def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
ARADIGM CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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ARADIGM
CORPORATION
3929 Point Eden Way
Hayward, California, 94545
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held On May 15,
2009
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Aradigm Corporation, a California corporation
(Aradigm). The meeting will be held on Friday,
May 15, 2009, at 9:00 a.m. local time at
Aradigms offices for the following purposes:
1. To elect the four nominees for director named herein to
serve until the next annual meeting of shareholders and until
their successors are duly elected and qualified.
2. To approve an amendment to Aradigms Employee Stock
Purchase Plan to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan by
2,500,000 shares.
3. To ratify the selection of Odenberg, Ullakko,
Muranishi & Co. LLP as Aradigms independent
registered public accounting firm for the fiscal year ending
December 31, 2009.
4. To conduct any other business properly brought before
the meeting.
These items of business are more fully described in the Proxy
Statement accompanying this Notice.
The record date for the annual meeting is March 31, 2009.
Only shareholders of record at the close of business on that
date may vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
Igor Gonda, Ph.D.
President and Chief Executive Officer
Hayward, California
April 9, 2009
Important Notice Regarding the Availability of Proxy
Materials for the Shareholders Meeting to Be Held on
May 15, 2009 at 9:00 am at 3929 Point Eden Way, Hayward,
California, 94545
The proxy statement and annual report to shareholders are
available at www.aradigm.com.
You are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please
complete, date, sign and return the enclosed proxy as promptly
as possible in order to ensure your representation at the
meeting. A return envelope (which is postage prepaid if mailed
in the United States) has been provided for your
convenience. Even if you have voted by proxy, you may still vote
in person if you attend the meeting. Please note, however, that
if your shares are held of record by a broker, bank or other
nominee and you wish to vote at the meeting, you must obtain a
proxy issued in your name from that record holder.
Table of
Contents
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ARADIGM
CORPORATION
3929 Point Eden Way
Hayward, California, 94545
PROXY STATEMENT FOR ANNUAL
MEETING OF SHAREHOLDERS
To Be Held On May 15,
2009
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I
receiving these materials?
We have sent you these proxy materials because the Board of
Directors of Aradigm Corporation is soliciting your proxy to
vote at the 2009 Annual Meeting of Shareholders. You are invited
to attend the annual meeting to vote on the proposals described
in this proxy statement. However, you do not need to attend the
meeting to vote your shares. Instead, you may simply complete,
sign and return the enclosed proxy card.
We intend to mail these proxy materials on or about
April 9, 2009 to all shareholders of record entitled to
vote at the annual meeting.
Who can
vote at the annual meeting?
Only shareholders of record at the close of business on
March 31, 2009 will be entitled to vote at the annual
meeting. On this record date, there were 99,899,455 shares
of Common Stock outstanding and entitled to vote.
Shareholder
of Record: Shares Registered in Your Name
If on March 31, 2009 your shares were registered directly
in your name with our transfer agent, Computershare
Trust Company, N.A., then you are a shareholder of record.
As a shareholder of record, you may vote in person at the
meeting or vote by proxy. Whether or not you plan to attend the
meeting, we urge you to fill out and return the enclosed proxy
card to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or
Bank
If on March 31, 2009 your shares were held in an account at
a brokerage firm, bank, dealer, or other similar organization,
then you are the beneficial owner of shares held in street
name and these proxy materials are being forwarded to you
by that organization. The organization holding your account is
considered the shareholder of record for purposes of voting at
the annual meeting. As a beneficial owner, you have the right to
direct your broker or other agent regarding how to vote the
shares in your account. You are also invited to attend the
annual meeting. However, since you are not the shareholder of
record, you may not vote your shares in person at the meeting
unless you request and obtain a valid proxy from your broker or
other agent.
What am I
voting on?
There are three matters scheduled for a vote:
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Election of four directors;
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Approval of an amendment to Aradigms Employee Stock
Purchase Plan (the Purchase Plan) to increase the
aggregate number of shares of Common Stock authorized for
issuance under such plan by 2,500,000 shares; and
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Ratification of selection by the Audit Committee of the Board of
Directors of Odenberg, Ullakko, Muranishi & Co. LLP as
our independent registered public accounting firm for the fiscal
year ending December 31, 2009.
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How do I
vote?
You may either vote For all the nominees for
director or you may Withhold your vote for any
nominee you specify. For each of the other matters to be voted
on, you may vote For or Against or
abstain from voting. The procedures for voting are fairly simple:
Shareholder
of Record: Shares Registered in Your Name
If you are a shareholder of record, you may vote in person at
the annual meeting or vote by proxy using the enclosed proxy
card. Whether or not you plan to attend the meeting, we urge you
to vote by proxy to ensure your vote is counted. You may still
attend the meeting and vote in person even if you have already
voted by proxy.
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To vote in person, come to the annual meeting and we will give
you a ballot when you arrive.
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To vote using the proxy card, simply complete, sign and date the
enclosed proxy card and return it promptly in the envelope
provided. If you return your signed proxy card to us before the
annual meeting, we will vote your shares as you direct.
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Beneficial
Owner: Shares Registered in the Name of Broker or
Bank
If you are a beneficial owner of shares registered in the name
of your broker, bank, or other agent, you should have received a
proxy card and voting instructions with these proxy materials
from that organization rather than from Aradigm. Simply complete
and mail the proxy card to ensure that your vote is counted. To
vote in person at the annual meeting, you must obtain a valid
proxy from your broker, bank, or other agent. Follow the
instructions from your broker or bank included with these proxy
materials, or contact your broker or bank to request a proxy
form.
How many
votes do I have?
On each matter to be voted upon, you have one vote for each
share of Common Stock you own as of March 31, 2009.
However, you may be able to cumulate your votes for
Proposal 1, the election of directors, if at least one
shareholder gives notice at the meeting, before the voting, that
he or she intends to cumulate votes. Under cumulative voting,
you have four votes for each share of Common Stock you own. You
may cast all of your votes for one candidate, or you may
distribute your votes among different candidates as you choose.
However, you may cumulate votes (cast more than one vote per
share) for a candidate only if the candidate is nominated before
the voting and at least one shareholder gives notice at the
meeting, before the voting, that he or she intends to cumulate
votes. If you do not specify how to distribute your votes, by
giving your proxy you are authorizing the proxyholders (the
individuals named on your proxy card) to cumulate votes in their
discretion.
What if I
return a proxy card or otherwise vote but do not make specific
choices?
If you return a signed and dated proxy card or otherwise vote
without marking any voting selections, your shares will be
voted, as applicable For the election of all four
nominees for director, For the amendment to the
Purchase Plan and For the ratification of Odenberg,
Ullakko, Muranishi & Co. LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2009. If any other matter is properly
presented at the meeting, your proxyholder (one of the
individuals named on your proxy card) will vote your shares
using his or her best judgment.
Who is
paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In
addition to these proxy materials, our directors and employees
and Georgeson Shareholder Communications, Inc.
(Georgeson) may also solicit proxies in person, by
telephone, or by other means of communication. Directors and
employees will not be paid any additional compensation for
soliciting proxies, but Georgeson, if retained, would be paid
its customary fee, estimated to be $10,000 plus out-of-pocket
expenses, if it solicits proxies.
2
What does
it mean if I receive more than one set of proxy
materials?
If you receive more than one set of proxy materials, your shares
may be registered in more than one name or in different
accounts. Please follow the voting instructions on the proxy
cards and proxy materials to ensure that all of your shares are
voted.
Can I
change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote
at the meeting. If you are the record holder of the shares, you
may revoke your proxy in any one of following ways:
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You may submit another properly completed proxy card with a
later date.
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You may send a timely written notice that you are revoking your
proxy to our Secretary at 3929 Point Eden Way, Hayward,
California, 94545.
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You may attend the annual meeting and vote in person. Simply
attending the meeting will not, by itself, revoke your proxy.
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Your most current proxy card is the one that is counted.
If your shares are held by your broker or bank as a nominee or
agent, you should follow the instructions provided by your
broker or bank.
When are
shareholder proposals due for next years annual
meeting?
To be considered for inclusion in next years proxy
materials, your proposal must be submitted in writing by
December 21, 2009, to our Secretary at 3929 Point Eden Way,
Hayward, California, 94545. If you wish to submit a proposal
that is not to be included in next years proxy materials
or nominate a director, you must do so no later than the close
of business on March 16, 2010 and no earlier than the close
of business on February 16, 2010. You are also advised to
review our bylaws, which contain additional requirements about
advance notice of shareholder proposals and director
nominations. A copy of our bylaws is available via written
request to our Secretary at 3929 Point Eden Way, Hayward,
California, 94545, or by accessing EDGAR on the SECs
website at www.sec.gov.
How are
votes counted?
Votes will be counted by the inspector of election appointed for
the meeting, who will separately count For and (with
respect to proposals other than the election of directors)
Against votes, abstentions and broker non-votes.
Abstentions and broker non-votes will not be counted towards the
vote total for any proposal.
If your shares are held by your broker as your nominee (that is,
in street name), you will need to obtain a proxy
form from the institution that holds your shares and follow the
instructions included on that form regarding how to instruct
your broker to vote your shares. If you do not give instructions
to your broker, your broker can vote your shares with respect to
discretionary items, but not with respect to
non-discretionary items. On non-discretionary items
for which you do not give your broker instructions, the shares
will be treated as broker non-votes.
What are
broker non-votes?
Broker non-votes occur when a beneficial owner of shares held in
street name does not give instructions to the broker
or nominee holding the shares as to how to vote on matters
deemed non-routine. Generally, if shares are held in
street name, the beneficial owner of the shares is entitled to
give voting instructions to the broker or nominee holding the
shares. If the beneficial owner does not provide voting
instructions, the broker or nominee can still vote the shares
with respect to matters that are considered to be
routine, but not with respect to
non-routine matters. Under the rules and
interpretations of the New York Stock Exchange,
non-routine matters are generally those involving a
contest or a matter that may substantially affect the rights or
privileges of shareholders, such as mergers or shareholder
proposals.
3
How many
votes are needed to approve each proposal?
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For the election of directors, the four nominees receiving the
most For votes (from the holders of votes of shares
present in person or represented by proxy and entitled to vote
on the election of directors) will be elected. Broker non-votes
will have no effect.
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To be approved, Proposal 2 (approval of an amendment to our
purchase plan to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan by
2,500,000 shares), must receive For votes from
the holders of a majority of shares present either in person or
by proxy and entitled to vote. Broker non-votes will have no
effect.
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To be approved, Proposal 3 (ratifying the selection of
Odenberg, Ullakko, Muranishi & Co. LLP as our
independent registered public accounting firm for the fiscal
year ending December 31, 2009) must receive
For votes from the holders of a majority of shares
present either in person or by proxy and entitled to vote.
Abstentions and broker non-votes will have no effect.
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What is
the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. A
quorum will be present if shareholders holding a majority of the
outstanding shares are present at the meeting in person or
represented by proxy. On the record date, there were
99,899,455 shares of Common Stock outstanding and entitled
to vote. Thus, the holders of 49,949,728 shares must be
present in person or represented by proxy at the meeting or by
proxy to have a quorum.
Your shares will be counted towards the quorum only if you
submit a valid proxy (or one is submitted on your behalf by your
broker, bank or other nominee) or vote at the meeting.
Abstentions and broker non-votes will be counted towards the
quorum requirement. If there is no quorum, the holders of a
majority of the shares present in person or represented by proxy
at the meeting may adjourn the meeting to another date.
How can I
find out the results of the voting at the annual
meeting?
Preliminary voting results will be announced at the annual
meeting. Final voting results will be published in our quarterly
report on
Form 10-Q
for the second quarter of 2009.
What
proxy materials are available on the internet?
The proxy statement and
Form 10-K
are available at www.aradigm.com.
PROPOSAL 1
ELECTION
OF DIRECTORS
Our Board of Directors (the Board) currently
consists of four directors. There are four nominees for director
this year. Each director to be elected will hold office until
the next annual meeting and until his successor is elected, or
until the directors death, resignation or removal. Each of
the nominees listed below is currently a member of our Board who
was previously elected by the shareholders. It is our policy to
invite nominees to attend the annual meeting and to encourage
attendance at meetings at which substantial shareholder
attendance is expected. All of the nominees for election as a
director at the 2008 Annual Meeting of Shareholders attended the
2008 Annual Meeting of Shareholders, with the exception of John
M. Siebert.
The four candidates receiving the highest number of affirmative
votes by the holders of shares entitled to be voted will be
elected. Shares represented by executed proxies will be voted,
if authority to do so is not withheld, for the election of the
four nominees named below. If any nominee becomes unavailable
for election as a result of an unexpected occurrence, your
shares will be voted for the election of a substitute nominee
proposed by us. Each person nominated for election has agreed to
serve if elected. Our management has no reason to believe that
any nominee will be unable to serve.
4
Nominees
The following is a brief biography of each nominee for director
and their ages as of March 31, 2009.
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Name
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Age
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Principal Occupation/Position Held With Us
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Frank H. Barker
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78
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Director
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Igor Gonda
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61
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President, Chief Executive Officer and Director
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John M. Siebert
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69
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Director
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Virgil D. Thompson
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69
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Chairman and Director
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Frank H. Barker has been a director since May 1999. From
January 1980 to January 1994, Mr. Barker served as a
company group chairman of Johnson & Johnson, Inc., a
diversified health care company, and was Corporate Vice
President from January 1989 to January 1996. Mr. Barker
retired from Johnson & Johnson, Inc. in January 1996.
