<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:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
Notes:
<PAGE>
VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, Pennsylvania 19341
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 18, 2000
----------------
To Our Stockholders:
Our annual stockholders' meeting will be held on Thursday, May 18, 2000 at
10:00 a.m., local time, at The Desmond Great Valley Hotel, One Liberty
Boulevard, Malvern, Pennsylvania for the following purposes:
1. To elect two (2) directors to Class I of our board of directors. Each
director elected by the stockholders will serve for a three-year term
and until the election and qualification of his successor;
2. To approve our stock option plan, as amended, to:
. increase the number of shares of common stock available for issuance
under our stock option plan by 750,000 shares;
. eliminate the discretion and authority of our board of directors to
reprice outstanding stock options without the consent of our
stockholders;
. eliminate the discretion and authority of our board of directors to
grant stock options at an exercise price that is less than the fair
market value of our common stock on the date of grant; and
. require stockholder consent before we could amend our stock option
plan to eliminate our obligation to obtain stockholder consent to
reprice options or grant options at an exercise price that is less
than the fair market value of our common stock on the date of grant.
3. To amend our amended and restated certificate of incorporation to
increase the number of shares of common stock that we are authorized to
issue by 73,000,000 shares;
4. To approve our 2000 employee stock purchase plan; and
5. To transact any other business that may arise at the meeting.
Any action may be taken on these matters at the annual meeting, or on the
date to which the annual meeting may be adjourned. Our board of directors has
chosen April 1, 2000 as the record date for determining the stockholders who
will be entitled to receive notice of our annual meeting and to vote at that
meeting. We will maintain a complete list of our stockholders entitled to vote
at the annual meeting at our headquarters, located at 405 Eagleview Boulevard,
Exton, Pennsylvania, for ten days before the annual meeting. If we have to
adjourn the meeting, then we will take action on the items described above on
the date to which the meeting is adjourned.
The proxy statement included with this notice discusses each of our
proposals to be considered at the annual meeting. We also have included a copy
of our annual report to stockholders for the year ended December 31, 1999 for
your review.
<PAGE>
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE SO THAT WE CAN COUNT YOUR
VOTE. WE HAVE INCLUDED A POSTAGE-PREPAID ENVELOPE FOR YOUR USE.
RETURNING THE PROXY CARD WILL NOT AFFECT YOUR RIGHT TO ATTEND THE
MEETING AND VOTE.
By Order of the Board of Directors,
Thomas F. Doyle
Vice President, General Counsel and
Secretary
April 10, 2000
Exton, Pennsylvania
<PAGE>
VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, Pennsylvania 19341
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 2000
----------------
We are sending you this proxy statement and the enclosed proxy card because
our board of directors is soliciting your proxy to vote your shares at our
2000 annual meeting of stockholders. The annual meeting will be held on May
18, 2000 at 10:00 a.m., local time, at The Desmond Great Valley Hotel, One
Liberty Boulevard, Malvern, Pennsylvania. We began mailing this proxy
statement and the proxy card on or about April 10, 2000. We have also included
our annual report for the year ended December 31, 1999 for your review. The
annual report is not part of this proxy statement.
ABOUT THE ANNUAL MEETING
Who is entitled to vote at the annual meeting?
Only our stockholders of record at the close of business on April 1, 2000
are entitled to receive notice of our annual meeting and to vote at the
meeting. On April 1, 2000, we had [ ] shares of our common stock
outstanding, and 2,300,000 shares of series A convertible participating
preferred stock outstanding. The series A preferred stock was convertible into
2,346,295 shares of common stock on that date. Each common stockholder that is
entitled to vote will have the right to one vote for each share of common
stock outstanding in such stockholder's name on the record date. The holders
of the series A preferred stock will have the right to one vote for each share
of common stock into which the preferred stock is convertible on the record
date.
Do I have to attend the meeting in order to vote?
No. If you want to have your vote count at the meeting, but not actually
attend the meeting in person, fill out the enclosed proxy card and mail it
back to us in the enclosed postage-prepaid envelope.
Your shares will be voted in the manner that you indicate on your signed
proxy card. The proxy card provides spaces for you to withhold your authority
to vote your shares for the nominees for the board of directors. The proxy
card also provides spaces for you to vote "for" or "against" or "abstain" from
voting in connection with (1) our proposal to increase the number of shares of
common stock available under our stock option plan, (2) our proposal to
increase the number of shares of common stock available for issuance under our
certificate of incorporation and (3) our proposal to approve our 2000 employee
stock purchase plan.
If you return a signed proxy card but do not indicate how you wish to vote
your shares, your shares will be voted by the management proxies set forth on
the proxy card in the manner recommended by our board of directors in this
proxy statement.
How many votes are required to conduct business at the annual meeting?
We need to receive votes from holders of a majority of the common stock
outstanding or issuable upon conversion of the series A preferred stock and
entitled to vote, either in person or by proxy, in order to have a quorum at
the meeting. If a quorum is present, we will be able to conduct business at
the meeting.
The nominees for director will be elected by a plurality of the votes cast
at the annual meeting. You can cast your vote in favor of the nominees for
director, or you can withhold your votes from these persons. If you
1
<PAGE>
withhold your authority, then your votes will be excluded from the vote and
will have no effect, other than for purposes of determining the presence of a
quorum.
Any other matter submitted to the stockholders will require the affirmative
vote of a majority of the shares represented and entitled to vote, in person
or by proxy, at the annual meeting, unless a greater percentage is required
either by law or by our certificate of incorporation or bylaws. If you
"abstain" from voting on any of these matters, your abstention will be
considered as present and entitled to vote for purposes of determining the
presence of a quorum, but will have the effect of a vote "against" the
particular matter.
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. We believe that brokers that do not receive instructions
are entitled to vote those shares for the election of the directors. If the
brokers do not vote those shares, it will have no effect on the outcome of the
election, as the directors are to be elected by a plurality of the votes cast.
We believe that brokers are not entitled to vote those shares, however, on the
proposals to approve the amendments to our option plan and amended and
restated certificate of incorporation, or on the proposal to approve our
employee stock purchase plan.
Can I change my vote after I return the proxy card?
Yes. You can revoke your proxy by sending a written revocation or another
properly created proxy bearing a later date than your originally filed proxy
card before the annual meeting to Thomas F. Doyle, our corporate secretary, or
by simply voting at the meeting in person.
How can I get additional information about the company?
We will be happy to provide you (without charge) with a copy of our annual
report on Form 10-K for the fiscal year ended December 31, 1999 and other
documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. Please address your requests for such
documents 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 information regarding the beneficial
ownership of our common stock as of April 1, 2000, except as otherwise
indicated in the relevant footnote, by (1) each person or group that we know
beneficially owns more than 5% of our common stock, (2) each of our directors
and director nominees, (3) our Chief Executive Officer and our four most
highly compensated executive officers other than our Chief Executive Officer
for the fiscal year ended December 31, 1999, collectively referred to in this
proxy statement as the "named executive officers," and (4) all current
executive officers and directors as a group. Unless otherwise indicated, the
address of each person identified below is c/o ViroPharma Incorporated, 405
Eagleview Boulevard, Exton, Pennsylvania 19341.
The percentages of beneficial ownership shown below are based on shares
of Common Stock outstanding as of April 1, 2000, unless otherwise stated.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes those securities
over which a person may exercise voting or investment power. In addition,
shares of common stock which a person has the right to acquire upon the
conversion of preferred stock or the exercise of stock options and warrants
within 60 days of the date of this table are deemed outstanding for the
purpose of computing the percentage ownership of that person, but are not
deemed outstanding for computing the percentage ownership of any other person.
Except as indicated in the footnotes to this table or as affected by
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned.
<TABLE>
<CAPTION>
Number of Shares Percentage of
of Common Stock Shares
Beneficial Owner Beneficially Owned Beneficially Owned
---------------- ------------------ ------------------
<S> <C> <C>
5% Stockholders
- ---------------
PSV, LP (1)............................. 2,941,295 16.30%
Capital Research and Management Company
(2).................................... 790,000 5.23
Directors and Executive Officers
- --------------------------------
Claude H. Nash (3)...................... 517,884 3.41
Marc S. Collett (4)..................... 263,362 1.73
Mark A. McKinlay (5).................... 196,960 1.30
Johanna A. Griffin (6).................. 136,489 *
Ann H. Lamont........................... 69,222 *
Vincent J. Milano (7)................... 63,153 *
Frank Baldino, Jr. (8).................. 62,333 *
Robert J. Glaser (9).................... 30,833 *
David J. Williams (10).................. 13,333 *
Howard Pien (11)........................ 6,667 *
All directors and executive officers as
a group (13 persons) (12).............. 1,446,125 9.25%
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of our common stock.
