def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o |
|
Preliminary Proxy Statement |
o |
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ |
|
Definitive Proxy Statement |
o |
|
Definitive Additional Materials |
o |
|
Soliciting Material Pursuant to §240.14a-12 |
ARADIGM CORPORATION
(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):
þ |
|
No fee required. |
o |
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
|
(1) |
|
Title of each class of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Aggregate number of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule a-II (set forth the amount on which the filing fee is calculated and state how it was
determined): |
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
Proposed maximum aggregate value of transaction: |
|
|
|
|
|
|
|
|
|
|
|
(5) |
|
Total fee paid: |
|
|
|
|
|
|
|
|
|
o |
|
Fee paid previously with preliminary materials. |
|
o |
|
Check box if any part of the fee is offset as provided by Exchange Act Rule a-II(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. |
|
(6) |
|
Amount Previously Paid: |
|
|
|
|
|
|
|
|
|
|
|
(7) |
|
Form, Schedule or Registration Statement No.: |
|
|
|
|
|
|
|
|
|
|
|
(8) |
|
Filing Party: |
|
|
|
|
|
|
|
|
|
|
|
(9) |
|
Date Filed: |
|
|
|
|
|
|
|
|
|
ARADIGM
CORPORATION
3929 Point Eden Way
Hayward, California, 94545
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held On June 20, 2007
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Aradigm Corporation, a California corporation
(Aradigm). The meeting will be held on Wednesday,
June 20, 2007, at 9:00 a.m. local time at
Aradigms offices for the following purposes:
1. To elect five directors to hold office until the next
annual meeting of shareholders and until their successors are
elected.
2. To approve an amendment to the Aradigm Corporation 2005
Equity Incentive Plan to increase the aggregate number of shares
of Common Stock authorized for issuance under such plan by
1,600,000 shares.
3. To ratify the selection of Odenberg, Ullakko,
Muranishi & Co. LLP as Aradigms independent
registered public accounting firm for the fiscal year ending
December 31, 2007.
4. To conduct any other business properly brought before
the meeting.
These items of business are more fully described in the Proxy
Statement accompanying this Notice.
The record date for the annual meeting is April 26, 2007.
Only shareholders of record at the close of business on that
date may vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
-s- Dr. Igor Gonda
Dr. Igor Gonda
President and Chief Executive Officer
Hayward, California
May 1, 2007
You are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please
complete, date, sign and return the enclosed proxy as promptly
as possible in order to ensure your representation at the
meeting. A return envelope (which is postage prepaid if mailed
in the United States) is enclosed for your convenience. Even if
you have voted by proxy, you may still vote in person if you
attend the meeting. Please note, however, that if your shares
are held of record by a broker, bank or other nominee and you
wish to vote at the meeting, you must obtain a proxy issued in
your name from that record holder.
Table
of Contents
|
|
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
5
|
|
|
|
|
10
|
|
|
|
|
11
|
|
|
|
|
20
|
|
|
|
|
22
|
|
|
|
|
25
|
|
|
|
|
35
|
|
|
|
|
36
|
|
|
|
|
36
|
|
ARADIGM
CORPORATION
3929 Point Eden Way
Hayward, California, 94545
PROXY
STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I
receiving these materials?
We have sent you this proxy statement and the enclosed proxy
card because the Board of Directors of Aradigm Corporation is
soliciting your proxy to vote at the 2007 Annual Meeting of
Shareholders. You are invited to attend the annual meeting to
vote on the proposals described in this proxy statement.
However, you do not need to attend the meeting to vote your
shares. Instead, you may simply complete, sign and return the
enclosed proxy card.
We intend to mail this proxy statement and accompanying proxy
card on or about May 4, 2007 to all shareholders of record
entitled to vote at the annual meeting.
Who can
vote at the annual meeting?
Only shareholders of record at the close of business on
April 26, 2007 will be entitled to vote at the annual
meeting. On this record date, there were 53,999,817 shares
of common stock outstanding and entitled to vote.
Shareholder
of Record: Shares Registered in Your Name
If on April 26, 2007 your shares were registered directly
in your name with our transfer agent, Computershare Trust
Company, N.A., then you are a shareholder of record. As a
shareholder of record, you may vote in person at the meeting or
vote by proxy. Whether or not you plan to attend the meeting, we
urge you to fill out and return the enclosed proxy card to
ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or
Bank
If on April 26, 2007 your shares were held in an account at
a brokerage firm, bank, dealer, or other similar organization,
then you are the beneficial owner of shares held in street
name and these proxy materials are being forwarded to you
by that organization. The organization holding your account is
considered the shareholder of record for purposes of voting at
the annual meeting. As a beneficial owner, you have the right to
direct your broker or other agent regarding how to vote the
shares in your account. You are also invited to attend the
annual meeting. However, since you are not the shareholder of
record, you may not vote your shares in person at the meeting
unless you request and obtain a valid proxy from your broker or
other agent.
What am I
voting on?
There are three matters scheduled for a vote:
|
|
|
|
|
Election of five directors;
|
|
|
|
Approval of an amendment to our 2005 Equity Incentive Plan to
increase the number of shares of our common stock authorized for
issuance under the plan by 1,600,000 shares; and
|
|
|
|
Ratification of Odenberg, Ullakko, Muranishi & Co. LLP
as our independent registered public accounting firm for the
fiscal year ending December 31, 2007.
|
How do I
vote?
You may either vote For all the nominees for
director or you may abstain from voting for any nominee you
specify. For each of the other matters to be voted on, you may
vote For or Against or abstain from
voting. The procedures for voting are fairly simple:
Shareholder
of Record: Shares Registered in Your Name
If you are a shareholder of record, you may vote in person at
the annual meeting or vote by proxy using the enclosed proxy
card. Whether or not you plan to attend the meeting, we urge you
to vote by proxy to ensure your vote is counted. You may still
attend the meeting and vote in person even if you have already
voted by proxy.
|
|
|
|
|
To vote in person, come to the annual meeting and we will give
you a ballot when you arrive.
|
|
|
|
To vote using the proxy card, simply complete, sign and date the
enclosed proxy card and return it promptly in the envelope
provided. If you return your signed proxy card to us before the
annual meeting, we will vote your shares as you direct.
|
Beneficial
Owner: Shares Registered in the Name of Broker or
Bank
If you are a beneficial owner of shares registered in the name
of your broker, bank, or other agent, you should have received a
proxy card and voting instructions with these proxy materials
from that organization rather than from Aradigm. Simply complete
and mail the proxy card to ensure that your vote is counted. To
vote in person at the annual meeting, you must obtain a valid
proxy from your broker, bank, or other agent. Follow the
instructions from your broker or bank included with these proxy
materials, or contact your broker or bank to request a proxy
form.
How many
votes do I have?
On each matter to be voted upon, you have one vote for each
share of common stock you own as of April 26, 2007.
However, you may be able to cumulate your votes for
Proposal 1, the election of directors, if at least one
shareholder gives notice at the meeting, before the voting, that
he or she intends to cumulate votes. Under cumulative voting,
you have five votes for each share of common stock you own. You
may cast all of your votes for one candidate, or you may
distribute your votes among different candidates as you choose.
However, you may cumulate votes (cast more than one vote per
share) for a candidate only if the candidate is nominated before
the voting and at least one shareholder gives notice at the
meeting, before the voting, that he or she intends to cumulate
votes. If you do not specify how to distribute your votes, by
giving your proxy you are authorizing the proxyholders (the
individuals named on your proxy card) to cumulate votes in their
discretion.
What if I
return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any
voting selections, your shares will be voted For the
election of all five nominees for director, For the
amendment to our 2005 Equity Incentive Plan and For
the ratification of Odenberg, Ullakko, Muranishi & Co.
LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2007. If any other matter
is properly presented at the meeting, your proxyholder (one of
the individuals named on your proxy card) will vote your shares
using his or her best judgment.
Who is
paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In
addition to these mailed proxy materials, our directors and
employees and Georgeson Shareholder Communications, Inc.
(Georgeson) may also solicit proxies in person, by
telephone, or by other means of communication. Directors and
employees will not be paid any additional compensation for
soliciting proxies, but Georgeson, if retained, would be paid
its customary fee, estimated to be $8,500 plus
out-of-pocket
expenses, if it solicits proxies.
2
What does
it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are
registered in more than one name or are registered in different
accounts. Please complete, sign and return each proxy card to
ensure that all of your shares are voted.
Can I
change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote
at the meeting. You may revoke your proxy in any one of three
ways:
|
|
|
|
|
You may submit another properly completed proxy card with a
later date.
|
|
|
|
You may send a timely written notice that you are revoking your
proxy to our Secretary at 3929 Point Eden Way, Hayward,
California, 94545.
|
|
|
|
You may attend the annual meeting and vote in person. Simply
attending the meeting will not, by itself, revoke your proxy.
|
When are
shareholder proposals due for next years annual
meeting?
To be considered for inclusion in next years proxy
materials, your proposal must be submitted in writing by
January 4, 2008, to our Secretary at 3929 Point Eden Way,
Hayward, California, 94545. If you wish to submit a proposal
that is not to be included in next years proxy materials
or nominate a director, you must do so no later than the close
of business on April 21, 2008 and no earlier than the close
of business on March 22, 2008. You are also advised to
review our bylaws, which contain additional requirements about
advance notice of shareholder proposals and director nominations.
How are
votes counted?
Votes will be counted by the inspector of election appointed for
the meeting, who will separately count For and (with
respect to proposals other than the election of directors)
Against votes, abstentions and broker non-votes.
Abstentions and broker non-votes will not be counted towards the
vote total for any proposal.
If your shares are held by your broker as your nominee (that is,
in street name), you will need to obtain a proxy
form from the institution that holds your shares and follow the
instructions included on that form regarding how to instruct
your broker to vote your shares. If you do not give instructions
to your broker, your broker can vote your shares with respect to
discretionary items, but not with respect to
non-discretionary items. On non-discretionary items
for which you do not give your broker instructions, the shares
will be treated as broker non-votes.
What are
broker non-votes?
Broker non-votes occur when a beneficial owner of shares held in
street name does not give instructions to the broker
or nominee holding the shares as to how to vote on matters
deemed non-routine. Generally, if shares are held in
street name, the beneficial owner of the shares is entitled to
give voting instructions to the broker or nominee holding the
shares. If the beneficial owner does not provide voting
instructions, the broker or nominee can still vote the shares
with respect to matters that are considered to be
routine, but not with respect to
non-routine matters. Under the rules and
interpretations of the New York Stock Exchange
(NYSE), non-routine matters are
generally those involving a contest or a matter that may
substantially affect the rights or privileges of shareholders,
such as mergers or shareholder proposals.
How many
votes are needed to approve each proposal?
|
|
|
|
|
For the election of directors, the five nominees receiving the
most For votes (from the holders of votes of shares
present in person or represented by proxy and entitled to vote
on the election of directors) will be elected. Broker non-votes
will have no effect.
|
3
|
|
|
|
|
To be approved, Proposal 2 (approval of an amendment to our
2005 Equity Incentive Plan to increase the number of shares of
our common stock authorized for issuance under the plan by
1,600,000 shares) and Proposal 3 (ratifying the
selection of Odenberg, Ullakko, Muranishi & Co. LLP as
our independent registered public accounting firm for the fiscal
year ending December 31, 2007) must receive
For votes from the holders of a majority of shares
present either in person or by proxy and entitled to vote.
Broker non-votes will have no effect.
|
What is
the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. A
quorum will be present if shareholders holding a majority of the
outstanding shares are present at the meeting in person or
represented by proxy. On the record date, there were
53,999,817 shares of common stock outstanding and entitled
to vote.
Your shares will be counted towards the quorum only if you
submit a valid proxy vote or vote at the meeting. Abstentions
and broker non-votes will be counted towards the quorum
requirement. If there is no quorum, the holders of a majority of
the shares present in person or represented by proxy at the
meeting may adjourn the meeting to another date.
How can I
find out the results of the voting at the annual
meeting?
Preliminary voting results will be announced at the annual
meeting. Final voting results will be published in our quarterly
report on
Form 10-Q
for the second quarter of 2007.
4
PROPOSAL 1
ELECTION
OF DIRECTORS
Our Board of Directors (the Board) currently
consists of five directors. There are five nominees for director
this year. Each director to be elected will hold office until
the next annual meeting and until his successor is elected, or
until the directors death, resignation or removal. Each of
the nominees listed below, except for Dr. Siebert, who
joined the Board in November 2006, is currently a member of our
Board who was previously elected by the shareholders.
Dr. Siebert was recommended for election to the Board by
Frank Barker, the chair of the Nominating and Corporate
Governance Committee. It is our policy to invite nominees to
attend the annual meeting and to encourage attendance at
meetings at which substantial shareholder attendance is
expected. One of the nominees for election as a director at the
2006 Annual Meeting of Shareholders attended the 2006 Annual
Meeting of Shareholders.
The five candidates receiving the highest number of affirmative
votes by the holders of shares entitled to be voted will be
elected. Shares represented by executed proxies will be voted,
if authority to do so is not withheld, for the election of the
five nominees named below. If any nominee becomes unavailable
for election as a result of an unexpected occurrence, your
shares will be voted for the election of a substitute nominee
proposed by us. Each person nominated for election has agreed to
serve if elected. Our management has no reason to believe that
any nominee will be unable to serve.
Nominees
The following is a brief biography of each nominee for director
and their ages as of March 30, 2007.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Principal Occupation/Position Held With Us
|
|
Frank H. Barker
|
|
|
76
|
|
|
Director
|
Igor Gonda
|
|
|
59
|
|
|
President, Chief Executive Officer
and Director
|
Stephen O. Jaeger
|
|
|
62
|
|
|
Chairman of eBT International,
Inc. and Director
|
John M. Siebert
|
|
|
67
|
|
|
Chairman and Chief Executive
Officer of CyDex, Inc.
|
Virgil D. Thompson
|
|
|
67
|
|
|
President and Chief Executive
Officer of Angstrom Pharmaceuticals, Chairman and Director
|
Frank H. Barker has been a director since May 1999. From
January 1980 to January 1994, Mr. Barker served as a
company group chairman of Johnson & Johnson, Inc., a
diversified health care company, and was Corporate Vice
President from January 1989 to January 1996. Mr. Barker
retired from Johnson & Johnson, Inc. in January 1996.
Mr. Barker holds a B.A. in Business Administration from
Rollins College, Winter Park, Florida. Mr. Barker is a
director of Jenex Corporation, a Canadian medical devices
company.
Igor Gonda, Ph.D. has served as our President and
Chief Executive Officer since August 2006, and as a director
since September 2001. From December 2001 to August 2006,
Dr. Gonda was the Chief Executive Officer and Managing
Director of Acrux Limited, a publicly traded specialty
pharmaceutical company located in Melbourne, Australia. From
July 2001 to December 2001, Dr. Gonda was our Chief
Scientific Officer and, from October 1995 to July 2001, was our
Vice President, Research and Development. From February 1992 to
September 1995, Dr. Gonda was a Senior Scientist and Group
Leader at Genentech, Inc. His key responsibilities at Genentech
were the development of the inhalation delivery of rhDNase
(Pulmozyme) for the treatment of cystic fibrosis and
non-parenteral methods of delivery of biologics. Prior to that,
Dr. Gonda held academic positions at the University of
Aston in Birmingham, United Kingdom, and the University of
Sydney, Australia. Dr. Gonda holds a B.Sc. in Chemistry and
a Ph.D. in Physical Chemistry from Leeds University, United
Kingdom. Dr. Gonda was the Chairman of our Scientific
Advisory Board until August 2006.
Stephen O. Jaeger has been a director since March 2004.
Mr. Jaeger was Chairman, President and Chief Executive
Officer of eBT International, Inc. a privately held software
products and services company, from 1999 to December 2005. Prior
to joining eBT, Mr. Jaeger was the Executive Vice President
and Chief Financial Officer of Clinical Communications Group,
Inc., a provider of educational marketing services to the
pharmaceutical and
5
biotech industries, from 1997 to 1998. From 1995 to 1997,
Mr. Jaeger served as Vice President, Chief Financial
Officer and Treasurer of Applera Corp., formerly known as Perkin
Elmer Corporation, an analytical instrument and systems company
with a focus on life science and genetic discovery. Prior to
1995, Mr. Jaeger was Chief Financial Officer and a director
of Houghton Mifflin Company and held various financial positions
with BP, Weeks Petroleum Limited and Ernst & Young LLP.
Mr. Jaeger holds a B.A. in Psychology from Fairfield
University and an M.B.A. in Accounting from Rutgers University
and is a Certified Public Accountant. Mr. Jaeger is the
Chairman of the Board of Savient Pharmaceuticals Inc., a
publicly traded specialty pharmaceutical company, and a director
of Arlington Tankers, Ltd., a publicly traded shipping company.
Mr. Jaeger is the Chairman of and the designated
audit committee financial expert on our, Savient
Pharmaceuticals and Arlington Tankers audit
committees.
John M. Siebert, Ph.D. has been a director since
November 2006. Since May 2003, Dr. Siebert has been the
Chairman and Chief Executive Officer of CyDex, Inc., a privately
held specialty pharmaceutical company. From September 1995 to
April 2003, he was President and Chief Executive Officer of CIMA
Labs Inc., a publicly traded drug delivery company, and from
July 1995 to September 1995 he was President and Chief Operating
Officer of CIMA Labs. From 1992 to 1995, Dr. Siebert was
Vice President, Technical Affairs at Dey Laboratories, Inc., a
privately held pharmaceutical company. From 1988 to 1992, he
worked at Bayer Corporation. Prior to that, Dr. Siebert was
employed by E.R. Squibb & Sons, Inc., G.D.
Searle & Co. and The Procter & Gamble Company.
Dr Siebert holds a B.S. in Chemistry from Illinois Benedictine
University, an M.S. in Organic Chemistry from Wichita State
University and a Ph.D. in Organic Chemistry from the University
of Missouri.
Virgil D. Thompson has been a director since June 1995
and has been Chairman of the Board since January 2005. Since
November 2002, Mr. Thompson has been President and Chief
Executive Officer of Angstrom Pharmaceuticals, Inc., a privately
held pharmaceutical company. From September 2000 to November
2002, Mr. Thompson was President, Chief Executive Officer
and a director of Chimeric Therapies, Inc., a privately held
biotechnology company. From May 1999 until September 2000,
Mr. Thompson was the President, Chief Operating Officer and
a director of Savient Pharmaceuticals, a publicly traded
specialty pharmaceutical company. From January 1996 to April
1999, Mr. Thompson was the President and Chief Executive
Officer and a director of Cytel Corporation, a publicly traded
biopharmaceutical company that was subsequently acquired by IDM
Pharma, Inc. From 1994 to 1996, Mr. Thompson was President
and Chief Executive Officer of Cibus Pharmaceuticals, Inc., a
privately held drug delivery device company. From 1991 to 1993,
Mr. Thompson was President of Syntex Laboratories, Inc., a
U.S. subsidiary of Syntex Corporation, a publicly traded
pharmaceutical company. Mr. Thompson holds a B.S. in
Pharmacy from Kansas University and a J.D. from The George
Washington University Law School. Mr. Thompson is a
director of Questcor Pharmaceuticals, Inc., a publicly traded
pharmaceutical company, and Savient Pharmaceuticals.
THE BOARD
OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Independence
of the Board of Directors
We have chosen to apply the listing standards of the Nasdaq
Global Market (Nasdaq) in determining the
independence of our directors. The Board consults with counsel
to ensure that the Boards determinations are consistent
with all relevant securities and other laws and regulations
regarding the definition of independent, including
those set forth in pertinent listing standards of the Nasdaq, as
in effect from time to time.
Consistent with these considerations, after review of all
relevant transactions or relationships between each director, or
any of his family members, and us, our senior management and our
independent registered public accounting firm, the Board
affirmatively has determined that all of our directors are
independent directors within the meaning of the applicable
Nasdaq listing standards, except for Dr. Gonda, our
President and Chief Operating Officer. In addition, each person
who served as a director for any portion of 2006 was independent
within the meaning of the applicable Nasdaq listing standards,
except for Dr. Gonda, V. Bryan Lawlis, who was employed as
our President and Chief Executive Officer until August 2006, and
Richard Thompson, who was employed as our Chief Executive
Officer until August 2004.
6
Meetings
of the Board of Directors
The Board held fifteen meetings during the last fiscal year.
Each of our current Board members attended 75% or more of the
aggregate of the meetings of the Board and of the committees on
which he served, held during the period for which he was a
director or committee member, respectively, except for
Dr. Siebert, who joined our Board in November 2006.
In fiscal 2006 our independent directors met fifteen times in
regularly scheduled executive sessions at which only independent
directors were present. These meetings were chaired by
Mr. V. Thompson, the Chairman of the Board. Persons
interested in communicating with the independent directors with
their concerns or issues may address correspondence to a
particular director, or to the independent directors generally,
in care of Aradigm at 3929 Point Eden Way, Hayward, California,
94545.
Shareholder
Communications with the Board of Directors
We have implemented a process by which shareholders may
communicate with the Board or any of its directors. Shareholders
who wish to communicate with the Board may do so by sending
written communications addressed to the Secretary of Aradigm at
3929 Point Eden Way, Hayward, California 94545. All
communications will be compiled by our Secretary and submitted
to the Board or the individual directors on a periodic basis.
