SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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
VICAL INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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VICAL INCORPORATED
9373 Towne Centre Drive, Suite 100
San Diego, CA 92121
(858) 646-1100
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Vical Incorporated which will be held on Thursday, May 18, 2000, at 9:00 a.m.
local time, at the Embassy Suites La Jolla, 4550 La Jolla Village Drive, San
Diego, California.
The formal notice of the Annual Meeting and the Proxy Statement have
been made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return,
at an early date, the enclosed proxy in the prepaid envelope addressed to
ChaseMellon Shareholder Services, L.L.C., our agent, to ensure that your shares
will be represented. YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND
RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING IN PERSON.
A copy of the Company's Annual Report to Stockholders is also enclosed.
The Board of Directors and Management look forward to seeing you at the
meeting.
Sincerely yours,
/s/ ALAIN B. SCHREIBER, M.D.
-------------------------------------
Alain B. Schreiber, M.D.
President and Chief Executive Officer
VICAL INCORPORATED
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2000
------------
To the Stockholders of Vical Incorporated:
The Annual Meeting of Stockholders of Vical Incorporated, a Delaware
corporation (the "Company") will be held at the Embassy Suites La Jolla, 4550 La
Jolla Village Drive, San Diego, California, on Thursday, May 18, 2000, at 9:00
a.m. local time, for the following purposes:
1. To elect two Class II directors;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors; and
3. To transact such other business as may properly come before the
Annual Meeting and any adjournment of the Annual Meeting.
Stockholders of record as of the close of business on March 27, 2000,
are entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. A complete list of stockholders entitled to vote will be available at
the Secretary's office, 9373 Towne Centre Drive, Suite 100, San Diego, for ten
days before the meeting.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN
IF YOU PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR
VOTE AT THE MEETING.
By Order of the Board of Directors.
/s/ MARTHA J. DEMSKI
-----------------------------------
Martha J. Demski
Vice President, Chief Financial Officer,
Secretary and Treasurer
San Diego, California
April 10, 2000
VICAL INCORPORATED
------------
PROXY STATEMENT
------------
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Vical Incorporated, a Delaware corporation (the
"Company"), of proxies in the accompanying form to be used at the Annual Meeting
of Stockholders to be held at the Embassy Suites La Jolla, 4550 La Jolla Village
Drive, San Diego, California, on Thursday, May 18, 2000, at 9:00 a.m. local time
and any adjournment thereof (the "Annual Meeting"). The shares represented by
the proxies received in response to this solicitation and not revoked will be
voted at the Annual Meeting. A proxy may be revoked at any time before it is
exercised by filing with the Secretary of the Company a written revocation or a
duly executed proxy bearing a later date or by voting in person at the Annual
Meeting. On the matters coming before the Annual Meeting for which a choice has
been specified by a stockholder by means of the ballot on the proxy, the shares
will be voted accordingly. If no choice is specified, the shares will be voted
FOR the election of the nominees for directors listed in this Proxy Statement
and FOR approval of Proposal 2 described in the Notice of Annual Meeting and in
this Proxy Statement.
Stockholders of record at the close of business on March 27, 2000, are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, there were 19,821,998 shares of Common Stock outstanding
and entitled to vote. Each holder of Common Stock is entitled to one vote for
each share held as of the record date.
Directors are elected by a plurality vote. The other matters submitted
for stockholder approval at this Annual Meeting will be decided by the
affirmative vote of a majority of shares present in person or represented by
proxy and entitled to vote on each such matter. Abstentions with respect to any
matter are treated as shares present or represented and entitled to vote on that
matter and thus have the same effect as negative votes. If shares are not voted
by the broker who is the record holder of the shares, or if shares are not voted
in other circumstances in which proxy authority is defective or has been
withheld with respect to any matter, these non-voted shares are not deemed to be
present or represented for purposes of determining whether stockholder approval
of that matter has been obtained.
The expense of printing and mailing proxy materials will be borne by
the Company. In addition to the solicitation of proxies by mail, solicitation
may be made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid to such persons for such solicitation. The Company will reimburse brokerage
firms and others for their reasonable expenses in forwarding solicitation
materials to beneficial owners of the Company's Common Stock. The Company has
retained Beacon Hill Partners, Inc. at a cost of approximately $2,500, plus
reimbursement of expenses, to assist in the solicitation of proxies.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Vical Incorporated, Investor
Relations, 9373 Towne Centre Drive, Suite 100, San Diego, California,
92121-3088; (858) 646-1127. To provide the Company sufficient time to arrange
for reasonable assistance or accommodation, please submit all requests by April
19, 2000.
