SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
APROGENEX, INC.
(Name of Registrant as Specified in Its Charter)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________
(2) Aggregate number of securities to which transactions 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.:
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(3) Filing party:
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(4) Date filed:
____________________________________________________________________
NOTICE OF ANNUAL MEETING
JUNE 24, 1996
AND PROXY STATEMENT
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 24, 1996
TO THE STOCKHOLDERS OF
APROGENEX, INC.:
The annual meeting of stockholders of Aprogenex, Inc. (the "Company") will
be held at The Marriott Medical Center, 6580 Fannin Street, Houston, Texas
77030, on June 24, 1996, at 8:00 am, Houston time, for the following purposes:
1. To elect five directors;
2. To consider and act upon a proposal to amend and restate the
Company's Director Stock Option Plan and to increase by 50,000
shares the aggregate number of shares of Common Stock that may be
purchased under the plan;
3. To approve the appointment of Arthur Andersen & Co. as the
independent public accountants for the Company for 1996; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 17, 1996 as
the record date for determining stockholders entitled to notice of and to vote
at the meeting.
You are cordially invited to attend the meeting in person. Even if you
plan to attend the meeting, however, you are requested to mark, sign, date and
return the accompanying proxy as soon as possible.
By Order of the Board of Directors,
J. Donald Payne
Corporate Secretary
June 7, 1996
8000 El Rio Street
Houston, Texas 77054-4104
APROGENEX, INC.
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are being mailed to
stockholders beginning on or about June 10, 1996. These are furnished in
connection with the solicitation of proxies by the Board of Directors of
Aprogenex, Inc. (the "Company") for use at the 1996 annual meeting of
stockholders of the Company (the "Annual Meeting") to be held at the time and
place and for the purposes set forth in the accompanying notice. In addition to
the solicitation of proxies by mail, proxies may also be solicited by telephone,
telegram or personal interview by regular employees of the Company. The Company
will pay all costs of soliciting proxies. The Company will also reimburse
brokers or other persons holding stock in their names or in the names of their
nominees for their reasonable expenses in forwarding proxy material to
beneficial owners of stock, in accordance with applicable Securities and
Exchange Commission and American Stock Exchange requirements.
All duly executed proxies received prior to the meeting will be voted in
accordance with the choices specified thereon. As to any matter for which no
choice has been specified in a duly executed proxy, the shares represented
thereby will be voted (i) for the election as directors of the nominees listed
herein; (ii) for approval of the proposal to amend and restate the Company's
Director Stock Option Plan (the "Directors Plan") and to increase by 50,000
shares the aggregate number of shares of Common Stock that may be purchased
under the Directors Plan, (iii) for approval of Arthur Andersen & Co. as the
Company's independent public accountants for 1996, and (iv) in connection with
any other business that may properly come before the meeting. A stockholder
giving a proxy may revoke it at any time before it is voted at the meeting by
filing with the Corporate Secretary of the Company an instrument revoking the
proxy, by delivering a duly executed proxy bearing a later date or by appearing
at the meeting and voting in person.
This is the third annual meeting of stockholders of the Company since the
initial public offering of its common stock, par value $.001 per share ("Common
Stock"), in October 1993. As of May 17, 1996, the record date for determining
stockholders entitled to vote at the meeting, there were shares of stock
entitled to a total of 7,113,338 votes at the meeting. As of such date,
5,200,598 shares of Common Stock were outstanding, each of which is entitled to
one vote at the meeting. Additionally, as of such date, 449,000 of Series A
Convertible Preferred Stock were outstanding, which shares are each entitled to
4.26 votes, or in total entitled to a total 1,912,740 votes. The quorum for
transaction of business at the meeting is the presence in person or by proxy of
the holders of shares of stock having a majority of the votes that could be cast
by the holders of all outstanding shares of stock entitled to vote at the
meeting.
The Company's 1995 Annual Report on Form 10-KSB, including financial
statements, for the year ended December 31, 1995, has previously been mailed to
all stockholders. The Annual Report is not a part of this proxy solicitation
material.
SECURITY OWNERSHIP
COMMON STOCK. The following table sets forth information regarding the
beneficial ownership of shares of Common Stock as of December 31, 1995, for
(i) each person known by the Company to be the beneficial owner of more than
5% of the Common Stock, (ii) each current director of the Company, (iii) each
of the current executive officers of the Company and (iv) all current
executive officers and directors of the Company as a group. See "Certain
Relationships and Certain Transactions."
The amounts set forth in the table do not include any increase in the
number of shares of outstanding Common Stock that may result from conversion of
the Series A Convertible Preferred Stock that may occur subsequent to December
31, 1995. Each such share of Series A Convertible Preferred Stock is convertible
into 4.26 shares of Common Stock, and is entitled to the number of votes based
on such conversion rate. See "Series A Convertible Preferred Stock."
Except as otherwise indicated, the persons named below have sole
investment and voting power with respect to the shares of Common Stock shown as
beneficially owned by them. The business address of each director and officer is
c/o Aprogenex, Inc., 8000 El Rio Street, Houston, Texas 77054.
NUMBER PERCENT OF
OF COMMON
COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED
- ------------------------------------ ------ -----
WestMed Venture Partners, L.P. (1)
Oppenheimer Tower
World Financial Center
New York, New York 10281 .............. 493,197 9.5%
The Genesis Fund, Ltd. (2)
c/o Acorn Ventures
520 Post Oak Blvd., Suite 130
Houston, Texas 77027 .................. 360,408 7.0
Stuart Schube (3)
c/o Acorn Ventures
520 Post Oak Blvd., Suite 130
Houston, Texas 77027 .................. 385,230 7.5
W.S. Farish & Company (4)
1100 Louisiana Street, Suite 1200
Houston, Texas 77002 .................. 481,665 9.3
Dr. Joel Bresser (5) ..................... 358,917 7.0
R. Walter Cunningham (6) ................. 374,329 7.2
Dr. Michael Hogan (7) .................... -- --
Christopher T. Kelly (7) ................. -- --
David M. Leech (8) ....................... -- --
Terry Ward (9) ........................... 512,060 9.8
J. Donald Payne (10) ..................... 67,856 1.3
Dr. Luis Cantarero (11) .................. 30,125 .6
All current executive officers
and directors
as a group (6 persons) (12) ......... 968,958 18.3
(1) Includes 16,458 shares issuable upon exercise of warrants exercisable
within 60 days of December 31, 1995.
(2) Includes 1,848 shares issuable upon exercise of warrants exercisable
within 60 days of December 31, 1995.
(3) Mr. Schube is a principal of The Genesis Fund, Ltd. and therefore may
be deemed the beneficial owner of the 360,408 shares of Common Stock
beneficially owned by The Genesis Fund, Ltd. The shares set forth also
include 5,900 shares held by Mr. Schube's wife and as to which Mr.
Schube disclaims beneficial ownership.
(4) Includes 50,510 shares issuable upon exercise of warrants exercisable
within 60 days of December 31, 1995. Does not include shares that may be
issuable upon conversion of notes or exercise of warrants to be acquired
in June, 1996 as set forth below.
(5) Dr. Bresser was a Director of the Company until May, 1996. As indicated in
copies of Forms 4 provided to the Company, Dr. Bresser has sold or gifted
50,000 shares of Common Stock subsequent to the date set forth in the
table above.
(6) Mr. Cunningham is a principal of The Genesis Fund, Ltd. and therefore
may be deemed the beneficial owner of the 360,408 shares of Common
Stock beneficially owned by The Genesis Fund, Ltd. Mr. Cunningham was
a Director of the Company until February, 1996.
