UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
SIGA TECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
___________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
___________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
___________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
___________________________________________________________________
(5) Total fee paid:
___________________________________________________________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
___________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
___________________________________________________________________
(3) Filing Party:
___________________________________________________________________
(4) Date Filed:
___________________________________________________________________
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 408
New York, New York 10170
(212) 672-9100
April 27, 2007
Dear Stockholder:
You are cordially invited to attend our 2007 Annual Meeting of
Stockholders on May 30, 2007, at 10:00 a.m. (local time), at the offices of
Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, 29th Floor,
New York, New York 10036. On the following pages you will find the formal notice
of annual meeting and proxy statement.
To ensure that you are represented at the Annual Meeting, whether or not
you plan to attend the meeting in person, please read carefully the accompanying
proxy statement, which describes the matters to be voted upon, and please
complete, date, sign and return the enclosed proxy card promptly.
I hope that you will attend the meeting and I look forward to seeing you
there.
Sincerely,
/s/ Eric A. Rose
----------------
Eric A. Rose, M.D.
Chief Executive Officer
and Chairman of the Board
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 408
New York, New York 10170
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 30, 2007
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of SIGA Technologies, Inc., a Delaware corporation ("SIGA"),
will be held on Wednesday, May 30, 2007, at 10:00 a.m. (local time), at the
offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas,
29th Floor, New York, New York 10036, and at any adjournment.
At the Annual Meeting, SIGA's stockholders will be voting on proposals to
do the following:
1. To elect ten directors to the Board of Directors of SIGA;
2. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm of SIGA for the fiscal
year ending December 31, 2007; and
3. To transact such other business as may properly come before the
Annual Meeting or at any adjournment or postponement thereof.
Stockholders of record at the close of business on April 25, 2007 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment or
postponement thereof. A list of such stockholders will be available at the
Annual Meeting and for any purpose related to the Annual Meeting, during the ten
days prior to the Annual Meeting, at SIGA's office, during ordinary business
hours.
All stockholders are cordially invited to attend the Annual Meeting. If
you do not expect to be present at the Annual Meeting, you are requested to fill
in, date and sign the enclosed proxy and mail it promptly in the enclosed
envelope to make sure that your shares are represented at the Annual Meeting. In
the event you decide to attend the Annual Meeting in person, you may, if you
desire, revoke your proxy and vote your shares in person.
YOUR VOTE IS IMPORTANT
IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ Thomas N. Konatich
----------------------
Thomas N. Konatich
Secretary
New York, New York
April 27, 2007
SIGA Technologies, Inc.
420 Lexington Avenue, Suite 408
New York, New York 10170
--------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 30, 2007
--------------
This proxy statement is furnished to stockholders of SIGA Technologies,
Inc. ("SIGA") in connection with the solicitation of proxies, in the
accompanying form, by the Board of Directors of SIGA (the "Board of Directors")
for use in voting at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of
the Americas, 29th Floor, New York, New York 10036, on Wednesday, May 30, 2007,
at 10:00 a.m., and at any adjournment or postponement thereof.
This proxy statement and the accompanying form of proxy, are first being
mailed to stockholders on or about April 27, 2007.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Purpose of the Annual Meeting
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this proxy statement.
Record Date and Outstanding Shares
The Board of Directors has fixed the close of business on April 25, 2007
as the record date (the "Record Date") for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting. Only stockholders of
record at the close of business on the Record Date will be entitled to vote at
the Annual Meeting or any and all adjournments or postponements thereof. As of
the Record Date, SIGA had issued and outstanding 33,014,410 shares of common
stock, par value $.0001 per share ("Common Stock").
Voting at the Annual Meeting
Each share of Common Stock outstanding on the Record Date will be entitled
to one vote on each matter submitted to a vote of the stockholders. Cumulative
voting by stockholders is not permitted.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the stockholders entitled to vote at the Annual
Meeting is necessary to constitute a quorum. Abstentions and broker "non-votes"
are counted as present and entitled to vote for purposes of determining a
quorum. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power for that particular item and has not
received instructions from the beneficial owner.
For the election of directors, a plurality of the votes cast is required.
Abstentions and broker "non-votes" are not considered for the purpose of the
election of directors.
For the ratification of the appointment of PricewaterhouseCoopers LLP as
the independent registered public accounting firm of SIGA for the fiscal year
ending December 31, 2007, the affirmative vote of a majority of the total votes
1
cast on such proposal in person or by proxy at the Annual Meeting is required.
Abstentions and broker "non-votes" for such proposal are not considered to have
been voted on the proposal.
Revocability and Voting of Proxies
Any person signing a proxy in the form accompanying this proxy statement
has the power to revoke it prior to the Annual Meeting or at the Annual Meeting
prior to the vote pursuant to the proxy. A proxy may be revoked by any of the
following methods:
o by writing a letter delivered to Thomas N. Konatich, Secretary of SIGA,
stating that the proxy is revoked;
o by submitting another proxy with a later date; or
o by attending the Annual Meeting and voting in person.
Please note, however, that if a stockholder's shares are held of record by
a broker, bank or other nominee and that stockholder wishes to vote at the
Annual Meeting, the stockholder must bring to the Annual Meeting a letter from
the broker, bank or other nominee confirming that stockholder's beneficial
ownership of the shares.
Unless we receive specific instructions to the contrary or unless such
proxy is revoked, shares represented by each properly executed proxy will be
voted: (i) FOR the election of each of SIGA's nominees as a director; (ii) FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as the
independent registered public accounting firm of SIGA for the fiscal year ending
December 31, 2007; and (iii) with respect to any other matters that may properly
come before the Annual Meeting, at the discretion of the proxy holders. SIGA
does not presently anticipate that any other business will be presented for
action at the Annual Meeting.
Solicitation
SIGA will pay the costs of soliciting proxies. SIGA may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to beneficial owners.
Directors, officers and regular employees may also solicit proxies by telephone,
facsimile or other means or in person. They will not receive any additional
payments for the solicitation.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Ten directors are to be elected at the Annual Meeting to hold office until
the next Annual Meeting of Stockholders and until their successors have been
duly elected and qualified. Unless otherwise instructed, the proxy holders will
vote the proxies received by them FOR the election of the ten persons named in
the table below as directors of SIGA. Proxies cannot be voted for a greater
number of persons than the nominees named. In the event that any of the below
listed nominees for director should become unavailable for election for any
presently unforeseen reason, the persons named in the accompanying proxy form
have the right to use their discretion to vote for a substitute.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION (ITEM 1 OF THE ENCLOSED PROXY CARD) OF DR. ROSE, MR. ANTAL, MR.
CONSTANCE, MR. FASMAN, DR. HAMMER, DR. MJALLI, DR. OZ, MR. SAVAS, MS. SLOTKIN
AND DR. WEINER AS DIRECTORS.
Director Nominee Information
The following table sets forth biographical information of each director
nominee, including their ages, data on their business backgrounds and the names
of public companies and other selected entities for which they also serve as
directors:
Name Age Position
---- --- --------
Eric A. Rose, M.D. 54 Chief Executive Officer and Chairman of the Board
James J. Antal* 55 Director
Thomas E. Constance* 69 Director
Steven L. Fasman* 44 Director
Scott M. Hammer, M.D. * 59 Director
Adnan M. Mjalli, Ph.D. 42 Director
Mehmet C. Oz, M.D. * 44 Director
Paul G. Savas* 44 Director
Judy S. Slotkin* 54 Director
Michael A. Weiner, M.D. * 60 Director
* Determined by the Board of Directors to be independent pursuant to Rule
4200 of the NASD Marketplace Rules.
Eric A. Rose, M.D. was elected Chairman of the Board of SIGA at a Board
meeting on January 25, 2007. On March 1, 2007, Dr. Rose became the Company's
Chief Executive Officer after taking a leave from his position as Chairman of
the Department of Surgery and Surgeon-in-Chief of the Columbia Presbyterian
Center of New York Presbyterian Hospital, a position he has held since August
1994. Dr. Rose has served as a director of SIGA since April 19, 2001 and served
as Interim Chief Executive Officer of SIGA from April 19, 2001 until June 22,
2001. Dr. Rose is a past President of the International Society for Heart and
Lung Transplantation. Dr. Rose was recently appointed as Morris & Rose Milstein
Professor of Surgery at Columbia University's College of Physicians and
Surgeons' Department of Surgery. Dr. Rose is a director of Nephros, Inc.,
PharmaCore, Inc., TransTech Pharma, Inc. and Keryx Biopharmaceuticals, Inc. Dr.
Rose also holds a position of Executive Vice President - Life Sciences at
MacAndrews & Forbes Holdings Inc., a SIGA shareholder, and is a former director
of Nexell Therapeutics Inc. (f/k/a VimRx). Dr. Rose is a graduate of both
Columbia College and Columbia University College of Physicians & Surgeons.
James J. Antal has served as a director of SIGA since November 2004. Mr.
Antal has been an active consultant and founding investor in several Southern
California based emerging companies since his retirement from Experian in 2002.
He has served as Chief Financial Advisor to Black Mountain Gold Coffee Co.
(2003-2005), and as Chief Financial Officer of Pathway Data, Inc. (2005 to
present). Mr. Antal joined the Board of Directors and serves as the Chairman of
the audit committee for Cleveland Bio Labs, effective upon the completion of the
Cleveland Bio Labs IPO, which occurred in July, 2006. Mr. Antal was the Chief
Financial Officer and Chief Investment Officer from 1996 to 2002 for Experian, a
$1.6 billion global information services subsidiary of UK-based GUS plc. Prior
to the GUS acquisition of Experian (the former TRW Inc. Information Systems and
Services businesses), Mr. Antal held various finance positions with TRW from
1978 to 1996, including Senior VP of Finance for TRW Information Systems and
Services and TRW Inc. Corporate Director of
3
Financial Reporting and Accounting. He earned his undergraduate degree in
accounting from The Ohio State University in 1973, and became a certified public
accountant (Ohio) in 1974. He engaged in active practice as a CPA with Ernst &
Ernst until 1978. Mr. Antal has served as a director of First American Real
Estate Solutions, an Experian joint venture with First American Financial Corp.
Thomas E. Constance has served as a director of SIGA since April 19, 2001.
Mr. Constance is Chairman and, since 1994, a partner of Kramer Levin Naftalis &
Frankel LLP, a law firm in New York City, which SIGA has retained to provide
legal services. Mr. Constance serves as a Trustee of the M.D. Sass Foundation
and St. Vincent's Services. He also serves on the Advisory Board of Directors of
Barington Capital, L.P.
Steven L. Fasman has been Senior Vice President-Law at MacAndrews & Forbes
Holdings Inc. since 2004. Prior to that, he served as Vice President-Law at
MacAndrews & Forbes from 1998-2003 and Senior Counsel at MacAndrews & Forbes
from 1992-1997. From 1987 to 1992, he was associated with Paul, Weiss, Rifkind,
Wharton & Garrison. Mr. Fasman was recommended to the Nominating and Corporate
Governance Committee for inclusion as a director-nominee by the Chief Executive
Officer.
Dr. Hammer is the Harold C. Neu Professor of Medicine, Professor of
Epidemiology and Chief of the Division of Infectious Diseases at the Columbia
University Medical Center (CUMC), a position he has held since 1999. Dr.
Hammer's major investigative interest is the treatment and prevention of HIV
disease. He is an investigator in the National Institutes of Health sponsored
AIDS Clinical Trials Group (ACTG), a multicenter organization which performs
clinical trials designed to improve the understanding and treatment of HIV
infection and its complications. As an ACTG investigator, Dr. Hammer chaired the
two largest national trials of antiretroviral therapy carried out by that group
in the 1990's, studies which contributed to the current standard of care of HIV
infection. In addition to his interest in the treatment of persons with
established HIV infection, Dr. Hammer is an investigator in the National
Institutes of Health sponsored HIV Vaccine Trials Network (HVTN), a multicenter
organization whose mission is to develop an effective preventive HIV vaccine. He
is Chair of the AIDS Vaccine Research Working Group, an advisory committee to
the Division of AIDS, NIAID. He is a former Chair of the Antiviral Products
Advisory Committee of the Food and Drug Administration and currently serves on
the Editorial Board of the New England Journal of Medicine. Dr. Hammer is Chair
of the International AIDS Society-USA's Antiretroviral Guidelines Panel, is a
member of the Governing Council of the International AIDS Society, is a member
of the World Health Organization's Strategic and Technical Advisory Committee
for HIV/AIDS, serves as Co-Chair of the Steering Committee of the WHO's Global
HIV Drug Resistance Surveillance Program, and continues in his role as
Guidelines Development Group Chair of the WHO's Antiretroviral Guidelines for
Resource Limited Settings. He has served as a member of the International
Advisory Committees of the Swiss HIV Cohort Study, the French National
Association for AIDS Research and the HIV-NAT (Netherlands-Australia-Thailand)
Collaborative Research Network. In his role as Chief of the Division of
Infectious Diseases at CUMC, he is dedicated to fellow and faculty growth and to
the development of state-of-the-art infection surveillance at the institutional
and regional levels to improve and protect the public health.
Adnan M. Mjalli, Ph.D. has served as a director of SIGA since January
2004. Dr. Mjalli founded TransTech Pharma, Inc., a privately held drug discovery
company in High Point, North Carolina, in 1999 and has since served as its
President, Chairman of the Board and Chief Executive Officer. He also serves as
Chairman of the Board of PharmaCore, Inc. where he previously served as
President and CEO from December of 1998 to November 2000. Dr. Mjalli obtained
his Ph.D. in medicinal chemistry in 1989 from the University of Exeter, UK. His
postdoctoral work was carried out at the University of Rochester. Prior to
founding TransTech Pharma, he held various positions of increasing
responsibility in research and senior management at several pharmaceutical and
biotechnology companies, including Merck & Co., Inc.
Mehmet C. Oz, M.D. has served as a director of SIGA since April 19, 2001.
Dr. Oz has been a Cardiac Surgeon at Columbia University Presbyterian Hospital
since 1993 and a Professor of Surgery and Vice Chairman for Cardiovascular
Services of the Department of Surgery there since July 2001. Dr. Oz directs the
following programs at New York University Presbyterian Hospital, Columbia
University: the Cardiovascular Institute, the complementary medicine program,
the clinical profusion program and clinical trials of new surgical technology.
