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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.
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(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)(4)
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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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 27, 1999
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 27, 1999 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 two directors to hold office until the 2002 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 ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1999.
4. 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, 1999 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
[SIGNATURE]
Robert L. Jones
SECRETARY
Richmond, California
April 23, 1999
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 27, 1999
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 27, 1999 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 23, 1999 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,
1999 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 15, 1999, the Company had outstanding and entitled to
vote 11,468,154 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 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 toward a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
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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
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2000 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is December 23, 1999. The deadline for submitting a stockholder
proposal or a nomination for director that is not included in such proxy
statement and form of proxy is no earlier than February 26, 2000, and no later
than March 28, 2000. Stockholders are also advised to review the Company's
By-laws, which contain additional requirements with respect to advance notice of
stockholder proposals.
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 seven members with two
vacancies. There are two directors in Class III whose term of office expires in
1999. Each of the nominees for election to Class III is currently a director of
the Company who was previously elected by stockholders. If elected at the Annual
Meeting, each of the nominees would serve until the annual meeting of
stockholders in 2002 and until his successor is elected and duly 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 seven
members with two vacancies.
Bayer Corporation has the right to have a nominee elected to the Company's
Board of Directors until the later of (i) the end of the research term of the
collaborative agreement with the Company, or (ii) if the parties have a compound
in clinical development, until such time as the parties do not have a 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 two 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.
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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 2002 ANNUAL
MEETING--CLASS III
SAMUEL D. COLELLA, age 60, 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. 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 52, 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.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING--CLASS I
PAUL GODDARD, PH.D., age 49, has served as a director of the Company since
February 1997. From March 1991 to August 1998, Dr. Goddard served as Chief
Executive Officer of Neurex Corporation, a biotechnology company, and from
October 1991 to August 1998, he served as Chairman of the Board. Since August
1998, Dr. Goddard has served as President and Chief Executive Officer of Elan
Pharmaceuticals, Inc., a biotechnology company and a division of Elan
Corporation plc. 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 51, 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. In addition, he serves on the
board of directors of GenVec, Inc. Dr. Wierenga holds a B.A. from Hope College
and a Ph.D. in chemistry from Stanford University.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING--CLASS II
MICHAEL J. BERENDT, PH.D., age 50, 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. Dr. Berendt is on the Board of Directors of Myriad Genetics, Inc.
and the Waters Corporation. 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 and University.
EDWARD E. PENHOET, PH.D., age 58, has served as a director of the Company
since July 1997. Dr. Penhoet was a co-founder and director of Chiron Corporation
and served as its Chief Executive Officer until May 1998 when he became Vice
Chairman. Dr. Penhoet has been a faculty member of the Biochemistry Department
at the University of California, Berkeley, for 26 years. In July 1998, Dr.
Penhoet was appointed the Dean of the School of Public Health, at the University
of California at Berkeley.
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NICOLE VITULLO, age 41, 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 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.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1998, 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 three
non-employee directors: Mr. Colella, Ms. Vitullo and Dr. Wierenga. 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 Dr. Penhoet. It met twice during such
fiscal year.
During the fiscal year ended December 31, 1998, 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.
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 2,625,000 shares of the Company's Common
Stock authorized and reserved for issuance under the 1996 Plan. As of March 31,
1999, options (net of canceled or expired options) covering an aggregate of
2,081,787 shares of Common Stock had been granted under the 1996 Plan, and
approximately 541,713 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
53,000 shares of Common Stock to current executive officers and directors at
exercise prices ranging from $4.875 to $10.8125 per share and granted to all
employees and consultants (excluding executive officers) as a group options to
purchase 267,106 shares at exercise prices ranging from $4.00 to $10.9375 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, 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 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 April 1999, 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
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300,000 shares of Common Stock from a total of 2,625,000 shares to 2,925,000
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 incentive stock options,
nonstatutory stock options, stock appreciation rights, stock bonuses and
restricted stock purchase awards (collectively "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 not intended to qualify as incentive
stock options under the Code. Stock appreciation rights granted under the 1996
Plan may be tandem rights, concurrent rights or independent rights. See "Federal
Income Tax Information" for a discussion of the tax treatment of awards.
