusts, as to
which he disclaims beneficial ownership. The foregoing information is derived
from a Schedule 13G/A filed on behalf of Dr. Rosenwald on February 14, 2000.
EXECUTIVE OFFICERS
The following sets forth the names and ages of our executive officers,
their respective positions and offices, and their respective principal
occupations or employments during the last five years.
Name Age Office
---- --- ------
Louis R. Bucalo, M.D........... 41 Chairman, President and Chief
Executive Officer
Sunil Bhonsle.................. 50 Executive Vice President and Chief
Operating Officer
Richard C. Allen, Ph.D......... 57 Executive Vice President, Cell Therapy
Robert E. Farrell.............. 50 Executive Vice President and Chief
Financial Officer
Jan Wallace, M.D............... 59 Executive Vice President, Clinical
Development and Regulatory Affairs
Louis R. Bucalo, M.D. is a founder of Titan and has served as our
President and Chief Executive Officer since January 1993. Dr. Bucalo has served
as a director of Titan since March 1993 and was elected Chairman of the Board of
Directors in January 2000. From July 1990 to April 1992, Dr. Bucalo was
Associate Director of Clinical Research at Genentech, Inc., a biotechnology
company. Dr. Bucalo holds an M.D. from Stanford University and a B.A. in
biochemistry from Harvard University.
Sunil Bhonsle joined Titan as Executive Vice President and Chief Operating
Officer in September 1995. Mr. Bhonsle served in various positions, including
Vice President and General Manager-Plasma Supply and Manager-Inventory and
Technical Planning, at Bayer Corporation from July 1975 until April 1995. Mr.
Bhonsle holds an M.B.A. from the University of California at Berkeley and a
B.Tech. in chemical engineering from the Indian Institute of Technology.
Richard C. Allen, Ph.D., joined Titan as Executive Vice President in
August 1995. From January 1995 until it was merged into Titan in March 1999, he
also served as President and Chief Executive Officer of Theracell. From June
1991 until December 1994, Dr. Allen was Vice President and General Manager of
the Neuroscience Strategic Business Unit of Hoechst-Roussel Pharmaceuticals,
Inc. Dr. Allen holds a Ph.D. in medicinal chemistry and a B.S. in pharmacy from
the Medical College of Virginia.
3
<PAGE>
Robert E. Farrell joined Titan as Executive Vice President and Chief
Financial Officer in September 1996. Mr. Farrell was employed by Fresenius USA,
Inc. from 1991 until August 1996 where he served in various capacities,
including Vice President Administration, Chief Financial Officer and General
Counsel. His last position was Corporate Group Vice President. Mr. Farrell holds
a B.A. from University of Notre Dame and a J.D. from Hastings College of Law,
University of California.
Jan Wallace, M.D., joined us in March 2000. From March 1998 until joining
Titan, Dr. Wallace served as Senior Vice President, Clinical and Regulatory
Affairs, for Elan Pharmaceuticals. From May 1992 until March 1998, he served as
Vice President, Clinical and Regulatory Affairs, of Athena Neurosciences, Inc.
Prior thereto, Dr. Wallace spent approximately five years at
Warren-Lambert/Parke Davis, employed in various executive positions.
ELECTION OF DIRECTORS
At the meeting, eight directors will be elected by the shareholders to
serve until the next Annual Meeting of Shareholders or until their successors
are elected and shall qualify. It is intended that the accompanying proxy will
be voted for the election, as directors, of the eight persons named below,
unless the proxy contains contrary instructions. The Company has no reason to
believe that any of the nominees will not be a candidate or will be unable to
serve. However, in the event that any of the nominees should become unable or
unwilling to serve as a director, the persons named in the proxy have advised
that they will vote for the election of such person or persons as shall be
designated by the Management.
The following sets forth the names and ages of the eight nominees for
election to the Board of Directors, their respective principal occupations or
employments during the past five years and the period during which each has
served as a director of the Company.
Name Age Director Since
---- --- --------------
Louis R. Bucalo, M.D. (1) 41 March 1993
Victor Bauer, Ph.D. 64 November 1997
Ernst-Gunter Afting, M.D., Ph.D. (2)(3) 57 May 1996
Eurelio M. Cavalier(1) 67 September 1998
Michael K. Hsu (2) 51 March 1993
Hubert Huckel, M.D. (1)(2)(3) 68 October 1995
Konrad M. Weis, Ph.D. (1)(3) 71 March 1993
Ley S. Smith (1) 66 July 2000
-----------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
Louis R. Bucalo, M.D., see biographical information set forth above under
"Executive Officers."
Victor J. Bauer, Ph.D., joined us in February 1997, and currently serves
as Executive Director of Corporate Development. From April 1996 until its merger
into Titan, Dr. Bauer also served as a director and Chairman of Theracell. From
December 1992 until February 1997, Dr. Bauer was a self-employed consultant to
companies in the pharmaceutical and biotechnology industries. Prior to that
time, Dr. Bauer was with Hoechst-Roussel Pharmaceuticals Inc., where he served
as President from 1988 through 1992.
Ernst-Gunter Afting, M.D., Ph.D., has served as the President of the
GSF-National Center for Environment and Health, a government research center in
Germany, since 1995. From 1984 until 1995, Dr. Afting was employed in various
capacities by the Hoechst Group, serving as Divisional Head of the
4
<PAGE>
Pharmaceuticals Division of the Hoechst Group from 1991 to 1993 and as President
and Chief Executive Officer of Roussel Uclaf (a majority stockholder of Hoechst
AG) in Paris from 1993 until 1995.
Eurelio M. Cavalier was employed in various capacities by Eli Lilly & Co.
from 1958 until his retirement in 1994, serving as Vice President Sales from
1976 to 1982 and Group Vice President U.S. Pharmaceutical Business Unit from
1982 to 1993. Mr. Cavalier currently serves on the Boards of Directors of
DataChem, Inc., ProSolv, Inc. and St. Vincent Hospital. He serves on the
Advisory Board of COR Therapeutics and Indiana Heart Institute.
Michael K. Hsu is currently a General Partner of EndPoint Merchant Group,
a merchant bank specializing in making investments into the healthcare and life
science industries. Mr. Hsu has served as Director-Corporate Finance of National
Securities Corp. from November 1995 through April 1998, and from November 1994
through October 1995 served with Coleman & Company Securities in the same
capacity. Mr. Hsu previously held various executive positions with Steinberg and
Lyman Health Care Company, Ventana Venture Growth Fund and Asian Pacific Venture
Group (Thailand).
