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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
SUPERGEN, INC.
- -----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / $125 Per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SUPERGEN, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 30, 2000
------------------------
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of SuperGen, Inc., a Delaware corporation (the "Company"), will be
held on Tuesday, May 30, 2000 at 2:00 p.m., local time, at the San Ramon
Marriott, 2600 Bishop Drive, San Ramon, California 94583 for the following
purposes:
1. To elect six (6) directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To approve an amendment to the Company's Certificate of Incorporation to
increase from 40,000,000 to 150,000,000 the total number of shares of
Common Stock, par value $0.001, which the Company will have the authority
to issue.
3. To ratify and approve an amendment to the Company's Amended and Restated
1993 Stock Option Plan increasing the number of shares of Common Stock
authorized for issuance by 2,000,000 shares for a total of 5,850,000
shares reserved under the Plan.
4. To ratify the appointment of Ernst & Young LLP as independent auditors
for the fiscal year ending December 31, 2000.
5. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only holders of record of the Company's Common Stock at the close of
business on April 14, 2000, the record date, are entitled to notice of and to
vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Annual Meeting may vote in person even if he or she has returned a proxy.
JOSEPH RUBINFELD, PH.D.
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
San Ramon, California
April 17, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE
<PAGE>
SUPERGEN, INC.
------------------------
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF STOCKHOLDERS
------------------------
PROCEDURAL MATTERS
GENERAL
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of SuperGen, Inc. ("We," "SuperGen," or the
"Company") for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on Tuesday, May 30, 2000 at 2:00 p.m., local time, and at any
adjournments thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the
San Ramon Marriott, 2600 Bishop Drive, San Ramon, California 94583. The
Company's headquarters is located at Two Annabel Lane, Suite 220, San Ramon,
California 94583, and the telephone number at that location is (925) 327-0200.
These proxy solicitation materials were mailed on or about April 20, 2000,
together with the Company's 1999 Annual Report to Stockholders, to all
stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Stockholders of record at the close of business on April 14, 2000 (the
"Record Date") are entitled to notice of and to vote at the meeting. As of the
Record Date, shares of the Company's Common Stock were issued and
outstanding. No shares of Preferred Stock were outstanding.
REVOCABILITY OF PROXIES
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING PROCEDURES
Each stockholder is entitled to one vote for each share of Common Stock held
on all matters to be voted on by the stockholders. Votes cast in person or by
proxy will be tabulated by ChaseMellon Shareholder Services, L.L.C., the
Company's transfer agent.
Upon the execution and return of the enclosed form of proxy, the shares
represented thereby will be voted in accordance with the terms of the proxy,
unless the proxy is revoked. If no directions are indicated in such proxy, the
shares represented thereby will be voted (i) "FOR" the election of each of the
Company's nominees as a director, (ii) "FOR" approval of an amendment to the
Company's Certificate of Incorporation increasing the number of authorized
shares of Common Stock from 40,000,000 to 150,000,000, (iii) "FOR" ratification
and approval of an amendment to the Company's Amended and Restated 1993 Stock
Option Plan increasing the number of shares of Common Stock authorized for
issuance by 2,000,000 to 5,850,000 shares, and (iv) "FOR" ratification of the
appointment of Ernst & Young LLP as independent auditors for the Company for the
fiscal year ending December 31, 2000.
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QUORUM; ABSTENTIONS; BROKER NON-VOTES
A majority of the outstanding shares of Common Stock entitled to vote on the
Record Date, whether present in person or represented by proxy, shall constitute
a quorum for the transaction of business at the Annual Meeting or any
adjournments thereof. Shares that are voted "FOR" or "AGAINST" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as votes eligible to be cast by the Common Stock present in
person or represented by proxy at the meeting and "entitled to vote on the
subject matter" (the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions in the counting of votes, we believe that
abstentions should be counted for purposes of determining both the presence or
absence of a quorum for the transaction of business and the total number of
Votes Cast with respect to a particular matter. Accordingly, abstentions will
have the same effect as a vote against proposals set forth in this Proxy
Statement. In the absence of controlling precedent to the contrary, we intend to
treat abstentions in this manner. In a 1988 Delaware case, BERLIN V. EMERALD
PARTNERS, the Delaware Supreme Court held that, while broker non-votes may be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, broker non-votes should not be counted for the purposes
of determining the number of Votes Cast with respect to the particular proposal
on which the broker has expressly not voted. Broker non-votes with respect to
proposals set forth in this Proxy Statement will therefore not be considered
Votes Cast and, accordingly, will not affect the determination as to whether the
requisite majority of Votes Cast has been obtained with respect to a particular
matter.
COSTS OF SOLICITATION OF PROXIES
We will bear the costs of soliciting proxies. We may reimburse brokerage
firms and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners. Proxies
may also be solicited by certain of the Company's directors, officers and
employees, without additional compensation, personally or by telephone, letter,
e-mail or facsimile.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of our stockholders intended to be presented at the regularly
scheduled 2001 Annual Meeting of Stockholders must be received by us no later
than December 11, 2000, and must satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals to be included in
our proxy statement for that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
Our Board of Directors (the "Board") is currently composed of six members.
The directors are elected to serve one-year terms and until their respective
successors are elected and qualified. The Board has nominated the persons set
forth below for election as directors. All of the nominees, with the exception
of Thomas V. Girardi, are current directors of the Company. Unless otherwise
instructed, the holders of proxies solicited by this Proxy Statement will vote
the proxies received by them for such nominees. In the event that any nominee is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxy holders will vote for a nominee designated by the present Board to fill
the vacancy. We are not aware of any reason that any nominee will be unable or
will decline to serve as a director.
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VOTE REQUIRED
The six (6) nominees receiving the highest number of affirmative votes of
the shares entitled to be voted shall be elected as directors of the Company.
Votes withheld from any director are counted for purposes of determining the
presence or absence of a quorum but have no other legal effect under Delaware
law.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
ALL NOMINEES FOR DIRECTOR NAMED BELOW.
INFORMATION REGARDING NOMINEES
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ---- -------- ---------------------------------------------------
<S> <C> <C>
Joseph Rubinfeld.......... 67 President, Chief Executive Officer and Director of
the Company
Denis Burger (1).......... 56 President and Chief Executive Officer, AVI
BioPharma, Inc.
Thomas V. Girardi......... 60 Senior Partner, Girardi & Keese
Walter J. Lack (1)(2)..... 51 Partner, Engstrom, Lipscomb & Lack
Julius A. Vida (2)........ 71 President, Vida International Pharmaceutical
Consultants
Daniel Zurr (1)(2)........ 54 President and Chief Executive Officer, Quark
Biotech, Inc.
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
JOSEPH RUBINFELD, PH.D. co-founded the Company in 1991. He has served as
Chief Executive Officer, President and a director of the Company since its
inception and was Chief Scientific Officer from inception until September 1997.
