SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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SIGA Pharmaceuticals, Inc.
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(SC14A-07/98)
SIGA PHARMACEUTICALS, INC.
420 Lexington Avenue, Suite 620
New York, NY 10170
(212) 672-9100
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------------------
NOTICE IS HEREBY GIVEN, that the Annual Meeting of the Stockholders of SIGA
Pharmaceuticals, Inc. (the "Company") will be held in New York, New York at
10:00 a.m. on November 20 at The Grand Hyatt, 109 East 42nd Street, New York, NY
10017, (i) for the election of Directors of the Company to hold office until the
next annual meeting of the stockholders and until their successors are duly
elected and qualified; (ii) to amend the Company's 1996 Incentive and
Non-Qualified Stock Option Plan; (iii) to transact such other business as may
properly come before the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on October 14, 1998
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting.
If you do not expect to be personally present at the meeting, but wish your
stock to be voted for the business to be transacted thereat, the Board of
Directors requests that you fill in, sign and date the enclosed proxy and
promptly return it by mail in the postage paid envelope provided.
BY ORDER OF THE BOARD OF DIRECTORS
Judson Cooper
Chairman of the Board
October 30, 1998
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
SIGA PHARMACEUTICALS, INC.
420 Lexington Avenue, Suite 620
New York, NY 10170
(212) 672-9100
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To be held on November 20, 1998
INTRODUCTION
The Annual Meeting is called to elect members of the Board of Directors and
to amend the Company's 1996 Incentive and Non-Qualified Stock Option Plan. The
Meeting, however, will be open for the transaction of such other business as may
properly come before it, although, as of the date of this proxy statement,
management does not know of any other business that will come before the Annual
Meeting. If any other matters do come before the Annual Meeting, the persons
named in the enclosed form of proxy are expected to vote said proxy in
accordance with their judgment on such matters.
This proxy statement and the accompanying proxy card are first being mailed
to stockholders on or about October 30, 1998. A copy of the Annual Report for
the fiscal year ended December 31, 1997, which includes audited financial
statements, is included herewith for those stockholders of record as of October
14, 1998, the record date for the Annual Meeting.
The solicitation of proxies in the accompanying form is made by, and on
behalf of, the Board of Directors, and no compensation will be paid therefor.
There will be no solicitation of proxies other than by mail or personal
solicitation by officers and employees of the Company. The Company will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of proxy material to the beneficial owners of
shares held of record by such persons, and such persons will be reimbursed for
reasonable expenses incurred by them in connection therewith. A stockholder
executing the accompanying proxy has the power to revoke it at any time prior to
the exercise thereof by filing with the Secretary of the Company: (i) a duly
executed proxy bearing a later date; or (ii) a written instrument revoking the
proxy.
An affirmative vote of a majority of the shares present in person or
represented by proxy and entitled to vote is required for approval of all
matters being submitted to the stockholders for their consideration. All votes
will be tabulated by the inspector of election appointed for the Annual Meeting,
who will separately tabulate affirmative and negative votes, abstentions and
broker non-votes. Abstentions and broker non-votes are each included for
purposes of determining whether a quorum is present, but do not represent votes
cast with respect to any proposal.
VOTING SECURITIES
The Board of Directors has fixed the close of business on October 14, 1998
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting.
As of September 30, 1998, the outstanding capital stock of the Company
consisted of 6,577,712 shares of Common Stock. Each holder of Common Stock is
entitled to one vote for each share of Common Stock held by him or her at the
close of business on the record date.
The shares for which the accompanying proxy is solicited will be voted
providing the proxy is executed and returned by the stockholder prior to the
Annual Meeting.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 30, 1998, by
(i) each person who was known by the Company to own beneficially
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more than 5% of any class of the Company's Common Stock, (ii) each of the
Company's Directors, and (iii) all current Directors and executive officers of
the Company as a group. Except as otherwise noted, each person listed below has
sole voting and dispositive power with respect to the shares listed next to such
person's name.
