<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:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ViroPharma Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ViroPharma Incorporated
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated 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.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, Pennsylvania 19341
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 14, 1999
----------------
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 Friday,
May 14, 1999 at 10:00 a.m., local time, at the Sheraton Great Valley Hotel,
707 East Lancaster Pike, Frazer, Pennsylvania for the following purposes:
(1) To elect two (2) directors to Class III of the Board of Directors of
the Company (the "Board of Directors") each to serve for a three-year
term and until the election and qualification of his successor, and to
ratify the election of two (2) directors to Class I and one (1)
director to Class II of the Board of Directors previously elected by
the Board of Directors to fill vacancies resulting from the
resignations of directors, each until the election and qualification of
his successor;
(2) To approve an amendment to the Company's Second Amended and Restated
Certificate of Incorporation granting the Board of Directors the right,
concurrent with the right of the stockholders, to adopt, amend or
repeal the Company's Bylaws, subject to certain limitations set forth
in the Bylaws;
(3) To approve an amendment to the Company's Bylaws granting to the Board
of Directors the right to amend the Bylaws, subject to certain
limitations;
(4) To approve the transfer of certain of the Company's assets into one or
more newly established wholly-owned subsidiaries of the Company formed
under the laws of the State of Delaware for the purpose of obtaining
the benefits of Delaware corporate and tax laws; and
(5) To transact such other business as may properly come before the meeting.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which the Annual Meeting
may be adjourned.
The Board of Directors has fixed the close of business on April 1, 1999 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting and at any adjournments or postponements thereof.
Only stockholders of record of the Company's common stock at the close of
business on that date will be entitled to notice of, and to vote at, the
Annual Meeting and at any adjournments or postponements thereof. A complete
list of such stockholders will be available at the Company's headquarters,
located at 405 Eagleview Boulevard, Exton, Pennsylvania, for ten days before
the Annual Meeting.
Your attention is directed to the accompanying proxy statement for the
resolutions to be proposed at the Annual Meeting and additional information
regarding each proposal. A copy of the Company's Annual Report to Stockholders
for the year ended December 31, 1998 is enclosed with this Notice and the
proxy statement.
<PAGE>
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.
By Order of the Board of Directors,
Thomas F. Doyle
Vice President, General Counsel and
Secretary
[April 2], 1999
Exton, Pennsylvania
<PAGE>
VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, Pennsylvania 19341
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1999
----------------
This Proxy Statement (the "Proxy Statement") is being furnished to the
stockholders of ViroPharma Incorporated (the "Company") in connection with the
solicitation by the Board of Directors (the "Board of Directors" or "Board")
of the Company of proxies in the enclosed form (the "Proxy Card") for use at
the Annual Meeting of Stockholders of the Company to be held on Friday, May
14, 1999 at the Sheraton Great Valley Hotel, 707 East Lancaster Pike, Frazer,
Pennsylvania and any adjournments or postponements thereof (the "Annual
Meeting"). This Proxy Statement and the enclosed Proxy Card were first sent to
the stockholders on or about [April 2], 1999.
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,
1998 (the "Annual Report"), 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 ANNUAL MEETING
Only stockholders of record at the close of business on April 1, 1999 (the
"Record Date") are entitled to notice of the Annual Meeting and to vote at the
Annual Meeting. As of the Record Date, the Company had outstanding
[11,574,094] shares of Common Stock, par value $.002 per share (the "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 Annual 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 by the stockholder
signing such Proxy Card. The Proxy Card provides spaces for a stockholder to
withhold authority to vote for the nominees for, and to ratify the previous
elections of certain members of, the Board of Directors. The Proxy Card also
provides spaces for a stockholder to vote "for" or "against" or "abstain" from
voting with respect to the approval of the amendment of the Company's Second
Amended and Restated Certificate of Incorporation (the "Second Amended and
Restated Certificate of Incorporation") granting the Board of Directors the
right to adopt, amend or repeal the Company's Bylaws (the "Bylaws") without
the necessity of stockholder approval, subject to certain limitations set
forth in the Bylaws, the approval of the amendment of the Company's Bylaws to
provide for Bylaw amendments by the Board of Directors (subject to certain
limitations) and the approval of the transfer of certain of the Company's
assets to one or more newly established, wholly-owned subsidiaries formed
under the laws of the State of Delaware. The nominees for director are to be
elected, and certain members of the Board of Directors are to be ratified, 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, the affirmative
vote of a majority of the shares represented, in person or by proxy, at
-1-
<PAGE>
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 and ratification of the directors, votes may be
cast in favor of, or withheld from, the nominees and other directors. 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 for
which such withheld votes will be counted. Abstentions may be specified on the
proposals to approve the amendments to the Second Amended and Restated
Certificate of Incorporation and Bylaws and the transfer of assets to one or
more Delaware subsidiaries (but not for the election or ratification of the
directors). Abstentions will be considered present and entitled to vote at the
Annual Meeting, but will not be counted as votes cast in the affirmative.
Abstentions on the proposals to approve the amendments to the Second Amended
and Restated Certificate of Incorporation and Bylaws and the transfer of
assets to one or more Delaware subsidiaries will have the effect of a negative
vote because these proposals require 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 and national
quotation systems 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 and ratification of the directors; however, the Company believes that
brokers are not entitled to vote such shares with respect to the proposals to
approve the amendments to the Second Amended and Restated Certificate of
Incorporation and Bylaws and the transfer of assets to one or more Delaware
subsidiaries. A failure by brokers to vote those shares will have no effect on
the outcome of the election and ratification of the directors, as the
directors are 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.