Hubert Huckel, M.D., served in various positions with The Hoechst Group
from 1964 until his retirement in December 1992. At the time of his retirement,
Dr. Huckel was Chairman of the Board of Hoechst-Roussel Pharmaceuticals, Inc.,
Chairman and President of Hoechst-Roussel Agri-Vet Company and a member of the
Executive Committee of Hoechst Celanese Corporation. He currently serves on the
Board of Directors of Thermogenesis, Corp. and Gynetics, Inc.
Konrad M. Weis, Ph.D., is the former President, Chief Executive Officer
and Honorary Chairman of Bayer Corporation. Dr. Weis serves as a director of PNC
Equity Management Company, Michael Baker Corporation, Visible Genetics, Inc. and
Demegen, Inc.
Ley S. Smith served in various positions with The Upjohn Company and
Pharmacia & Upjohn from 1958 until his retirement in November 1997. From 1991 to
1993 he served as Vice Chairman of the Board of The Upjohn Company, and from
1993 to 1995 he was President and Chief Operating Officer of The Upjohn Company.
At the time of his retirement, Mr. Smith was Executive Vice President of
Pharmacia & Upjohn, and President of Pharmacia & Upjohn's U.S. Pharma Product
Center. He currently serves on the Board of Directors of BioStar, Inc., MDS,
Inc., Crescendo Pharmaceuticals, Illuminis and is a member of the Regional Board
of National City Corp.
Director Compensation
During 1999, non-employee directors received annual options to purchase
10,000 shares of common stock vesting quarterly in lieu of cash compensation for
the Board of Directors meetings, and were reimbursed for their expenses in
attending such meetings. Directors are not precluded from serving the Company in
any other capacity and receiving compensation therefor. In addition, directors
are entitled to receive options ("Director Options") pursuant to our 1998 Stock
Option Plan. See "Amendment to 1998 Stock Option Plan" for a description of the
proposed changes to the terms of Director Options. In August 1999, each of our
current directors received Director Options to purchase 5,000 shares of common
stock at an exercise price of $9.063 per share.
We are a party to a consulting agreement with Dr. Afting pursuant to which
he receives fees of $7,000 annually.
The Company is party to a consulting agreement with Dr. Jaffe, a director
of Titan who is not standing for reelection this year, pursuant to which he
receives fees of $35,000 annually.
5
<PAGE>
Board Committees and Designated Directors
The Board of Directors has an Executive Committee, a Compensation
Committee and an Audit Committee. The Executive Committee exercises all the
power and authority of the Board of Directors in the management of Titan between
Board meetings, to the extent permitted by law. The Compensation Committee makes
recommendations to the Board concerning salaries and incentive compensation for
our officers and employees and administers our stock option plans. The Audit
Committee assists the Board in overseeing Titan's financial and accounting
operations by reviewing (i) its system of internal controls and its financial
reporting process, (ii) the results and scope of the audit, (iii) its processes
for monitoring compliance with laws and regulations, and (iv) the Company's
business practices.
The Board of Directors met four times during 1999 and also took action by
unanimous written consent. The Executive Committee met one time and also took
action by unanimous written consent, and the Compensation Committee and Audit
Committee each met one time. Each of our current directors attended at least 75%
of the aggregate of (i) the meetings of the Board of Directors and (ii) meetings
of any Committees of the Board on which such person served which were held
during the time such person served.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the aggregate
compensation awarded to, earned by, or paid to the Chief Executive Officer and
to executive officers whose annual compensation exceeded $100,000 for the fiscal
year ended December 31, 1999 (collectively, the "named executive officers") for
services during the fiscal years ended December 31, 1999, 1998 and 1997:
Summary Compensation Table
--------------------------------------------------------------------------------
Name and Principal Position Year Salary Bonus
--------------------------------------------------------------------------------
Annual Compensation
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Louis R. Bucalo, M.D. 1999 $222,013 $0
1998 $243,100 $0
President and Chief Executive Officer 1997 $231,525 $58,721(1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Sunil Bhonsle 1999 $180,100 $0
Executive Vice President and 1998 $194,800 $0
Chief Operating Officer 1997 $190,991 $68,370(1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1999 $180,475 $0
Richard C. Allen, Ph.D. 1998 $197,800 $0
Executive Vice President (2) 1997 $193,984 $77,096(1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Robert E. Farrell 1999 $173,425 $0
Executive Vice President and 1998 $190,400 $0
Chief Financial Officer 1997 $186,665 $18,500
--------------------------------------------------------------------------------
-----------
(1) A portion of the bonus paid in 1997 pertains to fiscal 1995.
(2) Dr. Allen also served as President and Chief Executive Officer of Theracell
until Theracell merged with and into Titan in March 1999, and President and
Chief Operating Officer of ProNeura during these periods. Until March 1999, Dr.
Allen received his entire salary from Theracell. Dr. Allen's bonus in 1997
included $20,000 paid by Titan.
