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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 Pursuant to Section240.14a-11(c) or
Section240.14a-12
ONYX PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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.
(6) Amount Previously Paid:
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(7) Form, Schedule or Registration Statement No.:
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(8) Filing Party:
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(9) Date Filed:
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ONYX PHARMACEUTICALS, INC.
3031 RESEARCH DRIVE
RICHMOND, CALIFORNIA 94806
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 28, 1998
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To the Stockholders of
ONYX Pharmaceuticals, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ONYX
PHARMACEUTICALS, INC., a DELAWARE corporation (the "Company"), will be held on
Thursday, May 28, 1998 at 10:00 a.m, local time, at the Company's executive
offices located at 3031 Research Drive, Richmond, California 94806, for the
following purposes:
(1) To elect three directors to hold office until the 2001 Annual Meeting of
Stockholders.
(2) To approve the Company's 1996 Equity Incentive Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 300,000 shares.
(3) To approve the Company's 1996 Employee Stock Purchase Plan, as amended,
to increase the aggregate number of shares of Common Stock authorized for
issuance under such plan by 75,000 shares.
(4) To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1998.
(5) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 15, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
[LOGO]
Robert L. Jones
SECRETARY
Richmond, California
April 22, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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ONYX PHARMACEUTICALS, INC.
3031 RESEARCH DRIVE
RICHMOND, CALIFORNIA 94806
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of ONYX
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on Thursday, May 28, 1998 at 10:00
a.m., local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the Company's executive
offices, 3031 Research Drive, Richmond, California. The Company intends to mail
this proxy statement and accompanying proxy card on or about April 22, 1998 to
all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April 15,
1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 15, 1998, the Company had outstanding and entitled to
vote 11,265,223 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 3031
Research Drive, Richmond, California 94806, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
1999 Annual Meeting of Stockholders must be received by the Company not later
than December 23, 1998 in order to be included in the proxy statement and proxy
relating to that Annual Meeting.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and By-laws provide that
the Board of Directors shall be divided into three classes: Class I, Class II
and Class III, each class consisting, as nearly as possible, of one-third of the
total number of directors, with each class having a three-year term. Vacancies
on the Board may be filled only by persons elected by a majority of the
remaining directors. A director elected by the Board to fill a vacancy
(including a vacancy created by an increase in the Board of Directors) shall
serve for the remainder of the full term of the class of directors in which the
vacancy occurred and until such director's successor is elected and qualified.
The Board of Directors is presently composed of nine members with no
vacancies. There are four directors in Class II whose term of office expires in
1998, one of whom, Kathleen LaPorte, is not seeking re-election. Each of the
nominees for election to Class II is currently a director of the Company who was
previously appointed by the Board of Directors. If elected at the Annual
Meeting, each of the nominees would serve until the annual meeting of
stockholders in 2001 and until his or her successor is elected and has
qualified, or until such director's earlier death, resignation or removal. If
the nominees are elected at the Annual Meeting, the Board of Directors shall be
composed of eight members.
Bayer Corporation has the right to have a nominee elected to the Company's
Board of Directors until the later of (i) the expiration of the research term of
the collaborative agreement with the Company or (ii) if the parties have a
Collaboration Compound (as defined in the collaborative agreement) in clinical
development, until such time as the parties do not have a Collaboration Compound
in clinical development. Dr. Michael J. Berendt currently serves as the Bayer
Corporation nominee on the Board of Directors.
International Biotechnology Trust plc ("IBT") has the right to have its
nominee elected to the Company's Board of Directors as long as it continues to
own more than 66 2/3% of the Common Stock purchased by it from the Company on
January 12, 1998. Nicole Vitullo currently serves as the IBT nominee on the
Board of Directors.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the three nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL
MEETING--CLASS II
MICHAEL J. BERENDT, PH.D., age 49, has served as a director of the Company
since December 1996. Dr. Berendt has served as a Senior Vice President for
Research for the Pharmaceutical Division of Bayer Corporation, a pharmaceutical
company, since December 1996. From November 1993 to November 1996, Dr. Berendt
held various research and management positions at the Pharmaceutical Division of
Bayer Corporation including Vice President, Institute for Bone & Joint Disorders
and Cancer. From January 1982 to September 1993, Dr. Berendt held various
research and management positions at Pfizer, Inc., a pharmaceutical company,
including the position of Group Director. Dr. Berendt is on the Board of
Directors of Myriad Genetics, Inc. Dr. Berendt holds a B.S. from Ohio Dominican
College, a M.S. in microbiology from Miami University and a Ph.D. in
microbiology/immunology from Hahnemann Medical College.
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EDWARD PENHOET, PH.D., age 57, has served as a director of the Company since
July 1997. A co-founder and a director of Chiron Corporation, a biotechnology
company, Dr. Penhoet has served as its President and Chief Executive Officer
since its inception in 1981. Upon the appointment of the new President and Chief
Executive Officer of Chiron Corporation in May 1998, Dr. Penhoet will assume the
position of Vice Chairman of Chiron Corporation. Dr. Penhoet has been a faculty
member of the Biochemistry Department at the University of California, Berkeley,
for 25 years. Since 1983, he has been an Adjunct Professor at that university.
Dr. Penhoet is Chairman of the California Healthcare Institute and a member of
the California Governor's Biotechnology Council.
NICOLE VITULLO, age 40, has served as a director of the Company since
February 1998. Ms. Vitullo has served as Senior Vice President of Rothchild
Asset Management since 1992. Rothchild Asset Management advises and manages two
publicly traded investment funds including Biotechnology Investments Limited and
International Biotechnology Trust plc. Prior to joining Rothchild Asset
Management, Ms. Vitullo was Director, Corporate Communication and Investor
Relations at Cephalon, Inc., a pharmaceutical company. Ms. Vitullo serves on the
board of directors of Anergen, Inc., Cadus Pharmaceuticals, Corvas International
and Cytel Corporation. Ms. Vitullo holds a B.A. in mathematics and an M.B.A.
from the University of Rochester.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING--CLASS III
SAMUEL D. COLELLA, age 59, has served as Chairman of the Board of the
Company since February 1993 and as a director of the Company since its
inception. Mr. Colella has been a partner in Institutional Venture Partners, a
private venture capital firm, since 1984. In addition, he serves on the board of
directors of Integrated Medical Resources Inc., CV Therapeutics, Inc., and
Pharmacopeia, Inc. Mr. Colella holds a B.S. in business and engineering from the
University of Pittsburgh and an M.B.A. from Stanford University.
HOLLINGS C. RENTON, age 51, has served as President and Chief Executive
Officer and as a director of the Company since March 1993. Prior to joining the
Company, Mr. Renton served as President and Chief Operating Officer of Chiron
Corporation from December 1991 to March 1993 following Chiron Corporation's
acquisition of Cetus Corporation. Prior to the acquisition, Mr. Renton served as
President of Cetus Corporation from August 1990 to February 1993 and as Chief
Operating Officer of Cetus Corporation from 1987 to August 1990. Mr. Renton
holds an M.B.A. from the University of Michigan.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING--CLASS I
PAUL GODDARD PH.D., age 48, has served as a director of the Company since
February 1997. Dr. Goddard has served as Chief Executive Officer of Neurex
Corporation, a biotechnology company, since March 1991 and as Chairman of the
Board since October 1991. Before joining Neurex Corporation, he was with
SmithKline Beecham, a pharmaceutical company, where he was Senior Vice President
and Director of the Japan/Pacific region from 1989 to March 1991. Dr. Goddard
serves on the board of directors of Molecular Devices Corporation and Ribi
ImmunoChem Research, Inc. He completed his Ph.D. in the area of etiology and
pathophysiology of colon cancer at St. Mary's Hospital, University of London.
WENDELL D. WIERENGA, Ph.D., age 50, has served as a director of the Company
since December 1996. Dr. Wierenga has served as Senior Vice President Research
for the Parke-Davis Pharmaceutical Research division of Warner-Lambert Company
since 1990. Dr. Wierenga has also served as Vice President of the Medtech
division of Warner-Lambert Company since 1992. Dr. Wierenga holds a B.A. from
Hope College and a Ph.D. in chemistry from Stanford University.
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RANDY THURMAN, age 48, has served as a director of the Company since
December 1996. Mr. Thurman is Chief Executive Officer of Strategic Reserves,
LLC, a global healthcare consulting company, and has served as a director of
Spencer Stuart, an executive search firm, since March 1993. From September 1993
to December 1996, Mr. Thurman was Chairman and Chief Executive Officer of
Corning Life Services Inc., a global healthcare company. Prior to such time, Mr.
Thurman was President of Rhone-Poulenc Rorer, a pharmaceutical company. Mr.
Thurman serves as Chairman of the Board of Enzon, Inc. and is on the Board of
Directors of Closure Medical Corp. Mr. Thurman holds a B.A. in economics from
Virginia Polytechnic Institute and a M.A. in economics from Webster University.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997, the Board of Directors held
six meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is currently composed of four
non-employee directors: Mr. Colella, Ms. LaPorte, Ms. Vitullo and Dr. Wierenga.
Ms. LaPorte will resign from the Audit Committee when her term of office as a
director ends at the Annual Meeting. The Audit Committee met once during such
fiscal year.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of three non-employee
directors: Mr. Colella, Dr. Goddard and Mr. Thurman. It met twice during such
fiscal year.
During the fiscal year ended December 31, 1997, all directors except Drs.
Berendt and Goddard attended at least 75% of the aggregate of the meetings of
the Board and of the committees on which they served, held during the period for
which they were a director or committee member, respectively.
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PROPOSAL 2
APPROVAL OF THE 1996 EQUITY INCENTIVE PLAN, AS AMENDED
In March 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1996 Equity Incentive Plan (the "1996
Plan"). As amended to date, there are 2,325,000 shares of the Company's Common
Stock authorized and reserved for issuance under the 1996 Plan. As of March 31,
1998, options (net of canceled or expired options) covering an aggregate of
1,973,230 shares of Common Stock had been granted under the 1996 Plan, and
approximately 351,770 shares of Common Stock (plus any shares that might in the
future be returned to the plan as a result of cancellation or expiration of
options) remained available for future grants, under the 1996 Plan. During the
last fiscal year, under the 1996 Plan, the Company granted options to purchase
121,212 shares of Common Stock to the executive officers named in the Summary
Compensation Table and directors at exercise prices of $10.88 to $12.00 per
share and granted to all employees and consultants (excluding executive
officers) as a group options to purchase 278,872 shares at exercise prices of
$6.125 to $12.50 per share.