The Company will furnish without charge to any stockholder, upon written or
oral request, a copy of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and other documents filed pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
Requests for such documents should be addressed to Thomas F. Doyle, Vice
President, General Counsel and Secretary of ViroPharma Incorporated, 405
Eagleview Boulevard, Exton, Pennsylvania 19341, telephone number (610) 458-
7300.
-2-
<PAGE>
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], 1999, 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 and nominees, (iii) each of the Company's executive
officers named in the Summary Compensation Table (collectively, the "Named
Executive Officers") and (iv) all current executive officers and directors as
a group.
<TABLE>
<CAPTION>
Total Number of Shares Percentage of Class of
of Common Stock Common Stock
Beneficially Owned(1) Beneficially Owned(1)
---------------------- ----------------------
<S> <C> <C>
5% Stockholders
- ---------------
Oak Investment Partners VI, Limited Partnership(2)..... 1,573,003 13.6%
One Gorham Island
Westport, Connecticut 06880
FMR Corp.(3)........................................... 1,178,100 10.2
82 Devonshire Street
Boston, Massachusetts 02109
Technology Leaders II L.P.(4).......................... 766,700 6.6
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
Sevin Rosen Fund IV L.P.(5)............................ 754,961 6.5
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
UBS Asset Management (New York) Inc. (6)............... 590,000 5.1
1345 Avenue of the Americas
West 54th & 55th Streets
New York, New York 10105
Directors and Executive Officers
- --------------------------------
Ann H. Lamont (2)...................................... 1,573,003 13.6
Claude H. Nash (7)..................................... 485,596 4.2
Marc S. Collett (8).................................... 235,880 2.0
Mark A. McKinlay (9)................................... 166,290 1.4
Johanna A. Griffin (10)................................ 119,799 1.0
Guy Diana (11)......................................... 95,118 *
Frank Baldino, Jr. (12)................................ 55,667 *
Jon M. Rogers.......................................... 25,573 *
Robert J. Glaser (13).................................. 23,733 *
David J. Williams (14)................................. 6,666 *
All directors and executive officers and a group (14
persons)(15).......................................... 2,870,298 24.2
</TABLE>
- --------
* Less than one percent.
(1) Applicable percentage of ownership is based on [11,574,094] shares of
Common Stock outstanding as of [April 1], 1999. 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], 1999 or within 60 days thereafter are deemed outstanding
and to be beneficially owned by the person holding such option or warrant
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.
-3-
<PAGE>
(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) As reflected in a Schedule 13G dated February 10, 1999. According to such
Schedule 13G, FMR Corp. is the parent holding company of Fidelity
Management & Research Company ("Fidelity"), a registered investment
company under the Investment Advisors Act of 1940 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, as amended ("FMT Co."). Fidelity is the
beneficial owner of 923,300 shares of Common Stock. Edward Johnson III
(Chairman of FMR Corp.) and FMR Corp., through its control of Fidelity
and the Funds, each has the sole 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 254,800 shares of Common Stock
as a result of it serving as investment manager of certain institutional
accounts. Edward Johnson III and FMR Corp., through its control of FMT
Co., each has the sole power to dispose of the shares of Common Stock
beneficially owned by FMT Co., and the sole power to vote 238,600 shares
of such Common Stock. Certain of the institutional accounts have the sole
power to vote 16,200 shares of Common Stock beneficially owned by FMT Co.
(4) Each of Technology Leaders II, L.P., Technology Leaders II Offshore C.V.
and Technology Leaders II Management L.P. has the shared voting and
dispositive power for such shares.
(5) As reflected in a Schedule 13G dated February 16, 1999 and in information
provided to the Company by Sevin Rosen Fund IV, L.P. Includes 748,727
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.
(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) Includes 400 shares of Common Stock held by Mr. Nash as custodian for two
minor children, and 38,175 shares of Common Stock issuable upon exercise
of currently exercisable options.
(8) Includes 1,000 shares of Common Stock held by Dr. Collett as custodian
for a minor child, and 49,528 shares of Common Stock issuable upon
exercise of currently exercisable options.
(9) Includes 59,090 shares of Common Stock issuable upon exercise of
currently exercisable options.
(10) Includes 22,882 shares of Common Stock issuable upon exercise of
currently exercisable options.
(11) Includes 17,500 shares of Common Stock issuable upon exercise of
currently exercisable options.
(12) Includes 6,667 shares of Common Stock issuable upon exercise of currently
exercisable options.
(13) Includes 13,333 shares of Common Stock issuable upon exercise of
currently exercisable options.
(14) Represents 6,666 shares of Common Stock issuable upon exercise of
currently exercisable options.
(15) Includes options to purchase 275,976 shares of Common Stock, which either
are exercisable as of April 1, 1999 or will be exercisable within 60 days
after April 1, 1999.
