<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MAXYGEN
(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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO OF MAXYGEN]
515 Galveston Drive
Redwood City, California 94063
April 25, 2000
To Our Stockholders:
I am pleased to invite you to attend the first annual meeting of
stockholders of Maxygen, Inc. to be held at Hotel Sofitel, 233 Twin Dolphin
Dr., Redwood City, California, 94065, on Thursday, May 25, 2000, at 1:00 p.m.
local time.
The matters expected to be acted upon at the meeting are described in detail
in the following Notice of Annual Meeting of Stockholders and Proxy Statement.
The Board of Directors appreciates and encourages stockholder participation
in the Company's affairs and invites you to attend the meeting in person. It is
important, however, that your shares be represented at the annual meeting in
any event and for that reason we ask that whether or not you expect to attend
the meeting, you take a moment to complete, date, sign and return the
accompanying proxy in the enclosed postage-paid envelope. Returning the proxy
does not deprive you of your right to attend the meeting and to vote your
shares in person.
We thank you for your support and look forward to seeing you at the meeting.
Sincerely,
/s/ Russell J. Howard
Russell J. Howard
President and Chief Executive
Officer
<PAGE>
MAXYGEN, INC.
515 Galveston Drive
Redwood City, California 94063
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 2000
----------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of
Maxygen, Inc., a Delaware corporation (the "Company"), will be held at Hotel
Sofitel, 233 Twin Dolphin Dr., Redwood City, California, 94065, on Thursday,
May 25, 2000, at 1:00 p.m. local time for the following purposes:
1. To elect seven directors of the Company, each to serve until the next
annual meeting of stockholders and until his or her successor has been
elected and qualified or until his or her earlier resignation or
removal. The Company's Board of Directors intends to present the
following nominees for election as directors:
Russell J. Howard, Ph.D. Adrian Hennah
Isaac Stein Gordon Ringold, Ph.D.
Robert J. Glaser, M.D. George Poste, D.V.M., Ph.D.
M.R.C. Greenwood, Ph.D.
2. To consider and vote upon a proposal to amend the Company's 1997 Stock
Option Plan to increase the number of shares of common stock reserved
for issuance thereunder by 1,500,000 shares, from 7,500,000 shares to
9,000,000 shares.
3. To amend the Company's Amended and Restated Certificate of Incorporation
to increase the number of shares of common stock authorized by
30,000,000 shares, from 70,000,000 to 100,000,000 shares.
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 14, 2000,
as the record date for the determination of stockholders entitled to notice
of, and to vote at, the meeting or any adjournment thereof.
By Order of the Board of Directors
Julian Stern
Secretary
Redwood City, California
April 25, 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN 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.
<PAGE>
MAXYGEN, INC.
515 Galveston Drive
Redwood City, CA 94063
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 2000
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Maxygen, Inc., a Delaware corporation (the "Company" or "Maxygen"), for use at
the annual meeting of stockholders of the Company to be held on May 25, 2000 at
1:00 p.m. local time, or at any adjournment or postponement of the meeting, for
the purposes set forth in this Proxy Statement and in the accompanying Notice
of Annual Meeting. The annual meeting will be held at Hotel Sofitel, 233 Twin
Dolphin Dr., Redwood City, California 94065. The Company's telephone number is
(650) 298-5300.
These proxy solicitation materials, together with the Company's 1999 Annual
Report, are being mailed on or about April 25, 2000, to all stockholders of
record on April 14, 2000.
Record Date
Stockholders of record at the close of business on April 14, 2000 (the
"Record Date") are entitled to notice of, and to vote at, the meeting. At the
Record Date, approximately 32,394,156 shares of the Company's common stock were
issued and outstanding.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a date later than the
date of the proxy being revoked, or by attending the meeting and voting in
person. Attending the meeting will not, by itself, revoke the proxy.
Voting and Solicitation
Holders of the Company's common stock are entitled to one vote for each
share held as of the record date. Holders of common stock do not have
cumulative voting rights.
For Shares Registered in the Name of a Broker or Bank
A number of brokers and banks are participating in a program through ADP
Investor Communication Services that offers telephone and Internet voting
options. If your shares are held in an account with a broker or bank
participating in the ADP Investor Communications Services program, you may vote
those shares telephonically by calling the telephone number shown on the voting
form received from your broker or bank, or via the Internet at ADP Investor
Communication Services' voting Web site (www.proxyvote.com).
General Information for All Shares Voted Via the Internet or By Telephone
Votes submitted via the Internet or by telephone must be received by 4 p.m.,
on May 24. Submitting your proxy via the Internet or by telephone will not
affect your right to vote in person should you decide to attend the meeting.
<PAGE>
The telephone and Internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been recorded
properly. Stockholders voting via the Internet should understand that there may
be costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, that must be borne by the
stockholder.
Solicitation
The cost of soliciting proxies will be borne by the Company. Proxies may
also be solicited by certain of the Company's directors, officers and
employees, without additional compensation, personally or by telephone,
facsimile or letter.
Quorum, Abstentions, and Broker Non-Votes
The required quorum for the transaction of business at the annual meeting is
a majority of the shares of common stock outstanding on the Record Date.
Abstentions are included in the determination of shares present for quorum
purposes. Because abstentions represent shares entitled to vote, the effect of
an abstention will be the same as a vote against a proposal. If shares are held
in "street name" through a broker or other nominee, the broker or nominee may
not be permitted to exercise voting discretion with respect to certain matters
to be acted upon. If the broker or nominee is not given specific instructions,
shares held in the name of such broker or nominee may not be voted on those
matters and will not be considered as present and entitled to vote with respect
to those matters. Shares represented by such "broker non-votes" will, however,
be counted in determining whether there is a quorum.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the meeting, stockholders will elect members of the Company's Board of
Directors (the "Board") to hold office until the next annual meeting of
stockholders and until their respective successors have been elected and
qualified or until any such director's earlier death, resignation or removal.
Each nominee listed below is currently a director of the Company. The size of
the Board is presently set at seven members. Accordingly, seven nominees will
be elected at the meeting to be the seven directors of the Company. Directors
are elected by a plurality of the votes present in person or represented by
proxy and entitled to vote. If signed and returned, shares represented by the
accompanying proxy will be voted for the election of the seven nominees
recommended by the Board unless the proxy is marked in such a manner as to
withhold authority so to vote. If any nominee for any reason is unable to serve
or for good cause will not serve, the proxies may be voted for such substitute
nominee as the proxy holder may determine. Each person nominated for election
has agreed to serve if elected and the Company has no reason to believe that
any nominee will be unable to serve.
Directors/Nominees
The names of the nominees and certain information about them, including
their ages as of March 22, 2000, are set forth below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Position With the Company Since
- --------------- --- ------------------------- --------
<S> <C> <C> <C>
Russell J. Howard, Ph.D.... 49 President and Chief Executive Officer 1998
Isaac Stein(1)(2).......... 53 Director, Chairman of the Board 1996
Robert J. Glaser, M.D.(2).. 81 Director 1997
M.R.C. Greenwood, Ph.D..... 56 Director 1999
Adrian Hennah(1)........... 42 Director 1997
Gordon Ringold,
Ph.D.(1)(2)............... 49 Director 1997
George Poste, D.V.M.,
Ph.D...................... 55 Director 1999
</TABLE>
- --------
(1) Current member of the Audit and Finance Committee.
(2) Current member of the Compensation Committee.
Russell J. Howard, Ph.D., has served as the Company's President, Chief
Executive Officer and Director since June 1998 and is one of the Company's co-
founders. Dr. Howard was elected the President and Chief Operating Officer in
May 1997. Originally trained in biochemistry and chemistry, Dr. Howard has
spent over 20 years studying infectious diseases, primarily malaria, and
currently serves on the National Institutes of Health and USAID advisory panels
for malaria vaccine development. Prior to joining Maxygen, Dr. Howard was from
August 1994 to June 1996 the President and Scientific Director of Affymax
Research Institute.
Isaac Stein has served as the Company's Chairman of the Board since June
1998 and a director since May 1996 and is one of the Company's co-founders.
Since November 1982, Mr. Stein has been president of Waverley Associates, Inc.
a private investment firm. Mr. Stein is also a Managing Member of Technogen
Enterprises, L.L.C. and Technogen Managers, L.L.C., which is the general
partner of Technogen Associates, L.P. and a director of ALZA Corporation, the
Benham Group of mutual funds and CV Therapeutics, Inc. He is also a trustee of
Stanford University and the Chairman of the Board of UCSF Stanford Health Care.
Robert J. Glaser, M.D., has served as one of the Company's Directors since
September 1997. Dr. Glaser was Director for Medical Science at the Lucille P.
Markey Charitable Trust from 1984 to June 1997, and a trustee from 1988 to June
1997. In accordance with the donor's will, the Trust ceased operations in June
1997. Dr. Glaser is also a director of ALZA Corporation and Hanger Orthopedic
Group, Inc. Dr. Glaser has held faculty appointments at several universities,
including Dean of the School of Medicine at Stanford University and Professor
of Social Medicine at Harvard University. Originally trained as an internist,
Dr. Glaser has
3
<PAGE>
124 publications on streptococcal infections, rheumatic fever, medical
education and health care, as well as being a contributor to numerous
scientific treatises.
M.R.C. Greenwood, Ph.D., has served as one of the Company's Directors since
February 1999. Dr. Greenwood has been Chancellor of the University of
California ("UC") at Santa Cruz since July 1996. Prior to being named
Chancellor of UC Santa Cruz, Dr. Greenwood was Dean of Graduate Studies and
Vice President at UC Davis from July 1989 to July 1996. In addition, from
November 1993 to May 1995, Dr. Greenwood took a leave from UC Davis to serve as
Associate Director for Science in the White House Office of Science and
Technology Policy. Dr. Greenwood received her doctorate in physiology,
developmental biology and neurosciences from Rockefeller University.
Adrian Hennah has served as one of the Company's Directors since September
1997. Mr. Hennah has held several key positions in the Glaxo Wellcome
organization. He is currently co-leader of the effort planning for the
integration of Glaxo Wellcome and SmithKline Beecham. Prior to that he held the
position of Senior Vice President and Chief Financial Officer of Glaxo Wellcome
Inc. Prior to that, Mr. Hennah had, as Senior Vice President of Operations, a
range of responsibilities within research and development including finance,
technology alliances, business redesign and strategy process, human resources
and engineering. He also led the team coordinating the integration of Glaxo and
Wellcome in 1996. Mr. Hennah is also a Director of Affymetrix. Mr. Hennah has a
degree in law from Cambridge University and is a Sloan Fellow of the London
Business School.
Gordon Ringold, Ph.D., has served as one of the Company's Directors since
September 1997. Since March 1995, Dr. Ringold has been Chief Executive Officer
and Scientific Director of Affymax Research Institute where he manages the
development of novel technologies to accelerate the pace of drug discovery.
Prior to serving as Chief Executive Officer, Dr. Ringold was the President and
Scientific Director of Affymax Research Institute. Dr. Ringold received his
Ph.D. in the laboratory of Dr. Harold Varmus, prior to joining the Stanford
University School of Medicine, Department of Pharmacology, and serving as the
Vice President and Director of the Institute for Cancer and Development Biology
of Syntex Research. Dr. Ringold is a Managing Member of Technogen Enterprises,
L.L.C. and Technogen Managers, L.L.C., which is the general partner of
Technogen Associates, L.P. and has served as Chairman and Chief Executive
Officer of SurroMed, a biotechnology company focused on novel clinical
databases since 1997.