This Proxy Statement and the accompanying form of proxy are being
mailed on or about April 10, 2000, to all stockholders entitled to vote at the
meeting.
IMPORTANT
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO
THAT, WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT,
YOUR SHARES CAN BE VOTED. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR
VOTE AT THE ANNUAL MEETING.
-2-
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES
The Company has three classes of directors serving staggered three-year
terms. Class II and Class III consist of three directors each and Class I
consists of two directors. Two Class II directors are to be elected at the
Annual Meeting to serve until the 2003 Annual Meeting and until their respective
successors shall have been elected and qualified or until such directors'
earlier resignation, removal from office, death or incapacity. The terms of the
Class III and Class I directors expire in 2001 and 2002, respectively. One Class
II director's seat is vacant and this seat will remain vacant following the
Annual Meeting as the Nominating Committee has not yet identified a suitable
candidate for this seat. Shares represented by the enclosed proxy can not be
voted for a greater number of persons than the number of nominees named.
Unless authority to vote for directors is withheld, it is intended that
the shares represented by the enclosed proxy will be voted for the election of
R. Gordon Douglas, Jr., M.D. and M. Blake Ingle, Ph.D. Dr. Douglas and Dr. Ingle
are members of the Board of Directors of the Company. Each of the nominees has
been nominated as a Class II director by the Company's Board of Directors. In
the event any of such nominees becomes unable or unwilling to accept nomination
or election, the shares represented by the enclosed proxy will be voted for the
election of the other nominee and such other nominee as the Board of Directors
may select. The Board of Directors has no reason to believe that any such
nominee will be unable or unwilling to serve.
There are no family relationships among executive officers or directors
of the Company.
Set forth below is information regarding the nominees for Class II
directors and the continuing directors of Class III and Class I.
Class II
R. GORDON DOUGLAS, JR., M.D., is Chairman of our Board of Directors and
has been one of our directors since May 1999. Dr. Douglas retired in April 1999
from Merck & Co., Inc., where he had been President of Merck Vaccines since
1991, and a member of the Merck Management Committee. Prior to joining Merck in
1989, Dr. Douglas was a physician and academician. His teaching and
administrative affiliations included Baylor College of Medicine, University of
Rochester School of Medicine, and Cornell University Medical College. His
medical practice included affiliations with The New York Hospital, Memorial
Sloan-Kettering Cancer Center, The Rockefeller University Hospital and North
Shore University Hospital. He has served as a visiting professor at a number of
medical schools and as a consultant to several pharmaceutical and biomedical
companies. Dr. Douglas is a graduate of Princeton University and Cornell
University Medical College. He received his medical staff training at The New
York Hospital and Johns Hopkins Hospital and is Board Certified in Internal
Medicine. He is a member of the Institute of Medicine, the Association of
American Physicians, the Infectious Diseases Society of America and numerous
other organizations.
M. BLAKE INGLE, PH.D., has been one of our directors since June 1996.
Dr. Ingle is a partner in Inglewood Ventures. From 1993 to 1996 Dr. Ingle was
Chief Executive Officer of Canji Inc., a privately held gene therapy company
acquired by Schering Plough in 1996, and he served from 1995 to 1996 as Acting
Chief Executive Officer of Telios Pharmaceuticals, Inc., subsequently acquired
by Integra Life Sciences. Dr. Ingle previously worked with Bayer. From 1980 to
1993, Dr. Ingle held a variety of positions with IMCERA Group, Inc.,
subsequently Mallinckrodt, Inc., including Chief Scientific Officer, Chief
Financial Officer and President of its Pittman Moore division and most recently
as President and
-3-
Chief Executive Officer of IMCERA Group, Inc. Dr. Ingle also
serves as a member of the Board of Directors of Corvas International, Inc., Inex
Pharmaceuticals and Burnham Institute. He received his B.S. degree from Fort
Lewis College and his M.S. and Ph.D. from Colorado State University.
Class III
PATRICK F. LATTERELL has been one of our directors since February 1992.
He has been a General Partner with Venrock Associates since 1989. From 1985 to
1989, he was a General Partner at Rothschild Ventures Inc., "Rothschild," where
he was responsible for Rothschild's healthcare ventures. Prior to joining
Rothschild, Mr. Latterell was Manager of Corporate Development with Syntex
Corporation from 1983 through 1985. Mr. Latterell currently serves as a director
of Oratec Interventions Inc., Signal Pharmaceuticals Inc. and several privately
held biomedical companies. He received S.B. degrees in Biological Sciences and
Economics from the Massachusetts Institute of Technology and an M.B.A. from the
Stanford University Graduate School of Business.
