<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 14a-11(c) or Section 14a-12
ViroPharma Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
ViroPharma Incorporated
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: *
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculted and state how it
was determined.
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, PA 19341
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
----------------
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of ViroPharma Incorporated (the "Company") will be held on May 21,
1998 at 10:00 a.m., local time, at the Company's headquarters at 405 Eagleview
Boulevard, Exton, Pennsylvania for the following purposes:
(1) To elect a director to Class II of the Board of Directors to serve for
a three-year term and until the election and qualification of her
successor;
(2) To approve the amendment and restatement of the Company's 1995 Stock
Option Plan; and
(3) To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 10, 1998 are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting and
any adjournments thereof. A complete list of such stockholders will be
available at the Company's headquarters, 405 Eagleview Boulevard, Exton,
Pennsylvania, for ten days before the meeting.
By Order of the Board of Directors,
Thomas F. Doyle
Vice President, General Counsel and
Secretary
April 16, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, PA 19341
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
----------------
This Proxy Statement is being furnished to the stockholders of ViroPharma
Incorporated (the "Company") in connection with the Annual Meeting of
Stockholders of the Company to be held on May 21, 1998 and any adjournments
thereof (the "Annual Meeting"). This Proxy Statement and the enclosed Proxy
Card are being mailed to stockholders on or about April 16, 1998.
Execution and return of the enclosed Proxy Card are being solicited by and
on behalf of the Board of Directors of the Company for the purposes set forth
in the foregoing notice of meeting. The costs incidental to the solicitation
and obtaining of proxies, including the cost of reimbursing banks and brokers
for forwarding proxy materials to their principals, will be borne by the
Company. Proxies may be solicited, without extra compensation, by officers and
employees of the Company by mail, telephone, facsimile, personal interviews
and other methods of communication.
The Annual Report to Stockholders for the fiscal year ended December 31,
1997, including financial statements and other information with respect to the
Company, is being mailed to stockholders with this Proxy Statement. Such
Annual Report is not part of this Proxy Statement.
VOTING AT THE MEETING
RECORD DATE; VOTE REQUIRED; PROXIES
Only stockholders of record at the close of business on April 10, 1998 are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting. As
of that date, the Company had outstanding 11,480,820 shares of Common Stock,
par value $.002 per share ("Common Stock"). The holders of a majority of such
shares, represented in person or by proxy, shall constitute a quorum at the
Annual Meeting. A quorum is necessary before business may be transacted at the
Annual Meeting except that, even if a quorum is not present, the stockholders
present in person or by proxy shall have the power to adjourn the meeting from
time to time until a quorum is present. Each stockholder entitled to vote
shall have the right to one vote for each share of Common Stock outstanding in
such stockholder's name.
The shares of Common Stock represented by each properly executed Proxy Card
will be voted at the Annual Meeting in the manner directed therein by the
stockholder signing such Proxy Card. The Proxy Card provides spaces for a
stockholder to withhold authority to vote for the nominee for the Board of
Directors and to vote for or against or abstain from voting with respect to
the approval of the amendment and restatement of the Company's 1995 Stock
Option Plan (the "Amended Plan"). The nominee for director is to be elected by
a plurality of the votes cast at the Annual Meeting. With respect to any other
matter that may properly be brought before the Annual Meeting, including the
approval of the Amended Plan, the affirmative vote of a majority of the shares
represented in person or by proxy at the Annual Meeting and entitled to vote
is required to take action, unless a greater percentage is required either by
law or by the Company's Second Amended and Restated Certificate of
Incorporation or Bylaws.
With regard to the election of the director, votes may be cast in favor of
or withheld from the nominee. Votes that are withheld will be excluded
entirely from the vote and will have no effect, other than for purposes of
determining the presence of a quorum. Abstentions may be specified on the
proposal to approve the Amended Plan (but not for the election of the
director). Abstentions will be considered present and entitled to vote at the
<PAGE>
Annual Meeting, but will not be counted as votes cast in the affirmative.
Abstentions on the proposal to approve the Amended Plan will have the effect
of a negative vote because this proposal requires the affirmative vote of a
majority of the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote. Brokers who hold shares in street name for
customers have the authority under the rules of the various stock exchanges to
vote on certain items when they have not received instructions from beneficial
owners. The Company believes that brokers that do not receive instructions are
entitled to vote those shares with respect to the election of the director;
however, the Company believes that brokers are not entitled to vote such
shares with respect to the proposal to approve the Amended Plan. A failure by
brokers to vote those shares will have no effect on the outcome of the
election of the director, as the director is to be elected by a plurality of
the votes cast.
If a signed Proxy Card is returned and the stockholder has given no
direction with respect to a voting matter, the shares will be voted with
respect to that matter by the proxy agents as recommended by the Board of
Directors. Execution and return of the enclosed Proxy Card will not affect a
stockholder's right to attend the Annual Meeting and vote in person. Any
stockholder giving a proxy has the right to revoke it by giving notice of
revocation to the Secretary of the Company at any time before the proxy is
voted.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 1, 1998, except as otherwise
indicated in the relevant footnote, by (i) each person or group who is known
by the Company to own beneficially more than 5% of the Common Stock, (ii) each
of the Company's directors, (iii) the Company's chief executive officer and
the four other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers") and (iv) all current executive
officers and directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING SHARES
BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
--------------------- --------------------
<S> <C> <C>
5% STOCKHOLDERS
- ---------------
Oak Investment Partners VI, Limited 1,573,003 13.7
Partnership(2)....................
One Gorham Island
Westport, Connecticut 06880
Sevin Rosen Fund IV L.P.(3)........ 1,264,962 11.0
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
FMR Corp.(4)....................... 980,500 8.5
82 Devonshire Street
Boston, Massachusetts 02109
Technology Leaders II L.P.(5)...... 766,700 6.7
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
UBS Asset Management (New York) 590,000 5.1
Inc.(6)...........................
1345 Avenue of the Americas
West 54th & 55th Streets
New York, New York 10105
Frazier Healthcare II L.P.(7)...... 574,581 5.0
Two Union Square
601 Union Street, Suite 2110
Seattle, Washington 98101
</TABLE>
-2-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
Ann H. Lamont(2)....................................... 1,573,003 13.7
Claude H. Nash(8)...................................... 458,134 4.0
Marc S. Collett(9)..................................... 211,022 1.8
Mark A. McKinlay(10)................................... 141,245 1.2
Johanna A. Griffin(11)................................. 104,858 *
Frank Baldino, Jr.(12)................................. 49,000 *
Jon M. Rogers(13)...................................... 16,537 *
Robert J. Glaser....................................... 3,400 *
David J. Williams...................................... -- --
All directors and executive officers as a group (13
Persons)(14).......................................... 2,682,300 23.4
</TABLE>
- --------
* Less than one percent.
(1) Applicable percentage of ownership is based on 11,480,565 shares of
Common Stock outstanding as of April 1, 1998. In accordance with the
rules of the Securities and Exchange Commission (the "Commission"),
shares underlying options to purchase Common Stock that are exercisable
as of April 1, 1998 or within 60 days thereafter are deemed outstanding
and to be beneficially owned by the person holding such options for
purposes of computing such person's percentage ownership, but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Includes 1,537,139 shares of Common Stock owned by Oak Investment
Partners VI, Limited Partnership and 35,864 shares of Common Stock owned
by Oak VI Affiliates Fund, Limited Partnership. Ms. Lamont is a managing
member of Oak Associates VI, LLC and Oak VI Affiliates, LLC, the general
partners of Oak Investment Partners VI Limited Partnership and Oak VI
Affiliates Fund, Limited Partnership, respectively. Ms. Lamont shares
voting and investment power with respect to the limited partnerships with
the other managing members of Oak Associates VI, LLC and Oak VI
Affiliates, LLC, respectively. Ms. Lamont disclaims beneficial ownership
of shares in which she has no pecuniary interest.
(3) Includes 1,258,728 shares of Common Stock owned by Sevin Rosen Fund IV
L.P. and 6,234 shares of Common Stock owned by Sevin Rosen Bayless
Management Company.
(4) As reflected in a Schedule 13G dated February 14, 1998. According to such
Schedule 13G, FMR Corp. is the parent holding company of Fidelity
Management & Research Company, a registered investment company under the
Investment Advisors Act of 1940 ("Fidelity") that acts as investment
advisor to various other investment companies (the "Funds"), and Fidelity
Management Trust Company, a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934 ("FMT Co."). Fidelity is the beneficial
owner of 901,900 shares of Common Stock. FMR Corp., through its control
of Fidelity, and the Funds each has the power to dispose of the shares of
Common Stock owned by the Funds. The Funds have the sole power to vote
such shares. FMT Co. is the beneficial owner of 78,600 shares of Common
Stock as a result of it serving as investment manager of certain
institutional accounts (the "Institutional Accounts"). FMR Corp., through
its control of FMT Co., has the sole power to dispose of the shares of
Common Stock beneficially owned by FMT Co., and the sole power to vote
63,900 shares of such Common Stock. Certain Institutional Accounts have
the sole power to vote 14,700 shares of Common Stock beneficially owned
by FMT Co.
(5) As reflected in a Schedule 13G dated February 8, 1998 and in information
provided to the Company in connection with the sale by Technology Leaders
II L.P. ("TL II") of certain restricted securities. According to TL II,
each of TL II, Technology Leaders II Offshore C.V. and Technology Leaders
II Management L.P. has the shared voting and dispositive power for such
shares.
(6) As reflected in a Schedule 13G dated February 13, 1998. According to UBS
Asset Management (New York) Inc., it has the sole power to dispose or
direct the disposition of such shares.
(7) As reflected in a Schedule 13G dated February 10, 1998 and in information
provided to the Company in connection with the sale by Frazier Healthcare
II L.P. ("Frazier") of certain restricted securities. According to
Frazier, each of Frazier, FMH II, L.L.C., Frazier Management, L.L.C.,
Frazier & Company, Inc. and Alan D. Frazier share the voting and
dispositive power for such shares.
-3-
<PAGE>
(8) Includes 82,875 issued but unvested shares of Common Stock purchased by
Dr. Nash upon the founding of the Company in December 1994 and 400 shares
Common Stock held by Dr. Nash as custodian for two minor children. Also
includes 15,713 shares of Common Stock issuable upon exercise of
currently exercisable options.
(9) Includes 25,500 issued but unvested shares of Common Stock purchased by
Dr. Collett upon the founding of the Company in December 1994. Also
includes 27,670 shares of Common Stock issuable upon exercise of
currently exercisable options.
(10) Includes 25,500 issued but unvested shares of Common Stock purchased by
Dr. McKinlay upon the founding of the Company in December 1994. Also
includes 34,045 shares of Common Stock issuable upon exercise of
currently exercisable options.