PURPOSE
The Board adopted the 1996 Plan to provide a means by which employees,
directors and consultants of the Company and its affiliates may be given an
opportunity to purchase stock in the Company, to assist in retaining the
services of such persons, to secure and retain the services of persons capable
of filling key positions and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its affiliates. All of the
approximately 189 employees, directors and consultants of the Company and its
affiliates are eligible to participate in the 1996 Plan.
ADMINISTRATION
The Board administers the 1996 Plan. Subject to the provisions of the 1996
Plan, the Board has the power to construe and interpret the 1996 Plan and to
determine the persons to whom and the dates on which awards will be granted, the
number of shares of Common Stock to be subject to each award, the time or times
during the term of each option within which all or a portion of such option may
be exercised, the exercise price of each option, the type of consideration and
other terms of the option or award.
The Board has the power to delegate administration of the 1996 Plan to a
committee composed of one or more members of the Board. In the discretion of the
Board, a committee may consist solely of two or more "non-employee directors"
within the meaning of Rule 16b-3 of the Exchange Act or solely of two or more
"outside directors" within the meaning of Section 162(m) of the Code. For this
purpose, a "non-employee director" generally is a director who does not receive
remuneration from the Company other than compensation for service as a director
(except for amounts not in excess of specified limits applicable pursuant to
Rule 16b-3 under the Exchange Act). An "outside director" generally is a
director who is neither a current or former officer of the Company nor a current
employee of the Company, does not receive any remuneration from the Company
other than compensation for service as a director, and is not employed by or
have certain ownership interests in an entity that receives remuneration from
the
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Company (except within specified limits applicable under regulations issued
pursuant to Section 162(m) of the Code). If administration is delegated to a
committee, the committee has the power to delegate administrative powers to a
subcommittee of one or more members. As used herein with respect to the 1996
Plan, the "Board" refers to any committee the Board appoints or, if applicable,
any such subcommittee, as well as to the Board itself. In accordance with the
foregoing provisions, the Board has delegated administration of the 1996 Plan to
the Compensation Committee.
ELIGIBILITY
Incentive stock options and stock appreciation rights related thereto may be
granted under the 1996 Plan only to employees (including officers) of the
Company and its affiliates. Employees (including officers), directors, and
consultants of both the Company and its affiliates are eligible to receive all
other types of awards 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 exercise price is at least 110% of the fair market value
of the stock subject to the option on the date of grant and the term of the
option does not exceed five years from the date of grant. In addition, the
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which incentive stock options are exercisable for
the first time by a participant during any calendar year (under the 1996 Plan
and all other such plans of the Company and its affiliates) may not exceed
$100,000.
No person may be granted options and/or stock appreciation rights under the
1996 Plan exercisable for more than 300,000 shares of Common Stock during any
calendar year ("Section 162(m) Limitation").
STOCK SUBJECT TO THE 1996 PLAN
Subject to this Proposal, an aggregate of 2,925,000 shares of Common Stock
is reserved for issuance under the 1996 Plan. If awards granted under the 1996
Plan expire or otherwise terminate without being exercised, the shares of Common
Stock not acquired pursuant to such awards again become available for issuance
under the 1996 Plan.
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 may
not be less than 100% of the fair market value of the stock subject to the
option on the date of the 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 may not be less than 85% of the fair market value of the
stock on the date of grant. As of April 15, 1999, the closing price of the
Company's Common Stock as reported on the Nasdaq National Market System was
$8.1875 per share.
The exercise price of options granted under the 1996 Plan must be paid
either in cash at the time the option is exercised or, at the discretion of the
Board, (i) by delivery of other Common Stock of the Company, (ii) pursuant to a
deferred payment arrangement, or (iii) in any other form of legal consideration
acceptable to the Board.
REPRICING. In the event of a decline in the value of the Company's Common
Stock, the Board has the authority to offer participants the opportunity to
replace outstanding higher priced options with new lower priced options. To the
extent required by Section 162(m) of the Code, a repriced option is deemed to be
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canceled and a new option granted. Both the option deemed to be canceled and the
new option deemed to be granted will be counted against the Section 162(m)
Limitation.