Dr. Oz received his undergraduate degree from Harvard University in 1982, and,
in 1986, he received a joint M.D./M.B.A. degree from the University of
Pennsylvania Medical School and the Wharton School of Business.
Paul G. Savas has served as a director of SIGA since January 2004. Mr.
Savas has been an Executive Vice President of Finance at MacAndrews & Forbes
Holdings, Inc. and its affiliates since May 2006. Prior to that, Mr. Savas
4
served in various positions at MacAndrews & Forbes and its affiliates, including
as Senior Vice President of Finance from October 2002 until May 2006, Vice
President from 1998 until 2002, and Director of Corporate Finance from 1994
until 1998. Mr. Savas is a director of Rev Holdings LLC, Clarke American Corp.,
TransTech Pharma, Inc. and PharmaCore, Inc.
Judy S. Slotkin has served as a director of SIGA since November 2004. Ms.
Slotkin was Co-Head of the Finance Committee of the Modern Africa Fund, a $120
million private equity fund, from 1998 until 2003. Ms. Slotkin was formerly
Department Head in the Corporate Finance Division of Citigroup (Citibank
Investment Bank) where she was responsible for various businesses and the first
head of the group's Capital Markets Desk. Prior to that, Ms. Slotkin held
various positions in the Citigroup (Citibank) commercial bank. Ms. Slotkin is a
director of Nephros, Inc.
Michael A. Weiner, M.D. has served as a director of SIGA since April 19,
2001. Dr. Weiner is the Hettinger Professor of Pediatrics at Columbia University
College of Physicians and Surgeons since 1996. Dr. Weiner is also the Director
of Pediatric Oncology at New York Presbyterian Hospital. Dr. Weiner was a
director of Nexell Therapeutics, Inc. (f/k/a VimRx) from March 1996 to February
1999. Dr. Weiner is a 1972 graduate of the New York State Health Sciences Center
at Syracuse and was a post graduate student at New York University and Johns
Hopkins University.
Meetings of the Board of Directors
The Board of Directors of SIGA held eleven meetings during 2006. During
2006, one director, Dr. Mehmet C. Oz, attended fewer than 75% of the aggregate
of the meetings of the Board of Directors and committees thereof, upon which
such director served during the period for which he has been a director or
committee member. In addition, actions were taken during 2006 by unanimous
written consent of the directors.
Those members of the Board of Directors who are independent as defined by
Rule 4200 of the NASD Marketplace Rules (the "Independent Directors") are also
required, pursuant to Rule 4350(c)(2) of the NASD Marketplace Rules, to
regularly convene executive sessions where only such Independent Directors are
present. Such meetings may be in conjunction with regularly-scheduled meetings
of the Board of Directors. Each member of the Board of Directors is also
expected to attend the annual meeting of stockholders of SIGA. Seven members of
the Board of Directors attended SIGA's 2006 annual meeting of stockholders.
Committees of the Board of Directors
The Board of Directors currently has, and appoints the members of,
standing Audit, Compensation and Nominating and Corporate Governance Committees.
Each member of the Audit, Compensation and Nominating and Corporate Governance
Committees is an Independent Director. Each of these committees has a written
charter approved by the Board of the Directors in March 2004. A copy of each
charter is posted on SIGA's website at www.siga.com under the "Corporate
Governance" section.
Audit Committee. The Audit Committee, which currently consists of
directors Paul G. Savas, Judy S. Slotkin and James J. Antal, held ten meetings
during 2006. The Board of Directors has determined that each of the members of
the Audit Committee is "independent" under the applicable laws, rules and
regulations. The Company has determined that Mr. Savas is an "Audit Committee
financial expert" within the meaning of Regulation S-K promulgated by the
Securities and Exchange Commission (the "SEC"). The purpose of the Audit
Committee is to assist the Board of Directors in the oversight of the integrity
of the financial statements of SIGA, SIGA's compliance with legal and regulatory
matters, the independent registered public accounting firm's qualifications and
independence, and the performance of SIGA's independent registered public
accounting firm. The primary responsibilities of the Audit Committee are set
forth in its charter, and include various matters with respect to the oversight
of SIGA's accounting and financial reporting process and audits of the financial
statements of SIGA on behalf of the Board of Directors. The Audit Committee also
selects the independent registered public accounting firm to conduct the annual
audit of the financial statements of SIGA; reviews the proposed scope of such
audit; reviews accounting and financial controls of SIGA with the independent
registered public accounting firm and our financial accounting staff; and
reviews and approves transactions between us and our directors, officers, and
their affiliates. A copy of the Audit Committee charter is available on SIGA's
website at www.siga.com under the "Corporate Governance" section. Also see the
section of this proxy statement entitled "Report of the Audit Committee."
5
Compensation Committee. The Compensation Committee, which currently
consists of directors Donald G. Drapkin, Paul G. Savas and Michael A. Weiner,
held one meeting during 2006. The Board of Directors has determined that each of
the members of the Compensation Committee is "independent" within the meaning of
the NASDAQ listing standards. The Compensation Committee functions include
reviewing and approving the compensation and benefits for SIGA's executive
officers, administering SIGA's stock plans and making recommendations to the
Board of Directors regarding these matters. A copy of the Compensation Committee
charter is available on SIGA's website at www.siga.com under the "Corporate
Governance" section. Also see the section of this proxy statement entitled
"Compensation Discussion and Analysis."
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee (the "Nominating Committee"), which currently
consists of directors Judy S. Slotkin, James J. Antal and Michael A. Weiner, was
formed in March 2004 and held three meetings in 2006. On December 19, 2006, the
Board of Directors elected Dr. Weiner to replace Mehmet C. Oz. The Board of
Directors has determined that each of the members of the Nominating Committee is
"independent" within the meaning of the NASDAQ listing standards. The Nominating
Committee is responsible for searching for and recommending to the Board of
Directors potential nominees for director positions, making recommendations to
the Board of Directors regarding the size and composition of the Board of
Directors and its committees, monitoring the Board of Director's effectiveness
and developing and implementing SIGA's corporate governance procedures and
policies. A copy of the Nominating and Corporate Governance Committee charter is
available on SIGA's website at www.siga.com under the "Corporate Governance"
section.
In selecting candidates for the Board of Directors, the Nominating
Committee begins by determining whether the incumbent directors whose terms
expire at the annual meeting of stockholders desire and are qualified to
continue their service on the Board of Directors. SIGA is of the view that the
continuing service of qualified incumbents promotes stability and continuity of
the board, giving SIGA the benefit of the familiarity and insight into SIGA's
affairs that its directors have accumulated during their tenure, while
contributing to the Board of Director's ability to work as a collective body.
Accordingly, it is the policy of the Nominating Committee, absent special
circumstances, to nominate qualified incumbent directors who continue to satisfy
the Nominating Committee's criteria for membership on the Board of Directors,
whom the Nominating Committee believes will continue to make important
contributions to the Board of Directors and who consent to stand for re-election
and, if re-elected, to continue their service on the Board of Directors. If
there are positions on the Board of Directors for which the Nominating Committee
will not be re-nominating an incumbent director, or if there is a vacancy on the
Board of Directors, the Nominating Committee will solicit recommendations for
nominees from persons whom the Nominating Committee believes are likely to be
familiar with qualified candidates, including members of the Board of Directors
and management of SIGA. The Nominating Committee may also engage a professional
search firm to assist in the identification of qualified candidates, but did not
do so in 2006. As to each recommended candidate that the Nominating Committee
believes merits serious consideration, the Nominating Committee will collect as
much information, including without limitation, soliciting views from other
directors and SIGA's management and having one or more Nominating Committee
members interview each such candidate, regarding each candidate as it deems
necessary or appropriate in order to make an informed decision with respect to
such candidate. Based on all available information and relevant considerations,
the Nominating Committee will select, for each directorship to be filled, a
candidate who, in the view of the Nominating Committee, is most suited for
membership on the Board of Directors. In making its selection, SIGA will
evaluate candidates proposed by stockholders under criteria similar to the
evaluation of other candidates, except that the Nominating Committee may
consider, as one of the factors in its evaluation of stockholder recommended
nominees, the size and duration of the interest of the recommending stockholder
or stockholder group in the equity of SIGA. This consideration may also include
how long the recommending stockholder intends to continue holding its equity
interest in SIGA.
The Nominating Committee has adopted a policy with regard to the minimum
qualifications that must be met by a Nomination Committee-recommended nominee
for a position on SIGA's Board of Directors, which policy is described in this
paragraph. The Nominating Committee generally requires that all candidates for
the Board of Directors be of high personal integrity and ethical character. The
Nominating Committee requires that candidates not have any interests that would,
in the view of the Nominating Committee, materially impair his or her ability to
(i) exercise independent judgment or (ii) otherwise discharge the fiduciary
duties owed as a director to SIGA and its stockholders. In addition, candidates
must be able to represent fairly and equally all stockholders of SIGA without
favoring or advancing any particular stockholder or other constituency of SIGA.
Candidates must have demonstrated achievement in one or more fields of business,
professional, governmental, communal, scientific or educational endeavor.
Candidates are expected to have sound judgment and a general appreciation
regarding major issues facing public companies of a size and operational scope
similar to SIGA, including contemporary governance concerns, regulatory
obligations of a public issuer, strategic business planning, competition in a
global economy, and basic concepts of corporate finance. Candidates must also
have, and be
6
prepared to devote, adequate time to the Board and its committees. It is
expected that, taking into account their other business and professional
commitments, including their service on the boards of other companies, each
candidate will be available to attend meetings of the Board and any committees
on which the candidate will serve, as well as SIGA's annual meeting of
stockholders. SIGA also requires that at least a majority of the directors
serving at any time on the Board are independent, as defined under the rules of
the NASDAQ stock market and that at least three of the directors satisfy the
financial literacy requirements required for service on the Audit Committee
under the rules of the NASDAQ stock market.
The Nominating Committee has adopted a policy with regard to the
consideration of director candidates recommended by stockholders, the material
elements of which policy are described in this paragraph. The Nominating
Committee will consider recommendations for nomination for director submitted by
holders of SIGA's shares entitled to vote generally in the election of
directors. The Nominating Committee will give consideration to these
recommendations for positions on the Board where the Nominating Committee has
not determined to re-nominate a qualified incumbent director. While the
Nominating Committee has not established a minimum number of shares that a
stockholder must own in order to present a nominating recommendation for
consideration, or a minimum length of time during which the stockholder must own
its shares, the Nominating Committee may take into account the size and duration
of a recommending stockholder's ownership interest in SIGA. The Nominating
Committee may also consider whether the stockholder making the nominating
recommendation intends to maintain an ownership interest in SIGA of
substantially the same size as at its interest at the time of making the
recommendation. The Nominating Committee may refuse to consider recommendations
of nominees who do not satisfy the minimum qualifications prescribed by the
Nominating Committee for board candidates.
The Nominating Committee has adopted procedures to be followed by
stockholders in submitting recommendations of candidates for director. The
procedures are posted on SIGA's website at www.siga.com under the "Corporate
Governance" section, and described in this paragraph. A stockholder (or group of
stockholders) wishing to submit a nominating recommendation for an annual
meeting of stockholders should try to ensure that it is received by SIGA, as
provided herein, not later than 120 calendar days prior to the first anniversary
of the date of the proxy statement for the prior annual meeting of stockholders.
All stockholder nominating recommendations should be in writing, addressed to
"the Nominating and Corporate Governance Committee" care of SIGA's Chief
Financial Officer at SIGA's principal headquarters, 420 Lexington Avenue, Suite
408, New York, New York 10170. Submissions should be made by mail, courier or
personal delivery. A nominating recommendation should be accompanied by the
following information concerning each recommending stockholder:
o The name and address, including telephone number, of the recommending
stockholder;
o The number and class of SIGA's shares owned (beneficially or of record) by
the recommending stockholder and the time period for which such shares
have been held;
o A statement from the stockholder as to whether the stockholder has a good
faith intention to continue to hold the reported shares through the date
of SIGA's next annual meeting of stockholders;
o Sufficient information about the proposed nominee for the Nominating
Committee to make an informed decision regarding the qualifications of the
proposed nominee;
o Any relationship between the proposed nominee and the recommending
stockholder; and
o Such other information as the Nominating Committee may reasonably request.
The nominating recommendation must be accompanied by the consent of the proposed
nominee to be interviewed by the Nominating Committee, if the Nominating
Committee chooses to do so in its discretion (and the recommending stockholder
must furnish the nominee's contact information for this purpose), and, if
nominated and elected, to serve as a director of SIGA.
Compensation Committee Interlocks and Insider Participation
None.
7
Code of Ethics
SIGA has adopted a code of ethics and business conduct that applies to its
officers, directors and employees, including without limitation, our Chief
Executive Officer, Chief Financial Officer and Chief Scientific Officer. The
Code of Ethics and Business Conduct is available on SIGA's website at
www.siga.com under the "Corporate Governance" section.
Stockholder Communications with the Board of Directors
SIGA stockholders may send communications to the Board, any committee of
the Board or an individual director. The process for so communicating is posted
on SIGA's website at www.siga.com under the "Corporate Governance" section.
8
REPORT OF THE AUDIT COMMITTEE
The members of the Audit Committee have been appointed by the Board of
Directors. During the 2006 fiscal year, the Audit Committee consisted solely of
independent directors, as defined in Rule 4200(a)(15) of the NASD Marketplace
Rules. The Audit Committee operates under a written charter that was amended and
restated by the Board of Directors in March 2004 in order to assure continued
compliance by SIGA with SEC and NASDAQ rules enacted in response to requirements
of the Sarbanes-Oxley Act.
The Audit Committee assists the Board of Directors in monitoring the
integrity of SIGA's financial statements, the independent registered public
accounting firm's qualifications and independence, the performance of the
independent registered public accounting firm, and the compliance by SIGA with
legal and regulatory requirements. Management is responsible for SIGA's internal
controls and the financial reporting process. The independent registered public
accounting firm is responsible for performing an independent audit of SIGA's
financial statements in accordance with generally accepted auditing standards
and for issuing a report on those financial statements. The Audit Committee
monitors and oversees these processes.
In this context, the Audit Committee has reviewed and discussed the
audited financial statements for the year ended December 31, 2006 with
management and with PricewaterhouseCoopers LLP, SIGA's independent registered
public accounting firm. The Audit Committee has discussed with
PricewaterhouseCoopers LLP the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (Communications with Audit Committees),
which includes, among other items, matters related to the conduct of the audit
of SIGA's annual financial statements.
