SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VICAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[VICAL LETTERHEAD]
VICAL INCORPORATED
9373 Towne Centre Drive, Suite 100
San Diego, CA 92121
(619) 453-9900
April 14, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Vical Incorporated which will be held on Thursday, May 28, 1998, at 9:00
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,
/s/ ALAIN B. SCHREIBER, M.D.
Alain B. Schreiber, M.D.
President and Chief Executive Officer
VICAL INCORPORATED
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
---------------
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 Thursday, May 28, 1998, at
9:00 a.m., Pacific Daylight Time, for the following purposes:
1. To elect three Class III directors;
2. To consider and vote upon a proposal to amend the Company's Stock
Incentive Plan;
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 6, 1998, are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. A complete list of stockholders entitled to vote will be available
at the Secretary's office, 9373 Towne Centre Drive, Suite 100, San Diego, for
ten days before the meeting.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN
IF YOU PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHTS TO
ATTEND OR VOTE AT THE MEETING.
By Order of the Board of Directors.
/s/ MARTHA J. DEMSKI
Martha J. Demski
Vice President, Chief Financial Officer,
Secretary and Treasurer
San Diego, California
April 14, 1998
VICAL INCORPORATED
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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 Thursday, May 28, 1998, 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 6, 1998, 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 15,771,712 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,
92121-3088;
-1-
(619) 646-1127. To provide the Company sufficient time to arrange for
reasonable assistance or accommodation, please submit all requests by May 1,
1998.
This Proxy Statement and the accompanying form of proxy are being mailed
on or about April 14, 1998, to all stockholders entitled to vote at the
meeting.
IMPORTANT
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE
SO THAT, WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR
NOT, YOUR SHARES CAN BE VOTED. THIS WILL NOT LIMIT YOUR RIGHTS TO
ATTEND OR VOTE AT THE ANNUAL MEETING.
-2-
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES
The Company has three classes of directors, with each class serving
staggered three-year terms. Three Class III directors are to be elected at
the Annual Meeting to serve until the 2001 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 two Class I and three Class II directors expire in 1999 and
2000, 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. Patrick F. Latterell, Mr. Gary A. Lyons and Mr. Dale A. Smith as Class
III directors. Mr. Latterell, Mr. Lyons and Mr. Smith are currently members
of the Board of Directors of the Company. Each of the nominees has been
nominated as a Class III 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 III
directors and the continuing directors of Class I and Class II.
Class III
PATRICK F. LATTERELL, age 40, 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, a pharmaceutical and healthcare products company, from
1983 through 1985. Mr. Latterell currently serves as a director of
Biocircuits 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 47, 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.
-3-
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 42, 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 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 58, 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, Zoran Corporation, FemRx, Inc., CardioThoracic
Systems, Inc., 3Dfx Interactive, 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.
Class II
ROBERT C. BELLAS, JR., age 56, 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 48, has been a director of the Company since
August 1990. Since 1987, he has been a General Partner of Sanderling
Ventures, 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
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Chairman of DepoTech Corporation, a director of Regeneron Pharmaceuticals,
Inc., 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 56, 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. 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. Dr. Ingle also serves as a
member of the Board of Directors of Corvas International, Inc. and Synbiotics
Corporation. He received his B.S. degree from Fort Lewis College and his
M.S. and Ph.D. from Colorado State University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES FOR
CLASS III DIRECTOR SET FORTH ABOVE.
-5-
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings during the year ended December
31, 1997. 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 two meetings during 1997.
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 three meetings during 1997.
The Stock Plan Committee's functions are to assist in the administration of,
and grant options under, the Stock Incentive Plan of Vical Incorporated (the
"Stock Incentive Plan") and to administer the 1992 Directors' Stock Option
Plan of Vical Incorporated (the "1992 Directors' Stock Plan").
The members of the Audit Committee are Mr. Middleton, Mr. Smith and Mr.
