UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant toss. 240.14a-12
XOMA Ltd.
(Name of Registrant as Specified In Its Charter)
-------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set for 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:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule of Registration Statement No.:
3) Filing Party:
4) Date Filed:
(XOMA LOGO)
XOMA LTD.
2910 Seventh Street
Berkeley, California 94710
(510) 644-1170
April 24, 2002
To Our Shareholders:
You are cordially invited to attend the annual general meeting of
shareholders of XOMA Ltd. on May 29, 2002 at 9:00 a.m. local time, which will be
held at The Park Hyatt San Francisco, 333 Battery Street, San Francisco,
California.
Details of business to be conducted at the annual general meeting are
provided in the enclosed Notice of Annual General Meeting of Shareholders and
Proxy Statement. Also enclosed for your information is a copy of our Annual
Report to Shareholders for 2001. Some of our shareholders will be accessing
these materials and appointing a proxy to vote through the Internet and may not
be receiving a paper proxy card by mail.
We hope that you will attend the annual general meeting. In any event,
please promptly sign, date and return the enclosed proxy in the accompanying
reply envelope or appoint a proxy to vote by telephone or through the Internet.
Sincerely yours,
John L. Castello
Chairman of the Board,
President and
Chief Executive Officer
Enclosures
XOMA LTD.
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NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD AT 9:00 A.M. ON MAY 29, 2002
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To the Shareholders of XOMA Ltd.:
Notice is hereby given that the annual general meeting of shareholders of
XOMA Ltd. (the "Company") will be held at The Park Hyatt San Francisco, 333
Battery Street, San Francisco, California, on May 29, 2002, at 9:00 a.m. local
time, for the following purposes:
1. To elect directors;
2. To appoint Ernst & Young LLP to act as the Company's independent
auditors for the 2002 fiscal year and authorize the Board to agree to
such auditors' fee;
3. To receive the Company's audited financial statements for the 2001
fiscal year;
4. To approve an amendment to the Company's 1998 Employee Share Purchase
Plan to increase the number of shares issuable over the term of the
plan by 1,000,000 shares to 1,500,000 shares in the aggregate; and
5. To consider and transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 10, 2002,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, this meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
Christopher J. Margolin
Secretary
April 24, 2002
Berkeley, California
YOUR VOTE IS IMPORTANT
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You are cordially invited to attend the meeting in person. Whether or not
you plan to attend the meeting, please promptly mark, sign and date the enclosed
proxy and mail it in the accompanying postage pre-paid envelope or vote by
telephone or through the Internet.
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XOMA LTD.
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PROXY STATEMENT
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TO THE SHAREHOLDERS:
The enclosed proxy is solicited on behalf of the Board of Directors of XOMA
Ltd., a company organized under the laws of Bermuda ("XOMA" or the "Company"),
for use at the annual general meeting of shareholders to be held at The Park
Hyatt San Francisco, 333 Battery Street, San Francisco, California, on May 29,
2002, at 9:00 a.m. local time, or any adjournment or postponement thereof, at
which shareholders of record holding Common Shares on April 10, 2002, will be
entitled to vote. On April 10, 2002, the Company had issued and outstanding
70,297,094 common shares, par value US$.0005 per share ("Common Shares").
Holders of Common Shares are entitled to one vote for each share held.
All registered shareholders can vote by paper proxy or by telephone by
following the instructions included with their proxy card. Shareholders whose
Common Shares are registered in the name of a bank or brokerage firm should
follow the instructions provided by their bank or brokerage firm on voting their
Common Shares. Shareholders whose Common Shares are registered in the name of a
bank or brokerage firm participating in the ADP Investor Communication Services
online program may appoint a proxy to vote electronically through the Internet.
Instruction forms will be provided to shareholders whose bank or brokerage firm
is participating in ADP's program. Signing and returning the proxy card or
submitting the proxy by telephone or through the Internet does not affect the
right to vote in person at the annual general meeting.
In the case of registered shareholders, a proxy may be revoked at any time
prior to its exercise by (a) giving written notice of such revocation to the
Secretary of the Company at the Company's principal office, 2910 Seventh Street,
Berkeley, California 94710, (b) appearing and voting in person at the annual
general meeting, (c) properly completing and executing a later-dated proxy and
delivering it to the Company at or before the annual general meeting or (d)
retransmitting a subsequent proxy by telephone before the annual general
meeting. Presence without voting at the annual general meeting
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will not automatically revoke a proxy, and any revocation during the meeting
will not affect votes previously taken. Shareholders whose Common Shares are
registered in the name of a bank or brokerage firm should follow the
instructions provided by their bank or brokerage firm on revoking their
previously appointed proxies. Abstentions and broker non-votes are each included
in the number of Common Shares present and voting for purposes of establishing a
quorum but are not counted in tabulations of the votes cast on proposals
presented to shareholders.
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing, and mailing of this proxy statement, the proxy
card, and any additional material furnished to shareholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding in their names Common Shares that are beneficially owned by
others to forward to such beneficial owners. The solicitation of proxies may be
supplemented by one or more of telephone, telegram, or personal solicitation by
directors, officers, or employees of the Company for no additional compensation.
We have also engaged Georgeson Shareholder Communications Inc. to assist in such
solicitation at an estimated fee of $7,500 plus disbursements. Shareholders
appointing a proxy to vote through the Internet should understand that there may
be costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, that must be borne by the shareholder.
The Company intends to mail this proxy statement and make it available on
the Internet on or about April 24, 2002.
SHARE OWNERSHIP
The following table sets forth as of April 10, 2002, certain information
regarding all shareholders known by the Company to be the beneficial owners of
more than 5% of the Company's outstanding Common Shares and regarding each
director, each executive officer and all directors and current executive
officers as a group, together with the approximate percentages of outstanding
Common Shares owned by each of them. Unless otherwise indicated, each of the
shareholders has sole voting and investment power with respect to the Common
Shares beneficially owned, subject to community property laws where applicable.
