SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
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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 ss. 240.14a-11(c) or ss. 240.14a-12
SUGEN, Inc.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
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Item 22(a)(2) of Schedule 14A.
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14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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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:
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<PAGE>
[SUGEN, Inc. LOGO]
SUGEN, Inc.
351 Galveston Drive
Redwood City, California 94063
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
----------------
TO THE STOCKHOLDERS OF SUGEN, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of SUGEN,
INC., a Delaware corporation (the "Company"), will be held on Wednesday, May 20,
1998 at 10:00 a.m. local time at the offices of the Company, located at 351
Galveston Drive, Redwood City, California, 94063, for the following purposes:
1. To elect two directors to hold office until the 2001 Annual Meeting
of Stockholders.
2. To approve an amendment to the Company's 1992 Stock Option Plan, as
amended (the "Option Plan"), to increase the aggregate number of
shares of Common Stock available for issuance under the Option Plan
by 750,000 shares.
3. To approve an amendment to the Company's 1994 Non-Employee
Directors' Stock Option Plan, as amended (the "Directors' Plan"),
to increase the aggregate number of shares of Common Stock
available for issuance under the Directors' Plan by 150,000 shares.
4. To ratify the selection of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending December 31,
1998.
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 23, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
RICHARD D. SPIZZIRRI
Secretary
Redwood City, California
April 17, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
SUGEN, Inc.
351 Galveston Drive
Redwood City, California 94063
------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
May 20, 1998
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
SUGEN, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders (the "Annual Meeting") to be held on May 20, 1998, at
10:00 a.m. local time, or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at the offices of the Company, located at 351
Galveston Drive, Redwood City, California 94063. The Company intends to mail
this proxy statement and accompanying proxy card on or about April 17, 1998 to
all stockholders entitled to vote at the Annual Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other employees of the Company. No
additional compensation will be paid to directors, officers or other employees
for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on March
23, 1998 (the "Record Date") will be entitled to notice of and to vote at the
Annual Meeting. At the close of business on the Record Date, there were
15,385,653 shares of Common Stock outstanding and entitled to vote. Each holder
of record of Common Stock on the Record Date will be entitled to one vote for
each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 351
Galveston Drive, Redwood City, California 94063, a written notice of revocation
or a duly executed proxy bearing a later date, or it may be revoked by attending
the meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
<PAGE>
Stockholder Proposals
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than December 18, 1998 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the size of the Board of Directors) shall serve for the remainder
of the full term of the class of directors in which the vacancy occurred and
until such director's successor is elected and qualified.
The Board of Directors is presently composed of eleven members, including
two vacancies. There are two directors in the class whose term of office expires
in 1998. Each of the nominees for election to this class is currently a director
of the Company. If elected at the Annual Meeting, each of the nominees would
serve until the 2001 Annual Meeting and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal.
The two vacancies on the Board of Directors include one in the class whose
term of office expires in 1998 and one in the class whose term of office expires
in 1999. Pursuant to the Company's Bylaws, subject to certain exceptions,
vacancies can be filled only by the affirmative vote of a majority of the Board
of Directors. Accordingly, at the Annual Meeting, stockholders cannot vote for a
greater number of persons than the number of nominees named.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the two nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
Nominees for Election for a Three-Year Term Expiring at the 2001 Annual Meeting
Stephen Evans-Freke, 46, a founder of the Company, has served as Chief
Executive Officer and Chairman of the Board of the Company since its inception.
Mr. Evans-Freke was also a founder of Selectide Corporation, a biotechnology
company based on combinatorial chemistry screening technology, and served as its
Chairman of the Board from 1990 until its acquisition by Marion Merrell Dow,
Inc. in January 1995. From 1976 to 1990, Mr. Evans-Freke was employed by
PaineWebber Incorporated, a brokerage, financial service and investment banking
company, and served most recently as a member of its Board of Directors and
President of PaineWebber Development Corporation, a subsidiary of PaineWebber
Incorporated. He is also involved with various private companies, serving as a
director of Pharmaceutical Partners LLC, President of International Technology
Investment Managers, Inc. and Chairman of International Technology Investment
Managers (Asia) Inc. He is also a director of ValiGene, Inc., a privately held
genomics company, and of Montier Asset Management Ltd. Mr. Evans-Freke formerly
served as a director of Genentech Development Corporation, Amgen Development
Corporation, Centocor Development Corporation and a number of other
biotechnology and high technology companies. Mr. Evans-Freke received a degree
in Law from the University of Cambridge.
2
<PAGE>
Axel Ullrich, Ph.D., 54, a founder of the Company, has served as a
consultant to the Company in his capacity as Co-Chief Scientist and has been a
member of the Board of Directors of the Company since its inception. Since 1988,
Dr. Ullrich has served as Director, Department of Molecular Biology, Max-
Planck-Institut for Biochemie, a research institute of the Max-Planck Society, a
German government-funded organization of over eighty research institutes. From
1982 to 1988, Professor Ullrich served in senior research positions at
Genentech. Professor Ullrich is the 1998 recipient of the German Cancer Society
prize in recognition of his significant contributions to cancer research.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A VOTE
IN FAVOR OF EACH NAMED NOMINEE.
Directors Continuing in Office Until the 1999 Annual Meeting
Heinrich Kuhn, 62, has served as a director of the Company since December
1991. Since 1979 he has served as Managing Director of Garching Innovation GmbH,
the technology transfer agency of the Max-Planck Society.
Jeremy L. Curnock Cook, 48, was appointed as a director of the Company in
December 1996. Mr. Curnock Cook has been Head of the Rothschild Bioscience Unit
and a director of Rothschild Asset Management Limited since 1987. He is a
director of several British companies, including International Biotechnology
Trust plc, Biocompatibles International plc, Therexsys Ltd. and Vanguard Medica
Group plc. He also serves on the Boards of Directors of Cell Therapeutics, Inc.,
Creative Biomolecules, Inc., Targeted Genetics Corp. and Ribozyme
Pharmaceuticals, Inc. in the United States.
Michael A. Wall, 69, has served as a director of the Company since December
1991. From 1979 to 1987, when he retired, Mr. Wall served as Chairman of
Centocor, Inc., and continued to serve as a member of its board of directors
until 1993. He has participated as a founder, director, or manager of over a
dozen technology firms since 1955. Mr. Wall is also a director of Kopin
Corporation and is Chairman of the Board of Directors of Alkermes, Inc.
Directors Continuing in Office Until the 2000 Annual Meeting
Charles M. Hartman, 56, has served as a director of the Company since
December 1991. He has been a general partner of CW Group, a venture capital
partnership, since 1983. Mr. Hartman is a director of Ribozyme Pharmaceuticals,
Inc., Geron Corporation and several privately-held life sciences companies as
well as The Hastings Center, a nonprofit organization dedicated to the study of
ethics in medicine and life sciences.
Donald E. Nickelson, 65, has served as a director of the Company since
October 1992. Mr. Nickelson served as President of PaineWebber Group, a
brokerage service and investment banking company, from 1988 until retiring in
1990. He also served as a director of PaineWebber Group from 1980 until 1993.
Mr. Nickelson serves as Vice-Chairman and Director of Harbour Group Industries,
Inc., and as Chairman of the Board of Omniquip International, Inc., Del
Industries and Rapid Rack Industries. He also serves as Director of Carey
Diversified LLC and also as a Trustee of the Mainstay Mutual Funds Group.
Bruce R. Ross, 57, was appointed as a director of the Company in August
1994. From 1980 to March 1994, when he retired, Mr. Ross held various senior
management positions with Bristol-Myers Squibb, an international pharmaceutical
company, including Vice President, Bristol-Myers Oncology Division, President,
U.S. Pharmaceutical Group and Senior Vice President, Policy, Planning &
Development. Mr. Ross is currently the President of Cancer Rx and currently
serves as a director of IDEC Corp. and the Fox Chase Cancer Center.
Richard D. Spizzirri, 65, has served as a director of the Company since
December 1991 and as Secretary since May 1992. Mr. Spizzirri was a partner at
the law firm of Davis, Polk & Wardwell from 1967 to December 1994, when he
retired. He continues to serve as senior counsel to Davis, Polk & Wardwell and
also serves as a director of Centocor, Inc. and Stuart Entertainment, Inc.
3
<PAGE>
Honorary Member of the Board
Joseph Schlessinger, Ph.D., 53, a founder of the Company, has served as a
consultant to the Company in his capacity as Co-Chief Scientist, as well as an
honorary member of the Board of Directors, since its inception. He has served as
a professor and Chairman of the Department of Pharmacology at New York
University Medical Center since 1990, and as the Ruth and Leonard Simon
Professor in Cancer Research in the Department of Chemical Immunology at the
Weizmann Institute of Science in Rehovot, Israel, since 1984. He was formerly
Director of Research for Rorer Biotechnology, a biotechnology company.
Board Committees and Meetings
During the fiscal year ended December 31, 1997 the Board of Directors held
five meetings. The Board has delegated certain of its powers to its Audit
Committee, Compensation Committee, Executive Committee and Nominating Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the Company's annual audit and discuss the
financial statements; recommends to the Board the independent auditors to be
retained; and receives and considers the auditors' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee is composed of three
non-employee directors: Messrs. Hartman (Chairman), Nickelson and Spizzirri. It
met twice during 1997.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation for executive officers, grants stock options under the
Company's 1992 Stock Option Plan and 1995 Long-Term Objectives Stock Option Plan
for Senior Management, determines compensation levels and performs such other
functions regarding compensation as the Board may delegate. The Compensation
Committee is currently composed of three non-employee directors: Messrs.
Nickelson (Chairman), Ross and Wall. Mr. Nickelson joined the Compensation
Committee in October 1997 following the resignation of Dr. Evnin, who served on
the committee until his resignation from the Company's Board of Directors in
October 1997. Mr. Ross joined the Compensation Committee in February 1998
following the resignation of Mr. Utt, who served on the committee until his
resignation from the Company's Board of Directors in January 1998. In addition
to actions taken by unanimous written consent, the Compensation Committee met
once during the last fiscal year.
The Executive Committee currently consists of Messrs. Evans-Freke
(Chairman), Hartman, Nickelson, Ross and Spizzirri. Mr. Spizzirri joined the
Executive Committee in February 1998 following the resignation of Dr. Evnin, who
served on the committee until his resignation from the Company's Board of
Directors in October 1997. The Board has delegated its power and authority to
manage and operate the Company in the ordinary course of business between Board
meetings to this committee, including the securing of debt financing and lease
transactions. The Board retains the power to issue shares of stock, declare
dividends and adopt certificates of ownership and merger on behalf of the
Company. In addition to actions taken by unanimous written consent, the
Executive Committee met three times during the last fiscal year.