(1) Represents 2,300,000 shares of series A convertible participating
preferred stock purchased by PSV, LP (formerly Perseus-Soros
BioPharmaceutical Fund, L.P.), which are convertible into 2,346,295
shares of common stock, and 595,000 shares of common stock issuable upon
exercise of warrants. The address of PSV, LP is c/o Perseus Capital LLC,
The Army and Navy Club Building, 1627 I Street, N.W., Suite 610,
Washington, D.C. 20006.
(2) As reflected in a Schedule 13G dated February 10, 2000. The address of
Capital Research and Management Company is 333 South Hope Street, Los
Angeles, CA 90071.
(3) Includes 800 shares of common stock held by Mr. Nash as custodian for two
minor children, and 66,301 shares of common stock issuable upon the
exercise of stock options which are exercisable within 60 days of the
date of this table.
3
<PAGE>
(4) Includes 1,000 shares of common stock held by Dr. Collett as custodian
for a minor child, and 77,010 shares of common stock issuable upon the
exercise of stock options which are exercisable within 60 days of the
date of this table.
(5) Includes 89,760 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(6) Includes 39,572 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(7) Includes 44,029 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(8) Includes 13,333 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(9) Includes 13,333 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(10) Includes 13,333 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(11) Includes 6,667 shares of common stock issuable upon the exercise of stock
options which are exercisable within 60 days of the date of this table.
(12) Includes 447,514 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
4
<PAGE>
PROPOSAL 1
ELECTION OF CLASS I DIRECTORS
Our board of directors currently consists of 6 directors. The board consists
of three classes of directors, with each director serving a three-year term.
Each year, one class of directors is subject to stockholder vote. At the
annual meeting, stockholders will vote on the election of two class I
directors. Each class I director elected at the annual meeting will serve
until the 2003 annual meeting of stockholders and until such director's
successor has been elected and qualified, except if the director resigns, is
removed or dies before such time.
Class I members presently are Robert J. Glaser and David J. Williams. Mr.
Glaser and Mr. Williams are the director nominees for election to the board of
directors at the annual meeting. Class II members are Ann H. Lamont and Howard
Pien and Class III members are and Frank Baldino, Jr., Ph.D. and Claude H.
Nash.
The affirmative vote of a plurality of shares of the common stock present or
represented by proxy at the annual meeting and entitled to vote is required
for the election of Mr. Glaser and Mr. Williams as directors. If either of
them should become unable to accept nomination or election, a circumstance
which we do 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 -- Nominees for Terms Continuing until 2003
Robert J. Glaser. Mr. Glaser has served as one of our directors since August
1997. Mr. Glaser is currently President of the McKesson HBOC Pharmaceutical
Services division of McKesson HBOC. He was President and Chief Operating
Officer 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 47 years of age.
David J. Williams. Mr. Williams has served as one of our directors since
November 1997. Mr. Williams has been President and Chief Operating Officer of
Aventis Pasteur, and its predecessor Pasteur Merieux Connaught USA, since
1988. Mr. Williams also is a director of Blue Cross of Northeastern
Pennsylvania. Mr. Williams is 50 years of age.
Class II -- Directors with Terms Continuing until 2001
Ann H. Lamont. Ms. Lamont, a co-founder of ViroPharma, has served as one of
our directors 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. Ms. Lamont is 43
years of age.
Howard Pien. Mr. Pien has served as one of our directors 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 42 years of
age.
Class III -- Nominees with Terms Continuing until 2002
Claude H. Nash. Mr. Nash, a co-founder of ViroPharma, has served as Chairman
of our board of directors since February 1997, and as Chief Executive Officer,
President and one of our directors since our commencement of operations in
December 1994. From 1983 until 1994, Mr. Nash served as Vice President,
Infectious Disease and Tumor Biology at Schering-Plough Corporation, a
pharmaceutical company. Mr. Nash received his Ph.D. from Colorado State
University. Mr. Nash also is a director of Adolor Corporation. Mr. Nash is 57
years of age.
5
<PAGE>
Frank Baldino, Jr., Ph.D. Dr. Baldino has served as one of our directors
since June 1995. Since 1987, he has served as President, Chief Executive
Officer 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., Pharmacopeia, Inc. and
Adolor Corporation. Dr. Baldino is 46 years of age.
Committees and Meetings of the Board
The board of directors has a compensation committee and an audit committee.
During 1999, the board of directors held 8 meetings, the compensation
committee held 2 meetings, and the audit committee held 2 meetings. Mr.
Williams attended 4 of 8 meetings of the board of directors held in 1999. Mr.
Pien attended 5 of 8 meetings of the board of directors held in 1999.
The compensation committee makes recommendations concerning salaries and
incentive compensation for our employees and consultants. The audit committee
reviews the results and scope of the audit and other services provided by our
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. Mr. Williams attended 1 of 2 audit
committee meetings in 1999.
Compensation of Directors
Non-employee directors not affiliated with any of our investors receive
$10,000 per year, plus travel expenses for each meeting of the board of
directors they attend. These directors also receive options to purchase 20,000
shares of our common stock upon their election, or reelection, to the board of
directors. Dr. Baldino received a grant of options to purchase 20,000 shares
of our common stock after he was reelected to the board at our 1999 annual
meeting.
In July 1997, we entered into an agreement with Dr. Baldino, and in November
1997, we entered into an agreement with Mr. Williams, in connection with their
participation on the board of directors. Under these agreements, Dr. Baldino
and Mr. Williams were granted stock options to purchase 13,334 and 20,000
shares of our 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 $5,000 per year, payable in equal, quarterly installments and credited
against the director fees payable to them as described above.
Each of our directors and officers are parties to indemnification agreements
with us. Under these agreements, they will be indemnified against liabilities
and expenses incurred in connection with their services to us to the fullest
extent permitted by Delaware law. Their indemnification rights are subject to
each director and officer meeting the applicable standard of care and to a
determination to indemnify by a majority of disinterested directors or by
independent counsel.
6
<PAGE>
Compensation Committee Interlocks and Insider Participation
None.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES FOR CLASS
I DIRECTORS AS DESCRIBED IN PROPOSAL NO. 1.
EXECUTIVE COMPENSATION
The following table provides information on compensation paid or earned
during the fiscal years ended December 31, 1997, December 31, 1998 and
December 31, 1999 to the named executive officers.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
Long-term
Compensation
------------
Securities
Other Annual Underlying All Other
Name and Position Year Salary Bonus Compensation($)(1) Options Compensation
----------------- ---- -------- ------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Claude H. Nash.......... 1999 $241,805 $19,344 -- 40,500 $22,500(2)
Chief Executive Officer
and 1998 241,805 33,000 -- 27,000 22,500(2)
President 1997 220,000 55,000 -- 45,000 20,000(3)
Mark McKinlay........... 1999 194,740 15,579 -- 22,500 $ 2,500(4)
Vice President, Research
& 1998 194,740 28,300 -- 15,000 2,500(4)
Development 1997 181,500 46,375 -- 25,000 --
Marc S. Collett......... 1999 170,665 13,653 -- 22,500 $ 2,500(4)
Vice President,
Discovery 1998 170,665 23,925 -- 15,000 $ 2,500(4)
Research 1997 159,500 39,875 -- 25,000 --
Johanna A. Griffin...... 1999 148,135 11,851 -- 15,000 $ 2,222(4)
Vice President, Business 1998 148,135 20,963 -- 12,000 $ 2,222(4)
Development 1997 139,750 34,938 -- 20,000 --
Vincent J. Milano....... 1999 134,400 10,752 -- 22,500 $ 6,487(5)
Vice President, Chief
Financial 1998 134,400 18,500 -- 12,000 $ 9,681(5)
Officer and Treasurer 1997 120,000 12,000 -- 20,000 $ 2,874(5)
</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 us for life insurance of which we
are not the beneficiary and contributions to our 401(k) plan of
approximately $2,500 made by us on behalf of Mr. Nash.
(3) Represents premiums paid by us for life insurance of which we are not a
beneficiary.
(4) Represents contributions made by us on behalf of such person to our 401(k)
plan.
(5) Represents debt forgiveness of $4,471 in 1999, $7,665 in 1998 and $2,874
in 1997 that otherwise would have been due under a promissory note that
Mr. Milano signed in favor of us in connection with his relocation
expenses that were reimbursed by us in 1997, and contributions to our
401(k) plan of $2,061 in 1999 and 1998.
Stock Option Grants
The following table summarizes stock options granted to the named executive
officers during the fiscal year ended December 31, 1999. These options vest in
four annual installments commencing on the first anniversary of the date of
grant. The percentage of total options granted is based on an aggregate of
385,100 options granted to employees in 1999, including options granted to our
named executive officers.