The Audit Committee has also received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and has
discussed with PricewaterhouseCoopers LLP the issue of their independence from
SIGA and management. In addition, the Audit Committee has considered whether the
provision of non-audit services by the independent registered public accounting
firm in 2006 is compatible with maintaining the auditors' independence and has
concluded that it is.
Based on its review of the audited financial statements and the various
discussions noted above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in SIGA's Annual
Report on Form 10-K for the year ended December 31, 2006. The Audit Committee
has also recommended, subject to stockholder ratification, the selection of
SIGA's independent registered public accounting firm for the year ending
December 31, 2007.
The members of the Audit Committee are Paul G. Savas, Judy S. Slotkin and
James J. Antal, none of whom is or, during the fiscal year 2006, was, an
employee of SIGA.
Respectfully submitted by the Audit Committee,
Paul G. Savas, Chairman
James J. Antal
Judy S. Slotkin
9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, comprised of independent directors, has:
(1) reviewed and discussed the Compensation Discussion and Analysis included in
this proxy statement with management; and
(2) based on the review and discussions referred to in paragraph (1) above, the
Compensation Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in the Company's proxy
statement relating to the 2007 Annual Meeting of shareholders.
During the year ended December 31, 2006, the Compensation Committee was
comprised of Donald G. Drapkin, Paul G. Savas and Mehmet C. Oz. On December 19,
2006, the Board of Directors elected Michael A. Weiner to replace Mehmet C. Oz
on the Committee. The events described in this report occurred after Michael A.
Weiner replaced Mehmet C. Oz on the Compensation Committee.
Respectfully submitted by the Compensation Committee,
Donald G. Drapkin
Paul G. Savas
Michael A. Weiner
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the
beneficial ownership of SIGA's voting securities as of March 15, 2007 of (i)
each person known to SIGA to beneficially own more than 5% of the applicable
class of voting securities, (ii) each director and director nominee of SIGA,
(iii) each Named Executive Officer and (iv) all directors and executive officers
of SIGA as a group. As of March 15, 2007, a total of 32,714,394 shares of Common
Stock were outstanding. Each share of Common Stock is entitled to one vote on
matters on which holders of Common Stock are eligible to vote. The column
entitled "Percentage of Total Voting Stock Outstanding" shows the percentage of
total voting stock beneficially owned by each listed party.
The number of shares beneficially owned is determined under rules
promulgated by the Securities and Exchange Commission, and the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
those rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and also any shares which
the individual has the right to acquire within 60 days of March 15, 2007,
through the exercise or conversion of any stock option, convertible security,
warrant or other right. Unless otherwise indicated, each person or entity named
in the table has sole voting power and investment power (or shares that power
with that person's spouse) with respect to all shares of capital stock listed as
owned by that person or entity.
Ownership of Common Stock
The following tables set forth certain information regarding the
beneficial ownership of SIGA's voting securities as of March 15, 2007 of (i)
each person known to SIGA to beneficially own more than 5% of the applicable
class of voting securities, (ii) each director and director nominee of SIGA,
(iii) each Named Executive Officer, and (iv) all directors and officers of SIGA
as a group. As of March 15, 2007, a total of 32,714,394 shares of common stock
were outstanding. Each share of common stock is entitled to one vote on matters
on which common stockholders are eligible to vote. The column entitled
"Percentage of Total Voting Stock" shows the percentage of total voting stock
beneficially owned by each listed party.
Percentage of Percentage of
Name and Address of Amount of Beneficial Common Stock Total Voting
Beneficial Owner (1) Ownership (2) Outstanding Stock Outstanding
-------------------- --------------------- ---------------- --------------------
Beneficial Holders
MacAndrews & Forbes Inc. (3)
35 East 62nd Street
New York, NY 10021........................ 5,620,771(4) 16.3% 16.3%
TransTech Pharma, Inc.
4170 Mendenhall Oaks Parkway
High Point, NC 27265...................... 5,296,634(5) 15.3% 15.3%
Bernard L. Kasten Jr., M.D.(19)
8622 Twilight Tear Lane
Cincinnati, OH 45249...................... 1,672,360(20) 4.91% 4.91%
Officers and Directors
Donald G. Drapkin (6) (14)
35 East 62nd Street
New York, NY 10021......................... 1,818,326(7) 5.3% 5.3%
James J. Antal
30952 Steeplechase Dr.
San Juan Capistrano, CA 94704.............. 56,154(8) * *
Judy S. Slotkin (18)
888 Park Avenue
NY, NY 10021............................... 98,849(9) * *
11
Thomas E. Constance
1177 Avenue of the Americas,
New York, NY 10036.......................... 273,467(10) * *
Scott M. Hammer, M.D.
161 Fort Washington Ave.
New York, NY 10032 25,000(11) * *
Adnan M. Mjalli, Ph.D. (14)
4170 Mendenhall Oaks Parkway, Suite 110
High Point, NC 27265......................... 45,000(12) * *
Mehmet C. Oz, M.D.
177 Fort Washington Ave
New York, NY 10032........................... 145,000(13) * *
Eric A. Rose, M.D. (14)
35 East 62nd Street
New York, NY 10021........................... 810,090(15) 2.4% 2.4%
Paul G. Savas (14)
35 East 62nd Street
New York, NY 10021.......................... 71,664(16) * *
Michael A. Weiner, M.D.
161 Fort Washington Ave.
New York, NY
10032......................................... 132,500(13) * *
Thomas N. Konatich............................ 545,000(17) 1.6% 1.6%
Dennis E. Hruby, Ph.D. ....................... 625,000(17) 1.9% 1.9%
All Executive Officers and Directors as a
group (twelve persons)........................ 4,646,050(21) 12.6% 12.6%
-------------
* Less than 1%
(1) Unless otherwise indicated the address of each beneficial owner identified
is 420 Lexington Avenue, Suite 408, New York, NY 10170.
(2) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given date which such person has the right to acquire
within 60 days after such date. For purposes of computing the percentage
of outstanding shares held by each person or group of persons named above
on a given date, any security which such person or persons has the right
to acquire within 60 days after such date is deemed to be outstanding for
the purpose of computing the percentage ownership of such person or
persons, but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.
(3) MacAndrews & Forbes Inc. is a direct wholly-owned subsidiary of MacAndrews
& Forbes Holdings Inc., a holding company whose sole stockholder is Ronald
O. Perelman.
(4) Includes 1,764,206 shares of common stock issuable upon exercise of
warrants.
(5) Includes 1,824,412 shares of common stock issuable upon exercise of
warrants.
(6) Mr. Drapkin is a director and Vice Chairman of MacAndrews & Forbes
Holdings Inc. and MacAndrews & Forbes Inc. and a director of TransTech
Pharma.
(7) Includes 1,145,000 shares of common stock issuable upon exercise of
options, shares of common stock underlying a warrant to purchase up to
347,826 shares of common stock and shares of common stock underlying a
warrant to purchase up to 30,500 shares of common stock (the "Drapkin
September 2001 Investor Warrant"). However, the Drapkin September 2001
Investor Warrant provides that, with certain limited exceptions, such
warrant is not exercisable if, as a result of such exercise, the number of
shares of common stock beneficially owned by Mr. Drapkin
12
and his affiliates (other than shares of common stock which may be deemed
beneficially owned through the ownership of the unexercised portion of the
Drapkin September 2001 Investor Warrant) would exceed 9.99% of the
outstanding shares of common stock. Does not include shares of common
stock that Mr. Drapkin, as a director and Vice Chairman of Mafco Holdings
Inc. and MacAndrews & Forbes or as director of TransTech Pharma, may be
deemed to beneficially own and as to which Mr. Drapkin disclaims
beneficial ownership.
(8) Includes 45,000 shares of common stock issuable upon exercise of options.
(9) Includes 45,000 shares of common stock issuable upon exercise of options.
(10) Includes 12,200 shares issuable upon exercise of warrants and 245,000
shares of common stock issuable upon exercise of options.
(11) Includes 25,000 shares issuable upon exercise of options.
(12) Includes 45,000 shares of common stock issuable upon exercise of options.
Does not include shares of common stock that Dr. Mjalli, as a director of
TransTech Pharma, may be deemed to beneficially own and as to which Dr.
Mjalli disclaims beneficial ownership.
(13) Includes 12,500 shares issuable upon exercise of warrants and 120,000
shares issuable upon exercise of options.
(14) Dr. Rose, Dr. Mjalli, Mr. Drapkin and Mr. Savas are directors of TransTech
Pharma.
(15) Includes 88,610 shares of common stock issuable upon exercise of warrants
and 620,000 shares of common stock issuable upon exercise of options. Does
not include shares of common stock that Dr. Rose, as a director of
TransTech Pharma, may be deemed to beneficially own and as to which Dr.
Rose disclaims beneficial ownership.
(16) Includes 9,303 shares of common stock issuable upon exercise of warrants
and 45,000 shares issuable upon exercise of options.
(17) Neither of Messrs. Konatich and Hruby own shares of common stock. All
shares listed as beneficially owned by each of Messrs. Konatich and Hruby
are shares issuable upon exercise of stock options.
(18) Includes 45,000 shares issuable upon exercise of options and 18,244 shares
issuable upon exercise of warrants.
(19) Dr. Kasten became our Chief Executive Officer in the third quarter of
2004. Dr. Kasten resigned as Chief Executive Officer of SIGA effective as
of April 30, 2006.
(20) Includes 1,350 shares of common stock issuable upon exercise of warrants
and 1,310,000 shares of common stock issuable upon exercise of options
(21) See footnotes (6)-(20).
13
MANAGEMENT
Officers
The following table sets forth certain information with respect to the
Named Executive Officers of SIGA:
Name Age Position
---- --- --------
Bernard L. Kasten Jr. M.D. (1) 60 Director, Chief Executive Officer
Thomas N. Konatich (2) 61 Vice President, Chief Financial Officer, Secretary and
Treasurer
Dennis E. Hruby, Ph.D. 54 Vice President, Chief Scientific Officer
Eric A. Rose, M.D. 54 Chief Executive Officer and Chairman of the Board
(1) Dr. Kasten became Chief Executive Officer on July 2, 2004. Dr.
Kasten resigned as Chief Executive Officer of SIGA effective as of
April 30, 2006. Dr. Kasten was a director of SIGA until December 19,
2006.
(2) Mr. Konatich was appointed to serve in an additional capacity as
Acting Chief Executive Officer effective May 1, 2006 through
February 28, 2007.
Bernard L. Kasten, Jr., M.D. has been a director of SIGA since May 23,
2003 and was Chief Executive Officer from the third quarter of 2004 through
April 30, 2006. Prior to becoming Chief Executive Officer of SIGA and since
February 2002, Dr. Kasten has been Vice President, Medical Affairs of MedPlus
Inc., a healthcare information technology company and a wholly-owned subsidiary
of Quest Diagnostics, Inc., a diagnostic testing, information and services
company. Since 1975, Dr. Kasten has been a Diplomat of the American Board of
Pathology with a sub-specialty certification 1976 in Medical Microbiology. Dr.
Kasten's staff appointments have included service in the Division of Laboratory
Services at The Cleveland Clinic; Associate of Pathology and Laboratory Services
at the Bethesda Hospital Systems in Cincinnati, Ohio and Chief Laboratory
Officer at Quest Diagnostics Incorporated. Dr. Kasten was a founder of Plexus
Vaccine Inc., a vaccine company of which SIGA acquired substantially all of the
assets in May 2003. Dr. Kasten is also a director of Seracare Life Sciences,
Inc. Dr. Kasten is an author of "Infectious Disease Handbook" 5th Edition, 2003,
Lexi-Comp Inc.
Thomas N. Konatich has served as Vice President, Chief Financial Officer
and Treasurer since April 1, 1998. He was named Secretary of SIGA on June 29,
2001. During the periods from October 5, 2001 until July 2, 2004 and May 1, 2006
until February 28, 2007, Mr. Konatich was our Acting Chief Executive Officer.
From November 1996 through March 1998, Mr. Konatich served as Chief Financial
Officer and a director of Innapharma, Inc., a privately held pharmaceutical
development company. From 1993 through November 1996, Mr. Konatich served as
Vice President and Chief Financial Officer of Seragen, Inc., a publicly traded
biopharmaceutical development company. Mr. Konatich has an MBA from the Columbia
Graduate School of Business.
Dennis E. Hruby, Ph.D. has served as Vice President - Chief Scientific
Officer since June 2000. From April 1, 1997 through June 2000, Dr. Hruby was our
Vice President of Research. From January 1996 through March 1997, Dr. Hruby
served as a senior scientific advisor to SIGA. Dr. Hruby is a Professor of
Microbiology at Oregon State University, and from 1990 to 1993 was Director of
the Molecular and Cellular Biology Program and Associate Director of the Center
for Gene Research and Biotechnology. Dr. Hruby specializes in virology and cell
biology research, and the use of viral and bacterial vectors to produce
recombinant vaccines. He is a member of the American Society of Virology, the
American Society for Microbiology and a fellow of the American Academy of
Microbiology. Dr. Hruby received a Ph.D. in microbiology from the University of
Colorado Medical Center and a B.S. in microbiology from Oregon State University.
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The Compensation Committee of the Board of Directors is responsible for
implementing the Board's directives relating to the compensation of our named
executive officers, as well as our other key employees. In this regard, the
Compensation Committee has the responsibility to establish a compensation policy
for officers and key employees designed to (i) attract and retain the best
possible executive talent; (ii) tie annual and long term cash and stock
incentives to achievement of measurable corporate and individual performance
objectives; and (iii) provide competitive compensation to our officers and key
employees to align executives' incentives with the creation of stockholder
value.
14
As a general matter, the compensation policy for officers and key
employees includes:
o base salary, which is determined on an annual or semi-annual
basis
o annual or other time-based cash incentive compensation, and
o long-term incentive compensation in the forms of equity
participation awards.
This section discusses the principles underlying our executive
compensation policies, our decisions to date and the principles that we expect
to use in coming years.
Our Named Executive Officers
For 2006, our Named Executive Officers and their titles were:
Name Title
Dr. Bernard L. Kasten Chief Executive Officer(1)
Thomas N. Konatich Acting Chief Executive Officer(2) & Vice President, Chief Financial Officer,
Secretary and Treasurer
Dr. Dennis E. Hruby Chief Scientific Officer and Vice President
Dr. Eric A. Rose Chief Executive Officer(3) and Chairman of the board
(1) From July 2, 2004 through April 30, 2006.