In April 1997, the Board of Directors adopted, and the stockholders
subsequently approved, an amendment to the 1996 Plan to increase the number of
shares authorized under the 1996 Plan by 600,000 shares of Common Stock from a
total of 1,725,000 shares to 2,325,000 shares and to conform the 1996 Plan's
administrative provisions to the amended rules under Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and to permit
the Company, under Section 162(m)of the Internal Revenue Code of 1986, as
amended (the "Code"), to continue to be able to deduct as a business expense
certain compensation attributable to the exercise of stock options granted under
the 1996 Plan.
In February 1998, the Board of Directors approved an amendment to the 1996
Plan, subject to stockholder approval, to increase the number of shares
authorized for issuance under the 1996 Plan by 300,000 shares of Common Stock
from a total of 2,325,000 shares to 2,625,000 shares. The Board of Directors
adopted this amendment to ensure that the Company can continue to grant stock
options under the 1996 Plan at levels determined appropriate by the Board of
Directors and the Compensation Committee.
Stockholders are requested in this Proposal 2 to approve the 1996 Plan, as
amended. The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting will be
required to approve the 1996 Plan, as amended. Abstentions will be counted
toward the tabulation of votes cast on proposals presented to the stockholders
and will have the same effect as negative votes. Broker non-votes are counted
towards a quorum, but are not counted for any purpose in determining whether
this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the 1996 Plan are outlined below:
GENERAL
The 1996 Plan provides for the grant of (i) both incentive and nonstatutory
stock options, (ii) stock bonuses, (iii) rights to purchase restricted stock and
(iv) stock appreciation rights (collectively, "Stock Awards"). Incentive stock
options granted under the 1996 Plan are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Code. Nonstatutory stock
options granted under the 1996 Plan are intended not to qualify as incentive
stock options under the Code. See "Federal Income Tax Information" for a
discussion of the tax treatment of Stock Awards.
PURPOSE
The 1996 Plan was adopted to provide a means by which officers, directors,
employees of and consultants to the Company and its affiliates could be given an
opportunity to purchase stock in the
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Company, to assist in retaining the services of employees holding key positions,
to secure and retain the services of persons capable of filling such positions
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
ADMINISTRATION
The 1996 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1996 Plan and, subject to the
provisions of the 1996 Plan, to determine the persons to whom and the dates on
which Stock Awards will be granted; whether a Stock Award will be an incentive
stock option, a nonstatutory stock option, a stock bonus, a right to purchase
restricted stock, a stock appreciation right or a combination of the foregoing;
the provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be permitted to receive stock
pursuant to a Stock Award; whether a person shall be permitted to receive stock
upon exercise of an independent stock appreciation right; and the number of
shares with respect to which a Stock Award shall be granted to each such person.
The Board of Directors is authorized to delegate administration of the 1996 Plan
to a committee composed of not fewer than two (2) members of the Board. The 1996
Plan provides that, in the Board's discretion, directors serving on the such
committee will also be "non-employee directors" within the meaning of Rule 16b-3
promulgated under the Exchange Act ("Rule 16b-3") or "outside directors" within
the meaning of Section 162(m) of the Code. The Board has delegated
administration of the 1996 Plan to the Compensation Committee of the Board, and
the Compensation Committee has delegated the authority to grant Stock Awards to
eligible persons who are not subject to Rule 16b-3 to the Chief Executive
Officer. As used herein with respect to the 1996 Plan, the "Board" refers to the
Compensation Committee as well as to the Board of Directors itself.
ELIGIBILITY
Incentive stock options and stock appreciation rights related to incentive
stock options may be granted under the 1996 Plan only to employees (including
officers and directors who are employees) of the Company and its affiliates.
Employees, non-employee directors and consultants are eligible to receive Stock
Awards other than incentive stock options and stock appreciation rights under
the 1996 Plan.
No incentive stock option may be granted under the 1996 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the incentive stock option exercise price is at least 110%
of the fair market value of the stock subject to the incentive stock option on
the date of grant, and the term of the option does not exceed five years from
the date of grant. For incentive stock options granted under the 1996 Plan, the
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which such options are exercisable for the first
time by an optionee during any calendar year (under all such plans of the
Company and its affiliates) may not exceed $100,000.
The 1996 Plan has a per-individual, per-calendar year period limitation on
the number of shares of Common Stock that may be made subject to options and
stock appreciation rights equal to 300,000 shares of Common Stock. The purpose
of this limitation is generally to permit the Company to continue to be able to
deduct for tax purposes the compensation attributable to the exercise of options
and stock appreciation rights granted under the 1996 Plan. To date, the Company
has not granted to any individual in any calendar year options and stock
appreciation rights to purchase a number of shares equal to or in excess of the
limitation.
STOCK SUBJECT TO THE 1996 PLAN
If any Stock Award granted under the 1996 Plan expires or otherwise
terminates without being exercised (or vested, in the case of restricted stock),
the Common Stock subject to such Stock Awards again becomes available for
issuance under the 1996 Plan. Shares subject to the stock appreciation rights
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will not be available for subsequent issuance under the 1996 Plan. The Common
Stock subject to the 1996 Plan may be unissued shares or reacquired shares,
bought on the market or otherwise.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1996 Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options
under the 1996 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonstatutory options under the 1996 Plan may not be less
than 85% of the fair market value of the Common Stock subject to the option on
the date of the option grant. However, if options were granted with exercise
prices below fair market value, deductions for compensation attributable to the
exercise of such options could be limited by Section 162(m). See "Federal Income
Tax Information." At March 31, 1997, the closing price of the Company's Common
Stock as reported on the Nasdaq National Market was $7.50 per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the 1996 Plan is deemed to be canceled and a new option granted.
Both the options deemed to be canceled and the new options deemed to be granted
will be counted against the 300,000 share limitation.
The exercise price of options granted under the 1996 Plan must be paid
either: (a) in cash at the time the option is exercised, (b) by delivery of
other Common Stock of the Company or pursuant to a deferred payment arrangement
at the discretion of the Board, or (c) in any other form of legal consideration
acceptable to the Board.
RESTRICTIONS ON TRANSFER. Under the 1996 Plan, an incentive stock option
may not be transferred by the optionee otherwise than by will or by the laws of
descent and distribution and may be exercised only by the optionee during the
lifetime of the optionee. A nonstatutory stock option may not be transferred
except by will or by the laws of descent and distribution unless otherwise
specified in the option agreement, in which case the nonstatutory stock option
may be transferred upon such terms and conditions as set forth in the option,
including pursuant to a domestic relations order. In any case, the optionee may
designate in writing a third party who may exercise the option in the event of
the optionee's death.
OPTION EXERCISE. Options granted under the 1996 Plan may become exercisable
("vest") in cumulative increments as determined by the Board. Shares covered by
currently outstanding options under the 1996 Plan typically vest at the rate of
25% of the shares subject to the option on the first anniversary of the date of
grant and 1/48th of such shares at the end of each month thereafter during the
optionee's employment or relationship as a consultant or director. Shares
covered by options granted in the future under the 1996 Plan may be subject to
different vesting terms. The Board has the power to accelerate the time during
which an option may be exercised. In addition, options granted under the 1996
Plan may permit exercise prior to vesting, but in such event the optionee may be
required to enter into an early exercise stock purchase agreement that allows
the Company to repurchase shares not yet vested at their exercise price should
the optionee leave the employ of the Company before vesting. To the extent
provided by the terms of an option, an optionee may satisfy any federal, state
or local tax withholding obligation relating to the exercise of such option by a
cash payment upon exercise, by authorizing the Company to withhold a portion of
the stock otherwise issuable to the optionee, by delivering already-owned stock
of the Company or by a combination of these means.
TERM. The maximum term of options under the 1996 Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1996 Plan terminate three months
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after termination of the optionee's employment or relationship as a consultant
or director of the Company or any affiliate of the Company, unless: (a) such
termination is due to such person's disability, in which case the option may be
exercised (to the extent the option was exercisable at the date of termination)
at any time not exceeding twelve months following such termination; (b) the
optionee dies while employed by or serving as a consultant or director of the
Company or any affiliate of the Company, or within three months after
termination of such relationship, in which case the option may be exercised (to
the extent the option was exercisable at the time of the optionee's death)
within eighteen months of the optionee's death by the person or persons to whom
the rights to such option pass by will or by the laws of descent and
distribution; or (c) the option by its terms specifically provides otherwise.
Individual options by their terms may provide for exercise within a longer or
shorter period of time following termination of employment or the consulting
relationship. The option term may also be extended in the event that exercise of
the option within these periods is prohibited for specified reasons.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
The following is a description of the permissible terms of stock bonuses and
restricted stock purchase agreements under the 1996 Plan. The terms and
conditions of stock bonus or restricted stock purchase agreements may change
from time to time, and the terms and conditions of separate agreements need not
be identical, but each stock bonus or restricted stock purchase agreement
includes the substance of each of the following provisions as appropriate:
PURCHASE PRICE. The purchase price under each restricted stock purchase
agreement is such amount as the Board may determine and designate in such
agreement, but in no event may the purchase price be less than eighty-five
percent (85%) of the stock's fair market value on the date such award is made.
Notwithstanding the foregoing, the Board may determine that eligible
participants in the 1996 Plan may be awarded stock pursuant to a stock bonus
agreement in consideration for past services actually rendered to the Company
for its benefit.
TRANSFERABILITY. No rights under a stock bonus or restricted stock purchase
agreement shall be transferable except by will or the laws of descent and
distribution or pursuant to a domestic relations order.
CONSIDERATION. The purchase price of stock acquired pursuant to a stock
purchase agreement must be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Board or the Compensation Committee, according to
a deferred payment or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board in its discretion. Notwithstanding the foregoing, the Board may
award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
VESTING. Shares of stock sold or awarded under the Plan may, but need not,
be subject to a repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board.
TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT. In
the event a participant's continuous status as an employee, director or
consultant terminates, the Company may repurchase or otherwise re-acquire any or
all of the shares of stock held by that person which have not vested as of the
date of termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
STOCK APPRECIATION RIGHTS
The three types of Stock Appreciation Rights that are authorized for
issuance under the 1996 Plan are as follows:
TANDEM STOCK APPRECIATION RIGHTS. Tandem stock appreciation rights may be
granted appurtenant to an option, and are generally subject to the same terms
and conditions applicable to the particular option
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<PAGE>
grant to which they pertain. Tandem stock appreciation rights require the holder
to elect between the exercise of the underlying option for shares of stock and
the surrender, in whole or in part, of such option for an appreciation
distribution. The appreciation distribution payable on the exercised tandem
right is in cash (or, if so provided, in an equivalent number of shares of stock
based on fair market value on the date of the option surrender) in an amount up
to the excess of (i) the fair market value (on the date of the option surrender)
of the number of shares of stock covered by that portion of the surrendered
option in which the optionee is vested over (ii) the aggregate exercise price
payable for such vested shares.
CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent stock appreciation rights
may be granted appurtenant to an option and may apply to all or any portion of
the shares of stock subject to the underlying option and are generally subject
to the same terms and conditions applicable to the particular option grant to
which they pertain. A concurrent right is exercised automatically at the same
time the underlying option is exercised with respect to the particular shares of
stock to which the concurrent right pertains. The appreciation distribution
payable on an exercised concurrent right is in cash (or, if so provided, in an
equivalent number of shares of stock based on fair market value on the date of
the exercise of the concurrent right) in an amount equal to such portion as
shall be determined by the Board at the time of the grant of the excess of (i)
the aggregate fair market value (on the date of the exercise of the concurrent
right) of the vested shares of stock purchased under the underlying option which
have concurrent rights appurtenant to them over (ii) the aggregate exercise
price paid for such shares.
INDEPENDENT STOCK APPRECIATION RIGHTS. Independent stock appreciation
rights may be granted independently of any option and are generally subject to
the same terms and conditions applicable to nonstatutory stock options. The
appreciation distribution payable on an exercised independent right may not be
greater than an amount equal to the excess of (i) the aggregate fair market
value (on the date of the exercise of the independent right) of a number of
shares of Company stock equal to the number of share equivalents in which the
holder is vested under such independent right, and with respect to which the
holder is exercising the independent right on such date, over (ii) the aggregate
fair market value (on the date of the grant of the independent right) of such
number of shares of Company stock. The appreciation distribution payable on the
exercised independent right is in cash or, if so provided, in an equivalent
number of shares of stock based on fair market value on the date of the exercise
of the independent right.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1996 Plan or subject to
any Stock Award granted under the 1996 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1996 Plan and Stock
Awards outstanding thereunder will be appropriately adjusted as to the class and
the maximum number of shares subject to such plan, and the class, number of
shares and price per share of stock subject to such outstanding options.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1996 Plan provides that, in the event of a dissolution or liquidation of
the Company, sale of substantially all the assets of the Company, specified
types of mergers or other corporate reorganizations, to the extent permitted by
law, any surviving corporation will either assume Stock Awards outstanding under
the 1996 Plan or substitute similar options for those outstanding under such
plan, or such outstanding options will continue in full force and effect. In the
event that any surviving corporation declines to assume or continue Stock Awards
outstanding under the 1996 Plan, or to substitute similar Stock Awards, then the
time during which such Stock Awards may be exercised shall be accelerated and
the Stock Awards terminated if not exercised during such time.
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<PAGE>
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1996 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1996 Plan will terminate on March 26, 2006.
The Board may also amend the 1996 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its adoption by the Board if
the amendment would require stockholder approval in order for the Plan to comply
with Section 422 of the Code, Rule 16b-3, or any Nasdaq or securities exchange
listing requirements. Subject to the foregoing, the Board may amend the 1996
Plan in any respect the Board deems necessary or advisable to provide optionees
with the maximum benefits available under the Code or to bring the 1996 Plan or
the Stock Award granted thereunder into compliance with the Code.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1996 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code. There generally are no federal income
tax consequences to the optionee or the Company by reason of the grant or
exercise of an incentive stock option. However, the exercise of an incentive
stock option may increase the optionee's alternative minimum tax liability, if
any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be capital gain or loss. Generally, if the optionee disposes of the
stock before the expiration of either of these holding periods (a "disqualifying
disposition"), at the time of disposition, the optionee will realize taxable
ordinary income equal to the lesser of (a) the excess of the stock's fair market
value on the date of exercise over the exercise price, or (b) the optionee's
actual gain, if any, on the purchase and sale. The optionee's additional gain,
or any loss, upon the disqualifying disposition will be a capital gain or loss,
which will be long-term, mid-term or short-term depending on how long the
optionee has held the stock. Capital gains are generally subject to lower tax
rates than ordinary income. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
1996 Plan generally have the following federal income tax consequences: There
are no tax consequences to the optionee or the Company by reason of the grant of
a nonstatutory stock option. Upon exercise of a nonstatutory stock option, the
optionee normally will recognize taxable ordinary income equal to the excess of
the stock's fair market value on the date of exercise over the option exercise
price. Generally, with respect to employees, the Company is required to withhold
from regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, the provisions
of Section 162(m) of the Code and the satisfaction of a tax reporting
obligation, the Company will generally be entitled to a business expense
deduction equal to the taxable ordinary income realized by the optionee. Upon
disposition of the stock, the optionee will recognize a capital gain or loss
equal to the difference between the selling price and the sum of the amount paid
for such stock plus any amount recognized as ordinary income upon exercise of
the option. Such gain or loss will be long-term, mid-term or short-term
depending on how long the optionee has held the stock. Slightly different rules
may apply to optionees who acquire stock subject to repurchase options or who
are subject to Section 16(b) of the Exchange Act.
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<PAGE>
RESTRICTED STOCK AND STOCK BONUSES. Restricted stock and stock bonuses
granted under the 1996 Plan generally have the following federal income tax
consequences:
Upon acquisition of stock under a restricted stock or stock bonus award, the
recipient normally will recognize taxable ordinary income equal to the excess of
the stock's fair market value over the purchase price, if any. However, to the
extent the stock is subject to certain types of vesting restrictions, the
taxable event will be delayed until the vesting restrictions lapse unless the
recipient elects to be taxed on receipt of the stock. Generally, with respect to
employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness, Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
recognized by the recipient. Upon disposition of the stock, the recipient will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such stock, if any, plus any amount
recognized as ordinary income upon acquisition (or vesting) of the stock. Such
gain or loss will be long-term, mid-term or short-term depending on how long the
stock was held from the date ordinary income was measured.
STOCK APPRECIATION RIGHTS. No taxable income is realized upon the receipt
of a stock appreciation right, but upon exercise of the stock appreciation
right, the fair market value of the shares (or cash in lieu of shares) received
must be treated as compensation taxable as ordinary income to the recipient in
the year of such exercise. Generally, with respect to employees, the Company is
required to withhold from the payment made on exercise of the stock appreciation
right or from regular wages or supplemental wage payments an amount based on the
ordinary income recognized. Subject to the requirement of reasonableness,
Section 162(m) of the Code and the satisfaction of a reporting obligation, the
Company will be entitled to a business expense deduction equal to the taxable
ordinary income recognized by the recipient.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. As part of the Omnibus Budget
Reconciliation Act of 1996, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to awards under the 1996 Plan, when combined with all
other types of compensation received by a covered employee from the Company, may
cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that: (i) the stock award plan contains a per-employee limitation on
the number of shares for which stock options and stock appreciation rights may
be granted during a specified period; (ii) the per-employee limitation is
approved by the stockholders; (iii) the award is granted by a compensation
committee comprised solely of two or more "outside directors;" and (iv) the
exercise price of the award is no less than the fair market value of the stock
on the date of grant. Compensation attributable to restricted stock will qualify
as performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors"; and (ii) the
purchase price of the award is no less than the fair market value of the stock
on the date of grant. Stock bonuses qualify as performance-based compensation
under the Treasury regulations only if: (i) the award is granted by a
compensation committee comprised solely of "outside directors;" (ii) the award
is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain; (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award that the
performance goal has been satisfied; and (iv) prior to the granting (or
exercisability) of the award, stockholders have approved the material terms of
the award (including the class of employees eligible for such award, the
business criteria on which the performance goal is based, and the maximum amount
(or formula used to calculate the amount) payable upon attainment of the
performance goal).
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<PAGE>
PROPOSAL 3
APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN
In March 1996, the Board of Directors adopted, and in April 1996 the
stockholders subsequently approved, the Company's Employee Stock Purchase Plan
(the "Purchase Plan"), and authorized and reserved up to 100,000 shares of the
Company's Common Stock for issuance under such plan. As of March 31, 1998, an
aggregate of 55,713 shares of Common Stock has been issued under the Purchase
Plan and 44,287 shares of Common Stock remain for the grant of future rights
under the Purchase Plan.
In February 1998, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Purchase Plan to increase the number of shares
authorized for issuance under such plan by 75,000 shares of Common Stock to an
aggregate total of 175,000 shares of Common Stock. This amendment is intended to
continue to afford the Company the opportunity of providing employees of the
Company and its affiliates with stock incentives and to ensure that the Company
can continue to provide such incentives at levels determined appropriate by the
Board of Directors so as to retain the services of its employees, to secure and
retain the services of new employees and to provide incentives for such persons
to exert maximum efforts for the success of the Company. During the last
completed fiscal year, shares were purchased in the amounts and at the weighted
average prices per share under the Purchase Plan as follows: Hollings C. Renton,
713 shares ($8.13) William Gerber, 665 shares ($8.71); Allan Balmain, 585 shares
($7.40); Gregory L. Giotta, -0- shares; Douglas L. Blankenship, 905 shares
($7.30); all executive officers named in the Summary Compensation Table as a
group, 2,868 shares ($7.85); and all employees (excluding such executive
officers) as a group, 30,643 shares ($7.61).
Stockholders are requested in this Proposal 3 to approve the Purchase Plan,
as amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting
will be required to approve the Purchase Plan, as amended. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the Purchase Plan are outlined below:
PURPOSE
The Purchase Plan provides a means by which employees of the Company (and
any parent or subsidiary of the Company designated by the Board of Directors to
participate in the Purchase Plan) may be given an opportunity to purchase Common
Stock of the Company through payroll deductions, to assist the Company in
retaining the services of its employees, to secure and retain the services of
new employees, and to provide incentives for such persons to exert maximum
efforts for the success of the Company. All of the Company's employees are
eligible to participate in the Purchase Plan.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board
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has the power to delegate administration of such plan to a committee of not less
than two Board members. The Board may abolish any such committee at any time and
revest in the Board the administration of the Purchase Plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights (an "offering") to
all eligible employees from time to time by the Board. Each offering shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate. Generally, the duration of each offering is 24 months. The initial
offering commenced on the effective date of the initial public offering of the
Company's stock and will end on June 30, 1998. Thereafter, a new offering will
commence on July 1 every two years.
