SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Vical Incorporated
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N/A
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VICAL INCORPORATED
9373 Towne Centre Drive, Suite 100
San Diego, CA 92121
(619) 453-9900
May 6, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Vical Incorporated which will be held on Tuesday, June 10, 1997, at 11:00
a.m., at The Hyatt Regency La Jolla, 3777 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,
Alain B. Schreiber, M.D.
President and Chief Executive Officer
VICAL INCORPORATED
____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 10, 1997
____________
To the Stockholders of Vical Incorporated:
The Annual Meeting of Stockholders of Vical Incorporated, a Delaware
corporation (the "Company") will be held at The Hyatt Regency La Jolla, 3777 La
Jolla Village Drive, San Diego, California, on Tuesday, June 10, 1997, at 11:00
a.m., Pacific Daylight Time, for the following purposes:
1. To elect three Class II directors;
2. To consider and vote upon a proposal to amend and restate the
1992 Stock Plan of Vical Incorporated;
3. To ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors; and
4. 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 April 15, 1997,
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.
Martha J. Demski
Vice President, Chief Financial Officer,
Secretary and Treasurer
San Diego, California
May 6, 1997
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 Hyatt Regency La Jolla, 3777 La Jolla
Village Drive, San Diego, California, on Tuesday, June 10, 1997, 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 Proposals 2 and 3 described in the Notice of
Annual Meeting and in this Proxy Statement.
Stockholders of record at the close of business on April 15, 1997, are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, the Company had approximately 15,437,473 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 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,
92121-3027; (619) 646-1127. To provide the Company sufficient time to arrange
for reasonable assistance or accommodation, please submit all requests by May
16, 1997.
This Proxy Statement and the accompanying form of proxy are being
mailed on or about May 6, 1997, 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.
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PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES
The Company has three classes of directors, with each class serving
staggered three-year terms. Three Class II directors are to be elected at the
Annual Meeting to serve until the 2000 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 three Class III and the two Class I directors expire in 1998 and
1999, respectively.
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 Mr. Robert C. Bellas, Jr., Dr. M. Blake Ingle and Mr. Fred A.
Middleton as Class II directors. Mr. Bellas, Dr. Ingle and Mr. Middleton are
currently 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 nominees 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
ROBERT C. BELLAS, JR., age 55, has been a director of the Company
since September 1988. Mr. Bellas has been a General Partner with Morgenthaler
Ventures since 1984, where he is responsible for the firm's investments in
healthcare services, medical devices and biomedical ventures. Morgenthaler
Ventures provided early venture capital financing to such companies as Arbor
Health Care Company, Athena Neurosciences, Inc., Cardiovascular Imaging
Systems, Inc., Cytel Corporation, Gliatech Inc., The Liposome Company,
Perclose, Inc., Ribozyme Pharmaceuticals, Inc., Sequana Therapeutics, Inc. and
Verifone, Inc. Mr. Bellas also serves as a director of CardioThoracic Systems,
Inc. and Medaphis Corporation, as well as several privately held healthcare
companies. From 1980 to 1983, Mr. Bellas served as Vice President and General
Manager of the Crystal & Electronics Division of Harshaw Chemical Company, a
subsidiary of Gulf Oil Corporation. Between 1973 and 1980, he held marketing
and management positions with Acurex Corporation and EMI Therapy Systems. Mr.
Bellas has a B.S. in Engineering from the U.S. Naval Academy and an M.B.A.
from the Stanford University Graduate School of Business.
FRED A. MIDDLETON, age 47, has been a director of the Company since
August 1990. Since 1987, he has been a General Partner of Sanderling Venture
Partners, Inc., a venture capital firm specializing in the development of early
stage biomedical companies. From 1978 to 1984, Mr. Middleton was a member of
the start-up management team of Genentech, Inc., where he served as Vice
President, Finance and Corporate Development and President of Genentech
Development Corporation. From 1984 to 1986, he was Managing General Partner of
Morgan Stanley Ventures. He also serves as Chairman of DepoTech Corporation, a
director of Regeneron Pharmaceuticals, Inc.,
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and a director of several privately held biomedical companies. He received his
B.S. in Chemistry from the Massachusetts Institute of Technology and an M.B.A.
from the Harvard Business School.
M. BLAKE INGLE, age 54, has been a director of the Company since June
1996. Dr. Ingle was from 1993 to 1996 Chief Executive Officer of Canji Inc., a
privately held gene therapy company acquired by Schering Plough in 1996, and
served from 1995 to 1996 as Acting Chief Executive Officer of Telios
Pharmaceuticals, Inc., a biotechnology company acquired by Integra Life
Sciences in 1996. Dr. Ingle previously worked with Bayer and from 1980 to 1993
Dr. Ingle held a variety of positions with IMCERA Group, Inc. (subsequently
Mallinckrodt, Inc., a healthcare and chemical products company), including
Chief Scientific Officer, Chief Financial Officer and President of its Pittman
Moore division and most recently as President and Chief Executive Officer of
IMCERA Group, Inc. 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, age 39, has been a director of the Company since
February 1992. He has been a General Partner with Venrock Associates, a
venture capital firm, since 1989. From 1985 to 1989, he was a General Partner
at Rothschild Ventures Inc., a venture capital firm ("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 Biocircuits Corporation, Geron Corporation, Pharmacyclics, 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, age 45, has been a director of the Company since March
1997. He has been President, Chief Executive Officer and Director of
Neurocrine Biosciences, Inc., a neuroimmunology biopharmaceutical company,
since 1993. 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, age 66, has been a director of the Company 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 in Concord, California.
Mr. Smith holds a B.A. in Business Administration from the University of
Washington, Seattle.
Class I
ALAIN B. SCHREIBER, M.D., age 41, has been President, Chief Executive
Officer and a director of the Company since May 1992. Prior to joining the
Company, Dr. Schreiber held various executive level positions at Rhone-Poulenc
Rorer Inc., a pharmaceutical company, from July 1985 to April 1992, most
recently as Senior Vice President of Discovery Research. From October 1982 to
June 1985, Dr. Schreiber served as Biochemistry Department Head at Syntex
Research. He received
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his undergraduate degree and M.D. from the Free University of Brussels, after
which he was awarded a research fellowship in immunology at the Weizmann
Institute.
PHILIP M. YOUNG, age 57, has been a director of the Company 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, Penederm, Inc., Zoran Corporation, FemRx, Inc.,
CardioThoracic Systems, Inc. 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 FOR ELECTION OF THE
NOMINEES FOR DIRECTOR SET FORTH ABOVE.
-5-
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings during the year ended
December 31, 1996. Subsequent to becoming a member of the Board of Directors,
Dr. Ingle did not attend at least 75% of the aggregate number of meetings of
the Board of Directors and of the committees on which he served.
The Board of Directors has appointed a Compensation Committee, a Stock
Plan Committee and an Audit Committee. The Board of Directors has not
appointed a Nominating Committee.