George Poste, D.V.M., Ph.D., has served as one of the Company's Directors
since October 1999. Dr. Poste has been Chief Executive Officer of Health
Technology Networks since January 1, 2000. From 1992 to December 31, 1999 Dr.
Poste was President, R&D and Chief Science and Technology Officer at SmithKline
Beecham and a member of the Board of Directors. Dr. Poste is also a Research
Professor at the University of Pennsylvania and holds the William Pitt
Fellowship at Pembroke College, Cambridge University. He is a Board-certified
pathologist and was awarded a D.Sc. for meritorious research contributions by
the University of Bristol in 1987. Dr. Poste received his Doctorate in
Veterinary Medicine in 1966 and his Ph.D. in Virology in 1969 from the
University of Bristol.
Required Vote
The seven nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them will be elected
as directors.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS
4
<PAGE>
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board currently consists of seven members. The Board met five times,
including telephone conference meetings, during 1999, and acted by written
consent one time. No director attended fewer than 75% of the aggregate of the
total number of meetings of the Board (held during the period for which he or
she was a director) and the total number of meetings held by all committees of
the Board on which he or she served (during the period that he or she served),
except Alejandro Zaffaroni and Adrian Hennah, each of whom attended
approximately 66% of the meetings held by the Board.
Standing committees of the Board include an Audit and Finance Committee and
a Compensation Committee. The Company has no nominating committee.
Isaac Stein, Adrian Hennah and Gordon Ringold are the current members of the
Company's Audit and Finance Committee. The Audit and Finance Committee was
constituted in the end of 1999 and did not meet in 1999. The Audit and Finance
Committee makes recommendations to the Board regarding the selection of
independent auditors, reviews the scope of audit and other services by our
independent auditors, reviews the accounting principles and auditing practices
and procedures to be used for our financial statements and reviews the results
of those audits.
Isaac Stein, Robert Glaser and Gordon Ringold are the current members of the
Company's Compensation Committee. The Compensation Committee met four times
during 1999. The Compensation Committee makes recommendations to the Board
regarding our stock and compensation plans, approves compensation of certain
officers and grants stock options.
DIRECTOR COMPENSATION
The Company reimburses nonemployee directors for expenses incurred in
connection with attending Board and committee meetings but it does not
compensate them for their services as board or committee members. The Company
has in the past granted nonemployee directors options to purchase common stock
pursuant to the terms of the Company's stock plans, and the Board and
Compensation Committee continues to have the discretion to grant options to new
nonemployee directors. Beginning after the stockholders meeting in 2000,
nonemployee directors will each receive nondiscretionary, automatic grants of
options to purchase 20,000 shares of common stock upon joining the Board and
nondiscretionary, automatic grants of options to purchase 5,000 shares of
common stock each year pursuant to the 1999 Nonemployee Directors Stock Option
Plan.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION INTERLOCKS
None of the members of the Company's Compensation Committee is currently, or
has ever been at any time since our formation, one of our officers or
employees, nor has served as a member of the Board or compensation committee of
any entity that has one or more officers serving as a member of our Board or
compensation committee.
In March 1997, Isaac Stein issued a full recourse promissory note in the
amount of $120,000 in favor of Maxygen in connection with the purchase of
600,000 shares of our common stock, which he repaid in full in January 2000.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
common stock as of February 15, 2000 by: each person who is known by the
Company to beneficially own more than 5% of the common stock; each of the named
executive officers and each director; and all executive officers and directors
as a group.
Percentage of ownership is based on 32,269,644 shares outstanding as of
February 15, 2000. Beneficial ownership is calculated based on Securities and
Exchange Commission requirements. All shares of the common stock subject to
options currently exercisable or exercisable within 60 days after February 15,
2000 are deemed to be outstanding for the purpose of computing the percentage
of ownership of the person holding such options, but are not deemed to be
outstanding for computing the percentage of ownership of any other person.
Unless otherwise indicated below, each stockholder named in the table has sole
or shared voting and investment power with respect to all shares beneficially
owned, subject to applicable community property laws. Unless otherwise
indicated in the table, the address of each individual listed in the table is
Maxygen, Inc., 515 Galveston Drive, Redwood City, California 94063.
<TABLE>
<CAPTION>
Number of Percentage
Shares of Shares
Beneficially Beneficially
Beneficial Owner Owned Owned
- ---------------- ------------ ------------
<S> <C> <C>
Glaxo Wellcome International BV (1)................ 6,785,000 21.0%
Huister Heideweg 62 3705 LZ Zeist
The Netherlands
Technogen Associates, L.P. (2)..................... 3,274,772 10.1
525 University Avenue, Suite 700
Palo Alto, California 94301
Technogen Enterprises, L.L.C. (3).................. 3,274,772 10.1
525 University Avenue, Suite 700
Palo Alto, California 94301
Russell J. Howard, Ph.D. (4)....................... 877,636 2.7
Willem P.C. Stemmer, Ph.D. (5)..................... 1,147,500 3.6
Simba Gill, Ph.D. (6).............................. 456,738 1.4
John Bedbrook, Ph.D. (7)........................... 203,000 *
Norman Kruse, Ph.D. (8)............................ 154,043 *
Michael Rabson, Ph.D. (9).......................... 361,100 1.1
Isaac Stein (10)................................... 3,862,106 12.0
Robert J. Glaser, M.D.............................. -- *
M.R.C. Greenwood, Ph.D. (11)....................... 75,000 *
Adrian Hennah (12)................................. 75,000 *
George Poste, Ph.D. (13)........................... 75,000 *
Gordon Ringold, Ph.D. (14)......................... 3,821,439 11.8
Joseph Affholter, Ph.D. (15)....................... 67,313 *
All directors and executive officers as a group (14
persons) (16)..................................... 8,076,303 24.4
</TABLE>
- --------
* Less than 1% of Maxygen's outstanding common stock.
(1) Includes 75,000 shares subject to immediately exercisable options held by
Adrian Hennah and which Mr. Hennah has assigned to Glaxo Wellcome plc,
which is the parent of Glaxo Wellcome International BV.
(2) Consists of 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Enterprises, L.L.C.
and Technogen Associates, L.P. are under common control.
6
<PAGE>
(3) Consists of 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Enterprises, L.L.C.
and Technogen Associates, L.P. are under common control.
(4) Includes 53,636 shares held by the Russell and Maureen Howard Trust, of
which Dr. Howard is a trustee. Also includes 297,500 shares that are
subject to immediately exercisable options. As of February 15, 2000, the
Company has the right to repurchase 444,375 shares including shares
issuable upon exercise of options held by Dr. Howard if Dr. Howard ceases
his employment, directorship or consultancy with the Company.
(5) Includes 352,187 shares that are subject to the Company's right of
repurchase as of February 15, 2000 if Dr. Stemmer ceases his employment,
directorship or consultancy with the Company.
(6) Includes 307,537 shares that are subject to the Company's right of
repurchase as of February 15, 2000 if Dr. Gill ceases his employment,
directorship or consultancy with the Company.
(7) Includes 200,000 shares that are subject to immediately exercisable
options. As of February 15, 2000, the Company has the right to repurchase
all of the shares issuable upon exercise of these options if Dr. Bedbrook
ceases his employment, directorship or consultancy with the Company.
(8) Includes 127,500 shares that are subject to our right of repurchase as of
February 15, 2000 if Dr. Kruse ceases his employment, directorship or
consultancy with the Company.
(9) As of February 15, 2000, the Company has the right to repurchase 350,000
of these shares if Dr. Rabson ceases his employment, directorship or
consultancy with the Company.
(10) Includes 3,211,574 shares that are held by Technogen Associates, L.P. and
63,198 shares held by Technogen Enterprises, L.L.C. Technogen Managers,
L.L.C. is the general partner of Technogen Associates, L.P. Mr. Stein is a
Managing Member of Technogen Enterprises, L.L.C. and Technogen Managers,
L.L.C. and disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest in the limited liability companies.
Includes 525,667 shares held by the Stein 1995 Revocable Trust, of which
Mr. Stein is a trustee and 41,667 shares held by Stein Partners, of which
Mr. Stein is a general partner. As of February 15, 2000, the Company has
the right to repurchase 162,500 shares held by Mr. Stein if he ceases his
employment, directorship or consultancy with the Company.
(11) Includes 75,000 shares that are subject to immediately exercisable
options. As of February 15, 2000, the Company has the right to repurchase
56,250 shares issuable upon exercise of these options if Dr. Greenwood
ceases her employment, directorship or consultancy with the Company.
(12) Includes 75,000 shares that are subject to immediately exercisable
options. As of February 15, 2000, the Company has the right to repurchase
37,500 shares issuable upon exercise of these options if Mr. Hennah ceases
his employment, directorship or consultancy with the Company. Mr. Hennah
has assigned beneficial ownership of these shares to Glaxo Wellcome plc
and disclaims beneficial ownership of the shares.
(13) Includes 75,000 shares that are subject to immediately exercisable
options. As of February 15, 2000, the Company has the right to repurchase
all of the shares issuable upon exercise of these options if Dr. Poste
ceases his employment, directorship or consultancy with the Company.
(14) Includes 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Managers, L.L.C. is
the general partner of Technogen Associates, L.P. Dr. Ringold is a
Managing Member of Technogen Enterprises, L.L.C. and Technogen Managers,
L.L.C. and disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest in the limited liability companies. Also
includes 20,000 shares held by the Gregory Zarucki Ringold 1998 Trust,
20,000 shares held by the Alexander Zarucki Ringold 1998 Trust and 20,000
shares held by the Melanie Gault-Ringold 1998 Trust. As of February 15,
2000, the Company has the right to repurchase 137,500 shares held by Dr.
Ringold if he ceases his employment, directorship or consultancy with the
Company.
(15) Includes 6,875 shares that are subject to the Company's right of
repurchase as of February 15, 2000 if Dr. Affholter ceases his employment,
directorship or consultancy with the Company.
(16) Includes shares included pursuant to notes (2), (3), (4), (5), (6), (7),
(8), (9), (10), (11), (12), (13), (14) and (15), 175,200 shares
beneficially owned by Howard Simon, of which 136,500 shares are subject to
immediately exercisable options and 38,500 shares are subject to the
Company's right of repurchase as of February 15, 2000.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid by Maxygen during 1997,
1998 and 1999 to the Chief Executive Officer, to the Company's four other most
highly compensated executive officers and certain other executive officers
included pursuant to the rules and regulations of the Securities and Exchange
Commission (the "named executive officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------- ------------
Number of
Securities
Other Annual Underlying All Other
Name and Position Year Salary Bonus Compensation Options Compensation(1)
- ----------------- ---- -------- ------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Russell J. Howard....... 1999 $225,000 $ -- $ -- 172,500 $832
President, Chief
Executive 1998 218,333 -- -- 200,000 833
Officer and Director 1997 153,750 -- -- 150,000 666
Simba Gill(2)........... 1999 192,850 -- 1,500(3) 126,738 686
Chief Financial Officer
and 1998 99,750 10,000 55,414(4) 330,000 275
Senior Vice President
of 1997 -- -- -- -- --
Business Development
Michael Rabson(5)....... 1999 57,539 -- -- 350,000 145
Senior Vice President
of Legal 1998 -- -- -- -- --
Affairs and General
Counsel 1997 -- -- -- -- --
Willem P.C. Stemmer..... 1999 154,500 -- -- 22,500 786
Vice President of
Research 1998 136,667 -- -- -- 502
1997 81,667 -- -- 300,000 345
John Bedbrook(6)........ 1999 34,599 -- -- 200,000 310
President of
Agriculture 1998 -- -- -- -- --
1997 -- -- -- -- --
Norman Kruse............ 1999 147,791 -- 32,209(7) 66,543
Director of
Intellectual Property, 1998 118,767 10,000 114,809(8) 87,500
Chief Patent Counsel 1997 -- -- -- -- --
Joseph Affholter(10).... 1999 139,019 -- 62,321(9) 65,700 541
Former Vice President
of 1998 84,480 10,000 85,264(10) 110,000 393
Biocatalysis and
Chemicals 1997 -- -- -- -- --
</TABLE>
- --------
(1) Consists of term life insurance premiums paid by Maxygen on behalf of the
listed individual.