OPTION EXERCISE. Options granted under the 1996 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Vesting typically
will occur during the optionholder's continued service with the Company or an
affiliate, whether such service is performed in the capacity of employee,
director or consultant (collectively, "service") and regardless of any change in
the capacity of such service. Shares covered by different options granted 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 vest or be exercised. In
addition, options granted under the 1996 Plan may permit exercise prior to
vesting, but in such event the participant may be required to enter into an
early exercise stock purchase agreement that allows the Company to repurchase
unvested shares, generally at their exercise price, should the participant's
service terminate before vesting. To the extent provided by the terms of an
option, a participant 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 participant, by delivering already-owned Common 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 generally terminate three months after termination
of the participant's service unless (i) such termination is due to the
participant's disability, in which case the option may, but need not, provide
that it may be exercised (to the extent the option was exercisable at the time
of the termination of service) at any time within 12 months of such termination;
(ii) the participant dies before the participant's service has terminated, or
within three months after termination of such service, in which case the option
may, but need not, provide that it may be exercised (to the extent the option
was exercisable at the time of the participant's death) within 18 months of the
participant's death by the person or persons to whom the rights to such option
have passed; or (iii) the option by its terms specifically provides otherwise. A
participant may designate a beneficiary who may exercise the option following
the participant's death. Individual option grants by their terms may provide for
exercise within a longer period of time following termination of service.
The option term may be extended in the event that exercise of the option
within these periods is prohibited by law, particularly applicable securities
law.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
PAYMENT. The Board determines the purchase price under a restricted stock
purchase agreement, but the purchase price may not be less than 85% of the fair
market value of the Company's Common Stock on the date of grant. The Board may
award stock bonuses in consideration of past services without a purchase
payment.
The purchase price of stock acquired pursuant to a restricted stock purchase
agreement under the 1996 Plan must be paid either in cash at the time the award
is exercised or, at the discretion of the Board, (i) by delivery of other Common
Stock of the Company, (ii) pursuant to a deferred payment arrangement, or (iii)
in any other form of legal consideration acceptable to the Board.
VESTING. Shares of stock sold or awarded under the 1996 Plan may, but need
not be, subject to a repurchase option in favor of the Company in accordance
with a vesting schedule as determined by the Board. The Board has the power to
accelerate the vesting of stock acquired pursuant to a restricted stock purchase
agreement under the 1996 Plan.
RESTRICTIONS ON TRANSFER. Rights under a stock bonus or restricted stock
bonus agreement may not be transferred other than by will or by the laws of
descent and distribution or except where required by law.
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STOCK APPRECIATION RIGHTS
The 1996 Plan authorizes three types of stock appreciation rights:
TANDEM STOCK APPRECIATION RIGHTS. Tandem stock appreciation rights are tied
to an underlying option and require the participant to elect whether to exercise
the underlying option or to surrender the option for an appreciation
distribution equal to the market price of the vested shares purchasable under
the surrendered option less the aggregate exercise price payable for such
shares. Appreciation distributions payable upon exercise of tandem stock
appreciation rights shall generally be made in cash.
CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent stock appreciation rights
are tied to an underlying option and are exercised automatically at the same
time the underlying option is exercised. The participant receives an
appreciation distribution equal to the market price of the vested shares
purchased under the option less the aggregate exercise price payable for such
shares. Appreciation distributions payable upon exercise of concurrent stock
appreciation rights shall generally be made in cash.
INDEPENDENT STOCK APPRECIATION RIGHTS. Independent stock appreciation
rights are not tied to any underlying option, but instead are denominated in
"share equivalents." A share equivalent for this purpose is equal to a share of
Common Stock. Independent stock appreciation rights entitle the participant to
receive, upon exercise, a distribution for each exercised share equivalent that
is equal to the current fair market value of a share of Common Stock, less the
value of the share on the original date of grant. Distributions payable upon
exercise of independent stock appreciation rights may, at the Board's
discretion, be made in cash, in shares of stock or a combination thereof.