(11) Includes 15,938 issued but unvested shares of Common Stock purchased by
Dr. Griffin upon the founding of the Company in December 1994. Also
includes 9,941 shares of Common Stock issuable upon exercise of currently
exercisable options.
(12) Includes 12,750 issued but unvested shares of Common Stock purchased by
Dr. Baldino in January 1996.
(13) Represents 16,537 shares of Common Stock issuable upon exercise of
exercisable options.
(14) Includes 178,501 issued but unvested shares of Common Stock purchased by
the founders of the Company. Includes options to purchase 141,409 shares
of Common Stock, which either are exercisable as of April 1, 1998 or will
be exercisable within 60 days of April 1, 1998.
-4-
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The By-laws of the Company permit up to seven persons to serve as members of
the Board of Directors. The Board of Directors currently consists of five
directors and is classified with respect to terms of office into three
classes. Only one person has been nominated to serve as a Class II director.
Mr. Steve Dow was a Class II director and resigned from the Board in March
1998. Given the proximity of Mr. Dow's resignation to date that this proxy was
mailed, the Company has not yet found a replacement for Mr. Dow. The Class II
director elected at the Annual Meeting will serve until the 2001 annual
meeting of stockholders and until such director's successor has been elected
and qualified, except in the event of such director's earlier death,
resignation or removal. The terms of office for the Class I Directors will
expire at the annual meeting to be held in the year 2000, upon the election
and qualification of their successors. The terms of office of the Class III
directors will expire at the annual meeting to be held in 1999, upon the
election and qualification of their successors.
Dr. Baldino, Ms. Lamont and Claude Nash were elected to the Board of
Directors pursuant to an Amended and Restated Shareholders' Voting Agreement,
dated as of May 31, 1996, by and among the Company and certain of its
stockholders and executive officers. Pursuant to the agreement, Ms. Lamont was
designated to be a director by Oak Investment Partners VI, Limited
Partnership, Dr. Baldino was designated to be a director by the holders of all
outstanding shares of redeemable preferred stock and Common Stock voting as a
single class, and Claude Nash was designated to be a director by the holders
of Common Stock.
The Board of Directors has nominated Ann Lamont for election as a Class II
director.
The persons named as proxy agents in the enclosed Proxy Card intend (unless
instructed otherwise by a stockholder) to vote for the election of Ann Lamont
for election as a Class II director. In the event that the nominee should
become unable to accept nomination or election (a circumstance which the Board
of Directors does not expect), the proxy agents intend to vote for any
alternate nominee designated by the Board of Directors or, in the discretion
of the Board, the position may be left vacant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE CLASS II
NOMINEE.
Set forth below is certain information with respect to the nominee for
director and each other person currently serving as a director of the Company
whose term of office will continue after the Annual Meeting, including the
class and term of office of each such person. This information has been
provided by each director at the request of the Company.
CLASS I -- DIRECTORS WITH TERMS CONTINUING UNTIL 2000
ROBERT J. GLASER. Mr. Glaser has served as a director of the Company since
August 1997. Mr. Glaser is currently President of the McKesson Pharmaceutical
Services division of McKesson Corporation. He was President and COO of Ostex
International from 1996-1997. Mr. Glaser was Senior Vice President of
Marketing for Merck U.S. Human Health from 1994-1996, Vice President of
Marketing from 1993-1994 and Vice President of Merck's Vaccine Division from
1991-1993. Mr. Glaser is 46 years of age.
DAVID J. WILLIAMS. Mr. Williams has served as a director of the Company
since November 1997. Mr. Williams has been President and Chief Operating
Officer of Pasteur Merieux Connaught USA since 1988. Mr. Williams also serves
on the Board of Directors of Blue Cross of Northeastern Pennsylvania. Mr.
Williams is 48 years of age.
CLASS II -- NOMINEE FOR TERM CONTINUING UNTIL 2001
ANN H. LAMONT. Ms. Lamont, a co-founder of the Company, has served as a
director of the Company since June 1995. Since 1986, Ms. Lamont has served as
general partner and managing member of certain limited partnerships affiliated
with Oak Investment Partners, a venture capital organization whose affiliates
are principal stockholders in the Company. Ms. Lamont also serves on the Board
of Directors of Avecor Cardiovascular, Inc. She is 41 years of age.
-5-
<PAGE>
CLASS III -- DIRECTORS WITH TERMS CONTINUING UNTIL 1999
CLAUDE H. NASH, PH.D. Claude Nash, a co-founder of the Company, has served
as Chairman of the Board of Directors since February 1997, and as Chief
Executive Officer, President and director since the Company's commencement of
operations in December 1994. From 1983 until 1994, Claude Nash served as Vice
President, Infectious Disease and Tumor Biology at Schering-Plough Research
Institute. He is 55 years of age.
FRANK BALDINO, JR., PH.D. Dr. Baldino has served as a director of the
Company since June 1995. Since 1987, he has served as President, CEO and
director of Cephalon, Inc., an integrated specialty biopharmaceutical company
that discovers, develops, and markets products to treat neurological
disorders. Dr. Baldino is also a director of Integrated Systems Consulting
Group, Inc. and Pharmacopeia, Inc. Dr. Baldino is 44 years of age.
COMMITTEES AND MEETINGS
The Board of Directors has a Compensation Committee and an Audit Committee.
During 1997, the Board of Directors held five meetings, the Compensation
Committee held one meeting, and the Audit Committee held four meetings. Each
director attended at least 75% of the aggregate of the meetings of the Board
of Directors held during 1997 and of the committee or committees on which he
or she served during the year.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation for employees of and consultants to the Company, and
the Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent auditors.
The current members of the Compensation Committee are Mr. Glaser and Ms.
Lamont, and the current members of the Audit Committee are Dr. Baldino and Mr.
Williams. With respect to the Compensation Committee, Mr. Glaser replaced Mr.
Steve Dow, who resigned from the Compensation Committee and the Board of
Directors in March 1998.
COMPENSATION ARRANGEMENTS
Non-employee directors not affiliated with investors in the Company receive
$10,000 per year, plus travel expenses for each meeting of the Board of
Directors they attend.
In July 1997 the Company entered into Agreements with each of Dr. Baldino
and Mr. Glaser, and in November 1997 the Company entered into an Agreement
with Mr. Williams, in connection with their participation on the Company's
Board of Directors. Pursuant to such Agreements, Dr. Baldino, Mr. Glaser and
Mr. Williams were granted options to purchase 13,334, 20,000 and 20,000 shares
of the Company's Common Stock, respectively, at an exercise price equal to the
fair market value of the Common Stock on the date of grant, and are each to be
paid $5,000 per year, payable in equal, quarterly installments and credited
against the director fees payable to them as described above.
Dr. Baldino, Mr. Dow and Ms. Lamont are parties to indemnification
agreements with the Company. Pursuant to the agreements, the directors are to
be indemnified against liabilities and expenses incurred in connection with
their services to the Company to the fullest extent permitted by Delaware law.
Such indemnification is subject to the director's meeting the applicable
standard of care and to a determination to indemnify by a majority of
disinterested directors (as defined in the agreements) or by independent
counsel (also as defined in the agreements).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Dow and Ms. Lamont are parties to certain transactions with the Company.
See "--Compensation Arrangements" for a description of Mr. Dow's and Ms.
Lamont's indemnification agreements with the Company; and "Certain
Transactions- Warrant Exercises" for a description of cashless exercises of
warrants by Oak Investment Partners VI Limited Partnership and Oak VI
Affiliates Fund, Limited Partnership (collectively, "Oak"), Sevin Rosen Fund
IV, LP, of which Mr. Dow is a partner ("Sevin Rosen") and Claude Nash.
-6-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or earned during the fiscal
years ended December 31, 1995, December 31, 1996 and December 31, 1997 to the
Company's chief executive officer and the Named Executive Officers.
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1)(2) OPTIONS COMPENSATION
----------------- ---- --------- -------- --------------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Claude H. Nash.......... 1997 $220,000 $55,000 -- 45,000 $20,000(3)
Chief Executive Officer 1996 180,000 18,000 -- 17,850 20,000
and President 1995 180,000 -- -- --
Jon M. Rogers(4)........ 1997 189,000 45,250 -- 30,000 --
Vice President, Clinical 1996 104,218 10,500 -- 36,147 --
Research 1995 -- -- --
Mark McKinlay........... 1997 181,500 46,375 -- 25,000
Vice President, Research 1996 165,000 16,500 -- 60,180 --
& Development 1995 165,000 --
Marc S. Collett......... 1997 159,500 39,875 -- 25,000 --
Vice President, Discov- 1996 145,000 14,500 -- 47,430 --
ery Research 1995 145,000 -- --
Johanna A. Griffin...... 1997 139,750 34,938 -- 20,000 --
Vice President, Business 1996 125,000 12,500 -- 19,763 --
Development 1995 125,000 -- --
</TABLE>
- --------
(1) In 1995, certain of the Named Executive Officers also received cash
payments for deferred compensation for services performed in December
1994. Drs. Nash, McKinlay, Collett and Griffin received payments of
$6,923, $6,346, $5,576 and $4,807, respectively.
(2) Excludes perquisites and other personal benefits, securities or property
which are, in the aggregate, less than 10% of the total annual salary and
bonus.
(3) Represents premiums paid by the Company for life insurance of which the
Company is not the beneficiary. The Company currently intends to continue
paying these premiums in future years and does not expect such premiums to
exceed $20,000 per year.
(4) Dr. Rogers joined the Company in June 1996.
-7-
<PAGE>
The following table summarizes stock options granted during fiscal 1997 to
the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
NUMBER OF STOCK PRICE APPRECIATION FOR
SECURITIES PERCENTAGE OF OPTION TERM(3)
UNDERLYING TOTAL OPTIONS EXERCISE EXPIRATION -----------------------------
NAME OPTIONS GRANTED(1) GRANTED(2) PRICE DATE 5% 10%
---- ----------------- ------------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Claude H. Nash.......... 45,000 13.5% $8.75 1/1/07 $ 247,628 $ 627,536
Jon M. Rogers........... 30,000 9.0 8.75 1/1/07 165,085 418,357
Mark McKinlay........... 25,000 7.5 8.75 1/1/07 137,571 348,631
Marc S. Collett......... 25,000 7.5 8.75 1/1/07 137,571 348,631
Johanna A. Griffin...... 20,000 6.0 8.75 1/1/07 110,057 278,905
</TABLE>
- --------
(1) These options are exercisable in four annual installments commencing on
the first anniversary of the date of grant.
(2) Based on an aggregate of 332,434 options granted to employees in 1997,
including options granted to the Named Executive Officers.