6
<PAGE>
Option Grants in Last Fiscal Year
The following table contains information concerning the stock option
grants made to the named executive officers during the fiscal year ended
December 31, 1999. No stock appreciation rights were granted to these
individuals during such year.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
% of
Total
Number of Options Potential Realizable
Securities Granted to Exercise Value at Assumed
Underlying Employees of Base Annual Rate of Stock
Options in Fiscal Price Expiration Price Appreciation
Name Granted Year ($/Sh) (1) Date for Option Terms
------------------------------------------------------------------------------------------------
Individual Grant 5% 10%
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Louis R. Bucalo 75,100 4.70% $3.625 01/04/2009 $163,002 $413,078
------------------------------------------------------------------------------------------------
Louis R. Bucalo 28,000 1.75% $3.688 02/04/2009 $64,942 $164,576
------------------------------------------------------------------------------------------------
Louis R. Bucalo(2) 27,531 1.72% $0.080 03/10/2009 $180,003 $287,930
------------------------------------------------------------------------------------------------
Louis R. Bucalo 5,000 0.31% $9.063 08/30/2009 $28,498 $72,220
------------------------------------------------------------------------------------------------
Louis R. Bucalo 400,000 25.05% $12.750 11/24/2009 $3,207,363 $8,128,087
------------------------------------------------------------------------------------------------
Sunil Bhonsle 55,600 3.48% $3.625 01/04/2009 $126,754 $321,219
------------------------------------------------------------------------------------------------
Sunil Bhonsle 21,000 1.32% $3.688 02/04/2009 $48,707 $123,432
------------------------------------------------------------------------------------------------
Sunil Bhonsle 184,000 11.52% $12.750 11/24/2009 $1,475,387 $3,738,920
------------------------------------------------------------------------------------------------
Richard C. Allen 41,200 2.58% $3.625 01/04/2009 $93,925 $238,025
------------------------------------------------------------------------------------------------
Richard C. Allen 21,000 1.32% $3.688 02/04/2009 $48,707 $123,432
------------------------------------------------------------------------------------------------
Richard C. Allen (2) 100,617 6.30% $0.08 03/10/2009 $657,854 $1,052,290
------------------------------------------------------------------------------------------------
Richard C. Allen 132,000 8.27% $12.750 11/24/2009 $1,058,430 $2,682,269
------------------------------------------------------------------------------------------------
Robert E. Farrell 26,300 1.65% $3.625 01/04/2009 $59,957 $151,943
------------------------------------------------------------------------------------------------
Robert E. Farrell 21,000 1.32% $3.688 02/04/2009 $48,707 $123,432
------------------------------------------------------------------------------------------------
Robert E. Farrell 66,000 4.13% $12.750 11/24/2009 $529,215 $1,341,134
------------------------------------------------------------------------------------------------
</TABLE>
----------------
(1) The exercise price may be paid in cash, in shares of common stock valued at
the fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchase shares. We may also finance
the option exercise by loaning the optionee sufficient funds to pay the exercise
price for the purchased shares, together with any federal and state income tax
liability incurred by the optionee in connection with such exercise.
(2) Represents substitute options issued in connection with the merger of
Theracell into Titan.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1999 with respect to the
named executive officers. No stock appreciation rights were exercised during
such year or were outstanding at the end of that year.
7
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Shares
Acquired on
Name Exercise Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options at
Options at FY-End FY-End (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Louis R. Bucalo -0- 754,130 473,044(2) $9,937,731 $3,439,758(2)
------------------------------------------------------------------------------------------------------------------------------------
Sunil Bhonsle -0- 403,678 231,621(2) $5,590,912 $1,863,912(2)
------------------------------------------------------------------------------------------------------------------------------------
Richard C. Allen -0- 308,515 153,169(2) $4,868,737 $1,168,360(2)
------------------------------------------------------------------------------------------------------------------------------------
Robert E. Farrell 21,000 170,966 94,234 $2,085,619 $ 768,650
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------
(1) Based on the fair market value of our common stock at year-end, $19.000 per
share, less the exercise price payable for such shares.
(2) A portion of employee's options are immediately exercisable. Upon the
employee's cessation of service, we have the right to repurchase any shares
acquired pursuant to said grant. Our right to repurchase shares expires in equal
monthly installments over the five year period commencing on the date of grant.
Options to which our repurchase right has not expired are deemed unexercisable
for purposes of this table.
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements
We are a party to an employment agreement with Dr. Bucalo expiring in
February 2003 which provides for a base annual salary of $210,000, subject to
annual increases of 5% and bonuses of up to 25% at the discretion of the Board
of Directors. In the event of the termination of the agreement with Dr. Bucalo,
other than for reasons specified therein, we are obligated to make severance
payments equal to his base annual salary for the greater of the balance of the
term of the agreement or 18 months.
Employment agreements with each of Dr. Allen, Mr. Bhonsle and Mr. Farrell
provide for a base annual salary of $185,000 subject to automatic annual
increases based on increases in the consumer price index, and bonuses of up to
20% at the discretion of the Board of Directors. In the event the employee's
employment is terminated other than for "good cause" (as defined), we are
obligated to make severance payments equal to the base annual salary for six
months. All of the agreements contain confidentiality provisions.
In order to preserve our cash resources, we have determined, and the
executives agreed, that the 1999 salaries of Drs. Bucalo and Allen and Messrs.
Bhonsle and Farrell would be at $219,000, $178,000, $178,000 and $171,000,
respectively.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
more than 10% of a registered class of the Company's equity securities to file
with the SEC initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company. Such executive
officers, directors, and greater than 10% beneficial owners are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms filed
by such reporting persons.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and greater than 10% beneficial owners were complied with,
except for Form 4s for Robert Farrell and Hubert Huckel reporting the exercise
of options and a Form 3 for Jan Wallace which were filed up to two months late.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The goal of the Company's executive compensation policy is to ensure that
an appropriate relationship exists between executive compensation and the
creation of shareholder value, while at the same time attracting, motivating and
retaining executive officers. The Compensation Committee's informal executive
compensation philosophy (which applies generally to all executive officers of
the Company, including the President and Chief Executive Officer) considers a
number of factors, which may include:
o providing levels of compensation competitive with companies in comparable
industries which are at a similar stage of development and in the
Company's geographic area;
o integrating the compensation of the executive officers of the Company with
the achievement of performance goals;
o rewarding above average corporate performance; and
o recognizing and providing incentive for individual initiative and
achievement.
The executive officers receive base salaries pursuant to the terms of
their employment agreements with the Company. See "Executive Compensation --
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements." However, during fiscal 1999, the executive officers agreed to a
reduction in their base salaries in order to preserve the Company's cash
position, with the understanding that their compensation for the year would be
weighted toward bonus compensation contingent upon the Company achieving certain
business and financial objectives. During fiscal 1999, the annual option grants
to the Company's executive officers reflected the Company's recognition of the
milestones the executive officers assisted the Company in achieving during the
year.
The Compensation Committee also endorses the position that equity
ownership by the executive officers of the Company is beneficial in aligning
their interests with those of the shareholders, especially in the enhancement of
shareholder value by providing the executive officers with longer-term
incentives. Bonus awards are determined based on a range of measures and
internal targets set before the start of each fiscal year and in part by
comparison to the compensation of executive officers of comparable biotechnology
and pharmaceutical companies. The Compensation Committee considers the Company's
performance under these measures and uses its subjective judgment and discretion
in approving individual compensation.
The Compensation Committee has implemented its policy on longer-term
compensation to executive officers, including the chief executive officer,
generally by granting to an executive officer upon joining the Company stock
options with vesting over a period of 48 months commencing from the date of
grant but requiring at least 12 months of employment for any option to vest.