RESTRICTIONS ON TRANSFER
The participant may not transfer an incentive stock option other than by
will or by the laws of descent and distribution. A participant may also
designate a beneficiary who may exercise the option following the participant's
death. During the lifetime of the participant, only the participant may exercise
an incentive stock option. The Board may grant nonstatutory stock options that
are transferable in certain limited instances. Shares subject to repurchase by
the Company under an early exercise stock purchase agreement may be subject to
restrictions on transfer that the Board deems appropriate.
ADJUSTMENT PROVISIONS
Transactions not involving receipt of consideration by the Company, such as
a merger, consolidation, reorganization, stock dividend, or stock split, may
change the class and number of shares of Common Stock subject to the 1996 Plan
and outstanding awards. In that event, the 1996 Plan will be appropriately
adjusted as to the class and the maximum number of shares of Common Stock
subject to the 1996 Plan and the Section 162(m) Limitation, and outstanding
awards will be adjusted as to the class, number of shares and price per share of
Common Stock subject to such awards.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1996 Plan provides that, in the event of a dissolution, liquidation or
sale of substantially all of the assets of the Company, specified types of
merger, or other corporate reorganization ("change in control"), then to the
extent permitted by law, any surviving corporation will be required to either
assume or continue awards outstanding under the 1996 Plan or substitute similar
awards for those outstanding under the 1996 Plan, or such outstanding awards
will continue in full force and effect. If any surviving corporation declines to
assume or continue awards outstanding under the 1996 Plan, or to substitute
similar awards, then, with respect to participants whose service has not
terminated, the vesting and the time during which their options may be exercised
will be accelerated and for all awards any repurchase rights or acquisition
rights shall lapse. In such event, an outstanding award will terminate if the
participant does not exercise it before a change in control. The acceleration of
an award in the event of an acquisition or similar corporate event
8
<PAGE>
may be viewed as an anti-takeover provision, which may have the effect of
discouraging a proposal to acquire or otherwise obtain control of the Company.
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 also may 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 if the amendment would (i) modify the requirements as to eligibility
for participation (to the extent such modification requires stockholder approval
in order for the 1996 Plan to satisfy Section 422 of the Code, if applicable, or
Rule 16b-3 of the Exchange Act); or (ii) change the 1996 Plan in any other way
if such change requires stockholder approval in order to comply with Rule 16b-3
of the Exchange Act or to satisfy the requirements of Section 422 of the Code or
any Nasdaq or other applicable securities exchange listing requirements. The
Board may submit any other amendment to the 1996 Plan for stockholder approval,
including, but not limited to, amendments intended to satisfy the requirements
of Section 162(m) of the Code regarding the exclusion of performance-based
compensation from the limitation on the deductibility of compensation paid to
certain employees.
FEDERAL INCOME TAX INFORMATION
Long-term capital gains currently are generally subject to lower tax rates
than ordinary income or short-term capital gains. The maximum long-term capital
gains rate for federal income tax purposes is currently 20% while the maximum
ordinary income rate and short-term capital gains rate is effectively 39.6%.
Slightly different rules may apply to participants who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
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 participant 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
participant's alternative minimum tax liability, if any.
If a participant 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
more than one year from the date on which the shares are transferred to the
participant upon exercise of the option, any gain or loss on a disposition of
such stock will be a long-term capital gain or loss.
Generally, if the participant disposes of the stock before the expiration of
either of these holding periods (a "disqualifying disposition"), then at the
time of disposition the participant will realize taxable ordinary income equal
to the lesser of (i) the excess of the stock's fair market value on the date of
exercise over the exercise price, or (ii) the participant's actual gain, if any,
on the purchase and sale. The participant's additional gain or any loss upon the
disqualifying disposition will be a capital gain or loss, which will be
long-term or short-term depending on whether the stock was held for more than
one year.
To the extent the participant 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.
9
<PAGE>
NONSTATUTORY STOCK OPTIONS, RESTRICTED STOCK PURCHASE AWARDS AND STOCK
BONUSES. Nonstatutory stock options, restricted stock purchase awards and stock
bonuses granted under the 1996 Plan generally have the following federal income
tax consequences:
There are no tax consequences to the participant or the Company by reason of
the grant. Upon acquisition of the stock, the participant normally will
recognize taxable ordinary income equal to the excess, if any, of the stock's
fair market value on the acquisition date over the purchase price. 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
participant elects to be taxed on receipt of the stock. With respect to
employees, the Company is generally 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 participant.