(3) Represents the hypothetical gains or "option spreads" that would exist for
the options at the end of their ten year term. These gains are based on
assumed rates of annual compound stock price appreciation of 5% and 10%
from the date the option was granted to the end of the option term (which
calculated assumed prices are less than the closing price on the Nasdaq
National Market on April 1, 1998; see also "Fiscal Year-End Options
Values" below) and are calculated based on the exercise price per share on
the date of grant. Such 5% and 10% assumed annual compound rates of stock
price appreciation are mandated by the rules of the Commission and do not
represent the Company's estimate or projection of the future Common Stock
price.
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers on
December 31, 1997.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS(#) ($)
------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
- ---- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Claude H. Nash....... 4,462 58,388 $ 69,005 $606,420
Jon M. Rogers........ 9,037 57,110 154,467 729,651
Mark McKinlay........ 15,045 70,135 257,661 994,858
Marc S. Collett...... 11,858 60,572 202,119 828,223
Johanna A. Griffin... 4,940 34,823 76,397 406,738
</TABLE>
- --------
(1) Based on the difference between $17.625, which was the closing price per
share on December 31, 1997, and the exercise price of the option.
CONFIDENTIALITY AND INVENTIONS AGREEMENTS
The Company has entered into confidentiality and inventions agreements with
each of its employees. The agreements provide that, among other things, all
inventions, discoveries and ideas made or conceived by an employee during
employment which are useful to the Company or related to the business of the
Company or which were made or conceived with the use of the Company's time,
material, facilities or trade secret information, belong exclusively to the
Company, without additional compensation to the employee. The agreements also
have confidentiality provisions in favor of the Company and a noncompetition
provision in favor of the Company during employment.
-8-
<PAGE>
CERTAIN TRANSACTIONS
See "Matters Concerning Directors-Compensation Arrangements" for a
description of the Company's indemnification and other agreements with certain
directors and "Executive Compensation-Confidentiality and Inventions
Agreements" for a description of the Company's confidentiality and inventions
agreements with all employees.
PROMISSORY NOTE
On June 12, 1997, the Company loaned $104,107 to Jon M. Rogers, M.D., Vice
President-Clinical Research of the Company, in connection with the relocation
of his residence required by his employment with the Company. The loan is
evidenced by a promissory note (the "Rogers Note"), which bears interest at an
annual rate of 6.8% and comes due in full on the date of Dr. Rogers'
resignation from the Company or in monthly installments beginning on the date
of termination of Dr. Rogers' employment with the Company (other than by
resignation), and extending over a period of between 48 months and 192 months
thereafter, depending upon when the termination of employment occurs. The
Rogers Note provides that on each of the first four anniversaries of the date
of the Rogers Note, 25% of the original principal amount of the loan will be
forgiven by the Company so long as Dr. Rogers is then in the Company's employ.
FINANCINGS
For information regarding beneficial ownership of the Company's securities
by officers, directors and greater than 5% stockholders of the Company, see
"Security Ownership of Certain Beneficial Owners and Management."
WARRANT EXERCISES
In June 1997, Oak (of which Ms. Lamont is a principal) exercised warrants to
purchase 22,435 shares of Common Stock; Sevin Rosen exercised warrants to
purchase 22,437 shares of Common Stock; Technology Leaders II L.P. and
Technology Leaders II Offshore C.V. collectively exercised warrants to
purchase 22,436 shares of Common Stock; and Claude Nash exercised warrants to
purchase 4,487 shares of Common Stock. The foregoing warrants were exercised
on a cashless basis and were otherwise exercisable on a cash basis for 81,597
shares of Common Stock in the aggregate.
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NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH ON PAGE 16 SHALL NOT
BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT
OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two non-employee directors. The Committee is responsible for
setting and administering the policies which govern annual executive salaries,
bonuses (if any) and stock ownership programs. The Committee annually
evaluates the performance, and determines or recommends to the full board, the
compensation of the Chief Executive Officer ("CEO") and the other executive
officers of the Company based upon a mix of the achievement of corporate
goals, individual performance and comparisons with other bio-pharmaceutical
companies.
The policies of the Committee with respect to executive officers, including
the CEO, are to provide compensation designed to attract, motivate and retain
executives of outstanding ability and potential and to align the interests of
executive officers with the interest of the Company's stockholders. The
Company seeks to provide incentives for superior individual performance by
paying competitive compensation, and to base a significant portion of
compensation upon the Company's performance. To meet these goals, the
Committee has adopted a mix among the compensation elements of salary, bonus
and stock options. In 1998, the Stockholder Value Reward program discussed
below will emphasize the link between executive incentives and the creation of
stockholder value as measured by the equity markets. In general, the salaries
and stock option awards of executive officers, including the CEO, are not
determined by the Company's achievement of specific corporate performance
criteria. Instead, the Committee determines the salaries for executive
officers based upon an evaluation of compensation data from an analysis of
certain comparable companies, and from a relevant industry survey(s), for
similar executive positions. In awarding stock options, the Committee
considers individual performance, overall contribution to the Company, officer
retention, the number of unvested stock options and the total number of stock
options to be awarded. In addition, the Committee generally does not award
stock options to executive officers more frequently than once every year.
The Committee met in December 1997 and January 1998 to review and approve
base salary increases and option grants for executive officers, including the
CEO, for 1998. The Committee considered the results of the Company's Phase II
clinical trial for viral meningitis and the Company's successful completion of
a follow-on public offering in July 1997, together with the other factors
described above. Consistent with the policies described in this report, the
Committee increased 1998 base salaries for all executive officers other than
the CEO by an average of 8.6% over 1997 salaries. In determining the CEO's
salary, the Committee considered the CEO's performance in 1997, the Company's
performance in 1997, and the fact that the CEO was below the average salaries
for his position when compared to the salary data and industry surveys
described above. The Committee recommended to the Board, and the full Board
approved, an increase to the CEO's base salary of 10%. In addition, after
considering the criteria relating to awarding stock options and consistent
with the Company's general policies, the Committee granted options to those
employees recommended by management, and to all executive officers, including
the CEO.
During 1997, the Committee also approved bonuses to all employees and
executive officers. The bonus, equal to 10% of each person's base salary, was
approved in August 1997 for the completion of the Company's Phase II clinical
trials in viral meningitis and the Company's follow-on public offering
described above. In January 1998, the Committee also approved an additional
bonus for each executive officer, including the CEO, equal to an average of
15% of each executive's 1997 annual salary.
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In December 1997 and January 1998, the Committee also reviewed and approved
the Executive Compensation Guidelines (the "Guidelines"). The Guidelines will
be effective in 1998. In addition to the compensation objectives and
strategies discussed above, the Guidelines call for a significant portion of
executive officers' cash compensation to be linked directly to the performance
of the Company stock, thus establishing a direct correlation between increases
in stockholder value and executive compensation. Under the Guidelines, and
until such time following the Company's launch of its first commercial product
that an alternative measurement of financial performance is adopted by the
Committee (for example, earnings per share), increases in stockholder value
will be measured with reference to the amount by which the Company's adjusted
market capitalization for the applicable year (the "Evaluation Period")
exceeds the Company's adjusted market capitalization for the year immediately
preceding the Evaluation Period. For the purpose of the foregoing evaluation,
the Company's adjusted market capitalization will be determined by computing
the Company's average market capitalization during the last five business days
in June and December of each year.
If the Company's adjusted market capitalization for an Evaluation Period
increases over its adjusted market capitalization for the immediately
preceding year, then each executive may be eligible (at the discretion of the
Committee after considering the Company's then-current cash position, among
other factors) to participate in the Company's "Stockholder Value Reward"
program. The Stockholder Value Reward component of each executive's
compensation is determined by multiplying a percentage figure to be determined
each year by the Committee times the product of the executive's annual base
salary in the Evaluation Period multiplied by the Company's percentage
increase in adjusted market capitalization for the Evaluation Period.
To assist the Company in meeting its goals of executive retention and long-
term increases in stockholder value, the Stockholder Value Reward for any
Evaluation Period is to be paid in three equal, annual increments, and is
subject to reevaluation. The first one-third of an executive's Stockholder
Value Reward is payable immediately after the end of the Evaluation Period.
Thereafter, the full amount of the remaining portions of the Stockholder Value
Reward for the Evaluation Period may be paid only if the Company's adjusted
market capitalization increases from year to year over the next two years. If
the Company's adjusted market capitalization decreases in the year following
the Evaluation Period ("Performance Year 1"), or decreases in the year
following Performance Year 1 ("Performance Year 2") when compared to the
Company's adjusted market capitalization for Performance Year 1, the portions
of the Stockholder Value Reward deferred to Performance Year 1 or Performance
Year 2 (as the case may be) will be proportionately decreased. Except in
certain limited circumstances, if an Executive leaves the Company, he or she
will forfeit any then-unpaid Stockholder Value Reward.
DEDUCTIBILITY OF CERTAIN COMPENSATION
Section 162(m) of the Internal Revenue Code generally denies a federal
income tax deduction for certain compensation exceeding $1,000,000 paid to the
CEO or any of the four other highest paid executive officers, excluding (among
other things) certain performance-based compensation. Through December 31,
1997, this provision has not affected the Company's tax deductions, but the
Committee will continue to monitor the potential impact of Section 162(m) on
the Company's ability to deduct executive compensation.
COMPENSATION COMMITTEE
Ann H. Lamont
Steve Dow*
February 27, 1998
* Mr. Dow resigned from the Compensation Committee and the Board of Directors
in March 1998.
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PROPOSAL 2
APPROVAL OF STOCK OPTION PLAN
In March 1998, the Company's Board of Directors approved and adopted the
Amended Plan, subject to stockholder approval. The Amended Plan is an
amendment and restatement of the Company's 1995 Stock Option Plan (the "Prior
Plan"). The purpose of the Amended Plan is to (i) further the growth and
success of the Company by enabling selected employees, directors, consultants
and advisors of the Company and any subsidiaries, including non-employee
directors, to acquire shares of common stock of the Company, thereby
increasing their personal interest in such growth and success, and (ii)
provide a means of rewarding outstanding performance of such persons to the
Company and any subsidiaries.
The Prior Plan provided for the grant of options to acquire a maximum of
1,200,000 shares of Common Stock. As of April 1, 1998, 198,419 shares remained
available for grant under the Prior Plan and will remain available for grant
under the Amended Plan. Because the Amended Plan is an amendment and
restatement of the Prior Plan, options awarded under the Prior Plan will be
governed by the Amended Plan, except to the extent that certain provisions of
the Amended Plan may constitute a modification of outstanding option
agreements that may not be implemented without the optionee's consent.
A copy of the Amended Plan is included herein as Annex A, and the following
description of the principal features of the Amended Plan is qualified in its
entirety by reference thereto.