7
<PAGE>
The potential realizable value of each grant, as set forth in the table
below, is calculated assuming that the market price of the underlying security
appreciates at annualized rates of 5% and 10% over the ten-year term of the
option. The results of these calculations are based on rates set forth by the
Securities and Exchange Commission and are not intended to forecast possible
future appreciation of the price of our common stock.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Number of Price Appreciation of
Securities Exercise Option Term
Underlying Total Options Price Expiration ----------------------
Name Options Granted Granted ($/share) Date 5% 10%
---- --------------- ------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Claude H. Nash.......... 40,500 10.5% $11.625 1/1/09 $ 296,091 $ 750,353
Mark McKinlay........... 22,500 5.8% 11.625 1/1/09 164,495 416,863
Marc S. Collett......... 22,500 5.8% 11.625 1/1/09 164,495 416,863
Johanna A. Griffin...... 15,000 3.9% 11.625 1/1/09 109,664 277,909
Vincent J. Milano....... 22,500 5.8% 11.625 1/1/09 164,495 416,863
</TABLE>
Aggregated Fiscal Year-End Option Values
The following table shows 1999 year-end amounts and value of shares of our
common stock underlying outstanding options for our five highest paid
executive officers. None of these persons exercised any stock options in 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at December 31, In-The-Money Options at
1999 December 31, 1999(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Claude H. Nash.............. 42,638 87,712 $1,195,749 $2,134,803
Mark McKinlay............... 61,385 61,295 2,019,850 1,637,862
Marc S. Collett............. 51,823 58,108 1,676,269 1,523,336
Johanna A. Griffin.......... 27,822 38,941 832,818 975,766
Vincent J. Milano........... 22,118 50,202 655,298 1,303,559
</TABLE>
- --------
(1) Based on the difference between the closing price per share of $36.13 on
December 31, 1999, and the exercise price of the option.
Confidentiality and Inventions Agreements
We have entered into confidentiality and inventions agreements with each of
our 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 us or related to our business or which were
made or conceived with the use of our time, material, facilities or trade
secret information, belong exclusively to us, without additional compensation
to the employee. The agreements also have confidentiality provisions in favor
of us and noncompetition provisions in favor of us during employment.
8
<PAGE>
The following Report of the Compensation Committee and the Performance
Graph on page 11 will 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 we
specifically incorporate this information by reference. the following
report shall not otherwise be deemed filed under such acts.
REPORT OF THE
COMPENSATION COMMITTEE
The compensation committee of the board of directors is composed of two non-
employee directors. The compensation committee is responsible for setting and
administering the policies that 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, or CEO, and our other executive
officers based upon a mix of the achievement of corporate goals, individual
performance and comparisons with other biopharmaceutical companies.
The goals 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 interests of our stockholders. We
seek to provide incentives for superior individual performance by paying
competitive compensation, and to base a significant portion of compensation
upon our 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 the 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
our stage of development. Accordingly, the compensation committee evaluates
other indications of performance, such as our progress in achieving milestones
in the development of our drug candidates, in obtaining rights to drug
candidates and in raising the capital needed for our 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 us 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 us,
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 December 1999 and January 2000 to review
and approve base salary increases and option grants for the CEO and other
executive officers for 2000, and bonuses based on our market capitalization
during 1999. In determining the CEO's salary, the committee observed that we
achieved positive results in our clinical trials with pleconaril, our lead
drug candidate, for adult meningitis and viral respiratory infection in 1999.
The committee also noted that we were successful in raising over $60 million
in our October 1999 public offering of shares of our common stock. Further,
the compensation committee considered our performance as a whole in 1999, and
the facts that the CEO did not receive a salary increase in 1999 and was below
the average salary for his position when compared to the salary data and
industry surveys described above. The compensation committee set the CEO's
base salary for 2000 at $302,256. The full board ratified the
9
<PAGE>
compensation committee's determination. In addition, after considering the
criteria relating to awarding stock options, and consistent with the our
general policies, the committee granted options to those employees recommended
by management, and to all executive officers, including the CEO. Under our
Stockholder Value Reward program, the CEO and our other executives were
eligible for a bonus because our adjusted market capitalization for 1999
significantly increased over its adjusted market capitalization in 1998. In
connection with that program, the committee approved a $270,425 bonus for the
CEO.
Deductibility of Certain Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a federal income tax deduction for certain compensation exceeding
$1,000,000 paid to the CEO or any of the other named executive officers,
excluding, among other things, certain performance-based compensation. Through
December 31, 1999, this provision has not affected our tax deductions, and the
compensation committee believes that, at the present time, it is quite
unlikely that the compensation paid to any of our employees 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 Internal Revenue
Code Section 162(m) in the future to the extent consistent with our best
interests.
MEMBERS OF THE COMPENSATION COMMITTEE
Robert J. Glaser
Ann H. Lamont
April 1, 2000
10
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return on
our common stock, based on its market price, with the cumulative total
stockholder return of the Nasdaq National Market-US and the Nasdaq
Pharmaceutical Index. Dividend reinvestment has been assumed. The graph
commences as of November 19, 1996, the date our common stock first started
trading on the Nasdaq National Market.
[GRAPH]
<TABLE>
<CAPTION>
ViroPharma Nasdaq US Nasdaq Pharm.
---------- --------- -------------
<S> <C> <C> <C>
11/19/96 $100.00 $100.00 $100.00
12/31/96 $125.00 $102.38 $106.13
12/31/97 $251.79 $125.60 $109.59
12/31/98 $133.04 $176.56 $140.28
12/31/99 $528.57 $319.66 $260.40
</TABLE>
11
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO STOCK OPTION PLAN
In March 1998, our board unanimously approved an amended and restated stock
option plan. This plan amended and restated our original 1995 stock option
plan. The amended and restated stock option plan was approved by our
stockholders in May 1998. Under this plan, rights to acquire shares of our
common stock may be granted which are either:
. options intended to qualify as incentive stock options, or ISOs, under
Section 422(b) of the Internal Revenue Code; or
. non-qualified stock options, or NSOs.
We can grant stock options under the plan to our employees, directors,
consultants and advisors.
Amendments to the Option Plan
On March 13, 2000, our board of directors adopted an amendment to the option
plan to increase the number of shares of our common stock reserved for
issuance upon the exercise of options granted under the option plan by 750,000
from 2,000,000 to 2,750,000. In the past, our board of directors has increased
shares available under the option plan every two or three years. Beginning
with the March 2000 increase of 750,000 shares, our board will be increasing
the shares available under the option plan on an annual basis, in smaller
amounts approximating the number of shares required for the options that we
anticipate granting over the next year. As we approach commercialization, we
will need to hire additional personnel to build our specialty sales force to
call on emergency medicine, infectious disease and pediatric infectious
disease physicians. We also will need to hire additional personnel to support
our commercialization, manufacturing, quality assurance, preclinical
development and research activities. Incentive stock options are a vital
component of compensation packages that we can offer to attract high-caliber
individuals. Importantly, stock options also serve to ensure that our
employees' overall compensation is tied to increases in stockholder value. Our
board adopted this amendment to ensure that, as we grow over the coming year,
we can meet these objectives and continue to grant stock options to employees
at levels determined appropriate by the compensation committee.
In response to concerns raised by several stockholders in 1998, when our
option plan was last amended, our board of directors also included three
amendments to our option plan designed to limit the board's future flexibility
in administering the option plan. With the amendments to the option plan
recently approved by our board of directors, our option plan now:
. prohibits repricing of outstanding options without the consent of the
stockholders;
. prohibits the grant of any option at an exercise price less than fair
market value of our common stock on the date of grant; and
. requires us to obtain stockholder approval of any amendment to the
option plan that would eliminate our obligation to obtain stockholder
consent to reprice options, or that would allow us to grant options at
an exercise price that is less than the fair market value of our common
stock on the date of grant.
Although we have never repriced our options, or granted options at less than
fair market value, the flexibility to do so under the previous option plan was
of concern to some stockholders. A copy of our option plan, as amended and
restated by our board of directors in the manner described above, can be found
at the end of this proxy statement as Annex A.
As of March 1, 2000, 240,382 shares of our common stock remained available
for the granting of options under our option plan and 1,535,226 shares of our
common stock were reserved for issuance under outstanding, unexercised options
under our option plan. The number of shares subject to our option plan is
subject to adjustment in the case of a stock split, stock dividend,
combination, recapitalization or similar transaction.
12
<PAGE>
As of March 1, 2000, ISOs to purchase 1,351,547 shares of our common stock
were outstanding under our option plan, with exercise prices ranging from $.20
to $72.00. NSOs to purchase 183,679 shares of common stock were outstanding
under our option plan on that date, with exercise prices ranging from $.10 to
$22.50. Outstanding options have expiration dates ranging from December 5,
2004 to February 15, 2010. On April 1, 2000, the last sale price for our
common stock reported on the Nasdaq National Market was $ .