During fiscal 1997, the Compensation Committee made a determination to implement
an annual option grant program to executive officers to be based upon the
findings in the Radford Associates-Biotechnology Compensation Survey, 1997.
During fiscal 1998, the first annual option grants based on the results of such
survey were made.
Hubert Huckel, M.D.
Marvin Jaffe, M.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1999, the members of the Company's
Compensation Committee were Drs. Huckel, Widder and Jaffe. Dr. Jaffe received
consulting fees from the Company of $35,000. See "Certain Transactions" and
"Director Compensation."
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STOCK PRICE PERFORMANCE PRESENTATION
The following chart compares the cumulative total shareholder return on
the Company's Shares with the cumulative total shareholder return of (i) the
Amex Market Index and (ii) a peer group index consisting of companies reporting
under the Standard Industrial Classification Code 2834 (Pharmaceutical
Preparations):
COMPARE CUMULATIVE TOTAL RETURN
AMONG TITAN PHARMACEUTICALS, INC.,
AMEX MARKET INDEX AND SIC CODE INDEX
[The following table was depicted as a line graph in the printed material.]
01/18/96 12/31/96 12/31/97 12/31/98 12/31/99
TITAN PHARMACEUTICALS, INC 100.00 129.41 88.24 59.80 298.04
PEER GROUP INDEX 100.00 115.16 167.33 237.34 213.53
AMEX MARKET INDEX 100.00 104.68 125.96 124.24 154.90
-----------------
* Assumes $100 invested on January 18, 1996 and assumes dividends reinvested.
Measurement points are at the last trading day of the fiscal years ended
December 31, 1996, 1997, 1998 and 1999. The material in this chart is not
soliciting material, is not deemed filed with the SEC and is not incorporated by
reference in any filing of the Company under the Securities Act of 1933, as
amended or the 1934 Act, whether made before or after the date of this proxy
statement and irrespective of any general incorporation language in such filing.
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CERTAIN TRANSACTIONS
In June and July of 1997, Dr. Hubert Huckel, a director of Titan, received
an aggregate of $155,000 in consulting fees for services rendered in connection
with our consummation of the Zomaril (iloperidone) license. Dr. Huckel was paid
pursuant to a consulting agreement which provided for the payment of fees based
upon a percentage of the consideration paid by us upon completion of a licensing
transaction with Dr. Huckel's assistance. The consulting agreement expired by
its terms in January 1998.
In January 1999, we completed a private placement of 2,254,545 shares of
our common stock. Dr. Hubert Huckel and Mr. Michael Hsu, directors of Titan,
participated in the offering by purchasing 100,000 and 5,272 shares,
respectively.
We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. We have adopted a policy that all future transactions, including loans,
between us and our officers, directors, principal stockholders and their
affiliates must be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested outside directors on the Board of
Directors.
AMENDMENTS TO 1998 STOCK OPTION PLAN
At the Annual Meeting, the shareholders are being asked to approve
amendments to the Company's 1998 Stock Option Plan (the "1998 Plan") in order to
(i) increase the number of shares reserved for issuance thereunder by 1,500,000
shares, from 1,000,000 shares to 2,500,000 shares of Common Stock and (ii)
modify the provisions for automatic grants to directors. The 1998 Plan was
adopted by the Board of Directors on July 10, 1998 and approved by the
shareholders at the annual meeting on July 24, 1998. On April 28, 2000 and July
28, 2000, the Board of Directors adopted the proposed amendments to the 1998
Plan and recommends that the shareholders approve such amendments. The
affirmative vote of persons holding at least a majority of the outstanding
Shares is required for approval of the amendments to the 1998 Plan.
Summary of the Plan
Under the 1998 Plan, 1,000,000 Shares are authorized for issuance,
employees, officers and directors of, and consultants or advisers to, the
Company and any subsidiary corporations are eligible to receive incentive stock
options ("incentive options") within the meaning of Section 422 of the Code
and/or options that do not qualify as incentive options ("non-qualified
options"). The 1998 Plan, which expires in June 2008, is administered by the
Board of Directors or a committee of the Board of Directors. The purposes of the
1998 Plan are to ensure the retention of existing executive personnel, key
employees, directors, consultants and advisors who are expected to contribute to
the Company's future growth and success and to provide additional incentive by
permitting such individuals to participate in the ownership of the Company, and
the criteria to be utilized by the Board of Directors or the committee in
granting options pursuant to the 1998 Plan, will be consistent with these
purposes. The 1998 Plan provides for automatic grants of options to certain
directors in the manner set forth below under "Directors' Options."
Options granted under the 1998 Plan may be either incentive options or
non-qualified options. Incentive options granted under the 1998 Plan are
exercisable for a period of up to 10 years from the date of grant at an exercise
price which is not less than the fair market value of the Shares on the date of
the grant, except that the term of an incentive option granted under the 1998
Plan to a shareholder owning more than 10% of the outstanding voting power may
not exceed five years and its exercise price may not be less than 110% of the
fair market value of the shares on the date of grant. To the extent that the
aggregate fair market value, as of the date of grant, of the Shares for which
incentive options become
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exercisable for the first time by an optionee during the calendar year exceeds
$100,000, the portion of such option which is in excess of the $100,000
limitation will be treated as a nonqualified option. Options granted under the
1998 Plan to officers, directors or employees of the Company may be exercised
only while the optionee is employed or retained by the Company or within 90 days
of the date of termination of the employment relationship or directorship.
However, options which are exercisable at the time of termination by reason of
death or permanent disability of the optionee may be exercised within 12 months
of the date of termination of the employment relationship or directorship. Upon
the exercise of an option, payment may be made by cash, by surrender of Shares
having a fair market value equal to the purchase price, by provisions for
cashless exercise or by any other means that the Board of Directors or the
committee determines. No options may be granted under the 1998 Plan after June
2008.
