<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
Neurex Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NEUREX CORPORATION
3760 HAVEN AVENUE
MENLO PARK, CALIFORNIA 94025
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Neurex
Corporation, a Delaware corporation (the "Company"), will be held at the Hotel
Sofitel, which is located at 203 Twin Dolphin Drive, Redwood City, California
94065 at 9:00 a.m. on Thursday, May 7, 1998, for the following purposes:
PROPOSAL 1. To elect nine (9) directors of the Company for terms
expiring at the 1998 Annual Meeting;
PROPOSAL 2. To ratify the selection of Ernst & Young LLP as auditors
of the Company's financial statements for the calendar year ending December
31, 1998;
PROPOSAL 3. To consider and act upon a proposal to approve the
Company's 1998 Employee, Consultant, and Director Stock Option Plan and the
authorization of 1,000,000 shares of common stock for issuance thereunder;
and to transact such other business as may properly come before the meeting
or any adjournments thereof.
The close of business on March 23, 1998, has been fixed as the record date
for the determination of stockholders entitled to receive notice of and to vote
at the meeting.
PLEASE SIGN, DATE AND MAIL YOUR PROXY IN THE ENVELOPE PROVIDED FOR YOUR
CONVENIENCE. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE MEETING AND, IF
YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
[SIG]
Thomas L. Barton
Secretary
Dated: April 6, 1998
<PAGE> 3
NEUREX CORPORATION
3760 HAVEN AVENUE
MENLO PARK, CALIFORNIA 94025
PROXY STATEMENT
------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Neurex Corporation (the "Company") for use
at the Annual Meeting of Stockholders to be held on May 7, 1998, or at any
adjournment thereof, for the purposes set forth herein and in the foregoing
Notice. This Proxy Statement and the accompanying Proxy are being mailed to the
Company's stockholders on or about April 6, 1998.
At the close of business on March 23, 1998, the record date fixed by the
Board of Directors of the Company for determining those stockholders entitled to
vote at the Annual Meeting (the "Record Date"), the outstanding shares of the
Company entitled to vote consisted of 22,366,397 shares of Common Stock. Each
stockholder of record at the close of business on the Record Date is entitled to
one vote for each share then held on each matter submitted to a vote of the
stockholders.
A form of proxy is enclosed for use at the Meeting. The proxy may be
revoked by a stockholder at any time prior to the meeting, and any stockholder
present at the meeting may revoke his or her proxy thereat and vote in person if
he or she so desires. When such proxy is properly executed and returned, the
shares it represents will be voted at the meeting in accordance with any
instructions noted thereon. If no direction is indicated, all shares represented
by valid proxies received pursuant to this solicitation (and not revoked prior
to exercise) will be voted for the election of the nominees for directors named
herein (unless authority to vote is withheld) and in favor of all other
proposals stated in the Notice of Meeting and described in this Proxy Statement.
The Company's Annual Report for the year ended December 31, 1997, is
enclosed with this Proxy Statement.
PROPOSAL 1:
ELECTION OF DIRECTORS
NOMINEES
Nine directors are to be elected at the Annual Meeting, each to hold office
until the next Annual Meeting and until his successor is elected and qualified.
The Board of Directors has nominated for election as directors the nine persons
indicated in the following table. Proxy holders may not vote for a greater
number of persons than the number of nominees named below. In the election of
directors, the proxy holders intend, unless directed otherwise, to vote for the
election of the nominees named below, all of whom are now members of the Board
of Directors. In the event that cumulative voting is employed in the election of
directors, the proxy holders intend, unless directed otherwise, to distribute
the votes represented by each proxy among the nominees named herein so as to
elect all or as many of them as possible. The Company's Bylaws currently fix the
number of directors on the Company's Board of Directors at ten. There exists one
vacancy on the Board resulting from the March 17, 1998, resignation of Roberto
Crea as an officer and director and as a result there are only nine (9)
nominees. It is not anticipated that any of the nominees will decline or be
unable to serve as a director. If, however, that should occur, the proxy holders
will vote the proxies in their discretion for any nominee designated by the
present Board of Directors to fill the vacancy. In any event, may went proxies
will not be noted for more than nine (9) persons.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
<PAGE> 4
The following table gives certain information as to each person nominated
for election as a director:
As of April 15, 1997
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
---- --- --------------
<S> <C> <C>
Paul Goddard, Ph.D................................. 48 1991
Robert R. Luther, M.D.............................. 49 1996
Thomas L. Barton................................... 55 1983
David L. Anderson.................................. 54 1987
Gerard N. Burrow, M.D.............................. 65 1996
John F. Chappell................................... 61 1992
Raymond C. Egan.................................... 55 1996
John W. Glynn, Jr.................................. 57 1989
Howard E. Greene, Jr............................... 55 1986
</TABLE>
Paul Goddard has served as the Company's Chief Executive Officer since
March 1991. Since May 1991, he has been a member of the Board of Directors of
the Company, and was elected Chairman in November 1991. From 1976 through
February 1991, Dr. Goddard was employed by SmithKline Beecham, in various
positions, most recently as Senior Vice President and Director, Japan-Pacific.
From 1976 to 1989 he was employed by SmithKline Beckman Corporation, most
recently as Senior Vice President, Strategic Marketing. Dr. Goddard received a
B.S. in Biochemistry from the University of London and a Ph.D. from St. Mary's
Hospital, Paddington, England, in Aetiology and Epidemiology of Colon Cancer. He
also serves as a member of the Board of Directors of Molecular Devices, Onyx
Pharmaceuticals, Inc., and Ribi ImmunoChem Research, Inc.
Robert R. Luther is the Executive Vice President of Development and has
served as a member of the Board of Directors since 1996. He has been an officer
of the Company since March 1992. From 1980 through February 1992, Dr. Luther was
employed by Abbott Laboratories, in various positions, most recently as Division
Director, Pharmaceutical Research and Development. He received his B.S. and M.D.
degrees from Northwestern University and he is a fellow of the American College
of Clinical Pharmacology.
Thomas L. Barton, a founder of the Company, has served as its General
Counsel and Secretary and as a member of the Board of Directors since 1983. Mr.
Barton was a partner in the law firm of Holtzmann, Wise & Shepard LLP from 1982
until July 1995. Since that time he has been a partner in the law firm of Wise &
Shepard LLP. Mr. Barton received his undergraduate degree from Yale University,
his MBA from Stanford Business School and his J.D. from Northwestern University.
David L. Anderson has served as a Director of the Company since November
1987. He serves as the Managing Director of the general partner of Sutter Hill
Ventures, a California Limited Partnership ("Sutter Hill"), a venture capital
investment firm, since 1974 and a general partner of SHV Limited, a California
Limited Partnership, a venture capital investment firm affiliated with Sutter
Hill, since August 1991. He is also a member of the Board of Directors of Dionex
Corporation and Cytel Corporation ("Cytel").
Gerard N. Burrow has served as a Director of the Company since August 1996.
Dr. Burrow is Special Advisor for Health Affairs to the President of Yale
University. From 1992 to 1997, he served as the Dean of the Yale School of
Medicine. He also served as Vice Chancellor for Health Services and Dean of the
School of Medicine at the University of California, San Diego.
John F. Chappell has served as a Director of the Company since January
1992. Mr. Chappell is the President of Plexus Ventures, Inc. ("Plexus"), an
investment firm which he founded in December 1990. Prior to founding Plexus, Mr.
Chappell was employed for 28 years by SmithKline Beckman Corporation and
SmithKline. From July 1989 to July 1990, he served as the Chairman of SmithKline
and as a Director of SmithKline. He was the President of SmithKline & French
Laboratories from September 1988 to July 1989 and was the President of
SmithKline & French International from February 1985 to September 1988. He is
currently serving as a director of Ribi ImmunoChem Research, Inc. and Tanox
Biosystems, Inc. He also has
2
<PAGE> 5
served as a director of the Pharmaceutical Manufacturers' Association and of the
Industrial Biotechnology Association.
Raymond C. Egan has served as Director of the Company since August 1996.
Mr. Egan is the President and founder of Princeton Healthcare Consultants, a
healthcare consulting company, founded in 1995. Prior to founding his company,
Mr. Egan was with Bristol-Myers Squibb Company where he held a number of
executive and marketing positions.
John W. Glynn, Jr. has served as a Director of the Company since November
1989. He has been a general partner of Glynn Ventures, a venture capital
partnership, and Glynn Capital Management, an investment management firm, both
founded by Mr. Glynn, since 1983. Mr. Glynn is also a member of the Board of
Directors of The Pacific Bank.
Howard E. Greene, Jr., has served as a Director of the Company since
November 1986. He has been Chairman of the Board of Directors of Amylin
Pharmaceuticals, Inc. ("Amylin"), a biotechnology company, since 1987. Mr.
Greene has also been a general partner of the general partner of Biovest
Partners, a California Limited Partnership, a venture capital investment firm,
since October 1986. Mr. Greene is a director of Allergan, Inc., the Chairman of
the Board of Directors of Cytel and Amylin and a trustee of the Scripps Clinic
and Research Foundation.
BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1997, there were six meetings of the
Company's Board of Directors. Each Board member attended 75% or more of the
aggregate of the meetings of the Board of Directors and the meetings of all
Committees of the Board of Directors on which he served.
The Audit Committee was established on September 28, 1993. The members of
the Audit Committee are John Glynn, David Anderson and Thomas Barton, none of
whom are employees of the Company. The functions of the Audit Committee are to
define the scope of the audit, review the auditor's reports and comments, and
monitor the internal auditing procedures of the Company. The Audit Committee met
three times during the Company's year ended December 31, 1997.
The Compensation Committee was established on September 28, 1993. The
members of the Compensation Committee are David Anderson and John Glynn, neither
of whom is employed by the Company. The Compensation Committee makes
recommendations with respect to compensation of senior officers and granting of
stock options and stock awards. The Compensation Committee met three times
during the Company's year ended December 31, 1997.
The Nominating Committee was established on November 18, 1993. The members
of the Nominating Committee are David Anderson and Howard E. Greene, Jr.,
neither of whom is employed by the Company. The Nominating Committee makes
recommendations as to the size of the Board of Directors and the selection,
nomination and recruitment of Directors. It does not solicit independent
nominations from stockholders or any other third parties and will not consider
nominations put forward by stockholders. The Nominating Committee did not meet
during the year ended December 31, 1997.