Young. The Audit Committee held one meeting during 1997. 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
Non-employee directors receive an annual fee of $10,000 for service on
the Board of Directors and an additional annual fee of $4,000 for service on
one or more committees of the Board of Directors. All fees are paid on or
about February 15 following the year during which services were rendered.
Directors are reimbursed for their expenses for each meeting attended. Under
the 1992 Directors' Stock Plan, options to purchase a total of 202,500 shares
of Common Stock were granted to non-employee directors, of which, options to
purchase 15,000 shares of Common Stock were granted in 1997. Under the Stock
Incentive Plan, as amended, each new non-employee director of the Company, on
the date of his or her election to the Board, will receive an option to
purchase 20,000 shares of Common Stock at the fair market value on the date
of grant. These options will generally vest 25% on the first anniversary of
the date of grant, with the remaining shares vesting quarterly over three
years. Each non-employee director who has served on the Board for at least
six months on the date of each of the Company's regular annual meetings also
receives an annual grant of an option to purchase 12,500 shares which shall
become exercisable in full on the date of the regular annual meeting of
stockholders following the date of grant. Of the shares available under the
Stock Incentive Plan, no more than 30% in the aggregate are available for
grant to non-employee directors. The Board of Directors may provide
discretionary grants to non-employee directors.
-6-
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 non-employee directors. The
Stock Plan Committee of the Board of Directors also consists of Mr. Bellas,
Dr. Ingle and Mr. Latterell.
CERTAIN TRANSACTIONS
See "Executive Compensation" and "Employment Agreements."
-7-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 2, 1998,
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 9.10%
P.O. Box 7842, Madison, WI 53707
Alain B. Schreiber(3). . . . . . . . . . . . . . . 510,876 3.22%
Deirdre Y. Gillespie(4). . . . . . . . . . . . . . -- *
Martha J. Demski(5). . . . . . . . . . . . . . . . 120,007 *
Jon A. Norman(6) . . . . . . . . . . . . . . . . . 80,375 *
George J. Gray(7). . . . . . . . . . . . . . . . . 68,375 *
Robert H. Zaugg(8) . . . . . . . . . . . . . . . . 50,064 *
Robert C. Bellas, Jr.(9) . . . . . . . . . . . . . 61,126 *
Patrick F. Latterell(10) . . . . . . . . . . . . . 69,201 *
Gary A. Lyons (11) . . . . . . . . . . . . . . . . 3,750 *
Fred A. Middleton(12). . . . . . . . . . . . . . . 292,564 1.85%
Philip M. Young(13). . . . . . . . . . . . . . . . 630,713 3.99%
Dale A. Smith(14). . . . . . . . . . . . . . . . . 19,375 *
M. Blake Ingle(15) . . . . . . . . . . . . . . . . 9,063 *
All directors and executive officers as a group
(13 persons)(16). . . . . . . . . . . . . . . 1,915,489 11.80%
- ------------------
* 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, 1998.
(3) Includes 3,570 shares held in trust for the benefit of Dr. Schreiber's
children and 130,626 shares subject to stock options exercisable on March
2, 1998, or within 60 days thereafter.
(4) Dr. Gillespie joined the Company as Executive Vice President and Chief
Business Officer on March 1, 1998. Dr Gillespie owns no shares subject to
stock options exercisable on March 2, 1998, or within 60 days thereafter.
-8-
(5) Includes 1,450 shares held in trust for the benefit of Ms. Demski's child
and 32,375 shares subject to stock options exercisable on March 2, 1998, or
within 60 days thereafter.
(6) Includes 80,375 shares subject to stock options exercisable on March 2,
1998, or within 60 days thereafter.
(7) Includes 28,375 shares subject to stock options exercisable on March 2,
1998, or within 60 days thereafter.
(8) Includes 17,564 shares subject to stock options exercisable on March 2,
1998, or within 60 days thereafter.
(9) Includes 40,000 shares subject to stock options exercisable on March 2,
1998, or within 60 days thereafter. Also includes 4,225 shares held by the
Bellas Family Partnership. Mr. Bellas is the managing partner of the
Bellas Family Partnership 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.