All communications directed to the Audit Committee in accordance
with our whistleblower policy that relate to questionable
accounting or auditing matters involving us will be forwarded
directly to the Audit Committee.
Code of
Ethics
We have adopted the Aradigm Corporation Code of Business Conduct
and Ethics that applies to all of our officers, directors and
employees. The Code of Business Conduct and Ethics is available
on our website at www.aradigm.com. If we make any substantive
amendments to the Code of Business Conduct and Ethics or grant
any waiver from a provision of the Code to any executive officer
or director, we will promptly disclose the nature of the
amendment or waiver on our website.
Information
Regarding the Committees of our Board of Directors
The Board has three committees: an Audit Committee, a
Compensation Committee and a Nominating and Corporate Governance
Committee (formerly called the Nominating Committee). The
following table provides membership information and meeting
information for each of the Board committees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating and
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
Name
|
|
Audit
|
|
|
Compensation
|
|
|
Governance
|
|
|
Frank H. Barker
|
|
|
X
|
|
|
|
|
|
|
|
X
|
*
|
Igor Gonda
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Jaeger
|
|
|
X
|
*
|
|
|
X
|
|
|
|
|
|
John M. Siebert
|
|
|
|
|
|
|
X
|
|
|
|
X
|
|
Virgil D. Thompson
|
|
|
X
|
|
|
|
X
|
*
|
|
|
X
|
|
Total meetings in fiscal year 2006
|
|
|
6
|
|
|
|
8
|
|
|
|
2
|
|
Audit
Committee
The Audit Committee of the Board was established by the Board in
accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended, to oversee our corporate
accounting and financial reporting processes and audits of our
financial statements. For this purpose, the Audit Committee
performs several functions. The Audit Committee evaluates the
performance of and assesses the qualifications of our
independent registered public accounting firm; determines and
approves the engagement of our independent registered public
accounting firm; determines whether to retain or terminate the
existing independent registered public accounting firm or to
7
appoint and engage a new independent registered public
accounting firm; reviews and approves the retention of the
independent registered public accounting firm to perform any
proposed permissible non-audit services; monitors the rotation
of partners of the independent registered public accounting firm
on our audit engagement team as required by law; confers with
management and our independent registered public accounting firm
regarding the effectiveness of internal controls over financial
reporting; establishes procedures, as required under applicable
law, for the receipt, retention and treatment of complaints
received by us regarding accounting, internal accounting
controls or auditing matters and the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters; reviews the financial statements
to be included in our Annual Report on
Form 10-K
and our quarterly financial statements; and discusses with
management and our independent registered public accounting firm
the results of the annual audit. Currently, three directors
comprise the Audit Committee: Messrs. Barker, Jaeger
(chair) and V. Thompson. The Audit Committee is governed by a
written charter that is available to shareholders on our website
at www.aradigm.com.
The Board annually reviews the Nasdaq listing standards
definition of independence for Audit Committee members and has
determined that all members of our Audit Committee are
independent (as independence is currently defined in
Rule 4350(d)(2)(A)(i) and (ii) of the Nasdaq listing
standards). The Board has determined that Mr. Jaeger
qualifies as an audit committee financial expert, as
defined in applicable rules of the Securities and Exchange
Commission (the SEC). The Board made a qualitative
assessment of Mr. Jaegers level of knowledge and
experience based on a number of factors, including his formal
education and experience as a Chief Financial Officer for public
reporting companies.
Compensation
Committee
The Compensation Committee of the Board reviews and recommends
to the Board the overall compensation strategy and policies for
us. The Compensation Committee reviews and recommends to the
Board corporate performance goals and objectives relevant to the
compensation of our executive officers and other senior
management; reviews and recommends to the Board the compensation
and other terms of employment of our Chief Executive Officer;
reviews and recommends to the Board for approval the
compensation and other terms of employment of the other
officers; and oversees the administration of our stock option
and purchase plans, pension and profit sharing plans, stock
bonus plans, deferred compensation plans and other similar
programs. Beginning this year, the Compensation Committee also
began to review with management our Compensation Discussion and
Analysis and to consider whether to recommend that it be
included in these proxy materials and other filings. Three
directors currently comprise the Compensation Committee:
Dr. Siebert and Messrs. Jaeger and V. Thompson
(chair). All members of our Compensation Committee are
independent (as independence is currently defined in
Rule 4200(a)(15) of the Nasdaq listing standards). The
Compensation Committee is governed by a written charter that is
available to shareholders on our website at www.aradigm.com.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board
is responsible for identifying, reviewing and evaluating
candidates to serve as directors (consistent with criteria
approved by the Board), recommending to the Board candidates for
election and re-election to the Board, making recommendations to
the Board regarding the membership of the committees of the
Board, assessing the performance of the Board and its committees
and monitoring compliance with the our Code of Business Conduct
and Ethics. The Nominating and Corporate Governance Committee
met twice during the fiscal year. Currently, the Nominating and
Corporate Governance Committee consists of three directors:
Dr. Siebert and Messrs. Barker (chair) and V.
Thompson. All current members of the Nominating and Corporate
Governance Committee are independent (as independence is
currently defined in Rule 4200(a)(15) of the Nasdaq listing
standards). The Nominating and Corporate Governance Committee is
governed by a written charter that is available to shareholders
on our website at www.aradigm.com.
Any potential candidates for director nominees, including
candidates recommended by shareholders, are reviewed in the
context of the current composition of the Board, our operating
requirements and the long-term interests of shareholders. In
conducting this assessment, the Committee considers such factors
as it deems appropriate given our current needs and those of our
Board, to maintain a balance of knowledge, experience and
capability. In the case of incumbent directors whose terms of
office are set to expire, the Nominating and
8
Corporate Governance Committee reviews such directors
overall service during their term, including the number of
meetings attended, level of participation and quality of
performance. The Committee also determines whether the nominee
would be independent, which determination is based upon
applicable Nasdaq listing standards, applicable SEC rules and
regulations and the advice of counsel, if necessary. The
Committee then compiles a list of potential candidates from
suggestions it may receive, but may also engage, if it deems
appropriate, a professional search firm to generate additional
suggestions. The Committee conducts any appropriate and
necessary inquiries into the backgrounds and qualifications of
possible candidates as it deems appropriate. The Committee meets
to discuss and consider such candidates qualifications and
then selects a nominee for recommendation to the Board by
majority vote. To date, the Nominating and Corporate Governance
Committee has not paid a fee to any third party to assist in the
process of identifying or evaluating director candidates. While
the Committee and the Board have from time to time received and
considered suggestions from shareholders for nominations to the
Board, the Committee has received no suggestions for which
disclosure is required in this proxy statement.
The Nominating and Corporate Governance Committee will consider
director candidates recommended by shareholders. The Committee
will consider candidates recommended by shareholders in the same
manner as it considers recommendations from other sources.
Shareholders who wish to recommend individuals for consideration
by the Nominating and Corporate Governance Committee to become
nominees for election to the Board may do so by delivering a
written recommendation to the Nominating and Corporate
Governance Committee at the following address: 3929 Point Eden
Way, Hayward, California 94545 at least 60 days prior to
the anniversary date of the last annual meeting of shareholders.
Submissions should include the full name of the proposed
nominee, a description of the proposed nominees business
experience for at least the previous five years, complete
biographical information, a description of the proposed
nominees qualifications as a director and a representation
that the nominating shareholder is a beneficial or record owner
of our stock.
9
REPORT OF
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS(*)
The Audit Committee has reviewed and discussed the audited
financial statements for the fiscal year ended December 31,
2006 with our
management. The
Audit Committee has discussed with our independent registered
public accounting firm the matters required to be discussed by
the Statement on Auditing Standards No. 61, as amended
(AICPA, Professional Standards, Vol. 1. AU
section 380), as adopted by the Public Company Accounting
Oversight Board (PCAOB) in
Rule 3200T.
The Audit Committee has also received the written
disclosures and the letter from our independent registered
public accounting firm required by the Independence Standards
Board Standard No. 1, (Independence Discussions with
Audit Committees), as adopted by the PCAOB in
Rule 3600T and has discussed with our independent
registered public accounting firm the firms
independence.
Based on the foregoing, the Audit Committee has
recommended to the Board of Directors that the audited financial
statements be included in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006.
From the members of the Audit Committee of Aradigm Corporation:
Frank H. Barker
Stephen Jaeger
Virgil D. Thompson
(*) The material in this report is not soliciting
material, is not deemed filed with the SEC,
and is not to be incorporated by reference into any filing of
the Company under the Securities Act of 1933, as amended, or the
Securities Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation
language contained in such filing.
10
PROPOSAL 2
APPROVAL OF 2005 EQUITY INCENTIVE PLAN, AS AMENDED
In March 2005, the Board adopted, and our shareholders
subsequently approved, the Aradigm Corporation 2005 Equity
Incentive Plan (the 2005 Plan), an amended, restated
and retitled version of the Aradigm Corporation 1996 Equity
Incentive Plan. As of March 30, 2007, a total of
4,918,638 shares of our Common Stock have been authorized
for issuance under the 2005 Plan.
As of March 30, 2007, stock awards (net of canceled or
expired stock awards) covering an aggregate of
3,744,056 shares of our Common Stock had been granted under
the 2005 Plan, and 1,174,582 remained available for future grant
under the 2005 Plan. During the 2006 fiscal year, under the 2005
Plan, we granted to all current executive officers as a group
options to purchase 1,244,000 shares at a exercise prices
of $1.29 to $3.77 per share and we granted to
Dr. Gonda a stock bonus award pursuant to which he may
receive up to 100,000 shares. During the same period we
granted to all employees and directors (excluding current
executive officers) as a group options to purchase
1,254,000 shares at exercise prices of $1.02 to
$3.77 per share and restricted stock bonus awards to
receive up to 85,592 shares (net of canceled or expired
awards).
In April 2007, the Board adopted an amendment to the 2005 Plan,
subject to shareholder approval, to increase the number of
shares authorized for issuance under the 2005 Plan by
1,600,000 shares to 6,518,638 shares. This amendment
is intended to afford us greater flexibility in providing
employees with stock incentives and ensures that we can continue
to provide such incentives at levels determined appropriate by
the Board.
The following summary description of the 2005 Plan, as amended,
is qualified in its entirety by reference to the full text of
the 2005 Plan that is attached as Appendix A to the proxy
statement filed via EDGAR with the SEC, including all changes
that this proposal would effect if approved by our shareholders
at the annual meeting.
Shareholders are requested in this Proposal 2 to approve
the amendment to the 2005 Plan. The affirmative vote of the
holders of a majority of the shares present in person or
represented by proxy and voting at the meeting will be required
to approve the amendment to the 2005 Plan. For purposes of this
vote, abstentions and broker non-votes will not be counted for
any purpose in determining whether this matter has been approved.
THE BOARD
OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the 2005 Plan are outlined below:
General
The 2005 Plan provides for the grant of incentive stock options,
nonstatutory stock options, stock purchase awards, stock bonus
awards, stock unit awards, stock appreciation rights and other
forms of equity compensation (collectively, the stock
awards). Incentive stock options granted under the 2005
Plan are intended to qualify as incentive stock
options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or the
Code. Nonstatutory stock options granted under the
2005 Plan are not intended to qualify as incentive stock options
under the Code. See Federal Income Tax Information
for a discussion of the tax treatment of stock awards.
Purpose
We adopted the 2005 Plan to provide a means by which selected
officers, directors, employees of and consultants to us and our
affiliates could be given an opportunity to acquire an equity
interest in Aradigm Corporation, to assist in retaining the
services of employees holding key positions, to secure and
retain the services of persons capable of filling such positions
and to provide incentives for such persons to exert maximum
efforts for our success. As of March 30, 2007, all of our
approximately 49 employees, directors and consultants are
eligible to participate in the 2005 Plan.
11
Administration
The Board administers the 2005 Plan. Subject to the provisions
of the 2005 Plan, the Board has the authority to construe and
interpret the plan, to determine the persons to whom and the
dates on which stock awards will be granted, the type of stock
award to grant to such person, the number of shares of Common
Stock to be subject to each stock award, the time or times
during the term of each stock award within which all or a
portion of the award may be exercised, the exercise, purchase,
or strike price of each stock award, the type of consideration
permitted to exercise or purchase each stock award, and other
terms of the stock awards.
The Board is authorized to delegate administration of the 2005
Plan to a committee composed of not fewer than two members of
the Board. The Board has delegated administration of the 2005
Plan to the Compensation Committee of the Board. As used herein
with respect to the 2005 Plan, the Board refers to
the Compensation Committee as well as to the Board itself. In
the Boards discretion, directors serving on the
Compensation Committee will be outside directors
within the meaning of Section 162(m) of the Code
(Section 162(m)). See Federal Income Tax
Information for a discussion of the application of
Section 162(m).
The Board may also delegate to one or more of our officers the
authority to designate officers and employees to be recipients
of stock awards and the terms thereof
and/or
determine the number of shares of our Common Stock to be subject
to the stock awards granted to such officers and employees, so
long as the Board resolution delegating such authority specifies
the total number of shares of Common Stock underlying stock
awards that the officer may grant, the officer does not grant
any stock awards to himself or herself and the Board does not
delegate the authority to determine the fair market value on the
date of grant of the Common Stock underlying the stock awards.
Eligibility
Incentive stock options may be granted under the 2005 Plan only
to our employees (including officers) and our affiliates.
Employees, non-employee Board members and consultants of us and
our affiliates are eligible to receive all other types of stock
awards under the 2005 Plan.
No incentive stock option may be granted under the 2005 Plan to
any person who, at the time of the grant, owns (or is deemed to
own) stock possessing more than 10% of our total combined voting
power or its affiliates, unless the exercise price of such
option is at least 110% of the fair market value of the stock
subject to the option on the date of grant and the term of the
option does not exceed five years from the date of grant. In
addition, the aggregate fair market value, determined on the
date of grant, of the shares of Common Stock with respect to
which incentive stock options are exercisable for the first time
by a participant during any calendar year (under the 2005 Plan
and any of our other plans and those of our affiliates) may not
exceed $100,000.
No employee may be granted stock awards under the 2005 Plan
exercisable for more than 1,500,000 shares of Common Stock
during any calendar year.
Stock
Subject to the 2005 Plan
Subject to this Proposal, an aggregate of 6,518,638 shares
of Common Stock are reserved for issuance under the 2005 Plan.
This share reserve consists of the number of shares we estimate
will be carried over from the 1996 Plan, including shares
subject to outstanding options under such predecessor plan, plus
the additional shares that are the subject of Proposal 2.
If stock awards granted under the 2005 Plan expire or otherwise
terminate without being exercised or if we reacquire shares of
Common Stock pursuant to the terms of unvested stock awards, the
shares of Common Stock not acquired pursuant to such stock
awards again become available for issuance under the 2005 Plan
(provided, however, that any shares of Common Stock reacquired
pursuant to incentive stock option awards will again become
available for reissuance only for awards other than incentive
stock options). If any shares of Common Stock subject to a stock
award are not delivered because such shares are withheld for
payment of taxes or because such shares are tendered as
consideration for the exercise price of a stock award, the
shares of Common Stock not delivered pursuant to such stock
awards again become available for issuance under the 2005 Plan;
provided, however, that any shares of Common Stock not delivered
pursuant to incentive stock option awards will again become
available for reissuance only for awards other than incentive
stock options.
12
Terms of
Options
The following is a description of the permissible terms of
options under the 2005 Plan. Individual stock option agreements
may be more restrictive as to any or all of the permissible
terms described below.
Exercise Price. The exercise price of
incentive stock options under the 2005 Plan may not be less than
the fair market value of our Common Stock subject to the option
on the date of the option grant, and in some cases (see
Eligibility above), may not be less than 110% of
such fair market value. The exercise price of nonstatutory
options under the 2005 Plan may not be less than 100% of the
fair market value of our Common Stock subject to the option on
the date of the option grant. At March 30, 2007, the
closing price of our Common Stock as quoted on the OTC
Bulletin Board, an electronic quotation service for
securities traded
over-the-counter,
was $1.22 per share.
Consideration. The exercise price of options
granted under the 2005 Plan must be paid either in cash at the
time the option is exercised or, at the discretion of the Board,
(i) pursuant to a broker-assisted
same-day
sale, (ii) by delivery of other shares of our Common
Stock, (iii) pursuant to a deferred payment arrangement or
(iv) in any other form of legal consideration acceptable to
the Board.
Restrictions on Repricing. Under the terms of
the 2005 Plan, the Board does not have the authority to reprice
any outstanding stock awards under the 2005 Plan or cancel and
re-grant any outstanding stock awards under the 2005 Plan,
unless our shareholders have approved such an action within
12 months prior to such an event.
Vesting. Options granted under the 2005 Plan
may become exercisable in cumulative increments, or
vest, as determined by the Board. Shares covered by
currently outstanding options under the 2005 Plan typically vest
at the rate of 25% per year during the optionees
employment or services as a consultant or director. Shares
covered by options granted in the future under the 2005 Plan may
be subject to different vesting terms. The Board has the
authority to accelerate the time during which an option may
vest. In addition, options granted under the 2005 Plan may
permit exercise prior to vesting. However, any unvested shares
acquired under such an early exercise arrangement may be subject
to repurchase by us or to any other restriction the Board
determines to be appropriate. To the extent provided by the
terms of an option, a participant may satisfy any federal, state
or local tax withholding obligation relating to the exercise of
such option by a cash payment upon exercise, by authorizing us
to withhold a portion of the stock otherwise issuable to the
participant or by such other method as the Board determines to
include in the stock award agreement.
Term. The Board has the discretion to
determine the term of an option. However, the maximum term of an
incentive stock option granted under the 2005 Plan is
10 years, except that in certain cases (see
Eligibility above) the maximum permitted term of
such award is five years. Options under the 2005 Plan terminate
three months after termination of the participants service
unless (i) such termination is due to the
participants permanent and total disability (as defined in
the Code), in which case the option may be exercised (to the
extent the option was exercisable at the time of the termination
of service) at any time within 12 months of such
termination, unless the option agreement provides otherwise;
(ii) the participant dies before the participants
service has terminated, or within a certain period after
termination of service, in which case the option may be
exercised (to the extent the option was exercisable at the time
of the participants death) within 18 months of the
participants death by the person or persons to whom the
rights to such option pass by will or by the laws of descent and
distribution, unless the option agreement provides otherwise; or
(iii) the option by its terms specifically provides
otherwise. In no event, however, may an option be exercised
beyond the expiration of its term.
A participants option agreement may provide that if the
exercise of the option following the termination of the
participants service would be prohibited because the
issuance of stock would violate the registration requirements
under the Securities Act, then the option will terminate on the
earlier of (i) the expiration of the term of the option or
(ii) three months after the termination of the
participants service during which the exercise of the
option would not be in violation of such registration
requirements.
Restrictions on Transfer. Unless specified
otherwise by the Board or required by law, a participant in the
2005 Plan may not transfer a stock option other than by will or
by the laws of descent and distribution or pursuant to a
domestic relations order. During the lifetime of the
participant, only the participant may exercise a stock option. A
participant may designate a beneficiary who may exercise an
option following the participants death. Shares
13
subject to repurchase by us pursuant to an early exercise
arrangement may be subject to restrictions on transfer that the
Board deems appropriate.
Terms of
Stock Purchase Awards and Stock Bonus Awards
Stock purchase awards and stock bonus awards may be granted
under the 2005 Plan pursuant to stock purchase award agreements
and stock bonus award agreements, respectively.
Purchase Price. The purchase price for stock
purchase awards must be at least the par value of our Common
Stock.
Consideration. The purchase price for stock
purchase awards may be paid in cash, or, at the discretion of
the Board, under a deferred payment or similar arrangement, by
past services rendered to us or in any other form of legal
consideration acceptable to the Board and permissible under
applicable law. The Board may grant stock bonus awards in
consideration for past services rendered to us or any other form
of legal consideration acceptable to the Board and permissible
under applicable law.
Vesting. Shares of stock acquired under a
stock purchase may, but need not, be subject to a repurchase
right or option in our favor; and shares of stock acquired under
a stock bonus award may, but need not, be subject to forfeiture
to us in accordance with a vesting schedule as determined by the
Board. The Board has the authority to accelerate the vesting of
stock acquired pursuant to a stock purchase or stock bonus award.
Termination of Service. Upon termination of a
participants service, we may repurchase or otherwise
reacquire any forfeited shares of stock that have not vested as
of such termination under the terms of the applicable stock
purchase award or stock bonus award agreement.
Restrictions on Transfer. Rights to acquire
shares under a stock purchase or stock bonus award may be
transferred only upon such terms and conditions as may be
approved by the Board.
Terms of
Stock Unit Awards
Stock unit awards may be granted under the 2005 Plan pursuant to
stock unit award agreements.
Consideration. The purchase price for stock
unit awards may be paid in any form of legal consideration
acceptable to the Board.
Settlement of Awards. A stock unit award may
be settled by the delivery of shares of our Common Stock, cash,
in any combination of the two or in any other form of
consideration, as determined by the Board.