3
<PAGE> 6
PROPOSAL 2:
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditor for the year ending December 31, 1998, and has further
directed that management submit the selection of the auditor for ratification by
the stockholders at the Annual Meeting. Ernst & Young LLP was first appointed
independent auditor of the Company in October 1991. Representatives of Ernst &
Young LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditor is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Board will reconsider whether
to retain that firm. Even if the selection is ratified, the Board in its
discretion may direct the appointment of a different independent accounting firm
at any time during the year if the Board determines that such a change would be
in the best interests of the Company and its stockholders.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
4
<PAGE> 7
PROPOSAL 3:
ADOPTION OF THE COMPANY'S 1998 EMPLOYEE, CONSULTANT AND
DIRECTOR STOCK OPTION PLAN AND THE AUTHORIZATION OF 1,000,000
SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER
Stockholders are being asked to approve the adoption of the Neurex 1998
Employee, Director, and Consultant Stock Option Plan (the "1998 Plan") and the
reservation for issuance of 1,000,000 shares of common stock thereunder. The
Company currently has granted options under its 1988 Employee and Consultant
Stock Option Plan (the "1988 Option Plan"); however, by its terms, the 1988
Option Plan terminates on April 20, 1998. In February 1998, in order to continue
to attract and retain personnel who possess a high degree of competence,
experience and motivation, the Company's Board of Directors adopted the 1998
Employee, Consultant, and Director Stock Option Plan and reserved 1,000,000
shares of Common Stock for issuance thereunder.
In the opinion of the Board, the adoption of the 1998 Plan would provide
the necessary flexibility to attract, motivate and reward employees and
directors of and consultants to, the Company in a manner that would improve the
Company's financial performance. As of February 28, 1998, the Company had 141
current employees and 7 outside directors, all of whom were eligible to
participate in the 1998 Plan. The affirmative vote of the holders of a majority
of the shares of Common Stock voting at the Annual Meeting is necessary to
approve the 1998 Plan.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
DESCRIPTION OF PROPOSED 1998 STOCK OPTION PLAN
In February 1998, the Board adopted the 1998 Plan, subject to stockholder
approval. Under the 1998 Plan, there are 1,000,000 shares of Common Stock
reserved for issuance upon exercise of options granted to key employees and
directors of, and consultants to, the Company. The 1998 Plan provides for the
grant of both incentive stock options, intended to qualify as such under Section
422 of the Code, and nonstatutory stock options. The 1998 Plan will terminate on
February 3, 2008, unless sooner terminated by the Board of Directors. The
following description of the 1998 Plan is qualified in its entirety by reference
to the 1998 Plan, which is attached hereto as Appendix A.
ADMINISTRATION
The administration of the 1998 Plan may be delegated by the Board of
Directors to the Compensation Committee subject to certain restrictions. Subject
to these restrictions and the limitations set forth in the 1998 Plan, the
Compensation Committee has the authority to select the persons to whom grants
are to be made, to designate the number of shares to be covered by each option,
to establish vesting schedules, to determine whether an option is to be an
incentive stock option or a nonstatutory stock option and to specify other terms
of the options.
TERM OF OPTIONS
The maximum term of options granted under the 1998 Plan is ten (10) years
in the case of incentive stock options and ten (10) years and one (1) week in
the case of a nonstatutory stock option; provided that in the case of an
incentive option granted to a 10% stockholder, the term of the option may be no
more than five (5) years from the date of grant. No option may be exercised
after the expiration of its terms. Options granted under the 1998 Plan generally
are nontransferable and expire three months after the termination of an
optionee's employment, directorship, or consultancy relationship with the
Company. In general, if an optionee is permanently disabled or dies during his
or her employment by, or service to, the Company, such person's options will
expire within such period as the Administrator prescribes in the stock option
agreement; generally, such period is one (1) year. If options granted under the
1998 Plan expire or otherwise terminate without being exercised, the Common
Stock not purchased pursuant to such options again becomes available for
issuance under the 1998 Plan.
5
<PAGE> 8
ELIGIBILITY; LIMITATIONS
Nonstatutory stock options may be granted under the 1998 Plan to employees,
directors and consultants of the Company. Incentive stock options may be granted
only to employees. If the aggregate fair market value of all shares of Common
Stock subject to an optionee's incentive stock option which are exercisable for
the first time during any calendar year exceeds $100,000, the excess options
will be treated as nonstatutory stock options. Any optionee who owns more than
10% of the combined voting power of all classes of outstanding stock of the
Company is not eligible for the grant of an incentive stock option unless the
exercise price of the option is at least 110% of the fair market value of the
Common Stock on the date of grant.
EXERCISE OF OPTIONS
The Administrator determines when options become exercisable, and may in
its discretion, accelerate the vesting of any outstanding option. Stock option
grants to employees and consultants vest and become exercisable over four years.
Stock option grants to non-employee directors vest monthly over a three year
period.
The exercise price of nonstatutory stock options granted under the 1998
Plan must equal at least 85% and the exercise price of incentive stock options
must equal at least 100% of the fair market value of the Common Stock on the
date of grant. The exercise price of options granted to any person who, at the
time of grant, owns stock possessing more than 10% of the total combined voting
power of all classes of stock must be at least 100% of the fair market value of
such stock on the date of grant in the case of a nonstatutory stock option and
110% in the case of an incentive stock option and, in the case of an incentive
stock option granted to such persons, the term of these options cannot exceed
five years. The exercise price of a nonstatutory stock option may be determined
by the Administrator; provided, however, the exercise price of a nonstatutory
stock option intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code may not be less than 100% of the fair
market value of the Common Stock on the date of grant.
ADJUSTMENT PROVISIONS
In the event any change is made to the Common Stock issuable under the 1998
Plan by reason of any stock dividend, stock split, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments shall be
made by the Board to (i) the aggregate number and/or class of shares issuable
under the 1998 Plan, and (ii) the number and/or class of shares and the exercise
price per share of the stock subject to each outstanding option in order to
preclude the dilution or enlargement of benefits hereunder.
In the event that the Company is not the surviving entity in any merger,
reorganization or consolidation (collectively, a "Merger") the options shall
terminate unless they are assumed by the surviving corporation in the Merger. As
a matter of policy, in the event of a Merger, options granted to outside
directors become fully exercisable and, subject to the direction of the Board,
50% of unvested options granted to executive officers become immediately
exercisable and the remaining 50% of the portion of unvested options granted to
executive officers will have their vesting period reduced by 50%.
AMENDMENT AND TERM
The Board may amend or modify the 1998 Plan at any time provided that no
such amendment or modification may adversely affect outstanding options without
the consent of the holders thereof. In addition, in order to obtain the benefits
provided by Section 422 of the Code and Rule 16b-3 under the Exchange Act, the
Board will determine at the time of making each amendment whether or not it is
necessary to submit the amendment to the stockholders for approval. The 1998
Plan became effective when adopted by the Board in February 1998 and continues
until terminated by the Board; however, no option granted under the 1998 Plan
shall become exercisable, and no shares shall be issued, unless and until the
1998 Plan has been approved by the Company's stockholders. In no event will the
1998 Plan terminate later than February 3, 2008.
6
<PAGE> 9
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options under the 1998 Plan are intended to be eligible for
the favorable federal income tax treatment accorded "incentive stock options"
under the Code. There are generally no federal income tax consequences to the
optionee or the Company by reason of the grant or exercise of an incentive stock
option. If an optionee holds stock acquired through exercise of an incentive
stock option for more than two years from the date on which the option is
granted and more than one year from the date on which the shares are transferred
to the optionee upon exercise of an option, any gain or loss on a disposition of
such stock will be long term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods,
at the time of disposition, the optionee will realize taxable ordinary income
equal to the lesser of the excess of the stock's fair market value on the date
of exercise over the exercise price, or (ii) the optionee's actual gain, if any,
on the purchase and sale. The optionee's additional gain, or any loss upon the
disqualifying disposition will be a capital gain or loss which will be long term
or short term depending on whether the stock was held for more than one year.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the company will be entitled, subject to certain
requirements, to a corresponding business expense deduction in the tax year in
which the disqualifying disposition occurs.
Nonstatutory stock options granted under the 1998 Plan generally have the
following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to certain requirements, the
Company will be entitled to a business expense deduction equal to the taxable
ordinary income realized by the optionee. Upon disposition of the stock, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long or short term depending on whether the stock was held for more than
one year. Slightly different rules apply to optionees who acquire stock subject
to certain repurchase options or who are subject to Section 16(b) of the
Exchange Act.
7
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 28, 1998, certain
information with respect to each person known by the Company to be a beneficial
owner, as defined in Rule 13d-3 ("Rule 13d-3") promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), of more than 5% of the outstanding Common Stock of the Company.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS NUMBER OF SHARES OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK(1)
------------------- ------------------ ----------------
<S> <C> <C>
Equitable Companies Incorporated
1290 Avenue of the Americas
New York, NY 10104(2)...................... 1,912,720 8.5%
Medtronic, Inc.
7000 Central Avenue N.E.
Minneapolis, MN 55432(3)................... 1,851,711 8.3%
Warner -- Lambert Company
201 Tabor Road
Morris Plains, NJ 07950.................... 1,492,890 6.7%
Travelers Group Inc.
388 Greenwich Street
New York, NY 10013(4)...................... 1,354,065 6.0%
Larry N. Feinberg
712 Fifth Avenue
45th Floor
New York, NY 10019......................... 1,224,729 5.5%
UBS Asset Management (New York) Inc.
1290 Avenue of the Americas
New York, NY 10105(5)...................... 1,110,000 5.0%
</TABLE>
- ---------------
(1) Percentage of beneficial ownership is calculated assuming 22,359,758 shares
of common stock were outstanding on February 28, 1998. Beneficial ownership
is determined in accordance with the Rules of the United States Securities
and Exchange Commission ("SEC") and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
and warrants currently exercisable or exercisable within 60 days after
February 28, 1998, are deemed outstanding for computing percentage of the
person holding such options but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, the persons
named in the table have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them.