Dr. Rubinfeld was one of the four initial founders of Amgen, Inc. in 1980 and
served as Vice President and Chief of Operations until 1983. From 1987 to 1990,
he was a Senior Director at Cetus Corporation. From 1968 to 1980, Dr. Rubinfeld
was employed at Bristol-Myers Company International Division ("Bristol-Myers")
in a variety of positions, most recently as Vice President and Director of
Research and Development. While at Bristol-Myers, Dr. Rubinfeld was instrumental
in licensing the original anticancer line of products for Bristol-Myers,
including mitomycin and bleomycin. Prior to that time, Dr. Rubinfeld was a
research scientist with several pharmaceutical and consumer product companies
including Schering-Plough Corporation and Colgate-Palmolive Co. Dr. Rubinfeld is
a member of the Board of Directors of AVI BioPharma, Inc. and
NeoTherapeutics, Inc. He received his B.S. in chemistry from C.C.N.Y., and his
M.A. and Ph.D. in chemistry from Columbia University. Dr. Rubinfeld has numerous
patents and/or publications on a wide range of inventions and developments
including the 10-second developer for Polaroid film, manufacture of
cephalosporins and the first commercial synthetic biodegradable detergent. In
1984, Dr. Rubinfeld received the Common Wealth Award for Invention.
DENIS BURGER, PH.D. has served as a director of the Company since
January 1996. Dr. Burger has served as President and Chief Operating Officer of
AVI BioPharma, Inc. (formerly AntiVirals, Inc.) a biotechnology company
specializing in gene-targeted therapeutic and diagnostic products since
February 1992 and as Chief Executive Officer since February 1996. Dr. Burger was
a co-founder of Epitope, Inc., a biotechnology company, and served as its
Chairman from 1981 until 1990. He has also been the general partner of Sovereign
Ventures, LLC, a biotechnology consulting and merchant banking venture since
1991. Dr. Burger is a member of the Board of Directors of AVI BioPharma, Inc.
and Trinity Biotech, PLC. He received his B.A. in Bacteriology and Immunology
from the University of California, Berkeley, and his M.S. and Ph.D. in
Microbiology and Immunology from the University of Arizona, Tucson.
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THOMAS V. GIRARDI is senior partner of Girardi & Keese, a law firm
specializing in major business litigation, where he has worked since 1964.
Mr. Girardi has served as National President and Los Angeles Chapter President
of the American Board of Trial Advocates, is a fellow of the International
Academy of Trial Lawyers and the Inner Circle of Advocates, and is a member of
the American Board of Professional Liability Lawyers, International Society of
Barristers, and American Trial Lawyers Association. Mr. Girardi is also a member
of the Board of Directors of Spectrum Laboratories, Inc. He received his B.S.
and J.D. from Loyola Law School and an LLM from New York University.
WALTER J. LACK has served as a director of the Company since February 2000.
Mr. Lack is managing partner of Engstrom, Lipscomb & Lack, a Los Angeles,
California law firm that he founded in 1974. Mr. Lack has acted as a special
arbitrator for the Superior Court of the State of California since 1976 and for
the American Arbitration Association since 1979. He is a member of the
International Academy of Trial Lawyers and an Advocate of the American Board of
Trial Advocates. Mr. Lack is also a member of the Board of Directors of HCC
Insurance Holdings, Inc., Microvision Inc., and Spectrum Laboratories, Inc.
JULIUS A. VIDA, PH.D. has served as a director of the Company since
January 1996. Since June 1993, Dr. Vida has served as President of Vida
International Pharmaceutical Consultants. From 1976 to May 1993, Dr. Vida worked
at Bristol-Myers, where he served as Vice President of Business Development,
Licensing and Strategic Planning from 1991 to 1993, as Vice President of
Licensing from 1985 to 1991 and as Director of Licensing from 1982 to 1985.
Dr. Vida is a member of the Board of Directors of Biomatrix, Inc. and
Medarex, Inc., both biotechnology companies, and Orphan Medical. Dr. Vida
received his Ph.D. in Chemistry from Carnegie Mellon University and his M.B.A.
from Columbia University.
DANIEL ZURR, PH.D. has been a director of the Company since January 1994.
Dr. Zurr currently serves as President and Chief Executive Officer of Quark
Biotech, Inc. (formerly Expression Systems, Inc.). Dr. Zurr served as Scientific
Director and Business Development Director of the Pharmaceutical Division of
Israel Chemicals, Ltd., an Israeli limited liability company, from 1984 to 1985.
He also served as Director of Licensing at G.D. Searle & Company, Limited, from
1980 to 1983. He was Chief Executive Officer of Plantex-Ikapharm, an Israeli
pharmaceutical company, from 1975 to 1980. Dr. Zurr received his M.Sc. at the
Hebrew University of Jerusalem and his Ph.D. from the Imperial College
University of London in 1972.
BOARD MEETINGS AND COMMITTEES
During the year ended December 31, 1999, the Board held nine meetings
(including regularly scheduled and special meetings). With the exception of
Lawrence J. Ellison, a current director who is not standing for re-election, all
of the incumbent directors attended 75% or more of the meetings of the Board and
committees, if any, upon which such directors served.
The Board currently has two standing committees: an Audit Committee and a
Compensation Committee. The Audit Committee is composed of Mr. Lack, Dr. Vida
and Dr. Zurr and the Compensation Committee is composed of Dr. Burger,
Mr. Lack, and Dr. Zurr. We have no nominating committee or committee performing
similar functions.
AUDIT COMMITTEE. The Audit Committee makes such examinations as are
necessary to monitor the corporate financial reporting and the internal and
external audits of the Company, provides to the Board the results of its
examinations and recommendations derived therefrom, outlines to the Board
improvements made, or to be made, in internal accounting controls, nominates
independent auditors, and provides to the Board such additional information and
materials as it may deem necessary to make the Board aware of significant
financial matters that require Board attention. The Audit Committee held one
meeting during 1999.
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<PAGE>
COMPENSATION COMMITTEE. The Compensation Committee reviews the Company's
executive compensation policy, including equity compensation for senior
executives of the Company, and makes recommendations to the Board regarding such
matters. The Compensation Committee held four meetings during 1999.
DIRECTOR COMPENSATION
All non-employee directors of the Company receive $1,000 in compensation for
attendance at each meeting of the Board, and Board Committee members shall each
receive $1,000 for each Board Committee meeting held on a day on which no Board
meeting is held. Directors and Board Committee members are also reimbursed for
all reasonable expenses incurred by them in attending Board and Committee
meetings. We have adopted the 1996 Directors' Stock Option Plan providing for
stock options to be granted to certain non-employee directors.
PROPOSAL TWO
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has declared advisable an amendment to the Company's
Certificate of Incorporation to increase the aggregate number of authorized
shares of Common Stock from 40,000,000 to 150,000,000 (the "Amendment") and has
directed that the Amendment be submitted to the stockholders at the Annual
Meeting.
The Company's Certificate of Incorporation presently authorizes the issuance
of 40,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock.
The Amendment would increase the authorized number of shares of Common Stock to
150,000,000. No change is proposed in the number of authorized shares of
Preferred Stock.
PROPOSED AMENDMENT
If the Amendment is approved, the text of the first paragraph of the Fourth
Article of the Certificate of Incorporation would read in its entirety as
follows:
The Corporation is authorized to issue two classes of stock to be
designated respectively Common Stock and Preferred Stock. The total
number of shares of all classes of stock which the Corporation has the
authority to issue is 152,000,000, consisting of 150,000,000 shares of
Common Stock, $0.001 par value (the "Common Stock"), and 2,000,000
shares of Preferred Stock, $0.001 par value (the "Preferred Stock").