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Number of Percentage of
Common Shares Common Shares
Name of Beneficial Owner Beneficially Owned Beneficially Owned
James G. Andress(1)................................... 41,000 *
William K. Bowes, Jr.(2).............................. 65,069 *
John L. Castello(3)................................... 918,717 1.3
Peter B. Davis(4)..................................... 257,683 *
Clarence L. Dellio(5)................................. 274,658 *
Arthur Kornberg, M.D.(6).............................. 55,000 *
Christopher J. Margolin(7)............................ 249,114 *
Steven C. Mendell(8).................................. 74,000 *
Patrick J. Scannon, M.D., Ph.D.(9).................... 558,375 *
W. Denman Van Ness(10)................................ 67,931 *
All executive officers
and directors as a
group (10 persons)(11).............................. 2,561,547 3.6
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* Indicates less than 1%.
(1) Represents 41,000 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date.
(2) Includes 35,000 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date.
(3) Includes 828,750 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date. Does not include 9,776
Common Shares that have vested pursuant to the Company's Deferred Savings
Plan.
(4) Includes 192,167 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date. Does not include 7,797
Common Shares that have vested pursuant to the Company's Deferred Savings
Plan.
(5) Includes 189,719 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date. Does not include 10,459
Common Shares that have vested pursuant to the Company's Deferred Savings
Plan.
(6) Includes 45,000 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date.
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(7) Includes 213,833 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date. Does not include 9,995
Common Shares that have vested pursuant to the Company's Deferred Savings
Plan.
(8) Includes 34,000 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date. Does not include 631
Common Shares that have vested pursuant to the Company's Deferred Savings
Plan and are now held in a rollover IRA account.
(9) Includes 468,250 Common Shares issuable upon the exercise of options
exercisable as of 60 days after the record date. Does not include 10,459
Common Shares that have vested pursuant to the Company's Deferred Savings
Plan.
(10) Includes 32,481 Common Shares held by The Van Ness 1983 Revocable Trust, of
which Mr. Van Ness is a trustee. Also includes 450 Common Shares held by
various trusts of which Mr. Van Ness may be deemed the beneficial owner.
Mr. Van Ness disclaims such beneficial ownership. Includes 35,000 Common
Shares issuable upon the exercise of options exercisable as of 60 days
after the record date.
(11) Includes 2,082,719 Common Shares issuable upon exercise of options
exercisable as of 60 days after the record date. Does not include 49,117
Common Shares that have vested pursuant to the Company's Deferred Savings
Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for the last three completed fiscal years of the Company:
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SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Securities
Other Annual Underlying All Other
Name and Principal Position Salary Bonus Compensation Options Compensation
Year ($) ($)(1) ($)(2) (#) ($)(3)
John L. Castello
(Chairman of the 2001 $500,000 N/A $2,696 75,000 $31,390
Board, President and 2000 $500,000 N/A $5,284 50,000 $27,356
Chief Executive Officer) 1999 $500,000 N/A $5,944 50,000 $29,039
Patrick J. Scannon, M.D.,
Ph.D. 2001 $340,000 $64,881 $0 25,000 $12,760
(Senior Vice President and Chief 2000 $330,000 $63,712 $0 25,000 $16,187
Scientific and 1999 $320,000 $62,926 $0 30,000 $15,018
Medical Officer)
Clarence L. Dellio 2001 $273,000 $63,495 $10,500 40,000 $7,293
(Senior Vice President, 2000 $263,000 $53,188 $5,058 35,000 $6,343
Operations) 1999 $253,000 $49,598 $9,731 35,000 $6,687
Peter B. Davis
(Vice President, 2001 $250,000 $78,673 $0 25,000 $7,056
Finance and Chief 2000 $240,000 $64,645 $0 25,000 $6,216
Financial Officer) 1999 $230,000 $40,950 $0 45,000 $6,491
Christopher J. Margolin
(Vice President, 2001 $250,000 $54,349 $9,615 25,000 $7,056
General Counsel and 2000 $240,000 $49,159 $9,231 50,000 $6,216
Secretary) 1999 $230,000 $49,816 $8,846 45,000 $6,491
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(1) Each amount in this column for 2001, 2000 and 1999 represents awards under
the Company's Management Incentive Compensation Plan in the following
amounts: Dr. Scannon - $16,277 and 986 Common Shares in 2001 (relating to
performance in 2000); $16,080 in each of 2001 and 2000 and 1,221 Common
Shares in 2000 (relating to performance in 1999); $16,246 in each of 2001,
2000 and 1999 and 2,849 Common Shares in 1999 (relating to performance in
1998); $15,306 in each of 2000 and 1999 (relating to performance in 1997);
$15,128 in 1999 (relating to performance in 1996); Mr. Dellio - $14,173 and
859 Common Shares in 2001 (relating to performance in 2000); $14,111 in
2000 and 1,072 Common Shares in each of 2001 and 2000 (relating to
performance in 1999); $13,444 in each of 2001, 2000 and 1999 and 2,357
Common Shares in 1999 (relating to performance in 1998); $11,522 in 1999
(relating to performance in 1997); $11,189 in 1999 (relating to performance
in 1996); Mr. Davis - $13,053 and 742 Common Shares in 2001 (relating to
performance in 2000); $12,443 in 2000 and 887 Common Shares in 2001 and
2000 (relating to performance in 1999); $11,849 in 1999 and 1,873 Common
Shares in each of 2001, 2000 and 1999 (relating to performance in 1998);
$10,763 in each of 2000 and 1999 (relating to performance in 1997); 959
Common Shares in 1999 (relating to performance in 1996); Mr. Margolin -
$14,403 and 872 Common Shares in 2001 (relating to performance in 2000);
$12,328 in each of 2001 and 2000 and 926 Common Shares in 2000 (relating to
performance in 1999); $13,215 in each of 2001, 2000 and 1999 and 2,317
Common Shares in 1999 (relating to performance in 1998); $11,288 in each of
2000 and 1999 (relating to performance in 1997); $12,098 in 1999 (relating
to performance in 1996).