(7) On May 30, 1996, Mr. Kelly and Dr. Hogan were elected to the Board of
Directors.
(8) On April 1, 1996, David Leech was elected to the Board of Directors and to
the position of Acting President and Chief Executive Officer.
(9) Includes 13,429 shares issuable upon exercise of options and warrants
exercisable within 60 days of December 31, 1995. Does not include shares
that may be issuable upon conversion of notes or exercise of warrants to
be acquired in June, 1996 as set forth below. Mr. Ward is the Chief
Financial Officer and a director of W.S. Farish & Company, and therefore
may be deemed the beneficial owner of the 481,665 shares beneficially
owned by W.S. Farish & Company. Mr. Ward disclaims beneficial ownership of
such shares.
(10) Includes 40,056 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1995.
(11) Includes 30,125 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1995.
(12) Includes 134,120 shares issuable upon exercise of options and warrants
exercisable within 60 days of December 31, 1995.
2
W.S. Farish & Company and Mr. Ward are expected to be participants in a
private placement involving the sale of convertible notes and warrants expected
to be closed after the date of this Proxy Statement. If consummated, the private
placement is expected to increase the number of shares of Common Stock
beneficially owned by W.S. Farish & Company and Mr. Ward by approximately
1,000,000 shares, assuming conversion of the notes and exercise of the warrants,
or beneficial ownership of approximately 25% of the outstanding Common Stock,
excluding the effect conversion of the Series A Convertible Preferred Stock.
SERIES A CONVERTIBLE PREFERRED STOCK. The following table sets forth
information regarding the beneficial ownership of shares of Series A Convertible
Preferred Stock as of December 31, 1995, for (i) each person known by the
Company to be the beneficial owner of more than 5% of the Series A Convertible
Preferred Stock, (ii) each current director of the Company, (iii) each of the
current executive officers of the Company and (iv) all current executive
officers and directors of the Company as a group. Except as otherwise indicated,
the persons named below have sole investment and voting power with respect to
the shares of Series A Convertible Preferred Stock shown as beneficially owned
by them.
NUMBER OF PERCENT OF
SERIES A SERIES A
CONVERTIBLE CONVERTIBLE
PREFERRED PREFERRED
NAME OF BENEFICIAL OWNER SHARES STOCK OWNED
------------------------ ------ -----------
Hugh Virgil Sherill 25,000 5.4%
M.D. Sabbah 40,000 8.7
Keys Foundation 50,000 10.9
South Ferry #2, L.P. 25,000 5.4
Dr. Joel Bresser (1) -- --
R. Walter Cunningham (2) -- --
Dr. Michael Hogan (3) -- --
Christopher T. Kelly (3) -- --
David M. Leech (4) -- --
Terry Ward -- --
J. Donald Payne -- --
Dr. Luis Cantarero -- --
All current executive officers and
directors
as a group (6 persons) -- --
(1) Dr. Bresser was a Director of the Company until May, 1996.
(2) Mr. Cunningham was a Director of the Company until February, 1996.
(3) On May 30, 1996, Mr. Kelly and Dr. Hogan were elected to the Board of
Directors.
(4) On April 1, 1996, David Leech was elected to the Board of Directors and to
the position of Acting President and Chief Executive Officer.
3
PROPOSAL NO. 1
ELECTION OF FIVE DIRECTORS
Unless contrary instructions are set forth in the proxy, it is intended
that the persons named in the proxy will vote all shares of stock represented by
the proxy for the election of Dr. Hogan and Mssrs. Kelly, Leech, Payne and Ward
as directors, all of whom are presently members of the Board of Directors of the
Company. The five directors elected at the meeting will each serve for a term
expiring on the date of the annual meeting in 1997. Directors of the Company are
elected annually and hold office until their successors have been elected and
qualified or their earlier resignation or removal.
Should any nominee become unavailable for election, the Board of Directors
of the Company may designate another nominee, in which case the persons acting
under duly executed proxies will vote for the election of the replacement
nominee. Management is not aware of any circumstances likely to render any
nominee unavailable. Election of directors will be by a plurality of the votes
cast. A stockholder may, in the manner set forth in the enclosed proxy card,
instruct the proxy holder not to vote that stockholder's shares for one or more
of the named nominees.
The Company's bylaws currently provide for a Board of Directors of five
persons. Five persons currently serve on the Board and are expected to continue
to serve until the annual meeting. Pursuant to the Company's bylaws, the Board
is also empowered elect additional candidates or replacements to the Board of
Directors prior to the next stockholders meeting. The proxies solicited hereby
cannot be voted for a number of persons greater than the number of nominees
named below. A plurality of the votes of the holders of outstanding stock of the
Company represented at the meeting at which a quorum is present may elect
directors. The Restated Certificate of Incorporation of the Company, as amended,
does not permit cumulative voting.
The Board believes that the election of the persons listed below as
directors of the Company is in the best interests of the Company and its
stockholders. The Board therefore recommends a vote FOR the nominees and it is
intended that the proxies not marked to the contrary will be so voted.
NOMINEES. The following sets forth information concerning the five
nominees for election as directors at the meeting, including position with the
Company and the business experience of each during at least the past five years,
and the age of each nominee as of June 1, 1996.
DR. MICHAEL E. HOGAN. Dr. Hogan has been a director of the Company
since May 1996. Dr. Hogan has been the Professor of Molecular Physiology and
Biophysics, Baylor College of Medicine since 1994 and a Professor at Baylor's
Center for Biotechnology since 1987. Dr. Hogan is the scientific founder of
Triplex Pharmaceutical Corporation and currently serves on the Scientific
Advisory Board of Aronex Pharmaceuticals, Inc., Lark Sequencing Technologies and
Genometrix Corporation. From 1981 to 1987, Dr. Hogan was an Assistant Professor
at Princeton University. Dr. Hogan currently has 23 pending and issued patent
applications for oligonucleotide therapeutics and nucleic acid based
diagnostics. Dr. Hogan is 45 years old.
CHRISTOPHER T. KELLY. Mr. Kelly has been a director of the Company
since May 1996. In September 1993, Mr. Kelly co-founded Spectral
Pharmaceuticals, Inc., formed to identify, develop and commercialize diagnostic
imaging agents, and has served as President and Chief Executive Officer of that
company since March 1994. From March 1992 to August 1993, Mr. Kelly was the Vice
President Commercial Development of Triplex Pharmaceutical Corporation. From
March 1986 to March 1992, Mr. Kelly held senior strategic planning and business
development positions at Sterling Drug, Inc., serving as Vice President Business
Development, Consumer Health Products from November 1989 to March 1992. Mr.
Kelly previously held senior marketing positions with Boehringer Mannheim
Diagnostics, Cooper Biomedical, Inc., and Hoffman-LaRoche Inc. Mr. Kelly is 49
years old.
DAVID LEECH. Mr. Leech has been a director of the Company and Acting
President and Chief Executive Officer since April 1996. Mr. Leech is also a
consultant to the Company. See "Arrangements with Mr. Leech." Mr. Leech is the
founder and President of Nestor Consulting, Inc., which provides consulting
services to biopharmaceutical and medical device companies. From February 1992
to September 1995, Mr. Leech was the President and Chief Executive Officer of
Argus Pharmaceuticals, Inc., a biopharmaceutical company. From 1988 to 1992, Mr.