Options may be granted only to such employees, officers and directors of,
and consultants and advisors to, the Company or any subsidiary of the Company as
the Board of Directors or the committee shall select from time to time in its
sole discretion, provided that only employees of the Company or a subsidiary of
the Company shall be eligible to receive incentive options. An optionee may be
granted more than one option under the 1998 Plan. The Board of Directors or the
committee will, in its discretion, determine (subject to the terms of the 1998
Plan) who will be granted options, the time or times at which options shall be
granted, and the number of Shares subject to each option, whether the options
are incentive options or nonqualified options, and the manner in which options
may be exercised. In making such determination, consideration may be given to
the value of the services rendered by the respective individuals, their present
and potential contributions to the success of the Company and its subsidiaries
and such other factors deemed relevant in accomplishing the purpose of the 1998
Plan.
The 1998 Plan may be amended or terminated by the Board at any time. No
amendment or termination may adversely affect any outstanding option without the
written consent of the optionee.
The 1998 Plan provides for the automatic grant of stock options to
purchase Shares to directors of the Company who beneficially own less than 10%
of the outstanding Shares ("Eligible Directors"). Eligible Directors of the
Company are granted Director Options to purchase 10,000 shares of Common Stock
on the date they are first elected or appointed a director (an "Initial Director
Option"). Currently, commencing on the day immediately following the date of the
annual meeting of shareholders, each Eligible Director, other than directors who
received an Initial Director Option since the last annual meeting, are granted
Director Options to purchase 5,000 shares of Common Stock ("Automatic Grant") on
the day immediately following the date of each annual meeting of shareholders,
as long as such director is a member of the Board of Directors. The exercise
price for each Share subject to a Director Option shall be equal to the fair
market value of the Common Stock on the date of grant. Director Options are
exercisable in full one year following the date of grant and expire the earlier
of 10 years after the date of grant or 90 days after the termination of the
director's service on the Board of Directors.
Proposed Amendments to the 1998 Plan
In April 2000, the Board approved an increase in the number of Shares of
Common Stock available for issuance under the 1998 Plan from 1,000,000 Shares to
2,500,000 Shares. The following table reflects, as of July 14, 2000, the number
of Shares authorized for issuance under the 1998 Plan, the aggregate number of
options granted prior to July 14, 2000, the number of options exercised, the
number of Shares currently subject to outstanding options, and the number of
Shares available for issuance in connection with the grant of future options to
purchase Shares under the 1998 Plan.
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--------------------------------------------------------------------------------
Shares
Options Shares Subject Available for
Shares Granted (Net Options to Outstanding Grant of
Authorized of Forfeitures) Exercised Options Future Options
--------------------------------------------------------------------------------
1,000,000 1,064,550(1) 122,236 1,000,000 0
--------------------------------------------------------------------------------
(1) Includes 64,550 shares underlying options granted to employees which are
subject to approval by the shareholders of the amendments to the Plan.
As of July 14, 2000, no Shares remained available for issuance under the
1998 Plan. 1,435,450 Shares would be available for future issuance upon the
exercise of future option grants if shareholder approval of the proposed
amendment is obtained. On July 14, 2000, the closing price of our Shares was
$36.188 per share.
The Board has also approved the following modifications to the terms of
the Director Options: Rather than an annual grant of 5,000 Shares on the day
following the annual meeting which vests in full one year from the date of
grant, Eligible Directors will receive bi-annual grants of 15,000 Shares
commencing on the date following the earlier of the (i) 2000 Annual Meeting of
Shareholders or (ii) the first annual meeting of shareholders after their
election to the Board. Such options will vest in 48 equal monthly installments
commencing on the date of grant. In addition, Eligible Directors will receive
annual grants of 5,000 Shares for each Committee on which they serve, which
options will vest in 12 equal monthly installments. Lastly, Eligible Directors
who have received an Initial Director Option during the same year in which a
bi-annual grant is being made to the Board shall not be precluded from receiving
such bi-annual grant.
Other than the increase in the number of Director Options which they may
be eligible for in their roles as directors, the proposed amendments will not
result in new benefits accruing to the named executive officers. In addition,
the number of Shares underlying options that could be granted to the named
executive officers and other Company employees if this proposal is approved is
indeterminable at this time.
The remaining terms and conditions of the 1998 Plan remain unchanged by
the proposed amendment.
APPOINTMENT OF INDEPENDENT AUDITORS
Our Management recommends the appointment of Ernst & Young LLP,
independent certified public accountants, as our independent auditors. Ernst &
Young LLP has been the Company's auditors for the past three fiscal years and
has no direct or indirect financial interest in the Company. A representative of
Ernst & Young LLP is expected to be present at the Annual Meeting of
Shareholders with the opportunity to make a statement if he or she desires to do
so, and shall be available to respond to appropriate questions.
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GENERAL
Our Management does not know of any matters other than those stated in
this Proxy Statement which are to be presented for action at the meeting. If any
other matters should properly come before the meeting, it is intended that
proxies in the accompanying form will be voted on any such other matters in
accordance with the judgment of the persons voting such proxies. Discretionary
authority to vote on such matters is conferred by such proxies upon the persons
voting them.
We will bear the cost of preparing, printing, assembling and mailing the
proxy, Proxy Statement and other material which may be sent to shareholders in
connection with this solicitation. It is contemplated that brokerage houses will
forward the proxy materials to beneficial owners at our request. In addition to
the solicitation of proxies by use of the mails, officers and regular employees
of we may solicit proxies without additional compensation, by telephone or
telegraph. We do not expect to pay any compensation for the solicitation of
proxies.
We will provide without charge to each person being solicited by this
Proxy Statement, on the written request of any such person, a copy of our Annual
Report on Form 10-K for the year ended December 31, 1999 (as filed with the
Securities and Exchange Commission) including the financial statements thereto.
All such requests should be directed to Sunil Bhonsle, 400 Oyster Point
Boulevard, Suite 505, South San Francisco, California 94080.
SHAREHOLDER PROPOSALS
The Annual Meeting of Shareholders for the fiscal year ending December 31,
2000 is expected to be held in July 2001. All proposals intended to be presented
at our next Annual Meeting of Shareholders must be received at our executive
office no later than April 25, 2001, for inclusion in the Proxy Statement and
form of proxy related to that meeting.
By Order of the Board of Directors,
Louis R. Bucalo, M.D.,
Dated: July 31, 2000 Chairman, President and Chief
Executive Officer
14
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APPENDIX A
TITAN PHARMACEUTICALS, INC.