The Nominating Committee was established to make recommendations concerning
nominations of new members to the Board of Directors. No procedure has been
established for the consideration of nominees recommended by stockholders. The
Nominating Committee was established in September 1997 and is composed of four
directors: Messrs. Curnock Cook, Evans-Freke (Chairman), Nickelson and Ross.
There were no meetings in 1997.
During the fiscal year ended December 31, 1997, with the exception of Mr.
Wall, who attended 60%, all incumbent directors attended at least 80% of the
aggregate of the meetings held of the Board and of the committees on which they
served during the period for which they were a director or committee member.
4
<PAGE>
MANAGEMENT
<TABLE>
Executive officers are appointed annually by the Board and serve at the
discretion of the Board. Set forth below are the names of and certain
biographical information concerning the executive officers of the Company.
<CAPTION>
Name Age Position
- ------------------------------------- ----- --------------------------------------------------
<S> <C> <C>
Stephen Evans-Freke (1) ............. 46 Chief Executive Officer and Chairman of the Board
K. Peter Hirth, Ph.D ................ 46 Executive Vice President and Chairman of the
Research and Development Committee
Stephen K. Carter, M.D. ............. 60 Senior Vice President, Clinical and Regulatory
Affairs
Sara A. Courtneidge, Ph.D. .......... 44 Senior Vice President, Research
Susan M. Kanaya. .................... 35 Treasurer
Peter J. Langecker, M.D., Ph.D. ..... 47 Vice President, Clinical Affairs
Gerald McMahon, Ph.D. ............... 43 Vice President, Drug Discovery
Gregory D. Plowman, M.D., Ph.D. ..... 41 Vice President, Molecular Biology
Dorian Rinella ...................... 49 Vice President, Human Resources
Laura K. Shawver, Ph.D .............. 40 Vice President, Preclinical and Pharmaceutical
Development
<FN>
- ------------
(1) See "Proposal 1 -- Election of Directors" for biographical information
concerning the Company's Chief Executive Officer and Chairman of the Board.
</FN>
</TABLE>
K. Peter Hirth, Ph.D., Executive Vice President, and Chairman of the
Research and Development Committee, joined the Company in March 1992. Dr. Hirth
held several positions with Boehringer Mannheim GmbH, a German pharmaceutical
company, from August 1984 to December 1991, most recently as Vice President and
Head of Immunopharmacology, Allergy, Virology and Microbiology.
Stephen K. Carter, M.D., Senior Vice President Clinical and Regulatory
Affairs, joined the Company in January 1998. From 1995 to 1997, Dr. Carter
served as Senior Vice President, Research and Development of Boehringer
Ingelheim Pharmaceuticals, Inc., a pharmaceutical company. From 1982 to 1995,
Dr. Carter held several positions at Bristol-Myers Squibb Pharmaceutical
Research Institute, a pharmaceutical company, most recently as Senior Vice
President, Worldwide Clinical Research and Development. Dr. Carter also serves
as a director of Alfacell Corporation. Dr. Carter has committed fifty percent of
his time to his SUGEN responsibilities, the balance being devoted to third party
consultancy and other interests. Dr. Carter received his Medical Degree in 1963
from the New York Medical College.
Sara A. Courtneidge, Ph.D., Senior Vice President, Research, joined the
Company in November 1994. Dr. Courtneidge was employed by the European Molecular
Biology Laboratory, an international molecular biology research center in
Heidelberg, Germany, from August 1985 to September 1994, first as Group Leader,
and most recently as Senior Scientist, Differentiation Programme. From January
1981 to July 1985, Dr. Courtneidge was a member of the Scientific Staff at the
National Institute of Medical Research, London, England.
Susan M. Kanaya, Treasurer, joined the Company in December 1994 and held
various positions with the Company prior to being appointed an officer of the
Company in October 1997. From July 1994 to September 1994, Ms. Kanaya served as
Business Manager of Viacom/Paramount New Media, a software development company,
and from July 1993 to July 1994, she served as Controller of 50/50 Micro
Electronics, Inc., a semi-conductor company. From March 1990 to May 1993, Ms.
Kanaya was employed by Power Up Software Corporation, a software development
company, serving as Accounting Manager until June 1992, then as Controller until
May 1993. Ms. Kanaya also previously served as a Supervising Senior Accountant
of KPMG Peat Marwick.
Peter J. Langecker, M.D., Ph.D., Vice President, Clinical Affairs, joined
the Company in July 1997. From July 1995 to July 1997, Dr. Langecker served as
Vice President, Clinical Research of Coulter
5
<PAGE>
Pharmaceutical, Inc., a biotechnology company, and from March 1992 to July 1995,
he served as Director, Clinical Research, Oncology of Schering-Plough Corp., an
international pharmaceutical company. Subsequent to receiving his Medical Degree
in 1984 and his Doctorate Degree in 1988 from the University of Munich, Dr.
Langecker joined CIBA-GEIGY AG, an international pharmaceutical company, where
he served as General Medical Advisor until February 1992.
Gerald McMahon, Ph.D., Vice President, Drug Discovery, joined the Company
in January 1994 and held various positions with the Company prior to being
appointed an officer of the Company in January 1998. Dr. McMahon served as
director of molecular oncology at Sandoz Research Institute from January 1989 to
January 1994. From 1984 to 1989 Dr. McMahon was employed by the Division of
Toxicology and the Department of Chemistry at MIT in Cambridge, Massachusetts
and conducted postdoctoral research in the Department of Hematology and Oncology
at Tufts University School of Medicine. Dr. McMahon earned his B.S. in Biology
and his Ph.D. in Molecular Biology from the Rennsselaer Polytechnic Institute.
Gregory D. Plowman, M.D., Ph.D., Vice President, Molecular Biology, joined
the Company in January 1994 and held various positions with the Company prior to
being appointed an officer of the Company in January 1998. Dr. Plowman held
several positions at Bristol-Myers Squibb from 1988 to December 1993, most
recently as head of a receptor biology program in the Oncology Drug Discovery
Department. During this period he cloned several growth factors and RTKs
including amphiregulin, HER3 and HER4. He earned his B.A. in Biology and
Chemistry from Whitman College and his M.D. and Ph.D. from the University of
Washington.
Dorian Rinella, Vice President, Human Resources, joined the Company in
December 1991 and held various positions with the Company prior to being
appointed an officer of the Company in January 1998. From 1984 to December 1991,
Ms. Rinella was employed by Doric Development, Inc., a real estate development
firm.
Laura K. Shawver, Ph.D., Vice President, Preclinical and Pharmaceutical
Development, joined the Company in June 1992 and held various positions with the
Company prior to being appointed an officer of the Company in February 1997.
From August 1989 to June 1992, Dr. Shawver held several positions at Berlex
Biosciences, most recently as Director of Cell Biology and Immunology. Dr.
Shawver also served as a research associate in the Department of Hematology and
Oncology at the Jewish Hospital at Washington University from 1986 to August
1989. Dr. Shawver received her Ph.D. in Pharmacology from the University of Iowa
and completed her postdoctoral fellowship in the Department of Microbiology at
the University of Virginia.
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
1992 STOCK OPTION PLAN
In February 1992, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1992 Stock Option Plan (the "Option Plan").
As a result of a series of amendments, at December 31, 1997 there were 2,750,000
shares of the Company's Common Stock authorized for issuance under the Option
Plan.
Through March 31, 1998, stock options (net of canceled or expired options)
covering an aggregate of 2,897,742 shares of the Company's Common Stock had been
granted under the Option Plan, of which options to purchase 147,742 shares (net
of canceled or expired options) are subject to stockholder approval of this
Proposal 2.
In February 1998, the Board of Directors approved an amendment to the
Option Plan, subject to stockholder approval, to enhance the flexibility of the
Board in granting stock options to employees, officers and consultants of the
Company and its affiliates and to directors of the Company. The amendment
increases the number of shares authorized for issuance under the Option Plan by
750,000 shares, from an aggregate of 2,750,000 shares to a total of 3,500,000
shares. The Board approved this amendment to ensure that the Company can
continue to grant stock options at levels determined appropriate by the Board.
6
<PAGE>
Stockholders are requested in this Proposal 2 to approve the amendment to
the Option Plan, as amended. The affirmative vote of the holders of a majority
of the shares present in person or represented by proxy and entitled to vote at
the meeting will be required to approve the Option Plan, as amended.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Option Plan are outlined below:
General
Incentive stock options granted under the Option Plan are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Nonstatutory stock
options granted under the Option Plan are intended not to qualify as incentive
stock options under the Code. See "Federal Income Tax Information" for a
discussion of the tax treatment of the various options included in the Option
Plan.
Purpose
The Option Plan was adopted to provide a means by which employees
(including officers and employee directors) of and selected consultants to the
Company and its affiliates and under certain circumstances, directors of the
Company could be given an opportunity to receive stock in the Company, to assist
in retaining the services of employees holding key positions, to secure and
retain the services of persons capable of filling such positions and to provide
incentives for such persons to exert maximum efforts for the success of the
Company. All full-time regular employees are eligible to participate in the
Option Plan.
Administration
The Option Plan is administered by the Board of Directors of the Company.
The Board has the power to construe and interpret the Option Plan and, subject
to the provisions of the Option Plan, to determine the persons to whom and the
dates on which options will be granted, what type of option will be granted, the
number of shares to be subject to each option, the time or times during the term
of each option within which all or a portion of such option may be exercised,
the exercise price, the type of consideration and other terms of the option. The
Board of Directors is authorized to delegate administration of the Option Plan
to a committee composed of at least two members of the Board. The Board has
delegated administration of the Option Plan to the Compensation Committee of the
Board. As used herein with respect to the Option Plan, the "Board" refers to the
Compensation Committee as well as to the Board of Directors itself.
Eligibility
Incentive stock options may be granted under the Option Plan only to
employees (including officers and employee directors) of the Company and its
affiliates. Consultants, directors and employees (including officers and
employee directors) are eligible to receive options other than incentive stock
options under the Option Plan. Directors who are not salaried employees of or
consultants to the Company or to any affiliate of the Company are not eligible
to participate in the Option Plan.
No option may be granted under the Option Plan to any person who, at the
time of the grant, owns (or is deemed to own) stock possessing more than 10% of
the total combined voting power of the Company or any affiliate of the Company,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant, and the term of the option
does not exceed five years from the date of grant. For incentive stock options
granted under the Option Plan, the aggregate fair market value, determined at
the time of grant, of the shares of Common Stock with respect to which such
options are exercisable for the first time by an optionee during any calendar
year (under
7
<PAGE>
all such plans of the Company and its affiliates) may not exceed $100,000. No
person may be granted options covering more than 434,527 shares of Common Stock
in any calendar year.