GENERAL EFFECT OF PROPOSED AMENDMENT AND REASONS FOR APPROVAL
Of the Company's 40,000,000 authorized shares of Common Stock, 30,555,785
were issued and outstanding as of March 31, 2000. As of March 31, 2000,
3,322,204 shares are reserved for issuance under the Company's stock option and
employee stock purchase plans. In addition, 5,166,943 shares of common stock are
issuable upon exercise of warrants at March 31, 2000. In September 1999, we
notified holders of warrants issued in connection with our initial public
offering that we will redeem any such warrants that remain unexercised on
April 16, 2000 at a redemption price of $0.25 per share. As of March 31, 2000,
there were 2,098,505 such warrants outstanding. In December 1999, we also
granted Abbott Laboratories an option to purchase up to 49% of the shares of our
common stock outstanding at the time of the exercise.
5
<PAGE>
The Board of Directors believes that the Amendment is advisable in order to
maintain the Company's financing and capital-raising flexibility, to facilitate
future stock splits, to have shares available for use in employee benefit plans
and other corporate purposes, and to generally maintain the Company's
flexibility in today's competitive, fast-changing environment. There are no
present agreements, understandings or plans for the issuance of any of the
additional shares that would be authorized by the Amendment, except for the
shares that would be issued to Abbott Laboratories upon exercise of their option
to purchase up to 49% of the shares of our common stock outstanding at the time
of the exercise.
Adoption of the Amendment would enable the Board from time to time to issue
additional shares of Common Stock for such purposes and such consideration as
the Board may approve without further approval of the Company's stockholders,
except as may be required by law or the rules of any national securities
exchange on which the shares of Common Stock are at the time listed. As is true
for shares presently authorized, Common Stock authorized by the Amendment may,
among other things, have a dilutive effect on earnings per share and on the
equity and voting power of the existing holders of Common Stock.
There are no preemptive rights with respect to Common Stock. The additional
authorized shares of Common Stock would have the identical powers, preferences,
and rights as the shares now authorized. Under Delaware law, stockholders will
not have any dissenters' or appraisal rights in connection with the Amendment.
If the Amendment is approved by the stockholders, it will become effective upon
executing, acknowledging and filing a Certificate of Amendment required by the
General Corporation Law of Delaware.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock as of the record date, in person or by proxy, and entitled to
vote on this proposal will be required to approve the amendment to the Company's
Certificate of Incorporation. Abstentions and broker non-votes will have the
same effect as votes against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
PROPOSAL THREE
AMENDMENT TO AMENDED AND RESTATED
1993 STOCK OPTION PLAN
GENERAL
Our Amended and Restated 1993 Stock Option Plan (the "1993 Plan") provides
for the granting to employees of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
for the granting to employees and consultants of nonstatutory stock options and
stock purchase rights. The 1993 Plan was originally adopted by the Board in
December 1993 and approved by the Company's stockholders in January 1994. Unless
terminated sooner, the 1993 Plan will terminate automatically in December 2003.
In April 2000, the Board voted to increase the number of shares authorized
for issuance under the 1993 Plan by an aggregate of 2,000,000 shares, bringing
the total shares currently reserved for issuance under the 1993 Plan to
5,850,000 shares. Proposal Three seeks stockholder approval of the increase in
shares authorized under the 1993 Plan. As of March 31, 2000 and after giving
effect to the proposed 2,000,000 share increase, there were 2,007,845 shares
available for future grant under the 1993 Plan. Approval of this amendment to
the 1993 Plan also perfects the stockholder approval requirement of Section 422
of the Code.
6
<PAGE>
We believe that stock options play a key role in our ability to recruit,
reward and retain executives and key employees. Companies like SuperGen have
historically used stock options as an important part of recruitment and
retention packages. We compete directly with other companies for experienced
executives and sales personnel and believe that we must be able to offer
comparable packages to attract the caliber of individuals necessary to our
business. Our growth is partly responsible for the need to increase shares
issuable under the 1993 Plan. The total number of employees has increased from
30 full-time employees as of December 31, 1996, to 83 full-time employees and
two part-time employees as of March 31, 2000.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of Common Stock
represented, in person or by proxy, and entitled to vote on this proposal will
be required to ratify and approve the amendment to the 1993 Plan. Abstentions
will have the same effect as votes against this proposal. Broker non-votes will
not be counted as having been represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1993 PLAN.
The essential provisions of the 1993 Plan are outlined below.
ADMINISTRATION
The 1993 Plan may be administered by the Board, the Compensation Committee
or a committee appointed by the Board. The 1993 Plan is currently administered
by the Compensation Committee (hereinafter referred to as the "Administrator")
composed of Dr. Burger, Mr. Lack, and Dr. Zurr.
ELIGIBILITY; LIMITS ON GRANTS
The 1993 Plan provides that options and stock purchase rights may be granted
to employees, officers, directors and consultants to the Company, its parent or
subsidiaries. Incentive stock options may be granted only to employees,
including employee directors and officers. The Administrator approves the
participants, the time or times at which options and stock purchase rights are
granted and the number of shares subject to each. The 1993 Plan is administered
so as to satisfy certain requirements under the federal securities laws,
including under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Code.
The 1993 Plan limits the discretion allowed to the Administrator in granting
options. This limitation is intended to preserve the Company's ability to deduct
for federal income tax purposes the compensation expense relating to options
exercised by certain executive officers under the 1993 Plan. The limitation
provides that under the 1993 Plan no employee may be granted in any one fiscal
year options and stock purchase rights to receive more than 500,000 shares of
Common Stock (except in connection with the commencement of employment, in which
case options and stock purchase rights to purchase no more than an additional
200,000 shares may be granted). See discussion below under "Tax Information" for
a summary of the more general rules governing the availability to the Company of
tax deductions in connection with stock options exercised under the 1993 Plan.
As of March 31, 2000, there were 85 employees currently eligible to
participate in the 1993 Plan, and 120 optionees, including consultants, held
outstanding options under the 1993 Plan.
TERMS OF OPTIONS AND STOCK PURCHASE RIGHTS
The terms of options and stock purchase rights granted under the 1993 Plan
are determined by the Administrator but may not be longer than ten years, except
in the case of incentive stock options granted to an optionee who at the time of
grant owns stock representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any parent or subsidiary of the Company
(a "10%
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Stockholder"), for whom the term of each option may not be longer than five
years. Each option or stock purchase right is evidenced by a written agreement
between the Company and the optionee to whom such option or stock purchase right
is granted and is subject to the following additional terms and conditions:
(a) EXERCISE OF THE OPTION: The Administrator determines when options
may be exercisable. Shares subject to an option generally vest and are
exercisable over four (4) years at the rate of one-quarter "1/4" of the
shares on the first anniversary of the option grant and the balance of the
shares subject to the option vesting at the rate of 1/36th per month
thereafter. The Administrator may accelerate the vesting of any outstanding
option. The purchase price of the shares to be purchased upon exercise of
any option may be paid, at the discretion of the Administrator, in cash,
check, or other shares of Common Stock (with some restrictions), or, if
specified in the optionee's option agreement, promissory note, cashless
exercise, a reduction in the amount of any Company liability to the
optionee, any combination thereof, or other legally permitted consideration.
