SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
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[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SUGEN, Inc.
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(Name of Registrant as Specified in Its Charter)
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(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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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[SUGEN LOGO]
SUGEN, Inc.
230 East Grand Avenue
South San Francisco, California 94080
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1999
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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 19, 1999 at 10:00 a.m. local time at the offices of the Company, located at
230 East Grand Avenue, South San Francisco, California, 94080, for the following
purposes:
1. To elect two directors to hold office until the 2002 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 provide for
automatic and non-discretionary option grants to certain directors who
serve on certain committees of the Board of Directors.
4. To approve an amendment to the Company's Employee Stock Purchase Plan,
as amended (the "Employees' Plan"), to increase the aggregate number
of shares of Common Stock available for issuance under the Employees'
Plan by 200,000 shares.
5. To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for its fiscal year ending December 31, 1999.
6. 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 22,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
RICHARD D. SPIZZIRRI
Secretary
South San Francisco, California
April 22, 1999
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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SUGEN, Inc.
230 East Grand Avenue
South San Francisco, California 94080
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
May 19, 1999
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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 19, 1999, 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 230 East
Grand Avenue, South San Francisco, California 94080. The Company intends to mail
this proxy statement and accompanying proxy card on or about April 22, 1999 to
all stockholders entitled to vote at the Annual Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of the Company's common stock (the
"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 22, 1999 (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, the Company had
outstanding and entitled to vote 16,738,166 shares of Common Stock. Each holder
of record of Common Stock on such 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, 230
East Grand Avenue, South San Francisco, California 94080, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
Stockholder Proposals
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2000 annual
meeting of stockholders pursuant to Rule 14a-8 of the
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Securities and Exchange Commission is December 23, 1999. Unless a stockholder
who wishes to bring a matter before the stockholders at the Company's 2000
annual meeting of stockholders notifies the Company of such matter no earlier
than February 19, 2000 and no later than March 21, 2000, management will have
discretionary authority to vote all shares for which it has proxies in
opposition to such matter. Stockholders are also advised to review the Company's
Bylaws, which contain additional requirements with respect to advance notice of
stockholder proposals and director nominations.
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 four vacancies. There are two directors in the class whose term of
office expires in 1999. 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 2002 Annual Meeting and until his or her
successor is elected and has qualified, or until such director's earlier death,
resignation or removal.
The four vacancies on the Board of Directors include two in the class
of directors whose term of office expires in 1999, one in the class whose term
of office expires in 2000 and one in the class whose term of office expires in
2001. Pursuant to the Company's Bylaws, subject to certain exceptions, the
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 2002 Annual Meeting
Jeremy L. Curnock Cook, 49, 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, Cantab Pharmaceuticals plc, Cobra
Therapeutics 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 and
Angiotech Pharmaceuticals, Inc. and Inflazyme Pharmaceuticals Ltd. in Canada. He
is also a director of AMRAD Corporation in Australia.
Gerald Moller, 55, has served as a director since April 1999. From 1975
to 1998, Dr. Moller held numerous positions with Boehringer Mannheim GmbH, a
German pharmaceutical company, including Chief Executive Officer of Boehringer
Mannheim Group, Amsterdam and most recently as Head of Global Development and
Strategic Marketing Roche Pharma and a Member of the Executive Committee
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of Hoffman-La Roche, Basel. Dr. Moller serves a director of Ferrarius Biotech
GmbH and Chairman of the Board of COMED e.v. in Germany. Dr. Moller received his
Ph.D. in physical chemistry from the University of Kiel.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A VOTE
IN FAVOR OF EACH NAMED NOMINEE.
Directors Continuing in Office Until the 2000 Annual Meeting
Samuel A. Hamad, 57, has served as President of SUGEN International AG
and Acting Chief Executive Officer of SUGEN Europe AG (both subsidiaries of the
Company) since June 1998 and as a director since April 1999. From 1983 to
November 1997, Mr. Hamad held various senior management positions with
Bristol-Myers Squibb Company, an international pharmaceutical company, including
President of Bristol-Myers Squibb Europe and President, Bristol-Myers Squibb
Intercontinental. Prior to joining Bristol-Myers Squibb Company, Mr. Hamad held
senior management positions with Pfizer, Inc. and Merck & Company.
Donald E. Nickelson, 66, 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. and Del
Industries. He also serves as director of Carey Diversified, LLC and Tarponwear
International, Inc., and serves as a Trustee of the Mainstay Mutual Funds Group.
Richard D. Spizzirri, 66, 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.
Directors Continuing in Office Until the 2001 Annual Meeting
Stephen Evans-Freke, 47, 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 and President of International
Technology Investment Managers, 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.
Axel Ullrich, Ph.D., 55, 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 HERE IT IS1988, Dr. Ullrich has served as Director,
Department of Molecular Biology, Max-Planck-Institut fur 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.
Honorary Member of the Board
Joseph Schlessinger, Ph.D., 54, 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
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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, 1998 the Board of Directors
held seven meetings. The Board has delegated certain of its powers to its Audit
Committee, Compensation 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 currently composed of two
non-employee directors: Messrs. Spizzirri (Chairman) and Nickelson. Mr. Ross
joined the Audit Committee in July 1998, following the resignation of Mr.
Hartman, who served on the committee until his resignation from the Company's
Board of Directors in July 1998. Mr. Ross served on the committee until his
resignation from the Company's Board of Directors in February 1999. The Audit
Committee met twice during 1998.
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 two non-employee directors:
Messrs. Nickelson (Chairman) and Spizzirri. Mr. Spizzirri joined the
Compensation Committee in July 1998, following the resignation of Mr. Wall, who
served on the committee until his resignation from the Company's Board of
Directors in June 1998. Mr. Ross served on the committee until his resignation
from the Company's Board of Directors in February 1999. In addition to actions
taken by unanimous consent, the Compensation Committee met once 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
currently composed of three directors: Messrs. Curnock Cook, Evans-Freke
(Chairman) and Nickelson. Mr. Ross served on the committee until his resignation
from the Company's Board of Directors in February 1999. There were no meetings
of the Nominating Committee in 1998.
During the fiscal year ended December 31, 1998, 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.
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MANAGEMENT
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.
