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SECURITIES AND EXCHANGE COMMISSION
Exchange Act of 1934 (Amendment No. )
Filed by a Party other than the Registranto
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
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o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
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/s/ Charles S. Berkman |
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10275 Science Center Drive
San Diego, California 92121
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Year First Elected | ||||||||||
Name | Offices Held | Director | Age * | |||||||
John W. Kozarich(A)(N) | Chairman of the Board | 2003 | 56 | |||||||
John L. Higgins | President, Chief Executive Officer and Director | 2007 | 37 | |||||||
Jason M. Aryeh(C)(N) | Director | 2006 | 38 | |||||||
Todd C. Davis(C) | Director | 2007 | 46 | |||||||
Elizabeth M. Greetham(A) | Director | 2007 | 57 | |||||||
David M. Knott(C) | Director | 2007 | 62 | |||||||
Jeffrey R. Perry(N) | Director | 2005 | 46 |
* | as of April 15, 2007 |
(A) | Member of the Audit Committee | |
(C) | Member of the Compensation Committee | |
(N) | Member of the Nominating and Corporate Governance Committee |
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• | Permit the Company to grant stock issuances of unvested or vested shares at a nominal or no purchase price. Currently, the 2002 Plan requires that a participant pay 100% of the fair market value of the underlying shares of any such award. This amendment will provide the Company with maximum flexibility to structure stock issuance awards under the 2002 Plan. | |
• | Permit the Company to grant independent stock appreciation rights, restricted stock units and dividend equivalent awards to employees, directors and consultants. Currently, the 2002 Plan does not permit these types of awards. | |
• | Provide for a new10-year term of the 2002 Plan. If this Proposal Two is approved by the stockholders, if the plan is not terminated earlier by our board of directors, it will terminate on the day before the tenth anniversary of the date of its adoption by the board of directors in March 2017, and no option or award may be granted after that date. Currently, the 2002 Plan is set to expire in March 2012. | |
• | Provide the Plan Administrator (as defined below) with maximum flexibility in the event of a change in control of the Company to provide for (1) the cash-out of awards, (2) the substitution of other awards or (3) adjustments to outstanding awards, all in the discretion of the Plan Administrator. The amended 2002 Plan will provide the Plan Administrator with maximum flexibility to address outstanding equity awards in the event of a change in control without the need to obtain participant consent to such actions. The existing change in control provisions of the 2002 Plan will remain unchanged. | |
• | Permit the payment of the exercise price or purchase price of an award to be paid with a promissory note, with the consent of the Plan Administrator. Executive officers and directors would not be eligible for such payment method. | |
• | Permit the payment of any withholding taxes arising from the exercise, vesting or payment of an award through the surrender of previously owned shares or shares issuable upon exercise or vesting of the award. Currently this is only available to holders of non-qualified stock options or stock issuance awards. | |
• | Permit the Company to grant awards other than stock options that will qualify as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code (the “Code”). |
• | the Discretionary Option Grant Program, | |
• | the Automatic Option Grant Program, |
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• | the Stock Issuance Program (including the Director Fee Stock Issuance Program), | |
• | the Other Stock Awards Program, and | |
• | the Director Fee Option Grant Program. |
• | the maximum numberand/or class of securities issuable under the 2002 Plan; | |
• | the numberand/or class of securities for which any one person may be granted awards per calendar year under the 2002 Plan; | |
• | the numberand/or class of securities for which grants are to be made under the Automatic Option Grant Program to new or continuing non-employee members of our board of directors; the numberand/or class of securities and price per share in effect under each outstanding option; and | |
• | the numberand/or class of securities and the exercise or purchase price per share in effect under each outstanding award under the 2002 Plan. |
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• | require participants to surrender their outstanding awards for a cash payment; | |
• | replace outstanding awards with other rights or property; | |
• | accelerate the vesting of all or a portion of the awards; | |
• | require that the successor or survivor corporation assume the awards or replace them with equivalent awards; or | |
• | adjust the terms and conditions of outstanding awards. |
• | vest or accelerate in full when such awards are not to be assumed by any successor corporation; | |
• | vest or accelerate in full when such awards are to be assumed by any successor corporation; or | |
• | vest or accelerate in full when such awards are to be assumed by any successor corporation and the employee holding such options is involuntarily terminated. |
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• | March 14, 2017; or | |
• | the termination of all outstanding options in connection with certain changes in control or ownership of the company. |
• | net earnings (either before or after interest, taxes, depreciation and amortization; | |
• | net losses; | |
• | sales or revenue; | |
• | operating earnings; | |