(b) EXERCISE PRICE: The exercise price under the 1993 Plan is
determined by the Administrator, provided that, in the case of an incentive
stock option, the exercise price may not be less than 100% of the fair
market value of the Common Stock on the date the option is granted, and,
provided further, that, in the case of an incentive stock option granted to
a 10% Stockholder, the exercise price may be no less than 110% of the fair
market value of the Common Stock on the date the option is granted. In the
case of a non-statutory stock option, the exercise price is determined by
the Administrator; however, in the case of a non-statutory option intended
to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, the exercise price may not be less than 100% of
the fair market value of the Common Stock on the date the option is granted.
(c) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP: If an
optionee's status as an employee or consultant terminates for any reason
other than death or disability, an option under the 1993 Plan may be
exercised not later than thirty (30) days (or such other period of time, not
exceeding three months in the case of incentive options, as is determined by
the Administrator and specified in the optionee's option agreement) after
such termination (but in no event later than the date of expiration of the
term of the option) and may be exercised only to the extent such option was
exercisable and vested on the date of termination.
(d) DISABILITY OF OPTIONEE: If an optionee's continuous status as an
employee, director or consultant terminates as a result of the optionee's
disability (as defined in Section 22(e)(3) of the Code), an option may be
exercised within twelve (12) months after termination of employment due to
such disability (but in no event later than the date of expiration of the
term of the option), but only to the extent such option was exercisable and
vested on the date of termination.
(e) DEATH OF OPTIONEE: If an optionee should die while employed by the
Company, an option may be exercised by the optionee's estate at any time
within twelve (12) months after the date of death (but in no event later
than the date of expiration of the term of the option), but only to the
extent such options were exercisable and vested on the date of death.
(f) TERMINATION OF OPTIONS: Stock options granted under the 1993 Plan
expire as determined by the Administrator, but in no event later than ten
(10) years from the date of grant. However, in the case of an incentive
stock option granted to a 10% Stockholder, the term of the option may not be
greater than five (5) years. Under the form of option agreement currently
used by the Company, options generally expire ten (10) years from the date
of grant.
(g) NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS: Unless
otherwise specified by the Administrator, options and stock purchase rights
are non-transferable by the optionee other than by will or by the laws of
descent or distribution and are exercisable during the optionee's lifetime
only by the optionee.
8
<PAGE>
(h) OTHER PROVISIONS: The option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1993 Plan as may
be determined by the Administrator.
The 1993 Plan permits the Company to grant stock purchase rights to purchase
Common Stock of the Company either alone, in addition to, or in tandem with
other awards under the 1993 Plan and/or cash awards made outside the Plan. Upon
the granting of a stock purchase right under the 1993 Plan, the offeree is
advised in writing of the terms, conditions and restrictions related to the
offer, including the number of shares of Common Stock that the offeree is
entitled to purchase, the price to be paid and the time within which the offeree
must accept such offer (which shall in no event exceed six (6) months from the
date of grant). The offer is accepted by execution of a restricted stock
purchase agreement between the Company and the offeree.
Unless the Administrator determines otherwise, the restricted stock purchase
agreement grants the Company a repurchase option exercisable upon the voluntary
or involuntary termination of the purchaser's employment or consulting
relationship with the Company for any reason (including death or disability as
defined in Section 22(e)(3) of the Code). The purchase price for shares
repurchased pursuant to this repurchase option is the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option lapses at such rate as the Administrator
may determine.
Upon exercise of a stock purchase right, the purchaser has all rights of a
stockholder of the Company. As of the Record Date, the Company has not granted
any stock purchase rights under the 1993 Plan.
CHANGES IN CAPITALIZATION
In the event a change, such as a stock split or stock dividend payable in
Common Stock, is made in the Company's capitalization which results in an
exchange of Common Stock for a greater or lesser number of shares without
receipt of consideration by the Company, appropriate adjustment will be made in
the number of shares reserved for issuance under the 1993 Plan and in the number
of shares subject to outstanding options and stock purchase rights under the
1993 Plan, as well as in the price per share of Common Stock covered by such
options and stock purchase rights. Such adjustment will be made by the Board,
whose determination will be final, binding and conclusive.
In the event of the proposed dissolution or liquidation of the Company,
options and stock purchase rights outstanding under the 1993 Plan will terminate
immediately prior to such action. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
into another corporation, outstanding options and stock purchase rights may be
assumed or an equivalent option or stock purchase right may be substituted by
the successor entity. If such outstanding options and stock purchase rights are
not assumed or substituted, however, the Administrator must provide for all or
some part of the options and stock purchase rights to become fully vested and
immediately exercisable for a period of fifteen (15) days.
AMENDMENT AND TERMINATION OF THE PLAN
The Board may amend the 1993 Plan at any time, or may terminate the 1993
Plan, without stockholder approval; provided, however, that stockholder approval
is required for any amendment to the 1993 Plan for which stockholder approval
would be required under the Code or other applicable rules, and no action by the
Board or stockholders may unilaterally impair any option or stock purchase right
previously granted under the 1993 Plan. In any event, the 1993 Plan will
terminate in December 2003. Any options outstanding under the 1993 Plan at the
time of its termination will remain outstanding until they expire by their
terms.
9
<PAGE>
TAX INFORMATION
THE FOLLOWING IS A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION WITH
RESPECT TO THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE
1993 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE OPTIONEE'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY,
STATE OR FOREIGN COUNTRY IN WHICH A PARTICIPANT MAY RESIDE.
INCENTIVE STOCK OPTIONS
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. A different rule for measuring ordinary
income upon such a premature disposition may apply if the optionee is also an
officer, director, or 10% Stockholder of the Company. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period.
NON-STATUTORY STOCK OPTIONS
All other options which do not qualify as incentive stock options are
referred to as non-statutory stock options. An optionee will not recognize any
taxable income at the time he or she is granted a non-statutory stock option.
However, upon the option's exercise, the optionee will recognize taxable income,
generally measured as the excess of the then fair market value of the shares
purchased over the exercise price. Any taxable income recognized in connection
with an option exercise by an optionee who is also an employee of the Company
will be subject to tax withholding by the Company. The Company will be entitled
to a tax deduction in the same amount as the ordinary income recognized by the
optionee. Upon resale of such shares by the optionee, any difference between the
sales price and the exercise price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period.
STOCK PURCHASE RIGHTS
Stock purchase rights will generally be taxed in the same manner as
non-statutory stock options. However, the stock issued upon exercise of a stock
purchase right is usually subject to the Company's right to repurchase such
stock upon the purchaser's termination of employment with the Company, which
right lapses progressively over time. As a result, at the time of purchase, this
restricted stock is subject to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code. As a result, the purchaser will not recognize
ordinary income at the time of purchase. Instead, the purchaser will recognize
ordinary income on the date or dates when the stock ceases to be subject to
substantial risk of forfeiture. The stock will generally cease to be subject to
a substantial risk of forfeiture when it is no longer subject to the Company's
right to repurchase the stock (i.e., as it "vests"). At such times, the
purchaser will recognize the ordinary income measured as the difference between
the purchase price and the fair market value of the stock on the date the stock
is no longer subject to a substantial risk of forfeiture. The ordinary income
recognized by a purchaser who is an employee will be treated as wages and will
be subject to tax withholding by the Company. Generally, the Company will be
entitled to a tax deduction in the amount and at the time the purchaser
recognizes ordinary income.
