UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
RIBOZYME PHARMACEUTICALS, INC.
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(Name of Registrant as Specified In Its Charter)
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[LOGO OF RPI]
RIBOZYME PHARMACEUTICALS, INC.
2950 Wilderness Place
Boulder, Colorado 80301
To our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Ribozyme Pharmaceuticals, Inc. (the "Company") to be held on the 21st day of May
1999 at 8:00 a.m., local time, at the principal offices of the Company, 2950
Wilderness Place, Boulder, Colorado. Your Notice of Annual Meeting, Proxy
Statement and Proxy are enclosed, as is the Company's 1998 Annual Report, which
includes the Company's financial statements.
At the Annual Meeting, you will be asked to (1) elect six directors; (2)
authorize an increase in the number of shares of Company stock which may be
issued upon the exercise of options granted under the Company's 1996 Stock
Option Plan; and (3) to ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for 1999. The Board of Directors has approved
the proposals described in the Proxy Statement and recommends that you vote
"FOR" each proposal.
Your vote is important. Whether or not you plan to attend the Annual
Meeting in person, we ask that you return your completed Proxy, using the
envelope provided, as soon as possible and in any case no later than 3:00 p.m.
on Thursday, May 20, 1999.
Thank you for your continued support.
Very truly yours,
RIBOZYME PHARMACEUTICALS, INC.
/s/ Ralph E. Christoffersen
Dr. Ralph E. Christoffersen
President and CEO
Date: April 22, 1999
RIBOZYME PHARMACEUTICALS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 21, 1999
TO OUR SHAREHOLDERS:
Notice is hereby given that pursuant to the call of its Board of Directors,
the Annual Meeting of Shareholders of Ribozyme Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), will be held on Friday, May 21, 1999, at 8:00 a.m.,
local time, at 2950 Wilderness Place, Boulder, Colorado, for the following
purposes:
(1) To elect six (6) directors of the Company to hold office until the
next Annual Meeting of Shareholders or until their respective
successors shall be elected and qualified.
(2) To approve an increase in the number of options which may be granted
under the Company's 1996 Stock Option Plan by 350,000, from 1,667,154
to 2,017,154.
(3) To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for 1999.
(4) To transact such other business as may be properly presented at the
meeting.
The names of the Board of Directors' nominees for directors of the Company
are set forth in the accompanying Proxy Statement.
Only shareholders of record at the close of business on April 13, 1999,
will be entitled to vote at the meeting. To be sure that your shares are
represented at the meeting, you are urged to vote, sign, date and promptly
return the enclosed Proxy in the envelope provided. You may revoke your Proxy
at any time prior to the time it is voted.
By Order of the Board of Directors
/s/ Lawrence E. Bullock
Lawrence E. Bullock, Secretary
Date: April 22, 1999
Boulder, Colorado
IMPORTANT -- PLEASE MAIL YOUR PROXY PROMPTLY. In order that there may be proper
representation at the meeting, you are urged to sign and return the enclosed
proxy in the envelope provided as soon as possible so that it will be received
no later than 3:00 p.m., May 20, 1999. Shares of company stock represented by
proxies which are returned unmarked will be voted in favor of the nominees and
the ratification of the independent auditors and, in the discretion of
management, upon such other business as may properly be presented at the
meeting.
PROXY STATEMENT
ANNUAL MEETING OF
TO BE HELD MAY 21, 1999
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by management under the direction of the Board of Directors of the
Company for use at the Annual Meeting of Shareholders of the Company to be held
May 21, 1999. Only shareholders of record as of April 13, 1999, will be
entitled to notice of, and to vote at, the Annual Meeting. Each share is
entitled to one vote on the matters to be voted on at the Annual Meeting. As of
April 13, 1999, 9,185,856 shares of Company Stock were outstanding held of
record by 146 shareholders.
The cost of soliciting Proxies will be borne by the Company. In addition
to use of the mail, Proxies may be solicited personally or by telephone or
facsimile by directors and officers who will not be specially compensated for
such solicitation. The Company has engaged American Stock Transfer & Trust
Company, the Company's transfer agent, to solicit Proxies held by brokers and
nominees. Brokerage firms and other custodians, nominees and fiduciaries will
be requested to forward these soliciting materials to their principals and the
Company will, upon request, reimburse them for the reasonable expenses of doing
so. The Company's transfer books will remain open between the record date and
meeting date.
This Proxy Statement and enclosed Proxy were first mailed to the Company's
shareholders on or about April 22, 1999.
Your Proxy is important in helping to achieve good representation at the
meeting. Any shareholder giving a Proxy has the right to revoke it at any time
before it is exercised; therefore, execution of the Proxy will not in any way
affect the shareholder's right to attend the meeting in person. Revocation may
be made prior to the meeting by written revocation or duly executed Proxy
bearing a later date sent to the Company, Attention: Lawrence E. Bullock,
Secretary, 2950 Wilderness Place, Boulder, Colorado 80301; or a Proxy may be
revoked personally at the Annual Meeting by written notice to the Secretary at
the Annual Meeting prior to the voting of the Proxy. In the absence of specific
instructions to the contrary, shares represented by properly executed Proxies
received by management, including unmarked Proxies, will be voted to elect the
nominees to the Board described herein, to approve the increase in the number of
shares of Company stock which may be issued upon the exercise of options granted
under the Company's 1996 Stock Option Plan, and to ratify the selection of Ernst
& Young LLP as the Company's independent auditors for 1999. If a broker
indicates on the Proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, these shares will not be
considered as present and entitled to vote with respect to that matter.
The holders of a majority of the outstanding Company Stock, present in
person or by Proxy, are required for a quorum at the meeting. Cumulative voting
is not permitted. If a quorum is present at the meeting, the simple majority
vote of shares voting is required to elect the six directors, to approve the
increase in the number of shares of Company stock which may be issued upon the
exercise of options granted under the Company's 1996 Stock Option Plan and to
ratify the Company's independent auditors.
3
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of April 13, 1999 there were 9,185,856 shares of Company Stock
outstanding, par value $.01, held of record by 146 shareholders. The following
table summarizes information regarding the beneficial ownership of the Company's
outstanding securities as of April 13, 1999 (which includes shares that may be
acquired on the exercise of stock options vested or warrants exercisable through
June 13, 1999), by:
. each person or group that the Company knows owns more than 5% of the
outstanding shares of common stock,
. each of the Company's directors,
. each Named Executive Officer listed in the Summary Compensation Table,
and
. all of the Company's directors and executive officers as a group.
Beneficial ownership is determined in accordance with rules of the SEC and
includes shares over which the indicated beneficial owner exercises voting
and/or investment power. Shares of common stock subject to options or warrants
currently exercisable or exercisable within 60 days are deemed outstanding for
computing the percentage ownership of the person holding the options but are not
deemed outstanding for computing the percentage ownership of any other person.
Except as otherwise indicated in the footnotes to this table, the Company
believes that each stockholder identified in the table has sole voting and
investment power with respect to all shares listed opposite their names. Unless
otherwise indicated, the following officers, directors and stockholders can be
reached at the Company's principal offices.
Number of Shares Percentage of
Name and Address Beneficially Owned Shares Outstanding
- ---------------------------------------------------------- ---------------------- -------------------
Schering Berlin Venture Corporation....................... 2,034,765(1) 19.3%
3400 Change Bridge Road
Monteville, New Jersey 07045
Chiron Corporation........................................ 1,063,868(2) 11.0%
4560 Horton Street
Emeryville, California 94608
International Biotechnology Trust plc..................... 1,012,633 11.0%
c/o Rothschild Asset Management, Ltd.