• | cash flow (including, but not limited to, operating cash flow and free cash flow); | |
• | return on net assets; | |
• | return on stockholders’ equity; | |
• | return on assets; | |
• | return on capital; | |
• | stockholder returns; | |
• | gross or net profit margin; | |
• | earnings per share; | |
• | price per share of our common stock; or | |
• | market share. |
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Weighted Average | ||||||||
Options Granted | Exercise Price of | |||||||
Name and Principal Position | �� | (Number of Shares) | Granted Options($)(1) | |||||
Henry F. Blissenbach(2) | 172,009 | (3) | $ | 6.8745 | ||||
Former Chairman of the Board and Interim Chief Executive Officer | ||||||||
Paul V. Maier(2) | 55,000 | (4) | $ | 6.4409 | ||||
Former Senior Vice President, Chief Financial Officer | ||||||||
David E. Robinson(2) | 150,000 | (5) | $ | 6.3000 | ||||
Former Chairman of the Board, President, Chief Executive Officer and Director | ||||||||
Andres F. Negro-Vilar(2) | 60,000 | (6) | $ | 6.6875 | ||||
Former Senior Vice President and Chief Scientific Officer | ||||||||
Martin D. Meglasson | 40,000 | (7) | $ | 7.6563 | ||||
Vice President, Discovery Research | ||||||||
Warner R. Broaddus(2) | 45,000 | (8) | $ | 7.3333 | ||||
Former Vice President, General Counsel and Secretary | ||||||||
All directors who are not executive officers (8 persons) | 255,692 | (9) | $ | 7.3000 | ||||
All current executive officers as a group (5 persons)(1) | 121,000 | (10) | $ | 7.5461 | ||||
All employees who are not executive officers (510 persons)(1) | 1,675,594 | (11) | $ | 7.0500 |
(1) | Exercise prices reflect the $2.50 downward adjustment made to such exercise prices in April 2007 to reflect the Company’s one-time special cash dividend paid in April 2007. | |
(2) | Messrs. Blissenbach, Negro-Vilar, Robinson, Maier and Broaddus are no longer executive officers of the Company. For purposes of this table, these individuals are not treated as current executive officers but are included in the employee total. | |
(3) | Options to purchase 170,000 shares of our common stock remained outstanding as of April 15, 2007. | |
(4) | Options to purchase 43,333 shares of our common stock remained outstanding as of April 15, 2007. | |
(5) | None of these options remained outstanding as of April 15, 2007. | |
(6) | Options to purchase 48,334 shares of our common stock remained outstanding as of April 15, 2007. | |
(7) | Options to purchase 34,687 shares of our common stock remained outstanding as of April 15, 2007. | |
(8) | Options to purchase 38,333 shares of our common stock remained outstanding as of April 15, 2007. | |
(9) | Options to purchase 253,683 shares of our common stock remained outstanding as of April 15, 2007. | |
(10) | Options to purchase 114,905 shares of our common stock remained outstanding as of April 15, 2007. | |
(11) | Options to purchase 668,359 shares of our common stock remained outstanding as of April 15, 2007. |
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(c) | ||||||||||||
Number of Securities | ||||||||||||
(a) | Remaining Available | |||||||||||
Number of Securities | (b) | for Future Issuance | ||||||||||
to be Issued | Weighted-Average | Under Equity | ||||||||||
Upon Exercises of | Exercise Price of | Compensation Plans | ||||||||||
Outstanding Options, | Outstanding Options, | (Excluding Securities | ||||||||||
Warrants and Rights | Warrants and Rights | Reflected in Column(a)) | ||||||||||
Equity compensation plans approved by security holders | 5,766,386 | $ | 12.17 | 920,386 | (1) | |||||||
Equity compensation plans not approved by security holders(2) | — | — | — | |||||||||
5,766,386 | 12.17 | 920,386 | ||||||||||
(1) | At December 31, 2006, 797,639 and 122,747 shares were available under the 2002 Option Plan and the 2002 Employee Stock Purchase Plan, respectively, for future grants of stock options or sale of stock. | |
(2) | There are no equity compensation plans (including individual compensation arrangements) not approved by the Company’s security holders. |
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Fee Category | Fiscal 2006 Fees | Fiscal 2005 Fees | ||||||
Audit Fees(1) | $ | 2,414.3 | $ | 1,360.9 | ||||
Audit-related Fees(2) | 584.1 | 1,586.0 | ||||||
Tax Fees(3) | 114.9 | 36.2 | ||||||
All Other Fees(4) | 12.9 | 29.3 | ||||||
Total Fees | 3,126.2 | 3,012.4 | ||||||
(1) | Audit fees consist of fees for professional services rendered for the audit of the Company’s consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory and regulatory filings or engagements. In 2006 and 2005, audit fees included fees for professional services rendered for the audits of (i) management’s assessment of the effectiveness of internal control over financial reporting and (ii) the effectiveness of internal control over financial reporting. | |
(2) | Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements but are not reported under “Audit Fees.” Such fees include, among other things, employee benefit plan audits and certain consultations concerning financial accounting and reporting standards. In 2006, audit-related fees represented professional services rendered in connection with a proxy statement related to the sale of the Company’s AVINZA product line to King Pharmaceuticals. In 2005, audit-related fees represented professional services rendered in connection with the re-audits of the Company’s financial statements for the years ended December 31, 2003 and 2002. | |
(3) | Tax fees consist of fees for professional services rendered for assistance with federal, state and international tax compliance. | |
(4) | Other fees for 2006 consist of $7,600 in fees billed in connection with the SEC enforcement investigation and $5,200 in fees billed in connection with the Organon co-promote termination matter. Other fees for 2005 consist of fees billed in connection with the SEC enforcement investigation. |