10
<PAGE>
Notwithstanding the foregoing, a purchaser may accelerate the date of his or
her recognition of ordinary income, and the beginning of any capital gain
holding period, by timely filing an election pursuant to Section 83(b) of the
Code. In such event, the ordinary income recognized, if any, would be equal to
the difference between the purchase price and the fair market value of the stock
on the date of purchase, and the capital gain holding period would commence on
the purchase date.
Different rules may apply in the case of purchasers who are subject to
Section 16 of the Exchange Act.
PARTICIPATION IN THE 1993 PLAN
The grant of options and stock purchase rights under the 1993 Plan to
eligible employees and consultants is subject to the discretion of the
Administrator. The table on page 15 sets forth information with respect to
options granted under the 1993 Plan during 1999 to each of the officers named in
the Summary Compensation Table. The term of options under the 1993 Plan (other
than those granted to 10% Stockholders, as to which the term is five years from
the date of grant) is generally ten years from the date of grant.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed Ernst & Young LLP as independent auditors of the
Company to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 2000, and recommends that the stockholders vote
for ratification of such appointment.
Ernst & Young LLP has audited our financial statements since March 1994. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement and is expected to be
available to respond to appropriate questions.
VOTE REQUIRED
Ratification of the appointment of Ernst & Young LLP as our independent
auditors will require the affirmative vote of a majority of the outstanding
shares of Common Stock represented, in person or by proxy, and entitled to vote
on this proposal. Abstentions will have the same effect as a vote against this
proposal. Broker non-votes will not be counted as having been represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF APPOINTING
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
11
<PAGE>
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of March 31, 2000 for the following: (i) each person or entity
who is known by the Company to own beneficially more than 5% of the outstanding
shares of the Company's Common Stock; (ii) each of the Company's directors;
(iii) each of the officers named in the Summary Compensation Table; and
(iv) all current directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OWNED (1) OWNED (%)
- ---- ------------ ------------
<S> <C> <C>
Abbott Laboratories (2) .................................... 28,460,729 49.0
100 Abbott Park Road
Abbott Park, IL 60064
Tako Ventures, LLC (3)...................................... 4,017,313 12.4
Lawrence Ellison
c/o Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94065
Joseph Rubinfeld (4) ....................................... 2,728,934 8.6
c/o SuperGen, Inc.
Two Annabel Lane, Suite 220
San Ramon, CA 94583
Edward L. Jacobs (5)........................................ 26,739 *
Rajesh Shrotriya (6)........................................ 131,515 *
Luigi Lenaz (7)............................................. 68,456 *
Frederick Grab (8).......................................... 55,176 *
Denis Burger (9)............................................ 150,000 *
Walter J. Lack (10)......................................... 110,000 *
Julius A. Vida (11)......................................... 29,175 *
Daniel Zurr (12)............................................ 50,000 *
All current directors and executive officers as a group (11
persons) (13)............................................. 7,274,333 21.9
</TABLE>
- ------------------------
* Less than 1%.
(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rule, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares which the individual has the right to acquire at May 30, 2000 through
the exercise of any stock option or other right. Unless otherwise indicated
in the footnotes, each person has sole voting and investment power (or
shares such powers with his or her spouse) with respect to the shares shown
as beneficially owned. At March 31, 2000, there were 30,555,785 shares of
our Common Stock outstanding.
(2) Includes 27,527,335 shares issuable upon the exercise of a stock option to
purchase shares of Common Stock exercisable at May 30, 2000.
(3) Tako Ventures, LLC is an investment entity controlled by Lawrence J.
Ellison, a current director of the Company. Includes 1,775,000 shares
issuable upon exercise of warrants to purchase shares of Common Stock and
exercisable at May 30, 2000.
(4) Includes 1,645,860 shares held jointly by Joseph and Loretta Rubinfeld,
husband and wife, 20,000 shares held individually by Joseph Rubinfeld,
49,000 shares held by Joseph and Loretta Rubinfeld as custodians under the
California Uniform Transfers to Minors Act, 1,004,167 shares issuable upon
exercise of options to purchase shares of Common Stock exercisable by Joseph
Rubinfeld at May 30, 2000, and options to purchase 9,907 shares of Common
Stock exercisable by Loretta Rubinfeld, his wife, at May 30, 2000.
12
<PAGE>
(5) Includes 26,542 shares issuable upon the exercise of stock options to
purchase shares of Common Stock exercisable at May 30, 2000.
(6) Includes 131,432 shares issuable upon the exercise of stock options to
purchase shares of Common Stock exercisable at May 30, 2000.
(7) Includes 64,233 shares issuable upon the exercise of stock options to
purchase shares of Common Stock exercisable at May 30, 2000.
(8) Includes 1,009 shares held jointly by Frederick and Elaine Grab, husband and
wife, 3,000 shares held individually by Frederick Grab, and 51,167 shares
issuable on the exercise of stock options to purchase shares of Common Stock
exercisable at May 30, 2000.
(9) Includes 100,000 shares owned by AVI BioPharma, Inc. ("AVI"). Dr. Burger in
his capacity as President and Chief Executive Officer of AVI may be deemed
to be the beneficial owner of these shares. Dr. Burger disclaims beneficial
ownership of the shares held by AVI except to the extent of his pecuniary
interest therein.
(10) Includes 10,000 shares issuable upon the exercise of a stock option to
purchase shares of Common Stock exercisable at May 30, 2000.
(11) Includes 10,000 shares issuable upon the exercise of a stock option to
purchase shares of Common Stock exercisable at May 30, 2000. Does not
include an additional 25,000 shares issuable upon the exercise of a
performance-based option to purchase Common Stock of the Company.
(12) Represents 50,000 shares issuable upon the exercise of a stock option to
purchase shares of Common Stock exercisable at May 30, 2000.
(13) See footnotes (3) through (12). Includes 1,776,191 shares issuable upon
exercise of warrants to purchase shares of Common Stock and 1,360,969 shares
issuable upon the exercise of stock options to purchase shares of Common
Stock held by executive officers and directors which are exercisable at
May 30, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities ("10% of Class Stockholders") to file with
the Securities and Exchange Commission (the "SEC") reports of ownership on
Form 3 and reports on changes in ownership on Form 4 or Form 5. Such executive
officers, directors and 10% of Class Stockholders are also required by SEC rules
to furnish the Company with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons that no Forms
5 were required for such persons, the Company believes that, through the Record
Date, its executive officers, directors and 10% of Class Stockholders complied
with all applicable Section 16(a) filing requirements, except that the Form 5
filed by Dr. Rubinfeld in February 2000 reported a gift of Common Stock made in
April 1998, and a Form 4 for Denis Burger reporting his beneficial ownership of
Common Stock acquired by AVI BioPharma, Inc. in December 1999 was filed late.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in January of 1993 and is
currently composed of Dr. Burger, Mr. Lack, and Dr. Zurr, who are all directors
of the Company. Dr. Burger is President and Chief Executive Officer of AVI
BioPharma, Inc. and Dr. Zurr is President and Chief Executive Officer of Quark
Biotech, Inc. Dr. Rubinfeld is a member of the Boards of Directors of AVI
BioPharma, Inc. and Quark Biotech, Inc. and serves on the compensation committee
of AVI BioPharma, Inc. No member of the Compensation Committee is or was
formerly an officer, employee or consultant of the Company.