GARY A. LYONS has been one of our directors since March 1997. He has
been President, Chief Executive Officer and Director of Neurocrine Biosciences,
Inc. since 1993 and serves as a Director of IntraBiotics Pharmaceuticals since
December 1999. From 1983 to 1993, Mr. Lyons held various executive positions at
Genentech, Inc., including Vice President of Business Development, Vice
President of Sales, and Director of Sales and Marketing. From 1973 to 1983, Mr.
Lyons worked with American Critical Care, serving as Director of Sales from 1980
to 1983. Mr. Lyons holds a B.A. in Marine Biology from the University of New
Hampshire and an M.B.A. from Northwestern University, JL Kellogg Graduate School
of Management.
DALE A. SMITH has been one of our directors since August 1995. From
1979 until his retirement in July 1995, Mr. Smith was Group Vice President of
Baxter International Inc., where he was responsible for the biotechnology group
and various corporate research groups including applied sciences, blood
substitutes, venture technology and Baxter International Inc.'s European
research center. Currently he serves as a business advisor to several companies
and as a Board Member of Cerus Corporation. Mr. Smith holds a B.A. in Business
Administration from the University of Washington, Seattle.
Class I
ALAIN B. SCHREIBER, M.D., has been our President, Chief Executive
Officer and a director since May 1992. Prior to joining us, Dr. Schreiber held
various executive level positions at Rhone-Poulenc Rorer Inc. from July 1985 to
April 1992, lastly as Senior Vice President of Discovery Research. From October
1982 to June 1985, Dr. Schreiber served as Biochemistry Department Head at
Syntex Corp. Dr. Schreiber is a director of Spiros Development Corp. II Inc. and
is also an appointed adviser for foreign trade of the Belgian Foreign Trade
Counsel in the United States. He received his undergraduate degree and M.D. from
the Free University of Brussels, after which he was awarded a fellowship in
immunology at the Weizmann Institute.
PHILIP M. YOUNG has been one of our directors since February 1992. He
has been a general partner of U.S. Venture Partners, a venture capital firm,
since April 1990. Mr. Young is a director of The Immune Response Corporation,
Zoran Corporation and several privately held companies. He received a B.M.E.
from Cornell University, an M.S. from George Washington University and an M.B.A.
from the Harvard Business School.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES
FOR CLASS II DIRECTOR SET FORTH ABOVE.
-4-
BOARD MEETINGS AND COMMITTEES
The Board of Directors held seven meetings during the year ended
December 31, 1999. The Board of Directors has appointed a Compensation
Committee, a Stock Plan Committee, an Audit Committee and a Nominating
Committee.
The members of the Compensation Committee are Dr. Ingle, Mr. Latterell
and Mr. Lyons. The Compensation Committee held one meeting during 1999. The
Compensation Committee's functions are to assist in the implementation of, and
provide recommendations with respect to general and specific compensation
policies and practices of the Company.
The members of the Stock Plan Committee are Dr. Ingle, Mr. Latterell
and Mr. Lyons. The Stock Plan Committee held two meetings during 1999. The Stock
Plan Committee's functions are to assist in the administration of, and grant
options under, the Stock Incentive Plan of Vical Incorporated (the "Stock
Incentive Plan") and to administer the 1992 Directors' Stock Option Plan of
Vical Incorporated (the "1992 Directors' Stock Plan").
The members of the Audit Committee are Dr. Douglas, Mr. Smith and Mr.
Young. The Audit Committee held one meeting during 1999. The Audit Committee's
functions are to review the scope of the annual audit, monitor the independent
auditor's relationship with the Company, advise and assist the Board of
Directors in evaluating the auditor's examination, supervise the Company's
financial and accounting organization and financial reporting, and nominate for
stockholder approval at the annual meeting, with the approval of the Board of
Directors, a firm of certified public accountants whose duty it is to audit the
financial records of the Company for the fiscal year for which it is appointed.
The members of the Nominating Committee are Dr. Douglas, Mr. Smith and
Mr. Young. The Nominating Committee held no meetings during 1999. The Nominating
Committee's function is to select and nominate individuals to fill vacancies in
the Company's Board of Directors. The Nominating Committee will not consider
nominees recommended by security holders.