Upon disposition of the stock, the participant 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
acquisition (or vesting) of the stock. Such gain or loss will be long-term or
short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to participants who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
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 participant 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 participant.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. Section 162(m) of the Code
denies a deduction to any publicly-held corporation for compensation paid to
certain "covered employees" in a taxable year to the extent that compensation to
such covered employee exceeds $1 million. It is possible that compensation
attributable to awards, 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 and stock appreciation rights will qualify as
performance-based compensation if the award is granted by a compensation
committee comprised solely of "outside directors" and either (i) the plan
contains a per-employee limitation on the number of shares for which such awards
may be granted during a specified period, the per-employee limitation is
approved by the stockholders, and the exercise price of the award is no less
than the fair market value of the stock on the date of grant, or (ii) the award
is granted (or exercisable) only upon the achievement (as certified in writing
by the compensation committee) of an objective performance goal established in
writing by the compensation committee while the outcome is substantially
uncertain, and the award is approved by stockholders.
Compensation attributable to restricted stock purchases will qualify as
performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors," (ii) the number
of shares subject to the award is within the per-employee limitation described
above, and (iii) the purchase price of the award is no less than the fair market
value of the stock on the
10
<PAGE>
date of grant. Stock bonuses and restricted stock purchases with a purchase
price below fair market value 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).
PROPOSAL 3
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, 1999 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. 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.
11
<PAGE>
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................................... 52 President, Chief Executive Officer and Director
Norman Hardman, Ph.D., F.R.S.C....................... 53 Chief Operating Officer
Gregory Giotta, Ph.D., J.D........................... 52 Vice President and Chief Legal Counsel
Mary Ann Rafferty.................................... 50 Vice President, Human Resources
Marilyn E. Wortzman, C.P.A........................... 52 Controller
</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.
NORMAN HARDMAN, PH.D., F.R.S.C., joined the Company in March 1999 as Chief
Operating Officer with a focus on managing overall research and development.
Prior to joining the Company, Dr. Hardman served as President and Chief
Operating Officer of GeneMedicine Inc., a gene thereapy company, from March 1998
to March 1999, and as Chief Scientific Officer of GeneMedicine Inc. from April
1997 to March 1998. From 1986 to 1997, Dr. Hardman held numerous research and
development management positions at Ciba-Geigy Ag and Novartis Ag, Swiss
pharmaceutical companies. Dr. Hardman earned a Ph.D. in Biochemistry from the
University of Manchester, U.K., and a B.Sc. in Chemistry from the University of
London. He has been elected as a Fellow of the Royal Society of Chemistry.
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. 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 from April 1996 to
February 1998. 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 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 Linguistics from State University New York, Albany.
MARILYN E. WORTZMAN, C.P.A. was appointed Controller of the Company in
August 1998 after performing that function in an acting capacity since April
1997. From April 1992 to September 1996, Ms. Wortzman served as Finance Manager
for AutoDesk, Inc., a software company. From 1989 to April 1992, Ms. Wortzman
served as controller of Rucker Fuller Company, a contract office furnishings
company, and prior to that, she served as a supervisory senior for the
accounting firm of Ernst & Young LLP. Ms. Wortzman earned a B.A. in Political
Science from Syracuse University.
12
<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 1, 1999 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 9.79%
Five Arrows House
St. Swithins Lane
London EC4N 8NR
United Kingdom
Entities Affiliated with Institutional Venture Partners(3)..... 985,349 8.58
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Bayer Corporation(4)........................................... 945,510 8.25
400 Morgan Lane
Westhaven, CT 96516
Chiron Corporation(5).......................................... 750,030 6.54
4560 Horton Street
Emeryville, CA 94608
Warner-Lambert Company(6)...................................... 657,737 5.74
201 Tabor Road
Morris Plains, NJ 07950
Michael J. Berendt, Ph.D.(4)................................... -- *
Samuel D. Colella(3)(7)........................................ 1,008,432 8.77
Paul Goddard, Ph.D.(8)......................................... 15,833 *
Edward E. Penhoet, Ph.D.(5).................................... -- *
Hollings C. Renton(9).......................................... 319,986 2.74
Nicole Vitullo(2)(10).......................................... 5,833 *
Wendell Wierenga, Ph.D.(6)(11)................................. 28,000 *
Allan Balmain, Ph.D., F.R.S.E.(12)............................. 125,217 1.08
Douglas L. Blankenship(13)..................................... 9,389 *
Gregory Giotta, Ph.D., J.D.(14)................................ 37,900 *
Mary Ann Rafferty(15).......................................... 42,397 *
All executive officers and directors as a group (11
persons)(16)................................................. 1,592,987 13.34
</TABLE>
- ------------------------
* Less than one percent.