Mr. Barker holds a B.A. in Business Administration from
Rollins College, Winter Park, Florida. Mr. Barker is a
director of Jenex Corporation, a Canadian medical devices
company.
Igor Gonda, Ph.D. has served as our President and
Chief Executive Officer since August 2006, and as a director
since September 2001. From December 2001 to August 2006,
Dr. Gonda was the Chief Executive Officer and Managing
Director of Acrux Limited, a publicly traded specialty
pharmaceutical company located in Melbourne, Australia. From
July 2001 to December 2001, Dr. Gonda was our Chief
Scientific Officer and, from October 1995 to July 2001, was our
Vice President, Research and Development. From February 1992 to
September 1995, Dr. Gonda was a Senior Scientist and Group
Leader at Genentech, Inc. His key responsibilities at Genentech
were the development of the inhalation delivery of rhDNase
(Pulmozyme) for the treatment of cystic fibrosis and
non-parenteral methods of delivery of biologics. Prior to that,
Dr. Gonda held academic positions at the University of
Aston in Birmingham, United Kingdom, and the University of
Sydney, Australia. Dr. Gonda holds a B.Sc. in Chemistry and
a Ph.D. in Physical Chemistry from Leeds University, United
Kingdom. Dr. Gonda was the Chairman of our Scientific
Advisory Board until August 2006.
John M. Siebert, Ph.D. has been a director since
November 2006. From May 2003 to October 2008, Dr. Siebert
was the Chairman and Chief Executive Officer of CyDex
Pharmaceuticals, Inc., a privately held specialty pharmaceutical
company. From September 1995 to April 2003, he was President and
Chief Executive Officer of CIMA Labs Inc., a publicly traded
drug delivery company, and from July 1995 to September 1995 he
was President and Chief Operating Officer of CIMA Labs. From
1992 to 1995, Dr. Siebert was Vice President, Technical
Affairs at Dey Laboratories, Inc., a privately held
pharmaceutical company. From 1988 to 1992, he worked at Bayer
Corporation. Prior to that, Dr. Siebert was employed by
E.R. Squibb & Sons, Inc., G.D. Searle & Co.
and The Procter & Gamble Company. Dr Siebert holds a
B.S. in Chemistry from Illinois Benedictine University, an M.S.
in Organic Chemistry from Wichita State University and a Ph.D.
in Organic Chemistry from the University of Missouri.
Virgil D. Thompson has been a director since June 1995
and has been Chairman of the Board since January 2005. From
November 2002 until July 2007, Mr. Thompson was President
and Chief Executive Officer of Angstrom Pharmaceuticals, Inc., a
privately held pharmaceutical company where he continues to
serve as a director. From September 2000 to November 2002,
Mr. Thompson was President, Chief Executive Officer and a
director of Chimeric Therapies, Inc., a privately held
biotechnology company. From May 1999 until September 2000,
Mr. Thompson was the President, Chief Operating Officer and
a director of Savient Pharmaceuticals, a publicly traded
specialty pharmaceutical company. From January 1996 to April
1999, Mr. Thompson was the President and Chief Executive
Officer and a director of Cytel Corporation, a publicly traded
biopharmaceutical company that was subsequently acquired by IDM
Pharma, Inc. From 1994 to 1996, Mr. Thompson was President
and Chief Executive Officer of Cibus Pharmaceuticals, Inc., a
privately held drug delivery device company. From 1991 to 1993,
Mr. Thompson was President of Syntex Laboratories, Inc., a
U.S. subsidiary of Syntex Corporation, a publicly traded
pharmaceutical company. Mr. Thompson holds a B.S. in
Pharmacy from Kansas University and a J.D. from The George
Washington University Law School. Mr. Thompson is chairman
of the board of directors of Questcor Pharmaceuticals, Inc., a
publicly traded pharmaceutical company, and is a director of
Savient Pharmaceuticals.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
5
Independence
of the Board of Directors
We have chosen to apply the listing standards of the Nasdaq
Global Market (Nasdaq) in determining the
independence of our directors. The Board consults with counsel
to ensure that the Boards determinations are consistent
with all relevant securities and other laws and regulations
regarding the definition of independent, including
those set forth in pertinent listing standards of the Nasdaq, as
in effect from time to time.
Consistent with these considerations, after review of all
relevant transactions or relationships between each director and
nominee for director, or any of his family members, and us, our
senior management and our independent registered public
accounting firm, the Board affirmatively has determined that the
following three directors and nominees for directors are
independent within the meaning of the applicable Nasdaq listing
standards: Mr. Barker, Dr. Siebert, and
Mr. Thompson. In making this determination, the Board found
that none of these directors or nominees for director had a
material or disqualifying relationship with the Company.
Dr. Gonda, our President and Chief Executive Officer, is
not an independent director within the meaning of the applicable
Nasdaq standards by virtue of his employment with Aradigm. In
addition, each person who served as a director for any portion
of 2008 was independent within the meaning of the applicable
Nasdaq listing standards, except for Dr. Gonda.
Meetings
of the Board of Directors
The Board held 22 meetings during the last fiscal year. Each of
our current Board members attended 75% or more of the aggregate
of the meetings of the Board and of the committees on which he
served, held during the period for which he was a director or
committee member, respectively.
In fiscal 2008 our independent directors met or held telephonic
Board meetings nine times in regularly scheduled executive
sessions at which only independent directors were present. These
meetings were chaired by Mr. Thompson, the Chairman of the
Board. Persons interested in communicating with the independent
directors with their concerns or issues may address
correspondence to a particular director, or to the independent
directors generally, in care of Aradigm at 3929 Point Eden Way,
Hayward, California, 94545.
Shareholder
Communications with the Board of Directors
We have implemented a process by which shareholders may
communicate with the Board or any of its directors. Shareholders
who wish to communicate with the Board may do so by sending
written communications addressed to the Secretary of Aradigm at
3929 Point Eden Way, Hayward, California 94545. All
communications will be compiled by our Secretary and submitted
to the Board or the individual directors on a periodic basis.
All communications directed to the Audit Committee in accordance
with our whistleblower policy that relate to questionable
accounting or auditing matters involving us will be forwarded
directly to the Audit Committee.
Code of
Ethics
We have adopted the Aradigm Corporation Code of Business Conduct
and Ethics that applies to all of our officers, directors and
employees. The Code of Business Conduct and Ethics is available
on our website at www.aradigm.com. If we make any substantive
amendments to the Code of Business Conduct and Ethics or grant
any waiver from a provision of the Code to any executive officer
or director, we will promptly disclose the nature of the
amendment or waiver on our website.
6
Information
Regarding the Committees of our Board of Directors
The Board has three committees: an Audit Committee, a
Compensation Committee and a Nominating and Corporate Governance
Committee (formerly called the Nominating Committee). The
following table provides membership information and meeting
information for each of the Board committees during 2008:
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Nominating and
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Corporate
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Name
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Audit
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Compensation
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Governance
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Frank H. Barker
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X
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X
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Igor Gonda
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Stephen Jaeger(1)
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X
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*
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X
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Timothy Lynch(2)
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X
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*
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X
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John M. Siebert
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X
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X
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Virgil D. Thompson
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X
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X
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*
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X
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Total meetings in fiscal year 2008
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5
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7
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3
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Committee Chairperson |
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Mr. Jaeger did not stand for re-election at the 2008 Annual
Meeting and his membership on the Audit Committee and
Compensation Committee ended upon the election of the new Board
at the meeting. |
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Mr. Lynch resigned from the Board on February 17,
2009. He served on the Audit Committee and Compensation
Committee from May 15, 2008 until his resignation. |
Below is a description of each committee of the Board. The Board
has determined that each member of each committee meets the
applicable Nasdaq rules and regulations regarding
independence and that each member is free of any
relationship that would impair his individual exercise of
independent judgment with regard to Aradigm.
Audit
Committee
The Audit Committee of the Board was established by the Board in
accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended, to oversee our corporate
accounting and financial reporting processes and audits of our
financial statements. For this purpose, the Audit Committee
performs several functions. The Audit Committee evaluates the
performance of and assesses the qualifications of our
independent registered public accounting firm; determines and
approves the engagement of our independent registered public
accounting firm; determines whether to retain or terminate the
existing independent registered public accounting firm or to
appoint and engage a new independent registered public
accounting firm; reviews and approves the retention of the
independent registered public accounting firm to perform any
proposed permissible non-audit services; monitors the rotation
of partners of the independent registered public accounting firm
on our audit engagement team as required by law; confers with
management and our independent registered public accounting firm
regarding the effectiveness of internal controls over financial
reporting; establishes procedures, as required under applicable
law, for the receipt, retention and treatment of complaints
received by us regarding accounting, internal accounting
controls or auditing matters and the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters; reviews the financial statements
to be included in our Annual Report on
Form 10-K
and our quarterly financial statements on
Form 10-Q;
and discusses with management and our independent registered
public accounting firm the results of the annual audit.
Currently, three directors comprise the Audit Committee:
Messrs. Barker and Thompson and Dr. Siebert (chair).
The Audit Committee is governed by a written charter that is
available to shareholders on our website at www.aradigm.com.
The Board annually reviews the Nasdaq listing standards
definition of independence for Audit Committee members and has
determined that all members of our Audit Committee are
independent (as independence is currently defined in
Rule 4350(d)(2)(A)(i) and (ii) of the Nasdaq listing
standards). The Board has determined that Dr. Siebert
qualifies as an audit committee financial expert, as
defined in applicable rules of the Securities and Exchange
Commission (the SEC). The Board made a qualitative
assessment of Dr. Sieberts level of knowledge and
experience based on a number of factors, including formal
education and executive experience.
7
Compensation
Committee
The Compensation Committee of the Board reviews and recommends
to the Board the overall compensation strategy and policies for
us. The Compensation Committee reviews and recommends to the
Board corporate performance goals and objectives relevant to the
compensation of our executive officers and other senior
management; reviews and recommends to the Board the compensation
and other terms of employment of our Chief Executive Officer;
reviews and recommends to the Board for approval the
compensation and other terms of employment of the other
officers; and oversees the administration of our stock option
and purchase plans, pension and profit sharing plans, stock
bonus plans, deferred compensation plans and other similar
programs. Three directors currently comprise the Compensation
Committee: Messrs. Barker and Thompson (chair) and
Dr. Siebert. All members of our Compensation Committee are
independent (as independence is currently defined in
Rule 4200(a)(15) of the Nasdaq listing standards). The
Compensation Committee is governed by a written charter that is
available to shareholders on our website at www.aradigm.com.
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board
is responsible for identifying, reviewing and evaluating
candidates to serve as directors (consistent with criteria
approved by the Board), recommending to the Board candidates for
election and re-election to the Board, making recommendations to
the Board regarding the membership of the committees of the
Board, assessing the performance of the Board and its committees
and monitoring compliance with our Code of Business Conduct and
Ethics. Currently, the Nominating and Corporate Governance
Committee consists of three directors: Dr. Siebert and
Messrs. Barker (chair) and Thompson. All current members of
the Nominating and Corporate Governance Committee are
independent (as independence is currently defined in
Rule 4200(a)(15) of the Nasdaq listing standards). The
Nominating and Corporate Governance Committee is governed by a
written charter that is available to shareholders on our website
at www.aradigm.com.
Any potential candidates for director nominees, including
candidates recommended by shareholders, are reviewed in the
context of the current composition of the Board, our operating
requirements and the long-term interests of shareholders. In
conducting this assessment, the Committee considers such factors
as it deems appropriate given our current needs and those of our
Board, to maintain a balance of knowledge, experience and
capability. The Nominating and Corporate Governance Committee
reviews directors overall service during their term,
including the number of meetings attended, level of
participation and quality of performance. The Committee also
determines whether the nominee would be independent, which
determination is based upon applicable Nasdaq listing standards,
applicable SEC rules and regulations and the advice of counsel,
if necessary. The Committee then compiles a list of potential
candidates from suggestions it may receive, but may also engage,
if it deems appropriate, a professional search firm to generate
additional suggestions. The Committee conducts any appropriate
and necessary inquiries into the backgrounds and qualifications
of possible candidates as it deems appropriate. The Committee
meets to discuss and consider such candidates
qualifications and then selects a nominee for recommendation to
the Board by majority vote. In 2008 the Nominating and Corporate
Governance Committee authorized the payment of a fee to a third
party to assist in the process of identifying and evaluating
director candidates. While the Committee and the Board have from
time to time received and considered suggestions from
shareholders for nominations to the Board, the Committee has
received no suggestions for which disclosure is required in this
proxy statement.
The Nominating and Corporate Governance Committee will consider
director candidates recommended by shareholders. The Committee
will consider candidates recommended by shareholders in the same
manner as it considers recommendations from other sources.
Shareholders who wish to recommend individuals for consideration
by the Nominating and Corporate Governance Committee to become
nominees for election to the Board may do so by delivering a
written recommendation to the Nominating and Corporate
Governance Committee at the following address: 3929 Point Eden
Way, Hayward, California 94545 at least 60 days prior, but
no more than 90 days prior, to the anniversary date of the
last annual meeting of shareholders. Submissions should include
the full name of the proposed nominee, a description of the
proposed nominees business experience for at least the
previous five years, complete biographical information, a
description of the proposed nominees qualifications as a
director and a representation that the nominating shareholder is
a beneficial or record owner of our stock.