Vesting. At the time of the grant of a stock
unit, the Board may impose such restrictions or conditions to
the vesting of the stock unit as it, in its sole discretion,
deems appropriate. Also, at the time of grant, the Board may
impose additional restrictions or conditions that delay the
delivery of stock or cash subject to the stock unit award after
vesting. The Board has the authority to accelerate the vesting
of stock unit awards as it deems appropriate.
Dividend Equivalents. Dividend equivalent
rights may be credited with respect to shares covered by a stock
unit award, as determined by the Board. We do not anticipate
paying cash dividends on our Common Stock for the foreseeable
future.
Termination of Service. Except as otherwise
provided in the applicable award agreement, stock units that
have not vested will be forfeited upon the participants
termination of service.
Terms of
Stock Appreciation Rights
Stock appreciation rights may be granted under the 2005 Plan
pursuant to stock appreciation rights agreements.
Exercise. Each stock appreciation right is
denominated in shares of Common Stock equivalents. Upon exercise
of a stock appreciation right, we will pay the participant an
amount equal to the excess of (i) the aggregate fair market
value on the date of exercise of a number of Common Stock
equivalents with respect to which the
14
participant is exercising the stock appreciation right over
(ii) the strike price on the date of grant, as determined
by the Board.
Settlement of Awards. The appreciation
distribution upon exercise of a stock appreciation right may be
paid in cash, in shares of our Common Stock, in any combination
of the two or in any other form of consideration determined by
the Board.
Vesting. The Board may impose such conditions
and restrictions as to the vesting of stock appreciation rights
as it deems appropriate. The Board has the authority to
accelerate the vesting of stock appreciation rights as it deems
appropriate.
Termination of Service. Upon termination of a
participants service, the participant generally may
exercise any vested stock appreciation right for three months
(or such longer or shorter period specified in the stock
appreciation right agreement) after the date such service
relationship ends. In no event may a stock appreciation right be
exercised beyond the expiration of its term.
Terms of
Other Equity Awards
The Board may grant other equity awards based in whole or in
part by reference to the value of our Common Stock. See the full
text of the 2005 Plan, set forth in Appendix A to the Proxy
Statement filed via EDGAR with the SEC, for more details.
Subject to the provisions of the 2005 Plan, the Board has the
authority to determine the persons to whom and the dates on
which such other equity awards will be granted, the number of
shares of Common Stock (or cash equivalents) to be subject to
each award, and other terms and conditions of such awards.
Performance-Based
Stock Awards
Under the 2005 Plan, a stock award may be granted, vest or be
exercised based upon the attainment during a certain period of
time of certain performance goals. All employees of and
consultants to us and our affiliates and directors are eligible
to receive performance-based stock awards under the 2005 Plan.
The length of any performance period, the performance goals to
be achieved during the performance period, and the measure of
whether and to what degree such performance goals have been
attained shall be determined by the Board. The maximum benefit
to be received by any individual in any calendar year
attributable to performance-based stock awards may not exceed
the value of 500,000 shares of our Common Stock.
In granting a performance-based stock award, the Board will set
a period of time (a performance period) over which
the attainment of one or more goals (performance
goals) will be measured for the purpose of determining
whether the award recipient has a vested right in or to such
award. Within the time period prescribed by Section 162(m)
of the Code (typically before the 90th day of a performance
period), the Board will establish the performance goals, based
upon one or more pre-established criteria (performance
criteria) enumerated in the 2005 Plan and described below.
As soon as administratively practicable following the end of the
performance period, the Board will certify (in writing) whether
the performance goals have been satisfied.
Performance goals under the 2005 Plan shall be determined by the
Board, based on one or more of the following performance
criteria: (i) earnings per share; (ii) earnings before
interest, taxes and depreciation; (iii) earnings before
interest, taxes, depreciation and amortization (EBITDA);
(iv) net earnings; (v) total shareholder return;
(vi) return on equity; (vii) return on assets,
investment or capital employed; (viii) operating margin;
(ix) gross margin; (x) operating income; (xi) net
income (before or after taxes); (xii) net operating income;
(xiii) net operating income after tax; (xiv) pre- and
after-tax income; (xv) pre-tax profit; (xvi) operating
cash flow; (xvii) sales or revenue targets;
(xviii) increases in revenue or product revenue;
(xix) expenses and cost reduction goals;
(xx) improvement in or attainment of expense levels;
(xxi) improvement in or attainment of working capital
levels; (xxii) economic value added (or an equivalent
metric); (xxiii) market share; (xxiv) cash flow;
(xxv) cash flow per share; (xxvi) share price
performance; (xxvii) debt reduction;
(xxviii) implementation or completion of projects or
processes; (xxix) customer satisfaction; (xxx) total
shareholder return; (xxxi) shareholders equity; and
(xxxii) to the extent that an award is not intended to
comply with Section 162(m) of the Code, other measures of
performance selected by the Board.
15
The Board is authorized to adjust or modify the calculation of a
performance goal for a performance period in order to prevent
the dilution or enlargement of the rights of participants,
(a) in the event of, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event or development;
(b) in recognition of, or in anticipation of, any other
unusual or nonrecurring events affecting us, or our financial
statements, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business
conditions; or (c) in view of the Boards assessment
of our business strategy, performance of comparable
organizations, economic and business conditions, and any other
circumstances deemed relevant. Specifically, the Board is
authorized to make adjustment in the method of calculating
attainment of performance goals and objectives for a performance
period as follows: (i) to exclude the dilutive effects of
acquisitions or joint ventures; (ii) to assume that any
business we divested achieved performance objectives at targeted
levels during the balance of a performance period following such
divestiture; and (iii) to exclude the effect of any change
in the outstanding shares of our Common Stock by reason of any
stock dividend or split, stock repurchase, reorganization,
recapitalization, merger, consolidation, spin-off, combination
or exchange of shares or other similar corporate change, or any
distributions to common shareholders other than regular cash
dividends. In addition, the Board is authorized to make
adjustment in the method of calculating attainment of
performance goals and objectives for a performance period as
follows: (i) to exclude restructuring
and/or other
nonrecurring charges; (ii) to exclude exchange rate
effects, as applicable, for
non-U.S. dollar
denominated net sales and operating earnings; (iii) to
exclude the effects of changes to generally accepted accounting
standards required by the Financial Accounting Standards Board;
(iv) to exclude the effects to any statutory adjustments to
corporate tax rates; (v) to exclude the impact of any
extraordinary items as determined under generally
accepted accounting principles; and (vi) to exclude any
other unusual, non-recurring gain or loss or other extraordinary
item.
Changes
to Capital Structure
In the event any change is made to the outstanding shares of our
Common Stock without our receipt of consideration (whether
through a stock split or other specified change in our capital
structure), appropriate adjustments will be made to:
(i) the maximum number
and/or class
of securities issuable under the 2005 Plan; (ii) the
maximum number
and/or class
of securities issuable as incentive stock options under the 2005
Plan; (iii) the maximum number
and/or class
of securities for which any one person may be granted options
and/or stock
appreciation rights or performance-based awards per calendar
year pursuant to the limitation under Section 162(m); and
(iv) the number
and/or class
of securities and the price per share in effect under each
outstanding stock award under the 2005 Plan.
Effect of
Certain Corporate Events
In the event of our dissolution or liquidation, any stock award
which remains unvested or subject to a right or repurchase shall
terminate immediately prior to such liquidation or dissolution
and the shares of Common Stock subject to such repurchase right
may be repurchased by us notwithstanding that that the holder of
such award is providing service to us. The Board may, in its
discretion, cause some or all stock awards to become fully
vested, exercisable
and/or no
longer subject to repurchase or forfeiture before the
liquidation or dissolution is completed, but contingent on its
completion.
In the event of certain significant corporate transactions, all
outstanding stock awards under the 2005 Plan may be assumed,
continued or substituted for by any surviving or acquiring
entity (or its parent company). If the surviving or acquiring
entity (or its parent company) elects not to assume, continue or
substitute such stock awards, then (i) with respect to any
such stock awards that are held by individuals then performing
services for us or our affiliates, the vesting and
exercisability provisions of such stock awards will be
accelerated in full and such awards will be terminated if not
exercised prior to the effective date of the corporate
transaction; and (ii) all other outstanding stock awards
will be terminated if not exercised prior to the effective date
of the corporate transaction.
A significant corporate transaction will be deemed to occur in
the event of (i) a sale or all or substantially all of our
consolidated assets and those of our subsidiaries, (ii) the
sale of at least 90% of our outstanding securities, (iii) a
merger or consolidation in which we are not the surviving
corporation or (iv) a merger, consolidation or similar
transaction in which we are the surviving corporation, but
shares of our outstanding Common Stock are converted into other
property by virtue of the transaction.
16
Following certain specified change in control transactions, the
vesting and exercisability of specified stock awards will be
accelerated only if specifically provided by a
participants award agreement. The acceleration of a stock
award in the event of certain significant corporate transactions
or a change in control may be viewed as an anti-takeover
provision, which may have the effect of discouraging a proposal
to acquire or otherwise obtain control of us.
Duration,
Termination and Amendment
The Board may suspend or terminate the 2005 Plan without
shareholder approval or ratification at any time. Unless sooner
terminated, the 2005 Plan will terminate on March 20, 2015.
The Board may amend the 2005 Plan at any time or from time to
time. However, no amendment will be effective unless approved by
our shareholders if the amendment would (i) modify the
requirements as to eligibility for participation (to the extent
such modification requires shareholder approval in order for the
2005 Plan to satisfy Section 422 of the Code, if
applicable, or
Rule 16b-3
of the Securities Exchange Act of 1934, as amended (the
Exchange Act)); (ii) increase the number of
shares reserved for issuance upon exercise of awards; or
(iii) change any other provision of the 2005 Plan in any
other way if such modification requires shareholder approval in
order to comply with
Rule 16b-3
of the Exchange Act or satisfy the requirements of
Section 422 of the Code or any securities exchange listing
requirements. The Board may submit any other amendment to the
2005 Plan for shareholder approval, including, but not limited
to, amendments intended to satisfy the requirements of
Section 162(m) regarding the exclusion of performance-based
compensation from the limitation on the deductibility of
compensation paid to certain employees.
Federal
Income Tax Information
The following is a summary of the principal United States
federal income taxation consequences to employees and us with
respect to participation in the 2005 Plan. This summary is not
intended to be exhaustive, and does not discuss the income tax
laws of any city, state or foreign jurisdiction in which a
participant may reside.
Incentive Stock Options. Incentive stock
options granted under the 2005 Plan are intended to be eligible
for the favorable federal income tax treatment accorded
incentive stock options under the Code. There
generally are no federal income tax consequences to the
participant or us by reason of the grant or exercise of an
incentive stock option. However, the exercise of an incentive
stock option may give rise to or increase alternative minimum
tax liability for the participant.
If a participant holds stock acquired through exercise of an
incentive stock option for more than two years from the date on
which the option was granted and more than one year after the
date the option was exercised for those shares, any gain or loss
on a disposition of those shares (a qualifying
disposition) will be a long-term capital gain or loss.
Upon such a qualifying disposition, we will not be entitled to
any income tax deduction.
Generally, if the participant disposes of the stock before the
expiration of either of these holding periods (a
disqualifying disposition), then at the time of
disposition the participant will realize taxable ordinary income
equal to the lesser of (i) the excess of the stocks
fair market value on the date of exercise over the exercise
price or (ii) the participants actual gain, if any,
on the purchase and sale. The participants additional gain
or any loss upon the disqualifying disposition will be a capital
gain or loss, which will be long-term or short-term depending on
whether the stock was held for more than one year.
To the extent the participant recognizes ordinary income by
reason of a disqualifying disposition, generally we will be
entitled (subject to the requirement of reasonableness, the
provisions of Section 162(m), and the satisfaction of a tax
reporting obligation) to a corresponding income tax deduction in
the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options, Restricted Stock Purchase Awards
and Stock Bonuses. There generally are no tax
consequences to the participant or us by reason of the grant of
these awards. Upon acquisition of the stock under any of these
awards, the participant normally will recognize taxable ordinary
income equal to the excess, if any, of the stocks fair
market value on the acquisition date over the purchase price.
However, to the extent the stock is subject to certain types of
vesting restrictions, the taxable event will be delayed until
the vesting restrictions lapse
17
unless the participant elects to be taxed on receipt of the
stock under Section 83(b) of the Code. With respect to
employees, we are generally required to withhold from regular
wages or supplemental wage payments an amount based on the
ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) and the
satisfaction of a tax reporting obligation, we will generally be
entitled to a business expense deduction equal to the taxable
ordinary income realized by the participant.
Upon disposition of the stock, the participant will recognize a
capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock plus any
amount recognized as ordinary income upon acquisition (or
vesting) of the stock. Such gain or loss will be long-term or
short-term depending on whether the stock was held for more than
one year. Slightly different rules may apply to participants who
acquire stock subject to certain repurchase options or who are
subject to Section 16(b) of the Exchange Act.
Stock Unit Awards. No taxable income is
generally recognized upon receipt of a stock unit award. The
participant will recognize ordinary income in the year in which
the shares subject to that unit are actually issued to the
participant in an amount equal to the fair market value of the
shares on the date of issuance. We and the participant will be
required to satisfy certain tax withholding requirements
applicable to such income. We will be entitled to an income tax
deduction equal to the amount of ordinary income recognized by
the participant at the time the shares are issued. In general,
the deduction will be allowed for the taxable year in which such
ordinary income is recognized by the participant.
Section 409A of the Code may apply to the grant of a stock
unit award if the award permits the participant to defer receipt
of the stock after vesting, unless a deferral election and
certain other requirements are met.
Stock Appreciation Rights. No taxable income
is realized upon the receipt of a stock appreciation right. Upon
exercise of the stock appreciation right, the fair market value
of the shares (or cash in lieu of shares) received is recognized
as ordinary income to the participant in the year of such
exercise. Generally, with respect to employees, we are required
to withhold from the payment made on exercise of the stock
appreciation right or from regular wages or supplemental wage
payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness,
Section 162(m) and the satisfaction of a reporting
obligation, we will be entitled to an income tax deduction equal
to the amount of ordinary income recognized by the participant.
Potential Limitation on Company
Deductions. Section 162(m) denies a
deduction to any publicly held corporation for compensation paid
to certain covered employees in a taxable year to
the extent that compensation to such covered employee exceeds
$1 million. It is possible that compensation attributable
to awards, when combined with all other types of compensation
received by a covered employee from us, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified
performance-based compensation, are disregarded for
purposes of the deduction limitation. In accordance with
Treasury Regulations issued under Section 162(m),
compensation attributable to stock options and stock
appreciation rights will qualify as performance-based
compensation if the award is granted by a compensation committee
comprised solely of outside directors and either
(i) the plan contains a per-employee limitation on the
number of shares for which such awards may be granted during a
specified period, the per-employee limitation is approved by the
shareholders, and the exercise price of the award is no less
than the fair market value of the stock on the date of grant or
(ii) the award is granted (or exercisable) only upon the
achievement (as certified in writing by the compensation
committee) of an objective performance goal established in
writing by the compensation committee while the outcome is
substantially uncertain, and the award is approved by
shareholders.
Stock purchase awards, stock units and stock bonus awards will
qualify as performance-based compensation under the Treasury
Regulations only if (i) the award is granted by a
compensation committee comprised solely of outside
directors, (ii) the award is granted (or exercisable)
only upon the achievement of an objective performance goal
established in writing by the compensation committee while the
outcome is substantially uncertain, (iii) the compensation
committee certifies in writing prior to the granting (or
exercisability) of the award that the performance goal has been
satisfied and (iv) prior to the granting (or
exercisability) of the award, shareholders have approved the
material terms of the award (including the class of employees
eligible for such award, the business criteria on which the
performance goal is based, and the maximum amount or
formula used to calculate
18
the amount payable upon attainment of the
performance goal). The Company intends to comply with these
regulations with respect to performance-based compensation that
it may award.
New Plan
Benefits
Since benefits under the 2005 Plan will depend on the
individuals selected at the discretion of the Board
and/or the
Compensation Committee to receive awards, the number of shares
to be awarded and the fair market value of our common stock at
various future dates, it is not possible at this time to
determine the benefits that will be received under the 2005 Plan
by all eligible employees, officers, directors or consultants.
Equity
Compensation Plan Information
Equity
Compensation Plan Information
The following table summarizes our equity compensation plan
information as of December 31, 2006. Information is
included for the equity compensation plans approved by our
stockholders. There are no equity compensation plans not
approved by our stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
Available for
|
|
|
|
|
|
|
|
|
|
Future Issuance
|
|
|
|
Common Stock to
|
|
|
|
|
|
Under Equity
|
|
|
|
be Issued Upon
|
|
|
Weighted-Average
|
|
|
Compensation
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options
|
|
|
Outstanding Options
|
|
|
Securities Reflected
|
|
|
|
and Rights
|
|
|
and Rights
|
|
|
in Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by our stockholders
|
|
|
3,163,981
|
(1)(2)
|
|
$
|
8.90
|
|
|
|
1,734,849
|
(3)
|
Equity compensation plans not
approved by our stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Issuable pursuant to our 1996 Equity Incentive Plan, the 1996
Non-Employee Directors Plan and the 2005 Equity Incentive
Plan. |
|
(2) |
|
Includes 100,000 shares that we agreed to grant
Dr. Gonda, our President and Chief Executive Officer, in
two 50,000 share tranches, to be earned based on
achievement of minimum share price appreciation objectives after
each of the first two years from his employment start date of
August 10, 2006. |
|
(3) |
|
Includes 340,847 shares reserved under our Employee Stock
Purchase Plan (See Note 6 to the financial statements
included in our annual report). |
19
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected
Odenberg, Ullakko, Muranishi & Co. LLP as our
independent registered public accounting firm for the fiscal
year ending December 31, 2007 and has further directed that
management submit the selection of an independent registered
public accounting firm for ratification by our shareholders at
the annual meeting. Prior to the selection of Odenberg, Ullakko,
Muranishi & Co. LLP as our independent registered
public accounting firm in April 2007, Ernst & Young LLP
had audited our financial statements, since 1995.
Representatives of Odenberg, Ullakko, Muranishi & Co.
LLP are expected to be present at the annual meeting. They will
have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
Neither our bylaws nor other governing documents or law require
shareholder ratification of the selection of Odenberg, Ullakko,
Muranishi & Co. LLP as our independent registered
public accounting firm. However, the Audit Committee is
submitting the selection of Odenberg, Ullakko,
Muranishi & Co. LLP to the shareholders for
ratification as a matter of good corporate practice. If the
shareholders fail to ratify the selection, the Audit Committee
will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee in its discretion may
direct the appointment of a different independent registered
public accounting firm at any time during the year if they
determine that such a change would be in the best interests of
Aradigm.
The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and voting at the
annual meeting (which shares voting affirmatively also
constitute a majority of the required quorum) will be required
to ratify the selection of Odenberg, Ullakko,
Muranishi & Co. LLP. For purposes of this vote,
abstentions and broker non-votes will not be counted for any
purpose in determining whether this matter has been approved.
Principal
Accountant Fees and Services
The following table represents aggregate fees billed to us for
fiscal years ended December 31, 2006 and December 31,
2005, by Ernst & Young LLP, our independent registered
public accounting firm for each of those years. All services
described below were pre-approved by the Audit Committee.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Audit Fees(1)
|
|
$
|
505
|
|
|
$
|
377
|
|
Audit-related Fees(2)
|
|
|
|
|
|
|
30
|
|
Tax Fees
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
505
|
|
|
$
|
407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees represent fees for professional services related to
the performance of the audit of our annual financial statements,
review of our quarterly financial statements and consents on SEC
filings. |
|
(2) |
|
Audit-related fees in 2005 relate to preparing for the
implementation and internal control documentation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002. |
Pre-Approval
Policies and Procedures
The Audit Committee pre-approves audit services, audit-related
services and non-audit services provided by our independent
registered public accounting firm, Odenberg, Ullakko,
Muranishi & Co. LLP, and will not approve services that
the Audit Committee determines are outside the bounds of
applicable laws and regulations. Pre-approval may also be given
as part of the Audit Committees approval of the scope of
the engagement of the independent registered public accounting
firm or on an individual explicit
case-by-case
basis before the
20
independent registered public accounting firm is engaged to
provide each service. The pre-approval of services may be
delegated to one or more of the Audit Committees members,
but the decision must be reported to the full Audit Committee at
its next scheduled meeting.
The Audit Committee has determined that the rendering of the
services, other than audit services, by Odenberg, Ullakko,
Muranishi & Co. LLP is compatible with maintaining the
principal accountants independence.
Change in
Independent Registered Public Accounting Firm
Effective as of April 12, 2007, the Audit Committee
dismissed Ernst & Young LLP as our independent
registered public accounting firm. On the same date, the Audit
Committee engaged Odenberg, Ullakko, Muranishi & Co.
LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2007.