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DIRECTORS AND MANAGEMENT
• | all persons who are beneficial owners of 5% or more of our outstanding common stock; | |
• | each of our current directors, including our president and chief executive officer, Mr. Higgins, our named executive officers; and | |
• | all of our executive officers and directors as a group. |
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Shares Beneficially | ||||||||||||
Number of Shares | Owned via Options, | |||||||||||
Beneficially | Warrants or | Percent of | ||||||||||
Beneficial Owner | Owned | Convertible Notes | Class Owned | |||||||||
David M. Knott(1) 485 Underhill Blvd., Ste. 205 Syosset, NY11791-3419 | 8,463,557 | — | 8.37 | % | ||||||||
Glenview Capital Management LLC(2) 767 Fifth Avenue, 44th Floor New York, NY 10153 | 7,322,288 | — | 7.24 | % | ||||||||
Harvest Management, LLC(3) 600 Madison Avenue, 11th Floor New York, NY 10022 | 5,396,857 | — | 5.34 | % | ||||||||
OZ Management, LLC(4) 9 West 57th Street, 39th Floor New York, NY 10019 | 5,192,180 | — | 5.14 | % | ||||||||
Jason M. Aryeh(5) | 1,633,093 | 1,575 | 1.62 | % | ||||||||
Todd C. Davis | — | — | * | |||||||||
Elizabeth M. Greetham | — | — | * | |||||||||
John L. Higgins | 150,000 | — | * | |||||||||
David M. Knott(1) | 8,463,557 | — | 8.37 | % | ||||||||
John W. Kozarich(6) | 55,399 | 48,021 | * | |||||||||
Jeffrey R. Perry(6) | 23,953 | 21,575 | * | |||||||||
Michael A. Rocca(6) | 96,475 | 84,799 | * | |||||||||
Henry F. Blissenbach(7) | 253,123 | 238,118 | * | |||||||||
Warner R. Broaddus(8) | 121,458 | 121,458 | * | |||||||||
Paul V. Maier(9) | 287,659 | 202,708 | * | |||||||||
Martin D. Meglasson | 60,188 | 59,688 | * | |||||||||
Andres F. Negro-Vilar(10) | 331,442 | 324,209 | * | |||||||||
David E. Robinson(11) | — | — | * | |||||||||
Directors and executive officers as a group (13 persons)(6) | 10,957,321 | 664,922 | 10.84 | % |
* | Less than 1% |
(1) | Pursuant to a Schedule 13D/A filed December 6, 2006, which reported that David M. Knott and Dorset Management Corporation had sole voting power over 7,693,955 shares, shared voting power over 678,671 shares, sole dispositive power over 8,171,973 shares and shared dispositive power over 291,584 shares. | |
(2) | Pursuant to a Schedule 13G/A filed on February 14, 2007, which reported that Glenview Capital Management, LLC, Glenview Capital GP, LLC, and Lawrence M. Robbins had shared voting and dispositive power over 7,322,288 shares and Glenview Capital Master Fund, LTD had shared voting and dispositive power over 4,285,083 shares. | |
(3) | Pursuant to a Schedule 13G filed on February 14, 2007, which reported that Harvest Management, LLC, James M. Rutman, Nathaniel Bohrer and Marjorie G. Kellner had shared voting and dispositive power over 3,896,857 shares and 1,500,000 shares held in swap. | |
(4) | Pursuant to a Schedule 13G/A filed on February 14, 2007, which reported that OZ Management, LLC and Daniel S. Och had sole voting and dispositive power over 5,192,180 shares and OZ Master Fund, Ltd. had sole voting and dispositive power over 4,936,276 shares. |
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(5) | Includes 1,572,668 shares held by JALAA Equities, LP., of which Mr. Aryeh is the founder and general partner, 24,700 held directly by Mr. Aryeh, 25,350 shares held by Mr. Aryeh’s spouse and 8,800 held in a family trust. | |
(6) | Includes restricted stock awards grants under the 2002 stock incentive plan. See “Director Compensation.” Does not include shares held by Dr. Negro-Vilar and Messrs. Broaddus, Maier and Robinson as such persons are no longer executive officers of the Company. | |
(7) | On August 1, 2006, our board of directors appointed Dr. Blissenbach, chairman and interim chief executive officer. Dr. Blissenbach served as our interim chief executive officer until we announced the appointment of Mr. Higgins as our president and chief executive officer in January 2007. Dr. Blissenbach served as our chairman until March 2007. | |
(8) | On February 28, 2007, Mr. Broaddus resigned as our vice president, general counsel and secretary. | |
(9) | On January 31, 2007, Mr. Maier resigned as our senior vice president and chief financial officer. | |
(10) | On February 15, 2007, Dr. Negro-Vilar resigned as our senior vice president and chief scientific officer. | |
(11) | On July 31, 2006, Mr. Robinson resigned as director, chairman, president and chief executive officer. |
• | Attract, motivate and retain individuals of superior ability and managerial talent critical to its long-term success; | |
• | Align executives’ interests with the Company’s corporate strategies, business objectives and the long-term interests of the Company’s stockholders; | |
• | Create incentives to achieve key strategic and financial performance measures; and | |
• | Enhance the executives’ incentive to increase the Company’s stock price and maximize stockholder value. |
• | base salary; | |
• | annual variable performance bonus awards payable in cash; | |
• | long-term stock-based incentive awards; and | |
• | employee benefits and perquisites. |
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• | industry experience, knowledge and qualifications; | |
• | the salary levels in effect for comparable positions within the Company’s principal industry marketplace competitors; and | |
• | internal comparability considerations. |
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• | base salary of $400,000 per year; | |
• | performance bonus opportunity with a target of 50% of salary, up to a maximum of 75%; | |
• | restricted stock grant of 150,000 shares, vesting over two years; | |