DIRECTORS' COMPENSATION
Non-employee directors receive an annual fee of $10,000 for service on
the Board of Directors and an additional annual fee of $4,000 for service on one
or more committees of the Board of Directors. Dr. Douglas receives $15,000 (in
lieu of the $10,000 annual fee which the other non-employee directors receive)
for serving as Chairman of the Board of Directors. Additionally, he received an
option to purchase 10,000 shares of common stock upon becoming Chairman. This
option vests 25% on the first anniversary of the date of grant, with the
remaining shares vesting quarterly over three years. All fees are paid on or
about February 15 following the year during which services were rendered.
Directors are reimbursed for their expenses for each meeting attended. Under the
1992 Directors' Stock Plan, options to purchase a total of 202,500 shares of
Common Stock were granted to non-employee directors. Under the Stock Incentive
Plan, as amended, each new non-employee director of the Company, on the date of
his or her election to the Board, will receive an option to purchase 20,000
shares of Common Stock at the fair market value on the date of grant. These
options will generally vest 25% on the first anniversary of the date of grant,
with the remaining shares vesting quarterly over three years. Each non-employee
director who has served on the Board for at least six months on the date of each
of the Company's regular annual meetings also receives an annual grant of an
option to purchase 12,500 shares which shall become exercisable in full on the
date of the regular annual meeting of stockholders following the date of grant.
The Chairman of the Board of Directors also receives an annual grant of an
option to purchase 20,000 shares (in lieu of the 12,500 shares which the other
non-employee director receive) which shall also become exercisable in full on
the date of the regular annual meeting of stockholders following the date of
grant. Of the shares available under the Stock Incentive Plan, no more than 30%
in the aggregate are
-5-
available for grant to non-employee directors. The Board of Directors may
provide discretionary grants to non-employee directors. Under the Stock
Incentive Plan, options to purchase 92,500 shares of Common Stock were granted
to directors in 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Dr.
Ingle, Mr. Lyons and Mr. Latterell, who are non-employee directors. The Stock
Plan Committee of the Board of Directors also consists of Dr. Ingle, Mr. Lyons
and Mr. Latterell.
CERTAIN TRANSACTIONS
See "Executive Compensation" and "Employment Agreements."
-6-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 1, 2000,
as to shares of the Company's Common Stock beneficially owned by: (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of the
Company's officers named under "Executive Compensation--Summary Compensation
Table," and (iv) all directors and executive officers of the Company as a group.
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
OWNED (1) OWNED
------------ ------------
State of Wisconsin Investment Board(2)........................................ 1,252,000 6.33%
P.O. Box 7842, Madison, WI 53707
Alain B. Schreiber(3)......................................................... 596,275 2.98%
Deirdre Y. Gillespie(4)....................................................... 58,100 *
Martha J. Demski(5)........................................................... 146,732 *
Jon A. Norman(6).............................................................. 103,788 *
George J. Gray(7)............................................................. 102,238 *
R. Gordon Douglas, Jr.(8)..................................................... 0 *
Patrick F. Latterell(9)....................................................... 91,701 *
Gary A. Lyons (10)............................................................ 26,250 *
Philip M. Young(11)........................................................... 60,514 *
Dale A. Smith(12)............................................................. 47,500 *
M. Blake Ingle(13)............................................................ 39,063 *
All directors and executive officers as a group
(11 persons)(14)........................................................... 1,346,574 6.38%
- ----------------
* Less than 1%.
(1) To the Company's knowledge, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) Based on a Schedule 13G provided to the Company by the State of
Wisconsin Investment Board dated February 10, 2000.
(3) Includes 10,170 shares held in trust for the benefit of Dr. Schreiber's
children and 216,025 shares subject to stock options exercisable on
March 1, 2000, or within 60 days thereafter.
(4) Includes 58,100 shares subject to stock options exercisable on March 1,
2000, or within 60 days thereafter.
(5) Includes 2,300 shares held in trust for the benefit of Ms. Demski's
child and 63,850 shares subject to stock options exercisable on March
1, 2000, or within 60 days thereafter.
(6) Includes 103,788 shares subject to stock options exercisable on March
1, 2000, or within 60 days thereafter.
(7) Includes 62,238 shares subject to stock options exercisable on March 1,
2000, or within 60 days thereafter.
(8) R. Gordon Douglas, Jr., MD, joined the board of directors on May 27,
1999, and became Chairman of the Board of Directors on December 9,
1999. None of the stock options he received as a director were
exercisable on March 1, 2000, or within 60 days thereafter.
-7-
(9) Includes 62,500 shares subject to stock options exercisable on March 1,
2000, or within 60 days thereafter.