(2) From May 1, 2006 through February 28, 2007.
(3) On March 1, 2007, Dr. Eric A. Rose became our Chief Executive
Officer.
Our Executive Compensation Decision Process
Overview
Our Compensation Committee reviews and approves on a periodic basis the
corporate goals and objectives with respect to the compensation for the chief
executive officer and other executive officers.
Role of Executive Officers in Setting Compensation Decisions
Regarding most compensation matters, the Chief Executive Officer has
historically provided recommendations to the Compensation Committee relying on
his personal experience with respect to evaluating the contribution of our other
executive officers. We anticipate that Dr. Eric A. Rose, currently our Chief
Executive Officer and Chairman of the Board will be involved in compensation
recommendations, with input from our Chief Financial Officer and Chief
Scientific Officer, as it relates to the compensation of other key employees.
The Compensation Committee considers, but retains the right to reject or modify
such recommendations. Although the Chief Executive Officer may attend a portion
of the meetings of the Compensation Committee, neither he nor any other member
of management may be present during executive sessions of the Compensation
Committee. Moreover, the Chief Executive Officer may not be present when
decisions with respect to his compensation are made. The Committee has used, on
more than one occasion, a third party compensation consultant.
Compensation Advisors
The Compensation Committee has the authority to retain compensation
consultants to advise the Compensation Committee as it deems necessary to carry
out its duties.
Competitive Market Analysis and Benchmarking
In reviewing and recommending the compensation of the Chief Executive
Officer and other executive officers, the Compensation Committee considers the
compensation awarded to officers of similarly situated companies, our
performance, the individuals' performance, compensation given to our officers in
past years or any other factor the Compensation Committee deems appropriate.
15
Evaluations
The Compensation Committee evaluates at least once a year the performance
of our officers and other key employees in light of goals and objectives
established by the Committee and based upon these evaluations the Compensation
Committee recommends to the full Board of Directors, the annual compensation for
our officers and key employees, including base salary, bonus, incentive and
equity compensation.
Our Compensation Philosophy and Program Objectives
The overall objectives of the Company's compensation program are to
attract and retain the best possible executive talent, to motivate these
executives to achieve the goals inherent in the Company's business strategy, to
maximize the link between executive and stockholder interests through a stock
option plan and to recognize individual contributions as well as overall
business results. To achieve these objectives, the Company has developed an
overall compensation strategy and specific compensation plans that tie a
substantial portion of an executive's compensation to performance.
Our Executive Compensation Program
Overview
The key elements of the Company's compensation program consist of fixed
compensation in the form of base salary, and the discretion to award variable
compensation in the forms of annual incentive compensation and stock option
awards. The Compensation Committee's policies with respect to each of these
elements are discussed below. In addition, while the elements of compensation
described below are considered separately, the Compensation Committee takes into
account the full compensation package offered by the Company to the individual,
including pension benefits, insurance and other benefits, as well as the
programs described below.
Base Salary
The compensation philosophy of the Company is to maintain executive base
salary at a competitive level to enable the Company to attract and retain
executives and key employee talent needed to accomplish the Company's goals. In
determining the appropriate base salary levels and, to a lesser extent, other
compensation elements, the Compensation Committee considers the scope of
responsibility, prior experience and past accomplishments, as well as historical
practices within the Company. Economic and business conditions affecting the
Company are also considered. The Compensation Committee also considers
historical levels of salary paid by the Company as well as the provisions in the
various executive's employment contracts with the Company, which contracts are
more fully discussed elsewhere in this proxy statement.
Periodic adjustments in base salary may be merit based with respect to
individual performance or tied to the Company's financial condition or other
competitive factors. The Compensation Committee takes into account the effect of
any corporate transactions that have been consummated during the relevant year
and, where appropriate, also considers non-financial performance measures. These
include the Company's market share, scientific developments and improvements in
relations with employees and investors.
For Mr. Konatich and Dr. Hruby, we paid as base salary in 2006 the amounts
required under their employment agreements. These amounts were reviewed and set
by our Compensation Committee. These base salary levels reflect our Compensation
Committee's subjective judgment, which took into account each executive's
respective position and tenure, our present needs, the executive's individual
performance, achievements and prior contributions.
For Dr. Kasten, we paid the amounts required by various agreements to
which we and he are parties and which, in all instances, where reviewed and
approved by the Compensation Committee.
Annual Incentive Compensation
The Compensation Committee, in its discretion, may establish cash
incentive programs and otherwise award bonuses to executive officers and key
employees. Annual incentive compensation to our executive officers is payable
pursuant to contractual provisions with certain executives which provide
eligibility to receive discretionary bonuses, in the sole discretion of the
Board of Directors based on the executives performance, economic and business
conditions affecting the Company, and the financial condition of the Company.
The Compensation Committee makes recommendations to the Board of Directors with
respect to such amounts. In addition, Dr. Hruby and Mr. Konatich are
contractually entitled to certain guaranteed cash bonus payments each year. The
annual incentive compensation earned by the executives with respect to 2006 was
discretionary and determined by the Compensation Committee. We believe that the
annual incentive bonuses motivate and encourage our executives to fulfill our
objectives and provide us with the opportunity to recognize superior individual
performance.
16
For 2006, both Mr. Konatich and Dr. Hruby were eligible for annual cash
bonuses. In the case of Mr. Konatich, his annual cash bonus was $60,000 and for
Dr. Hruby his annual cash bonus was $62,500.
Long-Term Incentive Awards
The Compensation Committee believes that granting stock options on an
ongoing basis provides officers and key employees with strong economic interest
in maximizing stock price appreciation over the long term. We believe that the
practice of granting stock options is critical to retaining and recruiting the
key talent necessary at all employee levels to ensure the Company's continued
success. This element of compensation is governed by the Amended and Restated
1996 Incentive and Non-Qualified Stock Option Plan (the "Option Plan") that
provides for grants of incentive stock options and non-qualified stock options
to our executives, directors and key employees. The Option Plan is administered
by our Compensation Committee, which determines persons to be granted stock
options, the amount of stock options to be granted to each such person, and the
terms and conditions of any stock options as permitted under the Plan. The
exercise price of stock options is set by the Compensation Committee and has
been at a price at least equal to the market price of the common stock on the
date of the grant. The options therefore do not have any value to the executive
unless the market price of the common stock rises, which ensures that the
interests of our executives are aligned with those of our shareholders. Through
these option grants, we seek to emphasize the importance of improving the
performance of our stock price, increasing shareholder value over the long-term.
Both Incentive Options and Nonqualified Options may be granted under the
Option Plan. An Incentive Option is intended to qualify as an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). As such, any Incentive Option granted under the Plan
will have an exercise price of not less than 100% of the fair market value of
the shares on the date on which such option is granted. With respect to an
Incentive Option granted to an employee who owns more than 10% of the total
combined voting stock of SIGA or of any parent or subsidiary of SIGA, the
exercise price for such option must be at least 110% of the fair market value of
the shares subject to the option on the date the option is granted.
In determining the size of an option grant to a named executive officer,
the Compensation Committee considers not only competitive market factors,
changes in responsibility and the executive officers' achievement of
pre-established goals, but also the number, term and vesting of options
previously granted to the officer. The Compensation Committee may also consider
the total compensation package or changes made thereto, when determining whether
to make an option award.
During the year ended December 31, 2006 the Compensation Committee did not
authorize awards of options to the officers of the Company.
Additional Benefits and Perquisites
Our officers and key employees are entitled to participate in the benefit
plans which are generally available to all employees, including health, dental,
life, and accidental disability. For each of these benefit plans, the Company
makes contributions to the premiums paid to the plans. The Company also offers a
401(k) defined contribution plan, however, the Company does not make any
contribution to the 401(k) plan. In each case, we provide these benefits to our
executive officers on the same basis as our other employees.
Severance and Change-in-Control Agreements
Finally, we also provide some of our executive officers with severance and
change-in-control arrangements in their employment contracts. We believe that
severance and change of control packages are a common characteristic of
compensation for key executive officers. They are intended to provide our
executive officers with a sense of security in making the commitment to dedicate
their professional career to our success. Due to our size relative to other
public companies and our operating history, we believe that severance and
change-in-control arrangements are necessary to help us attract and retain
necessary skilled and qualified executive officers to continue to grow our
business. As described elsewhere in this proxy statement, Dr. Kasten, our former
Chief Executive Officer, entered into an arrangement with the Company in
connection with his resignation.
Our Compensation Policies
Section 162(m) Policy
The Compensation Committee attempts to ensure full deductibility of
compensation notwithstanding the limitation on the deductibility of certain
compensation in excess of one million dollars under Section 162(m) of the Code.
17
The Company's stock options are designed so as to cause stock options and
bonuses granted there under to be exempt from the limitations contained in
Section 162(m) of the Code.
Common Share Ownership Requirements
While we have not adopted a formal written policy on common share
ownership requirements, part of our compensation philosophy involves common
share ownership by our executive officers, because we believe that it helps to
align their financial interests with those of our shareholders. We also
recognize, on the other hand, that our executive officers cannot acquire more
than 10% of our common shares without triggering adverse tax consequences. In
addition, we expect our executive officers to abide by the provisions of our
2004 Policy on Confidential Information and Insider Trading.
Timing of Awards
Our Compensation Committee has the authority to issue equity awards under
our Amended and Restated 1996 Incentive and Non-Qualified Option Plan. We expect
that the Compensation Committee will continue making ongoing annual option
awards to our executive officers and key employees. The Compensation Committee
strives to ensure that any award is made in such a manner to avoid even the
appearance of manipulation because of its award date.
18
Summary Compensation Table
The following table sets forth the total compensation of the Company's
Named Executive Officers for the fiscal year ended December 31, 2006. The Named
Executive Officers are the Company's Chief Executive Officer, Chief Financial
Officer, Chief Scientific Officer and the three other most highly compensated
officers whose total compensation exceeded $100,000.
Summary Compensation Table
Change in
Pension Value
and
Non-Equity Nonqualified
Inventive Deferred All
Stock Option Plan Compensation Other
Salary Bonus Awards Awards Compensation Earnings Compensation Total
Name and Principal Position Year ($) ($) ($) ($) ($) ($) ($) ($)
---- ------ ------- ------ --------- ------------ ------------ ------------ ---------
Bernard L. Kasten, M.D. 2006 83,333 -- -- -- -- -- 94,792 178,125
Chief Executive Officer (1) 2005 250,000 -- -- -- -- -- -- 250,000
2004 113,636 -- -- 2,556,000 -- -- -- 2,669,636
Thomas N. Konatich 2006 233,333 117,500 -- -- -- -- -- 350,833
Chief Financial Officer (2) 2005 230,000 35,000 -- -- -- -- -- 265,000
2004 218,485 50,000 -- 86,865 -- -- -- 355,350
Dennis E. Hruby, Ph.D. 2006 229,166 174,500 -- -- -- -- -- 403,666
Chief Scientific Officer 2005 225,000 112,500 -- -- -- -- -- 337,500
2004 213,363 63,000 -- 119,910 -- -- -- 396,273
Eric A. Rose, M.D. 2006 -- -- -- -- -- -- -- --
Chief Executive Officer (3) 2005 -- -- -- -- -- -- -- --
2004 -- -- -- -- -- -- -- --
(1) Dr. Kasten became Chief Executive Officer on July 2, 2004. His annual
salary was $250,000. Dr. Kasten resigned as Chief Executive Officer of SIGA
effective as of April 30, 2006.
(2) Mr. Konatich was appointed to serve in an additional capacity as Acting
Chief Executive Officer effective from May 1, 2006 through February 28,
2007.
(3) Dr. Rose became Chief Executive Officer on March 1, 2007.
Salary
The amounts reported in the "Salary" column above represent base salaries
paid to each of the Named Executive Officers for the fiscal year ended 2006.
Bonus
The amounts reported in the "Bonus" column above for the year ended
December 31, 2006, include bonus which was paid in 2006 and bonus accrued as
compensation for 2006 and paid in 2007.
Option Awards
As of January 1, 1996, we adopted our 1996 Incentive and Non-Qualified
Stock Option Plan. An amendment and restatement of such plan, as amended, was
adopted on May 3, 2001 and was further refined by the Board of Directors on June
29, 2001 (the "Plan"). The Plan was approved by our stockholders at an annual
meeting on August 15, 2001, and amended on January 8, 2004, to increase the
maximum number of shares of common stock available for issuance under the Plan
to 10,000,000. Stock options may be granted to key employees, consultants and
outside directors pursuant to the Plan. The Plan was amended again at our annual
meeting on May 26, 2005, when our stockholders voted to increase the maximum
number of shares of common stock available for issuance under the Plan from
10,000,000 to 11,000,000.
19
The Plan is administered by our Compensation Committee which determines
persons to be granted stock options, the amount of stock options to be granted
to each such person, and the terms and conditions of any stock options as
permitted under the Plan. The members of the Compensation Committee are Michael
A. Weiner, M.D., Paul G. Savas and Donald G. Drapkin. See "Committees of the
Board of Directors" above for more information.
Both Incentive Options and Nonqualified Options may be granted under the
Plan. An Incentive Option is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Any Incentive Option granted under the Plan will have an
exercise price of not less than 100% of the fair market value of the shares on
the date on which such option is granted. With respect to an Incentive Option
granted to an employee who owns more than 10% of the total combined voting stock
of SIGA or of any parent or subsidiary of SIGA, the exercise price for such
option must be at least 110% of the fair market value of the shares subject to
the option on the date the option is granted.
The Plan, as amended, provides for the granting of options to purchase
11,000,000 shares of common stock, of which 7,546,145 options were outstanding
as of December 31, 2006.
20
All Other Compensation
The amount reported in the "All Other Compensation" reflects payments made
to Dr. Kasten under his Separation Agreement with the Company, dated March 31,
2006.
Grants of Plan Based Awards
No options or other grants of plan based awards were granted during the
year ended December 31, 2006 to any named executive officer in their capacity as
such; however, Dr. Eric A. Rose, who became our Chief Executive Officer on March
1, 2007, received an award of an option to purchase 10,000 shares of our common
stock on December 19, 2006, in his capacity as a director of SIGA. Please see
the section entitled "Directors' Compensation" below for a description of Dr.