ELIGIBILITY
Any person who is customarily employed at least twenty (20) hours per week
and five (5) months per calendar year by the Company (or by any parent or
subsidiary of the Company designated from time to time by the Board) on the
first day of an offering is eligible to participate in that offering under the
Purchase Plan, provided such employee has been in the continuous employ of the
Company for such continuous period preceding the first day of the offering
period as the Board may require, but in no event shall the required period of
continuous employment be greater than two (2) years. The Board may provide in
any offering that certain employees of the Company who are "highly compensated"
as defined in the Code are not eligible to be granted rights under the Purchase
Plan.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or of any parent or subsidiary of the Company (including any stock which such
employee may purchase under all outstanding rights and options), nor will any
employee be granted rights that would permit such employee to buy more than
$25,000 worth of stock (determined at the fair market value of the shares at the
time such rights are granted) under all employee stock purchase plans of the
Company in any calendar year.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering to
the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions of up to a percentage
designated by the Board not exceeding fifteen percent (15%) of such employees'
total base compensation during the purchase period.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan shall be the lower of (a) 85% of the fair market value of a
share of Common Stock on the date of commencement of the offering (or the date
an employee first becomes eligible to receive rights under such offering, if
later), or (b) 85% of the fair market value of a share of Common Stock on the
specified purchase date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. A participant may reduce or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any offering only to the extent specified by the Board for such
offering. All payroll deductions made for a participant are credited to his or
her account under the Purchase Plan and deposited with the general funds of the
Company. A participant may make additional payments into such account only as
specifically provided for in the offering and only if the participant has not
had the maximum amount withheld during such offering period.
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PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board may specify a maximum number of shares
any employee may be granted the right to purchase and the maximum aggregate
number of shares which may be purchased pursuant to such offering by all
participants. If the aggregate number of shares to be purchased upon exercise of
rights granted in the offering would exceed the maximum aggregate number, the
Board would make a pro rata allocation of shares available in a uniform and
equitable manner. Unless the employee's participation is discontinued, his right
to purchase shares is exercised automatically at the end of the purchase period
at the applicable price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a given
offering by terminating his or her payroll deductions and by delivering to the
Company a notice of withdrawal from the Purchase Plan. Such withdrawal may be
elected at any time prior to the end of an offering except as provided by the
Board in such offering.
Upon any withdrawal from an offering by an employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan, but the employee
will be required to deliver a new participation agreement in order to
participate in subsequent offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable otherwise than
by will or the laws of descent and distribution, and may be exercised only by
the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, such plan will terminate at the time that all of the shares
subject to the Purchase Plan's share reserve, as increased and/or adjusted from
time to time, have been issued under the terms of the Purchase Plan.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (a) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (b) modify the
requirements relating to eligibility for participation in the Purchase Plan, or
(c) modify any other provision of the Purchase Plan in a manner that would
materially increase the benefits accruing to participants under the Purchase
Plan.
Rights granted before amendment or termination of the Purchase Plan will not
be altered or impaired by any amendment, suspension or termination of such plan,
except as expressly provided in the Purchase Plan or with consent of the person
to whom such rights were granted, or except as necessary to ensure that
14
<PAGE>
the Purchase Plan and/or rights granted under the Purchase Plan comply with any
laws, governmental regulation, or the requirements of Section 423 of the Code.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving corporation, a reverse
merger in which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, or any other capital reorganization in which more than 50% of
the shares of the Company entitled to vote are exchanged, then, as determined by
the Board in its sole discretion, any successor corporation may assume such
outstanding rights or substitute similar rights for those outstanding under the
Purchase Plan, such rights may continue in full force and effect, or
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to the transaction described above and the participant's
rights under the ongoing offering terminated.
SHARES SUBJECT TO THE PURCHASE PLAN
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan. The stock subject
to the Purchase Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan which qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchased shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the purchase price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the purchase price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as a capital gain or loss. Capital gains currently are generally subject to
lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the purchase date over the purchase price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as
capital gain. Even if the stock is later disposed of for less than its fair
market value on the purchase date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such purchase date. Any capital gain or loss will be long-term, mid-term or
short-term depending on the length of time the stock has been held.
There are no federal income tax consequences to the Company by reason of the
grant or exercise of rights under the Purchase Plan. The Company is entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
(subject to the requirement of reasonableness, the provisions of Section 162(m)
of the Code and the satisfaction of a tax reporting obligation).
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PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 1992.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
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MANAGEMENT
EXECUTIVE OFFICERS
Information with respect to the executive officers of the Company is set
forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Hollings C. Renton................................... 51 President, Chief Executive Officer and Director
Allan Balmain, Ph.D., F.R.S.E........................ 52 Vice President, Research
Gregory Giotta, J.D., Ph.D........................... 51 Vice President and Chief Legal Counsel
Mary Ann Rafferty.................................... 49 Vice President, Human Resources
Douglas L. Blankenship............................... 36 Treasurer
</TABLE>
HOLLINGS C. RENTON has served as President and Chief Executive Officer and
as a director of the Company since March 1993. Prior to joining the Company, Mr.
Renton served as President and Chief Operating Officer of Chiron Corporation
from December 1991 to March 1993 following Chiron Corporation's acquisition of
Cetus Corporation. Prior to the acquisition, Mr. Renton served as President of
Cetus Corporation from August 1990 to February 1993 and as Chief Operating
Officer of Cetus Corporation from 1987 to August 1990. Mr. Renton holds an
M.B.A. from the University of Michigan.
ALLAN BALMAIN, PH.D., F.R.S.E. has served as Vice President of Research
since October 1996. Dr. Balmain served as Professor of molecular oncology at the
CRC Beatson Laboratories, University of Glasgow from June 1993 until October
1996 and held a Jerry Turner Fellowship of the Cancer Research Campaign, Great
Britain. Dr. Balmain directed a research group in the area of molecular genetics
of multistage carcinogenesis at the CRC Beatson Institute of Glasgow from 1983
to October 1996. Dr. Balmain served as consultant to the Company from November
1994 until October 1996. Prior to joining the Company, he cofounded Cyclacel, a
biotechnology company based in Scotland. Dr. Balmain received a Ph.D. in
chemistry from the University of Glasgow and performed post-doctoral research as
a Royal Society European Fellow at the University of Strasbourg, France and as
an Alexander von Humboldt Fellow at the German Cancer Research Center,
Heidelberg. He has been elected as a Fellow of the Royal Society of Edinburgh.
GREGORY GIOTTA, PH.D., J.D. joined the Company in June 1995 as Vice
President and Chief Legal Counsel. Prior to joining the Company, Dr. Giotta
served as Vice President and Chief Intellectual Property Attorney at Glycomed
Corporation, a biotechnology company, from October 1992 to June 1995. Prior to
that, Dr. Giotta held various positions at Cetus Corporation from 1990 to
October 1992, including Director of Patents and Trademarks for therapeutics. Dr.
Giotta earned a Ph.D. from the University of California at Santa Cruz and a J.D.
from the University of San Diego. Dr. Giotta also pursued post-doctoral research
at Harvard University and the Salk Institute.
MARY ANN RAFFERTY has served as Vice President, Human Resources since
February 1998 and previously as Director, Human Resources since April 1996.
Prior to joining the Company, Ms. Rafferty served as Director, Human Resources
at Biogenex, Inc., a biotechnology company, from June 1995 to April 1996 and as
Group Human Resources Manager for the Life Sciences Group at Bio-Rad
Laboratories, Inc., a biotechnology company, from July 1990 to June 1995. Ms.
Rafferty is Vice Chair of the Human Resource Committee of the Biotechnology
Industry Organization and is a member of the Board of Advisors of the Radford
Associates Biotechnology Compensation Survey. Ms. Rafferty earned a B.A. in
Communications and a B.A. in Linguistics from State University New York, Albany.
DOUGLAS L. BLANKENSHIP has served as Treasurer since March 1997 and
previously as Director of Finance since October 1995. Prior to joining the
Company, Mr. Blankenship worked in a variety of finance related positions at Eli
Lilly from September 1990 to September 1995. Mr. Blankenship, a certified public
accountant, previously served as an audit manager with KPMG Peat Marwick. Mr.
Blankenship earned a B.S. in business administration from California Polytechnic
State University and an M.B.A. from The Wharton School, University of
Pennsylvania.
17
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 1998 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP(1)
-----------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
- ------------------------------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
International Biotechnology Trust plc(2) ................................................. 1,122,807 9.97%
Five Arrows House
St. Swithins Lane
London EC4N 8NR
United Kingdom
Entities Affiliated with Institutional Venture Partners(3) ............................... 985,349 8.74%
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Bayer Corporation(4) ..................................................................... 945,510 8.39%
400 Morgan Lane
Westhaven, CT 96516
Chiron Corporation(5) .................................................................... 884,030 7.85%
4560 Horton Street
Emeryville, CA 94608
Warner Lambert Company(6) ................................................................ 657,737 5.84%
201 Tabor Road
Morris Plains, NJ 07950
Michael J. Berendt, Ph.D.(4).............................................................. 0 *
Samuel D. Colella(3)(7)................................................................... 1,003,849 8.89%
Paul Goddard, Ph.D.(8).................................................................... 6,250 *
Kathleen LaPorte(9)....................................................................... 295,150 2.62%
Edward Penhoet, Ph.D.(5).................................................................. 0 *
Hollings C. Renton(10).................................................................... 309,752 2.70%
Randy Thurman(11)......................................................................... 21,500 *
Nicole Vitullo(2)......................................................................... 0 *
Wendell Wierenga, Ph.D.(6)(11)............................................................ 21,500 *
Allan Balmain, Ph.D., F.R.S.E.(12)........................................................ 121,145 1.06%
Douglas L. Blankenship(13)................................................................ 11,148 *
William Gerber, M.D.(14).................................................................. 138,299 1.21%
Gregory Giotta, Ph.D., J.D.(15)........................................................... 35,400 *
All executive officers and directors as a group (13 persons)(16).......................... 1,963,993 16.58%
</TABLE>
- ------------------------
* Less than one percent.
18
<PAGE>
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
11,264,210 shares of Common Stock outstanding on March 31, 1998, adjusted
as required by rules promulgated by the SEC. Beneficial ownership also
includes shares of stock subject to options and warrants currently
exercisable or convertible, or exercisable or convertible within 60 days of
March 31, 1998.
(2) Ms. Vitullo, a director of the Company, is a Senior Vice President of
Rothchild Asset Management which advises and manages International
Biotechnology Trust plc. Ms. Vitullo disclaims beneficial ownership of the
shares held by International Biotechnology Trust plc.
(3) Includes 955,477 shares held by Institutional Venture Partners V, L.P.
("IVP") and 15,865 shares held by Institutional Venture Management V, L.P.
("IVM"), of which Mr. Colella, a Director of the Company, is a partner. IVM
is the general partner of IVP. Also includes 14,007 shares IVM has the
right to acquire pursuant to an option exercisable within 60 days of March
31, 1998. Mr. Colella disclaims beneficial ownership of the shares held by
IVP and IVM, except to the extent of his pecuniary interests therein
(4) Dr. Berendt, a director of the Company, is Senior Vice President for
Research for Bayer. Dr. Berendt disclaims beneficial ownership of the
shares held by Bayer Corporation, a wholly-owned subsidiary of Bayer AG.