(2) Dr. Gill joined Maxygen in July 1998. His annualized salary for 1998 was
$190,000.
(3) Consists of $1,500 for reimbursement of relocation expenses.
(4) Consists of $19,550 in the form of a housing allowance and $35,864 for
reimbursement of relocation expenses.
(5) Dr. Rabson joined Maxygen in September 1999. Dr. Rabson's annualized
salary for 1999 was $220,000.
(6) Dr. Bedbrook joined Maxygen in November 1999. Dr. Bedbrook's annualized
salary for 1999 was $212,500.
(7) Consists of $32,209 in the form of a housing allowance.
(8) Consists of $31,233 in the form of a housing allowance and $83,575 for
reimbursement of relocation expenses.
(9) Consists of $55,381 in the form of a housing allowance and $6,946 as
interest forgiven on a promissory note.
(10) Consists of $39,953 in the form of a housing allowance, $42,444 for
reimbursement of relocation expenses and $2,867 as interest forgiven on a
promissory note.
(11) Dr. Affholter joined Maxygen in May 1998. In January 2000, Dr. Affholter
resigned as the Company's Vice President of Biocatalysis and Chemicals and
is no longer an employee.
8
<PAGE>
Stock Options Granted in the Fiscal Year Ended December 31, 1999
The following table sets forth information with respect to stock options
granted during the fiscal year ended December 31, 1999 to each of the named
executive officers. All options were granted under Maxygen's 1997 Stock Option
Plan. The following options are immediately exercisable in full at the date of
grant, but shares purchased on exercise of unvested options are subject to a
repurchase right in favor of the Company that entitles the Company to
repurchase unvested shares at their original exercise price on termination of
the employee's services with the Company. The repurchase right lapses as to 25%
of the shares on the first anniversary of the grant date and the balance,
ratably by year, over the next three years. Under certain circumstances the
vesting of options, and consequently the lapse of the repurchase right, may be
accelerated.
The percentage of options granted is based on an aggregate of 2,986,830
options granted by Maxygen during the fiscal year ended December 31, 1999 to
Maxygen's employees, including the named executive officers. The potential
realizable value amounts in the last two columns of the following chart
represent hypothetical gains that could be achieved for the respective options
if exercised at the end of the option term assuming an initial price equal to
$16.00 (the price at which the Company's common stock was first sold to the
public). The assumed 5% and 10% annual rates of stock price appreciation from
the date of grant to the end of the option term are provided in accordance with
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future common stock price. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the common stock, overall market conditions and the option
holder's continued employment through the vesting period.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Terms
--------------------------------------------- ----------------------
Number of % of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted Fiscal Year Share Date 5% 10%
---- ---------- ------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Russell J. Howard....... 172,500 5.8% $0.75 9/08/09 $4,366,374 $ 7,029,354
President, Chief
Executive
Officer and Director
Simba Gill.............. 120,138 4.0 0.75 9/08/09 3,040,971 4,895,609
Chief Financial Officer
and 6,600 0.2 0.50 3/24/09 168,711 270,599
Senior Vice President
of
Business Development
Michael Rabson.......... 350,000 11.7 0.75 9/08/09 8,859,310 14,262,458
Senior Vice President
of
Legal Affairs and
General Counsel
Willem P.C. Stemmer..... 122,500 4.1 0.75 9/08/09 3,100,758 4,991,860
Vice President of
Research
John Bedbrook........... 200,000 6.7 7.50 11/10/09 3,712,463 6,799,976
President of
Agriculture
Norman Kruse............ 46,543 1.6 0.75 9/8/09 1,178,111 1,896,622
Director of
Intellectual Property 20,000 0.7 0.75 9/27/09 506,246 814,998
and Chief Patent
Counsel
Joseph Affholter........ 45,700 1.5 0.75 9/8/09 1,156,772 1,862,269
Former Vice President
of 20,000 0.7 0.75 9/27/09 506,246 814,998
Biocatalysis and
Chemicals
</TABLE>
9
<PAGE>
Aggregated Option Exercises in Fiscal Year 1999 and Fiscal-Year End Option
Values
The following table sets forth certain information regarding exercised stock
options during the fiscal year ended December 31, 1999 and unexercised options
held as of December 31, 1999 by each of the named executive officers. The
Company granted all options under the 1997 Stock Option Plan. These options are
immediately exercisable in full at the date of grant, but shares purchased on
exercise of unvested options are subject to a repurchase right in favor of the
Company that entitles the Company to repurchase unvested shares at their
original exercise price on termination of the employee's services with the
Company. Generally, the repurchase right lapses as to 25% of the shares on the
first anniversary of the grant date and the balance, ratably by year, over the
next three years. Under certain circumstances the vesting of options, and
consequently the lapse of the repurchase right, may be accelerated. The value
realized is based on the fair market value of the underlying securities as of
the date of exercise, minus the per share exercise price, multiplied by the
number of shares underlying the option. The value of unexercised in-the-money
options are based on a value of $71.00 per share, the last reported sale price
of the Company's common stock on the Nasdaq National Market on December 31,
1999, minus the per share exercise price, multiplied by the number of shares
underlying the option. Each of the people below who exercised options paid 10%
of the exercise price by cash and the remaining amount with a full recourse
promissory note.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at Fiscal Year- In-The Money Options at
Shares End Fiscal Year-End
Acquired on Realized ------------------------- -------------------------
Name Exercise Value Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Russell J. Howard....... 75,000 $33,750 297,500
President, Chief
Executive
Officer and Director -- $20,955,625 $ --
Simba Gill.............. 126,738 1,650 -- -- -- --
Chief Financial Officer
and
Senior Vice President
of
Business Development(1)
Michael Rabson.......... 350,000 -- -- -- -- --
Senior Vice President
of
Legal Affairs and
General Counsel
Willem P.C. Stemmer..... 122,500 -- -- -- -- --
Vice President of
Research
John Bedbrook........... -- -- 200,000 -- 12,700,000 --
President of
Agriculture
Norman Kruse............ 154,043 45,391 -- -- -- --
Director of
Intellectual Property,
Chief Patent Counsel
Joseph Affholter........ 175,700 49,500 -- -- -- --
Former Vice President
of
Biocatalysis and
Chemicals
</TABLE>
- --------
(1) The Company's right of repurchase lapses over a four-year period with
respect to 25% of the underlying shares at the first anniversary of the
grant date and in equal monthly installments over the next three years.
10
<PAGE>
COMPENSATION AND OTHER TRANSACTIONS WITH OFFICERS AND DIRECTORS
For information concerning compensation and severance agreements and other
transactions between the Company and certain executive officers and directors,
see "Executive Compensation," "Director Compensation," "Related Party
Transactions" and "Compensation Committee Interlocks and Insider Participation
Interlocks".
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program has been administered by the
Compensation Committee of the Board since September 1999. Prior to September
1999, compensation decisions and grants of stock options were made by the
Board. The current members of the Compensation Committee are Isaac Stein,
Robert Glaser and Gordon Ringold, each of whom is a non-employee director
within the meaning of Section 16 of the Exchange Act, and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code.
General Compensation Philosophy
The role of the Compensation Committee is to review and administer all
compensation arrangements for executive officers, and to be responsible for
administering the Company's benefit plans. The Company's compensation policy
for officers is to provide market-based compensation to executives and senior
managers, with an emphasis on performance-based cash and equity incentives tied
to specific strategic business achievements.
Executive Compensation
Base Salary. Salaries for executive officers for 1999 were generally
determined on an individual basis by the Board of Directors at the time of hire
and were set at the low end of the market for comparable biotechnology
businesses. For 2000, the Compensation Committee will review the base salaries
of the executive officers by evaluating each executive's scope of
responsibility, performance, prior experience and salary history, as well as
the salaries for similar positions at comparable companies.
Cash Bonus. Executive offers are eligible to receive annual cash performance
bonuses of up to 30% of base salary. Bonuses are awarded based on individual
achievement of goals and based on the Company achieving specific milestones.
Stock Options. Executive officers are eligible to receive annual
performance-based equity compensation in the form of stock options. The
Compensation Committee believes that equity-based compensation in the form of
stock options links the interests of executives with the long-term interests of
the Company's stockholders and encourages executives to remain in employed by
the Company. Since 1997, the Company has issued stock options to executives
pursuant to the 1997 Stock Option Plan. Grants are awarded based on a number of
factors, including the Company's achievement of specific milestones, the
individual's level of responsibility, the amount and term of options already
held by the individual, the individual's contributions to the achievement of
Maxygen's financial and strategic objectives, and industry practices and norms.
Chief Executive Officer Compensation
Russell J. Howard's base salary for 1999 was $225,000 and he received a
stock option to purchase 172,500 shares of the Company's Common Stock. Dr.
Howard did not receive any stock options during fiscal 1999. For 1999, Dr.
Howard's compensation was based on factors describe above for all executive
officers. For 2000, the Compensation Committee will evaluate his compensation
consistent with the factors described above for all executive officers.
11
<PAGE>
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Code limits the tax deduction to $1 million for
compensation paid to certain executives of public companies. However,
performance-based compensation that has been approved by stockholders is
excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the Board committee that establishes such goals consists
only of "outside directors." Additionally, stock options will qualify for the
performance-based exception where, among other requirements, the exercise price
of the option is not less than the fair market value of the stock on the date
of grant, and the plan includes a per-executive limitation on the number of
shares for which options may be granted during a specified period. All members
of the Compensation Committee qualify as outside directors. The 1997 Stock
Option Plan is has been approved by the Company's stockholders in order that
grants made thereunder will meet the Section 162(m) requirements for
"performance based" compensation and be exempt from the limitations on
deductibility. Historically, the combined salary and bonus of each executive
officer has been below the $1 million limit. The Compensation Committee's
present intention is to grant future compensation that does not exceed the
limitations of Section 162(m), although the Compensation Committee reserves the
right to award compensation that does not comply with these limits on a case-
by-case basis.
COMPENSATION COMMITTEE
Isaac Stein
Robert J. Glaser
Gordon Ringold
12
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The following graph shows the total stockholder return of an investment of
$100 in cash on December 16, 1999, the date the Company's common stock began to
trade on the Nasdaq National Market, through December 31, 1999, the last date
of trading of fiscal 1999 for (i) the Company's common stock, (ii) the NASDAQ
Stock Market (U.S.) Index, and (iii) the NASDAQ Biotechnology Index. All values
assume reinvestment of the full amount of all dividends.
