Unassociated Document
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________________________
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
Filed
by the Registrant ý
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Filed
by a Party other than the Registrant ¨
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Check
the appropriate box:
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x Preliminary
Proxy Statement
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¨ Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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¨ Definitive
Proxy Statement
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¨ Definitive
Additional Materials
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¨ Soliciting
Material Pursuant to Rule 14a-11(c) or Rule
14a-12
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TARGETED
GENETICS 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):
x
No
fee
required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
CALCULATION
OF FILING FEE
Title
of each class of securities to which transaction
applies
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Aggregate
number of securities to which transaction applies
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unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11
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Proposed
maximum aggregate value of transaction
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Fee paid previously with preliminary
materials. |
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Check box if any part of the fee is
offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which
the offsetting fee was paid previously. Identify the previous filing
by
registration statement number, or the form or schedule and the date
of its
filing. |
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(1) |
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____________________________________________________________ |
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(2) |
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______________________________________________________________________ |
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(4) |
Date Filed:
_______________________________________________________________________ |
April
___, 2007
Dear
Fellow Shareholder:
You
are
cordially invited to attend the Targeted Genetics Corporation 2007 Annual
Meeting of Shareholders to be held on Thursday, May 17, 2007, at 9:00 a.m.
local
time, at the Washington Athletic Club, 1325 Sixth Avenue, Seattle, Washington.
The
matters to be acted upon are described in the accompanying notice of annual
meeting and proxy statement. We will also report on our 2006 business results
and other matters of interest to our shareholders and there will be time for
questions.
YOUR
VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual Meeting,
we
urge you to vote so we can be assured of having the presence of a quorum at
the
meeting. Please mark your votes on the enclosed proxy card, sign and date the
proxy card and return it promptly in the enclosed postage-prepaid envelope.
If
you attend the Annual Meeting, you may vote in person if you wish, even if
you
previously returned your proxy card. If you hold your shares through an account
with a broker, bank or other custodian, please follow the instructions you
receive from them to vote your shares.
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Sincerely, |
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H. Stewart Parker
President and Chief Executive
Officer
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TARGETED
GENETICS CORPORATION
1100
Olive Way, Suite 100
Seattle,
Washington 98101
________________
NOTICE
OF 2007 ANNUAL MEETING OF SHAREHOLDERS
________________
The
2007
Annual Meeting of Shareholders of Targeted Genetics Corporation will be held
on
Thursday, May 17, 2007, at 9:00 a.m. local time, at the Washington Athletic
Club, 1325 Sixth Avenue, Seattle, Washington, for the following purposes, as
more fully described in the proxy statement accompanying this
notice:
· |
To
elect two Class 1 directors to our Board of Directors, each to serve
a
three-year term expiring at the 2010 annual meeting of shareholders
or
until their successors are duly elected and qualified;
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· |
To
approve an amendment to our Amended and Restated Articles of Incorporation
to increase the authorized shares of common stock from 18,000,000
shares
to 30,000,000 shares;
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· |
To
approve an amendment and restatement of the Targeted Genetics 1999
Stock
Option Plan, which will be known as the “Targeted Genetics Corporation
Stock Incentive Plan” upon shareholder
approval;
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· |
To
ratify the selection of Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending December
31,
2007; and
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· |
To
transact any other business as may properly come before the Annual
Meeting
and any adjournments or postponements
thereof.
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Our
Board
of Directors has fixed the close of business on March 16, 2007 as the record
date for the Annual Meeting. Only holders of record of our common stock on
the
record date are entitled to notice of and to vote at the Annual Meeting and
any
adjournments or postponements thereof.
Your
vote is very important.
Whether
or not you plan to attend the Annual Meeting, to ensure your representation
and
to ensure the presence of a quorum, you should complete, sign, date and return
the enclosed proxy card as promptly as possible in the enclosed postage-prepaid
envelope.
The
approximate date of mailing this proxy statement and the accompanying proxy
card
is April ___, 2007.
By
order
of the Board of Directors,
David
J.
Poston
Vice
President and Chief Financial Officer
Seattle,
Washington
April
___, 2007
TARGETED
GENETICS CORPORATION
1100
Olive Way, Suite 100
Seattle,
Washington 98101
________________
PROXY
STATEMENT
FOR
2007
ANNUAL MEETING OF SHAREHOLDERS
________________
This
proxy statement is being furnished to holders of shares of common stock of
Targeted Genetics Corporation, a Washington corporation, in connection with
the
solicitation of proxies by our Board of Directors for use at our 2007 Annual
Meeting of Shareholders, or Annual Meeting, and at any adjournments or
postponements thereof. We will hold the Annual Meeting on Thursday, May 17,
2007
at the Washington Athletic Club, 1325 Sixth Avenue, Seattle, Washington, at
9:00
a.m. local time. This proxy statement and the accompanying proxy card, together
with our 2006 Annual Report to Shareholders, are first being mailed to
shareholders entitled to vote at the Annual Meeting on or about April ___,
2007.
GENERAL
INFORMATION
What
is the purpose of the Annual Meeting?
There
are
four proposals to be considered and voted upon at the Annual
Meeting:
· |
election
of two Class 1 directors to our Board of Directors, each to serve
a
three-year term expiring at the 2010 annual meeting of shareholders
or
until their successors are duly elected and qualified;
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· |
approval
of an amendment to our Amended and Restated Articles of Incorporation,
or
Restated Articles, to increase the authorized shares of common stock
from
18,000,000 shares to 30,000,000 shares;
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· |
approval
of an amendment and restatement of the Targeted Genetics 1999 Stock
Option
Plan, or Option Plan, which will be known as the “Targeted Genetics
Corporation Stock Incentive Plan,” or Stock Incentive Plan upon
shareholder approval; and
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· |
ratification
of the selection of Ernst & Young LLP as our independent registered
public accounting firm for the fiscal year ending December 31,
2007.
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We
will
also consider any other such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
Who
is entitled to vote at the Annual Meeting?
We
have
one class of voting securities outstanding, which is designated as common stock,
and each share of common stock is entitled to one vote. You may vote all shares
of our common stock that you owned at the close of business on March 16, 2007,
the record date. As of the record date, [_____] shares of our common stock
were
outstanding and entitled to vote at the Annual Meeting.
What
constitutes a quorum?
The
presence, in person or by proxy, of the holders of a majority of the shares
of
our common stock entitled to vote at the Annual Meeting constitutes a quorum
for
the transaction of business.
What
are the voting requirements to elect the directors and to approve each of the
proposals?
· |
Proposal
1: The two Class 1 directors who receive the greatest number of
affirmative votes cast at the Annual Meeting, in person or by proxy,
will
be elected to the Board of Directors. You are not entitled to cumulate
votes in electing directors.
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· |
Proposal
2: The affirmative vote of the holders of shares representing a majority
of our outstanding common stock is required to approve the amendment
to
our Restated Articles.
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Proposal
3: The affirmative vote of the holders of shares representing a majority
of the votes cast at the Annual Meeting, in person or by proxy, is
required to approve the amendment and restatement of the Option Plan.
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· |
Proposal
4: The affirmative vote of the holders of shares representing a majority
of the votes cast at the Annual Meeting, in person or by proxy, is
required to ratify the selection of Ernst & Young as our independent
registered public accounting firm.
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What
is the effect of not voting?
The
effect of not voting depends on how the shares you own are held. If you are
the
holder of record and do not attend the Annual Meeting or return a valid proxy,
your shares will not be represented at the Annual Meeting and will not count
toward the quorum requirement. If there is a quorum, however, failure to vote
your shares will not affect the outcome of Proposal 1 (election of directors),
Proposal 3 (approval of an amendment and restatement of the Option Plan) and
Proposal 4 (ratification of selection of our independent registered public
accounting firm). Your unvoted shares will, however, have the effect of a vote
against Proposal 2 (approval of an amendment to the Restated Articles) because
approval of that proposal requires the affirmative vote of the holders of shares
representing a majority of our outstanding common stock.
If
you
own shares in street name (such as through a broker, bank or other custodian),
your custodian may represent your shares at the Annual Meeting for the purposes
of obtaining a quorum. In the absence of voting instructions, the custodian
may
or may not vote your shares in its discretion depending on the proposals being
considered at the Annual Meeting. Your custodian may vote your shares in its
discretion on routine matters such as Proposal 1 (the election of directors)
and
Proposal 4 (ratification of selection of our independent registered public
accounting firm). On non-routine matters such as Proposal 2 (approval of an
amendment to the Restated Articles) and Proposal 3 (approval of an amendment
and
restatement of the Option Plan), your shares will not be voted at the Annual
Meeting if you do not give your custodian specific instructions on how to vote.
This is called a broker non-vote. With respect to Proposal 3 (approval of an
amendment and restatement of the Option Plan), broker non-votes will not affect
the outcome because they are not treated as votes cast. With respect to Proposal
2 (approval of an amendment to the Restated Articles), a broker non-vote would
have the same effect as a vote against the proposal because approval of the
proposal requires the affirmative vote of the holders of shares representing
a
majority of our outstanding common stock.
How
are votes withheld and abstentions treated?
Shares
of
our common stock subject to abstentions are treated as present at the Annual
Meeting and will therefore be counted toward establishing the presence of a
quorum. Abstentions are not treated as votes cast, however, so abstentions
will
have no effect on Proposal 1 (election of directors), which outcome is
determined by a plurality of the votes cast or on Proposal 3 (approval of an
amendment and restatement of the Option Plan) and Proposal 4 (ratification
of
selection of our independent registered public accounting firm), which outcomes
are determined by a majority of the votes cast. With respect to the Proposal
2
(approval of an amendment to the Restated Articles), abstentions will have
the
same negative effect as a vote against the proposal.
How
are the votes counted?
Shares
of
common stock represented by properly executed proxies that we receive at or
before the Annual Meeting that have not been revoked will be voted at the Annual
Meeting in accordance with the instructions contained on the proxy card. Proxies
and ballots will be received and tabulated by Mellon Investor Services LLC,
our
transfer agent and the inspector of elections for the Annual Meeting. Shares of
common stock represented by properly executed proxy cards for which no
instruction is given will be voted “for” the election of the nominees for
director, “for” approval of the amendment to the Restated Articles, “for” the
amendment and restatement of the Option Plan and “for” ratification of selection
of our independent registered public accounting firm.
To
ensure
that your shares are voted, please complete, sign, date and return promptly
the
enclosed proxy card in the postage-prepaid envelope we have provided.
Can
I change my vote after I have delivered my proxy?
If
you
are a registered shareholder, you may revoke a proxy at any time before its
exercise by voting in person at the Annual Meeting or by delivering written
notice of revocation to our chief financial officer at any time prior to the
Annual Meeting. If your shares are held in street name, you must contact your
broker, bank or other custodian to obtain a proxy to vote your shares if you
wish to cast your vote in person at the Annual Meeting or to change your vote.
If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting, all proxies will be voted in
the
same manner as the proxies would have been voted at the original convening
of
the Annual Meeting (except for any proxies that have at that time effectively
been revoked or withdrawn), even if the proxies had been effectively voted
on
the same or any other matter at a previous meeting.
Who
pays the cost of soliciting votes for the Annual Meeting?
We
will
bear the cost of soliciting proxies from our shareholders. In addition to
solicitation by mail, our directors, officers and employees may solicit proxies
by telephone, facsimile, e-mail, in person or otherwise. We will not
additionally compensate our directors, officers and employees for this
solicitation but will reimburse them for the out-of-pocket expenses that they
incur. We will reimburse persons who hold our common stock of record but not
beneficially, such as brokerage firms, nominees, fiduciaries and other
custodians, for the reasonable expenses they incur in forwarding solicitation
materials to, and requesting authority for the exercise of proxies from, the
persons for whom they hold the shares. In addition, we have retained Mellon
Investor Services, 480 Washington Blvd., 27th
Floor,
Jersey City, NJ 07310 to aid in the solicitation of proxies by mail, telephone,
e-mail and personal solicitation. For these services, we will pay Mellon
Investor Services a fee of $6,000 plus expenses.
What
is the recommendation of the Board of Directors?
The
Board
of Directors recommends that you vote FOR the election of the nominees for
director, FOR approval of the amendment to the Restated Articles, FOR the
amendment and restatement of the Option Plan and FOR ratification of selection
of our independent registered public accounting firm.
________________
PROPOSAL
ONE
ELECTION
OF DIRECTORS
Our
bylaws provide that our Board of Directors shall be composed of not less than
one nor more than nine directors. We currently have seven directors, each of
whom is placed into one of three classes such that, to the extent possible,
there is an equal number of directors in each class. Directors generally hold
office for a three-year term or until his or her successor is duly elected
and
qualified. However, if a director resigns from the Board of Directors before
his
or her term expires, the director elected or appointed to fill the resulting
vacancy must be elected by the shareholders at the next meeting of shareholders
at which directors are elected to complete the balance of that term.
At
the
Annual Meeting, two Class 1 directors are to be elected. Unless they receive
contrary instructions, the persons named as proxies on the enclosed proxy card
intend to cast votes represented by properly executed proxy cards for the
election of these nominees. If a nominee should become unavailable for any
reason, the persons named as proxies intend to cast votes for election of a
substitute nominee designated by the Board of Directors. The Board of Directors
has no reason to believe that any of the nominees named will be unable to serve
if elected. If a quorum is present, the two nominees receiving the highest
number of votes cast at the Annual Meeting, in person or by proxy, will be
elected to serve as
Class 1 directors.
Jack
L.
Bowman and Jeremy L. Curnock Cook have been nominated for election to the Board
of Directors as Class 1 directors. If Messrs. Bowman and Cook are re-elected,
the following is a list of persons who will constitute our Board of Directors
following the Annual Meeting.
Name
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Age
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Class
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Director
Since
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Term
Expires
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Jack
L. Bowman
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73
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1
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1997
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2010
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Jeremy
L. Curnock Cook (chairman)
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57
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1
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1995
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2010
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Joseph
M. Davie
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67
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2
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2000
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2008
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Roger
L. Hawley
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53
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2
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2005
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2008
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Nelson
L. Levy
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64
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3
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1999
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2009
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H.
Stewart Parker
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50
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3
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1989
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2009
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Michael
S. Perry
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47
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3
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2005
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2009
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Biographical
Information
Jack
L. Bowman has
served as a director since March 1997. From 2003 to 2004, Mr. Bowman served
as
chairman of the board and chief executive officer of NeoRx Corporation, now
Poniard Pharmaceuticals, Inc., a publicly-held biotechnology company. From
1987
to 1994, Mr. Bowman was a company group chairman at Johnson & Johnson, with
primary responsibility for a group of companies in the diagnostic, blood glucose
monitoring and pharmaceutical businesses. From 1980 to 1987, he held various
positions, including executive vice president, at American Cyanamid Company,
a
pharmaceutical company. Mr. Bowman previously served as a member of the board
of
trustees of The Johns Hopkins University. He currently serves as a director
of
Celgene Corporation and AVI BioPharma, Inc., both publicly-held
biopharmaceutical companies. Mr. Bowman holds a B.E. in music from Western
Washington University.
Jeremy
L. Curnock Cook has
served as a director since July 1995 and as chairman of our Board of Directors
since February 1998. From 1987 to 2000, Mr. Cook was a director of Rothschild
Asset Management Limited, a corporate and investment advisory company, and
was
responsible for the Rothschild Bioscience Unit. Mr. Cook founded the
International Biochemicals Group in 1975, which was sold to Royal Dutch Shell
in
1985, where he served as managing director until 1987. He currently serves
as
chairman of the board of Bioscience Managers Limited and Inflazyme
Pharmaceuticals, Ltd., a publicly-held biopharmaceutical company. He is also
director of Osteologix, Inc., a publicly-held pharmaceutical company, and
several publicly-held and privately-held companies outside the United States.
Mr. Cook previously served as a director of Cell Therapeutics, Inc. and Creative
BioMolecules, Inc. Mr. Cook holds a M.A. in Natural Sciences from Trinity
College, Dublin.
Joseph
M. Davie has
served as a director since October 2000. Dr. Davie is currently serving as
interim chief science officer of Curis, Inc., a publicly-held therapeutic drug
development company. Dr. Davie was employed by Biogen, Inc., a biopharmaceutical
company, from 1993 to 2000, most recently serving as senior vice president,
research. From 1987 to 1993, Dr. Davie held several positions at G.D. Searle
& Co., including president of research and development and senior vice
president of science and technology. Dr. Davie was professor and head of the
Department of Microbiology and Immunology at Washington University School of
Medicine from 1975 to 1987. He currently serves as a director of Curis, Inc.,
CV
Therapeutics, Inc., and Inflazyme Pharmaceuticals, Ltd., both publicly-held
biopharmaceutical companies, and several privately-held companies. Dr. Davie
holds an A.B., M.A. and Ph.D. in bacteriology from Indiana University and a
M.D.
from Washington University School of Medicine.
Roger
L. Hawley
has
served as a director since August 2005. Since February 2006, Mr. Hawley has
served as chief executive officer of Zogenix, Inc., a privately-held specialty
pharmaceutical company. From 2003 until January 2006, Mr. Hawley served as
executive
vice
president, commercial and technical operations of InterMune,
Inc, a
publicly-held biopharmaceutical company. From
2002
to 2003, Mr. Hawley served as chief commercial officer at Prometheus
Laboratories, Inc., a specialty pharmaceutical company. From 2001 to 2002,
Mr.
Hawley served as vice president/general manager of sales and marketing at Elan
Pharmaceuticals, Inc., a publicly-held biopharmaceutical company. From 1987
to
2001, Mr. Hawley held various management positions in corporate finance, sales,
and marketing at GlaxoSmithKline, Inc.
Prior to
joining GlaxoSmithKline, Mr. Hawley spent 12 years in financial management
with
Marathon Oil Company. Mr.
Hawley also serves as a director of Alios BioPharma Inc., a privately-held
biotechnology company. Mr. Hawley holds a B.S. in accounting from Eastern
Illinois University.
Nelson
L. Levy
has
served as a director since May 1999. Since 1985, Dr. Levy has served as chief
executive officer of CoreTechs Corporation, a privately-held technology
development company. He served as president of Fujisawa Pharmaceutical Company,
the U.S. subsidiary of Japan’s third-largest pharmaceutical company, from 1992
to 1993. Dr. Levy served as vice president for pharmaceutical research at Abbott
Laboratories from 1981 to 1984. Dr. Levy served as a tenured professor of
microbiology and immunology at Duke University from 1970 to 1981. He currently
serves as a director of several privately-held companies and on the scientific
advisory boards of several publicly and privately-held biotechnology and
pharmaceutical companies. Dr. Levy holds a B.A. from Yale University, a M.D.
from Columbia University and a Ph.D. from Duke University.