(2) Pursuant to a Schedule 13G dated and filed with the SEC on February 13,
1998, these shares are held indirectly by Equitable Companies Incorporated
("Equitable"), Mutuelles AXA, and AXA-UAP; and directly by various entities
controlled by Equitable, including AXA Sun Life & Provincial Holdings (UK)
("AXA Sun Life"), Alliance Capital Management L.P. ("Alliance") and
Donaldson, Lufkin, and Jenrette Securities Corporation ("Donaldson"), all of
whom own such shares in their capacities as investment advisors, investment
companies, or investment managers. AXA Sun Life reports sole investment
power and voting power for 386,550 shares. Alliance reports sole investment
power and sole voting power for 1,525,770 and 20,370 shares, respectively.
According to the schedule 13G, shared investment power is held with respect
to 400 shares and shared voting power is held with respect to 1,503,800
shares.
(3) Includes 1,179,085 shares owned by Medtronic Asset Management, Inc., a
wholly owned subsidiary of Medtronic, Inc. Also, includes 669,646 shares of
Common Stock issuable upon exercise of warrants exercisable within 60 days.
(4) Pursuant to a 13G dated and filed with the SEC on February 6, 1998,
Travelers Group Inc., and Salomon Smith Barney Holdings Inc., each reports
shared investment and voting power. Salomon Smith Barney Holdings Inc., is a
wholly owned subsidiary of Travelers Group Inc.
(5) Pursuant to a 13G dated and filed with the SEC on February 17, 1998, UBS
Asset Management Inc. reports sole investment power and UBS (Lux) Equity
Invest reports sole voting power.
8
<PAGE> 11
SECURITY OWNERSHIP OF
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the ownership
of each director and each executive officer, including their beneficial
ownership as defined in Rule 13d-3, of shares of Common Stock and beneficial
ownership of Common Stock by all officers and directors as a group. All such
ownership is as of February 28, 1998. Included in share ownership are shares
that may be acquired upon the exercise of options that are currently exercisable
or become exercisable on or before April 30, 1998 ("Exercisable Options").
<TABLE>
<CAPTION>
DIRECTOR/ SHARES PERCENT
OFFICER BENEFICIALLY BENEFICIALLY
NAME AGE SINCE POSITION(S) OWNED OWNED(11)
---- --- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
David L. Anderson(1).................. 54 1987 Director 262,836 1.0%
Thomas L. Barton(2)................... 55 1983 Director, General
Counsel and Secretary 134,443 *
Gerard N. Burrow, M.D.(3)............. 65 1996 Director 14,554 *
John F. Chappell(4)................... 61 1992 Director 112,887 *
Roberto Crea, Ph.D.(5)................ 49 1994 Director, S.V.P. of
Research & Technology
Development 736,987 3.3%
Raymond C. Egan(6).................... 55 1996 Director 16,804 *
John W. Glynn, Jr.(7)................. 57 1989 Director 45,713 *
Paul Goddard, Ph.D.(8)................ 48 1991 Director, Chairman,
President & CEO 518,032 2.3%
Howard E. Greene, Jr.(7).............. 55 1986 Director 49,130 *
Robert R. Luther, M.D.(9)............. 48 1992 Director, Executive
V.P. of Development 205,576 *
John W. Varian........................ 38 1997 V.P. Finance & CFO -- *
Paul L. Wood, Ph.D. .................. 49 1998 V.P. Research/
Pre-clinical
Development -- *
Philip J. Young(10)................... 40 1996 V.P. Sales and
Marketing 44,269 *
All Directors and executive officers
as a group (12 persons)............. 2,133,385 9.5%
</TABLE>
- ---------------
* Less than one percent
(1) Includes 48,134 shares held of record by Sutter Hill Ventures and 37,609
shares held by Anvest LP. Mr. Anderson is the Managing Director of the
general partner of Sutter Hill and a general partner of Anvest LP. Mr.
Anderson disclaims beneficial ownership of the shares held by the two
partnerships, except as to his proportionate interest therein. Does not
include 164,221 shares held by Sutter Hill in which Mr. Anderson has no
beneficial or pecuniary interest and over which he exercises no investment
or voting power. Includes 8,443 shares that may be acquired upon the
exercise of Exercisable Options.
(2) Includes 16,443 shares that may be acquired upon the exercise of
Exercisable Options.
(3) Includes 14,554 shares that may be acquired upon the exercise of
Exercisable Options.
(4) Includes 17,095 shares that may be acquired upon the exercise of
Exercisable Options, 38,600 shares held by Plexus, and 14,583 shares that
may be acquired upon the exercise of Exercisable Options held by Plexus, of
which Mr. Chappell is the sole shareholder.
(5) Includes 117,915 shares that may be acquired upon the exercise of
Exercisable Options.
(6) Includes 15,804 shares that may be acquired upon the exercise of
Exercisable Options.
9
<PAGE> 12
(7) Includes 14,609 shares that may be acquired upon the exercise of
Exercisable Options.
(8) Includes 509,712 shares that may be acquired upon the exercise of
Exercisable Options.
(9) Includes 161,042 shares that may be acquired upon the exercise of
Exercisable Options.
(10) Includes 44,269 shares that may be acquired upon the exercise of
Exercisable Options.
(11) Percentage of beneficial ownership is calculated assuming 22,359,758 shares
of common stock were outstanding on February 28, 1998.
- ---------------
Roberto Crea resigned from the Company as a Director and Vice President of
Research and Technology Development on March 17, 1998, positions he had held
since July 1994. Prior to joining the Company, he was the Chairman and Chief
Executive Officer of Creagen, Inc., from its founding in 1991 until its
acquisition by the Company in July 1994. Prior to Creagen, Dr. Crea was a
founder and director of Creative BioMolecules, Inc. From 1978 to 1982, Dr. Crea
was with Genentech, Inc. as Director of DNA Chemistry. He received a Ph.D. in
Chemistry from the University of Pavia, Italy.
John W. Varian has been the Company's Vice President and Chief Financial
Officer since June 1997. Prior to joining the Company, Mr. Varian served as Vice
President, Finance and Chief Financial Officer of Anergen, Inc., a biotechnology
company, from 1991 to 1997. Mr. Varian also served as a Senior Manager with
Ernst & Young LLP. Mr. Varian is a certified public accountant and received his
Bachelors Degree in Business Administration from Western Michigan University.
Bradford M. Wait resigned his position as a Vice President of the Company
on January 30, 1998. During the first half of 1997 and from January 1992 until
July 1996 he served as the Company's Vice President of Finance and
Administration and Chief Financial Officer. Prior to joining the Company, Mr.
Wait served in 1990 and 1991 as Vice President -- Finance and Chief Financial
Officer of PIXAR, a software company. Mr. Wait also served in various senior
executive capacities at Siltec Corporation, a silicon wafer manufacturer, from
1983 to 1989. Mr. Wait is a certified public accountant and received his B.S. in
Business Administration from the University of California, Berkeley.
Paul L. Wood has been the Company's Vice President of Research/Preclinical
Development since March 9, 1998. Prior to joining the Company, Dr. Wood served
as Vice President of Preclinical Development for CoCensys, Inc., a biotechnology
company, from August 1993 until March 1998. Dr. Wood is a pharmacologist who
obtained his B.S. in biology/biochemistry from Trent University and his Ph.D. in
pharmacology from Queen's University.
Philip J. Young has been the Company's Vice President of Sales and
Marketing since November 1996. Prior to joining the Company, Mr. Young was
employed by Pharmacia, Inc., Peptide Hormones Division, in various positions,
most recently as Director of Sales and Marketing. Mr. Young also served as
Director of Marketing at Gilead Sciences, Inc., from May 1994 until November
1995. Mr. Young received his B.S. in Sociology from James Madison University.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the calendar year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with except that Mr.
Young filed his initial report on Form 3 late. The April Form 4 report for Mr.
Chappell was filed on time, but was later amended to include information
10
<PAGE> 13
regarding one transaction. The Form 4 report for Mr. Barton was filed on time,
but was later amended to include information regarding one transaction.
CERTAIN TRANSACTIONS
On November 13, 1995, Warner-Lambert Company purchased $1,500,000 of the
Company's common stock at $4.50 per share and on March 29, 1996, Warner-Lambert
purchased $1,500,000 of common stock at $19.93 per share. In connection with a
former agreement, Warner-Lambert also paid Neurex $1,500,000 on October 1, 1995,
$500,000 on January 1, 1996, $250,000 on April 1, 1996, and $250,000 on July 1,
1996, in lieu of milestone payments, subject to repayment by Neurex by
offsetting such amounts against future royalties, if any.
A note receivable from Roberto Crea, a former director and Senior Vice
President of Research and Technology Development, totaling $123,000 at December
31, 1996, bearing interest at 8.75% per annum was paid in full (including
accrued interest of $7,000) on the maturity date of August 8, 1997. The note had
been secured by 100,000 shares of Neurex common stock held in escrow and a deed
of trust on Dr. Crea's home in San Mateo, California.
Promissory note receivables in the amounts of $35,000 and $75,000 from
Philip Young, Vice President of Sales and Marketing, were issued during 1997
bearing interest at 5.81% per annum, and secured by certain securities and real
property located in San Mateo, California. The first note totaling $75,000 will
be forgiven as compensation expense to the officer at a rate of 33% per year as
long as the officer is employed by the Company. The second note totaling $35,000
is due in full on February 28, 2000, or immediately if the officer's employment
is terminated for any reason whatsoever.
On January 1, 1995, the Company entered into a Consultant Agreement with
Plexus Ventures, Inc. ("Plexus"), a Pennsylvania corporation wholly-owned by
John Chapell, a director of the Company. This agreement was terminated by the
Company upon the successful contract negotiations with Beaufour Ipsen of France
for CORLOPAM(R) for which Plexus assisted. Plexus remains entitled to certain
success fees payable in cash and stock, based upon the total value of certain
future transactions with Beaufour Ipsen.
On July 18, 1996, the Company entered into a Business Development Agreement
with Plexus to assist the Company in the development, registration and
commercialization of Neurex products in certain Asian countries. Under the terms
of the agreement, Plexus received options to purchase 25,000 shares of common
stock and will receive monthly retainer fees and is entitled to certain success
fees based upon the total value of any transactions entered into by the Company
with the assistance of Plexus. The original term of the agreement was 12 months,
but it may be terminated earlier by the Company upon 60 days notice. In July
1997, the parties extended the agreement for an additional 12 month term. The
fees paid by the Company to Plexus did not exceed 5% of the gross revenues in
the last fiscal years.