-4-
<PAGE>
PROPOSAL 1
ELECTION OF CLASS III DIRECTORS AND RATIFICATION OF PREVIOUSLY
ELECTED CLASS I AND CLASS II DIRECTORS
The Board of Directors currently consists of 6 directors and is classified
with respect to terms of office into three classes with each director serving
a three-year term. Generally, each year, one class of directors is subject to
stockholder vote. However, the stockholders may be asked to vote on director
nominees from more than one class to ratify the election of directors
previously appointed by the directors to fill vacancies in the Board. At the
Annual Meeting, stockholders will vote on the election of two class III
directors and the ratification of three other directors (two in Class I and
one in Class II) previously elected by the Board of Directors to fill
vacancies. The Class III directors elected at the Annual Meeting each will
serve until the 2002 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 II directors will expire at the annual meeting to be held
in 2001, upon the election and qualification of their successors.
Class I members presently are Robert J. Glaser and David J. Williams. Class
II members are Ann H. Lamont and Howard Pien and Class III members are Claude
H. Nash and Frank Baldino, Jr., Ph.D.
Mr. Nash and Dr. Baldino are the Class III director nominees for election to
the Board of Directors at the Annual Meeting, each to serve until the annual
meeting to be held in 2002 and until his successor shall have been elected and
qualified. Mr. Glaser and Mr. Williams are the Class I directors who were
previously elected to the Board of Directors to fill vacancies, whose
appointments are sought to be ratified at the Annual Meeting. Each shall serve
until the annual meeting to be held in 2000. Mr. Pien is the Class II director
who was previously elected to the Board of Directors to fill a vacancy whose
appointment is sought to be ratified at the Annual Meeting. Mr. Pien shall
serve until the annual meeting to be held in 2001.
The affirmative vote of a plurality of shares of the Common Stock present,
or represented by proxy, at the Annual Meeting entitled to vote is required
for the election and ratification of the foregoing directors. In the event
that any nominees 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 nominees designated by the Board of Directors
or, in the discretion of the Board, the positions may be left vacant.
Described below is certain information regarding each director, including
the nominees.
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 HBOC
Pharmaceutical Services division of McKesson HBOC. 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 49 years of age.
Class II -- Directors with Terms Continuing until 2001
Ann H. Lamont. Ms. Lamont, a co-founder of the Company, has served as
director of the Company since June 1995. Since 1986, Ms. Lamont has served as
general partner and managing member of certain limited
-5-
<PAGE>
partnerships affiliated with Oak Investment Partners, a venture capital
organization whose affiliates are principal stockholders in the Company. Ms.
Lamont is 42 years of age. Ms. Lamont also serves of the Board of Directors of
BMJ Medical Management, Inc.
Howard Pien. Mr. Pien has served as a director of the Company since August
1998. Mr. Pien is President, Pharmaceuticals, SmithKline Beecham, and has
overall responsibility for the commercial operations of SmithKline Beecham's
global pharmaceutical business. Since joining SmithKline Beecham in 1991, Mr.
Pien has held key positions in SmithKline Beecham's pharmaceutical business in
the United States, the United Kingdom, China and Korea. Mr. Pien is 41 years
of age.
Class III -- Nominees for Terms Continuing until 2002
Claude H. Nash. Mr. 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, Mr. Nash served as Vice President,
Infectious Disease and Tumor Biology at Schering-Plough Research Institute.
Mr. Nash is 56 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
committed to the discovery, development and marketing of products to treat
neurological disorders and cancer. Dr. Baldino is also a director of First
Consulting Group, Inc. and Pharmacopeia, Inc. Dr. Baldino is 45 years of age.
Committees and Meetings of the Board
The Board of Directors has a Compensation Committee and an Audit Committee.
During 1998, the Board of Directors held 6 meetings, the Compensation
Committee held 2 meetings, and the Audit Committee held 3 meetings. Mr.
Williams attended 4 of 6 meetings of the Board of Directors held in 1998. Mr.
Pien attended 2 of 3 meetings of the Board of Directors held after his
election in August 1998.
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, Mr. Pien and Mr. Williams.
Compensation of Directors
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 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
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 $5,000
per year, payable in equal, quarterly installments and credited against the
director fees payable to them as described above. The agreement with Mr.
Glaser was terminated in September 1998.
Dr. Baldino and Ms. Lamont are parties to indemnification agreements with
the Company. Pursuant to the agreements, they are to be indemnified against
liabilities and expenses incurred in connection with their services to the
Company to the fullest extent permitted by Delaware law. Such indemnification
is subject to each director meeting the applicable standard of care and to a
determination to indemnify by a majority of disinterested directors (as
defined in the agreements) or by independent counsel (also as defined in the
agreements).