H.
Stewart Parker managed
our formation as a wholly-owned subsidiary of Immunex Corporation (Immunex
was
subsequently acquired by Amgen) and has served as our president, chief executive
officer and a director since our formation in 1989. She served in various
capacities at Immunex from 1981 through 1991, most recently as vice president,
corporate development. Ms. Parker also served as president and a director of
Receptech Corporation, a company formed by Immunex in 1989 to accelerate the
development of soluble cytokine receptor products, from 1991 to 1993. She serves
on the board of directors and the executive committee of BIO, the primary trade
organization for the biotechnology industry. Ms. Parker also serves as a
director of Neose Technologies, Inc., a publicly-held biotechnology company,
and
of several privately-held companies. Ms. Parker holds a B.A. and M.B.A. from
the
University of Washington.
Michael
S. Perry
has
served as a director since November 2005. Dr. Perry is currently chief
development officer at VIA Pharmaceuticals, Inc., a privately-held drug
development company, and is also a venture partner with Bay City Capital, a
venture capital firm. Dr. Perry previously served as chairman and chief
executive officer of Extropy Pharmaceuticals, Inc., a privately-held pediatric
specialty pharmaceutical company, from 2003 to 2005. From 2002 to 2003, Dr.
Perry served as president and chief executive officer of Pharsight Corporation,
a publicly-held software and consulting services firm. From 2000 to 2002, Dr.
Perry served as global head of research and development for Baxter BioScience.
From 1994 to 2000, Dr. Perry was president and chief executive officer of both
SyStemix Inc. and Genetic Therapy Inc., two wholly-owned subsidiaries of
Novartis Corp. Prior to 1994, Dr. Perry held various management positions with
Syntex Corporation, Schering-Plough Corporation and BioResearch Laboratories,
Inc. Dr. Perry holds a Doctor of Veterinary Medicine, a Ph.D. in Biomedical
Science-CardioPulmonary Pharmacology and a B.S. in Physics from the University
of Guelph.
Director
Nomination Process
Our
Board
of Directors adopted a charter of the Nominating and Corporate Governance
Committee, or Nominating Committee, that describes the process by which
candidates for possible inclusion in our recommended slate of director nominees
are selected. The Board of Directors may amend this charter at any time and
the
most current version is available on our web site at http://www.targetedgenetics.com.
Under
its charter, the Nominating Committee is responsible for developing criteria
for
identifying and evaluating nominees for our Board of Directors.
Our
Nominating Committee has two primary methods for identifying candidates beyond
those proposed by our shareholders. On a periodic basis, the Nominating
Committee may solicit ideas for possible candidates from a number of sources,
including members of our Board of Directors, senior-level management,
individuals personally known to the members of our Board of Directors and
research, including publications, databases and internet searches. In addition,
the Nominating Committee may from time to time use its authority under its
charter to retain a search firm to identify candidates. At a minimum, a nominee
must have significant management or leadership experience that is relevant
to
our business as well as the highest standards of ethical conduct.
In
accordance with our bylaws and applicable law, recommendations for nominations
for the election of directors for consideration by the Nominating Committee
may
be made by any shareholder of record entitled to vote for the election of
directors at shareholder meetings held for such purpose. The
requirements a shareholder must follow for recommending persons for
consideration by the Nominating Committee for election as directors are set
forth in our bylaws and the section of this proxy statement entitled
“Shareholder
Proposals for the 2008 Annual Meeting.”
Subject
to the superior rights, if any, of the holders of any class or series of stock
having a preference over our common stock that we may issue in the future,
if a
shareholder complies with the procedures for recommending persons for
consideration by the Nominating Committee for election as directors, the
Nominating Committee will conduct the appropriate and necessary inquiries into
the backgrounds, qualifications and skills of the shareholder-recommended
candidates and, in the exercise of the Nominating Committee’s independent
judgment in accordance with the policies and procedures adopted in its charter,
will determine whether to recommend the shareholder-recommended candidates
to
our Board of Directors for inclusion in the list of candidates for election
as
director at the next shareholder meeting at which directors will be
elected.
The
Nominating Committee will consider all candidates identified through the
processes described above and will evaluate each of them, including incumbents,
based on the same criteria. If, based on the Nominating Committee’s initial
evaluation, a candidate continues to be of interest, the Nominating Committee
will generally conduct interviews and arrange for appropriate background and
reference checks.
Director
Independence
Our
Board
of Directors has determined that each of the following directors is an
independent director as defined in the NASDAQ rules: Jack L. Bowman, Jeremy
L.
Curnock Cook, Joseph M. Davie, Nelson L. Levy, Roger L. Hawley and Michael
S.
Perry. H. Stewart Parker is not independent because she is employed as our
President and CEO.
Our
Board
of Directors has also determined that each member of the three committees of
our
Board of Directors meets the independence requirements applicable to those
committees, as prescribed by NASDAQ and the Securities and Exchange Commission,
or SEC, and that each member of the Audit Committee, Messrs. Cook and Hawley
and
Dr. Levy, are “audit committee financial experts,” as that term is defined by
the SEC.
Committees
Our
Board
of Directors maintains three standing committees: the Audit Committee, the
Compensation Committee and the Nominating and Corporate Governance Committee.
Each year, committee and committee chair assignments are made at the Board
of
Directors meeting immediately following the annual meeting of shareholders.
The
composition of each committee is as follows:
Audit
|
|
Compensation
|
|
Nominating
and Corporate Governance
|
Roger
L. Hawley *
|
|
Jack
L. Bowman *
|
|
Joseph
M. Davie *
|
Jeremy
L. Curnock Cook
|
|
Joseph
M. Davie
|
|
Jack
L. Bowman
|
Nelson
L. Levy
|
|
Michael
S. Perry
|
|
Jeremy
L. Curnock Cook
|
|
|
|
|
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*Chairman
|
|
|
|
|
Audit
Committee. The
Audit
Committee operates under a written charter adopted by our Board of Directors
as
of March 4, 2004. The Audit Committee has general responsibility for monitoring
our finance, accounting, audit, review and attest activities and internal
controls. In addition, the Audit Committee selects and engages our independent
registered public accounting firm and ensures that such firm understands that
it
shall be ultimately accountable to and report to the Audit Committee. The Audit
Committee has the sole authority to retain, evaluate, terminate and replace
the
independent registered public accounting firm. A listing of the relevant
experience that qualify Messrs. Cook and Hawley and Dr. Levy as “audit committee
financial experts” can be found in their biographical information contained at
the beginning of “Proposal
One — Election of Directors.”
The
report of the Audit Committee is set forth below in this proxy
statement.
Compensation
Committee.
The
Compensation Committee operates under a written charter adopted by our Board
of
Directors as of March 4, 2004. The Compensation Committee establishes salaries,
incentives, option grants and other forms of compensation for our directors
and
executive officers. The Compensation Committee also administers our various
incentive compensation and benefit plans, including our stock option plans,
and
recommends the establishment of policies relating to our incentive compensation
and benefit plans. The report of the Compensation Committee is set forth below
this proxy statement.
Nominating
and Corporate Governance Committee. The
Nominating Committee operates under a written charter adopted by our Board
of
Directors as of March 4, 2004. The Nominating Committee ensures that our Board
of Directors is appropriately constituted to meet its fiduciary obligations
to
our company and our shareholders, monitors and safeguards the independence
of
our Board of Directors and provides a leadership role in shaping our corporate
governance.
Board
and Committee Attendance and Meetings
During
fiscal year 2006, our Board of Directors held a total of seven meetings and
took
additional actions by unanimous written consent; the Audit Committee held a
total of five meetings; the Compensation Committee held a total of two meetings
and took additional actions by unanimous written consent; and the Nominating
Committee held one meeting.
It
is the
practice of our Board of Directors to hold an executive session without
management present at each of the meetings of the Board of Directors. During
fiscal year 2006, each director attended at least 75% of all of the meetings
of
the Board of Directors and committees on which he served except as follows:
Dr.
Davie attended 57% (4 out of 7) of the Board of Directors meetings and 50%
(1
out of 2) of the Compensation Committee meetings and Dr. Perry attended 71%
(5
out of 7) of the Board of Directors meetings. It is the practice that all of
our
directors attend the annual meeting of shareholders. At the time of our 2006
annual meeting of shareholders, our Board of Directors was comprised of 8
directors, all of whom attended the meeting.
Director
Compensation
Annual
Compensation for Non-Employee Directors.
Non-employee directors are compensated for their service on the Board of
Directors and on any committee of the Board of Directors as well as their
attendance at Board of Directors and committee meetings. We also reimburse
our
directors for travel expenses incurred for attending meetings. For each fiscal
year, non-employee directors receive the following compensation:
|
Annual
Retainer
|
|
Attendance
Fees (per meeting)
|
|
|
|
|
Board
of Directors
|
$10,000
($15,000 for the chairman)
|
|
$1,000
($1,500 for the chairman)
|
|
|
|
|
Audit
Committee
|
$4,000
($5,000 for the chairman)
|
|
$500
($750 for the chairman)
|
|
|
|
|
Compensation
Committee
|
$3,000
($4,000 for the chairman)
|
|
$500
($750 for the chairman)
|
|
|
|
|
All
other Board committees
|
$1,000
($2,000 for the chairman)
|
|
$500
($750 for the chairman)
|
Director
Summary Compensation Table for Fiscal Year 2006.
The
following table provides the compensation provided to each of our directors
for
the fiscal year ending December 31, 2006. Directors who are our employees do
not
receive any fees for their services as directors.
Name
|
|
Fees
Earned or Paid in Cash
|
|
Option
Awards (1)
|
|
All
Other Compensation (2)
|
|
Total
|
|
Jack
L. Bowman
|
|
$
|
24,000
|
|
$
|
4,896
|
|
$
|
1,826
|
|
$
|
30,722
|
|
Jeremy
L. Curnock Cook
|
|
|
33,000
|
|
|
5,875
|
|
|
30,666
|
|
|
69,541
|
|
Joseph
M. Davie
|
|
|
19,500
|
|
|
4,896
|
|
|
3,535
|
|
|
27,931
|
|
Roger
L. Hawley
|
|
|
25,375
|
|
|
3,917
|
|
|
1,100
|
|
|
39,392
|
|
Nelson
L. Levy
|
|
|
23,000
|
|
|
3,917
|
|
|
4,757
|
|
|
31,674
|
|
H.
Stewart Parker (3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Michael
S. Perry
|
|
|
20,750
|
|
|
3,917
|
|
|
2,670
|
|
|
27,337
|
|
(1)
Reflects the dollar amount recognized for financial statement reporting purposes
for the fiscal year ended December 31, 2006 in accordance with the provisions
of
FAS 123R. See Note 10 to the consolidated financial statements of our annual
report for the fiscal year ended December 31, 2006 regarding the assumptions
underlying the valuation of equity awards. As of December 31, 2006, each
director has the following number of options outstanding: Jack L. Bowman 15,500;
Jeremy L. Curnock Cook 17,500; Joseph M. Davie 13,500; Roger L. Hawley 8,000;
Nelson L. Levy 13,500; H. Stewart Parker 139,778; and Michael S. Perry 8,000.
(2) Includes
reimbursements for travel expenses.
(3)
See
Executive
Compensation - Summary Compensation Table
for
disclosure related to H. Stewart Parker, who is also an executive
officer.
Stock
Option Program for Non-Employee Directors.
Under
our stock option grant program for non-employee directors, new directors receive
an initial grant of a non-qualified stock option to purchase 6,000 shares of
our
common stock, which vest over a three-year period and have an exercise price
equal to the closing price on the date of the grant. Additionally, on an annual
basis, we grant non-qualified stock options to purchase 2,000 shares of our
common stock to our non-employee directors (2,500 shares of common stock to
our
chairman of the board), which cliff vest one year after the date of grant and
have an exercise price equal to the closing price on the date of the grant.
These grants are made under our stock option grant program for non-employee
directors and are generally approved at the annual Board of Directors meeting
that immediately follows the annual meeting of shareholders.
Compensation
Committee Interlocks and Insider Participation
During
the 2006 fiscal year, Mr. Bowman, Dr. Davie and Dr. Perry served on the
Compensation Committee. No member of our Compensation Committee has served
as
one of our officers or employees during fiscal year 2006 or at any other time.
During fiscal year 2006, none of our executive officers served on the board
of
directors or compensation committee of any other entity that has or has had
one
or more executive officers who served as a member of our Board of Directors
or
our Compensation Committee. No member of our Compensation Committee had any
relationship with us requiring disclosure as a related-party transaction in
the
section of the proxy statement entitled “Certain
Relationships and Related Transactions.”
The
Board of Directors recommends a vote FOR
the
election of Messrs. Bowman and Cook.
________________
EXECUTIVE
OFFICERS
The
following table lists our executive officers, who will serve in the capacities
noted until their successors are duly appointed and qualified.
Name
|
|
Age
|
|
Position
|
H.
Stewart Parker
|
|
51
|
|
President,
Chief Executive Officer and Director
|
Barrie
J. Carter, Ph.D
|
|
62
|
|
Executive
Vice President and Chief Scientific Officer
|
David
J. Poston
|
|
44
|
|
Vice
President, Finance, Chief Financial Officer and
Treasurer
|
H.
Stewart Parker’s
biography is contained in the section of this proxy statement entitled
“Proposal
One - Election of Directors - Biographical Information.”
Barrie
J. Carter has
served as our executive vice president since 1992. Dr. Carter has served as
our
chief scientific officer since 2001 and was director of research and development
from 1992 to 2000. Before joining Targeted Genetics, he was employed for 22
years by the National Institutes of Health, or NIH. He served as chief of the
laboratory of molecular and cellular biology in the National Institute for
Diabetes and Digestive and Kidney Diseases from 1982 to 1992. Dr. Carter serves
on the editorial boards of Human
Gene Therapy,
Molecular
Therapy and
Virology.
He
serves as a director of the American Society for Gene Therapy and as a director
of Lentigen Corporation, a privately-held biotechnology company. From 1995
to
2000, he was an affiliate professor of medicine at the University of Washington
Medical School. Dr. Carter holds a B.Sc. (Honors) from the University of Otago,
Dunedin, New Zealand and a Ph.D. in biochemistry from the University of Otago
Medical School. He spent a period of postdoctoral training at the Imperial
Cancer Research Fund Laboratories in London before joining the NIH. His
long-term research interests are in the molecular biology of viruses,
development of AAV vectors and gene therapy.
David
J. Poston has
served as our vice president, finance, chief financial officer and treasurer
since January 2006 and has served as assistant secretary since 2001. From 2005
until January 2006, Mr. Poston served as acting chief financial officer and
treasurer. Mr. Poston joined Targeted Genetics in 1999 as our director, finance.
From 2001 until January 2006, Mr. Poston served as senior director,
finance.
From
2000 to its sale in 2004, Mr. Poston also served as secretary/treasurer of
CellExSys, our majority-owned cell therapy subsidiary. Prior to 1999, Mr. Poston
served as controller of Corixa Corporation from 1997 to 1998.
He
started his career in public accounting at KPMG in 1985.
Mr.
Poston earned his B.A. degree in Business Administration from the University
of
Puget Sound and graduated as the Norton Clapp Arete Scholar.
EXECUTIVE
COMPENSATION
Compensation
Discussion & Analysis
Overview.
The
Compensation Committee of our Board of Directors has overall responsibility
for
approving and evaluating the executive compensation plans, policies and
programs. The Compensation Committee is charged with, among other
things:
· |
reviewing
and approving corporate and individual goals and objectives of the
executive officers;
|
· |
evaluating
the performance of the executive officers in light of such goals
and
objectives and determining compensation for the executive officers;
and
|
· |
overseeing
the administration of the stock or cash-based compensation and incentive
programs and approving grants and awards of stock options and other
equity
securities made to the executive
officers.
|
The
Compensation Committee consists of Jack L. Bowman, Joseph M. Davie and Michael
S. Perry, all of whom are independent directors under the NASDAQ rules. Our
executive officers are H. Stewart Parker, our chief executive officer, Dr.
Barrie Carter, our chief scientific officer and David J. Poston, our chief
financial officer.
Objectives
of Executive Compensation Program. The
Compensation Committee uses distinct elements of executive compensation for
different purposes with the overall intended objectives of reward, motivation
and retention of our executive officers, all with an eye towards achieving
long-term shareholder value. The Compensation Committee believes it is important
for us to attract and retain qualified executive officers and to ensure that
their compensation is competitive relative to the compensation paid to similarly
situated executives at comparable companies. The executive compensation program
is designed to motivate our executive officers, individually and as a management
group, to manage in the best interests of the shareholders and to reward them
for doing so.
Setting
Elements of Executive Compensation.
There
are primarily three elements in the total compensation package provided to
our
executive officers: base salary and annual bonus are cash compensation and
long-term incentive compensation in the form of stock options is non-cash
compensation. In addition, executive officers may participate in our 401(k)
plan
and other benefit plans generally available to all employees.
The
Compensation Committee generally sets cash compensation for all executive
officers at regularly scheduled meetings each January and grants stock options
to executive officers at regularly scheduled meetings immediately following
each
annual meeting of shareholders. The Compensation Committee uses the same factors
and methodology to determine compensation for each of the executive officers,
including the chief executive officer.
With
any
executive compensation decision, the Compensation Committee receives
recommendations from the chief executive officer and reviews and discusses
the
overall compensation picture. The Compensation Committee does not engage a
consultant regarding executive compensation matters or delegate authority with
respect to administration of any plans, policies or programs, including those
relating to executive officer stock option matters.
The
Compensation Committee does not use any formula and does not have any formal
policy with respect to allocating compensation between the various elements
but
rather considers both qualitative and quantitative indicators of individual
and
corporate performance to determine the composition of executive compensation.
Pursuant to its charter, the Compensation Committee takes into account each
executive officer’s performance, our overall corporate performance, the
compensation paid to similarly situated executives at comparable companies,
the
compensation paid to the executive officers in past years and any other factors
it deems appropriate.