Amount of
Name and Address of Beneficial Percentage
Beneficial Owner(1) Ownership(2) of Total
- ---------------- ---------- --------
Judson Cooper 511,017(3) 7.7%
Joshua D. Schein, Ph.D. 511,017(4) 7.7%
Steven M. Oliveira
129 Post Road East
Westport, CT 06880 431,016 6.6%
Richard B. Stone 414,915 6.3%
135 East 57th St., 11th FL New York, NY 10022
Terence E. Downer 5,750(5) *
International Sounding Board
60 Huntley Way Bridgewater, NJ 08807
Donald S. Howard 5,750(6) *
3 Hook Harbor Road Atlantic Highlands, NJ 07716
All Officers and Directors as a Group (six persons) 1,033,534 15.5%
- ----------
* Less than 1% of the outstanding shares of Common Stock.
(1) Unless otherwise indicated the address of each beneficial owner identified
is 420 Lexington Avenue, Suite 620, New York, NY 10170.
(2) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given date which such person has the right to acquire within
60 days after such date. For purposes of computing the percentage of
outstanding shares held by each person or group of persons named above on a
given date, any security which such person or persons has the right to
acquire within 60 days after such date is deemed to be outstanding for the
purpose of computing the percentage ownership of such person or persons,
but is not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
(3) Includes currently exercisable options to purchase 33,334 shares of Common
Stock.
(4) Includes currently exercisable options to purchase 33,334 shares of Common
Stock.
(5) Consists of currently exercisable warrants to purchase shares of Common
Stock.
(6) Consists of currently exercisable warrants to purchase shares of Common
Stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) reports that they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations from certain of the Company's executive
officers and directors that no other such reports were required, the Company
believes that during 1997 all Section 16(a) filing requirements applicable to
its officers, directors and greater than ten-percent beneficial owners were
complied with on a timely basis.
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ITEM 1 - ELECTION OF DIRECTORS
Five Directors are to be elected at the Annual Meeting to hold office until
the next annual meeting of stockholders and until their successors have been
duly elected and qualified. It is the intention of the persons named in the
accompanying proxy form to vote FOR the election of the five persons named in
the table below as Directors of the Company, unless authority to do so is
withheld. Proxies cannot be voted for a greater number of persons than the
nominees named. In the event that any of the below listed nominees for Director
should become unavailable for election for any presently unforeseen reason, the
persons named in the accompanying proxy form have the right to use their
discretion to vote for a substitute.
The following table sets forth the name and age of each Director and the
positions and offices held by each with the Company in addition to the position
as a director:
Name Age Position
- ----- --- ------
Joshua D. Schein, Ph.D 38 Chief Executive Officer, Secretary and Director
Judson A. Cooper 40 Chairman of the Board, Executive Vice President
Adam D. Eilenberg 42 Director
Stephen C. Knight, M.D. 38 Director
Jeffrey Rubin Director
Joshua D. Schein, Ph. D. has served as Chief Executive Officer of the
Company since August 1998 and as acting Chief Executive Officer from April 1998
to August 1998. Dr. Schein has also served as Secretary and a Director of the
Company since December 1995. Dr. Schein served as Chief Financial Officer of the
Company from December 1995 until April 1998. From December 1996 to June 1998,
Dr. Schein was a Director of DepoMed, Inc., a publicly traded biotechnology
company. From October 1994 to December 1995, Dr. Schein served as a Vice
President of Investment Banking at Josephthal, Lyon and Ross, Incorporated, an
investment banking firm. From June 1991 to September 1994, Dr. Schein was a Vice
President at D. Blech & Company, Incorporated, a merchant hank that invested in
the biopharmaceutical industry. Dr. Schein received a Ph.D. in neuroscience from
the Albert Einstein College of Medicine and an MBA from the Columbia Graduate
School of Business. Dr. Schein is a principal of CSO Ventures LLC ("CSO") and
Prism Ventures LLC ("Prism"), privately held limited liability companies. See
"Certain Relationships and Related Transactions."
Judson A. Cooper has served as Chairman of the Board of Directors of the
Company since August 1998 and as acting Chairman of the Board from April 1998 to
August 1998. Mr. Cooper has also served as Director of the Company since
December 1995 and Executive Vice President since November 1996. From December
1995 until November 1996 Mr. Cooper served as President. From December 1996 to
June 1998, Mr. Cooper was a Director of DepoMed, Inc., a publicly traded
biotechnology company. Mr. Cooper had been a private investor from September
1993 to December 1995. From 1991 to 1993, Mr. Cooper served as a Vice President
of D. Blech & Company, Incorporated. Mr. Cooper is a graduate of the Kellogg
School of Management. Mr. Cooper is a principal of CSO and of Prism. See
"Certain Relationships and Related Transactions."