Five Arrows House
St. Swithin's Lane
London EC4N 8NR England
Ralph E. Christoffersen, Ph.D............................. 159,434(3) 1.7%
Jeremy L. Curnock Cook.................................... 1,022,633(4) 11.1%
Anthony B. Evnin, Ph.D.................................... 325,773(5) 3.5%
David Ichikawa............................................ 5,000(6) *
David T. Morgenthaler..................................... 382,874(7) 4.2%
Anders P. Wiklund......................................... 13,733(8) *
Lawrence E. Bullock....................................... 29,606(9) *
Alene Holzman............................................. 15,799(10) *
Thomas H. Rossing, M.D.................................... 9,899(11) *
Nassim Usman, Ph.D........................................ 30,746(12) *
Executive officers and directors as a group (10 persons).. 1,995,497(13) 21.3%
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* Less than 1%.
4
(1) Includes 1,356,882 shares convertible from outstanding debt assuming a
conversion price of $4.00 per share.
(2) Includes 444,444 shares issuable upon exercise of warrants.
(3) Includes options to purchase 69,706 shares.
(4) Includes options to purchase 10,000 shares and 1,012,633 shares held by the
International Biotechnology Trust plc, for which Rothschild Asset
Management, Ltd. ("Rothschild") acts as investment advisor. Mr. Cook is a
director of Rothschild but disclaims beneficial ownership of these shares.
(5) Includes options to purchase 10,000 shares, 218,022 shares held by Venrock
Associates and 97,751 shares held by Venrock Associates II, L.P. Mr. Evnin
is a general partner of both partnerships and disclaims beneficial
ownership of these shares except to the extent of his general partnership
interests.
(6) Excludes 1,063,868 shares and warrants to purchase shares held by Chiron
Corporation. Mr. Ichikawa is employed by Chiron and disclaims beneficial
ownership of those shares. Includes options to purchase 5,000 shares.
(7) Includes options to purchase 10,000 shares, 362,874 shares held by
Morgenthaler Venture Partners III and 10,000 shares held by Morgenthaler
Family Partnership. Mr. Morgenthaler is a general partner of both
partnerships and disclaims beneficial ownership of these shares except to
the extent of his general partnership interests.
(8) Includes options to purchase 13,733 shares.
(9) Includes options to purchase 21,180 shares.
(10) Includes options to purchase 12,000 shares.
(11) Includes options to purchase 9,000 shares.
(12) Includes options to purchase 28,265 shares and 532 shares owned by Dr.
Usman's spouse to which Dr. Usman disclaims beneficial ownership.
(13) Includes options to purchase 188,884 shares.
PROPOSAL 1 - ELECTION OF DIRECTORS
Directors and Nominees
In accordance with the Company's Bylaws, six directors will be elected to
the Board of Directors to serve until the 2000 Annual Meeting of Shareholders or
until his successor has been duly elected and qualified. The Proxies will be
voted, unless authority to do so is withheld, in favor of the six nominees
recommended by the Board. Each nominee is currently a member of the Board of
Directors of the Company. The Board has no reason to anticipate that any
nominee will decline or be unable to serve as a director. In the event any
nominee does decline or is unable to serve, Proxies may be voted for the
election of a substitute nominee or the Board may reduce the number of directors
to be elected. Certain information regarding each nominee is set forth below.
Name Age Position
---- --- --------
Ralph E. Christoffersen, Ph.D. (1) 61 Chief Executive Officer, President and Director
David T. Morgenthaler (1) (2) 79 Chairman of the Board
Jeremy L. Curnock Cook (1) (3) 49 Director
Anthony B. Evnin, Ph.D. (1) (2) 58 Director
David Ichikawa (3) 46 Director
Anders P. Wiklund (2) (3) 58 Director
________________________
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
5
Ralph E. Christoffersen, Ph.D., has served as Chief Executive Officer,
President and Director of Ribozyme Pharmaceuticals since June 1992. From 1989
to June 1992, Dr. Christoffersen was Senior Vice President and Director of U.S.
Research at SmithKline Beecham Pharmaceuticals, a pharmaceutical company. From
1983 to 1989, he held senior management positions in research at The Upjohn
Company, a pharmaceutical company. Prior to joining The Upjohn Company, Dr.
Christoffersen served as a Professor of Chemistry and Vice Chancellor for
Academic Affairs at the University of Kansas, and as President of Colorado State
University. He received his Ph.D. in physical chemistry from Indiana
University.
David T. Morgenthaler has served as a director since February 1992 and was
elected Chairman of the Board in December 1995. Mr. Morgenthaler was a founder
of and has been Managing Partner of Morgenthaler Ventures, a private venture
capital firm, since 1968. He has been a director of a number of public and
private companies. Mr. Morgenthaler received his M.S. degree from the
Massachusetts Institute of Technology.
Jeremy L. Curnock Cook has served as a director since July 1995. Mr. Cook
is a director of Rothschild Asset Management, an investment fund, and has been
responsible for the Rothschild Bioscience Unit since 1987. Mr. Cook founded the
International Biochemicals Group in 1975 which he subsequently sold to Royal
Dutch Shell in 1985, remaining as Managing Director until 1987. He is also a
director of International Biotechnology Trust, Creative BioMolecules Inc.,
Targeted Genetics Inc., Cantab Pharmaceuticals plc, Biocompatibles International
plc, Sugen Inc., Cell Therapeutics, Vanguard Medica plc, Angiotech
Pharmaceuticals, Inc., Inflazyme Pharmaceuticals and Amrad Corp. Limited. Mr.
Cook holds an M.A. in Natural Sciences from Trinity College Dublin.
Anthony B. Evnin, Ph.D., has served as a director since February 1992. Dr.
Evnin has been a General Partner of Venrock Associates, a venture capital
partnership, since 1975. He is also a director of AxyS Pharmaceutical
Corporation, Centocor, Inc., Opta Food Ingredients, Inc., and Triangle
Pharmaceuticals, Incorporated. Dr. Evnin received his Ph.D. from the
Massachusetts Institute of Technology.
David Ichikawa has served as a director since May 1998. Mr. Ichikawa has
been employed by Chiron Corporation, a biotechnology company, since September
1994 and is currently Vice President of Finance and Operations of Chiron
Technologies. He has also held management positions at Boehringer Mannhiem
Corporation and Chiron (Cetus) Corporation. Mr. Ichikawa received his M.B.A.
from the University of California at Berkeley.
Anders P. Wiklund has served as a director since August 1994. Mr. Wiklund
has been employed by Biacore Holdings Inc., a life science instrument
manufacturer, since January 1997 and is currently Senior Vice President. From
1967 through 1996, Mr. Wiklund served in numerous executive positions for the
Kabi and Pharmacia group of companies, including President and CEO of Kabi
Vitrum Inc. and Kabi Pharmacia, Incorporated. Mr. Wiklund is also a director of
Trega Bioscience, Inc., Medivir, A.B. and InSite Vision, Inc., as well as
private company boards. Mr. Wiklund received a Master of Pharmacy degree from
the Pharmaceutical Institute in Stockholm.
The Board of Directors recommends a vote FOR THE ELECTION OF THE SIX
---
NOMINEES FOR DIRECTOR NAMED ABOVE.
The officers of the Company hold office until their successors are
appointed by the Board of Directors (see "Executives and Executive
Compensation"). There are no arrangements or understandings between any of the
directors or nominees listed above or the officers, or any other persons,
pursuant to which any of the above directors have been selected as directors, or
officers have been selected as officers. In 1998 the Company provided Directors
and Officers Liability Insurance in the aggregate amount of $5.0 million.
Board Committees and Meetings
In 1998 there were five meetings of the Board of Directors of the Company.