The
Compensation Committee generally sets qualitative corporate performance
objectives and reviews the progress on such objectives when making compensation
decisions. The Compensation Committee also considers individual factors such
as
the value of each executive officer’s skills and abilities in support
of our objectives, his or her contribution to the management team and his
or her prior compensation, including prior stock option grants. We do not have
a
quantitative performance-based plan that sets forth corporate objectives that
must be met by executive officers. Generally, the Compensation Committee aims
at
having 20-40% of the total compensation for executive officers based on
individual and corporate performance.
Base
Salary.
We
compete with a variety of companies for executive-level talent and the
Compensation Committee uses base salary to compensate the executive officers
for
services rendered as well as for motivation and retention purposes. Base
salaries are intended to be competitive and are therefore set close to the
median of base salaries paid by other biotechnology companies of similar size
and mission, taking into consideration individual factors such as experience,
tenure, qualifications, institutional knowledge and potential business and
management team disruption due to turnover.
Base
salaries are reviewed annually to determine whether they are consistent with
our
overall compensation objectives. The Compensation Committee reviews the results
of two biotechnology compensation surveys in which we participate, the Radford
Global Life Sciences Survey and the Northwest Biotech & Health Technology
Salary Survey. The Compensation Committee also reviews the base salary of each
executive officer against the individual and aggregate base salaries for
executives at companies that are (i) in the same sector of the biotechnology
industry, (ii) pursuing development of similar products or are in the same
stage
of development and/or (iii) in the same area geographically. The data in the
competitive peer group comparison and the surveys together are referred to
as
the “competitive market study.” For 2007, the companies in the competitive peer
group were:
· Aastrom
Biosciences, Inc.
|
· Genvec
Inc.
|
· Seattle
Genetics Inc.
|
· Alnylam
Pharmaceuticals Inc.
|
· Introgen
Therapeutics Inc.
|
· Sirna
Therapeutics Inc.
|
· Ariad
Pharmaceuticals Inc.
|
· Nastech
Pharmaceutical Co. Inc.
|
· Valentis
Inc.
|
· Avigen
Inc.
|
· NeoRx
Corp.
|
· Vical
Inc.
|
· Cell
Genesys Inc.
|
· Onyx
Pharmaceuticals Inc.
|
· Zymogenetics
Inc.
|
· Dendreon
Corp.
|
· Sangamo
Biosciences Inc.
|
|
In
considering increases in base salary, the Compensation Committee reviews
individual and corporate performance as well as market and industry conditions
and our overall financial health. In fiscal year 2006, while the Compensation
Committee concluded that the executive officers had achieved substantially
all
of the 2005 corporate goals, the Compensation Committee did not increase their
base salaries, except for an increase for Mr. Poston in recognition of his
promotion to vice president and chief financial officer in January 2006, because
of our financial position and generally poor market and economic conditions
affecting gene therapy product development. For fiscal year 2007, the
Compensation Committee determined that increases in base salary were appropriate
for the executive officers primarily because the executive officers achieved
substantially all of the 2006 corporate objectives set for them, the executive
officers did not receive increases in base salary in 2006 and their salaries
were generally below market, and retention of the executive officers was in
our
best interests. To determine the amount of increase, the Compensation Committee
reviewed the recommendations of the chief executive officer as well as the
competitive market study.
Discretionary
Annual Bonus.
The
Compensation Committee may grant annual bonuses as a reward for achievement
of
individual and corporate short-term goals. Any grant of annual bonus is
discretionary and is made in view of individual and corporate performance and
in
furtherance of our compensation objectives. When an annual bonus is deemed
appropriate, the amount is determined after recommendations from the chief
executive officer and a review of the competitive market study. While the
Compensation Committee has generally set target bonus percentages at 35% for
our
chief executive officer and 25% for the other executive officers in past years,
the Compensation Committee believes that bonus amounts should be dependent
on
our financial and operational performance as well as the performance of the
individual executive officer.
In
fiscal
year 2006, although the Compensation Committee concluded that the executive
officers had achieved substantially all of the 2005 corporate goals, the
Compensation Committee did not grant any discretionary bonuses for 2005 results
in light of our financial position and generally poor market and economic
conditions affecting gene therapy product development. In fiscal year 2007,
the
Compensation Committee determined that a bonus was appropriate due to the
overall strong performance of the executive team in 2006 in the progression
of
our clinical and preclinical programs, restructuring our financial structure
and
successfully raising capital. Based on the competitive market study and in
light
of the performance of each executive officer and our corporate objectives,
the
Compensation Committee recommended, and our Board of Directors approved, a
bonus
for each of the executive officers in an amount equal to 15% of their 2006
base
salary.
On
March
2, 2007, the Compensation Committee set performance goals for the management
team for fiscal year 2007. The bonus goals were designed to provide structure
for a discretionary annual bonus for the management team, including all of
the
executive officers, for achieving certain corporate bonus goals during fiscal
year 2007. The bonus goals focus on strengthening our financial position and
diversifying our product and technology portfolio in fiscal year 2007. Bonus
payments (if any) will be payable to the management team, including the
executive officers, at the beginning of fiscal year 2008, after review by the
Compensation Committee and our Board of Directors of corporate and individual
performance during fiscal year 2007. If we reach the goals, each member of
the
management team, including each executive officer, may receive cash annual
bonus
payments equal to a percentage of his or her base salary paid during fiscal
year
2007. The percentage is a range based on level of achievement of the bonus
goals, as determined by the Compensation Committee at the end of fiscal year
2007. With respect to the chief executive officer, the bonus percentage range
is
0%-200% of 2006 base salary. With respect to the other executive officers,
the
bonus percentage is 0%-160% of 2006 base salary. The Compensation Committee
may
adjust the bonus amounts on a discretionary basis for individual
performance.
Long-Term
Incentive Programs.
The
Compensation Committee grants stock options to executive officers on an annual
basis as a way to provide a long-term incentive opportunity that is linked
to an
increase in shareholder value. The Compensation Committee determines the value
of the stock option grant in view of individual and corporate performance and
in
furtherance of our overall compensation objectives. The Compensation Committee
takes into consideration the recommendations from the chief executive officer
as
well as the vested and unvested stock option holdings of each executive officer
when setting each stock option grant.
To
make
the long-term incentive opportunity more meaningful and encourage retention
of
our employees, including our executive officers, there is a proposal before
the
shareholders to approve an amendment and restatement of our Option Plan, which
will, among other things, provide the Compensation Committee with the ability
to
grant alternatives to stock options. Please see the section “Proposal
Three: Approval of an Amendment and Restatement of the Targeted Genetics 1999
Stock Option Plan”
for
more discussion regarding this proposal. If this proposal is approved by the
shareholders at the Annual Meeting, the Compensation Committee will have the
ability to grant forms of equity other than stock options, which have
historically been granted to the employees, including the executive officers.
Generally,
on an annual basis, the Compensation Committee grants stock options to all
employees, including executive officers, at its regularly scheduled meeting
following the annual meeting of shareholders. In 2006, the Compensation
Committee made an exception to this general practice in light of our reverse
stock split in 2006 (see the Grants
of Plan-Based Awards
section
of this proxy statement below for more detail). The timing of stock option
grants is not coordinated with the release of material non-public information
and is typically in the middle of the second fiscal quarter. Stock options
are
granted with an exercise price equal to the market value of our common stock
on
the date of the grant and with a term of ten years and stock options generally
become exercisable over a four-year period in sixteen equal installments
beginning three months after the date of the grant. To encourage employee
retention, all stock options are granted as incentive stock options to the
maximum extent possible under the Internal Revenue Code.
In
2006,
stock option grants to executive officers were approximately 28% of the total
stock options granted to all employees.
Perquisites. Our
executive officers do not receive any material incremental benefits that are
not
otherwise available to all of our employees. Our health and other insurance
plans are the same for all employees.
Tax
and Accounting Considerations. The
Compensation Committee considers tax and accounting consequences when making
decisions regarding our executive compensation programs. Section 162(m) of
the
Internal Revenue Code limits deduction of compensation paid to executive
officers to $1,000,000 in any fiscal year unless the compensation is
performance-based. Our stock option grants comply with Section 162(m). Our
bonus
plan does not comply because cash compensation does not exceed $1,000,000
in any fiscal year. Under Statement of Financial Accounting Standards 123R,
grants of equity compensation result in a stock-compensation charge to our
earnings equal to the fair value of the instrument being issued. The
Compensation Committee has continued to grant stock options to employees,
including executive officers, without taking into effect FAS 123R.
Equity
Ownership by Executives.
We do
not have a formal stock ownership requirement for our executive officers but
we
encourage stock ownership on a voluntary basis. One of our primary objectives
in
executive compensation is to align the interests of our executives with those
of
our shareholders and we therefore review the holdings of our executive officers
to evaluate whether we are furthering that objective.
____________________________
Summary
Compensation Table. The
following table outlines the compensation paid to each of our three executive
officers for fiscal year ending December 31, 2006.
Name
and
Principal
Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Option
Awards (1)
|
|
All
Other Compensation (2)
|
|
Total
|
|
H.
Stewart Parker
|
|
|
2006
|
|
$
|
418,000
|
|
$
|
62,700
|
|
$
|
36,016
|
|
$
|
3,464
|
|
$
|
520,180
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barrie
J. Carter, Ph.D.
|
|
|
2006
|
|
|
278,000
|
|
|
41,700
|
|
|
28,464
|
|
|
2,501
|
|
|
350,665
|
|
Executive
Vice President and Chief Scientific Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
J. Poston
|
|
|
2006
|
|
|
200,000
|
|
|
30,000
|
|
|
28,464
|
|
|
951
|
|
|
259,415
|
|
Vice
President, Finance, Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Reflects the dollar amount recognized for financial statement reporting purposes
for the fiscal year ended December 31, 2006 in accordance with FAS 123R
excluding the effect of estimated forfeitures. FAS 123R requires us to estimate
forfeitures when awards are granted and reduce estimated compensation expense
accordingly. This table was prepared assuming that none of the awards will
be
forfeited. For our audited financial statements, compensation expense is
adjusted for actual forfeitures. See Note 10 to our consolidated financial
statements for the fiscal year ended December 31, 2006 regarding the assumptions
underlying the valuation of equity awards.
(2)
Reflects the matching contributions to a 401(k) account, excess life insurance
premiums and subsidized parking.
Grants
of Plan-Based Awards. The
following table supplements the Summary Compensation Table by providing
additional information about options granted to our executive officers during
the fiscal year ending December 31, 2006.
Name
|
|
Grant
Date
|
|
All
Other Option Awards: Number of Securities Underlying
Options
|
|
Exercise
or Base Price of Option Awards (/Sh)
|
|
H.
Stewart Parker
|
|
|
6/12/06
|
|
|
38,000
|
|
$
|
3.80
|
|
Barrie
J. Carter
|
|
|
6/12/06
|
|
|
30,000
|
|
|
3.80
|
|
David
J. Poston
|
|
|
6/12/06
|
|
|
30,000
|
|
|
3.80
|
|
By
unanimous written consent, on June 12, 2006, the Compensation Committee granted
stock options to executive officers with an exercise price of $3.80, which
was
at a premium to the $2.46 closing market price of our stock on the June 12,
2006
date of grant. The Compensation Committee granted the stock options at a premium
to align the interests of the executive officers with those shareholders who
held shares of our common stock immediately prior to the announcement of our
reverse stock split. These stock options vest monthly and will become fully
exercisable one year after the date of the grant.
Outstanding
Equity Awards at Fiscal Year-End.
The
following table sets forth certain information regarding the value of all
unexercised options previously awarded to our executive officers as of fiscal
year ending December 31, 2006.
|
|
Option
Awards
|
|
Name
|
|
Number
of Securities Underlying Unexercised Options Exercisable
|
|
Number
of Securities Underlying Unexercised Options Unexercisable
|
|
Option
Exercise Price
|
|
Option
Expiration Date
|
|
H.
Stewart Parker
|
|
|
2,904
|
|
|
—
|
|
$
|
47.50
|
|
|
1/14/07
|
|
|
|
|
3,115
|
|
|
—
|
|
|
47.50
|
|
|
1/14/07
|
|
|
|
|
5,376
|
|
|
—
|
|
|
19.40
|
|
|
1/15/08
|
|
|
|
|
4,211
|
|
|
—
|
|
|
19.40
|
|
|
1/15/08
|
|
|
|
|
1,081
|
|
|
—
|
|
|
22.50
|
|
|
1/21/09
|
|
|
|
|
12,226
|
|
|
—
|
|
|
22.50
|
|
|
1/21/09
|
|
|
|
|
3,111
|
|
|
—
|
|
|
85.60
|
|
|
1/20/10
|
|
|
|
|
756
|
|
|
—
|
|
|
85.60
|
|
|
1/20/10
|
|
|
|
|
2,190
|
|
|
—
|
|
|
66.60
|
|
|
1/23/11
|
|
|
|
|
13,809
|
|
|
—
|
|
|
66.60
|
|
|
1/23/11
|
|
|
|
|
2,112
|
|
|
—
|
|
|
25.70
|
|
|
1/22/12
|
|
|
|
|
10,887
|
|
|
—
|
|
|
25.70
|
|
|
1/22/12
|
|
|
|
|
10,000
|
|
|
—
|
|
|
4.30
|
|
|
3/20/13
|
|
|
|
|
12,500
|
|
|
7,500
|
|
|
13.10
|
|
|
5/20/14
|
|
|
|
|
3,750
|
|
|
6,250
|
|
|
9.10
|
|
|
5/26/15
|
|
|
|
|
19,000
|
|
|
19,000
|
|
|
3.80
|
|
|
6/12/16
|
|
Barrie
J. Carter
|
|
|
2,840
|
|
|
—
|
|
|
47.50
|
|
|
1/14/07
|
|
|
|
|
867
|
|
|
—
|
|
|
47.50
|
|
|
1/14/07
|
|
|
|
|
4,558
|
|
|
—
|
|
|
19.40
|
|
|
1/15/08
|
|
|
|
|
1,371
|
|
|
—
|
|
|
19.40
|
|
|
1/15/08
|
|
|
|
|
3,849
|
|
|
—
|
|
|
22.50
|
|
|
1/21/09
|
|
|
|
|
2,891
|
|
|
—
|
|
|
22.50
|
|
|
1/21/09
|
|
|
|
|
720
|
|
|
—
|
|
|
85.60
|
|
|
1/20/10
|
|
|
|
|
1,440
|
|
|
—
|
|
|
85.60
|
|
|
1/20/10
|
|
|
|
|
2,041
|
|
|
—
|
|
|
66.60
|
|
|
1/23/11
|
|
|
|
|
4,259
|
|
|
—
|
|
|
66.60
|
|
|
1/23/11
|
|
|
|
|
1,563
|
|
|
—
|
|
|
25.70
|
|
|
1/22/12
|
|
|
|
|
3,437
|
|
|
—
|
|
|
25.70
|
|
|
1/22/12
|
|
|
|
|
7,000
|
|
|
—
|
|
|
4.30
|
|
|
3/20/13
|
|
|
|
|
9,375
|
|
|
5,625
|
|
|
13.10
|
|
|
5/20/14
|
|
|
|
|
2,812
|
|
|
4,688
|
|
|
9.10
|
|
|
5/26/15
|
|
|
|
|
15,000
|
|
|
15,000
|
|
|
3.80
|
|
|
6/12/16
|
|
David
J. Poston
|
|
|
2,800
|
|
|
—
|
|
|
22.50
|
|
|
1/21/09
|
|
|
|
|
750
|
|
|
—
|
|
|
85.60
|
|
|
1/20/10
|
|
|
|
|
2,000
|
|
|
—
|
|
|
66.60
|
|
|
1/23/11
|
|
|
|
|
500
|
|
|
—
|
|
|
59.50
|
|
|
5/8/11
|
|
|
|
|
2,500
|
|
|
—
|
|
|
25.70
|
|
|
1/22/12
|
|
|
|
|
700
|
|
|
—
|
|
|
25.70
|
|
|
1/22/12
|
|
|
|
|
1,000
|
|
|
—
|
|
|
7.60
|
|
|
8/7/12
|
|
|
|
|
5,687
|
|
|
3,413
|
|
|
13.10
|
|
|
5/20/14
|
|
|
|
|
1,012
|
|
|
1,688
|
|
|
9.10
|
|
|
5/26/15
|
|
|
|
|
15,000
|
|
|
15,000
|
|
|
3.80
|
|
|
6/12/16
|
|
Option
Exercises and Stock Vested.
None of
the executive officers exercised options during the fiscal year ending December
31, 2006.
Equity
Compensation Plan Information.
The
following table summarizes information about our equity compensation plans
by
type as of December 31, 2006.
Plan
Category
|
|
Options
Outstanding
|
|
Weighted
Average Exercise Price
|
|
Options
Available for Future Issuance
|
|
Approved
by security holders
|
|
|
835,085
|
|
$
|
15.39
|
|
|
128,924
|
|
Not
approved by security holders
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
|
835,085
|
|
$
|
15.39
|
|
|
128,924
|
|
Pension
Benefits.
We do
not provide pension benefits or post-retirement health coverage for any of
our
employees, including our executive officers. Our executive officers are eligible
to participate in our 401(k) contributory defined contribution plan.
Historically, we have provided to each participant a matching contribution
equal
to 25% of the participant’s contributions to the plan. Our Board of Directors
suspended company matching contributions effective January 31, 2006 as a result
of our financial condition. All of our executive officers participated in our
401(k) plan during fiscal year ending December 31, 2006 and received matching
contributions for the one-month stub period before matching contributions were
suspended. Effective January 1, 2007, our Board of Directors reinstated the
matching contributions, set the matching contribution at 25% of each
participant’s compensation and established a maximum quarterly match of $500 per
quarter.
Nonqualified
Deferred Compensation.
We do
not provide any nonqualified deferred compensation plans to our executive
officers.
Post-Employment
Compensation.
Senior
Management Employment Agreements.
Our
employment agreements with Ms. Parker and Dr. Carter provide that these
executive officers will be entitled to certain benefits in connection with
their
termination of employment following a “change in control” (as defined in the
employment agreements). In addition, these employment agreements provide the
level of compensation they will receive following a change in control if they
are not terminated.
If
Ms.
Parker’s or Dr. Carter’s employment is involuntarily terminated for any reason
other than death, disability or cause (as defined in the employment agreements)
or if she or he resigns for good reason (as defined in the employment
agreements), during the two-year period following a change in control, then
she
or he will be entitled to receive severance benefits as described
below:
· |
Cash
Payment.
