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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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NPS PHARMACEUTICALS, INC.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
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(2) Aggregate number of securities to which transaction applies:
Not Applicable
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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NPS PHARMACEUTICALS, INC.
420 CHIPETA WAY
SALT LAKE CITY, UTAH 84108-1256
___________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999 AT 3:00 P.M. (LOCAL TIME)
AT THE
MARRIOTT-UNIVERSITY PARK HOTEL
500 SOUTH WAKARA WAY
SALT LAKE CITY, UTAH 84108-1256
___________
TO THE STOCKHOLDERS OF NPS PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of NPS
Pharmaceuticals, Inc., a Delaware corporation, will be held on Wednesday, May
26, 1999, at 3:00 p.m., local time, at the Marriott-University Park Hotel, 500
South Wakara Way, Salt Lake City, Utah for the following purposes:
1. To elect eight members to the Board of Directors.
2. To approve an increase of 200,000 shares of common stock for issuance
under two of the Company's equity incentive plans as follows: (a)
100,000 shares under the Employee Stock Purchase Plan; and (b) 100,000
shares under the Non-Employee Directors' Stock Option Plan.
3. To ratify the selection of KPMG LLP as independent auditors of the
Company for its fiscal year ending December 31, 1999.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 7, 1999, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting of Stockholders and at any adjournment thereof.
By Order of the Board of Directors
James U. Jensen
Secretary
Salt Lake City, Utah
April 21, 1999
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN,
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE.
YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE,
HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK, OR
OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM
THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
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NPS PHARMACEUTICALS, INC.
420 CHIPETA WAY
SALT LAKE CITY, UTAH 84108-1256
___________
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
(MAY 26, 1999)
___________
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board of Directors" or the "Board") of NPS Pharmaceuticals, Inc., a Delaware
corporation ("NPS" or the "Company"), for use at the Annual Meeting of
Stockholders to be held on May 26, 1999, at 3:00 p.m., local time and at any
adjournment thereof (the "Annual Meeting"), for the purposes set forth herein
and in the accompanying Notice of Annual Meeting. The Annual Meeting will be
held at the Marriott-University Park Hotel, 500 South Wakara Way, Salt Lake
City, Utah.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing, and mailing of this Proxy Statement, the proxy
card, and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries, and custodians holding in their names shares of NPS common stock,
par value $.001 beneficially owned by others to forward to such beneficial
owners. The Company may reimburse persons representing beneficial owners of
common stock for their costs of forwarding solicitation materials to such
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram, or personal solicitation by directors, officers, or
other regular employees of the Company. No additional compensation will be paid
to directors, officers, or other regular employees for such services.
The Company intends to mail this Proxy Statement and accompanying proxy
card on or about April 21, 1999, to all stockholders entitled to vote at the
Annual Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
April 7, 1999 is the record date for determining those holders of NPS
common stock entitled to notice of and to vote at the Annual Meeting. On the
record date, the Company had outstanding and entitled to vote 12,662,301 shares
of common stock. Stockholders will be entitled to one vote for each share held
on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the Inspector of Elections appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions, and broker non-votes. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the stockholders, and will
have the same effect as negative votes. Broker non-votes are counted toward a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any stockholder giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by filing with
the Secretary of the Company, at the Company's principal executive office, 420
Chipeta Way, Salt Lake City, Utah 84108-1256, a written notice of revocation or
a duly executed proxy
1
bearing a later date, or it may be revoked by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not, by itself, revoke a
proxy.
STOCKHOLDER PROPOSALS FOR 2000
Proposals of stockholders that are intended to be presented at the
Company's 2000 annual meeting of stockholders and considered for inclusion in
the proxy statement relating to such meeting must be received by the Company not
later than December 10, 1999. In order to be timely, stockholder proposals and
director nominations intended to be presented at the Company's 2000 annual
meeting, but not included in the proxy statement for the meeting, must be
received by the Company no earlier than February 28, 2000 and no later than
March 27, 2000.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and the
Amended and Restated Bylaws provide that directors are to be elected at the
Annual Meeting to serve for a term of one year and until their respective
successors are duly elected and qualified or until their respective death,
resignation, or removal. Vacancies on the Board resulting from death,
resignation, disqualification, removal, or other causes and any newly created
directorships resulting from any increase in the number of directors shall be
filled by the affirmative vote of a majority of the directors then in office,
unless the Board of Directors determines by resolution that any such vacancy
shall be filled by the stockholders. A director elected by the Board to fill a
vacancy (including a vacancy created by an increase in the Board of Directors)
shall serve for the remainder of the full term of the director for which the
vacancy was created or occurred and until such director's successor is elected
and qualified.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Annual Meeting. Shares
represented by executed proxies will be voted, if authority to do so is not
withheld, for the election of the eight nominees below. In the event that any
nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as the Board may propose.
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
number of directors which constitute the whole Board of Directors is to be fixed
by one or more resolutions adopted by the Board of Directors. In September 1999,
the Board of Directors adopted a resolution to increase the number of directors
to nine. As permitted by the Company's Bylaws, the Board nominated Peter G.
Tombros to fill the vacant seat on the Board until his successor is duly elected
and qualified. Effective January 1, 1999, a director who had served for several
years withdrew from the Board. Accordingly, the Board adjusted the number of
directorships to eight. Each of the eight nominees is currently a director of
the Company, and each nominee has agreed to serve if elected. The Board has no
reason to believe that any nominee will be unable to serve. If and when elected
at the Annual Meeting, each of the nominees will serve until the 2000 Annual
Meeting of Stockholders and until such elected nominee's successor is duly
elected and qualified, or until such elected nominee's earlier death,
resignation, or removal.
Set forth below, in alphabetical order, is biographical information for
each person nominated to serve on the Company's Board of Directors.
NOMINEES FOR ELECTION
SANTO J. COSTA, J.D.
Mr. Costa, 53, has served as a director since January 1995 and as a member
of the Compensation Committee since 1996. Mr. Costa has served as President,
Chief Operating Officer, and a director of Quintiles Transnational Corporation,
a publicly held global contract research organization, since April 1994. From
July 1993 to April 1994, he ran his own consulting firm, Santo J. Costa and
Associates. From 1986 to 1993, he was employed by Glaxo, Inc., a worldwide
pharmaceutical company, where he served as Senior Vice President, Administration
and General Counsel and was a member of that company's Board of Directors. From
1977 to 1986 he was employed
2
by Merrell Dow Pharmaceuticals (now Hoechst Marion Roussel) where he served as
U.S. Area Counsel, and from 1971 to 1977 as Food & Drug Counsel for
Norwich/Eaton Pharmaceuticals. Mr. Costa received his B.S. in Pharmacy and his
J.D. from St. John's University.
JAMES G. GRONINGER
Mr. Groninger, 54, has served as a director since 1988 and as a member of
the Audit and Compensation Committees since 1994. Mr. Groninger founded in
January 1995 and is President of The Bay South Company, a Richmond, Virginia-
based provider of financial advisory and investment banking services. From 1988
through 1994, he served as a Managing Director, Investment Banking Division, of
PaineWebber Incorporated. Currently he serves on the Board of Directors of
Designs, Inc., a specialty retailer, Layton Bioscience, Inc., a privately-owned
biotechnology company, and Cygne Designs, Inc., a manufacturer of apparel. Mr.
Groninger received a B.S. in Industrial Administration from Yale University and
an M.B.A. from Harvard Business School.
HUNTER JACKSON, PH.D.
Dr. Jackson, 48, has been Chief Executive Officer and Chairman of the Board
since founding the Company in 1986 and a member of the Nominating Committee
since 1997. He was appointed to the additional position of President in January
1994. Prior to founding the Company, he was an Associate Professor in the
Department of Anatomy at the University of Utah School of Medicine. Dr. Jackson
received a B.A. in English from the University of Illinois and a Ph.D. in
Psychobiology from Yale University. He received postdoctoral training in the
Department of Neurosurgery, University of Virginia Medical School.
JAMES U. JENSEN, J.D.