8
REPORT OF
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS (*)
The Audit Committee has reviewed and discussed the audited
financial statements for the fiscal year ended December 31,
2008 with our management. The Audit Committee has discussed with
the independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards
No. 114, The Auditors Communication with Those
Charged with Governance, as adopted by the Public Company
Accounting Oversight Board (PCAOB) in
Rule 3200T. The Audit Committee has also received the
written disclosures and the letter from the independent
registered public accounting firm required by applicable
requirements of the PCAOB regarding the independent registered
public accounting firms communications with the audit
committee concerning independence, and has discussed with the
independent registered public accounting firm the independent
registered public accounting firms independence. Based on
the foregoing, the Audit Committee has recommended to the Board
of Directors that the audited financial statements be included
in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008.
From the members of the Audit Committee of Aradigm Corporation:
Frank H. Barker
John M. Siebert, (Chair)
Virgil D. Thompson
PROPOSAL 2
APPROVAL
OF EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In April 1996, the Board of Directors adopted, and the
shareholders subsequently approved, the Employee Stock Purchase
Plan (Purchase Plan). A total of
2,050,000 shares of the Companys Common Stock have
previously been authorized for issuance under the Purchase Plan.
At February 28, 2009, an aggregate of 1,110,084 shares
had been issued under the Purchase Plan and 939,916 shares
remained for the grant of future rights under the Purchase Plan.
During the last fiscal year, shares were purchased at prices
ranging from $0.33 to $0.94 in the following amounts under the
Purchase Plan: all current executive officers as a group
(58,146 shares), and all employees (excluding current
executive officers) as a group (242,378 shares).
In February 2009, the Board of Directors of the Company adopted
an amendment to the Purchase Plan, subject to shareholder
approval, to increase the number of shares authorized for
issuance under the Purchase Plan by 2,500,000 to
4,550,000 shares. This amendment is intended to afford the
Company greater flexibility in providing employees with stock
incentives and ensures that the Company can continue to provide
such incentives at levels determined appropriate by the Board.
The following summary description of the Purchase Plan, as
amended, is qualified in its entirety by reference to the full
text of the Purchase Plan that is attached as Appendix A to
the proxy statement filed via EDGAR with the SEC, including all
changes that this proposal would effect if approved by our
shareholders at the annual meeting.
Shareholders are requested in this Proposal 2 to approve
the Purchase Plan, as amended. The affirmative vote of the
holders of a majority of the shares present in person or
represented by proxy and voting at the meeting (which shares
voting affirmatively also constitute at least a majority of the
required quorum) will be required to approve the Purchase Plan,
as amended. For purposes of this vote abstentions and broker
non-votes will not be counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
(*) The material in this report is not
soliciting material, is not deemed filed
with the SEC, and is not to be incorporated by reference into
any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Act of 1934, as amended, whether made
before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
9
The essential features of the Purchase Plan, as amended, are
outlined below:
Purpose
The purpose of the Purchase Plan is to provide a means by which
employees of the Company (and any parent or subsidiary of the
Company designated by the Board of Directors to participate in
the Purchase Plan) may be given an opportunity to purchase
Common Stock of the Company through payroll deductions, to
assist the Company in retaining the services of its employees,
to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for
the success of the Company. At March 31, 2009, all of the
Companys approximately 36 employees were eligible to
participate in the Purchase Plan.
The rights to purchase Common Stock granted under the Purchase
Plan are intended to qualify as options issued under an
employee stock purchase plan as that term is defined
in Section 423(b) of the Code.
Administration
The Purchase Plan is administered by the Board of Directors,
which has the final power to construe and interpret the Purchase
Plan and the rights granted under it. The Board has the power,
subject to the provisions of the Purchase Plan, to determine
when and how rights to purchase Common Stock of the Company will
be granted, the provisions of each offering of such rights
(which need not be identical), and whether any parent or
subsidiary of the Company shall be eligible to participate in
such plan. The Board has the power, which it has not exercised,
to delegate administration of such plan to a committee of not
less than two Board members. The Board may abolish any such
committee at any time and revest in itself the administration of
the Purchase Plan.
Offerings
The Purchase Plan is implemented by offerings of rights to all
eligible employees from time to time by the Board. Generally,
each such offering is two years in duration. The Board may set
the duration of an offering for a period of time not to exceed
27 months.
Eligibility
Any person who is customarily employed at least 20 hours
per week and five months per calendar year by the Company (or by
any parent or subsidiary of the Company designated from time to
time by the Board) on the first day of an offering period is
eligible to participate in that offering under the Purchase
Plan, provided such employee has been in the continuous employ
of the Company for at least 10 days preceding the first day
of the offering period.
Notwithstanding the foregoing, no employee is eligible for the
grant of any rights under the Purchase Plan if, immediately
after such grant, the employee would own, directly or
indirectly, stock possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company or
of any parent or subsidiary of the Company (including any stock
which such employee may purchase under all outstanding rights
and options), nor will any employee be granted rights that would
permit him or her to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time
such rights are granted) under all employee stock purchase plans
of the Company in any calendar year.
Participation
in the Plan
Eligible employees become participants in the Purchase Plan by
delivering to the Company, prior to the date selected by the
Board as the offering date for the offering, an agreement
authorizing payroll deductions of up to 15% of such
employees total compensation during the purchase period.
Purchase
Price
The purchase price per share at which shares are sold in an
offering under the Purchase Plan is the lower of (i) 85% of
the fair market value of a share of Common Stock on the date of
commencement of the offering, or (ii) 85% of the fair
market value of a share of Common Stock on any purchase date.
10
Payment
of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll
deductions over the offering period. At any time during the
purchase period, a participant may reduce or terminate his or
her payroll deductions. A participant may not increase or begin
such payroll deductions after the beginning of any purchase
period, except, if the Board provides, in the case of an
employee who first becomes eligible to participate as of a date
specified during the purchase period. All payroll deductions
made for a participant are credited to his or her account under
the Purchase Plan and deposited with the general funds of the
Company. A participant may not make any additional payments into
such account.
Purchase
of Stock
By executing an agreement to participate in the Purchase Plan,
the employee is entitled to purchase shares under such plan. In
connection with offerings made under the Purchase Plan, the
Board specifies a maximum number of shares any employee may be
granted the right to purchase and the maximum aggregate number
of shares which may be purchased pursuant to such offering by
all participants. If the aggregate number of shares to be
purchased upon exercise of rights granted in the offering would
exceed the maximum aggregate number, the Board would make a pro
rata allocation of shares available in a uniform and equitable
manner. Unless the employees participation is
discontinued, his or her right to purchase shares is exercised
automatically at the end of the purchase period at the
applicable price. See Withdrawal below.
Withdrawal
While each participant in the Purchase Plan is required to sign
an agreement authorizing payroll deductions, the participant may
withdraw from a given offering by terminating his or her payroll
deductions and by delivering to the Company a notice of
withdrawal from the Purchase Plan. Such withdrawal may be
elected at any time prior to the end of the applicable offering
period.
Upon any withdrawal from an offering by the employee, the
Company will distribute to the employee his or her accumulated
payroll deductions without interest, less any accumulated
deductions previously applied to the purchase of stock on the
employees behalf during such offering, and such
employees interest in the offering will be automatically
terminated. The employee is not entitled to again participate in
such offering. An employees withdrawal from an offering
will not have any effect upon such employees eligibility
to participate in subsequent offerings under the Purchase Plan.
Termination
of Employment
Rights granted pursuant to any offering under the Purchase Plan
terminate immediately upon cessation of an employees
employment for any reason, and the Company will distribute to
such employee all of his or her accumulated payroll deductions,
without interest.
Restrictions
on Transfer
Rights granted under the Purchase Plan are not transferable and
may be exercised only by the person to whom such rights are
granted.
Duration,
Amendment and Termination
The Board may, in its discretion, suspend or terminate the
Purchase Plan at any time.
The Board may amend the Purchase Plan at any time. Any amendment
of the Purchase Plan must be approved by the shareholders within
12 months of its adoption by the Board if the amendment
would (i) increase the number of shares of Common Stock
reserved for issuance under the Purchase Plan, (ii) modify
the requirements relating to eligibility for participation in
the Purchase Plan, or (iii) modify any other provision of
the Purchase Plan in a manner that would materially increase the
benefits accruing to participants under the Purchase Plan, if
such approval is required in order to comply with the
requirements of
Rule 16b-3
under the Exchange Act.
11
Rights granted before amendment or termination of the Purchase
Plan will not be altered or impaired by any amendment or
termination of such plan without consent of the person to whom
such rights were granted.
Effect of
Certain Corporate Events
In the event of a dissolution, liquidation or specified type of
merger of the Company, the surviving corporation either will
assume the rights under the Purchase Plan or substitute similar
rights, or the exercise date of any ongoing offering will be
accelerated such that the outstanding rights may be exercised
immediately prior to, or concurrent with, any such event.
Stock
Subject to Purchase Plan
If rights granted under the Purchase Plan expire, lapse or
otherwise terminate without being exercised, the Common Stock
not purchased under such rights again becomes available for
issuance under such plan.
Federal
Income Tax Information
Rights granted under the Purchase Plan are intended to qualify
for favorable federal income tax treatment associated with
rights granted under an employee stock purchase plan which
qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase
of shares as if such amounts were actually received. Other than
this, no income will be taxable to a participant until
disposition of the shares acquired, and the method of taxation
will depend upon the holding period of the purchased shares.
If the stock is disposed of at least two years after the
beginning of the offering period and at least one year after the
stock is transferred to the participant, then the lesser of
(i) the excess of the fair market value of the stock at the
time of such disposition over the purchase price or
(ii) the excess of the fair market value of the stock as of
the beginning of the offering period over the purchase price
(determined as of the beginning of the offering period) will be
treated as ordinary income. Any further gain or any loss will be
taxed as a capital gain or loss. Capital gains currently are
generally subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of
either of the holding periods described above, then the excess
of the fair market value of the stock on the purchase date over
the purchase price will be treated as ordinary income at the
time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary
income from other payments made to the participant. The balance
of any gain will be treated as capital gain. Even if the stock
is later disposed of for less than its fair market value on the
purchase date, the same amount of ordinary income is attributed
to the participant, and a capital loss is recognized equal to
the difference between the sales price and the fair market value
of the stock on such purchase date.
There are no federal income tax consequences to the Company by
reason of the grant or purchase of rights under the Purchase
Plan. The Company is entitled to a deduction to the extent
amounts are taxed as ordinary income to a participant (subject
to the requirement of reasonableness, the provisions of
Section 162(m) and the satisfaction of a tax reporting
obligation).
12
Equity
Compensation Plan Information
Equity
Compensation Plan Information
The following table summarizes our equity compensation plan
information as of December 31, 2008. Information is
included for the equity compensation plans approved by our
shareholders. There are no equity compensation plans not
approved by our shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Available for
|
|
|
|
|
|
|
Future Issuance
|
|
|
Common Stock to be
|
|
Weighted-Average
|
|
Under Equity
|
|
|
Issued Upon Exercise of
|
|
Exercise Price of
|
|
Compensation Plans
|
|
|
Outstanding Options
|
|
Outstanding Options
|
|
(Excluding Securities
|
Plan Category
|
|
and Rights
|
|
and Rights
|
|
Reflected in Column(a))
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by Aradigm shareholders
|
|
|
4,185,061
|
(1)
|
|
$
|
4.14
|
|
|
|
4,927,515
|
(2)
|
Equity compensation plans not approved by Aradigm shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Issued pursuant to the Companys 1996 Equity Incentive
Plan, the 1996 Non-Employee Directors Plan, and the 2005
Equity Incentive Plan. |
|
(2) |
|
Shares available for future issuance includes
939,916 shares reserved under Employee Stock Purchase Plan. |
PROPOSAL 3
RATIFICATION
OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected
Odenberg, Ullakko, Muranishi & Co. LLP as our
independent registered public accounting firm for the fiscal
year ending December 31, 2009 and has further directed that
management submit the selection of an independent registered
public accounting firm for ratification by our shareholders at
the annual meeting. Prior to the selection of Odenberg, Ullakko,
Muranishi & Co. LLP as our independent registered
public accounting firm in April 2007, Ernst & Young
LLP had audited our financial statements, since 1995.
Representatives of Odenberg, Ullakko, Muranishi & Co.
LLP are expected to be present at the annual meeting. They will
have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
Neither our bylaws nor other governing documents or law require
shareholder ratification of the selection of Odenberg, Ullakko,
Muranishi & Co. LLP as our independent registered
public accounting firm. However, the Audit Committee is
submitting the selection of Odenberg, Ullakko,
Muranishi & Co. LLP to the shareholders for
ratification as a matter of good corporate practice. If the
shareholders fail to ratify the selection, the Audit Committee
will reconsider whether or not to retain that firm. Even if the
selection is ratified, the Audit Committee in its discretion may
direct the appointment of a different independent registered
public accounting firm at any time during the year if they
determine that such a change would be in the best interests of
Aradigm and its shareholders.
The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and voting at the
annual meeting (which shares voting affirmatively also
constitute a majority of the required quorum) will be required
to ratify the selection of Odenberg, Ullakko,
Muranishi & Co. LLP. For purposes of this vote,
abstentions and broker non-votes will not be counted for any
purpose in determining whether this matter has been approved.
13
Principal
Accountant Fees and Services
The following table represents aggregate fees billed to us for
fiscal years ended December 31, 2008 and 2007, by Odenberg,
Ullakko, Muranishi & Co. LLP, our independent
registered public accounting firm since April 2007, and
Ernst & Young LLP, our independent registered public
accountant firm for the first four months of 2007. All services
described below were pre-approved by the Audit Committee.