Stephen C. Knight, M.D., a nominee for Director of the Company, is Chief
Financial Officer and Senior Vice President of Financial Business Development at
Epix Medical, Inc. Prior to joining Epix Medical in July 1996, Dr. Knight was a
Senior Consultant at Arthur D. Little, Inc. While at Arthur D. Little, Dr.
Knight specialized in mergers and acquisitions, strategic planning, and
valuation in the pharmaceutical industry. Dr. Knight has performed medical
research at the National Institutes of Health, AT&T Bell Laboratories, and Yale
and Columbia Universities. Dr. Knight received an M.D. from the Yale University
School of Medicine and a Master's Degree from the Yale School of Organization
and Management.
4
Adam D. Eilenberg is a nominee for Director of the Company. Since 1994, Mr.
Eilenberg has been engaged in the private practice of law in New York City and
is currently a member of the firm Ehrenreich Eilenberg Krause and Zivian LLP,
which serves as general corporate and securities counsel to the Company. From
1987 to 1994, Mr. Eilenberg was first associated with and then a partner of
Heller Horowitz & Felt, P.C. and from 1981 to 1986 was associated with the New
York law firm then known as Kramer, Levin, Nessin, Kamin & Frankel. Mr.
Eilenberg's firm represents several other privately held biotechnology and high
technology companies in which Messrs. Cooper and Schein hold significant or
controlling interests, as well as Pharmos Corporation, a public drug development
company in which Dr. Stephen C. Knight, a nominee for director, is a director.
Mr. Eilenberg received his law degree in 1980 from Harvard University.
Jeffrey Rubin is a nominee for Director of the Company. Mr. Rubin is
Principle and Managing Director of The Whitestone Group, an asset management and
investment banking firm he formed in January 1998. From 1994 to 1997, Mr. Rubin
was founder and a director of the Fastcast Corporation, a company specializing
in optical technologies. From 1989 to 1994, Mr. Rubin was a Vice President of
American European Corporation, an import/export company. Mr. Rubin received a
Bachelor of Arts degree in 1989 from the University of Michigan.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the 1997 fiscal year, there were two meetings of the Board of
Directors. A quorum of Directors was present, either in person or by telephonic
hookup, for all of the meetings. Actions were also taken during the year by the
unanimous written consent of the Directors.
The members of the Audit Committee during 1997 were Messrs. Downer and
Howard, neither of whom is an employee of the Company. The Audit Committee has
been delegated the responsibility of reviewing with the independent auditors the
plans and results of the audit engagement, reviewing the adequacy, scope and
results of the internal accounting controls and procedures, reviewing the degree
of independence of the auditors, reviewing the auditor's fees and recommending
the engagement of the auditors to the full Board of Directors.
The members of the Compensation Committee during 1997 were Messrs. Downer
and Howard. The Compensation Committee administers the Company's stock option
plan and other corporate benefits programs. The Compensation Committee also
reviews and approves bonuses, stock option grants, compensation philosophy and
current competitive status, and executive officer compensation.
The Board of Directors does not have a standing nominating committee.
EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the Chief
Executive Officer of the Company for 1997 and the previous year, as well as all
other executive officers of the Company who received compensation in excess of
$100,000 for 1997.
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Summary Compensation Table
Annual Compensation Long Term Compensation
------------------------------- ----------------------
Stock
Underlying
Name/ Other Annual Options/ All Other
Principal Position Year Salary Bonuses Compensation Warrants Compensation
- ------------------ ---- ------ ------- ------------ -------- ------------
David H. de Weese, Chairman 1997 $231,923 -- --(5) 16,667 --
Chief Executive Officer and 1996 21,635(1) -- --(5) 477,683 --
President
Joshua D. Schein, Ph.D., 1997 154,616(2) -- --(5) 16,667 --
Executive Vice President, 1996 153,116(2) -- --(5) 16,667 --
Chief Financial Officer
and Director
Judson A. Cooper, 1997 154,616(3) -- --(5) 16,667 --
Executive Vice 1996 153,116(3) -- --(5) 16,667 --
President and Director
Dennis E. Hruby, Ph.D., 1997 78,549(4) -- 27,366 10,000 --
Vice President of Research 1996 50,000 -- --(5) -- --
- ----------
(1) Mr. de Weese was Chairman, President and Chief Executive Officer of the
Company from November 1996 through April 1998.