(10) Includes 40,000 shares subject to stock options exercisable on March 2,
1998, or within 60 days thereafter.
(11) Includes 3,750 shares subject to options exercisable on March 2, 1998 or
within 60 days thereafter.
(12) Includes 40,000 shares subject to stock options exercisable on March 2,
1998, or within 60 days thereafter. Also includes 249,564 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
Ventures, 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.
(13) Includes 40,000 shares subject to stock options exercisable on March 2,
1998, 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.
(14) Includes 19,375 shares subject to stock options exercisable on March 2,
1998, or within 60 days thereafter.
(15) Includes 9,063 shares subject to stock options exercisable on March 2,
1998, or within 60 days thereafter.
(16) Includes all shares referenced in notes (3) through (15) including 481,503
shares subject to stock options exercisable on March 2, 1998, 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, 1995, 1996 and
1997, 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 1997 exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER(4)
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS(#) COMPENSATION($)
- ------------------ ---- --------- -------- --------------- ---------- ---------- --------------
Alain B. Schreiber 1997 300,000 75,000 -- -- 40,000 4,200
President and Chief 1996 290,000 75,000 -- -- 50,000 4,060
Executive Officer 1995 280,000 40,000 42,385(1) -- 40,000 3,528
Martha J. Demski 1997 165,000 25,000 -- -- 20,000 2,970
Vice President and 1996 155,000 25,000 -- -- 20,000 2,790
Chief Financial 1995 147,648 20,000 -- -- 10,000 2,654
Officer
Jon A. Norman 1997 170,000 30,000 -- -- 23,000 3,060
Vice President, 1996 160,000 25,000 25,009(2) -- 20,000 2,880
Research 1995 155,000 15,000 26,089(2) -- 10,000 2,778
George J. Gray 1997 160,000 25,000 -- -- 20,000 2,880
Vice President, 1996 150,000 25,000 -- -- 20,000 2,700
Operations 1995 137,000 15,000 38,007(3) -- 10,000 2,466
Robert H. Zaugg 1997 136,000 20,000 -- -- 18,000 2,448
Vice President, 1996 130,000 13,000 -- -- 15,000 2,340
Business 1995 125,000 5,000 -- -- 5,000 2,250
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 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. 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
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forgiveness of the last one-third of the loan principal and $9
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 1995 includes $36,667
representing the last third of the loan principal and $1,340 of implied
interest income. See "--Employment Agreements."
(4) Represents matching contribution by the Company under the Company's 401(k)
plan.
-11-
STOCK OPTION GRANTS IN 1997 FISCAL YEAR
The following tables summarize option grants to, and exercises by, the
Company's Chief Executive Officer and the Named Officers during fiscal 1997, and
the value of the options held by each such person at the end of fiscal 1997.
OPTION GRANTS IN 1997
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(4)
-------------------------------------------------------- ---------------------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE(3) 5%($) 10%($)
- ---- ------------- ------------- --------- ---------- ------- -------
Alain B. Schreiber 40,000 12 14.1563 11/24/07 356,110 902,455
Martha J. Demski 20,000 6 14.1563 11/24/07 178,055 451,227
Jon A. Norman 23,000 7 14.1563 11/24/07 204,763 518,911
George J. Gray 20,000 6 14.1563 11/24/07 178,055 451,227
Robert H. Zaugg 18,000 5 14.1563 11/24/07 160,249 406,105
- --------------
(1) Options granted in 1997 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 1997 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 1997.
AGGREGATED OPTION EXERCISES IN 1997
AND 1997 YEAR-END OPTION VALUES
NUMBER OF VALUE OF
UNEXERCISED SECURITIES UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, (#) DECEMBER 31, ($)(1)
------------------------- ------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
Alain B. Schreiber -- -- 122,500 107,500 251,250 97,500
Martha J. Demski 8,566 66,817 32,434 42,000 6,389 22,125
Jon A. Norman 10,000 161,550 86,000 45,000 740,925 22,125
George J. Gray 20,000 341,800 26,000 42,000 40,125 22,125
Robert H. Zaugg -- -- 16,000 33,000 23,438 12,188
- ---------------
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1997 ($12.00 per share), minus the exercise
price.