(5) Dr. Penhoet, a director of the Company, is the Chief Executive Officer of
Chiron Corporation. Dr. Penhoet disclaims beneficial ownership of the
shares held by Chiron Corporation.
(6) Dr. Wierenga, a director of the Company, is Senior Vice President Research
for the Parke-Davis Pharmaceutical Research division of Warner-Lambert
Company. Dr. Wierenga disclaims beneficial ownership of the shares held by
Warner-Lambert Company.
(7) Includes 15,000 shares which may be acquired pursuant to options
exercisable within 60 days of March 31, 1998. Also includes 500 shares held
by Colella Family Partners and 3,000 shares held by the Colella Family
Trust.
(8) Includes 6,250 shares which may be acquired pursuant to options exercisable
within 60 days of March 31, 1998.
(9) Includes 241,854 shares held by Sprout Capital VI, L.P. ("Sprout") and also
includes 38,296 shares held by DLJ Capital Corporation ("DLJ"). DLJ is the
managing general partner of Sprout. Ms. LaPorte, a director of the Company,
is a general partner of DLJ Associates VI, L.P., the general partner of
Sprout. Ms. LaPorte disclaims beneficial ownership of the shares held by
such entities except to the extent of her pecuniary interests therein. Also
includes 15,000 shares which may be acquired pursuant to options
exercisable within 60 days of March 31, 1998.
(10) Includes 116,607 shares held by The Renton Family Trust. Also includes
193,145 shares Mr. Renton has the right to acquire pursuant to options
exercisable within 60 days of March 31, 1998 of which 103,305 would be
subject to repurchase by the Company if exercised.
(11) Includes 21,500 shares which may be acquired pursuant to options
exercisable within 60 days of March 31, 1998 of which 12,917 would be
subject to repurchase by the Company if exercised.
(12) Includes 120,560 shares Dr. Balmain has the right to acquire pursuant to
options exercisable within 60 days of March 31, 1998 of which 80,418 would
be subject to repurchase if exercised.
19
<PAGE>
(13) Includes 2,452 shares Mr. Blankenship has the right to acquire pursuant to
options exercisable within 60 days of March 31, 1998 of which 1,403 would
be subject to repurchase if exercised. Also includes 3,969 shares which
are subject to repurchase by the Company.
(14) Includes 136,917 shares Dr. Gerber has the right to acquire pursuant to
options exercisable within 60 days of March 31, 1998 of which 41,548 would
be subject to repurchase by the Company if exercised.
(15) Includes 35,400 shares Dr. Giotta has the right to acquire pursuant to
options exercisable within 60 days of March 31, 1998 of which 16,871 would
be subject to repurchase by the Company if exercised.
(16) Includes 1,251,492 shares held by entities affiliated with certain
directors and officers and includes 581,731 shares subject to stock
options held by directors, officers and entities affiliated with certain
directors exercisable within 60 days of March 31, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that the
initial report of ownership was filed late by Ms. Vitullo.
20
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The 1996 Non-Employee Directors' Stock Option Plan (the "Directors' Plan"),
as amended, provides that each member of the Board at the initial public
offering of the Company's Common Stock was granted an option to purchase 20,000
shares of the Company's Common Stock, and each new member of the Company's Board
will be granted an option to purchase 20,000 shares of the company's Common
Stock on the date of his or her initial election to the Board. Further, the
Directors' Plan provides for the automatic, non-discretionary grant of options
to purchase 5,000 shares of the Company's Common Stock, on the anniversary of
each non-employee director's initial grant, if such non-employee director is
continuing to serve as a director on such date.
During the last fiscal year, the Company granted options to purchase an
aggregate of 40,000 shares of Common Stock to non-employee directors of the
Company pursuant to the Directors' Plan, at a weighted average exercise price
per share of $10.09 (based on the closing sales prices reported on the Nasdaq
National Market for the date of each grant). As of March 31, 1998, no options
had been exercised under the Directors' Plan nor had any options granted to
non-employee directors under the 1996 Plan been exercised.
In October and November 1996, each of Mr. Thurman and Dr. Wierenga entered
into consulting agreements with the Company. Pursuant to the consulting
agreements, Mr. Thurman and Dr. Wierenga each receive an annual retainer of
$10,000. In addition Mr. Thurman and Dr. Wierenga are each paid $1,200 per day
for their consulting services, up to a maximum of 12 days each per annum. The
consulting agreements also provide that the Board of Directors of the Company
shall grant each of Mr. Thurman and Dr. Wierenga an option to purchase 1,500
shares of Common Stock per annum. The consulting agreements are for a term of
two years but may be terminated earlier with 30 days notice by either party.
21
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain compensation awarded or paid by the
Company during the years ended December 31, 1997, 1996, and 1995 to its
President and Chief Executive Officer, the Company's other three most highly
paid executive officers who earned more than $100,000 during the year ended
December 31, 1997 and one former executive officer who earned more than $100,000
during the year ended December 31, 1997 (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARD
ANNUAL COMPENSATION -------------
------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS COMPENSATION
- ------------------------------------------------ --------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Hollings C. Renton ............................. 1997 $ 258,080 $ 387(1) 109,454 $ 2,707(3)
President and Chief Executive Officer 1996 248,063 33,333(2) 15,403 2,570(3)
1995 236,250 -- -- --
Allan Balmain, Ph.D., F.R.S.E. ................. 1997 220,002 387(1) -- 75,307(4)
Vice President, Research 1996 41,460 -- 120,000 81,250(5)
1995 -- -- -- --
Gregory L. Giotta, Ph.D., J.D. ................. 1997 175,433 387(1) 1,800 1,768(3)
Vice President and Chief Legal Counsel 1996 169,950 -- 17,087 1,670(3)
1995 84,974 10,487 24,513 --
Douglas L. Blankenship ......................... 1997 98,449 4,387(1) 504 195(3)
Treasurer 1996 91,046 -- 13,154 172(3)
1995 -- -- --
William Gerber, M.D. ........................... 1997 230,013 387(1) 9,454 2,384(3)
Former Vice President and Chief Operating 1996 220,500 33,333(2) 15,403 2,252(3)
Officer 1995 139,000 -- -- --
</TABLE>
- ------------------------
(1) Represents holiday bonus and any annual bonus earned for 1997 performance.
(2) Represents annual bonus earned for 1996 performance.
(3) Represents the taxable portion of group life insurance paid by the company.
(4) Includes $25,000 relocation bonus, $34,681 relocation reimbursement, of
which $8,770 was paid in 1998, $13,380 in mortgage assistance payments and
$2,246 taxable portion of group life insurance paid by the Company.
(5) Includes $41,250 for consulting services and $40,000 relocation bonus.
22
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED IN EXERCISE APPRECIATION FOR TERM(2)
OPTIONS FISCAL PRICE PER EXPIRATION ------------------------
NAME GRANTED YEAR(1) SHARE DATE 5% 10%
- ----------------------------------------- ----------- ----------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Hollings C. Renton ...................... 9,454 2.36% $ 10.875 2/6/07 $ 64,771 $ 163,471
President and Chief Executive Officer 100,000 25.00% 12.00 3/31/07 756,000 1,908,000
Allan Balmain, Ph.D., F.R.S.E. .......... -- -- -- -- -- --
Vice President, Research
Gregory L. Giotta, Ph.D., J.D. .......... 1,800 0.45% 10.875 2/6/07 12,332 31,124
Vice President and Chief Legal Counsel
Douglas L. Blankenship .................. 504 0.13% 10.875 2/6/07 3,453 8,714
Treasurer
William Gerber, M.D. .................... 9,454 2.36% 10.875 2/6/07 64,771 163,471
Former Vice President and Chief
Operating Officer
</TABLE>
- ------------------------
(1) Based on an aggregate of 400,084 options granted to employees and
consultants of the Company in fiscal 1997 including the Named Executive
Officers.
(2) The potential realizable value is calculated based on the term of the option
at its time of grant (10 years) and is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated price.
The 5% and 10% assumed rates of appreciation are derived from the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
23
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
VALUE OF UNEXERCISED
UNDERLYING IN- THE MONEY OPTIONS
UNEXERCISED OPTIONS AT DECEMBER 31,
SHARES AT DECEMBER 31, 1997 1997(1)
ACQUIRED ON VALUE -------------------- ----------------------
NAME EXERCISE REALIZED VESTED UNVESTED VESTED UNVESTED
- -------------------------------------------- ------------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Hollings C. Renton ......................... -- -- 82,670 110,475 $ 496,861 $ 28,938
President and Chief Executive Officer
Allan Balmain, Ph.D., F.R.S.E. ............. -- -- 29,726 90,834 $ 3,740 0
Vice President, Research
Gregory Giotta, Ph.D., J.D. ................ 8,000 $ 80,690 14,008 21,392 $ 56,280 $ 69,918
Vice President and Chief Legal Counsel
Douglas L. Blankenship ..................... -- -- 794 1,658 $ 86 $ 157
Treasurer
William Gerber, M.D. ....................... -- -- 81,108 55,809 $ 509,085 $ 287,198
Former Vice President and Chief Operating
Officer
</TABLE>
- ------------------------
(1) Determined using the December 31, 1997 closing price of $7.75 per share,
minus the exercise price, multiplied by the number of shares underlying the
option.
EMPLOYMENT CONTRACTS
In May 1995, the Company entered into an employment agreement with Dr.
Gregory Giotta providing for an annual compensation of $165,000 per year and an
option to purchase up to 24,513 shares of Common Stock at an exercise price of
$1.07 per share subject to a four-year vesting schedule. If Dr. Giotta were
terminated because of a change in control of the Company, Dr. Giotta would
receive a severance payment equal to six months salary.
In August 1995, the Company entered into an employment agreement, amended in
March 1997, with Dr. Allan Balmain for an annual compensation of $220,000, an
option to purchase up to 100,000 shares of Common Stock at an exercise price
equal to the market price on Dr. Balmain's start date, $10.125, subject to a
four-year vesting schedule and an option to purchase up to 20,000 shares of
Common Stock at an exercise price equal to the market price on Dr. Balmain's
start date, $10.125, subject to vesting on the attainment of certain milestones.