(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
11,464,780 shares of Common Stock outstanding on March 1, 1999, adjusted as
required by rules promulgated by the SEC. Beneficial ownership also
includes shares of
13
<PAGE>
stock subject to options and warrants currently exercisable or convertible,
or exercisable or convertible within 60 days of March 1, 1999.
(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
1, 1999. 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 Vice Chairman 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 19,583 shares which may be acquired pursuant to options
exercisable within 60 days of March 1, 1999. Also includes 500 shares held
by Colella Family Partners and 3,000 shares held by the Colella Family
Trust.
(8) Represents 15,833 shares Dr. Goddard has the right to acquire pursuant to
options exercisable within 60 days of March 1, 1999.
(9) Includes 119,491 shares held by The Renton Family Trust and 1,200 shares
held by Mr. Renton's spouse. Also includes 193,145 shares Mr. Renton has
the right to acquire pursuant to options exercisable within 60 days of
March 1, 1999 of which 83,856 would be subject to repurchase by the Company
if exercised.
(10) Represents 5,833 shares Ms. Vitullo has the right to acquire pursuant to
options exercisable within 60 days of March 1, 1999.
(11) Represents 28,000 shares Dr. Wierenga has the right to acquire pursuant to
options exercisable within 60 days of March 1, 1999 of which 8,334 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 1, 1999 of which 57,501 would
be subject to repurchase if exercised.
(13) Includes 1,469 shares Mr. Blankenship has the right to acquire pursuant to
options exercisable within 60 days of March 1, 1999.
(14) Represents 37,900 shares Dr. Giotta has the right to acquire pursuant to
options exercisable within 60 days of March 1, 1999 of which 13,738 would
be subject to repurchase by the Company if exercised.
(15) Includes 39,441 shares Ms. Rafferty has the right to acquire pursuant to
options exercisable within 60 days of March 1, 1999 of which 22,530 would
be subject to repurchase by the Company if exercised.
14
<PAGE>
(16) Includes 1,094,333 shares held by entities affiliated with certain
directors and officers and includes 475,771 shares subject to stock
options held by directors, officers and entities affiliated with certain
directors exercisable within 60 days of March 1, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange 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, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that Dr.
Giotta failed to file timely one report with respect to a stock option grant to
purchase 7,500 shares of Common Stock. Dr. Giotta filed such report shortly
after being notified of the failure to file timely.
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 30,000 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 $7.60 (based on the closing sales prices reported on the Nasdaq
National Market for the date of each grant). As of March 31, 1999, 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 November 1998, Dr. Wierenga entered into a consulting agreement with the
Company. Pursuant to the consulting agreement, Dr. Wierenga receives an annual
retainer of $10,000. In addition, Dr. Wierenga is paid $1,200 per day for his
consulting services, up to a maximum of 12 days per annum. The consulting
agreement also provides that the Board of Directors of the Company shall grant
Dr. Wierenga an option to purchase 1,500 shares of Common Stock per annum. The
consulting agreement is for a term of two years but may be terminated earlier
with 30 days notice by either party.