AMENDED 1998 STOCK OPTION PLAN
1. Purpose.
The purpose of this plan (the "Plan") is to secure for Titan
Pharmaceuticals, Inc. (the "Company") and its shareholders the benefits arising
from capital stock ownership by employees, officers and directors of, and
consultants or advisors to, the Company who are expected to contribute to the
Company's future growth and success. Except where the context otherwise
requires, the term "Company" shall include all present and future subsidiaries
of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue
Code of 1986, as amended or replaced from time to time (the "Code"). Those
provisions of the Plan which make express reference to Section 422 shall apply
only to Incentive Stock Options (as that term is defined in the Plan).
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the Code
or non-statutory options which are not intended to meet the requirements of
Section 422 of the Code.
(b) Administration. The Plan will be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company, whose
construction and interpretation of the terms and provisions of the Plan shall be
final and conclusive. The delegation of powers to the Committee shall be
consistent with applicable laws or regulations (including, without limitation,
applicable state law and Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3")). The
Committee may in its sole discretion grant options to purchase shares of the
Company's Common Stock, $.001 par value per share ("Common Stock") and issue
shares upon exercise of such options as provided in the Plan. The Committee
shall have authority, subject to the express provisions of the Plan, to construe
the respective option agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option agreements, which need not be identical, and
to make all other determinations in the judgment of the Committee necessary or
desirable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any option agreement in the manner and to the extent it shall deem expedient to
carry the Plan into effect and it shall be the sole and final judge of such
expediency. No director or person acting pursuant to authority delegated by the
Board of Directors shall be liable for any action or determination under the
Plan made in good faith.
(c) Applicability of Rule 16b-3. Those provisions of the Plan which make
express reference to Rule 16b-3 shall apply to the Company only at such time as
the Company's Common Stock is registered under the Exchange Act, subject to the
last sentence of Section 3(b),
<PAGE>
and then only to such persons as are required to file reports under Section
16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
(a) General. Options may be granted to persons who are, at the time of
grant, employees, officers or directors of, or consultants or advisors to, the
Company or any subsidiaries of the Company as defined in Sections 424(e) and
424(f) of the Code ("Participants") provided, that Incentive Stock Options may
only be granted to individuals who are employees of the Company (within the
meaning of Section 3401(c) of the Code). A person who has been granted an option
may, if he or she is otherwise eligible, be granted additional options if the
Committee shall so determine.
(b) Grant of Options to Reporting Persons. The selection of a director or
an officer who is a Reporting Person (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option, the timing of
the option grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board of Directors,
(ii) by a committee consisting of two or more directors having full authority to
act in the matter, each of whom shall be an "Independent Director" as defined by
Rule 1.62-27 of the Code or (iii) pursuant to provisions for automatic grants
set forth in Section 3(c) below.
(c) Directors' Options. Directors of the Company who are not stockholders
of the Company owning in excess of 10% of the outstanding Common Stock of the
Company ("Eligible Directors") will be granted a Director Option to purchase
10,000 shares of Common Stock on the date that such person is first elected or
appointed a director ("Initial Director Option"). Commencing on the day
immediately following the earlier of (i) the date of the annual meeting of
stockholders for the Company's fiscal year ending December 31, 1999, or (ii) the
first annual meeting of stockholders following their election to the Board, each
Eligible Director will receive an automatic bi-annual grant ("Automatic
Bi-Annual Grant") of a Director Option to purchase 15,000 shares of Common
Stock. In addition, each Eligible Director will receive an automatic annual
grant on the day immediately following the date of the annual meeting of
stockholders for each committee of the Board on which they serve ("Committee
Grant"). The exercise price for each share subject to a Director Option shall be
equal to the fair market value of the Common Stock on the date of grant. Initial
Director Options shall become exercisable in full twelve months from the date
such options are granted and Automatic Bi-Annual Grants shall vest in 48 equal
monthly installments commencing on the date of grant. Committee Grants shall
vest in 12 equal monthly installments commencing on the date of grant. All
Director Options will expire the earlier of 10 years after the date of grant or
90 days after the termination of the director's service on the Board.
4. Stock Subject to Plan.
The stock subject to options granted under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. Subject to adjustment as
provided in Section 15 below, the maximum number of shares of Common Stock of
the Company which may be issued and sold under the Plan is 2,500,000 shares. If
an option granted under the Plan shall expire,
2
<PAGE>
terminate or is cancelled for any reason without having been exercised in full,
the unpurchased shares subject to such option shall again be available for
subsequent option grants under the Plan.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors at the time
of grant of such option; provided, however, that in the case of an Incentive
Stock Option, the exercise price shall not be less than 100% of the Fair Market
Value (as hereinafter defined) of such stock, at the time of grant of such
option, or less than 110% of such Fair Market Value in the case of options
described in Section 11(b). "Fair Market Value" of a share of Common Stock of
the Company as of a specified date for the purposes of the Plan shall mean the
closing price of a share of the Common Stock on the principal securities
exchange (including the Nasdaq National Market) on which such shares are traded
on the day immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if no
shares were traded on such immediately preceding day, or if the shares are not
traded on a securities exchange, Fair Market Value shall be deemed to be the
average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded. If the shares are not publicly
traded, Fair Market Value of a share of Common Stock (including, in the case of
any repurchase of shares, any distributions with respect thereto which would be
repurchased with the shares) shall be determined in good faith by the Board of
Directors. In no case shall Fair Market Value be determined with regard to
restrictions other than restrictions which, by their terms, will never lapse.
(b) Payment of Purchase Price. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
by surrender of shares having a Fair Market Value equal to the purchase price,
or by any other means, including pursuant to provisions for cashless exercise,
which the Board of Directors or Committee determines are consistent with the
purpose of the Plan and with applicable laws and regulations (including, without
limitation, the provisions of Rule 16b-3 and Regulation T promulgated by the
Federal Reserve Board).
7. Option Period.
Subject to earlier termination as provided in the Plan, each option and
all rights thereunder shall expire on such date as determined by the Board of
Directors and set forth in the applicable option agreement, provided, that such
date shall not be later than 10 years after the date on which the option is
granted.
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8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the option agreement evidencing such option, subject to the provisions
of the Plan. Subject to the requirements in the immediately preceding sentence,
if an option is not at the time of grant immediately exercisable, the Board of
Directors may (i) in the agreement evidencing such option, provide for the
acceleration of the exercise date or dates of the subject option upon the
occurrence of specified events, and/or (ii) at any time prior to the complete
termination of an option, accelerate the exercise date or dates of such option.