Mr. Jensen, 54, has been Vice President, Corporate Development and Legal
Affairs, since August 1991. He has been Secretary and a director of the Company
since 1987. From 1986 to July 1991 he was a partner in the law firm of Woodbury,
Jensen, Kesler & Swinton, P.C. (or its predecessor firm) concentrating on
technology transfer and licensing and corporate finance. From July 1985 until
October 1986, he served as Chief Financial Officer of Cericor, a software
company, and from 1983 to July 1985, as its outside general counsel. From 1980
to 1983 he served as General Counsel and Secretary of Dictaphone Corporation, a
subsidiary of Pitney Bowes Inc. He serves as a director of Wasatch Funds, Inc.,
a registered investment company, and of InterWest Home Medical, Inc., a public
home use medical equipment distributor. Mr. Jensen received a B.A. in
English/Linguistics from the University of Utah and a J.D. and an M.B.A. from
Columbia University.
JOSEPH KLEIN, III
Mr. Klein, 38, was appointed to the Board of Directors of the Company in
April 1998 and serves as a member of the Compensation Committee. Currently, Mr.
Klein is a Health Care Investment analyst with the Kaufmann Fund, Inc., an
emerging growth company mutual fund. From December 1995 to February 1998, Mr.
Klein was a Portfolio Manager and Chairman of the Investment Advisory Committee
of T. Rowe Price Health Sciences Fund, Inc. From April 1990 to February 1998,
Mr. Klein was Vice President and Health Care Investment Analyst for T. Rowe
Price Associates, Inc., an investment management firm. Mr. Klein serves as a
director of Guilford Pharmaceuticals, a public biotech company; and Synbiotics
Corporation, a public veterinary diagnostic products company. Mr. Klein received
an M.B.A. from Stanford Graduate School of Business and a B.A. in economics from
Yale University.
DONALD E. KUHLA, PH.D.
Dr. Kuhla, 57, has been a director of the Company since 1991, a member of
the Audit Committee since 1996, and a member of the Nominating Committee since
1997. Since July 1998, Dr. Kuhla has been President and COO of Albany Molecular
Research, Inc., a public chemical contract research organization, where he has
been a director since October 1995. From February 1994 through June 1998 Dr.
Kuhla was Vice President of Plexus Ventures, Inc., a biotechnology investment
and consulting firm. From 1990 to 1994, Dr. Kuhla held senior management
positions with two venture capital backed, biotechnology start-up companies. His
early career was
3
spent in research and development and operations management positions with
Pfizer Inc. and Rorer Group, Inc., his last position at Rorer being Senior Vice
President of Operations. Dr. Kuhla received a B.A. in Chemistry from New York
University and a Ph.D. in Organic Chemistry from Ohio State University.
THOMAS N. PARKS, PH.D.
Dr. Parks, 48, has been a director of the Company since its founding in
1986 and a member of the Audit Committee since 1996 and the Nominating Committee
since 1997. Dr. Parks also serves as a scientific consultant to NPS. He is
currently the George and Lorna Winder Professor of Neuroscience and Chairman of
the Department of Neurobiology and Anatomy at the University of Utah Medical
School. Dr. Parks joined the faculty at the University of Utah Medical School in
1978 as an assistant professor. Dr. Parks received a B.S. in Biology from the
University of California at Irvine and a Ph.D. in Psychobiology from Yale
University. He was a postdoctoral fellow in Development Neurology at the
University of Virginia Medical School.
PETER G. TOMBROS
Mr. Tombros, 57, was appointed to the Board of Directors of the Company in
September 1998 and serves as a member of the Compensation and Nominating
Committees. Since April 1994, Mr. Tombros has served as President, Chief
Executive Officer and a Director of Enzon, Inc., a public biopharmaceutical
company that develops, manufactures and markets enhanced therapeutics. Prior to
joining Enzon, Mr. Tombros spent 25 years with Pfizer, Inc., a research based,
global healthcare company. Mr. Tombros served as vice president of Pfizer, Inc.
in the following areas: Executive Vice President of Pfizer Pharmaceuticals, a
division of Pfizer, Inc., corporate strategic planning, and investor relations.
Currently, Mr. Tombros serves on the Board of Directors of the following: Enzon,
Inc.; ALPHARMA Inc., a Norwegian company specializing in the areas of animal
health, pharmaceuticals, and fine chemicals; the New Jersey Technology Council;
the Biotechnology Council of New Jersey; and the American Foundation of
Pharmaceutical Education. He is also on the Board of Trustees of Cancer Care and
the National Cancer Care Foundation. Mr. Tombros received a B.S. and M.S. from
Pennsylvania State University and a MBA from the Wharton Graduate School of
Business.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE
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BOARD COMMITTEES AND MEETINGS
The Board has standing Audit, Compensation, and Nominating Committees each
with a formal, written charter.
The Audit Committee's functions include: meeting with the Company's
independent auditors at least annually to review the results of the annual audit
and discuss the financial results for the year as reported in the Company's
financial statements; recommending to the Board of Directors the independent
auditors to be retained for the ensuing year; and receiving and considering the
auditors' comments as to controls, adequacy of staff and management performance
and procedures in connection with audit and financial controls. The Audit
Committee is composed of three non-employee directors, Mr. Groninger, Dr. Kuhla,
and Dr. Parks. The Audit Committee met two times during the fiscal year ended
December 31, 1998.
The Compensation Committee's functions include: establishing, reviewing,
and overseeing salaries, incentive compensation, and other forms of compensation
paid to officers and employees of the Company; administering the Company's
incentive compensation and benefit plans, including the 1998 Stock Option Plan,
1994 Employee Stock Purchase Plan, the 1994 Equity Incentive Plan, and the 1987
Stock Option Plan; and performing such other functions regarding compensation as
the Board of Directors may delegate. The Compensation Committee reviews the
performance of the Company's officers, particularly the CEO and submits the
Report of the Compensation Committee set out below. The Compensation Committee
is composed of non-employee directors, Mr. Costa, Mr. Groninger, and Mr. Klein.
The Compensation Committee met two times during the fiscal year ended December
31, 1998.
4
The Nominating Committee's functions include: evaluating Director
performance on at least an annual basis; providing information and materials
relating to the nomination of directors; interviewing, nominating, and
recommending individuals for membership on the Company's Board of Directors and
its committees; and performing such other functions as the Board of Directors
may delegate. The Nominating Committee will consider nominees for directors
nominated by stockholders upon submission in writing to the Secretary of the
Company of the names of such nominees, together with their qualifications for
service as a director of the Company. In order for any nominees for directors
nominated by stockholders to be considered by the Nominating Committee, such
nominations must be submitted no later than December 1st of the year preceding
the Annual Meeting. The Nominating Committee met two times during the fiscal
year ended December 31, 1998. The members of the Nominating Committee are Dr.
Kuhla, Dr. Jackson, Dr. Parks, and Mr. Tombros.
During the fiscal year ended December 31, 1998, the Board of Directors held
four meetings. Each Board member standing for reelection attended 75% or more of
the aggregate of the meetings held by the Board and by the respective committees
on which such Board member served during the period for which he was a director
or a member of such committee.
PROPOSAL 2
INCREASE IN SHARES ISSUABLE UNDER NPS EQUITY INCENTIVE PLANS
In February 1999, the Board of Directors adopted, subject to stockholder
approval, amendments to the Company's Employee Stock Purchase Plan (ESPP) and
the Non-Employee Directors' Stock Option Plan (Directors' Plan). The amendments
increase by 100,000 the number of shares authorized for issuance under the ESPP
from 160,000 shares to 260,000 shares and by 100,000 the number of shares
authorized for issuance under the Directors' Plan from 160,000 to 260,000
shares.
Stockholders are requested in this Proposal 2 to approve the amendment to
the ESPP and the Directors' Plan. The affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled to
vote at the meeting will be required to approve this Proposal 2. The vote
concerning approval of the amendment of the respective plans will be considered
as one proposal.
Summaries of the principal features of each of the plans are provided below
under "Executive Compensation" but are qualified in their entirety by reference
to the full text of each of the plans that were filed electronically with this
Proxy Statement with the Securities and Exchange Commission, such text is not
included in the printed version of this Proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP as the Company's independent
auditors for the fiscal year ending December 31, 1999, and has further directed
that management submit the selection of independent public auditors for
ratification by the stockholders at the Annual Meeting. KPMG has audited the
Company's financial statements since the Company's inception in 1986.
Representatives of KPMG are expected to be present at the Annual Meeting, will
have an opportunity to make a statement if they so desire, and will be available
to respond to appropriate questions.
Stockholder ratification of the selection of KPMG as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of KPMG to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail to
ratify the selection, the Board will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Board in its discretion
5
may direct the appointment of a different independent accounting firm at any
time if the Board determines that such a change would be in the best interests
of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of NPS common stock as of March 1, 1999 by: (a) all those known by the Company
to be beneficial owners of more than five percent of the Company's common stock;
(b) each director and nominee for director; (c) each of the executive officers
named in the Summary Compensation Table; and (d) all executive officers and
directors of the Company as a group.
