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 ý
Filed by
a Party other than the Registrant ¨
Check the
appropriate box:
ý Preliminary
Proxy Statement
¨ Confidential, for Use of the
Commission Only (as permitted by Rule 14a-6(e)(2))
¨ Definitive
Proxy Statement
¨ Definitive
Additional Materials
¨ Soliciting
Material Pursuant to § 240.14a-11(c) or § 240.14a-12
PEREGRINE
PHARMACEUTICALS, INC.
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of Filing Fee (Check the appropriate box):
ý No
fee required
¨ Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title
of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
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(3)
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unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11
(set
forth the amount on which the filing fee is calculated and state how it
was determined):
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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.
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(1) Amount
previously paid:
(2) Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4) Date
Filed:
PRELIMINARY
SUBJECT
TO COMPLETION
August
[ ], 2008
Dear
Stockholder:
You are
cordially invited to attend our annual meeting of stockholders on Tuesday,
October 21, 2008, at 10:00 a.m. Pacific Daylight Time at the Wyndham Hotel, 3350
Avenue of the Arts, Costa Mesa, California.
This booklet includes the Notice of
Annual Meeting and the Proxy Statement. The Proxy Statement describes the
business to be transacted at the meeting and provides other information about
the Company that you should know when you vote your shares.
Your vote is very
important. Instructions for voting appear on the proxy card or the
voting instruction form. Please review the instructions on the proxy
card or the voting instruction form forwarded by your bank, broker or other
holder of record regarding each of these voting options.
In
addition to the formal business to be transacted, management will make a
presentation on developments during the past year and respond to comments and
questions of general interest to stockholders.
We hope
you will be able to attend the meeting and we look forward to seeing you on
Tuesday, October 21, 2008.
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Very
truly yours,
Steven
W. King
President,
Chief Executive Officer and
Director
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14282
Franklin Avenue ● Tustin,
California 92780
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
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Date:
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Tuesday,
October 21, 2008
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Time:
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10:00
a.m. Pacific Daylight Time
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Place:
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Wyndham
Hotel at the Orange County Performing Arts Center
3350
Avenue of the Arts
Costa
Mesa, California 92626
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Items
of Business:
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1.
To elect five directors to our Board of Directors until the next annual
meeting and until their successors are elected and qualified;
2.
To ratify the Audit Committee’s selection of Ernst & Young LLP as
our independent registered public accounting firm for our current fiscal
year ending April 30, 2009;
3.
To approve an amendment to our certificate of incorporation, as amended,
to effect a reverse stock split of shares of our common stock issued and
outstanding at a ratio to be established by our Board of Directors in its
discretion, of up to one for ten (but not less than one for
three);
4. To
approve our 2008 Stock Incentive Plan; and
5.
To transact such other business as may properly come before the meeting or
any adjournment thereof.
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Record
Date:
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You
are entitled to notice of, and to vote at the annual meeting and any
adjournments of that meeting, if you were a stockholder of record at the
close of business on August 22, 2008.
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Voting
by Proxy:
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Please
submit the enclosed proxy as soon as possible so that your shares can be
voted at the annual meeting in accordance with your instructions. For
specific instructions regarding voting, please refer to the Questions and
Answers beginning on page 1 of the Proxy Statement and the
instructions on your proxy card.
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By
Order of the Board of Directors,
Paul
J. Lytle
Chief
Financial Officer and
Corporate
Secretary
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Tustin,
California
August
[ ], 2008
This
Notice of Annual Meeting of Stockholders, Proxy Statement and accompanying proxy
card
are
being distributed on or about September 8, 2008
General
Information
Your vote is very
important. For this reason, the Board of Directors of
Peregrine Pharmaceuticals, Inc., a Delaware corporation (referred to as “we,”
“us,” “our,” “Company,” or “Peregrine”), is soliciting your proxy to
vote your shares of common stock at the 2008 Annual Meeting of Stockholders (the
“Annual Meeting”), or at any continuation, postponement or adjournment thereof,
for the purposes discussed in this Proxy Statement and in the accompanying
Notice of Annual Meeting and any business properly brought before the Annual
Meeting.
Why
am I receiving these materials?
Proxies are solicited to give all
stockholders of record an opportunity to vote on matters properly presented at
the Annual Meeting. This Proxy Statement is being sent to all
stockholders of record as of the close of business on August 22, 2008 in
connection with the solicitation of proxies on behalf of the Board of Directors
for use at the 2008 Annual Meeting of Stockholders to be held on October
21, 2008. We intend to commence mailing this Proxy
Statement and accompanying proxy card on or about September 8, 2008 to all
stockholders entitled to vote at the Annual Meeting.
Our
Financial Information
The Annual Report to Stockholders of
the Company for the fiscal year ended April 30, 2008, including audited
consolidated financial statements, has been mailed to the stockholders
concurrently herewith, but such report is not incorporated in this Proxy
Statement and is not deemed to be a part of the proxy solicitation
material.
Who
is eligible to vote?
Stockholders of Peregrine, as recorded
in our stock register at the close of business on August 22, 2008, can vote at
the Annual Meeting. Each share of Peregrine’s common stock is
entitled to one vote. As of August 22, 2008, there were
[ ]
shares of our common stock outstanding and entitled to vote.
How
do I vote?
There are
three ways to vote by proxy:
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(1)
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by
mail;
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(2)
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by
telephone; or
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(3)
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via
the Internet.
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You may
also vote in person at the Annual Meeting. If you choose to vote by
mail, mark your proxy card enclosed with the Proxy Statement, date and sign it,
and mail it in the postage-paid envelope. If you vote by telephone or
via the Internet, please do not return a signed proxy card. We
recommend you vote by proxy even if you plan to attend the
meeting. You can always change your vote at the Annual
Meeting. Please note, however, that if your shares are held of record
by a broker, bank, or other nominee and you wish to vote in person at the
meeting, you must obtain a legal proxy issued in your name from such broker,
bank or other nominee.
Who
pays the cost of proxy solicitation?
Our Board of Directors is soliciting
the enclosed proxy. We will make proxy solicitations by electronic or
regular mail and we will bear the costs of this solicitation. We will
request banks, brokerage houses, nominees and other fiduciaries nominally
holding shares of our common stock to forward the proxy soliciting materials to
the beneficial owners of such common stock and to obtain authorization for the
execution of proxies. We will, upon request, reimburse such parties
for their reasonable expenses in forwarding proxy materials to the beneficial
owners. In the event we decide to hire a service to solicit proxies, we would
expect such service to cost less than $10,000 plus reasonable and approved
out-of-pocket expenses.
1
What
is a proxy?
Giving us your proxy means you
authorize us to vote your shares at the meeting in the manner you
direct. You may vote for all, some or none of our director
candidates. You may also vote for or against the other proposals or
abstain from voting.
How
do I specify how I want my shares voted?
If you are a registered stockholder,
you can specify how you want your shares voted on each proposal by marking the
appropriate boxes on the proxy card. Please review the voting
instructions on the proxy card and read the entire text of the proposals and the
positions of the Board of Directors in the Proxy Statement prior to marking your
vote.
If your proxy card is signed and
returned without specifying a vote or an abstention on a proposal, it will be
voted according to the recommendation of the Board of Directors on that
proposal. That recommendation is shown for each proposal on the proxy
card.
How
do I vote if I am a beneficial stockholder?
If you are a beneficial stockholder,
you have the right to direct your broker or nominee on how to vote the
shares. You should complete a Voting Instruction Card which your
broker or nominee is obligated to provide you. If you wish to vote in
person at the meeting, you must first obtain from the record holder a proxy
issued in your name.
Brokerage
firms have the authority under the NASDAQ Stock Market rules to vote shares on
routine matters for which their customers do not provide voting
instructions. While the amendment to our certificate of incorporation
to effect a reverse stock split of our outstanding shares should be considered a
routine matter, we urge you to instruct your broker or other nominee how to vote
your shares, because without those instructions, your broker or other nominee
might not vote your shares with regard to the amendment to our certificate of
incorporation.
What
are the Board of Directors’ voting recommendations?
For the reasons set forth in more
detail later in the Proxy Statement, our Board of Directors recommends that you
vote FOR
the following proposals:
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1.
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the
election of our five directors;
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2.
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the
ratification of the Audit Committee’s appointment of Ernst & Young LLP
as our independent registered public accounting firm for fiscal year
2009;
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3.
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the
approval of the amendment to our certificate of incorporation to effect a
reverse stock split of shares of our common stock;
and
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4.
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the
approval of our 2008 Stock Incentive
Plan.
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Can
I revoke a proxy?
To revoke your proxy if you are a
stockholder of record, you must advise our Secretary in writing before the
meeting, deliver a validly executed proxy with a later date that we receive
prior to the meeting, or attend the meeting and vote your shares in person. You
may revoke your proxy at any time before your shares are voted. Attendance at
the Annual Meeting will not, by itself, revoke a proxy.
What
is a quorum?
In order to carry on the business of
the meeting, we must have a quorum. This means that at least a
majority of the outstanding shares eligible to vote on the record date must be
present at the meeting, either by proxy or in person. Abstentions and
broker non-votes are counted as present at the meeting for determining whether
we have a quorum. A broker non-vote occurs when a broker returns a
proxy but does not vote on a particular proposal because the broker does not
have discretionary voting power for that particular item and has not received
voting instructions from the beneficial owner.
2
How
many votes are needed to have the proposals pass?
For the reasons set forth in more
detail later in the Proxy Statement, our Board of Directors recommends that you
vote for the following four proposals:
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Proposal
No. 1 -
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the
election of our five directors;
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Proposal
No. 2 -
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the
ratification of the Audit Committee’s appointment of Ernst & Young LLP
as our independent registered public accounting firm
for fiscal year 2009;
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Proposal
No. 3 -
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the
approval of the amendment to our certificate of incorporation to effect a
reverse stock split of shares of our common stock; and
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Proposal
No. 4 -
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the
approval of our 2008 Stock Incentive
Plan.
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The Board of Directors will be elected
by a favorable vote of a plurality of the shares of common stock present and
entitled to vote, in person or by proxy, at the Annual
Meeting. Accordingly, abstentions and broker non-votes as to the
election of directors will not be counted in determining which nominees received
the largest number of votes cast.
In order
for Proposal No. 2 and Proposal No. 4 to pass, the affirmative vote of a
majority of the shares present in person or by proxy and entitled to vote at the
Annual Meeting is required for each. Only proxies and ballots
indicating votes “FOR,” “AGAINST” or “ABSTAIN” on the proposals or providing the
designated proxies with the right to vote in their judgment and discretion on
the proposals are counted to determine the number of shares present and entitled
to vote. Broker non-votes will have no effect on the result of the
vote although they will count toward the presence of a
quorum. Abstentions as to the proposal will have the same effect as
votes against a proposal.
In order
for Proposal No. 3 to pass, the affirmative vote of stockholders holding a
majority of the outstanding shares of our common stock as of the record date is
required. While the amendment to our certificate of incorporation to
effect a reverse stock split of our outstanding shares should be considered a
routine matter, we urge you to instruct your broker or other nominee how to vote
your shares, because without those instructions, your broker or other nominee
might not vote your shares with regard to the amendment to our certificate of
incorporation.
How
are the votes counted?
All
votes will be tabulated by the inspector of election appointed for the Annual
Meeting who will separately tabulate affirmative and negative votes and
abstentions. Any information that identifies a stockholder or the
particular vote of a stockholder is kept confidential.
What
is “Householding” of annual meeting materials?
Some
banks, brokers and other nominee record holders may be “householding” our proxy
statements and annual reports. This means that only one copy of our
proxy statement and annual report to stockholders may have been sent to multiple
stockholders in your household. We will promptly deliver a separate
copy of either document to you if you call or write us at our principal
executive offices, 14282 Franklin Avenue, Tustin, California, 92780, Attn:
Investor Relations, telephone: (714) 508-6000. If you want to receive
separate copies of the proxy statement or annual report
to stockholders in the future, or if you are receiving multiple copies and would
like to receive only one copy per household, you should contact your bank,
broker, or other nominee record holder, or you may contact us at the above
address and telephone number.
3
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PROPOSAL
NO 1:
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The first
proposal on the agenda for the Annual Meeting will be electing five directors to
serve until the next annual meeting or until their successors are
elected. There are five nominees for the five currently
authorized seats on our Board of Directors. Unless authority to vote
for directors has been withheld in the proxy, the persons named in the enclosed
proxy intend to vote at the Annual Meeting FOR the election of
the nominees presented below.
Under
Delaware law, the five nominees receiving the highest number of votes will be
elected as directors at the Annual Meeting. As a result, proxies
voted to “Withhold Authority” and broker non-votes will have no practical
effect.
Each
person nominated for election is currently serving as a director of Peregrine
and each nominee has consented to serve as a director for the ensuing
year. If any nominee becomes unavailable to serve for any reason
before the election, then the enclosed proxy will be voted for the election of
such substitute nominee, if any, as shall be designated by the Board of
Directors. The Board of Directors has no reason to believe that any
of the nominees will become unavailable to serve.
Information
with respect to the number of shares of common stock beneficially owned by each
director as of August 15, 2008 appears under the heading “Security Ownership of
Certain Beneficial Owners, Directors and Management.” The name, age,
years of service on our Board of Directors, and principal occupation and
business experience of each director nominee is set forth below.
DIRECTOR BIOGRAPHY
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Name and Age
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Principal Occupation and Business
Experience
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Director
Since
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Thomas
A. Waltz, M.D. , Chairman of the Board
(age
75)
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Dr.
Waltz is a neurosurgeon and is Senior Consultant in Neurosurgery of the
Scripps Clinic in La Jolla, California. Dr. Waltz was Chairman
and CEO of the Scripps Clinic from 1991 to 2000 and President of the
Scripps Clinic Medical Group from 1990 to 2000. During his
tenure as CEO of the Scripps Clinic, he was responsible for an
organization with 400 physicians, 1,200 employees and an operating budget
of $350 million. In addition to his current clinical practice,
he is on the Board of Genoptix Inc. and Premera Blue Cross of Washington
and Alaska. Genoptix is a publically traded (GXDX) company that
provides specialized clinical laboratory services to patients with
hematologic diseases and the hematologists and oncologists who care for
them. Premera is a not-for-profit Blue Cross medical
insurance provider insuring more than one million enrollees in Washington,
Alaska and Oregon. From 2001 until early 2008, Dr. Waltz was on
the Board of The Doctors Company. The Doctors Company provides
medical malpractice insurance to physicians in the United
States. Dr. Waltz received his undergraduate degree from the
University of Cincinnati, his M.D. from Vanderbilt University, and his
neurosurgical training at Baylor College of Medicine in
Houston. He also had training in Neurology at The National
Hospital for Neurological Diseases in London, England and Neuropathology
at Oxford University.
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2004
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Carlton
M. Johnson
(age
48)
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Mr.
Johnson has served as a director since November 1999. Mr.
Johnson currently serves as in-house legal counsel for Roswell Capital
Partners, LLC and has served as in-house legal counsel for Equiplace
Securities, LLC and Swartz Investments, LLC since 1996. Mr.