Rose's option award.
Employment Agreements
We currently have employment agreements with Dr. Rose, Mr. Konatich and
Dr. Hruby. These agreements became effective as of March 1, 2007 in the case of
Dr. Rose and January 22, 2007 in the case of Mr. Konatich and Dr. Hruby. In
fiscal year 2006, Mr. Konatich and Dr. Hruby were employed under prior
employment agreements (which the current agreements amend and restate). In
addition, we had an employment agreement with our former Chief Executive
Officer, Dr. Bernard L. Kasten, during his term of employment.
We have included below descriptions of the current employment agreements
and those in effect as of December 31, 2006. As we believe that the current
agreements are the most relevant for an understanding of the current
arrangements with our named executive officers, we have included them first.
However, we follow the current descriptions with descriptions of the prior
agreements in place as of December 31, 2006, so that the relevant information is
available for those matters in this proxy statement that are required to be
disclosed as of December 31, 2006.
Eric A. Rose - Chief Executive Officer
On January 31, 2007, we entered into an employment agreement with Dr. Eric
A. Rose, M.D., pursuant to which he became our Chief Executive Officer,
effective as of March 1, 2007. The employment agreement expires on February 29,
2008, and, unless either party provides thirty (30) days notice prior to the end
of the term, shall automatically renew for additional one (1) year periods
thereafter. Pursuant to the employment agreement, we agree to pay to Dr. Rose an
annual base salary of $400,000, subject to any cost of living adjustments as may
be approved by our Board. Dr. Rose is also eligible to receive bonus payments
(in either cash or stock options) as may be approved by the Board in its sole
discretion. We may terminate his employment agreement (with or without cause),
provided that upon any termination by us without cause (including, without
limitation, termination without cause upon a change in control), or termination
by Dr. Rose for
21
good reason, we will be obligated to continue to pay Dr. Rose's base salary for
one year, and all stock options and other stock-based grants to Dr. Rose shall
immediately and irrevocably vest and become exercisable upon the date of
termination and shall remain exercisable for a period of not less than one (1)
year from the date of termination. Further detail on our severance obligations
to Dr. Rose, including the definitions of "cause," "good reason" and "change in
control" is set forth below under the heading "Potential Payments Upon
Termination or Change-in-Control."
Thomas N. Konatich - Chief Financial Officer
On January 22, 2007, we entered into an amended and restated employment
agreement with Thomas N. Konatich, our Chief Financial Officer, which replaced
his prior employment agreement (which agreement is described in the following
paragraph). Mr. Konatich also serves as our Vice President, Secretary and
Treasurer, and from May 1, 2006 through February 28, 2007 served as our Acting
Chief Executive Officer. The current employment agreement expires on January 22,
2009, and, unless either party provides thirty (30) days notice prior to the end
of the term, shall automatically renew for additional one (1) year periods
thereafter. Pursuant to the employment agreement, we agree to pay to Mr.
Konatich an annual base salary of $250,000, subject to any cost of living
adjustments as may be approved by our Board, and an annual cash bonus of
$60,000. Mr. Konatich is also eligible to receive such additional bonus payments
(in either cash or stock options) as may be approved by our Board in its sole
discretion. We may terminate his employment agreement (with or without cause),
provided that upon any termination by us without cause (including, without
limitation, termination without cause upon a change in control), or termination
by Mr. Konatich for good reason, we will be obligated to continue to pay Mr.
Konatich's base salary for two (2) years, and all stock options and other
stock-based grants to Mr. Konatich shall immediately and irrevocably vest and
become exercisable upon the date of termination and shall remain exercisable for
a period of not less than one (1) year from the date of termination.
Previously, Mr. Konatich was employed by SIGA under an employment
agreement dated April 1, 1998, as amended on January 19, 2000, as amended and
restated on October 6, 2000, as amended on each of January 31, 2002, November 5,
2002, July 29, 2004 and February 1, 2006. Mr. Konatich received an annual base
salary of $230,000 and received a one-time payment of $50,000 for prior service
as Acting Chief Executive Officer (which duties concluded on July 2, 2004). Mr.
Konatich served as the Company's Chief Executive Officer from May 1, 2006
through February 28, 2007. His employment agreement provided for an additional
bonus payment at the discretion of the Board of Directors and not to exceed
twenty five percent (25%) of his annual base salary amount. He received options
to purchase 95,000 shares of common stock, at $4.44 on April 1, 1998. The
options vested on a pro rata basis on the first, second, third and fourth
anniversaries of the agreement. On January 19, 2000, he received an additional
grant to purchase 100,000 shares at an exercise price of $2.00 per share. These
options vested on a pro rata basis each quarter through January 19, 2002. On
January 31, 2002, Mr. Konatich was granted an Incentive Stock Option to purchase
50,000 shares at an exercise price of $3.94 per share. Such options vested in
eight equal quarterly installments beginning on April 20, 2002. On November 5,
2002, Mr. Konatich was granted an Incentive Stock Option to purchase 150,000
shares at an exercise price of $2.50 per share. 75,000 of these options vested
immediately and 75,000 options vested on September 1, 2003. On July 29, 2004,
Mr. Konatich was granted an Incentive Stock Option to purchase 150,000 shares at
an exercise price of $1.40 per share. 75,000 of these options vested
immediately, with the remaining 75,000 options vesting on a pro rata basis from
January 1, 2005 through December 31, 2005, with no provision for acceleration
under any circumstances. Mr. Konatich was also eligible to receive additional
stock options and bonuses at the discretion of the Board of Directors. SIGA was
permitted to terminate the employment agreement with or without cause (as such
term was defined in his employment agreement), provided that upon any
termination without cause, SIGA would have been obligated to continue to pay Mr.
Konatich's salary and all other amounts due under the employment agreement for
the remainder of the term. If Mr. Konatich had terminated due to a change of
control (as such term was defined in his employment agreement), SIGA would have
been required to pay Mr. Konatich a change in control amount (as such term was
defined in his employment agreement) plus his accrued and unpaid base salary,
and, upon the first event constituting a change of control, all stock options
and other stock-based grants to Mr. Konatich would have immediately and
irrevocably vested and become exercisable upon the date of such event.
Further detail on our severance obligations to Mr. Konatich, including the
definitions in his current employment agreement of "cause," "good reason" and
"change in control" is set forth below under the heading "Potential Payments
Upon Termination or Change-in-Control."
Dr. Dennis E. Hruby - Chief Scientific Officer
On January 22, 2007, we entered into an amended and restated employment
agreement with Dr. Dennis E. Hruby, our Chief Scientific Officer which replaced
his prior employment agreement (which agreement is described in the following
paragraph). The current employment agreement expires on January 22, 2010.
Pursuant to the employment agreement, we agree to pay to Dr. Hruby an annual
base salary of $250,000, subject to any cost of living adjustments as may be
approved by our Board, and an annual cash bonus of no less than twenty-five
percent (25%) and no more than fifty percent (50%) of Dr. Hruby's base salary.
Dr. Hruby is also eligible to receive such additional bonus payments (in either
22
cash or stock options) as may be approved by our Board in its sole discretion.
We may terminate his employment agreement (with or without cause), provided that
upon any termination by us without cause (including, without limitation,
termination without cause upon a change in control), or termination by Dr. Hruby
for good reason, we will be obligated to continue to pay Dr. Hruby's base salary
for two years, and all stock options and other stock-based grants to Dr. Hruby
shall immediately and irrevocably vest and become exercisable upon the date of
termination and shall remain exercisable for a period of not less than two (2)
years from the date of termination.
Previously, we employed Dr. Hruby under an employment agreement dated
January 1, 1998, as amended on each of June 16, 2000, January 31, 2002, October
3, 2002 and July 29, 2004. This employment agreement would have expired on
December 31, 2007, had the new employment agreement (discussed above) not been
entered into. Dr. Hruby received a base salary of $225,000 per year, and his
employment agreement also provided for additional bonus payments at the
discretion of the Board of Directors and not to exceed fifty percent (50%) of
his base salary amount. Dr. Hruby received options to purchase 10,000 shares of
common stock at an exercise price of $5.00 per share on April 1, 1997 and 40,000
shares of common stock at an exercise price of $4.63 per share on April 1, 1998.
The options became exercisable on a pro rata basis on the first, second, third
and fourth anniversaries of the employment agreement. Under the June 16, 2000
amendment, Dr. Hruby was granted options to purchase 125,000 shares of SIGA's
common stock at $2.00 per share. The options vested ratably over the remaining
term of the amendment. The January 31, 2002 amendment changed the terms of the
lock-up agreed to in the June 16, 2000 amendment to the employment agreement
limiting Hruby's ability to sell SIGA stock. On January 31, 2002, Dr. Hruby was
granted an Incentive Stock Option to purchase 50,000 shares at an exercise price
of $3.94 per share. Such options vested in four equal annual installments
beginning on August 15, 2002. As part of the October 3, 2002 amendment, Dr.
Hruby was granted an option to purchase 300,000 shares of common stock. Options
with respect to 75,000 shares vested upon the signing of the amendment and an
additional 75,000 vested on a pro rata basis on September 1 of each 2003, 2004
and 2005. The options have an exercise price of $2.50 per share. Dr. Hruby
surrendered his option to purchase up to 50,000 shares of common stock of SIGA
at an exercise price of $3.94 that he was granted under an earlier amendment. On
July 29, 2004, Dr. Hruby was granted an Incentive Stock Option to purchase
150,000 shares at an exercise price of $1.40 per share, which options vested in
75,000 share increments on December 31 of each year, commencing December 31,
2005. Dr. Hruby was eligible to receive additional stock options and bonuses at
the discretion of the Board of Directors. SIGA was permitted to terminate the
employment agreement with or without cause (as such term is defined in the
employment agreement), provided that upon any termination without cause SIGA
would have been obligated to continue to pay Dr. Hruby's salary for the
remainder of the term. In addition, SIGA had the right to terminate Dr. Hruby's
employment upon one (1) year written notice with such termination being treated
as a termination for cause. If Dr. Hruby was terminated due to a change of
control (as such term was defined in his employment agreement), SIGA would have
been required to pay Dr. Hruby a change in control amount (as such term was
defined in his employment agreement) plus his accrued and unpaid base salary,
and, upon the first event constituting a change of control, all stock options
and other stock-based grants to Dr. Hruby would have immediately and irrevocably
vested and become exercisable upon the date of such event.
Further detail on our severance obligations to Dr. Hruby including the
definitions in his current employment agreement of "cause," "good reason" and
"change in control" is set forth below under the heading "Potential Payments
Upon Termination or Change-in-Control."
Dr. Bernard L. Kasten - Former Chief Executive Officer
We employed Dr. Bernard L. Kasten, as SIGA's Chief Executive Officer,
under an employment agreement dated July 2, 2004. Dr. Kasten received an annual
base salary of $250,000 and his employment agreement also provided for
additional bonus payments at the discretion of the Board of Directors. On July
2, 2004, he received options to purchase 2,500,000 shares of common stock with
an exercise price of $1.30 per share, of which 500,000 shares vested on the date
of grant; with respect to the next 1,000,000 shares, an additional 166,666
shares vested on the end of each six (6) month period after date of grant until
the end of the sixth six (6) month period at which time 166,667 shares were to
vest. Effective April 30, 2006, SIGA and Dr. Kasten reached an agreement for Dr.
Kasten's resignation. In connection with such agreed upon resignation, SIGA and
Dr. Kasten entered into a Separation Agreement dated March 31, 2006 (the
"Separation Agreement"). Under the provisions of the Separation Agreement, Dr.
Kasten received his salary on the existing terms and conditions as set forth in
his employment agreement with SIGA, dated July 2, 2004 (the "Kasten Employment
Agreement") in lieu of any other severance or payment, through September 16,
2006 (the "Separation Period"). Concurrently with the execution of the
Separation Agreement, SIGA and Dr. Kasten also amended Dr. Kasten's Incentive
Stock Option Agreement such that Dr. Kasten's "Milestone Options" (as such term
is defined in the Kasten Employment Agreement) were cancelled and Dr. Kasten's
"Time Vested Options" (as such term is defined in the Kasten Employment
Agreement) were amended such that with respect to the Time Vested Options which
had not vested as of the date of the Separation Agreement, such options will
vest as follows: with respect to 166,666 shares as of July 2, 2006 and with
respect to the remaining 83,334 shares, as of January 2, 2007. Time Vested
Options granted to Dr. Kasten which vested prior to the date
23
of the Separation Agreement shall remain unchanged. Dr. Kasten was also
permitted to continue to receive medical and/or dental insurance benefits under
the relevant SIGA plans until (i) the end of the Remaining Tenure (defined as
the earlier of April 30, 2006 or Dr. Kasten's obtaining new employment), (ii) he
becomes entitled to Medicare or (iii) he becomes eligible for coverage under
medical and/or dental insurance benefit plans, as the case may be, of another
employer through his future employment, whichever occurs first. The Separation
Agreement also contains mutual non-disparagement and release terms, requires
that Dr. Kasten remain available to SIGA on a reasonable basis for transitional
purposes during the Separation Period and requires SIGA to indemnify Dr. Kasten
under the terms of its certificate of incorporation and bylaws for acts relating
to his employment.
Outstanding Equity Awards at Fiscal Year End
The following table provides certain summary information concerning
unexercised options and equity incentive plan awards for each Named Executive
Officer as of December 31, 2006.