The members of the Compensation Committee are Mr. Bellas, Dr. Ingle
and Mr. Latterell. The Compensation Committee held four meetings during 1996.
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 Mr. Bellas, Dr. Ingle and
Mr. Latterell. The Stock Plan Committee held six meetings during 1996. The
Stock Plan Committee's functions are to assist in the administration of, and
grant options under, the 1992 Stock Plan of Vical Incorporated (the "1992 Stock
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 Mr. Middleton, Mr. Smith and
Mr. Young. The Audit Committee held one meeting during 1996. 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.
DIRECTORS' COMPENSATION
Directors do not receive any fees for service on the Board of
Directors. Directors are reimbursed for their expenses for each meeting
attended. Non-employee directors are eligible to participate in the 1992
Directors' Stock Plan. The 1992 Directors' Stock Plan provides for the
automatic grant of options to non-employee directors of the Company to purchase
shares of the Company's Common Stock. Under the 1992 Directors' Stock Plan,
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 15,000 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 7,500 shares which shall become exercisable in full on
the date of the regular annual meeting of stockholders following the date of
grant. Options under the 1992 Directors' Stock Plan may be granted only to
directors of the Company who are not employees of the Company. All shares
covered by options granted under the 1992 Directors' Stock Plan vest in the
event of a change of control of the Company. The 1992 Directors' Stock Plan is
administered by the Stock Plan Committee. In addition, under the 1992 Stock
Plan nonstatutory stock options may be granted to outside directors or
affiliates of outside directors. Of the shares available under the
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1992 Stock Plan, no more than 30% in the aggregate are available for grant to
outside directors. The Board of Directors may provide discretionary grants to
outside directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Mr.
Bellas, Dr. Ingle and Mr. Latterell, who are outside directors. The Stock Plan
Committee of the Board of Directors also consists of Mr. Bellas, Dr. Ingle and
Mr. Latterell.
CERTAIN TRANSACTIONS
See "Employment Agreements."
-7-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 3,
1997, 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) . . . . . . . . . . . . . . . . . . 1,433,600 9.29%
P.O. Box 7842, Madison, WI 53707
Alain B. Schreiber(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 465,876 3.00%
Martha J. Demski(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,439 *
Jon A. Norman(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,750 *
George J. Gray(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,750 *
Robert H. Zaugg(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,751 *
Robert C. Bellas, Jr.(8) . . . . . . . . . . . . . . . . . . . . . . . . . 598,725 3.87%
Patrick F. Latterell(9) . . . . . . . . . . . . . . . . . . . . . . . . . . 59,201 *
Fred A. Middleton(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . 402,466 2.60%
Philip M. Young(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620,713 4.02%
Dale A. Smith(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,625 *
M. Blake Ingle(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,813 *
All directors and executive officers as a group
(11 persons)(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,446,109 15.51%
________________
* 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 January 21, 1997.
(3) Includes 1,250 shares held in trust for the benefit of Dr.
Schreiber's children and 85,626 shares subject to stock options
exercisable on March 3, 1997, or within 60 days thereafter.
(4) Includes 650 shares held in trust for the benefit of Ms. Demski's
child and 23,939 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter.
(5) Includes 83,750 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter.
(6) Includes 15,750 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter.
-8-
(7) Includes 9,251 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter.
(8) Includes 30,000 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter. Also includes 568,725 shares
held by Morgenthaler Venture Partners II ("MVPII"). Mr. Bellas is a
general partner of Morgenthaler Management Partners II, which is the
managing general partner of MVPII, and may be deemed to share voting
and investment power of such shares. Mr. Bellas disclaims beneficial
ownership of such shares except to the extent of his pecuniary
interest therein.
(9) Includes 30,000 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter.
(10) Includes 30,000 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter. Also includes 369,466 shares
held by Sanderling Venture Partners II, L.P., Sanderling Biomedical,
L.P., and Sanderling Ventures Limited, L.P., each of which is managed
by Sanderling Venture Partners, Inc., its general partner. Mr.
Middleton is a general partner of Sanderling and may be deemed to
share voting and investment control of these shares. Mr. Middleton
disclaims beneficial ownership of these shares except to the extent
of his pecuniary interest therein. Also includes 3,000 shares held
by trusts for the benefit of Mr. Middleton's children.
(11) Includes 30,000 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter. Includes 562,285, 17,571 and
5,857 shares held by U.S. Venture Partners III, L.P., Second
Ventures, L.P. and U.S.V. Entrepreneur Partners, L.P. Mr. Young is a
general partner of the general partner of these funds, and 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 5,625 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter.
(13) Includes 2,813 shares subject to stock options exercisable on March
3, 1997, or within 60 days thereafter.
(14) Includes shares included pursuant to notes (3), (4), (5), (6), (7),
(8), (9), (10), (11), (12) and (13) and includes 346,754 additional
shares subject to stock options exercisable on March 3, 1997, or
within 60 days thereafter.
-9-
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, 1994, 1995
and 1996, 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 1996 exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
--------------------------------------------- -----------------------
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation($) Awards(s)($) Options (#) Compensation($)
- ------------------ ---- --------- -------- --------------- ------------ ----------- ---------------
Alain B. Schreiber 1996 290,000 75,000 -- -- 50,000 4,060(4)
President and Chief 1995 280,000 40,000 42,385(1) -- 40,000 3,528(4)
Executive Officer 1994 260,000 26,000 44,447(1) -- 40,000 3,427(4)
Martha J. Demski 1996 155,000 25,000 -- -- 20,000 2,790(4)
Vice President and 1995 147,648 20,000 -- -- 10,000 2,654(4)
Chief Financial 1994 140,000 14,000 -- -- 8,000 2,520(4)
Officer
Jon A. Norman 1996 160,000 25,000 25,009(2) -- 20,000 2,880(4)
Vice President, 1995 155,000 15,000 26,089(2) -- 10,000 2,778(4)
Research 1994 145,000 14,500 27,169(2) -- 8,000 1,742(4)
George J. Gray 1996 150,000 25,000 -- -- 20,000 2,700(4)
Vice President, 1995 137,000 15,000 38,007(3) -- 10,000 2,466(4)
Operations 1994 125,000 12,500 40,128(3) -- 8,000 2,363(4)
Robert H. Zaugg 1996 130,000 13,000 -- -- 15,000 2,340(4)
Vice President, 1995 125,000 5,000 -- -- 5,000 2,250(4)
Business 1994 110,000 11,000 -- -- 5,000 2,035(4)
Development
_____________________
(1) In connection with Dr. Schreiber's joining the Company in 1992, the
Company loaned him $125,000 interest-free, which loan was forgiven in
equal installments over three years. Amount for 1994 includes $41,667
representing forgiveness of an additional one-third of the loan
principal and $2,780 of implied interest income relating to this loan
for the year ended December 31, 1994. Amount for 1995 includes
$41,666 representing forgiveness of the last one-third of the loan
principal and $719 of implied interest income relating to this loan
for the year ended December 31, 1995. See "--Employment Agreements."