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|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Audit Fees(1)
|
|
$
|
271
|
|
|
$
|
371
|
|
Audit-related Fees
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
|
46
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
317
|
|
|
$
|
399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees represent fees for professional services related to
the performance of the audit of our annual financial statements,
review of our quarterly financial statements and consents on SEC
filings. |
Pre-Approval
Policies and Procedures
The Audit Committee pre-approves audit services, audit-related
services and non-audit services provided by our independent
registered public accounting firm, Odenberg, Ullakko,
Muranishi & Co. LLP, and will not approve services
that the Audit Committee determines are outside the bounds of
applicable laws and regulations. Pre-approval may also be given
as part of the Audit Committees approval of the scope of
the engagement of the independent registered public accounting
firm or on an individual explicit
case-by-case
basis before the independent registered public accounting firm
is engaged to provide each service. The pre-approval of services
may be delegated to one or more of the Audit Committees
members, but the decision must be reported to the full Audit
Committee at its next scheduled meeting.
The Audit Committee has determined that the rendering of the
services, other than audit services, by Odenberg, Ullakko,
Muranishi & Co. LLP is compatible with maintaining the
principal accountants independence.
Change in
Independent Registered Public Accounting Firm
Effective as of April 12, 2007, the Audit Committee
dismissed Ernst & Young LLP as our independent
registered public accounting firm. On the same date, the Audit
Committee engaged Odenberg, Ullakko, Muranishi & Co.
LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2007.
In connection with Ernst & Young LLPs audits for
the interim period between January 1, 2007 and
April 12, 2007, there were no disagreements with
Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Ernst & Young LLP,
would have caused Ernst & Young LLP to make reference
to the subject matter of such disagreements in connection with
its reports. In addition, no reportable events, as defined in
Item 304(a)(1)(v) of
Regulation S-K,
occurred during our the interim period between January 1,
2007 and April 12, 2007.
Prior to April 12, 2007, neither we nor anyone on our
behalf has consulted with Odenberg, Ullakko,
Muranishi & Co. LLP regarding either (i) the
application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that
might be rendered on our financial statements, and neither a
written report was provided to us nor oral advice was provided
by Odenberg, Ullakko, Muranishi & Co. LLP that was an
important factor considered by us in reaching a decision as to
any accounting, auditing or financial reporting issue; or
(ii) any matter that was the subject of a disagreement, as
that term is defined in Item 304 (a)(1)(iv) of
Regulation S-K
and the related instructions to Item 304 of
Regulation S-K,
or a reportable event, as that term is defined in Item 304
(a)(1)(v) of
Regulation S-K.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
14
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of our common stock as of February 28, 2009 by:
(i) each director and nominee for director; (ii) each
of the executive officers named in the Summary Compensation
Table (provided below); (iii) all of our executive officers
and directors as a group; and (iv) all those known by us to
be beneficial owners of more than five percent of our common
stock.
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|
|
|
|
|
Beneficial Ownership Common(1)
|
|
|
|
Number of
|
|
|
Percent of
|
|
|
|
Shares
|
|
|
Total (%)
|
|
|
Arnhold and S. Bleichroeder Advisers, LLC. and related
entities(2)
1345 Avenue of the Americas
New York, NY 10105
|
|
|
38,064,005
|
|
|
|
38.18
|
|
The Conus Fund LP and related entities(3)
49 West
38th Street,
11th Floor
New York, NY 10018
|
|
|
9,458,491
|
|
|
|
9.49
|
|
Highbridge International LLC and related entities(4)
9 West
57th Street,
27th Floor
New York, NY 10019
|
|
|
9,087,991
|
|
|
|
9.11
|
|
Laurence W. Lytton(5)
467 Central Park West, #17-A
New York, NY 10025
|
|
|
5,829,303
|
|
|
|
5.85
|
|
Igor Gonda, Ph.D.(6)
|
|
|
715,476
|
|
|
|
*
|
|
Nancy Pecota(7)
|
|
|
47,500
|
|
|
|
*
|
|
D. Jeffery Grimes(8)
|
|
|
170,125
|
|
|
|
*
|
|
Babatunde A. Otulana, M.D.(9)
|
|
|
497,017
|
|
|
|
*
|
|
Norman Halleen(10)
|
|
|
0
|
|
|
|
*
|
|
Virgil D. Thompson(11)
|
|
|
151,250
|
|
|
|
*
|
|
Frank H. Barker(12)
|
|
|
127,543
|
|
|
|
*
|
|
John M. Siebert, Ph.D.(13)
|
|
|
69,000
|
|
|
|
*
|
|
All executive officers and directors as a group
(6 persons)(14)
|
|
|
1,280,894
|
|
|
|
1.28
|
|
|
|
|
* |
|
Less than one percent |
|
(1) |
|
This table is based upon information supplied by officers,
directors and principal shareholders and Forms 4 and
Schedules 13D and 13G filed with the Securities and Exchange
Commission (SEC). Unless otherwise indicated in the
footnotes to this table and subject to community property laws
where applicable, we believe that each of the shareholders named
in this table has sole voting and investment power with respect
to the shares indicated as beneficially owned. Applicable
percentages are based on 99,704,455 shares of common stock
outstanding on February 28, 2009, adjusted as required by
rules promulgated by the SEC. Unless otherwise indicated, the
address of each person on this table is
c/o Aradigm
Corporation, 3929 Point Eden Way, Hayward, California, 94545. |
|
(2) |
|
Based upon information contained in a Schedule 13G
Amendment No. 4 and Form 3, each filed with the SEC on
March 5, 2009, Arnhold and S. Bleichroeder, LLC (ASB), an
investment adviser registered under Section 203 of the
Investment Advisers Act of 1940, is deemed to be the beneficial
owner of 38,064,005 shares or 38.18% of the Common Stock
believed to be outstanding as a result of acting as investment
advisor to various clients. Clients of ASB have the right to
receive and the ultimate power to direct the receipt of
dividends from, or the proceeds of the sale of, such securities.
First Eagle Value in Biotechnology Master Fund, Ltd.
(FEVBM), a Cayman Islands company for which ASB acts
as investment adviser, may be deemed to beneficially own
14,298,624 of these 38,064,005 shares, which equates to
14.34% of the Common Stock. In addition, 21 April Fund,
Ltd., a Cayman islands company for which ASB acts as investment
adviser, may be deemed to beneficially own 9,870,442 of the
38,064,005 shares, which equates to 9.90% of the Common
Stock. Finally, DEF Associates N.V., a Netherlands Antilles
company for which ASB acts as investment |
15
|
|
|
|
|
adviser, may be deemed to beneficially own 5,000,000 of the
38,064,005 shares, or 5.01% of the Common Stock. |
|
(3) |
|
The Conus Fund LP and related entities (Conus)
have not yet made a filing under Section 13 of the
Securities Exchange Act of 1934, as amended. The information
reflected for Conus is as of February 28, 2009 and is based
solely upon information contained in an Investor Questionnaire
provided to us by Conus in connection with our registered direct
offerings that were completed in February 2009. |
|
(4) |
|
The information reflected for Highbridge International LLC and
related entities (Highbridge) is as of
February 28, 2009 and is based upon (i) information
contained in an Investor Questionnaire provided to us by
Highbridge in connection with our registered direct offerings
that were completed in February 2009 and (ii) a
Schedule 13G Amendment No. 1, as filed with the SEC on
February 9, 2009. |
|
(5) |
|
Based upon information contained in a Schedule 13G filed
with the SEC on March 6, 2009, Laurence W. Lytton has sole
voting and dispositive power over 5,829,303 shares. |
|
(6) |
|
Includes 550,643 shares of common stock subject to options
exercisable within 60 days of February 28, 2009. Does
not include 300,000 shares that may be acquired only upon
the occurrence of certain future events pursuant to a restricted
stock bonus agreement between Dr. Gonda and Aradigm. |
|
(7) |
|
Includes 12,500 shares of common stock subject to options
exercisable within 60 days of February 28, 2009. |
|
(8) |
|
Includes 67,812 shares of common stock subject to options
exercisable within 60 days of February 28, 2009. |
|
(9) |
|
Includes 488,999 shares of common stock subject to options
exercisable within 60 days of February 28, 2009.
Dr. Otulana ceased serving as our Chief Medical Officer on
December 31, 2008. Does not include 150,000 shares
that may be acquired only upon the occurrence of certain future
events pursuant to a restricted stock bonus agreement between
Dr. Otulana and Aradigm. |
|
(10) |
|
Mr. Halleen ceased serving as our interim chief financial
officer on September 30, 2008. |
|
(11) |
|
Includes 147,350 shares of common stock subject to options
exercisable within 60 days of February 28, 2009. |
|
(12) |
|
Includes 87,543 shares of common stock subject to options
exercisable within 60 days of February 28, 2009. |
|
(13) |
|
Includes 65,000 shares of common stock subject to options
exercisable within 60 days of February 28, 2009. |
|
(14) |
|
See footnotes (6) through (8), (11) through
(13) above. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act requires our directors
and executive officers, and persons who own more than ten
percent of a registered class of our equity securities, to file
with the SEC initial reports of ownership and reports of changes
in ownership of our common stock and other equity securities.
Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no
other reports were required, during the fiscal year ended
December 31, 2008, all Section 16(a) filing
requirements applicable to our officers, directors and greater
than ten percent beneficial owners were complied with, other
than two Forms 4, covering four transactions, were filed
late for Mr. Barker, two Forms 4, covering two
transactions, were filed late for Mr. Lynch and one
Form 4, covering one transaction, was filed late for each
of Dr. Siebert and Mr. Thompson.
16
COMPENSATION
The policies of the Compensation Committee, or the Committee,
with respect to the compensation of executive officers,
including the Chief Executive Officer, or CEO, are designed to
provide compensation sufficient to attract, motivate and retain
executives of outstanding ability and potential and to establish
an appropriate relationship between executive compensation and
the creation of shareholder value. To meet these goals, the
Committee recommends executive compensation packages to our
board of directors that are based on a mix of salary, bonus and
equity awards.
Overall, the board and the Committee seek to provide total
compensation packages that are competitive in terms of total
potential value to our executives, and that are tailored to the
unique characteristics of our company in order to create an
executive compensation program that will adequately reward our
executives for their roles in creating value for our
shareholders. The board and the Committee intend to provide
executive compensation packages that are competitive with other
similarly situated companies in our industry. Historically, the
board and the Committee generally weighted executives
compensation packages more heavily in favor of equity-based
compensation versus salary, as they believe performance and
equity-based compensation is important to maintain a strong link
between executive incentives and the creation of shareholder
value. The board and the Committee believe that performance and
equity-based compensation are the most important component of
the total executive compensation package for maximizing
shareholder value while, at the same time, attracting,
motivating and retaining high-quality executives. For 2009, the
board and the Committee continued their emphasis on equity-based
compensation. Given the companys current financial
situation and market capitalization , the state of the equity
markets, the companys proposed business plans and the
recent reduction in headcount, the board and the Committee
viewed the company as analogous to a
start-up
company and believed that a focus on equity-based compensation
was even more important as a tool to motivate the companys
executive officers.
The board and the Committee have reviewed this Compensation
Discussion and Analysis with the companys management.
Benchmarking
of Compensation Practices
The board and the Committee believe it is important when making
compensation-related decisions to be informed as to current
practices of similarly situated publicly held companies in the
life sciences industry. Beginning in late 2008, given the board
and Committees focus on equity-based compensation, the
board and the Committee retained a consultant to review
equity-based compensation of executives in the biotechnology
industry. The consultant prepared a study reviewing the
equity-based compensation practices of 120 publicly held
biotechnology companies with market capitalizations of between
$50 and $400 million. In addition to this benchmarking
study, the board and the Committee take into account input from
other sources, including past benchmarking studies, input from
other independent members of the board of directors and publicly
available data relating to the compensation practices and
policies of other companies within and outside of our industry.
For example, in late 2007, the board and the Committee reviewed
several publicly available broad-based studies of cash and
equity compensation paid to executives at up to 575 publicly
held companies in the life sciences industry and, in late 2006,
the Committee reviewed a special study of the compensation
practices of 19 publicly held life sciences companies that were
chosen based on business characteristics similar to ours.
Benchmarking studies were used primarily in making compensation
decisions for Dr. Igor Gonda, our CEO, Ms. Nancy
Pecota, our Vice President, Finance, and Chief Financial
Officer, and Mr. D. Jeffery Grimes, our Vice President of
Legal Affairs, General Counsel & Secretary. Given the
companys operating performance and continued need for
capital, in 2009 the board and the Committee retained total cash
compensation for these three executive officers at the same
level as paid in 2008. Based on the board and Committees
last annual review of total cash compensation, the board and
Committee believe these salaries are substantially equivalent to
the median cash compensation paid by comparable companies in the
life sciences industry. Consistent with the boards and the
Committees greater emphasis on equity-based compensation,
in 2009 they sought to establish equity compensation for these
three executive officers at a level approximately equal to the
equity-based compensation paid by 75% of comparable companies in
the life sciences industry, based on the survey conducted in
late 2008.
17
While benchmarking may not always be appropriate as a
stand-alone tool for setting compensation due to the aspects of
our business and objectives that may be unique to us, the board
and the Committee generally believe that gathering this
information is an important part of their compensation-related
decision-making process.
The Committee has in the past retained and may in the future
retain the services of third-party executive compensation
specialists, as the Committee sees fit, in connection with the
establishment of compensation and related policies.