Option Awards
Equity
Incentive
Plan
Number of Number of Awards:
Securities Securities Number of
Underlying Underlying Securities
Unexercised Unexercised Underlying
Options Options Unexercised Option Option
(#) (#) Unearned Exercise Expiration
Name and Principal Position Exercisable Unexercisable Options (#) Price ($) Date
Bernard L. Kasten, M.D. 100,000 -- -- 1.81 3/20/2007
Chief Executive Officer (1) 1,250,000 -- -- 1.30 7/2/2014
Thomas N. Konatich 95,000 -- -- 4.44 4/1/2008
Chief Financial Officer (2) 100,000 -- -- 2.00 1/19/2010
50,000 -- -- 3.94 1/31/2012
150,000 -- -- 2.50 11/15/2012
150,000 -- -- 1.40 7/29/2014
Dennis E. Hruby, Ph.D. 10,000 -- -- 5.00 4/1/2007
Chief Scientific Officer 40,000 -- -- 4.63 4/1/2008
125,000 -- -- 2.00 5/25/2010
300,000 -- -- 2.50 7/23/2012
150,000 -- -- 1.40 6/29/2014
Eric A. Rose, M.D. 600,000 -- -- 2.50 5/3/2001
Chief Executive Officer (3) 10,000 -- -- 1.22 6/2/2005
10,000 -- -- 2.72 12/19/2006
24
Stock Awards
Equity
Equity Incentive
Incentive Plan Awards:
Plan Awards: Market or
Number of Market Number of Payout
Shares or Value of Unearned Value of
Units of Shares or Shares, Units Unearned
Stock Units of or Other Shares, Units
That Stock That Rights That or Other
Have Not Have Not Have Not Rights That
Name and Principal Position Vested Vested (#) Vested (#) have Not
vested ($)
Bernard L. Kasten, M.D. -- -- -- --
Chief Executive Officer (1) -- -- -- --
Thomas N. Konatich -- -- -- --
Chief Financial Officer (2) -- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
Dennis E. Hruby, Ph.D. -- -- -- --
Chief Scientific Officer -- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
Eric A. Rose, M.D. -- -- -- --
Chief Executive Officer (3) -- -- -- --
-- -- -- --
(1) Dr. Kasten became Chief Executive Officer on July 2, 2004. His annual
salary was $250,000. Dr. Kasten resigned as Chief Executive Officer of
SIGA effective as of April 30, 2006.
(2) Mr. Konatich was appointed to serve in an additional capacity as Acting
Chief Executive Officer effective from May 1, 2006 through February 28,
2007.
(3) Dr. Rose became Chief Executive Officer on March 1, 2007.
Option Exercises and Stock Vested
During the fiscal year ended December 31, 2006 no options were exercised
by any of our officers. Our officers did not receive any stock awards during the
current year or any other year.
Fiscal Year-End Option Values
The following table provides certain summary information concerning stock
options held as of December 31, 2006 by SIGA's Named Executive Officers.
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options At
Options # Fiscal Year-End ($) (1)
Exercisable Unexercisable Exercisable Unexercisable
Bernard L. Kasten, M.D 1,350,000 -- $3,256,500 --
Thomas N. Konatich 545,000 -- $ 715,000 --
Dennis E. Hruby, Ph.D. 625,000 -- $ 946,250 --
Eric A. Rose, M.D 620,000 -- $ 785,600 --
(1) Based upon the closing price on December 31, 2006, as reported on the
Nasdaq SmallCap Market and the exercise price per option.
Potential Payments Upon Termination or Change in Control
Severance Arrangement for Thomas N. Konatich
The following table and footnotes describe and quantify the potential
payments upon termination or change in control for Mr. Konatich, assuming that
termination or change-in-control was effective as of December 31, 2006:
Termination by the
Company without
cause (or by the Termination upon Termination by the
officer for good death or Company due to a
Thomas N. Konatich cause) disability change in control
Aggregate monthly cash payments $ 249,167 $ -- $ --
Lump sum cash payment -- -- 249,167
Value of accelerated stock options -- -- --
----------- ----------- -----------
Total $ 249,167 $ -- $ 249,167
=========== =========== ===========
Pursuant to Mr. Konatich's prior employment agreement (which was in effect
as of December 31, 2006), the following termination and change in
control-related circumstances would trigger payments or the provision of other
benefits:
o Termination by the Company for cause.
o Termination by the Company based on Mr. Konatich's death or
disability.
o Termination by the Company without cause (or by Mr. Konatich
for good reason).
o Termination by the Company due to a change in control.
Payments Upon any Termination other than in connection with a Change in Control:
If Mr. Konatich was terminated for cause or disability, or if he resigned
for reasons other than a material breach by the Company of its obligations under
his employment agreement, or a material reduction of his duties, or if he died,
then the Company had no obligation to pay Mr. Konatich any amount, whether for
salary, benefits, bonuses, or other compensation or expense reimbursements of
any kind, accruing after his termination, and such rights would be, except as
25
otherwise required by law, forfeited immediately upon termination. However,
payments of base salary would continue until the expiration of the employment
agreement where Mr. Konatich was terminated for death or disability. If the
Company had terminated Mr. Konatich without cause, then the Company would have
been obligated to continue to pay Mr. Konatich's salary and all other amounts
due under the employment agreement for the remainder of the term of the
employment agreement (as if no early termination had occurred).
Payments Upon any Termination in connection with a Change in Control:
Applicability. The change in control provisions applied if Mr. Konatich's
employment was terminated (or a notice of termination is given) 90 days prior to
or within 18 months after a change in control. Pursuant to the employment
agreement, a change in control would have occurred (i) upon an acquisition of
35% of the voting power of economic interest of the Company's common stock, (ii)
certain changes in the majority of the board of director's membership, (iii) the
approval by the Company's stockholders of certain reorganizations, mergers or
consolidations, (iv) the sale or other disposition of more than 50% of the
Company's assets, (iv) a fundamental change in the business or (v) a hostile
takeover.
Change of Control Payment. If Mr. Konatich was terminated within the applicable
period other than for death, disability, or by him without cause, the Company
would have been required to pay to him, in a lump sum, on or prior to the 5th
day following the date of termination, an amount equal to his salary and all
other amounts due under his employment agreement for the remainder of its term,
plus a gross up payment and any accrued and unpaid base salary.
Stock Option Floor. Upon a change in control all stock options and other
stock-based grants to Mr. Konatich by SIGA would have immediately vested and
become exercisable as of such date.
Gross Up Payment. If Mr. Konatich had incurred the excise tax imposed by the IRS
on "Excess Parachute Payments" the Company would have been required to pay an
additional amount such that the amount retained by Mr. Konatich after deduction
of any excise tax on both the Excess Parachute Payment and any federal, state
and local income tax (together with penalties and interest) as well as the
excise tax due on the gross up itself would have been equal to the amounts he
would have received upon a change of control had no such tax been imposed.
Satisfactory Alternative. Mr. Konatich's rights with respect to a change in
control termination would not have applied if, prior to or simultaneously with a
such a termination due to a change in control, he was offered employment within
the New York Metro area by another business as its chief financial officer at a
level of compensation equal to or greater than his compensation by the Company.
Pursuant to Mr. Konatich's current employment agreement (which was
effective as of January 22, 2007), the following termination and change in
control-related circumstances would trigger payments or the provision of other
benefits:
o Termination by the Company without cause or by Mr. Konatich
for good reason.
o Termination by the Company within 90 days of the occurrence of
a change in control (other than for cause)
o Termination by the Company for cause or by Mr. Konatich
without good reason.
o Termination by the Company based on Mr. Konatich's death or
total disability.
If Mr. Konatich's employment agreement is terminated without cause or if
Mr. Konatich terminates his employment for good reason, he will be entitled to
the following: (i) any accrued but unpaid salary for services rendered through
the date of termination (ii) any vacation accrued to the date of termination, in
accordance with Company policy; (iii) any accrued but unpaid expenses through
the date of termination required to be reimbursed in accordance with his
employment agreement; (iv) any benefits to which he may be entitled upon
termination pursuant to the plans, programs and grants referred to in the
employment agreement in accordance with the terms of such plans, programs and
grants, (v) the continued payment of his salary for two (2) years; and (vi) the
Company shall take all such action as is necessary such that all stock options
and other stock-based grants to Mr. Konatich shall, immediately and irrevocably
vest and become exercisable as of the date of termination and shall remain
exercisable for a period of not less than one (1) year from the date of
termination.
If Mr. Konatich's employment agreement is terminated within 90 days after
the occurrence of a change in control other than for cause, he will be entitled
to the following: (i) any accrued but unpaid salary for services rendered
through the date of termination (ii) any vacation accrued to the date of
termination, in accordance with Company policy; (iii) any accrued but unpaid
expenses through the date of termination required to be reimbursed in accordance
with his employment
26
agreement; (iv) any benefits to which he may be entitled upon termination
pursuant to the plans, programs and grants referred to in the employment
agreement in accordance with the terms of such plans, programs and grants, (v)
the continued payment of his salary for two (2) years; and (vi) the Company
shall take all such action as is necessary such that all stock options and other
stock-based grants to Mr. Konatich shall, immediately and irrevocably vest and
become exercisable as of the date of termination and shall remain exercisable
for a period of not less than one (1) year from the date of termination.
If Mr. Konatich's employment is terminated for cause, or if he voluntarily
terminates his employment, he will be entitled to the following: (i) any accrued
but unpaid salary for services rendered through the date of termination (ii) any
vacation accrued to the date of termination, in accordance with Company policy;
(iii) any accrued but unpaid expenses through the date of termination required
to be reimbursed in accordance with his employment agreement; and (iv) any
benefits to which he may be entitled upon termination pursuant to the plans,
programs and grants referred to in the employment agreement in accordance with
the terms of such plans, programs and grants.
If Mr. Konatich's employment is terminated prior to the expiration of the
term by reason of death or total disability, his estate or beneficiaries will be
entitled to the following: (i) any accrued but unpaid salary for services
rendered through the date of termination (ii) any vacation accrued to the date
of termination, in accordance with Company policy; (iii) any accrued but unpaid
expenses through the date of termination required to be reimbursed in accordance
with his employment agreement; and (iv) any benefits to which he may be entitled
upon termination pursuant to the plans, programs and grants referred to in the
employment agreement in accordance with the terms of such plans, programs and
grants.
Severance Arrangement for Dr. Hruby
The following table and footnotes describe and quantify the potential
payments upon termination or change in control for Dr. Hruby, assuming that
termination or change-in-control was effective as of December 31, 2006:
Termination by the
Company without
cause (or by the Termination upon Termination by the
officer for good death or Company due to a
Dr. Dennis E. Hruby cause) disability change in control
Aggregate monthly cash payments $ 225,000 $ -- $ --
Lump sum cash payment -- -- 225,000
Value of accelerated stock options -- -- --
------------ ------------ ------------
Total $ 225,000 $ -- $ 225,000
============ ============ ============
Pursuant to Dr. Hruby's prior employment agreement (which was in effect as
of December 31, 2006), the following termination and change in control-related
circumstances would trigger payments or the provision of other benefits:
o Termination by the Company for cause (including by providing
one (1) year written notice with such termination being
treated as a termination for cause).
o Termination by the Company based on Dr. Hruby's death or
disability.
o Termination by the Company without cause (or by Dr. Hruby for
good reason).
o Termination by the Company due to a change in control.
Payments Upon any Termination other than in connection with a Change in Control:
If Dr. Hruby was terminated for cause or disability, or if he resigned for
reasons other than a material breach by the Company of its obligations under his
employment agreement, or a material reduction of his duties, or if he died, then
the Company had no obligation to pay Dr. Hruby any amount, whether for salary,
benefits, bonuses, or other compensation or expense reimbursements of any kind,
accruing after his termination, and such rights would be, except as otherwise
required by law, forfeited immediately upon termination. However, payments of
base salary would continue until the expiration of the employment agreement
where Dr. Hruby was terminated for death or disability. If the Company had
terminated Dr. Hruby without cause, then the Company would have been obligated
to continue to pay Dr. Hruby's salary and all other amounts due under the
employment agreement for the remainder of the term of the employment agreement
(as if no early termination had occurred).
27
Payments Upon any Termination in connection with a Change in Control:
Applicability. The change in control provisions applied if Dr. Hruby's
employment was terminated (or a notice of termination is given) 90 days prior to
or within 12 months after a change in control. Pursuant to the employment
agreement, a change in control would have occurred (i) upon an acquisition of
35% of the voting power of economic interest of the Company's common stock, (ii)
certain changes in the majority of the board of director's membership, (iii) the
approval by the Company's stockholders of certain reorganizations, mergers or
consolidations, (iv) the sale or other disposition of more than 50% of the
Company's assets, (iv) a fundamental change in the business or (v) a hostile
takeover.
Change of Control Payment. If Dr. Hruby was terminated within the applicable
period other than for death, disability, or by him for any reason, the Company
would have been required to pay to him, in a lump sum, on or prior to the 5th
day following the date of termination, an amount equal to his salary and all
other amounts due under his employment agreement for the remainder of its term,
plus a gross up payment and any accrued and unpaid base salary.
Stock Option Floor. Upon a change in control all stock options and other
stock-based grants to Dr. Hruby by SIGA would have immediately vested and become
exercisable as of such date.
Gross Up Payment. If Dr. Hruby had incurred the excise tax imposed by the IRS on
"Excess Parachute Payments" the Company would have been required to pay an
additional amount such that the amount retained by Dr. Hruby after deduction of
any excise tax on both the Excess Parachute Payment and any federal, state and
local income tax (together with penalties and interest) as well as the excise
tax due on the gross up itself would have been equal to the amounts he would
have received upon a change of control had no such tax been imposed.
Satisfactory Alternative. Dr. Hruby's rights with respect to a change in control
termination would not have applied if, prior to or simultaneously with such a
termination due to a change in control, he was offered employment within 50
miles of Albany Oregon by another business at a level of compensation equal to
or greater than his compensation by SIGA
Pursuant to Dr. Hruby's current employment agreement (which was effective
as of January 22, 2007), the following termination and change in control-related
circumstances would trigger payments or the provision of other benefits:
o Termination by the Company without cause or by Dr. Hruby for
good reason.
o Termination by the Company within 90 days of the occurrence of
a change in control (other than for cause)
o Termination by the Company for cause or by Dr. Hruby without
good reason.
o Termination by the Company based on Dr. Hruby's death or total
disability.
If Dr. Hruby's employment agreement is terminated without cause or if Dr.
Hruby terminates his employment for good reason, he will be entitled to the
following: (i) any accrued but unpaid salary for services rendered through the
date of termination (ii) any vacation accrued to the date of termination, in
accordance with Company policy; (iii) any accrued but unpaid expenses through
the date of termination required to be reimbursed in accordance with his
employment agreement; (iv) any benefits to which he may be entitled upon
termination pursuant to the plans, programs and grants referred to in the
employment agreement in accordance with the terms of such plans, programs and
grants, (v) the continued payment of his salary for two (2) years; and (vi) the
Company shall take all such action as is necessary such that all stock options
and other stock-based grants to Dr. Hruby shall, immediately and irrevocably
vest and become exercisable as of the date of termination and shall remain
exercisable for a period of not less than two (2) years from the date of
termination.