(2) Does not include Dr. Schein's share ($40,000) of payments made to CSO. See
"Certain Relationships and Related Transactions."
(3) Does not include Mr. Cooper's share ($40,000) of payments made to CSO. See
"Certain Relationships and Related Transactions."
(4) Dr. Hruby became Vice President of Research on April 1, 1997. He was a
consultant to the Company in 1996 and the first quarter of 1997.
(5) Aggregate amount does not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus for the named officer.
The following tables set forth information with respect to the named
executive officers concerning the grant, repricing and exercise of options
during the last fiscal year and unexercised options held as of the end of the
fiscal year.
Option Grants for the Year Ended December 31, 1997
Common Stock % of Total
Underlying Options Granted Exercise Expiration
Name Options Granted(1) to Employees Price Per Share Date
- ---- ------------------ --------------- --------------- ----------
David H. de Weese ........ 16,667 27.8% $5.00 11/18/07
Joshua D. Schein ......... 16,667 27.8% $5.00 9/15/02
Judson A. Cooper ......... 16,667 27.8% $5.00 9/15/02
Dennis E. Hruby .......... 10,000 16.6% $5.00 4/1/07
- ----------
(1) All options were granted pursuant to the Company's 1996 Stock Option Plan.
Aggregated Option Exercises for the Year Ended December 31, 1997 and Option
Values as of December 31, 1997:
Number of Securities
Underlying Unexercised Options Value of Unexercised
Shares at December 31, 1997 In-the-Money Options(1)
Acquired Value ----------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
David H. de
Weese(2) ........ -- -- 33,334 -- $27,084 --
Joshua D
Schein, Ph.D .... -- -- 33,334 -- 52,084 --
Judson A
Cooper .......... -- -- 33,334 -- 52,084 --
Dennis E
Hruby ........... -- -- 10,000 -- 0 --
- ----------
(1) Based upon the closing price on December 31, 1997 as reported on the Nasdaq
SmallCap Market and the exercise price per option.
(2) Excludes warrants, 50% of which were exercisable on December 31, 1997, to
purchase 461,016 shares of Common Stock at an exercise price of $3.00 per
share.
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Employment Contracts and Directors Compensation
Dr. Joshua Schein, a Chief Executive Officer of the Company, has an
employment agreement with the Company which expires in December 2000 and is
cancelable by the Company only for cause, as defined in the agreement. Dr.
Schein currently receives an annual base salary of $225,000 and 16,667 stock
options per year, exercisable at the fair market value on the date of grant, and
is eligible to receive additional stock options and bonuses at the discretion of
the Board of Directors. In addition, Dr. Schein will receive a cash payment
equal to 1.5% of the total consideration received by the Company in a
transaction resulting in a change of ownership of at least 50% of the
outstanding Common Stock of the Company.
Judson Cooper, a Chairman of the Board of Directors of the Company, has an
employment agreement with the Company which expires in December 2000 and is
cancelable by the Company only for cause, as defined in the agreement. Mr.
Cooper currently receives an annual base salary of $225,000 and 16,667 stock
options per year, exercisable at the fair market value on the date of grant, and
is eligible to receive additional stock options and bonuses at the discretion of
the Board of Directors. In addition, Mr. Cooper will receive a cash payment
equal to 1.5% of the total consideration received by the Company in a
transaction resulting in a change of ownership of at least 50% of the
outstanding Common Stock of the Company.
Thomas Konatich became Chief Financial Officer of the Company as of April
1, 1998. Mr. Konatich's employment agreement with the Company expires on April
1, 2000 and is cancelable by the Company only for cause, as defined in the
agreement. Mr. Konatich receives an annual base salary of $170,000 and received
options to purchase 95,000 shares of Common Stock, exercisable at the fair
market value on April 1, 1998. The options vest on a pro rata basis on the
first, second, third and fourth anniversaries of the agreement. Mr. Konatich is
also eligible to receive additional stock options and bonuses at the discretion
of the Board of Directors.
Dr. Dennis Hruby, Vice President of Research of the Company, has an
employment agreement with the Company which expires on January 1, 2000 and is
cancelable by the Company only for cause, as defined in the agreement. Dr. Hruby
received options to purchase 40,000 shares of Common Stock at an exercise price
of $4.63 per share. The options become exercisable on a pro rata basis on the
first, second, third and fourth anniversaries of the agreement. Dr. Hruby is
eligible to receive additional stock options and bonuses at the discretion of
the Board of Directors.