Name Age Position
---- --- --------
Stephen Evans-Freke (1) ............ 47 Chief Executive Officer and Chairman
of the Board
K. Peter Hirth, Ph.D. .............. 47 Executive Vice President and Chairman
of the Research and Development
Committee
Stephen K. Carter, M.D. ............ 61 Senior Vice President, Clinical and
Regulatory Affairs
Sara A. Courtneidge, Ph.D. ......... 45 Senior Vice President, Research
James L. Knighton .................. 45 Senior Vice President and Chief
Financial Officer
Peter J. Langecker, M.D., Ph.D. .... 48 Vice President, Clinical Affairs
Gerald McMahon, Ph.D. .............. 44 Vice President, Drug Discovery
Gregory D. Plowman, M.D., Ph.D. .... 42 Vice President, Molecular Biology
Dorian Rinella ..................... 50 Vice President, Human Resources
Laura K. Shawver, Ph.D. ............ 41 Vice President, Preclinical and
Pharmaceutical Development
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(1) See "Proposal 1 -- Election of Directors" for biographical information
concerning the Company's Chief Executive Officer and Chairman of the Board.
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 and Cytogen 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.
James L. Knighton, Senior Vice President and Chief Financial Officer,
joined the Company in October 1998. From 1994 to October 1998, Mr. Knighton was
employed by Chiron Corporation, a biotechnology company, as Vice President,
Business Operations until 1996 and as Vice President, Investor Relations from
1996 to October 1998. From 1989 to 1994, Mr. Knighton held several positions
with Dupont Merck Pharmaceutical Company, most recently as Corporate Vice
President, Strategic Planning. Mr. Knighton earned his B.S. at the University of
Notre Dame, his M.S. in Genetics at the University of Pennsylvania School of
Medicine and his M.B.A. at The Wharton School, the University of Pennsylvania.
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 Pharmaceutical, Inc., a
biotechnology company, and from March 1992 to July 1995, he served as Director,
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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, 1998 there were 3,500,000
shares of the Company's Common Stock authorized for issuance under the Option
Plan.
Through March 31, 1999, stock options (net of canceled or expired
options) covering an aggregate of 3,556,452 shares of the Company's Common Stock
had been granted under the Option Plan, of which options to purchase 56,452
shares (net of canceled or expired options) are subject to stockholder approval
of this Proposal 2.
In February 1999, 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 3,500,000 shares to a total of 4,250,000
shares. The Board approved this amendment to ensure that the Company can
continue to grant stock options at levels determined appropriate by the Board.
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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.
Abstentions will be counted toward the tabulation of votes cast on proposals
presented to stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether this matter has been approved.
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
The Option Plan provides for the grant of both incentive and
nonstatutory stock options. 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 directors of the Company may 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 and its affiliates. All of
the approximately 248 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. Subject to the provisions of the Option Plan, the Board has the power
to construe and interpret the Option Plan and 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. In
the discretion of the Board, a committee may consist solely of two or more
outside directors in accordance with Section 162(m) of the Code or solely of two
or more non-employee directors in accordance with Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). 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.
The regulations under Section 162(m) of the Code require that the
directors who serve as members of the committee must be "outside directors." The
Option Plan provides that, in the Board's discretion, directors serving on the
committee may be "outside directors" within the meaning of Section 162(m). This
limitation would exclude from the committee directors who are (i) current
employees of the Company or an affiliate, (ii) former employees of the Company
or an affiliate receiving compensation for past services (other than benefits
under a tax-qualified pension Option Plan), (iii) current and former officers of
the Company or an affiliate, (iv) directors currently receiving direct or
indirect remuneration from the Company or an affiliate in any capacity (other
than as a director), and (v) any other person who is otherwise considered an
"outside director" for purposes of Section 162(m). The definition of an "outside
director" under Section 162(m) is generally narrower than the definition of a
"non-employee director" under Rule 16b-3 of the Exchange Act.
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Eligibility
Incentive stock options may be granted under the Option Plan only to
employees (including officers) of the Company and its affiliates. Consultants,
directors and employees (including officers) are eligible to receive options
other than incentive stock options under 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 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 Option Plan
Subject to stockholder approval of this Proposal 2, an aggregate of
4,250,000 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, 1999, the
closing price of the Company's Common Stock as reported on the Nasdaq National
Market System was $19.1875 per share.
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 (iii) in any other form of
legal consideration acceptable to the Board.
Repricing. In the event of a decline in the value of the Company's
Common Stock, the Board has the authority to offer 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.
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 services as a consultant or director and 1|M/12th of the remaining
shares on the first day of each quarter thereafter during the optionee's
employment or service as a consultant or director. Subsequent grants to the
optionee, if any, typically vest at the rate of 1|M/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
8
<PAGE>
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 service of the Company or an affiliate 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 10 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
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 12 months or less of such termination; or (b) the optionee dies
while providing services to the Company or any affiliate of the Company, 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 12 months or less 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.
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 the Option 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 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 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 12 months before or
9
<PAGE>
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, Rule 16b-3 of the Exchange Act or any
Nasdaq or securities exchange listing requirements); (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 or any Nasdaq or securities exchange listing
requirements. The Board may submit any other amendment to the Option Plan for
stockholder approval, including, but not limited to, amendments intended to
satisfy the requirements of Section 162(m) of the Code regarding the exclusion
of performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
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
Long-term capital gains currently are generally subject to lower tax
rates than ordinary income or short-term capital gains. The maximum long-term
capital gains rate for federal income tax purposes is currently 20% while the
maximum ordinary income rate and short-term capital gains rate is effectively
39.6%. Slightly different rules may apply to optionees who acquire stock subject
to certain repurchase options or who are subject to Section 16(b) of the
Exchange Act.
Incentive Stock Options. Incentive stock options under the 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 a long-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 or short-term depending on whether
the stock was held for more than one year.
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, if any, of the stock's fair market value on the date of exercise
over the option exercise price. However, to the extent the stock is subject to
certain types of vesting
10
<PAGE>
restrictions, the taxable event will be delayed until the vesting restrictions
lapse unless the participant elects to be taxed on receipt of the stock.
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
(or vesting of the stock). Such gain or loss will be long-term or short-term
depending on whether the stock was held for more than one year. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. Section 162(m) of the Code
denies a deduction to any publicly held corporation for compensation paid to
certain "covered employees" in a taxable year to the extent that compensation
exceeds $1,000,000. 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.
11
<PAGE>
NEW PLAN BENEFITS
The following table presents certain information, as of March 31, 1999,
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 1998 as a director. None of the options to
acquire 56,452 shares of Common Stock that are subject to stockholder approval
were granted to non-executive officers.