(2) Mr. Castello's amounts in this column for 2001, 2000 and 1999 include
financial services provided to Mr. Castello in the amount of $1,582, $2,989
and $3,666, respectively. The balance of Mr. Castello's amount in this
column for 2000 represents taxes paid by XOMA on Mr. Castello's behalf. All
of Mr. Dellio's and Mr. Margolin's amounts in this column for 2001 and 2000
and the balance of Mr. Castello's and all of Mr. Dellio's and Mr.
Margolin's amounts in this column for 1999 represent cash payments in lieu
of earned vacation.
(3) Amounts in this column for 2001, 2000 and 1999 include the Company's Common
Shares contributed to accounts under the Company's Deferred Savings Plan,
valued at fiscal year-end formula prices of $9.07, $9.6781 and $2.975,
respectively, per share, in
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the following amounts: Mr. Castello - 552 Common Shares for 2001, 517
Common Shares for 2000 and 1,681 Common Shares for 1999; Dr. Scannon, Mr.
Dellio, Mr. Davis and Mr. Margolin - 579 Common Shares each for 2001, 542
Common Shares each for 2000 and 1,681 Common Shares each for 1999. Amounts
for 2001, 2000 and 1999 also include group term life insurance premiums in
the following amounts: Mr. Castello -- $8,382 for 2001, $4,356 for 2000 and
$6,039 for 1999; Dr. Scannon -- $1,518 for 2001, $1,518 for 2000 and $2,343
for 1999; Mr. Dellio -- $2,043 for 2001, $1,093 for 2000 and $1,687 for
1999; Mr. Davis and Mr. Margolin -- $1,806 for 2001, $966 for 2000 and
$1,491 for 1999. Mr. Castello's amounts in this column include life
insurance premiums paid in the amount of $18,000 for each of 2001, 2000 and
1999. Dr. Scannon's amounts for 2001, 2000, 1999 include $5,992, $9,419 and
$7,675 respectively, which represent the difference between (i) the amount
of interest Dr. Scannon would have been required to pay in interest for
each such year had the loan made to him by the Company pursuant to his
employment agreement been made at the then-prevailing market rate and (ii)
the amount of interest payable on the loan for each such year in accordance
with its terms. See "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."
The following table contains information concerning the grant of options
under the Company's option plans to the named executive officers as of the end
of the last completed fiscal year of the Company. No share appreciation rights
("SARs") were granted during the last fiscal year and none were held at the end
of the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of % of Total Potential Realized Value
Securities Options of Assumed Annual Rates of
Underlying Granted Exercise Share Price Appreciation
Options to Employees or For Option Term (1)
Granted In Fiscal Base Price Expiration 0% 5% 10%
Name (#) Year ($/Sh) Date ($) ($) ($)
John L. Castello....... 75,000 11.2% $8.625 2/21/11 0 $406,816 $1,030,952
Patrick J. Scannon, M.D., Ph.D.
................. 25,000 3.7% $8.625 2/21/11 0 $135,605 $343,651
Clarence L. Dellio..... 40,000 6.0% $8.625 2/21/11 0 $216,969 $549,841
Peter B. Davis......... 25,000 3.7% $8.625 2/21/11 0 $135,605 $343,651
Christopher J. Margolin 25,000 3.7% $8.625 2/21/11 0 $135,605 $343,651
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(1) The amounts set forth in the three columns represent hypothetical gains
that might be achieved by the optionees if the respective options are
exercised at the end of their ten-year option terms. These gains are based
on assumed rates of share price appreciation of 0%, 5% and 10% compounded
annually from the dates the respective options were granted. The 0%
appreciation column is included because the options were granted with
exercise prices equal to the market price of the underlying Common Shares
on the date of grant, and thus will have no value unless the Company's
share price increases above the exercise prices as a result of actions by
the executives that improve the Company's performance and/or other factors
affecting such price.
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The following table sets forth information with respect to the named
executive officers concerning the exercise of options during the last completed
fiscal year of the Company and unexercised options held as of the end of the
fiscal year. No SARs were exercised during the last fiscal year and none were
held at the end of the fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Shares
Acquired Number of Securities Value of Unexercised
On Value Underlying Unexercised In-the-Money Options at
Exercise Realized Options at FY-End FY-End ($)(1)
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Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ---------- ---------- ----------- ------------- ----------- -------------
John L. Castello....... -- -- 805,499 129,501 $5,207,255 $278,746
Patrick J. Scannon, M.D.,
Ph.D........... 10,000 $57,775 458,501 56,499 $2,969,706 $140,231
Clarence L. Dellio..... -- -- 177,469 77,333 $843,625 $197,152
Peter B. Davis......... 5,000 $31,250 181,167 63,833 $917,878 $165,998
Christopher J. Margolin -- -- 200,750 79,250 $1,043,923 $235,953
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(1) The amounts listed in the two columns are based on the closing price per
share of $9.85 on December 31, 2001, as reported on The Nasdaq Stock
Market, less the applicable option exercise prices.
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Employment Contracts and Termination of
Employment and Change-in-Control Arrangements
The Company has entered into an employment agreement with Mr. Castello,
dated as of April 29, 1992, that provides for his employment as President and
Chief Executive Officer at a salary of $500,000 per year. Under this agreement,
Mr. Castello also receives all standard Company employee benefits and
supplemental life insurance for the amount that an annual premium of $18,000
provides. The agreement also provides for a grant of options for 500,000 Common
Shares under the Company's 1981 Share Option Plan (the "Option Plan"), which was
made in 1992.
Mr. Castello's employment may be terminated, with or without cause, at the
will of either party. If terminated by the Company for any reason other than due
cause or by Mr. Castello for good reason, Mr. Castello must be paid his then
current base salary and benefits for one year. If terminated for due cause, he
is entitled to no further compensation. Good reason includes, in the context of
a change of control, the assignment to Mr. Castello of duties inconsistent with
his prior duties; his removal from, or failure to re-elect him to, any position
he held immediately prior to the change in control; any termination by the
Company within three years of the change of control other than for due cause or
upon disability or death; a good faith determination by Mr. Castello that
changes in circumstances resulting from the change in control leave him
substantially unable to perform his duties, after notice; the failure of the
Company's successor or the transferee of its assets or business to assume its
obligations under the agreement; or, a significant relocation of the Company's
executive offices. Good reason also includes any reduction in base pay or
benefits or any breach of the agreement by the Company.