(2) In connection with Dr. Norman's joining the Company in January 1993,
the Company loaned him $75,000 interest-free, which loan was forgiven
in equal installments over three years.
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Amount for 1994 includes $25,000 representing forgiveness of one-third
of the loan principal and $2,169 of implied interest income relating
to this loan. Amount for 1995 includes $25,000 representing one-third
of the loan principal and $1,089 of implied interest income relating
to this loan. Amount for 1996 includes $25,000 representing
forgiveness of the last one-third of the loan principal and $9.00 of
implied interest income relating to this loan for the year ended
December 31, 1996. See "--Employment Agreements."
(3) In connection with Mr. Gray's joining the Company in October 1992, the
Company loaned him $110,000 interest-free, which loan was forgiven in
equal installments over three years. Amount for 1994 includes $36,667
representing forgiveness of one-third of the loan principal and $3,461
of implied interest income. Amount for 1995 includes $36,667
representing the last third of the loan principal and $1,340 of
implied interest income. See "--Employment Agreements."
(4) Represents matching contribution by the Company under the Company's
401(k) plan.
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STOCK OPTION GRANTS IN 1996 FISCAL YEAR
The following tables summarize option grants to, and exercises by, the
Company's Chief Executive Officer and the Named Officers during fiscal 1996,
and the value of the options held by each such person at the end of fiscal
1996.
OPTION GRANTS IN 1996
Potential
Realizable Value at
Assumed Annual Rates
of Stock Appreciation
Individual Grants for Option Term(4)
---------------------------------------------------------- ------------------------
Number of % of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(#)(1) Fiscal Year ($/Sh)(2) Date(3) 5%($) 10%($)
- ---- ------------- ------------- ---------- ------------ ---------- -----------
Alain B. Schreiber 50,000 12% $18.00 12/04/06 $566,005 $1,434,368
Martha J. Demski 20,000 5% $15.1875 11/25/06 $191,027 $484,099
Jon A. Norman 20,000 5% $15.1875 11/25/06 $191,027 $484,099
George J. Gray 20,000 5% $15.1875 11/25/06 $191,027 $484,099
Robert H. Zaugg 15,000 4% $15.1875 11/25/06 $143,270 $363,074
____________
(1) Options granted in 1996 vest 25% on the first anniversary of the date
of grant, with the remaining shares vesting quarterly over three
years. All such options vest in the event of a change in control of
the Company.
(2) The exercise price on the date of grant was equal to 100% of the fair
market value on the date of grant.
(3) The options have a term of 10 years, subject to earlier termination
in certain events related to termination of employment.
(4) The 5% and 10% assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent
the Company's estimate or projection of the future Common Stock
price. The amounts reflected in this table may not necessarily be
achieved.
-12-
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR END OPTION
VALUES
The following table contains information relating to the exercise of
options by the Company's Chief Executive Officer and the Named Officers during
fiscal 1996.
AGGREGATED OPTION EXERCISES IN 1996
AND 1996 YEAR-END OPTION VALUES
Number of Value of
Unexercised Securities Unexercised
Underlying Options at In-the-Money Options at
December 31, 1996(#) December 31, 1996($)(1)
------------------------- -------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
Alain B. Schreiber -- -- 76,250 113,750 458,906 444,844
Martha J. Demski -- -- 25,250 37,750 110,062 134,438
Jon A. Norman 10,000 164,800 84,000 34,000 1,208,912 123,188
George J. Gray -- -- 34,000 34,000 403,112 123,188
Robert H. Zaugg -- -- 8,250 22,750 44,906 73,406
____________
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1996 ($16.50 per share), minus the
exercise price.
EMPLOYMENT AGREEMENTS
In 1992, the Company entered into a four-year employment agreement
with Alain B. Schreiber pursuant to which Dr. Schreiber was employed as
President and Chief Executive Officer at an annual base salary of at least
$225,000. Dr. Schreiber also purchased 412,500 shares of Common Stock for
$66,000, which vested over four years. If Dr. Schreiber is terminated without
cause or resigns for specified reasons, the Company has agreed to pay him one
year's base salary.
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.
-13-
In February 1994, the Company entered into a four-year employment
agreement with Martha J. Demski pursuant to which Ms. Demski is employed as
Vice-President and Chief Financial Officer at an annual base salary of at least
$140,000. If Ms. Demski is terminated without cause or resigns for specified
reasons, the Company has agreed to pay her six months base salary.
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
-14-
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 1996 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. In addition, the Company's Compensation
Committee retained iQuantic, Inc., a consulting firm, to research and prepare a
report regarding the compensation package, bonus program and stock option
program of the Company's executive officers and employees.
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 stockholder with the goals of the executive 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.
-15-
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 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 Company's 1992 Stock Plan is
administered by the Company's Stock Plan Committee, a committee of outside
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.
1996 CEO COMPENSATION
The annual salary of Alain B. Schreiber, M.D., the Company's President
and Chief Executive Officer was $290,000 at the end of fiscal year 1996; a
$10,000 increase over his 1995 salary. Additionally, Dr. Schreiber was granted
a cash bonus of $75,000 and incentive stock options for 50,000 shares in
December 1996. In establishing Dr. Schreiber's salary base and increase for
1996 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 1996. Specifically, corporate
objectives achieved included the expansion of its patent portfolio, completion
of accruals in initial Phase II clinical trials in five cancer indications,
development of new
-16-
DNA vaccines for the prevention of infectious diseases and the exercise of
product options, with commensurate payments, from the Company's corporate
partners Merck & Co., Inc., Pasteur Merieux Connaught and Genzyme Corporation.
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 was enacted in 1993 and
became effective in 1994. Section 162(m) 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. In 1994, the Board of Directors
approved an amendment of the Company's 1992 Stock Plan to, among other things,
qualify for exemption from the $1 million limit on deductions under Section
162(m) with respect to option grants under the 1992 Stock 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
Robert C. Bellas, Jr. Robert C. Bellas, Jr.
Patrick F. Latterell Patrick F. Latterell
M. Blake Ingle M. Blake Ingle
-17-
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 Although such a
graph would normally be for a five-year period, the Company's Common Stock has
been publicly traded only since March 9, 1993, and as a result, the following
graph commences as of such date. 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]
3/9/93 12/31/93 12/31/94 12/31/95 12/31/96
Vical Incorporated . . . . $100.00 $270.00 $165.00 $242.50 $330.00
Nasdaq Composite . . . . . 100.00 113.46 110.05 154.55 189.27
Nasdaq Pharmaceutical . . 100.00 124.77 93.91 171.79 172.33
Assumes a $100 investment on March 9, 1993, in each of the Company's
Common Stock, the securities comprising the Nasdaq Composite Index, and the
securities comprising the Nasdaq Pharmaceutical Index.