In connection with Dr. Balmain's relocation from Scotland, the Company agreed to
reimburse Dr. Balmain for his reasonable moving expenses, to provide a
relocation bonus of $65,000 and to provide reasonable mortgage assistance for a
period not to exceed three years. In addition, the Company loaned Dr. Balmain
$300,000 secured by his personal residence, $25,000 of which will be forgiven at
the end of each year beginning in 1998 as long as Dr. Balmain remains an
employee of the Company. If Dr. Balmain were terminated because of a change in
control of the Company, Dr. Balmain would receive a severance payment equal to
six months salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of three non-employee
directors: Samuel D. Colella, Randy Thurman and Paul Goddard, Ph.D. Neither
Messrs. Colella nor Thurman nor Dr. Goddard is an officer or employee of the
Company. Mr. Thurman is a consultant to the Company.
24
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
COMPENSATION PHILOSOPHY
The primary goal of the Company is to align compensation with the Company's
business objectives and performance. The Company's aim is to attract, retain and
reward executive officers and other employees who contribute to the long-term
success of the Company and to motivate those individuals to enhance long-term
stockholder value. To establish this relationship between employee compensation
and the creation of stockholder value, the Board of Directors has adopted a
total compensation package comprised of base salary, cash bonus and stock option
awards. Key elements of this compensation package are:
- The Company pays salaries at least competitive with those of leading
biotechnology companies with which the Company competes for talent.
- The Company maintains incentive opportunities designed to motivate and
reward achievement of specific company and individual goals. The
availability of these incentives is designed to ensure that the total
compensation for employees is competitive with the industry.
- The Company provides significant equity-based incentives for executives
and other employees to ensure that individual's are motivated over the
long term to respond to the Company's business challenges and
opportunities as owners.
SALARY COMPENSATION
The salary compensation for all employees, including executive officers, is
based upon the compensation of employees in similar positions in other
biotechnology companies, in accordance with published biotechnology compensation
survey information and based upon the advice of consultants to the Company.
Salary adjustments for 1997 were based on each individual's performance. In
establishing base salaries for the executive officers other than the Chief
Executive Officer, the Compensation Committee carefully reviewed the progress
made in the programs headed by each officer and the role of these officers in
the scientific and business development of the programs of the Company. In
addition, the Compensation Committee relied on market survey information.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer joined the Company in 1993. His initial salary
and stock option grants were determined on the basis of negotiations between the
Board of Directors and the Chief Executive Officer with due regard to his
experience, competitive salary information and market conditions at the time.
Mr. Renton's 1997 salary was set by the Board of Directors. As with the other
executive officers, the amount of Mr. Renton's total compensation was based on
the Company's 1997 accomplishments and the Chief Executive Officer's significant
contributions thereto, including, among other things, performance to Company
milestones set by the Board of Directors, the commencement of Phase II clinical
trials and additional Phase I clinical trials for the Company's lead product,
ONYX-015, the extension of the Cell-Cycle Program with Warner-Lambert Company
("Warner-Lambert") and the partnering of the Company's Inflammation Program with
Warner-Lambert. In addition, the Board of Directors relied on market survey
information.
- ------------------------
(1) The material in this report is not "soliciting materials," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933 as amended (the "Securities
Act") or the Exchange Act, whether made before or after the date hereof and
irrespective of any general incorporation language contained in such filing.
25
<PAGE>
INCENTIVE COMPENSATION
The Company's primary incentive programs presently consist of the 1996 Plan,
the 1996 Employee Stock Purchase Plan (the "Purchase Plan") and the cash bonus
program.
The 1996 Plan utilizes vesting periods to encourage employees to continue in
the employ of the Company. Through option grants, employees receive equity
incentives to build long-term stockholder value. At the time of hiring, each
employee receives a standard initial stock option grant for such employee's job
position at the Company which vests over 4 years. The Compensation Committee
intends to grant an additional option to each employee every two years
thereafter which is equal to 15% of such employee's position grant. Such options
vest ratably over four years. Beginning in 1997, the Compensation Committee
began granting additional options to certain key employees for as much as 50% to
75% of their position grant in order to retain such key employees. Such option
grants "back-end" vest over 4 years so that 10% vest in the first year, 15% vest
in the second year, 25% vest in the third year and 50% vest in the fourth year.
The exercise price of options granted under the 1996 Plan is 100% of the fair
market value of the underlying stock on the date of grant. Employees receive
value from these grants only to the extent that the Company's Common Stock
appreciates in the long term.
In 1997, the Compensation Committee granted stock options to none of the
Company's executive officers in connection with the commencement of employment.
In 1997, the Board of Directors granted stock options to four of the executive
officers including the Chief Executive Officer. The grant of the options was
based on the prior performance of each executive officer and the need to retain
these officers in light of the key roles played by such executive officers in
the growth and success of the Company. In this regard, the Compensation
Committee was mindful of, among other things, the success of these officers,
which was evidenced by, performance to Company milestones set by the Board of
Directors, the commencement of Phase II clinical trials and additional Phase I
clinical trials for the Company's lead product, ONYX-015, the extension of the
Cell-Cycle Program with Warner-Lambert and the partnering of the Company's
Inflammation Program with Warner-Lambert. In reaching its decisions, the
Compensation Committee relied on its experience and the vesting status of the
executive officer's previously issued stock options.
The Company established the Purchase Plan both to encourage employees to
continue in the employ of the Company and to motivate employees through an
ownership interest in the Company. Under the Purchase Plan, employees, including
officers, may have up to 15% of their earnings withheld for purchases of Common
Stock on certain dates specified by the Purchase Plan. The price of Common Stock
purchased will be equal to 85% of the lower of the fair market value of the
Common Stock on the date of commencement of participating in each 24-month
offering period or on each specified purchase date.
In January 1996, the Compensation Committee adopted a plan to grant every
employee an annual incentive stock option grant based on the Company meeting
certain milestones set by the Board of Directors. In April 1997, the
Compensation Committee replaced such plan with a broad-based annual incentive
cash bonus plan. Under such program, awards are tied to the Company meeting
certain goals which are set by the Board. Individual bonuses would vary based on
the performance of such employee.
The Chief Executive Officer, the other executive officers and all other
employees of the Company are eligible to receive cash bonuses under the cash
bonus plan. However, the Compensation Committee is allowed to distinguish
between certain officers and other employees in determining whether the bonus
criteria is met. For fiscal 1997, the Compensation Committee determined that 45%
of the bonus criteria were met and set aside an aggregate 45% of the target
bonus pool for distribution to employees of the Company at the discretion of the
management of the Company. Certain officers of the Company were not eligible for
the cash bonus plan. An aggregate of approximately $200,000 was paid as bonuses
to employees under this program.
26
<PAGE>
CERTAIN TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of not more than $1 million of
compensation paid to certain executive officers in a taxable year. Compensation
above $1 million may be deducted if it is "performance-based compensation"
within the meaning of the Code.
The Compensation Committee has determined that the stock options granted
under the 1996 Plan with an exercise price at least equal to the fair market
value of the Company's common stock on the date of grant should be treated as
"performance-based compensation."
From the members of the Compensation Committee of ONYX Pharmaceuticals, Inc.
Samuel D. Colella
Paul Goddard, Ph.D.
Randy Thurman
27
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON (1)
The following graph shows the total stockholder return of an investment of
$100 in cash on May 8, 1996 (the day immediately preceding the Company's initial
public offering) for (i) the Company's Common Stock, (ii) the Nasdaq Stock
Market-US Index and (iii) the Nasdaq Pharmaceutical Index. All values assume
reinvestment of full amount of all dividends:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
ONYX PHARMACEUTICALS, INC. NASDAQ PHARMACEUTICAL NASDAQ STOCK MARKET-US
<S> <C> <C> <C>
5/08/96 $100 $100 $100
6/96 67 95 100
9/96 95 97 104
12/96 93 95 109
3/97 100 90 103
6/97 85 97 122
9/97 73 109 143
12/97 65 98 134
</TABLE>
- ------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
28
<PAGE>
CERTAIN TRANSACTIONS
On May 2, 1997, Warner-Lambert purchased 192,941 shares of Common Stock at a
purchase price of $17.28 per share for an aggregate equity investment of $3.33
million. This transaction completed Warner-Lambert's obligation to purchase
$10.3 million of equity under the 1995 Cell Cycle Collaboration Agreement.
In March 1997, the Board of Directors granted Mr. Renton an option to
purchase 100,000 shares of Common Stock at an exercise price of $12.00 per share
with back-end vesting over four years.
The Company has entered into indemnity agreements with certain officers,
directors and other key employees which provide, among other things, that the
Company will indemnify such officer or director, under the circumstances and to
the extent provided for therein, for expenses, damages, judgments, fines and
settlements he or she may be required to pay in actions or proceedings which he
or she is or may be made a party by reason of his or her position as a director,
officer or other agent of the Company, and otherwise to the full extent
permitted under Delaware law and the Company's By-laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
[LOGO]
Robert L. Jones
SECRETARY
April 22, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, ONYX
PHARMACEUTICALS, INC. 3031 RESEARCH DRIVE, RICHMOND, CALIFORNIA 94806.
29
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ONYX PHARMACEUTICALS, INC.
1996 EQUITY INCENTIVE PLAN
ADOPTED BY MARCH 26, 1996
APPROVED BY THE STOCKHOLDERS ON APRIL 30, 1996
AMENDED DECEMBER 13, 1996
APPROVED BY STOCKHOLDERS ON MAY 22, 1997
AMENDED FEBRUARY 4, 1998
APPROVED BY THE STOCKHOLDERS ON MAY __, 1998
1. PURPOSES.
(a) In 1992, the Board adopted the Onyx Pharmaceuticals, Inc. 1992
Incentive Stock Plan, which plan was subsequently approved by the Company's
stockholders. On March 26, 1996 the Board hereby amends and restates the
Company's 1992 Incentive Stock Plan in the form of this 1996 Equity Incentive
Plan. On December 13, 1996, the Board amended the Plan to comport with the
requirements of amended Rule 16b-3. The purpose of the Plan is to provide a
means by which selected Employees and Directors of and Consultants to the
Company, and its Affiliates, may be given an opportunity to benefit from
increases in value of the stock of the Company through the granting of (i)
Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses,
(iv) rights to purchase restricted stock, and (v) Stock Appreciation Rights,
all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) Stock
Appreciation Rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
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(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Onyx Pharmaceuticals, Inc., a Delaware corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
individual's service relationship with the Company, whether through employment
or as a Director or Consultant, is not interrupted or terminated. The Board,
in its sole discretion, may determine whether Continuous Status as an Employee,
Director or Consultant shall be considered interrupted in the case of: (i) any
leave of absence approved by the Board, including sick leave, military leave,
or any other personal leave; or (ii) transfers between locations of the Company
or between the Company, Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation
is required to be reported to shareholders under the Exchange Act, as
determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
of the Nasdaq Stock Market, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in common stock) on the last market trading day
prior to the day of determination, or such other date or average of a range of
dates as shall be selected by the Board and consistently applied, as reported
in the Wall Street Journal or such other source as the Board deems reliable;
2.