1992 Stock Option Plan
----------------------
Number of
Shares Subject to
Name and Position Options Granted
- ----------------- ---------------
Stephen Evans-Freke ............................................ 45,000
Chief Executive Officer and
Chairman of the Board
K. Peter Hirth, Ph.D. .......................................... 30,000
Executive Vice President and Chairman of
the Research and Development Committee
Sara A. Courtneidge, Ph.D. ..................................... 25,000
Senior Vice President, Research
Peter J. Langecker, M.D., Ph.D. ................................ 7,000
Vice President, Clinical Affairs
Laura K. Shawver, Ph.D. ........................................ 15,000
Vice President, Preclinical and Pharmaceutical
Development
All Executive Officers as a group (10 persons) ................. 170,000
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, 1998 there were 380,000 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 (as defined below), 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 10
days subsequent to each annual meeting of stockholders, commencing with the 1995
Annual Meeting of Stockholders.
Through March 31, 1999, stock options (net of canceled or expired
options) covering an aggregate of 203,000 shares of the Company's Common Stock
had been granted under the Directors' Plan. As of that date, 177,000 shares of
Common Stock (plus any shares that might in the future be returned to the
Directors' Plan as a result of cancellations or expiration of options) remained
available for future grant under the Directors' Plan.
In June 1998, the Board of Directors approved an amendment to the
Directors' Plan, subject to stockholder approval, to more adequately compensate
persons who are directors of the Company and who are not employees of the
Company or of any affiliates ("Non-Employee Directors"). The amendment provides
for automatic and non-discretionary option grants to certain directors who serve
on certain committees of the Board of Directors as follows: 2,000 shares for
services as a member of the Executive Committee, 1,000 shares for services as a
member of the Audit, Compensation and/or Nominating
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<PAGE>
Committees or 2,000 shares for services as the Chairman of any such Committee.
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, 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 Directors' Plan. Abstentions
will be counted toward the tabulation of votes cast on proposals presented to
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
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 the automatic, non-discretionary grant
of nonstatutory stock options to Non-Employee Directors of the Company.
Nonstatutory stock options granted under the Directors' Plan are not intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Code. See "Federal Income 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
may 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.
Stock Subject to the Directors' Plan
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 was then a Non-Employee Director and had been a Non-Employee Director
for at least three months would 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
13
<PAGE>
Stock; and (iii) 10 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. In addition, for services on certain
Committees of the Board of Directors, a director will receive an option to
purchase 2,000 shares of Common Stock for Executive Committee membership (other
than a Chairman), an option to purchase 1,000 shares of Common Stock for Audit,
Compensation and/or Nominating Committee membership (other than a Chairman) and
an option to purchase 2,000 shares of Common Stock for services as the Chairman
of any such Committee.
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 and
committee grants vest in full on the date 10 days prior to the date of the first
annual meeting of stockholders of the Company subsequent to the date of the
grant. In December 1998, 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, 1999, the closing price of the Company's Common Stock
as reported on the Nasdaq National Market System was $19.1875 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 the Directors' 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 of the merger into other property; (iii) any other
capital reorganization in which more than 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 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 Zelected 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.
14
<PAGE>
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 or any Nasdaq or securities exchange
listing requirements.
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
Options granted under the Directors' Plan generally have the federal
income tax consequences of nonstatutory stock options described under the
"Federal Income Tax Information" in Proposal 2 above.
The following table presents certain information, as of March 31, 1999,
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 1998 as a director. None of the options to
acquire 56,452 shares of Common Stock that are subject to stockholder approval
were granted to non-executive officers.
NEW PLAN BENEFITS
The following table presents certain information with respect to
options to be granted in 1999, subject to stockholder approval, 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 Options Granted
----------------- ---------------
Jeremy L. Curnock Cook ................ 1,000
Donald E. Nickelson ................... 6,000
Richard D. Spizzirri .................. 5,000
15
<PAGE>
PROPOSAL 4
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN
In April 1994, the Board of Directors adopted the Company's Employee
Stock Purchase Plan (the "Purchase Plan"). At December 31, 1998, there were
200,000 shares of Common Stock reserved for issuance under the Purchase Plan.
In February 1999, the Board amended the Purchase Plan, subject to
stockholder approval, to increase the number of shares of Common Stock
authorized for issuance under the Purchase Plan from a total of 200,000 shares
to a total of 400,000 shares. The Board adopted this amendment in order to
ensure that the Company can continue to grant purchase rights at levels
determined appropriate by the Board.
During the last fiscal year, shares of Common Stock were purchased in
the amounts and at the weighted average prices per share under the Purchase Plan
as follows: Peter J. Langecker, M.D., Ph.D. 920 shares ($11.68), all current
executive officers as a group 920 shares ($11.68), and all employees (excluding
executive officers) as a group 46,323 shares ($11.68).
As of March 31, 1999, purchase rights (net of canceled or expired
purchase rights) covering an aggregate of 193,578 shares of the Company's Common
Stock had been issued under the Purchase Plan. Only 6,422 shares of Common Stock
(plus any shares that might in the future be returned to the Purchase Plan as a
result of cancellations or expiration of purchase rights) remained available for
future issuance under the Purchase Plan.
Stockholders are requested in this Proposal 4 to approve the amendment
to the Purchase 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 amendment to the Purchase
Plan. Abstentions will be counted toward the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A VOTE
IN FAVOR OF PROPOSAL 4
The essential features of the Purchase Plan, as amended, are outlined
below:
Purpose
The purpose of the Purchase Plan is to provide a means by which
employees of the Company (and any parent or subsidiary of the Company designated
by the Board to participate in the Purchase Plan) may be given an opportunity to
purchase Common Stock of the Company through payroll deductions, to assist the
Company in retaining the services of its employees, to secure and retain the
services of new employees, and to provide incentives for such persons to exert
maximum efforts for the success of the Company. All of the Company's
approximately 248 full-time regular employees are eligible to participate in the
Purchase Plan. The rights to purchase Common Stock granted under the Purchase
Plan are intended to qualify as options issued under an "employee stock purchase
plan" as that term is defined in Section 423(b) of the Code.
Administration
The Board administers the Purchase Plan and has the final power to
construe and interpret both the Purchase Plan and the rights granted under it.
The Board has the power, subject to the provisions of the Purchase Plan, to
determine when and how rights to purchase Common Stock of the Company will be
granted, the provisions of each offering of such rights (which need not be
identical), and whether employees of any parent or subsidiary of the Company
will be eligible to participate in the Purchase Plan.
The Board has the power, which it has not yet exercised, to delegate
administration of the Purchase Plan to a committee composed of not fewer than
two members of the Board. As used herein with respect to the Purchase Plan, the
"Board" refers to any committee the Board appoints as well as to the Board
itself.
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<PAGE>
Offerings
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each offering is six months
long.