The Amended Plan provides for the grant of options to acquire a maximum of
2,000,000 shares of Common Stock, which includes 1,200,000 shares of Common
Stock authorized for award under the Prior Plan as well as an additional
800,000 shares of Common Stock (the "Additional Shares"). As of April, 1 1998,
1,001,581 shares were subject to outstanding options, and 998,419 shares,
including all of the Additional Shares, remained available for grant. As of
April 1, 1998, option grants have been made under the Amended Plan (including
grants under the Prior Plan) to the following persons and groups (with
underlying share amounts to each person or group): Dr. McKinlay (100,180); Dr.
Nash (89,850); Dr. Collett (87,430); Dr. Rogers (78,147); Dr. Griffin
(51,763); all current executive officers as a group (581,366); all current
directors who are not executive officers as a group (53,334); and all other
employees as a group (289,184). All such options were granted at exercise
prices equal to the fair market value of the Company's Common Stock on the
date of grant. As of April 1, 1998, the market value of a share of Common
Stock was $21.625.
The Amended Plan permits the granting of qualified incentive stock options
("ISOs") or nonqualified stock options ("NSOs") (collectively, "Options"), at
the discretion of the Board of Directors of the Company (the "Board") or the
Compensation Committee of the Board (the "Committee"). Options granted under
the Amended Plan are evidenced by written agreements which contain such terms,
conditions, limitations and restrictions as the Committee deems advisable and
which are not inconsistent with the Amended Plan. Under the Amended Plan, ISOs
may be granted to individuals who, at the time of grant, are employees of the
Company or its affiliates, and NSOs may be granted to directors, employees,
consultants or advisors of the Company or its affiliates. The Amended Plan
confirms that non-employee directors are eligible to receive option grants.
The Amended Plan may be administered by the Board or the Committee.
Currently, the Committee administers the Amended Plan. Subject to the
provisions of the Amended Plan, the Committee has the authority (i) to
determine the persons to whom Options will be granted, the number of shares to
be covered by each Option, and the exercise price per share; (ii) to
prescribe, amend and rescind rules and regulations relating to the Amended
Plan; (iii) to determine the conditions which must be satisfied in order for
an Option to vest and become exercisable; (iv) to accelerate the vesting or
exercise date of any Option; and (v) to interpret the Amended Plan or any
agreement entered into with respect to an Option.
The Amended Plan provides that the Committee must establish an exercise
price for ISOs that is not less than the fair market value per share of the
Common Stock at the date of grant and an exercise price for NSOs of
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not less than par value per share. Each Option expires within 10 years of the
date of grant. However, if ISOs are granted to persons owning more than 10% of
the voting stock of the Company, the exercise price may not be less than 110%
of the fair market value per share at the date of grant and the term of such
ISOs may not exceed five years. The aggregate number of options which may be
granted under the Amended Plan to any individual participant is limited to
500,000 shares (subject to proportionate adjustment for changes in
capitalization). The Prior Plan did not contain this limitation. Options vest
upon satisfaction of vesting conditions, which may include attainment of
performance goals, completion of specified periods of service, or other
conditions specified by the Committee.
Unless provided otherwise in the terms of an option agreement, if an
optionee is an employee or director and the optionee's relationship with the
Company or any related corporation ceases for any reason (other than
termination for cause, death or disability, as such terms are defined in the
Amended Plan), the optionee may exercise options that are then vested within
the three-month period following such cessation (unless such options terminate
or expire sooner by their terms). If the optionee commences competitive
employment or service within the three-month period, all unexercised options
will terminate immediately. Unless provided otherwise in the terms of an
option agreement, if an optionee is an advisor or consultant, termination of
the relationship with the Company or any related corporation does not cause
acceleration of the expiration of the option; however, if the optionee
violates the terms of a non-competition covenant in an agreement that he or
she may have with the Company, all unexercised options will terminate
immediately. In the event an optionee's relationship with the Company or any
related corporation ceases due to disability or death, the option may be
exercised by the optionee or executor, as appropriate, for a period following
12 months from the date of termination; provided, however, that in the event
of termination due to disability, unexercised options will terminate if an
optionee who is an employee or director commences competitive employment or
service (or, in the case of a consultant or advisor, violates the terms of his
or her non-competition covenant) in the 12-month period following termination.
If an optionee is terminated for cause, all unexercised options are forfeited,
including options that have been exercised but for which no share certificates
have been issued (provided, in such instance, that the exercise price paid by
the optionee shall be refunded). The Prior Plan did not include option
forfeiture provisions upon a termination for cause or in connection with a
breach of any post-employment noncompetition agreements.
In the event of a Change of Control (as defined in the Amended Plan) in
which the Amended Plan is not continued by a successor corporation, or in
which equivalent, substituted options for common stock in a successor
corporation are not provided to optionees, the Amended Plan shall be
terminated and, with respect to optionees who are employees or members of the
Board, all unvested Options shall vest as follows: (i) all unvested Options
held by employees and Board members who have been employed by the Company or
who have served on the Board for at least two years as of the Change of
Control shall be fully vested; and (ii) fifty percent (50%) of all Options
held by all other employees and Board members which are not vested as of the
date of the Change of Control shall be fully vested, and the remaining portion
of such Options shall lapse and be forfeited.
In the event of a Change of Control in which the Amended Plan is continued
by a successor corporation or in which equivalent substituted options for
common stock in a successor corporation are provided to optionees, Options
previously granted to employees and Board members shall vest as follows: (i)
if an optionee who is employed by the Company at the Executive Director level
or above (each, an "Executive Officer") or is a member of the Board at the
time of the Change of Control is not offered substantially equivalent
employment with the successor corporation or a related employer (both in terms
of duties and compensation), then any unvested Options as of the date of the
Change of Control held by such Executive Officer or member of the Board shall
be fully and immediately vested and exercisable in the manner described in the
immediately preceding paragraph, taking into account all service performed
with the Company without regard to such optionee's title for purposes of
vesting; and (ii) if any optionee (without regard to such optionee's title) is
offered substantially equivalent employment with the successor corporation or
a related employer (both in terms of duties and compensation), then Options
shall not be subject to accelerated vesting; provided however, that if the
optionee's employment with the successor corporation or related employer is
terminated by the successor corporation or
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related employer during the six month period following such Change of Control,
then any unvested Options or substituted options shall be fully and
immediately vested and exercisable at the date of the optionee's termination
of employment in the manner described in the immediately preceding paragraph.
In addition, in the event of a Change of Control that is a merger,
consolidation or tax free reorganization or sale of substantially all of the
assets of the Company, the Board has the authority to distribute to each
optionee cash and/or other property in an amount equal to and in the same form
as the optionee would have received from the successor corporation if the
optionee had owned the shares subject to the option rather than the option at
the time of the Change of Control, provided that any such amount paid to an
optionee shall reflect the deduction of the exercise price the optionee would
have paid to purchase such shares. The Prior Plan included as an event
constituting a "Change of Control" any transaction resulting in any person or
entity acquiring eighty percent or more of the Company's voting stock, while
the Amended Plan sets this threshold at fifty percent. The Prior Plan did not
contain the provisions in the Amended Plan which condition accelerated vesting
upon a Change of Control on length or service and the availability of
substantially equivalent employment by a successor corporation.
The Option exercise price must be paid in full at the time the notice of
exercise of the Option is delivered to the Company and must be tendered in
cash, or by personal or certified check. In the discretion of the Committee,
Options may also be exercised by delivering a combination of shares and cash.
Unless otherwise provided by the Committee, Options are nontransferable. The
Board may suspend, amend or terminate the Amended Plan. Stockholder approval
must be obtained for amendments which would (i) increase the number of shares
which are to be reserved for the issuance of Options under the Amended Plan or
(ii) permit the granting of options to a class of employees other than those
presently permitted to receive Options under the Amended Plan.
The following is a brief description of the federal income tax consequences
of stock options which may be granted under the Amended Plan under present tax
laws. The following description does not purport to address all of the tax
consequences that may be applicable to any particular optionee or the Company.
In addition, such discussion does not address foreign, state or local taxes,
nor does it address federal taxes other than federal income tax. The
discussion is based upon applicable statutes, regulations, case law, and
administrative interpretations in effect as of the date of this Proxy
Statement.
Incentive Stock Options. There are no federal income tax consequences to
either the optionee or the Company upon the grant of an ISO. Except as
described below, the optionee will not recognize any income upon the exercise
of an ISO, and the Company will not be allowed any deduction, as long as the
optionee does not dispose of the shares within two years from the date the ISO
was granted or within one year from the date the shares were issued to the
optionee (the "holding period requirement"). Upon a sale of the shares after
the holding period requirement is satisfied, the optionee will recognize a
long-term capital gain (or loss) measured by the excess (or deficit) of the
amount realized from such sale over the option price of such shares, but no
deduction will be allowed to the Company. If an optionee disposes of shares
before the holding period requirement is satisfied, the optionee will
recognize ordinary income in the year of disposition, and the Company will be
entitled to a corresponding deduction, in an amount equal to the lesser of (a)
the excess of the fair market value of the shares on the date of exercise over
the option price of the shares or (b) the excess of the amount realized from
such disposition over the option price of the shares. Where shares are sold
before the holding period requirement is satisfied, the optionee will also
recognize a capital gain to the extent that the amount realized from the
disposition of the shares exceeds the fair market value of the shares on the
date of exercise. Upon exercise of an ISO, the excess, if any, of the fair
market value over the exercise price will be an item of tax preference for
purposes of the optionee's alternative minimum tax.
Non-Qualified Stock Options. There are no federal income tax consequences to
either the optionee or the Company upon the grant of an NSO. Upon the exercise
of an NSO, the optionee will recognize ordinary compensation income in an
amount equal to the excess of the fair market value of each share on the date
of exercise over the option price, and the Company generally will be entitled
to a federal income tax deduction of the same amount.
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In general, if previously owned shares are used to pay the exercise price of
options, the optionee's tax basis and holding period of such previously owned
shares will be carried over to the equal number of shares received on
exercise. The fair market value of any additional shares received upon the
exercise of an option will be recognized by the optionee as ordinary income.
The tax basis of the additional shares will be equal, in the aggregate, to the
ordinary income recognized by the optionee. The holding period will begin on
the day after the tax basis of the shares is determined. However, if the
previously owned shares had been acquired on the exercise of an ISO and the
holding period requirement for those shares was not satisfied at the time they
were used to exercise an option, such use would constitute a disposition of
such previously owned shares resulting in the recognition of ordinary income
as described above.
The persons named as proxy agents in the enclosed Proxy Card intend (unless
instructed otherwise by a stockholder) to vote in favor of the adoption of the
Amended Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDED
PLAN AS DESCRIBED ABOVE. A MAJORITY OF THE VOTES CAST IN PERSON OR BY PROXY AT
THE MEETING IS REQUIRED FOR SUCH APPROVAL.