Johnson has been an active member of the Alabama State Bar since 1986, the
Florida Bar since 1988, and the State Bar of Georgia since
1997. He has been a shareholder in the Florida AV-rated,
Bar-registered firm of Smith, Sauer, DeMaria & Johnson and Vice
President and President-Elect of the 600 member Escambia-Santa Rosa Bar
Association. He also served on the Florida Bar Young Lawyers
Division Board of Governors. Mr. Johnson earned his degree with
high honors in History/Political Science at Auburn University and his
Juris Doctor, also with high honors, at Samford University – Cumberland
School of Law. Mr. Johnson also serves on the board of Patriot
Scientific Corporation, a publicly traded company.
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1999
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4
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Name and Age
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Principal Occupation and Business
Experience
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Director
Since
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Steven
W. King
(age
44)
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Mr.
King has served as our President and Chief Executive Officer since March
2003. From August 2002 to such date, Mr. King served as Chief
Operating Officer of Peregrine. From February 2000 to August
2002, Mr. King served as our Vice President of Technology and Product
Development. Mr. King joined Peregrine in 1997 in the capacity
of Director of Research and Development. Mr. King was
responsible for planning and launching our wholly owned contract
manufacturing subsidiary, Avid Bioservices, Inc., in 2002. Mr.
King has served as the President of Avid since its
inception. Mr. King was previously employed at Vascular
Targeting Technologies, Inc. (formerly known as Peregrine Pharmaceuticals,
Inc.), a company we acquired in 1997, which held the rights to the
Vascular Targeting Agent technology. Mr. King previously worked
with Dr. Philip Thorpe, inventor of our Anti-Phosphatidylserine
(“Anti-PS”) Immunotherapeutic and VTA technology platforms, at the
University of Texas Southwestern Medical Center at Dallas and is a
co-inventor on over 40 U.S. and foreign patents and patent applications in
the Vascular Targeting Agent field. Mr. King received his
Bachelor’s and Master’s degrees from Texas Tech. University in Cell and
Molecular Biology.
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2003
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David
H. Pohl
(age
71)
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Mr.
Pohl served as Chairman of the Board, President and CEO of Patriot
Scientific Corporation from June 2005 to June 2007, and was a member of
its board of directors from April 2001 until February 2008. Mr.
Pohl also served as an officer of Patriot from January 2001 to March
2002. He is currently Chairman of the Board of Wellness.com,
Inc., a privately held Internet enterprise, and two of its
affiliates. Mr. Pohl was in the private practice of law
counseling business clients from 1997 to 2005, and from 1995 to 1996 was
Special Counsel to the Ohio Attorney General regarding entrepreneurial
investments by state employee pension funds. Previously, he was
a Senior Attorney with Jones Day Reavis & Pogue, a large U.S. law
firm, and held positions as a senior officer and general counsel in large
financial services corporations that developed assets of more than $1
billion. Mr. Pohl is a member of the Corporate Directors Forum
of San Diego, the Intellectual Property Law and Business Law Sections of
the State Bar of California, has served as a member of the Board of
Governors of the Corporate Counsel Section of the Ohio State Bar
Association, and is an Emeritus member of the Board of Directors of the
American Financial Services Association, Washington, D.C. Mr. Pohl earned
a Juris Doctor degree from the Ohio State University College of Law, and
also holds a B.S. in Administrative Sciences from Ohio State.
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2004
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Eric
S. Swartz
(age
52)
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Mr.
Swartz is the founder and President of Roswell Capital Partners, LLC and
was the founder and former President of Equiplace Securities, LLC and
Swartz Investments, LLC, a company he started in 1993. Prior to
1993, Mr. Swartz was a Vice President at Bear Stearns & Co.
specializing in foreign institutional equity investments in U.S.
securities. Prior to that, Mr. Swartz was a Vice President with
Oppenheimer & Co., where he was involved in overseas placements of
equity and debt for institutions in Germany, Austria, Switzerland, France,
Australia, and New Zealand. Mr. Swartz has approximately 20
years of experience in the securities business.
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1999
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Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” EACH NOMINEE DIRECTOR NAMED IN
PROPOSAL NO. 1.
5
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CORPORATE
GOVERNANCE
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Our Board
of Directors strongly believes in good corporate governance policies and
practices. We expect to continue to seek and implement those corporate
governance practices that we believe will promote a high level of performance
from our Board of Directors, officers and employees. This section
describes key corporate governance guidelines and practices that our Board has
adopted. Copies of the following corporate governance documents are posted
on our website at www.peregrineinc.com
(this website address is not intended to function as a hyperlink, and the
information contained on the Company’s website is not intended to be a part of
this Proxy Statement): (1) Code of Business Conduct and Ethics, (2)
Charter of the Compensation Committee of the Board of Directors,
(3) Charter of the Audit Committee of the Board of Directors, and
(4) Charter of the Nominating Committee of the Board of
Directors. If you would like a printed copy of any of these corporate
governance documents, please send your request to Peregrine Pharmaceuticals,
Inc., Attention: Corporate Secretary, 14282 Franklin Avenue, Tustin,
California 92780.
Board
of Directors
Our business is managed under the
direction of our Board of Directors pursuant to the Delaware General Corporation
Law and our Bylaws. Our Board of Directors has responsibility for
establishing broad corporate policies and reviewing our overall
performance. Among the primary responsibilities of our Board of
Directors is the oversight of the management of our company. Our
directors remain informed of our business and management’s activities by
reviewing documents provided to them before each board meeting and by attending
presentations made by our chief executive officer and other members of
management. The Board of Directors held eleven (11) formal meetings during the
fiscal year ended April 30, 2008. Each incumbent director attended at
least seventy-five percent (75%) of the meetings of the Board and of the
committees on which he served during the fiscal year ended April 30,
2008. In addition, members of the Board of Directors have access to
our books, records and reports and independent auditors and
advisors. Members of our management frequently interact with and are
at all times available to our directors.
Director
Independence
Under
applicable NASDAQ Marketplace rules, a director will only qualify as an
“independent director” if, in the opinion of our Board of Directors, that person
does not have a relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. Our
Board of Directors has determined that each of the current directors, as well as
those standing for re-election, are independent directors as defined by the
NASDAQ Marketplace Rules governing the independence of directors, except for
Steven W. King, our President and Chief Executive Officer.
Our
Audit, Compensation and Nominating Committees are composed entirely of
independent directors as required by applicable SEC and NASDAQ rules, including
Rule 10A-3 under the Exchange Act. In addition, there are no
family relationships among any of the directors or executive officers of the
Company.
The independent members of our Board of
Directors have a practice of meeting in executive sessions without the presence
of any members of Peregrine’s management. The independent members of
the Board of Directors met in eleven (11) executive sessions during the fiscal
year ended April 30, 2008.
Committees
of Our Board of Directors
The Board
of Directors has three standing committees: the Audit Committee, the
Compensation Committee, and the Nominating Committee. Each of the
three committees maintains a written charter approved by the Board of
Directors. The following is a summary of our three standing
committees:
6
Compensation
Committee. The primary
purposes of the Compensation Committee of the Board of Directors is to: (i)
establish the compensation policy of Peregrine Pharmaceuticals, Inc. (the
“Company”); (ii) ensure that the compensation of the Board of Directors, Chief
Executive Officer and other corporate officers of the Company enables it to
attract and retain high-quality leadership and is consistent with such policy;
(iii) review the performance and development of the Company’s Chief Executive
Officer and other corporate officers in achieving Company goals and objectives
and to ensure that senior executives of the Company are compensated effectively
in a manner consistent with the strategy of the Company; and (iv) produce an
annual report on executive compensation for inclusion in the Company’s proxy
statements, in accordance with applicable rules and regulations. The
Compensation Committee held six (6) meetings during the fiscal year ended April
30, 2008. The Compensation Committee has the authority to determine
director and executive compensation and may not delegate this
authority. The Compensation Committee’s members are currently Mr.
Eric S. Swartz (chairman of the committee), Mr. Carlton M. Johnson, Mr. David H.
Pohl, and Dr. Thomas A. Waltz. Each of these members is independent
under NASDAQ listing standards currently in effect.
Audit Committee. The Audit
Committee has the sole authority for the appointment, compensation and oversight
of the work of the independent auditors, and responsibility for reviewing and
discussing, prior to filing or issuance, with management and the independent
auditors (when appropriate) the Company’s audited consolidated financial
statements included in its Annual Report on Form 10-K. The Audit Committee
carries out its responsibilities in accordance with the terms of its
charter. The Audit Committee met five (5) times during the year ended
April 30, 2008. The Audit Committee of our Board of Directors has
determined that Mr. Carlton M. Johnson is an “audit committee financial expert”
as defined by the Securities and Exchange Commission (“SEC”) and is independent
under the current listing standards of NASDAQ. The Audit Committee
meets the NASDAQ composition requirements, including the requirements regarding
financial literacy and financial sophistication. The current Audit
Committee members are Mr. Carlton M. Johnson (chairman of the committee), Mr.
David H. Pohl, Mr. Eric S. Swartz, and Dr. Thomas A. Waltz. Each of
these members is independent under NASDAQ listing standards currently in
effect.
Nominating
Committee. The primary purpose of the Nominating Committee of
the Board is to (i) make recommendations to the Board regarding the size of the
Board, (ii) make recommendations to the Board regarding criteria for the
selection of director nominees, (iii) identify and recommend to the Board for
selection as director nominees individuals qualified to become members of the
Board, including stockholder recommendations, and (iv) recommend committee
assignments to the Board. The qualities and skills sought in
prospective members of the Board will be determined by the independent
directors. Generally, director candidates must be qualified
individuals who, if added to the Board, would provide the mix of director
characteristics, experience, perspective and skills appropriate for the
Company. Criteria for selection of candidates will include, but not
be limited to: (i) business and financial acumen, as determined by the committee
in its discretion, (ii) qualities reflecting a proven record of accomplishment
and ability to work with others, (iii) knowledge of the Company’s industry, (iv)
relevant experience and knowledge of corporate governance practices, and (v)
expertise in an area relevant to the Company. The Nominating Committee met two
(2) times during the year ended April 30, 2008. The Nominating
Committee’s members are Mr. David H. Pohl (chairman of the committee), Mr.
Carlton M. Johnson, Mr. Eric S. Swartz, and Dr. Thomas A. Waltz. Each
of these members is independent under NASDAQ listing standards currently in
effect.
Communicating
with the Board of Directors
Under our Code of Business Conduct
and Ethics, we have established an Open Door Policy and Hotline for the
confidential, anonymous submission by our directors, officers and employees of
concerns regarding violations or suspected violations of our Policy on Business
Conduct and Ethics, including matters relating to accounting and auditing
matters. In addition, the Audit Committee has established procedures
for the receipt, retention and treatment of communications received by us, our
Board of Directors and the Audit Committee regarding accounting, internal
controls or auditing matters. Written communications from our
stockholders and employees may be sent to: Peregrine Pharmaceuticals, Inc.,
Attention: Audit Committee Chair, 14282 Franklin Avenue, Tustin, California
92780.
In addition, the Company’s annual
meeting of stockholders provides an opportunity each year for stockholders to
ask questions of or otherwise communicate directly with members of the Board on
appropriate matters. In addition, stockholders may communicate in
writing with any particular director, or the directors as a group, by sending
such written communication to: Board of Directors, Attention:
Corporate Secretary, Peregrine Pharmaceuticals, Inc., 14282 Franklin
Avenue, Tustin, California 92780. Copies of written communications
received at such address will be provided to the Board or the relevant director
unless such communications are considered, in the reasonable judgment of the
Secretary, to be inappropriate for submission to the intended
recipient(s). Examples of stockholder communications that would be
considered inappropriate for submission to the Board include, without
limitation, customer complaints, solicitations, communications that do not
relate directly or indirectly to the Company’s business or communications that
relate to improper or irrelevant topics.
7
Director Attendance at Annual Meetings of
Stockholders
We have no policy requiring directors
to attend annual meetings of stockholders, but directors are encouraged to
attend our annual meetings at which they stand for re-election.
Members
of the Board of Directors who are also our employees receive no additional
compensation for serving as directors. The following information
outlines the compensation paid to our non-employee directors, including annual
base retainer fees, meeting attendance fees, and option awards for the fiscal
year ended April 30, 2008:
|
Name
|
Fees
Earned or
Paid
in Cash ($) (1)
|
Option
Awards
($) (2)
|
All
Other
Compensation
($)
|
Total
($)
|
||||
|
Thomas
A. Waltz, M.D.
|
$ 80,000
(5)
|
$10,383
|
-
|
$ 90,383
|
||||
|
Carlton
M. Johnson
|
$ 144,000
(3)
|
$10,383
|
-
|
$
154,383
|
||||
|
David
H. Pohl
|
$ 80,000
(5)
|
$10,383
|
-
|
$ 90,383
|
||||
|
Eric
S. Swartz
|
$ 82,000
(4)
|
$10,383
|
-
|
$ 92,383
|
________________________
|
(1)
|
In
fiscal year 2008, each non-employee director was eligible to receive an
annual cash retainer fee of $60,000 per year and was eligible to
receive a fee of $2,000 for each Board meeting attended, whether in-person
or telephonically. In addition, the chairman of the Audit
Committee was eligible to receive an additional annual cash retainer fee
of $60,000. Each non-employee director is also eligible to
receive a fee of $2,000 for each additional Company meeting attended in
excess of four hours in length.
|
|
(2)
|
These
amounts reflect non-cash expense recognized by us in fiscal year 2008 for
a portion of the current year option awards to directors, rather than an
amount paid to or realized by the director. During fiscal year
2008, each Director was granted an option to purchase 250,000 shares of
common stock of the Company at an exercise price of $0.39 per
share. Assumptions used in the valuation of option awards in
accordance with FAS 123R is included in Note 3 “Stock-Based
Compensation” in our Form 10-K for the period ended April 30, 2008,
filed with the SEC on July 14, 2008.
As
of April 30, 2008, each non-employee director held the following number of
shares of common stock underlying outstanding stock
options:
|
|
Director
|
Number
of Shares Underlying Outstanding Stock
Options
|
|
|
Thomas
A. Waltz, M.D.
|
600,000
|
|
|
Carlton
M. Johnson
|
1,300,000
|
|
|
David
H. Pohl
|
600,000
|
|
|
Eric
S. Swartz
|
950,000
|
|
(3)
|
Includes
an annual base retainer of $60,000, an annual retainer of $60,000 for
Mr. Johnson’s role as chairman of the Audit Committee, and meeting
fees of $24,000.
|
|
(4)
|
Includes
an annual retainer of $60,000 and meeting fees of $22,000.
|
|
(5)
|
Includes
an annual retainer of $60,000 and meeting fees of
$20,000.
|
8
|
RATIFY
APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
|
The next
proposal on the agenda for the Annual Meeting will be ratifying the Board’s
appointment of Ernst & Young LLP as the Company’s independent registered
public accounting firm for current fiscal year ending April 30,
2009. Our Board of Directors, upon the recommendation of its Audit
Committee, has ratified the selection of Ernst & Young LLP as our
independent registered public accounting firm for fiscal year 2009, subject to
ratification by our stockholders. Ernst & Young LLP has served in
this capacity for each of the eight (8) years ended April 30, 2008, and has
reported on the Company’s fiscal year 2008 consolidated financial
statements. During the eight (8) fiscal years ended April 30, 2008,
there were no disagreements between the Company and Ernst & Young LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure. The Audit Committee recommended to the
Board that Ernst & Young LLP be re-appointed for fiscal year
2009.