Stock Subject to the Incentive Plan
Subject to stockholder approval of this Proposal 2, an aggregate of
3,500,000 shares of Common Stock is reserved for issuance under the Option Plan.
If options granted under the Option Plan expire or otherwise terminate without
being exercised, the Common Stock not purchased pursuant to such options again
becomes available for issuance under the Option Plan.
Terms of Options
The following is a description of the permissible terms of options under
the Option Plan. Individual option grants may be more restrictive as to any or
all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the Option Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonstatutory options under the Option Plan may not be less
than 85% of the fair market value of the Common Stock subject to the option on
the date of the option grant, and in some cases (see "Eligibility" above) may
also not be less than 110% of such fair market value. However, if options were
granted with exercise prices below market value, deductions for compensation
attributable to the exercise of such options could be limited by Section 162(m)
of the Code. See "Federal Income Tax Information." At March 31, 1998, the
closing price of the Company's Common Stock as reported on the Nasdaq National
Market System was $13.625 per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the Option Plan is deemed to be canceled and a new option
granted. Both the option deemed to be canceled and the new option deemed to be
granted will be counted against the 434,527 per person share limitation.
The exercise price of options granted under the Option Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board (i) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement; or (c) in any other form of
legal consideration acceptable to the Board.
Option Exercise. Options granted under the Option Plan may become
exercisable in cumulative increments ("vest") as determined by the Board. Shares
covered by currently outstanding options under the Option Plan typically vest,
for an optionee's initial grant, at the rate of 25% of the shares subject to the
option on the first anniversary of the date of the optionee's commencement of
employment or consultant services and 1/12th of the remaining shares on the
first day of each quarter thereafter during the optionee's employment or service
as a consultant. Subsequent grants to the optionee, if any, typically vest at
the rate of 1/16th per quarter. Shares covered by options granted under the
Option Plan may be subject to different vesting terms. The Board has the power
to accelerate the time during which an option may be exercised. In addition,
options granted under the Option Plan may permit exercise prior to vesting, but
in such event the optionee may be required to enter into an early exercise stock
purchase agreement that allows the Company to repurchase shares not yet vested
at their exercise price should the optionee leave the employ of the Company
before vesting. To the extent provided by the terms of an option, an optionee
may satisfy any federal, state or local tax withholding obligation relating to
the exercise of such option by a cash payment upon exercise, by authorizing the
Company to withhold a portion of the stock otherwise issuable to the optionee,
by delivering already-owned stock of the Company or by a combination of these
means.
Term. The maximum term of options under the Option Plan is ten years,
except that in certain cases (see "Eligibility") the maximum term is five years.
Options under the Option Plan terminate within a period specified by the Board
(generally three months) after the optionee ceases to provide services to the
8
<PAGE>
Company or any affiliate of the Company, unless (a) the termination of service
is due to such person's permanent and total disability (as defined in the Code),
in which case the option may, but need not, provide that it may be exercised at
any time within twelve months of such termination; (b) the optionee dies while
providing services to the Company or any affiliate of the Company, or within
three months after termination of such service, in which case the option may,
but need not, provide that it may be exercised (to the extent the option was
exercisable at the time of the optionee's death) within twelve months of the
optionee's death by the person or persons to whom the rights to such option pass
by will or by the laws of descent and distribution; or (c) the option by its
terms specifically provides otherwise. Individual options by their terms may
provide for exercise within a longer period of time following termination of
employment or the consulting relationship. The option term may also be extended
in the event that exercise of the option within these periods is prohibited for
specified reasons.
Adjustment Provisions
If there is any change in the stock subject to the Option Plan or subject
to any option granted under the Option Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Option Plan and options
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to such plan, the maximum number of shares
which may be granted to any person during a calendar year, and the class, number
of shares and price per share of stock subject to such outstanding options.
Effect of Certain Corporate Events
The Option Plan provides for automatic acceleration of vesting of
outstanding options granted under the Option Plan in the event of a change of
control, which includes (i) a merger or consolidation in which the Company is
not the surviving corporation; (ii) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's outstanding common stock
are converted by virtue of the merger into other property; (iii) any other
capital reorganization in which more than fifty percent (50%) of the shares of
the Company entitled to vote are exchanged; (iv) a transaction or group of
related transactions involving the sale of all or substantially all of the
Company's assets; (v) certain acquisitions by a person, entity or group of the
beneficial ownership of securities of the Company representing more than fifty
percent (50%) of the combined voting power in the election of directors; and
(vi) certain changes in the composition of the Company's Board of Directors such
that, during any period of two consecutive years, individuals who, at the
beginning of such period, constitute the Board (including directors who at such
time were duly elected or nominated for election by the Company's stockholders
during such period), cease for any reason to have authority to cast at least a
majority of the votes which all directors on the Board are entitled to vote. The
acceleration of an option in the event of an acquisition or similar corporate
event may be viewed as an antitakeover provision, which may have the effect of
discouraging a proposal to acquire or otherwise obtain control of the Company.
Duration, Amendment and Termination
The Board may suspend or terminate the Option Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Option Plan will terminate in February 2002.
The Board may also amend the Option Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its adoption by the Board if
the amendment would: (a) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval in
order for the Plan to satisfy Section 422 of the Code, if applicable, or Rule
16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); (b) increase the number of shares reserved for
issuance upon exercise of options; or (c) change any other provision of the Plan
in any other way if such modification requires stockholder approval in order to
comply with Rule 16b-3 or satisfy the requirements of Section 422 of the Code.
The Board may submit any other amendment to the Option Plan for stockholder
approval, including, but not limited to, amendments intended to satisfy the
9
<PAGE>
requirements of Section 162(m) of the Code regarding the exclusion of
performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
Restrictions on Transfer
Under the Option Plan, an incentive stock option may not be transferred by
the optionee otherwise than by will or by the laws of descent and distribution
and, during the lifetime of an optionee, an option may be exercised only by the
optionee. A nonstatutory stock option may not be transferred except by will or
by the laws of descent and distribution or pursuant to a "qualified domestic
relations order." In addition, any shares subject to repurchase by the Company
under an early exercise stock purchase agreement may be subject to restrictions
on transfer which the Board deems appropriate.
Federal Income Tax Information
Incentive Stock Options. Incentive stock options under the Option Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term or mid-term capital gain or loss. Generally, if the
optionee disposes of the stock before the expiration of either of these holding
periods (a "disqualifying disposition"), at the time of disposition, the
optionee will realize taxable ordinary income equal to the lesser of (a) the
excess of the stock's fair market value on the date of exercise over the
exercise price, or (b) the optionee's actual gain, if any, on the purchase and
sale. The optionee's additional gain, or any loss, upon the disqualifying
disposition will be a capital gain or loss, which will be long-term, mid-term or
short-term depending on how long the stock was held (generally, mid-term capital
gain if the stock was held more than one year but not more than eighteen months
and long-term capital gain if the stock was held more than eighteen months).
Long-term and mid-term capital gains currently are generally subject to lower
tax rates than ordinary income. The maximum capital gains rate for federal
income tax purposes is currently 28% for mid-term capital gains and 20% for
long-term capital gains while the maximum ordinary income rate is effectively
39.6% at the present time. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
Option Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a reporting obligation, the Company will generally be entitled
to a business expense deduction equal to the taxable ordinary income realized by
the optionee. Upon disposition of the stock, the optionee will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such stock plus any amount recognized as ordinary
income upon exercise of the option. Such gain or loss will be long-term,
mid-term or short-term depending on how long the stock was held. 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.
10
<PAGE>
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m) of the Code,
compensation attributable to stock options will qualify as performance-based
compensation, provided that the option is granted by a compensation committee
comprised solely of "outside directors" and either: (i) the option plan contains
a per-employee limitation on the number of shares for which options may be
granted during a specified period, the per-employee limitation is approved by
the stockholders, and the exercise price of the option is no less than the fair
market value of the stock on the date of grant; or (ii) the option is granted
(or exercisable) only upon the achievement (as certified in writing by the
compensation committee) of an objective performance goal established in writing
by the compensation committee while the outcome is substantially uncertain, and
the option is approved by the stockholders. The Option Plan contains a
per-person, per-calendar year limitation of 434,527 shares, which was approved
by the Company's stockholders in 1995.
NEW PLAN BENEFITS
<TABLE>
The following table presents certain information, as of March 31, 1998,
with respect to options granted under the Option Plan which are subject to
stockholder approval, to (i) the Named Executive Officers (as defined below
under "Executive Compensation -- Compensation of Executive Officers") and (ii)
all executive officers as a group. No non-employee director was granted an
option under the Option Plan in 1997 as a director. None of the options to
acquire 147,742 shares of Common Stock that are subject to stockholder approval
were granted to non-executive officers.
<CAPTION>
1992 Stock Option Plan
---------------------------------------
Number of
Shares Subject to
Name and Position Dollar Value (1) Options Granted
------------------- ------------------ ------------------
<S> <C> <C>
Stephen Evans-Freke ................................... $ 585,000 45,000
Chief Executive Officer and
Chairman of the Board
K. Peter Hirth, Ph.D. ................................. 325,000 25,000
Executive Vice President and Chairman of
the Research and Development Committee
Sara A. Courtneidge, Ph.D ............................. 260,000 20,000
Senior Vice President, Research
Gerald McMahon, Ph.D. ................................. 130,000 10,000
Vice President, Drug Discovery
Laura K. Shawver, Ph.D. ............................... 156,000 12,000
Vice President, Preclinical and
Pharmaceutical Development
All Executive Officers as a group (8 persons) ......... 1,907,521 147,742
<FN>
- ------------
(1) Exercise price multiplied by the number of shares underlying the option(s).
</FN>
</TABLE>
11
<PAGE>
PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In April 1994, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1994 Non-Employee Directors' Stock Option
Plan (the "Directors' Plan"). As a result of a series of amendments, at December
31, 1997 there were 230,000 shares of the Company's Common Stock authorized for
issuance under the Directors' Plan.
In February 1995, the Directors' Plan was amended to increase the automatic
annual grant to each Non-Employee Director, from an option to purchase 2,000
shares of Common Stock to an option to purchase 5,000 shares of Common Stock and
to change the date of the grant from the date of each annual meeting of
stockholders, commencing with the 1996 Annual Meeting, to ten days subsequent to
each annual meeting of stockholders, commencing with the 1995 Annual Meeting of
Stockholders.
Through March 31, 1998, stock options (net of canceled or expired options)
covering an aggregate of 168,000 shares of the Company's Common Stock had been
granted under the Directors' Plan.