The Company has entered into an employment agreement with Dr. Scannon,
dated as of March 26, 2002, that provides for his employment as Chief Scientific
and Medical Officer at a salary of $340,000 per year. Under this agreement, Dr.
Scannon is entitled to participate in any benefit plan for which key executives
of the Company are eligible, including the Management Incentive Compensation
Plan established effective July 1, 1993 (as amended, the "Incentive Plan"). The
agreement also extends for one year a loan to Dr. Scannon in the amount of
$117,606.17, bearing interest at 6% per annum and secured by a pledge of certain
of the Company's Common Shares. The loan was originally made to Dr. Scannon in
1993, has been extended for nine additional years, and $302,074.56 in principal
and inter-
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est payments have been received by the Company to date. The loan will become
payable on demand in the event of any early termination of Dr. Scannon's
employment. Upon termination of his employment for any reason other than cause,
or upon resignation, Dr. Scannon must be paid his then current base salary and
benefits for one year.
The Company has entered into an employment agreement with Mr. Davis dated
as of April 1, 1994 that provides for his employment as Chief Financial Officer
at an initial salary of $200,000 per year. Under this agreement, Mr. Davis
received a one-time transition allowance in the amount of $35,000 and is
entitled to participate in any benefit plan for which executives of the Company
are eligible. In addition, the agreement provides for an initial grant of
options for 60,000 Common Shares under the Option Plan, which was made in 1994,
as well as participation in the Incentive Plan. Mr. Davis' employment agreement
provides no additional compensation in the event of a change of control but
provides a minimum severance amount equal to six months of base salary at the
time of termination.
Compensation Committee Report on Executive Compensation
The Company's compensation program for officers (including the named
executive officers) is administered by the Compensation Committee of the Board
of Directors (the "Committee"), which is composed of two non-employee directors.
Following review and approval by the Committee, all issues pertaining to officer
compensation are submitted to the full Board of Directors for approval. The
primary objectives of the Company's compensation program are to enable the
Company to attract, motivate and retain outstanding individuals and align their
success with that of the Company's shareholders through the creation of
shareholder value and achievement of strategic corporate objectives.
The level of compensation paid to an officer is determined on the basis of
the individual's overall experience, responsibility, performance and
compensation level in his or her prior position (for newly hired officers), the
individual's overall performance and compensation level at the Company during
the prior year (for current employees), the compensation levels of similarly
situated individuals in the pharmaceutical and biotechnology industries
(including, but not limited to, the biotechnology companies included in the AMEX
Biotechnology Index) and other labor markets in which the Company competes for
employees, the performance of the Company's Common Shares during the prior
fiscal year and such other factors as may be
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appropriately considered by the Board of Directors, by the Committee and by
management in making its initial proposals to the Committee.
Mr. Castello's compensation for 2001 was determined after considering the
general factors described above and the terms of his existing employment
contract. In 1992, the Committee approved, and recommended that the Board
approve, the terms of Mr. Castello's employment contract, as more fully
described under "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements," because it felt that the terms thereof were
necessary in order to attract a candidate of Mr. Castello's experience and
reputation in the pharmaceutical industry, which in turn was deemed necessary in
order to enable the Company to advance toward its long-range goal of becoming a
pharmaceutical company with commercially viable products. Mr. Castello has not
received a salary increase since his employment contract was executed in 1992.
The principal methods for long-term incentive compensation are the Option
Plan and Restricted Share Plan (the "Restricted Plan"), and compensation
thereunder principally takes the form of incentive and non-qualified option
grants. These grants are designed to promote the convergence of long-term
interests between the Company's key employees and its shareholders;
specifically, the value of options granted will increase or decrease with the
value of the Company's Common Shares. In this manner, key individuals are
rewarded commensurately with increases in shareholder value. These grants also
typically include a 5-year vesting period to encourage continued employment. The
size of a particular option grant is determined based on the individual's
position with and contribution to the Company. For grants during 2001, the
number of options granted were determined based on the numbers of options
granted to such individuals in the previous fiscal year, the aggregate number of
options held by each such individual, the number of options granted to similarly
situated individuals in the pharmaceutical and biotechnology industries, the
price of the Company's Common Shares relative to other companies in such
industries and the resulting relative value of such options; no specific
measures of corporate performance were considered.
Certain employees are also compensated through the Incentive Plan, in which
management employees (other than the Chief Executive Officer), as well as
certain additional discretionary participants chosen by the Chief Executive
Officer, are eligible to participate. Under the Incentive Plan, at the beginning
of each fiscal year, the Board of Directors (with ad-
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vice from the Committee) establishes a target incentive compensation pool, which
is then adjusted at year-end to reflect the Company's performance in achieving
its corporate objectives.
After each fiscal year, the Board of Directors and the Committee make a
determination as to the performance of the Company and Incentive Plan
participants in meeting corporate objectives and individual objectives, which
are determined from time to time by the Board of Directors in its sole
discretion and which included for 2001: a target level of cash at year end;
generation of current income; progress toward strategic alliances, potential
partnerships or financing arrangements; and various objectives tied to
development of the Company's product lines. Awards to Incentive Plan
participants vary depending upon the level of achievement of corporate
objectives, the size of the incentive compensation pool and the Incentive Plan
participants' base salaries and performance during the fiscal year as well as
their expected ongoing contribution to the Company. The Company must meet a
minimum percentage of its corporate objectives (currently 70%) before any awards
are made under the Incentive Plan.
Awards under the Incentive Plan vest over a three-year period with 50% of
each award payable during the first quarter of the following fiscal year, and
25% payable on each of the next two annual distribution dates, so long as the
participant remains an employee of the Company. The 50% on the first
distribution date is payable half in cash and half in Common Shares. The balance
on the next two annual distribution dates is payable, at the election of the
participant, all in cash, all in Common Shares or half in cash and half in
Common Shares or, for elections not made in a timely manner, all in Common
Shares. All share issuances under the Incentive Plan are made pursuant to the
Restricted Plan.