Leech was the President and Chief Executive Officer of Houston Biotechnology
Incorporated, which was engaged in the development of ophthamalic and
neurological therapeutics. Prior to 1988, Mr. Leech served in various senior
marketing and management positions with American Cyanamid Corporation and
Sterling Drug Company. Mr. Leech is 49 years old.
4
J. DONALD PAYNE. Mr. Payne has served as Vice President-Finance and
Chief Financial Officer of the Company since May 1992 and as a director since
September, 1995. Since March 1993, Mr. Payne has also served as Secretary. From
1984 to May 1989, he served as Vice President and Chief Financial Officer of
Entex Energy Development, Ltd. He held the same positions with the Energy
Resource Group of Entex, Inc. and its successor entities from 1981 through 1990.
Mr. Payne is a Certified Public Accountant and received a BBA from Texas A&M
University and an MBA from Rice University. Mr. Payne is 40 years old.
TERRY WARD. Mr. Ward has been a director of the Company since March
1994. Mr. Ward has been the Chief Financial Officer of W.S. Farish & Company
since 1979. He is also a director for W.S. Farish & Company, which is engaged in
investments, venture capital and other activities. Mr. Ward is 46 years old.
MEETINGS, STANDING COMMITTEES AND COMPENSATION OF THE BOARD. The Board has
appointed from among its members three standing committees of the Board. The
Compensation Committee is composed of Mssrs. Kelly and Ward. The principal
function of the Compensation Committee is to set compensation policy for all
employees. The Audit Committee is currently composed of Mr. Ward, and an
additional member of the Board is expected to be appointed at the next meeting
of the Board. The principal functions of the Audit Committee include overseeing
the performance and reviewing the scope of the audit function of the Company's
independent auditors.
The Nominating Committee is currently composed of Mssrs. Ward and Leech. The
primary function of the Nominating Committee is to recommend to the Board
persons to be considered for election to the Board. In making such
recommendations, the Nominating Committee will consider nominations submitted by
stockholders to the Secretary of the Company pursuant to timely notice. In order
to have such nominations considered by the Nominating Committee in making its
recommendations to the Board of persons to be considered for election to the
Board at any annual meeting of stockholders, a stockholder's notice must be
delivered or mailed and received at the principal executive offices of the
Company not less than 90 days prior to the anniversary date of the immediately
preceding annual meeting of the stockholders of the Company.
The Board of Directors met 14 times in 1995. The Compensation Committee
met two times in 1995. The Audit Committee and Nominating Committee each met
once during 1995. Each Director attended 75 percent or more of the aggregate of
the meetings of the Board and of the Board Committees to which he was assigned
as a regular member, with the exception of Jack Davis, who attended six of the
nine meetings of the Board held before his resignation from the Board.
For a discussion of compensation of members of the Board, see "Proposal
No. 3: Approval of Amendment and Restatement of Director Stock Option Plan
and Increase in Number of Shares Authorized for Grant."
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS. For information concerning Mssrs. Leech and Payne,
both of whom are directors of the Company, see "Nominees" above. The following
sets forth information concerning Dr. Luis Cantarero, the remaining executive
officer of the Company, including his position with the Company and business
experience during at least the past five years and his age as of June 1, 1996.
All officers of the Company are elected by the Board of Directors to hold office
until the earlier of their resignation, removal or termination.
DR. LUIS CANTARERO. Dr. Cantarero has served as the Vice
President-Research and Development of the Company since August 1994 and was
appointed Chief Operating Officer in August, 1995. From May 1992 to July 1994,
he served as Department Manager, Cellular Diagnostics of Abbott Laboratories,
Inc., and from 1988 to 1992, was Project Manager, Cellular Diagnostics at
Abbott. Dr. Cantarero served in various other capacities with the Diagnostics
Division of Abbott since 1984, and with Sigma Chemical Company from 1983 to
1984. Dr. Cantarero received an MS in Radiation Biology and a Ph.D. in
Immunology in 1976 and 1980, respectively from the University of Iowa. He is 45
years old.
5
SUMMARY COMPENSATION TABLE. The following table contains information
regarding compensation for services in all capacities to the Company for 1993,
1994 and 1995 of those persons who were (i) at December 31, 1995, the executive
officers of the Company and (ii) the Company's former Chief Executive Officer.
The Company did not have a chief executive officer as of such date.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARD
------------------- -----
OTHER SECURITIES ALL OTHER
NAME AND PRINCIPAL ANNUAL UNDERLYING COMPENSATION
POSITION YEAR SALARY COMPENSATION OPTIONS (1)
-------- ---- ------ ------------ ------- ---
Dr. Joel Bresser
(2) -- President
and Chief
Executive 1995 $112,654 - - $3,392
Officer until 1994 $141,153 - - $4,200
September, 1995 1993 $135,845 - - $4,200
Dr. Luis Cantarero
(3) -- Vice
President-Research
and Development
and Chief 1995 $136,500 - 72,000 (5) $4,214
Operating Officer 1994 $52,338 $30,000(4) 35,000 $1,615
J. Donald Payne --
Vice
President-Finance 1995 $99,000 - 40,000(5) $4,214
and Chief 1994 $97,615 - - $4,200
Financial Officer 1993 $91,731 - - $4,200
(1)Consists of the Company's contributions to the respective officers' accounts
under the Company's "cafeteria plan" within the meaning of Section 125 of the
Internal Revenue Code of 1986, as amended.
(2) Dr. Bresser resigned as President and Chief Executive Officer in
September, 1995.
(3) Dr. Cantarero joined the Company in August 1994.
(4) Represents cash paid to Dr. Cantarero in connection with his joining
the Company and his relocation to Houston, Texas.
(5) During 1995, options granted to Dr. Cantarero during 1994 and to Mr.
Payne earlier in 1995 were repriced. The amounts set forth include both
the original grant and each repriced option as if it were a separate
grant. See "Option Grants Table" below.
OPTION GRANTS TABLE. The following table contains information regarding
stock options granted during 1995 to those persons who were, at December 31,
1995, the executive officers of the Company. There were no grants to the
Company's former Chief Executive Officer. The Company did not have a chief
executive officer as of such date.
OPTIONS GRANTED DURING 1995
Percent of Total Exercise
Options Options Granted Price Expiration
NAME GRANTED TO EMPLOYEES IN 1995 ($/SHARE) DATE
---- ------- -------------------- --------- ----
Dr. Luis Cantarero 25,000(1) 10.1% $3.375 10/05/05
12,000(2) 4.9% $4.000 12/15/05
35,000(4) 14.2% $4.000 8/04/04
J. Donald Payne 10,000(1) 4.1% $3.375 10/05/05
15,000(3) 6.1% $7.750 1/24/05
15,000(4) 6.1% $4.000 1/24/05
(1)Exercisable based on certain performance milestones; 20% of such options
were exercisable at December 31, 1995.
(2)Exercisable at the rate of one-third on the first anniversary of grant and
ratably over the next twenty four months.
(3)Fully exercisable at the date of grant.
(4)Represents a repricing of an option previously granted, as described
below.
6
On December 15, 1995, the Compensation Committee of the Board of Directors
repriced all outstanding employee stock options with exercise prices at or in
excess of $7.75 per share. In making the decision to reprice the options, the
Committee considered various factors. The decline in the trading price of the
Company's Common Stock in 1994 and 1995 resulted in stock options granted to
certain employees having exercise prices substantially above the recent trading
price. The Committee believes that stock options represents a substantial part
of the compensation package for key employees, and that the retention of
employees, particularly given the current financial condition of the Company, is
heavily influenced by the potential for gain from stock option grants. The
Committee believes that the Company's success will depend in a large part upon
the ability to retain its key employees, that the competition for such employees
is intense, and that the loss of key employees could have an adverse impact upon
the Company. The Committee concluded that it was cost-effective to reprice
certain options to a price closer to current trading prices, and that such
action would provide a greater incentive for the retention of key employees and
thereby avoid costs associated with the potential recruitment of replacements.