• | eligibility for future discretionary, performance-based stock or option grants; | |
• | lump-sum relocation benefit of $100,000; | |
• | ordinary severance (i.e. involuntary termination for cause or voluntary termination with good cause, without a change of control) of 18 months’ salary, continuation of health benefits, and acceleration of stock and option vesting; and | |
• | change of control severance of two years salary, plus two years average annual bonus, continuation of health benefits, and acceleration of stock and option vesting. |
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• | one times the annual rate of base salary in effect for such officer at the time of involuntary termination plus | |
• | one times the average of bonuses paid to such officer for services rendered in the two fiscal years immediately preceding the fiscal year of involuntary termination. |
• | a merger, consolidation or reorganization of the Company in which 50% or more of its voting securities change ownership; | |
• | the sale, transfer or other disposition of all or substantially all of the Company’s assets in complete liquidation or dissolution of the Company, or | |
• | a change in control of the Company effected through a successful tender offer for more than 50% of the Company’s outstanding common stock or through a change in the majority of our board of directors as a result of one or more contested elections for board membership. |
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Non-Equity | ||||||||||||||||||||||||||||
Name and Principal | Salary | Option | Incentive Plan | All Other | ||||||||||||||||||||||||
Position | Year | ($) | Bonus ($)(6) | Awards ($)(7) | Compensation ($)(8) | Compensation ($)(9) | Total | |||||||||||||||||||||
Dr. Blissenbach, Former Chairman and interim Chief Executive Officer(1) | 2006 | $ | 200,000 | $ | 0 | $ | 453,729 | $ | 100,000 | $ | 55,422 | $ | 809,151 | |||||||||||||||
Mr. Maier, Former Senior Vice President and Chief Financial Officer(2) | 2006 | $ | 347,000 | $ | 111,667 | $ | 180,725 | $ | 107,353 | $ | 11,911 | $ | 758,656 | |||||||||||||||
Mr. Robinson Former Chairman and Chief Executive Officer(3) | 2006 | $ | 401,250 | $ | 0 | $ | 871,842 | $ | 0 | $ | 1,508,698 | $ | 2,781,790 | |||||||||||||||
Dr. Negro-Vilar, Former Senior Vice President and Chief Scientific Officer(4) | 2006 | $ | 471,000 | $ | 150,000 | $ | 188,945 | $ | 145,716 | $ | 16,447 | $ | 972,108 | |||||||||||||||
Dr. Meglasson, Vice President, Research | 2006 | $ | 292,000 | $ | 91,000 | $ | 183,057 | $ | 90,338 | $ | 27,742 | $ | 684,137 | |||||||||||||||
Mr. Broaddus Former Vice President and General Counsel(5) | 2006 | $ | 309,000 | $ | 95,333 | $ | 139,724 | $ | 95,597 | $ | 4,000 | $ | 643,654 |
(1) | Dr. Blissenbach was appointed chairman and interim chief executive officer effective August 1, 2006, following the resignation of Mr. Robinson and served in that capacity until the hiring of John L. Higgins as the Company’s chief executive officer in January 2007. “Option Award” includes $72,509 of compensation related to stock options granted to Dr. Blissenbach for his service as a non-employee director prior to his appointment as interim chief executive officer. Dr. Blissenbach received $22,746 in reimbursement of commuting expenses, $10,926 forgross-up of taxes, and $21,750 in non-employee director fees earned prior to his appointment as interim chief executive officer, which amounts are reflected in the “All Other Compensation” column. | |
(2) | Mr. Maier served as senior vice president and chief financial officer until his resignation on January 31, 2007. | |
(3) | Mr. Robinson served as chairman, president and chief executive officer until his resignation on July 31, 2006. Pursuant to his separation agreement, Mr. Robinson received a lump sum severance payment of $1,410,000, |
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plus $81,343 for accrued vacation, which amounts are included in the “All Other Compensation” column. The balance of the amount shown as “All Other Compensation” represents $1,355 in life insurance and $16,000 in medical insurance premiums. | ||
(4) | Dr. Negro-Vilar served as senior vice president and chief scientific officer until his resignation on February 15, 2007. | |
(5) | Mr. Broaddus served as vice president, general counsel and secretary until his resignation on February 28, 2007. | |
(6) | Represents bonus awards for 2006 under the Company’s retention bonus plan. | |
(7) | Represents the stock option expense for each named executive officer for fiscal 2006, determined under Statement of Financial Accounting Standards (SFAS) 123 (revised 2004),Share-Based Payment(SFAS 123(R)). Effective January 1, 2006, we adopted SFAS 123(R) using the modified prospective transition method. No stock-based employee compensation cost was recognized prior to January 1, 2006, as all options granted prior to 2006 had an exercise price equal to the market value of the underlying common stock on the date of the grant. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). We have applied the provisions of SAB 107 in our adoption of SFAS 123(R). Under the transition method, compensation cost recognized in 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments granted in 2006, based on grant-date fair value estimated in accordance with the provisions of SFAS 123(R). |
2006 | 2005 | 2004 | 2003 | |||||
Risk-free interest rates | 4.76% | 4.35% | 3.61% | 3.25% | ||||
Dividend Yield | — | — | — | — | ||||
Expected Volatility | 70% | 72% | 74% | 74% | ||||
Expected Term | 5.90 years | 5 years | 5 years | 5 years |
(8) | Represents performance bonus awards under the management bonus plan earned in 2006 and 2007, but paid in 2007. | |