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(2) If the common stock is quoted on the Nasdaq Stock Market (but
not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, or such other date or average of a range of dates as shall be
selected by the Board and consistently applied, as reported in the Wall Street
Journal or such other source as the Board deems reliable;
(3) In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means a
right granted pursuant to subsection 8(b)(3) of the Plan.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does
not receive compensation (directly or indirectly) from the Company or its
parent or subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any
3.
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time, and is not currently receiving direct or indirect remuneration from the
Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "PLAN" means this Onyx Pharmaceuticals, Inc. 1996 Equity Incentive
Plan.
(x) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(y) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(z) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(aa) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
(bb) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a Stock Appreciation Right, or a combination of the foregoing; the provisions
of each Stock Award granted (which need not be identical), including the time
or times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
4.
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(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board, Non-
Employee Directors and/or Outside Directors. If administration is delegated to
a Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, (and references in
this Plan to the Board shall thereafter be to the Committee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may
be adopted from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
Notwithstanding anything in the Section 3 to the contrary, at any time the
Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant Stock Awards to eligible persons who (i) are
not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at the
time of recognition of income resulting from such Stock Award, or (ii) not
persons with respect to whom the Company wishes to avoid the application of
Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate two million six hundred twenty-five thousand
(2,625,000) shares of the Company's common stock. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award shall
revert to and again become available for issuance under the Plan. Shares
subject to Stock Appreciation Rights exercised in accordance with Section 8 of
the Plan shall not be available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of
any of its Affiliates unless the exercise price of such Incentive Stock Option
is at least one hundred ten percent (110%) of the Fair Market Value of such
stock
5.
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at the date of grant and such Incentive Stock Option is not exercisable after
the expiration of five (5) years from the date of grant.
(c) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options and Stock
Appreciation Rights covering more than three hundred thousand (300,000) shares
of Common Stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of an
Incentive Stock Option or prior to the exercise of a Nonstatutory Stock Option,
(A) by delivery to the Company of other common stock of the Company,
(B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board. In the case of any
deferred payment arrangement, interest shall be payable at least annually and
shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Option is granted
only by such person. A Nonstatutory Stock Option may be transferred to the
extent provided in the Option Agreement; provided that if the Option Agreement
does not expressly permit the transfer of a Nonstatutory Stock Option, the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and
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distribution or pursuant to a domestic relations order satisfying the
requirements of Rule 16a-12 and the rules thereunder, and shall be
exercisable during the lifetime of the person to whom the Option is granted
only by such person or any transferee pursuant to such domestic relations
order. The person to whom the Option is granted may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a
third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that
the Optionee was entitled to exercise it at the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months after the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionee does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the
term of the Option set forth in the Option Agreement, or (ii) the tenth (10th)
day after the last date on which such exercise would result in such liability
under Section 16(b) of the Exchange Act. Finally, an Optionee's Option
Agreement may also provide that if the exercise of the Option following the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (other than upon the Optionee's death or disability) would be
prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Act, or comparable requirements of other
applicable securities laws, then the Option shall terminate on the earlier of
(i) the expiration of the term of the Option set forth in the first paragraph
of this subsection 6(f), or (ii) the expiration of a period of three (3) months
after the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant during which the exercise of the Option would not be in
violation of such registration requirements.
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(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the
Option at the date of death) by the Optionee's estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of
the term of such Option as set forth in the Option Agreement. If, at the time
of death, the Optionee was not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to
any other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the
Board or Committee shall have the authority (but not an obligation) to include
as part of any Option Agreement a provision entitling the Optionee to a further
Option (a "Re-Load Option") in the event the Optionee exercises the Option
evidenced by the Option Agreement, in whole or in part, by surrendering other
shares of common stock in accordance with this Plan and the terms and
conditions of the Option Agreement. Any such Re-Load Option (i) shall be for a
number of shares equal to the number of shares surrendered as part or all of
the exercise price of such Option; (ii) shall have an expiration date which is
the same as the expiration date of the Option the exercise of which gave rise
to such Re-Load Option; and (iii) shall have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the common stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option which is an Incentive Stock
Option and is granted to a 10% stockholder (as described in
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subsection 5(b)), shall have an exercise price which is equal to one hundred
ten percent (110%) of the Fair Market Value of the stock subject to the
Re-Load Option on the date of exercise of the original Option and shall have
a term which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; PROVIDED, HOWEVER, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred
thousand dollar ($100,000) annual limitation on exercisability of Incentive
Stock Options described in subsection 12(d) of the Plan and in Section 422(d)
of the Code. There shall be no Re-Load Options on a Re-Load Option. Any such
Re-Load Option shall be subject to the availability of sufficient shares under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus
or restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value
on the date such award is made. Notwithstanding the foregoing, the Board or
the Committee may determine that eligible participants in the Plan may be
awarded stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or pursuant to a domestic relations order satisfying the
requirements of Rule 16a-12 and any administrative interpretations or
pronouncements thereunder, so long as stock awarded under such agreement
remains subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
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(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under
the Plan to Employees, Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. If a Stock
Appreciation Right is granted to an individual who is at the time subject to
Section 16(b) of the Exchange Act (a "Section 16(b) Insider"), the Stock
Award Agreement of grant shall incorporate all the terms and conditions at
the time necessary to assure that the subsequent exercise of such right shall
qualify for the safe-harbor exemption from short-swing profit liability
provided by Rule 16b-3 promulgated under the Exchange Act (or any successor
rule or regulation). No limitation shall exist on the aggregate amount of
cash payments the Company may make under the Plan in connection with the
exercise of Stock Appreciation Rights.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in
cash (or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the Option surrender) in an amount up to the
excess of (A) the Fair Market Value (on the date of the Option surrender) of
the number of shares of stock covered by that portion of the surrendered Option
in which the Optionee is vested over (B) the aggregate exercise price payable
for such vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock
to which the Concurrent Right pertains. The appreciation distribution payable
on an exercised Concurrent Right shall be in cash
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(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the exercise of the Concurrent Right) in an
amount equal to such portion as shall be determined by the Board or the
Committee at the time of the grant of the excess of (A) the aggregate Fair
Market Value (on the date of the exercise of the Concurrent Right) of the
vested shares of stock purchased under the underlying Option which have
Concurrent Rights appurtenant to them over (B) the aggregate exercise price
paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will
be granted independently of any Option and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions applicable
to Nonstatutory Stock Options as set forth in Section 6. They shall be
denominated in share equivalents. The appreciation distribution payable on the
exercised Independent Right shall be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the exercise of
the Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is exercising the
Independent Right on such date, over (B) the aggregate Fair Market Value (on
the date of the grant of the Independent Right) of such number of shares of
Company stock. The appreciation distribution payable on the exercised
Independent Right shall be in cash or, if so provided, in an equivalent number
of shares of stock based on Fair Market Value on the date of the exercise of
the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect, at any time
and from time to time, (i) the repricing of any outstanding Options and/or any
Stock Appreciation Rights under the Plan and/or (ii) with the consent of the
affected holders of Options and/or Stock Appreciation Rights, the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of
stock, but having an exercise price per share not less than eighty-five percent
(85%) of the Fair Market Value (one hundred percent (100%) of the Fair Market
Value in the case of an Incentive Stock Option) or, in the case of an Incentive
Stock Option granted to a 10% stockholder (as described in subsection 5(b)),
not less than one hundred ten percent (110%) of the Fair Market Value) per
share of stock on the new grant date. Notwithstanding the foregoing, the Board
or the Committee may grant an Option and/or Stock Appreciation Right with an
exercise price lower than that set forth above if such Option and/or Stock
Appreciation Right is granted as part of a transaction to which section 424(a)
of the Code applies.
Shares subject to an Option or Stock Appreciation Right canceled under
this Section 9 shall continue to be counted against the maximum award of
Options and Stock Appreciation Rights permitted to be granted pursuant to the
Plan. The repricing of an Option and/or Stock Appreciation Right hereunder
resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and/or Stock Appreciation Right and the
grant of a substitute Option and/or Stock Appreciation Right; in the event of
such repricing, both the original and the substituted Options and Stock
Appreciation Rights shall be counted against the maximum awards of Options and
Stock Appreciation Rights permitted to be granted pursuant to the Plan, to the
extent required by Section 162(m) of the Code.
11.
<PAGE>
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority
is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant, nor any person to whom a
Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares subject to such Stock Award unless and until such person has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or
any Affiliate (or to continue acting as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee, with or without cause, the right of the Company's Board of
Directors and/or the Company's stockholders to remove any Director pursuant to
the terms of the Company's By-Laws and the provisions of the Delaware General
Corporation Law, or the right to terminate the relationship of any Consultant
pursuant to the terms of such Consultant's agreement with the Company or
Affiliate.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such
12.
<PAGE>
limit (according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d),
7(b) or 8(b), as a condition of exercising or acquiring stock under any Stock
Award, (1) to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account
and not with any present intention of selling or otherwise distributing the
stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered
under a then currently effective registration statement under the Securities
Act, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state, local,
or other tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination of
such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of the
common stock of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by
the Company), the Plan will be appropriately adjusted in the class(es) and
maximum number of shares subject to the Plan pursuant to subsection 4(a), and
the outstanding Stock Awards will be appropriately adjusted in the class(es)
and number of shares and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee,
the determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a "transaction not involving the receipt of consideration by the Company".)
13.
<PAGE>
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is not the surviving corporation; or (3) a reverse merger
in which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then to the extent permitted by applicable law:
(i) any surviving or acquiring corporation or an Affiliate of such surviving or
acquiring corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar Stock Awards for those outstanding under the Plan,
or (ii) such Stock Awards shall continue in full force and effect. In the
event any surviving or acquiring corporation and its Affiliates refuse to
assume or continue such Stock Awards, or to substitute similar options for
those outstanding under the Plan, then, with respect to Stock Awards held by
persons then performing services as Employees, Directors or Consultants, the
time during which such Stock Awards may be exercised shall be accelerated and
the Stock Awards terminated if not exercised prior to such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 10 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
shareholders of the Company to the extent shareholder approval is necessary for
the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3
under the Exchange Act or any Nasdaq or securities exchange listing
requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of performance-
based compensation from the limit on corporate deductibility of compensation
paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i)
the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
14.
<PAGE>
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on March 26, 2006, which shall be
within ten (10) years from the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the effective date of the initial
public offering of the Company's common stock, but no Stock Awards granted
under the Plan shall be exercised unless and until the Plan has been approved
by the stockholders of the Company, which approval shall be within twelve (12)
months before or after the date the Plan is adopted by the Board.