Rather than grant new options, the Committee determined that it was in the best
interests of the Company to reprice existing option grants. The Committee set
the new exercise price of the repriced options at $4.00 per share, which was
above the closing market price of $1.75 on the date of the repricing. This
higher price was established after review of the trading history of the
Company's stock prior to November, 1995, which was when the Committee first
began to consider such repricing. The options held by Dr. Cantarero and Mr.
Payne that were repriced are set forth in the table above.
OPTION EXERCISES AND YEAR-END VALUES TABLE. The table set forth below
contains information with respect to (i) the unexercised options to purchase
Common Stock granted in 1995 and prior years under the Company's 1990 Stock
Option Plan to the executive officers named in the Summary Compensation Table
and held by them at December 31, 1995, (ii) the aggregate number of shares
acquired by such executive officers upon the exercise during 1995 of options to
purchase Common Stock and (iii) the value of unexercised in-the-money options at
December 31, 1995.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1995 DECEMBER 31, 1995 (1)
ON VALUE ----------------- ---------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Joel Bresser - - - - $ - $ -
Dr. Luis
Cantarero - - 28,666 43,334 - -
J. Donald Payne - - 39,032 10,562 18,137 2,109
(1) Based on the closing price of the Common Stock on the American Stock
Exchange on December 31, 1995 ($1.6875).
</TABLE>
ARRANGEMENTS WITH MR. LEECH. On April 3, 1996, the Board of Directors
elected David Leech to the Board of Directors and approved a consulting
arrangement with Mr. Leech wherein he would also assume the duties of Acting
President and Chief Executive Officer of the Company. The consulting agreement
with Mr. Leech has a six month term commencing April 1, 1996 and may be extended
month to month thereafter. Either the Company or Mr. Leech may terminate the
arrangement after three months upon thirty days notice to the other party. The
agreement provides for a consulting fee of $10,000 per month and a performance
bonus of up to a maximum of $250,000 if certain corporate objectives are
achieved.
7
PROPOSAL NO. 2
APPROVAL OF AMENDMENT AND RESTATEMENT OF
DIRECTOR STOCK OPTION PLAN AND INCREASE IN NUMBER
OF SHARES AUTHORIZED FOR GRANT
PURPOSE OF THE PLAN. The Director Stock Option Plan (the "Plan") was
approved by stockholders at the 1995 annual meeting and provided for the grants
of stock options to non-management directors for service since the Company's
initial public offering in October 1993. The purpose of the Director Stock
Option Plan is to encourage ownership in the Company by outside directors of the
Company whose services are considered essential to the Company's continued
progress and thus to provide them with a further incentive to continue to serve
as directors of the Company. The Plan is also intended to assist the Company
through utilization of the incentives provided by the Plan to attract and retain
experienced and qualified candidates to fill vacancies in the Board which may
occur in the future.
BACKGROUND OF THE PROPOSAL. Under its current provisions, the Director
Stock Option Plan (as currently in effect, the "Current Directors Plan")
provides for the granting of stock options to non-employee directors as
compensation for their service as a director. Options to acquire 400 shares of
Common Stock are earned for each full or partial month of service as a director,
and grants of earned amounts are made annually on January 15 each year (the
"Annual Grant Date") following the calendar year of service for which such
grants were earned (e.g., for a full twelve months of service as a director in
1995, the director would be granted options to acquire 4,800 shares on January
15, 1996). The exercise price of the grant is the market price on the Annual
Grant Date. Options are earned monthly, and no minimum length of service as a
director is required.
The Company has from time to time experienced difficulty in recruiting
qualified non-management directors to serve on the Board, and the Board believes
that the terms of the Current Directors Plan do not provide the appropriate
incentives to recruit and retain qualified non-management directors. During
1995, four non-management directors (Wayne Fritzsche, Dr. Irvin Smith, John P.
Davis, and Dr. Wayne Ryan) resigned from the Board. These resignations and
delays in replacing said directors is evidence that Company has had difficulty
in recruiting alternative candidates.
Accordingly, on May 30, 1996, the Board of Directors approved the
amendment and restatement of the Current Directors Plan (such amendment and
restatement is referred to herein as the "Proposed Directors Plan") to provide
for terms of stock option grants that the Board believes will facilitate its
ability to recruit qualified non-management directors and will provide greater
incentives for such directors' continued service on the Board. Additionally,
because the proposed amendments provide for increased option grants that will
vest over two years, rather than being fully vested upon the grant, the Board
has also proposed that the number of shares of Common Stock authorized for grant
be increased from 100,000 to 150,000. Currently, a total of 100,000 shares of
Common Stock are reserved for issuance upon exercise of options granted under
the Plan. As of December 31, 1995, there were 49,800 ungranted options remaining
in the Plan. The proposed increase in the number of authorized options available
in the Plan will amount to one percent (1%) of the currently outstanding Common
Stock.
In addition to approving the Proposed Directors Plan, on May 30, 1996, the
Board adopted a plan to compensate nonmanagement directors by the cash payment
of $750 per meeting, up to a maximum of $9,000 per year. Directors who are not
also employees are not eligible to participate in any other benefit plan of the
Company. The Company will also pay ordinary and necessary out-of-pocket expenses
for non-management directors to attend Board and committee meetings.
As a consultant to the Company, Mr. Leech is considered a non-employee
director and, as such, is eligible to participate in the Current Directors Plan
and would be eligible to participate in the Proposed Directors Plan. Mr. Payne
is an employee of the Company and is not eligible for participation in the Plan.
THE DESCRIPTION IN THIS PROXY STATEMENT OF THE PROPOSED DIRECTORS PLAN IS
INTENDED SOLELY AS A SUMMARY, DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED
IN ITS ENTIRETY BY THE FULL TEXT OF THE PROPOSED DIRECTORS PLAN ATTACHED HERETO
AS EXHIBIT A.
COMPARISON OF THE PROVISIONS OF THE CURRENT DIRECTORS PLAN WITH THE
PROPOSED AMENDMENT AND RESTATEMENT. Under the Current Directors Plan, on the
Annual Grant Date, each non-employee director who served as such during the
entire calendar year preceding the Annual Grant Date will be granted an option
to purchase 4,800 shares of Common Stock. In the event that a non-employee
director is not a non-
8
employee director of the Company during the entire calendar year, such
non-employee director will be granted options to acquire 400 shares of Common
Stock for each month or portion thereof served as a non-employee director during
the prior year. Each option granted pursuant to the plan has an exercise price
per share equal to the Fair Market Value (as defined in the Current Directors
Plan) of a share of Common Stock on the date the option is granted (i.e., the
market price on the Annual Grant Date), and such options are fully vested and
exercisable as of the date of grant for a period of five years. Non-employee
directors are not currently eligible to receive benefits in any other benefit
plan of the Company.