Directors' Compensation. In 1997, outside Directors earned $1,500 for each
Board meeting attended.
Compensation Committee Report(1)
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, establishes the compensation plans
and specific compensation levels for executive officers, and
- --------
(1) The material in this report and under the caption "Performance Graph" are
not "soliciting material," are not deemed filed with the Securities and
Exchange Commission and are not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after
the date of this Proxy Statement and irrespective of any general
incorporation language therein.
7
administers the Company's 1996 Stock Option Plan. The Compensation Committee is
composed of two independent, non-employee Directors who have no interlocking
relationships as defined by the Securities and Exchange Commission other than as
described below (see "Compensation Committee Interlocks and Insider
Participation").
The Compensation Committee, being responsible for overseeing and approving
executive compensation and grants of stock options, is in a position to
appropriately balance the current cash compensation considerations with the
longer-range incentive-oriented growth outlook associated with stock options.
The main objectives of the Company's compensation structure include rewarding
individuals for their respective contributions to the Company's performance,
providing executive officers with a stake in the long-term success of the
Company and providing compensation policies that will attract and retain
qualified executive personnel.
The Compensation Committee believes that the chief executive officer's
(CEO) compensation should be heavily influenced by Company performance. The
Committee determines the appropriate level of bonuses and increases to salary,
if any, based in large part on Company performance. The Committee also considers
the salaries of CEOs of comparably-sized companies and their performance.
Stock options are granted to the CEO, and to other executives, primarily
based on the executive's ability to influence the Company's long-term growth.
The Compensation Committee has adopted similar policies with respect to
compensation of other officers of the Company. The Committee establishes base
salaries that are within the range of salaries for persons holding similarly
responsible positions at other companies. In addition, the Committee considers
factors such as relative Company performance, the individual's past performance
and future potential in establishing the base salaries of executive officers.
As with the CEO, the number of options granted to the other officers is
determined by the subjective evaluation of the executive's ability to influence
the Company's long-term growth. All options are granted at no less than the
current market price. Since the value of an option bears a direct relationship
to the Company's stock price, it is an effective incentive for managers to
create value for stockholders. The Committee therefore views stock options as an
important component of its long-term, performance-based compensation philosophy.
From the Members of the Compensation Committee: Terence Downer and Donald
Howard.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during 1997 were Messrs. Downer
and Howard. There were no interlocks on the Compensation Committee in 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a consulting agreement with CSO Ventures LLC
("CSO") pursuant to which CSO provided certain business services to the Company,
including business development, licensing, strategic alliances and
administrative support. Pursuant to the terms of the agreement, CSO received
$120,000 in 1997. The agreement expired on January 15, 1998. Mr. Cooper, Dr.
Schein and Steven Oliveira are the members of CSO.
Effective January 15, 1998, the Company entered into a consulting agreement
with Prism Ventures LLC ("Prism") pursuant to which Prism has agreed to provide
certain business services to the Company, including business development,
operations and other advisory services, licensing, strategic alliances, merger
and acquisition activity, financings and other corporate transactions. Pursuant
to the terms of the agreement, Prism receives an annual fee of $150,000 and
16,667 stock options per year. The agreement expires on January 15, 2001, and is
cancelable by the
8
Company only for cause as defined in the agreement. Mr. Cooper and Dr. Schein
are the members of Prism. The parties agreed in September 1998 to suspend the
Prism agreement as long as Mr. Cooper and Dr. Schein are both employed directly
by the Company.
PERFORMANCE GRAPH
The following graph compares the Company's cumulative stockholder's return
for the period beginning September 30, 1997 (the end of the quarter in which the
Company's Common Stock was first publicly traded) and ending September 30, 1998
with the cumulative total return of the NASDAQ Composite Index and the NASDAQ
Biotechnology Index over the same period.
9/30/97 12/31/97 3/31/98 6/30/98 9/30/98
Nasdaq Composite 100 93 109 112 [to come]
SIGA 100 87 79 72 [to come]
Nasdaq Biotech 100 89 99 93
9
ITEM 2 - PROPOSAL TO ADOPT THE INCENTIVE AND NON-QUALIFIED STOCK
OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, an
amendment (the "Amendment") to the 1996 Incentive and Non-Qualified Stock Option
Plan ("1996 Plan") authorizing the issuance of an additional 500,000 shares
under such plan, thereby increasing the aggregate number of shares issuable
under such plan from 333,333 to 833,333. There are currently 157,061 options
outstanding under the 1996 Plan.