For 2001, the Committee and the Board of Directors determined that
management had met a percentage of the corporate objectives summarized above in
excess of the 70% minimum required by the Incentive Plan in order to make awards
thereunder. For 2001, 34 individuals were determined to be eligible to
participate in the Incentive Plan, including all of the executive officers named
in the "Summary Compensation Table" above other than Mr. Castello.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally limits the deductible amount of annual compensation paid to
certain individual executive officers (i.e., the chief executive officer and the
four other
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most highly compensated executive officers of the Company) to no more than $1
million. However, qualifying performance-based compensation will be excluded
from the $1 million cap on deductibility, and the Committee believes, based on
information currently available, that the Company's options issued to its
executive officers qualify for this exclusion. Considering the current structure
of executive officer compensation and the availability of deferral
opportunities, the Committee believes that the Company will not be denied any
significant tax deduction for 2002. The Committee will continue to review tax
consequences as well as other relevant considerations in connection with
compensation decisions.
William K. Bowes, Jr.
W. Denman Van Ness
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Performance Graph
Comparison of Five Year Cumulative Total Return Among XOMA, Nasdaq
Composite Index and AMEX Biotechnology Index
As of XOMA Nasdaq AMEX Bio-
December 31, Ltd. Composite Index technology Index
1996 100.00 100.00 100.00
1997 108.52 121.64 112.56
1998 62.20 169.82 128.30
1999 58.54 315.21 271.27
2000 190.24 191.36 439.58
2001 192.19 151.08 402.34
The comparison assumes $100 invested on December 31, 1996 in the Company's
Common Shares, the Nasdaq Composite Index, and the AMEX Biotechnology Index.
Total return assumes reinvestment of dividends although the Company has never
paid cash dividends. Returns for the Company are not necessarily indicative of
future performance.
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ITEM 1 - ELECTION OF DIRECTORS
The Company's directors are elected annually to serve until the next annual
general meeting of shareholders and until their successors are elected, or until
their death, resignation or removal. The nominees for the Board of Directors are
set forth below. Unless otherwise instructed, the proxy holders will vote all
proxies received by them in the accompanying form for the nominees for directors
listed below. In the event any nominee should become unavailable for election
due to an unexpected occurrence, the proxies will be voted for any such
substitute nominee as may be designated by the present Board of Directors to
fill the vacancy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them for the nominees listed below. Each person nominated for election has
agreed to serve if elected, and management has no reason to believe that any of
the nominees listed below will be unable to serve. The seven candidates
receiving the highest number of affirmative votes of the Common Shares entitled
to vote at the annual general meeting will be elected as directors of the
Company.
Nominees To Board Of Directors
Name Title Age
John L. Castello............................. Chairman of the Board, 65
President and
Chief Executive Officer
Patrick J. Scannon, M.D., Ph.D............... Senior Vice President, Chief Scientific and 54
Medical Officer and Director
James G. Andress............................. Director 63
Williams K. Bowes, Jr........................ Director 75
Arthur Kornberg, M.D......................... Director 84
Steven C. Mendell............................ Director 60
W. Denman Van Ness........................... Director 59
Mr. Castello became Chairman of the Board, President and Chief Executive
Officer in March 1993. From April 1992 to March 1993, Mr. Castello was
President, Chief Executive Officer and a director. Mr. Castello was President
and Chief Operating Officer of the Ares Serono Group from 1988 to 1991 and prior
to that was President of the Serono Diagnostics Division from 1986
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to 1988. Ares Serono is known in the United States for fertility drugs, and it
is also the manufacturer of a bioengineered human growth hormone which is
marketed primarily outside of the United States. Mr. Castello previously held
senior management positions at Amersham International PLC and Abbott
Laboratories. Mr. Castello is also a director of Cholestech Corporation, which
is engaged in the business of developing products for the diagnostic measurement
of cholesterol and other blood components, and of Zierer Visa Services, Inc.,
which is a provider of visa and passport services to U.S. international
travelers.
Dr. Scannon is one of the founders of the Company and has served as a
director since its formation. Dr. Scannon became Chief Scientific and Medical
Officer in March 1993. He served as President of the Company from its formation
until April 1992 and as Vice Chairman, Scientific and Medical Affairs from April
1992 to March 1993. From 1998 until 2001, Dr. Scannon served as a director of
NanoLogics, Inc., a software company. From 1979 until 1981, Dr. Scannon was a
clinical research scientist at the Letterman Army Institute of Research in San
Francisco. A Board-certified internist, Dr. Scannon holds a Ph.D. in organic
chemistry from the University of California, Berkeley, and an M.D. from the
Medical College of Georgia.
Mr. Andress has been a director since November 1995 and is a former
Chairman of the Pharmaceuticals Group, Beecham Group, plc and Chairman,
Healthcare Products and Services of SmithKline Beecham, plc and the former
President and Chief Operating Officer of Sterling Drug, Inc. From 1996 to 2000,
he served as Chairman and CEO of Warner Chilcott, plc, a specialty
pharmaceuticals company. From 1989 to 1995, he served as CEO and director of
Information Resources, Inc., a decision support software and consumer packaged
goods research company and currently serves as a director. He also serves as a
director of Sepracor, Inc., a separations technology company, O.P.T.I.O.N. Care,
Inc., a home health care company, and Allstate Insurance Company.
Mr. Bowes has been a director since February 1986 and has been a General
Partner of U.S. Venture Partners since 1981. Mr. Bowes is also a director of
Amgen Inc., Applied Micro-Circuits Corporation, Lynx Therapeutics, Inc. and one
private company.
Dr. Kornberg has been a director since April 1991. He is a distinguished
author and researcher who was chairman and founder of the Department of
Biochemistry at the Stanford
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University School of Medicine. Dr. Kornberg received the Nobel Prize in 1959 for
his discovery of the enzymatic synthesis of DNA. His present research is on the
genetics, biochemistry, physiology and clinical relevance of inorganic
polyphosphate. He is the author of "DNA Replication," one of the basic textbooks
of biochemistry. Dr. Kornberg was a founder and is a member of the Boards of
Scientific Advisors of DNAX, now a wholly owned subsidiary of Schering-Plough
Corporation, and Regeneron Pharmaceuticals, Inc., a biotechnology company
focused on neurobiology, and is a member of the Board of Scientific Advisors of
Maxygen, Inc., a biotechnology company focused on molecular evolution
technology.