(10) Includes 26,250 shares subject to options exercisable on March 1, 2000,
or within 60 days thereafter.
(11) Includes 55,469 shares subject to stock options exercisable on March 1,
2000, or within 60 days thereafter. Includes 45 shares held by BHMS
Partners III, L.P. in which Mr. Young is a general partner, and he may
be deemed to share voting and investment power with respect to such
shares. Mr. Young disclaims beneficial interest in such shares except
to the extent of his pecuniary interest therein.
(12) Includes 47,500 shares subject to stock options exercisable on March 1,
2000, or within 60 days thereafter.
(13) Includes 39,063 shares subject to stock options exercisable on March 1,
2000, or within 60 days thereafter.
(14) Includes all shares referenced in notes (3) through (13) including
776,696 shares subject to stock options exercisable on March 1, 2000,
or within 60 days thereafter.
-8-
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for services rendered in
all capacities to the Company for the fiscal years ended December 31, 1997, 1998
and 1999, of (i) the Company's Chief Executive Officer and (ii) the Company's
four most highly compensated executive officers whose total annual salary and
bonus for fiscal year 1999 exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------------------- ---------------------------------------------
Restricted Securities
Name and Other Annual Stock Underlying All Other(2)
Principal Position Year Salary($) Bonus($) Compensation($) Awards($) Options(#) Compensation($)
- ------------------ ---- --------- -------- --------------- --------- ---------- ---------------
Alain B. Schreiber 1999 330,000 90,000 -- -- 4,620
President and Chief 1998 315,000 80,000 -- -- 34,400 4,410
Executive Officer 1997 300,000 75,000 -- -- 40,000 4,200
Deirdre Y. Gillespie 1999 226,000 48,000 33,500(1) 4,068
Executive Vice 1998 179,167 45,000 -- -- 121,600 2,580
President and Chief
Business Officer
Martha J. Demski 1999 182,000 36,000 -- -- 3,276
Vice President and 1998 173,000 27,000 -- -- 17,600 3,114
Chief Financial 1997 165,000 25,000 -- -- 20,000 2,970
Officer
Jon A. Norman 1999 188,000 29,000 -- -- 3,384
Vice President, 1998 179,000 27,000 -- -- 17,600 3,222
Research 1997 170,000 30,000 -- -- 23,000 3,060
George J. Gray 1999 177,000 29,000 -- -- 3,186
Vice President, 1998 168,000 27,000 19,800 3,024
Operations 1997 160,000 25,000 -- -- 20,000 2,880
- ---------------------
(1) In connection with Dr. Gillespie's joining the Company in March 1998,
the Company loaned her $90,000 interest-free, which loan is being
forgiven in equal installments over three years. The amount for 1999
includes $30,000 representing forgiveness of the first one-third of the
loan principal and $3,500 of implied interest income relating to this
loan for the year ended December 31, 1999.
(2) Represents matching contribution by the Company under the Company's
401(k) plan.
-9-
STOCK OPTION GRANTS IN 1999 FISCAL YEAR
The following tables summarize option grants to, and exercises by, the
Company's Chief Executive Officer and the Named Officers during fiscal 1999, and
the value of the options held by each such person at the end of fiscal 1999.
OPTION GRANTS IN 1999
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
-------------------------------------------------------- -------------------------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE(3) 5%($) 10%($)
- ---- ------------- ------------ ---------- ---------- -------- ---------
Alain B. Schreiber 8,600 1.8 14.00 1/22/09 75,719 191,887
35,000 7.5 20.75 12/2/09 456,735 1,157,455
Deirdre Y. Gillespie 5,400 1.2 14.00 1/22/09 47,544 120,487
26,000 5.6 20.75 12/2/09 339,289 859,824
Martha J. Demski 4,400 0.9 14.00 1/22/09 38,740 98,175
21,000 4.5 20.75 12/2/09 274,041 694,473
Jon A. Norman 4,400 0.9 14.00 1/22/09 38,740 98,175
24,000 5.1 20.75 12/2/09 313,190 793,684
George J. Gray 2,200 0.5 14.00 1/22/09 19,370 49,087
24,000 5.1 20.75 12/2/09 313,190 793,684
- -------------
(1) Options granted in 1999 vest 25% on the first anniversary of the date
of grant, with the remaining shares vesting quarterly over three years.
All such options vest in the event of a change in control of the
Company.
(2) The exercise price on the date of grant was equal to 100% of the fair
market value on the date of grant.