In February 1998, the Board of Directors approved an amendment to the
Directors' Plan, subject to stockholder approval, to enhance the flexibility of
the Board in granting stock options to persons who are directors of the Company
and who are not employees of the Company or of any affiliates ("Non-Employee
Directors"). The amendment increases the number of shares authorized for
issuance under the Directors' Plan by 150,000 shares, from an aggregate of
230,000 shares to a total of 380,000 shares. The Board approved this amendment
to ensure that the Company can continue to grant stock options at levels
determined appropriate by the Board.
Stockholders are requested in this Proposal 3 to approve the amendment to
the Directors' Plan. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the meeting and entitled to
vote will be required to approve the Directors' Plan.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3
The essential features of the Directors' Plan are outlined below.
General
The Directors' Plan provides for non-discretionary grants of nonstatutory
stock options to Non-Employee Directors of the Company. Nonstatutory stock
options granted under the Directors' Plan are intended not to qualify as
"incentive stock options" under the Code. See "Tax Information" below for a
discussion of the tax treatment of nonstatutory stock options.
Purpose
The Directors' Plan was adopted to provide a means by which each director
who is not otherwise an employee of the Company or of any affiliates will be
given an opportunity to purchase stock of the Company and to advance the
interests of the Company through the motivation, attraction and retention of
qualified Non-Employee Directors. All Non-Employee Directors are eligible to
receive options under the Directors' Plan.
Administration
The Directors' Plan is administered by the Board of Directors. The Board
has the power to construe and interpret the Directors' Plan and is authorized to
delegate administration of such plan to a committee composed of not fewer than
two members of the Board (the "Committee"). As used herein with respect to the
Directors' Plan, the "Board" refers to the Committee as well as to the Board of
Directors itself.
Eligibility
Only Non-Employee Directors of the Company are eligible to receive options
under the Directors' Plan.
12
<PAGE>
Stock Subject to the Directors' Plan
Subject to stockholder approval of this Proposal 3, an aggregate of 380,000
shares of Common Stock is reserved for issuance under the Directors' Plan. If
options granted under the Directors' Plan expire or otherwise terminate without
having been exercised in full, the stock not purchased pursuant to such options
again becomes available for issuance under the plan.
Terms of Options
The following is a description of the terms of options under the Directors'
Plan.
Non-Discretionary Grants. Option grants under the Directors' Plan are
automatic and non-discretionary. The Directors' Plan provides that (i) upon the
date of the Annual Meeting of Stockholders of the Company held during 1995, each
person who is then a Non-Employee Director and has been a Non-Employee Director
for at least three months will receive an automatic grant of an option to
purchase 2,000 shares of Common Stock ("Initial Grants"); (ii) each person
elected for the first time to be a Non-Employee Director after the adoption of
the Directors' Plan will be granted an option on the date of his or her initial
election as a Non-Employee Director to purchase 10,000 shares of Common Stock;
and (iii) ten days following the date of each annual meeting of stockholders,
commencing with the Annual Meeting held during 1995, each Non-Employee Director
who is then a Non-Employee Director and who has served as a Non-Employee
Director for at least three months, will receive an option to purchase 5,000
shares of Common Stock.
Option Exercise. The Initial Grants are fully exercisable ("vest") on the
date of grant. Options granted to new Non-Employee Directors vest in equal
annual installments over a period of five years from the date of the grant.
Options granted annually to existing Non-Employee Directors of the Company vest
in full on the date ten days prior to the date of the first annual meeting of
stockholders of the Company subsequent to the date of the grant. In December
1997, the Directors' Plan was amended to provide that future options granted
under the Directors' Plan will allow the optionees to exercise an option, in
whole or in part, prior to the full vesting of the options, subject to a
repurchase right in favor of the Company as to any unvested shares. All vesting
is subject to continued service on the Board as a Non-Employee Director.
Exercise Price; Payment. The exercise price of all options granted under
the Directors' Plan is 100% of the fair market value of the Common Stock of the
Company on the date on which the option is granted. The exercise price of
options granted under the Directors' Plan must be paid either (i) in cash at the
time the option is exercised; or (ii) by delivery of other Common Stock of the
Company; or (iii) by a combination of the methods of payment specified in (i) or
(ii) above. At March 31, 1998, the closing price of the Company's Common Stock
as reported on the Nasdaq National Market System was $13.625 per share.
Term. The term of options under the Directors' Plan is 10 years. An option
may be exercised following termination of the optionee's service as a
Non-Employee Director of the Company only for that number of shares for which it
was vested on the date of termination of such service.
Adjustment Provisions
If there is any change in the stock subject to the Directors' Plan or
subject to any option granted thereunder (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Directors' Plan and
options outstanding thereunder will be appropriately adjusted as to the class
and the maximum number of shares subject to such plan, and the class, number of
shares and price per share of stock subject to any such outstanding options.
Effect of Certain Corporate Events
The Directors' Plan provides for automatic acceleration of vesting of
outstanding options granted under the Directors' Plan in the event of a change
of control, which includes (i) a merger or consolidation in which the Company is
not the surviving corporation; (ii) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's outstanding common stock
are converted by virtue
13
<PAGE>
of the merger into other property; (iii) any other capital reorganization in
which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged; (iv) a transaction or group of related transactions
involving the sale of all or substantially all of the Company's assets; (v)
certain acquisitions by a person, entity or group of the beneficial ownership of
securities of the Company representing more than fifty percent (50%) of the
combined voting power in the election of directors; and (vi) certain changes in
the composition of the Company's Board of Directors such that, during any period
of two consecutive years, individuals who, at the beginning of such period,
constitute the Board (including directors who at such time were duly elected or
nominated for election by the Company's stockholders during such period), cease
for any reason to have authority to cast at least a majority of the votes which
all directors on the Board are entitled to vote. The acceleration of an option
in the event of an acquisition or similar corporate event may be viewed as an
antitakeover provision, which may have the effect of discouraging a proposal to
acquire or otherwise obtain control of the Company.
Duration, Amendment and Termination
Unless sooner terminated, the Directors' Plan will terminate in April 2004,
or upon the occurrence of any event described in the preceding paragraph. The
Board may suspend or terminate the Directors' Plan without stockholder approval
or ratification at any time or from time to time.
The Board may amend the Directors' Plan at any time, provided that the
Board shall not amend the plan more than once every six months with respect to
the provisions of the Directors' Plan which relate to the amount, price and
timing of grants, other than to comport with changes in the Code or the Employee
Retirement Income Security Act ("ERISA"). However, no amendment will be
effective unless approved by the stockholders of the Company within 12 months
before or after the adoption of the amendment, where the amendment would: (i)
modify the requirements as to eligibility for participation to the extent such
modification requires stockholder approval in order for such Plan to comply with
the requirements of Rule 16b-3; (ii) increase the number of shares reserved for
issuance upon exercise of options, or (iii) change any other provision of the
Directors' Plan in any other way if such modification requires stockholder
approval in order to comply with Rule 16b-3.
Restrictions on Transfer
Under the Directors' Plan, an option may not be transferred by the optionee
otherwise than by will or by laws of descent and distribution. During the
lifetime of an optionee, an option may be exercised only by the optionee, or by
his or her guardian or legal representative.
Federal Income Tax Information
The following is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Directors' Plan, does not purport to be complete, and does not
discuss the income tax laws of any state or foreign country in which an optionee
may reside.
Options granted under the Directors' Plan are nonstatutory options. 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 generally will recognize ordinary income for tax purposes measured by
the excess of the then fair market value of the shares over the option price.
Because the optionee may exercise an option as to unvested shares, subject to
the Company's repurchase right, the date of taxation (and the date of
measurement of taxable ordinary income) may be deferred in such instances unless
the optionee files an election under Section 83(b) of the Code. The filing of a
Section 83(b) election with respect to the exercise of an option may affect the
time of taxation and the amount of income recognized at such time. At the time
the optionee recognizes ordinary income due to the exercise of the option, the
Company will generally be entitled to a business expense deduction equal to the
taxable ordinary income realized by the optionee. Upon resale of such shares by
the optionee, any difference between the sales price and the exercise price, to
the extent not recognized as ordinary income as provided above, generally will
be treated as capital gain or loss, and will qualify for long-term or mid-term
capital gain or loss treatment if the shares have been held for more than one
year.
14
<PAGE>
NEW PLAN BENEFITS
The following table presents certain information with respect to options to
be granted in 1998 to all Non-Employee Directors as a group under the Directors'
Plan.
1994 Non-Employee Directors'
Stock Option Plan
---------------------------------------
Number of
Shares Subject To
Name and Position Dollar Value (1) Options Granted
------------------- ------------------ ------------------
All Non-Employee Directors as a
group (8 persons) ............ -- 40,000 (2)
- ------------
(1) The dollar value of the shares subject to options to be granted is not
determinable at this time but will be equal to the fair market value of the
stock subject to such option on the date of grant.
(2) Each of the Company's eight Non-Employee Directors will receive an option
to purchase 5,000 shares of the Company's Common Stock as of the date ten
days after the Company's 1998 Annual Meeting of Stockholders.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
began auditing the Company's financial statements with the fiscal year ended
December 31, 1992. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's 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 Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A VOTE
IN FAVOR OF PROPOSAL 4.
15
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 1998, by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table of the Company; (iii) all executive officers and directors of
the Company as a group; and (iv) all those known by the Company to be beneficial
owners of more than five percent of its Common Stock.
<CAPTION>
Beneficial Ownership (1)
-------------------------
Number of Percent of
Beneficial Owner Shares Total
- ---------------- ----------- -----------
<S> <C> <C>
Zeneca Limited ........................................................... 3,036,016 19.7
15 Stanhope Gate
London W1Y 6LN
England
Stephen Evans-Freke (2) .................................................. 763,469 4.9
Jeremy L. Curnock Cook (3) ............................................... 751,667 4.9
Charles M. Hartman (4) ................................................... 442,049 2.9
Heinrich Kuhn (5) ........................................................ 52,666 *
Donald E. Nickelson (6) .................................................. 50,999 *
Bruce R. Ross (7) ........................................................ 37,000 *
Richard D. Spizzirri (8) ................................................. 322,504 2.1
Axel Ullrich, Ph.D. (9) .................................................. 229,333 1.5
Michael A. Wall (10) ..................................................... 65,721 *
Sara A. Courtneidge, Ph.D. (11) .......................................... 69,999 *
K. Peter Hirth, Ph.D. (12) ............................................... 166,314 1.1
Gerald McMahon, Ph.D. (13) ............................................... 24,145 *
Laura K. Shawver, Ph.D. (14) ............................................. 42,072 *
All executive officers and directors as a group (19 persons) (15) ........ 3,323,747 20.6
<FN>
- ----------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission ("SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
15,412,360 shares of Common Stock outstanding on March 31, 1998, adjusted
as required by rules promulgated by the SEC.