15.
<PAGE>
ONYX PHARMACEUTICALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED MARCH 26, 1996
APPROVED BY THE STOCKHOLDERS ON APRIL 30, 1996
AMENDED FEBRUARY 4, 1998
APPROVED BY THE STOCKHOLDERS ON MAY __, 1998
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Onyx Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f), respectively, of the Internal Revenue
Code of 1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success
of the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an
"employee stock purchase plan" as that term is defined in Section 423(b) of
the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration
to a Committee, as provided in subparagraph 2(c). Whether or not the Board
has delegated administration, the Board shall have the final power to
determine all questions of policy and expediency that may arise in the
administration of the Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
1.
<PAGE>
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of
the Company and its Affiliates and to carry out the intent that the Plan be
treated as an "employee stock purchase plan" within the meaning of Section
423 of the Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee").
If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and
revest in the Board the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate one hundred seventy-five
thousand (175,000) shares of the Company's common stock (the "Common Stock").
If any right granted under the Plan shall for any reason terminate without
having been exercised, the Common Stock not purchased under such right shall
again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the
Plan to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate, which shall comply with the requirements of
Section 423(b)(5) of the Code that all employees granted rights to purchase
stock under the Plan shall have the same rights and privileges. The terms
and conditions of an Offering shall be incorporated by reference into the
Plan and treated as part of the Plan. The provisions of separate Offerings
need not be identical, but each Offering shall include (through incorporation
of the provisions of this Plan by reference in the document comprising the
Offering or otherwise) the period during which the Offering shall be
effective, which period shall not exceed twenty-seven (27) months beginning
with the Offering Date, and the substance of the provisions contained in
paragraphs 5 through 8, inclusive.
2.
<PAGE>
(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right
with a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in
subparagraph 5(b), an employee of the Company or any Affiliate shall not be
eligible to be granted rights under the Plan, unless, on the Offering Date,
such employee has been in the employ of the Company or any Affiliate for such
continuous period preceding such grant as the Board or the Committee may
require, but in no event shall the required period of continuous employment
be equal to or greater than two (2) years. In addition, unless otherwise
determined by the Board or the Committee and set forth in the terms of the
applicable Offering, no employee of the Company or any Affiliate shall be
eligible to be granted rights under the Plan, unless, on the Offering Date,
such employee's customary employment with the Company or such Affiliate is
for at least twenty (20) hours per week and at least five (5) months per
calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company
or designated Affiliate will, on a date or dates specified in the Offering
which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which
right shall thereafter be deemed to be a part of that Offering. Such right
shall have the same characteristics as any rights originally granted under
that Offering, as described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of
the exercise price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering;
and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before
the end of the Offering, he or she will not receive any right under that
Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns
stock possessing five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company or of any Affiliate. For
purposes of this subparagraph 5(c), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of any employee, and stock
which such
3.
<PAGE>
employee may purchase under all outstanding rights and options shall be
treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock
of the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at
the time such rights are granted) for each calendar year in which such rights
are outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that
the Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to
the number of shares of Common Stock of the Company purchasable with a
percentage designated by the Board or the Committee not exceeding fifteen
percent (15%) of such employee's Earnings (as defined in subparagraph 7(a))
during the period which begins on the Offering Date (or such later date as
the Board or the Committee determines for a particular Offering) and ends on
the date stated in the Offering, which date shall be no later than the end of
the Offering. The Board or the Committee shall establish one or more dates
during an Offering (the "Purchase Date(s)") on which rights granted under the
Plan shall be exercised and purchases of Common Stock carried out in
accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition,
in connection with each Offering that contains more than one Purchase Date,
the Board or the Committee may specify a maximum aggregate number of shares
which may be purchased by all eligible employees on any given Purchase Date
under the Offering. If the aggregate purchase of shares upon exercise of
rights granted under the Offering would exceed any such maximum aggregate
number, the Board or the Committee shall make a pro rata allocation of the
shares available in as nearly a uniform manner as shall be practicable and as
it shall deem to be equitable.
(c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
4.
<PAGE>
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within
the time specified in the Offering, in such form as the Company provides.
Each such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board or the Committee of such employee's
Earnings during the Offering. "Earnings" is defined as an employee's regular
salary or wages (including amounts thereof elected to be deferred by the
employee, that would otherwise have been paid, under any arrangement
established by the Company intended to comply with Section 401(k), Section
402(e)(3), Section 125, Section 402(h), or Section 403(b) of the Code, and
also including any deferrals under a non-qualified deferred compensation plan
or arrangement established by the Company), which shall include or exclude
(as provided for each Offering) the following items of compensation: bonuses,
commissions, overtime pay, incentive pay, profit sharing, other remuneration
paid directly to the employee, the cost of employee benefits paid for by the
Company or an Affiliate, education or tuition reimbursements, imputed income
arising under any group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection
with stock options, contributions made by the Company or an Affiliate under
any employee benefit plan, and similar items of compensation, as determined
by the Board or Committee. The payroll deductions made for each
participant shall be credited to an account for such participant under the
Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering.
Upon such withdrawal from the Offering by a participant, the Company shall
distribute to such participant all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the participant) under the Offering, without interest, and
such participant's interest in that Offering shall be automatically
terminated. A participant's withdrawal from an Offering will have no effect
upon such participant's eligibility to participate in any other Offerings
under the Plan but such participant will be required to deliver a new
participation agreement in order to participate in subsequent Offerings under
the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's
employment with the Company and any designated Affiliate, for any reason, and
the Company shall distribute to such terminated employee all of his or her
accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire stock for the terminated employee),
under the Offering, without interest.
5.
<PAGE>
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution,
or by a beneficiary designation as provided in paragraph 14 and, otherwise
during his or her lifetime, shall be exercisable only by the person to whom
such rights are granted.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of whole shares of stock of the
Company, up to the maximum number of shares permitted pursuant to the terms
of the Plan and the applicable Offering, at the purchase price specified in
the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of
shares which is less than the amount required to purchase one share of stock
on the final Purchase Date of an Offering shall be held in each such
participant's account for the purchase of shares under the next Offering
under the Plan, unless such participant withdraws from such next Offering, as
provided in subparagraph 7(b), or is no longer eligible to be granted rights
under the Plan, as provided in paragraph 5, in which case such amount shall
be distributed to the participant after such final Purchase Date, without
interest. If there are no remaining shares reserved under the Plan, the
amount, if any, of accumulated payroll deductions remaining in any
participant's account after the purchase of shares which is equal to the
amount required to purchase whole shares of stock on the final Purchase Date
of an Offering shall be distributed in full to the participant after such
Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and
other securities and other laws applicable to the Plan. If on a Purchase
Date in any Offering hereunder the Plan is not so registered or in such
compliance, no rights granted under the Plan or any Offering shall be
exercised on such Purchase Date, and the Purchase Date shall be delayed until
the Plan is subject to such an effective registration statement and such
compliance, except that the Purchase Date shall not be delayed more than
twelve (12) months and the Purchase Date shall in no event be more than
twenty-seven (27) months from the Offering Date. If on the Purchase Date of
any Offering hereunder, as delayed to the maximum extent permissible, the
Plan is not registered and in such compliance, no rights granted under the
Plan or any Offering shall be exercised and all payroll deductions
accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
6.
<PAGE>
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to issue and sell shares of stock upon
exercise of the rights granted under the Plan. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such
rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving
the receipt of consideration by the Company), the Plan and outstanding rights
will be appropriately adjusted in the class(es) and maximum number of shares
subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights. Such adjustments shall be made
by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4)
the acquisition by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any comparable successor provisions (excluding any
employee benefit plan, or related trust, sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty
percent (50%) of the combined voting power entitled to vote in the election
of directors, then, as determined by the Board in its sole discretion (i) any
surviving or acquiring corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants'
7.
<PAGE>
accumulated payroll deductions may be used to purchase Common Stock
immediately prior to the transaction described above and the participants'
rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3")); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under it into
compliance therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan,
except with the consent of the person to whom such rights were granted, or
except as necessary to comply with any laws or governmental regulations, or
except as necessary to ensure that the Plan and/or rights granted under the
Plan comply with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash.
In addition, a participant may file a written designation of a beneficiary
who is to receive any cash from the participant's account under the Plan in
the event of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant's death, the Company shall deliver
such shares and/or cash to the executor or administrator of the estate of
8.
<PAGE>
the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its sole discretion, may
deliver such shares and/or cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company
may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at
any time. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the
person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulation, or except as necessary to ensure
that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's
initial public offering of shares of common stock becomes effective (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the stockholders of the
Company within twelve (12) months before or after the date the Plan is
adopted by the Board or the Committee, which date may be prior to the
Effective Date.
9.
<PAGE>
ONYX PHARMACEUTICALS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 28, 1998
The undersigned hereby appoints HOLLINGS C. RENTON, DOUGLAS L. BLANKENSHIP
and ROBERT L. JONES, and each of them, as attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the shares of stock
of ONYX Pharmaceuticals, Inc. which the undersigned may be entitled to vote at
the Annual Meeting of Stockholders of ONYX Pharmaceuticals, Inc. to be held at
the Company's executive offices located at 3031 Research Drive, Richmond,
California 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 1 AND FOR PROPOSALS 2, 3 AND 4, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect three directors to hold office until the 2001 Annual
Meeting of Stockholders.
<TABLE>
<S> <C>
/ / FOR all nominees listed / / WITHHOLD AUTHORITY
below (except as indicated to to vote for all nominees
the contrary below.) listed below.
</TABLE>
Nominees: Michael J. Berendt, Ph.D., Edward Penhoet, Ph.D. and Nicole
Vitullo
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE SUCH NOMINEE'S NAME
BELOW:
________________________________________________________________________________
<PAGE>
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2, 3 AND 4.
PROPOSAL 2: To approve the Company's 1996 Equity Incentive Plan, as
amended, to increase the aggregate number of shares of Common
Stock authorized for issuance under such plan by 300,000
shares.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 3: To approve the Company's 1996 Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common
Stock authorized for issuance under such plan by 75,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 4: To ratify the selection of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending December 31,
1998.
/ / FOR / / AGAINST / / ABSTAIN
Dated: _____________________, 1998
__________________________________
__________________________________
SIGNATURE(S)
Please sign exactly as your name
appears on this proxy. If the
stock is registered in the names
of two or more persons, each
should sign. Executors,
administrators, trustees,
guardians and attorneys-in-fact
should add their titles. If signer
is a corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If signer is a partnership,
please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