Mr. Mendell has been a director of the Company since 1984. From April 1992
to March 1993, he was Chairman of the Board. Mr. Mendell was also Chief
Executive Officer of the Company from 1986 until April 1992. From April 1993 to
February 1998, Mr. Mendell was President and Chief Executive Officer of
Selective Genetics, Inc. (formerly Prizm Pharmaceuticals, Inc.), a private
company engaged in the development of gene therapy products for tissue
regeneration and repair. From February 1998 to June 1999, he was Chairman and
President of Selective Genetics, Inc. Mr. Mendell is currently President and
Chief Executive Officer of LMA North America Inc. and LMA International N.V., a
leading medical device company focused on the marketing and sale of products for
airway management and anesthesia. From November 1997 to December 1998, Mr.
Mendell served as President and Chief Executive Officer of Ciblex Corporation.
Ciblex is a private company engaged in the development of small molecules to
block the release of disease-causing proteins.
Mr. Van Ness has been a director since October 1981. He is Chairman of
Hidden Hill Advisors, a venture capital consulting firm. From April 1996 through
October 1999, he was a Managing Director of CIBC Capital Partners, an
international merchant banking organization. From 1986 through March 31, 1996,
Mr. Van Ness was a General Partner of Olympic Venture Partners II and Rainier
Venture Partners, venture capital funds, and from 1977 until 1985, he was a
General Partner of the venture capital group at Hambrecht & Quist, the manager
of several venture capital funds.
Executive Officers
Mr. Castello and Dr. Scannon are executive officers of the Company. The
remaining executive officers are listed below.
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Peter B. Davis is Vice President, Finance and Chief Financial Officer of
the Company. Before joining the Company in 1994, he was Vice President Financial
Operations for the Ares-Serono Group. Previously, he was Chief Financial Officer
of Akzo America Inc., where he was instrumental in structuring and negotiating
acquisitions and joint ventures. He has also held executive financial positions
with Stauffer Chemical Company and PepsiCo, Inc.
Clarence L. Dellio joined the Company in 1984 as Vice President with
responsibility for finance, manufacturing, and administration. In 1990, he
became Senior Vice President, Operations. Mr. Dellio was with Becton Dickinson &
Company for 11 years prior to joining the Company, holding the positions of Vice
President of Manufacturing, Director of Planning, and Division Controller of the
BBL Microbiology Systems.
Christopher J. Margolin is Vice President, General Counsel and Secretary of
the Company. Prior to joining the Company in 1991, Mr. Margolin was a corporate
attorney for Raychem Corporation, an international high technology company, for
11 years. From 1975 to 1980, he was a division counsel for TRW Inc. and from
1972 to 1975, he was an associate at the law firm of McCutchen, Black, Verleger
and Shea in Los Angeles.
BOARD MATTERS
Board Meetings and Committees
During the fiscal year ended December 31, 2001, the Board of Directors held
seven meetings. Each Board member attended at least 75% of the aggregate number
of meetings of the Board and the committees of the Board on which he served that
were held during the last fiscal year.
The Board of Directors has standing audit, compensation and nominating
committees. The nominating committee performs the functions of director
evaluation and selection. The committee currently consists of Messrs. Bowes,
Castello and Van Ness. The committee will not accept unsolicited director
nominations by shareholders. The committee held two meetings during 2001.
The audit committee is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing the Company's
accounting practices and system of internal accounting controls. This committee,
currently consisting of Mr. Mendell, Mr. Andress and Mr. Van Ness, held two
meetings during 2001.
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The compensation committee is responsible for recommending and reviewing
the compensation, including options and perquisites, of the Company's officers
and other employees. This committee, currently consisting of Messrs. Van Ness
and Bowes, held three meetings during 2001.
Board Compensation and Related Matters
Each non-employee director receives a quarterly retainer of $1,000, $1,000
for each meeting of the Board of Directors attended and $500 for each committee
meeting attended in person on a date other than on the date of a meeting of the
Board of Directors. Additionally, each non-employee director is granted options
to purchase 15,000 Common Shares pursuant to the 1992 Directors Share Option
Plan (the "Directors Plan") upon initial election to the Board of Directors and
is annually granted 7,500 Common Shares pursuant to the Directors Plan upon
reelection to the Board of Directors, each at an exercise price per share equal
to the closing market price of the Common Shares on the date of grant, which for
2001 was $8.625.
Directors who are employees of the Company are neither paid any fees or
other remuneration nor awarded options or Common Shares of the Company for
services as members of the Board of Directors or its committees.
Audit Committee Report
Each member of the audit committee is "independent" as defined in the
listing standards of The Nasdaq Stock Market. The Company's Board of Directors
has adopted a written charter for the audit committee.
In accordance with rules recently established by the Securities and
Exchange Commission, the audit committee has prepared the following report for
inclusion in this proxy statement:
As part of its ongoing activities, the audit committee has:
o met with management periodically to consider the adequacy of the
Company's internal controls and the objectivity of its financial
reporting, and discussed these matters with the Company's independent
auditors and with appropriate Company financial personnel;
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o regularly met privately with the independent auditors, who have
unrestricted access to the committee;
o recommended to the Board of Directors the appointment of the
independent auditors and reviewed periodically their performance and
independence from management;
o reviewed the Company's financing plans and reported recommendations to
the full Board of Directors for approval and to authorize action;
o reviewed and discussed with management the Company's audited
consolidated financial statements for the fiscal year ended December
31, 2001;
o discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications
with Audit Committees, as amended; and
o received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and discussed with the
independent auditors their independence.
Based on the review and discussions referred to above, the audit committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001.
Steven C. Mendell
James G. Andress
W. Denman Van Ness
ITEM 2 - APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its audit committee,
recommends the appointment of Ernst & Young LLP ("Ernst & Young") to serve as
the Company's independent auditors for 2002. Ernst & Young has been acting as
the Company's independent auditors since fiscal year 1998.