The table below sets forth the number of shares of our common stock
underlying options granted under the stock option plan as of March 1, 2000 to:
(1) the named executive officers who hold options, (2) our current executive
officers as a group, (3) our current nonemployee directors as a group, (4) the
director nominees and (5) our employees, including current officers who are
not executive officers, as a group.
<TABLE>
<CAPTION>
Shares of
Common Stock
Underlying
Name Option
- ---- ------------
<S> <C>
Claude H. Nash.................................................... 160,350
Mark McKinlay..................................................... 143,680
Marc S. Collett................................................... 130,931
Vincent J. Milano................................................. 110,308
Johanna A. Griffin................................................ 81,763
All current executive officers as a group......................... 819,031
All current nonemployee directors as a group...................... 93,334
Robert J. Glaser--director nominee................................ 20,000
David J. Williams--director nominee............................... 20,000
All employees, including all current officers who are not
executive
officers, as a group............................................. 763,703
</TABLE>
Description of Plan
Our stock option plan may be administered by our board of directors or by a
committee of the board. Currently, the compensation committee of the board
administers our option plan. Subject to the provisions of our option plan, the
compensation committee has the authority 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;
. prescribe, amend and rescind rules and regulations relating to the
option plan;
. determine the conditions which must be satisfied in order for an option
to vest and become exercisable;
. accelerate the vesting or exercise date of any option; and
. interpret the option plan or any option agreement.
Our option plan, as amended and restated, provides that the compensation
committee must establish an exercise price for ISOs and NSOs that is not less
than the fair market value per share of our common stock at the date of grant.
Our previous option plan permitted the compensation committee to price NSOs
below market value, provided that the exercise price could not be below the
par value per share of our common stock. We cannot reprice outstanding options
granted under our amended and restated option plan without the consent of our
stockholders. Our previous option plan permitted repricing of options without
stockholder consent.
Each option expires within 10 years of the date of grant. However, if ISOs
are granted to persons owning more than 10% of our voting stock, 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 the ISOs may not exceed five years. The aggregate
number of options which may be granted under the option plan to any one person
is limited to 500,000 shares, subject to proportionate adjustment for changes
in capitalization. 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 compensation committee.
13
<PAGE>
Generally, if an optionee is an employee or director and the optionee's
relationship with us ceases for any reason, other than termination for cause,
death or disability, the optionee may exercise options that are then vested
within the three-month period following the end of our relationship. Options
may terminate or expire sooner, however, by their terms. If the optionee
commences competitive employment within the three-month period, all
unexercised options will terminate immediately. If an optionee is an advisor
or consultant, termination of the relationship with us does not cause
acceleration of the expiration of the option. However, if the advisor or
consultant violates the terms of a non-competition covenant in an agreement
that he or she may have with us, all unexercised options will terminate
immediately.
If an optionee's relationship with us ends 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. However, if our
relationship ends because of a 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 that we refund the exercise
price paid by the optionee.
The plan also has provisions that take effect if we experience a change of
control. As used in the plan, a change of control means:
. the approval of a plan or other arrangement to dissolve or liquidate us;
. the approval of an agreement to sell or otherwise dispose of all or
substantially all of our assets;
. the approval of an agreement to merge or consolidate us with or into
another corporation. A merger or consolidation will not result in a
change of control, however, if our stockholders will own at least 50%,
on a fully diluted basis, of the voting capital stock of the surviving
corporation immediately after the merger or consolidation, in the same
proportion as our stockholders' ownership of our stock immediately
before the merger or consolidation;
. the acquisition by a third party of voting control over more than 50% of
the outstanding shares of our voting capital stock, on a fully diluted
basis. This will not result in a change of control, however, if:
. the transaction results from our original issuance of stock; and
. the transaction was approved by at least a majority of our directors
who shall have been either members of the board on the date that
this plan was originally adopted by the board or members of the
board for at least 12 months prior to the date that the transaction
is approved; or
. a significant change in the composition of the board of directors
occurs, such that a majority of the board shall have been board members
for less than 12 months. This change in board composition will not
result in a change of control, however, if the nomination for election
of each director who was not a director at the beginning of that 12
month period was approved by a vote of at least 60% of the directors who
are both still in office and who were directors at the beginning of that
twelve 12 month period; or
. the board determines that the events described in the fourth item above
are reasonably likely to occur.
If a change of control occurs and our option plan is not continued by a
successor corporation, and if our optionees do not receive equivalent options
for common stock in a successor corporation, then our option plan will be
terminated. In this case, options previously granted to employees and board
members that are not vested will vest as follows:
. if an employee or board member has been employed by us, or has served on
our board, for at least two years as of the change of control, then all
of his or her unvested options will be fully vested; or
14
<PAGE>
. if an employee or board member has been employed by us, or has served on
our board, for less than two years as of the change of control, then 50%
of all of his or her unvested options will be fully vested, and the
remaining portion of such options will lapse and be forfeited.
If a change of control occurs and our option plan is continued by a
successor corporation, or if our optionees receive substituted options for
common stock in a successor corporation, then options previously granted to
employees and board members shall vest as follows:
. if the employee is a member of our management team or is a board member
at the time of the change of control, and he or she is not offered
substantially equivalent employment with the successor corporation, both
in terms of duties and compensation, then any unvested options will
become fully vested and exercisable in the manner described above (i.e.,
all will vest if the person was employed by us for more than two years;
50% will vest if the person was employed by us for less than two years);
and
. if any person, without regard to such optionee's title, is offered
substantially equivalent employment with the successor corporation, then
options will not be subject to accelerated vesting. If that person's
employment with the successor corporation is terminated during the six
month period following the change of control, however, then any unvested
substituted options will be fully vested at the date of termination in
the manner described above (i.e., all will vest if the person was
employed by us for more than two years; 50% will vest if the person was
employed by us for less than two years).
The option exercise price must be paid in full at the time the notice of
exercise of the option is delivered to us and must be tendered in cash, or by
personal or certified check. The compensation committee has the discretion to
permit an optionee to exercise by delivering a combination of shares and cash.
The board may suspend, amend or terminate the option plan. With the amendments
to the option plan recently approved by our board of director, however,
stockholder approval must be obtained for amendments which would:
. increase the number of shares which are to be reserved for the issuance
of options under our option plan;
. permit the granting of options to a class of employees other than those
presently permitted to receive options under our option plan;
. permit repricing of options; or
. permit us to grant options at less than the fair market value of our
common stock on the date of grant.
The following is a brief description of the federal income tax consequences
of stock options which may be granted under our option plan under present tax
laws. The following description does not address all of the tax consequences
that may be applicable to us or to any particular optionee. In addition, the
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 us upon the grant of an ISO. Upon a sale of the shares
obtained from the exercise of an ISO, 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 us, if the following holding period requirement is
satisfied:
. the optionee does not dispose of the shares within two years from the
date the ISO was granted; or
. the optionee does not dispose of the shares within one year from the
date the shares were issued to the optionee.
15
<PAGE>
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 we will be entitled to a corresponding deduction, in an
amount equal to the lesser of:
. the excess of the fair market value of the shares on the date of
exercise over the option price of the shares; or
. 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 to us 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 we generally will be entitled to a federal
income tax deduction of the same amount.
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 BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO OUR OPTION PLAN AS DESCRIBED IN PROPOSAL NO. 2.
16
<PAGE>
PROPOSAL NO. 3
AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK ISSUABLE BY US
Our board of directors has unanimously approved an amendment to our amended
and restated certificate of incorporation which would increase the authorized
number of shares of common stock, par value $.002 per share, by 73,000,000
shares from 27,000,000 shares to 100,000,000 shares. The authorized number of
shares of our preferred stock would remain 5,000,000 shares. Accordingly, the
aggregate number of shares of capital stock, including both common stock and
preferred stock, that would be authorized for issuance after giving effect to
the proposed amendment would increase from 32,000,000 shares to 105,000,000
shares.
As noted above, as of April 1, 2000 there were shares of our common
stock outstanding. At that date, we had shares of common stock available
for issuance after giving effect to:
. 2,000,000 shares reserved for issuance under our stock option plan;
. 2,600,000 shares reserved for issuance upon conversion of our series A
convertible participating preferred stock;
. 200,000 shares reserved for issuance upon conversion of the series A
junior convertible preferred stock that have been reserved for issuance
under our Stockholders Rights Plan; and
. 595,000 shares reserved for issuance upon the exercise of outstanding
warrants.
The additional common stock to be authorized by adoption of the proposed
amendment to our amended and restated certificate of incorporation would have
rights identical to our currently outstanding common stock. Approval of the
proposed amendment by our stockholders and issuance of the common stock would
not affect the rights of the holders of our currently outstanding common
stock, except for effects incidental to increasing the number of shares of our
common stock outstanding, including a dilutive effect on present stockholders
if and when the additional shares were issued. In addition, the increase in
the authorized but unissued common stock could have the effect of making it
more difficult for a third party to acquire, or discouraging a third party
from acquiring, a majority of our outstanding voting stock.