-6-
<PAGE>
Compensation Committee Interlocks and Insider Participation
None.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES FOR CLASS
III DIRECTORS AND THE RATIFICATION OF THE CLASS I AND CLASS II DIRECTORS
PREVIOUSLY ELECTED BY THE BOARD AS DESCRIBED IN PROPOSAL NO. 1.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or earned during the fiscal years ended December 31, 1996,
December 31, 1997 and December 31, 1998 to the Named Executive Officers.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
Long-term
Compensation
------------
Securities
Other Annual Underlying All Other
Name and Position Year Salary($) Bonus($) Compensation($)(1) Options Compensation
----------------- ---- --------- -------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Claude H. Nash.......... 1998 $241,805 $33,000 -- 27,000 $22,500(2)
Chief Executive Officer
and 1997 220,000 55,000 -- 45,000 20,000(3)
President 1996 180,000 18,000 -- 17,850 20,000(3)
Mark McKinlay........... 1998 194,740 28,300 -- 15,000 $ 2,500(4)
Vice President, Research
& 1997 181,500 46,375 -- 25,000 --
Development 1996 165,000 16,500 -- 60,180 --
Jon M. Rogers(5)........ 1998 184,456 26,350 -- 12,000 $42,565(6)
Vice President, Clinical 1997 189,000 45,250 -- 30,000 --
Research 1996 104,218 10,500 -- 36,147 --
Marc S. Collett......... 1998 170,665 23,925 -- 15,000 $ 2,500(4)
Vice President,
Discovery 1997 159,500 39,875 -- 25,000 --
Research 1996 145,000 14,500 -- 47,430 --
Johanna A. Griffin...... 1998 148,135 20,963 -- 12,000 $ 2,222(4)
Vice President, Business 1997 139,750 34,938 -- 20,000 --
Development 1996 125,000 12,500 -- 19,763 --
Guy Diana .............. 1998 145,688 20,812 -- 2,500 $ 2,185(4)
Vice President,
Chemistry 1997 138,750 13,875 -- 15,000 --
Research 1996 125,000 12,500 -- 8,288 --
</TABLE>
- --------
(1) Excludes perquisites and other personal benefits, securities or property
which are, in the aggregate, less than 10% of the total annual salary and
bonus.
(2) Represents premiums of $20,000 paid by the Company for life insurance of
which the Company is not the beneficiary and contributions to the
Company's 401(k) plan of approximately $2,500 made by the Company on
behalf of Mr. Nash. The Company currently intends to continue paying these
premiums in future years and does not expect such premiums to exceed
$20,000 per year.
(3) Represents premiums paid by the Company for life insurance of which the
Company is not beneficiary.
(4) Represents contributions made by the Company to the Company's 401(k) plan
on behalf of such person.
(5) Dr. Rogers resigned from his employment with the Company as of November
16, 1998.
(6) Represents $26,027 in principal forgiven by the Company with respect to a
relocation loan agreement entered into with Dr. Rogers on June 12, 1997,
and $16,538 paid to Dr. Rogers under the terms of a
-7-
<PAGE>
severance agreement. See "Executive Compensation--Severance Agreement" for
a description of the severance agreement and "Certain Relationships and
Related Transactions--Promissory Note" for a description of the relocation
loan agreement.
Stock Option Grants
The following table summarizes stock options granted to the Named Executive
Officers during fiscal 1998.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------
Potential Realizable Value
as Assumed Annual Rates of
Number of Stock Price Appreciation of
Securities Percentage of Exercise Option Term(3)
Underlying Total Options Price Expiration ---------------------------
Name Options Granted(1) Granted(2) ($/share) Date 5% 10%
---- ----------------- ------------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Claude H. Nash.......... 27,000 8.2% $17.625 1/1/08 $ 299,275 $ 758,422
Mark McKinlay........... 15,000 4.5% 17.625 1/1/08 166,264 421,346
Jon M. Rogers........... 12,000 3.6% 17.625 1/1/08 133,011 337,076
Marc S. Collett......... 15,000 4.5% 17.625 1/1/08 166, 264 421,346
Johanna A. Griffin...... 12,000 3.6% 17.625 1/1/08 133,011 337,076
Guy Diana............... 2,500 0.8% 17.625 1/1/08 27,711 70,224
</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 330,700 options granted to employees in 1998,
including options granted to the Named Executive Officers.
(3) "Potential Realizable Value" of each grant is calculated assuming that the
market price of the underlying security appreciates at annualized rates of
5% and 10% over the five-year term of the option. The result of these
calculations are based on rates set forth by the Commission and are not
intended to forecast possible future appreciation of the price of the
Common Stock.
Aggregated Fiscal Year-End Option Values
The following table shows 1998 year-end amounts and value of shares of
Common Stock underlying outstanding options. The Named Executive Officers did
not exercise any stock options in 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at December 31, In-The-Money Options at
1998 December 31, 1998(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Claude H. Nash.............. 20,175 69,675 $70,202 $82,870
Mark McKinlay............... 36,340 63,840 268,847 275,884
Jon M. Rogers............... 25,573 52,573 162,919 171,364
Marc S. Collett............. 29,965 57,465 210,727 217,764
Johanna A. Griffin.......... 14,881 36,882 73,527 79,157
Guy Diana................... 9,572 14,144 19,048 33,876
</TABLE>
- --------
(1) Based on the difference between the closing price per share of $9.313 on
December 31, 1998, and the exercise price of the option.
-8-
<PAGE>
Severance Agreement
Effective November 16, 1998, Jon M. Rogers resigned from his employment with
the Company. On the same date Dr. Rogers and the Company entered into a
severance agreement, pursuant to which Dr. Rogers will provide consulting
services to the Company through February 16, 1999 at a fee of $16,538 per
month and then receive the same monthly payment as severance for a period of
three months thereafter (the "Rogers Agreement"). Under the terms of the
Rogers Agreement, Dr. Rogers agreed to release the Company from any other
obligations it may have incurred in connection with his employment with the
Company.
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Promissory Note
On June 12, 1997, the Company loaned $104,107 to Jon M. Rogers, M.D., then
the Company's Vice President-Clinical Research, 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.
Under the terms of the Rogers Agreement described above and the Rogers Note,
25% of the original principal amount of the loan will be forgiven by the
Company on each of the first four anniversaries of the date of the Rogers
Note, so long as Dr. Rogers is not then in breach of the Rogers Agreement.
During 1998, the Company forgave approximately $26,027, representing 25% of
the original principal amount of the loan.