Ms. Parker is entitled to receive a cash lump-sum payment equal to
two
times the sum of (a) her annual salary before the change in control
(or on
the date of termination, if higher) and (b) a percentage of that
annual
salary equal to her percentage bonus for the year prior to the change
in
control. Dr. Carter is entitled to receive a cash lump-sum payment
equal
to one and one-half times the sum of (a) his annual salary before
the
change in control (or on the date of termination, if higher) and
(b) a
percentage of that annual salary equal to his percentage bonus for
the
year prior to the change in control. If no percentage bonus has been
determined or if no percentage bonus was paid to Ms. Parker or Dr.
Carter
in the prior year, then the percentage bonus will be
10%.
|
· |
Welfare
Benefits.
Ms. Parker and Dr. Carter (and their dependents) will continue to
be
covered at under our welfare benefits plans (and at the same costs
to her
or him) as in effect on the change in control (or on the date of
termination, if she or he so elects) for a one year following the
date of
termination. However, the level of benefits may be reduced if she
or he is
provided substantially comparable benefits by another employer during
this
one-year period. We have the option, in lieu of providing welfare
benefits, to pay Ms. Parker and Dr. Carter a cash lump sum equal
to the
present value of the costs to us to provide these
benefits.
|
· |
Gross-Up
Payment.
If the payments and benefits Ms. Parker and Dr. Carter receive would
be
subject to an excise tax on account of them being (in whole or in
part)
parachute payments for purposes of the Internal Revenue Code, then
she or
he will receive a cash payment equal to an amount sufficient to compensate
the executive officer for the excise taxes (including any applicable
interest and penalties) on the payments and benefits received (and
including this cash and any related taxes on this payment).
|
Change
in Control Agreement.
We have
a change in control agreement with Mr. Poston that provides for the payment
of
certain benefits in the event he is terminated following a change of control
(as
defined in the change in control agreement). In addition, the change in control
agreement provides the level of compensation Mr. Poston will receive following
a
change in control if he is not terminated.
If
Mr.
Poston’s employment is involuntarily terminated for any reason other than death,
disability or cause (as defined in the change in control agreement) or if he
resigns for good reason (as defined in the change in control agreement), during
the one-year period following a change in control, then he will be entitled
to
receive severance benefits as described below:
· |
Cash
Payment.
Mr. Poston is entitled to receive a cash lump-sum payment equal to
one and
one-quarter times the sum of (a) his annual salary before the change
in
control (or on the date of termination, if higher) and (b) a percentage
of
that annual salary equal to his percentage bonus for the year prior
to the
change in control. If the percentage bonus has yet been determined
or if
no percentage bonus was paid to the executive officer in the prior
year,
then the percentage bonus will be
10%.
|
· |
Welfare
Benefits.
Mr. Poston (and his dependents) will continue to be covered at under
our
medical, dental and visions plans as required by COBRA and we will
pay the
applicable COBRA premium for one year following the date of termination.
|
In
the
event that the payments and benefits Mr. Poston receives would be subject to
an
excise tax on account of them being (in whole or in part) parachute payments
for
purposes of the Internal Revenue Code, then the payments and benefits to which
he is entitled may be reduced in order for Mr. Poston to receive the greater
benefit, on an after-tax basis.
Acceleration
of Stock Option Vesting.
The
Option Plan and our 1992 Restated Stock Option Plan each contain certain
provisions regarding the effects certain corporate transactions (including
reorganization and a change in control).
The
majority of the stock options granted to date to our employees, including all
of
the stock options granted to our executive officers, are under the Option Plan
or the 1992 Restated Stock Option Plan and therefore are subject to the change
in control provisions in these plans. In general, these plans provide that
the
stock options may be exchanged for stock options in the successor corporation
on
account of a corporate transaction. However, in the event of certain corporate
transactions as defined in the stock option plans, the stock options will vest
in full and be cashed out prior to the transaction. In addition, the Option
Plan
provides that if stock options are exchanged in connection with a corporate
transaction and the employee is terminated without cause (as defined in the
plan) or resigns for good reason (as defined in the plan) then the exchanged
stock options will vest in full and become exercisable. The number of shares
subject to all outstanding options held by our executive officers is set forth
in the “Outstanding
Equity Awards at Fiscal Year-End”
table
above.
Potential
Post-Employment Payments Table.
The
following table provides information regarding the value of the benefits that
could be payable to the executive officers under their change in control
agreements.
Name
|
|
Lump
Sum Payment
|
|
Excise
Tax Gross-Up
|
|
Benefits
(1)
|
|
Accelerated
Vesting of Stock Options
|
|
Total
|
|
H.
Stewart Parker
|
|
$
|
919,600
|
|
$
|
—
|
|
$
|
4,420
|
|
$
|
29,830
|
|
$
|
953,850
|
|
Barrie
J. Carter
|
|
|
458,700
|
|
|
—
|
|
|
9,591
|
|
|
23,550
|
|
|
491,841
|
|
David
J. Poston
|
|
|
275,000
|
|
|
—
|
|
|
9,591
|
|
|
23,550
|
|
|
308,141
|
|
(1)
including medical, dental and vision benefits for him/herself and his/her
dependants for the first year after termination.
____________________________
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee currently consists of Jack L. Bowman, Joseph M. Davie
and
Michael S. Perry, all of whom are independent directors as defined under NASDAQ
rules. We are responsible for our executive compensation program and for
administering our incentive compensation and benefit plans. On an annual basis,
we evaluate the performance and compensation of the executive
officers.
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, has recommended that our Board of
Directors include the Compensation Discussion and Analysis in the proxy
statement for the year ended December 31, 2006.
Compensation
Committee
Jack
L.
Bowman (chairman)
Joseph
M.
Davie
Michael
S. Perry
____________________________
SECURITY
OWNERSHIP
The
following table provides information with respect to the beneficial ownership
of
shares of our common stock outstanding as of March 1, 2007 by:
• each
person that we know beneficially owns 5% or more of our common
stock;
• each
of
our directors;
• each
executive officer named in the Summary Compensation Table; and
• all
of
our directors and executive officers as a group.
The
percentage ownership data is based on 13,107,235 shares of our common stock
outstanding as of March 1, 2007. Under the rules of the SEC, beneficial
ownership includes shares over which the indicated beneficial owner exercises
voting and/or investment power. Shares of common stock subject to options or
warrants that are currently exercisable or will become exercisable within 60
days are deemed outstanding for the purpose of computing the percentage
ownership of the person holding the option or warrant, but are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person. Except as otherwise noted, we believe that the beneficial owners of
the
shares of common stock listed below have sole voting and investment power with
respect to all shares beneficially owned, subject to applicable community
property laws.
Name
and Address of Beneficial Owner
|
|
|
Amount
and
Nature
of Beneficial
Ownership
|
|
|
Percent
of
Common
Stock
Outstanding
|
|
|
|
|
|
|
|
|
|
5%
or greater Owners:
|
|
|
|
|
|
|
|
Biogen
Idec Inc.(1)
|
|
|
2,170,409
|
|
|
16.6
|
%
|
14
Cambridge Center
|
|
|
|
|
|
|
|
Cambridge,
MA 02142
|
|
|
|
|
|
|
|
Elan
International Services, Ltd. (2)
|
|
|
1,162,628
|
|
|
8.9
|
%
|
102
James Court Flatts
|
|
|
|
|
|
|
|
Smith
Parish Fl 04
|
|
|
|
|
|
|
|
Bermuda
|
|
|
|
|
|
|
|
Special
Situations (3)
|
|
|
|
|
|
|
|
527
Madison Avenue, Suite 2600
|
|
|
|
|
|
|
|
New
York, NY 10022
|
|
|
900,000
|
|
|
6.9
|
%
|
Directors
and Executive Officers (4):
|
|
|
|
|
|
|
|
H.
Stewart Parker
|
|
|
146,725
|
|
|
1.1
|
%
|
Barrie
J. Carter
|
|
|
85,486
|
|
|
*
|
|
David
J. Poston
|
|
|
44,387
|
|
|
*
|
|
Jack
L. Bowman
|
|
|
13,500
|
|
|
*
|
|
Jeremy
L. Curnock Cook
|
|
|
14,500
|
|
|
*
|
|
Joseph
M. Davie
|
|
|
12,000
|
|
|
*
|
|
Roger
L. Hawley
|
|
|
2,000
|
|
|
*
|
|
Nelson
L. Levy
|
|
|
11,570
|
|
|
*
|
|
Michael
S. Perry
|
|
|
2,000
|
|
|
*
|
|
All
directors and executive officers as a group (9 persons)
|
|
|
332,168
|
|
|
2.5
|
%
|
__________
* Less
than
1%
(1)
The
information in this table for Biogen Idec Inc. is based solely on Amendment
No.
2 to Schedule 13D filed by Biogen Idec Inc. and Biogen Idec MA Inc. with the
SEC
regarding its beneficial ownership of our common stock as of November 7, 2006.
(2)
The
information in this table for Elan International Services, Ltd. is based solely
on a Form 4 filed by Elan International Services, Ltd. with the SEC regarding
its beneficial ownership of our common stock as of January 6,
2005.
(3)
The
information in this table for Special Situations is based solely on [___]
regarding its beneficial ownership of our common stock as of [_____,
2007].
(4) For
each
director and executive officer, includes beneficial ownership of the number
of
shares of common stock set forth below opposite such director’s or executive
officer’s name, which shares may be acquired within 60 days of March 1, 2007,
pursuant to the exercise of options granted under our stock option plans.
●
|
H.
Stewart Parker
|
115,550
|
●
|
Barrie
J. Carter
|
71,720
|
●
|
David
J. Poston
|
42,687
|
●
|
Jack
L. Bowman
|
13,000
|
●
|
Jeremy
L. Curnock Cook
|
14,500
|
●
|
Joseph
M. Davie
|
11,000
|
●
|
Roger
L. Hawley
|
2,000
|
●
|
Nelson
L. Levy
|
11,500
|
●
|
Michael
S. Perry
|
2,000
|
●
|
All
directors and executive officers as a group (9 persons)
|
283,957
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Our
Board
of Directors is responsible for monitoring and reviewing issues involving
potential conflicts of interest and reviewing and approving all related party
transactions. We have not engaged and do not propose to engage in any
transaction or series of transactions in which the amount involved exceeded
or
exceeds $60,000 and in which any of our directors or executive officers, any
holder of more than 5% of any class of our voting securities or any member
of
the immediate family of any of the foregoing persons had or will have a direct
or indirect material interest, nor was any director or executive officer or
any
of their family members indebted to us or any of our subsidiaries in any amount
in excess of $60,000 at any time except as described below.
On
November 7, 2006, we and Biogen Idec MA Inc. entered into an agreement to
restructure the repayment of our outstanding debt owed to Biogen in aggregate
principal amount of $8,150,000 million by entering into an amendment to the
Funding Agreement, as amended, between us and Biogen, as well as an Amended
and
Restated Promissory Note issued by us to Biogen. Under the amendment to the
Funding Agreement, we agreed to make an initial repayment to Biogen of $500,000
on November 7, 2006 and Biogen agreed to cancel an aggregate of $5,650,000
of
our outstanding indebtedness. We also agreed repay the remaining principal
balance owed to Biogen in two additional payments of $1,000,000 on each of
August 1, 2007 and August 1, 2008, with accrued and unpaid interest to be paid
on August 31, 2007 and upon maturity. Biogen will receive one-third of certain
up-front milestone payments received by us as prepayments of the remaining
outstanding debt to be applied first to the payment of any accrued and unpaid
interest on the principal being repaid and second to the payment of any
outstanding principal in reverse order of maturity (starting with the
outstanding principal due on August 1, 2008). In addition, upon a change of
control of us (as defined in the amendment), the repayment amount due on August
1, 2007 shall accelerate and become immediately due and payable no later than
the 30th business day following the change of control. Under the terms of the
amendment, we also issued 1,000,000 shares of our common stock to Biogen and
agreed, in certain circumstances, to provide to Biogen a right to demand
registration of the resale of such shares on Form S-3. As a result, as of March
1, 2007 Biogen holds 16.6% of our total issued and outstanding common
stock.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers
and
directors and holders of 10% or more of our equity securities to file reports
of
ownership and changes in ownership with the SEC. SEC regulations require our
executive officers, directors and 10%-or-greater shareholders to give us copies
of all Section 16(a) forms that they file with the SEC.
Based
solely on our review of these forms, or written representations from reporting
persons that no such forms were required for those persons, we believe that
our
executive officers, directors and 10%-or-greater shareholders complied with
all
applicable filing requirements for the 2006 calendar year.
________________
PROPOSAL
TWO
AMENDMENT
TO OUR
AMENDED
AND RESTATED ARTICLES OF INCORPORATION
Our
Board
of Directors has approved, and recommends that our shareholders approve, an
amendment to our Restated Articles in substantially the form attached to this
proxy statement as Annex A. The proposed amendment would increase our
authorized common stock from 18,000,000 shares to 30,000,000 shares,
which would increase our total authorized capital to 30,600,000 shares
including 600,000 shares of preferred stock. If approved by our
shareholders, the amendment will become effective upon filing with the Secretary
of State of Washington.
As
of the
record date, [______] shares of our common stock were outstanding and no
shares of preferred stock were outstanding. As of the record date, we had
reserved an aggregate of [______] shares of our common stock for (a) future
issuance upon the exercise of options outstanding under our stock option plans
and (b) the exercise of options that may be granted under our stock option
plans. In addition, we had reserved [_______] shares issuable upon the exercise
of outstanding warrants. Also, assuming approval by our shareholders of
Proposal
3, Approval of an Amendment and Restatement of the Targeted Genetics 1999 Stock
Option Plan, there
will be an aggregate of [______] shares of our common stock reserved for
future issuance under our option plans and the Stock Incentive
Plan.
To
fund
our continuing operations, we anticipate raising additional capital through
future issuances of common stock or securities convertible into common stock.
We
may also issue additional shares of stock in connection with the acquisition
of
complementary businesses or technologies or for other general corporate
purposes, including issuances upon the exercise of future stock options granted
under our stock option plans. Our Board of Directors believes that having the
additional shares of common stock authorized and available for issuance will
give us greater flexibility in considering potential future issuances of stock
that may be desirable or necessary to accommodate our business plan. Except
for
(a) options outstanding under our stock option plans, (b) two warrants issued
in
1999 to Alkermes, Inc. in connection with a technology license agreement and
(c)
warrants issued in connection with our January 2007 private placement, which
total [_____] shares as of the record date, we currently do not have any
commitments or understandings that would require the issuance of additional
shares of common stock.
Once
authorized, the additional shares of common stock may be issued upon the
approval of our Board of Directors but without further approval of our
shareholders, unless shareholder approval is required under any applicable
law
or rule of any securities market on which our securities are traded. The
additional shares of common stock would have rights identical to those of our
currently outstanding common stock. The proposed increase in the number of
shares of authorized common stock, and any future issuance of the additional
shares, will not affect the rights of our current holders of common stock,
except for effects that are incidental to the increase, such as dilution.
Approval
of the amendment requires the affirmative vote of a majority of the outstanding
shares of common stock. Abstentions and broker non-votes will have the same
effect as votes against this proposal.
Our
Board
of Directors believes that approval of the amendment is in the best interest
of
our shareholders and that the amendment is necessary to provide us with the
flexibility to pursue additional capital financing opportunities and licensing
and other strategic transactions, to provide grants of options to our employees
and to meet our general corporate needs. If the amendment is not approved,
we
may have insufficient shares of common stock authorized to complete these types
of transactions in the future.
The
Board of Directors recommends that you vote
FOR
the amendment of our Restated Articles.
________________
PROPOSAL
THREE
APPROVAL
OF AN AMENDMENT AND RESTATEMENT OF THE
TARGETED
GENETICS 1999 STOCK OPTION PLAN
Our
Board
of Directors has approved, subject to shareholder approval, an amendment and
restatement of the Targeted Genetics 1999 Stock Option Plan, or Option Plan,
that primarily relates to the maximum number of shares available for issuance
and the types of equity-based compensation that can granted. The Option Plan
was
last amended and restated by the Board of Directors on March 22, 2004 and
subsequently approved by our shareholders on May 20, 2004. If approved by the
shareholders, the plan that is the subject of this proposal will be known as
the
Targeted Genetics Corporation Stock Incentive Plan, or Stock Incentive Plan.
The
Board
of Directors reviewed the Option Plan and determined that, subject to
shareholder approval, the maximum number of shares of our common stock available
for issuance should be increased. In addition, in light of recent changes in
the
accounting treatment of various equity investments, the possibility of future
accounting and/or tax changes, and shareholder dilution concerns, the Board
of
Directors determined that it would be advantageous for us to have the maximum
flexibility in fashioning future equity-based compensation. The Stock Incentive
Plan will give us the flexibility to responsibly address these issues using
stock appreciation rights, stock grants and stock units, in addition to stock
options. The Stock Incentive Plan was developed in consultation with corporate
governance and compensation experts and contains a number of provisions that
have been identified as important compensation and corporate governance best
practices.
The
Stock
Incentive Plan was approved by the Board of Directors on March ____, 2007 and
is
effective upon an affirmative vote
of
the holders of shares representing a majority of the votes cast at the Annual
Meeting, in person or by proxy. If
the Stock Incentive Plan is not approved, then the Option Plan will continue
in
its current form.
Description
of the Stock Incentive Plan
The
following is a summary of the principal features the Stock Incentive Plan,
as
approved by the Board of Directors. The summary, however, is not a complete
description of the provisions in the Stock Incentive Plan. It is qualified
in
its entirety by reference to the full text of the Stock Incentive Plan. A copy
of the Stock Incentive Plan is attached to this proxy statement as Annex B
and
any shareholder who wishes to obtain a copy of the Stock Incentive Plan may
do
so by written request to our chief financial officer at our headquarters in
Seattle, Washington.
Purpose
The
Stock
Incentive Plan is intended to promote our success by providing a vehicle under
which a variety of equity-based incentive awards can be granted to employees,
consultants and non-employee directors.
General
The
Stock
Incentive Plan provides for the granting of stock options, stock appreciation
rights, or SARs, stock grants and stock units, collectively referred to as
Awards, to eligible key service providers. Subject to this proposal, the number
of shares of our common stock reserved for Awards under the Stock Incentive
Plan
will be a maximum of 2,547,9444 shares,
which represents an increase of 1,250,000 shares
from the maximum number of shares reserved under the Option Plan.