The proposed increase in the number of shares of our authorized common stock
will ensure that shares will be available, if needed, for issuance in
connection with acquisitions, stock splits, stock dividends or other corporate
purposes. Our board of directors believes that the availability of the
additional shares for such purposes without delay would be beneficial to us.
No further action or authorization by our stockholders would be necessary
prior to the issuance of the additional shares of common stock unless required
by applicable law or regulatory agencies or by the rules of any stock exchange
on which our securities may then be listed. If the proposed amendment is
adopted, it will become effective upon filing a certificate of amendment to
our amended and restated certificate of incorporation with the secretary of
state of the state of Delaware. The text of the proposed amendment to the
Amended and Restated Certificate of Incorporation is attached to this Proxy
Statement as Annex B.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION INCREASING
THE NUMBER OF SHARES OF COMMON STOCK THAT WE ARE AUTHORIZED TO ISSUE AS
DESCRIBED IN PROPOSAL NO. 3.
17
<PAGE>
PROPOSAL NO. 4
ADOPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
On March 13, 2000, our board of directors adopted an employee stock purchase
plan. The stock purchase plan is intended to be qualified under Internal
Revenue Code Section 423. If a plan is qualified under Section 423, our
employees who participate in the plan enjoy certain tax advantages, as
described below. In order for the plan to be qualified, our stockholders must
approve the plan.
The stock purchase plan allows our employees to purchase our common stock at
a discount, without being subject to tax until they sell the stock, and
without having to pay any brokerage commissions with respect to the purchases.
We plan to implement the stock purchase plan on July 1, 2000, provided that we
receive stockholder approval.
The purpose of the stock purchase plan is to encourage the purchase of
common stock by our employees, to provide employees with a personal stake in
ViroPharma and to help us retain our employees. In addition, our board can
approve the participation of any subsidiaries. Currently, we have no
subsidiaries and only employees of ViroPharma will participate in the stock
purchase plan.
The stock purchase plan will be administered by our board of directors or by
a committee of the board appointed by the board of directors.
Description of the Stock Purchase Plan
The stock purchase plan provides employees with the right to purchase shares
of our common stock through payroll deduction. A total of 300,000 shares of
our common stock are available for purchase under the stock purchase plan,
subject to adjustment in the number and price of shares available for purchase
in the event the outstanding shares of common stock are increased or decreased
through stock dividends, recapitalizations, reorganizations or similar
changes.
The stock purchase plan is administered by our board of directors, which may
delegate responsibility for administration to a committee of the board.
Subject to the terms of the stock purchase plan, the board or the committee
has authority to interpret the stock purchase plan, prescribe, amend and
rescind rules and regulations relating to it and make all other determinations
deemed necessary or advisable in administering the stock purchase plan.
A full-time employee is eligible to participate in the stock purchase plan
if he or she is employed on the first day of an offering period. A part-time
employee is eligible to participate in the stock purchase plan if, as of the
last day of the month immediately preceding the effective date of an election
to purchase our common stock under the stock purchase plan, he or she has been
employed by us on a part-time basis for at least 24 consecutive months. An
employee is considered to be a part-time employee if the employee is scheduled
to work at least 20 hours per week. As of March 1, 2000 approximately 110
employees, including our Chief Executive Officer and our other executive
officers, were eligible to participate in the stock purchase plan.
Any employee who, after purchasing our common stock under the stock purchase
plan, would own 5% or more of the total combined voting power or value of all
classes of our stock or any subsidiary corporation is not eligible to
participate. Ownership of stock is determined in accordance with the
provisions of Section 424(d) of the Internal Revenue Code. In addition, an
employee is not permitted to purchase stock worth more than $25,000 in fair
market value for each calendar year.
Stock will be available to be purchased every six months. Eligible employees
may elect to participate in the stock purchase plan during an offering which
starts on each January 1 and July 1 and ends on each June 30 and December 31,
respectively. Shares of common stock will be deemed to have been purchased on
June 30 or December 31, as applicable. The purchase price per share will be 85
percent of the lesser of:
. the fair market value per share of our common stock on January 1 or July
1, as applicable; or
18
<PAGE>
. the fair market value per share of our common stock on June 30 or
December 31, as applicable.
If any of these dates is not a trading day, then fair market value will be
determined on the next trading day after such date.
An eligible employee who wishes to participate in the stock purchase plan
must file an election form with the board or committee at least 15 days before
the applicable January 1 or July 1. Each participant will have payroll
deductions made from his or her compensation on each regular payday during the
time he or she is a participant in the stock purchase plan. All payroll
deductions will be credited to the participant's account under the stock
purchase plan. A participant who is on an approved leave of absence may
authorize continuing payroll deductions.
If the total number of shares of common stock for which purchase rights are
exercised at the end of a six-month offering period exceeds the maximum number
of shares of common stock available, the board or committee will make a pro
rata allocation of shares available for delivery and distribution. The
unapplied account balances will be credited to participants' accounts for the
next succeeding offering or, at the participant's election, returned to the
participant, without interest, as soon as practicable following the end of the
offering period.
A participant may discontinue his or her participation in the stock purchase
plan at any time, but no other change can be made during an offering period. A
participant may change the amount of payroll deductions for subsequent
offerings by giving written notice of such change to the board or committee on
or before the 15th day of the month immediately preceding the beginning of an
offering period.
A participant may elect to withdraw all, but not less than all, of the
balance credited to the participant's account by providing a termination form
to the board or the committee at any time before the end of the offering
period. All amounts credited to such participant's account shall be paid as
soon as practicable following receipt of the participant's termination form,
and no further payroll deductions will be made with respect to the
participant.
If a participant's employment terminates for any reason other than death,
all amounts credited to such participant's account will be returned to the
participant. If a participant's employment terminates due to death or the
participant dies after termination of employment but before the participant's
account has been returned, all amounts credited to such participant's account
will be returned to the participant's successor-in-interest. A participant who
is on an approved leave of absence will remain eligible to participate in the
stock purchase plan for the first 90 days of such leave of absence. If the
participant has not returned to regular non-temporary employment by the close
of business on the 90th day of such leave of absence, he or she will be
considered to have terminated employment for purposes of the stock purchase
plan.
All funds held or received by us under the stock purchase plan may be used
for any corporate purpose until applied to the purchase of shares of our
common stock or refunded to employees and will not be segregated from our
general assets. Shares of our common stock purchased under the stock purchase
plan will be issued from our authorized but unissued shares. We will pay all
fees and expenses incurred, excluding individual Federal, state, local or
other taxes, in connection with the stock purchase plan.
An employee's rights under the stock purchase plan belong to the employee
alone and may not be transferred or assigned to any other person during the
employee's lifetime.
A participant may not transfer the shares purchased pursuant to the stock
purchase plan for the nine-month period commencing on the date the shares are
purchased. In order to ensure that the transfer restrictions are adhered to,
we will hold the shares in escrow for the nine-month restriction period. The
restriction period may be waived if the participant makes a written request,
and the board or committee determines that the participant
19
<PAGE>
has suffered an unforeseeable financial emergency. An unforeseeable financial
emergency is an unexpected need for cash arising from illness, casualty loss,
sudden financial reversal, or other unforeseeable occurrence. If the board or
committee determines that a participant has incurred an unforeseeable
financial emergency, it shall release that number of shares from escrow the
sale of which will generate an amount necessary to meet the financial
emergency. In addition, the board or committee may waive all or part of the
restriction period on a uniform basis. After the shares of common stock have
been issued under the stock purchase plan and the restriction period has
expired, such shares may be assigned or transferred the same as any other
shares.
The stock purchase plan is not qualified under Section 401(a) of the
Internal Revenue Code. We generally will not be entitled to a deduction with
respect to stock purchased under the stock purchase plan, unless the stock is
disposed of less than one year after it is purchased by the employee, or less
than two years after the start of the offering period pursuant to which the
stock was purchased.
Generally, no tax consequences arise at the time the participant purchases
shares of common stock. Upon a disposition of shares, the participant will
receive compensation taxable as ordinary income for the taxable year in which
the disposition occurs in an amount equal to the lesser of:
. the excess of the purchase price over the fair market value of the
shares at the beginning of the offering period, or
. the excess over the purchase price of (a) the amount actually received
for the shares if sold or exchanged or (b) the fair market value of the
shares on the date of any other termination of his or her ownership
(such as by gift).
The amount of such ordinary income is then added to the participant's basis
in his shares for purposes of determining capital gain or loss. This tax
treatment only applies if the following holding period requirement is
satisfied:
. the participant does not dispose of the shares for at least one year
after the date of purchase, and
. the participant does not dispose of the shares for at least two years
after the beginning of the offering period during which the shares were
purchased.