-9-
<PAGE>
Notwithstanding anything to the contrary, the following Report of the
Compensation Committee and the Performance Graph on page 13 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 "Compensation
Committee") is composed of two non-employee directors. The Compensation
Committee is responsible for setting and administering the policies which
govern annual executive salaries, bonuses (if any) and stock ownership
programs. The Compensation 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 biopharmaceutical companies.
The policies of the Compensation 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 Compensation Committee has adopted a mix among the compensation elements
of salary, bonus and stock option grants with exercise prices set at fair
market value at the time of grant.
Many traditional measures of corporate performance for mature pharmaceutical
companies or companies in other industries, such as earnings per share or
sales growth, are not useful in the evaluation of pharmaceutical companies in
the Company's stage of development. Accordingly, the Compensation Committee
evaluates other indications of performance, such as the progress of the
Company in achieving milestones in the development of its drug candidates, in
obtaining rights to drug candidates and in raising the capital needed for its
operations as the basis in making executive compensation decisions.
The Compensation Committee also considers salary and other compensation data
from an analysis of certain comparable companies, and from a relevant industry
survey(s), for similar executive positions. Bonuses are awarded on a Company-
wide basis upon the achievement of corporate milestones. Executive officers
also are eligible to receive an additional bonus in connection with the
Stockholder Value Reward program adopted by the Company in 1998 that
emphasizes the link between executive incentives and the creation of
stockholder value as measured by the equity markets. In awarding stock
options, the Compensation 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
Compensation Committee generally does not award stock options to executive
officers more frequently than once every year.
The Compensation Committee met in January 1999 to review and approve base
salary increases and option grants for executive officers, including the CEO,
for 1999. The Compensation Committee observed that the Company's market
capitalization decreased substantially in fourth quarter of 1998 due to
changes in market conditions and the results of the first pediatric trial with
pleconaril reported by the Company. To underscore the commitment of the
Company to tying executive compensation to increases in stockholder value, the
Compensation Committee did not increase the salaries of the CEO or the
Company's other executive officers for 1999, other than relatively minor
increases for two members of the executive team. Instead, the Compensation
Committee granted the executives stock options at a higher level than in the
previous year in order to align the long-term interests of the Company's
executive officers with the interests of its stockholders.
-10-
<PAGE>
Under the Company's Stockholder Value Reward program, executives would have
been eligible for a bonus if the Company's adjusted market capitalization for
1998 increased over its adjusted market capitalization in 1997. No executive,
including the CEO, received any amounts under the Stockholder Value Reward
program for 1998. In January 1999, the Compensation Committee approved bonuses
to all employees and executive officers, equal to 5% of each person's base
salary, for the successful completion of the Company's adult viral meningitis
clinical trial.
The Compensation Committee's actions described above are intended to ensure
that a significant portion of the Company's executive compensation program,
including the compensation of the CEO, is contingent on Company's performance,
and is closely linked to increases in stockholder value.
Deductibility of Certain Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "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, 1998, this provision has not affected the
Company's tax deductions, and the Compensation Committee believes that at the
present time it is quite unlikely that the compensation paid to any Named
Executive Officer in a taxable year which is subject to the deduction limit
will exceed $1,000,000. The Compensation Committee intends to continue to
evaluate the effects of the statute and any applicable regulations and to
comply with Code Section 162(m) in the future to the extent consistent with
the best interests of the Company.
MEMBERS OF THE COMPENSATION COMMITTEE
Ann H. Lamont
Robert J. Glaser
April 1, 1999
-11-
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return on
the 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 Common Stock first started trading on the Nasdaq National Market.
[LINE GRAPH APPEARS HERE]
ViroPharma Nasdaq US Nasdaq Pharm.
11/19/96 100 100 100
12/31/96 125 102.38 106.13
3/31/97 185.71 96.82 100.8
6/30/97 255.36 114.57 108.82
9/30/97 314.29 133.94 122.06
12/31/97 251.79 125.6 109.59
3/31/98 300 146.96 120.46
6/30/98 332.14 151.21 111.65
9/30/98 253.57 136.9 105.65
12/31/98 133.04 176.56 140.28
1/29/99 167.86 202.43 153.26
-12-
<PAGE>
PROPOSAL NO. 2
AMENDMENT OF SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The stockholders also are being asked to vote on a proposal to amend the
Company's Second Amended and Restated Certificate of Incorporation to approve
the addition of a new Article Seventh granting the Board of Directors the
authority to adopt, amend and repeal the Company's Bylaws, subject to certain
limitations set forth in the Bylaws. The Company intends to limit the Board's
power to amend certain provisions of the Bylaws, as more fully described in
"Proposal No. 3" below. Currently, action of the stockholders is required to
adopt, amend or repeal the Bylaws of the Company. By limiting the Board's
power to amend certain provisions of the Bylaws, the Board of Directors
believes that it has preserved for the stockholders the right to approve
amendments to Bylaw provisions in which the stockholders may have a particular
interest. The Board of Directors believes that the proposed amendment will
provide the Board with greater flexibility in governing its internal affairs.
In addition, the power to amend the Bylaws, without the necessity of waiting
for the next annual meeting of stockholders or the delay and expense in
calling a special meeting of stockholders, will enhance the Board's ability to
manage the Company and more effectively deal with changed circumstances or
requirements with which it may be presented. The Board of Directors has
approved the proposed amendment. Stockholders are urged to read carefully the
following sections of this Proxy Statement before voting on the proposed
amendment. The text of the proposed amendment to the Second Amended and
Restated Certificate of Incorporation is attached to this Proxy Statement as
Annex A.