15
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain compensation awarded or paid by the
Company during the years ended December 31, 1998, 1997 and 1996 to its President
and Chief Executive Officer, the Company's other two most highly paid executive
officers who earned more than $100,000 during the year ended December 31, 1998,
and two former executive officers who earned more than $100,000 during the year
ended December 31, 1998 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARD
--------------------------
ANNUAL COMPENSATION NUMBER OF
------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS COMPENSATION
- --------------------------------------------------- --------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Hollings C. Renton................................. 1998 $ 272,600 -- -- $ 2,592(4)
President and Chief Executive Officer 1997 258,080 $ 387(2) 109,454 2,707(4)
1996 248,063 33,333(3) 15,403 2,570(4)
Allan Balmain, Ph.D., F.R.S.E...................... 1998 232,734 -- -- 45,373(7)
Former Vice President, Research 1997 220,002 387(2) -- 75,307(5)
1996 41,460 -- 120,000 81,250(6)
Gregory L. Giotta, Ph.D., J.D...................... 1998 187,154 -- 7,500 1,871(4)
Vice President and Chief Legal Counsel 1997 175,433 387(2) 1,800 1,768(4)
1996 169,950 -- 17,087 1,670(4)
Mary Ann Rafferty.................................. 1998 127,119 10,000(1) 27,000 1,181(4)
Vice President, Human Resources 1997 108,367 387(2) 2,336 626(4)
1996 60,734 271(3) 11,505 302(4)
Douglas L. Blankenship............................. 1998 103,363 4,000(1) 504 207(4)
Former Treasurer 1997 98,449 387(2) 13,154 195(4)
1996 91,046 -- -- 172(4)
</TABLE>
- ------------------------
(1) Represents annual bonus earned for 1997 performance.
(2) Represents holiday bonus.
(3) Represents annual bonus earned for 1995 performance.
(4) Represents the taxable portion of group life insurance paid by the Company.
(5) 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.
(6) Includes $41,250 for consulting services and $40,000 relocation bonus.
(7) Includes $18,000 in mortgage assistance payments, $25,000 in annual retainer
for first year member of Scientific Advisory Board, and $2,373 taxable
portion of group life insurance paid by the Company.
16
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED PRICE TERM (3)
OPTIONS IN FISCAL PER SHARE EXPIRATION ----------------------
NAME GRANTED YEAR (1) (2) DATE 5% 10%
- ----------------------------------------------- ----------- ------------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Hollings C. Renton............................. -- -- -- -- -- --
President and Chief Executive Officer
Allan Balmain, Ph.D., F.R.S.E.................. -- -- -- -- -- --
Former Vice President, Research
Gregory L. Giotta, Ph.D., J.D.................. 7,500 2.34% $ 10.8125 5/4/08 $ 51,089 $ 128,939
Vice President and Chief Legal Counsel
Mary Ann Rafferty.............................. 27,000 8.43% $ 7.375 1/20/08 $ 125,449 $ 316,609
Vice President, Human Resources
Douglas L. Blankenship......................... -- -- -- -- -- --
Former Treasurer
</TABLE>
- ------------------------
(1) Based on an aggregate of 320,106 options granted to employees and
consultants of the Company in fiscal 1998 including the Named Executive
Officers.
(2) Exercise prices are equal to the closing price of the Company's Common Stock
on the Nasdaq National Market on the date of grant.
(3) 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.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY
OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(1)
ACQUIRED ON VALUE ---------------------- ---------------------
NAME EXERCISE REALIZED VESTED UNVESTED VESTED UNVESTED
- ------------------------------------------------- ------------- --------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Hollings C. Renton............................... -- -- 102,217 90,928 $ 492,951 $ 14,710
President and Chief Executive Officer
Allan Balmain, Ph.D., F.R.S.E.................... -- -- 54,726 65,834 $ 3,320 --
Former Vice President, Research
Gregory Giotta, Ph.D., J.D....................... 5,000 $ 29,271 20,295 17,605 $ 59,172 $ 21,546
Vice President and Chief Legal Counsel
Mary Ann Rafferty................................ -- -- 13,507 25,934 -- --
Vice President, Human Resources
Douglas L. Blankenship........................... -- -- 1,407 1,045 -- --
Former Treasurer
</TABLE>
- ------------------------
(1) Determined using the December 31, 1998 closing price of $7.00 per share,
minus the exercise price, multiplied by the number of shares underlying the
option.
17
<PAGE>
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of three non-employee
directors: Samuel D. Colella, Edward E. Penhoet, Ph.D. and Paul Goddard, Ph.D.