The audit reports of Ernst & Young LLP on our financial
statements for the fiscal years ended December 31, 2005 and
2006 contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or
accounting principles. In connection with Ernst & Young
LLPs audits for the fiscal years ended December 31,
2005 and 2006, and in the subsequent interim period through
April 12, 2007, there were no disagreements with
Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Ernst & Young LLP,
would have caused Ernst & Young LLP to make reference
to the subject matter of such disagreements in connection with
its reports. In addition no reportable events, as defined in
Item 304(a)(1)(v) of
Regulation S-K,
occurred during our fiscal years ended December 31, 2005
and 2006, and in the subsequent interim period through
April 12, 2007. Ernst & Young LLPs letter to
the Securities and Exchange Commission stating its agreement
with the statements in this paragraph is filed as an exhibit to
our Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
April 17, 2007.
During our two most recent fiscal years, and in the subsequent
interim period through April 12, 2007, neither we nor
anyone on our behalf has consulted with Odenberg, Ullakko,
Muranishi & Co. LLP regarding either (i) the
application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that
might be rendered on our financial statements, and neither a
written report was provided to us nor oral advice was provided
by Odenberg, Ullakko, Muranishi & Co. LLP that was an
important factor considered by us in reaching a decision as to
any accounting, auditing or financial reporting issue; or
(ii) any matter that was the subject of a disagreement, as
that term is defined in Item 304 (a)(1)(iv) of
Regulation S-K
and the related instructions to Item 304 of
Regulation S-K,
or a reportable event, as that term is defined in Item 304
(a)(1)(v) of
Regulation S-K.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
21
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The following table sets forth certain information regarding the
ownership of our common stock as of April 15, 2007 by:
(i) each director and nominee for director; (ii) each
of the executive officers named in the Summary Compensation
Table (provided below); (iii) all of our executive officers
and directors as a group; and (iv) all those known by us to
be beneficial owners of more than five percent of our common
stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership Common
|
|
|
|
|
|
|
Number of
|
|
|
Percent of
|
|
|
|
|
Beneficial Owner
|
|
Shares
|
|
|
Total (%)
|
|
|
|
|
|
Wellington Management Company
LLP(2)
|
|
|
6,441,400
|
|
|
|
11.9
|
|
|
|
|
|
75 State Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
|
|
|
|
RA Capital Management, LLC(3)
|
|
|
6,444,010
|
|
|
|
11.9
|
|
|
|
|
|
111 Huntington Avenue,
Suite 610
Boston, MA 02199
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin C. Tang(4)
|
|
|
6,262,500
|
|
|
|
11.6
|
|
|
|
|
|
4401 Eastgate Mall
San Diego, CA 92121
|
|
|
|
|
|
|
|
|
|
|
|
|
Highbridge International LLC(5)
|
|
|
4,330,000
|
|
|
|
8.0
|
|
|
|
|
|
c/o Harmonic Fund Services
The Cayman Corporate Centre,
4th Floor
27 Hospital Road
Grand Cayman, Cayman Islands, B.W.I.
|
|
|
|
|
|
|
|
|
|
|
|
|
Deerfield Capital, L.P.(6)
|
|
|
3,303,100
|
|
|
|
6.1
|
|
|
|
|
|
780
3rd Avenue,
37th Floor
New York, NY 10017
|
|
|
|
|
|
|
|
|
|
|
|
|
Igor Gonda(7)
|
|
|
80,626
|
|
|
|
*
|
|
|
|
|
|
Thomas C. Chesterman(8)
|
|
|
174,312
|
|
|
|
*
|
|
|
|
|
|
Babatunde A. Otulana(9)
|
|
|
216,704
|
|
|
|
*
|
|
|
|
|
|
Virgil D. Thompson(10)
|
|
|
79,900
|
|
|
|
*
|
|
|
|
|
|
Frank H. Barker(11)
|
|
|
46,043
|
|
|
|
*
|
|
|
|
|
|
Stephen O. Jaeger(12)
|
|
|
24,000
|
|
|
|
*
|
|
|
|
|
|
John M. Siebert(13)
|
|
|
19,000
|
|
|
|
*
|
|
|
|
|
|
V. Bryan Lawlis(14)
|
|
|
43,869
|
|
|
|
*
|
|
|
|
|
|
Stephen J. Farr(15)
|
|
|
10,470
|
|
|
|
*
|
|
|
|
|
|
All executive officers and
directors as a group (7 persons)(16)
|
|
|
640,585
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
This table is based upon information supplied by officers,
directors and principal shareholders and Schedules 13D and 13G
filed with the SEC. Unless otherwise indicated in the footnotes
to this table and subject to community property laws where
applicable, we believe that each of the shareholders named in
this table has sole voting and investment power with respect to
the shares indicated as beneficially owned. Applicable
percentages are based on 53,999,817 shares of common stock
outstanding on April 15, 2007, adjusted as required by
rules promulgated by the SEC. Unless otherwise indicated, the
address of each person on this table is c/o Aradigm
Corporation, 3929 Point Eden Way, Hayward, California, 94545. |
|
(2) |
|
Based upon information contained in a Schedule 13G as filed
with the Securities and Exchange Commission (SEC) on
February 12, 2007 and a letter to us dated March 16,
2007, Wellington Management Company LLP
(Wellington), in its capacity as investment adviser,
may be deemed to beneficially own 6,441,400 shares of the
Issuer which are held of record by clients of Wellington. Those
clients have the |
22
|
|
|
|
|
right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, such
securities. No such client is known by Wellington to have such
right or power with respect to more than five percent of our
securities. Wellington disclaims beneficial ownership and any
pecuniary interest in these shares. |
|
(3) |
|
Based upon information contained in a Schedule 13G
Amendment No. 1 filed with the SEC on March 28, 2007,
Mr. Richard H. Aldrich and Mr. Peter Kolchinsky
(together, the Managers) are the managers of RA
Capital Management, LLC (Capital), which is the sole
general partner of RA Capital Biotech Fund, L.P. (the
Fund). In the aggregate, the Reporting Persons
beneficially own 6,444,010 shares of common stock (the
RA Shares). Each Reporting Person beneficially own
the RA Shares. The Fund has the power to vote and dispose of the
shares beneficially owned by it (as described above). Capital,
as the sole general partner of the Fund, has the sole authority
to vote and dispose of the RA Shares. The Manager, by virtue of
his position as manager of Capital, has the shared authority to
vote and dispose of all of the RA Shares. |
|
(4) |
|
Based upon information contained in a Schedule 13G filed
with the SEC on February 2, 2007, Kevin C. Tang may be
deemed to beneficially own 6,262,500 shares of our common
stock, which includes 5,310,000 shares owned of record by
Tang Capital Partners, for which Tang Capital Management, of
which Mr. Tang is manager, serves as general partner.
Mr. Tang shares voting and dispositive power over such
shares with Tang Capital Management and Tang Capital Partners.
With respect to the remaining 952,500 shares that
Mr. Tang may be deemed to beneficially own, Mr. Tang
has shared dispositive power and no voting power over
210,000 shares and sole voting and dispositive power over
742,500 shares. Mr. Tang disclaims beneficial
ownership of all such shares except to the extent of his
pecuniary interest therein. |
|
(5) |
|
Based upon information contained in a Schedule 13G filed
with the SEC on February 1, 2007, each reporting person
therein may be deemed the beneficial owner of
4,330,000 shares of common stock owned by Highbridge
International LLC. Highbridge International LLC is a subsidiary
of Highbridge Master L.P. Highbridge Capital Corporation and
Highbridge Capital L.P. are limited partners of Highbridge
Master L.P. Highbridge GP, Ltd. is the General Partner of
Highbridge Master L.P. Highbridge GP, LLC is the General Partner
of Highbridge Capital L.P. Highbridge Capital Management, LLC is
the trading manager of Highbridge Capital Corporation,
Highbridge Capital L.P., Highbridge International LLC and
Highbridge Master L.P. Glenn Dubin is a Co-Chief Executive
Officer of Highbridge Capital Management, LLC. Henry Swieca is a
Co-Chief Executive Officer of Highbridge Capital Management,
LLC. The foregoing should not be construed in and of itself as
an admission by any reporting person as to beneficial ownership
of shares of common stock owned by another reporting person. In
addition, each of Highbridge Master L.P., Highbridge Capital
Corporation, Highbridge Capital L.P., Highbridge GP, Ltd.,
Highbridge GP, LLC, Highbridge Capital Management, LLC, Glenn
Dubin and Henry Swieca disclaims beneficial ownership of shares
of common stock owned by Highbridge International LLC. |
|
(6) |
|
Based upon information contained in a Schedule 13G filed
with the SEC on February 2, 2007, and information provided
directly to us, Deerfield Capital, L.P., Deerfield Special
Situations Fund, L.P., Deerfield Management Company, L.P.,
Deerfield Special Situations Fund International Limited and
James E. Flynn share voting and dispositive power over the
3,303,100 shares reflected as beneficially owned. |
|
(7) |
|
Includes 31,000 shares of common stock subject to options
exercisable within 60 days of April 15, 2007. |
|
(8) |
|
Includes 153,372 shares of common stock subject to options
and 570 shares of common stock subject to outstanding
warrants that are each exercisable within 60 days of
April 15, 2007. |
|
(9) |
|
Includes 208,685 shares of common stock subject to options
exercisable within 60 days of April 15, 2007. |
|
(10) |
|
Includes 76,000 shares of common stock subject to options
exercisable within 60 days of April 15, 2007. |
|
(11) |
|
Includes 46,043 shares of common stock subject to options
exercisable within 60 days of April 15, 2007. |
|
(12) |
|
Includes 24,000 shares of common stock subject to options
exercisable within 60 days of April 15, 2007. |
|
(13) |
|
Includes 15,000 shares of common stock subject to options
exercisable within 60 days of April 15, 2007. |
|
(14) |
|
Includes 32,857 shares of common stock subject to options
and 1,709 shares of common stock subject to outstanding
warrants that are each exercisable within 60 days of
April 15, 2007. Dr. Lawlis ceased serving as our
President and Chief Executive Officer as of August 10, 2006. |
|
(15) |
|
Dr. Farr ceased serving as an executive officer on
June 16, 2006. |
|
(16) |
|
See footnotes (7) through (13) above. |
23
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act requires our directors
and executive officers, and persons who own more than ten
percent of a registered class of our equity securities, to file
with the SEC initial reports of ownership and reports of changes
in ownership of our common stock and other equity securities.
Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no
other reports were required, during the fiscal year ended
December 31, 2006, all Section 16(a) filing
requirements applicable to our officers, directors and greater
than ten percent beneficial owners were complied with, other
than one late Form 4 filing, covering one transaction, for
each of Dr. Seibert and Dr. Lawlis.
24
COMPENSATION
The policies of the Compensation Committee, or the Committee,
with respect to the compensation of executive officers,
including the Chief Executive Officer, or CEO, are designed to
provide compensation sufficient to attract, motivate and retain
executives of outstanding ability and potential and to establish
an appropriate relationship between executive compensation and
the creation of shareholder value. To meet these goals, the
Committee recommends executive compensation packages to our
board of directors that are based on a mix of salary, bonus and
equity awards. Although the Committee has not adopted any formal
guidelines for allocating total compensation between equity
compensation and cash compensation, our executives
compensation packages have more recently reflected an increased
focus on performance and equity-based compensation, as we
believe it is important to maintain a strong link between
executive incentives and the creation of shareholder value. We
believe that performance and equity-based compensation are the
most important component of the total executive compensation
package for maximizing shareholder value while, at the same
time, attracting, motivating and retaining high-quality
executives.
Overall, we seek to provide total compensation packages that are
competitive in terms of total potential value to our executives,
and that are tailored to the unique characteristics of our
company in order to create an executive compensation program
that will adequately reward our executives for their roles in
creating value for our shareholders. We intend to be competitive
with other similarly situated companies in our industry.
Benchmarking
of Cash and Equity Compensation
The Committee believes it is important when making its
compensation-related decisions to be informed as to current
practices of similarly situated publicly held companies in the
life sciences industry. In early 2006 the Committee commissioned
a study conducted by an outside consulting firm that specializes
in executive compensation. This study reviewed the cash and
equity compensation practices of 19 publicly held companies in
the life sciences industry. These companies were chosen for
inclusion in the study based on certain business characteristics
similar to ours, including revenues, stage of development,
employee headcount and market capitalization. In addition to
benchmarking studies, the Committee has historically taken into
account input from other sources, including input from other
independent members of the board of directors and publicly
available data relating to the compensation practices and
policies of other companies within and outside of our industry.
While benchmarking may not always be appropriate as a
stand-alone tool for setting compensation due to the aspects of
our business and objectives that may be unique to us, we
generally believe that gathering this information is an
important part of our compensation-related decision-making
process.
The Committee intends to retain the services of third-party
executive compensation specialists from time to time, as the
Committee sees fit, in connection with the establishment of cash
and equity compensation and related policies.
Compensation
Components
Base Salary. Generally, we believe that
executive base salaries should be set near the median of the
range of salaries for executives in similar positions and with
similar responsibilities at comparable companies. We believe
that maintaining base salary amounts at or near the industry
median minimizes competitive disadvantage while avoiding paying
amounts in excess of what we believe to be necessary to motivate
executives to meet corporate goals. Base salaries are generally
reviewed annually, and the Committee and board will seek to
adjust base salary amounts to realign such salaries with median
market levels after taking into account individual
responsibilities, performance and experience.
For 2006, the average increase in the salaries of the executive
officers, including the CEO, from 2005 salaries was 4%. For
2007, base salaries for executives will not be increased from
their 2006 levels.
Annual Executive Bonus Plan. In addition to
base salaries, we believe that performance-based cash bonuses
play an important role in providing incentives to our executives
to achieve defined annual corporate goals. Near the beginning of
each year, the board, upon the recommendation of the Committee
and subject to any applicable employment agreement, determines a
target bonus amount for each executive. The target percentages
are set at
25
levels that, upon achievement of 100% of the target percentage,
are likely to result in bonus payments that the Committee
believes to be at or near the median for target bonus amounts
for comparable companies and that, upon achievement beyond
target, can result in bonuses of up to 150% of that amount. The
Committee then reviews a detailed set of overall corporate
performance goals prepared by management that are intended to
apply to the executives bonus awards and, with some
distinctions, to the bonus awards for all of our other
employees. The Committee then works with management to develop
final corporate performance goals that are set at a level the
Committee believes management can reasonably achieve with hard
work over the next year.
At the end of each year, the board, upon the recommendation of
the Committee, determines the level of achievement for each
corporate goal and awards credit for the achievement of goals as
a percentage of the target bonus. Final determinations as to
bonus levels are then based on the achievement of these
corporate goals, which are the same for all executives, as well
as our assessment as to the overall success of our company and
the development of our business. Actual bonuses are paid to the
executives at the end of each fiscal year and may be above or
below target bonus levels, at the discretion of the board. Bonus
payments under our annual bonus plan are contingent on continued
employment with the company at the end of the year.
In March 2006, the board, upon recommendation of the Committee,
established target bonus awards (as a percentage of base salary)
of 50% for Dr. V. Bryan Lawlis, our former CEO, and 40% for
Mr. Chesterman, Dr. Otulana, Dr. Stephen J. Farr,
our former Senior Vice President and Chief Scientific Officer,
and Mr. Bobba Venkatadri, our former Senior Vice President
of Operations. Upon Dr. Gondas appointment as our CEO
in August 2006, pursuant to the terms of his employment offer
letter, the board set his target bonus at 33% of his prorated
2006 salary. In 2006, the corporate goals identified by the
Committee and the board included meeting various objectives
relating generally to the development and progression of
existing product candidates and collaborations, establishing new
collaborative arrangements, developing our supply chain and
successfully securing funding and managing expense levels.
In December 2006, the Committee and board determined that
applicable corporate performance goals that were achieved in
2006 merited a bonus award of 79% of the target bonus award for
executive officers. However, based on the overall development of
our business in 2006, the Committee and board decided to apply a
discretionary discount and awarded the executive officers
reduced bonuses of $22,364 to Dr. Gonda, $48,202 to
Mr. Chesterman and $45,352 to Dr. Otulana. The bonus
awards were 20%, 16% and 16% of the 2006 salary paid to
Dr. Gonda, Mr. Chesterman and Dr. Otulana,
respectively. The board also indicated to management that it
would consider awarding additional discretionary bonuses to the
executive officers upon successful completion of our follow-on
public offering. In February 2007, the board, upon
recommendation of the Committee, approved one-time discretionary
bonuses for our executives in the following amounts: $50,000 for
Dr. Gonda and $78,000 for each of Mr. Chesterman and
Dr. Otulana. Dr. Gondas bonus award is based on
the prorated salary for the portion of 2006 during which
Dr. Gonda served as our CEO. Drs. Lawlis and Farr and
Mr. Venkatadri did not receive 2006 bonuses as they were
not serving as officers at the end of 2006.
In February 2007, the board, upon recommendation of the
Committee, established 2007 target bonus awards (as a percentage
of base salary) of 50% for Dr. Gonda and 40% for
Mr. Chesterman and Dr. Otulana. 2007 bonus awards will
again be capped at 150% of the target award, based on maximum
goal achievement. The board, upon recommendation of the
Committee, also approved performance goals with respect to
bonuses under the 2007 Executive Bonus Plan. In 2007, half of
the executives bonus awards will be earned based on the
achievement of specified corporate performance goals, including
meeting various objectives relating generally to the development
and progression of existing product candidates and
collaborations, establishing new programs and collaborative
arrangements and managing expense levels. The remaining half of
the executives bonus awards will be earned based on our
common stock achieving specified price targets by the end of the
year. If our common stock closes at between $1.19 and
$1.42 per share (equal to approximately 125% and 150% of
the offering price in our recently completed follow-on public
offering), each executive officer will earn his target bonus
with respect to that portion of the bonus, and if our common
stock closes at or above $1.43 per share (equal to
approximately 150% of the offering price in our recently
completed follow-on public offering), each executive officer
will earn 150% of his target bonus with respect to that portion
of the bonus. Actual bonus payments under the 2007 Executive
Bonus Plan will be paid at the end of the year and may be above
or below the target bonus levels, at the discretion of the board
and the Committee.
26
Equity Awards. We believe that providing a
significant portion of our executives total compensation
package in stock options and other equity awards aligns the
incentives of our executives with the interests of our
shareholders and with our long-term success. The Committee and
board develop their equity award determinations based on their
judgments as to whether the complete compensation packages
provided to our executives, including prior equity awards, are
sufficient to retain, motivate and adequately award the
executives. This judgment is based in part on information
provided by benchmarking studies.
We grant equity awards through our 2005 Equity Incentive Plan,
which was adopted by our board and shareholders to permit the
grant of stock options, stock appreciation rights, restricted
shares, restricted stock units, performance shares and other
stock-based awards to our officers, directors, scientific
advisory board members, employees and consultants. All of our
employees, directors, scientific advisory board members and
consultants are eligible to participate in the 2005 Equity
Incentive Plan. The material terms of the 2005 Equity Incentive
Plan are further described in note 6 to our financial
statements included elsewhere in this Annual Report.
In March 2006, we issued to Dr. Lawlis,
Mr. Chesterman, Dr. Otulana, Dr. Farr and
Mr. Venkatadri options to purchase up to 150,000, 80,000,
60,000, 60,000 and 40,000 shares of our common stock,
respectively. In June 2006, we issued to each of
Mr. Chesterman and Dr. Otulana an option to purchase
up to 300,000 shares of our common stock. Upon
Dr. Gondas appointment as our CEO in August 2006, we
granted to Dr. Gonda an option to purchase up to
500,000 shares of our common stock. All options we granted
have an exercise price equal to the fair market of our common
stock on the date of grant.
In addition, in October 2006, as provided in
Dr. Gondas employment offer letter, we agreed to pay
to Dr. Gonda a stock bonus of up to 100,000 shares of
our common stock to be earned based on our common stock price
reaching certain price targets after each of the first two years
of his employment as more fully described below in the section
entitled 2006 Grants of Plan-based Awards. We
believe this award structure is consistent with our approach of
providing significant equity-based compensation to our
executives in order to align our executives interests with
those of our shareholders.
For 2007, the Committee has yet to consider whether to grant
additional equity awards to our executives.
Severance Benefits. We have adopted an
Executive Officer Severance Plan and have entered into change of
control agreements with each of our executive officers, the
terms of which are more described below in the section entitled
Potential Payments Upon Termination or Change in
Control. We believe these severance and change in control
benefits are an essential element of our executive compensation
package and assist us in recruiting and retaining talented
individuals.
Other Compensation. All of our executives are
eligible to participate in our employee benefit plans, including
medical, dental, life insurance and 401(k) plans. These plans
are available to all salaried employees and do not discriminate
in favor of executive officers. It is generally our policy to
not extend significant perquisites to our executives that are
not available to our employees generally. We have no current
plans to make changes to levels of benefits and perquisites
provided to executives.
27
The following table sets forth information regarding
compensation earned in 2006 by our CEO, our Chief Financial
Officer, our Chief Medical Officer, our former CEO and two other
former executive officers who would have been among the five
most highly compensated executives if they had been employed at
the end of the fiscal year (these individuals are collectively
referred to as our named executive officers):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards(1)
|
|
|
Compensation(2)
|
|
|
Compensation
|
|
|
Total
|
|
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Igor Gonda, Ph.D.(3)
|
|
|
2006
|
|
|
|
113,230
|
|
|
|
100,000
|
|
|
|
20,340
|
|
|
|
68,942
|
|
|
|
22,363
|
|
|
|
50,966
|
|
|
|
375,841
|
|
President and Chief Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas C. Chesterman
|
|
|
2006
|
|
|
|
305,076
|
|
|
|
|
|
|
|
|
|
|
|
202,471
|
|
|
|
48,202
|
|
|
|
28,596
|
|
|
|
584,291
|
|
Senior Vice President and Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Babatunde A.