If the proposed amendment and restatement of the plan proposed herein is
adopted, each non-employee director would receive a one-time grant of an option
to acquire 10,000 shares of Common Stock. The option would vest and be
exercisable as follows: 5,000 shares may be acquired on or after the first
anniversary of the grant, and the remaining 5,000 shares may be acquired on or
after the second anniversary of the grant. If the director resigns, is not
reelected or otherwise does not continue his service as a director (other than
as a result of death or disability), the unvested portion of the option would be
forfeited. The exercise price of the option would be the Fair Market Value (as
defined in the Proposed Directors Plan) on the date of grant. The option will
expire five years from the date of grant unless otherwise exercised.
For current non-employee directors, the Proposed Directors Plan has
special transition rules. For service during 1996, no options under the
provisions of the Current Directors Plan will be granted for any director
serving as of the date of approval of the Proposed Directors Plan by
stockholders. All grants to such directors will, in lieu of such options under
the Current Directors Plan, be made under the terms of the Proposed Directors
Plan. The one-time grant of an option to acquire 10,000 shares of Common Stock
will be made as of the date of approval of the amendment and restated plan, and
the exercise price of the option will be the Fair Market Value as of the date of
such approval. Any non-employee director who served in 1996 and who is not
reelected on the date of approval of the Proposed Directors Plan will receive an
option grant on January 15, 1997 for service in 1996 under the terms of the
Current Directors Plan.
As indicated, the proposed amendment would require a director to generally
serve at least one year before he is eligible to exercise any option grant.
Under the Current Directors Plan, the director earns a fully vested option grant
for each partial month of service. The Board believes the terms of the Proposed
Directors Plan will encourage retention of directors.
Additionally, the exercise price of the option under the Proposed
Directors Plan would be the Fair Market Value on the date of the grant, which
would generally be the date of initial election to the Board of Directors
(except that for current non-employee directors, the grant date would be the
date of stockholder approval of the Proposed Director Plan). Under the Current
Directors Plan, the exercise price is the Fair Market Value on January 15 of the
year subsequent to the year of service.
The Current Directors Plan provides that, upon the death of any optionee,
the option, all of which pursuant to the provisions of the plan was already
fully vested, must be exercised by the optionee's legal representative within
six months after death. As proposed in the amendment and restatement, all of the
unvested portion of a grant will become fully vested upon the death of the
director and must be exercised by the optionee's legal representative within six
months after death. Additionally, upon the total and permanent disability of the
director, all of the unvested portion of a grant will become fully vested.
The Company has reserved 100,000 shares of Common Stock of the Company for
issuance in accordance with the provisions of the Current Directors Plan. Shares
of Common Stock to be issued upon exercise of options under the Current
Directors Plan may be treasury shares or authorized by unissued shares. If the
Proposed Directors Plan is adopted, the number of shares reserved for issuance
would increase to 150,000.
The Current Directors Plan is administered by the Board of Directors.
Subject to the terms of the Current Directors Plan, the Board of Directors has
complete authority (i) to interpret the Current Directors Plan; (ii) to
prescribe, amend and rescind rules and regulations relating to it; (iii) to
determine the terms and provisions of the Current Directors Plan; and (iv) to
make all other determinations necessary or advisable for the administration of
the Current Directors Plan. If the Proposed Directors Plan is adopted, no
changes would occur in the administration provisions of the plan.
The Plan, currently and as proposed, provides for the grant of
Nonstatutory Stock Options as reflected in the terms of the written option
agreement with each optionee. Nonstatutory Stock Options are not intended to
qualify as
9
incentive stock options within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code").
Under both the Current Directors Plan and the Proposed Directors Plan, the
purchase price to be paid for the Common Stock to be issued upon the exercise of
the option will be by cash payment, which may take the form of a personal check.
Each award under the plan will be evidenced by an agreement that specifies the
terms, conditions and limitations of the award.
In the event of any subdivision or consolidation of outstanding shares of
Common Stock or declaration of a dividend payable in shares of Common Stock or
capital reorganization or reclassification or other transaction involving an
increase or reduction in the number of outstanding shares of Common Stock, the
Board shall adjust proportionally (i) the number of shares of Common Stock
reserved under this plan and covered by outstanding options denominated in
Common Stock; (ii) the exercise price in respect of such options; and (iii) the
appropriate fair market value and other price determinations for such options.
In the event of any consolidation or merger of the Company with another
corporation or entity or the adoption by the Company of a plan of exchange
affecting the Common Stock or any distribution to holders of Common Stock of
securities or property (other than normal cash dividends or dividends payable in
Common Stock), the Board shall make such adjustments as it may deem equitable,
including adjustments to avoid fractional shares, to give proper effect to such
event. In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Board shall be
authorized to issue or assume stock options, regardless of whether in a
transactions to which Section 424(a) of the Code applies, by means of
substitution of new options for previously issued options.
Options may be granted under the plan at any time on or after such
effective date and prior to the termination of the plan. The plan shall
terminate when all Common Stock subject to the plan is subject to an option to
purchase (unless earlier discontinued by the Board).
The Board may amend, modify, suspend or terminate the Current Directors
Plan for the purpose of meeting or addressing any changes in legal requirements
or for any other purpose permitted by law except that (i) the provisions of the
Current Directors Plan relating to the class of person eligible to participate
in this Current Directors Plan and the amount, price and timing of awards may
not be amended more often than once every six months except to comport with
changes in the Code, the Employee Retirement Income Security Act or rules
promulgated thereunder and (ii) in the event the Current Directors Plan complies
with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, no
revision or amendment shall change the number of shares subject to the Plan
(except as provided herein), change the designation of the class of directors
eligible to receive options or materially increase the benefits accruing to
participants under the Plan without the requisite approval of the stockholders.
The Proposed Directors Plan has similar provisions, except that stockholder
approval is required only for amendments for which such approval may be required
to continue compliance with Rule 16b-3 and that the Plan may be amended,
regardless of the nature of the amendment, more often than once every six months
to the extent permitted under Rule 16b-3. As a result of recently announced
changes to Rule 16b, the Company believes that by as early as August 1996, Rule
16b-3 will not restrict the frequency of amendments to the Plan nor require
stockholder approval for such amendments.
FEDERAL INCOME TAX CONSEQUENCES. All options granted under the Current
Directors Plan or the Proposed Directors Plan will be Nonstatutory Stock
Options. The holder of a Nonstatutory Stock Option generally will recognize no
taxable income as a result of the grant of the option. Upon the exercise of the
option, however, the holder of a Nonstatutory Stock Option will recognize
taxable ordinary income in an amount equal to the difference between the fair
market value of the shares on the date of exercise and the exercise or purchase
price (or in the case of relinquishment in an amount equal to the sum of the
cash received and the fair market value of the shares or award received
determined on the date of exercise) and, correspondingly, the Company will be
entitled to an income tax deduction for such amount.
OPTION GRANTS TO DIRECTORS FOR SERVICE IN 1996. Set forth below is a
summary table as to the options potentially available for service during 1996,
assuming each current director is reelected and continues to serve throughout
1996, to non-employee directors of the Company under the Current Directors Plan
as well as the amounts available if the Proposed Directors Plan is approved.
10
NEW PLAN BENEFITS
DIRECTOR STOCK OPTION PLAN
COMPARISON OF CURRENT AND PROPOSED PLAN BENEFITS
CURRENT DIRECTORS PLAN PROPOSED DIRECTORS PLAN
Number of Number of
Options Options
Dollar [Vested at Dollar [Vesting
Value ($) Date of Value ($) Over Two
Name (1) Grant] (2) (3) Years] (4)
- ---- --------- ---------- --------- ----------
Dr. Joel Bresser (5) 0 0 0
R. Walter Cunningham (6) 0 800 0 800
Dr. Michael Hogan (7) 0 3,200 0 10,000
Christopher T. Kelly (7) 0 3,200 0 10,000
David M. Leech (8) 0 3,600 0 10,000
J. Donald Payne (9) 0 0 0 0
Terry Ward 0 4,800 0 10,000
All non-employee directors
who are not executive
officers, as a group 0 12,000 0 30,800
All non-employee directors
who are executive officers,
as a group 0 3,600 0 10,000
(1) The exercise price of each option will be the Fair Market Value on January
15, 1997, the date of grant under the Current Directors Plan.