(9) | For each named executive officer other than Dr. Blissenbach, Mr. Robinson and Dr. Meglasson, represents life insurance and medical insurance premiums paid by the Company. The amounts for Dr. Blissenbach and Mr. Robinson are described in the footnotes above. For Dr. Meglasson, the amount represents $11,750 of housing allowance, $13,670 in medical insurance premiums and $2,322 in life insurance premiums. |
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Option | Exercise | Grant | ||||||||||||||||||||||||||||||||||||||||||
Awards: | or Base | Date Fair | ||||||||||||||||||||||||||||||||||||||||||
Number of | Price | Value of | ||||||||||||||||||||||||||||||||||||||||||
Compensation | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | Securities | of Option | Option | |||||||||||||||||||||||||||||||||||||||
Grant | Committee | Target | Maximum | Target | Underlying | Awards | Award | |||||||||||||||||||||||||||||||||||||
Name | Date | Action | ($) | ($) | ($) | (#) | (#) | (#) | Options(#) | ($/Sh) | ($) | |||||||||||||||||||||||||||||||||
Dr. Blissenbach(1) | 1/31/06 | 1/31/06 | — | — | — | — | — | — | 10,000 | $ | 12.40 | $ | 77,440 | |||||||||||||||||||||||||||||||
8/3/06 | 7/31/06 | — | — | — | 0 | 150,000 | 0 | $ | 9.20 | $ | 876,300 | |||||||||||||||||||||||||||||||||
9/27/06 | 9/27/06 | — | — | — | — | — | — | 10,000 | $ | 10.10 | $ | 64,380 | ||||||||||||||||||||||||||||||||
8/1/06 | 8/1/06 | $ | 0 | $ | 100,000 | $ | 100,000 | — | — | — | ||||||||||||||||||||||||||||||||||
Mr. Maier | 3/10/06 | 3/10/06 | — | — | — | — | — | — | 20,000 | $ | 11.90 | $ | 157,820 | |||||||||||||||||||||||||||||||
Mr. Robinson | 3/10/06 | 3/10/06 | — | — | — | — | — | — | 50,000 | $ | 11.90 | $ | 394,500 | |||||||||||||||||||||||||||||||
Dr. Negro-Vilar | 3/10/06 | 3/10/06 | — | — | — | — | — | — | 25,000 | $ | 11.90 | $ | 197,275 | |||||||||||||||||||||||||||||||
Dr. Meglasson | 3/10/06 | 3/10/06 | — | — | — | — | — | — | 25,000 | $ | 11.90 | $ | 197,275 | |||||||||||||||||||||||||||||||
Mr. Broaddus | 3/10/06 | 3/10/06 | — | — | — | — | — | — | 25,000 | $ | 11.90 | $ | 197,275 |
(1) | Option awards to Dr. Blissenbach on January 31, 2006 and September 27, 2006 were in connection with his service as a non-employee director. In August 2006, Mr. Blissenbach was awarded a performance bonus opportunity of up to $100,000 payable upon the completion of certain milestones: (a) recruit and appoint a successor CEO; (b) complete strategic transaction(s) approved by the Board; (c) before October 31st attain a positive cash flow net of debt in excess of $30 million by completion of real estate transaction; and (d) retain key personnel. This $100,000 cash bonus was paid to Dr. Blissenbach in early 2007. On August 3, 2006, Dr. Blissenbach was awarded an option to purchase 150,000 shares of stock which vests 100% upon the hiring of a successor chief executive officer or, if later, 50% after six months and 50% after 1 year. | |
(2) | Exercise prices do not reflect the $2.50 downward adjustment made to such exercise prices in April 2007 to reflect the Company’s one-time special cash dividend paid in April 2007. |
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Option Awards(1)(2) | ||||||||||||||||||||
Equity Incentive | ||||||||||||||||||||
Plan Awards: | ||||||||||||||||||||
Number of | Number of | |||||||||||||||||||
Securities | Number of | Securities | ||||||||||||||||||
Underlying | Securities | Underlying | Option | |||||||||||||||||
Unexercised | Unexercised | Unexercised | Exercise | Option | ||||||||||||||||
Options (#) | Options (#) | Unearned Options | Price | Expiration | ||||||||||||||||
Name | Exercisable | Unexercisable | (#) | ($) | Date | |||||||||||||||
Dr. Blissenbach(3) | 0 | 10,000 | — | 10.10 | 9/27/16 | |||||||||||||||
0 | 0 | 150,000 | 9.20 | 8/03/16 | 0 | 10,000 | — | 12.4000 | 1/31/16 | |||||||||||
2,009 | 0 | — | 3.7330 | 1/03/15 | 10,000 | 0 | — | 17.1600 | 6/11/14 | |||||||||||
1,507 | 0 | — | 4.9762 | 1/2/14 | ||||||||||||||||
10,000 | 0 | — | 13.3900 | 6/20/13 | ||||||||||||||||
4,113 | 0 | — | 1.8232 | 1/2/13 | 10,000 | 0 | — | 16.6900 | 5/15/12 | |||||||||||
857 | 0 | — | 5.6828 | 1/2/12 | 10,000 | 0 | — | 13.0200 | 5/25/11 | |||||||||||
763 | 40 | — | 4.5829 | 1/2/11 | 10,000 | 0 | — | 10.6250 | 5/25/10 | |||||||||||
756 | 0 | — | 4.6245 | 1/3/10 | 10,000 | 0 | — | 11.0625 | 5/20/09 | |||||||||||
10,000 | 0 | — | 14.50 | 5/21/08 | 8,118 | 0 | — | 12.00 | 5/21/07 | |||||||||||
Mr. Maier(4) | 3,750 | 16,250 | — | 11.90 | 3/10/16 | |||||||||||||||
729 | 22,604 | — | 7.25 | 7/05/15 | ||||||||||||||||
30,000 | 0 | — | 20.70 | 6/01/14 | ||||||||||||||||
3,125 | 6,250 | — | 9.25 | 4/29/13 | ||||||||||||||||
40,000 | 0 | — | 15.01 | 5/06/12 | ||||||||||||||||
40,000 | 0 | — | 10.68 | 7/6/11 | ||||||||||||||||
40,000 | 0 | — | 11.75 | 5/22/10 | ||||||||||||||||
Mr. Robinson(5) | 50,000 | 0 | — | 11.90 | 1/14/07 | |||||||||||||||
150,000 | 0 | — | 14.39 | 1/14/07 | 100,000 | 0 | — | 16.95 | 1/14/07 | |||||||||||
75,000 | 0 | — | 11.75 | 1/14/07 | 100,000 | 0 | — | 15.00 | 1/14/07 | |||||||||||
50,000 | 0 | — | 12.125 | 1/14/07 |
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Option Awards(1)(2) | ||||||||||||||||||||
Equity Incentive | ||||||||||||||||||||
Plan Awards: | ||||||||||||||||||||
Number of | Number of | |||||||||||||||||||
Securities | Number of | Securities | ||||||||||||||||||
Underlying | Securities | Underlying | Option | |||||||||||||||||
Unexercised | Unexercised | Unexercised | Exercise | Option | ||||||||||||||||
Options (#) | Options (#) | Unearned Options | Price | Expiration | ||||||||||||||||
Name | Exercisable | Unexercisable | (#) | ($) | Date | |||||||||||||||
Dr. Negro-Vilar(6) | 4,688 | 20,312 | — | 11.90 | 3/10/16 | |||||||||||||||
730 | 22,604 | — | 7.25 | 7/5/15 | ||||||||||||||||
30,000 | 0 | — | 20.70 | 6/1/14 | ||||||||||||||||