COMPARISON OF ONE MONTH CUMULATIVE TOTAL RETURN*
AMONG MAXYGEN, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------
12/16/99 12/31/99
<S> <C> <C>
MAXYGEN, INC. 100.00 197.22
NASDAQ STOCK MARKET 100.00 109.73
NASDAQ BIOTECHNOLOGY 100.00 130.26
</TABLE>
- --------
* $100 invested on 12/16/99 in stock or index--including reinvestment of
dividends. Fiscal year ending December 31. Starting point for the Company's
Common Stock represents normalized price at first trade. Actual initial
public offering price was $16 per share.
This section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission and is not to be incorporated by reference
in any filing of the Company under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, whether made before or after
the date hereof and irrespective of any general incorporation language in any
such filing.
13
<PAGE>
RELATED PARTY TRANSACTIONS
Since inception (May 1996), there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which the
Company was or is are to be a party in which the amount involved exceeds
$60,000 and in which any current director, executive officer or holder of more
that 5% of the Company's common stock had or will have a direct or indirect
interest other than (1) compensation arrangements, which are described where
required under "Management" and (2) the transactions described below.
In February 1997, the Company entered into a services agreement with Affymax
Research Institute. Pursuant to the services agreement, Affymax provided
certain accounting, administrative and facilities management services to the
Company and allowed the Company to occupy certain facilities leased by Affymax
in exchange for specified annual fees. The services agreement terminated on
April 1, 1999.
At the time of the Company's formation, the Company entered into a
technology transfer agreement with Affymax Technologies N.V. and Glaxo Group
Limited, each a wholly-owned subsidiary of Glaxo Wellcome plc, pursuant to
which the Company was assigned all right, title and interest in the patents,
patent applications and confidential information relating to the Company's
MolecularBreeding technologies, subject to an exclusive royalty-free license to
Affymetrix, Inc. under the patents and patent applications for use in the
diagnostics and research supply markets for specific applications. In exchange
for the intellectual property transferred the Company issued 5,460,000 shares
of common stock to Affymax.
In March 1997, in connection with the formation of the Company, the Company
made loans to certain officers and directors to purchase common stock, which
are evidenced by full recourse promissory notes and secured by the common stock
underlying this stock purchase. The promissory notes bear interest at 6.42% per
year, and interest payments on the notes are due and payable on June 30 and
December 31 of each year. Unpaid principal and interest on the notes are due
and payable on the earlier of 30 days after termination of the participant's
employment, directorship or consultancy with the Company, or three years after
the date of the promissory note. As of February 15, 2000, the original and
outstanding principal amounts of each promissory note by a director or
executive officer are set forth below.
<TABLE>
<CAPTION>
Original
Note Outstanding
Director or Executive Officer Amount Note Amount
----------------------------- -------- -----------
<S> <C> <C>
Russell J. Howard....................................... $ 60,000 $ 60,000
Isaac Stein............................................. 120,000 98,000
Willem P.C. Stemmer..................................... 120,000 120,000
</TABLE>
14
<PAGE>
Options granted to the Company's directors, executive officers and key
employees are immediately exercisable as to both vested and unvested shares,
with unvested shares being subject to a right of repurchase in our favor in the
event of termination of employment prior to vesting of all shares. These
individuals pay the exercise price for their outstanding options pursuant to
full recourse promissory notes secured by the common stock underlying the
options. The notes bear interest at 5.59% per year, and interest payments on
the notes are due and payable on June 30 and December 31 of each year. Unpaid
principal and interest on the notes are due and payable on the earlier of 30
days after termination of the participant's employment, directorship or
consultancy with the Company, or three years after the date of the promissory
note. As of February 15, 2000, the original and outstanding principal amounts
of each promissory note by a director or executive officer are set forth below.
<TABLE>
<CAPTION>
Original and
Outstanding
Director or Executive Officer Note Amount
----------------------------- ------------
<S> <C>
Joseph Affholter (1)............................................ $ 23,141
Simba Gill...................................................... 173,163
Russell J. Howard............................................... 47,250
Norman Kruse.................................................... 56,728
Michael S. Rabson............................................... 236,250
Gordon Ringold.................................................. 99,000
Howard Simon.................................................... 259,875
Willem P.C. Stemmer............................................. 136,688
</TABLE>
- --------
(1) Unpaid principal and interest under Dr. Affholter's notes are due and
payable on June 30, 2002. In April 1998, the Company loaned $72,500 to Dr.
Joseph Affholter, which is evidenced by a full recourse promissory note. In
April 1999, the Company loaned an additional $77,500 to Dr. Affholter and
received from Dr. Affholter a full recourse promissory note covering all
amounts due from Dr. Affholter, which note was secured by a deed of trust
on Dr. Affholter's principal residence and bore interest at 5.70% per year
with respect to $72,500 of the principal and 4.83% with respect to $77,500
of the principal. Under the terms of the promissory note, interest was
generally forgiven. The promissory note was due with respect to $72,500 of
the principal on April 1, 2003 and with respect to $77,500 of the principal
on March 30, 2004. In connection with Dr. Affholter's resignation in
January 2000, the loans were converted into a personal loan of $150,000,
with interest calculated semi-annually from February 1, 2001 at 5.59%. The
arrangements also defer payment of such loan until April 1, 2003 with
respect to $72,500 of the principal and until March 30, 2004 with respect
to $77,500 of the principal. The loan is secured by a pledge of vested
shares of Maxygen common stock valued at $300,000 as of the date of the
loan conversion.
In March 1997, December 1997 and April 1998, the Company sold to various
investors a total of 2,795,000 shares of Series A preferred stock at a purchase
price of $2.00 per share. In August 1998, the Company sold to various investors
a total of 3,666,667 shares of Series B preferred stock at a purchase price of
$3.00 per share. In December 1998, the Company sold to a collaborator a total
1,000,000 shares of Series C preferred stock at a purchase price of $5.00 per
share. In June 1999, the Company sold to various investors a total of 3,636,364
shares of Series D preferred stock at a purchase price of $5.50 per share. In
August 1999, the Company sold to a collaborator a total of 800,000 shares of
Series E preferred stock at a purchase price of $6.25. Upon the initial public
offering, each share of preferred stock was converted into one share of common
stock. Holders of the converted common stock are entitled to registration
rights.
15
<PAGE>
The table below sets forth the Company's current officers, directors,
immediate family members of officers and directors and holders of more than 5%
of the Company's outstanding stock who since January 1, 1997 invested in, or
became beneficial owners of the Company's common stock issued upon conversion
of the Company's preferred stock.
<TABLE>
<CAPTION>
Common
Stockholder Stock
- ----------- ---------
<S> <C>
Holders of More than 5%:
Glaxo Wellcome International B.V.................................... 1,250,000
Technogen Associates, L.P. (1)...................................... 3,274,772
Technogen Enterprises, L.L.C.(2).................................... 3,274,772
Directors:
Gordon Ringold (3).................................................. 3,291,439
Isaac Stein (4)..................................................... 3,348,106
Officers:
Russell Howard (5).................................................. 55,136
Willem Stemmer...................................................... 125,000
Michael Rabson...................................................... 9,100
Immediate Family Members of Officer and Directors:
Bhagwant Gill and Krishna Gill (6).................................. 128,787
Joseph Glaser, II (7)............................................... 8,712
Robert Glaser, Jr. (8).............................................. 10,991
Sally Glaser (9).................................................... 9,718
</TABLE>
- --------
(1) Consists of 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Enterprises, L.L.C.
and Technogen Associates, L.P. are under common control.
(2) Consists of 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Enterprises, L.L.C.
and Technogen Associates, L.P. are under common control.
(3) Includes 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Managers, L.L.C. is
the general partner of Technogen Associates, L.P. Dr. Ringold is a Managing
Member of Technogen Enterprises, L.L.C. and Technogen Managers, L.L.C. and
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in the limited liability companies.
(4) Includes 3,211,574 shares held by Technogen Associates, L.P. and 63,198
shares held by Technogen Enterprises, L.L.C. Technogen Managers, L.L.C. is
the general partner of Technogen Associates, L.P. Mr. Stein is a Managing
Member of Technogen Enterprises, L.L.C. and Technogen Managers, L.L.C. and
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in the limited liability companies. Also includes
525,667 shares held by the Stein 1995 Revocable Trust, of which Mr. Stein
is a trustee and 41,667 shares held by Stein Partners, of which Mr. Stein
is a general partner.
(5) Includes 53,636 shares held by the Russell and Maureen Howard Trust, of
which Dr. Howard is a trustee.
(6) Drs. Gill are the parents of Simba Gill.
(7) Mr. Glaser is the son of Robert J. Glaser.
(8) Mr. Glaser is the son of Robert J. Glaser.
(9) Ms. Glaser is the daughter of Robert J. Glaser.
The Company believes that all transactions between the Company and its
officers, directors, principal stockholders and other affiliates have been and
will be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
16
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO 1997 STOCK OPTION PLAN
The Company's Board approved amendments to the Company's 1997 Stock Option
Plan (the "Stock Option Plan") to increase the number of shares of common stock
reserved for issuance under the Stock Option Plan by 1,500,000 shares
(representing less than 5% of the Company's outstanding common stock), from
7,500,000 shares to 9,000,000 shares. Stockholder approval of this amendment is
being sought (i) for the purpose of qualifying options as incentive stock
options ("ISOs"), as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) in accordance with the rules of the
Nasdaq National Market, to permit listing any of such shares purchased by
officers, directors or key employees whether or not the Company could otherwise
obtain listing without such approval. Since as of March 31, 2000 there are only
1,161,430 shares remaining available for issuance under the Stock Option Plan
(subject to annual increases in accordance with the Stock Option Plan), the
Board believes that adding shares to the Stock Option Plan is necessary to
permit the Company to continue to attract and retain quality employees by
providing them with appropriate equity incentives and to remain competitive in
the industry.
The Stock Option Plan was adopted by the Board on March 1, 1997. Subsequent
to its adoption, the Board and the stockholders approved amendments to the
Stock Option Plan to increase the number of shares of the Company's common
stock authorized for issuance under the Stock Option Plan to 7,500,000. The
Board will also consider amending the Stock Option Plan to increase the number
of shares of the Company's common stock authorized for issuance thereunder from
7,500,000 to 9,000,000. This proposal seeks approval of the stockholders of the
increase in the number of shares reserved under the Stock Option Plan to
9,000,000 shares.
Set forth below is a summary of the principal features of the Stock Option
Plan, which summary is qualified in its entirety by reference to the terms and
conditions of the Stock Option Plan. The Company will provide, without charge,
to each person to whom a proxy statement is delivered, upon request of such
person and by first class mail within one business day of receipt of such
request, a copy of the Stock Option Plan. Any such request should be directed
as follows: General Counsel, Maxygen, Inc., 515 Galveston Drive, Redwood City,
California 94063; telephone number (650) 298-5300.
Purposes. The purposes of the Stock Option Plan are to (i) encourage
selected employees, directors and consultants to improve operations and
increase profits of the Company, (ii) encourage selected employees, directors
and consultants to accept or continue employment or association with the
Company or its affiliates, and (iii) increase the interest of selected
employees, directors and consultants in the Company's welfare through
participation in the growth in value of the common stock of the Company.
Number of Shares. The maximum number of shares that may be issued pursuant
to options granted under the Stock Option Plan is currently 7,500,000 shares.
The Stock Option Plan, however, provides for annual increases in the number of
shares available for issuance on the first day of each year, beginning January
1, 2001, equal to the lesser of 1,500,000 shares, 4% of the outstanding shares
on the date of the annual increase or an amount determined by the Board.