The adoption of the Amendment by the Board of Directors reflects a
determination by the Board that ensuring the continued availability of a
sufficient number of options available for grant under the 1996 Plan is
important to the Company's ongoing and continuing efforts to attract and retain
key senior management personnel and increase the interest of the Company's
executive officers in the Company's continuing success.
Since the granting of options under the 1996 Plan is discretionary, the
Company cannot at present determine the number of options that will be granted
in the future to any person or group of persons or the terms of any future
grant. Future option grants and the terms thereof will be determined by the
Compensation Committee in accordance with the terms of the 1996 Plan.
Set forth below is certain information concerning the 1996 Plan. A copy of
the 1996 Plan is available upon written request to the Company.
Description of 1996 Plan
The purpose of the 1996 Plan is to allow Directors, officers, key employees
and consultants of the Company and its subsidiaries to increase their
proprietary interest in, and to encourage such employees to remain in the employ
of, or maintain their relationship with, such entities. It is intended that
options granted under the 1996 Plan will qualify either as incentive stock
options under Section 422 of the Code or as non-qualified options. Options
granted under the 1996 Plan will only be exercisable for Common Stock.
The 1996 Plan is administered by a committee appointed by the Board of
Directors (the "Compensation Committee"). Members of the Compensation Committee
are not be eligible to receive options while they are members except to the
extent otherwise permitted under the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934. The Compensation Committee designates the
persons to receive options, the number of shares subject to the options and the
terms of the options, including the option price and the duration of each
option, subject to certain limitations.
The maximum number of shares of Common Stock available for issuance under
the 1996 Plan is 333,333 shares (833,333 if the Amendment is approved), subject
to adjustment in the event of stock splits, stock dividends, mergers,
consolidations and the like. Common Stock subject to options granted under the
1996 Plan that expire or terminate are available for options to be issued under
the 1996 Plan.
The price at which shares of Common Stock may be purchased upon exercise of
an incentive stock option must be at least 100% of the fair market value of
Common Stock on the date the option is granted (or at least 110% of fair market
value in the case of a person holding more than 10% of the outstanding shares of
Common Stock (a "10% Stockholder")).
The aggregate fair market value (determined at the time the option is
granted) of Common Stock with respect to which incentive stock options are
exercisable for the first time in any calendar year by an optionee under the
1996
10
Plan or any other plan of the Company or a subsidiary, shall not exceed
$100,000. The Compensation Committee will fix the time or times when, and the
extent to which, an option is exercisable, provided that no option will be
exercisable earlier than one year or later than ten years after the date of
grant (or five years in the case of a 10% Stockholder). The option price is
payable in cash or by check. However, the Board of Directors may grant a loan to
an employee, pursuant to the loan provision of the 1996 Plan, for the purpose of
exercising an option or may permit the option price to be paid in shares of
Common Stock at the then current fair market value, as defined in the 1996 Plan.
Upon termination of an optionee's employment or consultancy, all options
held by such optionee will terminate, except that any option that was
exercisable on the date employment or consultancy terminated may, to the extent
then exercisable, be exercised within three months thereafter (or one year
thereafter if the termination is the result of permanent and total disability of
the holder), and except such three month period may be extended by the
Compensation Committee in its discretion. If an optionee dies while he is an
employee or a consultant or during such three-month period, the option may be
exercised within one year after death by the decedent's estate or his legatees
or distributees, but only to the extent exercisable at the time of death.
The 1996 Plan provides that outstanding options shall vest and become
immediately exercisable in the event of a "sale" of the Company, including (i)
the sale of more than 75% of the voting power of the Company in a single
transaction or a series of transactions, (ii) the sale of substantially all
assets of the Company, (iii) approval by the stockholders of a reorganization,
merger or consolidation, as a result of which the stockholders of the Company
will own less than 50% of the voting power of the reorganized, merged or
consolidated company.