(2) Includes (i) 5,333 shares beneficially owned by ITIM Corp., of which Mr.
Evans-Freke is a stockholder and director, (ii) 23,424 shares beneficially
owned by Mr. Evans-Freke as co-trustee of his children's trusts, (iii)
8,271 shares owned by his spouse, (iv) 29,855 shares of Common Stock
subject to repurchase in favor of the Company, and (v) 270,000 shares
subject to stock options exercisable within 60 days of March 31, 1998, of
which 174,938 are subject to a repurchase option in favor of the Company in
the event of early exercise.
(3) Includes 736,667 shares beneficially held by International Biotechnology
Trust plc ("IBT") of which Mr. Curnock Cook is a director. Mr. Curnock Cook
is a director of Rothschild Asset Management Limited, the discretionary
investment advisor of IBT. Mr. Curnock Cook disclaims beneficial ownership
of the IBT shares. Also includes 15,000 shares subject to stock options
exercisable within 60 days of March 31, 1998, of which 8,000 would be
subject to a repurchase option in favor of the Company in the event of
early exercise.
16
<PAGE>
(4) Includes 306,666 shares owned by CW R&D II (Financial) Fund, L.P. and
105,050 shares owned by CW Ventures II, L.P. Mr. Hartman is a general
partner of CW Partners II, L.P. ("CWP II") and CW Partners III, L.P. ("CWP
III"). CWP II is a general partner of CW R&D II (Financial) Fund, L.P. CWP
III is a general partner of CW Ventures II, L.P. Mr. Hartman disclaims
beneficial ownership of the shares held by such entities except to the
extent of his partnership interests therein. Also includes 17,000 shares
subject to stock options exercisable within 60 days of March 31, 1998.
(5) Includes 27,000 shares subject to stock options exercisable within 60 days
of March 31, 1998, of which 3,125 are subject to a repurchase option in
favor of the Company in the event of an early exercise.
(6) Includes (i) 23,999 shares beneficially owned by Nickelson Properties
Limited Partnership of which Mr. Nickelson is a limited partner and the
sole shareholder and director of DN Holdings, Inc., the general partner of
Nickelson Properties Limited Partnership, and (ii) 27,000 shares subject to
stock options exercisable within 60 days of March 31, 1998.
(7) Includes 33,000 shares subject to stock options exercisable within 60 days
of March 31, 1998.
(8) Includes 17,000 shares subject to stock options exercisable within 60 days
of March 31, 1998.
(9) Includes 37,333 shares subject to stock options exercisable within 60 days
of March 31, 1998, of which 2,813 are subject to a repurchase option in
favor of the Company in the event of an early exercise.
(10) Includes (i) 6,666 shares registered to Mr. Wall as trustee of his
children's trust account, and (ii) 17,000 shares subject to stock options
exercisable within 60 days of March 31, 1998.
(11) Includes 68,999 shares subject to stock options exercisable within 60 days
of March 31, 1998.
(12) Includes (i) 25,000 shares of Common Stock issued subject to forfeiture at
the option of the Company upon the termination of employment prior to a
specified date, and (ii) 105,545 shares subject to stock options
exercisable within 60 days of March 31, 1998.
(13) Includes 14,146 shares subject to stock options exercisable within 60 days
of March 31, 1998.
(14) Includes 26,967 shares subject to stock options exercisable within 60 days
of March 31, 1998.
(15) Includes shares held by directors and executive officers of the Company,
and entities affiliated with such persons. Also includes 54,855 shares
subject to repurchase or forfeiture in favor of the Company and 763,947
shares subject to stock options held by executive officers and directors
exercisable within 60 days of March 31, 1998, of which 191,688 are subject
to a repurchase option in favor of the Company in the event of early
exercise; see Notes 2 through 14 above.
</FN>
</TABLE>
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 SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent stockholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were met.
EXECUTIVE COMPENSATION
Compensation of Directors
Each of the Company's non-employee directors receives a fee of $1,000 for
each Board of Directors and Board committee meeting attended. In the event that
a Board meeting and Board committee meeting are held on the same day, directors
receive a fee for attending only one meeting. Non-employee directors are also
eligible for reimbursement of their expenses incurred in connection with
attendance at meetings,
17
<PAGE>
in accordance with Company policy. Directors who are employees of the Company do
not receive separate compensation for their services as directors, but are
eligible to receive stock options under the Company's stock option plans. Each
non-employee director of the Company receives stock option grants under the
Directors' Plan. Only non-employee directors of the Company are eligible to
receive options under the Directors' Plan.
Compensation of Executive Officers
<TABLE>
The following table shows for the fiscal years ending December 31, 1997,
1996 and 1995, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and its other four most highly compensated executive
officers whose total annual salary and bonuses exceeded $100,000 for the fiscal
year ending December 31, 1997 (the "Named Executive Officers"):
<CAPTION>
Summary Compensation Table
Annual Compensation
------------------------------------------------
Other Annual
Name and Principal Position Year Salary Bonus Compensation
- ------------------------------------ ------ ------------ ----------- ----------------
<S> <C> <C> <C> <C>
Stephen Evans-Freke ................ 1997 $ 320,000 $110,000 $ 0
Chief Executive Officer and 1996 $ 290,000 $ 95,000 $ 0
Chairman of the Board 1995 $ 260,000 $ 84,000 $ 0
K. Peter Hirth, Ph.D ............... 1997 $ 225,000 $ 47,972 $ 0
Executive Vice President and 1996 $ 197,743 $ 50,000 $ 0
Chairman of the Research and 1995 $ 161,599 $ 33,735 $ 0
Development Committee
Sara A. Courtneidge, Ph.D. ......... 1997 $ 165,000 $ 31,350 $ 0
Senior Vice President, Research 1996 $ 147,700 $ 26,586 $ 0
1995 $ 143,458 $ 21,000 $ 925(4)
Gerald McMahon ..................... 1997 $ 130,000 $ 17,550 $ 0
Vice President, Drug Discovery 1996 $ 120,350 $ 18,053 $ 0
1995 $ 111,300 $ 13,773 $ 0
Laura K. Shawver, Ph.D. ............ 1997 $ 140,000 $ 23,800 $ 0
Vice President, Preclinical and 1996 $ 116,950 $ 17,543 $ 0
Pharmaceutical Development 1995 $ 106,848 $ 13,223 $ 0
Long-Term Compensation Awards
----------------------------------------------------------
Securities
Underlying
Restricted Stock Options/ All Other
Name and Principal Position Awards SARs (#) Compensation
- ------------------------------------ -------------------- ------------------ ------------------
Stephen Evans-Freke ................ $ 0 45,000 $ 0
Chief Executive Officer and $ 0 45,000 $ 0
Chairman of the Board $ 0 180,000 (1) $ 0
K. Peter Hirth, Ph.D ............... $ 350,000(2) 75,000 $ 0
Executive Vice President and $ 0 35,000 $ 50,000(3)
Chairman of the Research and $ 0 73,200 $ 0
Development Committee
Sara A. Courtneidge, Ph.D. ......... $ 0 20,000 $ 0
Senior Vice President, Research $ 0 20,000 $ 0
$ 0 25,000 $ 3,085(4)
Gerald McMahon ..................... $ 0 10,000 $ 0
Vice President, Drug Discovery $ 0 8,500 $ 0
$ 0 8,000 $ 0
Laura K. Shawver, Ph.D. ............ $ 0 12,000 $ 0
Vice President, Preclinical and $ 0 15,000 $ 0
Pharmaceutical Development $ 0 10,000 $ 0
<FN>
- ----------------
(1) Includes options to purchase 45,000 shares of Common Stock granted in
January 1996 for prior year's performance.
(2) Includes 25,000 shares of Common Stock issued to Dr. Hirth in September
1997 in connection with a Restricted Stock Purchase Agreement for past
services rendered to the Company, subject to forfeiture at the option of
the Company upon the termination of Dr. Hirth's employment prior to a
specified date. Subject to certain restrictions, such shares shall vest in
full on March 31, 1999.
(3) Dr. Hirth's other compensation of $50,000 during 1996 consisted of the
forgiveness of a loan for the purchase of a residence.
(4) Dr. Courtneidge's other compensation of $3,085 during 1995 consisted of
reimbursement for relocation expenses. The other annual compensation of
$925 during 1995 consisted of a tax gross-up on the relocation
reimbursement.
</FN>
</TABLE>
Stock Option Grants and Exercises
The Company grants options to its executive officers under its Option Plan
and Long-Term Objectives Stock Option Plan for Senior Management (the "LTO Plan"
and collectively with the Option Plan, the "Employee Plans"). As of December 31,
1997, options to purchase a total of 2,102,341 shares (net of canceled or
expired options) had been granted and were outstanding under the Employee Plans,
of which 77,161 are subject to stockholder approval.
18
<PAGE>
<TABLE>
The following tables show for the fiscal year ended December 31, 1997,
certain information regarding options granted to, exercised by, and held at year
end by the Named Executive Officers:
<CAPTION>
Option Grants in Fiscal Year 1997
Individual Grants
-------------------------------------------------------------
% of Total
Number of Options
Securities Granted to Market
Underlying Employees Exercise Price On
Options in Fiscal Price Date of Expiration
Name Granted (#) Year (1) ($/Sh) Grant Date
------ ------------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Stephen Evans-Freke (3) ................ 45,000 7.32 $ 13.00 $ 13.00 12/22/07
K. Peter Hirth, Ph.D. (4) .............. 50,000 8.14 14.00 14.00 9/15/07
25,000 4.07 13.00 13.00 12/22/07
Sara A. Courtneidge, Ph.D. (5) ......... 20,000 3.26 13.00 13.00 12/22/07
Gerald McMahon, Ph.D. (6) .............. 10,000 1.63 13.00 13.00 12/22/07
Laura K. Shawver, Ph.D. (7) ............ 12,000 1.96 13.00 13.00 12/22/07
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term (2)
---------------------------------
Name 0% ($) 5% ($) 10% ($)
------ -------- ----------- ------------
Stephen Evans-Freke (3) ................ $0 $367,903 $ 932,339
K. Peter Hirth, Ph.D. (4) .............. 0 440,226 1,115,620
0 204,391 517,966
Sara A. Courtneidge, Ph.D. (5) ......... 0 163,513 414,373
Gerald McMahon, Ph.D. (6) .............. 0 81,756 207,187
Laura K. Shawver, Ph.D. (7) ............ 0 98,108 248,624
<FN>
- ----------------
(1) Based on an aggregate of 614,500 options granted under the Option Plan in
fiscal year 1997 to employees. There were no options granted under the LTO
Plan in fiscal year 1997.