Administration. The Stock Option Plan provides that it may be administered
by the Board or a committee appointed by the Board. Currently, the Stock Option
Plan is administered by the Compensation Committee, the members of which are
appointed by the Board. The Compensation Committee currently consists of Isaac
Stein, Robert Glaser and Gordon Ringold, who are members of the Board and are
"non-employee directors" as that term is defined in the rules promulgated under
the Exchange Act. Other than as disclosed in this Proxy Statement, members of
the Compensation Committee have no material relationships with the Company, its
employees or its affiliates. Subject to the terms of the Stock Option Plan, the
Committee determines the optionees, the number of shares subject to each
option, the exercise prices, the exercise periods and the dates of grants. The
Committee also has the authority to construe and interpret any of the
provisions of the Stock Option Plan or any options granted thereunder. Such
interpretations are binding on the Company and
17
<PAGE>
on the optionees. Because grants under the Stock Option Plan are made at the
discretion of the Committee, future grants under the Stock Option Plan are not
determinable. Options may be granted under the Stock Option Plan until March
2007.
Eligibility. All employees, officers, directors and consultants of the
Company or any affiliate of the Company are eligible to receive option grants
under the Stock Option Plan. On March 31, 2000, approximately 151 employees
were eligible to receive options under the Stock Option Plan.
Both ISOs and nonqualified stock options ("NQSOs") may be granted under the
Stock Option Plan. The Stock Option Plan limits the aggregate fair market value
(determined as of the time the option is granted) of the shares with respect to
which ISOs are exercisable for the first time by the optionee during any
calendar year to not more than $100,000. There is no similar limit on NQSOs
granted under the Stock Option Plan.
Vesting. Subject to the provisions of the Stock Option Plan, the Committee
may determine the vesting schedule of each option and other terms and
conditions of exercisability under the Stock Option Plan. Options granted to
date under the Stock Option Plan generally vest as to 25% of the shares after
one year and ratably monthly thereafter for three additional years. Holders of
options previously granted under the Stock Option Plan also generally have been
granted the right to exercise options prior to vesting with the Company
retaining the right to repurchase at the exercise price any shares purchased if
the optionee ceases to perform services for the Company. This right of
repurchase lapses in accordance with the vesting schedule. Vesting of options
granted under the Stock Option Plan will accelerate and the options will become
fully exercisable for 30 days in the event the Company is acquired, unless the
successor corporation assumes or substitutes equivalent options in their place.
Exercise Period. Options granted under the Stock Option Plan must be
exercised within ten years of the option grant date (or such shorter time as
may be specified in the grant documents evidencing the option), except that an
ISO granted to a person owing ten percent or more of the total combined voting
power of all classes of stock of the Company or of any parent or subsidiary of
the Company (a "Ten Percent Stockholder") must be exercised within five years
of the option grant date (or such shorter time as may be specified in the grant
documents evidencing the option).
Exercise Price. The Committee determines the exercise price of each option
granted under the Stock Option Plan. The exercise price must be at least equal
to the fair market value for ISOs and 85% of fair market value for NQSOs (as
defined in the Stock Option Plan and determined as the closing price of the
Company's common stock on the Nasdaq National Market on the day of the grant)
per share of the Company's common stock on the date the option is granted,
except that the exercise price of an option granted to a Ten Percent
Stockholder must be at least equal to 110% of the fair market value per share
on the date of grant.
Payment of Exercise Price. To exercise an option, the optionee must deliver
to the Company an executed exercise notice and full payment for the shares
being purchased. With respect to all options under the Stock Option Plan as
currently in effect, payment may be made in cash or, where approved by the
Committee in its sole discretion and where permitted by law, by other specified
forms of payment.
Termination of Options. Under the Stock Option Plan, if an optionee's
association with the Company is terminated for any reason other than death or
disability, any outstanding option, to the extent (and only to the extent) that
it was exercisable on the date of such termination, may be exercised by the
optionee within the 90 days after such termination (or such shorter time as may
be specified in the grant evidencing the option), but in no event later than
the expiration date of the option. A longer exercise period may apply in the
event of termination of an optionee's association with the Company because of
the optionee's death or disability. If an option granted pursuant to the Stock
Option Plan expires or terminates for any reason without being exercised in
whole or in part, the shares thereby released from such option will again
become available for grant and purchase under other options subsequently
granted under the Stock Option Plan.
Adjustment of Option Shares. If the Company issues additional securities to
raise capital or otherwise where consideration is received for the shares, no
adjustment is required in the number of shares or the exercise
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<PAGE>
price per share for outstanding options under the Stock Option Plan. If the
number of outstanding shares of common stock of the Company is changed by a
stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company without consideration, or if a substantial portion of the Company's
assets are distributed, without consideration, to the stockholders of the
Company in a spin-off or similar transaction, the number of shares of common
stock available for option grants under the Stock Option Plan and the number of
shares and the exercise price per share for each outstanding option will be
proportionately adjusted, subject to any required action by the Board or
stockholders of the Company.
Assumption or Substitution of Options; Acceleration of Vesting for Options
Not Assumed or Substituted. Under the Stock Option Plan, in the event of a
merger or consolidation in which the Company is not the surviving corporation
or the sale of substantially all of the assets of the Company, any or all
outstanding options may be assumed or replaced by the successor corporation. In
the event such successor corporation, if any, refuses to assume or substitute
options, the options will become fully-exercisable for a period of 30 days.
Amendment and Termination of the Stock Option Plan. The Committee may amend
or terminate the Stock Option Plan at any time and in any respect, including
modifying the form of the grant or the exercise notice, except that the
Committee cannot, without the approval of the stockholders of the Company, make
changes which would require stockholder approval under the Code. No amendment
of the Stock Option Plan may adversely affect any outstanding option or
unexercised portion thereof without the optionee's written consent.
Outstanding Options Under The Stock Option Plan. The following information
with respect to outstanding options under the Stock Option Plan is provided as
of March 31, 2000. A total of 194 persons held options under the Stock Option
Plan to purchase an aggregate of 2,192,432 shares of common stock (including
both ISOs and NQSOs), with a weighted average exercise price of $12.77 per
share. There are 1,161,430 shares of common stock available for future grants
under the Stock Option Plan. Over the term of the Stock Option Plan, the
following Named Executive Officers (as defined in "Executive Compensation,"
above) have been granted options to purchase shares of common stock under the
Stock Option Plan: Russell J. Howard, Ph.D., President and Chief Executive
Officer, 522,500 shares; Willem P.C. Stemmer, Ph.D., Vice President of
Research, 422,500 shares; Simba Gill, Ph.D., Chief Financial Officer and Senior
Vice President of Business Development, 456,738 shares; John Bedbrook, Ph.D.,
President, Agriculture, 200,000 shares; Norman J. Kruse, Ph.D., Director,
Intellectual Property, 154,043 shares; Michael S. Rabson, Ph.D., Senior Vice
President of Legal Affairs and General Counsel, 350,000 shares; and Joseph
Affholter, Ph.D. Former Vice President, Biocatalysis and Chemicals, 175,700
shares. Current executive officers as a group have been granted options to
purchase 2,456,481 shares. All employees as a group, other than executive
officers, have been granted options to purchase 2,470,834 shares.
New Plan Benefits. The amounts of future option grants under the Stock
Option Plan to (i) the Company's Chief Executive Officer, (ii) the Company's
four most highly compensated executive officers (other than the Chief Executive
Officer) who were serving as executive officers at the end of fiscal 1999,
(iii) all current executive officers as a group, (iv) all current directors who
are not executive officers as a group, and (v) all employees, including all
officers who are not executive officers, as a group, are not determinable
because, under the terms of the Stock Option Plan, such grants are made in the
discretion of the Committee. Future option exercise prices under the Stock
Option Plan are not determinable because they are based upon the fair market
value of the Company's common stock on the date of grant.
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Certain United States Federal Income Tax Information
THE FOLLOWING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS BASED UPON
EXISTING STATUTES, REGULATIONS AND INTERPRETATIONS THEREOF. THE APPLICABLE
RULES ARE COMPLEX, AND INCOME TAX CONSEQUENCES MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH PLAN PARTICIPANT. THIS PROXY STATEMENT
DESCRIBES FEDERAL INCOME TAX CONSEQUENCES OF GENERAL APPLICABILITY BUT DOES NOT
PURPORT TO DESCRIBE PARTICULAR CONSEQUENCES TO EACH INDIVIDUAL PLAN PARTICIPANT
OR FOREIGN, STATE OR LOCAL INCOME TAX CONSEQUENCES, WHICH MAY DIFFER FROM
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
Incentive Stock Options
Award; Exercise. ISOs are intended to constitute "incentive stock options"
within the meaning of Section 422 of the Code. ISOs may be granted only to
employees of the Company (including directors who are also employees). An
optionee does not recognize taxable income upon either the grant or exercise of
an ISO. However, the excess of the fair market value of the shares purchased
upon exercise over the option exercise price (the "Option Spread") is
includable in the optionee's "alternative minimum taxable income" ("AMTI") for
purposes of the alternative minimum tax ("AMT"). The Option Spread is generally
measured on the date of exercise and is includable in AMTI in the year of
exercise. Special rules regarding the time of AMTI inclusion may apply for
shares subject to a repurchase right or other "substantial risk of forfeiture"
(including, in the case of each person subject to the reporting requirements of
Section 16 of the Exchange Act, limitations on resale of shares imposed under
Section 16(b) of the Exchange Act).
Sale Of Option Shares. If an optionee holds the shares purchased under an
ISO for at least two years from the date the ISO was granted and for at least
one year from the date the ISO was exercised, any gain from a sale of the
shares other than to the Company is taxable as long-term capital gain. Under
these circumstances, the Company would not be entitled to a tax deduction at
the time the ISO is exercised or at the time the stock is sold. If an optionee
were to dispose of stock acquired pursuant to an ISO before the end of the
required holding periods (a "Disqualifying Disposition"), the amount by which
the market value of the stock at the time the ISO is exercised exceeds the
exercise price (or, if less, the amount of gain realized on the sale) is
taxable as ordinary income, and the Company is entitled to a corresponding tax
deduction. Such income is subject to information reporting requirements and may
become subject to income and employment tax withholding. Gain from a
Disqualifying Disposition in excess of the amount required to be recognized as
ordinary income is capital gain. Optionees are required to notify the Company
immediately prior to making a Disqualifying Disposition. If stock is sold to
the Company rather than to a third party, the sale may not produce capital gain
or loss. A sale of shares to the Company will constitute a redemption of such
shares which could be taxable as a dividend unless the redemption is "not
essentially equivalent to a dividend" within the meaning of the Code. The
timing and amount of income from a Disqualifying Disposition and the beginning
of the optionee's holding period for determining whether capital gain or loss
is long- or short-term may be affected if option stock is acquired subject to a
repurchase right or other "substantial risk of forfeiture" (including in the
case of each person subject to the reporting requirements of Section 16 of the
Exchange Act, limitations on resale of shares imposed under Section 16(b) of
the Exchange Act).
Exercise With Stock. If an optionee pays for ISO shares with shares of the
Company acquired under an ISO or a qualified employee stock purchase plan
("statutory option stock"), the tender of shares is a Disqualifying Disposition
of the statutory option stock if the above described (or other applicable)
holding periods respecting those shares have not been satisfied. If the holding
periods with respect to the statutory option stock are satisfied, or the shares
were not acquired under a statutory stock option of the Company, then any
appreciation in value of the surrendered shares is not taxable upon surrender.