Eligibility
Any person who is customarily employed at least 20 hours per week and
five months per calendar year by the Company (or by any parent or subsidiary of
the Company designated by the Board) on the first day of an offering is eligible
to participate in that offering, provided such employee has been continuously
employed by the Company or the designated affiliate for at 30 days on the first
day of the offering.
However, no employee is eligible to participate in the Purchase Plan
if, immediately after the grant of purchase rights, the employee would own,
directly or indirectly, stock possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company or of any parent or
subsidiary of the Company (including any stock which such employee may purchase
under all outstanding rights and options). In addition, no employee may accrue
the right to purchase more than $25,000 worth of Common Stock (determined at the
fair market value of the shares at the time such rights are granted) under all
employee stock purchase plans of the Company and its affiliates for each
calendar year in which such right is outstanding at any time.
Participation in the Plan
Eligible employees enroll in the Purchase Plan by delivering to the
Company, prior to the date selected by the Board as the offering date for the
offering, an agreement authorizing payroll deductions of up to 15% of such
employees' base total compensation during the offering.
Purchase Price
The purchase price per share at which shares of Common Stock are sold
in an offering under the Purchase Plan is the lower of (i) 85% of the fair
market value of a share of Common Stock on first day of the offering or (ii) 85%
of the fair market value of a share of Common Stock on the last day of the
offering.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll deductions
over the offering. At any time during the offering, a participant may terminate
his or her payroll deductions as the Board provides in the offering. A
participant may not increase, decrease or begin such payroll deductions after
the beginning of the offering. All payroll deductions made for a participant are
credited to his or her account under the Purchase Plan and deposited with the
general funds of the Company. A participant may not make additional payments
into such account.
Purchase of Stock
By executing an agreement to participate in the Purchase Plan, the
employee is entitled to purchase shares under the Purchase Plan. In connection
with offerings made under the Purchase Plan, the Board specifies a maximum
number of shares of Common Stock an employee may be granted the right to
purchase and the maximum aggregate number of shares of Common Stock that may be
purchased pursuant to such offering by all participants. Currently, the maximum
aggregate number of shares that may be purchased on any purchase date is 40,000
shares or, if less, the number of shares remaining available under the Purchase
Plan. If the aggregate number of shares to be purchased upon exercise of rights
granted in the offering would exceed the maximum aggregate number of shares of
Common Stock available, the Board would make a pro rata allocation of available
shares in a uniform and equitable manner. Unless the employee's participation is
discontinued, his or her right to purchase shares is exercised automatically at
the end of the offering at the applicable price. See "Withdrawal" below.
17
<PAGE>
Withdrawal
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time up to 10 days prior to the end of the applicable
offering.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
shares of Common Stock on the employee's behalf during such offering, and such
employee's interest in the offering will be automatically terminated. The
employee is not entitled to again participate in that offering. However, an
employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
Termination of Employment
Rights granted pursuant to any offering under the Purchase Plan
terminate immediately upon cessation of an employee's employment for any reason,
and the Company will distribute to such employee all of his or her accumulated
payroll deductions, without interest.
Restrictions on Transfer
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
Duration, Amendment and Termination
The Board may suspend or terminate the Purchase Plan at any time.
Unless terminated earlier, the Purchase Plan will terminate in April 2004.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (i) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (ii) modify the
requirements relating to eligibility for participation in the Purchase Plan, or
(iii) modify any other provision of the Purchase Plan, if such approval is
required in order to obtain employee stock purchase plan treatment under Section
423 of the Code or to comply with the requirements of Rule 16b-3 under the
Exchange Act.
Rights granted before amendment or termination of the Purchase Plan
will not be altered or impaired by any amendment or termination of the Purchase
Plan without the consent of the employee to whom such rights were granted.
Effect of Certain Corporate Events
The Purchase Plan provides for the assumption, continuation or
acceleration of exercisability of outstanding rights granted under the Purchase
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; or (iii) any other capital reorganization in which more
than 50% of the shares of the Company entitled to vote are exchanged. The
acceleration of a right 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.
Stock Subject to Purchase Plan
Subject to stockholder approval of this Proposal 4, an aggregate of
400,000 shares of Common Stock is reserved for issuance under the Purchase Plan.
If rights granted under the Purchase Plan expire, lapse or otherwise terminate
without being exercised, the shares of Common Stock not purchased under such
rights again becomes available for issuance under the Purchase Plan.
18
<PAGE>
Federal Income Tax Information
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of
shares of Common Stock as if such amounts were actually received. Other than
this, no income will be taxable to a participant until disposition of the
acquired shares, and the method of taxation will depend upon the holding period
of the acquired shares.
If the stock is disposed of at least two years after the beginning of
the offering period and at least one year after the stock is transferred to the
participant, then the lesser of (i) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (ii) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will be taxed
as a long-term capital gain or loss. Such capital gains currently are generally
subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of
the holding periods described above, then the excess of the fair market value of
the stock on the exercise date over the exercise price will be treated as
ordinary income at the time of such disposition. The balance of any gain will be
treated as capital gain. Even if the stock is later disposed of for less than
its fair market value on the exercise date, the same amount of ordinary income
is attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such exercise date. Any capital gain or loss will be short-term or long-term,
depending on how long the stock has been held.
There are no federal income tax consequences to the Company by reason
of the grant or exercise of rights under the Purchase Plan. To the extent the
participant recognizes ordinary income by reason of a disqualifying disposition,
the Company will generally be entitled (subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a reporting obligation) to a corresponding business expense
deduction in the tax year in which the disqualifying disposition occurs.
PROPOSAL 5
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1999 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
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. Abstentions will
be counted toward the tabulation of votes cast on proposals presented to
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A VOTE
IN FAVOR OF PROPOSAL 5.
19
<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, 1999, 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 18.0
15 Stanhope Gate
London W1Y 6LN
England
Wellington Management Company, LLP ................................. 837,100 5.0
75 State Street
Boston, MA 02109
Stephen Evans-Freke(2) ............................................. 864,469 5.0
230 E. Grand Avenue
South San Francisco, CA 94080
Jeremy L. Curnock Cook(3) .......................................... 757,667 4.5
Samuel A. Hamad .................................................... -- --
Heinrich Kuhn(4) ................................................... 57,666 *
Gerald Moller, Ph.D ................................................ -- --
Donald E. Nickelson(5) ............................................. 61,999 *
Richard D. Spizzirri(6) ............................................ 362,075 2.1
Axel Ullrich, Ph.D.(7) ............................................. 234,333 1.4
Sara A. Courtneidge, Ph.D.(8) ...................................... 93,749 *
K. Peter Hirth, Ph.D.(9) ........................................... 233,928 1.4
Peter J. Langecker, M.D., Ph.D.(10) ................................ 37,917 *
Laura K. Shawver, Ph.D.(11) ........................................ 55,447 *
All executive officers and directors as a group (18 persons)(12) ... 3,167,592 17.7
<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
16,869,233 shares of Common Stock outstanding on March 31, 1999, 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, and (iv) 315,000 shares subject to stock
options exercisable within 60 days of March 31, 1999, of which 156,375 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 21,000 shares subject to stock options
exercisable within 60 days of March 31, 1999, of which 6,000 would be
subject to a repurchase option in favor of the Company in the event of
early exercise.