All directors attended 75 percent or more of the Company's Board meetings and
meetings of Board committees on which they served. The Board of the Company has
no standing nominating committee. Nominees for the Board of Directors are
determined by the entire Board.
6
The Company's Executive Committee, consisting of Drs. Christoffersen and
Evnin and Messrs. Morgenthaler (Chairman) and Cook, manages and operates the
Company in the ordinary course of business. The Board retains its power to issue
shares of stock, oversee secured debt financing and lease transactions, declare
dividends and adopt certificates of ownership and merger. The Executive
Committee met six times in 1998.
The Company's Compensation Committee, consisting of Dr. Evnin (Chairman)
and Messrs. Morgenthaler and Wiklund, reviews and recommends for Board approval
grants of options pursuant to the Company's 1996 Stock Option Plan (the "Plan"),
makes policy decisions concerning salaries and incentive compensation for
employees and consultants of the Company and reviews and recommends for Board
approval compensation for executive officers (see "Report by the Compensation
Committee on Executive Compensation" and "Executives and Executive Compensation-
- -1996 Stock Option Plan"). The Compensation Committee met three times in 1998.
The Company's Audit Committee, consisting of Messrs. Cook, Ichikawa
(Chairman) and Wiklund, makes recommendations to the Board regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors, and reviews
and evaluates the Company's audit and control functions. The Audit Committee
met one time in 1998
Director Compensation
Fees. As of April 1999, Directors of the Company who are not salaried
officers or employees may receive a fee of $1,000 per day for each Board or
Committee meeting attended and $500 per day for participation in a telephonic
meeting of the Board or a Board Committee (see "Board Committees and Meetings").
Directors may also be reimbursed for certain expenses in connection with
attendance at Board and Committee meetings.
Stock Options. Non-employee directors may also receive stock options for
5,000 shares of the Company's stock annually under the Company's stock option
plan. In 1997 and 1998, each non-employee director was granted an option to
purchase 5,000 shares. The options vest after one year of service. In
addition, Mr. Wiklund received an option to purchase 4,444 shares in June 1994,
of which 1,111 shares vested immediately and the remaining 3,333 shares vest in
increments of 20% over five years starting in 1995.
Executives and Executive Compensation
Certain information regarding the Company's executive officers is set forth
below.
Name Age Position
---- --- --------
Ralph E. Christoffersen, Ph.D. 61 Chief Executive Officer, President and Director
Lawrence E. Bullock 43 Vice President of Administration and Finance, Chief
Financial Officer and Secretary
Alene A. Holzman 42 Vice President of Business Development and General
Manager of Target Validation and Discovery Business
Thomas H. Rossing, M.D. 49 Vice President of Product Development
Nassim Usman, Ph.D. 39 Vice President of Research
Ralph E. Christoffersen, Ph.D. is discussed in "PROPOSAL 1-ELECTION OF
DIRECTORS-- Directors and Nominees."
Lawrence E. Bullock has served as Vice President of Administration and
Finance, Chief Financial Officer and Secretary, since January 1996. From
December 1990 to January 1996, Mr. Bullock was Chief Financial Officer, Director
of Finance and Administration and Secretary of La Jolla Pharmaceutical Company,
a biopharmaceutical company. Mr. Bullock received his M.B.A. from the
University of Utah.
7
Alene A. Holzman has served as Vice President of Business Development and
General Manager of Target Validation and Discovery Business since April 1997.
From January 1990 to March 1997, Ms. Holzman was Vice President of ChemTrak
Corporation, a medical technology firm, where she was responsible for finance,
business development and marketing and sales. From 1987 to 1990, she was Vice
President of CytoSciences, Inc., a biomedical company, and from 1981 to 1987 she
was Vice President of Marketing and Sales for Hana Biologics, Inc. (now Cell
Genesys Corporation), a biotechnology firm. Ms. Holzman received her M.B.A.
from the University of California at Berkeley.
Thomas H. Rossing, M.D., has served as Vice President of Product
Development since July 1997. From July 1996 to July 1997, Dr. Rossing was Vice
President of Clinical Development and Regulatory Affairs at GeneMedicine, Inc.,
a biotechnology company. From March 1993 to July 1996, Dr. Rossing was Director
of International Respiratory Clinical Research at GlaxoWellcome, a
pharmaceutical company. He has also served as Director of Clinical Pharmacology
and Worldwide Regulatory Liaison at Merck Research Laboratories, a
pharmaceutical company, and a staff physician at Brigham and Women's Hospital in
Boston, Massachusetts. He received his M.D. degree from Harvard University.
Dr. Rossing announced that he is retiring effective August 31, 1999.
Nassim Usman, Ph.D., has served as Vice President of Research since May
1996. From April 1994 until May 1996, Dr. Usman served as Director of Chemistry
and Biochemistry Research at Ribozyme Pharmaceuticals and from September 1992
until April 1994 Dr. Usman served as Senior Scientist in Chemistry and
Biochemistry. From January 1987 to September 1992, Dr. Usman was a Postdoctoral
Fellow and Scientist in the Departments of Biology and Chemistry at the
Massachusetts Institute of Technology. Dr. Usman received his Ph.D. in
chemistry from McGill University.
The following table summarizes the compensation paid to or earned by the
Company's Chief Executive Officer and the other four most highly compensated
executive officers whose annual compensation exceeded $100,000 in 1998 ("Named
Executive Officers").
8
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
------------------------------------------------------------------------------------
Shares
Other Restricted Underlying All
Annual Stock Options Other
Name and Principal Position Year Salary($) Bonus($) Comp.($) Awards(#) Granted(#) Comp.($)
- ------------------------------------------------------------------------------------------------------------------------
Ralph E. Christoffersen, Ph.D. 1998 285,670 50,000 37,862/1/ -- 198,748/2/ 4,998/3/
Chief Executive Officer and 1997 269,520 50,000 45,000/1/ -- 129,450 4,744/3/
President 1996 247,248 -- 70,000/1/ 188,100/4/ 97,770 153,910/4/
Lawrence E. Bullock 1998 150,800 25,000 75,883/5/ -- 85,957/2/ 4,998/3/
Vice President of Administration 1997 136,254 25,000 35,524/5/ -- 37,500 4,744/3/
and Finance, CFO and Secretary 1996 118,433 15,000 24,993/5/ -- 66,000 --
Alene A. Holzman/6/ 1998 156,900 6,500 37,721/7/ -- 100,000/2/ 4,998/3/
Vice President of Business 1997 108,557 12,500 28,389/7/ -- 80,000 3,494/3/
Development and General
Manager of Target Validation
and Discovery Business
Thomas H. Rossing, M.D./8/ 1998 250,650 -- 34,000/9/ -- 110,624/2/ 4,998/3/
Vice President of Product 1997 105,859 22,000 84,008/9/ -- 107,500 --
Development
Nassim Usman, Ph.D. 1998 183,038/11/ 23,000 25,841/10/ -- 99,167/2/ 4,998/3/
Vice President of Research 1997 158,004 -- 25,397/10/ -- 45,000 4,744/3/
1996 132,919 25,000 20,499/10/ -- 53,892 --
- --------------------------------
/1/ Includes (a) $50,000 in 1996 and $25,000 in each of 1997 and 1998 for
forgiveness of a loan made to Dr. Christoffersen for relocation expenses;
and (b) $20,000 in each of 1996 and 1997 and $12,862 in 1998 to assist him
with the tax liability relating to the loan forgiveness.
/2/ Includes shares granted in connection with the stock option repricing in
1998. See "Stock Option Plan--Repricing." All Named Executive Officers
received an option to purchase 0.75 share of common stock in exchange for
an option representing one share.
/3/ Matching contributions in common stock made under the Company's 401(k)
Salary Reduction Plan.