(3) The options have a term of 10 years, subject to earlier termination in
certain events related to termination of employment.
(4) The 5% and 10% assumed rates of appreciation are mandated by the rules
of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price. The
amounts reflected in this table may not necessarily be achieved.
-10-
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR END OPTION VALUES
The following table contains information relating to the exercise of
options by the Company's Chief Executive Officer and the Named Officers during
fiscal 1999.
AGGREGATED OPTION EXERCISES IN 1999
AND 1999 YEAR-END OPTION VALUES
NUMBER OF VALUE OF
UNEXERCISED SECURITIES UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, (#) DECEMBER 31, ($)(1)
SHARES ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
Alain B. Schreiber -- -- 206,100 101,900 3,672,443 1,295,955
Deirdre Y. Gillespie -- -- 49,150 103,850 720,541 1,384,997
Martha J. Demski -- -- 59,150 53,600 953,071 685,200
Jon A. Norman -- -- 98,900 58,100 2,200,459 736,434
George J. Gray -- -- 57,950 56,050 1,000,028 701,521
- ------------
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1999 ($29.9375 per share), minus the
exercise price.
EMPLOYMENT AGREEMENTS
In 1992, the Company entered into an employment agreement with Jon A.
Norman pursuant to which Dr. Norman joined the Company in January 1993 as Vice
President, Research at an annual base salary of at least $130,000. In connection
with the agreement, Dr. Norman received an option to purchase 80,000 shares of
Common Stock at a per share exercise price of $.32, which option vested over
four years.
In 1992, the Company entered into an employment agreement with George
J. Gray pursuant to which Mr. Gray is employed as Vice President, Operations at
an annual base salary of at least $100,000. In connection with the agreement,
Mr. Gray received an option to purchase 40,000 shares of Common Stock at a per
share exercise price of $.16, which option vested over four years. If Mr. Gray
is terminated without cause or resigns for specified reasons, the Company has
agreed to pay him six months base salary.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
-11-
REPORT OF THE COMPENSATION AND STOCK PLAN COMMITTEES
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
COMMITTEE REPORT TO STOCKHOLDERS
THIS REPORT SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO
ANY FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY
INCORPORATES THIS REPORT BY REFERENCE, AND SHALL NOT OTHERWISE BE
DEEMED FILED UNDER SUCH ACTS.
INTRODUCTION
The Compensation and Stock Plan Committees of the Board of Directors of
the Company (the "Committees") are pleased to present their report on executive
compensation. The report's objective is to assist stockholders in understanding
the Committees' objectives and procedures in establishing the compensation of
the Company's executive officers and describes the basis on which compensation
determinations for 1999 were made by the Committees. In making their
determinations, the Committees have relied, in part, on geographic and
competitive considerations, independent surveys of compensation of management of
companies in the biotechnology and pharmaceutical industries, including
companies included in the Nasdaq Pharmaceutical Stock Index used in the
Company's Stock Price Performance Graph set forth in this proxy statement, and
recommendations of management.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committees believe that a well-designed compensation program for
the Company's executive officers should:
Align the goals of the executive with the goals of the stockholder by
creating and enhancing stockholder value through the accomplishment of
strategic corporate objectives and by providing management with longer
term incentives through equity ownership by management.
Recognize individual initiative, effort, and achievement.
Provide total compensation that enables the Company to compete with
companies in the pharmaceutical and biotechnology industries, in order
to attract and retain high-caliber candidates on a long-term basis.
Align compensation with the Company's short-term and long-term
corporate objectives and strategy, focusing executive behavior on the
fulfillment of those objectives.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
Because the Company is still in the process of developing its
proprietary products and so has not yet brought any such products to market, the
use of traditional performance standards, such as profit levels and return on
equity, are not appropriate in the evaluation of executive officer performance.
Therefore, executive officer compensation is based primarily on the Company's
achievement of certain business objectives, including the completion of
financings, the achievement of product development milestones, the initiation
and continuation of corporate collaborations, and the issuance of patents
relating
-12-
to the Company's proprietary technology, as well as individual
contribution and achievement of individual business objectives by each of such
officers. Corporate and individual objectives are established at the beginning
of each fiscal year. Performance by the Company and executive officers is
measured by reviewing and determining if the corporate and individual objectives
have been accomplished. Currently, the Company's compensation structure for
executive officers includes a combination of base salary, bonus and stock
options.