-18-
(1) The Nasdaq Pharmaceutical Index includes all companies listed on the
Nasdaq Stock Market under the SIC Code 283. A copy of the list of
companies which comprise the Nasdaq Pharmaceutical Index may be
obtained upon request by contacting Vical Incorporated, Investor
Relations, 9373 Towne Centre Drive, Suite 100, San Diego, CA
92121-3027.
-19-
PROPOSAL 2
AMENDMENT AND RESTATEMENT OF THE 1992 STOCK PLAN
The 1992 Stock Plan of Vical Incorporated was adopted by the Company's
Board of Directors in October 1992, and most recently amended and restated in
December 1996. This amendment and restatement of the 1992 Stock Plan, as
proposed, will be effective as of December 4, 1996, if approved by the
Company's stockholders at the Annual Meeting.
The full text of the 1992 Stock Plan, substantially in the form in
which it will take effect if Proposal 2 is approved by the stockholders, is set
forth as Exhibit A to this Proxy Statement. The following description of the
1992 Stock Plan is a summary only. It is subject to, and qualified in its
entirety by, Exhibit A.
SUMMARY OF AMENDMENTS
The amendments to the 1992 Stock Plan approved by the Board of
Directors and submitted for stockholder approval include the following:
(1) To increase the number of shares of Common Stock reserved for
issuance under the 1992 Stock Plan by 700,000 shares; and
(2) To allow non-employee directors to participate in the Plan.
DESCRIPTION OF AMENDED AND RESTATED 1992 STOCK PLAN
PURPOSE
The purpose of the 1992 Stock Plan is to offer employees and
non-employee directors an opportunity to acquire a proprietary interest in the
success of the Company, or to increase such interest, by purchasing Shares of
the Company's Stock. The Plan provides both for the direct award or sale of
Shares and for the grant of Options to purchase Shares. Options granted under
the Plan may include NSOs as well as ISOs intended to qualify under Section 422
of the Internal Revenue Code ("Code").
ADMINISTRATION
The 1992 Stock Plan is administered by a committee of the Board (the
"Stock Plan Committee") consisting exclusively of outside directors of the
Company, who are appointed by the Board. The Board may act on its own behalf
with respect to outside directors and may also appoint one or more separate
committees consisting of one or more officers of the Company, who need not be
directors of the Company and who need not satisfy the foregoing requirements,
who may administer the Plan with respect to employees who are not "covered
employees" under Section 162(m)(3) of the Code and who are not required to
report pursuant to Section 16(a) of the Securities Exchange Act of 1934.
Subject to the limitations set forth in the 1992 Stock Plan, the Stock Plan
Committee has discretion to determine to whom options will be granted, the
type, number and vesting requirements of the shares to be granted, and to
interpret the 1992 Stock Plan and adopt rules thereunder and to make all other
decisions relating to the operation of the 1992 Stock Plan.
-20-
ELIGIBILITY AND SHARES SUBJECT TO THE 1992 STOCK PLAN
Under the 1992 Stock Plan, 1,700,000 shares of Common Stock have been
reserved for issuance (700,000 shares of which are subject to stockholder
approval at the Annual Meeting) either by direct sale or upon exercise of
options granted to employees (including officers and directors who are also
employees) and consultants and advisors of the Company who are not directors.
The 1992 Stock Plan provides for the grant of both incentive stock options
("ISOs") intended to qualify as such under section 422 of the Code, and
nonstatutory stock options ("NSOs"). ISOs may be granted only to common-law
employees of the Company or a subsidiary.
NSOs may be granted to outside directors or to affiliates of such
outside directors. The 1992 Stock Plan provides that options granted to any
optionee in a single calendar year may not cover more than 300,000 shares. In
addition, of the shares available under the 1992 Stock Plan, no more than 30%
in the aggregate are available for grant to outside directors.
The provisions allowing for director grants are subject to stockholder
approval at the Annual Meeting. Prior to recent changes to Rule 16b-3 under
the Securities Exchange Act of 1934, it was common to grant options to outside
directors through a nondiscretionary, predetermined formula. Such grants are
made in the Company's 1992 Directors' Stock Option Plan. As a result of the
16b-3 changes, however, which were effective starting in August 1996, the full
Board may provide discretionary grants to outside directors. With the
limitations set forth above, the 1992 Stock Plan has been amended, subject to
stockholder approval, to recognize such permitted flexibility.
If any options granted under the 1992 Stock Plan expire or are
canceled without having been exercised in full, the shares allocable to the
unexercised portion of such options shall again become available for grant
under the 1992 Stock Plan. If shares issued under the 1992 Stock Plan are
forfeited, they also become available for new grants.
As of March 3, 1997, there were 93 employees and two consultants
eligible to participate in the 1992 Stock Plan. As of March 3, 1997, each of
the Named Officers, all current executive officers of the Company as a group,
all current directors who are not executive officers as a group, each nominee
for election as a director, all employees of the Company as a group (excluding
all current executive officers), and all consultants of the Company as a group
had received options to purchase shares of the Company's Common Stock under the
1992 Stock Plan as follows: Alain B. Schreiber, President and Chief Executive
Officer, 190,000 shares; Martha J. Demski, Vice President and Chief Financial
Officer, 63,000 shares; Jon A. Norman, Vice President, Research, 128,000
shares; George J. Gray, Vice President, Operations 88,000 shares and Robert H.
Zaugg, Vice President, Business Development, 31,000 shares; all current
executive officers of the Company as a group, 500,000 shares; all current
directors who are not executive officers, as a group, 15,000 shares; Robert C.
Bellas, Jr., 2,500 shares; Fred A. Middleton, 2,500 shares and M. Blake Ingle,
2,500 shares; all employees of the Company as a group (excluding all current
executive officers), 521,563 shares; and all consultants of the Company as a
group, 30,000 shares. As of March 3, 1997, options to purchase an aggregate of
963,675 shares of Common Stock at an average exercise price of $11.67 per share
were outstanding under the 1992 Stock Plan. To date, all stock options have
been granted with exercise prices equal to the fair market value of the
Company's Common Stock on the date of grant. As of March 3, 1997, no shares of
Common Stock have been issued for direct sale under the 1992 Stock Plan. As of
March 3, 1997, a total of 633,437 shares of Common Stock are available for
future options, grants or direct sales under the 1992 Stock Plan. On April 15,
1997, the closing price for the Company's Common Stock on the Nasdaq National
Market was $12.25.
-21-
The allocation of the additional shares of stock which the
stockholders are being asked to approve hereby has not been determined.
Pursuant to the terms of the 1992 Stock Plan, the Stock Plan Committee will
determine the number of options (and any other awards) to be allocated to
employees and outside directors under the 1992 Stock Plan in the future, and
such allocations may only be made in accordance with the provisions of the 1992
Stock Plan as described herein.
TERMS OF OPTIONS
Options granted pursuant to the 1992 Stock Plan will vest at the time
or times determined by the Committee.
The maximum term of each option granted under the 1992 Stock Plan is
10 years (5 years in the case of an ISO granted to a 10% stockholder). Stock
options granted under the 1992 Stock Plan must be exercised by the optionee
within a term determined by the Stock Plan Committee.