/4/ Dr. Christoffersen received a bonus of $342,010, payable $153,910 in cash
and $188,100 in shares of common stock (18,810 shares at the Company's
initial public offering price of $10.00 per share), upon closing of the
Company's initial public offering in April 1996.
/5/ Includes (a) $9,058 and $9,641 in 1996 and 1997, respectively, representing
implied interest related to an interest-free loan made to Mr. Bullock for
relocation expenses; (b) $15,000 in each of 1997 and 1998 for partial
forgiveness of the loan; (c) $7,883 in each of 1997 and 1998 for taxes
relating to the loan; (d) $3,000 in each of 1997 and 1998 as reimbursements
for dependent day care expenses; and (e) $15,935 and $50,000, in 1996 and
1998, respectively, to reimburse Mr. Bullock for relocation expenses.
/6/ Ms. Holzman joined the Company on April 1, 1997.
/7/ Includes (a) $10,036 in 1997 representing implied interest related to an
interest-free loan made to Ms. Holzman for relocation expenses; (b) $15,853
and $9,721 in 1997 and 1998, respectively, to reimburse Ms. Holzman for
relocation expenses; (c) $25,000 in 1998 for partial forgiveness of the
loan; and (d) $2,500 and $3,000 in 1997 and 1998, respectively, as
reimbursements for dependent day care expenses.
/8/ Dr. Rossing joined the Company on July 28, 1997.
/9/ Includes (a) $14,901 in 1997 representing implied interest related to an
interest-free loan made to Dr. Rossing for relocation expenses; (b) $34,000
in 1998 for partial forgiveness of the loan; and (c)$69,107 in 1997 to
reimburse Dr. Rossing for relocation expenses.
/10/ Includes (a) $20,499 in 1996 representing implied interest related to an
interest-free loan made to Dr. Usman for relocation expenses; (b) $15,000
in each of 1997 and 1998 for partial forgiveness of the loan; (d) $7,883 in
each of 1997 and 1998 for taxes relating to the loan; and (d) $2,496 in
each of 1997 and 1998 as reimbursements for dependent day care expenses.
/11/ Includes $13,988 in additional salary for Dr. Usman's three month
temporary position as Vice President of an unconsolidated affiliate of the
Company.
9
Stock Option Plan
In March 1996, the Company amended, restated and merged its stock option
plans and named the resulting plan the 1996 Stock Option Plan (the "Plan").
Currently, 1,474,124 shares of the Company's common stock are reserved for
issuance under the Plan. As of April 13, 1999, options to purchase 1,376,436
shares were outstanding under the Plan. The Plan will terminate in January 2006,
unless earlier terminated by the Board of Directors. The purpose of the Plan is
to:
. attract and retain qualified personnel,
. provide additional incentives to the Company's employees, officers,
directors and consultants, and
. promote the success of the Company's business.
Under the Plan, the Company may grant or issue incentive stock options and
supplemental (non-qualified) stock options to its consultants, employees,
officers and directors.
Administration. The Company's Board has delegated administration of the
Plan to a Compensation Committee comprised of three independent directors (see
"Board Committees"). Subject to the limitations set forth in the Plan, the
Board or the Compensation Committee has the authority to:
. select the persons to whom grants are to be made,
. designate the number of shares to be covered by each option,
. determine whether an option is to be an incentive stock option or a
non-statutory stock option,
. establish vesting schedules, and
. subject to restrictions, specify the type of consideration to be paid
upon exercise and to specify other terms of the options.
Terms. The maximum term of options granted under the Plan is ten years,
however, the maximum term is five years for incentive options granted to a
person who at that time owns 10% of the total combined voting power of all
classes of stock. The aggregate fair market value of the stock with respect to
which incentive stock options are first exercisable in any calendar year may not
exceed $100,000 per optionee. Any portion in excess of $100,000 shall be
treated as non-statutory stock options. Options granted under the Plan are non-
transferable and generally expire upon the earlier of the stated expiration date
or three months after the termination of an optionee's service to the Company.
However, the expiration date would be 18 months in the event the optionee's
employment terminates by reason of death, or 12 months in the event the
optionee's employment terminates due to disability, or a longer or shorter
period as may be specified in the option agreement.
The Company's Board has discretion in connection with a merger,
consolidation, reorganization or similar corporate event where the Company are
the surviving corporation to prescribe the terms and conditions for the
modifications of the options granted under the Plan. If the Company is not the
surviving corporation in the event of its dissolution or liquidation, or its
merger or consolidation, all outstanding options will terminate unless assumed
by another corporation.
No specific vesting schedule is required under the Plan. The exercise
price of incentive stock options must equal at least the fair market value of
the common stock on the date of grant, except that the exercise price of
incentive stock options granted to any person who at the time of grant owns
stock possessing more than 10% of the combined voting power of all classes of
stock must be at least 110% of the fair market value of the stock on the date of
grant. The exercise price on non-statutory stock options under the Plan may be
no less than 85% of the fair market value of the common stock on the date of
grant.
10
Tax Consequences. Options granted under the Plan may be either "incentive
stock options," as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or "non-qualified options."
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are
satisfied, we will not be entitled to any deduction. If the holding periods with
respect to incentive stock options are not satisfied, the optionee will
recognize ordinary income at the time of sale or exchange equal to the
difference between the exercise price and the lower of (1) the fair market value
of the shares at the date of the option exercise or (2) the sales price of the
shares. Subject to Section 162(m) of the Code, we will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on a premature disposition of the shares in excess
of the amount treated as ordinary income will be characterized as long-term or
short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as "incentive stock options" are
referred to as "non-qualified options." An optionee will not recognize any
taxable income at the time they are granted a non-qualified option. However,
upon its exercise, the optionee will recognize ordinary income generally
measured as the excess of the then fair market value of the shares purchased
over the exercise price. Any taxable income recognized in connection with an
option exercise by an optionee who is also an employee will be subject to tax
withholding. Upon resale of shares by the optionee, any difference between the
sales price and the optionee's purchase price, to the extent not recognized as
taxable income as described above, will be treated as long-term or short-term
capital gain or loss, depending on the holding period. Subject to Section
162(m) of the Code, we will be entitled to a tax deduction in the same amount
as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a non-qualified option.
11
The following table contains information about stock options granted to
each of the Named Executive Officers during 1998 under the Plan:
OPTION GRANTS IN 1998
Individual Grants
-----------------------------------------------------
Potential Realizable
Number of % of Total Value at Annual
Shares Options Rate of Stock
Underlying Granted to Price Appreciation
Options Employees Exercise for Option Term/4/
Granted in Price Expiration ----------------------
(#)/1/ 1998/2/ ($/Share)/3/ Date 5%($) 10%($)
-----------------------------------------------------------------------------
Ralph E. Christoffersen 76,874/5/ 6.7% $3.00 09-18-08 145,037 367,552
*76,874/5/ 6.7 3.00 09-18-08 145,037 367,552
22,500 2.0 5.63 12-02-08 79,665 201,887
*22,500 2.0 5.63 12-02-08 79,665 201,887
------- ----
198,748 17.4
Lawrence E. Bullock 39,395/5/ 3.4 3.00 09-18-08 74,326 188,356
*21,562/5/ 1.9 3.00 09-18-08 40,681 103,093
12,500 1.1 5.63 12-02-08 44,258 112,160
*12,500 1.1 5.63 12-02-08 44,258 112,160
------- ----
85,957 7.5
Alene A. Holzman 30,000/5/ 2.6 3.00 09-18-08 56,601 143,437
*30,000/5/ 2.6 3.00 09-18-08 56,601 143,437
20,000 1.8 5.63 12-02-08 70,814 179,455
*20,000 1.8 5.63 12-02-08 70,814 179,455
------- ----
100,000 8.8
Thomas H. Rossing 40,312/5/ 3.5 3.00 09-18-08 76,056 192,741
*40,312/5/ 3.5 3.00 09-18-08 76,056 192,741
15,000 1.3 5.63 12-02-08 53,110 134,592
*15,000 1.3 5.63 12-02-08 53,110 134,592
------- ----
110,624 9.6
Nassim Usman 44,542/5/ 3.9 3.00 09-18-08 84,037 212,965
*29,625/5/ 2.6 3.00 09-18-98 55,893 141,644
12,500 1.1 5.63 12-02-08 44,258 112,160
*12,500 1.1 5.63 12-02-08 44,258 112,160
------- ----
99,167 8.7
- ----------------------------
* These options become 100% vested upon the completion of various research or
business performance milestones.