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OF BENEFICIAL PERCENT OF
- ------------------------------------------------------- OWNERSHIP TOTAL /(1)/
(UNLESS OTHERWISE NOTED) -------------------- ------------
BVF Partners, L.P./(2)/................................. 2,052,700 16.24%
333 West Wacker Drive, Suite 1600
Chicago, IL 60606
Wellington Management Company, LLP/(3)/................. 1,656,300 13.11%
75 State Street
Boston, MA 02109
T. Rowe Price Associates, Inc/(4)/...................... 1,600,000 12.66%
100 E. Pratt Street
Baltimore, MD 21202
Amgen Inc............................................... 1,000,000 7.91%
1840 DeHavilland Drive
Thousand Oaks, CA 91320
Dimensional Fund Advisors Inc./(5)/..................... 815,900 6.46%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Hunter Jackson, Ph.D./(6)/.............................. 591,025 4.60%
Thomas N. Parks, Ph.D./(7)/............................. 364,380 2.88%
Edward F. Nemeth, Ph.D./(8)/............................ 213,056 1.66%
James U. Jensen, J.D./(9)/.............................. 124,136 *
Thomas B. Marriott, Ph.D./(10)/......................... 122,519 *
Robert K. Merrell/(11)/................................. 84,200 *
Donald E. Kuhla, Ph.D./(12)/............................ 55,580 *
Skip Klein/(13)/........................................ 32,200 *
James G. Groninger/(14)/................................ 27,992 *
Santo J. Costa, J.D./(15)/.............................. 8,680 *
Peter Tombros........................................... 800 *
All directors and executive officers as a group/(16)/... 1,651,677 12.38%
________________________
* Less than 1%.
(1) The number of shares of common stock issued and outstanding on March 1,
1999 was 12,636,305 shares. The calculation of percentage ownership for
each listed beneficial owner is based upon the number of shares of common
stock issued and outstanding at March 1, 1999, plus shares of common stock
subject to options held by such person at March 1, 1999 and exercisable
within 60 days thereafter. The persons and
6
entities named in the table have sole voting and investment power with
respect to all shares shown as beneficially owned by them, except as noted
below.
(2) BVF Partners, L.P. and BVF, Inc. share voting and dispositive power with
respect to all of these shares and with Biotechnology Value Fund, L.P. with
respect to 989,600 of the shares.
(3) Wellington Management Company, LLP, a registered investment adviser, is
deemed to have beneficial ownership of 1,656,300 shares of NPS common
stock. Such shares are owned of record by clients of Wellington Management.
Wellington Management shares voting power with respect to 1,506,800 of such
shares and dispositive power with respect to all of such shares.
(4) These securities are owned by various individual and institutional
investors including T. Rowe Price New Horizons Fund, Inc. which owns
1,300,000 shares, which represents 10.29% of the shares outstanding, for
which T. Rowe Price Associates, Inc. serves as investment adviser with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, T. Rowe Price Associates is deemed to be a beneficial owner of such
securities; however, T. Rowe Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such securities.
(5) Dimensional Fund Advisors Inc., an investment advisor registered under the
Investment Advisors Act of 1940, furnishes investment advice to four
investment companies registered under the Investment Company Act of 1940
and serves as investment manager to certain other investment vehicles,
including commingled group trusts. In its role as investment advisor and
investment manager, Dimensional possesses both voting and investment power
over these securities. Dimensional disclaims beneficial ownership of these
securities.
(6) Includes 97,561 shares held in a trust and 2 shares held by Dr. Jackson's
children, of which he disclaims beneficial ownership. Also includes 213,600
shares subject to options exercisable within 60 days of March 1, 1999.
(7) Includes 10,000 shares held in a trust of which Dr. Parks disclaims
beneficial ownership. Also includes 15,480 shares subject to options
exercisable within 60 days of March 1, 1999.
(8) Includes 171,200 shares subject to options exercisable within 60 days of
March 1, 1999.
(9) Includes 1,000 shares held by a limited liability company of which Mr.
Jensen disclaims beneficial ownership. Also includes 51,200 shares subject
to options exercisable within 60 days of March 1, 1999.
(10) Includes 5,741 shares held by spouse, 1,121 shares held by children, of
which Mr. Marriott disclaims beneficial ownership. Also includes 102,200
shares subject to options exercisable within 60 days of March 1, 1999.
(11) Includes 78,200 shares subject to options exercisable within 60 days of
March 1, 1999.
(12) Includes 31,980 shares subject to options exercisable within 60 days of
March 1, 1999.
(13) Includes 4,200 shares subject to options exercisable within 60 days of
March 1, 1999.
(14) Includes 10,000 shares owned by spouse, and 7,450 shares owned by children,
of which Mr. Groninger disclaims beneficial ownership. Also includes 6,660
shares subject to options exercisable within 60 days of March 1, 1999.
(15) Includes 6,480 shares subject to options exercisable within 60 days of
March 1, 1999.
(16) Includes 12 people. An aggregate of 702,400 shares are subject to options
exercisable within 60 days of March 1, 1999.
The above table is based upon information supplied by officers, directors,
and principal stockholders and Schedules 13D and 13G filed with the
Commission. Beneficial ownership is determined in accordance with the rules
of the Commission and generally includes voting or investment power with
respect to securities.
Except as set forth herein, the address of the persons set forth above is
the address of the Company appearing elsewhere in this Proxy Statement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Commission reports of
ownership and changes in ownership of NPS common stock and other equity
securities of the Company. Officers, directors, and greater than 10%
stockholders are required by the Commission to furnish the Company with copies
of all Section 16(a) forms they file.
7
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, during the fiscal year ended December 31, 1998, the
Company believes that apart from James G. Groninger who reported late through an
amended Form 5 with respect to shares of common stock sold for the benefit of
certain family members in January 1998 and March 1998, and Amgen Inc. who
reported late through a Form 3 with respect to shares of common stock purchased
from the Company in 1996, all reporting persons complied with all applicable
Section 16(a) filing requirements.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's directors do not currently receive any cash compensation for
service on the Board or any Committee thereof. Outside directors are reimbursed
for certain expenses in connection with attendance at Board and Committee
meetings. Directors are eligible to receive stock options and stock bonuses
under the stock plans described below.
1994 Non-Employee Directors' Stock Option Plan
- ----------------------------------------------
In January 1994, the Board adopted, and the stockholders subsequently
approved, the 1994 Non-Employee Directors' Stock Option Plan (Directors' Plan).
An amendment to increase from 90,000 to 160,000 the number of shares available
for grant under the Directors' Plan was approved by the stockholders in July
1996. Under the Directors' Plan, non-employee directors of the Company are
eligible to receive options. Options granted under the Directors' Plan are
automatic and non-discretionary and do not qualify as ISOs under the Internal
Revenue Code of 1986, as amended. Pursuant to the terms of the Directors' Plan,
each person who is elected for the first time to be an outside director of the
Company and who is not otherwise employed by the Company or an affiliate of the
Company (a "Non-Employee Director") will automatically be granted an option to
purchase 15,000 shares of common stock (subject to adjustment as provided in the
Directors' Plan) upon the date of his or her election to the Board. On December
1 of each year, each person who is then a Non-Employee Director and has been a
Non-Employee Director for at least three months will automatically be granted an
option to purchase 3,000 shares of common stock (subject to adjustment as
provided in the Directors' Plan) pursuant to the Directors' Plan.
No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date such option was granted. Options granted
under the Directors' Plan vest at a rate of 28% of the shares subject to the
option one year after date of grant and 3% of the shares become exercisable each
month thereafter, so long as the optionee has, during the entire period prior to
such vesting date, continuously served as a Non-Employee Director or in other
continuous affiliation as provided under the Directors' Plan. If the optionee's
service as a non-employee director terminates for any reason other than death,
the option will remain exercisable for twelve months after the date of
termination, or until the option's expiration date, if earlier. If the optionee
dies, the option will remain exercisable for eighteen months following the date
of death or until the expiration date of the option, whichever is earlier. The
exercise price of options granted under the Directors' Plan is 100% of the fair
market value of the common stock on the date of grant. Options granted under the
Directors' Plan are generally non-transferable. Unless otherwise terminated by
the Board, the Directors' Plan automatically terminates in January 2004.