For
purposes of determining the number of shares available for grant under the
Stock
Incentive Plan against the maximum number reserve for issuance as described
above, all Awards (including SARs) will be counted in full against the number
of
shares available for issuance-one (1) share for every one (1) share issued.
As
of March 1, 2007, the number of shares available for grant under the Option
Plan
was 146,760 shares.
The
Stock
Incentive Plan can be administered by our Board of Directors or Compensation
Committee or a combination of the two. In general, the members of the
Compensation Committee must qualify as “non-employee directors” under
Rule 16b-3 under the Securities Exchange Act of 1934 (for purposes of
qualifying Awards as exempt from liability under Section 16(b) of the Securities
Exchange Act of 1934), and as “outside directors” under
Section 162(m) of the Internal Revenue Code (for purposes of
qualifying Awards as “performance-based compensation” under Section 162(m)
of the Internal Revenue Code). However, our Board of Directors may appoint
one
or more separate committees of our Board of Directors who need no qualify as
“non-employee directors” or “outside directors” to administer the Stock
Incentive Plan with respect to key service providers not covered by Section
16
of the Exchange Act or Section 162(m) of the Internal Revenue Code. Unless
our
Board of Directors provides otherwise, the Compensation Committee will
administer the Stock Incentive Plan.
Subject
to the terms of the Stock Incentive Plan, the Compensation Committee has the
sole discretion to determine the key service providers who may be granted
Awards, the size and types of such Awards and the terms and conditions of such
Awards.
The
Stock Incentive Plan provides that during any of our fiscal years, no key
service provider (other than non-employee directors) may be granted Awards
covering more than 150,000 shares. However, during the fiscal year of any key
service provider’s initial year of service with us (other than non-employee
directors), the maximum number of shares that may be granted pursuant to Awards
is 500,000 shares. The Stock Incentive Plan also provides that no non-employee
director may be granted Awards covering more than 50,000 shares; however, shares
received pursuant to stock grants in lieu of the non-employee director’s annual
retainer fee(s) will not count against the 50,000 share annual limit.
Eligibility
to Receive Awards
Our
key
service providers and affiliates are eligible to be selected to receive one
or
more Awards. The actual number of individuals who will receive Awards under
the
Stock Incentive Plan cannot be determined because eligibility for participation
in the Stock Incentive Plan is in the discretion of the Compensation Committee.
Stock
Options
The
price
of shares of our common stock subject to each stock option is set by the
Compensation Committee but cannot be less than 100% of the fair market value
on
the date of grant of the stock option. In addition, the exercise price of an
ISO
must be at least 110% of fair market value on the grant date if the employee
owns stock possessing more than 10% of the total combined voting power of all
classes of our stock or the stock of any of our subsidiaries. Nevertheless,
substitute stock options may be granted at less than fair market value to key
service providers who receive such stock options in connection with a corporate
reorganization. Also, the aggregate fair market value of the shares (determined
on the grant date) covered by ISOs that first become exercisable by any employee
during any calendar year may not exceed $100,000.
The
exercise price of each stock option must be paid in full at the time of
exercise. The Compensation Committee also may permit payment through the tender
of shares of our common stock that are already owned by the participant, or
by
any other means that the Compensation Committee determines to be consistent
with
the Stock Incentive Plan’s purpose and applicable laws. Any taxes required to be
withheld must be paid by the participant at the time of exercise.
Options
become exercisable at the times and on the terms established by the Compensation
Committee in the applicable stock option agreement. If the stock option
agreement does not specify when the shares subject to the stock option will
vest
and become exercisable, the Stock Incentive Plan provides that shares will
vest
quarterly over four (4) years. Options expire at the times established by the
Compensation Committee, which generally will not be more than ten (10) years
after the date of grant (subject to the key service provider’s continuous
service).
Stock
Appreciation Rights
Stock
Grants and Stock Units
Stock
grant awards are shares of our common stock that may or may not be subject
to
vesting, in accordance with the terms and conditions established by the
Compensation Committee. Stock unit awards are bookkeeping entries that represent
shares of our common stock that may or may not vest, in accordance with the
terms and conditions established by the Compensation Committee. The Stock
Incentive Plan provides that if the applicable stock grant agreement or stock
unit agreement does not specify when the shares will vest, then the shares
subject to the award will vest in four (4) equal annual
installments.
In
determining whether a stock grant or stock unit award should be made and/or
the
vesting schedule for such award, the Compensation Committee may impose whatever
conditions to vesting as it determines to be appropriate. For example, the
Compensation Committee may determine to award a stock grant or stock units
only
if performance goals established by the Compensation Committee are satisfied.
Any performance goals may be applied on a company-wide or an individual business
unit basis, as determined by the Compensation Committee.
Performance
Goals
The
Compensation Committee in its discretion may make performance goals applicable
to a key service provider with respect to an Award. At the Compensation
Committee’s discretion, one or more of the following performance goals may
apply: (i) operating income; (ii) earnings before interest, taxes, depreciation
and amortization or EBITDA; (iii) earnings; (iv) cash flow; (v) market share;
(vi) sales or revenue; (vii) expenses; (viii) cost of goods sold; (ix)
profit/loss or profit margin; (x) working capital; (xi) return on equity or
assets; (xii) earnings per share; (xiii) economic value added; (xiv) stock
price; (xv) price/earnings ratio; (xvi) debt or debt-to-equity; (xvii) accounts
receivable; (xviii) writeoffs; (xix) cash; (xx) assets; (xxi) liquidity; (xxii)
operations; (xxiii) intellectual property (e.g., patents); (xxiv) product
development; (xxv) regulatory activity, including clinical trial activity;
(xxvi) manufacturing, production or inventory; (xxvii) mergers and acquisitions
or divestitures; (xxviii) business development activities; (xxix) financings;
(xxx) cash burn; and/or (xxxi) cash horizon. The Compensation Committee also
may
use other performance goals.
Nontransferability
of Awards
In
general, Awards granted under the Stock Incentive Plan may not be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated, other
than by will or by the applicable laws of descent and distribution and during
the life of a key service provider any Awards may be exercised only by the
recipient. Notwithstanding the above, the Compensation Committee (or our Board
of Directors, in the case of Awards granted to non-employee directors) may,
in
its discretion, permit Awards to be transferred to an individual or entity
other
than Targeted Genetics subject to such restrictions as the Compensation
Committee or our Board of Directors may impose.
Dividend
Equivalents
Recipients
of Awards may, if so determined by the Compensation Committee (or by our Board
of Directors in case of Awards to non-employee directors), be entitled to
receive cash or stock dividends, or cash payments in amounts equivalent to
cash
or stock dividends declared with respect to shares of our common stock and
the
Compensation Committee or our Board of Directors may provide that such amounts
shall be deemed to have been reinvested in additional shares of common stock
or
otherwise reinvested.
Corporate
Transactions
In
the
event of certain corporate transactions, subject to the applicable Award
agreement, all outstanding Awards will be subject to the applicable agreement
of
merger or reorganization, which may provide for assumption, substitution or
continuation of outstanding awards, exchange for other property, accelerated
vesting or cancellation without consideration. Awards that are not assumed,
substituted or continued will terminate upon consummation of the corporate
transaction.
Tax
Aspects
A
recipient of a stock option or SAR will not have taxable income upon the grant
of the stock option or SAR. For stock options (other than ISOs) and SARs, the
participant will recognize ordinary income upon exercise in an amount equal
to
the excess of the fair market value of the shares over the exercise price (the
“appreciation value”) on the date of exercise. In the United States, any gain or
loss recognized upon any later disposition of the shares generally will be
capital gain or loss.
Unless
the participant elects to be taxed at the time of receipt of a stock grant
award
that is subject to vesting, the participant will not have taxable income upon
receipt, but upon vesting. The participant will recognize ordinary income equal
to the fair market value of the shares at the time of vesting (minus any amount
paid for the stock grant). A recipient of stock units will not have taxable
income upon receipt of the Award; instead the participant will be taxed upon
payment of the Award. The participant will recognize ordinary income equal
to
the fair market value of the shares or the amount of cash received by the
participant. In addition, Section 409A of the Internal Revenue Code imposes
certain restrictions on deferred compensation arrangements. Awards that are
treated as deferred compensation under Section 409A of the Internal Revenue
Code are intended to meet the requirements of this section of the Internal
Revenue Code.
At
the
discretion of the Compensation Committee, the Stock Incentive Plan allows a
participant to satisfy tax withholding requirements under U.S. federal and
state
tax laws or applicable foreign tax laws in connection with the exercise or
receipt of an Award by electing to have shares of common stock withheld, or
by
delivering to us already-owned shares, having a value equal to the amount
required to be withheld.
We
will
be entitled to a tax deduction in connection with an Award under the Stock
Incentive Plan only in an amount equal to the ordinary income realized by the
participant and at the time the participant recognizes such income. In addition,
Section 162(m) of the Internal Revenue Code contains special
rules regarding the federal income tax deductibility of compensation paid
to our chief executive officer and to each of our other executive officers.
The
general rule is that annual compensation paid to any of these specified
executives will be deductible only to the extent that it does not exceed
$1,000,000. However, we can preserve the deductibility of certain compensation
in excess of $1,000,000 if it complies with conditions imposed by
Section 162(m), including the establishment of a maximum number of shares
with respect to which Awards may be granted to any one keys service provider
during one year. The Stock Incentive Plan has been designed to permit the
Compensation Committee to grant Awards that satisfy the requirements of
Section 162(m) thereby permitting us to continue to receive a federal
income tax deduction in connection with such Awards.
Awards
under the Stock Incentive Plan will be made at the discretion of the
Compensation Committee. The Compensation Committee has not made any decisions
on
the amount and type of Awards that are to be made to our key service providers
in future years under the Stock Incentive Plan. The following table sets forth
information concerning equity-based compensation made for fiscal year ending
December 31, 2006 under the Option Plan to our named executive officers,
executive officers as a group, non-employee directors as a group, and
non-executive employees as a group. This information may not be indicative
of
Awards that will be made under the Stock Incentive Plan in future
years.
Name and Position
|
|
Dollar Value
(1)
|
|
Awards Granted
(2)
|
|
H.
Stewart Parker
|
|
$
|
204,060
|
|
|
38,000
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
Barrie
J. Carter, Ph.D
|
|
|
161,100
|
|
|
30,000
|
|
Executive
Vice President and Chief Scientific Officer
|
|
|
|
|
|
|
|
David
J. Poston
|
|
|
161,100
|
|
|
30,000
|
|
Vice
President, Finance, Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
Executive
Group
|
|
|
1,063,260
|
|
|
198,000
|
|
Non-Employee
Director Group
|
|
|
88,605
|
|
|
16,500
|
|
Non-Executive
Employee Group
|
|
|
726,561
|
|
|
135,300
|
|
(1)
Based
on the closing price of $5.37 for our common stock on the Nasdaq Capital Market
on December 29, 2007.
(2)
Only
grants of stock options were authorized under the Option Plan during fiscal
year
2006. In general, stock options were granted at an exercise price of 100% of
the
fair market price of the underlying shares of our common stock on the date
of
grant, become exercisable over twelve (12) months and expire no later than
ten
(10) years from the date of grant.
Amendment
and Termination of the Stock Incentive Plan
The
Board of Directors recommends that you vote
FOR
the approval of an amendment and restatement of the Option
Plan.
PROPOSAL
FOUR
RATIFICATION
OF THE SELECTION OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit
Committee has selected Ernst & Young LLP to serve as our independent
registered public accounting firm for the fiscal year ending December 31, 2007.
We are asking the shareholders to ratify this selection. If our shareholders
fail to ratify the selection of Ernst & Young, the Audit Committee and our
Board of Directors will consider whether to retain Ernst & Young and may
retain that firm or another firm without resubmitting the matter to our
shareholders.
The
affirmative vote of the holders of shares representing a majority of the votes
cast at the Annual Meeting, in person or by proxy, is required to ratify the
selection of the independent registered public accounting firm. Ernst &
Young also served as our independent registered public accounting firm for
the
fiscal years ended December 31, 2005 and December 31, 2006. Representatives
of
Ernst & Young are expected to attend the Annual Meeting, be available to
respond to appropriate questions from shareholders and have the opportunity
to
make a statement if they desire to do so.
Our
management is responsible for our internal controls and the financial reporting
process. Our independent registered public accounting firm, Ernst & Young,
is responsible for performing an independent audit of our consolidated financial
statements in accordance with auditing standards generally accepted in the
United States and issuing a report on its audit.
The
fees
billed by Ernst & Young for the indicated services performed during the
fiscal years ended December 31, 2005 and December 31, 2006 were as
follows:
|
|
Fiscal
2006
|
|
Fiscal
2005
|
|
Audit
fees
|
|
$
|
387,000
|
|
$
|
420,000
|
|
Audit-related
fees
|
|
|
—
|
|
|
—
|
|
Tax
fees
|
|
|
21,000
|
|
|
21,000
|
|
Total
fees
|
|
$
|
408,000
|
|
$
|
441,000
|
|
Services
rendered by Ernst & Young in connection with fees presented above were as
follows:
Audit
fees:
Consists
of fees related to professional services rendered in connection with the audit
of our annual consolidated financial statements, the reviews of the consolidated
financial statements included in each of our quarterly reports on Form 10-Q
and
accounting consultations that relate to the audited consolidated financial
statements and are necessary to comply with generally accepted auditing
standards.
Tax
fees:
Consists
of fees billed for professional services related to federal and state tax return
preparation.
All
fees
billed by outside auditors incurred in 2006 were pre-approved by the Audit
Committee. Our Audit Committee has determined that Ernst & Young’s rendering
of all other non-audit services is compatible with maintaining auditor
independence. The Audit Committee has adopted a policy for the pre-approval
of
services provided by the independent registered public accounting firm. Under
the policy, pre-approval is generally provided for particular services or
categories of services, including planned services, project-based services
and
routine consultations projects. Each category is subject to a specific budget
or
quarterly dollar amount. In addition, the Audit Committee may also pre-approve
particular services on a case-by-case basis. For each proposed service, the
independent registered public accounting firm is required to provide detailed
back-up documentation at the time of approval. The Audit Committee has delegated
certain pre-approval authority to its Chairman. The Chairman must report any
decisions to the Audit Committee at its next scheduled meeting.
The
Board of Directors recommends that you vote FOR
the ratification of the
selection
of Ernst & Young LLP as our independent registered public accounting firm
for
the fiscal year ended December 31, 2007.
________________
AUDIT
COMMITTEE REPORT
In
fiscal
year 2006, the Audit Committee met and held discussions with management and
the
independent registered public accounting firm. In addition, the members of
the
Audit Committee individually reviewed our consolidated financial statements
before we filed them with the SEC in our quarterly reports on Forms 10-Q and
annual report on Form 10-K. Management represented to the Audit Committee that
our consolidated financial statements were prepared in accordance with generally
accepted accounting principles, and the Audit Committee reviewed and discussed
the consolidated financial statements with management and the independent
registered public accounting firm. The Audit Committee also discussed with
the
independent registered public accounting firm the matters required to be
discussed by Statement on Auditing Standards, or SAS, No. 61, as amended by
SAS
No. 90, Communication
with Audit Committees.
Our
independent registered public accounting firm also provided to the Audit
Committee the written disclosures required by the Independence Standards Board’s
Standard No. 1, Independence
Discussions with Audit Committees,
and
discussed with the Audit Committee Ernst & Young LLP’s independence and
considered the compatibility of non-audit services with the firm’s
independence.
Based
on
the Audit Committee’s discussion with management and the independent registered
public accounting firm and its review of the representation of management and
the report of the independent registered public accounting firm to the Audit
Committee, the Audit Committee recommended that our Board of Directors include
the audited consolidated financial statements in our annual report on Form
10-K
for the year ended December 31, 2006, to be filed with the Securities and
Exchange Commission. The Audit Committee also evaluated the performance of
Ernst
& Young LLP and recommended to our Board of Directors that Ernst & Young
LLP be selected as our independent registered public accounting firm to audit
and report on our consolidated financial statements for the year ending December
31, 2007.
Audit
Committee
Jeremy
L.
Curnock Cook
Nelson
L.
Levy
Roger
L.
Hawley
________________
CORPORATE
GOVERNANCE
We
have
adopted a Code of Conduct that applies to all of its directors, officers
(including our chief executive officer, chief financial officer, chief
accounting officer, controller and any person performing similar functions)
and
employees. Current copies of the following materials related to our corporate
governance policies and practices are available publicly on our web site at
www.targetedgenetics.com
under
the heading “Corporate Governance.”
• Amended
and Restated Articles of Incorporation
• Amended
and Restated Bylaws
• Audit
Committee Charter
• Nominating
and Corporate Governance Committee Charter
• Compensation
Committee Charter
Copies
may also be obtained, free of charge, by writing to: Corporate Secretary,
Targeted Genetics Corporation, 1100 Olive Way, Suite 100, Seattle, Washington
98101.
Shareholder
Communications with Board of Directors
Our
Board
of Directors has established a policy under which interested shareholders can
send communications to our Board of Directors, a committee of our Board of
Directors and individual directors by sending written communication to the
Corporate Secretary, Targeted Genetics Corporation, 1100 Olive Way, Suite 100,
Seattle, Washington 98101. The Corporate Secretary will forward such
communication to our Board of Directors, the appropriate committee of our Board
of Directors or individual directors unless the communication is unduly hostile,
threatening, illegal or similarly inappropriate, in which case the Corporate
Secretary has the authority to discard the communication or take appropriate
legal action regarding the communication.
OTHER
BUSINESS
As
of the
date of this proxy statement, we do not intend to present any business at the
Annual Meeting other than matters described in this proxy statement and we
are
not aware that any other person intends to present business at the Annual
Meeting. If, however, other matters requiring the vote of the shareholders
properly come before the Annual Meeting and any adjournments or postponements
thereof, the persons named on the accompanying proxy card will have
discretionary authority to vote the proxies held by them in accordance with
their judgment as to those matters.
SHAREHOLDER
PROPOSALS FOR THE 2008 ANNUAL MEETING
Under
the
SEC’s proxy rules and the applicable provisions of our bylaws, shareholder
proposals (including nominations for the election of directors) that meet
specified conditions may be included in our proxy statement and form of proxy
card for, and may be presented at, the 2008 annual meeting of shareholders.