EMPLOYMENT AGREEMENTS
In 1992, the Company entered into an 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. Pursuant to
this agreement, Dr. Schreiber also purchased 412,500 shares of Common Stock
for $66,000, which vested over four years. This agreement expired on April
17, 1996.
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 1994, the Company entered into an employment agreement with Martha J.
Demski pursuant to which Ms. Demski was employed as Vice-President and Chief
Financial Officer at an annual base salary of at least $140,000. This
agreement expired on February 21, 1998.
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 1997 were made by the Committees. In
making their determinations, the Committees have relied, in part, on
geographic and competitive considerations, independent surveys of
compensation of management of companies in the biotechnology and
pharmaceutical industries, including companies included in the Nasdaq
Pharmaceutical Stock Index used in the Company's Stock Price Performance
Graph set forth in this proxy statement, and recommendations of management.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Committees believe that a well-designed compensation program for the
Company's executive officers should:
Align the goals of the executive with the goals of the stockholder by
creating and enhancing stockholder value through the accomplishment of
strategic corporate objectives and by providing management with longer
term incentives through equity ownership by management.
Recognize individual initiative, effort, and achievement.
Provide total compensation that enables the Company to compete with
companies in the pharmaceutical and biotechnology industries, in order
to attract and retain high-caliber candidates on a long-term basis.
Align compensation with the Company's short-term and long-term
corporate objectives and strategy, focusing executive behavior on the
fulfillment of those objectives.
-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 Stock Incentive Plan is administered
by the Company's Stock Plan Committee, a committee of non-employee directors
of the Company. The Stock Plan Committee believes that by granting executive
officers an opportunity to obtain and increase their personal ownership of
Company stock, the best interests of stockholders and executives will be more
closely integrated. The options have exercise prices equal to fair market
value on the date of grant, vest over a four-year period, and expire ten
years from the date of grant. Vesting ceases should the executive leave the
Company's employ. These vesting provisions of the option plan serve to retain
qualified employees, providing continuing benefits to the Company beyond
those achieved in the year of grant. Therefore, executive officers, as well
as all full-time employees, are eligible to receive stock options
periodically at the discretion of the Committee. Consideration is given to
the executive officer's performance against the accomplishment of corporate
objectives, to comparisons with other biotechnology companies at similar
stages of development, to the number of options previously granted to each
executive officer and to the extent of vesting of options and/or restricted
stock previously awarded to each executive officer. The Company targets its
awards to be at the median point of the range for awards made to executive
officers of comparable companies.
CEO COMPENSATION
The annual salary of Alain B. Schreiber, M.D., the Company's President
and Chief Executive Officer was $300,000 at the end of fiscal year 1997; a
$10,000 increase over his 1996 salary. Additionally, Dr. Schreiber was
granted a cash bonus of $75,000 and incentive stock options for 40,000 shares
in November 1997. In establishing Dr. Schreiber's salary base and increase
for 1997 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 1997. Specifically,
corporate objectives achieved included the expansion of its patent
-16-
portfolio, completion of accruals in initial Phase II clinical trials in five
cancer indications and development of new DNA vaccines for the prevention of
infectious diseases. The Company also received a significant milestone
payment from Pasteur Merieux Connaught for the start of the malaria clinical
trial, entered into new license and option agreements with Rhone-Poulenc
Rorer and Merck & Co., Inc. ("Merck") for new vaccine targets, and amended
the existing Merck agreement which resulted in the investment by Merck of $5
million for shares of the Company's Common Stock at a 25% premium over market
value. 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 Stock Incentive 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 Stock Incentive Plan.
This Compensation Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this report by reference and shall not otherwise be
deemed filed under such Acts.