Representatives
of Ernst & Young LLP are expected to be present at the meeting with the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
Stockholder
ratification of the selection of Ernst & Young LLP as the Company’s
independent auditors is not required by the Bylaws or
otherwise. However, the Board is submitting the selection of
Ernst & Young LLP to the stockholders for ratification as a matter of
corporate practice. If the stockholders 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 accounting firm
at any time during the year if the Audit Committee determines that such a change
would be in the best interests of the Company and its stockholders.
Recommendation
THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE
“FOR” PROPOSAL NO. 2 TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR
2009.
Independent
Registered Public Accounting Firm Fees
The following summarizes aggregate fees
billed to the Company for the fiscal years ended April 30, 2008 and 2007 by
Ernst & Young LLP, our independent registered public accounting
firm:
|
2008
|
2007
|
|||||||
|
Audit
fees
|
$ | 293,000 | $ | 339,000 | ||||
|
Audit
related fees
|
- | - | ||||||
|
Tax
fees
|
27,000 | 22,000 | ||||||
|
All
other fees
|
2,000 | 2,000 | ||||||
|
Total
fees
|
$ | 322,000 | $ | 363,000 | ||||
Audit
fees pertain to the audit of our annual consolidated financial statements for
fiscal year 2008 and 2007, including attestation services relating to the report
on our internal controls in accordance with Section 404 of the Sarbanes-Oxley
Act of 2002, and timely reviews of our quarterly consolidated financial
statements, consents, and review of documents filed with the Securities and
Exchange Commission (“SEC”), including registration statements on Form
S-3.
Tax fees relate to tax compliance
services rendered in the preparation of our tax returns.
All other fees are attributable to the
Company’s subscription to an Ernst & Young LLP online service used for
accounting research purposes for fiscal year 2008 and 2007.
9
Pre-Approval
Policy for Services Provided by our Independent Registered Public Accounting
Firm
The Audit
Committee has established a policy to pre-approve all audit and permissible
non-audit services provided by our independent registered public accounting firm
consistent with applicable SEC rules. From and after the effective
date of the SEC rule requiring Audit Committee pre-approval of all audit and
permissible non-audit services provided by an independent registered public
accounting firm, the Audit Committee has pre-approved all audit and permissible
non-audit services provided by Ernst & Young LLP.
Ernst & Young LLP did not perform
any professional services with respect to information systems design and
implementation for the years ended April 30, 2008 and 2007. The Audit
Committee has considered whether the services provided by Ernst & Young LLP
are compatible with maintaining that firm’s independence.
Report
of the Audit Committee of the Board of Directors(*)
Each year, the Board of Directors
appoints an Audit Committee to review the Company’s financial matters. We
operate pursuant to a written Audit Committee Charter adopted by the Board of
Directors. In accordance with the Audit Committee Charter, we must
meet the independence requirements and other criteria set by the NASDAQ
Marketplace Rules as currently in effect. As part of our oversight of
our Company’s financial statements, our Chairman of the Audit Committee reviews
and discusses with both management and Ernst & Young LLP all annual and
quarterly financial statements prior to their issuance. In addition,
our responsibilities include recommending to the Board an accounting firm to be
hired as the Company’s independent registered public accounting
firm. We are also responsible for recommending to the Board that the
Company’s financial statements be included in its Annual Report. We
have taken the following steps in making our recommendation that the Company’s
financial statements be included in its Annual Report:
|
|
1.
|
The
Audit Committee discussed with Ernst & Young LLP, the Company’s
independent registered public accounting firm, for fiscal year ended April
30, 2008, those matters required to be discussed by Statement on Auditing
Standards No. 61, including information regarding the scope and results of
the audit. These communications and discussions are intended to
assist the Audit Committee in overseeing the financial reporting and
disclosure process.
|
|
|
2.
|
The
Audit Committee discussed with Ernst & Young LLP its independence and
received from Ernst & Young LLP a letter concerning independence as
required under applicable independence standards for auditors of public
companies. This discussion and disclosure helped the Audit
Committee in evaluating such
independence.
|
|
|
3.
|
The
Audit Committee reviewed and discussed with the Company’s management and
Ernst & Young LLP, the Company’s audited consolidated balance sheet at
April 30, 2008, and consolidated statements of operations, cash flows and
stockholders’ equity for the fiscal year ended April 30,
2008.
|
Based on
the reviews and discussions explained above, the Audit Committee recommended to
the Board that the Company’s financial statements be included in its annual
report for its fiscal year ended April 30, 2008. The Audit Committee
also recommended to the Board the selection of Ernst & Young LLP to serve as
the Company’s independent registered public accounting firm for fiscal year
2009.
THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Carlton M.
Johnson, Chairman of
the Audit Committee
David
H. Pohl
Eric
S. Swartz
Thomas
A. Waltz, M.D.
____________________________
* The report of the Audit Committee
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
10
|
AMEND OUR CERTIFICATE OF
INCORPORATION
TO EFFECT A REVERSE STOCK
SPLIT
|
Introduction
Our Board
of Directors (“Board”) is seeking approval of an amendment to our certificate of
incorporation to give the Board’s authorization to effect a reverse stock split
of our common stock issued and outstanding (the “Amended Certificate”), without
further approval of our stockholders, upon a determination by our Board that
such a reverse stock split is in the best interests of our company and our
stockholders, at any time before our 2009 annual meeting of stockholders.
The full text of the proposed Amended Certificate is attached to this
Proxy Statement as Exhibit
A.
The
Amended Certificate as approved by our Board of Directors does not specify an
exact ratio for the reverse stock split, but rather stipulates a range of
between one-for-three and one-for-ten (the “Reverse Split”). As such,
in asking the stockholders to approve the Reverse Split, the Board is also
asking the stockholders to grant to them the authority to set the ratio for the
Reverse Split. The Board of Directors, in its sole discretion, can
elect to abandon the Reverse Split in its entirety or can determine an
appropriate Reverse Split ratio between three and ten to one, depending on
market conditions. In setting the ratio for the Reverse Split, the
intention of our Board of Directors would be to increase the stock price
sufficiently above the $1.00 minimum bid price requirement that is required for
continued listing on the NASDAQ Capital Market in order to sustain long term
compliance with the listing requirements of the NASDAQ Capital
Market.
If the
Board of Directors implements the Reverse Split, the exact ratio for the Reverse
Split will be fixed by the Board and a written notice of such determination will
be distributed to the stockholders. We believe that this discretion
is essential because it provides the Board with the maximum flexibility to react
to changing market conditions and to therefore act in the best interests of our
Company and our stockholders. Additionally, obtaining stockholder
approval of the Reverse Split will enable us to avoid the additional time and
expense of holding a special meeting of stockholders should our Board determine
that it is in our best interest to implement the Reverse Split.
One
principal effect of the Reverse Split would be to decrease the number of
outstanding shares of our common stock. Except for minimal adjustments
that may result from the treatment of fractional shares as described below, the
Reverse Split will not have any dilutive effect on our stockholders since each
stockholder would hold the same percentage of common stock outstanding
immediately following the Reverse Split as such stockholder held immediately
prior to the Reverse Split. The relative voting and other rights that
accompany the shares of common stock would not be affected by the Reverse
Split.
Although
the Reverse Split will not have any dilutive effect on our stockholders, the
proportion of shares owned by our stockholders relative to the number of shares
authorized for issuance will decrease. As a result, the additional
authorized shares of common stock will be available for issuance at such times
and for such purposes as the Board of Directors may deem advisable without
further action by our stockholders, except as required by applicable laws and
regulations. We do not have any present plan or intention to issue
the additional shares of authorized but unissued common stock that would become
available as a result of the proposed Reverse Split.
The Reverse Split is not part of a
broader plan to take the Company private.
Reasons
for the Reverse Split
The Board
of Director’s primary objective in proposing the Reverse Split is to raise the
per share trading price of our common stock. The Board believes that
by increasing the market price per share of our common stock, the Company may
meet and maintain compliance with the listing requirements of the NASDAQ Capital
Market. The Board believes that the liquidity and marketability
of our common stock will be adversely affected if it is not quoted on a national
securities exchange as investors can find it more difficult to dispose of, or to
obtain accurate quotations as to the market value of, our common
stock. The Board believes that current and prospective investors will
view an investment in our common stock more favorably if our common stock
remains quoted on the NASDAQ Capital Market.
11
The Board
also believes that the Reverse Split and any resulting increase in the per share
price of our common stock should also enhance the acceptability and
marketability of our common stock to the financial community and investing
public. Many institutional investors have policies prohibiting them
from holding lower-priced stocks in their portfolios, which reduces the number
of potential buyers of our common stock. Additionally, analysts at
many brokerage firms are reluctant to recommend lower-priced stocks to their
clients or monitor the activity of lower-priced stocks. Brokerage
houses also frequently have internal practices and policies that discourage
individual brokers from dealing in lower-priced stocks. Further,
because brokers’ commissions on lower-priced stock generally represent a higher
percentage of the stock price than commissions on higher priced stock, investors
in lower-priced stocks pay transaction costs which are a higher percentage of
their total share value, which may limit the willingness of individual investors
and institutions to purchase our common stock.
We cannot
assure you that the Reverse Split will have any of the desired effects described
above. More specifically, we cannot assure you that after the Reverse
Split the market price of our common stock will increase proportionately to
reflect the ratio for the Reverse Split, that the market price of our common
stock will not decrease to its pre-split level, that our market capitalization
will be equal to the market capitalization before the Reverse Split, or that we
will be able to maintain our listing on the NASDAQ Capital Market.
NASDAQ
Requirements for Continued Listing on the NASDAQ Capital Market
The
Company’s common stock is currently quoted on the NASDAQ Capital Market under
the symbol “PPHM.” On July 25, 2007, we received a deficiency notice
from The NASDAQ Stock Market notifying us that we had not met the $1.00 minimum
closing bid price requirement for thirty consecutive trading days as required
under NASDAQ listing rules. According to the NASDAQ notice, we were
automatically afforded an initial “compliance period” of 180 calendar days, or
until January 22, 2008, to regain compliance with this
requirement. After the initial 180 calendar day period, we remained
noncompliant with the minimum closing bid price requirement but because we were
in compliance with all other initial listing requirements, we were afforded an
additional “compliance period” of 180 calendar days, or until July 21,
2008. Because we did not regain compliance, e.g., the closing bid
price of the Company’s common stock did not meet or exceed $1.00 per share for a
minimum of ten (10) consecutive business day prior to July 21, 2008, on July 22,
2008 we received a notice from The NASDAQ Stock Market indicating that we were
not in compliance with the minimum bid price requirement for continued listing,
and as a result our common stock is subject to delisting. On July 28,
2008, we requested a hearing with the NASDAQ Listing Qualifications Panel
(“Panel”) to review the delisting determination. Our request for a
hearing will stay the delisting pending a decision by the Panel. The
hearing date has been set by the Panel for September 4, 2008. At the
hearing, we will present to the Panel our definitive plan to achieve and sustain
long-term compliance with the listing requirements of the NASDAQ Capital
Market. If the Panel agrees, it has discretion to grant us a
conditional listing (exemption) for an additional period of time not to exceed
the earlier of 90 days from the date of its decision or 180 days from the date
of the delisting notification. Such conditional listing (exemption)
will allow us time to conduct our 2008 Annual Meeting and seek stockholder
approval of this Proposal No. 3. If the Proposal No. 3 is approved by
the stockholders, we will then have time to file the amendment to effect the
reverse split and thereafter have a closing bid price of at least $1.00 for a
minimum of ten (10) consecutive business days.
The Board
of Directors has considered the potential harm to the Company of a delisting
from the NASDAQ Capital Market and believes it is in the best interests of the
Company and our stockholders for the Company to regain compliance with the
minimum bid price listing standard.
12
Potential
Disadvantages of a Reverse Stock Split
As noted
above, the principal purpose of the Reverse Split would be to help increase the
per share market price of our common stock by a factor of between three and
ten. We cannot assure you, however, that the Reverse Split will
accomplish this objective for any meaningful period of time. While we
expect that the reduction in the number of outstanding shares of common stock
will increase the market price of our common stock, we cannot assure you that
the Reverse Split will increase the market price of our common stock by a
multiple equal to the number of pre-split shares in the Reverse Split ratio to
be determined by the Board of Directors, or result in any permanent increase in
the market price of our stock, which is dependent upon many factors, including
our business and financial performance, general market conditions, and prospects
for future success. Should the market price decline after the Reverse
Split, the percentage decline may be greater, due to the smaller number of
shares outstanding, than it would have been prior to the Reverse
Split. In some cases, the per share stock price of companies that
have effected reverse stock splits has subsequently declined back to pre-reverse
split levels. Accordingly, we cannot assure you that the market price
of our common stock immediately after the effective date of the Reverse Split
will be maintained for any meaningful period of time, that the ratio of post-
and pre-split shares will remain the same after the Reverse Split is effected,
or that the Reverse Split will not have an adverse effect on our stock price due
to the reduced number of shares outstanding after the Reverse
Split. A reverse stock split is often viewed negatively by the market
and, consequently, can lead to a decrease in our overall market
capitalization. If the per share market price does not increase
proportionately as a result of the Reverse Split, then the value of the Company
as measured by our stock capitalization will be reduced, perhaps
significantly.
The
number of shares held by each individual stockholder would be reduced if the
Reverse Split is implemented. This will increase the number of
stockholders who hold less than a “round lot,” or 100
shares. Typically, the transaction costs to stockholders selling “odd
lots” are higher on a per share basis. Consequently, the Reverse
Split could increase the transaction costs to existing stockholders in the event
they wish to sell all or a portion of their position.
Although
the Board believes that the decrease in the number of shares of our common stock
outstanding as a consequence of the Reverse Split and the anticipated increase
in the market price of our common stock could encourage interest in our common
stock and possibly promote greater liquidity for our stockholders, such
liquidity could also be adversely affected by the reduced number of shares
outstanding after the Reverse Split.
Effecting
the Reverse Split
If
approved by stockholders at the Annual Meeting and our Board of Directors decide
that it is in the best interests of the Company and our stockholders to effect a
reverse stock split, the Amended Certificate will be filed and the establishment
of an appropriate ratio for the Reverse Split will be established based on
several factors existing at the time. Our Board will consider, among
other factors, prevailing market conditions, the likely effect of the Reverse
Split on the market price of our common stock, and on our compliance with
applicable listing requirements, and the marketability and liquidity of our
common stock. The actual timing of the filing of the Amended
Certificate with the Secretary of State of the State of Delaware to effect the
Reverse Split will be determined by the Board. Also, if for any
reason the Board deems it advisable to do so, the Reverse Split may be abandoned
at any time prior to the filing of the Amended Certificate, without further
action by our stockholders. The Reverse Split will be effective as of
the date and time set forth in the Amended Certificate (the “Effective
Time”).