Compensation
Components
Base Salary. Generally, the board and the
Committee believe that executive base salaries should be set
near the median of the range of salaries for executives in
similar positions and with similar responsibilities at
comparable companies. The board and the Committee believe that
maintaining base salary amounts at or near the industry median
minimizes competitive disadvantage while conserving the
companys cash resources and avoiding paying amounts in
excess of what they believe to be necessary to motivate
executives to meet corporate goals. Base salaries are typically
reviewed annually. In the past, management has presented the
Committee with its initial recommendations for executive salary
levels and the Committee and board have determined whether to
adjust these base salary recommendations to realign such
salaries with median market levels after taking into account
individual responsibilities, performance, experience as well as
the benchmarking data reviewed by the Committee.
For 2008, the board, upon recommendation of the Committee,
established base salaries for Dr. Gonda, Ms. Pecota
and Mr. Grimes of $380,000, $238,000 and $230,000,
respectively. For 2009, management recommended to the board and
Committee that base salaries for Dr. Gonda, Ms. Pecota
and Mr. Grimes be retained at their 2008 levels. Given the
companys financial position, management felt, and the
board agreed, that an increase in base salary for 2009 was not
appropriate.
Annual
Executive Bonus Plan.
In addition to base salaries, the board and the Committee
believe that performance-based cash bonuses can play an
important role in providing incentives to our executives to
achieve defined annual corporate goals. Prior to or near the
beginning of each year, the board, upon the recommendation of
the Committee, reviews the target bonus amount (defined as a set
percentage of base salary) for each executive. The target bonus
amount is set at a level that, upon achievement of 100% of the
target goals, will result in bonus payments that the board and
the Committee believe to be at or near the median level for
target bonus amounts for comparable companies included in the
benchmark studies and that, upon achievement beyond the target
goals, can result in bonuses of up to 150% of the target bonus
amount.
The Committee also reviews a detailed set of overall corporate
performance goals (target goals) prepared by management that are
intended to apply to the executives bonus awards and, with
some distinctions, to the bonus awards for all of our other
employees. The Committee then works with management to develop
final corporate performance goals that are set at a level the
Committee believes management can reasonably achieve over the
next year. For each individual corporate goal, the Committee
establishes relative weights and then sets target performance
for Level 1 satisfaction (50% of target payout for that
goal), Level 2 satisfaction (100% of target payout for that
goal) and Level 3 satisfaction (150% of target payout for
that goal) of the corporate goal, with the attainment of each
specified level of performance tied to a specific percentage
payout of the target bonus amount for that goal. The relative
weights for each individual corporate goal may be changed by the
board during the year as a result of external and internal
events and their impact upon the company.
The goals are designed to lead to results that will maximize
shareholder value. For example, at the start of 2007, the board
and Committee concluded that the companys stock price
undervalued the company. In response, the Committee developed a
corporate goal and appropriately weighted the goal to reward
management for a significant increase in the companys
stock price. Similarly, the board and Committee determined that
the ARD-3100
program would likely drive the companys value in 2007 and
2008, and so in those years they weighted the goal related to
development of the ARD-3100 program higher than the other
operational performance goals.
18
At the end of each year, the board, upon the recommendation of
the Committee, determines the level of achievement for each
corporate goal, on a goal by goal basis, and awards credit for
the achievement of goals as a percentage of the target bonus.
Final determinations as to bonus levels are then based on the
achievement of these corporate goals, which are the same for all
executives, as well as the boards and the Committees
assessment as to the overall success of the company and the
development of the business.
Actual bonuses are targeted to be paid to the executives at the
end of each fiscal year and may be above or below target bonus
levels, at the discretion of the board. While the board and
Committee retain full discretion as to the amount, if any, of
bonus compensation paid to executives, the Committee strives to
develop corporate goals that are objective and reliably
measurable to deemphasize the need for subjective discretion.
The board and Committee strive to limit their discretionary
authority to unusual circumstances. For example, in 2006, the
Committee only awarded a partial bonus at the end of 2006 and
awarded the remaining portion of the bonus in February 2007
after the successful completion of the companys follow-on
public offering. The board and Committee felt that given the
companys cash position and the overall development of its
business in 2006, successful completion of the follow-on public
offering was an essential component of the executives
performance for the year.
Bonus payments under the annual bonus plan are contingent on
continued employment with the company at the end of the year.
In 2008, the board, upon recommendation of the Committee,
established 2008 target bonus awards (as a percentage of base
salary) of 50% for Dr. Gonda, 40% for Ms. Pecota and
30% for Mr. Grimes. For 2008, the Committee determined that
the executives bonus awards would be earned based on the
achievement of specified corporate performance goals, including
meeting various milestones related to the development of the
inhaled liposomal ciprofloxacin, inhaled treprostinil, and
inhaled combination products programs, reaching certain
milestones for in- and out-licensing of products in support of
the companys product pipeline, reaching a certain level of
manufacturing capabilities with a third-party contract
manufacturer, and the amount of the Companys cash burn for
the 2008 fiscal year.
In January 2009, the board and Committee determined the
executive team had satisfied corporate goals to a level that
would have entitled them to a payout of 60% of their target
bonus amounts. Management recommended to the board and Committee
not to pay the executives a bonus for 2008. Management felt, and
the board agreed, that given the companys cash position,
the recent reduction in force and the current economic climate,
a bonus was not appropriate.
In January 2009, the board, upon recommendation of the
Committee, established 2009 target bonus awards (as a percentage
of base salary) of 50% for Dr. Gonda and 40% for
Ms. Pecota and Mr. Grimes. For 2009, the Committee
will determine the specific corporate performance goals to be
achieved for the executives bonus awards to be earned.
Actual bonus awards for 2009 will be determined at the end of
the year and may be above or below the target bonus levels, at
the discretion of the board and the Committee.
Equity Awards. The board and the Committee
believe that providing a significant portion of our
executives total compensation package in stock options and
restricted stock awards aligns the incentives of our executives
with the interests of our shareholders and with our long-term
success. The board and the Committee develop their equity award
determinations based on their judgments as to whether the
complete compensation packages provided to our executives,
including prior equity awards, are sufficient to retain,
motivate and adequately award the executives. As discussed
above, the primary component of this judgment is based on
information provided by benchmarking studies. The board and the
Committee seek to establish equity compensation for our three
executive officers at a level approximately equal to the
equity-based compensation paid by 75% of the companies in the
surveys. Initial equity award grants are proposed to the
Committee by management and the board and the Committee then
work with management to ensure the award grants are at a level
the board and the Committee feel are appropriate.
We grant equity awards through our 2005 Equity Incentive Plan,
which was adopted by our board and shareholders to permit the
grant of stock options, stock appreciation rights, restricted
shares, restricted stock units, performance shares and other
stock-based awards to our officers, directors, scientific
advisory board members, employees and consultants. All of our
employees, directors, scientific advisory board members and
consultants are
19
eligible to participate in the 2005 Equity Incentive Plan. The
material terms of the 2005 Equity Incentive Plan are further
described in note 7 to our financial statements included in
our Annual Report that is enclosed with these proxy materials on
Form 10-K.
All options we grant have an exercise price equal to the fair
market value of our common stock on the date of grant.
For 2009, the board and Committee decided to grant equity awards
as a combination of stock options and restricted stock awards.
The stock options vest quarterly over four years and the
restricted stock awards vest annually over two years. The awards
were allocated with roughly two-thirds of the target grant
amount as stock options and one-third of the target grant amount
as restricted stock. However, the board and Committee determined
that the restricted stock award have a higher value to the
executives, and as a rough approximation of the difference in
value the board and Committee valued a restricted stock award
for one share as three times the value of a stock option to
purchase one share. Accordingly, if the board and Committee had
determined to grant an executive an award with a value
equivalent to an option to purchase 100,000 shares of our
stock, the actual allocation of the award between stock options
and restricted stock would have resulted in the grant of a stock
option to purchase about 67,000 shares and a restricted
stock award of about 11,000 shares.
In January 2009, the Committee granted Dr. Gonda,
Ms. Pecota and Mr. Grimes options to purchase 350,000,
200,000 and 200,000 shares of our common stock,
respectively, and restricted stock awards for 80,000, 35,000 and
35,000 shares of our common stock, respectively.
The Committee felt that the 2009 equity awards were necessary to
bring our executives equity compensation levels at a level
the Committee believes is necessary to retain a talented and
capable management team. The Committee anticipates making future
refresh equity award grants to executives annually, subject to
its discretion. The Committee believes this award structure is
consistent with our executive compensation policies.
Severance Benefits. The board, upon
recommendation of the Committee, previously adopted an Amended
and Restated Executive Officer Severance Plan, dated as of
December 31, 2008, and approved change of control
agreements with each of our executive officers, the terms of
which are more fully described below in the section entitled
Potential Payments Upon Termination or Change in
Control. The board and the Committee believe these
severance and change in control benefits are an essential
element of our executive compensation package and assist us in
recruiting and retaining talented individuals. Our business is
inherently risky and the board and the Committee believe the
severance benefits encourage our executives to take necessary
but reasonable business risks to increase shareholder value. The
board and the Committee believe the change of control benefits
align our executives interests more greatly in favor of
corporate liquidity events that can be potentially valuable to
our shareholders. They have established these severance and
change of control benefits at levels that they feel are
comparable to benefits offered to executives in similar
positions and with similar responsibilities at comparable
companies.
Other Compensation. All of our executives are
eligible to participate in our employee benefit plans, including
medical, dental, life insurance and 401(k) plans. These plans
are available to all employees and do not discriminate in favor
of executive officers. It is generally our policy to not extend
significant perquisites to our executives that are not available
to our employees generally. We have no current plans to make
changes to levels of benefits and perquisites provided to
executives.
20
Summary
Compensation Table
The following table sets forth information regarding
compensation earned in 2008, 2007, and 2006 by our CEO, Chief
Financial Officer, Vice President of Legal Affairs, our former
Chief Medical Officer and our former Interim Chief Financial
Officer (these individuals are collectively referred to as our
named executive officers):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards(1)
|
|
Awards(1)
|
|
Compensation
|
|
Compensation
|
|
Total
|
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Igor Gonda, Ph.D(2)
|
|
|
2008
|
|
|
|
380,000
|
|
|
|
|
|
|
|
53,002
|
|
|
|
266,197
|
|
|
|
|
|
|
|
25,101
|
|
|
|
724,300
|
|
President and Chief
|
|
|
2007
|
|
|
|
320,000
|
|
|
|
|
|
|
|
62,187
|
|
|
|
174,439
|
|
|
|
172,000
|
|
|
|
73,404
|
|
|
|
802,030
|
|
Executive Officer
|
|
|
2006
|
|
|
|
113,230
|
|
|
|
100,000
|
|
|
|
20,310
|
|
|
|
68,942
|
|
|
|
22,363
|
|
|
|
50,966
|
|
|
|
375,841
|
|
Nancy Pecota(3)
|
|
|
2008
|
|
|
|
66,823
|
|
|
|
|
|
|
|
|
|
|
|
2,472
|
|
|
|
|
|
|
|
1,760
|
|
|
|
71,055
|
|
Vice President and Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Jeffery Grimes(4)
|
|
|
2008
|
|
|
|
226,716
|
|
|
|
|
|
|
|
15,464
|
|
|
|
18,358
|
|
|
|
|
|
|
|
15,233
|
|
|
|
275,771
|
|
Vice President of Legal Affairs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norman Halleen(5)
|
|
|
2008
|
|
|
|
202,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,037
|
|
|
|
208,537
|
|
Former Interim Chief
|
|
|
2007
|
|
|
|
130,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,837
|
|
|
|
134,482
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Babatunde A. Otulana, M.D.(6)
|
|
|
2008
|
|
|
|
322,000
|
|
|
|
|
|
|
|
19,531
|
|
|
|
224,085
|
|
|
|
|
|
|
|
252,615
|
|
|
|
818,231
|
|
Former Senior Vice President of
|
|
|
2007
|
|
|
|
289,000
|
|
|
|
|
|
|
|
1,418
|
|
|
|
240,501
|
|
|
|
124,270
|
|
|
|
59,855
|
|
|
|
715,044
|
|
Development and Chief Medical Officer
|
|
|
2006
|
|
|
|
287,038
|
|
|
|
|
|
|
|
|
|
|
|
183,319
|
|
|
|
45,352
|
|
|
|
22,980
|
|
|
|
538,689
|
|
|
|
|
(1) |
|
The method of and assumptions used to calculate the value of
stock awards and option awards granted to our named executive
officers is discussed in Note 7 of the notes to our
financial statements included in our Annual Report on
Form 10-K. |
|
(2) |
|
Dr. Gonda commenced his employment with us on
August 10, 2006. Dr. Gondas bonus reflects a
$100,000 signing bonus for accepting his offer of employment. In
2006, Dr. Gonda also received a stock bonus award for up to
100,000 shares of our common stock. We valued
Dr. Gondas stock bonus on a Monte-Carlo simulation
due to the path-dependency of the award. We believe that the
Monte-Carlo simulation provides a more precise estimate for the
grant date fair value of a market-based equity award as the
simulation allows for vesting throughout the vesting period. In
accordance with Securities and Exchange Commission regulations,
the cost reflected in the table above only includes the portion
of the awards value that was amortized for 2006, 2007 and
2008. Dr. Gondas compensation includes $21,000 in
director fees and options expense of $2,485 that were both
attributable to his services as a director prior to his
appointment as our CEO in August 2006. Dr. Gonda has not
received any additional compensation for his services as a
director since he was appointed CEO in August 2006. |
|
(3) |
|
Ms. Pecota was appointed as an officer on
September 22, 2008. |
|
(4) |
|
Mr. Grimes was appointed as an officer on July 1, 2008. |
|
(5) |
|
Mr. Halleen ceased serving as an officer effective
September 30, 2008. |
|
(6) |
|
Dr. Otulana ceased serving as an officer effective
December 31, 2008. |
21
All Other Compensation in the summary compensation table above
includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Club
|
|
Health
|
|
|
|
Life
|
|
401(k)
|
|
Employee
|
|
Vacation
|
|
|
|
|
|
|
|
|
|
|
Member-
|
|
Care
|
|
Moving
|
|
Insurance
|
|
Matching
|
|
Stock
|
|
Benefits
|
|
Director
|
|
Severance
|
|
|
|
|
|
|
ships
|
|
Contribution
|
|
Allowance
|
|
Premiums
|
|
Contributions
|
|
Purchase
|
|
Paid
|
|
Fees
|
|
Benefits
|
|
Total
|
Name
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Igor Gonda, Ph.D.