Special basis and holding period rules apply where previously owned non-
statutory option stock is used to exercise an ISO.
20
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Nonqualified Stock Options
Award; Exercise. An optionee is not taxable upon the award of a NQO. Federal
income tax consequences upon exercise will depend upon whether the shares
thereby acquired are subject to a "substantial risk of forfeiture." If the
shares are not subject to a substantial risk of forfeiture, or if they are so
restricted and the optionee files an election under Section 83(b) of the Code
(a "Section 83(b) Election") with respect to the shares, the optionee will have
ordinary income at the time of exercise measured by the Option Spread on the
exercise date. The optionee's tax basis in the shares will be the fair market
value of the shares on the date of exercise, and the holding period for
purposes of determining whether capital gain or loss upon sale is long- or
short-term also will begin on or immediately after that date. If the shares are
subject to a substantial risk of forfeiture and no Section 83(b) Election is
filed, the optionee will not be taxable upon exercise, but instead will have
ordinary income on the date the restrictions lapse, in an amount equal to the
difference between the amount paid for the shares under the NQO and their fair
market value as of the date of lapse; in addition, the optionee's holding
period will begin on the date of the lapse.
Whether or not the shares are subject to a substantial risk of forfeiture,
the amount of ordinary income taxable to an optionee who is an employee at the
time of grant constitutes "supplemental wages" subject to withholding of income
and employment taxes by the Company, and the Company receives a corresponding
income tax deduction.
Sale Of Option Shares. Upon sale, other than to the Company, of shares
acquired under a NQO, an optionee generally will recognize capital gain or loss
to the extent of the difference between the sale price and the optionee's tax
basis in the shares, which will be long-term gain or loss if the employee's
holding period in the shares is more than one year. Certain reduced capital
gains rates apply if the shares are held for longer periods. If stock is sold
to the Company, rather than to a third party, the sale may not produce capital
gain or loss. A sale of shares to the Company will constitute a redemption of
such shares, which could be taxable as a dividend unless the redemption is "not
essentially equivalent to a dividend" within the meaning of the Code.
Exercise With Stock. If an optionee tenders common stock to pay all or part
of the exercise price of a NQO, the optionee will not have a taxable gain or
deductible loss on the surrendered shares. Instead, shares acquired upon
exercise that are equal in value to the fair market value of the shares
surrendered in payment are treated as if they had been substituted for the
surrendered shares, taking as their basis and holding period the basis and
holding period that the optionee had in the surrendered shares. The additional
shares are taxable to the optionee and are treated as newly acquired with a
basis equal to their fair market value on the date of exercise.
If the surrendered shares are statutory option stock as described above
under "Incentive Stock Options", with respect to which the applicable holding
period requirements for favorable income tax treatment have not expired, then
the newly acquired shares substituted for the statutory option shares should
remain subject to the federal income tax rules governing the surrendered
shares, but the surrender should not constitute a Disqualifying Disposition of
the surrendered stock.
ERISA Information. The Company believes that the Stock Option Plan is not
subject to any of the provisions of the Employment Retirement Income Security
Act of 1974, as amended ("ERISA").
Special Federal Income Tax Consideration Due to Short Swing Profit Rule
The potential liability of a person subject to Section 16 of the Exchange
Act to repay short-swing profits from the resale of shares acquired under a
Company plan constitutes a "substantial risk of forfeiture" within the meaning
of the above-described rules, which is generally treated as lapsing at such
time as the potential liability under Section 16 lapses. Persons subject to
Section 16 who would be required by Section 16 to repay profits from the
immediate resale of stock acquired under a Company plan should consider whether
to file a Section 83(b) Election at the time they acquire stock under a Company
plan in order to avoid deferral of the date that they are deemed to acquire
shares for federal income tax purposes.
21
<PAGE>
Required Vote.
Approval of the amendment to the Stock Option Plan requires the affirmative
vote of a majority of the votes cast by stockholders who are present or
represented at a duly held stockholders meeting at which a quorum of the voting
power is represented. Abstentions will have the same effect as a negative vote
on this proposal. Broker non-votes will have no effect on the outcome of this
vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE AMENDMENT TO THE STOCK OPTION PLAN
22
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PROPOSAL NO. 3
AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Description of the Amendment
At the annual meeting, the stockholders are being asked to approve an
amendment to the Company's Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of common stock by 30,000,000 shares
(the "Amendment"). The Company's Amended and Restated Certificate of
Incorporation currently authorizes the issuance of 70,000,000 shares of common
stock, with a par value of $0.0001 per share, and 5,000,000 shares of preferred
stock, with a par value of $0.0001 per share. The Board will also consider
adopting a resolution approving an amendment to the Amended and Restated
Certificate of Incorporation to increase the authorized number of shares of
common stock to 100,000,000, subject to stockholder approval. Since the
Company's Amended and Restated Certificate of Incorporation also authorizes
5,000,000 shares of preferred stock, the Amendment will have the effect of
increasing the total number of shares of capital stock authorized for issuance
from 75,000,000 to 105,000,000 shares. Stockholders are invited to read the
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation (the "Certificate"), a copy of which can be obtained from the
Company by contacting the Company at its corporate headquarters, Attention:
General Counsel.
Purpose and Effect of the Proposed Amendment
As of February 15, 2000, the Company had approximately 32,269,644 shares of
common stock outstanding and no shares of preferred stock outstanding, and as
of that date, the Company had approximately 2,111,602 shares of common stock
reserved for issuance under options granted pursuant to the Company's stock
option plans. The Company also had, as of such date, 1,943,385 shares of common
stock reserved for future issuance the Company's benefit plans.
In addition to the foregoing, the Board considers it advisable to have
additional authorized, but unissued shares of common stock available to allow
the Company to act promptly with respect to possible future financings,
possible acquisitions, additional issuances under the Company's employee
benefit plans, stock splits and for other corporate purposes approved by the
Board. Having additional authorized shares of common stock available for
issuance in the future would give the Company greater flexibility and allow
shares of common stock to be issued without the expense or delay of a
stockholders' meeting, except as may be required by applicable laws or
regulations. Other than for issuance under the Company's employee benefit plans
and potential acquisitions, the Company has no specific plans for the issuance
of additional shares of common stock.
Under the Company's Amended and Restated Certificate of Incorporation, the
Company's stockholders do not have preemptive rights with respect to the common
stock. Thus, should the Board elect to issue additional shares of common stock,
existing stockholders would not have any preferential rights to purchase such
shares. In addition, if the Board elects to issue additional shares of common
stock, such issuance could have a dilutive effect on the earnings per share,
voting power and shareholdings of current stockholders.
The proposed Amendment to increase the authorized number of shares of common
stock could, under certain circumstances, have an anti-takeover effect,
although this is not the intention of this proposal. In the event of a hostile
takeover attempt to take over control of the Company, it may be possible for
the Company to endeavor to impede the attempt by issuing shares of the common
stock, thereby diluting the voting power of the other outstanding shares and
increasing the potential cost to acquire control of the Company. The proposed
Amendment, therefore, may have the effect of discouraging unsolicited takeover
attempts. By potentially discouraging initiation of any such unsolicited
takeover attempt, the proposed Amendment may limit the opportunity for the
Company's stockholders to dispose of their shares at the higher price generally
available in takeover attempts or that may be available under a merger
proposal. The proposed Amendment may have the effect of permitting the
Company's current management, including the current Board, to retain its
position, and
23
<PAGE>
place it in a better position to resist changes that stockholders may wish to
make if they are dissatisfied with the conduct of the Company's business.
However, the Board is not aware of any attempt to take control of the Company
and the Board has not presented this proposal with the intent that it be
utilized as a type of anti-takeover device.
Required Vote.
Approval of the amendment to the Amended and Restated Certificate of
Incorporation will require the affirmative vote of a majority of the
outstanding shares of common stock entitled to vote at the meeting. As a
result, abstentions and broker non-votes will have the same effect as negative
votes.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE FOR THE AMENDMENT TO
THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
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 2001 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is December 27, 2000. Stockholders wishing to submit proposals or
director nominations that are not to be included in such proxy statement and
proxy must do so in accordance with our bylaws. Stockholders are also advised
to review the Company's Bylaws, which contain additional requirements with
respect to advance notice of stockholder proposals and director nominations,
including a requirement that the Company receive notice of any proposal or
nomination at least 120 days before the date of the first anniversary of the
2000 annual meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of the Company's common stock to
file initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission and the Nasdaq National Market. Such persons
are required by Securities and Exchange Commission regulation to furnish the
Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements were met during
the Company's most recent fiscal year.
INDEPENDENT PUBLIC ACCOUNTANTS
Effective December 1998, Ernst & Young LLP was engaged as the Company's
independent auditors and replaced other auditors who were dismissed as the
Company's independent auditors on the same date. The decision to change
auditors was approved by our board of directors. Our former auditors issued a
report for the period ended December 31, 1997 which contained an emphasis
paragraph as to the Company's ability to continue as a going concern. In
connection with the audit for the period ended December 31, 1997 and through
the date at which Ernst & Young LLP was engaged as the Company's independent
auditors, there were no disagreements with the Company's former auditors on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of the Company's former auditors, would have caused them to make
reference thereto in any of their reports. Prior to December 1998, the Company
had not consulted with Ernst & Young LLP on items that involved the Company's
accounting principles or the form of audit opinion to be issued on the
Company's financial statements.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so. The representatives of Ernst & Young LLP also will be available to
respond to questions raised during the meeting.
24
<PAGE>
ADDITIONAL INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 1999 is
being mailed with this Proxy Statement to stockholders of the Company.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
meeting, and, so far as is known to the Board, no matters are to be brought
before the meeting except as specified in the Notice of the Meeting. As to any
business that may properly come before the meeting, however, it is intended
that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
25
<PAGE>
1997 STOCK OPTION PLAN
OF
MAXYGEN, INC.
(as amended)
1. PURPOSES OF THE PLAN
--------------------
The purposes of the 1997 Stock Option Plan (the "Plan") of Maxygen, Inc., a
Delaware corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to
improve operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to accept
or continue employment or association with the Company or its Affiliates; and
(c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonstatutory
options" ("NSOs").
2. ELIGIBLE PERSONS
----------------
Every person who at the date of grant of an Option is a full-time employee
of the Company or of any Affiliate (as defined below) of the Company is eligible
to receive NSOs or ISOs under this Plan. Every person who at the date of grant
is a consultant to, or nonemployee director of, the Company or any Affiliate (as
defined below) of the Company is eligible to receive NSOs under this Plan. The
term "Affiliate" as used in the Plan means a parent or subsidiary corporation as
defined in the applicable provisions of the Code. The term "employee" includes
an officer or director who is an employee, of the Company. The term
"consultant" includes persons employed by, or otherwise affiliated with, a
consultant.
3. STOCK SUBJECT TO THIS PLAN
--------------------------
Subject to the provisions of Section 6.1.1 of the Plan, the total number of
shares of stock which may be issued under options granted pursuant to this Plan
shall be 7,500,000 shares of Common Stock plus an annual increase to be added on
the first day of the Company's fiscal year beginning in fiscal year 2001, equal
to the lesser of (i) 1,500,000 shares, (ii) 4% of the outstanding shares of
capital stock on such date or (iii) an amount
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<PAGE>
determined by the Board. The shares covered by the portion of any grant under
the Plan which expire unexercised shall become available again for grants under
the Plan.