Upon the
filing of the Amended Certificate, without further action on the part of the
Company or the stockholders, the outstanding shares of common stock held by
stockholders of record as of the Effective Time would be converted into a lesser
number of shares of common stock calculated in accordance with the terms of the
Amended Certificate, such reduced number of shares being referred to herein as
the “New Common Stock,” based on a reverse split ratio of between one-for-three
and one-for-ten. For example, if you presently hold 1,000 shares of
common stock, you would hold 200 shares of common stock following a one-for-five
reverse split.
13
Effect
on Outstanding Shares, Options, and Certain Other Securities
If the
Reverse Split is implemented, the number of shares of our common stock owned by
each stockholder will be reduced in the same proportion as the reduction in the
total number of shares outstanding, such that the percentage of our common stock
owned by each stockholder will remain unchanged except for any de minimis change
resulting from the issuance of one whole share in exchange for any fractional
shares that such stockholder would have received as a result of the Reverse
Split. The number of shares of common stock that may be purchased
upon exercise of outstanding options or other securities convertible into, or
exercisable or exchangeable for, shares of our common stock, and the exercise or
conversion prices for these securities, will also be adjusted in accordance with
their terms as of the Effective Time.
Pursuant
to the Rights Agreement (the “Rights Agreement”), dated as of March 16,
2006 between the Company and Integrity Stock
Transfer Inc. (the “Rights Agent”), following the Reverse Split, the
number of rights (“Rights”) associated with each share of our common stock
issued and outstanding shall be
proportionately increased by the factor of the Reverse Split. For
example, if the Reverse Split is one-for-five, then each share of common stock
following the Reverse Split will have 5 Rights. In accordance with
Section 12 of the Rights Agreement, this Proxy Statement shall also serve
as the certificate relating to an adjustment of Rights that is required to be
filed with the Rights Agent and mailed to each stockholder.
Effect
on Par Value
The amendment to our certificate of
incorporation, if the proposed reverse stock split is implemented, will not
change the per share par value of our common stock.
Effect
on Registration and Stock Trading
Our
common stock is currently registered under Section 12(b) of the 1934 Act
and we are subject to the periodic reporting and other requirements of the 1934
Act. The proposed reverse stock split will not affect the registration of our
common stock under the 1934 Act.
If the
proposed reverse stock split is implemented, our common stock will continue to
be reported on the NASDAQ Capital Market under the symbol “PPHM” (although the
letter “d” will be added to the end of the trading symbol for a period of 20
trading days from the effective date of the reverse stock split to indicate that
the reverse stock split has occurred).
Mechanics
of Reverse Stock Split
If this
Proposal No. 3 is approved by the stockholders at the Annual Meeting and
our Board of Directors decides that it is in the best interests of the Company
and our stockholders to effectuate a reverse stock split (i.e., we have not
otherwise regained compliance with NASDAQ’s minimum bid requirement),
stockholders will be notified that the reverse stock split has been
effected. The mechanics of the reverse stock split will differ depending
upon whether shares held in brokerage accounts or “street name” or whether
they are registered directly in a stockholder’s name and held in certificate
form.
|
|
·
|
Persons
who hold their shares in brokerage accounts or "street name" would not be
required to take any further action to effect the exchange of their
shares. If a stockholder’s shares are held in street name, the number
of shares the stockholder holds will automatically be adjusted to reflect
the reverse stock split on the effective date rounded up to the nearest
whole share if the number of shares are not evenly divisible by the ratio
of the Reverse Split.
|
|
|
·
|
If
a stockholder’s shares are registered directly in the stockholder’s name
and are certificated, as of the Effective Time of the Reverse Split, if
effected, each certificate representing shares of our common stock before
the reverse stock split would be deemed, for all corporate purposes, to
evidence ownership of the reduced number of shares of our common stock
resulting from the Reverse Split, and will be automatically rounded up to
the next whole share if not evenly divisible by the ratio of the Reverse
Split. The number of exact shares each stockholder owns will
also be maintained by Integrity Stock Transfer (the “Transfer
Agent”). THEREFORE, STOCKHOLDERS ARE NOT REQUIRED TO TAKE ANY
FURTHER ACTION AND SHOULD NOT SUBMIT INSTRUCTIONS TO THE TRANSFER AGENT
REQUESTING TO EXCHANGE THEIR CERTIFICATES OF PRE-SPLIT SHARES FOR
CERTIFICATES REPRESENTING POST-SPLIT SHARES. Each current outstanding
stock certificate as of the Effective Time, shall be deemed valid and
outstanding for the reduced number of shares of our common stock resulting
from the Reverse Split, and will be automatically rounded up to the next
whole share if not evenly divisible by the ratio of the Reverse
Split.
|
14
Payment
for Fractional Shares
No
fractional shares of common stock would be issued as a result of the proposed
reverse stock split. Instead, stockholders who otherwise would be entitled to
receive fractional shares because they hold a number of shares not evenly
divisible by the ratio of the Reverse Split, will automatically be entitled to
receive an additional share of common stock.
For
example, if the Board selects a Reverse Split of one-for-five, then a
stockholder who holds 52 shares on a pre-split basis would be issued eleven (11)
whole shares on a post-split basis.
Accounting
Consequences
The
Reverse Split will not affect the common stock capital account on our balance
sheet. However, because the par value of our common stock will remain
unchanged on the Effective Time, the components that make up the common stock
capital account will change by offsetting amounts. Specifically, on
our balance sheet, the common stock value would be adjusted downward in respect
of the shares of the New Common Stock to be issued in the Reverse Split, such
that the common stock value would become an amount equal to the aggregate par
value of the shares of New Common Stock being issued in the Reverse
Split. The additional paid-in capital amount recorded on our balance
sheet would be increased by an amount equal to the amount by which the common
stock was decreased. Additionally, net loss per share would increase
proportionately as a result of the Reverse Split since there would be fewer
shares outstanding.
No
Dissenter’s Rights
Under the
Delaware General Corporation Law, stockholders will not be entitled to
dissenter’s rights with respect to the proposed Amended Certificate to effect
the reverse stock split, and the Company does not intend to independently
provide stockholders with any such right.
Federal
Income Tax Consequences
The
following is a summary of the material United States federal income tax
consequences of the Reverse Split that we anticipate would affect our
stockholders. This summary is based on the United States federal
income tax laws as currently in effect and interpreted, and does not take into
account possible changes in such laws or interpretations. This
summary is provided for your general information only and does not address all
aspects of the possible federal income tax consequences of the Reverse Split and
IS NOT INTENDED AS TAX ADVICE
TO ANY PERSON. In particular, this summary does not consider
the federal income tax consequences to our stockholders in light of their
individual investment circumstances or to holders subject to special treatment
under the federal income tax laws, and does not address any consequences of the
Reverse Split under any state, local or foreign tax laws.
ACCORDINGLY,
YOU MUST CONSULT WITH YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES
OF THE REVERSE SPLIT TO YOU, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL,
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
We
believe that our stockholders who exchange their pre-Reverse Split shares of
common stock solely for post-Reverse Split shares of common stock should
generally recognize no gain or loss for federal income tax
purposes. A stockholder’s aggregate tax basis in the post-Reverse
Split shares of common stock to be received should be the same as the aggregate
tax basis in the pre-Reverse Split shares of common stock to be
exchanged. The holding period of the post-Reverse Split shares of
common stock received should include the period during which the surrendered
common stock was held, provided all such common stock was held as a capital
asset at the Effective Time.
The
Company will not recognize any gain or loss for accounting or tax purposes as a
result of the Reverse Split.
15
Our
beliefs regarding the tax consequences of the Reverse Split are not binding upon
the Internal Revenue Service, federal, state or local courts, and there can be
no assurance that the Internal Revenue Service or the courts will concur with
the positions expressed above. The state and local tax consequences
of the Reverse Split may vary significantly as to each stockholder, depending on
where he or she resides.
Vote
Required
Provided
a quorum is present, the affirmative vote of a majority of the voting power of
the outstanding shares of common stock is required to approve the amendment to
our certificate of incorporation that would allow our Board of Directors to
effect the Reverse Split and grant the Board the authority, in its sole
discretion, to establish the ratio for the Reverse Split at up to one-for-ten
(but not less than one-for-three), or to abandon the amendment and the Reverse
Split contemplated thereby. Votes may be cast for or against the
proposal or you may abstain. Votes that abstain and broker non-votes
will have the effect of a vote against the proposal, as the approval requires a
majority in voting power of the outstanding shares of common stock to vote in
favor of the proposal.
Recommendation
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE “FOR” PROPOSAL NO. 3 TO APPROVE THE AMENDMENT TO OUR
CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT.
Introduction
On August
8, 2008, the Compensation Committee recommended and our Board of Directors
approved, subject to stockholder approval, the 2008 Stock Incentive Plan (the
“Incentive Plan”). The Board of Directors approved the Incentive Plan to
help us:
|
|
·
|
Attract,
retain, motivate and reward officers, employees, directors, consultants
and other service providers of the
Company;
|
|
|
·
|
Provide
equitable and competitive compensation
opportunities;
|
|
|
·
|
Recognize
individual contributions and reward achievement of our goals;
and
|
|
|
·
|
Promote
creation of long-term value for stockholders by closely aligning the
interests of participants with the interests of
stockholders.
|
The Board of Directors and the
Compensation Committee believe that awards linked to common stock and awards
with terms tied to our performance can provide incentives for the achievement of
important performance objectives and promote the long-term success of the
Company. Therefore, they view the Incentive Plan as a key element of our
overall compensation program.
The
material features of the Incentive Plan are summarized below. The
summary is qualified in its entirety by reference to the specific provisions of
the Incentive Plan, the full text of which is set forth as Exhibit
B to this Proxy Statement.
Administration
The
Compensation Committee, composed of not less than two independent directors
appointed by the Board, will administer the Incentive Plan. Each
member of the Compensation Committee shall, at all times during their service as
such, be a “non-employee director” within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934. In the case of options intended to
qualify as “performance-based compensation” within the meaning of
Section 162(m) of the Internal Revenue Code, the committee will consist of
two or more “outside directors” within the meaning of Section 162(m) of the
Code. The Compensation Committee shall have conclusive authority to
construe and interpret the Incentive Plan and any award agreement entered into
under the Incentive Plan, and to establish, amend and rescind administrative
policies for the administration of the Incentive Plan and such additional
authority as the Board may from time to time determine is necessary or
desirable.
16
Eligibility
Those
persons eligible to participate in the Incentive Plan shall include officers and
other employees, non-employee directors and consultants of the Company and its
subsidiaries.
Shares
Subject to the Incentive Plan
The total
number of shares of Common Stock available under the Incentive Plan shall be
15,000,000, subject to adjustment as provided in the Incentive
Plan. In the event that Proposal No. 3 is approved by the
stockholders, and the Reverse Split is effected, the foregoing share amount will
be reduced proportionately based upon the reverse split ratio.
Participation
The
Compensation Committee shall select, from time to time, officers, employees,
non-employee directors and consultants who, in the opinion of the Compensation
Committee, can further the Incentive Plan’s purpose, and the Compensation
Committee shall determine the type or types of awards to be made to the
participants. The terms, conditions and restrictions of each award
shall be set forth in an award agreement.
Structure
of the Incentive Plan
The
Incentive Plan shall be divided into two separate equity programs, (i) the
“Discretionary Option Grant Program” under which eligible persons may, at the
discretion of the Incentive Plan Administrator, be granted options to purchase
shares of common stock, and (ii) the “Stock Issuance Program” under which
eligible persons may, at the discretion of the Incentive Plan Administrator, be
issued shares of common stock directly, either through the immediate purchase of
such shares or as a bonus for services rendered to the Company (or any parent or
subsidiary).
Change
in Control
In the event of a “change in control”
of the Company, stock options not otherwise exercisable shall become fully
exercisable.
Federal
Income Tax Aspects
The
following paragraphs are a summary of the general federal income tax
consequences to U.S. taxpayers and the Company in connection with awards granted
under the Incentive Plan. Tax consequences for any particular
individual may be different, and each individual should consult his or her tax
advisor regarding the specific tax consequences of any award grants under the
Incentive Plan. This summary is not intended to be exhaustive and
does not describe all federal, state or local tax laws.
Non-Statutory Stock
Options. No taxable income is reportable when a
non-statutory stock option is granted to a participant. Upon
exercise, the participant will recognize ordinary income in an amount equal to
the excess of the fair market value (on the exercise date) of the shares
purchased over the exercise price of the option. Any additional gain
or loss recognized upon any later disposition of the shares would be capital
gain or loss.
Incentive Stock
Options. No taxable income is reportable when an
incentive stock option is granted or exercised (except for purposes of the
alternative minimum tax, in which case taxation is the same as for nonqualified
stock options). If the participant exercises the option and then
later sells or otherwise disposes of the shares more than two years after the
grant date and more than one year after the exercise date, the difference
between the sale price and the exercise price will be taxed as capital gain or
loss. If the participant exercises the option and then later sells or
otherwise disposes of the shares before the end of the two- or one-year holding
periods described above, he or she generally will have ordinary income at the
time of the sale equal to the fair market value of the shares on the exercise
date (or the sale price, if less) minus the exercise price of the
option.
Restricted
Stock. A participant will not have taxable income
upon grant unless he or she elects to be taxed at that time. Instead,
he or she will recognize ordinary income at the time of vesting equal to the
fair market value (on the vesting date) of the shares or cash received minus any
amount paid for the shares.
17
Tax Effect on
Company. The Company generally will be entitled to a tax
deduction in connection with an award under the Incentive Plan in an amount
equal to the ordinary income realized by a participant and at the time the
participant recognizes such income (for example, the exercise of a nonqualified
stock option). Special rules limit the deductibility of compensation
paid to our Chief Executive Officer and to each of our four most highly
compensated executive officers. Under Section 162(m) of the Internal
Revenue Code (the “Code”), the annual compensation paid to any of these
specified executives will be deductible only to the extent that it does not
exceed $1,000,000. However, the Company can preserve the
deductibility of certain compensation in excess of $1,000,000 if the conditions
of Section 162(m) are met.
Section
280G. To the extent payments which are contingent on a change
in control are determined to exceed certain Code limitations on “golden
parachutes”, they may be subject to a 20% nondeductible excise tax and our
deduction with respect to the associated compensation expense may be disallowed
in whole or in part.
Section
409A. We intend for awards granted under the plan to comply
with Section 409A of the Internal Revenue Code. To the extent a
grantee would be subject to the additional 20% tax imposed on certain
nonqualified deferred compensation plans as a result of a provision of an award
under the plan, the provision will be deemed amended to the minimum extent
necessary to avoid application of the 20% additional tax.
Incentive
Plan Benefits
The exact
types and amounts of any awards to be made by the Committee to any eligible
employees pursuant to the Incentive Plan are not presently
determinable. As a result of the discretionary nature of the
Incentive Plan, it is not possible to state who the participants in such
Incentive Plan will be, the number of options or other awards to be received by
any person or group, or the benefits or amounts that would have been received by
certain persons or groups under such Incentive Plan during the last fiscal year
if the Incentive Plan had been in effect during that year.