As of December 31, 1998, options to purchase a total of 132,000 shares of
common stock had been granted under the Directors' Plan at exercise prices from
$3.00 to $10.25 per share, and a weighted average exercise price of $6.89 per
share. As of that date, options for 22,290 shares had been exercised since the
inception of the Directors' Plan. Prior to the adoption of the Directors' Plan,
the Company granted options to directors under the 1987 Stock Option Plan.
Non-Employee Directors' Stock Bonus Program
- -------------------------------------------
In December 1994, the Board adopted the Non-Employee Directors' Stock Bonus
Program under the 1994 Equity Incentive Plan (Stock Bonus Program). Under the
Stock Bonus Program, non-employee directors are eligible to receive grants of
shares of common stock for attendance at Board and Committee meetings. The Stock
Bonus
8
Program provides each Non-Employee Director of the Company with a non-
discretionary award of 200 shares of common stock for each Board meeting
attended and 200 shares of common stock per year for serving on a Board
Committee. A total of 7,200 shares were granted under the Stock Bonus Program
for meetings attended in 1998.
The right to receive awards under the Stock Bonus Program is generally non-
transferable. The stock awards are made at the end of each calendar year. Non-
Employee Directors entitled to stock bonus awards shall not possess any rights
of a stockholder of the Company until such shares are delivered to the Non-
Employee Director. Unless otherwise terminated by the Board, the Stock Bonus
Program terminates in January 2004.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended December 31, 1998,
December 31, 1997 and December 31, 1996, certain compensation awarded, paid to,
or earned by, the Company's Chief Executive Officer and its other four most
highly compensated executive officers (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) STOCK OPTIONS GRANTED(#)
--------------------------- ---- --------- -------- ------------------------
Hunter Jackson, Ph.D........................ 1998 264,231 60,000
Chief Executive Officer, President and 1997 235,846 40,000
Chairman of the Board 1996 214,884 22,659 45,000
James U. Jensen, J.D........................ 1998 173,539 30,000
Vice President, Corporate 1997 167,783 20,000
Development and Legal Affairs and 1996 152,592 17,624 25,000
Secretary
Thomas B. Marriott, Ph.D.................... 1998 182,846 30,000
Vice President, Development Research 1997 177,868 20,000
1996 165,758 18,883 25,000
Robert K. Merrell........................... 1998 149,569 30,000
Vice President, Finance, Chief Financial 1997 135,893 20,000
Officer, and Treasurer 1996 121,573 13,232 25,000
Edward F. Nemeth, Ph.D...................... 1998 165,754 30,000
Vice President, and Chief Scientific 1997 159,832 20,000
Officer 1996 150,038 16,365 30,000
9
1987 Stock Option Plan
- ----------------------
The 1987 Stock Option Plan (1987 Plan) was adopted in June 1987. The
purposes of the 1987 Plan were to attract and retain qualified personnel, to
provide additional incentives to employees, officers, advisors, directors, and
consultants of the Company, and to promote the success of the Company's
business. No options have been granted under the 1987 Plan since December 1993,
and the Company will not make any future grants under the 1987 Plan. As of
December 31, 1998, options to purchase a total of 894,474 shares of common stock
had been exercised for cash and services under the 1987 Plan at a weighted
average exercise price of $0.82 per share. As of December 31, 1998, options to
purchase a total of 415,218 shares of common stock were outstanding, with
exercise prices ranging from $0.67 to $4.00 per share and a weighted average
exercise price per share of $1.49.
Options granted under the 1987 Plan generally became exercisable at a rate
of one-third of the shares subject to the option on the first anniversary of the
option grant and one-third of the remaining shares subject to the option on each
of the second and third anniversary of the option grant. The maximum term of a
stock option under the 1987 Plan was ten years; however, if the optionee at the
time of grant had voting power over more than ten percent of the Company's
outstanding capital stock (a "10% Holder"), the maximum term of any ISO granted
under the 1987 Plan was five years. The aggregate fair market value of the stock
with respect to which ISOs are exercisable for the first time by an optionee in
any calendar year may not exceed $100,000. The exercise prices of ISOs granted
under the 1987 Plan were at least equal to 100%, 110% with respect to 10%
Holders, of the fair market value of the stock subject to the option on the date
of grant. Although no minimum exercise price of NSOs was required under the 1987
Plan, the exercise price of NSOs previously granted under the 1987 Plan
generally has been at least equal to the fair market value of the stock subject
to the option on the date of the grant. Any option that is exercisable at the
time of grant and which expires no sooner than three years from the grant date
is subject to an option exercise price equal to the fair market value of the
option on the grant date.
1994 Equity Incentive Plan
- --------------------------
In January 1994, the Board adopted the 1994 Equity Incentive Plan (1994
Plan), which was subsequently approved by the stockholders in February 1994.
Under the 1994 Plan, 1,702,503 shares have been authorized for issuance. The
purposes of the 1994 Plan are to attract and retain qualified personnel, to
provide additional incentives to employees, officers, directors, and consultants
of the Company and its affiliates and to promote the success of the Company's
business. Under the 1994 Plan, the Company may grant NSOs to employees,
officers, directors, and consultants to the Company and its affiliates and may
grant ISOs to employees of the Company and its affiliates. As of December 31,
1998, options to purchase a total of 181,076 shares of common stock had been
exercised for cash and services under the 1994 Plan at a weighted average
exercise price of $5.71 per share. As of December 31, 1998, options to purchase
1,330,756 shares of common stock with exercise prices ranging from $3.00 to
$16.63 per share, and a weighted average exercise price per share of $8.80 were
outstanding.
Options granted under the 1994 Plan prior to December 1, 1997, generally
become exercisable at a rate of 28% of the shares subject to the option at the
end of the first year and 3% of the shares subject to the option at the end of
each calendar month thereafter. Options granted under the 1994 Plan after
December 1, 1997 generally become exercisable at a rate of 28% of the shares
subject to the option at the end of the first year and 2% of the shares subject
to the options at the end of each calendar month thereafter. The maximum term of
a stock option under the 1994 Plan is ten years; however, if the optionee who is
granted an ISO at the time of grant is a 10% Holder, the maximum term of any ISO
granted under the 1994 Plan is five years. If an optionee terminates his or her
service to the Company, the optionee may exercise only those option shares
vested as of the date of termination and must effect such exercise within three
months of termination of service for any reason other than death or disability,
one year after termination due to disability, and eighteen months after
termination due to death. The aggregate fair market value with respect to which
ISOs are exercisable for the first time by an optionee in any calendar year may
not exceed $100,000. The exercise price of ISOs granted under the 1994 Plan must
be at least 100%, 110% with respect to 10% Holders, of the fair market value of
the common stock of the Company on the date of grant. The exercise price of NSOs
granted under the 1994 Plan is the fair market value of the Company's common
stock on the date of grant or such other exercise price as is set by the Board
at the date of grant. Payment of the exercise price may be made in cash or by
shares of NPS common stock valued at the fair market value of such shares on the
date
10
of exercise or in any other form acceptable to the Board. The 1994 Plan also
allows the Company to grant stock bonuses, reload options, rights to purchase
restricted stock, and stock appreciation rights.
The 1994 Plan may be amended at any time by the Board, although certain
amendments require stockholder approval. The 1994 Plan will terminate in January
2004, unless earlier terminated by the Board.
1994 Employee Stock Purchase Plan
- ---------------------------------
In January 1994, the Board adopted the 1994 Employee Stock Purchase Plan
(ESPP) which was subsequently approved by the stockholders in February 1994.
There were a total of 90,000 shares reserved for issuance under the ESPP. This
amount was increased to 160,000 shares pursuant to Board and stockholder
approval in 1996. As of March 1, 1999, a total of 129,306 shares of common stock
had been purchased under the ESPP at prices from $2.76 to $9.1375 per share.
During 1998, under the ESPP, executive officers as a group purchased 8,178
shares at an average purchase price of $6.80 per share and all employees
(excluding executive officers) as a group purchased 23,491 shares at an average
exercise price of $6.80 per share.
The purpose of the ESPP is to assist the company in retaining the services
of its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company. The ESPP provides a means by which employees of the Company and its
affiliates may purchase common stock of the company at a discount through
accumulated payroll deductions. The rights to purchase common stock granted
under the ESPP are intended to qualify as options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code. The
ESPP is implemented by offerings of rights to eligible employees. Eligible
participants in the ESPP include all employees, including executive officers who
work at least 20 hours per week and are customarily employed by the Company or
an affiliate of the Company for at least five months per calendar year.