Otulana, M.D.
|
|
|
2006
|
|
|
|
287,038
|
|
|
|
|
|
|
|
|
|
|
|
183,319
|
|
|
|
45,352
|
|
|
|
22,980
|
|
|
|
538,689
|
|
Senior Vice President of
Development and Chief Medical Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Executive
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
V. Bryan
Lawlis, Jr., Ph.D.(4)
|
|
|
2006
|
|
|
|
274,139
|
|
|
|
|
|
|
|
|
|
|
|
259,936
|
|
|
|
|
|
|
|
452,393
|
|
|
|
986,468
|
|
Former President and Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen J. Farr, Ph.D.(5)
|
|
|
2006
|
|
|
|
210,000
|
|
|
|
|
|
|
|
|
|
|
|
163,357
|
|
|
|
|
|
|
|
167,456
|
|
|
|
540,813
|
|
Former Senior Vice President and
Chief Scientific Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bobba Venkatadri(6)
|
|
|
2006
|
|
|
|
260,089
|
|
|
|
|
|
|
|
|
|
|
|
141,237
|
|
|
|
|
|
|
|
379,339
|
|
|
|
780,665
|
|
Former Senior Vice
President of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The method of and assumptions used to calculate the value of the
options granted to our named executive officers is discussed in
note 1 to our financial statements included elsewhere in
this prospectus. |
|
(2) |
|
Each executive officer employed at the end of 2006 received a
cash bonus for achievement of certain corporate and personal
goals pursuant to our 2006 Executive Bonus Plan. |
|
(3) |
|
Dr. Gonda commenced his employment with us on
August 10, 2006. Dr. Gondas bonus reflects a
$100,000 signing bonus for accepting his offer of employment.
Dr. Gonda also received a stock bonus award for up to
100,000 shares of our common stock. We valued
Dr. Gondas stock bonus on a Monte-Carlo simulation
due to the path-dependency of the award. The Company believes
that the Monte-Carlo simulation provides a more precise estimate
for the grant date fair value of a market-based equity award as
the simulation allows for vesting throughout the vesting period
In accordance with Securities and Exchange Commission
regulations, the cost reflected in the table above only includes
the portion of the awards value that was amortized for
2006. Dr. Gondas compensation includes $21,000 in
director fees and options expense of $2,485 that were both
attributable to his services as a director prior to his
appointment as our CEO in August 2006. Dr. Gonda has not
received any additional compensation for his services as a
director since he was appointed CEO in August 2006. |
|
(4) |
|
Dr. Lawlis ceased serving as our CEO on August 10,
2006. |
|
(5) |
|
Dr. Farr ceased serving as an executive officer on
June 16, 2006. |
|
(6) |
|
Mr. Venkatadri ceased serving as an executive officer on
September 15, 2006. |
28
All Other Compensation in the summary compensation table above
includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
|
|
|
401(k)
|
|
|
Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Club
|
|
|
Health Care
|
|
|
Moving
|
|
|
Insurance
|
|
|
Matching
|
|
|
Stock
|
|
|
Director
|
|
|
Severance
|
|
|
|
|
|
|
|
|
|
Memberships
|
|
|
Contribution
|
|
|
Allowance
|
|
|
Premiums
|
|
|
Contributions
|
|
|
Purchase
|
|
|
Fees
|
|
|
Benefits
|
|
|
Total
|
|
Name
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Igor Gonda, Ph.D.
|
|
|
2006
|
|
|
|
350
|
|
|
|
3,386
|
|
|
|
23,304
|
|
|
|
595
|
|
|
|
2,331
|
|
|
|
|
|
|
|
21,000
|
|
|
|
|
|
|
|
50,966
|
|
Thomas C. Chesterman
|
|
|
2006
|
|
|
|
350
|
|
|
|
14,855
|
|
|
|
|
|
|
|
1,707
|
|
|
|
9,065
|
|
|
|
2,618
|
|
|
|
|
|
|
|
|
|
|
|
28,596
|
|
Babatunde A.
Otulana, M.D.
|
|
|
2006
|
|
|
|
350
|
|
|
|
14,855
|
|
|
|
|
|
|
|
1,613
|
|
|
|
6,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,980
|
|
Former Executive
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
V. Bryan
Lawlis, Jr., Ph.D.
|
|
|
2006
|
|
|
|
|
|
|
|
6,585
|
|
|
|
|
|
|
|
1,172
|
|
|
|
7,000
|
|
|
|
|
|
|
|
|
|
|
|
437,636
|
|
|
|
452,393
|
|
Stephen J. Farr, Ph.D.
|
|
|
2006
|
|
|
|
300
|
|
|
|
7,427
|
|
|
|
|
|
|
|
872
|
|
|
|
4,643
|
|
|
|
|
|
|
|
|
|
|
|
154,214
|
|
|
|
167,456
|
|
Bobba Venkatadri
|
|
|
2006
|
|
|
|
300
|
|
|
|
7,230
|
|
|
|
|
|
|
|
1,184
|
|
|
|
5,344
|
|
|
|
|
|
|
|
|
|
|
|
365,281
|
|
|
|
379,339
|
|
2006
Grants of Plan-Based Awards
The following table sets forth information regarding plan-based
awards to our named executive officers in 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
Estimated Future
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Date Fair
|
|
|
|
|
|
|
|
|
|
Payouts Under Non-
|
|
|
Estimated Future
|
|
|
Number of
|
|
|
or Base
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
Payouts Under Equity
|
|
|
Securities
|
|
|
Price of
|
|
|
Stock and
|
|
|
|
|
|
|
|
|
|
Plan Awards(1)
|
|
|
Incentive Plan Awards(2)
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
|
|
|
|
|
Approval
|
|
|
Target
|
|
|
Maximum
|
|
|
Target
|
|
|
Maximum
|
|
|
Options
|
|
|
Awards
|
|
|
Awards(3)
|
|
Name
|
|
Grant Date
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/sh)
|
|
|
($)
|
|
|
Igor Gonda, Ph.D.
|
|
|
5/18/2006
|
|
|
|
5/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
1.52
|
|
|
|
3,996
|
|
|
|
|
8/10/2006
|
|
|
|
8/8/2006
|
|
|
|
37,743
|
|
|
|
56,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/10/2006
|
|
|
|
8/8/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
1.87
|
|
|
|
621,500
|
|
|
|
|
10/4/2006
|
|
|
|
10/4/2006
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
94,000
|
|
Thomas C. Chesterman
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
122,031
|
|
|
|
183,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,000
|
|
|
|
3.77
|
|
|
|
198,032
|
|
|
|
|
6/27/2006
|
|
|
|
6/27/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
|
1.29
|
|
|
|
255,660
|
|
Babatunde A.
Otulana, M.D.
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
114,815
|
|
|
|
172,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
3.77
|
|
|
|
148,524
|
|
|
|
|
6/8/2006
|
|
|
|
6/8/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
|
1.70
|
|
|
|
334,650
|
|
Former Executive
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
V. Bryan
Lawlis, Jr., Ph.D.
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
157,500
|
|
|
|
236,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
3.77
|
|
|
|
371,310
|
|
Stephen J. Farr, Ph.D.
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
119,524
|
|
|
|
179,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
3.77
|
|
|
|
148,524
|
|
Bobba Venkatadri
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
112,692
|
|
|
|
169,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/7/2006
|
|
|
|
3/2/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
3.77
|
|
|
|
99,016
|
|
|
|
|
(1) |
|
Reflects each executive officers participation in our 2006
Executive Bonus Plan. The amount of bonus actually paid under
the plan is reflected in the summary compensation table above. |
|
(2) |
|
Reflects a stock bonus award for up to 100,000 shares of
our common stock granted to Dr. Gonda. Dr. Gonda will
earn half of the shares underlying his award if the average
closing price of our common stock between June 9, 2007 and
August 9, 2007 is 120% of the average closing price between
June 9, 2006 and August 9, 2006 and he will earn the
other half of the shares underlying his award if the average
closing price of our common stock between June 9, 2008 and
August 9, 2008 is 125% of the greater of (i) the
average closing price between June 9, 2006 and
August 9, 2006 or (ii) the average closing price
between June 9, 2007 and August 9, 2007. In addition,
if the average closing price of our common stock between
June 9, 2008 and August 9, 2008 is 150% of the average
closing price between June 9, 2006 and August 9, 2006,
Dr. Gonda will be entitled to receive the full award of
100,000 share notwithstanding either of the first two price
targets being achieved. If we undergo a change in control on or
prior to August 9, 2008, Dr. Gonda, will earn the full
100,000 shares underlying the award if our shareholders
receive consideration in the transaction that reflects at least
a 15% return per annum from the average closing price of our
common stock between June 9, 2006 and August 9, 2006.
If we terminate |
29
|
|
|
|
|
Dr. Gondas employment without cause between
August 10, 2007 and August 9, 2008 and Dr. Gonda
had previously received the first half of his bonus award, he
will be entitled to receive the second half of the bonus award
upon his termination. In no event will the value of the shares
awarded to Dr. Gonda under the bonus award exceed
$1,000,000. |
|
(3) |
|
The method of and assumptions used to calculate the value of
options granted to our named executive officers is discussed in
note 1 to our Financial Statements included elsewhere in
this prospectus. We valued Dr. Gondas stock bonus on
a Monte-Carlo simulation due to the path-dependency of the
award. The Company believes that the Monte-Carlo simulation
provides a more precise estimate for the grant date fair value
of a market-based equity award as the simulation allows for
vesting throughout the vesting period. |
Outstanding
Equity Awards At December 31, 2006
The following table provides information regarding each
unexercised stock option held by each of our named executive
officers as of December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Payout Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
|
of Unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares, Units
|
|
|
Shares, Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or Other
|
|
|
or Other
|
|
|
|
|
|
|
Number of Securities
|
|
|
Option
|
|
|
|
|
|
Rights That
|
|
|
Rights That
|
|
|
|
|
|
|
Underlying Unexercised Options
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price(1)
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
Igor Gonda, Ph.D.
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
94,000
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
500,000
|
|
|
|
1.87
|
|
|
|
08/10/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
1.52
|
|
|
|
05/18/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
5.30
|
|
|
|
05/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
5.30
|
|
|
|
05/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
5.30
|
|
|
|
05/13/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
6.50
|
|
|
|
05/15/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
4.75
|
|
|
|
02/19/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
17.25
|
|
|
|
05/21/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
17.15
|
|
|
|
05/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
24.10
|
|
|
|
02/11/2012
|
|
|
|
|
|
|
|
|
|
Thomas C. Chesterman
|
|
|
(5
|
)
|
|
|
37,500
|
|
|
|
262,500
|
|
|
|
1.29
|
|
|
|
06/27/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
80,000
|
|
|
|
3.77
|
|
|
|
03/07/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
15,312
|
|
|
|
19,688
|
|
|
|
5.90
|
|
|
|
02/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
13,061
|
|
|
|
5,939
|
|
|
|
12.00
|
|
|
|
02/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
6,562
|
|
|
|
438
|
|
|
|
4.75
|
|
|
|
02/19/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
13.00
|
|
|
|
09/05/2012
|
|
|
|
|
|
|
|
|
|
Babatunde A.
Otulana, M.D.
|
|
|
(5
|
)
|
|
|
37,500
|
|
|
|
262,500
|
|
|
|
1.70
|
|
|
|
06/08/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
60,000
|
|
|
|
3.77
|
|
|
|
03/07/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
10,936
|
|
|
|
14,064
|
|
|
|
5.90
|
|
|
|
02/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
15,123
|
|
|
|
6,877
|
|
|
|
12.00
|
|
|
|
02/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
9,375
|
|
|
|
625
|
|
|
|
4.75
|
|
|
|
02/19/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000
|
|
|
|
|
|
|
|
24.10
|
|
|
|
02/11/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
17.20
|
|
|
|
09/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
30.00
|
|
|
|
03/15/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
112.50
|
|
|
|
02/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
35.00
|
|
|
|
05/21/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
60.00
|
|
|
|
02/02/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
61.25
|
|
|
|
03/30/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
|
|
|
|
|
64.38
|
|
|
|
10/21/2007
|
|
|
|
|
|
|
|
|
|
V. Bryan
Lawlis, Jr., Ph.D.
|
|
|
|
|
|
|
9,420
|
|
|
|
|
|
|
|
5.90
|
|
|
|
02/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,437
|
|
|
|
|
|
|
|
12.00
|
|
|
|
02/27/2014
|
|
|
|
|
|
|
|
|
|
Stephen J. Farr, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bobba Venkatadri
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
(1) |
|
Represents the fair market value of a share of our common stock
on the grant date of the option. |
|
(2) |
|
The stock bonus award vests as described in the section above
entitled 2006 Grants of Plan-based Awards. |
|
(3) |
|
The option vests over four years with 1/4 of the shares of
underlying common stock vesting on the first anniversary of the
grant date and 1/48 of the shares of underlying common stock
vesting each month thereafter. |
|
(4) |
|
The option vests over one year with 1/4 of the shares of
underlying common stock vesting every three months from the
grant date. |
|
(5) |
|
The option vests over four years with 1/16 of the shares of
underlying common stock vesting every three months from the
grant date. |
|
(6) |
|
The option vests over four years with 1/4 of the shares of
underlying common stock vesting on the first anniversary of the
grant date and 1/16 of the shares of underlying common stock
vesting every three months thereafter. |
2006
Option Exercises and Stock Vested
None of our named executive officers exercised options or had
shares of stock vest in 2006.
Pension
Benefits
None of our named executive officers participate in or have
account balances in qualified or non-qualified defined benefit
plans sponsored by us. The Committee may elect to adopt
qualified or non-qualified defined benefit plans in the future
if the Committee determines that doing so is in our best
interests.
Nonqualified
Deferred Compensation
None of our named executive officers participate in or have
account balances in nonqualified defined contribution plans or
other nonqualified deferred compensation plans maintained by us.
The Committee may elect to provide our officers and other
employees with non-qualified defined contribution or other
nonqualified deferred compensation benefits in the future if the
Committee determines that doing so is in our best interests.
Potential
Payments Upon Termination or Change in Control
The following table and summary set forth potential payments
payable to our current executive officers upon termination of
employment or a change in control. The Committee may in its
discretion revise, amend or add to the
31
benefits if it deems advisable. The table below reflects amounts
payable to our executive officers assuming their employment was
terminated on December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Without
|
|
|
|
|
|
|
|
|
|
|
|
Cause or
|
|
|
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
|
Termination Without
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Cause Prior to a
|
|
|
Change in
|
|
|
Following a Change
|
|
|
|
|
|
Change in Control
|
|
|
Control
|
|
|
in Control
|
|
Name
|
|
Benefit
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Igor Gonda, Ph.D.
|
|
Salary
|
|
|
320,000
|
|
|
|
|
|
|
|
640,000
|
|
|
|
Bonus
|
|
|
114,032
|
|
|
|
|
|
|
|
228,064
|
|
|
|
Option acceleration
|
|
|
|
|
|
|
|
|
|
|
562,180
|
|
|
|
Stock bonus acceleration(1)
|
|
|
|
|
|
|
90,000
|
|
|
|
90,000
|
|
|
|
Benefits continuation
|
|
|
12,539
|
|
|
|
|
|
|
|
25,078
|
|
|
|
Career transition assistance
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
Total value:
|
|
|
446,571
|
|
|
|
90,000
|
|
|
|
1,565,322
|
|
Thomas C. Chesterman
|
|
Salary
|
|
|
306,000
|
|
|
|
|
|
|
|
459,000
|
|
|
|
Bonus
|
|
|
87,234
|
|
|
|
|
|
|
|
130,851
|
|
|
|
Option acceleration
|
|
|
|
|
|
|
|
|
|
|
482,388
|
|
|
|
Benefits continuation
|
|
|
18,906
|
|
|
|
|
|
|
|
28,360
|
|
|
|
Career transition assistance
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
Total value:
|
|
|
412,140
|
|
|
|
|
|
|
|
1,110,599
|
|
Babatunde A.
Otulana, M.D.
|
|
Salary
|
|
|
289,000
|
|
|
|
|
|
|
|
433,500
|
|
|
|
Bonus
|
|
|
82,388
|
|
|
|
|
|
|
|
123,582
|
|
|
|
Option acceleration
|
|
|
|
|
|
|
|
|
|
|
497,583
|
|
|
|
Benefits continuation
|
|
|
18,906
|
|
|
|
|
|
|
|
28,360
|
|
|
|
Career transition assistance
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
Total value:
|
|
|
390,294
|
|
|
|
|
|
|
|
1,093,025
|
|
|
|
|
(1) |
|
The value of Dr. Gondas stock bonus is calculated
using a value of $0.90 per share of common stock, which was the
last reported closing sale price of our common stock prior to
December 31, 2006. Dr. Gonda is only entitled to
acceleration of his stock bonus upon a change in control if our
shareholders receive consideration in the transaction that
reflects at least a 15% return per annum from the average
closing price of our common stock between June 9, 2006 and
August 9, 2006. |
Termination without cause prior to a change in
control. If any of our executives is terminated
by us without cause prior to a change in control, upon executing
a general release and waiver, such executive is entitled to
receive (less applicable withholding taxes) in a lump sum
payment or in installments, at our discretion:
|
|
|
|
|
an amount equal to such executives annual base salary;
|
|
|
|
an amount equal to such executives current target bonus
multiplied by the average annual percentage achievement of
corporate goals for the three complete fiscal years preceding
the termination date; and
|
|
|
|
continuation of such executives health insurance benefits
for 12 months.
|
In addition, if we terminate Dr. Gondas employment
without cause between August 10, 2007 and August 9,
2008 and he received the initial 50,000 shares of his stock
bonus award on August 9, 2007, he will be entitled to
receive the remaining 50,000 unvested shares of his stock bonus
award.
Termination without cause or constructive termination
following a change in control. If any of our
executives is terminated by us without cause or constructively
terminated (which includes a material reduction in title or
duties, a material reduction in salary or benefits or a
relocation of 50 miles or more) during the
18-month
period following a change in control, upon executing a general
release and waiver, such executive is entitled to receive (less
applicable withholding taxes):
|
|
|
|
|
a lump sum payment equal to such executives annual base
salary multiplied by two, in the case of Dr. Gonda, and one
and one-half, in the case of Mr. Chesterman and
Dr. Otulana;
|
32
|
|
|
|
|
a lump sum payment equal to such executives current target
bonus multiplied by (i) the average annual percentage
achievement of corporate goals for the three complete fiscal
years preceding the termination date and (ii) two, in the
case of Dr. Gonda, and one and one-half, in the case of
Mr. Chesterman and Dr. Otulana;
|
|
|
|
continuation of such executives health insurance benefits
for 24 months, in the case of Dr. Gonda, and
18 months, in the case of Mr. Chesterman and
Dr. Otulana;
|
|
|
|
reimbursement of actual career transition assistance
(outplacement services) incurred by such executive within six
months of termination in an amount up to $20,000, in the case of
Dr. Gonda, and $10,000, in the case of Mr. Chesterman
and Dr. Otulana; and
|
|
|
|
acceleration of vesting of any stock options or restricted stock
awards that remain unvested as of the date of such
executives termination.
|
Compensation
Committee Interlocks and Insider Participation
During the 2006 fiscal year, the Committee initially consisted
of Messrs. Jaeger and V. Thompson and Dr. Gonda.
Dr. Gonda had previously served as an officer from October
1995 until December 2001. Dr. Gonda stepped down from the
Compensation Committee after his appointment as our CEO and was
replaced by Mr. Barker. No interlocking relationship exists
between our board or the Committee and the board of directors or
the compensation committee of any other company, nor has any
such interlocking relationship existed in the past.
Non-Employee
Director Compensation
The following table sets forth a summary of the compensation we
paid to our non-employee directors in 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Option
|
|
|
|
|
|
|
Cash
|
|
|
Awards(1)
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Frank H. Barker(2)
|
|
|
39,500
|
|
|
|
12,266
|
|
|
|
51,766
|
|
Igor Gonda(3)
|
|
|
21,000
|
|
|
|
2,485
|
|
|
|
23,485
|
|
Stephen O. Jaeger(4)
|
|
|
45,750
|
|
|
|
12,266
|
|
|
|
58,016
|
|
John Nehra(5)
|
|
|
8,500
|
|
|
|
5,626
|
|
|
|
14,126
|
|
Wayne Roe(6)
|
|
|
10,000
|
|
|
|
5,626
|
|
|
|
15,626
|
|
John M. Siebert(7)
|
|
|
4,810
|
|
|
|
3,165
|
|
|
|
7,975
|
|
Richard Thompson(8)
|
|
|
10,000
|
|
|
|
213,333
|
|
|
|
223,333
|
|
Virgil D. Thompson(9)
|
|
|
68,250
|
|
|
|
20,889
|
|
|
|
89,139
|
|
|
|
|
(1) |
|
The method of and assumptions used to calculate the value of the
options granted to our directors is discussed in note 1 to
our financial statements included elsewhere in this prospectus. |
|
(2) |
|
Mr. Barker owns options to purchase up to
54,043 shares of our common stock as of December 31,
2006, of which 36,043 shares are vested as of
December 31, 2006. |
|
(3) |
|
Represents compensation received by Dr. Gonda in 2006 for
services as a director prior to his appointment as our CEO in
August 2006. Dr. Gonda did not receive compensation for his
services as a director after he was appointed as our CEO.