Approval
of the Incentive Plan
Approval of the Incentive Plan requires
the affirmative vote of a majority of votes cast. Broker non-votes
will not be treated as votes cast for purposes of determining approval of such
proposal and will not be counted as votes for or against such
proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE
APPROVAL OF THE 2008 STOCK INCENTIVE PLAN.
18
|
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
MANAGEMENT
|
Share
Ownership
The
following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of August 15, 2008, by: (i) each
stockholder known to us to beneficially own more than 5% of our Common Stock;
(ii) each director and director nominee; (iii) our Chief Executive Officer,
Chief Financial Officer, and our other Named Executive Officer for the year
ended April 30, 2008; and (iv) all directors, director nominees, and Named
Executive Officers of the Company as a group. In general, “Beneficial
Ownership” refers to shares that an individual or entity has the power to vote
or dispose of, and any rights to acquire Common Stock that are currently
exercisable or will become exercisable within 60 days of August 15,
2008. Unless otherwise indicated, each person named below holds sole
investment and voting power, other than the powers that may be shared with the
person’s spouse under applicable law.
|
Beneficial
Ownership of
Common
Stock
|
||||||||
|
Name
of Beneficial Owner (a)
|
Number
of Shares
|
Percent
(b)
|
||||||
|
Carlton
M. Johnson
|
1,132,043 | (c) |
*
|
|||||
|
Steven
W. King
|
1,273,638 | (c) |
*
|
|
||||
|
David
H. Pohl
|
453,750 | (c) |
*
|
|||||
|
Eric
S. Swartz
|
3,524,642 | (c)(d) |
1.55%
|
|||||
|
Thomas
A. Waltz, M.D.
|
446,250 | (c) |
*
|
|||||
|
F.
David King
|
161,685 | (c) |
*
|
|||||
|
Paul
J. Lytle
|
831,416 | (c) |
*
|
|||||
|
All
directors, director nominees and executive officers
as a group (7 persons) |
7,823,424 | (c)(d) |
3.39%
|
|||||
_____________________
* Less than 1% of the outstanding shares of our Common
Stock.
|
|
(a)
|
The
address of all of our executive officers and directors is in c/o Peregrine
Pharmaceuticals, Inc., 14282 Franklin Avenue, Tustin, California,
92780.
|
|
|
(b)
|
Percent
of Common Stock computed on the basis of shares outstanding at
August 15, 2008, plus shares that could be acquired through the exercise
of stock options that will become exercisable within 60 days of August 15,
2008.
|
|
|
(c)
|
Includes
shares which the individuals shown above have the right to acquire as of
August 15, 2008, or within 60 days thereafter, pursuant to
outstanding stock options as follows: Mr. Johnson – 1,093,750 shares; Mr.
Steven King – 1,182,083 shares; Mr. Pohl – 443,750 shares; Mr. Swartz –
793,750 shares; Dr. Waltz – 443,750 shares; Mr. F. David King – 100,000;
and Mr. Lytle – 754,583 shares. Such shares are deemed to be
outstanding in calculating the percentage ownership of such individual
(and the group), but are not deemed to be outstanding as to any other
person.
|
|
|
(d)
|
Includes
538,693 shares of Common Stock owned by Swartz Ventures, Inc. and 264,887
shares held in an Individual Retirement Account (“IRA”) for the benefit of
Mr. Swartz. Mr. Swartz has sole control over Swartz Ventures,
Inc. and his IRA.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Exchange Act requires our executive officers and directors, and persons
who own more than 10% of a registered class of our equity securities (“Reporting
Persons”), to file reports of ownership and changes in ownership with the SEC
and with The NASDAQ Stock Market. Reporting Persons are required by
SEC regulations to furnish us with copies of all forms they file pursuant to
Section 16(a). Based solely on our review of the copies of such
reports we received, and written representations from certain Reporting Persons
that no other reports were required for those persons, to the best of our
knowledge, we believe that during the year ended April 30, 2008, each of the
Reporting Persons met all applicable Section 16(a) filing requirements
other than Mr. Pohl who inadvertently did not timely file a Form 4 following his
marriage to his current spouse who owned 10,000 shares of our common stock at
the time of their marriage and subsequently transferred such shares into a joint
account during fiscal year 2008.
19
Compensation
Philosophy and Policies
Executive
compensation programs affect all employees by setting general levels of
compensation and helping to create an environment of goals, rewards and
expectations. Because we believe the performance of every employee is
important to our success, we are mindful of the effect executive compensation
and incentive programs have on all of our employees.
Our Compensation
Committee (the “Committee”) continuously evaluates the performance, and no
less frequently than annually, determines or modifies the compensation of our
Chief Executive Officer (“CEO”) and our other executive officers based upon a
number of factors, including our attainment of certain corporate goals and
clinical milestones approved by the Committee, individual performance and
contribution towards the attainment of our corporate goals, levels of
responsibility and experience, and breadth of knowledge. In addition,
we currently do not fund retirement programs, company cars or other expensive
perquisites for our executives.
The
employment market for personnel and executives with experience in the
biotechnology and pharmaceutical industry in Southern California is very
competitive because there are many pharmaceutical, biotechnology and medical
device companies in that region. The majority of our competitors in
this geographic area have more resources than we do which makes it more
difficult for us to hire and retain key personnel. As a result, the
Committee must establish compensation packages that will enable the Company to
be competitive with the local market.
Given the
competitive environment in which we operate, the compensation philosophy of the
Committee with respect to our executive officers, including the CEO,
is:
|
|
·
|
to
maintain an overall compensation structure designed to attract, retain and
motivate executives of outstanding ability who are critical to our
long-term success by providing appropriate levels of risk and reward, in
proportion to individual contribution and
performance;
|
|
|
·
|
to
establish appropriate incentives to further the Company’s long-term
strategic plan and to hold executives accountable, through their
compensation, for their individual and corporate performance;
and
|
|
|
·
|
to
align the interests of executives with those of the
stockholders.
|
The Chief Executive Officer, who
attends most meetings of the Compensation Committee, assists the Committee in
determining the compensation of all other executive officers by, among other
things:
|
|
·
|
Setting
the base salaries of the other executive officers within limits
established by the Committee;
|
|
|
·
|
Establishing
annual individual performance objectives for the other executive officers
and evaluating their performance against such objectives (the Committee
reviews these performance
evaluations); and
|
|
|
·
|
Making
recommendations, from time to time, for special stock option grants (e.g.,
for motivational or retention purposes) to other executive
officers.
|
The other executive officers do not
have a role in determining their own compensation, other than discussing their
annual individual performance objectives with the President and Chief Executive
Officer.
Components
of Our Executive Compensation Program
We do not
have any formal or informal policy or target for allocating compensation between
long-term and short-term compensation or between cash and non-cash
compensation. Instead, the Committee, after reviewing information
gathered from an outside compensation database, determines subjectively what it
believes to be the appropriate level and mix of the various compensation
components.
20
The primary elements of our executive
compensation program are:
|
·
|
base
salary;
|
|
·
|
annual
incentive bonuses paid in cash or
stock;
|
|
·
|
stock
option awards; and
|
|
·
|
severance,
change in control and other
benefits.
|
Base
Salary
Base
salary is used to recognize the experience, skills, knowledge and
responsibilities required of all our employees, including our
executives. When establishing base salaries for fiscal year 2008, the
Committee considered various data regarding the base salaries of executive
officers in comparable positions at other biotechnology
companies. Additional factors included, but were not limited to,
company size, market capitalization, stage of development of a company’s
products and geographic location. The Committee also considered the
individual experience level and actual performance of each executive officer in
light of Peregrine’s needs and objectives. The Committee did not
retain the services of a compensation consultant because it felt that
compensation levels were well within the range of comparable companies in the
geographical area, and therefore did not feel the additional cost was
justifiable.
Base
salaries are reviewed at least annually by our Compensation Committee, and may
be adjusted to realign salaries with market levels after taking into account
individual responsibilities, performance and experience, subject to minimum
salary requirements set forth in applicable employment
agreements. Base salaries may be increased for merit reasons, based
on the executive’s success in meeting or exceeding individual performance
objectives as well as our combined success in meeting corporate goals,
including research and clinical milestones. An executive’s base
salary is also evaluated by reviewing the executive’s other compensation
components to ensure that the executive’s total compensation is in line with our
overall compensation philosophy as discussed above. Mr. Steven King’s
annual base salary is well within the range of comparable companies at $353,750
and has remained unchanged since May 7, 2006.
Annual
Incentive Bonus
The
Compensation Committee believes that a necessary component of our executive
compensation program is an annual incentive bonus. Although the Company
and its employees achieved a number of important milestones during fiscal year
2008, the Committee did not implement a formal incentive bonus program in an
effort to conserve financial resources. Currently, for fiscal year
2009, the Committee is in the process of developing a program that will reward
executives for the attainment of to be determined corporate goals.
Stock
awards to our executive officers are periodically granted by the Board of
Directors at their discretion. The grant date of annual and other
grants is either on the date the Board of Directors approves the grants or
on a pre-selected later date, such as a future hire date. In January
2008, the Board of Directors approved a broad grant of stock options to all
employees, executive officers and non-employee directors of
Peregrine. The number of shares underlying the stock options granted
to all employees and executive officers was based on a formula which considered
years of service with the Company and the Compensation Committee’s evaluation of
each recipient’s contributions to the Company. Prior to this grant,
the Board of Directors had not granted any stock options to any Named Executive
Officers since October 2003 other than a new hire grant to Mr. David King on
October 24, 2005, which grant was in accordance with the Company’s option
granting policies.
21
Severance,
Change-in-Control, and Other Benefits
Steven W.
King is subject to an employment agreement with us dated March 19, 2003,
pursuant to which he is employed as our President and Chief Executive
Officer. The agreement provides for an initial annual base salary of
$270,000 and the grant of a stock option to purchase up to 200,000 shares of
Common Stock, which option vested monthly over a period of 24
months. The agreement provides that Mr. King shall serve as President
and Chief Executive Officer for a minimum of six months. Thereafter,
Mr. King may terminate his employment upon 90 days notice. Upon such
termination, Mr. King shall receive six months’ base salary as
severance. We may terminate Mr. King’s employment at any time for
“cause” (as defined in the agreement). If Mr. King’s employment is
terminated by us for any reason other than “cause”, or within 90 days following
a “Change in Control” (as defined in the agreement), Mr. King shall receive six
months’ base salary as severance, benefit continuation for six months, and two
years to exercise any vested options. Mr. King’s annual base salary
has been $353,750 since May 7, 2006 and has remained unchanged through fiscal
year 2008.
In
addition, we maintain broad-based benefits that are provided to all employees,
including health, dental, and vision insurance, life and disability insurance
and a 401(k) plan. Under the 401(k) plan, executive officers are
allowed to contribute on the same basis as other employees of the Company as
determined by IRS regulations. To date, we have not made any matching
employee contributions to the 401(k) plan. In addition, executive
officers are eligible to participate in the same employee benefit plans as all
other employees. The cost of health and dental insurance was 100%
covered by the Company for executive officers during fiscal year
2008. In addition, all employees, including executive officers,
receive $50,000 in term-life insurance, long-term disability benefits, monthly
dues for a health club membership through July 2008, and vision insurance at no
cost to the employee. We also provide all employees, including
executive officers, the option to make pre-tax payroll deductions up to $2,500
per year under a flexible spending account plan that can be utilized for
out-of-pocket medical, dental and other allowable expenses. The
Company also provides paid-time-off benefits to cover vacation and sick time and
annually determined Company holidays.
The
Compensation Committee believes Peregrine’s compensation programs are designed
and administered in a manner consistent with its compensation philosophy and
objectives. We monitor these programs in recognition of the dynamic
marketplace in which Peregrine competes for talent. Peregrine intends
to continue to emphasize pay-for-performance and equity-based incentive programs
that reward executives for actual results and that are consistent with
stockholder interests.
Executive
Officers
The
following table lists the executive officers of the Company as of April 30,
2008:
|
Name
|
Age
|
Position
|
||
|
Steven
W. King
|
44
|
President
and Chief Executive Officer, Director
|
||
|
Paul
J. Lytle
|
40
|
Chief
Financial Officer and Corporate Secretary
|
||
|
F.
David King
|
53
|
Vice
President of Business Development
|
Steven W.
King has served as our President and Chief Executive Officer since March
2003. From August 2002 to such date, Mr. King served as Chief
Operating Officer of Peregrine. From February 2000 to August 2002,
Mr. King served as our Vice President of Technology and Product
Development. Mr. King joined Peregrine in 1997 in the capacity of
Director of Research and Development. Mr. King was responsible for
planning and launching our wholly owned contract manufacturing subsidiary, Avid
Bioservices, Inc., in 2002. Mr. King has served as the President of
Avid since its inception. Mr. King was previously employed at
Vascular Targeting Technologies, Inc., (formerly known as Peregrine
Pharmaceuticals, Inc.) a company we acquired in 1997, which held the rights to
the Vascular Targeting Agent technology. Mr. King previously worked
with Dr. Philip Thorpe, inventor of our Anti-Phosphatidylserine
Immunotherapeutic and Vascular Targeting Agent technology platforms, at the
University of Texas Southwestern Medical Center at Dallas and is a co-inventor
on over 40 U.S. and foreign patents and patent applications in the Vascular
Targeting Agent field. Mr. King received his Bachelors and Masters
degrees from Texas Tech. University in Cell and Molecular
Biology.
22
Paul J.
Lytle has served as Chief Financial Officer since August 2002 and has over 15
years of finance and accounting experience. Mr. Lytle oversees
various functions, including finance and accounting, financial reporting,
Corporate Governance, investor relations, human resources and information
technology. Mr. Lytle started with Peregrine in March 1997 as
Corporate Controller and has held positions of increasing responsibility at the
company. Mr. Lytle was promoted to Vice President of Finance and
Accounting and was elected as the company’s Corporate Secretary in
2000. Prior to joining Peregrine, Mr. Lytle worked for Deloitte &
Touche LLP. Mr. Lytle holds a BS in Business Administration from the
California State University at Long Beach and is a certified public accountant
in the State of California and a member of the American Institute of Certified
Public Accountants.
F. David
King has served as Vice President of Business Development since October 2005,
has over 20 years of commercial experience in the biopharmaceutical industry,
including sales, marketing and extensive business development experience.
His expertise in this area has led to the completion of significant
corporate partnering deals with industry partners. He has identified,
negotiated and closed a wide range of transactions including out-license,
in-license, co-promotion and joint development and marketing agreements.
Mr. King has an extensive network of contacts at biopharmaceutical
companies in North America, Europe and Asia. Mr. King was formerly
employed with Medinox, Inc., in San Diego, where he served as Vice President,
Corporate Development. Previously, Mr. King held several executive and
management level positions at various pharmaceutical companies, including Maxim
Pharmaceuticals, DepoTech Corporation (now SkyePharma Ltd.), and Glaxo Inc. (now
GlaxoSmithKline). He began his pharmaceutical industry career in sales and
marketing for Stuart Pharmaceuticals (now AstraZeneca). Mr. King holds a
bachelor’s degree in Business Administration from Goshen College in Goshen,
Indiana.