|
|
|
2008
|
|
|
|
350
|
|
|
|
11,933
|
|
|
|
|
|
|
|
2,100
|
|
|
|
7,750
|
|
|
|
2,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,101
|
|
|
|
|
2007
|
|
|
|
300
|
|
|
|
12,117
|
|
|
|
46,286
|
|
|
|
1,815
|
|
|
|
6,889
|
|
|
|
5,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,404
|
|
|
|
|
2006
|
|
|
|
350
|
|
|
|
3,386
|
|
|
|
23,304
|
|
|
|
595
|
|
|
|
2,331
|
|
|
|
|
|
|
|
|
|
|
|
21,000
|
|
|
|
|
|
|
|
50,966
|
|
Nancy Pecota
|
|
|
2008
|
|
|
|
|
|
|
|
286
|
|
|
|
|
|
|
|
375
|
|
|
|
1,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,760
|
|
D. Jeffery Grimes
|
|
|
2008
|
|
|
|
350
|
|
|
|
3,048
|
|
|
|
|
|
|
|
1,281
|
|
|
|
6,567
|
|
|
|
3,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,233
|
|
Former Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norman Halleen
|
|
|
2008
|
|
|
|
|
|
|
|
6,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,037
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
3,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,837
|
|
Babatunde A. Otulana, M.D.
|
|
|
2008
|
|
|
|
|
|
|
|
8,361
|
|
|
|
|
|
|
|
2,029
|
|
|
|
6,905
|
|
|
|
|
|
|
|
24,700
|
|
|
|
|
|
|
|
210,621
|
|
|
|
252,615
|
|
|
|
|
2007
|
|
|
|
350
|
|
|
|
18,102
|
|
|
|
|
|
|
|
1,642
|
|
|
|
6,415
|
|
|
|
|
|
|
|
33,346
|
|
|
|
|
|
|
|
|
|
|
|
59,855
|
|
|
|
|
2006
|
|
|
|
350
|
|
|
|
14,855
|
|
|
|
|
|
|
|
1,613
|
|
|
|
6,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,980
|
|
2008
Grants of Plan-Based Awards
The following table sets forth information regarding plan-based
awards to our named executive officers in 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
Grant
|
|
|
|
|
|
|
Estimated Future
|
|
Estimated Future
|
|
Awards:
|
|
Exercise
|
|
Date Fair
|
|
|
|
|
|
|
Payouts Under Non-
|
|
Payouts Under
|
|
Number of
|
|
or Base
|
|
Value of
|
|
|
|
|
|
|
Equity Incentive
|
|
Equity Incentive
|
|
Securities
|
|
Price of
|
|
Stock and
|
|
|
|
|
|
|
Plan Awards(1)
|
|
Plan Awards
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Approval
|
|
Target
|
|
Maximum
|
|
Target
|
|
Maximum
|
|
Options
|
|
Awards
|
|
Awards(2)
|
Name
|
|
Date
|
|
Date
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($/sh)
|
|
($)
|
|
Igor Gonda, Ph.D.
|
|
|
1/1/2008
|
|
|
|
1/1/2008
|
|
|
|
190,000
|
|
|
|
285,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nancy Pecota
|
|
|
9/30/2008
|
|
|
|
9/22/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
0.39
|
|
|
|
46,500
|
|
|
|
|
9/22/2008
|
|
|
|
9/22/2008
|
|
|
|
26,700
|
|
|
|
40,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Jeffery Grimes
|
|
|
7/1/2008
|
|
|
|
7/1/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,000
|
|
|
|
0.80
|
|
|
|
95,600
|
|
|
|
|
1/1/2008
|
|
|
|
1/1/2008
|
|
|
|
69,000
|
|
|
|
103,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norman Halleen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Babatunde A. Otulana, M.D.
|
|
|
1/1/2008
|
|
|
|
1/1/2008
|
|
|
|
128,800
|
|
|
|
193,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects each executive officers participation in our 2008
Executive Bonus Plan. The amount of bonus actually earned by
each executive officer is reflected in the summary compensation
table above. |
|
(2) |
|
The method of and assumptions used to calculate the value of
stock and option awards granted to our named executive officers
is discussed in Note 7 of the notes to our financial
statements included in our Annual Report on
Form 10-K. |
22
Outstanding
Equity Awards At December 31, 2008
The following table provides information regarding each
unexercised stock equity awards held by each of our named
executive officers as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Payout Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
of Unearned
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares, Units
|
|
Shares, Units
|
|
|
|
|
|
|
|
|
|
|
|
|
or Other
|
|
or Other
|
|
|
|
|
Number of Securities
|
|
Option
|
|
|
|
Rights That
|
|
Rights That
|
|
|
|
|
Underlying Unexercised Options
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
Price(1)
|
|
Expiration
|
|
Vested
|
|
Vested
|
Name
|
|
|
|
(#)
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
Igor Gonda, Ph.D.
|
|
|
(2
|
)
|
|
|
125,000
|
|
|
|
375,000
|
|
|
|
1.60
|
|
|
|
12/04/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/04/2017
|
|
|
|
300,000
|
|
|
|
75,000
|
|
|
|
|
(4
|
)
|
|
|
291,666
|
|
|
|
208,334
|
|
|
|
1.87
|
|
|
|
08/10/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
1.52
|
|
|
|
05/18/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
5.30
|
|
|
|
05/19/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
5.30
|
|
|
|
05/20/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
5.30
|
|
|
|
05/13/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
6.50
|
|
|
|
05/15/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
4.75
|
|
|
|
02/19/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
17.25
|
|
|
|
05/21/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
17.15
|
|
|
|
05/17/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
24.10
|
|
|
|
02/11/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
|
|
|
|
17.20
|
|
|
|
09/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,312
|
|
|
|
|
|
|
|
30.00
|
|
|
|
03/15/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,875
|
|
|
|
|
|
|
|
107.81
|
|
|
|
09/22/2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,624
|
|
|
|
|
|
|
|
112.50
|
|
|
|
02/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,875
|
|
|
|
|
|
|
|
35.00
|
|
|
|
05/21/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,062
|
|
|
|
|
|
|
|
60.00
|
|
|
|
02/02/2009
|
|
|
|
|
|
|
|
|
|
Nancy Pecota
|
|
|
(5
|
)
|
|
|
|
|
|
|
225,000
|
|
|
|
0.39
|
|
|
|
09/30/2018
|
|
|
|
|
|
|
|
|
|
D. Jeffery Grimes
|
|
|
(2
|
)
|
|
|
14,062
|
|
|
|
210,938
|
|
|
|
0.80
|
|
|
|
07/01/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
11,250
|
|
|
|
18,750
|
|
|
|
1.37
|
|
|
|
06/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/11/2017
|
|
|
|
30,000
|
|
|
|
7,500
|
|
Norman Halleen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Babatunde A. Otulana, M.D.
|
|
|
(2
|
)
|
|
|
25,000
|
|
|
|
75,000
|
|
|
|
1.60
|
|
|
|
12/04/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/04/2017
|
|
|
|
150,000
|
|
|
|
37,500
|
|
|
|
|
(2
|
)
|
|
|
75,000
|
|
|
|
125,000
|
|
|
|
1.37
|
|
|
|
06/20/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
187,500
|
|
|
|
112,500
|
|
|
|
1.70
|
|
|
|
06/08/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
41,250
|
|
|
|
18,750
|
|
|
|
3.77
|
|
|
|
03/07/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
23,437
|
|
|
|
1,563
|
|
|
|
5.90
|
|
|
|
02/22/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
22,000
|
|
|
|
|
|
|
|
12.00
|
|
|
|
02/27/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
4.75
|
|
|
|
02/19/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000
|
|
|
|
|
|
|
|
24.10
|
|
|
|
02/11/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
17.20
|
|
|
|
09/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
30.00
|
|
|
|
03/15/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
112.50
|
|
|
|
02/15/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
35.00
|
|
|
|
05/21/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
|
|
|
60.00
|
|
|
|
02/02/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the fair market value of a share of our common stock
on the grant date of the option. |
|
(2) |
|
The option vests over four years with 1/16 of the shares of
underlying common stock vesting every three months from the
grant date. |
|
(3) |
|
Each restricted stock grant award will vest in full if within
three years following the grant of the award if the company
achieves certain product and product-pipeline development
milestones. |
23
|
|
|
(4) |
|
The option vests over four years with 1/4 of the shares of
underlying common stock vesting on the first anniversary of the
grant date and 1/48 of the shares of underlying common stock
vesting each month thereafter. |
|
(5) |
|
The option vests over four years with 1/4 of the shares of
underlying common stock vesting on September 22, 2009 and
1/16 of the shares of underlying common stock vesting every
three months thereafter. |
|
(6) |
|
The option vests over four years with 1/4 of the shares of
underlying common stock vesting on the first anniversary of the
grant date and 1/16 of the shares of underlying common stock
vesting every three months thereafter. |
|
(7) |
|
Each restricted stock grant award will vest in full on the
second anniversary of the grant date. |
2008
Option Exercises and Stock Vested
None of our named executive officers exercised options or had
shares of restricted stock vest in 2008.
Pension
Benefits
None of our named executive officers participate in or have
account balances in qualified or non-qualified defined benefit
plans sponsored by us. The Committee may elect to adopt
qualified or non-qualified defined benefit plans in the future
if the Committee determines that doing so is in our best
interests.
Nonqualified
Deferred Compensation
None of our named executive officers participate in or have
account balances in nonqualified defined contribution plans or
other nonqualified deferred compensation plans maintained by us.
The Committee may elect to provide our officers and other
employees with non-qualified defined contribution or other
nonqualified deferred compensation benefits in the future if the
Committee determines that doing so is in our best interests.
24
Potential
Payments Upon Termination or Change in Control
The following table and summary set forth potential payments
payable to our current executive officers upon termination of
employment or a change in control. The Committee may in its
discretion revise, amend or add to the benefits if it deems
advisable. The table below reflects amounts payable to our
executive officers assuming their employment was terminated on
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Without
|
|
|
|
|
|
|
|
|
Cause or
|
|
|
|
|
|
|
|
|
Constructive
|
|
|
|
|
Termination Without
|
|
|
|
Termination
|
|
|
|
|
Cause Prior to a
|
|
Change in
|
|
Following a Change
|
|
|
|
|
Change in Control
|
|
Control
|
|
in Control
|
Name
|
|
Benefit
|
|
($)
|
|
($)
|
|
($)
|
|
Igor Gonda, Ph.D.
|
|
Salary
|
|
|
380,000
|
|
|
|
|
|
|
|
760,000
|
|
|
|
Bonus
|
|
|
174,103
|
|
|
|
|
|
|
|
348,207
|
|
|
|
Option acceleration(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock award acceleration(1)
|
|
|
|
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
Benefits continuation
|
|
|
13,471
|
|
|
|
|
|
|
|
26,942
|
|
|
|
Career transition assistance
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value:
|
|
|
567,574
|
|
|
|
75,000
|
|
|
|
1,230,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nancy Pecota
|
|
Salary
|
|
|
238,000
|
|
|
|
|
|
|
|
238,000
|
|
|
|
Bonus
|
|
|
87,235
|
|
|
|
|
|
|
|
87,235
|
|
|
|
Option acceleration(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock award acceleration(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits continuation
|
|
|
670
|
|
|
|
|
|
|
|
670
|
|
|
|
Career transition assistance
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value:
|
|
|
325,905
|
|
|
|
|
|
|
|
325,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Jeffery Grimes
|
|
Salary
|
|
|
230,000
|
|
|
|
|
|
|
|
230,000
|
|
|
|
Bonus
|
|
|
84,303
|
|
|
|
|
|
|
|
84,303
|
|
|
|
Option acceleration(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock award acceleration(1)
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
Benefits continuation
|
|
|
3,810
|
|
|
|
|
|
|
|
3,810
|
|
|
|
Career transition assistance
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total value:
|
|
|
318,113
|
|
|
|
|
|
|
|
325,613
|
|
|
|
|
(1) |
|
The value of the stock and option award acceleration was
calculated using a value of $0.25 per share of common stock,
which was the last reported closing sale price of our common
stock on December 31, 2008. |
Termination without cause prior to a change in
control. If any of our executives is terminated
by us without cause prior to a change in control, upon executing
a general release and waiver, such executive is entitled to
receive (less applicable withholding taxes) in a lump sum
payment or in installments, at our discretion:
|
|
|
|
|
an amount equal to such executives annual base salary;
|
|
|
|
an amount equal to such executives current target bonus
multiplied by the average annual percentage achievement of
corporate goals for the three complete fiscal years preceding
the termination date; and
|
|
|
|
continuation of such executives health insurance benefits
for 12 months.
|
Acceleration upon a change in control. If we
undergo a change in control on or prior to December 4,
2010, the restricted stock award granted to Dr. Gonda on
December 4, 2007 will vest in full.