20
<PAGE>
(4) Includes 32,000 shares subject to stock options exercisable within 60 days
of March 31, 1999, of which 625 are subject to a repurchase option in favor
of the Company in the event of an early exercise.
(5) 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) 38,000 shares subject to
stock options exercisable within 60 days of March 31, 1999.
(6) Includes 30,571 shares subject to stock options exercisable within 60 days
of March 31, 1999, of which 6,429 are subject to a repurchase option in
favor of the Company in the event of an early exercise.
(7) Includes 42,333 shares subject to stock options exercisable within 60 days
of March 31, 1999.
(8) Includes 92,749 shares subject to stock options exercisable within 60 days
of March 31, 1999.
(9) Includes 173,159 shares subject to stock options exerciseable within 60
days of March 31, 1999.
(10) Includes 36,499 shares subject to stock options exercisable within 60 days
of March 31, 1999.
(11) Includes 38,500 shares subject to stock options exercisable within 60 days
of March 31, 1999.
(12) Includes shares held by directors and executive officers of the Company,
and entities affiliated with such persons. Also includes 20,000 shares
subject to repurchase or forfeiture in favor of the Company and 980,354
shares subject to stock options held by executive officers and directors
exercisable within 60 days of March 31, 1999, of which 169,429 are subject
to a repurchase option in favor of the Company in the event of early
exercise; see Notes 2 through 11 above.
</FN>
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
Compensation of Directors
Each of the Company's non-employee directors receives a fee of $2,000
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, in accordance with Company policy. The Company paid
Axel Ullrich $4,000 in his capacity as a member of the Company's Science
Advisory Board. In the fiscal year ended December 31, 1998, the total
compensation paid to non-employee directors was $78,000. 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. In the fiscal
year ended December 31, 1998, the Company granted options (net of those canceled
or expired) covering an aggregate of 52,000 shares of Common Stock to all
non-employee directors as a group. As of March 31, 1999, options to purchase
46,000 shares of Common Stock had been exercised under the Directors' Plan. For
a description of the Directors' Plan, see "Proposal 3 -- Approval of an
Amendment to the Company's 1994 Non-Employee Directors' Stock Option Plan"
above.
21
<PAGE>
Compensation of Executive Officers
The following table shows for the fiscal years ending December 31,
1998, 1997 and 1996, 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
years ending December 31, 1998, 1997 and 1996 (the "Named Executive Officers"):
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
---------------------------------------- ---------------------------------------
Securities
Restricted Underlying
Other Annual Stock Options/ All Other
Name and Principal Position Year Salary Bonus Compensation Awards SARs (#) Compensation
- --------------------------- ---- ------ ----- ------------ ------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen Evans-Freke ................ 1998 $ 350,000 $122,500 $69,785(1) $ 0 45,000 $ 2,500(2)
Chief Executive Officer and 1997 $ 320,000 $110,000 $ 0 $ 0 45,000 $ 0
Chairman of the Board 1996 $ 290,000 $ 95,000 $ 0 $ 0 45,000 $ 0
K. Peter Hirth, Ph.D. .............. 1998 $ 250,000 $ 59,375 $ 0 $ 0 30,000 $ 2,500(2)
Executive Vice President and 1997 $ 225,000 $ 47,972 $ 0 $350,000(3) 75,000 $ 0
Chairman of the Research and 1996 $ 197,743 $ 50,000 $ 0 $ 0 35,000 $50,000(4)
Development Committee
Sara A. Courtneidge, Ph.D. ......... 1998 $ 180,000 $ 30,600 $ 0 25,000 $ 2,500(2)
Senior Vice President, 1997 $ 165,000 $ 31,350 $ 0 $ 0 20,000 $ 0
Research 1996 $ 147,700 $ 26,586 $ 0 $ 0 20,000 $ 0
Peter J. Langecker, M.D.,Ph.D.(5) .. 1998 $ 215,000 $ 32,250 $ 0 7,000 $ 2,500(2)
Vice President, Clinical Affair 1997 $ 98,952 $ 13,855 $10,000(6) $ 0 7,500 $ 0
1996 $ 0 $ 0 $ 0 $ 0 0 $ 0
Laura K. Shawver, Ph.D. ............ 1998 $ 155,000 $ 31,000 $ 0 $ 0 15,000 $ 2,500(2)
Vice President, Preclinical 1997 $ 140,000 $ 23,800 $ 0 $ 0 12,000 $ 0
and Pharmaceutical Development 1996 $ 116,950 $ 17,543 $ 0 $ 0 15,000 $ 0
<FN>
- ------------
(1) Mr. Evans-Freke's other annual compensation of $69,785 consists of
reimbursement for his relocation expenses.
(2) Consists of a discretionary contribution to the Company's 401(k) Plan made
by the Company on behalf of Mr. Evans-Freke and Drs. Hirth, Courtneidge,
Langecker and Shawver.
(3) 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.
(4) Dr. Hirth's other compensation of $50,000 during 1996 consisted of the
forgiveness of a loan for the purchase of a residence.
(5) Dr. Langecker commenced employment with the Company on July 16, 1997 at an
annual salary of $215,000.
(6) Represents a sign-on bonus.
</FN>
</TABLE>
22
<PAGE>
Stock Option Grants and Exercises
The Company grants options to its executive officers under its Option
Plan and Long-Term Objectives Stock Option Plan for Senior Management (the "LTO
Plan" and collectively with the Option Plan, the "Employee Plans"). As of
December 31, 1998, options to purchase a total of 2,705,023 shares (net of
canceled or expired options) had been granted and were outstanding under the
Employee Plans, of which 22,128 are subject to stockholder approval.