COMPENSATION COMMITTEE STOCK PLAN COMMITTEE
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 12/30/94 12/29/95 12/31/96 12/31/97
------ -------- -------- -------- -------- --------
Vical Incorporated.......... $100.00 $270.00 $165.00 $242.50 $330.00 $240.00
Nasdaq Composite............ 100.00 113.47 110.06 154.57 189.27 231.54
Nasdaq Pharmaceutical....... 100.00 124.78 93.91 171.80 172.30 178.05
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.
(1) The Nasdaq Pharmaceutical Index includes all companies listed on the Nasdaq
Stock Market under the SIC Code 283.
-18-
PROPOSAL 2
AMENDMENT OF THE STOCK INCENTIVE PLAN
The Stock Incentive Plan of Vical Incorporated was adopted by the
Company's Board of Directors in October 1992, and most recently amended and
restated as of December 4, 1996. This amendment of the Stock Incentive Plan,
as proposed, will be effective as of May 28, 1998, if approved by the
Company's stockholders at the Annual Meeting.
The full text of the Stock Incentive 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 Stock Incentive Plan is a summary only. It is subject to, and qualified
in its entirety by, Exhibit A.
SUMMARY OF AMENDMENTS
The amendment to the Stock Incentive Plan approved by the Board of
Directors and submitted for stockholder approval would increase the number of
shares of Common Stock reserved for issuance under the Stock Incentive Plan
by 750,000 shares.
DESCRIPTION OF AMENDED STOCK INCENTIVE PLAN
PURPOSE
The purpose of the Stock Incentive 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 Stock Incentive Plan is administered by a committee of the Board
(the "Stock Plan Committee") consisting exclusively of non-employee directors
of the Company, who are appointed by the Board. The Board may act on its own
behalf with respect to non-employee 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 Stock
Incentive 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 Stock Incentive Plan and adopt
rules thereunder and to make all other decisions relating to the operation of
the Stock Incentive Plan.
-19-
ELIGIBILITY AND SHARES SUBJECT TO THE STOCK INCENTIVE PLAN
Under the Stock Incentive Plan, 2,450,000 shares of Common Stock have
been reserved for issuance (750,000 shares of which are subject to
stockholder approval at the Annual Meeting) either by direct award or sale or
upon exercise of options granted to employees (including officers and
directors who are also employees), non-employee directors and their
affiliates, and consultants and advisors of the Company who are not
directors. The Stock Incentive 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
non-employee directors or to affiliates of such non-employee directors.
The Stock Incentive 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 Stock Incentive Plan, no more
than 30% in the aggregate are available for grant to non-employee directors.
If any options granted under the Stock Incentive 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 Stock Incentive Plan. If shares issued under the Stock Incentive
Plan are forfeited, they also become available for new grants.
As of March 2, 1998, there were 89 employees, seven non-employee
directors and two consultants eligible to participate in the Stock Incentive
Plan. As of March 2, 1998, the Company's Chief Executive Officer, 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 Stock Incentive Plan as follows: Alain B. Schreiber,
President and Chief Executive Officer, 230,000 shares; Martha J. Demski, Vice
President and Chief Financial Officer, 83,000 shares; Jon A. Norman, Vice
President, Research, 151,000 shares; George J. Gray, Vice President,
Operations 108,000 shares and Robert H. Zaugg, Vice President, Business
Development, 49,000 shares; all current executive officers of the Company as
a group, 721,000 shares; all current directors who are not executive
officers, as a group, 77,500 shares; Patrick F. Latterell, 12,500 shares;
Gary A. Lyons, 2,500 shares and Dale A. Smith, 12,500 shares; all employees
of the Company as a group (excluding all current executive officers), 838,145
shares; and all consultants of the Company as a group, 27,500 shares. As of
March 2, 1998, options to purchase an aggregate of 1,318,208 shares of Common
Stock at an average exercise price of $12.82 per share were outstanding under
the Stock Incentive 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 2, 1998, no shares of Common Stock have
been issued for direct sale under the Stock Incentive Plan. As of March 2,
1998, a total of 957,549 shares of Common Stock (750,000 shares of which are
subject to stockholder approval at the Annual Meeting) are available for
future options, grants or direct sales under the Stock Incentive Plan. On
March 2, 1998, the closing price for the Company's Common Stock on the Nasdaq
National Market was $15.25.