Termination without cause or constructive termination
following a change in control. If any of our
executives is terminated by us without cause or constructively
terminated (which includes a material reduction in title or
duties, a material reduction in salary or benefits or a
relocation of 50 miles or more) during the
18-month
25
period following a change in control, upon executing a general
release and waiver, such executive is entitled to receive (less
applicable withholding taxes):
|
|
|
|
|
a lump sum payment equal to twice such executives annual
base salary, in the case of Dr. Gonda, and such
executives annual base salary, in the case of
Ms. Pecota and Mr. Grimes;
|
|
|
|
a lump sum payment equal to such executives current target
bonus multiplied by (i) twice the average annual percentage
achievement of corporate goals for the three complete fiscal
years preceding the termination date, in the case of
Dr. Gonda, and (ii) the average annual percentage
achievement of corporate goals for the three complete fiscal
years preceding the termination date, in the case of
Ms. Pecota and Mr. Grimes;
|
|
|
|
continuation of such executives health insurance benefits
for 24 months, in the case of Dr. Gonda, and
12 months, in the case of Ms. Pecota and
Mr. Grimes;
|
|
|
|
reimbursement of actual career transition assistance
(outplacement services) incurred by such executive within six
months of termination in an amount up to $20,000, in the case of
Dr. Gonda, and $10,000, in the case of Ms. Pecota and
Mr. Grimes; and
|
|
|
|
acceleration of vesting of any stock options or restricted stock
awards that remain unvested as of the date of such
executives termination.
|
Compensation
Committee Interlocks and Insider Participation
No interlocking relationship exists between our board or the
Committee and the board of directors or the compensation
committee of any other company, nor has any such interlocking
relationship existed in the past.
Report of
the Compensation Committee
The Committee reviewed and discussed with management the
Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K,
which is contained in this Proxy Statement. Based on this review
and discussion, the Committee recommended to the board that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
Members of the Aradigm Corporation
Compensation Committee:
Frank H. Barker
John M. Siebert
Virgil D. Thompson, Chairman
Non-Employee
Director Compensation
The following table sets forth a summary of the compensation we
paid to our non-employee directors in 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Option
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Awards(1)
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Frank H. Barker(2)
|
|
|
61,000
|
|
|
|
12,518
|
|
|
|
73,518
|
|
Stephen O. Jaeger(3)
|
|
|
18,750
|
|
|
|
3,747
|
|
|
|
22,497
|
|
Timothy P. Lynch(4)
|
|
|
62,000
|
|
|
|
24,177
|
|
|
|
86,177
|
|
John M. Siebert(5)
|
|
|
58,000
|
|
|
|
12,518
|
|
|
|
70,518
|
|
Virgil D. Thompson(6)
|
|
|
99,500
|
|
|
|
21,908
|
|
|
|
121,408
|
|
|
|
|
(1) |
|
The method of and assumptions used to calculate the value of the
options granted to our directors is discussed in Note 7 of
our notes to our financial statements included in our Annual
Report on
Form 10-K. |
|
(2) |
|
Mr. Barker owns options to purchase up to
94,043 shares of our common stock as of December 31,
2008, of which 84,043 shares are vested as of
December 31, 2008. |
26
|
|
|
(3) |
|
Mr. Jaeger did not stand for re-election to the Board of
Directors in May 2008. Mr. Jaeger does not own any options
to purchase shares of our common stock as of December 31,
2008. |
|
(4) |
|
Mr. Lynch owns options to purchase up to 50,000 shares
of our common stock as of December 31, 2008, of which
32,500 shares are vested as of December 31, 2008.
Mr. Lynch resigned from the Board on February 17,
2009. He will have 90 days from the date of his resignation
to exercise any vested options. |
|
(5) |
|
Dr. Siebert owns options to purchase up to
70,000 shares of our common stock as of December 31,
2008, of which 60,000 shares are vested as of
December 31, 2008. |
|
(6) |
|
Mr. Thompson owns options to purchase up to
156,000 shares of our common stock as of December 31,
2008, of which 138,600 shares are vested as of
December 31, 2008. |
In 2009, the Chairman of the Board will receive an annual
retainer of $50,000 and all other non-employee directors will
receive an annual cash retainer of $30,000. Board members also
receive additional annual retainers for serving on board
committees. The additional annual retainer for the Chairman of
the Audit Committee will be $15,000 and the additional annual
retainer for all other members of the Audit Committee will be
$5,000. The additional annual retainer for the Chairman of the
Compensation Committee and the Chairman of the Nominating and
Corporate Governance Committee will be $10,000 and the
additional annual retainer for all other members will be $5,000.
The board retainer covers six meetings in a year and, if
exceeded, the Chairman of the Board will receive $1,500 for each
additional meeting and the other board members will receive
$1,000 for each additional meeting. If the number of meetings in
a year for any given committee exceeds four, the chairman of the
committee will receive $1,500 for each additional meeting and
the other committee members will receive $1,000 for each
additional meeting. Our directors are also entitled to receive
reimbursement of reasonable out-of-pocket expenses incurred by
them to attend board meetings.
In addition to the cash compensation, each non-employee director
will be granted an annual stock option award. Each non-employee
director will automatically receive an option to purchase up to
30,000 shares of our common stock upon election to the
board. The Chairman of the Board will be granted automatically
an option to purchase up to 35,000 shares of our common
stock upon re-election to the board and the other members of the
board will be granted automatically an option to purchase up to
20,000 shares of our common stock upon re-election to the
board.
Limitation
of Liability of Officers and Directors and
Indemnification
Our articles of incorporation and bylaws include provisions to
(i) eliminate the personal liability of our directors for
monetary damages resulting from breaches of their fiduciary
duty, to the extent permitted by California law and
(ii) permit us to indemnify our directors and officers,
employees and other agents to the fullest extent permitted by
the California Corporations Code. Pursuant to Section 317
of the California Corporations Code, a corporation generally has
the power to indemnify its present and former directors,
officers, employees and agents against any expenses incurred by
them in connection with any suit to which they are, or are
threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the
best interests of a corporation and, with respect to any
criminal action, they had no reasonable cause to believe their
conduct was unlawful. We believe that these provisions are
necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate liability for
breach of the directors duty of loyalty to us or our
shareholders, for acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law,
for any transaction from which the director derived an improper
personal benefit or for any willful or negligent payment of any
unlawful dividend.
We entered into indemnification agreements with certain
officers, including each of our named executive officers, and
each of our directors that provide, among other things, that we
will indemnify such officer or director, under the circumstances
and to the extent provided for therein, for expenses, damages,
judgments, fines and settlements such officer or director may be
required to pay in actions or proceedings to which such officer
or director is or may be made a party by reason of such
officers or directors position as an officer,
director or other agent of us, and otherwise to the full extent
permitted under California law and our bylaws.
27
CERTAIN
TRANSACTIONS
Review,
Approval or Ratification of Transactions with Related
Persons
The Board has adopted, in writing, a policy and procedures for
the review of related person transactions. Any related person
transaction we propose to enter into must be reported to our
Chief Financial Officer or our Vice President of Legal Affairs
and, unless otherwise reviewed and approved by the Board, shall
be reviewed and approved by the Audit Committee in accordance
with the terms of the policy, prior to effectiveness or
consummation of any related person transaction, whenever
practicable. The policy defines a related person
transaction as any financial transaction, arrangement or
relationship (including any indebtedness or guarantee of
indebtedness), or any series of similar transactions,
arrangements or relationships in which Aradigm (i) was or
is to be a participant, (ii) the amount involved exceeds
$120,000 and (iii) a Related Person (as defined therein)
had or will have a direct or indirect material interest. In
addition, any related person transaction previously approved by
the Audit Committee or otherwise already existing that is
ongoing in nature shall be reviewed by the Audit Committee
annually to ensure that such related person transaction has been
conducted in accordance with the previous approval granted by
the Audit Committee, if any, and that all required disclosures
regarding the related person transaction are made. Transactions
involving compensation of executive officers shall be reviewed
and approved by the Compensation Committee in the manner
specified in the charter of the Compensation Committee. As
appropriate for the circumstances, the Audit Committee shall
review and consider the Related Persons interest in the
related person transaction, the approximate dollar value of the
amount involved in the related person transaction, the
approximate dollar value of the amount of the Related
Persons interest in the transaction without regard to the
amount of any profit or loss, whether the transaction was
undertaken in the ordinary course of business, whether the
transaction with the Related Person is proposed to be, or was,
entered into on terms no less favorable to the company than
terms that could have been reached with an unrelated third
party, the purpose of, and the potential benefits to us of the
transaction and any other information regarding the related
person transaction or the Related Person in the context of the
proposed transaction that would be material to investors in
light of the circumstances of the particular transaction.
HOUSEHOLDING
OF PROXY MATERIALS
The SEC has adopted rules that permit companies and
intermediaries (e.g., brokers) to satisfy the delivery
requirements for proxy statements and annual reports with
respect to two or more shareholders sharing the same address by
delivering a single proxy statement addressed to those
shareholders. This process, which is commonly referred to as
householding, potentially means extra convenience
for shareholders and cost savings for companies.
This year, a number of brokers with account holders who are our
shareholders will be householding our proxy
materials. A single proxy statement will be delivered to
multiple shareholders sharing an address unless contrary
instructions have been received from the affected shareholders.
Once you have received notice from your broker that they will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate proxy statement and annual
report, please notify your broker, direct your written request
to Aradigm Corporation, Secretary, 3929 Point Eden Way, Hayward,
CA 94545 or contact our Secretary at
(510) 265-9000.
Shareholders who currently receive multiple copies of the proxy
statement at their address and would like to request
householding of their communications should contact
their broker.
28
OTHER
MATTERS
The Board of Directors knows of no other matters that will be
presented for consideration at the annual meeting. If any other
matters are properly brought before the meeting, it is the
intention of the persons named in the accompanying proxy to vote
on such matters in accordance with their best judgment.
By Order of the Board of Directors
Igor Gonda, Ph.D.
President and Chief Executive Officer
April 9, 2009
A copy of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 is available
without charge upon written request to: Secretary, Aradigm
Corporation, 3929 Point Eden Way, Hayward, CA 94545. Copies may
also be obtained without charge through the SECs website
at
http://www.sec.gov.
29
Appendix A
ARADIGM
CORPORATION
Employee
Stock Purchase Plan
Adopted
April 16, 1996
Approved by the Shareholders on June 5, 1996
Amended by the Board of Directors on April 7, 1998
Approved by the Shareholders on May 15, 1998
Amended by the Board of Directors on February 2, 1999
Approved by the Shareholders on May 21, 1999
Amended by the Board of Directors on April 3, 2000
Approved by the Shareholders on May 19, 2000
Amended by the Board of Directors on April 2, 2001
Approved by the Shareholders on May 18, 2001
Amended by the Board of Directors on December 17, 2001
Approved by the Shareholders on February 8, 2002
Amended by the Board of Directors on February 19, 2003
Approved by the Shareholders on May 15, 2003
Amended by the Board of Directors on March 21, 2005
Approved by the Shareholders on May 19, 2005
Amended by the Board of Directors on April 4, 2008
Approved by the Shareholders on May 15, 2008
Amended by the Board of Directors on February 25,
2009
Purpose
The purpose of the Employee Stock Purchase Plan (the
Plan) is to provide a means by which employees of
Aradigm Corporation, a California corporation (the
Company), and its Affiliates, as defined in
subparagraph 1(b), which are designated as provided in
subparagraph 2(b), may be given an opportunity to purchase stock
of the Company.
The word Affiliate as used in the Plan means any
parent corporation or subsidiary corporation of the Company, as
those terms are defined in Sections 424(e) and (f),
respectively, of the Internal Revenue Code of 1986, as amended
(the Code).
The Company, by means of the Plan, seeks to retain the services
of its employees, to secure and retain the services of new
employees, and to provide incentives for such persons to exert
maximum efforts for the success of the Company.
The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued
under an employee stock purchase plan as that term
is defined in Section 423(b) of the Code.
Administration
The Plan shall be administered by the Board of Directors (the
Board) of the Company unless and until the Board
delegates administration to a Committee, as provided in
subparagraph 2(c). Whether or not the Board has delegated
administration, the Board shall have the final power to
determine all questions of policy and expediency that may arise
in the administration of the Plan.
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The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of
such rights (which need not be identical).
To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan, in a
manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.
To amend the Plan as provided in paragraph 13.
Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the
intent that the Plan be treated as an employee stock
purchase plan within the meaning of Section 423 of
the Code.
The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board
(the Committee) constituted in accordance with the
requirements of
Rule 16b-3
under the Exchange Act. If administration is delegated to a
Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by
the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration
of the Plan.
Shares
Subject to the Plan
Subject to the provisions of paragraph 12 relating to
adjustments upon changes in stock, the stock that may be sold
pursuant to rights granted under the Plan shall not exceed in
the aggregate four million five hundred fifty thousand
(4,550,000) shares of the Companys common stock (the
Common Stock). If any right granted under the Plan
shall for any reason terminate without having been exercised,
the Common Stock not purchased under such right shall again
become available for the Plan.