Dr. Gonda owns options to purchase up to
551,809 shares of our common stock as of December 31,
2006, of which 49,809 shares are vested as of
December 31, 2006. |
|
(4) |
|
Mr. Jaeger owns options to purchase up to
32,000 shares of our common stock as of December 31,
2006, of which 14,000 shares are vested as of
December 31, 2006. |
|
(5) |
|
Mr. Nehra did not stand for re-election to our board of
directors at the 2006 Annual Meeting of Shareholders.
Mr. Nehra did not own any outstanding options as of
December 31, 2006. |
|
(6) |
|
Mr. Roe did not stand for re-election to our board of
directors at the 2006 Annual Meeting of Shareholders.
Mr. Roe did not own any outstanding options as of
December 31, 2006. |
33
|
|
|
(7) |
|
Dr. Siebert joined our board in November 2006. The fees
paid to him represent a pro-rated portion of his retainer for
the period during which he served as a director.
Dr. Siebert owns options to purchase up to
30,000 shares of our common stock as of December 31,
2006, of which no shares are vested as of December 31, 2006. |
|
(8) |
|
Mr. R. Thompson did not stand for re-election to our board
of directors at the 2006 Annual Meeting of Shareholders.
Mr. R. Thompsons option awards includes option
expense related to the options that were granted when he
previously served as our CEO. Mr. R. Thompson did not own
any outstanding options as of December 31, 2006. |
|
(9) |
|
Mr. V. Thompson owns options to purchase up to
87,600 shares of our common stock as of December 31,
2006, of which 54,600 shares are vested as of
December 31, 2006. |
In 2007, the Chairman of the Board will receive an annual
retainer of $50,000 and all other non-employee directors will
receive an annual cash retainer of $30,000. Board members also
receive additional annual retainers for serving on board
committees. The additional annual retainer for the Chairman of
the Audit Committee will be $15,000 and the additional annual
retainer for all other members of the Audit Committee will be
$5,000. The additional annual retainer for the Chairman of the
Compensation Committee and the Chairman of the Nominating and
Corporate Governance Committee will be $10,000 and the
additional annual retainer for all other members will be $5,000.
The board retainer covers six meetings in a year and, if
exceeded, the Chairman of the Board will receive $1,500 for each
additional meeting and the other board members will receive
$1,000 for each additional meeting. If the number of meetings in
a year for any given committee exceeds four, the chairman of the
committee will receive $1,500 for each additional meeting and
the other committee members will receive $1,000 for each
additional meeting. Our directors are also entitled to receive
reimbursement of reasonable
out-of-pocket
expenses incurred by them to attend board meetings.
In addition to the cash compensation, each non-employee director
will be granted an annual stock option award. Each non-employee
director will automatically receive an option to purchase up to
30,000 shares of our common stock upon election to the
board. The Chairman of the Board will be granted automatically
an option to purchase up to 35,000 shares of our common stock
upon re-election to the board and the other members of the board
will be granted automatically an option to purchase up to
20,000 shares of our common stock upon re-election to the
board.
Limitation
of Liability of Officers and Directors and
Indemnification
Our articles of incorporation and bylaws include provisions to
(i) eliminate the personal liability of our directors for
monetary damages resulting from breaches of their fiduciary
duty, to the extent permitted by California law and
(ii) permit us to indemnify our directors and officers,
employees and other agents to the fullest extent permitted by
the California Corporations Code. Pursuant to Section 317
of the California Corporations Code, a corporation generally has
the power to indemnify its present and former directors,
officers, employees and agents against any expenses incurred by
them in connection with any suit to which they are, or are
threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the
best interests of a corporation and, with respect to any
criminal action, they had no reasonable cause to believe their
conduct was unlawful. We believe that these provisions are
necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate liability for
breach of the directors duty of loyalty to us or our
shareholders, for acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law,
for any transaction from which the director derived an improper
personal benefit or for any willful or negligent payment of any
unlawful dividend.
We have entered into indemnification agreements with certain
officers, including each of our named executive officers, and
each of our directors that provide, among other things, that we
will indemnify such officer or director, under the circumstances
and to the extent provided for therein, for expenses, damages,
judgments, fines and settlements such officer or director may be
required to pay in actions or proceedings to which such officer
or director is or may be made a party by reason of such
officers or directors position as an officer,
director or other agent of us, and otherwise to the full extent
permitted under California law and our bylaws.
34
CERTAIN
TRANSACTIONS
Review,
Approval or Ratification of Transactions with Related
Persons
Our policy is to require that any transaction with a related
party required to be reported under applicable Securities and
Exchange Commission rules, other than compensation-related
matters and waivers of our code of business conduct and ethics,
be reviewed and approved or ratified by a majority of
independent, disinterested directors. We have not adopted
procedures for review of, or standards for approval of, these
transactions, but instead review such transactions on a case by
case basis. Our policy is to require that all
compensation-related matters be recommended for board approval
by the Compensation Committee and that any waiver of our code of
business conduct and ethics be reviewed and approved by the
Nominating and Corporate Governance Committee and be reported
under applicable SEC rules.
Transaction
with Novo Nordisk
On July 3, 2006, we restructured our commercial
relationship with Novo Nordisk relating to the development of
the AERx iDMS program through an intellectual property
assignment, a royalty prepayment and an eight-year promissory
note with Novo Nordisk. The promissory note was secured by the
royalty payments on any AERx iDMS sales by Novo Nordisk under
the license with us. Novo Nordisk was a holder of more than 10%
of our outstanding common stock and was treated as a related
party at the time of the transaction. The key features of this
restructuring included:
|
|
|
|
|
our transfer to Novo Nordisk of the ownership of 23 issued
United States patents and their corresponding
non-United
States counterparts, if any, as well as related pending
applications, in exchange for $12.0 million paid to us in
cash. We retained exclusive, royalty-free control of these
patents outside the field of glucose control and will continue
to be entitled to royalties that will rise to an average of five
percent or higher by the fifth year after commercialization with
respect to any inhaled insulin products marketed or licensed by
Novo Nordisk.
|
|
|
|
our receipt of a royalty prepayment of $8.0 million in
exchange for a one percent reduction on our average royalty rate
for the commercialized AERx iDMS product. As a result, we will
receive royalty rates under our license agreement with Novo
Nordisk that will commence at a minimum of 3.25% on launch, and
that we estimate will average 5% over the life of the
product.
|
|
|
|
our issuance of an eight-year promissory note to Novo Nordisk in
connection with our receipt from Novo Nordisk of a loan in the
principal amount of $7.5 million with interest accruing at
5% per year. The principal and accrued interest will be
payable to Novo Nordisk in three equal payments of
$3.5 million on July 2, 2012, July 1, 2013 and
June 30, 2014, commencing in six years at a five percent
annual interest rate. Our obligations under the note are secured
by royalty payments upon any commercialization of the AERx iDMS
product.
|
We and Novo Nordisk continue to cooperate and share in
technology development, as well as intellectual property
development and defense. Both we and Novo Nordisk have access to
any developments or improvements the other might make to the
AERx delivery system, within their respective fields of use. In
August 2006, Novo Nordisk announced that it had filed a lawsuit
against Pfizer claiming that Exubera, an inhaled insulin product
that Pfizer has been developing with Nektar Therapeutics,
infringes a patent originally developed by us and now owned by
Novo Nordisk with rights retained by us outside the field of
glucose control. In December 2006, Novo Nordisks motion
for a preliminary injunction in this case was denied. While the
outcome of this lawsuit is highly uncertain, we are entitled to
a portion of any proceeds, net of litigation costs, that may be
received by Novo Nordisk from a favorable outcome.
Novo Nordisk now owns less than 5% of our outstanding common
stock and is no longer considered a related party.
35
HOUSEHOLDING
OF PROXY MATERIALS
The SEC has adopted rules that permit companies and
intermediaries (e.g., brokers) to satisfy the delivery
requirements for proxy statements and annual reports with
respect to two or more shareholders sharing the same address by
delivering a single proxy statement addressed to those
shareholders. This process, which is commonly referred to as
householding, potentially means extra convenience
for shareholders and cost savings for companies.
This year, a number of brokers with account holders who are our
shareholders will be householding our proxy
materials. A single proxy statement will be delivered to
multiple shareholders sharing an address unless contrary
instructions have been received from the affected shareholders.
Once you have received notice from your broker that they will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate proxy statement and annual
report, please notify your broker, direct your written request
to Aradigm Corporation, Corporate Secretary, 3929 Point Eden
Way, Hayward, CA 94545 or contact our Corporate Secretary at
(510) 265-9000.
Shareholders who currently receive multiple copies of the proxy
statement at their address and would like to request
householding of their communications should contact
their broker.
OTHER
MATTERS
The Board of Directors knows of no other matters that will be
presented for consideration at the annual meeting. If any other
matters are properly brought before the meeting, it is the
intention of the persons named in the accompanying proxy to vote
on such matters in accordance with their best judgment.
By Order of the Board of Directors
-s- Dr. Igor Gonda
Dr. Igor Gonda
President and Chief Executive Officer
May 1, 2007
A copy of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 is available
without charge upon written request to: Corporate Secretary,
Aradigm Corporation, 3929 Point Eden Way, Hayward, CA 94545.
Copies may also be obtained without charge through the
SECs website at http://www.sec.gov.
36
Appendix A
ARADIGM
CORPORATION
2005 Equity Incentive
Plan
Adopted:
March 21, 2005
Approved By Shareholders: May 19, 2005
Termination Date: March 20, 2015
Amended by Board (including to reflect January 2006
1-for-5
reverse stock split): March 30, 2006
Approved By Shareholders: May 18, 2006
Amended by Board: April 10, 2007
(a) Amendment and Restatement. The Plan
is a complete amendment and restatement of the Companys
1996 Equity Incentive Plan that was previously adopted in April
1996 (as thereafter amended, the Prior
Plan). All outstanding awards granted under the
Prior Plan shall remain subject to the terms of the Prior Plan.
All Stock Awards granted on or after the effective date of this
Plan shall be subject to the terms of this Plan.
(b) Eligible Stock Award Recipients. The
persons eligible to receive Stock Awards are Employees,
Directors and Consultants.
(c) Available Stock Awards. The Plan
provides for the grant of the following Stock Awards:
(i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) Stock Purchase Awards, (iv) Stock Bonus
Awards, (v) Stock Appreciation Rights, (vi) Stock Unit
Awards and (vii) Other Stock Awards.
(d) General Purpose. The Company, by
means of the Plan, seeks to secure and retain the services of
the group of persons eligible to receive Stock Awards as set
forth in Section 1(a), to provide incentives for such
persons to exert maximum efforts for the success of the Company
and any Affiliate and to provide a means by which such eligible
recipients may be given an opportunity to benefit from increases
in value of the Common Stock through the granting of Stock
Awards.
As used in the Plan, the following definitions shall apply to
the capitalized terms indicated below:
(a) Affiliate means (i) any
corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each corporation
in the unbroken chain (other than the Company) owns, at the time
of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock
in one of the other corporations in such chain, and
(ii) any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company,
provided each corporation (other than the last corporation) in
the unbroken chain owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain. The Board shall have the authority
to determine (i) the time or times at which the ownership
tests are applied, and (ii) whether Affiliate
includes entities other than corporations within the foregoing
definition.
(b) Board means the Board of Directors
of the Company.
(c) Capitalization Adjustment has the
meaning ascribed to that term in Section 11(a).
(d) Cause means, with respect to a
Participant, the occurrence of any of the following:
(i) such Participants commission of any felony or any
crime involving fraud, dishonesty or moral turpitude under the
laws of the United States or any state thereof; (ii) such
Participants attempted commission of, or participation in,
a fraud or act of dishonesty against the Company;
(iii) such Participants intentional, material
violation of any material contract or agreement between the
Participant and the Company or any statutory duty owed to the
A-1
Company; (iv) such Participants unauthorized use or
disclosure of the Companys confidential information or
trade secrets; or (v) such Participants gross
misconduct. The determination that a termination is for Cause
shall be made by the Company in its sole discretion. Any
determination by the Company that the Continuous Service of a
Participant was terminated by reason of dismissal without Cause
for the purposes of outstanding Stock Awards held by such
Participant shall have no effect upon any determination of the
rights or obligations of the Company or such Participant for any
other purpose.
(e) Change in Control means the
occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events:
(i) any Exchange Act Person becomes the Owner, directly or
indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the
Companys then outstanding securities other than by virtue
of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur (A) on account of the acquisition of
securities of the Company by an investor, any affiliate thereof
or any other Exchange Act Person from the Company in a
transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through
the issuance of equity securities or (B) solely because the
level of Ownership held by any Exchange Act Person (the
Subject Person) exceeds the designated
percentage threshold of the outstanding voting securities as a
result of a repurchase or other acquisition of voting securities
by the Company reducing the number of shares outstanding,
provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of
voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or
other acquisition had not occurred, increases the percentage of
the then outstanding voting securities Owned by the Subject
Person over the designated percentage threshold, then a Change
in Control shall be deemed to occur;
(ii) there is consummated a merger, consolidation or
similar transaction involving (directly or indirectly) the
Company and, immediately after the consummation of such merger,
consolidation or similar transaction, the shareholders of the
Company immediately prior thereto do not Own, directly or
indirectly, either (A) outstanding voting securities
representing more than fifty percent (50%) of the combined
outstanding voting power of the surviving Entity in such merger,
consolidation or similar transaction or (B) more than fifty
percent (50%) of the combined outstanding voting power of the
parent of the surviving Entity in such merger, consolidation or
similar transaction, in each case in substantially the same
proportions as their Ownership of the outstanding voting
securities of the Company immediately prior to such transaction;
(iii) the shareholders of the Company approve or the Board
approves a plan of complete dissolution or liquidation of the
Company, or a complete dissolution or liquidation of the Company
shall otherwise occur;
(iv) there is consummated a sale, lease, exclusive license
or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries, other
than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and
its Subsidiaries to an Entity, more than fifty percent (50%) of
the combined voting power of the voting securities of which are
Owned by shareholders of the Company in substantially the same
proportions as their Ownership of the outstanding voting
securities of the Company immediately prior to such sale, lease,
license or other disposition; or
(v) individuals who, on the date this Plan is adopted by
the Board, are members of the Board (the Incumbent
Board) cease for any reason to constitute at least
a majority of the members of the Board; provided,
however, that if the appointment or election (or
nomination for election) of any new Board member was approved or
recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes
of this Plan, be considered as a member of the Incumbent Board.
A-2
The term Change in Control shall not include a sale of assets,
merger or other transaction effected exclusively for the purpose
of changing the domicile of the Company.
Notwithstanding the foregoing or any other provision of this
Plan, the definition of Change in Control (or any analogous
term) in an individual written agreement between the Company or
any Affiliate and the Participant shall supersede the foregoing
definition with respect to Stock Awards subject to such
agreement; provided, however, that if no definition of
Change in Control or any analogous term is set forth in such an
individual written agreement, the foregoing definition shall
apply.
(f) Code means the Internal Revenue Code
of 1986, as amended.
(g) Committee means a committee of one
(1) or more members of the Board to whom authority has been
delegated by the Board in accordance with Section 3(c).
(h) Common Stock means the common stock
of the Company.
(i) Company means Aradigm Corporation, a
California corporation.
(j) Consultant means any person,
including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is
compensated for such services or (ii) serving as a member
of the Board of Directors of an Affiliate and is compensated for
such services. However, service solely as a Director, or payment
of a fee for such service, shall not cause a Director to be
considered a Consultant for purposes of the Plan.
(k) Continuous Service means that the
Participants service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, is not
interrupted or terminated. A change in the capacity in which the
Participant renders service to the Company or an Affiliate as an
Employee, Consultant or Director or a change in the entity for
which the Participant renders such service, provided that there
is no interruption or termination of the Participants
service with the Company or an Affiliate, shall not terminate a
Participants Continuous Service. For example, a change in
status from an employee of the Company to a consultant to an
Affiliate or to a Director shall not constitute an interruption
of Continuous Service. To the extent permitted by law, the Board
or the chief executive officer of the Company, in that
partys sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave
of absence approved by that party, including sick leave,
military leave or any other personal leave. Notwithstanding the
foregoing, a leave of absence shall be treated as Continuous
Service for purposes of vesting in a Stock Award only to such
extent as may be provided in the Companys leave of absence
policy or in the written terms of the Participants leave
of absence.
(l) Corporate Transaction means the
occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially
all, as determined by the Board in its sole discretion, of the
consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of at least ninety percent
(90%) of the outstanding securities of the Company;
(iii) the consummation of a merger, consolidation or
similar transaction following which the Company is not the
surviving corporation; or
(iv) the consummation of a merger, consolidation or similar
transaction following which the Company is the surviving
corporation but the shares of Common Stock outstanding
immediately preceding the merger, consolidation or similar
transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise.
(m) Covered Employee means the chief
executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation
is required to be reported to shareholders under the Exchange
Act, as determined for purposes of Section 162(m) of the
Code.
A-3
(n) Director means a member of the Board.
(o) Disability means the permanent and
total disability of a person within the meaning of
Section 22(e)(3) of the Code.
(p) Employee means any person employed
by the Company or an Affiliate. However, service solely as a
Director, or payment of a fee for such services, shall not cause
a Director to be considered an Employee for purposes
of the Plan.
(q) Entity means a corporation,
partnership or other entity.
(r) Exchange Act means the Securities
Exchange Act of 1934, as amended.
(s) Exchange Act Person means any
natural person, Entity or group (within the meaning
of Section 13(d) or 14(d) of the Exchange Act), except that
Exchange Act Person shall not include (i) the
Company or any Subsidiary of the Company, (ii) any employee
benefit plan of the Company or any Subsidiary of the Company or
any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the
Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities,
(iv) an Entity Owned, directly or indirectly, by the
shareholders of the Company in substantially the same
proportions as their Ownership of stock of the Company; or
(v) any natural person, Entity or group (within
the meaning of Section 13(d) or 14(d) of the Exchange Act)
that, as of the effective date of the Plan as set forth in
Section 14, is the Owner, directly or indirectly, of
securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Companys then
outstanding securities.
(t) Fair Market Value means, as of any
date, the value of the Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common
Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the date in question,
as reported in The Wall Street Journal or such other
source as the Board deems reliable. Unless otherwise provided by
the Board, if there is no closing sales price (or closing bid if
no sales were reported) for the Common Stock on the date in
question, then the Fair Market Value shall be the closing
selling price (or closing bid if no sales were reported) on the
last preceding date for which such quotation exists.
(ii) In the absence of such markets for the Common Stock,
the Fair Market Value shall be determined by the Board in good
faith.
(u) Incentive Stock Option means an
Option intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
(v) Non-Employee Director means a
Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive
compensation, either directly or indirectly, from the Company or
an Affiliate for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to
which disclosure would not be required under Item 404(a) of
Regulation S-K
promulgated pursuant to the Securities Act
(Regulation S-K)),
does not possess an interest in any other transaction for which
disclosure would be required under Item 404(a) of
Regulation S-K,
and is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of
Regulation S-K;
or (ii) is otherwise considered a non-employee
director for purposes of
Rule 16b-3.
(w) Nonstatutory Stock Option means an
Option not intended to qualify as an Incentive Stock Option.
(x) Officer means a person who is an
officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated
thereunder.
(y) Option means an Incentive Stock
Option or a Nonstatutory Stock Option to purchase shares of
Common Stock granted pursuant to the Plan.
A-4
(z) Option Agreement means a written
agreement between the Company and an Optionholder evidencing the
terms and conditions of an Option grant. Each Option Agreement
shall be subject to the terms and conditions of the Plan.
(aa) Optionholder means a person to whom
an Option is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Option.
(bb) Other Stock Award means an award
based in whole or in part by reference to the Common Stock which
is granted pursuant to the terms and conditions of
Section 7(e).
(cc) Other Stock Award Agreement means a
written agreement between the Company and a holder of an Other
Stock Award evidencing the terms and conditions of an Other
Stock Award grant. Each Other Stock Award Agreement shall be
subject to the terms and conditions of the Plan.
(dd) Outside Director means a Director
who either (i) is not a current employee of the Company or
an affiliated corporation (within the meaning of
Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an
affiliated corporation who receives compensation for
prior services (other than benefits under a tax-qualified
retirement plan) during the taxable year, has not been an
officer of the Company or an affiliated corporation,
and does not receive remuneration from the Company or an
affiliated corporation, either directly or
indirectly, in any capacity other than as a Director, or
(ii) is otherwise considered an outside
director for purposes of Section 162(m) of the Code.
(ee) Own, Owned,
Owner, Ownership A person
or Entity shall be deemed to Own, to have
Owned, to be the Owner of, or to have
acquired Ownership of securities if such person or
Entity, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or
shares voting power, which includes the power to vote or to
direct the voting, with respect to such securities.