9. Nontransferability of Options.
No option granted under this Plan shall be assignable or otherwise
transferable by the optionee except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. An option may be exercised during the lifetime of the optionee only
by the optionee. In the event an optionee dies during his employment by the
Company or any of its subsidiaries, or during the three-month period following
the date of termination of such employment, his option shall thereafter be
exercisable, during the period specified in the option agreement, by his
executors or administrators to the full extent to which such option was
exercisable by the optionee at the time of his death during the periods set
forth in Section 10 or 11(d).
10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive Stock
Options and except as otherwise determined by the Committee at the date of grant
of an Option, and subject to the provisions of the Plan, an optionee may
exercise an option at any time within three months following the termination of
the optionee's employment or other relationship with the Company or within one
year if such termination was due to the death or disability of the optionee but,
except in the case of the optionee's death, in no event later than the
expiration date of the Option. If the termination of the optionee's employment
is for cause or is otherwise attributable to a breach by the optionee of an
employment or confidentiality or non-disclosure agreement, the option shall
expire immediately upon such termination. The Board of Directors shall have the
power to determine what constitutes a termination for cause or a breach of an
employment or confidentiality or non-disclosure agreement, whether an optionee
has been terminated for cause or has breached such an agreement, and the date
upon which such termination for cause or breach occurs. Any such determinations
shall be final and conclusive and binding upon the optionee.
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
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(a) Express Designation. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the Fair
Market Value of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years
from the date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate Fair Market Value, as of the
respective date or dates of grant, of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee ceases to be an
employee of the Company (or within such lesser period as may be specified
in the applicable option agreement), provided, that the agreement with
respect to such option may designate a longer exercise period and that the
exercise after such three-month period shall be treated as the exercise of
a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the Company,
or within three months after the optionee ceases to be such an employee,
the Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period
as may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provisions thereto) while in
the employ of the Company, the Incentive Stock Option may be exercised
within the period of one year after the date the optionee ceases to be
such an employee because of such disability (or within such lesser period
as may be specified in the applicable option agreement).
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For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors may, in its sole
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation restrictions on transfer,
repurchase rights, rights of first refusal, commitments to pay cash bonuses, to
make, arrange for or guaranty loans or to transfer other property to optionees
upon exercise of options, or such other provisions as shall be determined by the
Board of Directors; provided, that such additional provisions shall not be
inconsistent with any other term or condition of the Plan and such additional
provisions shall not cause any Incentive Stock Option granted under the Plan to
fail to qualify as an Incentive Stock Option within the meaning of Section 422
of the Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3 (if applicable).
13. General Restrictions.
(a) Investment Representations. The Company may require any person to whom
an Option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option or award, for
his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws, or with covenants or representations made by
the Company in connection with any public offering of its Common Stock,
including any "lock-up" or other restriction on transferability.
(b) Compliance With Securities Law. Each Option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or automated quotation system or under any state or
federal law, or the consent or approval of any governmental or regulatory body,
or that the disclosure of non-public information or the satisfaction of any
other condition is necessary as a condition of, or in connection with the
issuance or purchase of shares thereunder, such option may not be exercised, in
whole or in part, unless such listing, registration, qualification, consent or
approval, or satisfaction of such condition shall have been effected or obtained
on conditions acceptable to the Board of Directors. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
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14. Rights as a Stockholder.
The holder of an option shall have no rights as a stockholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations, Reorganizations and Related
Transactions.
(a) Recapitalizations and Related Transactions. If, through or as a result
of any recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, (i) the outstanding shares of Common
Stock are increased, decreased or exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional shares or new or
different shares or other non-cash assets are distributed with respect to such
shares of Common Stock or other securities, an appropriate and proportionate
adjustment shall be made in (x) the maximum number and kind of shares reserved
for issuance under or otherwise referred to in the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan, without changing the aggregate purchase price as to which such
options remain exercisable. Notwithstanding the foregoing, no adjustment shall
be made pursuant to this Section 15 if such adjustment (i) would cause the Plan
to fail to comply with Section 422 of the Code or with Rule 16b-3 or (ii) would
be considered as the adoption of a new plan requiring stockholder approval.
(b) Reorganization, Merger and Related Transactions. All outstanding
Options under the Plan shall become fully exercisable for a period of sixty (60)
days following the occurrence of any Trigger Event, whether or not such Options
are then exercisable under the provisions of the applicable agreements relating
thereto. For purposes of the Plan, a "Trigger Event" is any one of the following
events:
(i) the date on which shares of Common Stock are first
purchased pursuant to a tender offer or exchange offer (other than such an
offer by the Company, any Subsidiary, any employee benefit plan of the
Company or of any Subsidiary or any entity holding shares or other
securities of the Company for or pursuant to the terms of such plan),
whether or not such offer is approved or opposed by the Company and
regardless of the number of shares purchased pursuant to such offer;
(ii) the date the Company acquires knowledge that any person
or group deemed a person under Section 13(d)-3 of the Exchange Act (other
than the Company, any Subsidiary, any employee benefit plan of the Company
or of any Subsidiary or any entity holding shares of Common Stock or other
securities of the Company for or pursuant to the terms of any such plan or
any individual or entity or group or affiliate thereof which acquired its
beneficial ownership interest prior to the date the Plan was adopted by
the Board), in a transaction or series of transactions, has become the
beneficial owner, directly or indirectly (with beneficial ownership
determined as provided in Rule 13d-3, or any successor rule, under the
Exchange Act), of securities of
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the Company entitling the person or group to 30% or more of all votes
(without consideration of the rights of any class or stock to elect
directors by a separate class vote) to which all stockholders of the
Company would be entitled in the election of the Board of Directors were
an election held on such date; and
(iii) the date of approval by the stockholders of the Company
of an agreement (a "reorganization agreement") providing for:
(A) The merger of consolidation of the Company with
another corporation where the stockholders of the Company,
immediately prior to the merger or consolidation, do not
beneficially own, immediately after the merger or consolidation,
shares of the corporation issuing cash or securities in the merger
or consolidation entitling such stockholders to 80% or more of all
votes (without consideration of the rights of any class of stock to
elect directors by a separate class vote) to which all stockholders
of such corporation would be entitled in the election of directors
or where the members of the Board of Directors of the Company,
immediately prior to the merger or consolidation, do not,
immediately after the merger or consolidation, constitute a majority
of the Board of Directors of the corporation issuing cash or
securities in the merger or consolidation; or
(B) The sale or other disposition of all or
substantially all the assets of the Company.