Compensation
Summary
The
following table contains information with respect to the compensation for the
fiscal years ended April 30, 2008 and April 30, 2007 of our chief executive
officer, chief financial officer, up to three most highly compensated executive
officers serving as executive officers at the end of the last completed fiscal
year other than the chief executive officer and chief financial officer, and up
to two additional executive officers who would have been one of our three most
highly compensated executive officers, but who was not serving as an executive
officer at the end of the last completed fiscal year. We refer to the
executive officers identified in this table as our “Named Executive
Officers.”
SUMMARY
COMPENSATION TABLE
|
Name
and Principal
Position
|
Fiscal
Year
|
Salary
($) (1)
|
Bonus
($)
|
Stock
Awards ($) (4)
|
Option
Awards($) (5)
|
Non-Equity
Incentive Plan Compensation ($)
|
All
Other Compensation ($) (6)
|
Total
($)
|
||||||||
|
Steven
W. King, President and
Chief Executive Officer
|
2008
2007
|
384,534
(2)
373,588
(3)
|
-
-
|
-
46,931
|
10,383
-
|
-
-
|
17,746
16,200
|
412,663
436,719
|
||||||||
|
Paul
J. Lytle,
Chief Financial Officer and
Corporate Secretary
|
2008
2007
|
306,881
(2)
293,403
(3)
|
-
-
|
-
37,263
|
6,230
-
|
-
-
|
17,746
16,102
|
330,857
346,768
|
||||||||
|
F.
David King,
Vice President, Business
Development
|
2008
2007
|
210,000
210,000
|
-
-
|
-
30,900
|
40,098
40,577
|
-
-
|
11,490
10,340
|
261,588
291,817
|
______________________
|
(1)
|
Salary
information is reported as of the last payroll paid prior to or
immediately after April 30th of each fiscal
year.
|
|
(2)
|
Includes
the advancement of earned and accrued paid-time-off benefits (earned and
accrued vacation benefits) in the amount of $30,784 for Mr. Steven King
and $30,693 for Mr. Paul Lytle, to cover the aggregate purchase price of
stock options exercised and federal and state mandatory tax
obligations.
|
|
(3)
|
Includes
the advancement of earned and accrued paid-time-off benefits (earned and
accrued vacation benefits) in the amount of $21,761 for Mr. Steven King
and $18,561 for Mr. Paul Lytle, to cover federal and state income taxes
that were due upon the receipt of shares of common stock received under
the Company’s Stock Bonus Plan.
|
|
(4)
|
Represents
the non-cash dollar amount recognized for financial statement reporting
purposes for the fair market value of shares of common stock earned under
the Company’s Stock Bonus Plan for milestones achieved during fiscal year
2007 as follows: Mr. Steven W. King – 34,173 shares; Mr. F.
David King – 22,500 shares; and Mr. Paul J. Lytle – 27,133
shares.
|
|
(5)
|
Amounts
reflect the stock-based compensation expense recognized for financial
reporting purposes in fiscal year 2008 and 2007, in accordance with SFAS
No. 123(R) for stock options granted in and prior to fiscal year
2008. Assumptions used in the calculation of these amounts are
included in Note 3 “Stock-Based Compensation” in our Form 10-K
for the period ended April 30, 2008, filed with the SEC on July 14, 2008,
which identifies assumptions made in the valuation of option awards in
accordance with FAS 123R. Amounts do not represent amounts paid
to or realized by the Named Executive
Officer.
|
|
(6)
|
Amounts
shown in this column reflect the cost of benefits paid on behalf of the
Named Executive Officer for health, dental, and vision benefits in
addition to premiums paid for long-term disability and $50,000 in coverage
for term life insurance.
|
23
Option
Grants in Last Fiscal Year
The
following table sets forth information with respect to stock option grants
during fiscal year 2008 to our Named Executive Officers. All options
granted were at the fair market value on the date of grant as determined by the
Board of Directors. We have not included information for estimated
future payouts under non-equity and equity incentive plan awards as we did not
have an incentive plan established in fiscal year 2008.
|
Name
|
Options
Granted
|
%
of Total Options Granted
|
Exercise
of base Price ($/Sh)
|
Expiration
Date
|
Grant
Date
Fair
Value (1)
|
|||||
|
Steven
W. King
|
250,000
|
5.9%
|
$0.39
|
1/11/2018
|
$
69,225
|
|||||
|
Paul
J. Lytle
|
150.000
|
4.7%
|
$0.39
|
1/11/2018
|
$
41,535
|
|||||
|
F.
David King
|
100,000
|
2.4%
|
$0.39
|
1/11/2018
|
$
27,690
|
|
(1)
|
Represents
the estimated fair market value of options granted on the grant date based
on the Black-Scholes valuation model. The estimated fair value
of stock options requires various judgmental assumptions including
estimating stock price volatility, forfeiture rates, and expected
life. Assumptions used in the valuation of option awards in
accordance with FAS 123R is included in Note 3 “Stock-Based
Compensation” in our Form 10-K for the year ended April 30, 2008,
filed with the SEC on July 14,
2008.
|
Outstanding
Equity Awards at Fiscal Year-End
The following table shows information
regarding unexercised stock options held by our Named Executive Officers as of
fiscal year ended April 30, 2008:
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
||||
|
Steven
W. King
|
22,500
|
-
|
$1.59
|
5/27/2008
|
||||
|
130,000
|
-
|
$1.06
|
5/3/2009
|
|||||
|
258,333
|
-
|
$0.34
|
12/22/2009
|
|||||
|
150,000
|
-
|
$1.28
|
5/7/2011
|
|||||
|
200,000
|
-
|
$0.55
|
3/19/2013
|
|||||
|
350,000
|
-
|
$2.20
|
10/21/2013
|
|||||
|
31,250
|
218,750
(1)
|
$0.39
|
1/11/2018
|
|||||
|
|
|
|||||||
|
|
||||||||
|
Paul
J. Lytle
|
22,500
|
-
|
$1.59
|
5/27/2008
|
||||
|
130,000
|
-
|
$1.06
|
5/3/2009
|
|||||
|
133,333
|
-
|
$0.34
|
12/22/2009
|
|||||
|
135,000
|
-
|
$1.28
|
5/7/2011
|
|||||
|
300,000
|
-
|
$2.20
|
10/21/2013
|
|||||
|
18,750
|
131,250
(1)
|
$0.39
|
1/11/2018
|
|||||
|
|
||||||||
|
|
||||||||
|
F.
David King
|
100,000
|
100,000
(2)
|
$1.05
|
10/24/2015
|
||||
|
-
|
100,000
(3)
|
$0.39
|
1/11/2018
|
____________________
|
|
(1)
|
Option
will vest in twenty-four monthly installments beginning February 11,
2008.
|
|
|
(2)
|
Option
will vest in four equal annual installments beginning one year from the
date of grant. Of the remaining 100,000 unexerciseable options,
50,000 options will vest on each of the following
dates: October 24, 2008 and October 24,
2009.
|
|
|
(3)
|
Option
will vest in 50,000 share increments upon the closing of each licensing or
partnering agreement, as further defined in the option
agreement.
|
24
The following information sets forth
stock options exercised by the Company’s Named Executive Officers during fiscal
year 2008:
|
Option
Awards
|
||||
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($) (1)
|
||
|
Steven
W. King
|
15,000
|
$ 6,450
|
||
|
Paul
J. Lytle
|
30,000
|
$12,900
|
||
_______________________
|
|
(1)
|
Represents
the excess of the fair market value of the shares exercised on the
exercise date over the aggregate exercise price of such
shares. The Named Executive Officers continue to hold the
shares of common stock acquired on exercise as of the filing
date.
|
Potential
Payments Upon Termination or Change in Control
The following table sets forth the
potential payments to our Named Executive Officers assuming a termination event
or a change in control event occurred as of April 30, 2008:
POTENTIAL
TERMINATION AND CHANGE IN CONTROL PAYMENTS
|
Name
Executive Officer
|
Salary
&
Bonus ($)
|
Acceleration
of Vesting of Equity Awards (2)
|
Other
Payments
($)
|
Total
($)
|
||||
|
Steven
W. King (1)
|
176,875
|
-
|
9,374
|
186,249
|
||||
|
Paul
J. Lytle
|
-
|
-
|
-
|
-
|
||||
|
F.
David King
|
-
|
-
|
-
|
-
|
__________________
|
|
(1)
|
If
Mr. King’s employment is terminated by us for any reason other than
“cause”, or within 90 days following a “Change in Control” (as defined in
the agreement), Mr. King shall receive six months’ base salary as
severance, benefit continuation for six months, and two years to exercise
any vested options.
|
|
|
(2)
|
All
equity awards vest and become immediately exercisable in full upon a
change in control event.
|
Compensation
Committee Interlocks and Insider Participation
The
following non-employee directors currently serve on the Compensation Committee
of the Board of Directors: Mr. Carlton M. Johnson, Mr. David H. Pohl,
Mr. Eric S. Swartz, and Dr. Thomas A. Waltz. There are no interlocks
of executive officers or directors of the Company serving on the compensation
committee or equivalent committee of another entity, which has any director or
executive officer serving on the Compensation Committee, other committees or the
Board of Directors of the Company.
25
The Report of the Compensation
Committee of the Board of Directors shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 (the “Securities
Act”) or under the Securities Exchange Act of 1934 (the “Exchange Act”), except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such
Acts.
The
Compensation Committee of our Company has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K
with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Proxy Statement.
THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Eric
S. Swartz, Chairman of the Compensation Committee
Carlton
M. Johnson
David
H. Pohl
Thomas
A. Waltz, M.D.
Equity
Compensation Plan Information
We
maintain four equity compensation plans, the 1996 Plan, the 2002 Plan, the 2003
Plan, and the 2005 Plan. The 1996, 2003 and 2005 Plans were approved
by our stockholders while the 2002 Plan was not submitted for stockholder
approval.
The 2002
Plan is a broad-based non-qualified stock option plan for the issuance of up to
3,000,000 options. The 2002 Plan provides for the granting of options
to purchase shares of our common stock at prices not less than the fair market
value of our common stock at the date of grant and generally expire ten years
after the date of grant.
In
addition to the 2002 Plan, during 1999, we granted non-qualified options, which
are not part of any compensation plan, to purchase up to an aggregate of
1,500,000 shares of our common stock. As of April 30, 2008, options
to purchase 181,664 shares of our common stock were outstanding. The
resale of the underlying shares of common stock is registered on a registration
statement on Form S-3.
The
following table sets forth certain information as of April 30, 2008 concerning
our common stock that may be issued upon the exercise of options or pursuant to
purchases of stock under all of our equity compensation plans approved by
stockholders and equity compensation plans not approved by stockholders in
effect as of April 30, 2008:
|
Plan
Category
|
(a)
Number of Securities
to be Issued Upon the Exercise of Outstanding Options
|
(b)
Weighted-Average
Exercise Price of Outstanding Options ($/share)
|
(c)
Number
of Shares Remaining Available for Future Issuance Under Equity
Compensation Plans (Excluding Securities Reflected in Column
(a))
|
|||||||||
|
Equity
compensation plans approved by
stockholders
|
12,458,221
|
$
1.23
|
1,146,770
|
|||||||||
|
Equity
compensation plans not approved by stockholders
|
2,230,843
|
$
1. 29
|
|
55,041
|
|
|||||||
|
14,689,064
|
$
1.24
|
1,201,811
|
||||||||||
26
The
following graph shows a comparison of cumulative total returns for the Company,
Nasdaq Market Index and a Nasdaq Peer group for the period beginning
April 30, 2003 through April 30, 2008. The total cumulative
return on investment shown for the Company, the Nasdaq Market Index and the
Nasdaq Pharmaceutical Index (Peer Companies Group Index) are based on the
assumptions that on April 30, 2003, $100 was invested in the common stock of
each Index and that all dividends were reinvested. The Nasdaq Market
Index and the Nasdaq Pharmaceutical Index were prepared by The Center for
Research in Security Prices.
COMPARISON
OF FIVE-YEAR CUMULATIVE TOTAL RETURN
VALUE
OF INVESTMENT OF $100 ON APRIL 30, 2003
The
underlying data for the foregoing graph is as follows:
|
April
30,
2003
|
April
30,
2004
|
April
30,
2005
|
April
30,
2006
|
April
30,
2007
|
April
30,
2008
|
|
|
Peregrine
Pharmaceuticals, Inc.
|
$100.00
|
$283.05
|
$205.08
|
$235.59
|
$169.49
|
$
71.19
|
|
Nasdaq
Pharmaceutical Index
|
$100.00
|
$122.42
|
$129.46
|
$149.54
|
$150.03
|
$118.43
|
|
Nasdaq
Market Index (U.S.)
|
$100.00
|
$131.65
|
$131.71
|
$160.63
|
$176.82
|
$172.57
|
_______________________________
‡ The performance
graph and the underlying data is not soliciting material, and is not
incorporated into any past or future filing of the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
including this Proxy Statement, in whole or in part.
27
Stockholder
Proposals and Nominations
Pursuant
to Rule 14a-8 under the Exchange Act, stockholders may present proper
proposals for inclusion in the Company’s proxy statement and for consideration
at the Company’s next annual meeting of stockholders. To be eligible
for inclusion in the Company’s 2009 Proxy Statement, your proposal must be
received by the Company no later than May 11, 2009, and must otherwise comply
with Rule 14a-8. While the Board will consider stockholder
proposals, the Company reserves the right to omit from the Company’s proxy
statement stockholder proposals that it is not required to include under the
Exchange Act, including Rule 14a-8.
In
addition, the Company’s Nominating Charter contains an advance notice provision
with respect to matters to be brought at an annual meeting of stockholders,
including nominations, and not included in the Company’s Proxy
Statement. If you would like to nominate a director or bring any
other business before the stockholders at the 2009 Annual Meeting, you must
comply with the procedures contained in the Company’s Nominating Charter of the
Board of Directors and you must notify the Company in writing and such notice
must be delivered to or received by the Secretary no later than 90 days
prior to the 2009 Annual Meeting.
The
Nominating Charter of the Board of Directors provides that nominations may be
made by the Board, by a committee appointed by the Board or any stockholder
entitled to vote in the election of directors generally. Stockholders must
provide actual written notice of their intent to make nomination(s) to the
Secretary of the Company no later than 90 days prior to the relevant annual
meeting. Each notice must set forth (i) the name and address of
the stockholder who intends to make the nomination(s) and the person(s) to be
nominated; (ii) a representation that the stockholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person(s) specified in the
notice; (iii) a description of all arrangements or understandings between
the stockholder and each nominee and any other person(s) (naming such person(s))
pursuant to which the nomination(s) are to be made by the stockholder;
(iv) such other information regarding each nominee as would be required to
be included in a proxy statement filed pursuant to the proxy rules of the SEC
had the nominee been nominated, or intended to be nominated, by the Board; and
(v) the consent of each nominee to serve as a director of the Company if so
elected. Any candidates recommended by stockholders for nomination to
the Board will be evaluated in the same manner that nominees suggested by Board
members, management or other parties.