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PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return on
the Company's Common Stock with the cumulative total stockholder return of the
Nasdaq National Market--US and the Nasdaq Pharmaceutical Index. Dividends
reinvestment has been assumed. The graph commences as of November 19, 1996,
the date the Company's Common Stock first started trading on the Nasdaq
National Market.
[PERFORMANCE CHART APPEARS HERE]
11/19/96 11/29/96 12/31/96 1/31/97 2/28/97 3/31/97 4/30/97
ViroPharma $100.00 $103.57 $125.00 $180.36 $187.50 $185.71 $148.21
Nasdaq US $100.00 $102.58 $102.49 $109.76 $103.77 $ 96.85 $ 99.88
Nasdaq Pharm $100.00 $102.66 $105.61 $114.69 $115.48 $100.47 $ 94.52
5/30/97 6/30/97 7/31/97 8/29/97 9/30/97 10/31/97 11/28/97
ViroPharma $155.36 $255.36 $214.29 $228.57 $314.29 $314.29 $258.93
Nasdaq US $111.20 $114.61 $126.71 $126.51 $134.00 $127.06 $127.70
Nasdaq Pharm $108.76 $108.46 $111.55 $110.23 $121.67 $115.47 $111.85
12/31/97 1/30/98 2/27/98
ViroPharma $251.79 $267.85 $282.14
Nasdaq US $125.69 $129.72 $141.91
Nasdaq Pharm $109.24 $108.18 $111.74
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP has served as the Company's independent certified
public accountants since 1995. KPMG Peat Marwick LLP has been selected to
continue in such capacity for the current year. A representative of that firm
is expected to be present at the Annual Meeting with the opportunity to make a
statement if he or she desires to do so and to be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS -- 1999 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at annual meetings in accordance with regulations adopted by the
Commission. Any proposal which an eligible stockholder desires to have
presented at the 1999 annual meeting of stockholders concerning a proper
subject for inclusion in the proxy statement and for consideration at the
annual meeting, will be included in the Company's proxy statement and related
proxy card if it is received by the Company no later than December 17, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that directors and certain officers of the Company, and persons who own more
than ten percent of the Company's Common Stock, file with the Commission
initial reports of ownership and reports of changes in ownership of such
Common Stock. Such directors, officers and more than ten percent stockholders
are required by regulation to furnish the Company with copies of all Section
16(a) forms which 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, all fiscal year 1997 Section 16(a) filing requirements
applicable to its directors, officers and more than ten percent stockholders
were complied with.
OTHER MATTERS
The Board of Directors of the Company does not intend to bring any other
matters before the Annual Meeting and has no reason to believe any other
matters will be presented. If, however, other matters properly do come before
the meeting, it is the intention of the persons named as proxy agents in the
enclosed Proxy Card to vote upon such matters in accordance with their
judgment.
By Order of the Board of Directors,
Thomas F. Doyle
Vice President, General Counsel
and Secretary
April 16, 1998
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ANNEX A TO PROXY STATEMENT
VIROPHARMA INCORPORATED
STOCK OPTION PLAN
SECTION 1. PURPOSES.
The ViroPharma Incorporated 1995 Stock Option Plan was originally effective
September 20, 1995. The ViroPharma Incorporated Stock Option Plan (the "Plan")
is an amendment and restatement of this prior plan and is effective March 3,
1998. The purposes of the Plan are to: (a) further the growth and success of
ViroPharma Incorporated (the "Company") and its Subsidiaries by enabling
selected employees, directors, consultants and advisors of the Company and any
Subsidiaries to acquire shares of common stock of the Company, thereby
increasing their personal interest in such growth and success and (b) to
provide a means of rewarding outstanding performance of such persons to the
Company and/or its Subsidiaries. The Options granted pursuant to the Plan are
intended to constitute either Incentive Stock Options within the meaning of
Section 422 of the Code, or non-qualified stock options, as determined by the
Board or the Committee at the time of award. The type of Options awarded will
be specified in the Option Agreement between the Company and the Optionee. The
terms of the Plan shall be incorporated in the Option Agreement to be executed
by the Optionee.
SECTION 2. DEFINITIONS
(a) "Affiliate" shall mean, with respect to a Person, a Person that directly
or indirectly controls, or is controlled by, or is under common control with
such Person.
(b) "Award" shall mean a grant of an Option or Options to an Eligible Person
pursuant to the provisions of this Plan. Each separate grant of an Option or
Options to an Eligible Person and each group of Options which vests on a
separate date, is treated as a separate Award.
(c) "Board" shall mean the Board of Directors of the Company, as constituted
from time to time.
(d) "Change of Control" shall mean the happening of an event, which shall be
deemed to have occurred upon the earliest to occur of the following events:
(i) the date the stockholders of the Company (or the Board, if
stockholder action is not required) approve a plan or other
arrangement pursuant to which the Company will be dissolved or
liquidated, or
(ii) the date the stockholders of the Company (or the Board, if
stockholder action is not required) approve a definitive agreement to
sell or otherwise dispose of all or substantially all of the assets
of the Company, or
(iii) the date the stockholders of the Company (or the Board, if
stockholder action is not required) and the stockholders of the other
constituent corporations (or their respective boards of directors, if
and to the extent that stockholder action is not required) have
approved a definitive agreement to merge or consolidate the Company
with or into another corporation, other than, in either case, a
merger or consolidation of the Company in which holders of shares of
the Company's voting capital stock immediately prior to the merger or
consolidation will have at least 50% of the ownership of voting
capital stock of the surviving corporation immediately after the
merger or consolidation (on a fully diluted basis), which voting
capital stock is to be held in the same proportion (on a fully
diluted basis) as such holders' ownership of voting capital stock of
the Company immediately before the merger or consolidation, or
(iv) the date any entity, Person or group (within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Exchange Act), other than (A) the
Company, or (B) any of its Subsidiaries, or (C) any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
of its Subsidiaries or (D) any Affiliate (as such term is defined in
Rule 405 promulgated under the Securities Act) of any of the
1
<PAGE>
foregoing, shall have acquired beneficial ownership of, or shall have
acquired voting control over more than 50% of the outstanding shares
of the Company's voting capital stock (on a fully diluted basis),
unless the transaction pursuant to which such Person, entity or group
acquired such beneficial ownership or control resulted from the
original issuance by the Company of shares of its voting capital stock
and was approved by at least a majority of Directors who shall have
been either members of the Board on the date that this Plan is adopted
by the Board or members of the Board for at least twelve (12) months
prior to the date of such approval, or
(v) the first day after the date of this Plan when Directors are elected
such that there shall have been a change in the composition of the
Board such that a majority of the Board shall have been members of the
Board for less than twelve (12) months, unless the nomination for
election of each new Director who was not a Director at the beginning
of such twelve (12) month period was approved by a vote of at least
sixty percent (60%) of the Directors then still in office who were
Directors at the beginning of such period, or
(vi) the date upon which the Board determines (in its sole discretion) that
based on then current available information, the events described in
clause (iv) are reasonably likely to occur.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean a committee appointed by the Board in accordance
with Section 4(a) of the Plan, and if one is appointed, then such committee
shall possess all of the power and authority of, and shall be authorized to
take any and all actions required to be taken hereunder by, and make any and
all determinations required taken hereunder by, the Board.
(g) "Common Stock" shall mean common stock of the Company, $.002 par value
per Share.
(h) "Company" shall mean ViroPharma Incorporated.
(i) "Company Plan" means any restricted stock, stock bonus, stock option or
other compensation plan, program or arrangement established or maintained by
the Company or an Affiliate.
(j) "Director" shall mean an individual who is a member of the Board of
Directors of the Company.
(k) "Disability" shall mean a mental or physical disability of an Eligible
Person which renders such Eligible Person unable to perform the full extent of
his duties and responsibilities by reason of his illness or incapacity for a
period of 90 consecutive days or longer, or for 90 days during any six-month
period.
(l) "Eligible Person" shall mean any person employed by the Company or any
of its Subsidiaries. Additionally, the term "Eligible Person" shall include
advisors and consultants to the Company or any Subsidiary, as well as
Directors and members of the board of directors of a Subsidiary; provided that
Options to Eligible Persons who are not employees of the Company or any of its
Subsidiaries shall be limited to non-qualified stock options.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value Per Share" shall mean the fair market value of a
share of Common Stock, as determined pursuant to Section 8 hereof.
(o) "Incentive Stock Option" shall mean an Option which is an incentive
stock option as described in Section 422 of the Code.
(p) "Non-Employee Director" shall have the meaning set forth in Rule 16b-
3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and
Exchange Commission; provided, however, that the Board or the Committee may,
to the extent it
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deems it necessary or desirable to comply with Section 162(m) of the Code and
applicable regulations thereunder, ensure that each Non-Employee Director also
qualifies as an "outside director" as that term is defined in the regulations
under Section 162(m) of the Code.
(q) "Option(s)" shall mean an Incentive Stock Option or a non-qualified
stock option to purchase Shares that is awarded pursuant to the Plan.
(r) "Option Agreement" shall mean a written agreement substantially in the
form of Exhibit A-1 or A-2, or such other form or forms as the Board or the
Committee (subject to the terms and conditions of this Plan) may from time to
time approve evidencing and reflecting the terms of an Option.
(s) "Optionee" shall mean an Eligible Person to whom an Option is awarded.
(t) "Other Available Shares" means, as of any date, the excess, if any of:
(i) the total number of Shares owned by an Optionee; over
(ii) the sum of:
(A) the number of Shares owned by such Optionee for less than six
months; plus
(B) the number of Shares owned by such Optionee that has, within the
preceding six months, been surrendered as payment in full or in
part, of the exercise price for an option to purchase any
securities of the Company or an Affiliate under any Company Plan.
(u) "Participant" shall mean each Eligible Person of the Company or a
Subsidiary to whom an Award is granted pursuant to the Plan.
(v) "Person" shall mean an individual, partnership, corporation, limited
liability company, trust, joint venture, unincorporated association, or other
entity or association.
(w) "Plan" shall mean the ViroPharma Incorporated Stock Option Plan, as
amended from time to time.
(x) "Pool" shall mean the pool of Shares subject to the Plan, as described
in Section 6, and as adjusted in accordance with Section 9 of the Plan.
(y) "Securities Act" shall mean the Securities Act of 1933, as amended.
(z) "Shares" shall mean shares of Common Stock.
(aa) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.
SECTION 3. PARTICIPATION.
Participants in the Plan shall be selected by the Board or the Committee
from the Eligible Persons. The Board or the Committee may make Awards at any
time and from time to time to Eligible Persons. Any Award may include or
exclude any Eligible Person, as the Board or the Committee shall determine in
its sole discretion.
SECTION 4. ADMINISTRATION.