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Audit Fees. The aggregate fees for professional services rendered by Ernst
& Young for the audit of the Company's annual financial statements for the 2001
fiscal year and the reviews of the financial statements included in the
Company's Form 10-Qs for that fiscal year were $106,000.
Financial Information Systems Design and Implementation Fees. The Company
did not engage Ernst & Young to render services regarding financial information
systems design and implementation (as defined in Rule 2-01(c)(4) of Regulation
S-X under the Securities Exchange Act of 1934) for the 2001 fiscal year.
All Other Fees. The aggregate fees billed for services rendered by Ernst &
Young, other than the services covered in the two immediately preceding
paragraphs of this section, for the 2001 fiscal year were $153,291.
The audit committee considered whether the provision of the services
covered in the three immediately preceding paragraphs of this section is
compatible with maintaining Ernst & Young's independence.
The recommendation to appoint Ernst & Young and the authorization of the
Board of Directors to agree to Ernst & Young's fee are being submitted to the
shareholders at the annual general meeting. If such appointment is not made, the
Board of Directors will consider other auditors for appointment. The Board of
Directors recommends a vote "FOR" the appointment of Ernst & Young as the
Company's independent auditors for the 2002 fiscal year and the authorization of
the Board to agree to Ernst & Young's fee.
A representative of Ernst & Young is expected to be present at the meeting
with an opportunity, if desired, to make a statement and to respond to your
questions.
ITEM 3 - RECEIPT OF AUDITED FINANCIAL STATEMENTS
In accordance with Bermuda company law and practice, the Company's audited
financial statements for fiscal year 2001 will be laid before the annual general
meeting. No shareholder action is required in connection therewith.
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ITEM 4 - ADDITION OF SHARES TO THE 1998 EMPLOYEE SHARE PURCHASE PLAN
Background
The 1998 Employee Share Purchase Plan (the "Share Purchase Plan") is
designed to give employees of the Company an opportunity to purchase Common
Shares through payroll deductions, thereby encouraging employees to share in the
economic growth and success of the Company.
The Board of Directors has adopted, subject to shareholder approval, an
amendment to the Share Purchase Plan to increase the number of Common Shares
issuable over the term of the plan by 1,000,000 Common Shares to 1,500,000
Common Shares in the aggregate. The proposed amendment will enable the Company
to continue to encourage its employees to purchase Common Shares.
The essential features of the Share Purchase Plan are summarized below.
This summary does not purport to be a complete description of the Share Purchase
Plan. Copies of actual Share Purchase Plan documents may be obtained by
contacting the Secretary of the Company.
Description of the Share Purchase Plan
Any person who is an employee on a given enrollment date of an offering
period, generally the beginning of every calendar quarter (the "Offering
Period"), who is scheduled to work at least 20 hours per week on a regular basis
is eligible to participate in the Share Purchase Plan. An Offering Period will
generally be a 24 month period beginning with the enrollment date. New and
concurrent Offering Periods will generally begin every calendar quarter, so that
there may be as many as eight Offering Periods at any one time. Common Shares
will be purchased for participants in the Share Purchase Plan as of the last day
of each Offering Period (i.e., the last day prior to the second anniversary of
the beginning of the Offering Period) with the money deducted from their
paychecks during the Offering Period. The purchase price per Common Share will
be either (i) an amount equal to 85% of the fair market value of a Common Share
on the first day of such Offering Period or on the last day of such Offering
Period, whichever is lower or (ii) such higher price as may be set by the
compensation committee at the beginning of the Offering Period.
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A participant may elect to have payroll deductions made under the Share
Purchase Plan for the purchase of Common Shares in an amount for all current
Offering Periods not to exceed 20% of the participant's compensation.
Compensation for purposes of the Share Purchase Plan means total cash
compensation, including regular pay, overtime pay and bonuses, and it also
includes pre-tax employee contributions under a Section 401(k) plan or Section
125 plan. Contributions to the Share Purchase Plan will be on an after-tax basis
(i.e., such contributions are subject to federal, state and local taxes). A
participant may terminate his or her payroll deductions at any time. A
participant may elect (not more than once each quarter) to decrease the amount
of payroll deductions with respect to one or more current Offering Periods.
Increases may be made only by electing to participate in a future Offering
Period.
A share purchase account will be established for each participant in the
Share Purchase Plan. Amounts deducted from participants' paychecks will be
credited to their accounts with respect to each current Offering Period. No
interest will accrue with respect to any amounts credited to the accounts. As of
the last day of each Offering Period, the amount credited to a participant's
share purchase account with respect to such Offering Period will be used to
purchase the largest number of whole Common Shares at the price as determined
above. The Common Shares will be purchased directly from the Company. No
brokerage or other fees will be charged to participants. Unless approved by the
compensation committee, fractional shares will not be purchased, and any payroll
deductions which are not sufficient to purchase a whole Common Share will be
retained in the participant's account for the next expiring Offering Period. Any
other monies in a participant's account will be returned to the participant.
The maximum number of Common Shares that a participant may purchase during
an Offering Period with respect to such Offering Period is 50,000 Common Shares.
That maximum will be reduced if, after the purchase, the participant would own
Common Shares of the Company (including Common Shares he or she could purchase
under any outstanding options) possessing 5% or more of the total voting power
or value of all classes of shares of the Company, or if the total fair market
value of the Common Shares to be purchased for the participant determined on the
first day of the Offering Period would exceed $25,000 for each calendar year
during which the Offering Period is in effect. If the aggregate shares purchase
accounts to be used for the purchase of Common Shares as of the last day of an
Offering Period would purchase more Common Shares than are reserved for
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purchase and sale under the Share Purchase Plan, the number of Common Shares
which would otherwise be purchased for each participant will be reduced
proportionately and the remaining account balance of each participant will be
distributed to each such participant.