Under the Delaware General Corporation Law, the Board of Directors may amend
the Bylaws if the Second Amended and Restated Certificate of Incorporation
confers such authority on the Board. Currently, no such authority is granted
in the Company's Second Amended and Restated Certificate of Incorporation.
Regardless of whether the Board of Directors has been granted such authority,
the stockholders of the Company continue to maintain the power to amend the
Bylaws, as the Delaware General Corporation Law specifically provides that
conferring such power upon the directors does not divest the power of a
corporation's stockholders to amend its bylaws.
Bylaws typically provide rules and procedures for managing the business and
affairs of a corporation, such as calling and noticing meetings of the
stockholders and Board of Directors, quorum and voting requirements, voting
and inspection procedures, number and term of directors, nomination procedures
for election of persons to the board of directors, filling of vacancies on the
board of directors and the appointment of officers and officers' duties. From
time to time, it may be desirable, or even necessary, to add to or change
bylaw provisions to reflect changes in the corporation's practices or internal
governance procedures or to reflect changes in applicable law. In addition,
the Company's Board of Directors may from time to time decide that a change to
the Bylaws is desirable, for example, to modify the minimum or maximum number
of directors or to establish or change the duties of a committee of the Board
or officers of the Company. Granting the Company's Board of Directors the
power to amend the Company's Bylaws will allow the Board of Directors to
effect such changes in a more efficient, cost-effective manner without the
necessity of incurring the expense and time delay of soliciting stockholder
approval at a stockholders' meeting.
The affirmative vote of a majority of the Company's outstanding Common Stock
entitled to vote at the Annual Meeting is required to approve the proposal to
amend the Second Amended and Restated Certificate of Incorporation granting
the Board the authority to amend the Bylaws without stockholder approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT OF THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
GRANTING THE BOARD OF DIRECTORS THE POWER TO ADOPT, AMEND AND REPEAL THE
COMPANY'S BYLAWS WITHOUT FURTHER STOCKHOLDER APPROVAL AS DESCRIBED IN PROPOSAL
NO. 2.
-13-
<PAGE>
PROPOSAL NO. 3
AMENDMENT OF BYLAWS
The Board of Directors has approved a resolution (the "Bylaw Proposal"),
subject to stockholder approval, to amend the Company's Bylaws to allow the
Board of Directors of the Company to amend the Bylaws of the Company by an
affirmative vote of a majority of the Board of Directors without having to
solicit the approval of the Company's stockholders. The Bylaw Proposal
requires stockholder approval to amend certain provisions of the Bylaws
described below, however, in order to preserve for the stockholders the right
to approve amendments to Bylaw provisions in which the stockholders have a
particular interest. The Board of Directors believes it is in the best
interest of the Company to amend the Bylaws to allow the Board of Directors to
amend the Bylaws of the Company by an affirmative vote of a majority of the
Board. The text of the Bylaw Proposal is attached as Annex B to this Proxy
Statement. Presently, Section 6.7 of the Bylaws requires the affirmative vote
of the holders of a majority of the outstanding shares of the capital stock of
the Company in order for the Company to alter or repeal the Bylaws or make new
Bylaws.
The Board of Directors believes that the Bylaw Proposal will provide the
Board with greater flexibility in governing its internal affairs. In addition,
the power to amend the Bylaws without the necessity of waiting until the next
annual meeting of stockholders or the delay and expense in calling a special
meeting of stockholders will enhance the Board's ability to manage the Company
and more effectively deal with changed circumstances or requirements with
which it may be presented.
Notwithstanding any power that the Board of Directors may have to adopt,
amend or repeal the Bylaws, the stockholders of the Company shall maintain the
power to adopt, amend or repeal the Bylaws, as the Delaware General
Corporation Law specifically provides that conferring such power upon the
directors does not divest such power from the stockholders. In addition,
because the Board of Directors believes that certain provisions of the Bylaws
are fundamental to the rights of its stockholders, the Bylaw Proposal excepts
certain provisions of the Bylaws from the Board's power to amend the Bylaws.
If the Bylaw Proposal is approved by the stockholders, the following
provisions of the Bylaws will continue to require the approval of a majority
of the outstanding shares of capital stock of the Company for their amendment
or repeal:
1. Section 1.2. Special Meetings. Special meetings of stockholders may be
called at any time by the Chairman of the Board, if any, the Vice Chairman
of the Board, if any, the President or the Board of Directors, to be held
at such time and place either within or without the State of Delaware as
may be stated in the notice of the meeting. A special meeting of
stockholders shall be called by the Secretary upon the written request,
stating the purpose of the meeting, of stockholders who together own of
record 25% of the outstanding stock of any class entitled to vote at such
meeting.
2. Section 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which
the meeting is called. Unless otherwise provided by law, the written notice
of any meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited
in the United States mail, postage prepaid, directed to the stockholder at
his address as it appears on the records of the corporation.
3. Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of
stock held by him which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long
as, it is coupled with an interest
-14-
<PAGE>
sufficient in law to support an irrevocable power. A stockholder may revoke
any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another
duly executed proxy bearing a later date with the Secretary of the
corporation. Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors unless the holders of a
majority of the outstanding shares of all classes of stock entitled to vote
thereon present in person or by proxy at such meeting shall so determine.