The following tables show for the fiscal year ended December 31, 1998,
certain information regarding options granted to, exercised by, and held at year
end by the Named Executive Officers:
<TABLE>
Option Grants in Fiscal Year 1998
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term (2)
----------------------------------------------------- -----------------------------
% of Total
Number of Options
Securities Granted to Market
Underlying Employees in Exercise Price On
Options Fiscal Year Price Date of Expiration
Name Granted(#) (1) ($/Sh) Grant Date 0%($) 5%($) 10%($)
---- ---------- --- ------ ----- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen Evans-Freke (3) ..................... 45,000 6.6% $ 13.00 $ 13.00 12/08/08 $ 0 367,903 932,339
K. Peter Hirth, Ph.D. (4) ................... 30,000 4.4% 13.00 13.00 12/08/08 0 245,268 621,559
Sara A. Courtneidge, Ph.D. (5) .............. 25,000 3.6% 13.00 13.00 12/08/08 0 204,391 517,966
Peter J. Langecker, M.D., Ph.D. (6) ......... 7,000 1.0% 13.00 13.00 12/08/08 0 57,229 145,031
Laura K. Shawver, Ph.D. (7) ................. 15,000 2.2% 13.00 13.00 12/08/08 0 122,634 310,780
<FN>
- ------------
(1) Based on an aggregate of 684,964 options granted under the Option Plan in
fiscal year 1998 to employees. There were no options granted under the LTO
Plan in fiscal year 1998.
(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) Option 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, 1999.
(4) Option to purchase 30,000 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, 1999.
(5) Option to purchase 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 January 1, 1999.
(6) Option to purchase 7,000 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, 1999.
(7) Option to purchase 15,000 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, 1999.
</FN>
</TABLE>
23
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<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 $ 0 270,000/45,000 $1,260,000/$78,750
K. Peter Hirth, Ph.D. ...................... 0 0 149,196/116,738 884,888/315,876
Sara A. Courtneidge, Ph.D. ................. 0 0 82,124/56,876 524,348/129,964
Peter J. Langecker, M.D., Ph.D. ............ 0 0 25,312/64,188 32,578/86,548
Laura K. Shawver, Ph.D. .................... 3,000 36,750 33,092/34,750 201,013/81,891
<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,
1998 ($14.75), minus the exercise price of the option.
</FN>
</TABLE>
Employment Agreements
In connection with the appointment of James L. Knighton as Senior Vice
President and Chief Financial Officer of the Company in October 1998, the
Company entered into an agreement with Mr. Knighton. Pursuant to such agreement,
the Company paid Mr. Knighton $70,000 in bonuses and issued 20,000 shares of
Common Stock, subject to forfeiture at the option of the Company upon the
termination of Mr. Knighton's employment prior to a specified date. Subject to
certain restrictions, such shares shall vest on October 29, 2000. In the event
that Mr. Knighton is terminated without cause during his first two years of
employment, he will receive twelve months salary and bonus together with all
benefits, and stock and option grants awarded to Mr. Knighton will continue to
vest for the greater of twelve months after termination or the period required
to obtain 50% vesting on the initial grants made to Mr. Knighton.
In July 1998, the Compensation Committee approved a compensation
arrangement with Mr. Evans-Freke which was subsequently amended in February
1999. Pursuant to the terms of the amended arrangement, in consideration for Mr.
Evans-Freke's commitment to serve as Chief Executive Officer until at least June
30, 1999, the Company agreed to issue Mr. Evans-Freke up to 100,000 shares of
Common Stock, subject to the achievement of certain milestones related to the
financing of the Company, the hiring of senior executive management or certain
other events. Pursuant to the amended arrangement, Mr. Evans-Freke was issued
50,000 shares of Common Stock in March 1999.
Report of the Compensation Committee of the Board of Directors on Executive
Compensation(1)
The Company's executive compensation program is administered by the
Compensation Committee, composed in 1998 of Donald E. Nickelson, Bruce R. Ross,
Richard D. Spizzirri (effective June 1998) and Michael A. Wall (who resigned in
June 1998), each a non-employee director of the Company in 1998. Subsequent to
Mr. Wall's resignation from the Company's Board of Directors in June 1998,
Richard D. Spizzirri was elected to the Compensation Committee to replace Mr.
Wall. Mr. Ross served on the Compensation Committee until February 1999, when he
resigned from the Company's Board of Directors. Currently, there is one vacancy
on the Compensation Committee.
- ------------
(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any
filing of the Company under the Securities Act or Exchange Act, whether
made before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
24
<PAGE>
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, 1998 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.
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.
25
<PAGE>
Cash Bonuses
In December 1997, the Compensation Committee adopted the 1998 Key
Management Cash Incentive Compensation Plan (the "1998 CIP"). The objectives of
the 1998 CIP were consistent with the Company's compensation philosophy set
forth above. The objectives of the 1998 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 1998 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 1998 CIP were based on the achievement of the specific operating
objectives established for the Company during 1998, 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 1998 CIP, each of the Named Executive Officers received
a cash performance bonus for fiscal 1998 ranging from a high of approximately
35% to a low of approximately 15% of the executive officer's annual base salary.
All executive officers of the Company as a group received aggregate bonus awards
of $425,801 for fiscal 1998 performance, representing a range of 15% to 35% 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 1998, the Compensation Committee awarded performance based
stock option grants under the 1992 Plan to all of the Company's executive
officers for 1998 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 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 1998. 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.
26
<PAGE>
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 1998
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 1998 CIP. The Compensation Committee set Mr.
Evans-Freke's total annual compensation, including compensation derived from the
1998 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 $350,000 in 1998 as his annual base salary. In
determining Mr. Evans-Freke's salary for 1998, 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 1997 public offering of the Company's Common Stock
and private placement of convertible notes, 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 1998 and the desire to offer a competitive salary. His bonus award of
$122,500 for fiscal 1998 performance reflects substantial attainment of the
Company's goals for 1998, as discussed above under "Implementation of
Compensation Program -- Cash Bonuses," including securing the collaboration with
Taiho Pharmaceutical Ltd. and the advancement of the Company's research and
development activities, particularly the initiation of the Phase III
registrational study of SU101 in glioblastoma and the filing of an
Investigational New Drug application with Food and Drug Administration for
SU6668, the Company's third cancer product.
In July 1998, the Compensation Committee approved a compensation
arrangement with Mr. Evans-Freke which was subsequently amended in February
1999. Pursuant to the terms of the amended arrangement, in consideration for Mr.
Evans-Freke's commitment to serve as Chief Executive Officer until at least June
30, 1999, the Company agreed to issue Mr. Evans-Freke up to 100,000 shares of
Common Stock, subject to the achievement of certain milestones related to the
financing of the Company, the hiring of senior executive management or certain
other events. Pursuant to the amended arrangement, Mr. Evans-Freke was issued
50,000 shares of Common Stock in March 1999.