13
<PAGE>
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning total
compensation received by the Chief Executive Officer and each of the four other
most highly compensated executive officers (collectively, the "Named Officers")
for services rendered to the Company in all capacities during the last three
fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------ ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(2) BONUS ($) OPTIONS (#) ($)
- --------------------------- -------- ---------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph Rubinfeld, Ph.D. 1999 361,200 7,500 650,000 -- 4,800(3)
(1) ....................... 1998 350,000 7,500 158,800 200,000 4,800
President and Chief 1997 286,250 7,312 159,000 400,000 4,800
Executive Officer
Edward L. Jacobs (4) ........ 1999 155,250 -- 30,000 85,000 4,800(3)
Executive Vice President, 1998 N/A N/A N/A N/A N/A
Commercial Operations 1997 N/A N/A N/A N/A N/A
Rajesh Shrotriya, M.D. ...... 1999 225,000 5,606 -- 61,500 4,800(3)
Executive Vice President 1998 187,775 5,812 4,800 13,500 4,800
and Chief Scientific 1997 171,667 727 4,700 135,000 122,397
Officer
Luigi Lenaz, M.D. (5) ....... 1999 185,000 -- 15,000 10,000 4,800(3)
Senior Vice President of 1998 162,400 -- 4,200 50,000 4,800
Clinical Research and 1997 40,000 -- 15,000 75,000 --
Medical Affairs
Frederick L. Grab, Ph.D. .... 1999 108,150 -- -- -- 3,245(3)
Vice President, Compliance 1998 106,575 -- 2,800 7,000 3,314
and Regulatory Affairs--CMC 1997 104,800 -- 3,789 -- 9,783
Submissions
</TABLE>
- ------------------------
(1) Dr. Rubinfeld's amended Employment Agreement provided for an annual base
salary of $361,200 (increased from $350,000 effective January 1, 1999) and a
minimum annual performance bonus (a "Minimum Bonus") which the Board or its
Compensation Committee has set at $150,000 and which may be drawn in advance
from the ensuing year. In 1997, he was paid a bonus of $159,000, which
included a draw upon his entire Minimum Bonus for 1998. In 1998 he was paid
$158,800 which included the balance of his total 1998 bonus which the
Compensation Committee set at $300,000. In 1999, he was paid a bonus of
$650,000, which included his Minimum Bonus for 1999 of $150,000 and an
additional performance bonus of $500,000 granted by the Compensation
Committee. Effective January 1, 2000, the Compensation Committee increased
his annual base salary to $500,000, increased his Minimum Bonus to $250,000,
and granted him an additional performance bonus of $500,000.
(2) Represents use of Company leased vehicles.
(3) Represents 401(k) contribution.
(4) Mr. Jacobs joined the Company in March 1999.
(5) Dr. Lenaz joined the Company in October 1997.
14
<PAGE>
OPTION GRANTS IN 1999
The following table shows, as to the Named Officers, information concerning
stock options granted during 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM($)(2)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR(1) PER SHARE($) DATE 5% 10%
- ---- ---------- ---------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Joseph Rubinfeld,
Ph.D.................. -- -- -- -- -- --
Edward L. Jacobs........ 75,000 11.9% 8.250 02/24/09 389,129 986,128
10,000 1.6% 27.125 12/28/09 170,588 432,303
Rajesh Shrotriya,
M.D................... 51,500 8.2% 8.250 02/24/09 267,202 677,141
10,000 1.6% 27.125 12/28/09 170,588 432,303
Luigi Lenaz, M.D........ 10,000 1.6% 27.125 12/28/09 170,588 432,303
Frederick L. Grab,
Ph.D.................. -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The Company granted options to acquire 631,153 shares to employees in 1999.
(2) The Potential Realizable Value is calculated based on the fair market value
on the date of grant, which is equal to the exercise price of options
granted in 1999, assuming that the stock appreciates in value from the date
of grant until the end of the option term at the annual rates specified (5%
and 10%). Potential Realizable Value is net of the option exercise price.
The assumed rates of appreciation are specified in rules of the SEC and do
not represent the Company's estimate or projection of future stock price.
Actual gains, if any, resulting from stock option exercises and Common Stock
holdings are dependent on the future performance of the Common Stock and
overall stock market conditions, as well as the option holders' continued
employment through the exercise/vesting period. The amounts reflected in
this table may never be achieved.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth, as to the Named Officers, certain
information concerning the number of shares subject to both exercisable and
unexercisable stock options as of December 31, 1999. Also reported are values
for unexercised "in-the-money" options, which values represent the positive
spread between the respective exercise prices of outstanding stock options and
the fair market value of the Company's Common Stock as of December 31, 1999. No
options were exercised by the Named Officers in 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
FISCAL YEAR END OPTIONS AT FISCAL YEAR END(1)
--------------------------------- ---------------------------------
NAME EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- ---- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Joseph Rubinfeld, Ph.D.............. 935,416 164,584 18,325,772 2,799,228
Edward L. Jacobs.................... 3,000 82,000 63,375 1,543,500
Rajesh Shrotriya, M.D............... 123,502 86,498 2,162,362 1,489,700
Luigi Lenaz, M.D.................... 56,354 78,646 831,742 1,059,507
Frederick L. Grab, Ph.D............. 67,667 9,333 1,337,485 196,355
</TABLE>
- ------------------------
(1) The value of underlying securities is based on the $29.375 per share closing
price of the Company's Common on December 31, 1999 (the last market trading
day in 1999), minus the aggregate exercise price.
15
<PAGE>
EMPLOYMENT AGREEMENTS
We maintain an employment agreement with Joseph Rubinfeld (the "Employment
Agreement"). The Employment Agreement, as restated January 1, 1998, provides for
his employment as President and Chief Executive Officer at an annual base salary
of at least $350,000 commencing October 1, 1997 and an annual minimum
performance bonus ("Minimum Bonus"), which Minimum Bonus was set by the Board or
its Compensation Committee at $150,000 for 1997, 1998, and 1999 and $250,000 for
2000 with the added condition that in each of such years Dr. Rubinfeld be
allowed to draw against the Minimum Bonus for the ensuing year. As an additional
incentive, under the terms of the Employment Agreement, we issued Dr. Rubinfeld
an option to purchase up to 500,000 shares of Common Stock at a per share
exercise price of $6.00. Of the shares subject to this option, twenty-five
percent (25%) were vested and exercisable as of March 12, 1996 and an additional
1/36th of the remaining shares vested and became exercisable at the end of each
month thereafter. This option vested in full in March 1999. The Employment
Agreement provides for an employment term through December 31, 2002.