A participant may withdraw from participation in the Share Purchase Plan at
any time during an Offering Period (with respect to one or more Offering
Periods) by written notice to the Company. Upon withdrawal, a participant's
account balance will be distributed as soon as practicable and no Common Shares
with respect to such Offering Period(s) will be purchased. Rights to purchase
Common Shares under the Share Purchase Plan are exercisable only by the
participant and are not transferable.
If not sooner terminated automatically because all shares reserved under
the Share Purchase Plan have been issued and sold, the Share Purchase Plan will
continue in effect until terminated by the Board of Directors. The Board of
Directors may amend, suspend, or terminate the Share Purchase Plan at any time,
except that certain amendments may be made only with the approval of the
shareholders of the Company.
Federal Income Tax Consequences
The following is a summary of the federal income tax consequences to
employees participating in the Share Purchase Plan and to the Company, based
upon current provisions of the Code, the Treasury regulations promulgated
thereunder and administrative and judicial interpretations thereof, and does not
address the consequences under any other applicable tax laws. The provisions of
the Code, regulations thereunder and related interpretations are complicated and
their impact in any one case may depend upon the particular circumstances
relating thereto.
Rights to purchase shares under the Share Purchase Plan are referred to in
the Code as "options." A participating employee will not recognize income at the
time options are granted to such employee at the commencement of an Offering
Period or when the employee exercises such options and purchases Common Shares
at the end of an Offering Period. An employee will be taxed on amounts withheld
from salary under the Share Purchase Plan as if actually received, and the
Company will be entitled to deduct a corresponding amount.
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If an employee does not dispose of the Common Shares purchased pursuant to
the Share Purchase Plan until more than two years after the date of grant of the
options and one year after the transfer of the Common Shares to the employee, or
if the employee dies without having disposed of such Common Shares, such
employee must include in gross income as compensation (as ordinary income and
not as capital gain) for the taxable year of disposition or death an amount
equal to the lesser of (i) the excess of the fair market value of the Common
Shares at the time of disposition or death over the amount paid for the Common
Shares, or (ii) the excess of the fair market value of the Common Shares at the
date of grant of the options over the exercise price. If the amount realized
upon such a disposition by way of sale or exchange of the Common Shares exceeds
the purchase price plus the amount, if any, included in income as compensation,
such excess will be capital gain. If the holding period for the Common Shares is
not more than one year, the gain or loss will be short-term capital gain or
loss. Short-term capital gain is taxable at the same rates as ordinary income.
If the holding period is more than one year, the gain or loss will be long-term
capital gain or loss. In general, long-term capital gain is subject to lower
maximum federal income tax rates than ordinary income. Currently, the maximum
rate for long-term capital gain on assets held for more than eighteen months is
generally 20%, and the maximum rate on capital gain on assets held for more than
one year but less than eighteen months ("mid-term gain") is 28%.
The Company will not be entitled to any deduction in respect of options
granted under the Share Purchase Plan or Common Shares issued and delivered
pursuant to the exercise of such options, if the holding period requirements are
met or the employee dies prior to disposing of the Common Shares acquired upon
exercise.
If an employee disposes of the Common Shares within two years from the date
of grant of the option or within one year from the date of exercise (an "Early
Disposition"), the employee will recognize ordinary income at the time of
disposition which will equal the excess, if any, of the fair market value of the
Common Shares on the date of exercise over the amount paid for such Common
Shares. The Company may be required to withhold taxes related to such ordinary
income from other payments due the employee. The Company will generally be
entitled to a deduction in an amount equal to such income. The excess, if any,
of the amount realized on disposition of such Common Shares over the fair market
value of such Common Shares on the date of exercise will be long-term, mid-term
or short-
-27-
term capital gain, depending upon the holding period for the Common Shares. If
an employee disposes of such Common Shares for less than his or her basis in the
Common Shares, the difference between the amount realized and such basis will be
a long-term or short-term capital loss, depending upon the holding period for
the Common Shares.
Recommendation
At the annual general meeting, the Company's shareholders will be asked to
approve the proposal to amend the Share Purchase Plan to increase the number of
Common Shares issuable over the term of the Share Purchase Plan by 1,000,000
Common Shares to 1,500,000 Common Shares in the aggregate. The Board of
Directors believes that approval of the proposed amendment is in the best
interests of the Company, its shareholders and its employees because it will
continue to encourage employees to share in the economic growth and success of
the Company and unanimously recommends a vote "FOR" approval. Approval of the
amendment requires the affirmative vote of the holders of a majority of the
votes cast at the annual general meeting on the proposal.
CERTAIN TRANSACTIONS
Pursuant to his employment agreement, in 1993 the Company made a loan to
Dr. Scannon, its Senior Vice President, Chief Scientific and Medical Officer and
a Director, in the initial amount of $290,000. See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements." As of April 10,
2002, $117,896.16 of principal and interest on the loan remained outstanding and
$302,074.56 in principal and interest payments had been received by the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
changes in ownership with the SEC and The Nasdaq Stock Market. Such executive
officers and directors are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based on a review of the
copies of the forms furnished to the Company and written representations from
the Company's executive officers and directors, other than Mr. Margolin who
filed a Form 4 late with respect to one transaction, all persons subject to
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the reporting requirements of Section 16(a) filed the required reports with
respect to 2001 on a timely basis.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at this
annual general meeting other than those set forth in this proxy statement and in
the notice accompanying this proxy statement. If other matters should properly
come before the meeting, it is intended that the proxy holders will vote on such
matters in accordance with their best judgment.
It is important that your Common Shares be represented at the meeting,
regardless of the number of Common Shares which you hold. You are, therefore,
urged to promptly execute and return the accompanying proxy in the postage
prepaid envelope which has been enclosed for your convenience or vote by
telephone or through the Internet.
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SHAREHOLDER PROPOSALS
A shareholder who intends to present a proposal at the 2003 meeting of
shareholders must submit such proposal by November 30, 2002, to the Company for
inclusion in the Company's 2003 proxy statement and proxy card relating to such
meeting. The proposal must be mailed to the Company's principal office, at 2910
Seventh Street, Berkeley, California 94710, Attention: Secretary.
By Order of the Board of Directors,
Christopher J. Margolin
Secretary
April 24, 2002
Berkeley, California