(2) Under the Current Directors Plan, each director earns a fully vested option
to acquire 400 shares for each month or partial month of service, or 4,800
shares for each year of service.
(3) The exercise price of each option will be the Fair Market Value on the date
of approval of the Proposed Directors Plan by the stockholders. As of June
3, 1996, the closing price of the Common Stock on the American Stock
Exchange was $1.00.
(4) Under the Proposed Directors Plan, each director will be granted an option
to acquire 10,000 shares of Common Stock which will vest over two years.
(5) Dr. Bresser was an employee as of the date of his election as a director
in 1995, and as such, was not eligible under the plan. Dr. Bresser
resigned as a director in May 1996.
(6) Mr. Cunningham resigned as a director in February 1996, earning a grant of
an option to acquire 800 shares under the Current Directors Plan. If the
Proposed Directors Plan is approved, Mr. Cunningham will NOT receive any
grant under the Proposed Directors Plan but will receive a grant under the
terms of the Current Directors Plan on January 15, 1997.
(7) Dr. Hogan and Mr. Kelly became directors in May 1996, and, under the
Current Directors Plan, on January 15, 1997, each will be eligible for a
grant of a fully-vested option to acquire 3,200 shares of Common Stock if
he remains as a director throughout 1996. Under the terms of the Proposed
Directors Plan, Dr. Hogan and Mr. Kelly would, in lieu of such options
under the Current Directors Plan, be granted an option to acquire 10,000
shares on the date of approval of the plan by stockholders, and the option
would vest over two years.
(8) Mr. Leech became a director in April 1996, and, under the Current Directors
Plan, on January 15, 1997, he will be eligible for a grant of a
fully-vested option to acquire 3,600 shares of Common Stock if he remains
as a director throughout 1996. Under the terms of the Proposed Directors
Plan, Mr. Leech would be granted an option to acquire 10,000 shares on the
date of approval of the Plan by stockholders, and the option would vest
over two years.
(9) Mr. Payne is an employee of the Company and, as such, is not eligible to
participate in the Plan.
BOARD RECOMMENDATION. The Board believes that the amendment and
restatement of the Director Stock Option Plan is in the best interest of the
Company and its stockholders. The Board therefore recommends a vote FOR approval
of the amendment and restatement of the Director Stock Option Plan and for the
authorization of an additional 50,000 for grant under the plan. It is intended
that the proxies not marked to the contrary will be so voted. Since the approval
of the Director Stock Option Plan will result in the grant of options to all
non-employee directors of the Company, each of the non-employee directors of the
Company has an interest in and may benefit from the approval of the Director
Stock Option Plan.
11
The affirmative vote of the holders of a majority of the votes of the
outstanding stock of the Company present or represented and entitled to vote at
a meeting at which a quorum is present is required for approval of the amendment
and restatement of the Director Stock Option Plan and the increase in the number
of shares of Common Stock authorized for grant from 100,000 shares to 150,000
shares.
PROPOSAL NO. 3
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has approved and recommends the appointment of
Arthur Andersen & Co. as independent public accountants to conduct an audit of
the Company's financial statements for the fiscal year ending December 31, 1996.
Arthur Andersen & Co. has audited the financial statements of the Company since
its organization. Approval of the appointment of the accountants is being sought
in order to give stockholders the opportunity to express their opinion on the
matter. Approval will require the affirmative vote of the holders of the shares
having a majority of the votes of all shares present and represented at the
meeting. Should approval not be obtained, the Board of Directors would expect to
reconsider the appointment.
Members of Arthur Andersen & Co. are expected to attend the annual meeting
and, if present, be available to answer appropriate questions which may be asked
by stockholders. Such members will also have an opportunity to make a statement
at the meeting if they desire to do so.
CERTAIN TRANSACTIONS
In December, 1993, the Company engaged a director of the Company, Wayne
Fritzsche, to assist it in establishing collaborative arrangements for the
commercialization of infectious disease applications for the Company's
technology. Mr. Fritzsche was granted a vested three-year option to acquire
8,600 shares of Common Stock at $8.75 per share and received a monthly retainer
of $7,500 commencing in January, 1994. This retainer was to be recouped from any
future incentive payments to Mr. Fritzsche, which consist of a varying
percentage (ranging from 5% of the first $1 million to 1% of amounts over $5
million) of cash proceeds to the Company from these collaborative activities.
During April, 1994, the Company terminated this relationship, but the Company
continues to be obligated for the future incentive payments if the Company
consummates a transaction with certain entities contacted by Mr. Fritzsche. Mr.
Fritzsche was paid $31,321 under this agreement, including $1,321 of expenses.
The Company is a party to an Amended and Restated Stockholders' Agreement
dated June 8, 1993 (the "Stockholders' Agreement"), as amended, with Dr.
Bresser, certain holders of Common Stock and certain holders of the Company's
warrants. The Stockholders' Agreement also provides for certain registration
rights.
GENERAL
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT. Under
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), directors, certain officers and beneficial owners of 10% or more of the
Company's Common Stock are required from time to time to file with the
Securities and Exchange Commission (the "Commission") reports on Forms 3, 4 or 5
relating principally to transactions in the Company's securities by such person.
Based solely upon a review of Forms 3, 4 and 5 submitted to the Company during
and with respect to 1995, the Company believes that all of the directors and
executive officers of the Company have timely filed their respective Forms 3, 4
or 5 required by Section 16 (a) of the Exchange Act, during 1995.
COUNTING OF VOTES. All matters specified in this Proxy Statement that are
to be voted on at the annual meeting will be by written ballot. Inspectors of
election will be appointed, among other things, to determine the number of
shares outstanding and the voting power of each, the shares represented at the
annual meeting, the existence of a quorum and the authenticity, validity and
effect of proxies, to receive votes or ballots, to hear and determine all
challenges and questions in any way arising in connection with the right to
vote, to count and tabulate all votes and to determine the result. Each item
presented herein to be voted on at the annual meeting must be approved by the
affirmative vote of the holders of the number of shares described under each
such item. The inspectors of election will treat shares represented by proxies
that reflect abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum and for purposes of determining
the outcome of
12
any matter submitted to the stockholders for a vote. Abstentions, however, do
not constitute a vote "for" or "against" any matter and thus will be disregarded
in the calculation of a plurality or of "votes cast".
The inspectors of election will treat shares referred to as "broker
non-votes" (i.e. shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
that the broker or nominee does not have discretionary power to vote on a
particular matter) as shares that are present and entitled to vote for purposes
of determining the presence of a quorum. However, for purposes of determining
the outcome of any matter as to which the broker has physically indicated on the
proxy that it does not have discretionary authority to vote, those shares will
be treated as not present and not entitled to vote with respect to that matter
(even though those shares are considered entitled to vote for quorum purposes
and may be entitled to vote on other matters).