Generally, each offering is of 24 months' duration with purchases occurring
every six months. Participants may authorize payroll deductions of up to 15% of
their base compensation for the purchase of common stock under the ESPP. The
ESPP will terminate in January 2004.
1998 Stock Option Plan
- ----------------------
On March 3, 1998, the Board adopted the 1998 Stock Option Plan (1998 Plan),
which was subsequently approved by the stockholders on May 20, 1998. One million
shares have been authorized for issuance under the 1998 Plan. The purposes of
the 1998 Plan are to attract and retain qualified personnel, to provide
additional incentives to employees, officers, directors, and consultants of the
Company, and its affiliates, and to promote the success of the Company's
business. Under the 1998 Plan, the Company may grant NSOs to employees,
officers, directors, and consultants of the Company, and its affiliates, and may
grant ISOs to employees of the Company, and its affiliates. As of December 31,
1998, no options to purchase shares of common stock had been exercised. As of
December 31, 1998, options were outstanding to purchase 457,500 shares of common
stock with exercise prices ranging from $6.63 to $7.00 per share, and a weighted
average exercise price per share of $6.63.
Options granted under the 1998 Plan generally become exercisable at a rate
of 28% of the shares subject to the option at the end of the first year and 2%
of the shares subject to the options at the end of each calendar month
thereafter. The maximum term of a stock option under the 1998 Plan is ten years;
however, if the optionee who is granted an ISO at the time of grant is a 10%
Holder, the maximum term of any ISO granted under the 1998 Plan is five years.
If an optionee terminates his or her service to the Company, the optionee may
exercise only those option shares vested as of the date of termination and must
effect such exercise within three months of termination of service for any
reason other than death or disability, one year after termination due to
disability, and eighteen months after termination due to death. The aggregate
fair market value with respect to which ISOs are exercisable for the first time
by an optionee in any calendar year may not exceed $100,000. The exercise price
of ISOs granted under the 1998 Plan must be at least 100%, 110% with respect to
10% Holders, of the fair market value of NPS common stock on the date of grant.
The exercise price of NSOs granted under the 1998 Plan is the fair market value
of NPS common stock on the date of grant or such other exercise price as is set
by the Board at the date of grant. Payment of the exercise price may be made in
cash or by shares of NPS common stock valued at the fair market value of such
shares on the date of exercise or in any other form acceptable to the Board.
11
The 1998 Plan may be amended at any time by the Board, although certain
amendments require stockholder approval. The 1998 Plan will terminate in May
2008, unless earlier terminated by the Board.
The following table sets forth each grant of options to purchase common
stock made during the year ended December 31, 1998 to each of the Named
Executive Officers. Grants of options to each of the Named Executive Officers
were made under the 1998 Plan:
OPTION GRANTS IN 1998
SECURITIES % OF TOTAL POTENTIAL REALIZABLE VALUE AT
UNDERLYING OPTIONS EXERCISE ASSUMED ANNUAL RATES OF
OPTIONS GRANTED IN OR BASE PRICE EXPIRATION STOCK PRICE APPRECIATION
NAME GRANTED/(1)/ FISCAL YEAR PER SHARE DATE/(2)/ FOR OPTION TERM/(3)/
-------- ------------- ------------ ------------- ---------- -------------------------------
5% 10%
-------- --------
Hunter Jackson.......... 60,000 11.30% $6.63 12/04/08 $249,986 $633,513
James U. Jensen......... 30,000 5.65% $6.63 12/04/08 $124,993 $316,756
Thomas B. Marriott...... 30,000 5.65% $6.63 12/04/08 $124,993 $316,756
Robert K. Merrell....... 30,000 5.65% $6.63 12/04/08 $124,993 $316,756
Edward F. Nemeth........ 30,000 5.65% $6.63 12/04/08 $124,993 $316,756
______________________
(1) Options granted during 1998 to the executive officers of the Company are
subject to a contingent vesting schedule. See Compensation Committee Report
for a full description of the vesting schedules.
(2) These options have a ten-year term, subject to earlier termination upon
death, disability, or termination of employment.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated by assuming that the
stock price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock
price. No gain to the optionee is possible unless the stock price increases
over the option term, which will benefit all stockholders.
The following table sets forth information for fiscal year ended
December 31, 1998 with respect to (a) the exercise of stock options by the Named
Executive Officers in 1998; (b) the number of unexercised options held by the
Named Executive Officers as of December 31, 1998; and (c) the value of
unexercised in-the-money options as of December 31, 1998.
OPTION EXERCISES IN 1998 AND YEAR-END VALUE TABLE
NUMBER OF VALUE OF IN-THE-MONEY
SHARES ACQUIRED VALUE UNEXERCISED OPTIONS OPTIONS/(2)/
NAME ON EXERCISE REALIZED/(1)/ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- --------------- ------------ ----------- ------------- ----------- ---------------
Hunter Jackson......... 0 $ 0 205,000 105,000 $637,560 $63,780
James U. Jensen........ 2,700 $ 21,600 46,600 53,400 $ 0 $31,890
Thomas B. Marriott..... 3,000 $ 18,375 97,600 53,400 $263,868 $31,890
Robert K. Merrell...... 14,000 $113,375 80,600 53,400 $218,172 $31,890
Edward F. Nemeth....... 10,000 $ 58,750 166,600 53,400 $639,780 $31,890
_________________
(1) Value realized is based on the fair market value of NPS common stock on the
date of exercise (the closing sales price reported on the Nasdaq National
Market on such date) minus the exercise price, and does not necessarily
indicate that the optionee sold such stock.
(2) Represents the difference between the option exercise price and the closing
price of NPS common stock as reported on the Nasdaq National Market on
December 31, 1998 ($7.688) times the corresponding number of shares.
12
EMPLOYMENT AGREEMENTS
The Company has no employment agreements with any of its executive
officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Kuhla, a director of the Company since 1991, was a Vice President of
Plexus Ventures, Inc. from February 1994 through June 1998. The Company had a
consulting agreement with Plexus through December 31, 1995, whereunder Plexus
assisted the Company with its effort to establish a collaboration for the
Company's hyperparathyroidism program. During the years ended December 31, 1994,
1995, and 1996, the Company paid fees to Plexus totaling $34,000, $84,500, and
$400,000, respectively. Plexus may earn an additional $400,000 in fees as
payments are received from Amgen, Inc. The Company also granted Plexus an option
to purchase 20,000 shares of NPS common stock at $10.50 per share with vesting
contingent upon milestone payments from Amgen, of which Dr. Kuhla has a one-
third interest. In July 1998, the Company entered into a new Consulting
Agreement with Plexus for consulting services related to the development and
commercialization of certain Company programs. In return for such services, the
Company agreed to pay to Plexus four quarterly payments of $25,000 each,
reimbursement for out-of-pocket expenses, and a success fee related to services
to be performed by Plexus. As of July 1998, Dr. Kuhla is no longer affiliated
with Plexus.
The Company has also entered into a Consultant Services Agreement with Dr.
Kuhla, effective November 1, 1996, whereunder Dr. Kuhla will provide scientific
consulting services to the Company. In return for such consultant services in
fiscal year 1998, Dr. Kuhla received 600 shares of NPS common stock.
The Company's policy is to enter into agreements with each of its directors
and executive officers providing for the indemnification of such persons to the
fullest extent permitted by law for any liability they may incur by reason of
their service as officers and/or directors to the Company. The Company has
entered into indemnity agreements with each of its directors and executive
officers.
The Company entered into a development and license agreement with Amgen
effective December 1995 which granted Amgen the exclusive right to develop and
commercialize drugs for the treatment of HPT (and other indications other than
osteoporosis) worldwide excluding Japan, China (including Hong Kong), North and
South Korea, and Taiwan. Under the terms of the agreement with Amgen, NPS may
receive from Amgen up to an aggregate of $43.5 million in license fees, equity
purchases, and milestone payments plus royalties from any future product sales.
Amgen paid NPS a license fee of $10.0 million and purchased one million shares
of common stock for an aggregate purchase price of $7.5 million. NPS has the
option to participate with Amgen, under the direction of Amgen, in the clinical
development of a drug for primary HPT. Amgen is required to reimburse NPS for
such participation, limited to a total cost of $400,000 per year for a maximum
time period of five years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Costa, Mr. Groninger, Mr. Klein, and Dr. Timothy J. Rink served on the
Compensation Committee for fiscal year 1998. Dr. Rink withdrew from the Board
effective January 1, 1999. No officer or employee of the Company sits on the
Compensation Committee. No member of the Compensation Committee has at any time
been an officer or employee of the Company. Mr. Groninger is a brother-in-law of
Dr. Jackson, the Company's Chief Executive Officer, President and Chairman of
the Board. Mr. Groninger abstains from participating in the determination of the
proper compensation package for Dr. Jackson.