In December 1998, 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 1998. 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 1998, 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
Donald E. Nickelson, Chairman
Bruce R. Ross (Effective February 1998
through February 1999)
Richard D. Spizzirri (Effective
July 1998)
Michael A. Wall (Resigned June
1998)
27
<PAGE>
Compensation Committee Interlocks and Insider Participation
As noted above, the Company's Compensation Committee currently consists
of two non-employee directors: Mr. Nickelson (Chairman) and Mr. Spizzirri. There
were no officers or employees of the Company who participated in deliberations
of the Company's Compensation Committee concerning executive officer
compensation during the year ended December 31, 1998.
Performance Measurement Comparison(2)
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]
COMPARISON OF 17 QUARTER CUMULATIVE TOTAL RETURN ON INVESTMENT
DATES SUGEN, Inc. Nasdaq Stock Market -U.S. H&Q Biotechnology Sector
----- ----------- ------------------------- ------------------------
Oct-94 100.00 100.00 100.00
Dec-94 68.33 100.99 100.74
Mar-95 90.00 110.10 104.62
Jun-95 91.67 125.94 117.68
Sep-95 185.00 141.11 142.21
Dec-95 198.33 142.83 171.36
Mar-96 190.00 149.49 163.78
Jun-96 156.67 161.68 153.06
Sep-96 158.33 167.41 162.59
Dec-96 171.67 175.64 158.12
Mar-97 140.00 166.11 151.79
Jun-97 171.67 196.56 159.73
Sep-97 268.33 229.80 172.47
Dec-97 175.00 215.48 160.05
Mar-98 181.67 252.12 183.44
Jun-98 216.67 259.43 171.40
Sep-98 173.33 234.86 181.20
Dec-98 196.67 302.91 243.72
- ------------
(2) 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 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.
28
<PAGE>
CERTAIN TRANSACTIONS
The Company paid $100,000 to Joseph Schlessinger, Ph.D., an honorary
member of the Board of Directors of the Company, for consulting services
rendered to the Company in the last fiscal year, pursuant to a consulting
agreement entered into in August 1991.
In connection with the appointment of James L. Knighton as Senior Vice
President and Chief Financial Officer of the Company in October 1998, the
Company entered into an agreement with Mr. Knighton. Pursuant to such agreement,
the Company paid Mr. Knighton $70,000 in bonuses and issued 20,000 shares of
Common Stock, subject to forfeiture at the option of the Company upon the
termination of Mr. Knighton's employment prior to a specified date. Subject to
certain restrictions, such shares shall vest on October 29, 2000. In the event
that Mr. Knighton is terminated without cause during his first two years of
employment, he will receive twelve months salary and bonus together with all
benefits, and stock and option grants awarded to Mr. Knighton will continue to
vest for the greater of twelve months after termination or the period required
to obtain 50% vesting on the initial grants made to Mr. Knighton.
In September 1998, the Company granted Richard Spizzirri an option to
purchase 10,000 shares of the Company's Common Stock at an exercise price of
$13.75 per share, the then fair market value, in consideration for consulting
services rendered. The option vests over a four year period.
In October 1998, the Company entered into a loan agreement with K.
Peter Hirth, Executive Vice President and Chairman of the Research and
Development Committee, in the amount of $120,000. Subject to certain conditions,
the loan will be forgiven on October 13, 2001.
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 22, 1999
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the fiscal year ended December 31, 1998 is available
without charge upon written request to: Investor Relations, SUGEN, Inc., 230
East Grand Avenue, South San Francisco, CA 94080.
29
<PAGE>
1354-PS-99
<PAGE>
APPENDIX A
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.
<PAGE>
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)
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.
<PAGE>
(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.
(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.
3.
<PAGE>
(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.
<PAGE>
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 four million two hundred fifty thousand (4,250,000)
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 shall be not less than one hundred ten percent (110%) of the Fair Market
Value of the stock
5.
<PAGE>
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.
(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
6.
<PAGE>
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 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
7.
<PAGE>
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.
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.
8.
<PAGE>
(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 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
9.
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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.
(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
10.
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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
Approved by Stockholders on May 20, 1998
Amended by the Board of Directors on February 22, 1999
12.
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APPENDIX B
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
1.
<PAGE>
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 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.
(d) On June 1, 1998 and thereafter ten (10) days following the date of
each annual meeting of stockholders of the Company, commencing with the meeting
held during 1999, each Non-Employee Director of the Company who is then a member
of the Executive Committee of the Board 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.
(e) On June 1, 1998 and thereafter ten (10) days following the date of
each annual meeting of stockholders of the Company, commencing with the meeting
held during 1999, each Non-Employee Director of the Company who is then a member
(but not the Chairperson) of the Audit Committee, Compensation Committee and/or
Nominating Committee of the Board automatically shall be granted, for each such
committee, an option to purchase one thousand (1,000) shares of common stock of
the Company on the terms and conditions set forth herein.
2.
<PAGE>
(f) On June 1, 1998 and thereafter ten (10) days following the date of
each annual meeting of stockholders of the Company, commencing with the meeting
held during 1999, each Non-Employee Director of the Company who is then the
Chairperson of the Audit Committee, Compensation Committee and/or Nominating
Committee of the Board automatically shall be granted, for each such committee,
an option to purchase two thousand (2,000) 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.
(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
3.
<PAGE>
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 subparagraphs 5(c), 5(d), 5(e) and 5(f) 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 6(e). Any
unvested shares so purchased shall be subject to a repurchase right in favor of
the Company.
(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.
4.
<PAGE>
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.
(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.
5.
<PAGE>
(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.
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
6.
<PAGE>
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 that 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
(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.
7.
<PAGE>
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.
8.
<PAGE>
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 May 20 1998
Amended by the Board of Directors on June 1, 1998
9.
<PAGE>
APPENDIX C
SUGEN, INC.
EMPLOYEE STOCK PURCHASE PLAN
Adopted April 12, 1994
Effective April 1, 1995
Termination Date April 12, 2004
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Sugen, Inc., a Delaware corporation (the
"Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may 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 (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
1.
<PAGE>
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights 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, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) 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 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 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate four hundred (400,000) shares
of the Company's common stock (the "Common Stock"). If any right granted under
the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right 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. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the Offering or otherwise) the substance of the provisions
contained in paragraphs 5 through 8, inclusive.
2.
<PAGE>
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the Offering Period for such right shall begin on its
Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering Period for such Offering, he or she will not
receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's
3.