OTHER BUSINESS. Management does not intend to bring any business before
the meeting other than the matters referred to in the accompanying notice. If,
however, any other matters properly come before the meeting, it is intended that
the persons named in the accompanying proxy will vote pursuant to the proxy in
accordance with their best judgment on such matters to the extent permitted by
applicable law and regulations. The discretionary authority includes matters
which the Board of Directors does not know are to be presented at the meeting by
others and any proposals of stockholders omitted from the proxy material
pursuant to Rule 14a-8 of the Securities and Exchange Commission.
STOCKHOLDER PROPOSALS. Proposals of stockholders intended to be presented
at the Company's 1997 annual meeting, and otherwise eligible, must be received
by the Company (at the address indicated in the accompanying notice) no later
than January 31, 1997 to be included in the Company's proxy material and form of
proxy relating to that meeting.
By Order of the Board of Directors
David Leech
As President and Chief Executive Officer
Houston, Texas
June 7, 1996
13
EXHIBIT A
APROGENEX, INC.
DIRECTOR STOCK OPTION PLAN
AMENDED AND RESTATED AS OF JUNE [ ], 1996
1. PURPOSE. The purpose of this Director Stock Option Plan (the "Plan") of
Aprogenex, Inc. (the "Company"), is to encourage ownership in the Company by
outside directors of the Company whose services are considered essential to the
Company's continued progress and thus to provide them with a further incentive
to continue to serve as directors of the Company. The Plan is also intended to
assist the Company through utilization of the incentives provided by the Plan to
attract and retain experienced and qualified candidates to fill vacancies in the
Board which may occur in the future.
2. ADMINISTRATION. The Plan will be administered by the Board of Directors (the
"Board") of the Company. Subject to the express provisions of the Plan, the
Board will have complete authority to interpret the Plan; to prescribe, amend,
and rescind rules and regulations relating to it; to determine the terms and
provisions of the respective option agreements in accordance with the provisions
of the Plan; and to make all other determinations necessary or advisable for the
administration of the Plan. The Board's determination on the matters referred to
in this Section 2 will be conclusive.
3. PARTICIPATION IN THE PLAN. The Directors of the Company who are not employees
of the Company or any Parent or Subsidiary of the Company (within the meaning of
Section 424(e) or (f) of the Internal Revenue Code of 1986, as amended)
("Eligible Directors") shall be eligible to participate in the Plan. A director
who is or has been an employee of the Company or any Parent or Subsidiary of the
Company shall not be eligible to become an Eligible Director unless and until
such director is elected to a new term of office as a director while no longer
serving as an employee of the Company.
4. STOCK SUBJECT TO THE PLAN. The stock subject to the Plan shall consist of
150,000 shares of the $0.001 par value common stock of the Company ("Common
Stock"). Such shares may, as the Board shall from time to time determine, be
either authorized and unissued shares of Common Stock or issued shares of Common
Stock which have been reacquired by the Company. If any option granted under the
Plan expires or terminates for any reason without having been exercised in full,
the shares subject to, but not delivered under, such option may again become
available for the grant of other options under the Plan.
5. STOCK OPTIONS. Each option granted under this Plan shall be evidenced by a
written agreement in such form as the Board shall from time to time approve,
which agreements shall comply with and be subject to the following terms and
conditions:
A. OPTION GRANT DATES. For each Eligible Director who is elected to the
Board of Directors after the date of approval of the Plan, as amended and
restated, by the stockholders of the Company (such date hereinafter
referred to as the "Effective Date"), options shall be granted to each
such Eligible Director on the day of his or her initial election or
appointment to the Board of Directors (or, if such date falls on a
non-business day, the first business day thereafter) (the "Grant Date").
If the election or appointment is subject to or conditioned upon the
acceptance by the Eligible Director, then the Grant Date for all purposes
herein (other than the determination of Fair Market Value as set forth in
Section 5C herein) shall be such date of acceptance. Initially, for each
Eligible Director serving on the Effective Date, the Effective Date shall
be the Grant Date for such Eligible Director.
B. NUMBER OF SHARES EARNED. On the Grant Date, each Eligible Director
shall be awarded an option to purchase 10,000 shares of Common Stock.
Such grant is a one-time grant and not an annual grant.
C. OPTION PRICE PER SHARE. The options granted hereunder shall be
exercisable at a price per share equal to the Fair Market Value of the
Common Stock on the Grant Date (except that for Eligible Directors whose
term of service starts after the date of appointment or election, the date
of such appointment or election shall be the date for determination of the
Fair Market Value). For purposes of this Plan, the "Fair Market Value" of
a share on a particular date shall be deemed to be, (i) if the Common
Stock is listed on a national securities exchange, the closing selling
price per share of the Common Stock on any such national
A-1
securities exchange on that date, as reported in THE WALL STREET JOURNAL
or, if there shall have been no such sale so reported on that date, on the
last preceding date on which such a sale was so reported, or (ii) if the
Common Stock is not so listed, the closing selling price (or, if not so
reported, the mean between the closing bid and asked price) on that date,
or, if there are no quotations available for such date, on the last
preceding date on which such quotations shall be available, as reported by
NASDAQ, or, if not reported by NASDAQ, by the National Quotation Bureau,
Inc.
D. OPTIONS NONTRANSFERABLE. Each option granted under the Plan by its
terms shall not be transferable by the optionee otherwise than by will, or
by the laws of descent and distribution, and shall be exercisable during
the lifetime of the optionee only by the optionee. While living, no option
or interest therein may be transferred, assigned, pledged, or hypothecated
by the optionee, whether by operation of law or otherwise, or be made
subject to execution, attachment, or similar process.
E. EXERCISABILITY AND TERM OF OPTIONS. Each option granted under the Plan
shall vest as follows: (i) options as to 5,000 shares shall vest and be
exercisable on the first anniversary of the Grant Date; and (ii) options
as to the remaining 5,000 shares shall vest and be exercisable on the
second anniversary of the Grant Date. If not previously exercised or
forfeited pursuant to the provisions of Sections 5F, 5G and 5H herein,
such options shall expire on the fifth anniversary of the Grant Date.
F. TERMINATION OF STATUS AS A DIRECTOR. In the event of termination of an
optionee's status as an Eligible Director (regardless of whether such
termination is by resignation, removal, failure to nominate or reelect
upon the end of any term or by becoming an employee of the Company) prior
to such option or portion thereof becoming exercisable pursuant to the
provisions of Section 5E or 5G herein, then such option or portion thereof
which was not exercisable as of the date of such termination shall be
forfeited. Any portion of the option which was exercisable as of the date
of such termination shall continue to be exercisable until the earlier of
(i) the expiration of such option pursuant to Section 5E herein or (ii)
six months after the death of such optionee pursuant to the provisions of
section 5H herein.
G. DISABILITY OF OPTIONEE. In the event of the total and permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code of
1986) of an Eligible Director, regardless of whether the Eligible Director
continues to serve as a director of the Company, all of such option shall
become fully exercisable and may be exercised at any time prior to the
earlier of (i) the expiration of the option as set forth in Section 5E
herein or (ii) six months after the death of such optionee pursuant to the
provisions of section 5H herein.
H. DEATH. In the event of the death of an optionee during the term of the
option who is at the time of his death an Eligible Director of the
Company, the option shall become fully exercisable (regardless of the
extent of the right to exercise that had accrued as of the date of death),
and all of such option may be exercised at any time within six (6) months
following the date of death, by the optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance. In
the event of the death of an optionee during the term of the option who is
NOT at the time of his death an Eligible Director of the Company, the
option may be exercised at any time within six (6) months following the
date of death, by the optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent that the right to exercise that had accrued as of the date of
death. However, in no event may an option be exercised after the
expiration of such option pursuant to the provisions of section 5E herein.