Thomas L. Barton, a director, Secretary and General Counsel of the Company,
was a member of the law firm of Holtzmann, Wise & Shepard LLP which provided
legal services to the Company from the Company's inception through July 1995.
Mr. Barton is currently a member of the law firm of Wise & Shepard LLP which
provides legal services to the Company. The fees paid by the Company did not
exceed five percent of the gross revenues of either Holtzmann, Wise & Shepard
LLP or Wise & Shepard LLP in 1995 and 1997. In 1996 Wise & Shepard LLP was paid
$374,000 by the Company.
The Company believes that the foregoing transactions were in its best
interests. All of the foregoing transactions were approved by a majority of the
independent and disinterested members of the Board of Directors, were on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties and were in conjunction with bona fide business purposes of the Company.
As a matter of policy, all future transactions between the Company and any of
its officers, directors or principal stockholders will be approved by a majority
of the independent and disinterested members of the Board of Directors, will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties and will be in connection with bona fide business
purposes of the Company.
11
<PAGE> 14
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought nor is the Company aware of any pending or threatened litigation that may
result in claims for indemnification by any director, officer, employee or other
agents.
12
<PAGE> 15
EMPLOYEE BENEFIT PLANS
The following is a brief summary of plans in effect during the calendar
year ended December 31, 1997, under which officers, directors, employees and
consultants of the Company received benefits. The closing price of the Company's
Common Stock reported on the NASDAQ National Market on the Record Date was
$19.1875 per share.
401(K)
In July of 1988, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan"), which generally covers all of the Company's
full-time employees who have attained age 21. Pursuant to the 401(k) Plan,
employees may elect to defer up to 10% of their current compensation (subject to
certain statutorily prescribed limits, including an annual limit of $9,500 in
1997). These deferred amounts are contributed to the 401(k) Plan. The 401(k)
Plan permits, but does not require, additional matching and Company
contributions on behalf of participants. Since the Plan's inception, the Company
has not elected to contribute to each participant's contribution. The 401(k)
Plan is intended to qualify under Sections 401(k) and 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Contributions to such a qualified
plan are deductible to the Company when made and neither the contributions nor
the income earned on those contributions is taxable to participants until
withdrawn. All 401(k) Plan contributions are credited to separate accounts
maintained in trust by two individual trustees. Contributions are invested, at
the participant's direction, in one or more of the investment funds available
under the 401(k) Plan. All account balances are adjusted at least annually to
reflect the investment earnings and losses of the trust fund. Each participant
is fully vested in his or her salary deferral accounts under the 401(k) Plan.
Distributions may be made from a participant's account pursuant to the 401(k)
Plan's hardship withdrawal provisions as well as upon a participant's
termination of employment, disability or attainment of age 59 1/2. Distributions
will be in the form of a lump sum, installment payments or an annuity, in the
participant's discretion. Federal tax laws limit the amount that may be added to
a participant's accounts for any one year under a qualified plan such as the
401(k) Plan to the lesser of (i) $30,000 or (ii) 25% of the participant's
compensation (net of salary deferral contributions) for the year.
1992 STOCK PURCHASE PLAN
In December 1992, the Company adopted the 1992 Employee Stock Purchase Plan
(the "1992 Purchase Plan"), which is intended to qualify under Section 423 of
the Code. Any employee who works more than twenty (20) hours per week, has
worked for the company for at least two (2) years, and who owns less than 5% of
the outstanding shares of the capital stock of the Company may participate in
the 1992 Purchase Plan. To purchase shares under the 1992 Purchase Plan,
participating employees may elect to pay cash or to have periodic payroll
deductions. Each offering periods runs 24 to 27 months and is divided into four
consecutive purchase periods of six months, allowing eligible employees to join
the 1992 Purchase Plan and participating employees to purchase shares. The price
at which stock is purchased under the 1992 Purchase Plan is equal to 85% of the
fair market value of the Common Stock on the first day of the applicable
offering period or the last day of the applicable purchase period, whichever is
lower.
A total of 153,846 shares of Common Stock are reserved for issuance under
the 1992 Purchase Plan. As of December 31, 1997, a total of 117,802 shares of
Common Stock have been issued to employees and 36,044 shares remain available
for future issuance under the 1992 Purchase Plan. As of February 28, 1998,
participants in the 1992 Purchase Plan have the right to purchase 4,714 shares
of Common Stock. The Board intends to terminate the Company's 1992 Stock
Purchase Plan no later than the end of the current offering period, April 30,
1998.
13
<PAGE> 16
The following table sets forth as to the executive officers named in the
table under "Executive Compensation" who purchased shares pursuant to the 1992
Purchase Plan, all current executive officers as a group and all other employees
as a group (i) the number of shares of the Company's Common Stock purchased
under the 1992 Purchase Plan during the period from its inception until December
31, 1997; (ii) the aggregate purchase price thereof and (iii) the fair value of
stock purchased through December 31, 1997, under the 1992 Purchase Plan:
1992 PURCHASE PLAN EXERCISED
<TABLE>
<CAPTION>
NUMBER AGGREGATE FAIR VALUE
NAME YEAR OF SHARES PURCHASE PRICE OF STOCK PURCHASED
---- ---- --------- -------------- ------------------
<S> <C> <C> <C> <C>
Paul Goddard, Ph.D. ..................... 1997 1,400 $ 13,090 $ 15,400
1996 6,920 24,999 160,890
Robert R. Luther, M.D. .................. 1997 1,400 13,090 15,400
1996 6,920 24,999 160,890
Bradford M. Wait......................... 1997 -- -- --
1996 6,920 24,999 160,890
All current executive officers as a
group(5)............................... 1997 2,800 26,180 30,800
1996 20,760 74,996 482,670
All current employees
(who are not also executive
officers).............................. 1997 20,749 198,655 234,451
as a group (136) 1996 58,555 234,817 1,363,647
</TABLE>
1997 EMPLOYEE STOCK PURCHASE PLAN
In May 1997, the shareholders of the Company adopted the 1997 Employee
Stock Purchase Plan (the "1997 Purchase Plan"), which is intended to qualify
under Section 423 of the Code. A total of 400,000 shares of Common Stock are
reserved for issuance under the 1997 Purchase Plan. Under the 1997 Purchase
Plan, participating employees elect to withhold a specified percentage of each
salary payment over certain offering periods (the "Offering Period"). The Board
has set the length of the Offering Periods at six (6) months. The first day of
each Offering Period is the "Offering Date" for the Offering Period and the last
day of each Offering Period is the "Purchase Date" for the Offering Period. The
Board will have the authority to change the duration of future Offering Periods
if the change is announced prior to the Offering Date of the first Offering
Period to be affected.
Any employee who works more than twenty (20) hours per week, has worked for
the company for at least six (6) months prior to an Offering Period, and who
owns less than 5% of the outstanding shares of capital stock of the Company may
participate in the 1997 Purchase Plan. Participants will participate in the
Purchase Plan during each pay period through payroll deductions. A Participant
will make contributions to the 1997 Purchase Plan at a rate equal to not less
than 1%, up to a maximum of 10% (or such lower limit as set by the Committee) of
his or her base earnings of each pay period from the Company. Notwithstanding
the level of payroll deductions, no Participant will be permitted to purchase
shares under the 1997 Purchase Plan at a rate which, when aggregated with any
other purchases under other Company stock purchase plans, (i) exceeds 10% of
such employee's gross compensation; or (ii) exceeds $25,000 of fair market value
of common stock (determined as of the first trading day in an Offering Period)
in any year.
Enrollment in the 1997 Purchase Plan with respect to an Offering Period
will constitute a grant, as of the Offering Date, of an option to purchase
shares at a purchase price equal to 85% of the lesser of (i) the fair market
value of the shares on the Offering Date or (ii) the fair market value of the
shares on the Purchase Date. The fair market value of a share of the Company's
Common Stock will be the last reported sale price of the Company's Common Stock
on the NASDAQ National Market System on the Offering Date or Purchase Date. The
number of whole shares a Participant will be able to purchase in any Offering
Period will be determined by dividing the total payroll amount withheld from the
Participant during the Offering Period by the purchase price per share
determined as described above.
The following table sets forth as to the executive officers named in the
table under "Executive Compensation" who purchased shares pursuant to the 1997
Purchase Plan, all current executive officers as a
14
<PAGE> 17
group and all other employees as a group (i) the number of shares of the
Company's Common Stock purchased under the 1997 Purchase Plan during the period
from its inception until December 31, 1997; (ii) the aggregate purchase price
thereof and (iii) the fair value of stock purchased through December 31, 1997,
under the 1997 Purchase Plan:
1997 PURCHASE PLAN EXERCISED
<TABLE>
<CAPTION>
NUMBER AGGREGATE FAIR VALUE
NAME OF SHARES PURCHASE PRICE OF STOCK PURCHASED
---- --------- -------------- ------------------
<S> <C> <C> <C>
Paul Goddard, Ph.D. ........................... -- -- --
Robert R. Luther, M.D. ........................ 1,053 $ 12,083 $ 14,216
Roberto Crea, Ph.D. ........................... 822 9,432 11,097
All current executive officers as a group(5)... 1,875 21,516 25,313
All current employees.......................... 9,462 108,576 127,737
(who are not also executive officers) as a
group (136)
</TABLE>
1988 EMPLOYEE, CONSULTANT, AND DIRECTOR STOCK OPTION PLAN
In April 1988, the Company's Board of Directors adopted and the
stockholders of the Company approved the Company's 1988 Employee and Consultant
Stock Option Plan, as amended (the "1988 Option Plan"). A total of 4,311,111
shares of the Company's Common Stock has been reserved for issuance under the
Company's 1988 Option Plan. The 1988 Option Plan expires by its own terms on
April 20, 1998. As of December 31, 1997, options to purchase 3,161,422 shares
were outstanding at a weighted average exercise price of $9.1265 per share and
168,301 options had been exercised. As of February 28, 1998, the Company had 141
current employees and 7 outside directors, all of whom were eligible to
participate in the 1988 Option Plan.