Neither Mr. Colella nor Drs. Penhoet nor Goddard is an officer or employee of
the Company.
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, incentive variable cash
payouts 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 individuals 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 1998 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.
- ------------------------
(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.
18
<PAGE>
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 1998 salary was set by the Board of Directors. As with the other
executive officers, the amount of Mr. Renton's total compensation in 1998 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.
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 incentive
variable cash plan.
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. 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 1998, the Compensation Committee did not grant any stock options to the
Company's Named Executive Officers in connection with the commencement of
employment. In 1998, the Board of Directors granted stock options to two of the
Named Executive Officers, not 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 reaching its
decisions, the Compensation Committee relied on its experience and the vesting
status of the executive officers' 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
variable cash plan. Under such program, awards are tied to the Company meeting
certain goals which are set by the Board. Individual incentive payouts 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 incentive variable cash payouts
under the incentive variable cash plan. However, the Compensation Committee is
allowed to distinguish between certain officers and other employees in
19
<PAGE>
determining whether or not performance criteria are met. For fiscal 1998, the
Compensation Committee determined that 100% of the performance criteria were met
and set aside an aggregate 100% of the incentive variable cash pool for
distribution to employees of the Company at the discretion of the management of
the Company. An aggregate of approximately $639,000 was paid as incentive
variable cash payouts to employees under this program.
CERTAIN TAX CONSIDERATIONS
Section 162(m) of 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.
Edward E. Penhoet, Ph.D.
20
<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 STOCK MARKET (U.S.) NASDAQ PHARMACEUTICAL
<S> <C> <C> <C>
5/96 100 100 100
6/96 67 100 95
9/96 95 104 97
12/96 93 109 95
3/97 100 103 90
6/97 85 122 97
9/97 73 143 109
12/97 65 134 98
3/98 63 156 107
6/98 51 161 99
9/98 61 146 94
12/98 58 188 125
DOLLARS
</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 Securities Act or the Exchange Act whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
21
<PAGE>
CERTAIN TRANSACTIONS
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 of
$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 of $10.125, subject to
vesting on the attainment of certain milestones. The Company also agreed to
reimburse Dr. Balmain for his reasonable moving expenses, to provide a signing
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 in 1999.
In March 1999, the Compensation Committee granted Dr. Norman Hardman an
incentive stock option to purchase up to 83,330 shares of the Company's Common
Stock with an exercise price of $6.00 per share and a non-qualified stock option
to purchase up to 116,670 shares of the Company's Common Stock with an exercise
price of $6.00 per share. The exercise prices of the options granted to Dr.
Hardman were equal to the closing price of the Company's Common Stock on the
Nasdaq National Market on the date of grant. These options vest 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
[SIGNATURE]
Robert L. Jones
SECRETARY
April 23, 1999
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, 1998 is available
without charge upon written request to: Corporate Secretary, ONYX
Pharmaceuticals, Inc., 3031 Research Drive, Richmond, California 94806.
22
<PAGE>
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 28, 1998
AMENDED APRIL 1, 1999
APPROVED BY THE STOCKHOLDERS ON _______________
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.
1.
<PAGE>
(b) "BOARD" means the Board of Directors of the Company.
(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
2.
<PAGE>
selected by the Board and consistently applied, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(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
3.
<PAGE>
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 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.
4.
<PAGE>
(3) To amend the Plan or a Stock Award as provided in Section 14.
(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 nine hundred twenty-five thousand
(2,925,000) 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.
<PAGE>
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
6.
<PAGE>
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.
7.
<PAGE>
(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
8.
<PAGE>
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.
9.
<PAGE>
(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 a 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
10.
<PAGE>
(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.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 27, 1999
The undersigned hereby appoints HOLLINGS C. RENTON, MARILYN WORTZMAN 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 AND 3, 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 two directors to hold office until the 2002 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: Samuel D. Colella and Hollings C. Renton
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE SUCH NOMINEE'S NAME
BELOW:
________________________________________________________________________________
<PAGE>
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
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 ratify the selection of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending December 31,
1999.
/ / FOR / / AGAINST / / ABSTAIN
Dated: _____________________, 1999
__________________________________
__________________________________
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.