(2) The potential realizable value is based on the term of the option at the
time of grant (10 years). It is calculated by assuming that the stock price
on the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option, and that the option is
exercised and sold on the last day of its term at the appreciated price. No
gain to the optionee is possible unless the stock price increases over the
option term, which will benefit all stockholders.
(3) Options to purchase 45,000 shares of Common Stock vests over four years at
the rate of one-sixteenth of the shares subject to the option per quarter
beginning January 1, 1998.
(4) Each option to purchase 50,000 shares and 25,000 shares of Common Stock
vests over four years at the rate of one-sixteenth of the shares subject to
the option per quarter beginning October 1, 1997 for the September 1997
grant and January 1, 1998 for the December 1997 grant.
(5) Options to purchase 20,000 shares of Common Stock vest over four years at
the rate of one-sixteenth of the shares subject to the option per quarter
beginning January 1, 1998.
(6) Options to purchase 10,000 shares of Common Stock vest over four years at
the rate of one-sixteenth of the shares subject to the option per quarter
beginning January 1, 1998.
(7) Options to purchase 12,000 shares of Common Stock vest over four years at
the rate of one-sixteenth of the shares subject to the option per quarter
beginning January 1, 1998.
</FN>
</TABLE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<CAPTION>
Value of
Number of Securities Unexercised
Underlying In-the-Money
Unexercised Options Options at
Shares at FY-End (#) FY-End ($)(2)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($)(1) Unexercisable Unexercisable
- ------------------------------------ -------------- ----------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Stephen Evans-Freke ................ 0 $ 0 270,000/0 $ 821,250/0
K. Peter Hirth, Ph.D ............... 2,666 30,992 80,645/155,289 543,479/265,142
Sara A. Courtneidge, Ph.D. ......... 1,000 5,438 55,874/58,126 300,740/124,572
Gerald McMahon, Ph.D ............... 6,000 110,063 9,250/23,084 31,227/41,719
Laura K. Shawver, Ph.D. ............ 3,500 40,688 23,842/32,000 154,488/54,547
<FN>
- ----------------
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price and does not
necessarily indicate that the optionee sold such stock.
(2) Based on the fair market value of the Company's Common Stock at December
31, 1997 ($13.125), minus the exercise price of the option.
</FN>
</TABLE>
19
<PAGE>
Report of the Compensation Committee of the Board of Directors on Executive
Compensation (i)
The Company's executive compensation program is administered by the
Compensation Committee, composed in 1997 of Anthony B. Evnin (who resigned from
the Company's Board of Directors in October 1997), Donald E. Nickelson
(effective October 1997), Glenn S. Utt, Jr. and Michael A. Wall, each a
non-employee director of the Company in 1997. Subsequent to Mr. Utt's
resignation from the Company's Board of Directors in January 1998, Bruce R. Ross
was elected to the Compensation Committee to replace Mr. Utt.
The Company's executive compensation program is designed to retain,
motivate and reward executives who are responsible for leading the Company in
achieving its business objectives. All decisions by the Compensation Committee
relating to the compensation of the Company's executive officers are reviewed by
the full Board. This report is submitted by the Compensation Committee and
addresses the Company's compensation policies for the fiscal year ended December
31, 1997 as they affected Stephen Evans-Freke, in his capacity as Chairman of
the Board and Chief Executive Officer of the Company, and the other executive
officers of the Company.
Compensation Philosophy
The objectives of the executive compensation program are to (i) align
compensation with the Company's business objectives and individual performance,
(ii) motivate and reward high levels of performance, (iii) recognize and reward
the achievement of team and individual goals and (iv) enable the Company to
attract, retain and reward executive officers who contribute to the long-term
success of the Company.
The Company's executive compensation philosophy is to tie a significant
portion of executive compensation to the performance of the Company and is based
on the following:
- The Committee compares its executive compensation practices with
those of other companies in the industry and sets its compensation
guidelines based on this review. The Committee believes that the
Company's base annual salaries for its executives are generally in the
mid-range of those paid to executives of comparable companies in the
biopharmaceutical industry. The Compensation Committee seeks, however,
to provide its executives with opportunities for higher compensation
through cash bonuses, stock options and, to a more limited extent,
restricted stock awards.
- The Committee believes that, in order to further motivate its
executives, a very substantial portion of the compensation of the
Company's executives should be linked to the Company's performance,
including that of its stock in the marketplace. The linkage is achieved
through the Company's stock option program, which includes the
Company's 1992 Stock Option Plan (the "1992 Plan") and Long-Term
Objectives Stock Option Plan for Senior Management (the "LTO Plan").
This program also serves to more fully align the interests of
management with those of the Company's stockholders.
- The Committee also believes that an executive compensation program
that ties cash bonus awards to performance and achievement of the
Company's stated goals serves both as an influential motivator to its
executives and as an effective instrument for aligning their interests
with those of the stockholders of the Company.
- ------------
(i) The material in this report is not "soliciting material," is not deemed
filed with the SEC, and is not to be incorporated by reference in any filing of
the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date hereof
and irrespective of any general incorporation language contained in such filing.
20
<PAGE>
Implementation of Compensation Program
Annual compensation for the Company's executives consists of three
principal elements: salary, cash bonuses and stock options.
Salary
The Compensation Committee sets the base annual salary for executives by
reviewing compensation for comparable positions in the market and the historical
compensation levels of the Company's executives. Currently, the base annual
salaries of the Company's executives are at levels which the Compensation
Committee believes are generally in the midrange of executives of companies with
which the Company compares itself. Increases in annual salaries are based on a
review and evaluation of executive salary levels and the demonstrated
capabilities of the executives in managing the key aspects of a
biopharmaceutical company, including, generally in order of importance, (i)
research, drug discovery and preclinical and clinical development, (ii)
strategic planning, including corporate and scientific collaborations and
patent, (iii) financial matters, including attracting capital and financial
planning and (iv) human resources.
Cash Bonuses
In December 1996, the Compensation Committee adopted the 1997 Key
Management Cash Incentive Compensation Plan (the "1997 CIP"). The objectives of
the 1997 CIP were consistent with the Company's compensation philosophy set
forth above. The objectives of the 1997 CIP were to motivate and reward key
management, including officers of the Company, for achievement of significant
operating objectives and to retain key management by remaining competitive with
other biotechnology companies. The structure of the 1997 CIP was that two-thirds
of an officer's cash bonus was directly related to achievement of specific goals
and the remaining one-third was discretionary. The goals for the officers of the
Company are established annually by the Board of Directors or a Committee
designated by the Board. Individual bonuses of 15% or more of a participant's
annual base salary are approved by the Compensation Committee. Cash bonuses
under the 1997 CIP were based on the achievement of the specific operating
objectives established for the Company during 1997, combined with a subjective
assessment of individual performance. The Company's goals included the
achievement of objectives with respect to controlling cash spending, including
capital expenditures, in accordance with the Company's annual budget, management
of the Company's future relocation to a larger facility, advancement of the
Company's clinical and preclinical drug development programs, furthering the
Company's corporate collaboration strategies and obtaining additional financing
for the Company, as well as the attainment of other goals established for the
year for the Company and for individual executive officers
Pursuant to the 1997 CIP, each of the Named Executive Officers received a
cash performance bonus for fiscal 1997 ranging from a high of approximately 34%
to a low of approximately 14% of the executive officer's annual base salary. All
executive officers of the Company as a group received aggregate bonus awards of
$285,553 for fiscal 1997 performance, representing a range of 12% to 34% of the
executive officers' respective base salaries.
Stock Options
Total compensation at the executive level also includes long-term
incentives offered by stock options. Stock options are designed to promote the
identity of long-term interests between the Company's employees and its
stockholders and to assist in the retention of employees. In the case of stock
options, the size of individual option grants is generally intended to reflect
the executive's position with the Company and his or her importance and
contributions to the Company. Options have been granted to executives under the
1992 Plan and the LTO Plan. The option program generally requires a vesting
period to encourage employees to continue in the employ of the Company.
In December 1997, the Compensation Committee awarded performance based
stock option grants under the 1992 Plan to all of the Company's executive
officers for 1997 performance. Options granted under the 1992 Plan generally
vest quarterly over four years from the date of the grant. It has been the
Company's practice to fix the exercise price of option grants under the 1992
Plan at 100% of the fair
21
<PAGE>
market value per share on the date of grant. The Compensation Committee
considered the number of options held by executive officers when awarding stock
option grants under the 1992 Plan.
No options were granted under the LTO Plan in 1997. The LTO Plan was
adopted in 1995 to provide a means to enable the Company to create significant
incentives for senior executive management employees to exert maximum efforts
for the success of the Company through the award of options to purchase shares
of the Company's Common Stock, which become exercisable over an extended vesting
schedule, subject to acceleration upon the achievement of certain specific
long-term objectives important to the Company's success.
Limitation on Deduction of Compensation Paid to Certain Named Executive
Officers
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than $1,000,000 of
compensation paid to certain executive officers in a taxable year. Compensation
above $1,000,000 may be deducted if it is "performance-based compensation"
within the meaning of the Code.
The Compensation Committee has determined that stock options granted under
the 1992 Plan with an exercise price at least equal to the fair market value of
the Company's Common Stock on the date of grant shall be treated as
"performance-based compensation." The Compensation Committee has determined that
compensation attributable to stock options granted under the LTO Plan shall be
counted toward the $1,000,000 limitation and, to the extent such compensation
exceeds $1,000,000 when combined with all other types of compensation received
by a covered employee from the Company, may not be deductible as a business
expense by the Company.
Compensation of the Chief Executive Officer in Fiscal 1997
As discussed above, Mr. Evans-Freke is eligible to participate in the same
executive compensation plans available to the other executive officers of the
Company, including the 1997 CIP. The Compensation Committee set Mr.
Evans-Freke's total annual compensation, including compensation derived from the
1997 CIP and stock option program, at a level it believes is competitive with
that of other Chief Executive Officers at other companies in the
biopharmaceutical industry, although at the middle of the range. In addition,
Mr. Evans-Freke's performance-based options are at a level and subject to terms
that the Compensation Committee believes will properly motivate and retain Mr.
Evans-Freke as the Chief Executive Officer of the Company.