The exercise price of ISOs must not be less than 100% of the fair
market value of the Common Stock on the date of the grant (110% in the case of
an ISO grant to a 10% stockholder). The exercise price of NSOs must not be
less than the par value of a share of Common Stock. Under the 1992 Stock Plan,
the exercise price is payable in cash or Common Stock or by full-recourse
promissory note. The 1992 Stock Plan also permits an optionee to pay the
exercise price of an option by delivery (on a form prescribed by the Company)
of an irrevocable direction to a securities broker approved by the Company to
sell the optionee's shares and deliver all or a part of the sale proceeds to
the Company in payment of all or part of the exercise price and any withholding
taxes or by delivery of an irrevocable direction to pledge the optionee's
shares to a securities broker or lender approved by the Company as security for
a loan and to deliver all or part of the loan proceeds to the Company in
payment of all or part of the exercise price and any withholding taxes.
TERMS OF SHARES OFFERED FOR SALE
The terms of any sale of shares of Common Stock under the 1992 Stock
Plan will be set forth in a Common Stock purchase agreement to be entered into
between the Company and each purchaser. The terms of the stock purchase
agreements entered into under the 1992 Stock Plan need not be identical, and
the Stock Plan Committee determines all terms and conditions of each such
agreement, consistent with the 1992 Stock Plan. The purchase price for shares
sold under the 1992 Stock Plan may not be less than the par value of such
shares. The purchase price may be paid, at the Stock Plan Committee's
discretion, with a full-recourse promissory note secured by the shares, except
that the par value of the shares must be paid in cash. Shares may also be
awarded under the 1992 Stock Plan in consideration of services rendered prior
to the award, without a cash payment by the recipient.
Shares sold under the 1992 Stock Plan vest upon satisfaction of the
conditions specified in the stock purchase agreement. Vesting conditions are
determined by the Stock Plan Committee and may be based on the recipient's
service, individual performance, the Company's performance or such other
criteria as the Stock Plan Committee may adopt. Shares may be subject to
repurchase by the Company at their original purchase price in the event that
any applicable vesting conditions are not satisfied. Shares sold under the
1992 Stock Plan will be subject to restrictions on resale or transfer until
they have vested. Any right to acquire shares under the 1992 Stock Plan (other
than an option) will automatically expire if not exercised within 30 days after
the grant of such right was communicated by the Stock Plan Committee. A holder
of shares sold under the 1992 Stock Plan has the same voting, dividend and
other rights as the Company's other stockholders.
-22-
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate the 1992 Stock
Plan at any time, except that any such amendment, suspension or termination
shall not affect any option previously granted. Any amendment of the 1992
Stock Plan is subject to approval of the Company's stockholders only to the
extent required by applicable law. Unless sooner terminated by the Board of
Directors, the 1992 Stock Plan will terminate on February 23, 2004, and no
further options may be granted or stock sold pursuant to such plan following
the termination date.
EFFECT OF CERTAIN CORPORATE EVENTS
Outstanding awards under the 1992 Stock Plan provide for the automatic
vesting of employee stock options and (in the case of Common Stock purchase
agreements) the automatic termination of the Company's right of repurchase upon
a change of control. Future employee stock option agreements and common stock
purchase agreements entered into pursuant to the 1992 Stock Plan will contain
similar provisions, unless otherwise determined by the Stock Plan Committee.
For purposes of the 1992 Stock Plan, the term "change in control"
means either of the following events: (1) a change in the composition of the
Board of Directors after which fewer than one-half of the incumbent directors
either had been directors of the Company 24 months prior to such change or were
elected or nominated for election to the Board of Directors with the approval
of a majority of the directors who had been directors of the Company 24 months
prior to such change and who were still in office at the time of the election
or nomination; or (2) any person becomes, by acquisition or aggregation of
securities, the beneficial owner of securities representing 50% or more of the
combined voting power of the Company's then outstanding securities. A change
in the relative beneficial ownership under (2) above by reason of a reduction
in the number of outstanding securities of the Company will be disregarded.
In the event of a subdivision of the outstanding Common Stock, a
combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise) into a lesser number of shares, a declaration of
a dividend payable in Common Stock or in a form other than Common Stock in an
amount that has a material effect on the price of the shares, a
recapitalization, spinoff, reclassification, or a similar occurrence, the Stock
Plan Committee will make adjustments in the number and/or exercise price of
options and/or the number of shares available under the 1992 Stock Plan, as
appropriate.
In the event of a merger or other reorganization, outstanding options
will be subject to the agreement of merger or reorganization. Such agreement
may provide for the assumption of outstanding options by the surviving
corporation or its parent, for their continuation by the Company (if the
Company is the surviving corporation), for payment of a cash settlement equal
to the difference between the amount to be paid for one share under the
agreement of merger or reorganization and the exercise price for each option,
or for the acceleration of the exercisability of each option followed by the
cancellation of options not exercised or settled, in all cases without the
optionee's consent.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS UNDER THE 1992 STOCK PLAN
Neither the optionee nor the Company will incur any federal tax
consequences as a result of the grant of an option. The optionee will have no
taxable income upon exercising an ISO (except that the alternative minimum tax
may apply), and the Company will receive no deduction when an
-23-
ISO is exercised. Upon exercising an NSO, the optionee generally must
recognize ordinary income equal to the "spread" between the exercise price and
the fair market value of Common Stock on the date of exercise; the Company
generally will be entitled to a deduction for the same amount. In the case of
an employee, the option spread at the time an NSO is exercised is subject to
income tax withholding, but the optionee generally may elect to satisfy the
withholding tax obligation by having shares of Common Stock withheld from those
purchased under the NSO. The tax treatment of a disposition of option shares
acquired under the 1992 Stock Plan depends on how long the shares have been
held and on whether such shares were acquired by exercising an ISO or by
exercising an NSO. The Company will not be entitled to a deduction in
connection with a disposition of option shares, except in the case of a
disposition of shares acquired under an ISO before the applicable ISO holding
periods have been satisfied.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE COMPANY'S AMENDED AND RESTATED 1992 STOCK PLAN.
-24-
PROPOSAL 3
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 ended December 31, 1997, 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 1998 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's 1998 Annual Meeting must be
received by the Secretary of the Company no later than January 3, 1998 in order
that they may be included in the Company's proxy statement and form of proxy
relating to that meeting.
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. 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.
-25-
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.
Martha J. Demski
Vice President, Chief Financial Officer,
Secretary and Treasurer
San Diego, California
May 6, 1997
-26-
EXHIBIT A
1992 STOCK PLAN OF VICAL INCORPORATED
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was adopted on October 14, 1992. The Plan was amended and
restated effective as of January 7, 1993, and was last amended and restated
effective as of December 4, 1996, subject to the approval of the stockholders
at the 1997 annual meeting.