/1/ All options, other than performance-based options which are indicated by *,
vest in increments of 20% over a five year period and first become
exercisable on the first anniversary of the grant date. Options granted in
connection with the stock option repricing first vest on September 18,
1999. The options are granted for a term of ten years, subject to earlier
termination in events related to termination of employment.
/2/ In 1998 the Company granted options representing an aggregate of 1,139,560
shares of common stock to employees, including the Named Executive
Officers.
/3/ The exercise price of each option was equal to the fair market value of the
common stock on the date of the option grant as determined by the Board of
Directors.
12
/4/ Amounts reported in these columns show hypothetical gains that may be
realized upon exercise of the options, assuming the market price of common
stock appreciates at the specified annual rates of appreciation, compounded
annually over the term of the options. These numbers are calculated based
upon rules promulgated by the SEC. Actual gains, if any, depend on the
future performance of the Company's common stock and overall market
conditions.
/5/ Shares granted in connection with the stock option repricing.
The following table contains information about the number and value of
stock options held by each Named Executive Officer as of December 31, 1998. No
other Named Executive Officer exercised any stock options during 1998. A stock
option is "in-the-money" if the closing market price of the Company's common
stock exceeds the exercise price of the stock option. The value of "in-the-
money" unexercised stock options set forth in the table represents the
difference between the exercise price of these options and the closing sales
price of the Company's common stock on December 31, 1998, as reported by the
Nasdaq National Market, $4.38 per share.
1998 YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1998(#) at December 31, 1998($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------- ------------------------- -------------------------
Ralph E. Christoffersen 69,706 / 174,374 176,794 / 178,536
Lawrence E. Bullock 17,847 / 89,394 28,295 / 91,863
Alene A. Holzman 12,001 / 87,250 16,560 / 65,205
Thomas H. Rossing 9,000 / 101,624 12,420 / 98,841
Nassim Usman 28,265 / 85,885 47,537 / 84,288
13
Stock Option Repricing. In September 1998 the Company's Board of Directors
approved a repricing of all employee stock options outstanding under the Plan.
Pursuant to this repricing, each Named Executive Officer holding options
received 0.75 option for each one option surrendered with a new vesting date and
an exercise price of $3.00 per share. All non-executive employees who were
option holders received one new option for each one option surrendered with a
new vesting date and an exercise price of $3.00 per share. As a result of this
repricing offer, 890,921 options were canceled and 747,060 options were granted
effective September 18, 1998. The following table sets forth information
concerning the repricing of stock options held by each Named Executive Officer:
TEN-YEAR OPTION REPRICING IN 1998
Securities Length of
underlying Market price original option
number of of stock at Exercise price New term remaining
options time of at time of Exercise at date of
Name Date repriced (#) repricing ($) repricing ($) price ($) repricing
- ------------------------- ----------- ---------------- ---------------- ----------------- ------------ -------------------
Ralph E. Christoffersen 9-18-98 75,550 3.00 11.85 3.00 96 months
9-18-98 24,450 3.00 11.06 3.00 100 months
9-18-98 60,000 3.00 10.75 3.00 103 months
9-18-98 45,000 3.00 8.25 3.00 111 months
Lawrence E. Bullock 9-18-98 33,779 3.00 11.85 3.00 96 months
9-18-98 10,000 3.00 11.25 3.00 99 months
9-18-98 20,000 3.00 10.75 3.00 103 months
9-18-98 17,500 3.00 8.25 3.00 111 months
Alene E. Holzman 9-18-98 30,000 3.00 10.88 3.00 103 months
9-18-98 30,000 3.00 10.50 3.00 103 months
9-18-98 20,000 3.00 8.25 3.00 111 months
Thomas H. Rossing 9-18-98 100,000 3.00 8.50 3.00 106 months
9-18-98 7,500 3.00 8.25 3.00 111 months
Nassim Usman 9-18-98 17,000 3.00 15.25 3.00 91 months
9-18-98 26,892 3.00 11.85 3.00 96 months
9-18-98 10,000 3.00 11.25 3.00 99 months
9-18-98 20,000 3.00 10.75 3.00 103 months
9-18-98 25,000 3.00 8.25 3.00 111 months
Employment agreements
Ralph E. Christoffersen. In May 1992, the Company entered into an
employment agreement with Ralph E. Christoffersen, Ph.D., its President and
Chief Executive Officer, which, as amended, currently provides for:
. an annual salary of $297,000,
. an annual performance-based cash bonus of up to $80,000 (a bonus of
$64,000 was received in January 1999 for 1998 performance), and
. stock options for common stock as reflected in the tables in the
"Executives and Executive Compensation" section of this Proxy
Statement.
Dr. Christoffersen's agreement may be terminated upon his death, disability or
for cause. If the Company terminates Dr. Christoffersen's employment, he is
entitled to receive all accrued salary and benefits up to his termination and,
unless he has been terminated for cause, nine months of severance pay at the
same monthly rate as in effect at the time of his termination. If termination
occurs after January 1, 2000, Dr. Christoffersen shall be paid a lump sum cash
payment of up to $27,500.
14
Lawrence E. Bullock. In January 1996, the Company entered into an
employment agreement with Lawrence E. Bullock, its Vice President of
Administration and Finance, Chief Financial Officer and Secretary, which, as
amended, currently provides for:
. an annual salary of $158,350,
. an annual performance-based cash bonus of up to 20% of his current
salary (a bonus of $26,850 was received in January 1999 for 1998
performance), and
. an interest-free loan of $75,000 made in 1996, forgivable in five
equal annual installments, grossed-up for taxes, as long as Mr.
Bullock remains employed by the Company, and
. stock options for common stock as reflected in the tables in the
"Executives and Executive Compensation" section of this Proxy
Statement.
If the Company terminates Mr. Bullock's employment without cause, he is entitled
to six months' severance pay at his then current salary.
Nassim Usman, Ph.D. In May 1996, the Company entered into an employment
agreement with Nassim Usman, Ph.D., its Vice President of Research, which, as
amended, currently provides for:
. an annual salary of $177,925,
. an annual performance-based cash bonus of up to 20% of his current
salary (a bonus of $29,075 was received in January 1999 for 1998
performance), and
. an interest-free loan of $75,000 made in May 1996, forgivable in five
equal annual installments, grossed-up for taxes, as long as Dr. Usman
remains employed by the Company, and
. stock options for common stock as reflected in the tables in the
"Executives and Executive Compensation" section of this Proxy
Statement.
If the Company terminates Dr. Usman's employment without cause, he will be
entitled to six months' severance pay at his then current salary.