The 1988 Option Plan provides for the grant to employees of "incentive
stock options" within the meaning of section 422 of the Code and nonstatutory
stock options to employees, consultant and directors of the Company. The 1988
Option Plan permits the Company to grant nonstatutory stock options to purchase
shares of Common Stock of the Company to non-employee directors ("Outside
Directors") of the Company. At the present tine, as a matter of policy, outside
Directors newly elected or appointed to the Company's Board of Directors after
March 30, 1995, are granted options to purchase 12,000 shares of the Company's
Common Stock upon election and all Outside Directors are granted options to
purchase an additional 8,000 shares of the Company's Common Stock on March 30th
of each year for so long as they serve as directors of the Company. The exercise
price of all such options is the closing price of the Company's Common Stock on
the grant date and such grants shall vest monthly over a three (3) year period.
The administration of 1988 Option Plan has been delegated by the Board to
the Compensation Committee. Subject to the limitations set forth in the 1988
Option Plan, the Compensation Committee has the authority to select the persons
to whom grants are to be made, to designate the number of shares to be covered
by each option, to establish vesting schedules, to determine whether an option
is to be an incentive stock option or a nonstatutory stock option and to specify
other terms of the options. Options granted to employees typically vest at the
rate of 1/4th of the shares after one (1) year and an additional 1/48th of the
shares per month for three (3) years thereafter.
The exercise price of nonstatutory stock options granted under the 1988
Option Plan must equal at least 85% and the exercise price of incentive stock
options must equal at least 100% of the fair market value of the Common Stock on
the date of grant. The exercise price of options granted to any person who, at
the time of grant, owns stock possessing more than 10% of the total combined
voting power of all classes of stock must be at least 100% of the fair market
value of such stock on the date of grant in the case of a nonstatutory stock
option and 110% in the case of an incentive stock option, and, in the case of an
incentive stock option granted to such persons, the term of these options cannot
exceed five years. The maximum term of options granted under the 1988 Option
Plan is ten years and two days. Options granted under the 1988 Option Plan
generally are nontransferable and expire three months after the termination of
an optionee's employment or directorship relationship with the Company. In
general, if an optionee is permanently disabled or dies during his or her
15
<PAGE> 18
employment by, or service to, the Company, such person's options may be
exercised up to one year following such disability or death.
As of February 28, 1998, options (net of canceled or expired options)
covering an aggregate of 3,701,890 shares, had been granted under the 1988
Option Plan since its inception and 609,221 shares were available for future
grants under the 1988 Option Plan. The following table presents, as of February
28, 1998, the total number of options that have been granted under the 1988
Option Plan to (i) each executive officer of the Company, (ii) all executive
officers as a group, (iii) all directors (who are not also officers) as a group,
and (iv) all employees (who are not also officers or directors) as a group.
Please see "Executive Compensation" for information with respect to grant of
options to the executive officers.
STOCK OPTIONS GRANTED AS OF FEBRUARY 28, 1998
<TABLE>
<CAPTION>
NAME AND POSITION NO. OF SHARES
----------------- -------------
<S> <C>
Paul Goddard, Ph.D., Chairman, President and Chief
Executive Officer................................... 816,241
Robert R. Luther, M.D., Executive Vice President of
Development......................................... 358,206
Roberto Crea, Ph.D., Senior Vice President of Research
and Technology Development.......................... 170,000
John W. Varian, Vice President of Finance and
Administration and Chief Financial Officer.......... 115,000
Philip J. Young, Vice President of Sales and
Marketing........................................... 175,000
All current executive officers as a group (5)......... 1,634,447
All current directors (who are not also executive
officers) as a group (7)............................ 196,095
All current employees (who are not also executive
officers or directors) as a group (136)............. 1,871,348
</TABLE>
16
<PAGE> 19
EXECUTIVE COMPENSATION
The following tables set forth the total compensation paid by the Company
to the Chief Executive Officer and its executive officers who had the highest
combination of salary and bonuses for services rendered in all capacities for
the calendar years ended December 31, 1997, and 1996; the three months ended
December 31, 1995 (1995.25); and the fiscal year ended September 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION ALL OTHER
-------------------- OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) SARS(#) ($)
--------------------------- ------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Paul Goddard, Ph.D. ............. 1997 $323,771 $100,000(4) 100,000 --
Chairman, President and Chief 1996 298,639 125,000 -- --
Executive Officer 1995.25 72,750 -- -- --
1995 277,814 56,000(5) 502,565(6) --
Robert R. Luther, M.D. .......... 1997 238,238 44,262(4) 30,000 --
Executive V.P. of Development 1996 225,775 66,000 -- --
1995.25 55,000 -- 242,735(7) --
1995 212,060 34,000(5) 150,000 11,000(10)
Roberto Crea, Ph.D. ............. 1997 198,000 -- -- --
S.V.P. of Research & 1996 197,040 20,000 -- --
Technology Development 1995.25 48,000 -- -- --
1995 188,500 15,000(5) 170,000(8) --
Bradford M. Wait................. 1997 171,628 17,267(4) 15,000 --
V.P. of Finance and 1996 129,632 33,000 -- --
Administration & Chief 1995.25 32,000 -- -- --
Financial Officer 1995 124,638 15,000(5) 42,693(9) --
John W. Varian(2)................ 1997 75,795 15,159(4) 115,000 --
V.P. & Chief Financial Officer
Philip J. Young(3)............... 1997 203,750 59,270(4) 50,000 124,184(11)
V.P. of Sales and Marketing 1996 33,333 -- 125,000 7,117(11)
</TABLE>
- ---------------
(1) In 1996, the Company changed its year end from a fiscal year ending
September 30 to a calendar year ending December 31. The period 1995.25
reflects the stub period October 1, 1995, through December 31, 1995.
(2) Mr. Varian joined the company on June 17, 1997. Accordingly, the Summary
Compensation information includes only that compensation earned by Mr.
Varian from July 1, 1997, through December 31, 1997. Mr. Varian's
compensation in 1997 was at an annual rate of $160,000.
(3) Mr. Young joined the Company on November 1, 1996. Accordingly, the Summary
Compensation information includes only that compensation earned by Mr.
Young from November 1, 1996, through December 31, 1997.
(4) Includes amounts earned in 1997 and paid in 1998.
(5) Includes amounts earned in 1994 and paid in 1995.
(6) Includes repriced options to purchase 402,565 shares of Common Stock.
(7) Includes repriced options to purchase 192,735 shares of Common Stock.
(8) Includes repriced options to purchase 150,000 shares of Common Stock.
(9) Includes repriced options to purchase 27,693 shares of Common Stock.
(10) Represents cost of living allowance for $11,000 as part of his employment
agreement.
(11) Represents relocation expense of $7,117 in 1996 and $124,184 in 1997
associated with his employment arrangement with the Company.
17
<PAGE> 20
OPTION GRANTS TO OFFICERS IN 1997 CALENDAR YEAR
<TABLE>
<CAPTION>
NUMBER POTENTIAL REALIZABLE
OF % OF TOTAL EXERCISE VALUE AT ASSUMED ANNUAL
SECURITIES OPTIONS OR RATES OF STOCK PRICE
UNDERLYING GRANTED TO BASE APPRECIATION FOR
OPTIONS EMPLOYEES PRICE OPTION TERM(4)
GRANTED IN CALENDAR ($/PER EXP. -----------------------------
NAME (#)(1) YEAR(2) SHARE) DATE(3) 0%($) 5%($) 10%($)
---- ---------- --------------- -------- -------- ----- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul Goddard................................ 100,000 8.5% $14.75 12/11/07 0 $927,620 $2,430,457
Robert R. Luther............................ 30,000 2.5 14.75 12/11/07 0 278,286 705,231
John W. Varian.............................. 100,000 8.5 14.75 06/17/07 0 959,064 2,430,457
15,000 1.3 15.25 12/11/07 0 139,143 352,616
Philip J. Young............................. 50,000 4.2 14.75 12/11/07 0 463,810 1,175,385
Bradford M. Wait............................ 15,000 1.3 14.75 12/11/07 0 139,143 352,616
</TABLE>
- ---------------
(1) Twenty-five percent of the shares vest one year following the date of option
grant and the remainder vest in equal monthly amounts over the next three
years.
(2) Total options granted were 1,177,768.
(3) To the extent that any incentive stock options are deemed to be
non-qualified options, the non-qualified options shall have a term of 10
years and 2 days, subject to earlier termination in certain events.
(4) The 5% and 10% assumed rates of appreciation (over the deemed fair market
value at the grant date) are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future price of the Company's Common Stock.
AGGREGATED OPTION EXERCISES IN CALENDAR YEAR AND
CALENDAR YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
OPTIONS EXERCISED UNDERLYING IN-THE-MONEY
-------------------- OPTIONS OPTIONS($)
NUMBER OF VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
NAME SHARES REALIZED UNEXERCISABLE(U) UNEXERCISABLE(U)(1)
---- --------- -------- -------------------- -------------------
<S> <C> <C> <C> <C> <C>
Paul Goddard 1997 -- -- 467,830 (E) $5,763,560 (E)
288,411 (U) 2,147,616 (U)
Robert R. Luther 1997 30,000 $430,925 140,814 (E) 1,650,870 (E)
121,178 (U) 1,036,721 (U)
Roberto Crea 1997 -- -- 107,707 (E) 1,281,499 (E)
62,293 (U) 731,001 (U)
Bradford M. Wait 1997 65,625 (E) 770,574 (E)
15,000 (U) -- (U)
John Varian 1997 -- -- -- (E) -- (E)
115,000 (U) -- (U)
Philip J. Young 1997 -- -- 33,852 (E) -- (E)
141,148 (U) -- (U)
</TABLE>
- ---------------
(1) Calculated on the basis of the closing price of $13.875 on December 31,
1997, less the exercise price.
18
<PAGE> 21
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
MARKET
NUMBER OF PRICE EXERCISE LENGTH OF
SECURITIES OF STOCK AT PRICE AT ORIGINAL OPTION
UNDERLYING TIME OF TIME OF TERM REMAINING
OPTIONS/SARS REPRICING REPRICING NEW AT DATE OF
REPRICED OR OR OR EXERCISE REPRICING OR
NAME DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
---- ------- ------------ ----------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Paul Goddard.............. 5/12/95 102,565 $1.625 $5.580 $1.625 6 years 7 months
300,000 1.625 4.000 1.625 7 years 9 months
Robert R. Luther.......... 5/12/95 42,735 1.625 5.580 1.625 6 years 7 months
150,000 1.625 4.000 1.625 7 years 9 months
Roberto Crea.............. 5/12/95 150,000 1.625 3.500 1.625 8 years 4 months
Bradford M. Wait.......... 5/12/95 7,693 1.625 5.580 1.625 6 years 7 months
20,000 1.625 4.000 1.625 8 years 1 month
</TABLE>
EMPLOYMENT AGREEMENTS
In January 1991, the Company entered into an employment agreement with Dr.