(c) Board Authority to Make Adjustments. Any adjustments under this
Section 15 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
(a) General. In the event of any sale, merger, transfer or acquisition of
the Company or substantially all of the assets of the Company in which the
Company is not the surviving corporation, and provided that after the Company
shall have requested the acquiring or succeeding corporation (or an affiliate
thereof), that equivalent options shall be substituted and such successor
corporation shall have refused or failed to assume all options outstanding under
the Plan or issue substantially equivalent options, then any or all outstanding
options under the Plan shall accelerate and become exercisable in full
immediately prior to such event. The Committee will notify holders of options
under the Plan that any such options shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the options will terminate
upon expiration of such notice.
(b) Substitute Options. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing
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corporation. The Company may direct that substitute options be granted on such
terms and conditions as the Board of Directors considers appropriate in the
circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect; provided, however, that if at any time the
approval of the stockholders of the Company is required under Section 422 of the
Code or any successor provision with respect to Incentive Stock Options, the
Board of Directors may not effect such modification or amendment without such
approval; and provided, further, that the provisions of Section 3(c) hereof
shall not be amended more than once every six months, other than to comport with
changes in the Code, the Employer Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
(b) The modification or amendment of the Plan shall not, without the
consent of an optionee, affect his or her rights under an option previously
granted to him or her. With the consent of the optionee affected, the Board of
Directors may amend outstanding option agreements in a manner not inconsistent
with the Plan. The Board of Directors shall have the right to amend or modify
(i) the terms and provisions of the Plan and of any outstanding Incentive Stock
Options granted under the Plan to the extent necessary to qualify any or all
such options for such favorable federal income tax treatment (including deferral
of taxation upon exercise) as may be afforded incentive stock options under
Section 422 of the Code and (ii) the terms and provisions of the Plan and of any
outstanding option to the extent necessary to ensure the qualification of the
Plan under Rule 16b-3.
20. Withholding.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
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withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a Fair
Market Value equal to such withholding obligation as of the date that the amount
of tax to be withheld is to be determined. An optionee who has made an election
pursuant to this Section 20(a) may only satisfy his or her withholding
obligation with shares of Common Stock which are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
(b) The acceptance of shares of Common Stock upon exercise of an Incentive
Stock Option shall constitute an agreement by the optionee (i) to notify the
Company if any or all of such shares are disposed of by the optionee within two
years from the date the option was granted or within one year from the date the
shares were issued to the optionee pursuant to the exercise of the option, and
(ii) if required by law, to remit to the Company, at the time of and in the case
of any such disposition, an amount sufficient to satisfy the Company's federal,
state and local withholding tax obligations with respect to such disposition,
whether or not, as to both (i) and (ii), the optionee is in the employ of the
Company at the time of such disposition.
(c) Notwithstanding the foregoing, in the case of a Reporting Person whose
options have been granted in accordance with the provisions of Section 3(b)
herein, no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements of Rule
16b-3.
21. Cancellation and New Grant of Options, Etc.
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no Incentive Stock Options shall be granted thereafter. Amendments to the
Plan not requiring stockholder approval shall become effective when adopted by
the Board of Directors; amendments requiring stockholder approval (as provided
in Section 21) shall become effective when adopted by the Board of Directors,
but no Incentive Stock Option granted after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's stockholders. If
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such stockholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Incentive Stock Options granted on or after the
date of such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a particular
optionee. Subject to this limitation, options may be granted under the Plan at
any time after the effective date and before the date fixed for termination of
the Plan.
(b) Termination. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate upon the earlier of (i) the close of business on the
day next preceding the tenth anniversary of the date of its adoption by the
Board of Directors, or (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise or cancellation
of options granted under the Plan. If the date of termination is determined
under (i) above, then options outstanding on such date shall continue to have
force and effect in accordance with the provisions of the instruments evidencing
such options.
23. Provision for Foreign Participants.
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
24. Governing Law.
The provisions of this Plan shall be governed and construed in accordance
with the laws of the State of Delaware without regard to the principles of
conflicts of laws.
Adopted by the Board of Directors on June 10, 1998.
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PROXY
TITAN PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Dr. Louis R. Bucalo or Sunil Bhonsle as
proxy to represent the undersigned at the Annual Meeting of Shareholders to be
held at 400 Oyster Point Boulevard, Suite 505, South San Francisco, California
94080 on August 28, 2000 at 9:00 a.m., local time, and at any adjournments
thereof, and to vote the shares of Common Stock or Preferred Stock the
undersigned would be entitled to vote if personally present, as indicated below.
1. Election of Directors
FOR all nominees listed below |_| WITHHOLDING AUTHORITY |_|
(except as marked to the to vote for all nominees listed
contrary below) below
Louis R. Bucalo, M.D., Ernst-Gunter Afting, Victor J. Bauer, Ph.D.,
Eurelio Cavalier, Michael K. Hsu, Hubert Huckel, M.D., Ley S. Smith and
Konrad M. Weis, Ph.D.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
print that nominee's name on the line provided below.)
--------------------------------------------------------------------------------
2. Approval of the amendments to the 1998 Stock Option Plan.
FOR |_| AGAINST |_| ABSTAIN |_|
--------------------------------------------------------------------------------
3. Approval of the appointment of Ernst & Young LLP as independent
auditors.
FOR |_| AGAINST |_| ABSTAIN |_|
The shares of Common Stock represented by this proxy will be voted as
directed; however, if no direction is given, the shares of Common Stock will be
voted FOR the election of the nominees, FOR approval of the amendment to the
1998 Stock Option Plan and FOR the approval of the appointment of Ernst & Young
LLP as the independent auditors of the Company.
<PAGE>
If any other business is presented at the meeting, this proxy will be
voted by those named in this proxy in their best judgment. At the present time,
the Board of Directors knows of no other business to be presented at the
meeting.
DATED: , 2000
----------------------
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Signature
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Signature if held jointly
(Please date, sign as name appears at the
left, and return promptly. If the shares are
registered in the names of two or more
persons, each person should sign. When
signing as Corporate Officer, Partner,
Executor, Administrator, Trustee or
Guardian, please give full title. Please
note any changes in your address alongside
the address as it appears in the proxy.)