The purpose of the Plan is to offer Employees an opportunity to
acquire a proprietary interest in the success of the Company, or to increase
such interest, by purchasing Shares of the Company's Stock. The Plan provides
both for the direct award or sale of Shares and for the grant of Options to
purchase Shares. Options granted under the Plan may include NSOs as well as
ISOs intended to qualify under Section 422 of the Code.
The Plan is intended to comply in all respects with Rule 16b-3 (or its
successor) under the Exchange Act and shall be construed accordingly.
SECTION 2. DEFINITIONS.
(a) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.
(b) "Change in Control" shall mean the occurrence of either of the
following events:
(i) A change in the composition of the Board of Directors, as
a result of which fewer than one-half of the incumbent directors are
directors who either:
a. Had been directors of the Company 24 months prior
to such change; or
b. Were elected, or nominated for election, to the
Board of Directors with the affirmative votes of at least a
majority of the directors who had been directors of the
Company 24 months prior to such change and who were still in
office at the time of the election or nomination; or
(ii) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) by the acquisition or aggregation of
securities is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 50 percent or more of the
combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the
"Base Capital Stock"); except that any change in the relative
beneficial ownership of the Company's securities by any person
resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any decrease thereafter
in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such
person's beneficial ownership of any securities of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean a committee of the Board of Directors, as
described in Section 3(a).
(e) "Common-Law Employee" means an individual paid from W-2
Payroll of the Company or a Subsidiary. If, during any period, the Company (or
a Subsidiary, as applicable) has not treated an individual as a Common-Law
Employee and, for that reason, has not withheld employment taxes with respect
to him or her, then that individual shall not be an Employee for that period,
even if any person, court of law or government agency determines,
retroactively, that that individual is or was a Common-Law Employee during all
or any portion of that period.
(f) "Company" shall mean Vical Incorporated, a Delaware corporation.
(g) "Employee" shall mean (i) any individual who is a Common-Law
Employee of the Company or of a Subsidiary or (ii) an Outside Director and
(iii) a consultant or adviser who provides services to the Company or a
Subsidiary as an independent contractor. Service as an Outside Director or as
an independent contractor shall be considered employment for all purposes of
the Plan except as provided in Sections 4(b) and 4(c).
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(j) "Fair Market Value" shall mean the market price of Stock,
determined by the Committee as follows:
(i) If Stock was traded over-the-counter on the date in
question but was not traded on the Nasdaq Stock Market or the Nasdaq
National Market, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices quoted
for such date by the principal automated inter-dealer quotation system
on which Stock is quoted or, if Stock is not quoted on any such
system, the "Pink Sheets" published by the National Quotation Bureau,
Inc.;
(ii) If Stock was traded over-the-counter on the date in
question and was traded on the Nasdaq Stock Market or the Nasdaq
National Market, then the Fair Market Value shall be equal to the last
transaction price quoted for such date by the Nasdaq Stock Market or
the Nasdaq National Market;
(iii) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite transactions report for
such date; and
(iv) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
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Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the Western Edition of The
Wall Street Journal. Such determination shall be conclusive and binding on all
persons.
(k) "Incentive Stock Option" or "ISO" shall mean an employee
incentive stock option described in Section 422(b) of the Code.
(l) "Nonstatutory Option" or "NSO" shall mean an employee stock
option not described in Sections 422(b) or 423(b) of the Code.
(m) "Offeree" shall mean an individual to whom the Committee has
offered the right to acquire Shares under the Plan (other than upon exercise of
an Option).
(n) "Option" shall mean an ISO or NSO granted under the Plan and
entitling the holder to purchase Shares.
(o) "Optionee" shall mean an individual who holds an Option.
(p) "Outside Director" shall mean a member of the Board of Directors
who is not a Common-Law Employee of the Company or of a Subsidiary.
(q) "Plan" shall mean this 1992 Stock Plan of Vical Incorporated.
(r) "Purchase Price" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(s) "Service" shall mean service as an Employee.
(t) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(u) "Stock" shall mean the Common Stock ($.01 par value) of the
Company.
(v) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to the Optionee's Option.
(w) "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such
Shares.
(x) "Subsidiary" shall mean any corporation if the Company and/or one
or more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
(y) "Total and Permanent Disability" shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than one year.
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(z) "W-2 Payroll" shall mean whatever mechanism or procedure that
the Company or a Subsidiary utilizes to pay any individual which results in the
issuance of a Form W-2 to the individual. "W-2 Payroll" does not include any
mechanism or procedure which results in the issuance of any form other than a
Form W-2 to an individual, including, but not limited to, any Form 1099 which
may be issued to an independent contractor, an agency employee or a consultant.
Whether a mechanism or procedure qualifies as a "W-2 Payroll" shall be
determined in the absolute discretion of the Company (or Subsidiary, as
applicable), and the Company or Subsidiary determination shall be conclusive
and binding on all persons.
SECTION 3. ADMINISTRATION.
(a) Committee Composition. The Plan shall be administered by the
Committee. Except as provided below, the Committee shall consist exclusively
of directors of the Company, who shall be appointed by the Board. In addition,
the composition of the Committee shall satisfy:
(i) Such requirements, if any, as the Securities and Exchange
Commission may establish for administrators acting under plans
intended to qualify for exemption under Rule 16b-3 (or its successor)
under the Exchange Act; and
(ii) Such requirements as the Internal Revenue Service may
establish for outside directors acting under plans intended to qualify
for exemption under Section 162(m)(4)(C) of the Code.
The Board may act on its own behalf with respect to Outside Directors and may
also appoint one or more separate committees composed of one or more officers
of the Company, who need not be directors of the Company and who need not
satisfy the foregoing requirements, who may administer the Plan with respect to
Employees who are not "covered employees" under Section 162(m)(3) of the Code
and who are not required to report pursuant to Section 16(a) of the Exchange
Act.
(b) Committee Responsibilities. The Committee shall (i) select
the Employees who are to receive Options and other rights to acquire shares
under the Plan, (ii) determine the type, number, vesting requirements and other
features and conditions of such Options or other rights, (iii) interpret the
Plan and (iv) make all other decisions relating to the operation of the Plan.
The Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
SECTION 4. ELIGIBILITY.
(a) General Rules. Only Employees (including, without limitation,
independent contractors who are not members of the Board) shall be eligible for
designation as Optionees or Offerees by the Committee.
(b) Outside Directors. The Committee may provide that the NSOs
that otherwise would be granted to an Outside Director under this Plan shall
instead be granted to an affiliate of such Outside Director. Such affiliate
shall then be deemed to be an Outside Director for purposes of the Plan,
provided that the service-related vesting and termination provisions pertaining
to the NSOs shall be applied with regard to the service of the Outside
Director.