Alene A. Holzman. In February 1997, the Company entered into an employment
agreement with Alene A. Holzman, its Vice President of Business Development and
General Manager of Target Validation and Discovery Business, which, as amended,
currently provides for:
. an annual salary of $166,325,
. an annual performance-based cash bonus of up to 20% of her current
salary (a bonus of $24,175 was received in January 1999 for 1998
performance), and
. an interest-free loan of $75,000 made in June 1997, forgivable in
three equal annual installments as long as Ms. Holzman is employed by
the Company, and
. stock options for common stock as reflected in the tables in the
"Executives and Executive Compensation" section of this Proxy
Statement.
If the Company terminates Ms. Holzman's employment without cause, she is
entitled to six months' severance pay at her then current salary.
15
Thomas H. Rossing. In July 1997, the Company entered into an employment
agreement with Thomas H. Rossing, M.D., its Vice President of Product
Development, which, as amended, currently provides for:
. an annual salary of $258,175,
. an annual performance-based cash bonus of up to 15% of his current
salary (a bonus of $35,725 was received in January 1999 for 1998
performance), and
. an interest-free loan of $100,000 made in September, 1997 forgivable
in three equal annual installments as long as Dr. Rossing is employed
by the Company, and
. stock options for common stock as reflected in the tables in the
"Executives and Executive Compensation" section of this Proxy
Statement.
Dr. Rossing has given notice that he will retire from Ribozyme Pharmaceuticals
on August 31, 1999. If the Company terminates Dr. Rossing's employment without
cause prior to that time, he will be entitled to six months' severance pay at
his then current salary.
Employee Benefits
Executive Bonus Plan. In March 1998, the Company's Executive Bonus Plan
was adopted by the Board of Directors. This Bonus Plan provides the Company's
executive officers with the opportunity to earn an annual bonus contingent upon
their fulfillment of annual goals as determined by the Compensation Committee
comprised of three independent directors. The Compensation Committee has
complete authority to establish the goals for each executive officer, to
interpret all provisions of the Bonus Plan and to make all other determinations
necessary or advisable for the administration of the Bonus Plan. The
Compensation Committee may award each executive officer with an annual bonus
comprised of one or more of the following:
. cash payment,
. stock options pursuant to the Company's stock option plan, or
. forgiveness of any portion of the principal of loans provided to the
executive officer.
Section 401(k) Plan. As part of its effort to attract and maintain high
quality staff, the Company adopted a 401(k) Salary Reduction Plan and Trust on
June 1, 1992. The Company's employees may make pre-tax elective contributions
of up to 20% of their salary, subject to limitations prescribed by law. All
contributions are paid to a trustee who invests for the benefit of members of
the 401(k) Plan. In March 1997, the 401(k) Plan was amended to provide that the
Company may match the employee's contributions with common stock. The Company
may amend or terminate the 401(k) Plan at any time, subject to legal
restrictions.
Employee Stock Purchase Plan. In March 1996, the Company adopted an
Employee Stock Purchase Plan (the "Purchase Plan"), which authorizes the
issuance of up to 300,000 share of the Company's common stock to eligible
employees. Generally, each offering lasts for twenty-four months, and purchases
are made on each October 31 and April 30 during each offering. For example, the
initial offering began on April 11, 1996, and terminated on April 30, 1998.
Common stock is purchased for accounts of employees participating in the
Purchase Plan at a price per share equal to the lower of:
. 85% of the fair market value of a share of common stock on the date of
commencement of participation in the offering, or
. 85% of the fair market value of a share of common stock on the date of
purchase.
Generally, all regular employees, including executive officers, may participate
in the Purchase Plan and may authorize payroll deductions of up to 15% of their
base compensation for the purchase of common stock under the Purchase Plan. The
Company's Board of Directors has the authority to terminate the Purchase Plan at
its discretion. As of March 1, 1999, 99,832 shares had been issued pursuant to
the Purchase Plan.
16
Compensation Committee Interlocks
The members of the Company's Compensation Committee have no interlocking
relationships as defined under SEC regulations.
Report by the Compensation Committee on Executive Compensation
Responsibilities and Objectives. The Committee establishes and administers
the general compensation policies and plans for the Company and the specific
compensation levels for the executive officers and other key employees. The
Committee is responsible for conducting, at a minimum, annual reviews of
executive compensation and for taking certain actions regarding the compensation
of senior executives of the Company. The Committee determines the salary levels
for senior executives, and other key employees, and the types and amounts of
cash and other bonuses to be distributed to these individuals in accordance with
Bonus Plan. The Committee also determines grants of stock options pursuant to
the Plan.
This report is submitted by members of the Committee summarizing their
involvement in the compensation decisions and policies adopted by the Company
for the Company's executive officers.
General Policy. The Company's executive compensation practices are
designed to reward and provide an incentive for executives based on the
achievements of annual and long-term corporate and individual performance goals.
Compensation levels for executives are established after giving consideration to
a variety of quantitative measures including, but not limited to, Company
financial and operating performance, peer group comparisons and labor market
conditions. Before making decisions, the Committee elicits the recommendations
and advice of the CEO regarding appropriate or desired levels of compensation
for management personnel generally. The Committee has complete access to all
necessary Company personnel records, financial reports and other data, and may
seek the advice of experts and analysts.
The ultimate purpose of the Company's compensation structure is to attract
and retain executives of the highest caliber and to motivate these executives to
put forth maximum effort toward the achievement of Company goals identified
through the strategic planning process of the Board and management. Also, the
compensation design emphasizes long-term incentives in the form of stock options
that will encourage these individuals to maintain their focus on the paramount
importance of long-term shareholder interests.
Components of Compensation. In evaluating executive compensation, the
Committee focuses upon several fundamental components: salary, annual bonus and
long-term incentive compensation consisting of stock options. The Committee's
recommendations are offered to the full Board of Directors and are ultimately
ratified, changed or rejected by the full Board.
Salary levels for senior executives and other officers are reviewed by the
Committee annually. The Company has entered into employment agreements with its
executive officers, as amended from time to time, which set forth the salary
level for each executive (see "Executive Compensation--Employment Agreements").
In establishing salary levels, the Committee has relied upon salary survey data
and other publicly available information. The Committee also considers the
experience of each executive officer as well as his or her past performance and
expected future performance.
The annual bonus component of executive compensation has historically been
provided to an executive, if and as appropriate, for obtaining pre-determined
corporate and individual goals. The Committee typically determines whether
annual bonuses will be awarded to executives for attainment of these goals at
the end of each year. Pursuant to the Bonus Plan, the Committee may award
bonuses comprised of cash, stock options and loan forgiveness based on the
executive officer's fulfillment of annual goals previously established by the
Committee. At that time, the Committee also sets the performance goals for the
upcoming year.
17
The third component of the Company's executive compensation strategy is
long-term incentive compensation pursuant to which executives receive stock
options pursuant to the Plan which are tied to the long-term appreciation of the
value of the Company Stock. The Plan offers executives the possibility of
future gains depending upon the executives' continued employment by, and
contributions to, the Company. The Committee believes that a portion of the
total compensation of senior executives over a period of years should consist of
such long-term incentive awards (see "Executive Compensation--1996 Stock Option
Plan").
Executive officers of the Company also are permitted to participate in the
Purchase Plan which is open to all of the Company's full-time employees. (See
"Executive Compensation--Employee Stock Purchase Plan.") The Purchase Plan
enables the Company's employees, including executive officers, to acquire
Company Stock at a discount to the market price by allocating up to 15 % of
their base salary (subject to certain limits) to the acquisition of such stock.
Stock Option Repricing. In September 1998, the Committee approved a
repricing of all employee stock options outstanding under the Plan. Pursuant to
this repricing, each executive officer holding options received 0.75 option for
each one option surrendered with a new vesting date and an exercise price of
$3.00 per share. All non-executive employees who were option holders received
one new option for each one option surrendered with a new vesting date and an
exercise price of $3.00 per share. This action was taken to help restore the
incentive value of these options to the holders and to retain and motivate the
Company's employees. The Committee considered the potential reasons for the
decline in the Company's stock price in 1998 and concluded that the event was
largely not related to any failure of the stock option grantees to successfully
perform their jobs. As a result of this repricing offer, 890,921 options were
canceled and 747,060 options were granted effective September 18, 1998.