If Dr. Hruby's employment agreement is terminated within 90 days after the
occurrence of a change in control other than for cause, he will be entitled to
the following: (i) any accrued but unpaid salary for services rendered through
the date of termination (ii) any vacation accrued to the date of termination, in
accordance with Company policy; (iii) any accrued but unpaid expenses through
the date of termination required to be reimbursed in accordance with his
employment agreement; (iv) any benefits to which he may be entitled upon
termination pursuant to the plans, programs and grants referred to in the
employment agreement in accordance with the terms of such plans, programs and
grants, (v) the continued payment of his salary for two (2) years; and (vi) the
Company shall take all such action as is necessary such that all stock options
and other stock-based grants to Dr. Hruby shall, immediately and irrevocably
vest and become exercisable as of the date of termination and shall remain
exercisable for a period of not less than two (2) years from the date of
termination.
If Dr. Hruby's employment is terminated for cause, or if he voluntarily
terminates his employment, he will be entitled to the following: (i) any accrued
but unpaid salary for services rendered through the date of termination (ii) any
28
vacation accrued to the date of termination, in accordance with Company policy;
(iii) any accrued but unpaid expenses through the date of termination required
to be reimbursed in accordance with his employment agreement; and (iv) any
benefits to which he may be entitled upon termination pursuant to the plans,
programs and grants referred to in the employment agreement in accordance with
the terms of such plans, programs and grants.
If Dr. Hruby's employment is terminated prior to the expiration of the
term by reason of death or total disability, his estate or beneficiaries will be
entitled to the following: (i) any accrued but unpaid salary for services
rendered through the date of termination (ii) any vacation accrued to the date
of termination, in accordance with Company policy; (iii) any accrued but unpaid
expenses through the date of termination required to be reimbursed in accordance
with his employment agreement; and (iv) any benefits to which he may be entitled
upon termination pursuant to the plans, programs and grants referred to in the
employment agreement in accordance with the terms of such plans, programs and
grants.
Severance Arrangement for Dr. Bernard Kasten
Dr. Bernard L. Kasten served as SIGA's Chief Executive Officer from July
2, 2004 to April 30, 2006, under an employment agreement dated July 2, 2004.
Effective April 30, 2006, SIGA and Dr. Kasten reached an agreement for Dr.
Kasten's resignation. In connection with such agreed upon resignation, SIGA and
Dr. Kasten entered into a Separation Agreement dated March 31, 2006 (the
"Separation Agreement"). Under the provisions of the Separation Agreement, Dr.
Kasten received his salary on the existing terms and conditions as set forth in
his employment agreement with SIGA, dated July 2, 2004 (the "Kasten Employment
Agreement") in lieu of any other severance or payment, through September 16,
2006 (the "Separation Period"). Concurrently with the execution of the
Separation Agreement, SIGA and Dr. Kasten also amended Dr. Kasten's Incentive
Stock Option Agreement such that Dr. Kasten's "Milestone Options" (as such term
is defined in the Kasten Employment Agreement) were cancelled and Dr. Kasten's
"Time Vested Options" (as such term is defined in the Kasten Employment
Agreement) were amended such that with respect to the Time Vested Options which
had not vested as of the date of the Separation Agreement, such options vested
as follows: with respect to 166,666 shares, as of July 2, 2006, and with respect
to the remaining 83,334 shares, as of January 2, 2007. Time Vested Options
granted to Dr. Kasten which vested prior to the date of the Separation Agreement
shall remain unchanged. Dr. Kasten was permitted to continue to receive medical
and/or dental insurance benefits under the relevant SIGA plans until (i) the end
of the Remaining Tenure (defined as the earlier of April 30, 2006 or Dr.
Kasten's obtaining new employment), (ii) he became entitled to Medicare or (iii)
he became eligible for coverage under medical and/or dental insurance benefit
plans, as the case may be, of another employer through his future employment,
whichever occurred first. The Separation Agreement also contains mutual
non-disparagement and release terms, requires that Dr. Kasten remain available
to SIGA on a reasonable basis for transitional purposes during the Separation
Period and requires SIGA to indemnify Dr. Kasten under the terms of its
certificate of incorporation and bylaws for acts relating to his employment.
Severance Arrangement for Dr. Rose
Pursuant to Dr. Rose's current employment agreement (which was effective
as of January 22, 2007), the following termination and change in control-related
circumstances would trigger payments or the provision of other benefits:
o Termination by the Company without cause or by Dr. Rose for
good reason.
o Termination by the Company within 90 days of the occurrence of
a change in control (other than for cause)
o Termination by the Company for cause or by Dr. Rose without
good reason.
o Termination by the Company based on Dr. Rose's death or total
disability.
If Dr. Rose's employment agreement is terminated without cause or if Dr.
Rose terminates his employment for good reason, he will be entitled to the
following: (i) any accrued but unpaid salary for services rendered through the
date of termination (ii) any vacation accrued to the date of termination, in
accordance with Company policy; (iii) any accrued but unpaid expenses through
the date of termination required to be reimbursed in accordance with his
employment agreement; (iv) any benefits to which he may be entitled upon
termination pursuant to the plans, programs and grants referred to in the
employment agreement in accordance with the terms of such plans, programs and
grants, (v) the continued payment of his salary for one (1) year; and (vi) the
Company shall take all such action as is necessary such that all stock options
and other stock-based grants to Dr. Rose shall, immediately and irrevocably vest
and become exercisable as of the date of termination and shall remain
exercisable for a period of not less than one (1) year from the date of
termination.
If Dr. Rose's employment agreement is terminated within 90 days after the
occurrence of a change in control other than for cause, he will be entitled to
the following: (i) any accrued but unpaid salary for services rendered through
the date
29
of termination (ii) any vacation accrued to the date of termination, in
accordance with Company policy; (iii) any accrued but unpaid expenses through
the date of termination required to be reimbursed in accordance with his
employment agreement; (iv) any benefits to which he may be entitled upon
termination pursuant to the plans, programs and grants referred to in the
employment agreement in accordance with the terms of such plans, programs and
grants, (v) the continued payment of his salary for one (1) year; and (vi) the
Company shall take all such action as is necessary such that all stock options
and other stock-based grants to Dr. Rose shall, immediately and irrevocably vest
and become exercisable as of the date of termination and shall remain
exercisable for a period of not less than one (1) year from the date of
termination.
If Dr. Rose's employment is terminated for cause, or if he voluntarily
terminates his employment, he will be entitled to the following: (i) any accrued
but unpaid salary for services rendered through the date of termination (ii) any
vacation accrued to the date of termination, in accordance with Company policy;
(iii) any accrued but unpaid expenses through the date of termination required
to be reimbursed in accordance with his employment agreement; and (iv) any
benefits to which he may be entitled upon termination pursuant to the plans,
programs and grants referred to in the employment agreement in accordance with
the terms of such plans, programs and grants.
If Dr. Rose's employment is terminated prior to the expiration of the term
by reason of death or total disability, his estate or beneficiaries will be
entitled to the following: (i) any accrued but unpaid salary for services
rendered through the date of termination (ii) any vacation accrued to the date
of termination, in accordance with Company policy; (iii) any accrued but unpaid
expenses through the date of termination required to be reimbursed in accordance
with his employment agreement; and (iv) any benefits to which he may be entitled
upon termination pursuant to the plans, programs and grants referred to in the
employment agreement in accordance with the terms of such plans, programs and
grants.
Other General Terms
Circumstances Triggering Payments
"Cause," "good reason" and "change of control" are defined in Dr. Rose,
Mr. Konatich and Dr. Hruby's current employment agreement as follows:
"Cause" generally includes:
o executive officer's neglect or failure or refusal to perform his
duties under the applicable employment agreement (other than as a
result of total or partial incapacity due to physical or mental
illness);
o any act by or omission of executive officer constituting gross
negligence or willful misconduct in connection with the performance
of his duties that could reasonably be expected to materially injure
the reputation, business or business relationships of the Company or
any of its affiliates;
o perpetration of an intentional and knowing fraud against or
affecting the Company or any of its affiliates or any customer,
client, agent, or employee thereof;
o the commission by or indictment of executive officer for (A) a
felony or (B) any misdemeanor involving moral turpitude, deceit,
dishonesty or fraud ("indictment," for these purposes, meaning a
United States-based indictment, probable cause hearing or any other
procedure pursuant to which an initial determination of probable or
reasonable cause with respect to such offense is made);
o the breach of a covenant set forth in the applicable employment
agreement; or
o any other material breach the applicable employment agreement.
"Good reason" generally includes:
o the Company failing to pay the executive officer his base salary;
o executive officer no longer holding his agreed upon office or
offices of equivalent stature, or his functions and/or duties being
materially diminished; or
o executive officer's job site being involuntarily relocated to a
location which is more than fifty (50) miles from the agreed upon
region.
a "Change in Control" is deemed to occur upon:
o the consummation of a transaction or a series of related
transactions pursuant to which any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934
("Exchange Act"), other than the executive officer, his designee(s)
or "affiliate(s)" (as defined in Rule 12b-2 under the Exchange Act),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing forty percent (40%) or more of the combined
voting power of the Company's then outstanding securities;
30
o stockholders of the Company approve a merger or consolidation of the
Company with any other entity, other than a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than eighty percent (80%)
of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger
or consolidation; or
o the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of, or the Company sells or disposes of,
all or substantially all of the Company's assets.
Pursuant to their current employment agreements, during the term thereof plus an
additional twenty four months thereafter, Dr. Rose, Mr. Konatich and Dr. Hruby
have agreed not to engage in any competitive business with us or to induce our
employees to terminate their employment or to solicit our customers. We agree to
indemnify each of them under their respective employment agreement for
liabilities incurred because of their employment and to provide each of them
with the full protection of any directors' and officers' liability insurance
policies maintained generally for the benefit of our officers.
Under their prior employment agreement, Mr. Konatich and Dr. Hruby also had
confidentiality and non-competition obligations to the Company.
Equity Compensation Plan Information
The following table sets forth certain compensation plan information with
respect to both equity compensation plans approved by security holders and
equity compensation plans not approved by security holders as of December 31,
2006:
Number of Number of securities
securities to be Weighted-average remaining available
issued upon exercise price for future issuance
exercise of of outstanding under equity
outstanding options, compensation plans
options, warrants warrants and (excluding securities
Plan Category and rights rights reflected in column (a))
(a) (b) (c)
Equity compensation plans
approved by security holders (1) 7,546,145 $2.07 2,341,399
Equity compensation plans not
approved by security holders 190,000 $2.00 --
Total 7,736,145 $2.07 2,341,399
(1) SIGA Technologies, Inc., Amended and Restated 1996 Incentive and
Non-Qualified Stock Option Plan.
On December 31, 2006, options awarded outside of the Company's equity
compensation plan included 125,000 options awarded to an employee and 65,000
options awarded to consultants. In May 2000, the Company awarded its Chief
Scientific Officer options to acquire 125,000 shares of the Company's common
stock at an exercise price of $2.00 per share. In July 2000, the Company entered
into an agreement with a consultant to serve as the Company's public relations
agent and awarded the consultant options to acquire shares of the Company's
common stock. On December 31, 2006, the consultant held 27,500 options and
37,500 options with an exercise price of $1.50 per share and $1.75 per share,
respectively.
Director Compensation
During the fiscal year ending December 31, 2006, the named Directors and
Officers of SIGA received long-term incentive compensation under the Plan as
shown in the following table.
Non-Equity
Incentive Nonqualified
Fees Earned Stock Option Plan Deferred All Other
or paid in Awards Awards Compensation Compensation Compensation Total
Name Cash ($) ($) ($) ($) earnings ($) ($) ($)
James J. Antal (3) (4) 17,000 -- 14,850 -- -- -- 31,850
Thomas E. Constance 10,000 -- 14,850 -- -- -- 24,850
Donald G. Drapkin (6) 9,000 -- 14,850 -- -- -- 23,850
Scott M. Hammer, M.D. (2) -- -- 37,125 -- -- -- 37,125
Bernard L. Kasten, M.D. (1) 5,000 -- -- -- -- -- 5,000
Adnan M. Mjalli, Ph.D. 9,000 -- 14,850 -- -- -- 23,850
Mehmet C. Oz, M.D. 5,000 -- 14,850 -- -- -- 19,850
Eric A. Rose, M.D. (5) 9,000 -- 14,850 -- -- -- 23,850
Paul G. Savas (3) (6) 20,000 -- 14,850 -- -- -- 34,850
Judy S. Slotkin (3) (4) 17,500 -- 14,850 -- -- -- 32,350
Michael Weiner, M.D. (4) (6) 11,000 -- 14,850 -- -- -- 25,850
(1) Dr. Kasten served on our Board of Directors until December 19, 2006.
(2) Dr. Hammer was elected to serve on our Board of Directors on December 19,
2006.
(3) Member of the Audit Committee
(4) Member of the Nominating and Corporate Governance Committee
(5) Chairman of the Board
(6) Member of the Compensation Committee
The aggregate number of stock option awards held by each of the
directors at December 31, 2006, and the number of stock option awards granted in
the current fiscal year are shown in the following table:
Total Option
Option Awards Awards
During the Outstanding
Current Year at December 31,
Name (#) 2006 (#)
James J. Antal 10,000 45,000
Thomas E. Constance 10,000 245,000
Donald G. Drapkin 10,000 1,145,000
Scott M. Hammer, M.D. 25,000 25,000
Bernard L. Kasten, M.D. -- 1,350,000
Adnan M. Mjalli, Ph.D. 10,000 45,000
Mehmet C. Oz, M.D. 10,000 120,000
Eric A. Rose, M.D. 10,000 620,000
Paul G. Savas 10,000 45,000
Judy S. Slotkin 10,000 45,000
Michael Weiner, M.D. 10,000 120,000
Director Fees and Equity Compensation
Directors who are not currently receiving compensation as officers or
employees of the Company or any of its affiliates receive $1,000 per meeting for
board meetings and will be reimbursed for expenses incurred by them in
connection with serving on our Board of Directors. The chairman of the Audit
Committee will receive $1,000 per meeting for meetings of the Audit Committee
and all other members of the Audit Committee will receive $500 per meeting for
31
meetings of the Audit Committee. Members of Compensation Committee and
Nominating and Corporate Governance Committee will receive $500 per meeting for
meetings of the Compensation Committee and Nominating and Corporate Governance
Committee.