The Employment Agreement provides for annual adjustments to compensate for
changes in the cost of living, and such additional salary or incentive
compensation as the Compensation Committee of the Board may determine from time
to time. The Employment Agreement provides for participation in our employee
benefit plans and such other plans as we may institute for the benefit of our
executive employees.
CERTAIN TRANSACTIONS
AGREEMENTS WITH ABBOTT LABORATORIES. In December 1999, we entered into an
alliance with Abbott Laboratories under which Abbott will market and distribute
rubitecan and invest in shares of our common stock. We will co-promote rubitecan
with Abbott in the United States and Abbott has exclusive rights to market
rubitecan outside of the United States. In the U.S. market, we will share
profits from product sales equally with Abbott. Outside the U.S. market, Abbott
will pay us royalties and transfer fees based on product sales. We will remain
responsible for pursuing and funding the clinical development of rubitecan and
obtaining regulatory approval for the product in the United States, Canada and
the member states of the European Union.
We will receive a number of equity investments and cash payments from Abbott
which, when aggregated, amount to approximately $150 million. Each equity
investment and cash payment is conditioned upon the achievement of certain
developmental and sales milestones. In January 2000 we received a $26.5 million
equity investment from Abbott. In addition, we granted Abbott an option to
purchase up to 49% of the outstanding shares of our common stock at an exercise
price of $85 per share which expires in March 2003.
AGREEMENTS WITH AVI BIOPHARMA, INC. Dr. Burger is the President and Chief
Executive Officer of AVI BioPharma, Inc. ("AVI") and Dr. Rubinfeld is a member
of the Board of Directors of AVI. In December 1999, we entered into an agreement
with AVI whereby we acquired one million shares of AVI common stock, which
amounted to approximately seven and one half percent (7.5%) of AVI's outstanding
common stock, for $2.5 million cash and 100,000 shares of our common stock at
$28.25 per share. As part of the agreement, we also acquired exclusive
negotiating rights for the United States market for Avicine, AVI's proprietary
cancer vaccine currently in late-stage clinical testing against a variety of
solid tumors.
In April 2000, we completed our negotiations with AVI and entered into an
agreement for the U.S. marketing rights for Avicine in exchange for a
$20 million equity investment in shares of AVI common stock. We issued
$15 million in our common stock along with $5 million in cash to AVI as payment
for our investment. We will share U.S. developmental and regulatory approval
costs for Avicine and upon commercialization in the US we will split all U.S.
profits. AVI and SuperGen will jointly determine the optimum development
strategy for the international marketplace and will share all profits received.
We will be obligated to make additional payments to AVI based on successful
achievement of developmental,
16
<PAGE>
regulatory approval, and commercialization milestones over the next several
years. These payments could total an additional $80 million. As part of this
agreement, we obtained the right of first discussion to all of AVI's oncology
compounds and an option to acquire an additional 10% of AVI's common stock for
$35.625 per share. This option is exercisable for a three-year period commencing
on the earlier of the date the Food and Drug Administration accepts the NDA
submitted for Avicine or the date on which the closing price of AVI's common
stock exceeds the option exercise price.
INVESTMENT BY TAKO VENTURES, LLC. On June 17, 1997, we entered into an
agreement with Tako Ventures, LLC ("Tako"), an investment entity controlled by
Lawrence J. Ellison, a current director of the Company, for a private placement
in our Common Stock (the "Tako Agreement").
In January 1999, Tako exercised its pre-emptive rights pursuant to the Tako
Agreement and purchased 61,350 shares of unregistered restricted common stock
for a total purchase price of $400,002. This transaction reflected a discount of
4% to a weighted average stock price for a specific period of time. We granted
registration rights in connection with this transaction.
In March 1999, we entered into a promissory note with Tako, whereby Tako
agreed to advance us up to $5,000,000 through December 31, 1999. Advances under
this agreement would be secured by substantially all our assets. In connection
with this transaction, we issued Tako a five-year warrant to acquire 500,000
shares of unregistered restricted common stock at an exercise price of $11.00
per share. We calculated the value of the warrant at $2,000,000 using the
Black-Scholes valuation model. In September 1999, we terminated this promissory
note thereby releasing any security interest that Tako had in our assets. The
value of the warrant was charged to expense in 1999.
CONSULTING AGREEMENT. We maintain an agreement for consulting services in
the area of corporate development with one director, Julius A. Vida. During
1999, payments under this agreement totaled $24,000.
QUARK BIOTECH, INC. INVESTMENT. In May 1997, we made an equity investment
of $500,000 in Series C Preferred Stock of Quark Biotech, Inc. ("QBI"), a
biotechnology company, representing less than 1% of the outstanding stock of
QBI, and in September 1997 were issued a warrant to purchase 31,250 shares of
Series D Preferred Stock. Dr. Rubinfeld, Mr. Ellison (through Tako Ventures,
LLC), and Dr. Zurr, directors and stockholders of SuperGen, beneficially own an
aggregate of 11,924,413 shares, or approximately 63%, of QBI as of the Record
Date. Dr. Rubinfeld, Mr. Ellison, and Dr. Zurr are also directors of QBI.
Dr. Zurr is the President and Chief Executive Officer of QBI.
PROPERTY LEASE WITH QBI. In November 1997, we leased approximately
one-third of the laboratory square footage at the SuperGen Pharmaceutical
Research Institute to QBI for $3,000 per month for three years, plus its pro
rata share of specified common expenses. We also completed building and
laboratory improvements and purchased furniture on behalf of QBI for a total of
approximately $750,000, of which $300,000 was reimbursed by QBI in 1997 and of
which the balance is to be reimbursed by QBI.
MANAGEMENT INDEBTEDNESS. In June 1998, the Company loaned $85,000 to
Dr. Shrotriya. This loan has an annual interest rate of 5.5%. At December 31,
1999 the balance of this loan, including interest, was $93,000.
EMPLOYMENT OF CERTAIN FAMILY MEMBERS. Among employees who earned more than
$60,000 in 1999, three are immediate family members of Dr. Rubinfeld. The
employees are Joseph Iovino and Kevin Rolens, sons-in-law of Dr. Rubinfeld, and
Steven Rubinfeld, son of Dr. Rubinfeld, and their annual aggregate salary and
bonus amounts for the year ending December 31, 1999 were $95,000, $82,000, and
$132,097, respectively.
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board (the "Committee") consists of
directors Denis Burger, Walter Lack, and Daniel Zurr, neither of whom is an
employee or officer of the Company. The Committee was established in
January 1993 and is responsible for reviewing and making recommendations to the
Board regarding all forms of compensation to be provided to the executive
officers and directors of SuperGen, including stock compensation and loans, and
all bonus and stock compensation to all employees. The goal of the Committee is
to ensure that our compensation practices are sufficient to attract the
necessary talent to enable growth from a development stage company into one with
commercialized products.
COMPENSATION COMMITTEE PURPOSES
The Compensation Committee of the Board serves as an administrative arm of
the Board to make decisions on behalf of the Board with respect to all forms of
compensation to executive officers, and all bonus and stock compensation to
employees.