Review of Executive Compensation. The Committee, in making its
recommendations and determinations at year end 1998 regarding executive
compensation, was influenced by numerous positive considerations, including
achievement of all 1998 corporate goals as set forth in the 1998 budget and
planning process.
In light of the results in 1998, the Committee determined that increases in
executive compensation were justifiable, both to reward management for
accomplishments to date and to encourage future achievement of both short- and
long-term objectives. Accordingly, the Committee approved salary increases and
bonuses which it believes reflected appropriate rewards for management's
performance in 1998. The Committee also granted stock options to the executive
officers (see "Executive Compensation").
Compensation of Chief Executive Officer. In assessing appropriate types
and amounts of compensation for the Chief Executive Officer, the Committee
evaluates both corporate and individual performance. Corporate factors included
in the evaluation are (i) market capitalization, (ii) number of products in
clinical and preclinical development, (iii) levels and quality of research, and
(iv) current and potential funds raised in equity offerings and collaborations.
Individual factors include initiation and implementation of successful business
strategic partnerships, maintenance of an effective management team and various
personal qualities, including leadership, commitment and professional standing.
Conclusion. For these and other reasons, the Committee recommended an
increase in salary for Dr. Christoffersen from $285,670 in 1998 to $297,000 in
1999. In addition, the Committee approved and recommended payment of a $64,000
cash bonus, all payable to Dr. Christoffersen after January 1, 1999. The
Committee also granted stock options for 198,748 shares of Company Stock under
the Plan to Dr. Christoffersen in 1998 (see "Executive Compensation"). The
Committee believes that these compensation amounts and awards reflect
appropriate levels given the Company's performance in 1998 and the individual
performance of management. The Committee also believes that these awards
evidence the Committee's philosophy to emphasize long-term incentive rewards
tied to the Company's performance.
Submitted by the Compensation Committee: David T. Morgenthaler (Chairman)
Anders P. Wiklund
Anthony B. Evnin, Ph.D.
18
Company Performance
The following line graph presents the cumulative total shareholder return for
the Company Stock since April 11, 1996, when the Company Stock was listed on the
Nasdaq National Market, compared with the Nasdaq Composite (US) index and Nasdaq
Biotech index. Trade prices are not always disclosed to management. The graph
assumes that $100 was invested on April 11, 1996 and that dividends were
reinvested.
(PERFORMANCE GRAPH APPEARS HERE)
4/11/96 12/31/96 12/31/97 12/31/98
- -----------------------------------------------------------------------------------------------------
Ribozyme $ 100.00 $ 110.00 $ 80.00 $ 43.75
- -----------------------------------------------------------------------------------------------------
Nasdaq Biotech $ 100.00 $ 105.57 $ 105.50 $ 152.21
- -----------------------------------------------------------------------------------------------------
Nasdaq Composite (US) $ 100.00 $ 117.67 $ 143.13 $ 199.85
- -----------------------------------------------------------------------------------------------------
19
Certain Relationships and Related Transactions
The Company believes that the following transactions were in its best
interest. As a matter of policy, these transactions were, and all future
transactions between the Company and any of its officers, directors or
principal stockholders will be:
. approved by a majority of the independent members of the Board of
Directors,
. entered into on terms no less favorable to the Company than could be
obtained from unaffiliated third parties, and
. entered into in connection with bona fide business purposes.
Executive Loans. When the Company hired its executive officers it made
interest-free loans to each of them for relocation expenses. The Company has
forgiven all or a portion of the outstanding principal amount of each loan under
the terms of each officer's employment agreement. See "PROPOSAL 1- Election of
Directors--Employment Agreements."
Balance as of
Name Loan Amount April 13, 1999
----------------------------------------------------------------
Ralph E. Christoffersen, Ph.D. $250,000/1/ $ 0
Lawrence E. Bullock 75,000/2/ 30,000
Nassim Usman, Ph.D. 75,000/3/ 45,000
Alene A. Holzman 75,000/4/ 25,000
Thomas H. Rossing 100,000/5/ 66,000
- ------------------------
/1/ $50,000 forgiven in each of June 1993, January 1995, January 1996 and
January 1997, and $25,000 forgiven in each of January 1994 and January
1998.
/2/ $15,000 forgiven in each of June 1997, January 1998 and January 1999.
/3/ $15,000 forgiven in each of June 1997 and May 1998.
/4/ $25,000 forgiven in each of March 1998 and March 1999.
/5/ $34,000 forgiven in July 1998.
Chiron Transactions. Chiron Corporation and the Company granted each other
licenses to technologies and agreed to undertake research activities pursuant to
a collaboration agreement. Chiron purchased:
. 100,000 shares of the Company's common stock for a purchase price of
$3.60 per share,
. 107,095 shares of the Company's Series E Preferred Stock for a
purchase price of $37.35 per share, and
. a warrant at a price of $4.50 per warrant share, exercisable for
444,444 shares of the Company's common stock for an exercise price of
$40.50 per share.
In February 1996, the Company amended the warrant issuable to Chiron to reduce
the exercise price from $40.50 per share to $22.50 per share. When the Company
closed its initial public offering in April 1996, Chiron:
. purchased 377,202 shares of the Company's common stock for $3,640,000
at the initial public offering price less one-half of the underwriting
discount,
. paid the Company $1,800,000 to complete the purchase of its warrant,
and
. received 35,127 additional shares of the Company's common stock
pursuant to anti-dilutive provisions.
Chiron also has a representative on the Company's Board of Directors.
20
In May 1996, the Company entered into a second collaboration with Chiron
for the use of ribozymes to characterize gene function. The collaborations give
Chiron the right to develop and commercialize products that result from the
collaboration, and entitle the Company to receive product development milestone
payments and royalties on sales of commercial products. Chiron and Ribozyme
Pharmaceuticals each pay a portion of the research and development expenses of
the collaboration, and the Company agreed to provide Chiron $1.8 million, which
was paid in 1996, for research funding related to the proposed collaboration.
Schering AG Transaction. In April 1997, the Company entered into a
research collaboration with Schering AG focusing on the use of ribozymes and
related technologies for gene function validation. Schering AG purchased:
. 212,766 shares of the Company's common stock for $2.5 million in May
1997, and
. 465,117 shares of the Company's common stock for $2.5 million in 1998.
Separately, Schering AG provided loans of $2.0 million in both 1997 and
1998. the Company received an additional $1.0 million on this loan facility in
January 1999. Schering AG will continue to provide loans of up to $2 million
annually for each year through 2001, provided that the collaboration is
continued in each of those years. The loans, which carry an interest rate of 8%
per annum, are convertible into equity at Schering AG's option under certain
circumstances. Principal and interest payments are deferred until maturity of
the loans in April 2004.
In addition, Schering AG made research payments of $1.5 million in 1997 and
$2.0 million in 1998 and, provided that the collaboration is continued, will
make research payments of $2 million a year through 2001. All payments are
subject to some restrictions, including receipt of third party consents. Upon
payment of termination fees to us, the research collaboration may be terminated
at Schering AG's option at any time.