4. ADMINISTRATION
--------------
4.1 General. This Plan shall be administered by the Board of
-------
Directors of the Company (the "Board") or, by a committee (the "Committee") of
at least two Board members to which administration of the Plan, or of part of
the Plan, is delegated (in either case, the "Administrator").
4.2 Public Company. From and after such time as the Company registers
--------------
a class of equity securities under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Committee shall consist of Board
members who are "Non-Employee Directors" as defined under Rule 16b-3 promulgated
by the Securities and Exchange Commission ("Rule 16b-3"), or any successor rule
thereto.
4.3 Authority of Administrator. Subject to the other provisions of
--------------------------
this Plan, the Administrator shall have the authority, in its discretion: (i) to
grant Options; (ii) to determine the fair market value of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons to whom, and the time or times at which, Options
shall be granted, and the number of shares subject to each Option; (v) to
interpret this Plan; (vi) to prescribe, amend, and rescind rules and regulations
relating to this Plan; (vii) to determine the terms and provisions of each
Option granted (which need not be identical), including but not limited to, the
time or times at which Options shall be exercisable; (viii) with the consent of
the optionee, to modify or amend any Option; (ix) to accelerate the exercise
date of any Option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.
4.4 Interpretation by Administrator. All questions of interpretation,
-------------------------------
implementation, and application of this Plan shall be determined in its absolute
discretion by the Administrator. Such determinations shall be final and binding
on all persons.
4.5 Rule 16b-3. With respect to persons subject to Section 16 of the
----------
Exchange Act, if any, transactions under this Plan are intended to comply with
the applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent a transaction under this Plan or action by the Administrator fails to so
comply, it shall, to the extent deemed advisable by the Administrator, be
modified to comply with Rule 16b-3. Notwithstanding the above, it shall be the
responsibility of such persons, not of the
2
<PAGE>
Company or the Administrator, to comply with the requirements of Section 16 of
the Exchange Act; and neither the Company nor the Administrator shall be liable
if this Plan or any transaction under this Plan fails to comply with the
applicable conditions of Rule 16b-3 or any successor rule thereto, or if any
such person incurs any liability under Section 16 of the Exchange Act.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
-------------------------------------
5.1 No Options shall be granted under this Plan after ten years from
the date of adoption of this Plan by the Board.
5.2 Each Option shall be evidenced by a written stock option
agreement (the "Option Agreement"), in form satisfactory to the Company,
executed by the Company and the person to whom such Option is granted; provided,
however, that the failure by the Company, the optionee, or both to execute the
Option Agreement shall not invalidate the granting of an Option, although the
exercise of each option shall be subject to Section 6.1.3.
5.3 The Option Agreement shall specify whether each Option it
evidences is an NSO or an ISO.
5.4 Subject to Section 6.3.3 with respect to ISOs, the Administrator
may approve the grant of Options under this Plan to persons who are expected to
become employees, directors or consultants of the Company, but are not
employees, directors or consultants at the date of approval.
6. TERMS AND CONDITIONS OF OPTIONS
-------------------------------
Each Option granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NSOs shall be also subject to the terms
and conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. Options
-----------------------------------------------------
granted under this Plan shall be subject to the following terms and conditions:
6.1.1 Changes in Capital. Subject to Section 6.1.2, if the stock
------------------
of the Company is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, combination or reclassification, appropriate
adjustments shall be made by the Board in (a) the number and class of shares of
stock subject to this Plan and each Option outstanding under this Plan, and (b)
the exercise price of each outstanding Option; provided, however, that the
Company shall not be required to issue fractional shares as a
3
<PAGE>
result of any such adjustments. Each such adjustment shall be subject to
approval by the Board in its absolute discretion .
6.1.2 Corporate Transactions. In the event of the proposed
----------------------
dissolution or liquidation of the Company, the Administrator shall notify each
optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action. In the event of a merger or consolidation
of the Company with or into another corporation or entity in which the Company
does not survive, or in the event of a sale of all or substantially all of the
assets of the Company in which the stockholders of the Company receive
securities of the acquiring entity or an affiliate thereof, all Options shall be
assumed or equivalent options shall be substituted by the successor corporation
(or other entity) or a parent or subsidiary of such successor corporation (or
other entity). If such successor does not agree to assume the Options or to
substitute equivalent options therefor, unless the Administrator shall determine
otherwise, the Options shall be fully exercisable for a period of 30 days form
the date notice is given under this Section 6.1.2 and shall terminate upon
expiration of such 30-day period.
6.1.3 Time of Option Exercise. Subject to Section 5 and Section
-----------------------
6.3.4, Options granted under this Plan shall be exercisable (a) immediately as
of the effective date of the Option Agreement granting the Option, or (b) in
accordance with a schedule related to the date of the grant of the Option, the
date of first employment, or such other date as may be set by the Administrator
(in any case, the "Vesting Base Date") and specified in the Option Agreement
relating to such Option; provided, however, that the right to exercise an Option
must vest at the rate of at least 20% per year over five years from the date the
option was granted. Options granted to officers, directors or consultants may
become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Board of the
Administrator in accordance with this Plan. In any case, no Option shall be
exercisable until a written Option Agreement in form satisfactory to the Company
is executed by the Company and the optionee.
6.1.4 Option Grant Date. Except in the case of advance approvals
-----------------
described in Section 5.4, the date of grant of an Option under this Plan shall
be the date as of which the Administrator approves the grant.
6.1.5 Nonassignability of Option Rights. Except as otherwise
---------------------------------
determined by the Administrator and expressly set forth in the Option Agreement,
no Option granted under this Plan shall be assignable or otherwise transferable
by the optionee except by will or by the laws of descent and distribution.
During the life of the optionee, except as otherwise determined by the
Administrator and expressly set forth in the Option Agreement, an Option shall
be exercisable only by the optionee.
4
<PAGE>
6.1.6 Payment. Except as provided below, payment in full, in
-------
cash, shall be made for all stock purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion after
considering any tax or accounting consequences, may authorize any one or more of
the following additional methods of payment:
(a) Acceptance of the optionee's full recourse promissory
note for all or part of the Option price, payable on such terms and bearing such
interest rate as determined by the Administrator (but in no event less than the
minimum interest rate specified under the Code at which no additional interest
would be imputed and in no event more than the maximum interest rate allowed
under applicable usury laws), which promissory note may be either secured or
unsecured in such manner as the Administrator shall approve (including, without
limitation, by a security interest in the shares of the Company); and
(b) Delivery by the optionee of Common Stock already
owned by the optionee for all or part of the Option price, provided the value
(determined as set forth in Section 6.1.11) of such Common Stock is equal on the
date of exercise to the Option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any Option granted under this Plan by delivery of Common
Stock without the consent of the Administrator.
6.1.7 Termination of Employment.
-------------------------
(a) If, for any reason other than death, disability or
"cause" (as defined below), an optionee ceases to be employed by the Company or
any of its Affiliates (such event being called a "Termination"), Options held at
the date of Termination (to the extent then exercisable) may be exercised in
whole or in part at any time within 90 days of the date of such Termination, or
such other period of not less than 30 days after the date of such Termination as
is specified in the Option Agreement (but in no event after the Expiration
Date).
(b) If an optionee dies or becomes disabled (within the
meaning of Section 22(c)(3) of the Code) while employed by the Company or an
Affiliate or within the period that the Option remains exercisable after
Termination, Options then held (to the extent then exercisable) may be
exercised, in whole or in part, by the optionee, by the optionee's personal
representative or by the person to whom the Option is transferred by devise or
the laws of descent and distribution, at any time within 12 months after the
death or 12 months after the disability of the optionee, or such other
5
<PAGE>
period of not less than six months from the date of Termination as is specified
in the Option Agreement (but in no event after the Expiration Date).
(c) If an optionee is terminated for "cause," all Options
then held shall terminate and no longer be exercisable as of the date of
Termination.
(d) For purposes of this Section 6.1.7, "employment"
includes service as a director or as a consultant.
(e) For purposes of this Section 6.1.7, an optionee's
employment shall not be deemed to terminate by reason of sick leave, military
leave or other leave of absence approved by the Administrator, if the period of
any such leave does not exceed 90 days or, if longer, if the optionee's right to
reemployment by the Company or any Affiliate is guaranteed either contractually
or by statute.
(f) For purposes of this Section 6.1.7, "cause" shall
mean Termination (i) by reason of optionee's commission of a felony, misdemeanor
or other illegal conduct involving dishonesty, fraud or other matters of moral
turpitude, (ii) by reason of optionee's dishonesty towards, fraud upon, or
deliberate injury or attempted injury to the Company or any of its Affiliates,
or (iii) by reason of optionee's willfully engaging in misconduct which is
materially and demonstrably injurious to the Company or any of its Affiliates.
6.1.8 Repurchase of Stock. At the option of the Administrator,
-------------------
the stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director or
consultant whose employment, or director or consulting relationship with the
Company is terminated. Such right of repurchase shall be exercisable as the
Administrator may determine in the grant of option, either:
(a) at the Option exercise price and (i) shall lapse at
the rate of at least 20% per year over five years from the date the Option is
granted (without regard to the date it was exercised or becomes exercisable),
and must be exercised for cash or cancellation of purchase money indebtedness
within 90 days after such termination of employment (or in the case of
securities issued upon exercise of options after the date of termination, within
90 days after the date of the exercise) ; or
(b) at the higher of the Option exercise price or the
value (determined as set forth in Section 6.1.11) of the stock being repurchased
on the date of termination, and must be exercised for cash or cancellation of
purchase money indebtedness within 90 days of termination of employment (or in
the case of securities issued upon exercise of options after the date of
termination, within 90 days after the date
6
<PAGE>
of exercise), and such right shall terminate when the Company's securities
become publicly traded.
In addition to the restrictions set forth in subparagraphs (a) and (b)
above, the shares held by an officer, director or consultant of the issuer or an
affiliate of the issuer may be subject to additional or greater restrictions, at
the absolute discretion of the Administrator.
6.1.9 Withholding and Employment Taxes. At the time of exercise
--------------------------------
of an Option or at such other time as the amount of such obligations becomes
determinable (the "Tax Date"), the optionee shall remit to the Company in cash
all applicable federal and state withholding and employment taxes. If authorized
by the Administrator in its absolute discretion, after considering any tax or
accounting consequences, an optionee may elect to (i) deliver a full recourse
promissory note on such terms as the Administrator deems appropriate, (ii)
tender to the Company previously owned shares of Stock or other securities of
the Company, or (iii) have shares of Common Stock which are acquired upon
exercise of the Option withheld by the Company to pay some or all of the amount
of tax that is required by law to be withheld by the Company as a result of the
exercise of such Option. Any election pursuant to clause (ii) above, where the
optionee is tendering Common Stock issued pursuant to the exercise of an Option,
shall require that such shares have been held at least six months prior to the
Tax Date. Any securities tendered or withheld in accordance with this Section
6.1.9 shall be valued by the Company as of the Tax Date.
6.1.10 Other Provisions. Each Option granted under this Plan may
----------------
contain such other terms, provisions, and conditions not inconsistent with this
Plan as may be determined by the Administrator, and each ISO granted under this
Plan shall include such provisions and conditions as are necessary to qualify
the Option as an "incentive stock option" within the meaning of Section 422 of
the Code. If Options provide for a right of first refusal in favor of the
Company with respect to stock acquired by employees, directors or consultants,
such Options shall provide that the right of first refusal shall terminate upon
the earlier of (i) the closing of the Company's initial registered public
offering to the public generally, or (ii) the date ten years after the grant
date as set forth in Section 6.1.4.