13
REPORT OF THE COMPENSATION COMMITTEE(1)
FOR 1998
COMPENSATION PHILOSOPHY
Our compensation policies and programs seek to achieve three fundamental
goals:
. to enhance stockholder value by providing compensation for executive
officers and employees that promotes progress toward the achievement
of business objectives and performance;
. to reward executive officers and employees with compensation
incentives that are adequate to retain them in the future, despite
considerable competition for talent within the pharmaceutical industry
and their individual disciplines; and
. to attract and successfully recruit qualified, talented personnel
essential to the achievement of our business objectives.
COMPENSATION COMMITTEE
To ensure a clear and centralized focus on all aspects of compensation, the
Compensation Committee was formed by the Board of Directors in January 1994. In
1998, the Compensation Committee was composed of Mr. Costa, Mr. Groninger, Mr.
Klein, and Dr. Rink. The Compensation Committee operates under a Charter adopted
by the Board of Directors. Among other things, the Charter authorizes and
directs the Compensation Committee to establish and annually review the
compensation policies applicable specifically to the Company's executive
officers and generally to employees, including the relationship between
performance and compensation. The Compensation Committee is also authorized to
review and approve the basis for and level of compensation paid to the Chief
Executive Officer and other executive officers during each fiscal year. Finally,
the Compensation Committee reviews and approves awards made under our incentive
compensation and benefit plans, including the 1998 Stock Option Plan, the 1994
Employee Stock Purchase Plan, the 1994 Equity Incentive Plan, and the 1987 Stock
Option Plan. The Committee's recommendations are brought to the full Board for
review. During 1998, no member of the Compensation Committee was a former or
current officer or employee of the company.
COMPENSATION COMPONENTS
In order to link the compensation of executive officers with the
enhancement of stockholder value, the Board has adopted a compensation package
for each executive officer that consists of a base salary and long-term
incentive compensation in the form of stock option grants. In the past, during
the first part of December of each year, the Company's management proposed
specific compensation proposals to the Compensation Committee including salary
and long-term incentives for executive officers and employees. These proposals
are based on experience, achievements, responsibilities, outside compensation
surveys of other biopharmaceutical companies, geographical economic indicators,
and advice of outside consultants. In 1998, the Committee used this information
in its deliberations.
SALARY
Base salaries represent the fixed component of the Company's executive
compensation package. Generally, salary compensation is determined by evaluating
the compensation of executives in similar positions in peer pharmaceutical
companies, the level of experience of the particular executive officer, and the
executive officer's specific responsibilities. The Compensation Committee also
evaluates the achievement of Company objectives in determining base salaries for
the executive officers. In 1998, The Committee engaged the assistance of outside
consultants to advise with respect to compensation programs and evaluations. The
base salaries for executive officers were then set at levels believed to be
competitive and supportive of our compensation philosophy.
14
LONG-TERM INCENTIVES
The purpose of long-term incentive compensation is to encourage employees
to remain with NPS and to reward them for maximizing shareholder value. Long-
term compensation awards are discretionary and are based primarily on individual
performance and the achievement of Company goals and objectives.
In general, the Compensation Committee used subjective performance factors
to evaluate the granting of stock options to executive officers during 1998.
These factors included, but were not limited to, the following:
. progress in clinical trials and regulatory matters;
. the planning of appropriate collaborative arrangements and the
procurement and performance of ongoing collaborative arrangements with
pharmaceutical and biotechnology companies;
. the officer's overall individual performance in his or her position
and relative contribution during the year; and
. the Board of Directors' desire to retain the executive officer despite
considerable competition for executive talent within his/her
discipline and the industry in general.
This year, the Compensation Committee undertook to further align executive
officer compensation with the achievement of Company objectives. Accordingly,
the Compensation Committee agreed that awards to Senior Management of long-term
incentives in the form of stock options should be subject to the attainment of
specific goals. The executive officers were granted more optioned shares than in
previous years, however, vesting of two-thirds of these optioned shares are
contingent on the occurrence of certain events. The optioned shares are divided
into three equal portions, each with its own vesting and exercise schedule, as
follows:
. One-third of the optioned shares will vest over four years, under the
same vesting schedule as previously used and described above.
. One-third of the optioned shares will vest contingent upon the closing
of a strategic alliance, business collaboration, license agreement,
joint venture, or other third party agreement with respect to certain
NPS programs. Thirty percent of these shares will vest upon the
occurrence of this event, and the remaining 70% will vest over three
years. If this event has not occurred by a specified date, optioned
shares that would have vested will be forfeited, along with a
percentage each month until the event occurs.
. One-third of the optioned shares will vest immediately upon the
closing of a second collaboration or will be forfeited if the event
has not closed by the specified date.
The Committee agreed that under this structure of vesting, if the
objectives were achieved, there would be significant benefit to the Company's
shareholders. The Compensation Committee may modify the above criteria or select
other performance factors with respect to executive bonus awards during a given
fiscal year.
SUMMARY
The Compensation Committee believes that our executive officers are
committed to achieving positive long-term performance and enhanced stockholder
value, and that the compensation policies and programs discussed in this report
have motivated them to work toward these goals.
CEO EVALUATION
The Compensation Committee completed a thorough and formal evaluation of
the CEO's performance. The evaluation included a review of the Company's
Operating Plan and CEO Objectives. A written self evaluation was completed by
the CEO and delivered to the Committee. Each member of the Committee
independently evaluated the CEO. The Committee then met to discuss the CEO's
self-evaluation and each Committee member's evaluation. The
15
Chairman then prepared an initial consolidated evaluation and met with the CEO
to review the initial evaluation and the evaluation process. A consolidated
evaluation was then finalized. The Committee Chairman then reported to the
outside directors and the CEO the results of the evaluation at the December 1998
Board meeting.
CEO COMPENSATION
The Chief Executive Officer was a founder of the Company in 1986 and has
served in that capacity since then. His compensation package has historically
been below that of other chief executive officers in comparable companies in the
industry. In order to determine the appropriate salary and stock option grant
for the Chief Executive Officer, the Compensation Committee considered current
conditions, the salaries of other chief executive officers in the biotechnology
industry, the results of the formal evaluation of the CEO, and the CEO and
Company accomplishments in 1998. Significant progress was made in several areas
and the Company met or exceeded most of its performance goals. In the
Committee's review of CEO compensation, the following developments were
considered: Dr. Jackson's overall leadership of the Company as President, CEO,
and Chairman of the Board; the overall successful development of the Company's
strategic partnerships; the continued progress of NPS compounds in the pipeline
and through the clinic, including the initiation of certain clinical trials.
POLICY REGARDING DEDUCTIBILITY
We are required to disclose our policy regarding qualifying executive
compensation for deductibility under Section 162(m) of the Code, which provides
that, for purposes of regular income tax and the alternative minimum tax, the
allowable deduction for compensation paid or accrued with respect to a covered
employee of a publicly-held corporation is limited to no more than $1 million
per year. We do not anticipate that compensation payable to any executive
officer will exceed $1 million for fiscal year 1998. The Committee will continue
to evaluate the advisability of qualifying the deductibility of such
compensation in the future.
Compensation Committee
Santo J. Costa, Chairman
James G. Groninger
Joseph Klein, III
March 1999
16
PERFORMANCE MEASUREMENT COMPARISON (1)
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN*
AMONG NPS PHARMACEUTICALS, INC., THE NASDAQ STOCK MARKET-US
INDEX AND THE NASDAQ PHARMACEUTICALS INDEX
[GRAPH APPEARS HERE]
NPS PHARMACEUTICALS, INC. NASDAQ STOCK MARKET-US NASDAQ PHARMACEUTICALS
5/26/94 100 100 100
Jun-94 82 96 94
Dec-94 68 103 98
Jun-95 86 128 123
Dec-95 314 146 179
Jun-96 241 165 181
Dec-96 200 180 179
Jun-97 175 201 183
Dec-97 141 220 185
Jun-98 130 265 189
Dec-98 140 309 237
*$100 INVESTED ON 5/26/94 IN STOCK OR INDEX, INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
_______________
(1) The "Compensation Committee Report" and the "Performance Measurement
Comparison" chart are not "soliciting material," are not deemed filed with the
Commission and are not to be incorporated by reference in any filing of the
Company under the Securities Act or the Exchange Act, whether made before or
after the date hereof and irrespective of any general incorporation language in
such filing.