At all meetings of stockholders for the election of directors, a plurality
of the votes cast shall be sufficient to elect. All other elections and
questions shall, unless otherwise provided by law or by the certificate of
incorporation or these by-laws, be decided by the vote of the holders of a
majority of the outstanding shares of all classes of stock entitled to vote
thereon present in person or by proxy at the meeting.
4. Section 1.10 Consent of Stockholders in Lieu of Meeting. Any action
required by law to be taken at any annual or special meeting of
stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice
of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
5. Section 6.4. Indemnification of Directors, Officers and Employees. The
corporation shall indemnify to the full extent authorized by law any person
made, or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or
employee of the corporation or any predecessor of the corporation or serves
or served any other enterprise as a director, officer or employee at the
request of the corporation or any predecessor of the corporation.
In addition to the foregoing, any amendment to Section 2.2 of the Bylaws
that would permit the removal of a director only for cause or by a
supermajority vote of the stockholders also shall require the approval of a
majority of the outstanding shares of capital stock of the Company.
The Board of Directors believes that the adoption of the Bylaw Proposal will
provide the Company with more flexibility to adjust its internal governance
practices and procedures and to conform such documents to changes in the law
enacted from time to time. The Board of Directors believes that it is in the
best interest of the Company and its stockholders for the stockholders to
approve such amendment. The affirmative vote of a majority of the Company's
outstanding Common Stock entitled to vote at the Annual Meeting is required to
approve the Bylaws Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENT OF THE
BYLAWS AS DESCRIBED IN PROPOSAL NO. 3
-15-
<PAGE>
PROPOSAL NO. 4
TRANSFER OF ASSETS TO A WHOLLY-OWNED SUBSIDIARY
The Company's management has had under review the possibility of pursuing a
reorganization of certain operations of the Company. The proposed changes to
the Company's internal organizational structure are designed to obtain the
benefits of Delaware corporate and tax laws.
In pursuit of this strategy, the Board of Directors has determined that it
would be in the best interest of the Company and its stockholders for the
Board to have the ability to transfer certain of the Company's property and
assets (which may include substantially all of the Company's property and
assets) to one or more direct, wholly-owned subsidiaries formed under the laws
of the State of Delaware. The ability of the Company to transfer assets to a
new wholly-owned Delaware subsidiary and the consequent reorganization of the
Company's organizational structure would permit greater flexibility for the
Company to manage its assets more cost effectively and enable the Company to
take advantage of available opportunities under Delaware law to minimize, to
the extent feasible, the Company's present and future state tax obligations
and liabilities.
The Company is currently considering establishing such a subsidiary to
provide debt financing to the Company and a subsidiary to own and license
certain of the Company's intellectual property to the Company. No such
considerations are as yet definitive. The change in the Company's
organizational structure and the transfer of assets to any such wholly-owned
Delaware subsidiary will not result in any change in the business, management,
location of the principal executive offices or other facilities or
capitalization of the Company. In addition, any such restructuring will not
entail the issuance or redemption of any shares of capital stock of the
Company and the outstanding capital stock of the Company will not be affected
by the proposed internal restructuring.
As a result of the creation of a wholly-owned Delaware subsidiary, the
stockholders of the Company will not directly elect the directors of such
subsidiary. Directors of such a subsidiary will be elected by the Board of
Directors of the Company, as the Company will be the sole stockholder of such
subsidiary. Notwithstanding that fact, however, the overall management of the
affairs and operations of the Company will be under the direction of the Board
of Directors, who will be elected by the stockholders of the Company.
Additionally, stockholders of the Company will not be entitled to approve the
sale, lease or exchange of all or substantially all of the property and assets
of such a subsidiary, unless such sale, lease or exchange involves property or
assets comprising all or substantially all of the property or assets of the
Company.
While a transfer of certain of the assets of the Company to one or more
wholly-owned Delaware subsidiaries does not create any conflict of interest
between the Company and its stockholders, in the event that any of the
subsidiaries, through public or private sale, should be owned in part by
persons other than the Company or its stockholders, such conflicts could
arise. However, the Company has no present intention to affect a public or
private sale of any portion of the ownership of any of the potential wholly-
owned Delaware subsidiaries.
The Board of Directors has determined that it would be in the best interest
of the Company and its stockholders for the Company to have the ability to
transfer certain of its assets and property (which may include substantially
all of its assets and property) to one or more newly formed wholly-owned
subsidiaries of the Company established under the laws of the State of
Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NO. 4
-16-
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP has served as the Company's independent certified public
accountants since 1995. KPMG 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--FOR THE 2000 ANNUAL MEETING
The Company intends to mail next year's proxy statement to its stockholder
on or about April 15, 2000. Any stockholder proposal intended to be presented
at the Company's 2000 annual meeting of stockholders pursuant to Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") must be received by the Company at its office in Exton,
Pennsylvania on or before December 15, 1999 in order to be considered for
inclusion in the Company's proxy statement and form of proxy relating to such
annual meeting.
On May 21, 1998 the SEC adopted an amendment to Rule 14a-4, as promulgated
under the Exchange Act. The amendment to Rule 14a-4(c)(1) governs the
Company's use of its discretionary proxy voting authority with respect to a
stockholder proposal which the stockholder has not sought to include in the
Company's proxy statement. The new amendment provides that if a proponent of a
proposal fails to notify the Company at least 45 days prior to the month and
day of mailing of the prior year's proxy statement (or any date specified in
an advance notice provision), then the management proxies will be allowed to
use their discretionary voting authority when the proposal is raised at the
meeting, without any discussion of the matter in the proxy statement.