Shareholders who intend to present a proposal at our 2008 annual meeting of
shareholders must give us notice of the proposal no later than ________, 2007
for the proposal to be considered for inclusion in the proxy statement and
form
of proxy card for that meeting. Shareholders who intend to present a proposal
that will not be included in the proxy materials must give us notice of the
proposal at least 60 days but no more than 90 days before the date of the 2008
Annual Meeting. If notice or public disclosure of the date of the 2008 annual
meeting of shareholders is given or made to the shareholders less than 60 days
before the date of the 2008 annual meeting of shareholders, we must receive
notice of the proposal not later than the tenth day following the day on which
such notice of the 2008 annual meeting of shareholders was mailed or such public
disclosure was made. Because there are other requirements in the proxy rules,
however, our timely receipt of any such proposal by a qualified shareholder
will
guarantee neither the proposal’s inclusion in our proxy materials for, nor
presentation of the proposal at, the 2008 Annual Meeting.
ANNUAL
REPORT AND FORM 10-K
Copies
of
our annual report on Form 10-K for the year ended December 31, 2006 are being
mailed with this proxy statement to each shareholder of record. If you did
not
receive a copy of our annual report on Form 10-K, you may obtain a copy (without
exhibits) without charge by writing or calling Investor Relations, Targeted
Genetics Corporation, 1100 Olive Way, Suite 100, Seattle, Washington 98101,
(206) 623-7612. Copies of the exhibits to our annual report Form 10-K are
available for a nominal fee.
Annex
A
Targeted
Genetics Corporation
AMENDMENT
NO. 1 TO THE
AMENDED
AND RESTATED ARTICLES OF INCORPORATION
Section 4.1
shall be amended in its entirety to read as follows:
“4.1 Authorized
Capital
The
total
authorized stock of this corporation shall consist of 30,000,000 shares of
common stock, par value $.01 per share, and 600,000 shares of Preferred Stock,
par value $.01 per share.”
Annex
B
TARGETED
GENETICS CORPORATION
STOCK
INCENTIVE PLAN
EFFECTIVE
AS OF __________________, 2007
SECTION
1.
|
|
|
INTRODUCTION
|
|
|
1
|
|
|
|
|
|
|
|
|
|
SECTION
2.
|
|
|
DEFINITIONS
|
|
|
1
|
|
|
|
|
|
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SECTION
3.
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ADMINISTRATION
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6
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SECTION
4.
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GENERAL
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7
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SECTION
5.
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SHARES
SUBJECT TO PLAN AND SHARE LIMITS
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9
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SECTION
6.
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TERMS
AND CONDITIONS OF OPTIONS
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10
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SECTION
7.
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PAYMENT
FOR OPTION SHARES
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11
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SECTION
8.
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TERMS
AND CONDITIONS OF STOCK APPRECIATION RIGHTS
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11
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SECTION
9.
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TERMS
AND CONDITIONS FOR STOCK GRANTS.
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13
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SECTION
10.
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TERMS
AND CONDITIONS OF STOCK UNITS
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14
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SECTION
11.
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PROTECTION
AGAINST DILUTION
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15
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SECTION
12.
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EFFECT
OF A CORPORATE TRANSACTION
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16
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SECTION
13.
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LIMITATIONS
ON RIGHTS
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16
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SECTION
14.
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WITHHOLDING
TAXES
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17
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SECTION
15.
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DURATION
AND AMENDMENTS
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18
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SECTION
16.
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ADDENDA
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18
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SECTION
17.
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SEVERABILITY
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18
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SECTION
18.
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EXECUTION
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19
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TARGETED
GENETICS CORPORATION
STOCK
INCENTIVE PLAN
EFFECTIVE
AS OF _____________, 2007
SECTION
1. INTRODUCTION.
The
Board
hereby amends, restates and renames the Targeted Genetics Corporation 1999
Stock
Option Plan into the Targeted Genetics Corporation Stock Incentive Plan;
provided that, the Plan shall become effective upon its approval by the Company
shareholders. If the Company’s shareholders do not approve the Plan, no Awards
will be made under the Plan and the Targeted Genetics Corporation 1999 Stock
Option Plan will continue in effect in accordance with its terms.
Notwithstanding anything to the contrary, stock options granted prior to the
date the Plan becomes effective shall be governed by the terms and provisions
of
the Targeted Genetics Corporation 1999 Stock Option Plan and the applicable
stock option agreement.
The
Targeted Genetics Corporation 1999 Stock Option Plan was originally adopted
by
the Board on January 21, 1999 and it was thereafter approved by the Company’s
shareholders on May 5, 1999. Such plan was last amended by the Board on March
22, 2004 and approved by the Company’s shareholders on May 20,
2004.
The
purposes of the Plan are to promote the long-term success of the Company and
the
creation of shareholder value by offering Key Service Providers an opportunity
to share in such long-term success by acquiring a proprietary interest in the
Company and to attract and retain the best available personnel for positions
of
substantial responsibility, and to provide additional incentive to Employees,
Consultants and Directors.
The
Plan
seeks to achieve these purposes by providing for discretionary long-term
incentive Awards in the form of Options (which may constitute Incentive Stock
Options or Nonstatutory Stock Options), Stock Appreciation Rights, Stock Grants
and Stock Units.
The
Plan
shall be governed by, and construed in accordance with, the laws of the State
of
Washington (except its choice-of-law provisions). Capitalized terms shall have
the meaning provided in Section 2 unless otherwise provided in the Plan or
any
related Stock Option Agreement, SAR Agreement, Stock Grant Agreement or Stock
Unit Agreement.
SECTION
2. DEFINITIONS.
(a) “Affiliate”
means
any entity other than a Subsidiary, if the Company and/or one or more
Subsidiaries own not less than 50% of such entity.
(b) “Applicable
Laws” means
all
applicable laws, rules, regulations and requirements, including, but not limited
to, all applicable U.S. federal or state laws, any Stock Exchange rules or
regulations, and the applicable laws, rules or regulations of any other country
or jurisdiction where Awards are granted under the Plan or where Participants
reside or provide services, as such laws, rules, and regulations shall be in
effect from time to time.
(c) “Award”
means
any
Grant of an Option, SAR, Stock Grant or Stock Unit under the Plan.
(d) “Board”
means
the Board of Directors of the Company, as constituted from time to
time.
(e) “Cashless
Exercise”
means,
to the extent that a Stock Option Agreement so provides and as permitted by
applicable law, a program approved by the Committee in which payment may be
made
all or in part by delivery (on a form prescribed by the Committee) of an
irrevocable direction to a securities broker to sell Shares and to deliver
all
or part of the sale proceeds to the Company in payment of the aggregate Exercise
Price and, if applicable, the amount necessary to satisfy the Company’s
withholding obligations at the minimum statutory withholding rates, including,
but not limited to, U.S. federal, state and local income taxes, payroll taxes,
and foreign taxes, if applicable.
(f) “Cause”
means,
except as may otherwise be provided in a Participant’s employment agreement or
Award agreement, a conviction of a Participant for a felony crime or the failure
of a Participant to contest prosecution for a felony crime, or a Participant’s
misconduct, fraud or dishonesty (as such terms are defined by the Committee
in
its sole discretion), or any unauthorized use or disclosure of confidential
information or trade secrets, in each case as determined by the Committee,
and
the Committee’s determination shall be conclusive and binding.
(g) “Change
in Control”
means
the occurrence of any one or more of the following:
(i) the
sale,
transfer or disposition of all or substantially all of the Company’s assets
other than to (A) a corporation or other entity of which at least a majority
of
its combined voting power is owned directly or indirectly by the Company, (B)
a
corporation or other entity owned directly or indirectly by the holders of
capital stock of the Company in substantially the same proportions as their
ownership of Common Stock, or (C) an Excluded Entity (as defined in
subsection (ii) below)
(ii) the
merger, consolidation or other business combination transaction of the Company
with or into another corporation, entity or person, other than a transaction
with
or
into another corporation, entity or person in
which
the holders of at least a majority of the shares of voting capital stock of
the
Company outstanding immediately prior to such transaction continue to hold
(either by such shares remaining outstanding in the continuing entity or by
their being converted into shares of voting capital stock of the surviving
entity) a majority of the total voting power represented by the shares of voting
capital stock of the Company (or the surviving entity) outstanding immediately
after such transaction (an “Excluded Entity”); or
(iii) the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
of the Company representing more than 50% of the total combined voting power
of
the Company’s then outstanding securities pursuant to a tender or exchange offer
made directly to the Company’s stockholders which the Board does not recommend
such stockholders accept.
A
transaction (including a Corporate Transaction) shall not constitute a Change
in
Control if its sole purpose is to change the state of the Company’s
incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities
immediately before such transactions.
(h) “Code”
means
the Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder.
(i) “Committee”
means a
committee described in Section 3.
(j) “Common
Stock”
means
the Company’s common stock.
(k) “Company”
means
Targeted Genetics Corporation, a Washington corporation, and any
successor.
(l) “Consultant”
means an
individual who performs bona-fide services to the Company, a Parent, a
Subsidiary or an Affiliate, other than as an Employee or Director.
(m) “Corporate
Transaction” means
a
sale of all or substantially all of the Company’s assets, or a merger,
consolidation or other capital reorganization or business combination
transaction of the Company with or into another corporation, entity or
person.
(n) “Covered
Employees”
means
those persons who are subject to the limitations of Section 162(m) of the
Code.
(o) “Director”
means a
member of the Board.
(p) “Disability”
means
“permanent and total disability” as such term is defined in Section 22(e)(3) of
the Code.
(q) “Employee”
means
any individual who is a common-law employee of the Company, a Parent, a
Subsidiary, or an Affiliate.
(r) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
(s) “Exercise
Price”
means,
in the case of an Option, the amount for which a Share may be purchased upon
exercise of such Option, as specified in the applicable Stock Option Agreement.
“Exercise Price,” in the case of a SAR, means an amount, as specified in the
applicable SAR Agreement, which is subtracted from the Fair Market Value in
determining the amount payable upon exercise of such SAR.
(t) “Fair
Market Value”
means
the market price of a Share as established in good faith by the Committee or
(a)
if the Common Stock is listed on the Nasdaq National Market, the closing selling
price for the Common Stock as reported by the Nasdaq National Market for a
single trading day or (b) if the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange, the closing selling price for the
Common Stock as such price is officially quoted in the composite tape of
transactions on such exchange for a single trading day. If there is no such
reported price for the Common Stock for the date in question, then such price
on
the last preceding date for which such price exists shall be determinative
of
Fair Market Value. the market price of a Share as determined in good faith
by
the Committee.
(u) “Fiscal
Year”
means
the Company’s fiscal year.
(v) “Grant”
means
any grant of an Award under the Plan.
(w) “Incentive
Stock Option” or “ISO”
means an
incentive stock option described in Section 422 of the Code.
(x) “Key
Service Provider”
means an
Employee, Director or Consultant who has been selected by the Committee to
receive an Award under the Plan.
(y) “Non-Employee
Director”
means a
Director who is not an Employee.
(z) “Nonstatutory
Stock Option” or “NSO”
means a
stock option that is not an Incentive Stock Option.
(aa) “Option”
means an
ISO or NSO granted under the Plan entitling the Optionee to purchase
Shares.
(bb) “Optioned
Stock” means
Shares that are subject to an Option or that were issued pursuant to the
exercise of an Option.
(cc) “Optionee”
means an
individual, estate or other entity that holds an Option.
(dd) “Parent”
means
any corporation (other than the Company) in an unbroken chain of corporations
ending with the Company, if each of the corporations other than the Company
owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain. A corporation that
attains the status of a Parent on a date after the adoption of the Plan shall
be
considered a Parent commencing as of such date.
(ee) “Participant”
means an
individual or an estate or other entity that holds an Award.
(ff) “Performance
Goals” means
one
or more objective measurable performance factors as determined by the Committee
with respect to each Performance Period based upon one or more factors,
including, but not limited to: (i) operating income; (ii) earnings
before interest, taxes, depreciation and amortization (“EBITDA”);
(iii) earnings; (iv) cash flow; (v) market share; (vi) sales
or revenue; (vii) expenses; (viii) cost of goods sold;
(ix) profit/loss or profit margin; (x) working capital;
(xi) return on equity or assets; (xii) earnings per share;
(xiii) economic value added (“EVA”); (xiv) stock price;
(xv) price/earnings ratio; (xvi) debt or debt-to-equity;
(xvii) accounts receivable; (xviii) writeoffs; (xix) cash;
(xx) assets; (xxi) liquidity; (xxii) operations;
(xxiii) intellectual property (e.g.,
patents); (xxiv) product development; (xxv) regulatory activity,
including clinical trial activity; (xxvi) manufacturing, production or
inventory; (xxvii) mergers and acquisitions or divestitures; (xxviii)
business development activities; (xxix) financings; (xxx) cash burn; and/or
(xxxi) cash horizon, each with respect to the Company and/or one or more of
its
Affiliates or operating units. Awards issued to persons who are not Covered
Employees may take into account other factors.
(gg) “Performance
Period” means
any
period not exceeding thirty-six (36) months as determined by the Committee,
in
its sole discretion. The Committee may establish different Performance Periods
for different Participants, and the Committee may establish concurrent or
overlapping Performance Periods.
(hh) “Plan”
means
this Targeted Genetics Corporation Stock Incentive Plan, as it may be amended
from time to time.
(ii) “Re-Price”
means
that the Company has lowered or reduced the Exercise Price of outstanding
Options and/or outstanding SARs for any Participant(s) in a manner described
by
Item 402(i)(1) of SEC Regulation S-K (or its successor provision).
(jj) “Retirement”
means
retirement as of the individual’s normal retirement date under the Company’s
401(k) Plan or other similar successor plan applicable to salaried
employees.
(kk) “Rule
16b-3” means
Rule 16b-3 promulgated under the Exchange Act, as amended from time to time,
or
any successor provision.
(ll) “SAR
Agreement”
means
the agreement described in Section 8 evidencing each Award of a Stock
Appreciation Right.
(mm) “SEC”
means
the Securities and Exchange Commission.
(nn) “Section
16 Persons”
means
those officers, directors or other persons who are subject to Section 16 of
the
Exchange Act.
(oo) “Securities
Act”
means
the Securities Act of 1933, as amended.
(pp) “Service”
means
the absence of any interruption or termination of service as an Employee,
Director or Consultant. Continuous Service Status shall not be considered
interrupted or terminated in the case of: (i) Company approved sick leave;
(ii) military leave; (iii) any other bona fide leave of absence
approved by the Committee, provided that such leave is for a period of not
more
than ninety (90) days, unless reemployment upon the expiration of such leave
is
guaranteed by contract or statute, or unless provided otherwise pursuant to
a
written Company policy. Also, Continuous Service Status as an Employee or
Consultant shall not be considered interrupted or terminated in the case
of a transfer between locations of the Company or between the Company, its
Parents, Subsidiaries or Affiliates, or their respective successors, or a change
in status from an Employee to a Consultant or from a Consultant to an
Employee.
(qq) “Share”
means
one share of Common Stock.
(rr) “Stock
Appreciation Right” or “SAR”
means a
stock appreciation right awarded under the Plan.
(ss) “Stock
Exchange” means
any
stock exchange or consolidated stock price reporting system on which prices
for
the Common Stock are quoted at any give time.
(tt) “Stock
Grant”
means
Shares awarded under the Plan.
(uu) “Stock
Grant Agreement”
means
the agreement described in Section 9 evidencing each Award of a Stock
Grant.
(vv) “Stock
Option Agreement”
means
the agreement described in Section 6 evidencing each Award of an
Option.
(ww) “Stock
Unit”
means a
bookkeeping entry representing the equivalent of one Share, as awarded under
the
Plan.
(xx) “Stock
Unit Agreement”
means
the agreement described in Section 10 evidencing each Award of a Stock
Unit.
(yy) “Subsidiary”
means
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total
combined voting power of all classes of stock in one of the other corporations
in such chain. A corporation that attains the status of a Subsidiary on a date
after the adoption of the Plan shall be considered a Subsidiary commencing
as of
such date.
(zz) “10-Percent
Shareholder” means
an
individual who owns more than 10% of the total combined voting power of all
classes of outstanding stock of the Company, its Parent or any of its
Subsidiaries. In determining stock ownership, the attribution rules of Section
424(d) of the Code shall be applied.
SECTION
3. ADMINISTRATION.
(a) General.
The
Plan
shall be administered by the Board or a Committee, or a combination thereof,
as
determined by the Board. The Plan may be administered by different
administrative bodies with respect to different classes of Participants and,
if
permitted by Applicable Laws, the Board may authorize one or more officers
of
the Company to make Awards under the Plan to Employees and Consultants (who
are
not Section 16 Persons) within parameters specified by the
Board.
(b) Committee
Composition. If
a
Committee has been appointed pursuant to this Section 3, such Committee
shall continue to serve in its designated capacity until otherwise directed
by
the Board. From time to time the Board may increase the size of any Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies (however
caused) and dissolve a Committee and thereafter directly administer the Plan,
all to the extent permitted by the Applicable Laws and, in the case of a
Committee administering the Plan in accordance with the requirements of
Rule 16b-3 or of Section 162(m) of the Code, to the extent permitted
or required by such provisions.
Unless
the Board provides otherwise, the Board’s Compensation Committee shall be the
Committee. Members of the Committee shall serve for such period of time as
the
Board may determine and shall be subject to removal by the Board at any time.
The Board may also at any time terminate the functions of the Committee and
reassume all powers and authority previously delegated to the
Committee.
The
Committee shall have membership composition which enables (i) Awards to Section
16 Persons to qualify as exempt from liability under Section 16(b) of the
Exchange Act and (ii) Awards to Covered Employees to qualify as
“performance-based compensation” as provided under Section 162(m) of the
Code.
The
Board
may also appoint one or more separate committees of the Board, each composed
of
two or more directors of the Company who need not qualify under Rule 16b-3
or
under Section 162(m) of the Code, that may administer the Plan with respect
to
Key Service Providers who are not Section 16 Persons or Covered Employees,
respectively, may grant Awards under the Plan to such Key Service Providers
and
may determine all terms of such Awards.
Notwithstanding
the foregoing, the Board shall constitute the Committee and shall administer
the
Plan with respect to Non-Employee Directors, shall grant Awards under the Plan
to such Non-Employee Directors, and shall determine all terms of such
Awards.
(c) Authority
of the Committee.