(ff) Participant means a person to whom
a Stock Award is granted pursuant to the Plan or, if applicable,
such other person who holds an outstanding Stock Award.
(gg) Performance Criteria means the one
or more criteria that the Board shall select for purposes of
establishing the Performance Goals for a Performance Period. The
Performance Criteria that shall be used to establish such
Performance Goals may be based on any one of, or combination of,
the following: (i) earnings per share; (ii) earnings
before interest, taxes and depreciation; (iii) earnings
before interest, taxes, depreciation and amortization (EBITDA);
(iv) net earnings; (v) total shareholder return;
(vi) return on equity; (vii) return on assets,
investment or capital employed; (viii) operating margin;
(ix) gross margin; (x) operating income; (xi) net
income (before or after taxes); (xii) net operating income;
(xiii) net operating income after tax; (xiv) pre- and
after-tax income; (xv) pre-tax profit; (xvi) operating
cash flow; (xvii) sales or revenue targets;
(xviii) increases in revenue or product revenue;
(xix) expenses and cost reduction goals;
(xx) improvement in or attainment of expense levels;
(xxi) improvement in or attainment of working capital
levels; (xxii) economic value added (or an equivalent
metric); (xxiii) market share; (xxiv) cash flow;
(xxv) cash flow per share; (xxvi) share price
performance; (xxvii) debt reduction;
(xxviii) implementation or completion of projects or
processes; (xxix) customer satisfaction; (xxx) total
shareholder return; (xxxi) shareholders equity; and
(xxxii) other measures of performance selected by the
Board. Partial achievement of the specified criteria may result
in the payment or vesting corresponding to the degree of
achievement as specified in the Stock Award Agreement. The Board
shall, in its sole discretion, define the manner of calculating
the Performance Criteria it selects to use for such Performance
Period.
(hh) Performance Goals means, for a
Performance Period, the one or more goals established by the
Board for the Performance Period based upon the Performance
Criteria. The Board is authorized at any time in its sole
discretion, to adjust or modify the calculation of a Performance
Goal for such Performance Period in order to prevent the
dilution or enlargement of the rights of Participants,
(a) in the event of, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event or development;
(b) in recognition of, or in anticipation of, any other
unusual or nonrecurring events affecting the Company, or the
financial statements of the Company, or in response to, or in
anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions; or (c) in
view of the Boards assessment of the business strategy of
the Company, performance of comparable organizations, economic
and business conditions, and any other
A-5
circumstances deemed relevant. Specifically, the Board is
authorized to make adjustment in the method of calculating
attainment of Performance Goals and objectives for a Performance
Period as follows: (i) to exclude the dilutive effects of
acquisitions or joint ventures; (ii) to assume that any
business divested by the Company achieved performance objectives
at targeted levels during the balance of a Performance Period
following such divestiture; and (iii) to exclude the effect
of any change in the outstanding shares of common stock of the
Company by reason of any stock dividend or split, stock
repurchase, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or
other similar corporate change, or any distributions to common
shareholders other than regular cash dividends. In addition, the
Board is authorized to make adjustment in the method of
calculating attainment of Performance Goals and objectives for a
Performance Period as follows: (i) to exclude restructuring
and/or other
nonrecurring charges; (ii) to exclude exchange rate
effects, as applicable, for
non-U.S. dollar
denominated net sales and operating earnings; (iii) to
exclude the effects of changes to generally accepted accounting
standards required by the Financial Accounting Standards Board;
(iv) to exclude the effects to any statutory adjustments to
corporate tax rates; (v) to exclude the impact of any
extraordinary items as determined under generally
accepted accounting principles; and (vi) to exclude any
other unusual, non-recurring gain or loss or other extraordinary
item.
(ii) Performance Period means the one or
more periods of time, which may be of varying and overlapping
durations, as the Board may select, over which the attainment of
one or more Performance Goals will be measured for the purpose
of determining a Participants right to and the payment of
a Stock Award.
(jj) Plan means this Aradigm Corporation
2005 Equity Incentive Plan.
(kk) Rule 16b-3
means
Rule 16b-3
promulgated under the Exchange Act or any successor to
Rule 16b-3,
as in effect from time to time.
(ll) Securities Act means the Securities
Act of 1933, as amended.
(mm) Stock Appreciation Right means a
right to receive the appreciation on Common Stock that is
granted pursuant to the terms and conditions of
Section 7(d).
(nn) Stock Appreciation Right Agreement
means a written agreement between the Company and a holder of a
Stock Appreciation Right evidencing the terms and conditions of
a Stock Appreciation Right grant. Each Stock Appreciation Right
Agreement shall be subject to the terms and conditions of the
Plan.
(oo) Stock Award means any right granted
under the Plan, including an Option, a Stock Purchase Award,
Stock Bonus Award, a Stock Appreciation Right, a Stock Unit
Award or any Other Stock Award.
(pp) Stock Award Agreement means a
written agreement between the Company and a Participant
evidencing the terms and conditions of a Stock Award grant. Each
Stock Award Agreement shall be subject to the terms and
conditions of the Plan.
(qq) Stock Bonus Award means an award of
shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(b).
(rr) Stock Bonus Award Agreement means a
written agreement between the Company and a holder of a Stock
Bonus Award evidencing the terms and conditions of a Stock Bonus
Award grant. Each Stock Bonus Award Agreement shall be subject
to the terms and conditions of the Plan.
(ss) Stock Purchase Award means an award
of shares of Common Stock which is granted pursuant to the terms
and conditions of Section 7(a).
(tt) Stock Purchase Award Agreement
means a written agreement between the Company and a holder of a
Stock Purchase Award evidencing the terms and conditions of a
Stock Purchase Award grant. Each Stock Purchase Award Agreement
shall be subject to the terms and conditions of the Plan.
(uu) Stock Unit Award means a right to
receive shares of Common Stock which is granted pursuant to the
terms and conditions of Section 7(c).
A-6
(vv) Stock Unit Award Agreement means a
written agreement between the Company and a holder of a Stock
Unit Award evidencing the terms and conditions of a Stock Unit
Award grant. Each Stock Unit Award Agreement shall be subject to
the terms and conditions of the Plan.
(ww) Subsidiary means, with respect to
the Company, (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary
voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by
the Company, and (ii) any partnership in which the Company
has a direct or indirect interest (whether in the form of voting
or participation in profits or capital contribution) of more
than fifty percent (50%).
(xx) Ten Percent Shareholder means a
person who Owns (or is deemed to Own pursuant to
Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes
of stock of the Company or any Affiliate.
(a) Administration by Board. The Board
shall administer the Plan unless and until the Board delegates
administration of the Plan to a Committee, as provided in
Section 3(c).
(b) Powers of Board. The Board shall have
the power, subject to, and within the limitations of, the
express provisions of the Plan:
(i) To determine from time to time (1) which of the
persons eligible under the Plan shall be granted Stock Awards;
(2) when and how each Stock Award shall be granted;
(3) what type or combination of types of Stock Award shall
be granted; (4) the provisions of each Stock Award granted
(which need not be identical), including the time or times when
a person shall be permitted to receive Common Stock pursuant to
a Stock Award; and (5) the number of shares of Common Stock
with respect to which a Stock Award shall be granted to each
such person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or inconsistency
in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) To terminate or suspend the Plan as provided in
Section 13.
(v) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the
best interests of the Company and that are not in conflict with
the provisions of the Plan.
(vi) To adopt such procedures and
sub-plans as
are necessary or appropriate to permit participation in the Plan
by Employees who are foreign nationals or employed outside the
United States.
(c) Delegation to Committee.
(i) General. The Board may delegate some
or all of the administration of the Plan to a Committee or
Committees. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board that
have been delegated to the Committee, including the power to
delegate to a subcommittee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan
to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may retain the
authority to concurrently administer the Plan with the Committee
and may, at any time, revest in the Board some or all of the
powers previously delegated.
A-7
(ii) Section 162(m) and
Rule 16b-3
Compliance. In the sole discretion of the Board,
the Committee may consist solely of two or more Outside
Directors, in accordance with Section 162(m) of the Code,
and/or
solely of two or more Non-Employee Directors, in accordance with
Rule 16b-3.
In addition, the Board or the Committee, in its sole discretion,
may (1) delegate to a committee of one or more members of
the Board who need not be Outside Directors the authority to
grant Stock Awards to eligible persons who are either
(a) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting
from such Stock Award or (b) not persons with respect to
whom the Company wishes to comply with Section 162(m) of
the Code,
and/or
(2) delegate to a committee of one or more members of the
Board who need not be Non-Employee Directors the authority to
grant Stock Awards to eligible persons who are not then subject
to Section 16 of the Exchange Act.
(d) Delegation to an Officer. The Board
may delegate to one or more Officers of the Company the
authority to do one or both of the following (i) designate
Officers and Employees of the Company or any of its Subsidiaries
to be recipients of Stock Awards and the terms thereof, and
(ii) determine the number of shares of Common Stock to be
subject to such Stock Awards granted to such Officers and
Employees of the Company; provided, however, that the
Board resolutions regarding such delegation shall specify the
total number of shares of Common Stock that may be subject to
the Stock Awards granted by such Officer and that such Officer
may not grant a Stock Award to himself or herself.
Notwithstanding anything to the contrary in this
Section 3(d), the Board may not delegate to an Officer
authority to determine the Fair Market Value of the Common Stock
pursuant to Section 2(t)(ii) above.
(e) Effect of Boards Decision. All
determinations, interpretations and constructions made by the
Board in good faith shall not be subject to review by any person
and shall be final, binding and conclusive on all persons.
(f) Cancellation and Re-Grant of Stock
Awards. Neither the Board nor any Committee shall
have the authority to: (i) reprice any outstanding Stock
Awards under the Plan, or (ii) cancel and re-grant any
outstanding Stock Awards under the Plan, unless the shareholders
of the Company have approved such an action within twelve
(12) months prior to such an event.
|
|
4.
|
Shares Subject
to the Plan.
|
(a) Share Reserve. Subject to the
provisions of Section 11(a) relating to Capitalization
Adjustments, the number of shares of Common Stock that may be
issued pursuant to Stock Awards shall not exceed, in the
aggregate, six million five hundred eighteen thousand six
hundred thirty-eight (6,518,638) shares of Common Stock
(including shares underlying Stock Awards issued pursuant to the
Prior Plan).
(b) Reversion of Shares to the Share
Reserve. Any shares of Common Stock subject to
outstanding awards granted under the Prior Plan that would
otherwise have reverted to the share reserve of the Prior Plan
shall revert to and again become available for issuance under
this Plan. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been
exercised in full, or if any shares of Common Stock issued to a
Participant pursuant to a Stock Award are forfeited to or
repurchased by the Company, including, but not limited to, any
repurchase or forfeiture caused by the failure to meet a
contingency or condition required for the vesting of such
shares, then the shares of Common Stock not issued under such
Stock Award, or forfeited to or repurchased by the Company,
shall revert to and again become available for issuance under
the Plan. If any shares subject to a Stock Award are not
delivered to a Participant because such shares are withheld for
the payment of taxes, the number of shares that are not
delivered to the Participant shall remain available for issuance
under the Plan. If the exercise price of any Stock Award is
satisfied by tendering shares of Common Stock held by the
Participant (either by actual delivery or attestation), then the
number of shares so tendered shall remain available for issuance
under the Plan. Notwithstanding anything to the contrary in this
Section 4(b), subject to the provisions of
Section 11(a) relating to Capitalization Adjustments the
aggregate maximum number of shares of Common Stock that may be
issued pursuant to the exercise of Incentive Stock Options shall
be six million five hundred eighteen thousand six hundred
thirty-eight (6,518,638) shares of Common Stock plus the amount
of any increase in the number of shares that may be available
for issuance pursuant to Stock Awards pursuant to
Section 4(a).
(c) Source of Shares. The stock issuable
under the Plan shall be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the
Company on the open market.
A-8
(a) Eligibility for Specific Stock
Awards. Incentive Stock Options may be granted
only to Employees. Stock Awards other than Incentive Stock
Options may be granted to Employees, Directors and Consultants.
(b) Ten Percent Shareholders. A Ten
Percent Shareholder shall not be granted an Incentive Stock
Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the
Common Stock on the date of grant and the Option is not
exercisable after the expiration of five (5) years from the
date of grant.
(c) Section 162(m) Limitation on Annual
Grants. Subject to the provisions of
Section 11(a) relating to Capitalization Adjustments, at
such time as the Company may be subject to the applicable
provisions of Section 162(m) of the Code, no Employee shall
be eligible to be granted Stock Awards whose value is determined
by reference to an increase over an exercise or strike price of
at least one hundred percent (100%) of the Fair Market Value of
the Common Stock on the date the Stock Award is granted covering
more than five hundred thousand (500,000) shares of Common Stock
during any calendar year.
(d) Consultants. A Consultant shall not
be eligible for the grant of a Stock Award if, at the time of
grant, a
Form S-8
Registration Statement under the Securities Act
(Form S-8)
is not available to register either the offer or the sale of the
Companys securities to such Consultant because of the
nature of the services that the Consultant is providing to the
Company, because the Consultant is not a natural person, or
because of any other rule governing the use of
Form S-8.
Each Option shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate. All Options
shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates
shall be issued for shares of Common Stock purchased on exercise
of each type of Option. The provisions of separate Options need
not be identical; provided, however, that each Option
Agreement shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of
each of the following provisions:
(a) Term. The Board shall determine the
term of an Option; provided, however, that subject to the
provisions of Section 5(b) regarding Ten Percent
Shareholders, no Incentive Stock Option shall be exercisable
after the expiration of ten (10) years from the date of
grant.
(b) Exercise Price of an Incentive Stock
Option. Subject to the provisions of
Section 5(b) regarding Ten Percent Shareholders, the
exercise price of each Incentive Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set
forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in
a manner consistent with the provisions of Section 424(a)
of the Code.
(c) Exercise Price of a Nonstatutory Stock
Option. The exercise price of each Nonstatutory
Stock Option shall be not less than one hundred percent (100%)
of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an
exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner consistent with the
provisions of Section 424(a) of the Code.
(d) Consideration. The purchase price of
Common Stock acquired pursuant to the exercise of an Option
shall be paid, to the extent permitted by applicable law and as
determined by the Board in its sole discretion, by any
combination of the methods of payment set forth below. The Board
shall have the authority to grant Options that do not permit all
of the following methods of payment (or otherwise restrict the
ability to use certain methods) and to grant Options that
require the consent of the Company to utilize a particular
method of payment. The methods of payment permitted by this
Section 6(d) are:
(i) by cash or check;
A-9
(ii) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either
the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds;
(iii) by delivery to the Company (either by actual delivery
or attestation) of shares of Common Stock;
(iv) according to a deferred payment or similar arrangement
with the Optionholder; provided, however, that interest
shall compound at least annually and shall be charged at the
minimum rate of interest necessary to avoid (i) the
imputation of interest income to the Company and compensation
income to the Optionholder under any applicable provisions of
the Code and (ii) the treatment of the Option as a variable
award for financial accounting purposes; or
(v) in any other form of legal consideration that may be
acceptable to the Board.
(e) Transferability of Options. The Board
may, in its sole discretion, impose such limitations on the
transferability of Options as the Board shall determine. In the
absence of such a determination by the Board to the contrary,
the following restrictions on the transferability of Options
shall apply:
(i) Restrictions on Transfer. An Option
shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder.
(ii) Domestic Relations
Orders. Notwithstanding the foregoing, an Option
may be transferred pursuant to a domestic relations order.
(iii) Beneficiary
Designation. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company,
in a form provided by or otherwise satisfactory to the Company,
designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the
Option.
(f) Vesting Generally. The total number
of shares of Common Stock subject to an Option may vest and
therefore become exercisable in periodic installments that may
or may not be equal. The Option may be subject to such other
terms and conditions on the time or times when it may or may not
be exercised (which may be based on performance or other
criteria) as the Board may deem appropriate. The vesting
provisions of individual Options may vary. The provisions of
this Section 6(f) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to
which an Option may be exercised.
(g) Termination of Continuous Service. In
the event that an Optionholders Continuous Service
terminates (other than upon the Optionholders death or
Disability), the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise such
Option as of the date of termination of Continuous Service) but
only within such period of time ending on the earlier of
(i) the date three (3) months following the
termination of the Optionholders Continuous Service (or
such longer or shorter period specified in the Option Agreement)
or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination of
Continuous Service, the Optionholder does not exercise his or
her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.
(h) Extension of Termination Date. An
Optionholders Option Agreement may provide that if the
exercise of the Option following the termination of the
Optionholders Continuous Service (other than upon the
Optionholders death or Disability or upon a Change in
Control) would be prohibited at any time solely because the
issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration
of a period of three (3) months after the termination of
the Optionholders Continuous Service during which the
exercise of the Option would not be in violation of such
registration requirements or (ii) the expiration of the
term of the Option as set forth in the Option Agreement.
A-10
(i) Disability of Optionholder. In the
event that an Optionholders Continuous Service terminates
as a result of the Optionholders Disability, the
Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the
date of termination of Continuous Service), but only within such
period of time ending on the earlier of (i) the date twelve
(12) months following such termination of Continuous
Service (or such longer or shorter period specified in the
Option Agreement) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after
termination of Continuous Service, the Optionholder does not
exercise his or her Option within the time specified herein or
in the Option Agreement (as applicable), the Option shall
terminate.
(j) Death of Optionholder. In the event
that (i) an Optionholders Continuous Service
terminates as a result of the Optionholders death or
(ii) the Optionholder dies within the period (if any)
specified in the Option Agreement after the termination of the
Optionholders Continuous Service for a reason other than
death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date
of death) by the Optionholders estate, by a person who
acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option
upon the Optionholders death, but only within the period
ending on the earlier of (i) the date eighteen
(18) months following the date of death (or such longer or
shorter period specified in the Option Agreement) or
(ii) the expiration of the term of such Option as set forth
in the Option Agreement. If, after the Optionholders
death, the Option is not exercised within the time specified
herein or in the Option Agreement (as applicable), the Option
shall terminate.
(k) Early Exercise. The Option may
include a provision whereby the Optionholder may elect at any
time before the Optionholders Continuous Service
terminates to exercise the Option as to any part or all of the
shares of Common Stock subject to the Option prior to the full
vesting of the Option. Any unvested shares of Common Stock so
purchased may be subject to a repurchase option in favor of the
Company or to any other restriction the Board determines to be
appropriate. The Company shall not be required to exercise its
repurchase option until at least six (6) months (or such
longer or shorter period of time necessary to avoid a charge to
earnings for financial accounting purposes) have elapsed
following exercise of the Option unless the Board otherwise
specifically provides in the Option.
|
|
7.
|
Provisions
of Stock Awards other than Options.
|
(a) Stock Purchase Awards. Each Stock
Purchase Award Agreement shall be in such form and shall contain
such terms and conditions as the Board shall deem appropriate.
At the Boards election, shares of Common Stock may be
(i) held in book entry form subject to the Companys
instructions until any restrictions relating to the Stock
Purchase Award lapse or (ii) evidenced by a certificate,
which certificate shall be held in such form and manner as
determined by the Board. The terms and conditions of Stock
Purchase Award Agreements may change from time to time, and the
terms and conditions of separate Stock Purchase Award Agreements
need not be identical, provided, however, that each Stock
Purchase Award Agreement shall include (through incorporation of
the provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:
(i) Purchase Price. At the time of the
grant of a Stock Purchase Award, the Board will determine the
price to be paid by the Participant for each share subject to
the Stock Purchase Award. To the extent required by applicable
law, the price to be paid by the Participant for each share of
the Stock Purchase Award will not be less than the par value of
a share of Common Stock.
(ii) Consideration. At the time of the
grant of a Stock Purchase Award, the Board will determine the
consideration permissible for the payment of the purchase price
of the Stock Purchase Award. The purchase price of Common Stock
acquired pursuant to the Stock Purchase Award shall be paid
either: (A) in cash or by check at the time of purchase,
(B) at the discretion of the Board, according to a deferred
payment or other similar arrangement with the Participant,
(C) by past services rendered to the Company or (D) in
any other form of legal consideration that may be acceptable to
the Board in its sole discretion and permissible under
applicable law.
(iii) Vesting. Shares of Common Stock
acquired under a Stock Purchase Award may be subject to a share
repurchase right or option in favor of the Company in accordance
with a vesting schedule to be determined by the Board.
A-11
(iv) Termination of Participants Continuous
Service. In the event that a Participants
Continuous Service terminates, the Company shall have the right,
but not the obligation, to repurchase or otherwise reacquire,
any or all of the shares of Common Stock held by the Participant
that have not vested as of the date of termination under the
terms of the Stock Purchase Award Agreement. At the Boards
election, the price paid for all shares of Common Stock so
repurchased or reacquired by the Company may be at the lesser
of: (A) the Fair Market Value on the relevant date, or
(B) the Participants original cost for such shares.