If a participant disposes of shares of common stock purchased under the
stock purchase plan before the holding period is satisfied, he or she will
receive compensation taxable as ordinary income in the amount of the
difference between the amount paid for the shares and the fair market value of
the shares at the time of purchase. If the shares are sold or exchanged, the
amount of such ordinary income is added to the participant's basis in his
shares for purposes of determining capital gain or loss.
If a participant dies before disposing of the shares purchased under the
stock purchase plan, he or she will be deemed to have realized compensation
income taxable as ordinary income in the taxable year closing with his or her
death in an amount equal to the lesser of:
. the excess of the purchase price over the fair market value of the
shares at the beginning of the offering period, or
. the excess over the purchase price of the fair market value of the
shares on the date of death.
he or she is deemed not to have realized any capital gain or loss because of
death.
The board or the committee has the right to amend, modify or terminate the
stock purchase plan at any time without notice, provided that upon any
termination, all shares or unapplied payroll deductions will be distributed to
participants, and provided further, that no amendment will affect the right of
a participant to receive his or her proportionate interest in the shares or
unapplied payroll deductions. Upon any amendment of the stock purchase plan,
stockholder approval will be obtained if required by law.
20
<PAGE>
The above description is a partial summary of material provisions of our
stock purchase plan. This summary is qualified in its entirety by reference to
the full text of the plan which appears as Annex C attached to this proxy
statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF OUR EMPLOYEE
STOCK PURCHASE PLAN AS DESCRIBED IN THIS PROPOSAL NO. 4
21
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP has served as our independent certified public accountants since
1995. KPMG LLP has been selected to continue as our independent certified
public accountants for the current year. A representative of that firm is
expected to be present at the annual meeting, will have the opportunity to
make a statement if he or she desires to do so and will be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS--FOR THE 2001 ANNUAL MEETING
We intend to mail next year's proxy statement to our stockholders on or
about April 15, 2001. Applicable law requires any stockholder proposal
intended to be presented at our 2001 annual meeting of stockholders to be
received by us at our office in Exton, Pennsylvania on or before December 15,
2000 in order to be considered for inclusion in our proxy statement and form
of proxy for that annual meeting.
On May 21, 1998, the Securities and Exchange Commission adopted an amendment
to Rule 14a-4, issued under the Securities Exchange Act of 1934. The amendment
to Rule 14a-4(c)(1) governs our use of discretionary proxy voting authority
for a stockholder proposal which the stockholder has not sought to include in
our proxy statement. The amendment provides that if a proponent of a proposal
fails to notify us 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 our 2001 annual meeting of stockholders, if we are not
provided notice of a stockholder proposal, which the stockholder has not
previously sought to include in our proxy statement, by March 1, 2001, the
management proxies will be allowed to use their discretionary authority.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our
directors, certain of our officers and persons who own more than 10% of our
common stock, file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of such common stock. These
directors, officers and greater than 10% stockholders are required by
regulation to furnish us with copies of all Section 16(a) forms which they
file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were
required, our directors, officers and greater than 10% stockholders complied
with all fiscal year 1999 Section 16(a) filing requirements applicable to
them, other than one report that was filed late by Ms. Ann Lamont.
OTHER MATTERS
Our board of directors 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 other matters properly do come before the meeting, however, it
is the intention of the persons named as proxy agents in the enclosed proxy
card to vote on such matters as they deem appropriate.
The costs of preparing, assembling, mailing and soliciting the proxies will
be borne by us. Proxies may be solicited, without extra compensation, by our
officers and employees by mail, telephone, facsimile, personal interviews and
other methods of communication.
Thomas F. Doyle
Vice President, General Counsel and
Secretary
April 10, 2000
22
<PAGE>
Annex A
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 foregoing,
A-1
<PAGE>
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 was originally 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 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.
A-2
<PAGE>
(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 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.
A-3
<PAGE>
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 Section 7 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 2,750,000
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 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.
A-4
<PAGE>
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 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. Neither
the Board nor the Committee may reprice any outstanding Options.
(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
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.
A-5
<PAGE>
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.
(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.
A-6
<PAGE>
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.
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.
A-7
<PAGE>
(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, including the
individual limit specified in Section 6, 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.
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
A-8
<PAGE>
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.
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,
A-9
<PAGE>
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 invested 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,
taking into account service performed with the Company and the successor
corporation and all related employers for purpose of vesting.
(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.
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.
A-10
<PAGE>
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 automatically shall be converted into non-qualified stock options
on the first anniversary of the date of the adoption of such amendment.
(iii) Section 7(b) of the Plan may not be amended to permit the grant of
Options with an exercise price below Fair Market Value or to permit
outstanding Options to be repriced unless such amendment is approved by 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).
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.
A-11
<PAGE>
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 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
A-12
<PAGE>
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 15th day of March, 2000.
[CORPORATE SEAL]
VIROPHARMA INCORPORATED
Attest: /s/ Thomas F. Doyle By: /s/ Claude H. Nash
-------------------------- -------------------------
A-13
<PAGE>
Annex B
PROPOSED AMENDMENT TO AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION
Subject to the approval of the stockholders of the Company, the Amended and
Restated Certificate of Incorporation shall be amended by amending and
restating Article FOURTH, Paragraph A thereof in its entirety to read as
follows:
"FOURTH: A. The Corporation is authorized to issue two (2) classes of
capital stock, to be designated, respectively, Preferred Stock ("Preferred
Stock") and Common Stock ("Common Stock"). The total number of shares of
capital stock which the Corporation is authorized to issue is One Hundred
Five Million (105,000,000). The total number of shares of Common Stock
which the Corporation shall have the authority to issue is One Hundred
Million (100,000,000). The total number of shares of Preferred Stock which
the Corporation shall have the authority to issue is Five Million
(5,000,000). The Preferred Stock shall have a par value of $.001 per share,
and the Common Stock shall have a par value of $.002 per share."
B-1
<PAGE>
Annex C
VIROPHARMA INCORPORATED
2000 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The ViroPharma Incorporated 2000 Employee Stock Purchase Plan (the
"Plan") is intended to encourage and facilitate the purchase of Shares of the
Common Stock of ViroPharma Incorporated (the "Company") by employees of the
Company and any Participating Companies, thereby providing employees with a
personal stake in the Company and a long range inducement to remain in the
employ of the Company and Participating Companies. It is the intention of the
Company that the Plan qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Code.
2. Definitions.
(a) "Account" means a bookkeeping account established by the Committee on
behalf of a Participant to hold Payroll Deductions.
(b) "Approved Leave of Absence" means a leave of absence that has been
approved by the applicable Participating Company in such a manner as the Board
may determine from time to time.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Committee appointed pursuant to section 14 of the
Plan.
(f) "Company" means ViroPharma Incorporated.
(g) "Compensation" means an Employee's cash compensation payable for
services to a Participating Company during an Offering Period.
(h) "Election Form" means the form acceptable to the Committee which an
Employee shall use to make an election to purchase Shares through Payroll
Deductions pursuant to the Plan.
(i) "Eligible Employee" means an Employee who meets the requirements for
eligibility under section 3 of the Plan.
(j) "Employee" means a person who is an employee of a Participating Company.
(k) "Fair Market Value" means the closing price per Share on the principal
national securities exchange on which the shares are listed or admitted to
trading or, if not listed or traded on any such exchange, on the National
Market System of the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if not listed or traded on any such exchange
or system, the fair market value as reasonably determined by the Board, which
determination shall be conclusive.
(l) "Five Percent Owner" means an Employee who, with respect to a
Participating Company, is described in section 423(b) of the Code.
(m) "Offering" means an offering of Shares to Eligible Employees pursuant to
the Plan.
(n) "Offering Commencement Date" means January 1 and July 1 of each year on
or after adoption of the Plan by the Board.
C-1
<PAGE>
(o) "Offering Period" means the period extending from an Offering
Commencement Date through the following Offering Termination Date.
(p) "Offering Termination Date" means the last day of each June and December
following an Offering Commencement Date.
(q) "Option Price" means 85 percent of the lesser of: (1) the Fair Market
Value per Share on the Offering Commencement Date, or if such date is not a
trading day, then on the next trading day thereafter or (2) the Fair Market
Value per Share on the Offering Termination Date, or if such date is not a
trading day, then on the next trading day thereafter.
(r) "Participant" means an Employee who meets the requirements for
eligibility under section 3 of the Plan and who has timely delivered an
Election Form to the Committee.
(s) "Participating Company" means, as provided in Schedule A, the Company
and subsidiaries of the Company, within the meaning of section 424(f) of the
Code, if any, that are approved by the Board from time to time and whose
employees are designated as Employees by the Board.