Goddard pursuant to which he presently receives a salary at the rate of $331,300
per year. Pursuant to his original employment agreement, Dr. Goddard received an
option to purchase 213,676 shares of Common Stock at an exercise price of $0.585
per share which vested over five years. The agreement provides that Dr.
Goddard's employment may be terminated by either party upon 90 days notice. In
March 1992, the Board of Directors of the Company amended Dr. Goddard's
agreement to reflect, at the discretion of the Board of Directors, a bonus of up
to 20% of his salary based upon performance. In October 1995, the Board of
Directors amended Dr. Goddard's agreement to remove the 20% limitation on any
bonus awarded to Dr. Goddard. Dr. Goddard has signed a confidentiality agreement
with the Company.
In February 1992, the Company entered into an employment agreement with Dr.
Luther pursuant to which he presently receives a salary at the rate of $241,750
per year, plus the right to receive an annual bonus of up to 20% of salary based
upon performance. Pursuant to this agreement, Dr. Luther received an option to
purchase 85,471 shares of Common Stock under the Option Plan at an exercise
price of $6.44 per share which vests over five years. The exercise price of this
option was based upon a proposed sale of the Company's Common Stock; when the
contemplated sale was postponed, the options were repriced at $1.17 per share.
In October 1995, the Board of Directors amended Dr. Luther's agreement to remove
the 20% limitation on any bonus awarded to Dr. Luther. Dr. Luther has signed a
confidentiality agreement with the Company.
In January 1992, the Company entered into an employment agreement with Mr.
Wait. In accordance with his employment agreement, Mr. Wait resigned from the
Company in January, 1998. Mr. Wait has signed a confidentiality agreement with
the Company.
In June 1994, the Company entered into an employment agreement with Dr.
Crea. Dr. Crea resigned as an officer and director of the Company, effective
March 17, 1998. Dr. Crea has signed a confidentiality agreement with the
Company.
In December 1995, the Company's Board of Directors approved a resolution
providing that in the event of any merger, reorganization, or consolidation of
the Company with or into any other entity, or the sale of all or substantially
all of the Company's assets (collectively, a "Merger"), (i) 50% of all unvested
stock options held by each executive officer immediately prior to the effective
time of such Merger shall immediately vest, and (ii) each remaining vesting
period for the remaining 50% of the unvested options held by each executive
officer shall be reduced by half; provided, however, that the Company's Board of
Directors may, in its sole discretion, declare this resolution null and void
with respect to all executive officers, but not less than all, in any Merger if
the effect of the resolution would not be in the best interests of the Company.
19
<PAGE> 22
REMUNERATION OF NON-EMPLOYEE DIRECTORS
The members of the Board of Directors who are not employees of the Company
are not compensated for their services as Directors, other than grants of stock
options of Common Stock. At the present time newly elected outside directors
receive the option to purchase 12,000 shares of Common Stock upon election and
options to purchase an additional 8,000 shares on March 30th of each year
thereafter. All such options are granted at the closing price of the company's
Common Stock on the date of grant and vest monthly over a three (3) year period.
Vesting is accelerated upon merger of the Company where the Company is not the
surviving entity.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS WITH RESPECT TO EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") was
established on September 28, 1993. The functions of the Committee are to make
recommendations to the Board concerning salaries and incentive compensation for
the Company's executive officers. The Compensation Committee is composed of two
independent non-employee Directors, neither of whom has any interlocking
relationships as defined by the SEC.
The Company's executive compensation program has been designed to (i)
attract and retain executives capable of leading the Company to meet its
business objectives and to motivate them to enhance long-term stockholder value
through compensation that is comparable to the levels offered by other companies
in the biotechnology industry; (ii) motivate key executive officers to achieve
strategic business initiatives and reward them for their achievement; and (iii)
align the interests of executives with the long-term interests of the Company's
stockholders through award opportunities resulting in the ownership of the
Company's Common Stock. Annual compensation for the Company's executive officers
may consist of three elements: a cash salary, a cash incentive bonus and stock
option grants. All salary increases reflected consideration of competitive data
provided by an independent consulting firm, as well as the Committee's
assessment of the performance of each executive. Stock option grants provide an
incentive which focuses the executive's attention on managing the Company from
the perspective of an owner with an equity stake in the business. These stock
options will generally provide value to the recipient only when the price of the
Company's stock increases above the option grant price.
The Committee considered a variety of factors, both personal and corporate,
in evaluating the Company's executive officers and making compensation
decisions. These include the compensation paid by comparable companies to
individuals in comparable positions, the individual contributions of each
officer to the Company, the progress of the Company towards its long-term
objectives, including, progress on product development, regulatory approval and
strategic collaborations with other companies, and the executive's progress in
achieving the individual goals set for that particular executive. As the Company
progresses, executives' performance goals are expected to change.
The Compensation Committee based the 1997 compensation of the Chief
Executive Officer and the Company's other executive officers on the policies
described above. The base salaries of the Chief Executive Officer and the
Company's other executive officers generally increased in 1997 commensurate with
their increased responsibilities and the growth in scope of the Company's
operations. The 1997 cash bonuses paid to the executive officers, including the
Chief Executive Officer, were based on the achievement of individual
productivity and performance goals consistent with the Company's annual business
goals during the year. In December 1997, new stock option grants were made to
the executive officers, including the Chief Executive Officer. These stock
option grants were made by the Committee as part of the program of making
periodic stock option grants to executive officers, with the number of stock
options granted to each officer during 1997 determined on the basis of such
officer's contribution toward achieving the Company's strategic and product
development goals, as described above.
During 1998, it is anticipated that the Committee will conduct annual
performance reviews comparing actual Company progress against detailed annual
plans. Elements of such plans, including progress on product development and
regulatory approval, expense control, and organizational development may be
considered.
20
<PAGE> 23
REPORT ON REPRICED OPTIONS
On May 12, 1995, the Compensation Committee of the Board of Directors
determined that it was in the best interest of the Company and the Company's
stockholders to offer all employees, including executive officers, and
non-employee directors, the opportunity to cancel and replace any existing
options to purchase the Company's Common Stock with new grants, on a one-for-one
basis, subject to a new four year vesting period and all other terms and
conditions of the Stock Option Plan. Employees holding options to purchase a
total of 1,059,274 shares of Common Stock elected to reprice and revest and such
options were canceled and replaced pursuant to such program (the "Repriced
Options"). The Repriced Options were repriced to the closing bid price of the
Company's Common Stock on the NASDAQ National Market on May 12, 1995, which was
$1.625.
The Compensation Committee gathered information on recent option repricings
in the biotechnology industry in determining whether, and on what terms, to make
the repricing offer. The Compensation Committee, after such review, determined
that the repricing offer was appropriate to incentivize and retain the Company's
existing employees and executive officers. As of May 12, 1995, approximately 68%
of the Company's outstanding options had an exercise price 100% or more above
the current market price of the Company's Common Stock, and the Company's stock
price had been below $3.00 for more than four months. Due in part to a downturn
in the market for biotechnology stocks in general, there was little indication
that the Company's stock price would improve significantly in the near future.
In addition, recent announcements relating to the clinical status of both
SNX-111 and CORLOPAM, which the Company considered to be positive, had little or
no effect on the stock price. In the Committee's opinion, outstanding options
with exercise prices substantially above the current market value of the stock
provided little incentive for employees, including executive officers, to remain
with the Company and thus jeopardized the interests of the Company and its
stockholders. Option values are a particularly important factor in employee
retention in that, as is typical in the biotechnology industry, if a company is
successful, a significant portion of the compensation paid to such company's
employees and executive officers is comprised of the value of their stock
options, and the Committee felt that over the long-term, this price differential
could result in damage to the morale and motivation of the Company's employees.
THE COMPENSATION COMMITTEE
David Anderson John Glynn
21
<PAGE> 24
NEUREX CORPORATION
STOCK PERFORMANCE GRAPH(1)
The following graph compares the total stockholder return of the CRSP Total
Return Index for the NASDAQ stock market (U.S. Companies), and the CRSP Total
Return Index for the NASDAQ Pharmaceutical Companies, and the Company, since
September 22, 1993. The graph assumes that $100.00 was invested on September 22,
1993, the effective date of the Company's initial public offering of Common
Stock.
<TABLE>
<CAPTION>
NASDAQ
Measurement Period NASDAQ (U.S. (Pharmaceutical
(Fiscal Year Covered) Neurex Companies) Companies)
<S> <C> <C> <C>
9/22/93 100.00 100.00 100.00
12/31/93 80.00 101.13 88.79
3/31/94 80.00 96.88 101.72
6/30/94 77.60 92.35 124.71
9/30/94 72.60 100.00 115.07
12/31/94 45.00 98.86 93.86
3/31/95 35.00 107.77 101.33
6/30/95 40.00 123.28 117.85
9/30/95 132.60 138.13 147.26
12/31/95 182.60 139.81 171.71
3/31/96 370.00 146.33 178.66
6/30/96 437.60 158.28 173.54
9/30/96 382.60 163.91 177.51
12/31/96 340.00 171.97 172.21
3/31/97 237.50 162.65 163.55
6/30/97 282.50 192.46 176.55
9/30/97 295.00 225.02 198.07
12/31/97 277.50 211.02 177.96
</TABLE>
(1) These indices are calculated on a dividend reinvested basis. The Company
emphasizes that the performance of the Company's stock over the period shown
is not necessarily indicative of the future performance of the Company's
stock.
22
<PAGE> 25
OTHER MATTERS
EXPENSES OF SOLICITATION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, and the entire cost of such solicitation will be borne
by the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers and employees of the Company, by personal interview,
telephone and telegraph. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material and annual reports to the beneficial owners of stock held of record by
such persons, and the Company will reimburse them for reasonable out-of-pocket
and clerical expenses incurred by them in connection therewith.
FINANCIAL AND OTHER INFORMATION
All financial information is incorporated by reference to the information
contained in the Financial Statements included in the Company's Annual Report to
security holders.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Annual
Meeting of stockholders to be held in 1999 must be received by the Company no
later than December 31, 1998, in order to be included in the proxy statement and
proxy relating to that Annual Meeting.