The Company shall not be required to exercise its repurchase or
reacquisition option until at least six (6) months (or such
longer or shorter period of time necessary to avoid a charge to
earnings for financial accounting purposes) have elapsed
following the Participants purchase of the shares of stock
acquired pursuant to the Stock Purchase Award unless otherwise
determined by the Board or provided in the Stock Purchase Award
Agreement.
(v) Transferability. Rights to purchase
or receive shares of Common Stock granted under a Stock Purchase
Award shall be transferable by the Participant only upon such
terms and conditions as are set forth in the Stock Purchase
Award Agreement, as the Board shall determine in its sole
discretion, and so long as Common Stock awarded under the Stock
Purchase Award remains subject to the terms of the Stock
Purchase Award Agreement.
(b) Stock Bonus Awards. Each Stock Bonus
Award Agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. At the
Boards election, shares of Common Stock may be
(i) held in book entry form subject to the Companys
instructions until any restrictions relating to the Stock Bonus
Award lapse or (ii) evidenced by a certificate, which
certificate shall be held in such form and manner as determined
by the Board. The terms and conditions of Stock Bonus Award
Agreements may change from time to time, and the terms and
conditions of separate Stock Bonus Award Agreements need not be
identical, provided, however, that each Stock Bonus Award
Agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) Consideration. A Stock Bonus Award
may be awarded in consideration for (A) past services
actually rendered to the Company or an Affiliate, or
(B) any other form of legal consideration that may be
acceptable to the Board in its sole discretion and permissible
under applicable law.
(ii) Vesting. Shares of Common Stock
awarded under the Stock Bonus Award Agreement may be subject to
forfeiture to the Company in accordance with a vesting schedule
to be determined by the Board.
(iii) Termination of Participants Continuous
Service. In the event a Participants
Continuous Service terminates, the Company may receive via a
forfeiture condition, any or all of the shares of Common Stock
held by the Participant which have not vested as of the date of
termination of Continuous Service under the terms of the Stock
Bonus Award Agreement.
(iv) Transferability. Rights to acquire
shares of Common Stock under the Stock Bonus Award Agreement
shall be transferable by the Participant only upon such terms
and conditions as are set forth in the Stock Bonus Award
Agreement, as the Board shall determine in its sole discretion,
so long as Common Stock awarded under the Stock Bonus Award
Agreement remains subject to the terms of the Stock Bonus Award
Agreement.
(c) Stock Unit Awards. Each Stock Unit
Award Agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. The
terms and conditions of Stock Unit Award Agreements may change
from time to time, and the terms and conditions of separate
Stock Unit Award Agreements need not be identical, provided,
however, that each Stock Unit Award Agreement shall include
(through incorporation of the provisions hereof by reference in
the agreement or otherwise) the substance of each of the
following provisions:
(i) Consideration. At the time of grant
of a Stock Unit Award, the Board will determine the
consideration, if any, to be paid by the Participant upon
delivery of each share of Common Stock subject to the Stock Unit
Award. The consideration to be paid (if any) by the Participant
for each share of Common Stock subject to a Stock Unit Award may
be paid in any form of legal consideration that may be
acceptable to the Board in its sole discretion and permissible
under applicable law.
A-12
(ii) Vesting. At the time of the grant of
a Stock Unit Award, the Board may impose such restrictions or
conditions to the vesting of the Stock Unit Award as it, in its
sole discretion, deems appropriate.
(iii) Payment. A Stock Unit Award may be
settled by the delivery of shares of Common Stock, their cash
equivalent, any combination thereof or in any other form of
consideration, as determined by the Board and contained in the
Stock Unit Award Agreement.
(iv) Additional Restrictions. At the time
of the grant of a Stock Unit Award, the Board, as it deems
appropriate, may impose such restrictions or conditions that
delay the delivery of the shares of Common Stock (or their cash
equivalent) subject to a Stock Unit Award after the vesting of
such Stock Unit Award.
(v) Dividend Equivalents. Dividend
equivalents may be credited in respect of shares of Common Stock
covered by a Stock Unit Award, as determined by the Board and
contained in the Stock Unit Award Agreement. At the sole
discretion of the Board, such dividend equivalents may be
converted into additional shares of Common Stock covered by the
Stock Unit Award in such manner as determined by the Board. Any
additional shares covered by the Stock Unit Award credited by
reason of such dividend equivalents will be subject to all the
terms and conditions of the underlying Stock Unit Award
Agreement to which they relate.
(vi) Termination of Participants Continuous
Service. Except as otherwise provided in the
applicable Stock Unit Award Agreement, such portion of the Stock
Unit Award that has not vested will be forfeited upon the
Participants termination of Continuous Service.
(d) Stock Appreciation Rights. Each Stock
Appreciation Right Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of Stock Appreciation
Right Agreements may change from time to time, and the terms and
conditions of separate Stock Appreciation Right Agreements need
not be identical; provided, however, that each Stock
Appreciation Right Agreement shall include (through
incorporation of the provisions hereof by reference in the
agreement or otherwise) the substance of each of the following
provisions:
(i) Strike Price and Calculation of
Appreciation. Each Stock Appreciation Right will
be denominated in shares of Common Stock equivalents. The
appreciation distribution payable on the exercise of a Stock
Appreciation Right will be not greater than an amount equal to
the excess of (A) the aggregate Fair Market Value (on the
date of the exercise of the Stock Appreciation Right) of a
number of shares of Common Stock equal to the number of share of
Common Stock equivalents in which the Participant is vested
under such Stock Appreciation Right, and with respect to which
the Participant is exercising the Stock Appreciation Right on
such date, over (B) an amount (the strike price) that will
be determined by the Board at the time of grant of the Stock
Appreciation Right.
(ii) Vesting. At the time of the grant of
a Stock Appreciation Right, the Board may impose such
restrictions or conditions to the vesting of such Stock
Appreciation Right as it, in its sole discretion, deems
appropriate.
(iii) Exercise. To exercise any
outstanding Stock Appreciation Right, the Participant must
provide written notice of exercise to the Company in compliance
with the provisions of the Stock Appreciation Right Agreement
evidencing such Stock Appreciation Right.
(iv) Payment. The appreciation
distribution in respect to a Stock Appreciation Right may be
paid in Common Stock, in cash, in any combination of the two or
in any other form of consideration, as determined by the Board
and contained in the Stock Appreciation Right Agreement
evidencing such Stock Appreciation Right.
(v) Termination of Continuous Service. In
the event that a Participants Continuous Service
terminates, the Participant may exercise his or her Stock
Appreciation Right (to the extent that the Participant was
entitled to exercise such Stock Appreciation Right as of the
date of termination) but only within such period of time ending
on the earlier of (i) the date three (3) months
following the termination of the Participants Continuous
Service (or such longer or shorter period specified in the Stock
Appreciation Right Agreement) or (ii) the expiration of the
term of the Stock Appreciation Right as set forth in the Stock
Appreciation Right Agreement. If, after termination, the
Participant does not exercise his or her Stock Appreciation
Right within the time
A-13
specified herein or in the Stock Appreciation Right Agreement
(as applicable), the Stock Appreciation Right shall terminate.
(e) Other Stock Awards. Other forms of
Stock Awards valued in whole or in part by reference to, or
otherwise based on, Common Stock may be granted either alone or
in addition to Stock Awards provided for under Section 6
and the preceding provisions of this Section 7. Subject to
the provisions of the Plan, the Board shall have sole and
complete authority to determine the persons to whom and the time
or times at which such Other Stock Awards will be granted, the
number of shares of Common Stock (or the cash equivalent
thereof) to be granted pursuant to such Other Stock Awards and
all other terms and conditions of such Other Stock Awards.
8. Covenants
of the Company.
(a) Availability of Shares. During the
terms of the Stock Awards, the Company shall keep available at
all times the number of shares of Common Stock required to
satisfy such Stock Awards.
(b) Securities Law Compliance. The
Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may
be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided,
however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Stock Award
or any Common Stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards
unless and until such authority is obtained.
|
|
9.
|
Use
of Proceeds from Sales of Common Stock.
|
Proceeds from the sale of shares of Common Stock pursuant to
Stock Awards shall constitute general funds of the Company.
(a) Acceleration of Exercisability and
Vesting. The Board shall have the power to
accelerate the time at which a Stock Award may first be
exercised or the time during which a Stock Award or any part
thereof will vest in accordance with the Plan, notwithstanding
the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.
(b) Shareholder Rights. No Participant
shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares of Common Stock
subject to such Stock Award unless and until such Participant
has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.
(c) No Employment or Other Service
Rights. Nothing in the Plan, any Stock Award
Agreement or other instrument executed thereunder or any Stock
Award granted pursuant thereto shall confer upon any Participant
any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted
or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without
notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultants
agreement with the Company or an Affiliate or (iii) the
service of a Director pursuant to the Bylaws of the Company or
an Affiliate, and any applicable provisions of the corporate law
of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(d) Incentive Stock Option $100,000
Limitation. To the extent that the aggregate Fair
Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable
for the first time by any Optionholder during any calendar year
(under all plans of the Company and any Affiliates) exceeds one
hundred thousand dollars ($100,000), the Options or portions
thereof that exceed such limit (according to the order in which
they were granted) shall be treated as Nonstatutory Stock
Options, notwithstanding any contrary provision of the
applicable Option Agreement(s).
A-14
(e) Investment Assurances. The Company
may require a Participant, as a condition of exercising or
acquiring Common Stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the
Participants knowledge and experience in financial and
business matters
and/or to
employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and
business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits
and risks of exercising the Stock Award and (ii) to give
written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award
for the Participants own account and not with any present
intention of selling or otherwise distributing the Common Stock.
The foregoing requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (i) the issuance
of the shares upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or
(ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities
laws. The Company may, upon advice of counsel to the Company,
place legends on stock certificates issued under the Plan as
such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to,
legends restricting the transfer of the Common Stock.
(f) Withholding Obligations. To the
extent provided by the terms of a Stock Award Agreement, the
Company may, in its sole discretion, satisfy any federal, state
or local tax withholding obligation relating to a Stock Award by
any of the following means (in addition to the Companys
right to withhold from any compensation paid to the Participant
by the Company) or by a combination of such means:
(i) causing the Participant to tender a cash payment;
(ii) withholding shares of Common Stock from the shares of
Common Stock issued or otherwise issuable to the Participant in
connection with the Stock Award; or (iii) by such other
method as may be set forth in the Stock Award Agreement.
(g) Electronic Delivery. Any reference
herein to a written agreement or document shall
include any agreement or document delivered electronically or
posted on the Companys intranet.
(h) Performance Stock Awards. A Stock
Award may be granted, may vest, or may be exercised based upon
service conditions, upon the attainment during a Performance
Period of certain Performance Goals, or both. The length of any
Performance Period, the Performance Goals to be achieved during
the Performance Period, and the measure of whether and to what
degree such Performance Goals have been attained shall be
conclusively determined by the Board in its sole discretion. The
maximum benefit to be received by any individual in any calendar
year attributable to Stock Awards described in this
Section 10(h) shall not exceed the value of one hundred
thousand (100,000) shares of Common Stock.
|
|
11.
|
Adjustments
upon Changes in Common Stock; Corporate Transactions.
|
(a) Capitalization Adjustments. If any
change is made in, or other events occur with respect to, the
Common Stock subject to the Plan or subject to any Stock Award
after the effective date of the Plan set forth in
Section 14 without the receipt of consideration by the
Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company (each a Capitalization
Adjustment)), the Plan shall be appropriately
adjusted in: (i) the class(es) and maximum number of
securities subject to the Plan pursuant to Sections 4(a)
and 4(b), (ii) the class(es) and maximum number of
securities that may be issued pursuant to the exercise of
Incentive Stock Options pursuant to Section 4(b),
(iii) the maximum number of securities that may be awarded
to any person pursuant to Sections 5(c) and 10(h) and
(iv) the class(es) and number of securities and price per
share of stock subject to outstanding Stock Awards. The Board
shall make such adjustments, and its determination shall be
final, binding and conclusive. (Notwithstanding the foregoing,
the conversion of any convertible securities of the Company
shall not be treated as a transaction without receipt of
consideration by the Company.)
(b) Dissolution or Liquidation. In the
event of a dissolution or liquidation of the Company, all
outstanding Stock Awards (other than Stock Awards consisting of
vested and outstanding shares of Common Stock not subject to the
Companys right of repurchase) shall terminate immediately
prior to the completion of such dissolution or liquidation, and
the shares of Common Stock subject to the Companys
repurchase option may be repurchased by
A-15
the Company notwithstanding the fact that the holder of such
Stock Award is providing Continuous Service, provided,
however, that the Board may, in its sole discretion, cause
some or all Stock Awards to become fully vested, exercisable
and/or no
longer subject to repurchase or forfeiture (to the extent such
Stock Awards have not previously expired or terminated) before
the dissolution or liquidation is completed but contingent on
its completion.
(c) Corporate Transaction. The following
provisions shall apply to Stock Awards in the event of a
Corporate Transaction unless otherwise provided in a written
agreement between the Company or any Affiliate and the holder of
the Stock Award:
(i) Stock Awards May Be Assumed. In the
event of a Corporate Transaction, any surviving corporation or
acquiring corporation (or the surviving or acquiring
corporations parent company) may assume or continue any or
all Stock Awards outstanding under the Plan or may substitute
similar stock awards for Stock Awards outstanding under the Plan
(including but not limited to, awards to acquire the same
consideration paid to the shareholders of the Company pursuant
to the Corporate Transaction), and any reacquisition or
repurchase rights held by the Company in respect of Common Stock
issued pursuant to Stock Awards may be assigned by the Company
to the successor of the Company (or the successors parent
company, if any), in connection with such Corporate Transaction.
A surviving corporation or acquiring corporation may choose to
assume or continue only a portion of a Stock Award or substitute
a similar stock award for only a portion of a Stock Award. The
terms of any assumption, continuation or substitution shall be
set by the Board in accordance with the provisions of
Section 3.
(ii) Stock Awards Held by Current
Participants. In the event of a Corporate
Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue
such outstanding Stock Awards or substitute similar stock awards
for such outstanding Stock Awards, then with respect to Stock
Awards that have not been assumed, continued or substituted and
that are held by Participants whose Continuous Service has not
terminated prior to the effective time of the Corporate
Transaction (referred to as the Current
Participants), the vesting of such Stock Awards
(and, if applicable, the time at which such Stock Awards may be
exercised) shall (contingent upon the effectiveness of the
Corporate Transaction) be accelerated in full to a date prior to
the effective time of such Corporate Transaction as the Board
shall determine (or, if the Board shall not determine such a
date, to the date that is five (5) days prior to the
effective time of the Corporate Transaction), and such Stock
Awards shall terminate if not exercised (if applicable) at or
prior to the effective time of the Corporate Transaction, and
any reacquisition or repurchase rights held by the Company with
respect to such Stock Awards shall lapse (contingent upon the
effectiveness of the Corporate Transaction).
(iii) Stock Awards Held by Persons other than Current
Participants. In the event of a Corporate
Transaction in which the surviving corporation or acquiring
corporation (or its parent company) does not assume or continue
such outstanding Stock Awards or substitute similar stock awards
for such outstanding Stock Awards, then with respect to Stock
Awards that have not been assumed, continued or substituted and
that are held by persons other than Current Participants, the
vesting of such Stock Awards (and, if applicable, the time at
which such Stock Award may be exercised) shall not be
accelerated and such Stock Awards (other than a Stock Award
consisting of vested and outstanding shares of Common Stock not
subject to the Companys right of repurchase) shall
terminate if not exercised (if applicable) prior to the
effective time of the Corporate Transaction; provided,
however, that any reacquisition or repurchase rights held by
the Company with respect to such Stock Awards shall not
terminate and may continue to be exercised notwithstanding the
Corporate Transaction.
(iv) Payment for Stock Awards in Lieu of
Exercise. Notwithstanding the foregoing, in the
event a Stock Award will terminate if not exercised prior to the
effective time of a Corporate Transaction, the Board may
provide, in its sole discretion, that the holder of such Stock
Award may not exercise such Stock Award but will receive a
payment, in such form as may be determined by the Board, equal
in value to the excess, if any, of (A) the value of the
property the holder of the Stock Award would have received upon
the exercise of the Stock Award, over (B) any exercise
price payable by such holder in connection with such exercise.
(d) Change in Control. A Stock Award may
be subject to additional acceleration of vesting and
exercisability upon or after a Change in Control as may be
provided in the Stock Award Agreement for such Stock Award or
A-16
as may be provided in any other written agreement between the
Company or any Affiliate and the Participant, but in the absence
of such provision, no such acceleration shall occur.
|
|
12.
|
Amendment
of the Plan and Stock Awards.
|
(a) Amendment of Plan. Subject to the
limitations, if any, of applicable law, the Board at any time,
and from time to time, may amend the Plan. However, except as
provided in Section 11(a) relating to Capitalization
Adjustments, no amendment shall be effective unless approved by
the shareholders of the Company to the extent shareholder
approval is necessary to satisfy applicable law.
(b) Shareholder Approval. The Board, in
its sole discretion, may submit any other amendment to the Plan
for shareholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from
the limit on corporate deductibility of compensation paid to
Covered Employees.
(c) Contemplated Amendments. It is
expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide
eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options
and/or to
bring the Plan
and/or
Incentive Stock Options granted under it into compliance
therewith.
(d) No Impairment of Rights. Rights under
any Stock Award granted before amendment of the Plan shall not
be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the affected Participant and
(ii) such Participant consents in writing.
(e) Amendment of Stock Awards. The Board,
at any time and from time to time, may amend the terms of any
one or more Stock Awards, including, but not limited to,
amendments to provide terms more favorable than previously
provided in the Stock Award Agreement, subject to any specified
limits in the Plan that are not subject to Board discretion;
provided, however, that the rights under any Stock Award
shall not be impaired by any such amendment unless (i) the
Company requests the consent of the affected Participant and
(ii) such Participant consents in writing.
|
|
13.
|
Termination
or Suspension of the Plan.
|
(a) Plan Term. The Board may suspend or
terminate the Plan at any time. Unless sooner terminated, the
Plan shall terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or
approved by the shareholders of the Company, whichever is
earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension
or termination of the Plan shall not impair rights and
obligations under any Stock Award granted while the Plan is in
effect except with the written consent of the affected
Participant.
|
|
14.
|
Effective
Date of Plan.
|
This Plan (as an amendment and restatement of the Prior Plan)
shall become effective on the date that the Plan is adopted by
the Board, but no Stock Award shall be exercised (or, in the
case of a Stock Purchase Award, Stock Bonus Award, Stock Unit
Award, or Other Stock Award shall be granted) unless and until
the Plan has been approved by the shareholders of the Company,
which approval shall be within twelve (12) months before or
after the date the Plan is adopted by the Board.
The law of the State of California shall govern all questions
concerning the construction, validity and interpretation of this
Plan, without regard to such states conflict of laws rules.
A-17
PROXY
ARADIGM CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 20, 2007
The undersigned hereby appoints IGOR GONDA and THOMAS C. CHESTERMAN, and each of them, as
attorneys and proxies of the undersigned, with full power of substitution, to vote all shares of
stock of Aradigm Corporation that the undersigned may be entitled to vote at the 2007 Annual
Meeting of Shareholders of Aradigm Corporation to be held at Aradigm Corporations offices located
at 3929 Point Eden Way, Hayward, California on Wednesday, June 20, 2007 at 9:00 a.m. local time,
and at any and all postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the following matters and
in accordance with the following instructions, with discretionary authority as to any and all other
matters that may properly come before the meeting.
þ Please mark votes as in this example.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW AND A VOTE FOR PROPOSALS
2 AND 3.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN
PROPOSAL 1 AND FOR PROPOSALS 2 AND 3, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
|
|
|
|
|
|
|
|
|
|
|
1. |
|
To elect (01) Frank H.
Barker, (02) Igor Gonda,
(03) Stephen O. Jaeger,
(04) John M. Siebert and
(05) Virgil D. Thompson as
directors to hold office
until the next annual
meeting of shareholders and
until their successors are
elected. |
|
FOR ALL NOMINEES
WITHHELD FROM ALL NOMINEES
FOR ALL NOMINEES EXCEPT:
|
o
o
o |
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
To approve an amendment
to the Aradigm Corporation
2005 Equity Incentive Plan
to increase the aggregate
number of shares of Common
Stock authorized for
issuance under such plan by
1,600,000 shares.
|
|
FOR
o
|
|
AGAINST
o
|
|
ABSTAIN
o |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
|
To ratify the selection
of Odenberg, Ullakko,
Muranishi & Co. LLP as
Aradigms independent
registered public accounting
firm for the fiscal year
ending December 31, 2007.
|
|
FOR
o
|
|
AGAINST
o
|
|
ABSTAIN
o |
|
|
Please vote, date and promptly return this proxy in the enclosed return envelope which is
postage prepaid if mailed in the United States.
Please sign exactly as your name appears hereon. If stock is registered in the names of two
or more persons, each should sign. Executors, administrators, trustees, guardians and
attorneys-in-fact should add their titles. If signer is a corporation, please give full corporate
name and have a duly authorized officer sign, stating that if signer is a partnership, please sign
in partnership name by authorized person.
|
|
|
|
|
|
|
Signature:
|
|
|
|
Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature:
|
|
|
|
Date: |
|
|
|
|
|
|
|
|
|