With respect to the Company's 2000 annual meeting of stockholders, if the
Company is not provided notice of a stockholder proposal, which the
stockholder has not previously sought to include in the Company's proxy
statement under Rule 14a-8, by March 1, 2000, the management proxies will be
allowed to use their discretionary authority as outlined above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires that directors and certain
officers of the Company, and persons who own more than 10% 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 1998 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.
Thomas F. Doyle
Vice President, General Counsel and
Secretary
April 2, 1999
-17-
<PAGE>
Annex A
PROPOSED AMENDMENT TO SECOND AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
Subject to the approval of the stockholders of the Company, the Second
Amended and Restated Certificate of Incorporation shall be amended by adding
the following Article "SEVENTH."
"SEVENTH: In furtherance of the powers conferred by the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation is expressly authorized and empowered to make, alter, amend and
repeal the Bylaws of the Corporation, except as otherwise provided or
permitted in the Bylaws of the Corporation or under the General Corporation
Law of the State of Delaware."
-18-
<PAGE>
Annex B
BYLAW PROPOSAL
Subject to the approval of the stockholders of the Company, Section 6.7 of
the Company's Bylaws shall be amended and restated in its entirety as follows:
"Section 6.7. Amendment of By-laws. Except with respect to Sections 1.2,
1.3, 1.7, 1.10 and 6.4 of these by-laws, for which the amendment or repeal
thereof, or adoption of any provision inconsistent therewith, shall require
the approval of a majority of the outstanding shares of capital stock of the
Corporation, or any amendment to Section 2.2 that would permit the removal of
a director only for cause or by a supermajority vote of the stockholders,
which amendment also shall require the approval of a majority of the
outstanding shares of capital stock of the Corporation, these by-laws may be
amended or repealed, and new by-laws made, by the Board of Directors without
the approval of the majority of the outstanding shares of capital stock of the
Corporation."
-19-
<PAGE>
- --------------------------------------------------------------------------------
VIROPHARMA INCORPORATED
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON MAY 14, 1999
The undersigned hereby appoints Claude H. Nash and Thomas F. Doyle, or
either of them with full power to act alone (with full power of substitution,
and in place of either in case of substitution, his substitute), the attorneys
and proxies for and on behalf of the undersigned to attend the Annual Meeting of
VIROPHARMA INCORPORATED to be held Friday, May 14, 1999 at 10:00 a.m., local
time, at the Sheraton Great Valley Hotel, 707 East Lancaster Avenue, Frazer,
Pennsylvania, 19355 and any and all adjournments thereof, and to cast the number
of votes the undersigned would be entitled to vote if then personally present.
The undersigned instructs such proxies to vote as specified on this card.
PROPOSAL NO. 1
1. Election and Ratification of Directors.
CLASS III: CLASS I: CLASS II:
---------- -------- ---------
CLAUDE H. NASH ROBERT J. GLASER HOWARD PIEN
FRANK BALDINO, JR. PH.D DAVID J. WILLIAMS
FOR ALL NOMINEES [_] WITHHOLD [_] FOR ALL EXCEPT [_]
NOTE: If you do not wish your shares voted "FOR" a particular nominee, mark the
"FOR ALL EXCEPT" box and strike a line through the name(s) of the nominee(s).
Your shares will be voted for the remaining nominee(s).
PROPOSAL NO. 2
2. Proposal to amend the Company's Second Amended and Restated Certificate of
Incorporation granting the Board of Directors the right, concurrent with the
right of the stockholders, to adopt, amend or repeal the Company's Bylaws,
subject to certain limitations set forth in the Bylaws.
FOR [_] AGAINST [_] ABSTAIN [_]
PROPOSAL NO. 3
3. Proposal to amend the Company's Bylaws granting the Board of Directors the
right to amend the Bylaws, subject to certain limitations.
FOR [_] AGAINST [_] ABSTAIN [_]
PROPOSAL NO. 4
4. Proposal for approval allowing the Company to transfer certain of its
property and assets to one or more wholly-owned Delaware subsidiaries.
FOR [_] AGAINST [_] ABSTAIN [_]
- --------------------------------------------------------------------------------
(Please date and sign on reverse side)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" ALL NOMINEES FOR DIRECTORS, "FOR" THE PROPOSED AMENDMENT TO THE COMPANY'S
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, "FOR" THE PROPOSED
AMENDMENT TO THE COMPANY'S BYLAWS AND "FOR" APPROVAL ALLOWING THE COMPANY TO
TRANSFER CERTAIN OF THE COMPANY'S PROPERTY AND ASSETS TO ONE OR MORE
WHOLLY-OWNED DELAWARE SUBSIDIARIES AS DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT.
DISCRETIONARY AUTHORITY IS CONFERRED HEREBY AS TO ALL OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
Date: , 1998
----------------------------------
(Please be sure to sign and date this Proxy)
----------------------------------------------
(Stockholder sign here)
----------------------------------------------
(Co-owner sign here)
If shares are registered in the names of two
or more persons, each should sign. Executors,
administrators, trustees, guardians, attorneys
and corporate officers should show their full
titles.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
- --------------------------------------------------------------------------------