Mr. Evans-Freke earned $320,000 in 1997 as his annual base salary. In
determining Mr. Evans-Freke's salary for 1997, the Compensation Committee
reviewed various factors. These factors included Mr. Evans-Freke's contributions
for the prior year, including the advancement of research and development
activities and the successful 1996 public offering of the Company's Common
Stock, as well as Mr. Evans-Freke's overall success in managing and motivating
the Company's employees in order to meet the Company's operating and corporate
objectives, together with the challenges to be faced in 1997 and the desire to
offer a competitive salary. His bonus award of $110,000 for fiscal 1997
performance reflects substantial attainment of the Company's goals for 1997, as
discussed above under "Implementation of Compensation Program-Cash Bonuses",
including particularly the advancement of the Company's research and development
activities and the Company's receipt in 1997 of approximately $46.0 million of
net proceeds from the Company's private placement of convertible notes and
public offering of Common Stock.
22
<PAGE>
In December 1997, the Compensation Committee granted Mr. Evans-Freke an
option under the 1992 Plan to purchase 45,000 shares of the Company's Common
Stock in recognition of Mr. Evans-Freke's substantial contributions to the
Company in 1997. The Compensation Committee determined that the level of options
granted to Mr. Evans-Freke under the 1992 Plan was commensurate with Mr.
Evans-Freke's substantial contributions on behalf of the Company during 1997, as
set forth above, and that the level of options previously granted under the LTO
Plan and the terms of such options are consistent with the Company's objectives
of motivating and rewarding senior executive officers.
Compensation Committee
Anthony B. Evnin (Resigned October 1997)
Donald E. Nickelson (Effective October 1997),
Chairman
Bruce R. Ross (Effective February 1998)
Glenn S. Utt, Jr. (Resigned January 1998)
Michael A. Wall
23
<PAGE>
Performance Measurement Comparison
<TABLE>
The following chart shows the total stockholder return of an investment of
$100 on October 4, 1994 in cash of (i) the Company's Common Stock, (ii) the
Nasdaq Stock Market (U.S.) Index ("Nasdaq") and (iii) the Hambrecht & Quist
Biotechnology Index ("H&Q"). All values assume reinvestment of the full amount
of all dividends and compound on a monthly basis:
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<CAPTION>
COMPARISON OF 13 QUARTER CUMULATIVE TOTAL RETURN ON INVESTMENT
Oct-4-94 Dec-94 Mar-95 Jun-95 Sep-95 Dec-95 Mar-96 Jun-96 Sep-96 Dec-96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUGEN, Inc. 100 68.33 90.00 91.67 185.00 198.33 190.00 156.67 158.33 171.67
Nasdaq Stock Market-U.S. 100 101.13 110.24 126.10 141.29 143.01 159.69 161.91 167.67 175.91
H&Q Biotechnology Sector 100 100.74 104.62 117.68 142.21 171.36 163.78 153.05 162.59 158.12
</TABLE>
Mar-97 Jun-97 Sep-97 Dec-97
------ ------ ------ ------
SUGEN, Inc. 140.00 171.67 268.33 175.00
Nasdaq Stock Market-U.S. 166.37 196.86 230.16 215.86
H&Q Biotechnology Sector 151.79 159.73 172.47 160.05
- ----------------
This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Securities Act or the 1934 Securities Exchange Act, whether made
before or after the date hereof and irrespective of any general incorporation
language contained in any such filing.
The performance of the Company's stock over the period shown is not
necessarily indicative of future performance. October 4, 1994 was the effective
date of the Company's initial public offering.
24
<PAGE>
CERTAIN TRANSACTIONS
The Company paid $75,000 and $100,000 to Axel Ullrich, Ph.D., a director of
the Company, and Joseph Schlessinger, Ph.D., an honorary member of the Board of
Directors of the Company, respectively, for consulting services rendered to the
Company in the last fiscal year, pursuant to consulting agreements entered into
in August 1991.
The Company paid $60,000 to Stephen K. Carter, M.D., Senior Vice President,
Clinical and Regulatory Affairs, for consulting services rendered to the Company
in the last fiscal year, pursuant to a consulting agreement entered into in May
1997. Dr. Carter's appointment as Senior Vice President, Clinical and Regulatory
Affairs was effective in January 1998.
In connection with the resignation of Ms. Christine E. Gray-Smith from her
position as Vice President, Finance of the Company in November 1997, the Company
entered into a severance arrangement with Ms. Gray-Smith. Pursuant to such
arrangement, the Company paid Ms. Gray-Smith a bonus for the fiscal year ended
December 31, 1997 and the Company entered into a consulting agreement with Ms.
Gray-Smith effective January 2, 1998 which provides for the continued vesting of
stock options previously granted to Ms. Gray-Smith until July 1998.
The Company has entered into indemnity agreements with certain of its
officers and directors which provide, among other things, that the Company will
indemnify such officer or director, under the circumstances and to the extent
provided for therein, for expenses, damages, judgments, fines and settlements he
or she may be required to pay in actions or proceedings which he or she is or
may be made a party by reason of such person's position as a director, officer
or other agent of the Company, and otherwise to the full extent permitted under
Delaware law and the Company's Bylaws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
Richard D. Spizzirri
Secretary
April 17, 1998
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December 31, 1997 is available
without charge upon written request to: Investor Relations, SUGEN, Inc., 351
Galveston Drive, Redwood City, CA 94063.
25
<PAGE>
1354-PS-98
<PAGE>
Appendix A
SUGEN, INC.
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Adopted April 12, 1994
Effective October 4, 1994
Termination Date: April 12, 2004
1. PURPOSE.
(a) The purpose of the 1994 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of SUGEN, Inc. (the
"Company") who is not otherwise an employee of the Company or of any Affiliate
of the Company (each such person being hereafter referred to as a "Non-Employee
Director") will be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate three hundred eighty thousand
(380,000) shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without
1.
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having been exercised in full, the stock not purchased under such option shall
again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Upon the date of the annual meeting of stockholders of the Company
held during 1995, each person who is then a Non-Employee Director of the Company
and has been a Non-Employee Director for at least three (3) months automatically
shall be granted an option to purchase two thousand (2,000) shares of common
stock of the Company on the terms and conditions set forth herein.
(b) Each person who is, after the Adoption Date, elected for the first
time to be a Non-Employee Director automatically shall, upon the date of his or
her initial election to be a Non-Employee Director by the Board or stockholders
of the Company, be granted an option to purchase ten thousand (10,000) shares of
common stock of the Company on the terms and conditions set forth herein.
(c) Ten (10) days following the date of each annual meeting of
stockholders of the Company, commencing with the meeting held during 1995, each
person who is then a Non-Employee Director of the Company and has been a
Non-Employee Director for at least three (3) months automatically shall be
granted an option to purchase five thousand (5,000) shares of common stock of
the Company on the terms and conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director of the Company terminates for any reason or for no reason,
including the optionee's death, the option shall terminate on the earlier of the
Expiration Date or the date six (6) months following the date of termination of
service. In any and all circumstances, an option may be exercised following
termination of the optionee's service as a Non-Employee Director of the Company
only as to that number of shares as to which it was vested on the date of
termination of such service under the provisions of subparagraph 6(e).
(b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.
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(c) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than one thousand (1,000) shares; but when the number of shares being
purchased upon an exercise is one thousand (1,000) or more shares, the optionee
may elect to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash at the
time of exercise; or
(ii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its fair market
value on the date preceding the date of exercise; or
(iii) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(ii) above.
Notwithstanding the foregoing, this option may be exercised pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board which results in the receipt of cash (or check) by the Company prior to
the issuance of shares of the Company's common stock.
(d) An option shall not be transferable except by will or by the laws
of descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his or her
guardian or legal representative. The person to whom the option is granted may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the optionee,
shall thereafter be entitled to exercise the option.
(e) Options granted pursuant to the Plan shall become vested as
follows: (i) options granted pursuant to subparagraph 5(a) above shall become
fully vested on the date of grant; (ii) options granted pursuant to subparagraph
5(b) above shall become vested in installments over a period of five years from
the date of grant at the rate of twenty percent (20%) per year in five (5) equal
annual installments commencing on the date one year after the date of grant; and
(iii) options granted pursuant to subparagraph 5(c) above shall become fully
vested on the date ten days prior to the date of the first annual meeting of
stockholders of the Company subsequent to the date of the grant. The options
shall vest as set forth above, provided that the optionee has, during the entire
period prior to such vesting date, continuously served as a Non-Employee
Director to the Company or any Affiliate of the Company.
(f) The optionee may elect at any time while a Non-Employee Director of
the Company to exercise the option as to any or all of the shares subject to the
option prior to vesting of the option as described in subparagraph 5(e). Any
unvested shares so purchased shall be subject to a repurchase right in favor of
the Company.
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(g) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then-applicable securities laws.
(h) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan shall
constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
4.
<PAGE>
(b) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
(c) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director with or without cause.
(d) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him or her, shall
have any right, title or interest in or to any option reserved for the purposes
of the Plan except as to such shares of common stock, if any, as shall have been
reserved for such Non-Employee Director pursuant to an option granted to such
Non-Employee Director.
(e) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
(f) As used in this Plan, fair market value means, as of any date, the
value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock as quoted on such system or
exchange (or the exchange with the greatest volume of trading in common stock)
on the last market trading day prior to the day of determination, as reported in
the Wall Street Journal or such other source as the Board deems reliable;
(ii) If the common stock is quoted on the Nasdaq System (but
not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(iii) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
5.
<PAGE>
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
(b) In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation; (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; (3) any other capital reorganization in which more than fifty percent
(50%) of the shares of the Company entitled to vote are exchanged; (4) a
transaction or group of related transactions involving the sale of all or
substantially all of the Company's assets; (5) the acquisition by any person,
entity or group (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any subsidiary of the Company) of the
beneficial ownership, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power in the
election of directors; or (6) a change in the composition of the Company's Board
of Directors such that, during any period of two consecutive years, individuals
who, at the beginning of such period, constitute the Board, together with
individuals who are Approved New Directors (as defined below), cease for any
reason to have authority to cast at least a majority of the votes which all
directors on the Board are entitled to vote; then, to the extent not prohibited
by law, the time during which options outstanding under the Plan become fully
vested shall be accelerated prior to such event, and the options terminated if
not exercised at or prior to such event. For purposes of this subparagraph
10(b), an Approved New Director shall be a Board member whose election, or the
nomination for election by the Company's stockholders, was approved by a vote of
a majority of the votes entitled to be cast by the directors then still in
office who were directors at the beginning of the period.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan,
provided, however, that the Board shall not amend the Plan more than once every
six (6) months, with respect to the provisions of the Plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares which may be issued under
the Plan; or
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(ii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to comply with the
requirements of Rule 16b-3 or any Nasdaq or securities exchange listing
requirements); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to comply with the
requirements of Rule 16b-3.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be altered or impaired by such amendment unless
(i) the Company requests the consent of the person to whom the option was
granted and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on April 12, 2004. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the stockholders of the
Company approve the Plan.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
7.