The Board of Directors may amend, suspend or discontinue the 1996 Plan, but
it must obtain stockholder approval to (i) increase the number of shares subject
to the 1996 Plan, (ii) change the designation of the class of persons eligible
to receive options, (iii) decrease the price at which options may be granted,
except that the Board may, without stockholder approval accept the surrender of
outstanding options and authorize the granting of new options in substitution
therefor specifying a lower exercise price that is not less than the fair market
value of Common Stock on the date the new option is granted, (iv) remove the
administration of the 1996 Plan from the Compensation Committee, (v) render any
member of the Compensation Committee eligible to receive an option under the
1996 Plan while serving thereon, or (vi) amend the 1996 Plan in such a manner
that options issued under it intend to be incentive stock options, fail to meet
the requirements of Incentive Stock Options as defined in Section 422 of the
Code.
Under current federal income tax law, the grant of incentive stock options
under the 1996 Plan will not result in any taxable income to the optionee or any
deduction for the Company at the time the options are granted. The optionee
recognizes no gain upon the exercise of an option. However the amount by which
the fair market value of Common Stock at the time the option is exercised
exceeds the option price is an "item of tax preference" of the optionee, which
may cause the optionee to be subject to the alternative minimum tax. If the
optionee holds the shares of Common Stock received on exercise of the option at
least one year from the date of exercise and two years from the date of grant,
he will be taxed at the time of sale at long-term capital gains rates, if any,
on the amount by which the proceeds of the sale exceed the option price. If the
optionee disposes of the Common Stock before the required holding period is
satisfied, ordinary income will generally be recognized in an amount equal to
the excess of the fair market value of the shares of Common Stock at the date of
exercise over the option price, or, if the disposition is a taxable sale or
exchange, the amount of gain realized on such sale or exchange if that is less.
If, as permitted by the 1996 Plan, the Board of Directors permits an optionee to
exercise an option by delivering already owned shares of Common Stock valued at
fair market value) the optionee will not recognize gain as a result of the
payment of the option price with such already owned shares. However, if such
shares were acquired pursuant to the previous exercise of an option, and were
held less than one year after acquisition or less than two years from the date
of grant, the exchange will constitute a disqualifying disposition resulting in
immediate taxation of the gain on the already owned shares as ordinary income.
It is not clear how the gain will be computed on the disposition of shares
acquired by payment with already owned shares.
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The Company is currently in discussions with several emerging
pharmaceutical and biotechnology companies about potential business and/or
product consolidations, joint ventures, acquisitions, mergers or other business
combinations. If any such transaction is consummated, the existence of these
additional outstanding stock options under the 1996 Plan could have the effect
of reducing the aggregate consideration received by existing stockholders in
such transaction.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT
(ITEM 2 ON THE ENCLOSED PROXY CARD) INCREASING THE NUMBER OF SHARES AUTHORIZED
FOR ISSUANCE UNDER THE 1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN BY
500,000 FROM 333,333 TO 833,333.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed PricewaterhouseCoopers LLP as its independent
public accountants to examine the financial statements of the Company for the
current fiscal year. The selection of PricewaterhouseCoopers LLP was approved by
the Board of Directors prior to their appointment. PricewaterhouseCoopers LLP
has advised the Company that they do not have any material financial interests
in, or any connection with (other than as independent auditors, tax advisors and
management consultants), the Company.
PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting
and will have the opportunity to make a statement, if they desire to do so, and
they are expected to be available to respond to appropriate questions.
STOCKHOLDERS' PROPOSALS FOR 1999
ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders intend to present at the Company's 1999 annual
meeting of stockholders must be received by the Company by May 1, 1999 to be
eligible for inclusion in the proxy material for that meeting.
ANNUAL REPORT ON FORM 10-K
Upon sending a written request to Siga Pharmaceuticals, 420 Lexington
Avenue, Suite 620, New York, NY 10170, Attention: President, stockholders may
obtain, free of charge, a copy of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, and any amendments thereto, as filed
with the Securities and Exchange Commission.
OTHER MATTERS
As of the date of this Proxy Statement, the only business which management
expects to be considered at the Annual Meeting is the election of Directors, the
adoption of the incentive and non-qualified stock option plan and the
ratification of the selection of the independent auditors. If any other matters
come before the meeting, the persons named in the enclosed form of proxy are
expected to vote the proxy in accordance with their best judgment on such
matters.
BY ORDER OF THE BOARD OF DIRECTORS
JUDSON COOPER
Dated: October 30, 1998 Chairman of the Board
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