68,750 | 6,250 | — | 9.25 | 4/29/13 | ||||||||||||||||
30,000 | 0 | — | 15.01 | 5/6/12 | ||||||||||||||||
40,000 | 0 | — | 10.68 | 7/6/11 | 30,000 | 0 | — | 11.75 | 5/22/10 | |||||||||||
70,875 | 0 | — | 9.3125 | 10/1/08 | Dr. Meglasson | 4,688 | 20,312 | — | 11.90 | 3/10/16 | ||||||||||
0 | 9,687 | — | 7.25 | 7/5/15 | 50,000 | 0 | — | 15.63 | 2/26/14 | |||||||||||
Mr. Broaddus(7) | 4,688 | 20,312 | — | 11.90 | 3/10/16 | |||||||||||||||
416 | 12,917 | — | 7.25 | 7/5/15 | ||||||||||||||||
20,000 | 0 | — | 20.70 | 6/1/14 | ||||||||||||||||
1,042 | 2,083 | — | 9.25 | 4/29/13 | ||||||||||||||||
60,000 | 0 | — | 16.40 | 12/13/11 |
(1) | There are no stock awards outstanding for any of the named executive officers. | |
(2) | Except as noted for Dr. Blissenbach and Mr. Robinson below, each option grant to the named executive officers vests 12.5% after six months from grant and the remainder in 42 equal monthly installments. Each such option may accelerate and become fully vested upon a change of control as defined in the relevant option agreement. Exercise prices do not reflect the $2.50 downward adjustment made to such exercise prices in April 2007 to reflect the Company’s one-time special cash dividend paid in April 2007. | |
(3) | With the exception of the option to purchase 150,000 shares of stock awarded to Dr. Blissenbach on August 3, 2006, each of his other option grants are non-employee director grants which he received prior to his appointment as interim chief executive officer. These options vest over 1 year, or may fully vest upon a change of control as defined in the option agreements. The option granted on August 3, 2006 vested 100% upon the hiring of a successor chief executive officer. | |
(4) | Mr. Maier, our former senior vice president and chief financial officer resigned on January 31, 2007. Under the terms of his Professional Services Agreement, each of his outstanding options expire on December 31, 2007, unless earlier exercised. | |
(5) | Mr. Robinson, our former chairman, president and chief executive officer resigned on July 31, 2006. Under the terms of his separation agreement, each of his outstanding options expired on January 14, 2007, unless earlier exercised. | |
(6) | Dr. Negro-Vilar, our former senior vice president and chief scientific officer resigned on February 15, 2007. Under the terms of his Professional Services Agreement, each of his outstanding options expire on December 31, 2007, unless earlier exercised. | |
(7) | Mr. Broaddus, our vice president, general counsel and secretary resigned on February 28, 2007. Under the terms of his Professional Services Agreement, each of his outstanding options expire on December 31, 2007, unless earlier exercised. |
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Option Awards(1) | ||||||||
No. of Shares | Value Realized Upon | |||||||
Acquired on | Exercise | |||||||
Name | Exercise (#) | ($) | ||||||
Dr. Blissenbach | 0 | $ | 0 | |||||
Mr. Maier | 144,206 | $ | 328,031 | |||||
Mr. Robinson | 475,000 | $ | 846,091 | |||||
Dr. Negro-Vilar | 41,666 | $ | 138,280 | |||||
Dr. Meglasson | 5,313 | $ | 21,137 | |||||
Mr. Broaddus | 28,542 | $ | 73,207 |
(1) | There were no stock awards made or outstanding for the named executive officers in 2006. |
Non-qualified Deferred Compensation | ||||||||||||||||||||
Executive | Registrant | Aggregate | Aggregate | Aggregate | ||||||||||||||||
Contributions in | Contributions in | Earnings | Withdrawals/ | Balance | ||||||||||||||||
Last FY | Last FY | in Last FY | Distributions | at Last FYE | ||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
Dr. Blissenbach | — | — | — | — | — | |||||||||||||||
Mr. Maier | — | — | — | — | — | |||||||||||||||
Mr. Robinson | — | — | — | — | — | |||||||||||||||
Dr. Negro-Vilar | $ | 117,750 | — | $ | 7,331 | — | $ | 125,081 | ||||||||||||
Dr. Meglasson | — | — | $ | 400 | — | $ | 2,607 | |||||||||||||
Mr. Broaddus | — | — | — | — | — |
Termination | ||||||||||||||
Without | Termination | |||||||||||||
Cause; | Change of | Without | ||||||||||||
No Change of | Control; | Cause with Change | ||||||||||||
Control | No Termination | of Control | ||||||||||||
Name | Benefit | ($) | ($) | ($) | ||||||||||
Dr. Blissenbach | Salary | NA | — | NA | ||||||||||
Bonus | — | — | — | |||||||||||
Option acceleration | — | $ | 471,232 | — | ||||||||||
Option extension | — | — | — | |||||||||||
Benefits continuation | — | — | — | |||||||||||
Career transition | ||||||||||||||
assistance | — | — | — | |||||||||||
Total value: | — | $ | 471,232 | — |
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Termination | ||||||||||||||
Without | Termination | |||||||||||||
Cause; | Change of | Without | ||||||||||||
No Change of | Control; | Cause with Change | ||||||||||||
Control | No Termination | of Control | ||||||||||||
Name | Benefit | ($) | ($) | ($) | ||||||||||
Mr. Maier | Salary | $ | 173,500 | — | $ | 520,500 | ||||||||
Bonus | — | — | $ | 79,177 | ||||||||||
Option acceleration | — | $ | 189,712 | $ | 189,712 | |||||||||
Option extension | — | — | $ | 183,057 | ||||||||||
Benefits continuation | $ | 7,556 | — | $ | 22,669 | |||||||||
Career transition | ||||||||||||||
assistance | — | — | $ | 12,000 | ||||||||||
Total value: | $ | 181,056 | $ | 189,712 | $ | 1,007,115 | ||||||||
Dr. Negro-Vilar | Salary | $ | 471,000 | — | $ | 942,000 | ||||||||
Bonus | — | — | $ | 135,358 | ||||||||||
Option acceleration | — | $ | 206,768 | $ | 206,768 | |||||||||
Option extension | — | — | $ | 228,134 | ||||||||||
Benefits continuation | $ | 15,113 | — | $ | 30,226 | |||||||||
Career transition | ||||||||||||||
assistance | — | — | $ | 12,000 | ||||||||||
Total value: | $ | 486,113 | $ | 206,768 | $ | 1,554,486 | ||||||||
Dr. Meglasson | Salary | $ | 146,000 | — | $ | 438,000 | ||||||||