(t) "Payroll Deductions" means amounts withheld from a Participant's
Compensation pursuant to the Plan, as described in section 5 of the Plan.
(u) "Plan" means ViroPharma Incorporated 2000 Employee Stock Purchase Plan,
as set forth in this document, and as may be amended from time to time.
(v) "Plan Termination Date" means the earlier of:
(1) The Offering Termination Date for the Offering in which the maximum
number of Shares specified in section 5 of the Plan have been issued
pursuant to the Plan; or
(2) The date as of which the Board chooses to terminate the Plan as
provided in section 15 of the Plan.
(w) "Shares" means shares of common stock of the Company, $.002 par value
per Share.
(x) "Successor-in-Interest" means the Participant's executor or
administrator, or such other person or entity to whom the Participant's rights
under the Plan shall have passed by will or the laws of descent and
distribution.
(y) "Termination Form" means the form acceptable to the Committee which an
Employee shall use to withdraw from an Offering pursuant to section 8 of the
Plan.
3. Eligibility and Participation.
(a) Initial Eligibility. Except as provided in section 3(b) of the Plan,
each individual who is an Employee on an Offering Commencement Date shall be
eligible to participate in the Plan with respect to the Offering that
commences on that date.
(b) Ineligibility. An Employee shall not be eligible to participate in the
Plan if such Employee:
(1) Is a Five Percent Owner;
(2) Has not customarily worked more than 20 hours per week during a 24-
consecutive-month period ending on the last day of the month immediately
preceding the effective date of an election to purchase Shares pursuant to
the Plan; or
(3) Is restricted from participating under section 3(d) of the Plan.
C-2
<PAGE>
(c) Leave of Absence. An Employee on an Approved Leave of Absence shall be
eligible to participate in the Plan, subject to the provisions of sections
5(d) and 8(d) of the Plan. An Approved Leave of Absence shall be considered
active employment for purposes of sections 3(b)(2) and 3(b)(3) of the Plan.
(d) Restrictions on Participation. Notwithstanding any provisions of the
Plan to the contrary, no Employee shall be granted an option to participate in
the Plan if:
(1) Immediately after the grant, such Employee would be a Five Percent
Owner; or
(2) Such option would permit such Employee's rights to purchase stock
under all employee stock purchase plans of the Participating Companies
which meet the requirements of section 423(b) of the Code to accrue at a
rate which exceeds $25,000 in fair market value (as determined pursuant to
section 423(b)(8) of the Code) for each calendar year in which such option
is outstanding.
(e) Commencement of Participation. An Employee who meets the eligibility
requirements of sections 3(a) and 3(b) of the Plan and whose participation is
not restricted under section 3(d) of the Plan shall become a Participant by
completing an Election Form and filing it with the Committee on or before the
15th day of month immediately preceding the Offering Commencement Date for the
first Offering to which such Election Form applies. Payroll Deductions for a
Participant shall commence on the applicable Offering Commencement Date when
his or her authorization for Payroll Deductions becomes effective, and shall
end on the Plan Termination Date, unless sooner terminated by the Participant
pursuant to section 8 of the Plan.
4. Shares Per Offering. The Plan shall be implemented by a series of Offerings
that shall terminate on the Plan Termination Date. Offerings shall be made
with respect to Compensation payable for each Offering Period occurring on or
after adoption of the Plan by the Board and ending with the Plan Termination
Date. Shares available for any Offering shall be the difference between the
maximum number of Shares that may be issued under the Plan, as determined
pursuant to section 10(a) of the Plan, for all of the Offerings, less the
actual number of Shares purchased by Participants pursuant to prior Offerings.
If the total number of Shares for which options are exercised on any Offering
Termination Date exceeds the maximum number of Shares available, the Committee
shall make a pro rata allocation of Shares available for delivery and
distribution in as nearly a uniform manner as practicable, and as it shall
determine to be fair and equitable, and the unapplied Account balances shall
be returned to Participants as soon as practicable following the Offering
Termination Date.
5. Payroll Deductions.
(a) Amount of Payroll Deductions. An Eligible Employee who wishes to
participate in the Plan shall file an Election Form with the Committee at
least 15 days before the Offering Commencement Date for the first Offering for
which such Election Form is effective on which he or she may elect to have
Payroll Deductions of such amounts designated by the Committee on the Election
Form from time to time made from his or her Compensation on each regular
payday during the time he or she is a Participant in the Plan, provided that
the rules established by the Committee shall be consistent with section
423(b)(5) of the Code.
(b) Participants' Accounts. All Payroll Deductions with respect to a
Participant pursuant to section 5(a) of the Plan shall be credited to the
Participant's Account under the Plan.
(c) Changes in Payroll Deductions. A Participant may discontinue his
participation in the Plan as provided in section 8(a) of the Plan, but no
other change can be made during an Offering, including, but not limited to,
changes in the amount of Payroll Deductions for such Offering. A Participant
may change the amount of Payroll Deductions for subsequent Offerings by giving
written notice of such change to the Committee on or before the 15th day of
the month immediately preceding the Offering Commencement Date for the
Offering for which such change is effective.
C-3
<PAGE>
(d) Leave of Absence. A Participant who goes on an Approved Leave of Absence
before the Offering Termination Date after having filed an Election Form with
respect to such Offering may:
(1) Withdraw the balance credited to his or her Account pursuant to
section 8(b) of the Plan;
(2) Discontinue contributions to the Plan but remain a Participant in the
Plan through the earlier of (i) the Offering Termination Date or (ii) the
close of business on the 90th day of such Approved Leave of Absence unless
such Employee shall have returned to regular non-temporary employment
before the close of business on such 90th day;
(3) Remain a Participant in the Plan during such Approved Leave of
Absence through the earlier of (i) the Offering Termination Date or (ii)
the close of business on the 90th day of such Approved Leave of Absence
unless such Employee shall have returned to regular non-temporary
employment before the close of business on such 90th day, and continue the
authorization for the Participating Company to make Payroll Deductions for
each payroll period out of continuing payments to such Participant, if any.
6. Granting of Options. On each Offering Termination Date, each Participant
shall be deemed to have been granted an option to purchase a minimum of one
(1) Share and a maximum number of Shares that shall be a number of whole
Shares equal to the quotient obtained by dividing the balance credited to the
Participant's Account as of the Offering Termination Date, by the Option
Price.
7. Exercise of Options.
(a) Automatic Exercise. With respect to each Offering, a Participant's option
for the purchase of Shares granted pursuant to section 6 of the Plan shall be
deemed to have been exercised automatically on the Offering Termination Date
applicable to such Offering.
(b) Fractional Shares and Minimum Number of Shares. Fractional Shares shall
not be issued under the Plan. Amounts credited to an Account remaining after
the application of such Account to the exercise of options for a minimum of
one (1) full Share shall be credited to the Participant's Account for the next
succeeding Offering, or, at the Participant's election, returned to the
Participant as soon as practicable following the Offering Termination Date,
without interest.
(c) Transferability of Option. No option granted to a Participant pursuant
to the Plan shall be transferable other than by will or by the laws of descent
and distribution, and no such option shall be exercisable during the
Participant's lifetime other than by the Participant.
(d) Delivery of Certificates for Shares. The Company shall deliver
certificates for Shares acquired on the exercise of options during an Offering
Period as soon as practicable following the Offering Termination Date.
(e) Restriction on Transfer of Shares.
(1) The Shares acquired upon exercise of the options shall not be
transferable for the nine-month period commencing on the date of exercise.
In order to ensure that the transfer restriction is adhered to, the Company
shall hold such Shares in escrow for the duration of the restriction
period. Except as otherwise provided by this Section 7(e), during the
restriction period, the Participant shall have all the rights accorded a
shareholder of the Company.
(2) Notwithstanding the provisions of Section 7(e)(1):
(A) If the Committee, upon written request of a Participant,
determines, in its sole discretion, that the Participant has suffered
an unforeseeable financial emergency, the Company shall, as soon as
practicable following such determination, release that number of Shares
from escrow the sale of which will generate an amount necessary to meet
the emergency. For purposes of this Plan, an unforeseeable financial
emergency is an unexpected need for cash arising from an illness,
casualty loss, sudden financial reversal, or other such unforeseeable
occurrence.
(B) The Committee may, in its sole discretion, waive the restriction
period in whole or in part, provided that any such waiver shall be
applied uniformly to all Shares to which such restrictions apply.
C-4
<PAGE>
8. Withdrawals.
(a) Withdrawal of Account. A Participant may elect to withdraw the balance
credited to the Participant's Account by providing a Termination Form to the
Committee at any time before the Offering Termination Date applicable to any
Offering.
(b) Amount of Withdrawal. A Participant may withdraw all, but not less than
all, of the amounts credited to the Participant's Account by giving a
Termination Form to the Committee. All amounts credited to such Participant's
Account shall be paid as soon as practicable following the Committee's receipt
of the Participant's Termination Form, and no further Payroll Deductions will
be made with respect to the Participant.