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(c) Incentive Stock Options. Only Employees who are Common-Law
Employees of the Company or a Subsidiary shall be eligible for the grant of
ISOs. In addition, an Employee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company or any of its
Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in Section 422(c)(6) of the Code are satisfied.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be
authorized but unissued Shares or treasury Shares. The aggregate number of
Shares which may be issued under the Plan (upon exercise of Options or other
rights to acquire Shares) shall not exceed 1,700,000 Shares (subject to
adjustment pursuant to Section 9). Of the Shares available hereunder, no more
than 30% in the aggregate shall be available with respect to Outside Directors,
subject to adjustment pursuant to Section 9. The number of Shares that are
subject to Options or other rights outstanding at any time under the Plan shall
not exceed the number of Shares that then remain available for issuance under
the Plan. The Company, during the term of the Plan, shall at all times reserve
and keep available sufficient Shares to satisfy the requirements of the Plan.
Notwithstanding any other provision of the Plan, no Employee shall receive a
grant of more than 300,000 Shares in any calendar year.
(b) Additional Shares. In the event that any outstanding Option or
other right for any reason expires or is canceled or otherwise terminated, the
Shares allocable to the unexercised portion of such Option or other right shall
again be available for the purposes of the Plan. In the event that Shares
issued under the Plan are reacquired by the Company pursuant to any forfeiture
provision, right of repurchase or right of first refusal, such Shares shall
again be available for the purposes of the Plan.
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) Stock Purchase Agreement. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such award or sale
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions which are not inconsistent with the
Plan and which the Committee deems appropriate for inclusion in a Stock
Purchase Agreement. The provisions of the various Stock Purchase Agreements
entered into under the Plan need not be identical.
(b) Duration of Offers and Nontransferability of Rights. Any right
to acquire Shares under the Plan (other than an Option) shall automatically
expire if not exercised by the Offeree within 30 days after the grant of such
right was communicated to the Offeree by the Committee. Such right shall not
be transferable and shall be exercisable only by the Offeree to whom such right
was granted.
(c) Purchase Price. The Purchase Price of Shares to be offered under
the Plan shall not be less than the par value of such Shares. Subject to the
preceding sentence, the Purchase Price shall be determined by the Committee at
its sole discretion. The Purchase Price shall be payable in a form described
in Section 8.
(d) Withholding Taxes. As a condition to the purchase of Shares, the
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or
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foreign withholding tax obligations that may arise in connection with such
purchase. The Committee may permit the Offeree to satisfy all or part of his
or her tax obligations related to such Shares by having the Company withhold a
portion of any Shares that otherwise would be issued to him or her or by
surrendering any Shares that previously were acquired by him or her. The
Shares withheld or surrendered shall be valued at their Fair Market Value on
the date when taxes otherwise would be withheld in cash. The payment of taxes
by assigning Shares to the Company, if permitted by the Committee, shall be
subject to such restrictions as the Committee may impose, including any
restrictions required by rules of the Securities and Exchange Commission.
(e) Restrictions on Transfer of Shares. Any Shares awarded or sold
under the Plan shall be subject to such special forfeiture conditions, rights
of repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the
applicable Stock Purchase Agreement and shall apply in addition to any
restrictions that may apply to holders of Shares generally.
(f) Effect of Change in Control. The Committee may determine, at the
time of granting Shares or thereafter, that such Shares shall become fully
vested on an accelerated basis in the event that a Change in Control occurs
with respect to the Company. If the Committee finds that there is a reasonable
possibility that, within the succeeding six months, a Change in Control will
occur with respect to the Company, then the Committee may determine that all
Shares shall be fully vested on an accelerated basis.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions
of the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The Stock Option Agreement shall
specify whether the Option is an ISO or an NSO. The provisions of the various
Stock Option Agreements entered into under the Plan need not be identical.
(b) Number of Shares. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9.
(c) Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price of an ISO shall in no event be
less than 100% of the Fair Market Value of a Share on the date of grant (except
as a higher percentage may be required by Section 4(c)) and the Exercise Price
of an NSO shall not be less than the par value of a Share subject to such NSO.
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee at its sole discretion. The Exercise
Price shall be payable in a form described in Section 8.
(d) Withholding Taxes. As a condition to the exercise of an Option,
the Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with such exercise. The Optionee
shall also make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with the disposition of
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Shares acquired by exercising an Option. The Committee may permit the Optionee
to satisfy all or part of his or her tax obligations related to the Option by
having the Company withhold a portion of any Shares that otherwise would be
issued to him or her or by surrendering any Shares that previously were
acquired by him or her. Such Shares shall be valued at their Fair Market Value
on the date when taxes otherwise would be withheld in cash. The payment of
taxes by assigning Shares to the Company, if permitted by the Committee, shall
be subject to such restrictions as the Committee may impose, including any
restrictions required by rules of the Securities and Exchange Commission.
(e) Exercisability. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
vesting of any Option shall be determined by the Committee at its sole
discretion. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, Total and Permanent
Disability, retirement or other events.
(f) Effect of Change in Control. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable on an accelerated basis in the event that a Change in Control
occurs with respect to the Company. If the Committee finds that there is a
reasonable possibility that, within the succeeding six months, a Change in
Control will occur with respect to the Company, then the Committee may
determine that all outstanding Options shall be exercisable on an accelerated
basis.
(g) Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed 10 years from the date of grant, except as
otherwise provided in Section 4(c). Subject to the preceding sentence, the
Committee at its sole discretion shall determine when an Option is to expire.
(h) Nontransferability. An Option granted under the Plan shall not
be anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor's process, whether voluntarily, involuntarily or by
operation of law, except as approved by the Committee. Notwithstanding the
foregoing, ISOs may not be transferable. However, this Section 7 shall not
preclude an Optionee from designating a beneficiary who will receive any
outstanding Options in the event of the Optionee's death, nor shall it preclude
a transfer of Options by will or by the laws of descent and distribution.
(i) Termination of Service (Except by Death). If an Optionee's
Service terminates for any reason other than the Optionee's death, then the
Optionee's Option(s) shall, except to the extent determined by the Committee,
expire on the earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection (g)
above;
(ii) The date 90 days after the termination of the Optionee's
Service for any reason other than Total and Permanent Disability; or
(iii) The date six months after the termination of the
Optionee's Service by reason of Total and Permanent Disability.
The Optionee may exercise all or part of the Optionee's Option(s) at any time
before the expiration of such Option(s) under the preceding sentence, but only
to the extent that such Option(s) had become exercisable before the Optionee's
Service terminated. The balance of such Option(s) shall
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lapse when the Optionee's Service terminates. In the event that the Optionee
dies after the termination of the Optionee's Service but before the expiration
of the Optionee's Option(s), all or part of such Option(s) may be exercised
(prior to expiration) by the executors or administrators of the Optionee's
estate or by any person who has acquired such Option(s) directly from the
Optionee by bequest, beneficiary designation or inheritance, but only to the
extent that such Option(s) had become exercisable before the Optionee's Service
terminated.
(j) Leaves of Absence. For purposes of Subsection (i) above, Service
shall, except to the extent determined by the Committee, be deemed to continue
while the Optionee is on military leave, sick leave or other bona fide leave of
absence (as determined by the Committee). The foregoing notwithstanding, in
the case of an ISO granted under the Plan, Service shall not be deemed to
continue beyond the first 90 days of such leave, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
(k) Death of Optionee. If an Optionee dies while the Optionee is in
Service, then the Optionee's Option(s) shall, except to the extent determined
by the Committee, expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection (f)
above; or
(ii) The date six months after the Optionee's death.