Bonus | — | — | $ | 75,669 | ||||||||||
Option acceleration | — | $ | 126,087 | $ | 126,087 | |||||||||
Option extension | — | — | $ | 37,146 | ||||||||||
Benefits continuation | $ | 10,778 | — | $ | 32,335 | |||||||||
Career transition | ||||||||||||||
assistance | — | — | $ | 12,000 | ||||||||||
Total value: | $ | 156,778 | $ | 126,087 | $ | 721,237 | ||||||||
Mr. Broaddus | Salary | $ | 154,500 | — | $ | 463,500 | ||||||||
Bonus | — | — | $ | 76,799 | ||||||||||
Option acceleration | — | $ | 149,921 | $ | 149,921 | |||||||||
Option extension | — | — | $ | 47,403 | ||||||||||
Benefits continuation | $ | 2,272 | — | $ | 6,817 | |||||||||
Career transition | ||||||||||||||
assistance | — | — | $ | 12,000 | ||||||||||
Total value: | $ | 156,772 | $ | 149,921 | $ | 756,440 |
Fees Earned | ||||||||||||||||||||
or Paid | Stock | Option | All other | |||||||||||||||||
in Cash | Awards | Awards | Compensation | Total | ||||||||||||||||
Name | ($) | ($) | ($) | ($)(11) | ($) | |||||||||||||||
Jason Aryeh(1) | $ | 12,250 | — | $ | 32,190 | — | $ | 44,440 | ||||||||||||
Alexander D. Cross(2) | $ | 34,500 | — | $ | 87,082 | — | $ | 121,582 | ||||||||||||
John Groom(3) | $ | 18,000 | — | $ | 102,197 | — | $ | 120,197 | ||||||||||||
Irving S. Johnson(4) | $ | 9,000 | — | $ | 102,197 | $ | 9,500 | $ | 120,697 | |||||||||||
John Kozarich(5) | $ | 7,000 | $ | 27,490 | $ | 87,082 | $ | 2,500 | $ | 124,072 | ||||||||||
Daniel S. Loeb(6) | $ | 4,500 | $ | 27,490 | $ | 132,767 | — | $ | 164,757 |
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Fees Earned | ||||||||||||||||||||
or Paid | Stock | Option | All other | |||||||||||||||||
in Cash | Awards | Awards | Compensation | Total | ||||||||||||||||
Name | ($) | ($) | ($) | ($)(11) | ($) | |||||||||||||||
Carl C. Peck(7) | $ | 6,750 | $ | 27,490 | $ | 87,082 | $ | 2,250 | $ | 123,572 | ||||||||||
Jeffrey R. Perry(8) | $ | 4,500 | $ | 27,490 | $ | 132,767 | — | $ | 164,757 | |||||||||||
Brigette Roberts(9) | $ | 8,500 | $ | 27,490 | $ | 132,767 | — | $ | 168,757 | |||||||||||
Michael Rocca(10) | $ | 22,500 | $ | 42,495 | $ | 87,082 | — | $ | 152,077 |
(1) | Mr. Aryeh was elected to the Board on September 27, 2006. Mr. Aryeh received an initial option grant of 20,000 options upon that election. The grant date fair value of his option grants during 2006 was $128,760. The other directors served for all of fiscal 2006. | |
(2) | Dr. Cross held a total of 101,888 options outstanding at12/31/06. The grant date fair value of his option grants during 2006 was $141,820. | |
(3) | Mr. Groom held a total of 120,313 options outstanding at12/31/06. The grant date fair value of his option grants during 2006 was $172,051. | |
(4) | Dr. Johnson held a total of 103,368 options outstanding at12/31/06. The grant date fair value of his option grants during 2006 was $172,051. | |
(5) | Dr. Kozarich received 2,378 shares of restricted stock in 2006 in lieu of ordinary director fees (retainer and regular meetings) and held 56,446 options outstanding at12/31/06. The grant date fair value of his option grants during 2006 was $141,820. The grant date fair market value of his stock grants during 2006 was $27,490. | |
(6) | Mr. Loeb received 2,378 shares of restricted stock in 2006 in lieu of ordinary director fees (retainer and regular meetings) and held 20,000 options outstanding at12/31/06. In 2006 we also paid $203,864 to Third Point LLC, a firm controlled by Mr. Loeb, as reimbursement for legal and related expenses under a Stockholders Agreement between the Company and Third Point dated as of December 2, 2005. Mr. Loeb received a grant of options to purchase 20,000 shares in December 2005 upon his appointment to the Board and did not receive an option grant in 2006. The grant date fair value of his stock grants during 2006 was $27,490. | |
(7) | Dr. Peck received 2,378 shares of restricted stock in 2006 in lieu of ordinary director fees (retainer and regular meetings) and held 123,181 options outstanding at12/31/06. The grant date fair value of his option grants during 2006 was $141,820. The grant date fair market value of his stock grants during 2006 was $27,490. | |
(8) | Mr. Perry received 2,378 shares of restricted stock in 2006 in lieu of ordinary director fees (retainer and regular meetings) and held 20,000 options outstanding at12/31/06. Mr. Perry received a grant of options to purchase 20,000 shares in December 2005 upon his appointment to the Board and did not receive an option grant in 2006. The grant date fair value of his stock grants during 2006 was $27,490. | |
(9) | Dr. Roberts received 2,378 shares of restricted stock in 2006 in lieu of ordinary director fees (retainer and regular meetings) and held 20,000 options outstanding at12/31/06. Dr. Roberts received a grant of options to purchase 20,000 shares in December 2005 upon her appointment to the Board and did not receive an option grant in 2006. The grant date fair value of her stock grants during 2006 was $27,490. | |
(10) | Mr. Rocca received 3,676 shares of restricted stock in 2006 in lieu of ordinary director fees (retainer and regular meetings) and held 94,799 options outstanding at12/31/06. The grant date fair value of his stock and option grants during 2006 was $141,820. The grant date fair market value of his stock grants during 2006 was $42,495. | |
(11) | Represents fees earned in connection with participation on our scientific advisory board. |
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36
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37
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• | the amounts involved exceeded or will exceed $120,000; and | |
• | a director, nominee for director, executive officer, holder of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest. |