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 Stock Incentive Plan, the Stock Plan Committee will determine the number of
options (and any other awards) to be allocated to employees and non-employee
directors under the Stock Incentive Plan in the future, and such
-20-
allocations may only be made in accordance with the provisions of the Stock
Incentive Plan as described herein.
TERMS OF OPTIONS
Stock options granted pursuant to the Stock Incentive Plan will vest at
the time or times determined by the Stock Plan Committee and must be
exercised by the optionee within a term determined by the Committee. The
maximum term of each option granted under the Stock Incentive Plan is 10
years (5 years in the case of an ISO granted to a 10% stockholder).
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 Stock Incentive
Plan, the exercise price is payable in cash or Common Stock or by
full-recourse promissory note. The Stock Incentive 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 Stock
Incentive 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 Stock Incentive Plan need not be
identical, and the Stock Plan Committee determines all terms and conditions
of each such agreement, consistent with the Stock Incentive Plan. The
purchase price for shares sold under the Stock Incentive 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 Stock Incentive Plan in
consideration of services rendered prior to the award, without a cash payment
by the recipient.
Shares sold under the Stock Incentive 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
Stock Incentive Plan will be subject to restrictions on resale or transfer
until they have vested. Any right to acquire shares under the Stock
Incentive 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 Stock Incentive
Plan has the same voting, dividend and other rights as the Company's other
stockholders.
-21-
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate the Stock
Incentive Plan at any time, except that any such amendment, suspension or
termination shall not affect any option previously granted. Any amendment of
the Stock Incentive 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 Stock Incentive 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 Stock Incentive 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 Stock
Incentive Plan will contain similar provisions, unless otherwise determined
by the Stock Plan Committee.
For purposes of the Stock Incentive 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 Stock
Incentive 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 STOCK INCENTIVE 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
-22-
the alternative minimum tax may apply), and the Company will receive no
deduction when an 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 Stock Incentive 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 STOCK INCENTIVE PLAN.
-23-
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, 1998, 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 1999 Annual Meeting must be
received by the Secretary of the Company no later than January 4, 1999 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.
-24-
All of the filing requirements were timely satisfied. In making this
disclosure, the Company has relied solely on written representations of its
directors and executive officers and copies of the reports that have been
filed with the Commission.
Whether you intend to be present at the Annual Meeting or not, we urge
you to return your signed proxy promptly.
By order of the Board of Directors.
/s/ MARTHA J. DEMSKI
Martha J. Demski
Vice President, Chief Financial Officer,
Secretary and Treasurer
San Diego, California
April 14, 1998
-25-
EXHIBIT A
STOCK INCENTIVE 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, was amended and restated effective as
of December 4, 1996, and was amended and restated March 31, 1998, subject to the
approval of the stockholders at the 1998 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.
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.
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(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 Stock Incentive Plan of Vical Incorporated,
formerly the 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.
(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
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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.
(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.
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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 2,450,000 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 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.
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(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 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
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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 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
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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.
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
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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 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
-9-
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.
(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.
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SECTION 13. EXECUTION.
To record the amendment and restatement of the Plan by the Board of
Directors on March 31, 1998, effective March 31, 1998, 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 MAY 28, 1998
The undersigned stockholder of Vical Incorporated (the "Company")
acknowledges receipt of Notice of the Annual Meeting of Stockholders and
Proxy Statement, each dated April 14, 1998, 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 9:00 a.m. on May 28, 1998, 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 III director
listed below
Patrick F. Latterell, Gary A. Lyons and Dale A. Smith
(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 OF THE COMPANY'S STOCK INCENTIVE 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 May 28, 1998
Dated this ________ day of ________, 1998
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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.