All or part of the Optionee's Option(s) may be exercised at any time before the
expiration of such Option(s) under the preceding sentence by the executors or
administrators of the Optionee's estate or by any person who has acquired such
Option(s) directly from the Optionee by bequest, beneficiary designation or
inheritance, but only to the extent that such Option(s) had become exercisable
before the Optionee's death. The balance of such Option(s) shall lapse when
the Optionee dies.
(l) No Rights as a Stockholder. An Optionee, or a transferee of
an Optionee, shall have no rights as a stockholder with respect to any Shares
covered by the Optionee's Option until such person is entitled, pursuant to the
terms of such Option, to receive such Shares. No adjustments shall be made,
except as provided in Section 9.
(m) Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
Options or may accept the cancellation of outstanding Options (whether granted
by the Company or another issuer) in return for the grant of new Options for
the same or a different number of Shares and at the same or a different
Exercise Price. The foregoing notwithstanding, no modification of an Option
shall, without the consent of the Optionee, impair the Optionee's rights or
increase the Optionee's obligations under such Option.
(n) Restrictions on Transfer of Shares. Any Shares issued upon
exercise of an Option shall be subject to such special forfeiture conditions,
rights of repurchase, rights of first refusal and other transfer restrictions
as the Committee may determine. Such restrictions shall be set forth in the
applicable Stock Option Agreement and shall apply in addition to any
restrictions that may apply to holders of Shares generally.
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SECTION 8. PAYMENT FOR SHARES.
(a) General Rule. The entire Purchase Price or Exercise Price of
Shares issued under the Plan shall be payable in lawful money of the United
States of America at the time when such Shares are purchased, except as
provided in Subsections (b), (c), (d), (e) and (f) below.
(b) Surrender of Stock. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part with Shares which have already
been owned by the Optionee or the Optionee's representative for more than six
months and which are surrendered to the Company in good form for transfer.
Such Shares shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.
(c) Services Rendered. At the discretion of the Committee, Shares
may be awarded under the Plan in consideration of services rendered to the
Company or a Subsidiary prior to the award. If Shares are awarded without the
payment of a Purchase Price in cash, the Committee shall make a determination
(at the time of the award) of the value of the services rendered by the Offeree
and the sufficiency of the consideration to meet the requirements of Section
6(c).
(d) Promissory Note. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so provides, a portion of the Exercise Price or
Purchase Price (as the case may be) of Shares issued under the Plan may be paid
with a full-recourse promissory note, provided that (i) the par value of such
Shares must be paid in lawful money of the United States of America at the time
when such Shares are purchased, (ii) the Shares are pledged as security for
payment of the principal amount of the promissory note and interest thereon and
(iii) the interest rate payable under the terms of the promissory note shall
not be less than the minimum rate (if any) required to avoid the imputation of
additional interest under the Code. Subject to the foregoing, the Committee
(at its sole discretion) shall specify the term, interest rate, amortization
requirements (if any) and other provisions of such note.
(e) Exercise/Sale. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by the delivery (on a form
prescribed by the Company) of an irrevocable direction to a securities broker
approved by the Company to sell Shares and to deliver all or part of the sales
proceeds to the Company in payment of all or part of the Exercise Price and any
withholding taxes.
(f) Exercise/Pledge. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part by the delivery (on a form
prescribed by the Company) of an irrevocable direction to pledge Shares to a
securities broker or lender approved by the Company, as security for a loan,
and to deliver all or part of the loan proceeds to the Company in payment of
all or part of the Exercise Price and any withholding taxes.
SECTION 9. ADJUSTMENT OF SHARES.
(a) General. In the event of a subdivision of the outstanding Stock,
a declaration of a dividend payable in Shares, a declaration of a dividend
payable in a form other than Shares in an amount that has a material effect on
the value of Shares, a combination or consolidation of the outstanding Stock
into a lesser number of Shares, a recapitalization, a spinoff, a
reclassification or a similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the
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number of Shares available for future grants under Section 5, (ii) the number
of Shares covered by each outstanding Option or (iii) the Exercise Price under
each outstanding Option.
(b) Mergers and Consolidations. In the event that the Company is a
party to a merger or consolidation, outstanding Options shall be subject to the
agreement of merger or consolidation. Such agreement may provide for the
assumption of outstanding Options by the surviving corporation or its parent or
for their continuation by the Company (if the Company is the surviving
corporation). In the event the Company is not the surviving corporation and
the surviving corporation will not assume the outstanding Options, the
agreement of merger or consolidation may provide for payment of a cash
settlement for exercisable Options equal to the difference between the amount
to be paid for one Share under such agreement and the Exercise Price and for
the cancellation of Options not exercised or settled, in either case without
the Optionees' consent.
(c) Reservation of Rights. Except as provided in this Section 9, an
Optionee or Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 10. SECURITIES LAWS.
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws and regulations, and the regulations of any stock
exchange on which the Company's securities may then be listed.
SECTION 11. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the
right to terminate any person's Service at any time and for any reason.
SECTION 12. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's stockholders. In the event that the stockholders
fail to approve the Plan on or before the date 12 months after its adoption by
the Board of Directors, any ISOs already granted shall be treated as NSOs, and
no additional ISOs shall be granted after such date. The Plan shall terminate
automatically 10 years after its adoption by the Board of Directors and may be
terminated on any earlier date pursuant to Subsection (b) below.
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(b) Right to Amend or Terminate the Plan. The Board of Directors may
at any time and for any reason, amend, suspend or terminate the Plan. An
amendment of the Plan shall be subject to the approval the Company's
stockholders only to the extent required by applicable laws, regulations and
rules, including the rules of any applicable exchange.
(c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
SECTION 13. EXECUTION.
To record the amendment and restatement of the Plan by the Board of
Directors on December 4, 1996, effective December 4, 1996, the Company has
caused its authorized officer to execute the same.
VICAL INCORPORATED
By ______________________________
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VICAL INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING ON JUNE 10, 1997
The undersigned stockholder of Vical Incorporated (the "Company")
acknowledges receipt of Notice of the Annual Meeting of Stockholders and Proxy
Statement each dated May 6, 1997, 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 Hyatt Regency La Jolla, 3777 La Jolla Village
Drive, San Diego, California at 11:00 a.m., Pacific Daylight Time, on June 10,
1997, 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
Robert C. Bellas, M. Blake Ingle, Ph.D and Fred A. Middleton
(Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
2. TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S 1992
STOCK PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. 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 THREE
NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2 AND 3.
VICAL INCORPORATED
BOARD OF DIRECTORS PROXY
Annual Meeting of Stockholders June 10, 1997
Dated this _____ day of __________, 1997
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(Signature of Stockholder)
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(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.