(c) Termination of Employment. Upon termination of a Participant's
employment for any reason other than death, including termination due to
disability or continuation of a leave of absence beyond 90 days, all amounts
credited to such Participant's Account shall be returned to the Participant.
In the event of a Participant's (1) termination of employment due to death or
(2) death after termination of employment but before the Participant's Account
has been returned, all amounts credited to such Participant's Account shall be
returned to the Participant's Successor-in-Interest.
(d) Leave of Absence. A Participant who is on an Approved Leave of Absence
shall, subject to the Participant's election pursuant to section 5(d) of the
Plan, continue to be a Participant in the Plan until the earlier of (i) the
end of the first Offering ending after commencement of such Approved Leave of
Absence or (ii) the close of business on the 90th day of such Approved Leave
of Absence unless such Employee shall have returned to regular non-temporary
employment before the close of business on such 90th day. A Participant who
has been on an Approved Leave of Absence for more than 90 days shall not be
eligible to participate in any Offering that begins on or after the
commencement of such Approved Leave of Absence so long as such leave of
absence continues.
9. Interest. No interest shall be paid or allowed with respect to amounts paid
into the Plan or credited to any Participant's Account.
10. Shares.
(a) Maximum Number of Shares. No more than 300,000 Shares may be issued
under the Plan. Such Shares shall be authorized but unissued shares of the
Company. The number of Shares available for any Offering and all Offerings
shall be adjusted if the number of outstanding Shares of the Company is
increased or reduced by split-up, reclassification, stock dividend or the
like. All Shares issued pursuant to the Plan shall be validly issued, fully
paid and nonassessable.
(b) Participant's Interest in Shares. A Participant shall have no interest
in Shares subject to an option until such option has been exercised.
(c) Registration of Shares. Shares to be delivered to a Participant under
the Plan shall be registered in the name of the Participant.
(d) Restrictions on Exercise. The Board may, in its discretion, require as
conditions to the exercise of any option such conditions as it may deem
necessary to assure that the exercise of options is in compliance with
applicable securities laws.
11. Expenses. The Participating Companies shall pay all fees and expenses
incurred (excluding individual Federal, state, local or other taxes) in
connection with the Plan. No charge or deduction for any such expenses will be
made to a Participant upon the termination of his or her participation under
the Plan or upon the distribution of certificates representing Shares
purchased with his or her contributions.
C-5
<PAGE>
12. Taxes. The Participating Companies shall have the right to withhold from
each Participant's Compensation an amount equal to all Federal, state, city or
other taxes as the Participating Companies shall determine are required to be
withheld by them. In connection with such withholding, the Participating
Companies may make any such arrangements as are consistent with the Plan as it
may deem appropriate, including the right to withhold from Compensation paid
to a Participant other than in connection with the Plan and the right to
withdraw such amount from the amount standing to the credit of the
Participant's Account.
13. Plan and Contributions Not to Affect Employment. The Plan shall not confer
upon any Eligible Employee any right to continue in the employ of the
Participating Companies.
14. Administration. The Plan shall be administered by the Board, which may
delegate responsibility for such administration to a committee of the Board
(the "Committee"). If the Board fails to appoint the Committee, any references
in the Plan to the Committee shall be treated as references to the Board. The
Board, or the Committee, shall have authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, and to make
all other determinations deemed necessary or advisable in administering the
Plan, with or without the advice of counsel. The determinations of the Board
or the Committee on the matters referred to in this paragraph shall be
conclusive and binding upon all persons in interest.
15. Amendment and Termination. The Board may terminate the Plan at any time
and may amend the Plan from time to time in any respect; provided, however,
that upon any termination of the Plan, all Shares or Payroll Deductions (to
the extent not yet applied to the purchase of Shares) under the Plan shall be
distributed to the Participants, provided further, that no amendment to the
Plan shall affect the right of a Participant to receive his or her
proportionate interest in the Shares or his or her Payroll Deductions (to the
extent not yet applied to the purchase of Shares) under the Plan, and provided
further that the Company may seek shareholder approval of an amendment to the
Plan if such approval is determined to be required by or advisable under the
regulations of the Securities or Exchange Commission or the Internal Revenue
Service, the rules of any stock exchange or system on which the Shares are
listed or other applicable law or regulation.
16. Effective Date. The Plan shall be effective on July 1, 2000, subject to
approval by the Company's shareholders within one year of the adoption of the
Plan by the Board. Any option granted before the approval of the Plan by the
Company's shareholders shall be expressly conditioned upon such approval, and
no Share certificates shall be issued until such approval. If shareholder
approval is not received within 12 months before or after the date of the
initial adoption of the Plan by the Board, no Share certificates shall be
issued with respect to any automatic exercises which may have occurred
pursuant to section 7 of the Plan, and all amounts credited to Participants'
Accounts with respect to such Shares shall be returned to Participants as soon
as administratively practicable.
17. Government and Other Regulations.
(a) In General. The purchase of Shares under the Plan shall be subject to
all applicable laws, rules and regulations, and to such approvals by any
governmental agencies as may be required.
(b) Securities Law. The Committee shall have the power to make each grant
under the Plan subject to such conditions as it deems necessary or appropriate
to comply with the then-existing requirements of the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended, including
Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission.
18. Non-Alienation. No Participant shall be permitted to assign, alienate,
sell, transfer, pledge or otherwise encumber his interest under the Plan prior
to the distribution to him of Share certificates. Any attempt at assignment,
alienation, sale, transfer, pledge or other encumbrance shall be void and of
no effect.
19. Notices. Any notice required or permitted hereunder shall be sufficiently
given only if delivered personally, telecopied, or sent by first class mail,
postage prepaid, and addressed:
C-6
<PAGE>
If to the Company:
ViroPharma Incorporated
405 Eagleview Boulevard
Exton, PA 19341
Fax: (610) 458-7380
Attention: Employee Stock Purchase Plan Committee
or any other address provided pursuant to written notice.
If to the Participant:
At the address on file with the Company from time to time, or to such
other address as either party may hereafter designate in writing by
notice similarly given by one party to the other.
20. Successors. The Plan shall be binding upon and inure to the benefit of any
successor, successors or assigns of the Company.
21. Severability. If any part of this Plan shall be determined to be invalid or
void in any respect, such determination shall not affect, impair, invalidate or
nullify the remaining provisions of this Plan which shall continue in full
force and effect.
22. Acceptance. The election by any Eligible Employee to participate in this
Plan constitutes his or her acceptance of the terms of the Plan and his or her
agreement to be bound hereby.
23. Applicable Law. This Plan shall be construed in accordance with the law of
the Commonwealth of Pennsylvania, to the extent not preempted by applicable
Federal law.
IN WITNESS WHEREOF, the foregoing Plan is adopted this 15th day of March,
2000.
[CORPORATE SEAL] VIROPHARMA INCORPORATED
/s/ Thomas F. Doyle /s/ Claude H. Nash
Attest: _____________________________ By: _________________________________
C-7
<PAGE>
Schedule A
Participating Companies
ViroPharma Incorporated
C-8
<PAGE>
VIROPHARMA INCORPORATED
2000 Annual Meeting of Stockholders - May 18, 2000
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 May
18, 2000 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 I DIRECTOR FOR A TERM OF THREE YEARS:
Robert J. Glaser FOR [_] WITHHOLD AUTHORITY [_]
David J. Williams FOR [_] WITHHOLD AUTHORITY [_]
APPROVE AMENDMENT AND RESTATEMENT OF STOCK OPTION PLAN:
FOR [_] AGAINST [_] ABSTAIN [_]
APPROVE AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION:
FOR [_] AGAINST [_] ABSTAIN [_]
APPROVE ADOPTION OF EMPLOYEE STOCK PURCHASE PLAN:
FOR [_] AGAINST [_] ABSTAIN [_]
(Please date and sign on reverse side)
<PAGE>
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 as directors of the nominees named on this proxy card, FOR the
approval of the amendment and restatement of the Company's Stock Option Plan,
FOR the approval of the amendment to the Company's Amended and Restated
Certificate of Incorporation, and FOR the approval of the Company's Employee
Stock Purchase Plan. Abstentions on the proposal to approve the amendment and
restatement of the Company's Stock Option Plan, the amendment to the Company's
Amended and Restated Certificate of Incorporation, or the Company's Employee
Stock Purchase Plan will have the effect of a negative vote.
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 2000 Annual Report to Stockholders and the
Notice of the 2000 Annual Meeting and Proxy Statement relating thereto is hereby
acknowledged.
Date: , 2000
----------------------------
(Please date this Proxy)
-----------------------------------------
-----------------------------------------
(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.