Atugen Transaction. In December 1998, the Company and other investors
formed Atugen Biotechnology GmbH ("Atugen"). Financing for Atugen was
accomplished through a combination of venture capital, an investment by the
Company and German government grants and loans. Atugen's initial capitalization
totaled more than $20 million in cash and commitments. The Company invested
$2.0 million and retained a 49.5% equity interest as of December 31, 1998. All
five of the Company's executive officers and two of the Company's employees
received shares of Atugen's common stock in the formation at no cost to them,
for which the Company will receive a one-time compensation expense of
approximately $81,000. As of December 31, 1998, these seven people held 5.5% of
Atugen's common stock.
As part of the formation, Atugen received exclusive royalty-free licenses
to the Company's extensive patents and technologies for target validation and
discovery. The Company will receive a one-time $2.0 million up-front license
payment in 1999. The Company also will be compensated for providing management
and other services to Atugen under the terms of a services agreement.
Employees
As of April 13, 1999, the Company had 65 full-time employees, including a
technical scientific staff of 50. None of the Company's employees are covered by
collective bargaining arrangements. The Company believes its employee relations
are good.
21
PROPOSAL 2 -APPROVAL OF AN INCREASE IN THE NUMBER
OF OPTIONS WHICH MAY BE GRANTED UNDER
THE COMPANY'S 1996 STOCK OPTION PLAN
In March 1996, the Company amended, restated and merged its stock option
plans and named the resulting plan the 1996 Stock Option Plan (the "Plan"). The
Plan currently authorizes options to purchase up to 1,667,154 shares of the
Company's common stock. Currently, 1,478,493 shares of the Company's common
stock are reserved for issuance under the Plan. As of April 13, 1999, options
to purchase 1,386,487 shares were outstanding under the Plan. The Plan will
terminate in January 2006, unless earlier terminated by the Board of Directors.
For a more detailed description of the Plan, see "PROPOSAL 1 - ELECTION OF
DIRECTORS -- Stock Option Plan." Shareholders may receive a copy of the 1996
Stock Option Plan without charge upon written request directed to Lawrence E.
Bullock, Secretary, 2950 Wilderness Place, Boulder, Colorado 80301.
The Company's Board of Directors has proposed that the total number of
shares of Company stock which may be issued upon the exercise of options granted
under the Plan be increased by 350,000, from 1,667,154 to 2,017,154. Pursuant
to the terms of the Plan, an increase in the number of shares of Company stock
which may be issued upon the exercise of options under the Plan must be approved
by the shareholders of the Company.
The Board of Directors recommends that shareholders vote FOR APPROVAL OF AN
---
INCREASE OF 350,000 IN THE NUMBER OF SHARES OF COMPANY STOCK WHICH MAY BE ISSUED
UPON THE EXERCISE OF OPTIONS GRANTED UNDER THE 1996 STOCK OPTION PLAN.
PROPOSAL 3 - RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Ernst & Young LLP has served as the Company's independent auditors since
1992 and for the years ended December 31, 1992, through December 31, 1998. At
the Annual Meeting, shareholders will be asked to ratify the appointment of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending December 31, 1999.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will be available to respond to appropriate questions. Such
representatives of Ernst & Young LLP will also have the opportunity to make a
statement if they desire to do so.
The Board of Directors recommends that shareholders vote FOR RATIFICATION
---
OF THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
1999.
22
FILING OF SEC REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers, directors and persons who beneficially own more than 10
percent of the common stock of the Company to file initial reports of ownership
and reports of changes in ownership with the SEC. Such persons are also
required by SEC regulations to furnish the Company with copies of these reports.
Based solely on a review of the copies of such reports furnished to the Company,
the Company believes that its executive officers, directors and greater than 10
percent beneficial owners complied with all Section 16(a) filing requirements,
except that Mr. Ichikawa inadvertently made a late filing related to his initial
election to the Board of Directors.
FINANCIAL STATEMENTS
An annual report, including financial statements of the Company prepared in
conformity with generally accepted accounting principles, is being distributed
to all Company shareholders of record and is enclosed herewith. The Company's
annual report to the SEC on Form 10-K may be obtained without charge upon
written request directed to Lawrence E. Bullock, Secretary, 2950 Wilderness
Place, Boulder, Colorado 80301.
SHAREHOLDERS' PROPOSALS
It is expected that the 2000 Annual Meeting of Shareholders of the Company
will be held on or about May 18, 2000. Any proposals intended to be presented
at the 2000 Annual Meeting must be received at the Company's offices on or
before December 18, 1999, in order to be considered for inclusion in the
Company's Proxy Statement and form of Proxy relating to such meeting.
OTHER MATTERS
The Annual Meeting is called for the purposes set forth in this notice.
Management is not aware of any other matter that will come before the meeting.
However, if any other business should come before the meeting, your Proxy, if
signed and returned, will give to the persons designated in it discretionary
authority to vote according to their best judgment. It is the intention of the
persons named in the Proxy to vote pursuant to the Proxy in accordance with the
recommendations of management.
By Order of the Board of Directors
/s/ Lawrence E. Bullock
Lawrence E. Bullock, Secretary
Date: April 22, 1999
23
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
RIBOZYME PHARMACEUTICALS, INC.
MAY 21, 1999
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE FOLLOWING ITEMS:
FOR ALL NOMINEES WITHHOLD
LISTED AT RIGHT AUTHORITY TO VOTE
(EXCEPT AS MARKED FOR ALL NOMINEES
TO THE CONTRARY). LISTED AT RIGHT.
(1) To elect as directors the
nominees listed below. [_] [_]
Instruction: TO WITHHOLD AUTHORITY NOMINEES: Ralph E. Christoffersen
TO VOTE FOR ANY INDIVIDUAL NOMINEE, Jeremy L. Curnock Cook
STRIKE A LINE THROUGH THAT NOMINEE'S Anthony B. Evnin
NAME IN THE LIST AT RIGHT: David T. Morgenthaler
Anders P. Wiklund
David G. Ichikawa
(2) To approve an increase in the FOR AGAINST ABSTAIN
number of options which may be [_] [_] [_]
granted under the Company's
1996 Stock Option Plan by
350,000 from 1,667,154 to
2,017,154.
FOR AGAINST ABSTAIN
(3) To ratify the selection of [_] [_] [_]
Ernst & Young LLP as independent
auditors for the Company for the
year ending December 31, 1999.
(4) In their discretion, the proxy holders are authorized to vote upon such
other business as may properly come before the meeting or matters
incidental to the conduct of the meeting.
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1, 2 AND 3. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS MADE IT WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY BY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
I/WE DO _____ DO NOT _____ EXPECT TO ATTEND THIS ANNUAL MEETING OF SHAREHOLDERS.
Signature of Shareholder(s) ________________________ _________________________
WITNESS my hand this ____ day of ___________________, 1999.
NOTE: (Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, give full title as such. If
a corporation, please affix corporate seal. If a partnership, please sign
in partnership name by authorized persons. If joint tenants, each joint
tenant should sign.)
8888
REVOCABLE PROXY
RIBOZYME PHARMACEUTICALS, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1999
The undersigned holder of common stock of Ribozyme Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), acknowledges receipt of a copy of
the Notice of Annual Meeting of Shareholders dated April 22, 1999, and, revoking
any proxy heretofore given, hereby appoints Dr. Ralph E. Christoffersen and Dr.
Nassim Usman, and each of them, with full power to each of substitution as
attorneys and proxies to appear and vote all shares of common stock of the
Company registered in the name(s) of the undersigned and held by the undersigned
of record as of April 13, 1999, at the Annual Meeting of Shareholders of the
Company to be held at the Company's principal office, 2950 Wilderness Place,
Boulder, Colorado, on May 21, 1999, at 8:00 a.m., and at any postponements and
adjournments thereof, upon the following items as set forth in the Notice of
Annual Meeting and to vote according to their discretion on all other matters
which may be properly presented for action at the meeting. All properly executed
proxies will be voted as indicated.
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)