Richard Bowen: | Ordinary Severance Agreement and Change of Control Severance Agreement | |
Warner Broaddus: | Ordinary Severance Agreement | |
Tod Mertes: | Ordinary Severance Agreement | |
Matthew Witte: | Ordinary Severance Agreement and Change of Control Severance Agreement |
38
Table of Contents
• | A severance agreement for Mr. Crouch that provides for payment of six months salary in the event Mr. Crouch’s employment is terminated without cause, regardless of a change of control. | |
• | A key employee retention bonus agreement with Mr. Crouch that provides for a cash bonus payment to him of $50,000 provided he remained employed by the Company and in good standing through December 31, 2006. | |
• | A letter agreement with Mr. Mertes providing for (i) the payout of severance benefits under current severance agreements with Mr. Mertes and (ii) the payout of any bonus due in accordance with the 2006 executive bonus plan, upon any termination or resignation of his employment, provided he remained with the Company and in good standing through the final filing of our 2006 annual report onForm 10-K. |
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40
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41
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2002 STOCK INCENTIVE PLAN
MAY 16, 2002
(AS AMENDED EFFECTIVE MAY 31, 2007)
I. | PURPOSE OF THE PLAN |
II. | STRUCTURE OF THE PLAN |
III. | ADMINISTRATION OF THE PLAN |
A-1
Table of Contents
IV. | ELIGIBILITY |
A-2
Table of Contents
V. | STOCK SUBJECT TO THE PLAN |
A-3
Table of Contents
I. | OPTION TERMS |
A-4
Table of Contents
A-5
Table of Contents
II. | INCENTIVE OPTIONS |
III. | CHANGE IN CONTROL/HOSTILE TAKE-OVER |
A-6
Table of Contents
A-7
Table of Contents
I. | STOCK ISSUANCE TERMS |
A-8
Table of Contents
II. | CHANGE IN CONTROL/HOSTILE TAKE-OVER |
III. | SHARE ESCROW/LEGENDS |
IV. | DIRECTOR FEE STOCK ISSUANCE PROGRAM |
A-9
Table of Contents
A-10
Table of Contents
II. | CHANGE IN CONTROL/HOSTILE TAKE-OVER/HOSTILE TENDER-OFFER |
A-11
Table of Contents
III. | REMAINING TERMS |
I. | OPTION GRANTS |
II. | OPTION TERMS |
A-12
Table of Contents
III. | CHANGE IN CONTROL/HOSTILE TAKE-OVER/HOSTILE TENDER-OFFER |
A-13
Table of Contents
IV. | COMPLIANCE WITH SECTION 409A OF THE CODE |
A-14
Table of Contents
V. | REMAINING TERMS |
I. | STOCK APPRECIATION RIGHTS |
II. | DIVIDEND EQUIVALENTS |
A-15
Table of Contents
III. | RESTRICTED STOCK UNITS |
IV. | OTHER TERMS |
V. | CHANGE IN CONTROL/HOSTILE TAKE-OVER |
A-16
Table of Contents
VI. | COMPLIANCE WITH SECTION 409A OF THE CODE |
A-17
Table of Contents
I. | PURPOSE |
A-18
Table of Contents
II. | APPLICABILITY |
III. | PROCEDURES WITH RESPECT TO PERFORMANCE-BASED AWARDS |
IV. | PAYMENT OF PERFORMANCE-BASED AWARDS |
V. | ADDITIONAL LIMITATIONS |
I. | TAX WITHHOLDING |
A-19
Table of Contents
II. | EFFECTIVE DATE AND TERM OF THE PLAN |
III. | AMENDMENT OF THE PLAN |
A-20
Table of Contents
IV. | USE OF PROCEEDS |
V. | REGULATORY APPROVALS |
VI. | NO EMPLOYMENT/SERVICE RIGHTS |
A-21
Table of Contents
A-22
Table of Contents
A-23
Table of Contents
A-24
Table of Contents
A-25
Table of Contents
A-26
Table of Contents
The Board of Directors recommends a vote FOR Items 1, 2, and 3. | Please Mark Here for Address Change or Comments | o | |||||||||||||||||
SEE REVERSE SIDE | |||||||||||||||||||
FOR o | AGAINST o | ABSTAIN o | |||||||||||||||||
ITEM 1 – Election of Directors | Nominees: | ITEM 2 – | Amendment of 2002 Stock Incentive Plan | ||||||||||||||||
01 Jason Aryeh, 02 Todd C. Davis, 03 Elizabeth M. Greetham, 04 John L. Higgins, 05 David M. Knott, 06 John W. Kozarich, 07 Jeffrey R. Perry | |||||||||||||||||||
FOR all nominees listed at right (except as marked to the contrary) o | WITHHOLD AUTHORITY to vote for all nominees listed at right o | ||||||||||||||||||
FOR o | AGAINST o | ABSTAIN o | |||||||||||||||||
ITEM 3 – | Ratification of Appointment of Independent registered accounting firm | ||||||||||||||||||
WITHHELD FOR: (Write that nominee’s name in the space provided below): | |||||||||||||||||||
Check here if you plan to attend the annual meeting | o | ||||||||||||||||||
Signature | Signature | Date | |||||||||||||||||
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If signing for a corporation, give your title. When shares are in the names of more than one person, each should sign. |
Ù FOLD AND DETACH HEREÙ |
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the
same manner
as if you marked, signed and returned your proxy card.
INTERNET http://www.proxyvoting.com/lgnd Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. | OR | TELEPHONE 1-866-540-5760 Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. |
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
Choose MLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to Investor ServiceDirect® at www.melloninvestor.com/isd where step-by-step instructions will prompt you through enrollment. |
Table of Contents
PROXY |
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
LIGAND PHARMACEUTICALS INCORPORATED
The undersigned hereby appoints John L. Higgins and Charles S. Berkman, as proxies, jointly and severally, with full power of substitution to vote all shares of stock which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Ligand Pharmaceuticals Incorporated to be held at 8:30 a.m. local time at Ligand Pharmaceuticals Incorporated located at 10275 Science Center Drive, San Diego, California 92121 on Thursday, May 31, 2007, or at any postponements of adjournments thereof, as specified on the reverse side, and to vote in their discretion on such other business as may properly come before the Meeting and any adjournments thereof.
(Continued and to be marked, dated and signed, on the other side)
Address Change/Comments (Mark the corresponding box on the reverse side) | ||
Ù FOLD AND DETACH HEREÙ |