6.1.11 Determination of Value. For purposes of the Plan, the
----------------------
value of Common Stock or other securities of the Company shall be determined as
follows:
(a) If the stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System, its fair market value shall be the
closing sales price for such stock or
7
<PAGE>
the closing bid if no sales were reported, as quoted on such system or exchange
(or the largest such exchange) for the date the value is to be determined (or if
there are no sales for such date, then for the last preceding business day on
which there were sales), as reported in the Wall Street Journal or similar
-------------------
publication.
(b) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there are no quoted
prices for the date of grant, then for the last preceding business day on which
there were quoted prices).
(c) In the absence of an established market for the
stock, the fair market value thereof shall be determined in good faith by the
Administrator, by consideration of such factors as the Administrator in its
discretion deems appropriate among the recent issue price of other securities of
the Company, the Company's net worth, prospective earning power, dividend-paying
capacity, and other relevant factors, including the goodwill of the Company, the
economic outlook in the Company's industry, the Company's position in the
industry and its management, and the values of stock of other corporations in
the same or a similar line of business.
6.1.12 Option Term. Subject to Section 6.3.5, no Option shall be
-----------
exercisable more than ten years after the date of grant, or such lesser period
of time as is set forth in the stock option agreement (the end of the maximum
exercise period stated in the Option Agreement is referred to in this Plan as
the "Expiration Date").
6.1.13 Exercise Price. The exercise price of any Option granted
--------------
to any person who owns, directly or by attribution under the Code currently
Section 424(d), stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or of any Affiliate (a "Ten
Percent Stockholder") shall in no event be less than 110% of the fair market
value (determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.
6.2 Terms and Conditions to Which Only NSOs Are Subject. Except as
---------------------------------------------------
set forth in Section 6.1.13, the exercise price of a NSO shall be not less than
85% of the fair market value (determined in accordance with Section 6.1.11) of
the stock subject to the Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
---------------------------------------------------
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.13, the
--------------
exercise price of an ISO shall be determined in accordance with the applicable
provisions
8
<PAGE>
of the Code and shall in no event be less than the fair market value (determined
in accordance with Section 6.1.11) of the stock covered by the Option at the
time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by exercise
--------------------------
of an ISO granted pursuant to this Plan is disposed of in a "disqualifying
disposition" within the meaning of Section 422 of the Code, the holder of the
stock immediately before the disposition shall promptly notify the Company in
writing of the date and terms of the disposition and shall provide such other
information regarding the Option as the Company may reasonably require.
6.3.3 Grant Date. If an ISO is granted in anticipation of
----------
employment as provided in Section 5.4, the Option shall be deemed granted,
without further approval, on the date the grantee assumes the employment
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.
6.3.4 Vesting. Notwithstanding any other provision of this Plan,
-------
ISOs granted under all incentive stock option plans of the Company and its
subsidiaries may not "vest" for more than $100,000 in fair market value of stock
(measured on the grant dates(s)) in any calendar year. For purposes of the
preceding sentence, an option "vests" when it first becomes exercisable. If, by
their terms, such ISOs taken together would vest to a greater extent in a
calendar year, and unless otherwise provided by the Administrator, ISOs with
lower exercise prices shall vest before ISOs with higher exercise prices,
regardless of the grant date.
6.3.5 Term. Notwithstanding Section 6.1.12, no ISO granted to
----
any Ten Percent Stockholder shall be exercisable more than five years after the
date of grant .
7. MANNER OF EXERCISE
------------------
7.1 An optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 6.1.6. The date the Company
receives written notice of an exercise hereunder accompanied by payment of the
exercise price will be considered as the date such Option was exercised.
7.2 Promptly after receipt of written notice of exercise of an
Option, the Company shall, without stock issue or transfer taxes to the optionee
or other person entitled to exercise the Option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares of
stock. An optionee or permitted transferee of an optionee shall not have any
privileges as a stockholder with respect to
9
<PAGE>
any shares of stock covered by the Option until the date of issuance (as
evidenced by the appropriate entry on the books of the Company or a duly
authorized transfer agent) of such shares.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
-------------------------------------
Nothing in this Plan or any Option granted thereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment or consulting at any time, nor confer upon
any optionee any right to continue in the employ of, or consult with, the
Company or any of its Affiliates.
9. FINANCIAL INFORMATION
---------------------
The Company shall provide to each optionee during the period such optionee
holds an outstanding Option, and to each holder of Common Stock acquired upon
exercise of Options granted under the Plan for so long as such person is a
holder of such Common Stock, annual financial statements of the Company as
prepared either by the Company or independent certified public accountants of
the Company. Such financial statements shall include, at a minimum, a balance
sheet and an income statement, and shall be delivered as soon as practicable
following the end of the Company's fiscal year.
10. CONDITIONS UPON ISSUANCE OF SHARES
----------------------------------
Shares of Common Stock shall not be issued pursuant to the exercise of an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended (the
"Securities Act").
11. NONEXCLUSIVITY OF THE PLAN
--------------------------
The adoption of the Plan shall not be construed as creating any limitations
on the power of the Company to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
other than under the Plan.
12. MARKET STANDOFF
---------------
Each Optionee, if so requested by the Company or any representative of the
underwriters in connection with any registration of the offering of any
securities of the Company under the Securities Act of 1933, as amended (the
"Securities Act"), shall not sell or otherwise transfer any shares of Common
Stock acquired upon exercise of Options during the 180-day period following the
effective date of a registration statement of the company filed under the
Securities Act; provided, however, that such restriction shall
10
<PAGE>
apply only to the first two registration statements of the Company to become
effective under the Securities Act which includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under the
Securities Act. The Company may impose stop-transfer instructions with respect
to securities subject to the foregoing restriction until the end of such 180-day
period.
13. AMENDMENTS TO PLAN
------------------
The Board may at any time amend, alter, suspend or discontinue this Plan.
Without the consent of an optionee, no amendment, alteration, suspension or
discontinuance may adversely affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to the requirements of federal or other
tax laws relating to incentive stock options. No amendment, alteration,
suspension or discontinuance shall require stockholder approval unless (a)
stockholder approval is required to preserve incentive stock option treatment
for federal income tax purposes, or (b) the Board otherwise concludes that
stockholder approval is advisable.
14. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon adoption by the Board provided,
however, that no Option shall be exercisable unless and until written consent of
the stockholders of the Company, or approval of stockholders of the Company
voting at a validly called stockholders' meeting, is obtained within 12 months
after adoption by the Board. If such stockholder approval is not obtained within
such time, Options granted hereunder shall terminate and be of no force and
effect from and after expiration of such 12-month period. Options may be
granted and exercised under this Plan only after there has been compliance with
all applicable federal and state securities laws.
Plan adopted by the Board of Directors on March 1, 1997
Plan approved by Stockholders on March 30, 1997.
11
<PAGE>
MAXYGEN, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS OF MAXYGEN, INC. MAY 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MAXYGEN, INC.
The undersigned hereby appoints Simba Gill and Michael Rabson, or either of
them, each with full power of substitution, to represent the undersigned at the
Annual Meeting of Stockholders of MAXYGEN Inc. (the "Company") to be held at
1:00 p.m. local time on Thursday, May 25, 2000, at Hotel Sofitel, 233 Twin
Dolphin Dr., Redwood City, California 94065, and at any adjournments or
postponements thereof, and to vote the number of shares the undersigned would be
entitled to vote if personally present at the meeting on the following
matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. WHEN NO CHOICE IS
INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE SEVEN NOMINEES AND
FOR ALL OTHER PROPOSALS. In their discretion, the proxy holders are authorized
to vote upon such other business as may properly come before the meeting or
any adjournments or postponements thereof to the extent authorized by Rule
14a4-(c) promulgated under the Securities Exchange Act of 1934, as amended.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
YOU MAY ALSO VOTE VIA THE TELEPHONE OR OVER THE INTERNET, AS DESCRIBED IN THE
PROXY STATEMENT.
(Continued, and to be marked, dated and signed, on the reverse side)
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
VOTE BY TELEPHONE OR INTERNET
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
Maxygen encourages you to take advantage of the new and convenient way to vote
your shares. If voting by proxy, this year you may vote by mail, or choose one
of the two methods described below. Your telephone or internet vote authorizes
the named proxies to vote your shares in the same manner as if you marked,
signed, and returned your proxy card. To vote by telephone or internet, read the
accompanying proxy statement and then follow these easy steps:
* To vote by telephone call toll free on a touch tone telephone 1-800-840-
1208 - anytime. There is NO CHARGE to you for this call. Enter the 11 digit
control number located in the lower right hand corner.
- --------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL Items: Press 1.
- --------------------------------------------------------------------------------
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
- --------------------------------------------------------------------------------
OPTION #2: If you choose to vote on each Item separately, press 0. You will
hear these instructions:
- --------------------------------------------------------------------------------
Items 1: To vote FOR ALL nominees, press 1: to WITHHOLD FOR ALL nominees,
press 9.
To withhold FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
Items 2: To vote FOR, press 1: AGAINST, press 9: ABSTAIN, press 0.
Items 3: To vote FOR, press 1: AGAINST, press 9: ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
or
--
2. TO VOTE BY INTERNET: FOLLOW THE INSTRUCTIONS AT OUR INTERNET ADDRESS:
http//www.eproxy.com/maxy
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE OR INTERNET.
- --------------------------------------------------------------------------------
Call * * Toll Free * * On a Touch Tone Telephone
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
<PAGE>
Please mark [X]
your votes
as in this
example
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
SEVEN NOMINEES AND FOR PROPOSALS 2 AND 3.
1. ELECTION OF DIRECTORS FOR all nominees listed WITHHOLD
below (except as AUTHORITY
indicated to the to vote for all of the
contrary below) nominees listed below
[ ] [ ]
Nominees: Russell J. Howard, Ph.D. Adrian Hennah
Isaac Stein Gordon Ringold, Ph.D.
Robert J. Glaser, M.D. George Poste, D.V.M., Ph.D.
M.R.C. Greenwood, Ph.D.
Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
________________________________________________________________________________
FOR AGAINST ABSTAIN
2. To consider and vote upon a proposal to
amend the Company's 1997 Stock Option Plan [_] [_] [_]
to increase the number of shares of common
stock reserved for issuance thereunder by
1,500,000 shares, from 7,500,000 shares to
9,000,000 shares.
3. To amend the Company's Amended and Restated [_] [_] [_]
Articles of Incorporation to increase the
number of shares of common stock authorized
by 30,000,000 shares, from 70,000,000 to
100,000,000 shares.
4. To transact such other business as may properly
come before the meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice. Only stockholders of record at the close of business
on April 14, 2000 are entitled to notice of, and to vote at, the meeting or any
adjournment thereof.
YOUR VOTE IS IMPORTANT. WHETHER
OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE AND
PROMPTLY RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED
SO THAT YOUR SHARES MAY BE
REPRESENTED AT THE MEETING.
____________________________________________________ Date ______________, 2000
Signature (print title, if applicable)
____________________________________________________ Date ______________, 2000
Signature (print title, if applicable)
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares of stock stand of record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the proxy. If shares of stock are held of record by a
corporation, the proxy should be executed by the president or vice president and
the secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute the above proxy for a deceased stockholder should give
their full title. Please date the Proxy.
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