Non-employee directors will receive an initial grant of 25,000 options,
upon such non-employee director's first election to the Board of Directors,
which such options will be granted under SIGA's Amended and Restated 1996
Incentive and Non-Qualified Stock Option Plan. In addition, non-employee
directors will receive an annual grant of 10,000 options under SIGA's Amended
and Restated 1996 Incentive and Non-Qualified Stock Option Plan, made at each
Annual Meeting and commencing with the 2005 Annual Meeting. All such options
have an exercise price equal to the fair market value of the underlying SIGA
shares on the date of grant.
32
TRANSACTIONS WITH RELATED PERSONS
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
The Company's policies and procedures for reviewing, approving, and
ratifying transactions with related persons are set forth in a written policy.
See "Annex A" to this proxy statement for the full "Statement of Policy with
respect to Related Party Transactions."
Under these procedures, at each calendar year's first regularly scheduled
Audit Committee meeting, management recommends related party transactions be
entered into by the Company for that calendar year, including the proposed
aggregate value of such transactions, if applicable. After review, the Audit
Committee either approves or disapproves such transactions, and at each
subsequently scheduled meeting, management is required to update the Audit
Committee as to any material change to those proposed transactions.
Further, in the event management recommends any further related party
transactions subsequent to the first calendar year meeting, such transactions
may be presented to the Audit Committee for approval or preliminarily entered
into by management subject to ratification by the Audit Committee; provided
that, if ratification shall not be forthcoming, management shall make all
reasonable efforts to cancel or annul such transactions.
In addition, with respect to any related party transaction that includes a
compensation component, management will submit the terms of such proposed
compensation (or any subsequent material changes to such compensation) to the
Compensation Committee for its review. After its review, the Compensation
Committee either approves or disapproves the compensation component of the
related party transaction and informs management and the Audit Committee of such
approval or disapproval.
TRANSACTIONS WITH RELATED PERSONS
Based on information provided by the directors and the executive officers,
the Audit Committee determined that there were no related person transactions to
be reported in this proxy statement other than:
During the year ended December 31, 2006, we were billed by an affiliate of
TransTech Pharma, for services provided in connection with the manufacturing of
our leading drug candidate, SIGA-246.
Kramer Levin Naftalis and Frankel LLP, the Company's legal counsel billed
the Company for legal services provided to the Company.
33
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed the firm of
PricewaterhouseCoopers LLP as SIGA's independent registered public accounting
firm to audit the financial statements of SIGA for the fiscal year ending
December 31, 2007, and recommends that stockholders vote for ratification of
this appointment. PricewaterhouseCoopers LLP has audited SIGA's financial
statements since January 1997. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions. The affirmative vote of a majority of the
total votes cast on such proposal in person or by proxy at the Annual Meeting
will be required to ratify the selection of PricewaterhouseCoopers LLP.
If the stockholders fail to ratify the selection, the Audit Committee will
reconsider its selection of auditors. Even if the selection is ratified, the
Audit Committee, in its discretion, may direct the appointment of a different
independent registered public accounting firm at any time during the year, if it
determines that such change would be in the best interests of SIGA and its
stockholders.
Audit Fees
PricewaterhouseCoopers LLP billed SIGA $235,000 in the aggregate, for
professional services rendered by them for the audit of SIGA's annual financial
statements for the fiscal year ended December 31, 2006, reviews of the interim
financial statements included in SIGA's Forms 10-Q filed during the year ended
December 31, 2006 and consents and reviews of various documents filed with the
SEC during the year ended December 31, 2006.
PricewaterhouseCoopers LLP billed SIGA $184,300 in the aggregate, for
professional services rendered by them for the audit of SIGA's annual financial
statements for the fiscal year ended December 31, 2005, reviews of the interim
financial statements included in SIGA's Forms 10-Q filed during the year ended
December 31, 2005 and consents and reviews of various documents filed with the
SEC during the year ended December 31, 2005.
Audit Related Fees
PricewaterhouseCoopers LLP billed SIGA $183,236 in the aggregate, for
audit related services rendered by them during the year ended December 31, 2006.
There were no Audit Related Fees in 2005.
Tax Fees
PricewaterhouseCoopers LLP did not render any professional services for
tax compliance, tax advice or tax planning during either of the fiscal years
ended December 31, 2006 or December 31, 2005.
All Other Fees
PricewaterhouseCoopers LLP did not provide any products or render any
professional services (other than those covered above under "Audit Fees,"
"Audited Related Fees" and "Tax Fees") during either of the fiscal years ended
December 31, 2006 or December 31, 2005.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting Firm
The Audit Committee's policy is to pre-approve all audit and permissible
non-audit services provided by the independent registered public accounting
firm. These services may include audit services, audit-related services, tax
services, and other services.
SIGA did not make use in fiscal year 2005 of the rule that waives
pre-approval requirements for non-audit services in certain cases if the fees
for these services constitute less than 5% of the total fees paid to the auditor
during the year.
34
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION (ITEM 2 OF THE ENCLOSED PROXY CARD) OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS SIGA'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007.
STOCKHOLDER PROPOSALS
Stockholder proposals to be presented at the 2008 Annual Meeting of
Stockholders, for inclusion in SIGA's proxy statement and form of proxy relating
to that meeting, must be received by SIGA at its offices in New York, New York,
addressed to the Secretary, not later than January 1, 2008. Such proposals must
comply with SIGA's By-Laws and the requirements of Regulation 14A of the
Securities Exchange Act of 1934 (the "Exchange Act").
In addition, Rule 14a-4 of the Exchange Act governs SIGA's use of its
discretionary proxy voting authority with respect to a stockholder proposal that
is not addressed in the proxy statement. With respect to SIGA's 2008 Annual
Meeting of Stockholders, if SIGA is not provided notice of a stockholder
proposal prior to March 1, 2008, SIGA will be allowed to use its discretionary
voting authority when the proposal is raised at the meeting, without any
discussion of the matter in the proxy statement.
SECTION 16 BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires SIGA's officers and directors,
and persons who own more than ten percent of a registered class of SIGA's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than
ten-percent stockholders are required by Securities and Exchange Commission
regulation to furnish SIGA with copies of all Section 16(a) reports that they
file.
Based solely upon review of the copies of such reports furnished to SIGA
and written representations from certain of SIGA's executive officers and
directors that no other such reports were required, SIGA believes that during
the fiscal year ended December 31, 2006, each of the following individuals
failed to file on a timely basis one report relating to one transaction as
required by Section 16 of the exchange Act: Dr. Rose, Mr. Antal, Mr. Constance,
Mr. Drapkin, Dr. Hammer, Dr. Mjalli, Dr. Oz, Mr. Savas, Ms. Slotkin and Dr.
Weiner. All reports were subsequently filed.
AVAILABILITY OF ANNUAL REPORT AND FORM 10-K TO STOCKHOLDERS
SIGA's Annual Report to Stockholders for the year ended December 31, 2006
accompanies this proxy statement. SIGA will provide to any stockholder, upon
written request and without charge, a copy of its most recent Report on Form
10-K, including the financial statements, as filed with the Securities and
Exchange Commission. All requests for such reports should be directed to the
Chief Financial Officer, 420 Lexington Avenue, Suite 408, New York, New York
10170, telephone number (212) 672-9100.
OTHER MATTERS
At the date of this proxy statement, management was not aware that any
matters not referred to in this proxy statement would be presented for action at
the Annual Meeting. If any other matters should come before the Annual Meeting,
the persons named in the accompanying proxy will have discretionary authority to
vote all proxies in accordance with their best judgment, unless otherwise
restricted by law.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas N. Konatich
----------------------
Thomas N. Konatich
Secretary
Dated: April 27, 2007
35
SIGA TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 30, 2007
The undersigned hereby appoints Thomas N. Konatich as attorney and proxy
of the undersigned, with full power of substitution, to vote all of the shares
of stock of SIGA Technologies, Inc. which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of SIGA Technologies, Inc. to be held
at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the
Americas, 29th floor, New York, New York 10036, on Wednesday, May 30, 2007, at
10:00 a.m. (local time), and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL NO. 1, AND FOR THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
OF SIGA TECHNOLOGIES, INC. FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007 AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTOR NOMINEES LISTED
BELOW, AND "FOR" THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM OF SIGA TECHNOLOGIES, INC. FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2007
PLEASE VOTE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: |X|
1. To elect ten directors.
|_| FOR ALL NOMINEES
|_| WITHHOLD AUTHORITY FOR ALL NOMINEES
|_| FOR ALL EXCEPT (See instructions below)
NOMINEES: ( ) Eric A. Rose, M.D.
( ) Thomas E. Constance
( ) Adnan M. Mjalli, Ph.D.
( ) Mehmet C. Oz, M.D.
( ) Steven L. Fasman
( ) Paul G. Savas
( ) Michael A. Weiner, M.D.
( ) Judy S. Slotkin
( ) James J. Antal
( ) Scott M. Hammer, M.D.
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark "FOR ALL EXCEPT" and fill in circle next to each
nominee you wish to withhold, as shown here: ( )
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
registered public accounting firm of SIGA Technologies, Inc. for the
fiscal year ending December 31, 2007.
|_| FOR |_| AGAINST |_| ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT MAY BE REVOKED
PRIOR TO ITS EXERCISE.
RECEIPT OF NOTICE OF THE ANNUAL MEETING AND PROXY STATEMENT IS HEREBY
ACKNOWLEDGED, AND THE TERMS OF THE NOTICE AND PROXY STATEMENT ARE HEREBY
INCORPORATED BY REFERENCE INTO THIS PROXY. THE UNDERSIGNED HEREBY REVOKES ALL
PROXIES HERETOFORE GIVEN FOR SAID MEETING OR ANY AND ALL ADJOURNMENTS,
POSTPONEMENTS AND CONTINUATIONS THEREOF.
PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
____________________________________________________________________________
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
|_|
Signature of Stockholder: ______________________________________________________
Date: ________________
Signature of Stockholder: ______________________________________________________
Date: ________________
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. WHERE SHARES ARE HELD
JOINTLY, EACH HOLDER SHOULD SIGN. WHEN SIGNING AS EXECUTOR, ADMINISTRATOR,
ATTORNEY, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF SIGNER IS A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY DULY AUTHORIZED OFFICER,
GIVING FULL TITLE AS SUCH. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN FULL
PARTNERSHIP NAME BY AUTHORIZED PERSON.
Annex A
SIGA TECHNOLOGIES, INC.
STATEMENT OF POLICIES AND PROCEDURES WITH RESPECT TO
RELATED PARTY TRANSACTIONS
I. Introduction
The board of directors (the "Board of Directors") of SIGA Technologies,
Inc. (the "Company") recognizes that related party transactions present a
heightened risk of conflicts of interest and/or the perception of improper
valuation. Therefore, the Board of Directors adopted this policy, which shall be
followed in connection with all related party transactions involving the
Company.
A. Under this policy, any "Related Party Transaction" shall be consummated
or shall continue only if:
1. the Audit Committee of the Board of Directors has approved or
ratified such transaction in accordance with the guidelines set
forth in the policy and if the transaction is on terms comparable to
those that could be obtained in arm's length dealings with an
unrelated third party; and
2. the transaction involves compensation, such that the terms of such
compensation have been approved by the Compensation Committee of the
Board of Directors.
B. For these purposes, a "Related Party" is:
1. any director, nominee for director or executive officer of the
Company;
2. any immediate family member of a director, nominee for director or
executive officer of the Company (meaning any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law of such
person, and any person (other than a tenant or employee) sharing the
household of such person);
3. any person (or "group" as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) who is the beneficial owner of more than 5% of the Company's
voting securities;
4. any immediate family member of a person (or "group" as that term is
used in Section 13(d)(3) of the Exchange Act) who is the beneficial
owner of more than 5% of the Company's voting securities (meaning
any child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law of such person, and
any person (other than a tenant or employee) sharing the household
of such person); or
5. an entity that is owned or controlled by someone listed in 1, 2, 3
or 4 above, or an entity in which someone listed in 1, 2, 3 or 4
above has a substantial ownership interest or control of such
entity.
C. For these purposes, a "Related Party Transaction" is a transaction
between the Company and any Related Party (including, without limitation, any
transactions requiring disclosure under Item 404 of Regulation S-K under the
Exchange Act), other than:
1. transactions available to all employees generally; or
2. transactions involving less than $5,000 when aggregated with all
similar transactions.
II. Committee Approval
A. Audit Committee Approval. The Board of Directors has determined that
the Audit Committee is best suited to review and approve Related Party
Transactions. Accordingly, at each calendar year's first regularly scheduled
Audit Committee meeting, management shall recommend Related Party Transactions
be entered into by the Company for that calendar year, including the proposed
aggregate value of such transactions, if applicable. After its review, the Audit
Committee shall approve or disapprove such transactions and at each subsequently
scheduled meeting, management shall update the Audit Committee as to any
material change to those proposed transactions. In the event management
recommends any further Related Party Transactions subsequent to the first
calendar year meeting, such transactions may be presented to the Audit Committee
for approval or preliminarily entered into by management subject to ratification
by the Audit Committee; provided that, if ratification shall not be forthcoming,
management shall make all reasonable efforts to cancel or annul such
transactions.
B. Compensation Committee Approval. The Board of Directors has determined
that, if a Related Party Transaction involves compensation, it is advisable and
appropriate for the Compensation Committee to review and approve of the
compensation components of all Related Party Transactions. Accordingly, with
respect to any Related Party Transaction that includes a compensation component,
management will submit the terms of such proposed compensation (or any
subsequent material changes to such compensation) to the Compensation Committee
for its review. After its review, the Compensation Committee shall approve or
disapprove the compensation component of the Related Party Transaction and
inform management and the Audit Committee of such approval or disapproval.
III. Disclosure
The Securities Act of 1933, as amended, the Exchange Act, and the related
rules and regulations promulgated thereunder require the disclosure of certain
Related Party Transactions
in the Company's filings with the Securities and Exchange Commission. All
Related Party Transactions are to be disclosed to the extent required by law,
rule or regulation in the Company's applicable filings. Furthermore, all Related
Party Transactions shall be disclosed to the Audit Committee (and, to the extent
they include a compensation component, to the Compensation Committee), and any
material Related Party Transaction shall be disclosed to the full Board of
Directors.
IV. Other Agreements
Management shall ensure that all Related Party Transactions are approved
in accordance with any requirements of the Company's financing agreements (if
any).