You may
write to the Secretary of the Company at the Company’s principal executive
office, 14282 Franklin Avenue, Tustin, California 92780, to deliver the notices
discussed above and for a copy of the relevant Nominating Charter of the Board
of Directors regarding the requirements for making stockholder proposals and
nominating director candidates. In addition, the Nominating
Charter of the Board of Directors can also be found on our website at www.peregrineinc.com
(this website address is not intended to function as a hyperlink, and the
information contained on the Company’s website is not intended to be a part of
this Proxy Statement).
Other
Matters
Neither
the Board of Directors nor the management knows of any other business to be
presented at the Annual Meeting, but if other matters do properly come before
the Annual Meeting, it is intended that the persons named on the proxy card will
vote on those matters in accordance with their best judgment.
Annual
Report on Form 10-K
A copy of
the Company’s Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission (exclusive of Exhibits), will be furnished by first class
mail, within one business day of receipt of request, without charge to any
person from whom the accompanying proxy is solicited upon written request to
Peregrine Pharmaceuticals, Inc., Attention: Corporate Secretary, 14282 Franklin
Avenue, Tustin, California 92780-7017. If Exhibit copies are
requested, a copying charge of $.20 per page will be made. In
addition, all of the Company’s public filings, including the Annual Report on
Form 10-K, can be found on our website at www.peregrineinc.com
(this website address is not intended to function as a hyperlink, and the
information contained on the Company’s website is not intended to be a part of
this Proxy Statement).
|
By
Order of the Board of Directors,
Paul
J. Lytle
Chief
Financial Officer and
Corporate
Secretary
|
August
[ ], 2008
28
EXHIBIT
A
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE
OF INCORPORATION
OF
PEREGRINE
PHARMACEUTICALS, INC.,
A
DELAWARE CORPORATION
PEREGRINE PHARMACEUTICALS, INC., a
Delaware corporation organized and existing under and by virtue of the Delaware
General Corporation Law (hereinafter referred to as the “Corporation”), hereby
certifies as follows:
1. That
at a meeting of the Board of Directors of the Corporation resolutions were duly
adopted setting forth a proposed amendment of the Certificate of Incorporation
of the Corporation, declaring said amendment to be advisable and directing said
amendment to be submitted to the stockholders of the Corporation at the 2008
Annual Meeting. The resolutions set forth the proposed amendment as
follows:
RESOLVED, that ARTICLE 4 of the
Certificate of Incorporation of the Corporation be amended by adding the
following paragraph at the end thereof:
“Reverse Stock
Split.
Effective
as of the close of business on the filing date of this Certificate of Amendment
with the Secretary of State of the State of Delaware (the “Effective Time”),
every [insert number ranging from three to ten] outstanding shares of Common
Stock, par value $0.001, of the Corporation issued and outstanding or held in
the treasury of the Corporation as of the close of business on ________ __, 200_
will automatically be combined, reclassified and changed into one (1) fully paid
and non-assessable share of Common Stock, par value $0.001, without any further
action by the holders of such shares; provided, however, that no fractional
shares shall be issued. Stockholders who would otherwise be entitled to a
fractional share will receive one whole share of common stock in lieu of such
fraction. No other exchange, reclassification or cancellation of
issued shares shall be effected by this Amendment.”
2. That
thereafter, pursuant to resolution of the Board of Directors, an Annual Meeting
of the stockholders of the Corporation was duly called and held, upon notice in
accordance with Section 222 of the Delaware General Corporation Law, at which
Annual Meeting the necessary number of shares as required by statute were voted
in favor of the amendment.
3. That said amendment was
duly adopted in accordance with the provisions of Section 242 of the Delaware
General Corporation Law of the State of Delaware.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be
executed by Steven W. King, its President & CEO, and attested to by Paul J.
Lytle, its CFO & Corporate Secretary, this __ day of _______,
200_.
|
PEREGRINE
PHARMACEUTICALS, INC,
a
Delaware corporation
By:
_______________________________________
Steven W. King, President &
CEO |
ATTEST:
__________________________________________
Paul J.
Lytle, CFO & Corporate Secretary
A-1
EXHIBIT
B
PEREGRINE
PHARMACEUTICALS, INC.
2008 STOCK INCENTIVE
PLAN
ARTICLE
ONE
GENERAL
PROVISIONS
I.
PURPOSE OF THE
PLAN
This 2008
Stock Incentive Plan (the “Plan”) is intended to promote and advance the
interests of Peregrine Pharmaceuticals, Inc., a Delaware corporation (the
“Corporation”), and its stockholders by strengthening the Corporation’s ability
to attract and retain individuals of training, experience and ability as
officers, employees, non-employee directors and consultants and to furnish
additional incentives to such key individuals to promote the Corporation’s
financial success by providing them with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation.
Capitalized
terms shall have the meanings assigned to such terms in the attached
Appendix.
II.
STRUCTURE OF THE PLAN
A. The
Plan shall be divided into two separate equity programs:
(i) the
“Discretionary Option Grant Program” under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock, and
(ii) the
“Stock Issuance Program” under which eligible persons may, at the discretion of
the Plan Administrator, be issued shares of Common Stock directly, either
through the immediate purchase of such shares or as a bonus for services
rendered to the Corporation (or any Parent or Subsidiary).
B. The
provisions of Articles One and Four shall apply to all equity programs under the
Plan and shall govern the interests of all persons under the Plan.
III. ADMINISTRATION OF THE
PLAN
A. The
Plan will be administered by the Compensation Committee, composed of not less
than two directors appointed by the Board. Each member of the
Compensation Committee shall, at all times during their service as such, be a
"non-employee director" within the meaning of Rule 16b-3(b)(3) under the
Securities Exchange Act of 1934. The Compensation Committee
(hereinafter also referred to as the “Plan Administrator”) shall have conclusive
authority to construe and interpret the Plan and any award agreement entered
into thereunder, and to establish, amend and rescind administrative policies for
the administration of the Plan and such additional authority as the Board may
from time to time determine is necessary or desirable.
B-1
B. The
Plan Administrator shall, within the scope of its administrative functions under
the Plan, have full power and authority (subject to the provisions of the Plan)
to establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant Program and the Stock Issuance
Program and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding options or stock
issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant Program and/or the Stock Issuance Program under its
jurisdiction or any option or stock issuance thereunder.
C. Service
on the Compensation Committee shall constitute service as a Board member, and
members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such
committee. No member of the Compensation Committee shall be liable
for any act or omission made in good faith with respect to the Plan or any
option grants or stock issuances under the Plan.
IV.
ELIGIBILITY
A. The
persons eligible to participate in the Discretionary Option Grant Program and
the Stock Issuance Program are as follows:
(i) Employees,
(ii) non-employee
members of the Board or the board of directors of any Parent or Subsidiary of
the Corporation, and
(iii) consultants
and other independent advisors who provide services to the Corporation (or any
Parent or Subsidiary of the Corporation).
B. The
Plan Administrator shall, within the scope of its administrative jurisdiction
under the Plan, have full authority to determine:
(i) with
respect to option grants under the Discretionary Option Grant Program, which
eligible persons are to receive option grants, the time or times when such
option grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding, and
(ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
C. The
Plan Administrator shall have the absolute discretion either to grant options in
accordance with the Discretionary Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
B-2
V.
STOCK SUBJECT TO THE
PLAN
A. The
stock issuable under the Plan shall be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the Corporation on the
open market. The maximum number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall not exceed 15,000,000
shares. Such authorized share reserve includes the number of shares
subject to the outstanding options, which are hereby incorporated into the
Plan.
B. Shares
of Common Stock subject to outstanding options shall be available for subsequent
issuance under the Plan to the extent those options expire or terminate for any
reason prior to being exercised in full. Unvested shares issued under
the Plan and subsequently cancelled or repurchased by the Corporation, at the
original issue price paid per share, pursuant to the Corporation’s repurchase
rights under the Plan shall be added back to the number of shares of Common
Stock reserved for issuance under the Plan.
C. If
any change is made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made
to:
(i) the
maximum number and/or class of securities issuable under the Plan;
(ii) the
number and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan per calendar year; and
(iii) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option under the Plan.
Such
adjustments to the outstanding options are to be effected in a manner, which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.
ARTICLE
TWO
DISCRETIONARY OPTION GRANT
PROGRAM
I.
OPTION
TERMS
Each
option shall be evidenced by one or more documents in the form approved by the
Plan Administrator; provided, however,
that each such document shall comply with the terms specified
below. Each document evidencing an Incentive Option shall, in
addition, be subject to the provisions of the Plan applicable to such
options.
A. Exercise
Price.
1. The
exercise price per share shall be fixed by the Plan Administrator at a price not
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date; provided, however,
that the Plan Administrator may fix the exercise price at less than 100% of Fair
Market Value if such option is granted pursuant to an assumption or substitution
for another option in a manner satisfying Section 424(a) and 409A of the
Code.
B-3
2. The
exercise price shall become immediately due upon exercise of the option and may,
subject to the provisions of Section I of Article Four and the
documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash
or check made payable to the Corporation,
(ii)
shares of Common Stock held for the requisite period necessary to avoid a charge
to the Corporation’s earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date, or
(iii) to
the extent the option is exercised for vested shares, through a special sale and
remittance procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise, and
(b) the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to
the extent such sale and remittance procedure is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise
Date.
B. Exercise
and Term of Options.
Each option shall be exercisable at such time or times, during such
period and for such number of shares as shall be determined by the Plan
Administrator and set forth in the documents evidencing the
option. However, no option shall have a term in excess of ten (10)
years measured from the option grant date.
C. Effect of
Termination of Service.
1. The
following provisions shall govern the exercise of any options held by the
Optionee at the time of cessation of Service or death:
(i) Any
option outstanding at the time of the Optionee’s cessation of Service for any
reason shall remain exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option (which shall equal 1 year in the case of death or disability and
ninety (90) days in the case of any other cessation of Service), provided no
such option shall be exercisable after the expiration of the option
term.
(ii) Any
option exercisable in whole or in part by the Optionee at the time of death may
be subsequently exercised by the personal representative of the Optionee’s
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee’s will or in accordance with the laws of descent and
distribution.
(iii) Subject
to clause C.2.(ii) below of this Section I, during the applicable post-Service
exercise period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the date of
the Optionee’s cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised.
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2. The
Plan Administrator shall have complete discretion, exercisable either at the
time an option is granted or at any time while the option remains outstanding,
to:
(i) extend
the period of time for which the option is to remain exercisable following the
Optionee’s cessation of Service from the limited exercise period otherwise in
effect for that option to such greater period of time as the Plan Administrator
shall deem appropriate, but in no event beyond the expiration of the option
term, and/or
(ii) permit
the option to be exercised, during the applicable post-Service exercise period,
not only with respect to the number of vested shares of Common Stock for which
such option is exercisable at the time of the Optionee’s cessation of Service
but also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
D. Shareholder
Rights. The holder of an
option shall have no shareholder rights with respect to the shares subject to
the option until such person shall have exercised the option, paid the exercise
price and become a holder of record of the purchased shares.
E. Repurchase
Rights. The Plan
Administrator shall have the discretion to grant options which are exercisable
for unvested shares of Common Stock and to reserve the right to repurchase any
or all of those unvested shares should the Optionee thereafter cease to be in
Service to the Corporation. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited
Transferability of Options. During the lifetime of the
Optionee, options shall be exercisable only by the Optionee and shall be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee’s death.
II.
INCENTIVE
OPTIONS
The terms
specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Section II, all the provisions of Articles
One, Two and Four shall be applicable to Incentive Options. Options
that are specifically designated as Non-Statutory Options when issued under the
Plan shall not
be subject to the terms of this Section II.
A. Eligibility. Incentive Options
may only be granted to Employees.
B. Exercise
Price. The exercise
price per share shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date; provided, however,
that the Plan Administrator may fix the exercise price at less than 100% of Fair
Market Value if such option is granted pursuant to an assumption or substitution
for another option in a manner satisfying Section 424(a) and 409A of the
Code
C. Dollar
Limitation. The aggregate
Fair Market Value of the shares of Common Stock (determined as of the respective
date or dates of grant) for which one or more options granted to any Employee
under the Plan (or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive Options
during any one calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). To the extent the Employee holds two (2) or more
such options that become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options, as
Incentive Options shall be applied on the basis of the order in which such
options are granted.
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D. 10%
Shareholder. If any Employee
to whom an Incentive Option is granted is a 10% Shareholder, then the exercise
price per share shall not be less than one hundred ten percent (110%) of the
Fair Market Value per share of Common Stock on the option grant date, and the
option term shall not exceed five (5) years measured from the option grant
date.
III. CANCELLATION AND REGRANT OF
OPTIONS
The Plan
Administrator shall have the authority to effect, at any time and from time to
time, with the consent of the affected option holders, the cancellation of any
or all outstanding options under the Discretionary Option Grant Program and to
grant in substitution new options covering the same or a different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new grant date.
ARTICLE
THREE
STOCK ISSUANCE
PROGRAM
I.
STOCK ISSUANCES
Shares of
Common Stock may be issued under the Stock Issuance Program through direct and
immediate issuances without any intervening option grants. Each such
stock issuance shall be evidenced by a Stock Issuance Agreement that complies
with the terms specified below.
II.
STOCK ISSUANCE
TERMS
A. Purchase
Price.
1. The
purchase price per share shall be fixed by the Plan Administrator, but shall not
be less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the issuance date.
2. Subject
to the provisions of Section I of Article Four, shares of Common Stock may be
issued under the Stock Issuance Program for any of the following items of
consideration that the Plan Administrator may deem appropriate in each
individual instance:
(i) cash
or check made payable to the Corporation,
(ii) past
services rendered to the Corporation (or any Parent or Subsidiary),
or
(iii) any
other valid consideration for the issuance of shares of Common Stock under
Applicable Laws.
B. Vesting
Provisions.
1. Shares
of Common Stock issued under the Stock Issuance Program may, in the discretion
of the Plan Administrator, be fully and immediately vested upon issuance or may
vest in one or more installments over the Participant’s period of Service or
upon attainment of specified performance objectives. The elements of
the vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program, namely:
(i) the
Service period to be completed by the Participant or the performance objectives
to be attained,
B-6
(ii) the
number of installments in which the shares are to vest,
(iii) the
interval or intervals (if any) which are to lapse between installments,
and
(iv) the
effect which death, Permanent Disability or other event designated by the Plan
Administrator is to have upon the vesting schedule, shall be determined by the
Plan Administrator and incorporated into the Stock Issuance
Agreement.
2. Any
new, substituted or additional securities or other property (including money
paid other than as a regular cash dividend) which the Participant may have the
right to receive with respect to the Participant’s unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant’s unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The
Participant shall have full shareholder rights with respect to any shares of
Common Stock issued to the Participant under the Stock Issuance Program, whether
or not the Participant’s interest in those shares is
vested. Accordingly, the Participant shall have the right to vote
such shares and to receive any regular cash dividends paid on such
shares.