DISCRETIONARY AUTHORITY
The Annual Meeting is called for the specific purposes set forth in the
Notice of Meeting as discussed above, and also for the purpose of transacting
such other business as may properly come before the Meeting. At the date of this
Proxy Statement the only matters which management intends to present, or is
informed or expects that others will present for action at the Meeting, are
those matters specifically referred to in such Notice. The proxy holders will be
entitled to exercise discretionary authority as to any matters which may come
before the Meeting other than those specified above.
By Order of the Board of Directors
[SIG]
Thomas L. Barton
Secretary
Dated: April 6, 1998
Menlo Park, California
23
<PAGE> 26
APPENDIX A
NEUREX CORPORATION
1998 EMPLOYEE, CONSULTANT AND DIRECTOR STOCK OPTION PLAN
(AS ADOPTED EFFECTIVE FEBRUARY 3, 1998)
1. PURPOSES OF THIS PLAN. The purposes of this 1998 Employee, Consultant
and Director Stock Option Plan (this "Plan") of Neurex Corporation, a Delaware
corporation (the "Company"), are as follows:
(a) To furnish incentives to individuals chosen to receive options
because they are considered capable of responding by improving operations
and increasing profits;
(b) To encourage selected employees and consultants to accept or
continue employment with, or consulting to, the Company or its affiliates;
(c) To encourage non-employee directors to accept membership on, or to
continue serve as members of, the Company's Board of Directors; and
(d) To increase the interest of selected employees and consultants and
of non-employee directors in the Company's welfare through their
participation in the growth in value of the Company's Common Stock ("Common
Stock").
To accomplish the foregoing objectives, this Plan provides a means whereby
employees, consultants, and directors may receive options to purchase Common
Stock. Options granted under this Plan will be either nonstatutory stock options
(subject to federal income taxation upon exercise) or incentive stock options
(generally not subject to immediate federal income taxation upon exercise)
pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the
"IRC").
2. ELIGIBLE PERSONS. Every individual who at the date of grant is an
employee of the Company or of any parent or subsidiary of the Company (as
defined in Section 5.1(c) below) is eligible to receive incentive stock options
and nonstatutory stock options to purchase Common Stock under this Plan. The
term "employee" includes an officer or director who is an employee of the
Company or a parent or subsidiary of it, as well as a non-officer, non-director
employee of the Company or a parent or subsidiary of it. Every individual who at
the date of grant is a consultant to, or a non-employee director of, the Company
or of any parent or subsidiary of the Company is eligible to receive
nonstatutory stock options to purchase Common Stock under this Plan, but shall
not be eligible to receive incentive stock options. The term "consultant"
includes individuals employed by, or otherwise affiliated with, a person
providing consulting services to the Company or any parent or subsidiary of the
Company.
3. COMMON STOCK SUBJECT TO PLAN.
(a) There shall be reserved for issue upon the exercise of options
granted under this Plan One Million (1,000,000) shares of Common Stock,
subject to adjustment as provided in Section 7 hereof. If an option granted
under this Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject thereto shall again
be available for the purposes of this Plan.
(b) Notwithstanding any other provisions of this Plan, the aggregate
number of shares of Common Stock subject to outstanding options granted
under this Plan, plus the aggregate number of shares issued upon the
exercise of all options granted under this Plan, shall never be permitted
to exceed the number of shares specified in the first sentence of Section
3(a) above.
4. ADMINISTRATION. The Plan shall be administered by the Board of Directors
of the Company (the "Board"). The Board may appoint one or more Committees each
consisting of not less than two members of the Board to administer the Plan on
behalf of the Board (in either case the "Administrator"), subject to such terms
and conditions as the Board may prescribe. Once appointed, such Committees shall
continue to serve until otherwise directed by the Board. Any grants of options
to persons who are subject to Section 16 of the Securities Exchange Act of 1934
(the "Exchange Act") shall be made (i) by the entire Board, (ii) by a
24
<PAGE> 27
Committee of two or more directors, each of whom is a Non-Employee Director and
an Outside Director, or (iii) as otherwise permitted by both Rule 16b-3, Section
162(m) of the Code and other applicable regulations. The term "Non-Employee
Director" shall have the same meaning as defined or interpreted for purposes of
Rule 16b-3 (including amendments and successor provisions) as promulgated by the
Securities and Exchange Commission pursuant to its authority under the Exchange
Act. The term "Outside Director" shall have the same meaning as defined or
interpreted for purposes of Section 162(m) of the IRC. The Board may from time
to time increase the size of the Committee(s) and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, or fill vacancies however caused.
The Administrator may delegate nondiscretionary administrative duties to
such employees of the Company as it deems proper. Subject to the terms and
conditions of this Plan, and except as otherwise set forth herein, the
Administrator shall have the sole authority, in its discretion:
(a) to determine to which of the eligible individuals, and the time or
times at which, options to purchase Common Stock of the Company shall be
granted;
(b) to determine the number of shares of Common Stock to be subject to
options granted to each eligible individual;
(c) to determine the price to be paid for the shares of Common Stock
upon the exercise of each option;
(d) to determine the term and the exercise schedule of each option;
(e) to determine the terms and conditions of each stock option
agreement (which need not be identical) entered into between the Company
and any eligible individual to whom the Administrator has granted an
option;
(f) to interpret this Plan;
(g) to accelerate the exercise date or schedule with respect to any
option granted under this Plan or, with the consent of the holder thereof,
to modify or amend any such option; and
(h) to make all determinations deemed necessary or advisable for the
administration of this Plan.
5. TERMS OF OPTIONS. Each option granted under this Plan shall be evidenced
by a stock option agreement between the individual to whom the option is granted
(the "optionee") and the Company. Each such agreement shall designate the option
thereby granted as an incentive stock option, or a nonstatutory stock option or
in part an incentive stock option, and in part a nonstatutory stock option. Each
such agreement shall be subject to the terms and conditions set forth in Section
5.1, and to such other terms and conditions not inconsistent therewith as the
Administrator may deem appropriate in each case. In addition, incentive stock
options shall be subject to the terms and conditions set forth in Section 5.2.
5.1 TERMS AND CONDITIONS TO WHICH ALL OPTIONS ARE SUBJECT. All options
granted under this Plan shall be subject to the following terms and conditions:
(a) Term of Options. The period or periods within which an option may
be exercised shall be determined by the Administrator at the time the
option is granted, and such period or periods may be amended subsequently
only by written mutual agreement of the Company (at the direction of the
Administrator) and the optionee. In no event shall such period extend
beyond ten (10) years from the date the option is granted in the case of an
incentive stock option or ten (10) years and one (1) week from the date the
option is granted in the case of a nonstatutory stock option.
(b) Exercise Price. The price to be paid for each share of Common
Stock upon the exercise of an option shall be determined by the
Administrator at the time the option is granted, but shall in no event be
less than eighty-five percent (85%) in the case of a nonstatutory stock
option, and one hundred percent (100%) in the case of an incentive stock
option, of the fair market value of a share of Common Stock on the date the
option is granted. For all purposes of this Plan, the fair market value of
the Common Stock
25
<PAGE> 28
on any particular date shall be the closing price on the trading day next
preceding that date on the principal securities exchange on which the
Company's Common Stock is listed, or, if such Common Stock is not then
listed on any securities exchange, then the fair market value of the Common
Stock on such date shall be the closing price as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") on the trading day next preceding such date. In the event that
the Company's Common Stock is neither listed on a securities exchange nor
quoted by NASDAQ, then the Administrator shall determine the fair market
value of the Company's Common Stock on such date.
Notwithstanding the above provisions of this Section 5.1(b), the exercise
price of all options granted to the Company's non-employee directors will be
100% of the fair market value of the Common Stock determined as above.
(c) More than Ten Percent Shareholders. No option shall be granted to
any individual who, at the time such option would be granted, owns stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of outstanding capital stock of the Company, or of any
parent corporation or subsidiary corporation of the Company, unless the
exercise price (as provided in Section 5.1(b) hereof) is, in the case of a
nonstatutory stock option, not less than one hundred percent (100%) and in
the case of an incentive stock option, not less than one hundred ten
percent (110%) of the fair market value of the Common Stock on the date the
option is granted, and in the case of an incentive stock option the period
within which the option may be exercised (as provided in Section 5.1(a)
hereof) does not exceed five (5) years from the date the option is granted.
For purposes of this Section 5.1(c) in determining stock ownership, an
optionee shall be considered as owning the voting capital stock owned,
directly or indirectly, by or for his brothers and sisters, spouse,
ancestors and lineal descendants. Voting capital stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust shall be
considered as being owned proportionately by or for its shareholders,
partners or beneficiaries, as applicable. An optionee shall not be
considered as owning the shares of Common Stock issuable upon exercise of
any option which such optionee holds. Additionally, for purposes of this
Section 5.1(c), outstanding capital stock shall include all capital stock
actually issued and outstanding immediately after the grant of the option
to the optionee. Outstanding capital stock shall not include capital stock
authorized for issue under outstanding options held by the optionee or by
any other person. As used in this Plan, the terms "parent corporation" and
"subsidiary corporation" shall have the meanings set forth in IRC Sections
424(e) and (f), respectively.
(d) Method of Payment for Common Stock. The exercise price for each
share of Common Stock purchased under an option shall be paid in full in
cash at the time of purchase.
(e) Nontransferability. All options shall be nontransferable, except
by will or the laws of descent and distribution, and shall be exercisable
during the lifetime of the optionee only by the optionee.
(f) Withholding and Employment Taxes. At the time of exercise of an
option, the optionee shall remit to the Company in cash the amount of any
and all applicable federal and state withholding and employment taxes.
(g) Death. Upon the death of an employee, any option which such
employee holds may be exercised, within such period after the date of death
as the Administrator shall prescribe in the stock option agreement, by the
employee's representative or by the person entitled thereto under the
employee's will or the laws of intestate succession.
(h) Disability. Upon the permanent and total disability of an employee
(as defined in IRC Section 22(e)(3)), any stock option which the employee
holds may be exercised by the employee within such period after the date of
termination of employment resulting from such disability (not to exceed
twelve (12) months in the case of an incentive stock option) as the
Administrator shall prescribe in the stock option agreement. The option
shall terminate upon the expiration of such prescribed period, unless the
employee dies prior thereto, in which event the provisions of Section
5.1(g) hereof shall apply.