The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
Grant of
Rights; Offering
The Board or the Committee may from time to time grant or
provide for the grant of rights to purchase Common Stock of the
Company under the Plan to eligible employees (an
Offering) on a date or dates (the Offering
Date(s)) selected by the Board or the Committee. Each
Offering shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate,
which shall comply with the requirements of
Section 423(b)(5) of the Code that all employees granted
rights to purchase stock under the Plan shall have the same
rights and privileges. The terms and conditions of an Offering
shall be incorporated by reference into the Plan and treated as
part of the Plan. The provisions of separate Offerings need not
be identical, but each Offering shall include (through
incorporation of the provisions of this Plan by reference in the
document comprising the Offering or otherwise) the period during
which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering
Date, and the substance of the provisions contained in
paragraphs 5 through 8, inclusive.
Eligibility
Rights may be granted only to employees of the Company or, as
the Board or the Committee may designate as provided in
subparagraph 2(b), to employees of any Affiliate of the Company.
Except as provided in subparagraph 5(b), an employee of the
Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such
employee has been in the employ of the Company or any Affiliate
for such continuous period preceding such grant as the Board or
the Committee may require, but in no event shall the required
period of continuous employment be equal to or greater than two
(2) years. In addition, unless otherwise determined by the
Board or the Committee and set forth in the terms of the
applicable Offering, no employee of the Company or any
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Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employees customary
employment with the Company or such Affiliate is for at least
twenty (20) hours per week and at least five
(5) months per calendar year.
The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible
employee of the Company or designated Affiliate will, on a date
or dates specified in the Offering which coincides with the day
on which such person becomes an eligible employee or occurs
thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such
right shall have the same characteristics as any rights
originally granted under that Offering, as described herein,
except that:
the date on which such right is granted shall be the
Offering Date of such right for all purposes,
including determination of the exercise price of such right;
the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of
such Offering; and
the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any
right under that Offering.
No employee shall be eligible for the grant of any rights under
the Plan if, immediately after any such rights are granted, such
employee owns stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of
the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of any employee,
and stock which such employee may purchase under all outstanding
rights and options shall be treated as stock owned by such
employee.
An eligible employee may be granted rights under the Plan only
if such rights, together with any other rights granted under
employee stock purchase plans of the Company and any
Affiliates, as specified by Section 423(b)(8) of the Code,
do not permit such employees rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds
twenty five thousand dollars ($25,000) of fair market value of
such stock (determined at the time such rights are granted) for
each calendar year in which such rights are outstanding at any
time.
Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided,
however, that the Board may provide in an Offering that certain
employees who are highly compensated employees within the
meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
Rights;
Purchase Price
On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to
purchase up to the number of shares of Common Stock of the
Company purchasable with a percentage designated by the Board or
the Committee not exceeding fifteen percent (15%) of such
employees Earnings (as defined by the Board or the
Committee in each Offering) during the period which begins on
the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the
date stated in the Offering, which date shall be no later than
the end of the Offering. The Board or the Committee shall
establish one or more dates during an Offering (the
Purchase Date(s)) on which rights granted under the
Plan shall be exercised and purchases of Common Stock carried
out in accordance with such Offering.
In connection with each Offering made under the Plan, the Board
or the Committee may specify a maximum number of shares that may
be purchased by any employee as well as a maximum aggregate
number of shares that may be purchased by all eligible employees
pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board or
the Committee may specify a maximum aggregate number of shares
which may be purchased by all eligible employees on any given
Purchase Date under the Offering. If the aggregate purchase of
shares upon exercise of rights granted under the Offering would
exceed any such maximum
A-3
aggregate number, the Board or the Committee shall make a pro
rata allocation of the shares available in as nearly a uniform
manner as shall be practicable and as it shall deem to be
equitable.
The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
Participation;
Withdrawal; Termination
An eligible employee may become a participant in the Plan
pursuant to an Offering by delivering a participation agreement
to the Company within the time specified in the Offering, in
such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employees
Earnings during the Offering (as defined by the Board or
Committee in each Offering). The payroll deductions made for
each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the
general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an
eligible employee may begin such payroll deductions, after the
beginning of any Offering only as provided for in the Offering.
A participant may make additional payments into his or her
account only if specifically provided for in the Offering and
only if the participant has not had the maximum amount withheld
during the Offering.
At any time during an Offering, a participant may terminate his
or her payroll deductions under the Plan and withdraw from the
Offering by delivering to the Company a notice of withdrawal in
such form as the Company provides. Such withdrawal may be
elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company
shall distribute to such participant all of his or her
accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such
participants interest in that Offering shall be
automatically terminated. A participants withdrawal from
an Offering will have no effect upon such participants
eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new
participation agreement in order to participate in subsequent
Offerings under the Plan.
Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating
employees employment with the Company and any designated
Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have
been used to acquire stock for the terminated employee) under
the Offering, without interest.
Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and
distribution, or by a beneficiary designation as provided in
paragraph 14 and, otherwise during his or her lifetime,
shall be exercisable only by the person to whom such rights are
granted.
Exercise
On each Purchase Date specified therefor in the relevant
Offering, each participants accumulated payroll deductions
and other additional payments specifically provided for in the
Offering (without any increase for interest) will be applied to
the purchase of whole shares of stock of the Company, up to the
maximum number of shares permitted pursuant to the terms of the
Plan and the applicable Offering, at the purchase price
specified in the Offering. No fractional shares shall be issued
upon the exercise of rights granted under the Plan. The amount,
if any, of accumulated payroll deductions remaining in each
participants account after the purchase of shares which is
less than the amount required to purchase one share of stock on
the final Purchase Date of an Offering shall be held in each
such participants account for the purchase of shares under
the next Offering under the Plan, unless such participant
withdraws from such next Offering, as provided in subparagraph
7(b), or is no longer eligible to be granted rights under the
Plan, as provided in paragraph 5, in which case such amount
shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of
accumulated payroll deductions
A-4
remaining in any participants account after the purchase
of shares which is equal to the amount required to purchase
whole shares of stock on the final Purchase Date of an Offering
shall be distributed in full to the participant after such
Purchase Date, without interest.
No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan
(including rights granted thereunder) are covered by an
effective registration statement pursuant to the Securities Act
of 1933, as amended (the Securities Act) and the
Plan is in material compliance with all applicable state,
foreign and other securities and other laws applicable to the
Plan. If on a Purchase Date in any Offering hereunder the Plan
is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the
Plan is subject to such an effective registration statement and
such compliance, except that the Purchase Date shall not be
delayed more than twelve (12) months and the Purchase Date
shall in no event be more than twenty-seven (27) months
from the Offering Date. If on the Purchase Date of any Offering
hereunder, as delayed to the maximum extent permissible, the
Plan is not registered and in such compliance, no rights granted
under the Plan or any Offering shall be exercised and all
payroll deductions accumulated during the Offering (reduced to
the extent, if any, such deductions have been used to acquire
stock) shall be distributed to the participants, without
interest.
Covenants
of the Company
During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares
of stock required to satisfy such rights.
The Company shall seek to obtain from each federal, state,
foreign or other regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights
granted under the Plan. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission
or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights
unless and until such authority is obtained.
Use of
Proceeds from Stock
Proceeds from the sale of stock pursuant to rights granted under
the Plan shall constitute general funds of the Company.
Rights as
a Shareholder
A participant shall not be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares
subject to rights granted under the Plan unless and until the
participants shareholdings acquired upon exercise of
rights under the Plan are recorded in the books of the Company.
Adjustments
upon Changes in Stock
If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger,
consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or other
transaction not involving the receipt of consideration by the
Company), the Plan and outstanding rights will be appropriately
adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights. Such adjustments
shall be made by the Board or the Committee, the determination
of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be
treated as a transaction not involving the receipt of
consideration by the Company.)
In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company
is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of
the Companys Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or
otherwise; or (4) the acquisition by
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any person, entity or group within the meaning of
Section 13(d) or 14(d) of the Exchange Act or any
comparable successor provisions (excluding any employee benefit
plan, or related trust, sponsored or maintained by the Company
or any Affiliate of the Company) of the beneficial ownership
(within the meaning of
Rule 13d-3
promulgated under the Exchange Act, or comparable successor
rule) of securities of the Company representing at least fifty
percent (50%) of the combined voting power entitled to vote in
the election of directors, then, as determined by the Board in
its sole discretion (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar
rights for those under the Plan, (ii) such rights may
continue in full force and effect, or
(iii) participants accumulated payroll deductions may
be used to purchase Common Stock immediately prior to the
transaction described above and the participants rights
under the ongoing Offering terminated.
Amendment
of the Plan
The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 12 relating
to adjustments upon changes in stock, no amendment shall be
effective unless approved by the shareholders of the Company
within twelve (12) months before or after the adoption of
the amendment, where the amendment will:
Increase the number of shares reserved for rights under the Plan;
Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires shareholder
approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply
with the requirements of
Rule 16b-3
promulgated under the Exchange Act as amended
(Rule 16b-3));
or employee stock purchase plan treatment under Section 423
of the Code or to comply with the requirements of
Rule 16b-3
promulgated under the Exchange Act as amended
(Rule 16b-3)); or
Modify the Plan in any other way if such modification requires
shareholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code
or to comply with the requirements of
Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide
eligible employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations
promulgated thereunder relating to employee stock purchase plans
and/or to
bring the Plan
and/or
rights granted under it into compliance therewith.
Rights and obligations under any rights granted before amendment
of the Plan shall not be impaired by any amendment of the Plan,
except with the consent of the person to whom such rights were
granted, or except as necessary to comply with any laws or
governmental regulations, or except as necessary to ensure that
the Plan
and/or
rights granted under the Plan comply with the requirements of
Section 423 of the Code.
Designation
of Beneficiary
A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the
participants account under the Plan in the event of such
participants death subsequent to the end of an Offering
but prior to delivery to the participant of such shares and
cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the
participants account under the Plan in the event of such
participants death during an Offering.
Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the
death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of
such participants death, the Company shall deliver such
shares
and/or cash
to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
sole discretion, may deliver such shares
and/or cash
to the spouse or to any one or
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more dependents or relatives of the participant, or if no
spouse, dependent or relative is known to the Company, then to
such other person as the Company may designate.
Termination
or Suspension of the Plan
The Board in its discretion, may suspend or terminate the Plan
at any time. No rights may be granted under the Plan while the
Plan is suspended or after it is terminated.
Rights and obligations under any rights granted while the Plan
is in effect shall not be impaired by suspension or termination
of the Plan, except as expressly provided in the Plan or with
the consent of the person to whom such rights were granted, or
except as necessary to comply with any laws or governmental
regulation, or except as necessary to ensure that the Plan
and/or
rights granted under the Plan comply with the requirements of
Section 423 of the Code.
Effective
Date of Plan
The Plan shall become effective on the same day that the
Companys initial public offering of shares of common stock
becomes effective (the Effective Date), but no
rights granted under the Plan shall be exercised unless and
until the Plan has been approved by the shareholders of the
Company within twelve (12) months before or after the date
the Plan is adopted by the Board or the Committee, which date
may be prior to the Effective Date.
A-7
PROXY
ARADIGM CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 2009
The undersigned hereby appoints IGOR GONDA and D. JEFFERY GRIMES, and each of them, as
attorneys and proxies of the undersigned, with full power of substitution, to vote all shares of
stock of Aradigm Corporation that the undersigned may be entitled to vote at the 2009 Annual
Meeting of Shareholders of Aradigm Corporation to be held at Aradigm Corporations offices located
at 3929 Point Eden Way, Hayward, California on Friday, May 15, 2009 at 9:00 a.m. local time, and at
any and all postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the following matters and
in accordance with the following instructions, with discretionary authority as to any and all other
matters that may properly come before the meeting.
þ Please mark votes as in this example.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW AND A VOTE FOR
PROPOSALS 2 AND 3
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN
PROPOSAL 1 AND FOR PROPOSALS 2 AND 3, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
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1.
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To elect (01) Frank
H. Barker, (02)
Igor Gonda, (03)
John M. Siebert and
(04) Virgil D.
Thompson as
directors to hold
office until the
next annual meeting
of shareholders and
until their
successors are
elected.
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FOR ALL NOMINEES
WITHHELD FROM ALL NOMINEES
FOR ALL NOMINEES EXCEPT:
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2.
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To approve an
amendment to the
Aradigm Corporation
Employee Stock
Purchase Plan to
increase the
aggregate number of
shares of Common
Stock authorized
for issuance under
such plan by
2.500,000 shares.
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FOR
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AGAINST
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ABSTAIN
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3.
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To ratify the
selection of
Odenberg, Ullakko,
Muranishi & Co. LLP
as Aradigms
independent
registered public
accounting firm for
the fiscal year
ending December 31,
2009.
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FOR
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AGAINST
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ABSTAIN
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Please vote, date and promptly return this proxy in the enclosed return envelope which is
postage prepaid if mailed in the United States.
Please sign exactly as your name appears hereon. If stock is registered in the names of two
or more persons, each should sign. Executors, administrators, trustees, guardians and
attorneys-in-fact should add their titles. If signer is a corporation, please give full corporate
name and have a duly authorized officer sign. If signer is a partnership, please sign in
partnership name and by authorized person.
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Signature:
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Date:
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Signature:
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Date:
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