17
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
James U. Jensen,
Secretary
April 21, 1999
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 is available without charge upon written
request to:
NPS Pharmaceuticals, Inc.
Attn: Investor Relations
420 Chipeta Way
Salt Lake City, Utah 84108
18
NPS PHARMACEUTICALS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED 1999
1. PURPOSE.
1.1 The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of NPS Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph 1.2,
which are designated as provided in subparagraph 2.2, may be given an
opportunity to purchase stock of the Company.
1.2 The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
1.3 The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
1.4 The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2.3. Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
2.2 The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
2.2.1 To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
2.2.2 To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
2.2.3 To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully
effective.
2.2.4 To amend the Plan as provided in paragraph 13.
19
2.2.5 Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of
the Company.
2.3 The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
3.1 Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate two hundred sixty thousand
(260,000) shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
3.2 The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (a) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (b) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
5. ELIGIBILITY.
5.1 Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2.2, to
employees of any Affiliate of the Company. Except as provided in subparagraph
5.2, an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any
20
Affiliate shall be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee's customary employment with the Company or such
Affiliate is at least twenty (20) hours per week and at least five (5) months
per calendar year.
5.2 The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
5.2.1 the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the
purchase price of such right;
5.2.2 the Offering Period (as defined below) for such right shall
begin on its Offering Date and end coincident with the end of such
Offering; and
5.2.3 the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before
the end of the Offering Period (as defined below) for such Offering, he or
she will not receive any right under that Offering.
5.3 No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of
this subparagraph 5.3, the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
5.4 An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
5.5 Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
6.1 On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in Section 7(a)) during the period which begins
on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no more than twenty-seven (27) months after the
Offering Date (the "Offering Period"). In connection with each Offering made
under this Plan, the
21
Board or the Committee shall specify a maximum number of shares which may be
purchased by any employee as well as a maximum aggregate number of shares which
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering which contains more than one Purchase
Date and a corresponding Purchase Period (as defined in the Offering), the Board
or the Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
6.2 The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
6.2.1 an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
6.2.2 an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
6.3 In the event that the fair market value of the shares on a Purchase
Date of an Offering Period is less than the fair market value of the shares on
the Offering Date for such Offering Period, then every participant shall
automatically (a) be withdrawn from such Purchase Period at the close of such
Purchase Date (after the acquisition of shares for such Purchase Period), and
(b) be re-enrolled on the first business day subsequent to such Purchase Date
with such date now constituting the "Offering Date" for all purposes, including
determination of the Purchase Price of such right.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
7.1 An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time specified in
the Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to the maximum percentage specified by the
Board or the Committee of such employee's Earnings during the Offering Period.
"Earnings" is defined as the total compensation paid to an employee, including
all salary, wages (including amounts elected to be deferred by the employee,
that would otherwise have been paid, under any cash or deferred arrangement
established by the Company), overtime pay, commissions, bonuses, and other
remuneration paid directly to the employee, but excluding profit sharing, the
cost of employee benefits paid for by the Company, education or tuition
reimbursements, imputed income arising under any Company group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company under any employee benefit plan, and similar items of compensation. The
payroll deductions made for each participant shall be credited to an account for
such participant under the Plan and shall be deposited with the general funds of
the Company. A participant may reduce (including to zero), increase or begin
such payroll deductions after the beginning of any Purchase Period only as
provided for in the Offering. A participant may make additional payments into
his or her account only if specifically provided for in the Offering and only if
the participant has not had the maximum amount withheld during the Purchase
Period.
7.2 At any time during an Offering Period a participant may terminate his
or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of
22
withdrawal in such form as the Company provides. Such withdrawal may be elected
at any time prior to the end of the Offering Period except as provided by the
Board or the Committee in the Offering. Upon such withdrawal from the Offering
by a participant, the Company shall distribute to such participant all of his or
her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire stock for the participant) under the
Offering, without interest, and such participant's interest in that Offering
shall be automatically terminated. A participant's withdrawal from an Offering
will have no effect upon such participant's eligibility to participate in any
other Offerings under the Plan but such participant will be required to deliver
a new participation agreement in order to participate in subsequent Offerings
under the Plan.
7.3 Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
7.4 Rights granted under the Plan shall not be transferable, and, except
as provided in Section 14, shall be exercisable only by the person to whom such
rights are granted.
8. EXERCISE.
8.1 On each purchase date, as defined in the relevant Offering (a
"Purchase Date"), each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of shares
which is less than the amount required to purchase one share of stock on the
final Purchase Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7.2, or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
the participant after said final Purchase Date of the Offering, without
interest. The amount, if any, of accumulated payroll deductions remaining in
any participant's account after the purchase of shares which is equal to the
amount required to purchase whole shares of stock on the final Purchase Date of
an Offering shall be distributed in full to the participant after such Purchase
Date, without interest.
8.2 No rights granted under the Plan may be exercised to any extent unless
the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If on a Purchase Date of any Offering hereunder the Plan is
not so registered, no rights granted under the Plan or any Offering shall be
exercised on said Purchase Date and the Purchase Date shall be delayed until the
Plan is subject to such an effective registration statement, except that the
Purchase Date shall not be delayed more than two (2) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered, no rights granted under
the Plan or any Offering shall be exercised and all payroll deductions
accumulated during the Offering Period (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
23
9. COVENANTS OF THE COMPANY.
9.1 During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
9.2 The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
24
12. ADJUSTMENTS UPON CHANGES IN STOCK.
12.1 If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
rights will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights.
12.2 In the event of: (a) a dissolution or liquidation of the Company; (b)
a merger or consolidation in which the Company is not the surviving corporation;
(c) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (d) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, as determined by the Board in its sole discretion (i)
any surviving corporation may assume outstanding rights or substitute similar
rights for those under the Plan, (ii) such rights may continue in full force and
effect, or (iii) participants' accumulated payroll deductions may be used to
purchase Common Stock immediately prior to the transaction described above and
the participants' rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
13.1 The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
13.1.1 Increase the number of shares reserved for rights under the
Plan;
13.1.2 Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3")); or
13.1.3 Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
13.2 Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted or except as
necessary to comply with any laws or governmental regulation.
25
14. DESIGNATION OF BENEFICIARY.
14.1 A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to him of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death during an Offering Period.
14.2 Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company, the Company, in its discretion, may deliver such shares and/or cash
to the spouse or to any one or more dependents or relatives of the participant,
or if no spouse, dependent or relative is known to the Company, then to such
other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
15.1 The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on midnight, January 6, 2004. No
rights may be granted under the Plan while the Plan is suspended or after it is
terminated.
15.2 Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom such rights were granted or
except as necessary to comply with any laws or governmental regulation.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company.
26
NPS PHARMACEUTICALS, INC.
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
AS AMENDED 1999
1. PURPOSE
-------
1.1 The purpose of the 1994 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of NPS Pharmaceuticals,
Inc. (the "Company") who is not otherwise an employee of the Company or of any
Affiliate of the Company (each such person being hereafter referred to as a
"Non-Employee Director") will be given an opportunity to purchase stock of the
Company.
1.2 The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
1.3 The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION
2.1 The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2.2.
2.2 The Board may delegate administration of the Plan to a committee
composed of not fewer than two members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN
3.1 Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate two hundred sixty thousand (260,000)
shares of the Company's common stock. If any option granted under the Plan
shall for any reason expire or otherwise terminate without having been exercised
in full, the stock not purchased under such option shall again become available
for the Plan.
3.2 The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY
4.1 Options shall be granted only to Non-Employee Directors of the
Company.
27
5. NON-DISCRETIONARY GRANTS
5.1 Each person who is, after the date of approval of the Plan by the
Board elected for the first time to be a Non-Employee Director shall, upon the
date of his initial election to be a Non-Employee Director by the Board or
stockholders of the Company, be granted an option to purchase 15,000 shares of
common stock of the Company on the terms and conditions set forth herein.
5.2 On December 1, of each year, commencing with December 1, 1994, each
person who is then a Non-Employee Director and has been a Non-Employee Director
for at least three months, shall be granted an option to purchase 3,000 shares
of common stock of the Company on the terms and conditions set forth herein.