26
<PAGE> 29
(i) Retirement. Upon the voluntary retirement of an employee at or
after reaching sixty-five (65) years of age, any stock option which such
employee holds may be exercised by such employee with respect to all or any
portion of the balance of the Common Stock subject thereto within such
period after the date of retirement (not to exceed three (3) months in the
case of an incentive stock option) as the Administrator shall prescribe in
the stock option agreement. The option shall terminate upon the expiration
of such prescribed period, unless the employee dies prior thereto, in which
event the provisions of Section 5.1(g) hereof shall apply.
(j) Transfer to Related Corporation. If an employee leaves the employ
of the Company to become an employee of any parent or subsidiary
corporation of the Company, or if the employee leaves the employ of any
such parent or subsidiary corporation to become an employee of the Company
or of another parent or subsidiary corporation, such employee shall be
deemed to continue as an employee of the Company for all purposes of this
Plan.
(k) Other Severance. If an employee leaves the employ of the Company
for any reason other than as set forth in subsections (g) through (i),
above, any stock option which such employee holds may be exercised by such
employee with respect to all or any portion of the balance of the Common
Stock subject thereto within such period after the date of severance (not
to exceed three (3) months in the case of an incentive stock option) as the
Administrator shall prescribe in the stock option agreement.
(l) 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. However, options granted after
the date the Common Stock of the Company is first quoted on the National
Association of Securities Dealers Automated Quotation System or listed on
an established stock exchange shall not contain any provisions giving the
Company a right of first refusal to purchase the Common Stock underlying
the options.
5.2 ADDITIONAL TERMS AND CONDITIONS TO WHICH INCENTIVE STOCK OPTIONS ARE
SUBJECT. Options granted under this Plan which are designated as incentive stock
options shall be subject to the following additional terms and conditions:
(a) Annual Limitation. To the extent the aggregate fair market value
(determined as of the date an incentive stock option is granted) of the
stock with respect to which incentive stock options granted become
exercisable for the first time by an employee during any one (1) calendar
year (under this Plan and under all other plans of the Company and of any
parent or subsidiary corporation) exceed One Hundred Thousand Dollars
($100,000), such options shall be treated as options which are not
incentive stock options.
(b) Disqualifying Dispositions. If Common Stock acquired by exercise
of an incentive stock option granted pursuant to this Plan is disposed of
within two (2) years from the date of grant of the option or within one (1)
year after the transfer of the Common Stock to the optionee, the holder of
the Common Stock immediately prior to 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 disposition as the Company may
reasonably require.
6. STOCK ISSUANCE AND RIGHTS AS SHAREHOLDER. Notwithstanding any other
provisions of this Plan, no optionee shall have any of the rights of a
shareholder (including the right to vote and receive dividends) of the Company,
by reason of the provisions of this Plan or any action taken hereunder, until
the date such optionee shall both have paid the exercise price for the Common
Stock and shall have been issued (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) the
stock certificate evidencing such shares.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Subject to any required action by the Company's shareholders, the
number of shares of Common Stock covered by this Plan as provided in
Section 3, the number of shares covered by each outstanding option granted
hereunder and the exercise price thereof shall be proportionately adjusted
for
27
<PAGE> 30
any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of such shares or the payment
of a stock dividend (but only on the Common Stock) or any other increase or
decrease in the number of such outstanding shares of Common Stock effected
without the receipt of consideration by the Company; provided, however,
that the conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration."
(b) Subject to any required action by the Company's shareholders, if
the Company shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain and apply to the
securities to which a holder of the number of shares subject to the option
would have been entitled. A dissolution or liquidation of the Company or a
merger or consolidation in which the Company is not the surviving
corporation shall cause each outstanding option to terminate, unless the
surviving corporation in the case of a merger or consolidation assumes
outstanding options or replaces them with substitute options having
substantially similar terms and conditions; provided, however, that if an
outstanding option is to terminate upon any such event, the Administrator,
on such terms and conditions as it deems appropriate, may provide, either
by the terms of a stock option agreement or by a resolution adopted prior
to the occurrence of any such event, that, for some period of time prior to
such event, such option shall be exercisable as to all or any portion of
the shares covered by the portion of the option that previously has not
lapsed, terminated, or been exercised, notwithstanding any standard
exercise schedule otherwise provided for in the stock option agreement.
(c) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
(d) Except as hereinabove expressly provided in this Section 7, no
optionee shall have any rights by reason of any subdivision or
consolidation of shares of the capital stock of any class or the payment of
any stock dividend or any other increase or decrease in the number of
shares of any class or by reason of any dissolution, liquidation, merger or
consolidation or spin-off of assets or stock of another corporation, and
any issue by the Company of shares of stock of any class or of securities
convertible into shares of stock of any class shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to any option granted hereunder.
(e) The grant of an option pursuant to this Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
8. MANNER OF EXERCISE. An optionee wishing to exercise an option shall give
written notice to the Company at its principal executive office, to the
attention of the Secretary of the Company, accompanied by payment of the
exercise price as provided in Section 5.1(b). 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.
Promptly after receipt of written notice of exercise of an option, the
Company shall, without charge for stock issue or transfer taxes, deliver to the
optionee or such other person a certificate or certificates for the requisite
number of shares of stock pursuant to the terms of the option agreement.
9. EMPLOYMENT, CONSULTING OR DIRECTOR RELATIONSHIP. Nothing in this Plan or
any option granted hereunder shall interfere with or limit in any way the right
of the Company or of its parent or subsidiaries to terminate any optionee's
employment, consultancy, or directorship at any time, nor confer upon any
optionee any right to continue as an employee of, consultant to, or director of,
the Company or any of its parent or subsidiaries.
10. SECURITIES LAW REQUIREMENTS.
(a) The Administrator may require an individual as a condition of the
grant and of the exercise of an option, to represent and establish to the
satisfaction of the Administrator that all shares of Common
28
<PAGE> 31
Stock to be acquired upon the exercise of such option will be acquired for
investment and not for resale. The Administrator shall cause such legends
to be placed on certificates evidencing shares of Common Stock issued upon
exercise of an option as, in the opinion of the Company's counsel, may be
required by federal and applicable state securities laws.
(b) No shares of Common Stock shall be issued upon the exercise of any
option unless and until counsel for the Company determines that: (i) the
Company and the optionee have satisfied all applicable requirements under
the Securities Act of 1933, as amended, and the Exchange Act; (ii) any
applicable requirement of any stock exchange or quotation system on which
the Company's Common Stock is listed or quoted has been satisfied; and
(iii) all other applicable provisions of state and federal law have been
satisfied.
11. AMENDMENT. The Board may terminate this Plan or amend this Plan from
time to time in such respects as the Board may deem advisable, except that,
without the approval of the Company's shareholders in compliance with the
requirements of applicable law, no such revision or amendment shall:
(a) increase the number of shares of Common Stock reserved under
Section 3 hereof for issue under this Plan, except as provided in Section 7
hereof;
(b) change the class of persons eligible to participate in this Plan
under Section 2 hereof;
(c) extend the term of this Plan under Section 12 hereof; or
(d) amend this Section 11 to defeat its purpose.
12. TERMINATION. This Plan shall terminate automatically on February 3,
2008, and may be terminated at any earlier date by the Board. No option shall be
granted hereunder after termination of this Plan, but such termination shall not
affect the validity of any option then outstanding.
13. TIME OF GRANTING OPTIONS. The date of grant of an option hereunder
shall, for all purposes, be the date on which the Administrator makes the
determination granting such option.
14. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of this Plan.
15. EFFECTIVE DATE. This Plan shall become effective upon adoption by the
Board of Directors of the Company, and shall be effective on said date, provided
this Plan is approved within twelve (12) months of said date by the shareholders
of the Company in accordance with the Certificate of Incorporation and Bylaws of
the Company and the requirements of the IRC and the Delaware General Corporation
Law. Options may be granted hereunder, but may not be exercised, prior to the
date of such shareholder approval.
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<PAGE> 32
REVOCABLE PROXY
NEUREX CORPORATION
3760 HAVEN AVENUE
MENLO PARK, CA 94025
ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Neurex Corporation (the "Company") hereby
constitutes and appoints PAUL GODDARD and THOMAS L. BARTON the proxy of the
undersigned, with full power of substitution and revocation, to attend the
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
at the Hotel Sofitel, which is located at 203 Twin Dolphin Drive, Redwood City,
California, on May 7, 1998, at 9:00 a.m., local time, and at any adjournments
thereof, and to vote all of the shares of common stock of the Company which the
undersigned may be entitled to vote upon the following matters:
(Continued and to be signed on reverse side)
- FOLD AND DETACH HERE -
<PAGE> 33
Please mark
your vote as
indicated in X
this example
1. ELECTION OF DIRECTORS:
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR THE ELECTION OF ONE OR MORE
PERSONS NOMINATED BY THE BOARD OF DIRECTORS, MARK FOR ABOVE AND CROSS OUT
NAME(S) OF PERSONS WITH RESPECT TO WHOM AUTHORITY IS WITHHELD.)
Nominees: Paul Goddard Raymond C. Egan
Thomas L. Barton John W. Glynn, Jr.
David L. Anderson Howard E. Greene, Jr.
Gerard N. Burrow Robert R. Luther
John F. Chappell
FOR WITHHOLD
ALL AUTHORITY FOR
NOMINEES ALL NOMINEES
2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
FOR AGAINST WITHHELD
3. ADOPTION OF THE COMPANY'S 1998 EMPLOYEE, CONSULTANT AND DIRECTOR
STOCK OPTION PLAN AND THE AUTHORIZATION OF 1,000,000 SHARES OF COMMON
STOCK FOR ISSUANCE THEREUNDER.
FOR AGAINST WITHHELD
This Proxy is solicited by the Board of Directors of the Company and will be
voted as directed by the undersigned stockholder. THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF DIRECTORS AS
TO ANY MATTERS IF NO INSTRUCTIONS TO THE CONTRARY ARE MARKED HEREIN.
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement and hereby revokes any proxy or proxies heretofore
given. This Proxy may be revoked at any time prior to the Annual Meeting.
If you received more than one proxy card, please date, sign and return all
cards in the accompanying envelope.
Signature(s) Date
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- FOLD AND DETACH HERE -