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PLAN HISTORY
Adopted April 12, 1994 to be effective upon the Initial Public Offering of
SUGEN, Inc. Common Stock (October 4, 1994)
Approved by the Stockholders on May 20, 1994
Amended by the Board of Directors on February 24, 1995
Approved by Stockholders on June 6, 1995
Amended by the Board of Directors on December 19, 1995
Approved by the Stockholders on May 23, 1996
Amended by the Board of Directors on February 19, 1998
Approved by the Stockholders on _______________, 1998
8.
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Appendix B
SUGEN, INC.
1992 STOCK OPTION PLAN
Adopted February 28, 1992
Termination Date: February 27, 2002
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company, to
secure and retain the services of new Employees, Directors and Consultants, and
to provide incentives for such persons to exert maximum efforts for the success
of the Company.
(c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Company" means SUGEN, Inc., a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a
1.
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director's fee by the Company or who are not compensated by the Company for
their services as Directors.
(g) "Continuous Service" (formerly, "Continuous Status as an Employee,
Director or Consultant") means the employment or relationship as a Director or
Consultant is not interrupted or terminated by the Company or any Affiliate. The
Optionee's Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Optionee renders service to the
Company or an Affiliate as an Employee, Consultant or Director or a change in
the entity for which the Optionee renders such service, provided that there is
no interruption or termination of the Optionee's Continuous Service. For
example, a change in status from an Employee of the Company to a Consultant of
an Affiliate or a Director of the Company will not constitute an interruption of
Continuous Service. The Board or the chief executive officer of the Company, in
that party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by that
party, including sick leave, military leave, or any other personal leave;
provided, however, that for purposes of Incentive Stock Options, any such leave
may not exceed ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract (including certain Company policies) or statute;
or (ii) transfers between locations of the Company or between the Company,
Affiliates or its successor.
(h) "Covered Employee" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock as quoted on such system or
exchange (or the exchange with the greatest volume of trading in common stock)
2.
<PAGE>
on the last market trading day prior to the day of determination, as reported in
the Wall Street Journal or such other source as the Board deems reliable;
(2) If the common stock is quoted on the Nasdaq System (but
not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of common stock shall be the mean between the high bid
and high asked prices for the common stock on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(3) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(s) "Optioned Stock" means the common stock of the Company subject to
an Option.
(t) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.
(u) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(v) "Plan" means this SUGEN, Inc. 1992 Stock Option Plan.
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(w) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(x) "Securities Act" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Options; when and how the Option shall
be granted; whether the Option will be an Incentive Stock Option or a
Nonstatutory Stock Option; the provisions of each Option granted (which need not
be identical), including the time or times such Option may be exercised in whole
or in part; and the number of shares for which an Option shall be granted to
each such person.
(2) To construe and interpret the Plan and Options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan as provided in Section 11.
(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee may be, in the discretion of the Board, Outside Directors. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board (and references in this Plan to the Board shall thereafter be to
the Committee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Options to eligible persons who (1)
are not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at the
time of recognition of income resulting from such Option, or (ii) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code.
4.
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4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate three million five hundred thousand (3,500,000) shares
of the Company's common stock. If any Option shall for any reason expire or
otherwise terminate without having been exercised in full, the stock not
purchased under such Option shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) No person shall be eligible for the grant of an Option if, at the
time of grant, such person owns (or is deemed to own pursuant to Section 424(d)
of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date
of grant.
(c) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options
covering more than five percent (5%) of the number of shares of the Company's
common stock that was outstanding on the record date for the Company's 1995
Annual Stockholder Meeting (i.e., four hundred thirty-four thousand five hundred
twenty-seven (434,527) shares) in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the fair market value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the fair market value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, the exercise price of each
Option
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shall be not less than one hundred ten percent (110%) of the Fair Market Value
of the stock subject to the Option on the date the Option is granted if the
person to whom the Option is granted owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock, as described
in subsection 5(b).
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, and shall be exercisable
during the lifetime of the person to whom the Option is granted only by such
person or any transferee pursuant to a QDRO. The person to whom the Option is
granted may, by delivering written notice to the Company, in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. During the remainder of the term of the Option (if its term extends
beyond the end of the installment periods), the option may be exercised from
time to time with respect to any shares then remaining subject to the Option.
The provisions of this subsection 6(e) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
6.
<PAGE>
(f) Securities Law Compliance. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act, or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws.
(g) Termination of Continuous Service. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
Disability), the Optionee may exercise his or her Option, but only within such
period of time as is determined by the Board, and only to the extent that the
Optionee was entitled to exercise it at the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the case of an Incentive Stock Option, the Board shall determine
such period of time (generally not to exceed three (3) months from the date of
termination) when the Option is granted. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to the Plan.
(h) Disability of Optionee. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's Disability, the Optionee may
exercise his or her Option, but only within twelve (12) months from the date of
such termination (or such shorter period specified in the Option Agreement), and
only to the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to the Plan.
(i) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (or such shorter period specified in the Option Agreement) (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement), 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
the
7.
<PAGE>
Optionee was entitled to exercise the Option at the date of death. If, at the
time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after death, the Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company or to
any other restriction the Board determines to be appropriate. The Company shall
exercise its repurchase option to the extent permitted by applicable law.
(k) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
8.
<PAGE>
9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Throughout the term of any Option, the Company shall deliver to the
holder of such Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option term, such
financial and other information regarding the Company as comprises the annual
report to the stockholders of the Company provided for in the bylaws of the
Company.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment or relationship as a
Director or Consultant of any Employee, Director, Consultant or Optionee with or
without cause.
(e) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(f) If an Option is canceled, or deemed to be canceled, for purposes of
Section 162(m) of the Code and the regulations promulgated thereunder, then the
number of shares subject to the canceled Option shall continue to count towards
the maximum number of shares which may be granted to any person pursuant to
subsection 5(c) of the Plan. The provisions of this subsection 9(f) shall be
applicable only to the extent required by Section 162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of
9.
<PAGE>
shares, change in corporate structure or otherwise), the Plan and outstanding
Options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding Options.
(b) In the event of: (1) a merger or consolidation in which the Company
is not the surviving corporation; (2) a reverse merger in which the Company is
the surviving corporation but the shares of the Company's common stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; (3) any other capital reorganization in which more than fifty percent
(50%) of the shares of the Company entitled to vote are exchanged; (4) a
transaction or group of related transactions involving the sale of all or
substantially all of the Company's assets; (5) the acquisition by any person,
entity or group (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any subsidiary of the Company) of the
beneficial ownership, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power in the
election of directors; or (6) a change in the composition of the Company's Board
of Directors such that, during any period of two consecutive years, individuals
who, at the beginning of such period, constitute the Board, together with
individuals who are Approved New Directors (as defined below), cease for any
reason to have authority to cast at least a majority of the votes which all
directors on the Board are entitled to vote; then, to the extent not prohibited
by law, the time during which Options outstanding under the Plan may be
exercised shall be accelerated prior to such event, and the Options terminated
if not exercised at or prior to such event. For purposes of this subsection
10(b), an Approved New Director shall be a Board member whose election, or the
nomination for election by the Company's stockholders, was approved by a vote of
a majority of the votes entitled to be cast by directors then still in office
who were directors at the beginning of the period.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under
the Plan;
(2) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or
(3) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3 or
any Nasdaq or securities exchange listing requirements.
10.
<PAGE>
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on February 27, 2002 which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted to acquire shares of the Company's common stock under the Plan
shall be exercised unless and until the issuance of such shares under the Plan
has been approved by the stockholders of the Company.
11.
<PAGE>
PLAN HISTORY
Adopted February 28, 1992
Amended effective as of February 5, 1993
Amended by the Board of Directors on January 7, 1994 and April 12, 1994
Amended by the Board of Directors on February 24, 1995 and May 1, 1995
Approved by Stockholders on June 6, 1995
Amended by the Board of Directors on December 19, 1995
Approved by the Stockholders on May 23, 1996
Amended by the Board of Directors on December 10, 1996
Approved by the Stockholders on May 21, 1997
Amended by the Board of Directors on February 19, 1998
<PAGE>
APPENDIX C
DETACH HERE
PROXY
SUGEN, Inc.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
The undersigned hereby appoints STEPHEN EVANS-FREKE and SUSAN M. KANAYA,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of SUGEN, Inc. which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
SUGEN, Inc. to be held at the offices of the Company, located at 351 Galveston
Drive, Redwood City, California, on Wednesday, May 20, 1998, at 10:00 a.m.,
(local time), and at any and all postponements, continuations and adjournments
thereof, with all powers that the undersigned would possess if personally
present, upon and in respect of the following matters and in accordance with the
following instructions, with discretionary authority as to any and all other
matters that may properly come before meeting
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE>
DETACH HERE
<TABLE>
<CAPTION>
[X]Plese mark
votes as in
this example.
<S> <C> <C>
2. To approve an amendment to the FOR AGAINST ABSTAIN
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A Company's 1992 Stock Option Plan as [ ] [ ] [ ]
VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW amended, to increase the aggregate
AND A VOTE FOR PROPOSALS 2, 3 AND 4. number of shares of Common Stock
available for issuance under the
1. To elect two directors to hold office until the 2001 Plan by 750,000 shares.
Annual Meeting of Stockholders.
Nominees: Stephen Evans-Freke and Axel Ullrich, Ph.D. 3. To approve an amendment to the FOR AGAINST ABSTAIN
[ ] FOR [ ] WITHHELD Company's 1994 Non-Employee [ ] [ ] [ ]
ALL FROM ALL Directors' Stock Option Plan as
NOMINEES NOMINEES amended, to increase the aggregate
number of shares of Common Stock
[ ] MARK HERE [ ] available for issuance under the
-------------------------------------- FOR ADDRESS Plan by 150,000 shares.
For all nominees except as noted above CHANGE AND
NOTE BELOW 4. To ratify the selection of Ernst & FOR AGAINST ABSTAIN
Young LLP as independent auditors of [ ] [ ] [ ]
the Company for its fiscal year
ending December 31, 1998.
5. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Plese vote, date and promptly return this proxy in the
enclosed return envelope which is postage prepaid if mailed in
the United States.
Please sign exactly as your name appears hereon. If the stock
is registered in the names of two or more persons, each should
sign. Executors, administrators, trustees, gaurdians and
attorneys-in-fact should add their titles. If signer is a
corporation, plese give full corporate name and have a duly
authorized officer sign, stating title. If signer is a
partnership, please sign in partnership name by authorized
person.
Signature: Date: Signature: Date:
--------------------------------------- -------------- ------------------------------------- -----------
</TABLE>