<PAGE>
rights to purchase stock of the Company or any Affiliate to accrue at a rate
which exceeds twenty-five thousand dollars ($25,000) of fair market value of
such stock (determined at the time such rights are granted) for each calendar
year in which such rights are outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in Section 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no more than twenty-seven (27) months after the
Offering Date (the "Offering Period"). In connection with each Offering made
under this Plan, the Board or the Committee shall specify a maximum number of
shares which may be purchased by any employee as well as a maximum aggregate
number of shares which may be purchased by all eligible employees pursuant to
such Offering. In addition, in connection with each Offering which contains more
than one Purchase Date (as defined in the Offering), the Board or the Committee
may specify a maximum aggregate number of shares which may be purchased by all
eligible employees on any given Purchase Date under the Offering. If the
aggregate purchase of shares upon exercise of rights granted under the Offering
would exceed any such maximum aggregate number, the Board or the Committee shall
make a pro rata allocation of the shares available in as nearly a uniform manner
as shall be practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time specified in
the Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to the
4.
<PAGE>
maximum percentage specified by the Board or the Committee of such employee's
Earnings during the Offering Period. "Earnings" is defined as the total
compensation paid to an employee, including all salary, wages (including amounts
elected to be deferred by the employee, that would otherwise have been paid,
under any cash or deferred arrangement established by the Company), overtime
pay, commissions, and other remuneration paid directly to the employee, but
excluding bonuses, profit sharing, the cost of employee benefits paid for by the
Company, education or tuition reimbursements, imputed income arising under any
Company group insurance or benefit program, traveling expenses, business and
moving expense reimbursements, income received in connection with stock options,
contributions made by the Company under any employee benefit plan, and similar
items of compensation. The payroll deductions made for each participant shall be
credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero), increase or begin such payroll deductions after the
beginning of any Offering only as provided for in the Offering.
(b) At any time during an Offering Period a participant may terminate
his or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering Period except as provided by the Board or the Committee in the
Offering. Upon such withdrawal from the Offering by a participant, the Company
shall distribute to such participant all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the participant) under the Offering, without interest, and
such participant's interest in that Offering shall be automatically terminated.
A participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable, and,
except as provided in Section 14, shall be exercisable only by the person to
whom such rights are granted.
8. EXERCISE.
(a) On each purchase date, as defined in the relevant Offering (a
"Purchase Date"), each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant
5.
<PAGE>
to the terms of the Plan and the applicable Offering, at the purchase price
specified in the Offering. No fractional shares shall be issued upon the
exercise of rights granted under the Plan. The amount, if any, of accumulated
payroll deductions remaining in each participant's account after the purchase of
shares which is less than the amount required to purchase one share of stock on
the final Purchase Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
the participant after the final Purchase Date of the Offering, without interest.
The amount, if any, of accumulated payroll deductions remaining in any
participant's account after the purchase of shares which is equal to the amount
required to purchase whole shares of stock on the final Purchase Date of an
Offering shall be distributed in full to the participant after such Purchase
Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If on a Purchase Date of any Offering hereunder the Plan is
not so registered, no rights granted under the Plan or any Offering shall be
exercised on said Purchase Date and the Purchase Date shall be delayed until the
Plan is subject to such an effective registration statement, except that the
Purchase Date shall not be delayed more than two (2) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered, no rights granted under
the Plan or any Offering shall be exercised and all payroll deductions
accumulated during the Offering Period (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(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 rights granted under the
Plan. 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 rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
6.
<PAGE>
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any rights 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
rights 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 rights.
(b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then, as determined by the Board in its
sole discretion (i) any surviving corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 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 reserved for rights under
the Plan;
(ii) Modify the provisions as to eligibility for participation
in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan
treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended ("Rule 16b-3")); or
7.
<PAGE>
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted or except as
necessary to comply with any laws or governmental regulation.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to him of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death during an Offering Period.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on April 12, 2004. No rights may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights 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
8.
<PAGE>
the person to whom such rights were granted or except as necessary to comply
with any laws or governmental regulation.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company.
9.
<PAGE>
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 23, 1995
Amended by the Board of Directors on February 22, 1999
<PAGE>
APPENDIX D
- --------------------------------------------------------------------------------
PROXY SUGEN, Inc. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1999
The undersigned hereby appoints STEPHEN EVANS-FREKE AND JAMES L. KNIGHTON,
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 230 East Grand
Avenue, South San Francisco, California, on Wednesday, May 19, 1999, at 10:00
a.m., (local time), and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4 AND 5, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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POSITION ON THE FRONT OF THIS PROXY CARD
<PAGE>
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<CAPTION>
<S> <C> <C>
Please mark
[X] your votes
as this
MANAGEMENT AND THE BOARD OF DIRECTORS RECOMMEND A
VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW AND
A VOTE FOR PROPOSALS 2, 3, 4 AND 5.
FOR AGAINST ABSTAIN
WITHHOLD 2. To approve an amendment to the Company's 1992 [ ] [ ] [ ]
1. To elect two directors to FOR FOR ALL Stock Option Plan, as amended (the "Option
hold office until the 2002 [ ] [ ] Plan"), to increase the aggregate number of
Annual Meeting of Stockholders. shares of Common Stock available for issuance
under the Option Plan by 750,000 shares.
Nominees:
Jeremy L. Curnock Cook and Gerald Moller, Ph.D. 3. To approve an amendment to the Company's 1994 [ ] [ ] [ ]
Non-Employee Directors' Stock Option Plan, as
INSTRUCTION: To withhold authority to vote for any amended (the "Directors' Plan"), to provide for
individual nominee, strike a line through that automatic and non-discretionary option grants
nominee's name. to certain directors who serve on certain
committees of the Board of Directors.
MARK HERE FOR ADDRESS CHANGE AND [ ]
NOTE BELOW 4. To approve an amendment to the Company's [ ] [ ] [ ]
Employee Stock Purchase Plan, as amended (the
"Employees' Plan"), to increase the aggregate
number of shares of Common Stock available for
issuance under the Employees' Plan by 200,000
shares.
5. To ratify the selection of Ernst & Young LLP as [ ] [ ] [ ]
independent auditors of the Company for its
fiscal year ending December 31, 1999.
6. To transact such other business as may properly
come before the meeting or any adjournments
thereof.
Please 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, guardians and
attorneys-in-fact should add their titles. If signer
is a corporation, please give full corporate name
and have a duly authorized officer sign, stating
title. If signer is a partnership, please sign in
partnership name by authorized person.
Signature(s) ---------------------------------------------------------------- Dated: --------------------------------- , 1999
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TEXT POSITION ON THE BACK OF THIS PROXY CARD
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