(a) Procedure. The Plan shall be administered by the Board. The Board may at
any time appoint a Committee consisting of not less than two persons to
administer the Plan on behalf of the Board, each of whom is a Non-Employee
Director, subject to such terms and conditions as the Board may prescribe.
Members of the Committee shall serve for such period of time as the Board may
determine. Members of the Board or the Committee who are eligible for Options
or have been awarded Options may vote on any matters affecting the
administration of the Plan or the award of any Options pursuant to the Plan,
except that no such member shall
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act upon the award of an Option to himself or herself, but any such member may
be counted in determining the existence of a quorum at any meeting of the
Board or the Committee during which action is taken with respect to the award
of Options to himself or herself.
From time to time the Board may increase the size of the Committee and
appoint additional members thereto, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies however caused,
or remove all members of the Committee and thereafter directly administer the
Plan.
(b) Powers of the Board and the Committee. Subject to the provisions of the
Plan, the Board or the Committee shall have the authority, in its discretion:
(i) to make Awards;
(ii) to determine the Fair Market Value Per Share;
(iii) to determine the exercise price of the Options to be awarded in
accordance with Sections 7 and 8 of the Plan;
(iv) to determine the Eligible Persons to whom, and the time or times at
which, Awards shall be made, and the number of Shares to be subject to
each Award;
(v) to prescribe, amend and rescind rules and regulations relating to the
Plan;
(vi) to determine the terms and provisions of each Award under the Plan and
each Option Agreement (which need not be identical with the terms of
other Awards and Option Agreements) and, with the consent of the
Optionee, to modify or amend an outstanding Award or Option Agreement;
(vii) to determine the conditions which must be satisfied in order for an
Award to vest and become exercisable, which conditions may include
satisfaction of performance goals, vesting over time, and other
criteria as determined by the Board or the Committee;
(viii) to accelerate the vesting or exercise date of any Award;
(ix) to interpret the Plan or any agreement entered into with respect to an
Award or exercise of Options;
(x) to authorize any person to execute on behalf of the Company any
instrument required to effectuate an Award or to take such other
actions as may be necessary or appropriate with respect to the
Company's rights pursuant to Awards or agreements relating to the Award
or exercise thereof; and
(xi) to make such other determinations and establish such other procedures
as it deems necessary or advisable for the administration of the Plan.
(c) Effect of Decisions. All decisions, determinations and interpretations
of the Board or the Committee shall be final and binding with respect to all
Awards under the Plan.
(d) Limitation of Liability. Notwithstanding anything herein to the
contrary, no member of the Board or the Committee shall be liable for any good
faith determination, act or failure to act in connection with the Plan or any
Award hereunder
SECTION 5. ELIGIBILITY. Awards may be made only to Eligible Persons. An
Eligible Person who has received an Award, if he or she is otherwise eligible,
may receive additional Awards.
SECTION 6. STOCK SUBJECT TO THE PLAN. Subject to the provisions of this
Section 6 and the provisions of Section 9 of the Plan, the maximum aggregate
number of Shares which may be awarded and sold under the Plan is 2,000,000
Shares of Common Stock (collectively, the "Pool"). The maximum aggregate
number of Shares which may be awarded and sold under the Plan to any
individual Optionee is 500,000 Shares of Common Stock. Options awarded from
the Pool may be either Incentive Stock Options or non-qualified stock options,
as determined by the Board or the Committee. If an Option should expire or
become unexercisable for any reason
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without having been exercised in full, the Shares which were subject thereto
shall, unless the Plan shall have been terminated, be returned to the Pool and
become available for future award under the Plan.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
Each Option awarded pursuant to the Plan shall be authorized by the Board or
the Committee and shall be evidenced by an Option Agreement in such form as
the Board or the Committee may from time to time determine. Each Option
Agreement shall incorporate by reference all other terms and conditions of the
Plan, including the following terms and conditions:
(a) Number of Shares. The number of Shares subject to the Option, which
shall not include fractional Shares.
(b) Option Price. The price per Share payable on the exercise of any Option
which is an Incentive Stock Option shall be stated in the Option Agreement and
shall be no less than the Fair Market Value Per Share of the Common Stock on
the date such Option is awarded, without regard to any restriction other than
a restriction which will never lapse. Notwithstanding the foregoing, if an
Option which is an Incentive Stock Option shall be awarded under this Plan to
any person who, at the time of the award of such Option, owns stock possessing
more than 10% of the total combined voting power of all classes of the
Company's stock, the price per Share payable upon exercise of such Incentive
Stock Option shall be no less than 110 percent (110%) of the Fair Market Value
Per Share of the Common Stock on the date such Option is awarded. The price
per Share payable on the exercise of an Option which is a non-qualified stock
option shall be at least the par value per Share and shall be stated in the
Option Agreement.
(c) Consideration. The consideration to be paid for the Shares to be issued
upon the exercise of an Option, including the method of payment, shall be
determined by the Board or the Committee and may consist entirely of cash,
personal or certified check, or, at the election of the Optionee and as the
Board or the Committee may, in its sole discretion, approve, by surrendering
Shares with an aggregate Fair Market Value per Share equal to the aggregate
Option price, or by delivering such combination of Shares and cash as the
Board or the Committee may, in its sole discretion, approve; provided,
however, that Shares may be surrendered in satisfaction of the Option price
only if the Optionee certifies in writing to the Company that the Optionee
owns a number of Other Available Shares as of the date the Option is exercised
that is at least equal to the number of Shares to be surrendered in
satisfaction of the Option price; provided further, that the Option price may
not be paid in Shares if the Board or the Committee determines that such
method of payment would result in liability under Section 16(b) of the
Exchange Act to an Optionee.
Except as otherwise provided by the Board or the Committee, if payment is
made in whole or in part in Shares, the Optionee shall deliver to the Company
certificates registered in the name of such Optionee representing Shares
legally and beneficially owned by such Optionee, free of all liens, claims and
encumbrances of every kind and having an aggregate Fair Market Value on the
date of delivery that is not greater than the aggregate Option price
accompanied by stock powers duly endorsed in blank by the record holder of the
Shares represented by such certificates. If the Board or the Committee, in its
sole discretion, should refuse to accept Shares in payment of the Option
price, any certificates representing Shares which were delivered to the
Company shall be returned to the Optionee with notice of the refusal of the
Board or the Committee to accept such Shares in payment of the option price.
The Board or the Committee may impose such limitations and prohibitions on the
use of Shares to exercise an Option as it deems appropriate.
(d) Form of Option. The Option Agreement will state whether the Option
awarded is an Incentive Stock Option or a non-qualified stock option, and will
constitute a binding determination as to the form of Option awarded.
(e) Exercise of Options. Any Option awarded hereunder shall be exercisable
at such times and under such conditions as shall be set forth in the Option
Agreement (as may be determined by the Board or the Committee
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and as shall be permissible under the terms of the Plan), which may include
performance criteria with respect to the Company and/or the Optionee, and as
shall be permissible under the terms of the Plan.
An Option may be exercised in accordance with the provisions of this Plan as
to all or any portion of the Shares then exercisable under an Option from time
to time during the term of the Option. If an Option is exercised for a
fraction of a Share, the Fair Market Value of such fractional Share, as of the
date of exercise, will be paid in cash.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company at its principal executive office in
accordance with the terms of the Option Agreement by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company, accompanied by any
agreements required by the terms of the Plan and/or Option Agreement. Full
payment may consist of such consideration and method of payment allowable
under this Section 7 of the Plan. No adjustment shall be made for a dividend
or other right for which the record date is prior to the date the Option is
exercised, except as provided in Section 9 of the Plan.
As soon as practicable after any proper exercise of an Option in accordance
with the provisions of the Plan, the Company shall, without transfer or issue
tax to the Optionee, deliver to the Optionee at the principal executive office
of the Company or such other place as shall be mutually agreed upon between
the Company and the Optionee, a certificate or certificates representing the
Shares for which the Option shall have been exercised.
Exercise of an Option in any manner shall result in a decrease in the number
of Shares which thereafter may be available for sale under the Option by the
number of Shares as to which the Option is exercised.
(f) Term and Vesting of Options.
(i) Except as provided in Section 7(g)(iv), Options awarded hereunder shall
vest and become exercisable in whole or in part, in accordance with such
vesting conditions as the Board or the Committee shall determine, which
conditions shall be stated in the Option Agreement. Options may be
exercised in any order elected by the Optionee whether or not the
Optionee holds any unexercised Options under this Plan or any other plan
of the Company.
(ii) Notwithstanding any other provision of this Plan, no Option shall be (A)
awarded under this Plan after ten (10) years from the date on which this
Plan is adopted by the Board, or (B) exercisable more than ten (10)
years from the date of award; provided, however, that if an Option that
is intended to be an Incentive Stock Option shall be awarded under this
Plan to any person who, at the time of the award of such Option, owns
stock possessing more than 10% of the total combined voting power for
all classes of the Company's stock, the foregoing clause (B) shall be
deemed modified by substituting "five (5) years" for the term "ten (10)
years" that appears therein.
(iii) No Option awarded to any Optionee shall be treated as an Incentive
Stock Option, to the extent such Option would cause the aggregate
Fair Market Value Per Share (determined as of the date of award of
each such Option) of the Shares with respect to which Incentive Stock
Options are exercisable by such Optionee for the first time during
any calendar year to exceed $100,000. For purposes of determining
whether an Incentive Stock Option would cause such aggregate Fair
Market Value Per Share to exceed the $100,000 limitation, such
Incentive Stock Options shall be taken into account in the order
awarded. For purposes of this subsection, Incentive Stock Options
include all Incentive Stock Options under all plans of the Company
that are Incentive Stock Option plans within the meaning of Section
422 of the Code.
(g) Termination of Options.
(i) Unless sooner terminated as provided in this Plan, each Option shall be
exercisable for such period of time as shall be determined by the Board
or the Committee and set forth in the Option Agreement, and shall be
void and unexercisable thereafter.
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(ii) Except as otherwise provided herein or by the terms of any Award, with
respect to an Optionee who is an employee or Director, upon the
termination of such Optionee's employment or other relationship with the
Company for any reason, Options exercisable on the date of such
termination shall be exercisable by the Optionee (or in the case of the
Optionee's death subsequent to termination of employment or such other
relationship, by the Optionee's executor(s) or administrator(s)) for a
period of three (3) months from the date of the Optionee's termination.
Except as otherwise provided herein or by the terms of any Award, with
respect to an Optionee who is an advisor or consultant, the termination
of such Optionee's relationship with the Company for any reason shall
not accelerate the expiration date of Options exercisable on the date of
termination; provided however, that if such Optionee dies following such
termination, the Option shall be exercisable for a period of twelve (12)
months commencing on the date of the Optionee's death by such Optionee's
executor(s) or administrator(s).