Compensation for officers and key employees includes both cash and equity
elements. Cash compensation consists of base salary, which is determined on the
basis of the level of responsibility, expertise and experience of the employee,
taking into account competitive conditions in the industry. In addition, cash
bonuses may be awarded to officers and other key employees. Such bonuses are
based on accomplishment of designated Company goals.
Ownership of the Company's Common Stock is a key element of executive
compensation. Officers and other employees of SuperGen are eligible to
participate in the 1993 Plan, which was adopted prior to our initial public
offering in March 1996. The 1993 Plan permits the Board or a committee
designated by the Board to grant stock options to employees on such terms as the
Board or such committee may determine. Employee option grants typically vest
over a four-year period and thus require the employee's continuing efforts. The
Committee believes that it is in the stockholders' interests to link employee
compensation as closely as possible to equity appreciation and thus to share
with the employees the benefits of their efforts on behalf of our success.
DESCRIPTION OF 401(k) PLAN
We also maintain a 401(k) Plan to provide retirement benefits through tax
deferred salary deductions for all employees. We may make discretionary
contributions, which will be allocated based upon the relative compensation of
each participant with at least 1,000 hours of service during the plan year and
who are employed on the last day of the plan year. Company contributions vest
ratably over five years. For 1999, we have made a discretionary contribution at
the rate of 3% of each eligible participant's salary as defined.
1999 EXECUTIVE COMPENSATION
Executive compensation for 1999 included base salary, cash bonuses,
incentive stock option grants and other compensation. We issued cash bonuses in
recognition of employee's prior service and contributions towards the
achievement of Company goals.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR 1999
The compensation for Dr. Rubinfeld for 1999 was intended to reward him for
increasing stockholder value. It included a base salary of $361,200 per annum.
In addition, Dr. Rubinfeld receives a Minimum Bonus which was set by the Board
or its Compensation Committee at $150,000 for each of 1996, 1997, 1998 and 1999
and $250,000 for 2000, with the added condition that in each of such years
Dr. Rubinfeld be allowed to draw against the Minimum Bonus for the ensuing year.
In 1997, Dr. Rubinfeld was paid a bonus
18
<PAGE>
of $159,000, which included a draw of $150,000 upon his entire Minimum Bonus for
1998. The Compensation Committee set his total 1998 bonus at $300,000 and the
balance of the total 1998 bonus due him of $150,000 was paid in 1998. In 1999,
he was paid a bonus of $650,000, which included his Minimum Bonus for 1999 of
$150,000 and additional performance bonus of $500,000 granted by the
Compensation Committee. Effective January 1, 2000, the Compensation Committee
increased his annual base salary to $500,000, increased his Minimum Bonus to
$250,000, and granted him an additional performance bonus of $500,000. See
"Executive Officer Compensation--Employment Agreements."
INTERNAL REVENUE CODE SECTION 162(M) IMPLICATIONS FOR EXECUTIVE COMPENSATION
The Committee is responsible for addressing issues raised by Section 162(m)
of the Internal Revenue Code ("Section 162(m)"). This Section limits the
Company's tax deduction for compensation paid to certain executive officers that
does not qualify as "performance-based" to $1 million per executive officer. To
qualify as performance-based under Section 162(m), compensation payments must be
made pursuant to a plan that is administered by a committee of outside directors
and must be based on achieving objective performance goals. However, the
Committee believes that in some instances it may be necessary to forsake a tax
deduction in order to continue to attract and retain qualified executives.
SUMMARY
The Compensation Committee advises the Board regarding our cash and equity
incentive programs for the purpose of attracting and retaining highly skilled
executives who will promote our business goals and providing incentive for these
persons to achieve goals which are intended to build long-term stockholder
value.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Denis Burger, Chairman
Walter Lack
Daniel Zurr
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COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph compares our cumulative total stockholder return with
those of the Nasdaq Composite Index and the Nasdaq Pharmaceutical Index. The
graph assumes that $100 was invested on March 13, 1996 (the effective date of
the Company's initial public offering) in the Company's Common Stock and on
February 29, 1996 in the Nasdaq Composite Index and the Nasdaq Pharmaceutical
Index, including reinvestment of dividends. Note that historic stock price
performance is not necessarily indicative of future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SUPERGEN, INC. NASDAQ STOCK MARKET (U.S.) NASDAQ PHARMACEUTICALS
<S> <C> <C> <C>
3/13/96 $100 $100 $100
12/96 $288 $118 $94
12/97 $353 $144 $97
12/98 $218 $204 $124
12/99 $691 $377 $230
</TABLE>
20
<PAGE>
OTHER MATTERS
We know of no other matters to be submitted to the meeting. If any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed proxy card to vote the shares they represent as the Board
may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are therefore urged to execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
THE BOARD OF DIRECTORS
San Ramon, California
April 17, 2000
21
<PAGE>
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SUPERGEN, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of SuperGen, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders
and Proxy Statement, each dated April 17, 2000 and hereby appoints Joseph
Rubinfeld, its proxy and attorney-in-fact, with full power of substitution,
on behalf and in the name of the undersigned, to represent the undersigned at
the 2000 Annual Meeting of Stockholders of SuperGen, Inc. to be held on
Tuesday, May 30, 2000, at 2:00 p.m. local time, at the San Ramon Marriott,
2600 Bishop Drive, San Ramon, CA 94583 and at any adjournment(s) thereof,
and to vote all shares of Common Stock which the undersigned would be
entitled to vote if then and there personally present, on the matters set
forth on the reverse side, and, in their discretion, upon such other matter
or matters which may properly come before the meeting and any adjournment(s)
thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED "FOR" THE ELECTION OF THE SPECIFIED NOMINEES AS
DIRECTORS, "FOR" EACH PROPOSAL LISTED, AND AS SAID PROXY DEEMS ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
CONTINUED AND TO BE SIGNED ON THE OTHER SIDE
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- -------------------------------------------------------------------------------
Please mark
your votes as
indicated in
this example /X/
1. ELECTION OF DIRECTORS:
Nominees: Joseph Rubinfeld, Denis Burger, Thomas V. Girardi,
Walter J. Lack, Julius A. Vida, Daniel Zurr
FOR WITHHELD
/ / / /
/ /
---------------------------------------
For all nominees except as noted above
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE FROM 40,000,000 TO 150,000,000 THE TOTAL NUMBER
OF SHARES OF COMMON STOCK, PAR VALUE $0.001, WHICH THE COMPANY WILL HAVE
THE AUTHORITY TO ISSUE.
3. PROPOSAL TO RATIFY AND APPROVE AN AMENDMENT TO THE AMENDED AND RESTATED
1993 STOCK OPTION PLAN INCREASING THE NUMBER OF SHARES OF COMMON STOCK
AUTHORIZED FOR ISSUANCE BY 2,000,000 SHARES TO 5,850,000 SHARES:
FOR AGAINST ABSTAIN
/ / / / / /
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000:
FOR AGAINST ABSTAIN
/ / / / / /
In their discretion, upon such other matter or matters which may properly
come before the meeting and any adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED "FOR" THE ELECTION OF THE SPECIFIED NOMINEES AS
DIRECTORS, "FOR" EACH PROPOSAL LISTED, AND AS SAID PROXY DEEMS ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Signature(s)______________________________ Dated___________, 2000
This Proxy should be marked, dated, signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