BASE SALARY AND BONUS. Cash compensation amounts are based primarily
upon the competitive market for the executive officers' services determined
through comparisons with companies of similar size and/or complexity in the
pharmaceutical and biotechnology industries. Compensation of the Company's
officers is intended to fall at the median point of the range of compensation
for officers of comparable companies. Such compensation is tailored to executive
officers based on individual performance in the achievement of the individual's
and Company's objectives. This performance is compared to these objectives
annually.
LONG-TERM INCENTIVES. Long-term incentives are provided by means of
periodic grants of stock options. The Stock Incentive Plan is administered by
the Company's Stock Plan Committee, a committee of non-employee directors of the
Company. The Stock Plan Committee believes that by granting executive officers
an opportunity to obtain and increase their personal ownership of Company stock,
the best interests of stockholders and executives will be more closely
integrated. The options have exercise prices equal to fair market value on the
date of grant, vest over a four-year period, and expire ten years from the date
of grant. Vesting ceases should the executive leave the Company's employ. These
vesting provisions of the option plan serve to retain qualified employees,
providing continuing benefits to the Company beyond those achieved in the year
of grant. Therefore, executive officers, as well as all full-time employees, are
eligible to receive stock options periodically at the discretion of the
Committee. Consideration is given to the executive officer's performance against
the accomplishment of corporate objectives, to comparisons with other
biotechnology companies at similar stages of development, to the number of
options previously granted to each executive officer and to the extent of
vesting of options and/or restricted stock previously awarded to each executive
officer. The Company targets its awards to be at the median point of the range
for awards made to executive officers of comparable companies.
CEO COMPENSATION
The annual salary of Alain B. Schreiber, M.D., the Company's President
and Chief Executive Officer was $330,000 at the end of fiscal year 1999; a
$15,000 increase over his 1998 salary. Additionally, Dr. Schreiber was granted a
cash bonus of $90,000 and incentive stock options for 43,600 shares in December
1999. In establishing Dr. Schreiber's salary base and increase for 1999 and the
granting of the incentive stock options, the Committees recognized Dr.
Schreiber's efforts in advancing the development and growth of the Company and
the corporate objectives achieved in 1999. Specifically, corporate objectives
achieved included the expansion of its patent portfolio by four U.S. patents,
including a key patent for ALLOVECTIN-7, and one key European patent. Additional
achievements include the following:
- received Drug Safety Review Board recommendation to continue Phase
III and Phase II registration trials with ALLOVECTIN-7 in patients
with advanced metastatic melanoma;
- received orphan drug designation for ALLOVECTIN-7 in metastatic
melanoma indication;
- reported encouraging results from clinical trials with LEUVECTIN in
patients with advanced metastatic kidney cancer and prostate
cancer;
-13-
- licensed DNA technologies to Pfizer for delivery of therapeutic
proteins for animal health applications and received $6.0 million
for the sale of common stock of Vical, $1.0 million for an option
and license fee and a commitment to fund three years of research
and development totaling $1.5 million;
- received from Merck $1.0 million for the initiation of a Phase I
clinical trial with a preventive naked DNA vaccine for HIV and $2.0
million for extension of the agreement covering therapeutic DNA
vaccines for infectious diseases;
- received $1.6 million from Merial for the initial selection of
options for animal health DNA vaccines;
- added to Vical Board of Directors and appointed as Chairman of the
Board, R. Gordon Douglas, Jr., M.D., former President of Merck
Vaccines.
The Committees determined that these accomplishments were critical to
the Company's future growth and enhancement of stockholder value and,
accordingly, determined to reward Dr. Schreiber for his efforts on behalf of the
Company.
MISCELLANEOUS
Section 162(m) of the Internal Revenue Code disallows the deductibility
by the Company of any compensation over $1 million per year paid to each of the
chief executive officer and four other most highly compensated executive
officers, unless certain criteria are satisfied. The Stock Incentive Plan
qualifies for exemption from the $1 million limit on deductions under Section
162(m) with respect to option grants under the Stock Incentive Plan.
This Compensation Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this report by reference and shall not otherwise be deemed filed
under such Acts.
COMPENSATION COMMITTEE STOCK PLAN COMMITTEE
M. Blake Ingle M. Blake Ingle
Patrick F. Latterell Patrick F. Latterell
Gary A. Lyons Gary A. Lyons
-14-
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of the
Company's Common Stock with the Center for Research in Securities Prices
("CRSP") Total Return Index for the Nasdaq Stock Market (U.S. and Foreign)
(the "Nasdaq Composite Index") and the CRSP Total Return Index for the Nasdaq
Pharmaceutical Stocks (the "Nasdaq Pharmaceutical Index").(1) The comparisons
in the graph are required by the Securities and Exchange Commission and are
not intended to forecast or be indicative of possible future performance of
the Company's Common Stock.