(iii) Except as otherwise provided herein or by the terms of any Award,
upon the Disability or death of an Optionee while in the service of
the Company, Options held by such Optionee which are exercisable on
the date of Disability or death shall be exercisable for a period of
twelve (12) months commencing on the date of the Optionee's
Disability or death, by the Optionee or his legal guardian or
representative or, in the case of death, by his executor(s) or
administrator(s).
(iv) Options may be terminated at any time by agreement between the Company
and the Optionee.
(h) Forfeiture.
(i) Termination for Cause. Notwithstanding any other provision of this Plan,
if the Optionee's employment or engagement is terminated by the Company, and
the Board or the Committee makes a determination that the Optionee:
(A) has engaged in any type of disloyalty to the Company, including
without limitation, fraud, embezzlement, theft, or dishonesty in
the course of his employment or engagement, or has otherwise
breached any fiduciary duty owed to the Company;
(B) has been convicted of a felony;
(C) has disclosed trade secrets or confidential information of the
Company; or
(D) has breached any agreement with or duty to the Company in respect
of confidentiality, non-disclosure, non-competition or otherwise,
then all unexercised Options shall terminate upon the date of such a finding,
or, if earlier, the date of termination of employment or engagement for such a
finding, and the Optionee shall forfeit all Shares for which the Company has
not yet delivered share certificates to the Optionee and the Company shall
refund to the Optionee the Option purchase price paid to it, if any, in the
same form as it was paid (or in cash at the Company's discretion).
Notwithstanding anything herein to the contrary, the Company may withhold
delivery of share certificates pending the resolution of any inquiry that
could lead to a finding resulting in forfeiture.
(ii) Non-Competition. Notwithstanding any other provision of this Plan, if,
during the 3-month period following a termination of service, which period
shall be extended to 12 months in the event of a termination due to
Disability, an Optionee who is not a consultant or advisor commences any
employment or engagement with or by a competitor of the Company (including,
but not limited to, full or part-time employment or independent consulting
work), as determined in the sole discretion of the Board or the Committee, all
unexercised Options shall terminate immediately upon the commencement thereof.
In the event an Optionee who is a consultant or advisor has entered into an
agreement with the Company which contains non-competition covenants and such
consultant or advisor violates the terms of his or her non-competition
covenant, all unexercised Options shall terminate immediately upon the date of
such violation.
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SECTION 8. DETERMINATION OF FAIR MARKET VALUE PER SHARE OF COMMON STOCK.
(a) Except to the extent otherwise provided in this Section 8, the Fair
Market Value Per Share of Common Stock shall be determined by the Board or the
Committee in its sole discretion.
(b) Notwithstanding the provisions of Section 8(a), in the event that shares
of Common Stock are traded in the over-the-counter market, the Fair Market
Value Per Share of Common Stock shall be the mean of the bid and asked prices
for a share of Common Stock on the relevant valuation date as reported in The
Wall Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotations ("NASDAQ")
System), as applicable or, if there is no trading on such date, on the next
preceding date on which there were reported share prices. In the event shares
of Common Stock are listed on a national or regional securities exchange or
traded through the NASDAQ National Market, the Fair Market Value of a share of
Common Stock shall be the closing price for a share of Common Stock on the
exchange or on the NASDAQ National Market, as reported in The Wall Street
Journal on the relevant valuation date, or if there is no trading on that
date, on the next preceding date on which there were reported share prices.
SECTION 9. ADJUSTMENTS.
(a) Subject to required action by the stockholders, if any, the number of
Shares as to which Awards may be made under this Plan and the number of Shares
subject to outstanding Options and the Option prices thereof shall be adjusted
proportionately for any increase or decrease in the number of outstanding
Shares of Common Stock of the Company resulting from stock splits, reverse
stock splits, stock dividends, reclassifications and recapitalizations,
merger, consolidation, exchange of shares, or any similar change affecting
Common Stock.
(b) No fractional Shares shall be issuable on account of any action
mentioned in Section 9(a), and the aggregate number of Shares into which
Shares then covered by the Award, when changed as the result of such action,
shall be increased to the next highest whole number of Shares resulting from
such action, provided that no such increase shall be made if such increase
would cause an Incentive Stock Option to lose its status as such without the
consent of the Optionee.
SECTION 10. RIGHTS AS A STOCKHOLDER.
A recipient of an Award shall have no rights as a stockholder of the Company
and shall neither have the right to vote nor receive dividends with respect to
any Shares subject to an Option until such Option has been exercised and a
certificate with respect to the Shares purchased upon such exercise has been
issued to him.
SECTION 11. TIME OF AWARDING OPTIONS.
The date of an Award shall, for all purposes, be the date which the Board or
the Committee specifies when the Board or the Committee makes its
determination that an Award is made, or if none is specified, then the date of
such determination. Notice of the determination shall be given to each
Eligible Person to whom an Award is made within a reasonable time after the
date of such Award.
SECTION 12. MODIFICATION, EXTENSION AND RENEWAL OF OPTION.
Subject to the terms and conditions of the Plan, the Board or the Committee
may modify, extend or renew an Award, or accept the surrender of an Award (to
the extent not theretofore exercised). Notwithstanding the foregoing, (a) no
modification of an Award which adversely affects the Optionee shall be made
without the consent of the Optionee, and (b) no Incentive Stock Option may be
modified, extended or renewed if such action would cause it to cease to be an
"Incentive Stock Option" within the meaning of Section 422 of the Code, unless
the Optionee specifically acknowledges and consents to the tax consequences of
such action.
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SECTION 13. PURCHASE FOR INVESTMENT AND OTHER RESTRICTIONS.
(a) The obligation of the Company to issue Shares to an Optionee upon the
exercise of an Option granted under the Plan is conditioned upon such issuance
complying with all relevant provisions of applicable law, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder and any applicable foreign laws.
(b) At the option of the Board or the Committee, the obligation of the
Company to issue Shares to an Optionee upon the exercise of an Option granted
under the Plan may be conditioned upon obtaining appropriate representations,
warranties, restrictions and agreements of the Optionee. Among other
representations, warranties, restrictions and agreements, the Optionee may be
required to represent and agree that the purchase of Shares shall be for
investment, and not with a view to the public resale or distribution thereof,
unless the Shares are registered under the Securities Act and the issuance and
sale of the Shares complies with all other laws, rules and regulations
applicable thereto. Unless the issuance of such Shares is registered under the
Securities Act (and any similar law of a foreign jurisdiction applicable to
the Optionee), the Optionee shall acknowledge that the Shares purchased are
not registered under the Securities Act (or any such other law) and may not be
sold or otherwise transferred unless the Shares have been registered under the
Securities Act (or any such other law) in connection with the sale or other
transfer thereof, or that counsel satisfactory to the Company has issued an
opinion satisfactory to the Company that the sale or other transfer of such
Shares is exempt from registration under the Securities Act (or any such other
law), and unless said sale or transfer is in compliance with all other
applicable laws, rules and regulations, including all applicable federal,
state and foreign securities laws, rules and regulations. Unless the Shares
subject to an Award are registered under the Securities Act, the certificates
representing such Shares issued shall contain the following legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED
OF, BY GIFT OR OTHERWISE, OR IN ANY WAY ENCUMBERED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR A
SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO VIROPHARMA INCORPORATED
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS.
If required under the laws of any jurisdiction in which the Optionee
resides, the certificate or certificates may bear any such legend.
SECTION 14. TRANSFERABILITY.
No Option shall be assignable or transferable otherwise than by will or by
the laws of descent and distribution. During the lifetime of the Optionee, his
Options shall be exercisable only by such Optionee, or, in the event of his or
her legal incapacity or Disability, then by the Optionee's legal guardian or
representative.
SECTION 15. OTHER PROVISIONS.
The Option Agreement may contain such other provisions as the Board or the
Committee in its discretion deems advisable and which are not inconsistent
with the provisions of this Plan, including, without limitation, restrictions
upon or conditions precedent to the exercise of the Option.
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SECTION 16. CHANGE OF CONTROL.
(a) Notwithstanding anything to the contrary set forth in this Plan, in the
event of a Change of Control in which the Plan is not continued by a successor
corporation, or in which equivalent, substituted options for common stock in a
successor corporation are not provided to Optionees, the Plan shall be
terminated and, with respect to Optionees who are employees of the Company or
any of its Subsidiaries or who are members of the Board, all unvested Options
shall vest as follows: (i) with respect to such Optionees who have been
employed by the Company or a Subsidiary or who have served on the Board for at
least two years as of the Change of Control, Options shall be fully and
immediately vested and exercisable; and (ii) with respect to all other such
Optionees, fifty percent (50%) of that portion of the Options which are not
vested as of the date of the Change of Control shall be immediately vested and
exercisable and the remaining portion of the Options which are not vested
shall lapse and be forfeited.
(b) In the event of a Change of Control in which the Plan is continued by a
successor corporation or in which equivalent substituted options for common
stock in a successor corporation are provided to Optionees, with respect to
Optionees who are employees of the Company or any of its Subsidiaries or who
are members of the Board, Options shall vest as follows: (i) if an Optionee
who is employed by the Company at the Executive Director level or above (each,
an "Executive Officer") or is a member of the Board at the time of the Change
of Control is not offered substantially equivalent employment with the
successor corporation or a related employer (both in terms of duties and
compensation), then any unvested Options as of the date of the Change of
Control held by such Executive Officer or member of the Board shall be fully
and immediately vested and exercisable in accordance with Section 16(a)(i) or
16(a)(ii), as applicable, taking into account all service performed with the
Company without regard to such Optionee's title for purposes of vesting; and
(ii) if any Optionee (without regard to such Optionee's title) is offered
substantially equivalent employment with the successor corporation or a
related employer (both in terms of duties and compensation), then Options
shall not be subject to accelerated vesting; provided however, that if the
Optionee's employment with the successor corporation or related employer is
terminated by the successor corporation or related employer during the six
month period following such Change of Control, then any unvested Options or
substituted options shall be fully and immediately vested and exercisable at
the date of the Optionee's termination of employment in accordance with
Section 16(a)(i) or 16(a)(ii), as applicable.
(c) Notwithstanding Sections 16(a) and (b) hereof, any Optionee who is a
"disqualified individual," as that term is defined in Section 280G(c) of the
Code, shall be notified by the Committee of any event which may constitute a
Change of Control in advance of the effective date of such Change of Control.
Notice shall be provided, in the sole discretion of the Committee, as soon as
reasonably practicable prior to the Change of Control. The disqualified
individual may refuse to accept accelerated vesting of his or her Options
after consideration of the tax consequences to such disqualified individual
resulting from the Change of Control, provided that any such refusal shall be
communicated to the Committee in writing prior to the Change of Control. If it
is not practicable to provide advance notice of such Change of Control, the
disqualified individual will be deemed to have elected to refuse such
acceleration, but only to the extent that it is determined, as soon as
practicable after the Change of Control, that accelerated vesting will result
in negative tax consequences under Section 280G of the Code.