6. OPTION PROVISIONS
Each option shall contain the following terms and conditions:
6.1 The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date 10 years from
the date of grant ("Expiration Date"). If the optionee's service as a Non-
Employee Director of the Company or as an employee of or consultant to the
Company or any Affiliate of the Company, terminates for any reason or for no
reason, the option shall terminate on the earlier of the Expiration Date or the
date 12 months following the date of termination of service; provided, however,
that if such termination of service is due to the optionee's death, the option
shall terminate on the earlier of the Expiration Date or 18 months following the
date of the optionee's death. In any and all circumstances, an option may be
exercised following termination of the optionee's service as a Non-Employee
Director of the Company only as to that number of shares as to which it was
exercisable on the date of termination of such service under the provisions of
subparagraph 6.5.
6.2 The exercise price of each option shall be 100% of the fair market
value of the stock subject to such option on the date such option is granted.
6.3 Payment of the exercise price of each option is due in full in cash
upon any exercise; the optionee may elect to make payment of the exercise price
under one of the following alternatives:
6.3.1 Payment of the exercise price per share in cash at the time of
exercise; or
6.3.2 Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal: (a)
payment by delivery of shares of common stock of the Company already owned by
the optionee and owned free and clear of any liens, claims, encumbrances or
security interests, which common stock shall be valued at its fair market value
on the date of exercise; or (b) through surrender of shares of common stock
available for exercise under the option, which common stock shall be valued at
its fair market value on the date of exercise and owned free and clear of any
liens, claims, encumbrances, or security interests.
6.3.3 Payment by a combination of the methods of payment specified in
subparagraphs 6.3.1 and 6.3.2 above.
28
Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company prior to the
issuance of shares of the Company's common stock.
6.4 The Board or Committee may, in its discretion, authorize all or a
portion of the Nonstatutory Stock Options to be granted to an Optionee to be on
terms that permit transfer by such Optionee to (a) the spouse, children or
grandchildren of the Optionee ("Immediate Family Members"), (b) a trust or
trusts for the exclusive benefit of such Immediate Family members, or (c) a
partnership in which such Immediate Family Members are the only partners,
provided that (i) there may be no consideration or any such transfer, (ii) the
stock option agreement pursuant to which such Options are granted must expressly
provide for transferability in a manner consistent with this Section, (iii)
subsequent transfers of transferred options shall be prohibited except those
occurring by will or the laws of descent and distribution, and (iv) the Options
shall continue to be subject to all the terms and conditions that applied prior
to transfer in the same manner and to the same extent as non-transferred
options, including Sections 6.5 Vesting; 6.6 Securities Law Compliance. The
Options shall be exercisable by the transferee only to the extent, and for the
periods specified in such sections. The Company expressly disclaims any
obligation to provide notice to a transferee of the termination of the Option.
Unless transfer by an Optionee is specifically provided for in the Option
Agreement, a Nonstatutory Stock Option shall not be transferable except by will
or by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder (a "QDRO"), and shall be
exercisable during the lifetime of the person to whom the Statutory Stock Option
is granted only by such person or any transferee pursuant to a QDRO.
6.5 The option shall become exercisable in installments from the date of
grant at the rates set forth below. Twenty-eight percent of the shares shall
vest at 5:00 p.m., Mountain Standard Time ("MST"), on the first anniversary of
the date of grant and three percent of the remaining shares shall vest at 5:00
p.m. MST, on each monthly anniversary date thereafter (i.e., grant date December
1, 1999, 28% vest at 5:00 p.m. MST on December 1, 2000 MST, and 3% vest at 5:00
p.m. MST on the 1st day of each month thereafter), provided that the optionee
has, during the entire period prior to such vesting date, continuously served as
a Non-Employee Director or as an employee of or consultant to the Company or any
Affiliate of the Company, whereupon such option shall become fully exercisable
in accordance with its terms with respect to that portion of the shares
represented by that installment.
6.6 The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6.4, as a condition of exercising any such
option: (a) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (b)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (a) the issuance of the shares upon the exercise of the
option has been registered under a then-currently-effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (b), as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then-applicable securities laws.
6.7 Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities
29
Act or, if such shares are not then so registered, the Company has determined
that such exercise and issuance would be exempt from the registration
requirements of the Securities Act.
7. COVENANTS OF THE COMPANY
7.1 During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
7.2 The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS
9.1 Neither an optionee nor any person to whom an option is transferred
under subparagraph 6.4 shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
9.2 Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any Non-
Employee Director with or without cause.
9.3 No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
9.4 In connection with each option made pursuant to the Plan, it shall be
a condition precedent to the Company's obligation to issue or transfer shares to
a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK
10.1 If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend
30
in property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Plan and outstanding options will be appropriately adjusted in the class(es) and
maximum number of shares subject to the Plan and the class(es) and number of
shares and price per share of stock subject to outstanding options.
10.2 In the event of: (a) a merger or consolidation in which the Company
is not the surviving corporation; (b) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; or (c) any other capital reorganization in which more than 50% of the
shares of the Company entitled to vote are exchanged, the time during which
options outstanding under the Plan may be exercised shall be accelerated and the
options terminated if not exercised prior to such event.
11. AMENDMENT OF THE PLAN
11.1 The Board at any time, and from time to time, may amend the Plan.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within 12 months before or after the adoption of the amendment,
where the amendment will:
11.1.1 Increase the number of shares which may be issued under the
Plan;
11.1.2 Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to comply with the requirements of Rule 16b-3); or
11.1.3 Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to comply with the requirements of
Rule 16b-3.
11.2 Rights and obligations under any option granted before any amendment
of the Plan shall not be altered or impaired by such amendment unless (a) the
Company requests the consent of the person to whom the option was granted and
(b) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN
12.1 The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on midnight, January 6, 2004. No
options may be granted under the Plan while the Plan is suspended or after it is
terminated.
12.2 Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
12.3 The Plan shall terminate upon the occurrence of any of the events
described in Section 10.2 above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE
13.1 The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
31
13.2 No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13.1 above has been met.
32
NPS PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitutes and appoints Hunter Jackson and James U. Jensen
(with full power to act alone), the attorneys and proxies of the undersigned,
with power of substitution to each, to vote all shares of common stock of NPS
Pharmaceuticals, Inc., registered in the name provided herein which the
undersigned is entitled to vote, at the 1999 Annual Meeting of Stockholders.
This meeting will be held at the Marriott-University Park Hotel located at 500
South Wakara Way, Salt Lake City, Utah on May 26, 1999 at 3:00 p.m. Mountain
Time. This Proxy is given in accordance with the following instructions, and
carries discretionary authority related to any and all other matters that may
come before the meeting and any adjournments thereof.
1. To elect eight (8) directors as set forth in the Proxy Statement:
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as indicated to the contrary below) to vote for all nominees listed below:
Santo J. Costa, James G. Groninger, Hunter Jackson, James U. Jensen,
Skip Klein, Donald E. Kuhla, Thomas N. Parks, Peter G. Tombros
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below)
________________________________________________________________________________
2. To approve an increase of 200,000 shares of common stock for issuance
under two of the Company's equity incentive plans, as follows: (a)
100,000 shares under the Employee Stock Purchase Plan; and (b) 100,000
shares under the Non-Employee Directors' Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To ratify the appointment of KPMG LLP as independent auditors for the
Company for the 1999 fiscal year:
[_] FOR [_] AGAINST [_] ABSTAIN
This Proxy when properly executed will be voted as directed above. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE EIGHT (8)
DIRECTORS; FOR THE APPROVAL OF AN INCREASE OF 100,000 SHARES OF COMMON STOCK FOR
ISSUANCE UNDER EACH OF THE FOLLOWING EQUITY INCENTIVE PLANS (A) THE EMPLOYEE
STOCK PURCHASE PLAN, AND (B) THE NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN AS
SET FORTH IN THE PROXY STATEMENT; AND, TO RATIFY THE BOARD'S APPOINTMENT OF KPMG
LLP AS NPS'S INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR.
Dated___________________________________________________
________________________________________________________
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Please sign here
Do you plan to attend the Annual Meeting? [_]Yes [_] No
Please date this Proxy and sign your name exactly as it
appears hereon. Joint owners should each sign. When
signing as an agent, attorney, administrator, executor,
guardian, or trustee, please indicate your title as
such. If executed by a corporation, the Proxy should be
signed in the corporate name by a duly authorized
officer who should indicate his title. Please date,
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sign, and mail this proxy card in the enclosed envelope.
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