Subject
to the provisions of the Plan, the Committee shall have full authority and
sole
discretion to take any actions it deems necessary or advisable for the
administration of the Plan. Such actions shall include:
|
(i) |
selecting Key Service Providers who
are to
receive Awards under the Plan; |
|
(ii) |
determining
the type, number, vesting requirements and other features and conditions
of such Awards and amending such Awards;
|
|
(iii) |
correcting
any defect, supplying any omission, or reconciling any inconsistency
in
the Plan or any Award agreement;
|
|
(iv) |
accelerating
the vesting, or extending the post-termination exercise term, of
Awards at
any time and under such terms and conditions as it deems
appropriate;
|
|
(v) |
interpreting the Plan; |
|
(vi) |
making all other decisions relating
to the
operation of the Plan; and |
|
(vii) |
adopting
such plans or sub-plans as may be deemed necessary or appropriate
to
provide for the participation by Key Service Providers of the Company
and
its Subsidiaries and Affiliates who reside outside the U.S., which
plans
and/or sub-plans shall be attached hereto as
Appendices.
|
The
Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. The Committee’s determinations under the Plan shall be final
and binding on all persons.
(d) Indemnification.
To the
maximum extent permitted by applicable law, each member of the Committee, or
of
the Board, shall be indemnified and held harmless by the Company against and
from (i) any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in
which
he or she may be involved by reason of any action taken or failure to act under
the Plan or any Stock Option Agreement, SAR Agreement, Stock Grant Agreement
or
Stock Unit Agreement, and (ii) from any and all amounts paid by him or her
in settlement thereof, with the Company’s approval, or paid by him or her in
satisfaction of any judgment in any such claim, action, suit, or proceeding
against him or her, provided he or she shall give the Company an opportunity,
at
its own expense, to handle and defend the same before he or she undertakes
to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to
which such persons may be entitled under the Company’s Articles of
Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or
under
any power that the Company may have to indemnify them or hold them
harmless.
SECTION
4. GENERAL.
(a) General
Eligibility.
Only
Employees, Directors and Consultants shall be eligible for designation as Key
Service Providers by the Committee, in its sole discretion.
(b) Incentive
Stock Options.
Only Key
Service Providers who are common-law employees of the Company, a Parent or
a
Subsidiary shall be eligible for the grant of ISOs. In addition, a Key Service
Provider who is a 10-Percent Shareholder shall not be eligible for the grant
of
an ISO unless the requirements set forth in Section 422(c)(5) of the Code are
satisfied.
(c) Restrictions
on Shares.
Any
Shares issued pursuant to an Award shall be subject to such rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine, in its sole discretion. Such restrictions shall apply
in addition to any restrictions that may apply to holders of Shares generally
and shall also comply to the extent necessary with applicable law. In no event
shall the Company be required to issue fractional Shares under the
Plan.
(d) Beneficiaries.
Unless
stated otherwise in an Award agreement, a Participant may designate one or
more
beneficiaries with respect to an Award by timely filing the prescribed form
with
the Company. A beneficiary designation may be changed by filing the prescribed
form with the Company at any time before the Participant’s death. If no
beneficiary was designated or if no designated beneficiary survives the
Participant, then after a Participant’s death any vested Award(s) shall be
transferred or distributed to the Participant’s estate.
(e) Performance
Conditions.
The
Committee may, in its discretion, include performance conditions in an Award.
If
performance conditions are included in Awards to Covered Employees, then such
Awards may be subject to the achievement of Performance Goals established by
the
Committee. Such Performance Goals shall be established and administered pursuant
to the requirements of Section 162(m) of the Code. Before any Shares underlying
an Award or any Award payments subject to Performance Goals are released to
a
Covered Employee with respect to a Performance Period, the Committee shall
certify in writing that the Performance Goals for such Performance Period have
been satisfied. Awards with performance conditions that are granted to Key
Service Providers who are not Covered Employees need not comply with the
requirements of Section 162(m) of the Code.
(f) No
Rights
as a Shareholder.
A
Participant, or a transferee of a Participant, shall have no rights as a
shareholder with respect to any Common Stock covered by an Award until such
person has satisfied all of the terms and conditions to receive such Common
Stock, has satisfied any applicable withholding or tax obligations relating
to
the Award and the Shares have been issued (as evidenced by an appropriate entry
on the books of the Company or a duly authorized transfer agent of the
Company).
(g) Termination
of Service.
Unless
the applicable Award agreement or, with respect to Participants who reside
in
the U.S., the applicable employment agreement provides otherwise, the following
rules shall govern the vesting, exercisability and term of outstanding Awards
held by a Participant in the event of termination of such Participant’s Service
(in all cases subject to the term of the Award as applicable): (i) upon
termination of Service for any reason, all unvested portions of any outstanding
Awards shall be immediately forfeited without consideration and the vested
portions of any outstanding Stock Units shall be settled; (ii) if the Service
of
a Participant is terminated for Cause, then all unexercised Options and SARs,
unvested portions of Stock Units and unvested portions of Stock Grants shall
terminate and be forfeited immediately without consideration; (iii) if the
Service of Participant is terminated for any reason other than for Cause, death,
Retirement or Disability, then the vested portion of his/her then-outstanding
Options/SARs may be exercised by such Participant or his or her personal
representative within three (3) months after the date of such termination;
or
(iv) if the Service of a Participant is terminated due to death, Retirement
or
Disability, the vested portion of his/her then-outstanding Options/SARs may
be
exercised within twelve (12) months after the date of termination of
Service.
(h) Director
Fees.
Subject
to the consent and approval by the Board, each Non-Employee Director may elect
to receive a Stock Grant under the Plan in lieu of payment of a portion of
his
or her regular annual retainer based on the Fair Market Value of the Shares
on
the date any regular annual retainer would otherwise be paid. For purposes
of
the Plan, a Non-Employee Director’s regular annual retainer shall not include
any additional retainer paid in connection with service on any committee of
the
Board or paid for any other reason. Such an election may be for any dollar
or
percentage amount equal to at least 25% of the Non-Employee Director’s regular
annual retainer (up to a limit of 100% of the Non-Employee Director’s regular
annual retainer). The election must be made prior to the beginning of the annual
B cycle which shall be any twelve (12) month continuous period designated by
the
Board. Any amount of the regular annual retainer not elected to be received
as a
Stock Grant shall be payable in cash in accordance with the Company’s standard
payment procedures. Shares granted under this Section 4(h) shall otherwise
be
subject to the terms of the Plan applicable to Non-Employee Directors or to
Participants generally (other than provisions specifically applying only to
Employees).
SECTION
5. SHARES
SUBJECT TO PLAN AND SHARE LIMITS.
(a) Basic
Limitation.
The
stock issuable under the Plan shall be authorized but unissued Shares or Shares
acquired by the Company. The aggregate number of Shares reserved for Awards
under the Plan shall not exceed [__________] Shares, subject to adjustment
pursuant to Section 11, which includes the 950,000 Shares reserved for issuance
under the Targeted Genetics Corporation 1999 Stock Option Plan immediately
prior
to the Plan’s approval by the Company shareholders. All of the Shares available
for issuance under the Plan may be issued as Incentive Stock
Options.
(b) Additional
Shares.
If
Awards are forfeited or are terminated for any other reason before being
exercised, then the Shares underlying such Awards shall again become available
for Awards under the Plan. SARs shall be counted in full against the number
of
Shares available for issuance under the Plan, regardless of the number of Shares
issued upon settlement of the SARs. In addition, if a stock option previously
granted under the Targeted Genetics Corporation 1999 Stock Option Plan
terminates, expires, or lapses for any reason, any Shares subject to such stock
option shall again be available to be the subject of an Award under the
Plan.
(c) Dividend
Equivalents.
Any
dividend equivalents distributed under the Plan shall not be applied against
the
number of Shares available for Awards.
(d) Share
Limits.
(i) Limitation
on Grants to Participants.
Subject
to adjustment as provided in Section 11 below, the maximum aggregate number
of Shares that may be subject to Awards granted to any one person under the
Plan
for any Fiscal Year of the Company shall be 150,000 Shares, provided that such
limitation shall be 500,000 Shares during the fiscal year of any person’s
initial year of service with the Company.
(ii) Limits
on
Awards to Non-Employee Directors.
Subject
to adjustment pursuant to Section 11, no Non-Employee Director shall receive
Awards during any Fiscal Year covering, in the aggregate, in excess of 50,000
Shares; provided that any Shares received pursuant to an election under Section
4(h) shall not count against such limit.
SECTION
6. TERMS
AND CONDITIONS OF OPTIONS.
(a) Stock
Option Agreement.
Each
Grant of an Option under the Plan shall be evidenced and governed exclusively
by
a Stock Option Agreement between the Optionee and the Company. Such Option
shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions that are not inconsistent with the Plan and
that the Committee deems appropriate for inclusion in a Stock Option Agreement
(including without limitation any performance conditions). The provisions of
the
various Stock Option Agreements entered into under the Plan need not be
identical. The Stock Option Agreement shall also specify whether the Option
is
an ISO or an NSO.
(b) Number
of
Shares.
Each
Stock Option Agreement shall specify the number of Shares that are subject
to
the Option and shall be subject to adjustment of such number in accordance
with
Section 11.
(c) Exercise
Price.
An
Option’s Exercise Price shall be established by the Committee and set forth in a
Stock Option Agreement. The Exercise Price of an Option shall not be less than
100% of the Fair Market Value (110% for ISO grants to 10-Percent Shareholders)
on the date of Grant.
(d) Exercisability
and Term.
The
Stock Option Agreement shall specify the term of the Option; provided that
the
term of an Option shall in no event exceed ten (10) years from the date of
Grant. If not so established in the instrument evidencing the Option, the Option
shall vest and become exercisable according to the following schedule, which
may
be waived or modified by the Committee at any time:
Period
of Service
|
|
Percent
Vested
|
|
|
|
After
3 months
|
|
6.25%
of the Shares subject to the Option
|
|
|
|
For
each additional 3-month period thereafter
|
|
An
additional 6.25% of the Shares subject to the Option
|
|
|
|
After
4 years
|
|
100%
of the Shares subject to the Option
|
A
Stock
Option Agreement may provide for accelerated vesting in the event of the
Participant’s death, Disability, or other events. Notwithstanding any other
provision of the Plan, no Option can be exercised after the expiration date
provided in the applicable Stock Option Agreement and no Option may provide
that, upon exercise of the Option, a new Option will automatically be
granted.
(e) Modifications
or Assumption of Options.
Within
the limitations of the Plan, the Committee may modify, extend or assume
outstanding options or may accept the cancellation of outstanding options
(whether granted by the Company or by another issuer) in return for the grant
of
new Options for the same or a different number of Shares, at the same or a
different Exercise Price, and with the same or different vesting provisions.
Notwithstanding the preceding sentence or anything to the contrary herein,
the
Committee may not Re-Price outstanding Options unless there is approval by
the
Company shareholders and no modification of an Option shall, without the consent
of the Optionee, impair his or her rights or obligations under such
Option.
(f) Assignment
or Transfer of Options.
Except
as otherwise provided in the applicable Stock Option Agreement and then only to
the extent permitted by applicable law, no Option shall be transferable by
the
Optionee other than by will or by the laws of descent and distribution. Except
as otherwise provided in the applicable Stock Option Agreement, an Option may
be
exercised during the lifetime of the Optionee only by the Optionee or by the
guardian or legal representative of the Optionee. No Option or interest therein
may be assigned, pledged or hypothecated by the Optionee during his or her
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
SECTION
7. PAYMENT
FOR OPTION SHARES.
(a) Cash.
The
entire Exercise Price of Shares issued upon exercise of Options shall be payable
in cash at the time when such Shares are purchased.
(b) Surrender
of Stock.
To the
extent provided for in the applicable Stock Option Agreement, payment for all
or
any part of the Exercise Price may be made with Shares which have already been
owned by the Optionee; provided that the Committee may, in its sole discretion,
require that Shares tendered for payment be previously held by the Optionee
for
a minimum duration. Such Shares shall be valued at their Fair Market
Value.
(c) Cashless
Exercise.
To the
extent provided for in the applicable Stock Option Agreement, payment for all
or
any part of the Exercise Price may be made through Cashless
Exercise.
(d) Other
Forms of Payment.
To the
extent provided for in the applicable Stock Option Agreement, payment for all
or
any part of the Exercise Price may be made in any other form that is consistent
with Applicable Laws, regulations and rules and approved by the
Committee.
In
the
case of an ISO granted under the Plan, payment shall be made only pursuant
to
the express provisions of the applicable Stock Option Agreement. The Stock
Option Agreement may specify that payment may be made in any form(s) described
in this Section 7. In the case of an NSO granted under the Plan, the Committee
may, in its discretion at any time, accept payment in any form(s) described
in
this Section 7.
SECTION
8. TERMS
AND CONDITIONS OF STOCK APPRECIATION RIGHTS.
(a) SAR
Agreement.
Each
Grant of a SAR under the Plan shall be evidenced and governed exclusively by
a
SAR Agreement between the Participant and the Company. Such SAR shall be subject
to all applicable terms and conditions of the Plan and may be subject to any
other terms and conditions that are not inconsistent with the Plan and that
the
Committee deems appropriate for inclusion in a SAR Agreement (including without
limitation any performance conditions). A SAR Agreement may provide for a
maximum limit on the amount of any payout notwithstanding the Fair Market Value
on the date of exercise of the SAR. The provisions of the various SAR Agreements
entered into under the Plan need not be identical. SARs may be granted in
consideration of a reduction in the Participant’s compensation.
(b) Number
of
Shares.
Each SAR
Agreement shall specify the number of Shares to which the SAR pertains and
shall
be subject to adjustment of such number in accordance with Section
11.
(c) Exercise
Price.
Each SAR
Agreement shall specify the Exercise Price which shall be established by the
Committee. The Exercise Price of a SAR shall not be less than 100% of the Fair
Market Value on the date of Grant.
(d) Exercisability
and Term.
The SAR
Agreement shall specify the term of the SAR which shall not exceed ten (10)
years from the date of Grant. Unless the applicable SAR Agreement provides
otherwise, each SAR shall vest and become exercisable with respect to 25% of
the
Shares subject to the SAR upon completion of one year of Service measured from
the vesting commencement date, the balance of the Shares subject to the SAR
shall vest and become exercisable in thirty-six (36) equal installments upon
completion of each month of Service thereafter, and the term of the SAR shall
be
ten (10) years from the date of Grant. A SAR Agreement may provide for
accelerated vesting in the event of the Participant’s death, Disability, or
other events. SARs may be awarded in combination with Options or Stock Grants,
and such an Award shall provide that the SARs will not be exercisable unless
the
related Options or Stock Grants are forfeited. A SAR may be included in an
ISO
only at the time of Grant but may be included in an NSO at the time of Grant
or
at any subsequent time, but not later than six months before the expiration
of
such NSO. No SAR may provide that, upon exercise of the SAR, a new SAR will
automatically be granted.
(e) Exercise
of SARs.
If, on
the date when a SAR expires, the Exercise Price under such SAR is less than
the
Fair Market Value on such date but any portion of such SAR has not been
exercised or surrendered, then such SAR shall automatically be deemed to be
exercised as of such date with respect to such portion. Upon exercise of a
SAR,
the Participant (or any person having the right to exercise the SAR) shall
receive from the Company (i) Shares, (ii) cash or (iii) any combination of
Shares and cash, as the Committee shall determine at the time of Grant of the
SAR, in its sole discretion. The amount of cash and/or the Fair Market Value
of
Shares received upon exercise of SARs shall, in the aggregate, be equal to
the
amount by which the Fair Market Value (on the date of exercise) of the Shares
subject to the SARs exceeds the Exercise Price of the Shares.
(f) Modification
or Assumption of SARs.
Within
the limitations of the Plan, the Committee may modify, extend or assume
outstanding stock appreciation rights or may accept the cancellation of
outstanding stock appreciation rights (including stock appreciation rights
granted by another issuer) in return for the grant of new SARs for the same
or a
different number of Shares, at the same or a different Exercise Price, and
with
the same or different vesting provisions. Notwithstanding the preceding sentence
or anything to the contrary herein, unless there is approval by the Company
shareholders, the Committee may not Re-Price outstanding SARs and no
modification of a SAR shall, without the consent of the Participant, impair
his
or her rights or obligations under such SAR.
(g) Assignment
or Transfer of SARs.
Except
as otherwise provided in the applicable SAR Agreement and then only to the
extent permitted by applicable law, no SAR shall be transferable by the
Participant other than by will or by the laws of descent and distribution.
Except as otherwise provided in the applicable SAR Agreement, a SAR may be
exercised during the lifetime of the Participant only by the Participant or
by
the guardian or legal representative of the Participant. No SAR or interest
therein may be assigned, pledged or hypothecated by the Participant during
his
or her lifetime, whether by operation of law or otherwise, or be made subject
to
execution, attachment or similar process.
SECTION
9. TERMS
AND CONDITIONS FOR STOCK GRANTS.
(a) Amount
and Form of Awards.
Awards
under this Section 9 may be granted in the form of a Stock Grant. Each Stock
Grant Agreement shall specify the number of Shares to which the Stock Grant
pertains and shall be subject to adjustment of such number in accordance with
Section 11. A Stock Grant may also be awarded in combination with NSOs, and
such
an Award may provide that the Stock Grant will be forfeited in the event that
the related NSOs are exercised.
(b) Stock
Grant Agreement.
Each
Stock Grant awarded under the Plan shall be evidenced and governed exclusively
by a Stock Grant Agreement between the Participant and the Company. Each Stock
Grant shall be subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions that are not inconsistent
with
the Plan and that the Committee deems appropriate for inclusion in the
applicable Stock Grant Agreement (including without limitation any performance
conditions). The provisions of the various Stock Grant Agreements entered into
under the Plan need not be identical.
(c) Payment
for Stock Grants.
Stock
Grants may be issued with or without cash consideration or any other form of
legally permissible consideration approved by the Committee.
(d) Vesting
Conditions.
Each
Stock Grant may or may not be subject to vesting. Any such vesting provision
may
provide that Shares shall vest based on Service over time or shall vest, in
full
or in installments, upon satisfaction of performance conditions specified in
the
Stock Grant Agreement which may include Performance Goals pursuant to Section
4(e). Unless the applicable Stock Grant Agreement provides otherwise, each
Stock
Grant shall vest with respect to 25% of the Shares subject to the Stock Grant
upon completion of each year of Service on each of the first through fourth
annual anniversaries of the vesting commencement date. A Stock Grant Agreement
may provide for accelerated vesting in the event of the Participant’s death,
Disability, or other events.
(e) Assignment
or Transfer of Stock Grants.