[GRAPH]
12/30/94 12/29/95 12/29/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
Vical Incorporated.................. $100.00 $147.03 $200.00 $145.45 $172.00 $362.91
Nasdaq Composite.................... 100.00 140.36 171.84 209.84 290.12 534.66
Nasdaq Pharmaceutical............... 100.00 183.41 183.98 189.97 241.95 450.28
Assumes a $100 investment on December 30, 1994, in each of the
Company's Common Stock, the securities comprising the Nasdaq Composite Index,
and the securities comprising the Nasdaq Pharmaceutical Index.
(1) The Nasdaq Pharmaceutical Index includes all companies listed on the
Nasdaq Stock Market under the SIC Code 283.
-15-
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
has appointed the firm of Arthur Andersen LLP as the Company's independent
auditors for the fiscal year ending December 31, 2000, subject to ratification
by the stockholders. Arthur Andersen LLP has audited the Company's financial
statements since 1990. Representatives of Arthur Andersen LLP are expected to be
present at the Company's Annual Meeting. They will have an opportunity to make a
statement, if they desire to do so, and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ARTHUR
ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
If a stockholder wishes to have a stockholder proposal considered at
the Company's 2001 Annual Meeting, the stockholder must have given timely notice
of the proposal in writing to the Secretary of the Company. To be timely, a
stockholder's notice of the proposal must be delivered to or mailed and received
at the executive offices of the Company not less than 50 days nor more than 75
days prior to the date of the 2001 Annual Meeting. However, if less than 65 days
notice (including notice by prior public disclosure) of the 2001 Annual Meeting
date is provided to stockholders, notice of a stockholder proposal will be
timely if it is received no later than the close of business on the 15th day
following the date on which the notice of the 2001 Annual Meeting date was
mailed or public disclosure of such date was made.
Proposals of stockholders of the Company that are intended by a
stockholder to be included in the Company's proxy statement and form of proxy
for the 2001 Annual Meeting must be received by the Secretary of the Company no
later than December 2, 2000.
OTHER MATTERS
The Company knows of no other business that will be presented at the
Annual Meeting. If any other business is properly brought before the Annual
Meeting, it is intended that proxies in the enclosed form will be voted in
accordance with the judgment of the persons voting the proxies.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, executive officers and any persons holding more than 10% of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to identify in this Proxy Statement
those persons who failed to file timely these reports.
-16-
All of the filing requirements were timely satisfied. In making this
disclosure, the Company has relied solely on written representations of its
directors and executive officers and copies of the reports that have been filed
with the Commission.
Whether you intend to be present at the Annual Meeting or not, we urge
you to return your signed proxy promptly.
By order of the Board of Directors.
/s/ MARTHA J. DEMSKI
----------------------------------------
Martha J. Demski
Vice President, Chief Financial Officer,
Secretary and Treasurer
San Diego, California
April 10, 2000
-17-
VICAL INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON MAY 18, 2000
The undersigned stockholder of Vical Incorporated (the "Company")
acknowledges receipt of Notice of the Annual Meeting of Stockholders and Proxy
Statement, each dated April 10, 2000, and the undersigned revokes all prior
proxies and appoints Alain B. Schreiber, M.D. and Martha J. Demski, or each of
them, proxies for the undersigned to vote all shares of Common Stock of the
Company which the undersigned would be entitled to vote at the Annual Meeting of
Stockholders to be held at the Embassy Suites La Jolla, 4550 La Jolla Village
Drive, San Diego, California, at 9:00 a.m. local time on May 18, 2000, and any
postponement or adjournment thereof, and instructs said proxies to vote as
follows:
1. ELECTION OF DIRECTORS:
/ / FOR each of the nominees listed below (except as marked to the
contrary below)
/ / WITHHOLD AUTHORITY to vote for the nominees for Class II director
listed below
R. Gordon Douglas, M.D., and M. Blake Ingle, Ph.D.
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
2. TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY:
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE TWO
NOMINEES FOR DIRECTOR AND FOR PROPOSAL 2.
VICAL INCORPORATED
BOARD OF DIRECTORS PROXY
Annual Meeting of Stockholders May 18, 2000
Dated this ________ day of ________, 2000
------------------------------------------
(Signature of Stockholder)
------------------------------------------
(Signature of Stockholder)
Please sign exactly as your name or names appear
hereon. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If shares are held jointly,
each holder must sign.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.