(d) In addition to arranging for the exchange of Options for options to
purchase common stock in a successor corporation, in the event of a Change of
Control of the Company by reason of a merger, consolidation or tax free
reorganization or sale of all or substantially all of the assets of the
Company, the Board shall have the authority, in its discretion, to terminate
this Plan and to distribute to each Optionee cash and/or other property in an
amount equal to and in the same form as the Optionee would have received from
the successor corporation if the Optionee had owned the Shares subject to the
Option rather than the Option at the time of the Change of Control, provided
that any such amount paid to an Optionee shall reflect the deduction of the
exercise price the Optionee would have paid to purchase such Shares. The form
of payment or distribution to the Optionee pursuant to this Section shall be
determined by the Committee.
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SECTION 17. AMENDMENT OF THE PLAN.
Insofar as permitted by law and the Plan, and subject to Section 20(c), the
Board or the Committee may from time to time suspend, terminate or discontinue
the Plan or revise or amend it in any respect whatsoever with respect to any
Shares at the time not subject to an Option, including amendments necessary or
advisable to assure that the Incentive Stock Options or the non-qualified
stock options available under the Plan continue to be treated as such,
respectively, under all applicable laws.
SECTION 18. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Shares pursuant to the
exercise of Options shall be used for general corporate purposes or such other
purpose as may be determined by the Board.
SECTION 19. NO OBLIGATION TO EXERCISE OPTION.
The awarding of an Option shall impose no obligation upon the Optionee to
exercise such Option.
SECTION 20. APPROVAL OF STOCKHOLDERS.
(a) Effective Date of Plan. This amendment and restatement of the Plan shall
become effective on the date that it is adopted by the Board; provided,
however, that this amendment and restatement shall be rescinded, and all
actions taken pursuant to the Plan, as amended and restated (except the
granting of Options with respect to Shares initially authorized for award
under the Plan prior this amendment and restatement), shall be null and void
as of the first anniversary of the date of adoption by the Board unless,
before such first anniversary, the Plan, as amended and restated, is approved
by a majority of the votes cast at a duly held stockholder meeting at which a
quorum representing a majority of the Company's outstanding voting shares is
present, either in person or by proxy.
(b) Awards Prior to Stockholder Approval. The Board or the Committee may
make Awards hereunder before the stockholder meeting at which the Plan, as
amended and restated, will be presented to the Company's stockholders for
approval; provided, however, that any and all Options awarded for Shares in
excess of 1,200,000 Shares, the number of Shares initially authorized for
award under the Plan prior to this amendment and restatement, shall lapse
automatically on the first anniversary of the date of adoption by the Board if
the Plan is not approved by such stockholders on or before such date. With
respect to Options awarded before the earlier of the date the Plan is approved
by the Company's stockholders or the first anniversary of the date the Plan is
adopted by the Board, the Board or the Committee shall designate whether the
Option is for Shares previously authorized for award under the Plan, or is for
Shares as to which stockholder approval is pending.
(c) Stockholder Approval of Certain Amendments.
(i) If the Board or the Committee amends the Plan to increase the aggregate
number of Shares for which Options may be awarded hereunder, and
approval of the stockholders by a majority of the votes cast at a duly
held stockholder meeting at which a quorum representing a majority of
the Company's outstanding voting shares is present (either in person or
by proxy), is not obtained within twelve (12) months of the adoption of
such amendment, all Options awarded with respect to such increased
number of shares shall lapse automatically on the first anniversary of
the date of the adoption of such amendment.
(ii) If the Board or the Committee amends the Plan to change the
designation of the class of employees eligible to receive Options, and
approval of the stockholders by a majority of the votes cast at a duly
held stockholder meeting at which a quorum representing a majority of
the Company's outstanding voting shares is present (either in person
or by proxy), is not obtained within twelve (12) months of the
adoption of such amendment, all Incentive Stock Options awarded after
the date of such adoption
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automatically shall be converted into non-qualified stock options on the
first anniversary of the date of the adoption of such amendment.
SECTION 21. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
SECTION 22. RESERVATION OF SHARES.
The Company, during the term of this Plan, shall at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
The Company, during the term of this Plan, shall use its best efforts to
seek to obtain from appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain from any such regulatory agency having jurisdiction the
requisite authorization(s) deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any Shares hereunder, or the inability of the
Company to confirm to its satisfaction that any issuance and sale of any
Shares hereunder will meet applicable legal requirements, shall relieve the
Company of any liability in respect to the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
SECTION 23. STOCK OPTION AGREEMENTS.
Options shall be evidenced by an Option Agreement in such form or forms as
the Board or the Committee shall approve from time to time.
SECTION 24. TAXES, FEES, EXPENSES AND WITHHOLDING OF TAXES.
(a) The Company shall pay all original issue and transfer taxes (but not
income taxes, if any) with respect to the award of Options and/or the issue
and transfer of Shares pursuant to the exercise thereof, and all other fees
and expenses necessarily incurred by the Company in connection therewith, and
will use its best efforts to comply with all laws and regulations which, in
the opinion of counsel for the Company, shall be applicable thereto.
(b) The award of Options hereunder and the issuance of Shares pursuant to
the exercise of Options is conditioned upon the Company's reservation of the
right to withhold in accordance with any applicable law, from any compensation
or other amounts payable to the Optionee, any taxes required to be withheld
under federal, state or local law as a result of the award or exercise of such
Option or the sale of the Shares issued upon exercise thereof. To the extent
that compensation or other amounts, if any, payable to the Optionee is
insufficient to pay any taxes required to be so withheld, the Company may, in
its sole discretion, require the Optionee (or such other person entitled
herein to exercise the Option), as a condition of the exercise of an Option,
to pay in cash to the Company an amount sufficient to cover such tax liability
or otherwise to make adequate provision for the Company's satisfaction of its
withholding obligations under federal, state and local law, provided that such
satisfaction of tax liability is made within 60 days of the date on which
written notice of exercise has been given to the Company.
SECTION 25. NOTICES.
Any notice to be given to the Company pursuant to the provisions of this
Plan shall be addressed to the Company in care of its Secretary (or such other
person as the Company may designate from time to time) at its
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principal executive office, and any notice to be given to an Optionee shall be
delivered personally or addressed to him or her at the address given beneath
his or her signature on his or her Option Agreement, or at such other address
as such Optionee or his or her permitted transferee (upon the transfer of the
Shares) may hereafter designate in writing to the Company. Any such notice
shall be deemed duly given on the date and at the time delivered via hand
delivery, courier or recognized overnight delivery service or, if sent via
telecopier, on the date and at the time telecopied with confirmation of
delivery or, if mailed, on the date five (5) days after the date of the
mailing (which shall be by regular, registered or certified mail). Delivery of
a notice by telecopy (with confirmation) shall be permitted and shall be
considered delivery of a notice notwithstanding that it is not an original
that is received. It shall be the obligation of each Optionee and each
permitted transferee holding Shares purchased upon exercise of an Option to
provide the Secretary of the Company, by letter mailed as provided herein,
with written notice of his or her direct mailing address.
SECTION 26. NO ENLARGEMENT OF OPTIONEE RIGHTS.
This Plan is purely voluntary on the part of the Company, and the
continuance of the Plan shall not be deemed to constitute a contract between
the Company and any Optionee, or to be consideration for or a condition of the
employment or service of any Optionee. Nothing contained in this Plan shall be
deemed to give any Optionee the right to be retained in the employ or service
of the Company or any Subsidiary, or to interfere with the right of the
Company or any such corporation to discharge or retire any Optionee thereof at
any time subject to applicable law. No Optionee shall have any right to or
interest in Awards authorized hereunder prior to the award thereof to such
Optionee, and upon such Award he shall have only such rights and interests as
are expressly provided herein, subject, however, to all applicable provisions
of the Company's Certificate of Incorporation, as the same may be amended from
time to time.
SECTION 27. INFORMATION TO OPTIONEES.
The Company, upon request, shall provide without charge to each Optionee
copies of such annual and periodic reports as are provided by the Company to
its stockholders generally.
SECTION 28. AVAILABILITY OF PLAN.
A copy of this Plan shall be delivered to the Secretary of the Company and
shall be shown by him to any eligible person making reasonable inquiry
concerning it.
SECTION 29. INVALID PROVISIONS.
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid
or unenforceable provision was not contained herein.
SECTION 30. APPLICABLE LAW.
This Plan shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
Executed this 3rd day of March, 1998.
[CORPORATE SEAL] VIROPHARMA INCORPORATED
/s/ Thomas F. Doyle /s/ Claude H. Nash
Attest: _____________________________ By: _________________________________
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VIROPHARMA INCORPORATED
1998 Annual Meeting of Stockholders--May 21, 1998
SOLICITED ON BEHALF OF THE COMPANY AND APPROVED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Claude H. Nash and Thomas F.
Doyle, and each of them, as attorneys and proxies of the undersigned, with full
power of substitution, for and in the name of the undersigned, to appear at the
Annual Meeting of Stockholders of ViroPharma Incorporated to be held on the
21st day of May, 1998 and at any postponement or adjournment thereof, and to
vote all of the shares of ViroPharma Incorporated that the undersigned is
entitled to vote, with all powers and authority the undersigned would possess
if personally present. The undersigned hereby directs that this proxy be voted
as follows:
ELECTION OF CLASS II DIRECTOR FOR A TERM OF THREE YEARS:
Ann Lamont FOR [_] WITHHOLD AUTHORITY [_]
APPROVE AMENDMENT AND RESTATEMENT OF 1995 STOCK OPTION PLAN:
FOR [_] AGAINST [_] ABSTAIN [_]
This proxy, when properly executed, will be voted as directed. If no
directions to the contrary are indicated, the proxy agents intend to vote FOR
the election of the aforementioned nominee as a director, and FOR the approval
of the amendment and restatement of the Company's 1995 Stock Option Plan.
Abstentions on the proposal to approve the amendment and restatement of the
Company's 1995 Option Plan will have the effect of a negative vote.
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(Please date and sign on reverse side)
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A majority of the proxy agents present and acting in person, or by their
substitutes (or if only one is present and acting, then that one) may exercise
all the powers conferred hereby. DISCRETIONARY AUTHORITY IS CONFERRED HEREBY AS
TO ALL OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Receipt of the Company's 1997 Annual Report to Stockholders and the Notice of
the 1998 Annual Meeting and Proxy Statement relating thereto is hereby
acknowledged.
Date: ________________________, 1998
(Please date this Proxy)
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(Signature (s)
Please sign your name exactly as it
appears hereon, indicating any
official position or representative
capacity. If shares are registered
in more than one name, all owners
must sign.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
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