Except
as provided in the applicable Stock Grant Agreement, and then only to the extent
permitted by applicable law, a Stock Grant awarded under the Plan shall not
be
anticipated, assigned, attached, garnished, optioned, transferred or made
subject to any creditor’s process, whether voluntarily, involuntarily or by
operation of law. Any act in violation of this Section 9(e) shall be void.
However, this Section 9(e) shall not preclude a Participant from designating
a
beneficiary who will receive any vested outstanding Stock Grant Awards in the
event of the Participant’s death, nor shall it preclude a transfer of vested
Stock Grant Awards by will or by the laws of descent and
distribution.
(f) Voting
and Dividend Rights.
The
holder of a Stock Grant awarded under the Plan shall have the same voting,
dividend and other rights as the Company’s other shareholders. A Stock Grant
Agreement, however, may require that the holder of such Stock Grant invest
any
cash dividends received in additional Shares subject to the Stock Grant. Such
additional Shares subject to the Stock Grant shall be subject to the same
conditions and restrictions as the Stock Grant with respect to which the
dividends were paid. Such additional Shares subject to the Stock Grant shall
not
reduce the number of Shares available for issuance under Section 5.
(g) Modification
or Assumption of Stock Grants.
Within
the limitations of the Plan, the Committee may modify or assume outstanding
stock grants or may accept the cancellation of outstanding stock grants
(including stock granted by another issuer) in return for the grant of new
Stock
Grants for the same or a different number of Shares and with the same or
different vesting provisions. Notwithstanding the preceding sentence or anything
to the contrary herein, no modification of a Stock Grant shall, without the
consent of the Participant, impair his or her rights or obligations under such
Stock Grant.
SECTION
10. TERMS
AND CONDITIONS OF STOCK UNITS.
(a) Stock
Unit Agreement.
Each
grant of Stock Units under the Plan shall be evidenced and governed exclusively
by a Stock Unit Agreement between the Participant and the Company. Such Stock
Units shall be subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions that are not inconsistent
with
the Plan and that the Committee deems appropriate for inclusion in the
applicable Stock Unit Agreement (including without limitation any performance
conditions). The provisions of the various Stock Unit Agreements entered into
under the Plan need not be identical. Stock Units may be granted in
consideration of a reduction in the Participant’s other
compensation.
(b) Number
of
Shares.
Each
Stock Unit Agreement shall specify the number of Shares to which the Stock
Unit
Grant pertains and shall be subject to adjustment of such number in accordance
with Section 11.
(c) Payment
for Stock Units.
Stock
Units shall be issued without consideration.
(d) Vesting
Conditions.
Each
Award of Stock Units may or may not be subject to vesting. Any such vesting
provision may provide that Shares shall vest based on Service over time or
shall
vest, in full or in installments, upon satisfaction of performance conditions
specified in the Stock Unit Agreement which may include Performance Goals
pursuant to Section 4(e). Unless the applicable Stock Unit Agreement provides
otherwise, each Stock Unit shall vest with respect to 25% of the Shares subject
to the Stock Unit upon completion of each year of Service on each of the first
through fourth annual anniversaries of the vesting commencement date. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant’s death, Disability, or other events.
(e) Voting
and Dividend Rights.
The
holders of Stock Units shall have no voting rights. Prior to settlement or
forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s
discretion, carry with it a right to dividend equivalents. Such right entitles
the holder to be credited with an amount equal to all cash dividends paid on
one
Share while the Stock Unit is outstanding. Dividend equivalents may be converted
into additional Stock Units. Settlement of dividend equivalents may be made
in
the form of cash, in the form of Shares, or in a combination of both. Prior
to
distribution, any dividend equivalents which are not paid shall be subject
to
the same conditions and restrictions as the Stock Units to which they
attach.
(f) Form
and
Time of Settlement of Stock Units.
Settlement of vested Stock Units may be made in the form of (a) cash,
(b) Shares or (c) any combination of both, as determined by the Committee
at the time of the grant of the Stock Units, in its sole discretion. Methods
of
converting Stock Units into cash may include (without limitation) a method
based
on the average Fair Market Value of Shares over a series of trading days. Vested
Stock Units may be settled in a lump sum or in installments. The distribution
may occur or commence when the vesting conditions applicable to the Stock Units
have been satisfied or have lapsed, or it may be deferred, in accordance with
applicable law, to any later date. The amount of a deferred distribution may
be
increased by an interest factor or by dividend equivalents. Until an Award
of
Stock Units is settled, the number of such Stock Units shall be subject to
adjustment pursuant to Section 11.
(g) Creditors’
Rights.
A holder
of Stock Units shall have no rights other than those of a general creditor
of
the Company. Stock Units represent an unfunded and unsecured obligation of
the
Company, subject to the terms and conditions of the applicable Stock Unit
Agreement.
(h) Modification
or Assumption of Stock Units.
Within
the limitations of the Plan, the Committee may modify or assume outstanding
stock units or may accept the cancellation of outstanding stock units (including
stock units granted by another issuer) in return for the grant of new Stock
Units for the same or a different number of Shares and with the same or
different vesting provisions. Notwithstanding the preceding sentence or anything
to the contrary herein, no modification of a Stock Unit shall, without the
consent of the Participant, impair his or her rights or obligations under such
Stock Unit.
(i) Assignment
or Transfer of Stock Units.
Except
as provided in the applicable Stock Unit Agreement, and then only to the extent
permitted by applicable law, Stock Units shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor’s
process, whether voluntarily, involuntarily or by operation of law. Any act
in
violation of this Section 10(i) shall be void. However, this Section 10(i)
shall
not preclude a Participant from designating a beneficiary who will receive
any
outstanding vested Stock Units in the event of the Participant’s death, nor
shall it preclude a transfer of vested Stock Units by will or by the laws of
descent and distribution.
SECTION
11. PROTECTION
AGAINST DILUTION.
(a) Adjustments.
Subject
to any action required under Applicable Laws by the holders of capital stock
of
the Company, (i) the numbers and class of Shares or other stock or securities:
(x) available for future Awards under Section 5(a) above, (y) set forth in
Section 5(d) above, and (z) covered by each outstanding Award, (ii) the Exercise
Price of each outstanding Option, and (iii) any repurchase price per Share
applicable to Shares issued pursuant to any Award, shall be proportionately
adjusted by the Committee in the event of a stock split, reverse stock split,
stock dividend, combination, consolidation, recapitalization (including a
recapitalization through a large nonrecurring cash dividend) or reclassification
of the Shares, subdivision of the Shares, a rights offering, a reorganization,
merger, spin-off, split-up, change in corporate structure or other similar
occurrence. Any adjustment by the Committee pursuant to this Section 11 shall
be
made in the Committee’s sole and absolute discretion and shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or Exercise Price of an Award. If, by reason of
a
transaction described in this Section 11 or an adjustment pursuant to this
Section 11, a Participant’s Award agreement covers additional or different
shares of stock or securities, then such additional or different shares, and
the
Award agreement in respect thereof, shall be subject to all of the terms,
conditions and restrictions which were applicable to the Award prior to such
adjustment.
(b) Participant
Rights.
Except
as provided in this Section 11, a Participant shall have no rights by reason
of
any issue by the Company of stock of any class or securities convertible into
stock of any class, any subdivision or consolidation of shares of stock of
any
class, the payment of any stock dividend or any other increase or decrease
in
the number of shares of stock of any class. If by reason of an adjustment
pursuant to this Section 11 a Participant’s Award covers additional or different
shares of stock or securities, then such additional or different shares and
the
Award in respect thereof shall be subject to all of the terms, conditions and
restrictions which were applicable to the Award and the Shares subject to the
Award prior to such adjustment.
(c) Fractional
Shares.
Any
adjustment of Shares pursuant to this Section 11 shall be rounded down to the
nearest whole number of Shares. Under no circumstances shall the Company be
required to authorize or issue fractional shares and no consideration shall
be
provided as a result of any fractional shares not being issued or
authorized.
SECTION
12. EFFECT
OF A CORPORATE TRANSACTION.
(a) Corporate
Transaction.
In the
event that the Company is a party to a Corporate Transaction, outstanding Awards
shall be subject to the applicable agreement of merger, reorganization, or
sale
of assets. Such agreement may provide, without limitation, for the assumption
or
substitution of outstanding Options, SARs, or Stock Units by the surviving
entity or its parent, for the assumption of outstanding Stock Grant Agreements
by the surviving entity or its parent, for the replacement of outstanding
Options, SARs, and Stock Units with a cash incentive program of the surviving
entity which preserves the spread existing on the unvested portions of such
outstanding Awards at the time of the transaction and provides for subsequent
payout in accordance with the same vesting provisions applicable to those
Awards, for accelerated vesting of outstanding Awards, or for the cancellation
of outstanding Options, SARs, and Stock Units, with or without consideration,
in
all cases without the consent of the Participant. Notwithstanding the foregoing,
if outstanding Options, SARs or Stock Units are not assumed, substituted, or
replaced with a cash incentive program or any outstanding Stock Grant Agreements
are not assumed pursuant to Section 12(a), then such Awards shall terminate
upon
the consummation of the Corporate Transaction; provided, however, that the
Committee shall notify the Participant that the Award will terminate at least
five (5) days prior to the date on which the Award terminates.
(b) Acceleration.
The
Committee may determine, at the time of grant of an Award or thereafter, that
such Award shall become fully vested as to all Shares subject to such Award
in
the event that a Change in Control occurs. Unless otherwise provided in the
applicable Award agreement, employment agreement or other applicable written
agreement, in the event that a Change in Control occurs and any outstanding
Awards held by a current Key Service Provider is to be terminated (in whole
or
in part) pursuant to the preceding paragraph, the vesting (and exercisability,
if applicable) of each such Award shall accelerate such that the Award shall
become vested (and exercisable, if applicable) in full prior to the consummation
of the Change in Control at such time and on such conditions as the Committee
shall determine.
SECTION
13. LIMITATIONS
ON RIGHTS.
(a) No
Entitlements.
A
Participant’s rights, if any, in respect of or in connection with any Award is
derived solely from the discretionary decision of the Company to permit the
individual to participate in the Plan and to benefit from a discretionary Award.
By accepting an Award under the Plan, a Participant expressly acknowledges
that
there is no obligation on the part of the Company to continue the Plan and/or
grant any additional Awards. Any Award granted hereunder is not intended to
be
compensation of a continuing or recurring nature, or part of a Participant’s
normal or expected compensation, and in no way represents any portion of a
Participant’s salary, compensation, or other remuneration for purposes of
pension benefits, severance, redundancy, resignation or any other
purpose.
Neither
the Plan nor any Award granted under the Plan shall be deemed to give any
individual a right to remain an Employee, Consultant or Director of the Company,
a Parent, a Subsidiary or an Affiliate. The Company and its Parent and
Subsidiaries and Affiliates reserve the right to terminate the Service of any
person at any time, and for any reason, subject to Applicable Laws, the
Company’s Articles of
Incorporation and
Bylaws and a written employment agreement (if any), and such terminated person
shall be deemed irrevocably to have waived any claim to damages or specific
performance for breach of contract or dismissal, compensation for loss of
office, tort or otherwise with respect to the Plan or any outstanding Award
that
is forfeited and/or is terminated by its terms or to any future
Award.
(b) Shareholders’
Rights.
A
Participant shall have no dividend rights, voting rights or other rights as
a
shareholder with respect to any Shares covered by his or her Award prior to
the
issuance of such Shares (as evidenced by an appropriate entry on the books
of
the Company or a duly authorized transfer agent of the Company). No adjustment
shall be made for cash dividends or other rights for which the record date
is
prior to the date when such Shares are issued, except as expressly provided
in
Section 11.
(c) Issuance
Requirements.
Any
other provision of the Plan notwithstanding, the obligation of the Company
to
issue Shares or other securities under the Plan shall be subject to all
Applicable Laws, rules and regulations and such approval by any regulatory
body
as may be required. The Company reserves the right to restrict, in whole or
in
part, the delivery of Shares or other securities pursuant to any Award prior
to
the satisfaction of all legal requirements relating to the issuance of such
Shares or other securities, to their registration, qualification or listing
or
to an exemption from registration, qualification or listing.
SECTION
14. WITHHOLDING
TAXES.
(a) General.
A
Participant shall make arrangements satisfactory to the Company for the
satisfaction of any withholding tax obligations that arise in connection with
his or her Award. The Company shall not be required to issue any Shares or
make
any cash payment under the Plan until such obligations are
satisfied.
(b) Share
Withholding. If
a
public market for the Company’s Shares exists, the Committee may permit a
Participant to satisfy all or part of his or her withholding or income tax
obligations by having the Company withhold all or a portion of any Shares that
otherwise would be issued to him or her or by surrendering or attesting to
all
or a portion of any Shares that he or she previously acquired. Such Shares
shall
be valued based on the value of the actual trade or, if there is none, the
Fair
Market Value as of the previous day. Any payment of taxes by assigning Shares
to
the Company may be subject to restrictions, including, but not limited to,
any
restrictions required by rules of the SEC. The Committee may, in its discretion,
also permit a Participant to satisfy withholding or income tax obligations
related to an Award through Cashless Exercise or through a sale of Shares
underlying the Award.
SECTION
15. DURATION
AND AMENDMENTS.
(a) Term
of
the Plan.
The Plan
shall become effective upon its adoption by the Board. It shall continue in
effect for a term of ten (10) years unless sooner terminated under this Section
15. If required by the Applicable Laws, continuance of the Plan shall be subject
to approval by the holders of capital stock of the Company within twelve (12)
months before or after the date the Plan is adopted or, to the extent required
by Applicable Laws, any date the Plan is amended. Such approval shall be
obtained in the manner and to the degree required under the Applicable
Laws.
(b) Right
to
Amend or Terminate the Plan.
The
Board may amend or terminate the Plan at any time and for any reason. The
termination of the Plan, or any amendment thereof, shall not impair the rights
or obligations of any Participant under any Award previously granted under
the
Plan without the Participant’s consent. No Awards shall be granted under the
Plan after the Plan’s termination. An amendment of the Plan shall be subject to
the approval of the Company’s shareholders only to the extent such approval is
otherwise required by Applicable Laws, regulations or rules.
The
Committee may approve such addenda to the Plan as it may consider necessary
or
appropriate for the purpose of granting Awards to Employees, Consultants or
Directors, which Awards may contain such terms and conditions as the Committee
deems necessary or appropriate to accommodate differences in local law, tax
policy or custom, which, if so required under Applicable Laws, may deviate
from
the terms and conditions set forth in the Plan. The terms of any such addenda
shall supersede the terms of the Plan to the extent necessary to accommodate
such differences but shall not otherwise affect the terms of the Plan as in
effect for any other purpose.
SECTION
17. SEVERABILITY.
If
any
provision of the Plan or any Award is determined to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person, or would disqualify
the
Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to Applicable Laws,
or, if it cannot be so construed or deemed amended without, in the Committee’s
determination, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, person or Award, and the
remainder of the Plan and any such Award shall remain in full force and
effect.
SECTION
18. EXECUTION.
To
record
the adoption of the Plan by the Board, the Company has caused its duly
authorized officer to execute the Plan on behalf of the Company.
TARGETED
GENETICS CORPORATION
By
______________________________________
Title
_____________________________________
The
board of directors recommends a vote “FOR” the nominees in Proposal
1.
|
Please
mark
x
your
vote
as
indicated
|
|
FOR
the
Nominees
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WITHHOLD
AUTHORITY
to
vote
for
the Nominees
|
|
(1) ELECTION
OF DIRECTORS:
TWO CLASS 1 DIRECTORS
Nominees:
Jack L. Bowman
Jeremy
L. Curnock Cook
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¨
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¨
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SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER
IN
THE SPACE PROVIDED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED
“FOR” THE NOMINEES IN PROPOSAL 1 AND “FOR” PROPOSAL 2, PROPOSAL 3 AND
PROPOSAL 4.
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WITHHOLD
for the following only: (write the name of the nominee(s) in the
space
below)
|
¨ I
plan to attend the annual meeting.
|
The
board of directors recommends a vote “FOR” Proposal
2
|
Please
sign exactly as your name appears on your share certificate(s). Attorneys,
trustees, executors and other fiduciaries acting in a representative
capacity should sign their names and give their titles. An authorized
person should sign on behalf of corporations, partnerships, associations,
etc. and give his or her title. If your shares are held by two or
more
persons, each person must sign. Receipt of the notice of meeting
and proxy
statement is hereby acknowledged.
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|
FOR
|
AGAINST
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ABSTAIN
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(2)
AMEND
TARGETED GENETICS CORPORATION’S AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK FROM
18,000,000 SHARES TO 30,000,000 SHARES
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¨
|
¨
|
¨
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The
board of directors recommends a vote “FOR” Proposal
3
|
|
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FOR
|
AGAINST
|
ABSTAIN
|
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(3)
APPROVE
AN AMENDMENT AND RESTATEMENT OF THE TARGETED GENETICS 1999 STOCK
OPTION
PLAN, WHICH WILL BE KNOWN AS THE “TARGETED GENETICS CORPORATION STOCK
INCENTIVE PLAN” UPON SHAREHOLDER APPROVAL
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¨
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¨
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¨
|
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The
board of directors recommends a vote “FOR” Proposal
4
|
|
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FOR
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AGAINST
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ABSTAIN
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(3) RATIFY
THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR YEAR ENDING DECEMBER 31,
2007
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¨
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¨
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¨
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|
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Signature(s)_____________________________________________________ Date
_________________
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PROXY
TARGETED
GENETICS CORPORATION
This
proxy is solicited on behalf of Targeted Genetics Corporation’s board of
directors for the
Annual
Meeting of Shareholders to be held on May 17,
2006
The
undersigned hereby appoint(s) H. Stewart Parker and David J. Poston,
and
each of them, as proxies, with full power of substitution, to represent
and vote as designated all shares of common stock of Targeted Genetics
Corporation held of record by the undersigned on March 16, 2006 at
Targeted Genetic’s Annual Meeting of Shareholders, to be held at the
Washington Athletic Club, 1325 Sixth Avenue, Seattle, Washington,
at 9:00
a.m. local time on May 17, 2006, with authority to vote on the matters
listed below and with discretionary authority as to any other matters
that
may properly come before the meeting or any adjournments or postponements
of the meeting.
IMPORTANT—PLEASE
COMPLETE, DATE AND SIGN ON THE OTHER SIDE
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