I. EXERCISE OF OPTIONS. Options may be exercised only by written notice to
the Company at its corporate office accompanied by payment of the full
consideration for the shares as to which they are exercised, including any
federal, state and/or local income tax withholding amount due in
connection with the exercise. The purchase price, together with any income
tax withholding amount due, is to be paid in full to the Company upon the
exercise of the option by cash payment, which may take the form of a
personal check payable to the order of the Company.
J. NONSTATUTORY OPTIONS. All options granted hereunder shall be
non-statutory options not intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
6. ASSIGNMENT. The rights and benefits of a participant under this Plan
may not be assigned and any attempted assignment of such rights and benefits
shall be null and void.
A-2
7. LIMITATION OF RIGHTS.
A. NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or
implied, that the Company will retain a Director for any period of time,
or at any particular rate of compensation.
B. NO STOCKHOLDER'S RIGHTS FOR OPTIONEES. An optionee or the optionee's
representative shall have no rights as a stockholder with respect to the
shares covered by the options until the date of the issuance to the
optionee or the optionee's representative of a stock certificate
therefore, and no adjustment will be made for dividends or other rights
for which the record date is prior to the date such certificate is issued.
8. CHANGES IN PRESENT STOCK.
A. CORPORATE ACTS. The existence of outstanding options shall not affect
in any manner the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the capital stock of the Company or
its business or any merger or consolidation of the Company, or any issue
of bonds, debentures, preferred or prior preference stock (whether or not
such issue is prior to, on a parity with or junior to the Common Stock) or
the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act or
proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings enumerated above.
B. ADJUSTMENTS. In the event of any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend payable in
shares of Common Stock or capital reorganization or reclassification or
other transaction involving an increase or reduction in the number of
outstanding shares of Common Stock, the Board shall adjust proportionally
(i) the number of shares of Common Stock reserved under this Plan and
covered by outstanding options denominated in Common Stock; (ii) the
exercise price in respect of such options; and (iii) the appropriate Fair
Market Value and other price determinations for such options. In the event
of any consolidation or merger of the Company with another corporation or
entity or the adoption by the Company of a plan of exchange affecting the
Common Stock or any distribution to holders of Common Stock of securities
or property (other than normal cash dividends or dividends payable in
Common Stock), the Board shall make such adjustments as it may deem
equitable, including adjustments to avoid fractional shares, to give
proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board shall be authorized to issue or
assume stock options, regardless of whether in a transaction to which
Section 424(a) of the Code applies, by means of substitution of new
options for previously issued options or an assumption of previously
issued options.
9. EFFECTIVE DATE, TRANSITION FOR CURRENT DIRECTORS, AND DURATION OF THE PLAN.
A. EFFECTIVE DATE. The Plan, as amended and restated, shall take effect on
the date of approval of the Plan by the affirmative votes of the holders
of a majority of the outstanding shares of the Company present, or
represented, and entitled to vote at a meeting of the Company's
stockholders, or by the written consent of the holders of a majority of
the outstanding shares of the Company entitled to vote.
B. TRANSITION PROVISIONS. Upon the adoption of the Plan as set forth
herein, it is anticipated that current or previous Eligible Directors
during 1996 would otherwise be entitled to compensation under the
provisions of the Plan prior to its amendment and restatement. For any
Eligible Directors serving as a director as of such date of adoption, any
authorized or anticipated grants of options for service in 1996 pursuant
to the provisions of the Plan prior to such amendment and restatement
shall be superseded by the provisions of this Plan as amended and
restated. For any Eligible Directors whose service as a director in 1996
terminated prior to such amendment and restatement, any authorized or
anticipated grants of options pursuant to the provisions of the Plan prior
to such amendment shall be made and governed by the provisions of this
Plan prior to this amendment and restatement. Any grants to Eligible
Directors under the provisions of the Plan prior to this amendment and
restatement shall continue to be governed by the provisions of the Plan
before such amendment and restatement.
A-3
C. TERMINATION. The Plan shall terminate when all Common Stock subject to
the Plan is subject to an option to purchase (unless earlier discontinued
by the Board) but such termination shall not affect the rights of the
holder of any option outstanding on such date of termination. If, on a
date on which options would normally be granted, there is not a sufficient
number of shares available to grant each person otherwise eligible to
receive an option on that date an option to purchase the full number of
shares to which he or she would normally be entitled, options shall be
prorated among optionees according to the number of shares available on
such date of grant. Such optionees shall be deemed to have received the
full amount due to them on such date of grant. All options granted under
the Plan are subject to and may not be exercised before.
10. AMENDMENT OF THE PLAN. The Board may suspend or discontinue the Plan or
revise or amend it in any respect whatsoever; provided, however, that to the
extent required by Rule 16b-3 under the Securities Exchange Act of 1934, as
amended ("Rule 16b-3"), the provisions of this Plan relating to the class of
persons eligible to participate in this Plan and the amount, price, and timing
of awards may not be amended more often than once every six months except to
comport with changes in the Code, the Employee Retirement Income Security Act or
rules promulgated thereunder; and provided, further, that no revision or
amendment to the Plan shall be effective without stockholder approval to the
extent required by Rule 16b-3.
11. REQUIREMENTS OF LAW. The granting of options and the issuance of shares of
Common Stock upon the exercise of an option shall be subject to all applicable
laws, rules and regulations and to such approvals by any governmental agencies
or national securities exchanges as may be required.
12. NOTICE. Any written notice to the Company required by any of the
provisions of this Plan shall be addressed to the Secretary of the Company and
shall become effective when it is received.
13. GOVERNING LAW. This Plan and all determinations made and actions taken
pursuant hereto shall be governed by the law of the State of Delaware and
construed accordingly.
APROGENEX, INC.
As approved by the Board of Directors
of the Company on May 30, 1996
_____________________________________
Secretary
As approved by the stockholders of the
Company on June __, 1996
_____________________________________
Secretary
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MONDAY, JUNE 24, 1996
The undersigned hereby appoints J. Donald Payne and Peter J. Carbonaro,
jointly and severally, proxies, with full power of substitution and with
discretionary authority, to represent and vote, in accordance with the
instructions set forth below, all shares of Common Stock which the undersigned
is entitled to vote at the 1996 annual meeting of stockholders of Aprogenex,
Inc. (the "Company"), and any adjournments thereof, for the election of
directors (other than any for whom authority to vote is withheld below) and upon
such other business as may properly come before the meeting.
(1) ELECTION OF
DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME BELOW.)
Nominees: Dr. Michael E. Hogan, Christopher T. Kelly, David Leech, J. Donald
Payne and Terry Ward
All directors serve for a term of one year.
(2) PROPOSAL TO AMEND AND RESTATE THE COMPANY'S DIRECTOR STOCK OPTION PLAN AND
TO INCREASE BY 50,000 SHARES THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK
THAT MAY BE PURCHASED UNDER THE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL TO APPROVE THE APPOINTMENT OF ARTHUR ANDERSEN & CO. as the
independent public accountants for the Company for 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
UNLESS A CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS LISTED ON THE REVERSE SIDE.
__________________________________
Signature
Date: ______________________, 1996
(In signing as Attorney, Administrator,
Executor, Guardian, Trustee or
Corporate Officer, please add your
title as such.)
PLEASE SIGN, DATE AND RETURN PROMPTLY.