4. Should
the Participant cease to remain in Service while holding one or more unvested
shares of Common Stock issued under the Stock Issuance Program or should the
performance objectives not be attained with respect to one or more such unvested
shares of Common Stock, then those shares shall be immediately surrendered to
the Corporation for cancellation, and the Participant shall have no further
shareholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant’s purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.
5. The
Plan Administrator may in its discretion waive the surrender and cancellation of
one or more unvested shares of Common Stock that would otherwise occur upon the
cessation of the Participant’s Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in
the immediate vesting of the Participant’s interest in the shares as to which
the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant’s cessation of Service or the attainment or
non-attainment of the applicable performance objectives.
B-7
ARTICLE
FOUR
MISCELLANEOUS
I. FINANCING
The Plan
Administrator may permit any Optionee or Participant to pay the option exercise
price under the Discretionary Option Grant Program or the purchase price of
shares issued under the Stock Issuance Program by delivering a full-recourse,
interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. In no event may the maximum
credit available to the Optionee or Participant exceed the sum of:
(i) the
aggregate option exercise price or purchase price payable for the purchased
shares plus
(ii) any
Federal, state and local income and employment tax liability incurred by the
Optionee or the Participant in connection with the option exercise or share
purchase.
The
foregoing shall not be applicable to any executive officer or director of the
Corporation where the extension of such credit would result in a violation of
Section 402 of the Sarbanes-Oxley Act of 2002.
II. SHARE
ESCROW/LEGENDS
Unvested
shares issued under the Plan may, in the Plan Administrator’s discretion, be
held in escrow by the Corporation until the Participant’s interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
III. CHANGE IN CONTROL
A. In
the event of any Change in Control, each outstanding option under the
Discretionary Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Change in
Control, become fully exercisable with respect to the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock.
B. Outstanding
repurchase rights, if any, shall terminate automatically, and the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Change in Control.
IV. VESTING
Notwithstanding
any other provision of this agreement, the vesting schedule imposed with respect
to any option grant or share issuance shall not result in the Optionee or
Participant vesting in fewer than 20% per year for five years from the date of
the option grant or share issuance.
B-8
V. TAX WITHHOLDING
A. The
Corporation’s obligation to deliver shares of Common Stock upon the exercise of
options or the issuance or vesting of such shares under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
B. The
Plan Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock under the Plan with the
right to use shares of Common Stock in satisfaction of all or part of the Taxes
incurred by such holders in connection with the exercise of their options or the
vesting of their shares. Such right may be provided to any such
holder in either or both of the following formats:
1. Stock
Withholding: The election to have the Corporation withhold,
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
2. Stock
Delivery: The election to deliver to the Corporation, at the
time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
VI. EFFECTIVE DATE AND TERM OF THE
PLAN
A. The
Plan shall become effective immediately upon the Plan Effective
Date. Options may be granted under the Discretionary Option Grant
Program at any time on or after the Plan Effective Date. However, no
options granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Corporation’s shareholders approve the
Plan. If such shareholder approval is not obtained within twelve (12)
months after the Plan Effective Date, then all options previously granted under
this Plan shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.
B. All
options outstanding as of the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the
Plan. However, each outstanding option so incorporated shall continue
to be governed solely by the terms of the documents evidencing such option, and
no provision of the Plan shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such incorporated options with respect
to their acquisition of shares of Common Stock.
C. The
Plan shall terminate upon the earliest
of
(i) the
tenth anniversary of the Plan Effective Date, and
(ii) the
date on which all shares available for issuance under the Plan shall have been
issued as fully-vested shares.
Upon such
plan termination, all outstanding option grants and unvested stock issuances
shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such grants or issuances.
B-9
VII. AMENDMENT OF THE
PLAN
A. The
Board shall have complete and exclusive power and authority to amend or modify
the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
if so determined by the Board or pursuant to applicable laws or
regulations.
B. Options
to purchase shares of Common Stock may be granted under the Discretionary Option
Grant Program and shares of Common Stock may be issued under the Stock
Issuance Program that are in each instance in excess of the number of shares
then available for issuance under the Plan, provided any excess shares actually
issued under those programs shall be held in escrow until there is obtained any
required approval of an amendment sufficiently increasing the number of shares
of Common Stock available for issuance under the Plan. If such
approval is not obtained within twelve (12) months after the date the first such
excess issuances are made, then (i) any unexercised options granted on the basis
of such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
VIII. USE OF PROCEEDS
Any cash
proceeds received by the Corporation from the sale of shares of Common Stock
under the Plan shall be used for general corporate purposes.
IX. REGULATORY APPROVALS; SECTION 409A
COMPLIANCE STRATEGY
A. The
implementation of the Plan, the granting of any stock option under the Plan and
the issuance of any shares of Common Stock (i) upon the exercise of any granted
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation’s procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under
it and the shares of Common Stock issued pursuant to it.
B. No
shares of Common Stock or other assets shall be issued or delivered under the
Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable listing requirements of any
stock exchange (or the Nasdaq Stock Market, if applicable) on which Common Stock
is then listed for trading.
C. In
order to qualify for the exception to Section 409A of the Code set forth in
Treas. Reg. § 1.409A-1(b)(5)(i)(A), the exercise price for any option granted
under the terms of the Plan shall not be less than the Fair Market Value of a
share of Common Stock on the option grant date and the number of shares subject
to the option shall be fixed on the option grant date. In addition,
no option shall be subject to any further deferral as described in Treas. Reg. §
1.409A-1(b)(5)(i)(C) and (D).
B-10
X. NO EMPLOYMENT/SERVICE
RIGHTS
Nothing
in the Plan shall confer upon the Optionee or the Participant any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without
cause.
B-11
APPENDIX
The
following definitions shall be in effect under the Plan:
A. Applicable
Laws shall mean the legal requirements relating to the administration of
stock option plans and the issuance of stock and stock options under federal
securities laws, Delaware General Corporate Laws and securities laws, the Code,
and the applicable laws of any foreign country or jurisdiction where options
will be or are being granted under the Plan.
B. Board
shall mean the Corporation’s Board of Directors.
C. Change in
Control shall mean the
occurrence of any one of the following events:
(a) Any
“person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any of its Affiliates or any trustee, fiduciary or
other person or entity holding securities under any employee benefit plan or
trust of the Company or any of its Affiliates) together with all “affiliates”
and “associates” (as such terms are defined in Rule 12b-2 under the Exchange
Act) of such person, shall become the “beneficial owner” (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent (20%) or more of either
(i) the combined voting power of the Company’s then outstanding securities
having the right to vote in an election of the Board (“voting securities”) or
(ii) the then outstanding Shares (in either such case other than as a result of
an acquisition of securities directly from the Company); or
(b) When,
during any period of 24 consecutive months during the existence of the Plan, the
individuals who, at the beginning of such period, constitute the Board (the
“Incumbent Directors”) cease or any reason other than death to constitute at
least a majority thereof, provided, however, that a director who was not a
director at the beginning of such 24-month period shall be deemed to have
satisfied such 24-month period) or by prior operation of this subsection (b);
or
(c) The
shareholders of the Company shall approve (i) any consolidation or merger of the
Company or any Subsidiary where the shareholders of the Company, immediately
prior to the consolidation or merger, would not immediately after the
consolidation or merger, beneficially own (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, shares representing in the
aggregate eighty percent (80%) or more of the voting securities of the
corporation issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company or (iii) any plan or proposal for the liquidation or
dissolution of the Company.
(d) Notwithstanding
the foregoing, a “Change of Control” shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition of
securities by the Company which, by reducing the number of Shares or other
voting securities outstanding, increases (i) the proportionate number of Shares
beneficially owned by any person to twenty percent (20%) or more of the Shares
then outstanding or (ii) the proportionate voting power represented by the
voting securities beneficially owned by any person to twenty percent (20%) or
more of the combined voting power of all then outstanding voting securities;
provided, however, that if any person referred to in clause (i) or (ii) of this
sentence shall thereafter become the beneficial owner of any additional Shares
or other voting securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a “Change of Control” shall be deemed to
have occurred.
D. Code shall mean the Internal
Revenue Code of 1986, as amended.
E. Common
Stock shall mean the Corporation’s common stock.
B-12
F. Corporation shall mean Peregrine
Pharmaceuticals, Inc., a Delaware corporation, and its successors.
G. Discretionary
Option Grant Program shall mean the
discretionary option grant program in effect under the Plan.
H. Employee shall mean an individual
who is in the employ of the Corporation (or any Parent or Subsidiary), subject
to the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance.
I. Exercise
Date shall
mean the date on which the Corporation shall have received written notice of the
option exercise.
J. Fair
Market Value per share of Common
Stock on any relevant date shall be determined in accordance with the following
provisions:
(i) If
the Common Stock is at the time traded on the Nasdaq Stock Market, then the Fair
Market Value shall be deemed equal to the closing selling price per share of
Common Stock on the date in question, as such price is reported on the Nasdaq
Stock Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If
the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be deemed equal to the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(iii) If
the Common Stock is at the time quoted on the OTC Bulletin Board , then the Fair
Market Value shall be deemed equal to the closing bid price per share of Common
Stock on the date in question.
(iv) If
the Common Stock is at the time then reported in the “Pink Sheets,” published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the Fair Market Value shall be
deemed equal to the most recent bid price per share of the Common Stock as of
the date of question.
K. Incentive
Option shall mean an option which satisfies the requirements of Code
Section 422.
L. 1934
Act shall mean the Securities Exchange Act of 1934, as
amended.
M. Non-Statutory
Option shall
mean an option not intended to satisfy the requirements of Code Section
422.
N. Optionee shall mean any person to
whom an option is granted under the Discretionary Option Grant
Program.
O. Parent shall mean any
corporation (other than the Corporation) in an unbroken chain of corporations
ending with the Corporation, provided each corporation in the unbroken chain
(other than the Corporation) 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.
B-13
P. Participant shall mean any person
who is issued shares of Common Stock under the Stock Issuance
Program.
Q. Permanent
Disability or Permanently Disabled shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
R. Plan shall mean the
Corporation’s 2005 Stock Incentive Plan, as set forth in this
document.
S. Plan
Administrator shall mean the
Organization and Compensation Committee of the Board, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
T. Plan
Effective Date shall mean the date on which the Board adopted the
Plan.
U. Section
16 Insider shall mean an officer or
director of the Corporation subject to the short-swing profit liabilities of
Section 16 of the 1934 Act.
V. Service shall mean the
performance of services for the Corporation (or any Parent or Subsidiary) by a
person in the capacity of an Employee, a non-employee member of the board of
directors or a consultant or independent advisor, except to the extent otherwise
specifically provided in the documents evidencing the option grant or stock
issuance.
W.
Stock
Exchange shall mean either the
American Stock Exchange or the New York Stock Exchange.
X. Stock
Issuance Agreement shall mean the agreement
entered into by the Corporation and the Participant at the time of issuance of
shares of Common Stock under the Stock Issuance Program.
Y.
Stock
Issuance Program shall mean the stock
issuance program in effect under the Plan.
Z.
Subsidiary
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, 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.
AA. Taxes
shall mean the Federal, state and local income and employment tax liabilities
incurred by the holder of Non-Statutory Options or unvested shares of Common
Stock in connection with the exercise of those options or the vesting of those
shares.
BB. 10%
Shareholder shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
B-14
|
IF
NOT OTHERWISE MARKED, THE SHARES REPRESENTED BY
THIS
PROXY SHALL BE VOTED AS FOLLOWS:
“FOR” ITEMS 1, 2, 3 AND
4.
|
PLEASE
MARK VOTES
AS
SHOWN IN THIS EXAMPLE: ý
|
|||||
|
FOR
ALL
|
WITHHOLD
ALL
|
FOR
ALL
EXCEPT
|
||||
|
THE
BOARD OF DIRECTORS RECOMMENDS A
VOTE
“FOR
ALL” NOMINEES IN ITEM 1.
|
||||||
|
ITEM
1. Election of Directors.
Nominees:
[01] Carlton M. Johnson; [02] Steven W. King;
[03]
David H. Pohl; [04] Eric S. Swartz; [05] Thomas A.
Waltz, M.D.
|
¨
|
¨
|
¨
|
To
withhold authority to vote for any one or more individual nominee(s), mark
“FOR ALL EXCEPT” and write that nominee(s) number(s) on the line
below:
|
||
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ITEM 2, 3 AND 4.
|
FOR
|
AGAINST
|
ABSTAIN
|
|||
|
ITEM
2. Ratify the Audit Committee’s selection of
Ernst & Young LLP as our independent registered public accounting
firm for fiscal year 2009.
|
¨
|
¨
|
¨
|
|||
|
ITEM
3. Approve an amendment to our certificate of
incorporation, as amended, to effect a reverse stock split of our common
stock.
|
¨
|
¨
|
¨
|
|||
|
ITEM
4. Approve our 2008 Stock Incentive
Plan.
|
¨
|
¨
|
¨
|
|||
|
By
my signature below, I confer to the named proxies discretionary authority
on any other business that may properly come before the Annual Meeting or
any adjournment or postponement of the Annual Meeting.
|
||||||
|
ý
FOR NEW
ADDRESS: ¨
Please write
in your new address ð
|
______________________________________________________________________
______________________________________________________________________
|
|||||
| Signature _______________________ Date ______________ Signature _________________________ Date ______________ | ||||||
|
NOTE:
Please sign as name appears on this proxy. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please
give full titles as such.
|
||||||
YOUR
VOTE IS IMPORTANT!
PLEASE
VOTE
This
Proxy is Solicited on Behalf of the Board of Directors
For
the 2008 Annual Meeting of Stockholders
To
Be Held Tuesday, October 21, 2008, at 10 a.m. PDT
The
undersigned hereby appoints Steven W. King and Paul J. Lytle, or any one or all
of them, with full power of substitution, attorneys and proxies to represent the
undersigned at the annual meeting of stockholders of PEREGRINE PHARMACEUTICALS,
INC. to be held on October 21, 2008 and at any
adjournment or postponement thereof, with all the power which the undersigned
would possess if personally present and to vote, as specified on the reverse
side, all shares of Common Stock which the undersigned may be entitled to vote
at said meeting.
IF NO
OTHER INDICATION IS MADE ON THE REVERSE SIDE OF THIS FORM, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES FOR DIRECTOR LISTED IN ITEM 1 AND FOR ITEMS 2, 3 AND 4 AS
MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT AND IN THE DISCRETION OF THE
PERSONS NAMED ABOVE IN ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE
ANNUAL MEETING. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THOSE INSTRUCTIONS.
YOU MAY
REVOKE THIS PROXY AT ANY TIME PRIOR TO THE VOTE AT THE ANNUAL
MEETING.
PLEASE
COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ACCOMPANYING
ENVELOPE.
IF YOU HAVE NOT VOTED VIA THE
INTERNET OR TELEPHONE, FOLD ALONG THE
PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION
IN THE ENCLOSED ENVELOPE.