<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
\ \ Definitive Proxy Statement
\ \ Definitive Additional Materials
\ \ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Pharmacyclics, Inc.
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
\X\ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2), or Item 22(a)(2) of Schedule 14A.
\ \ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
\ \ 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 transactions 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:
<PAGE> 2
PHARMACYCLICS, INC.
995 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
NOVEMBER 11, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of Pharmacyclics, Inc. (the "Company") which will be held at
9:00 A.M. on December 6, 1996, at the Company's headquarters, 995 East Arques
Avenue, Sunnyvale, California 94086.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals:
(i) the election of six (6) directors to serve until the
1997 annual meeting and until their successors are
elected and qualified;
(ii) the amendment and restatement of the Company's
Certificate of Incorporation to increase the number
of authorized shares of common stock thereunder from
12,000,000 shares to 24,000,000 shares;
(iii) the amendment of the Company's 1995 Stock Option Plan
(the "Plan") in order to increase the total number of
shares of common stock authorized for issuance over
the term of the Plan by an additional 750,000 shares;
and
(iv) the ratification of the appointment of Price
Waterhouse LLP as the Company's independent
accountants for the fiscal year ending June 30, 1997.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote IN FAVOR OF each
such proposal.
After reading the Proxy Statement, please mark, date, sign and return
by no later than November 27, 1996, the enclosed proxy card in the accompanying
reply envelope. If you decide to attend the Annual Meeting, please notify the
Secretary of the Company that you wish to vote in person and your proxy will not
be voted. YOUR SHARES CANNOT BE VOTED UNLESS YOU MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY, OR ATTEND THE ANNUAL MEETING IN PERSON.
A copy of the Pharmacyclics, Inc. 1996 Annual Report is also enclosed.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Richard A. Miller,
President and Chief Executive Officer
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE SO THAT IF YOU ARE UNABLE TO ATTEND
THE ANNUAL MEETING YOUR SHARES MAY BE VOTED.
<PAGE> 3
PHARMACYCLICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 6, 1996
TO THE STOCKHOLDERS OF PHARMACYCLICS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Pharmacyclics, Inc., a Delaware corporation (the "Company"), will
be held at 9:00 A.M. local time on Friday, December 6, 1996, at the Company's
headquarters, 995 East Arques Avenue, Sunnyvale, California 94086, for the
following purposes:
1. To elect a Board of six directors to serve for the ensuing year
and until their respective successors are elected and qualified.
2. To approve an amendment and restatement of the Company's
Certificate of Incorporation to increase the number of authorized
shares of common stock thereunder from 12,000,000 shares to
24,000,000 shares.
3. To approve an amendment to the Company's 1995 Stock Option Plan
(the "Plan") in order to increase the total number of shares of
common stock authorized for issuance over the term of the Plan by
an additional 750,000 shares.
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending June 30, 1997.
5. To transact such other business as may properly come before the
Annual Meeting and any adjournment or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Stockholders of record at the close of business on October 23, 1996 are
entitled to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. A list of the stockholders entitled to vote at the Annual
Meeting will be available for inspection at the Company's offices for a period
of ten days immediately prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, please carefully read the
accompanying Proxy Statement which describes the matters to be voted upon at the
Annual Meeting and mark, date, sign and return the enclosed proxy card in the
accompanying reply envelope. Should you receive more than one proxy because your
shares are registered in different names and addresses, each proxy should be
returned to ensure that all your shares will be voted. If you decide to attend
the
<PAGE> 4
Annual Meeting, please notify the Secretary of the Company that you wish to
vote in person and your proxy will not be voted and only your vote at the Annual
Meeting will be counted. The prompt return of your proxy card will assist us in
preparing for the Annual Meeting.
Sincerely,
J. Stephan Dolezalek,
Secretary
Sunnyvale, California
November 11, 1996
YOUR VOTE IS VERY IMPORTANT. PLEASE READ THE ATTACHED PROXY STATEMENT
CAREFULLY. IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
ENVELOPE AS PROMPTLY AS POSSIBLE.
2.
<PAGE> 5
PHARMACYCLICS, INC.
995 East Arques Avenue
Sunnyvale, California 94086
-------------------------------
PROXY STATEMENT
-------------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 6, 1996
GENERAL INFORMATION FOR STOCKHOLDERS
THE ENCLOSED PROXY ("PROXY") IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS (THE "BOARD") OF PHARMACYCLICS, INC., A DELAWARE CORPORATION (THE
"COMPANY"), FOR USE AT THE 1996 ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL
MEETING") TO BE HELD AT 9:00 A.M. ON DECEMBER 6, 1996, AT THE COMPANY'S
HEADQUARTERS, 995 EAST ARQUES AVENUE, SUNNYVALE, CALIFORNIA 94086 AND AT ANY
ADJOURNMENT THEREOF.
This Proxy Statement and the accompanying form of Proxy was first
mailed to the stockholders entitled to vote at the Annual Meeting on or about
November 11, 1996.
RECORD DATE AND VOTING
Stockholders of record at the close of business on October 23, 1996 are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, there were 8,556,150 shares of the Company's common stock
(the "Common Stock") outstanding and entitled to vote, held by 95 stockholders
of record. No shares of the Company's preferred stock are outstanding. Each
stockholder is entitled to one vote for each share of Common Stock held by such
stockholder as of the record date. If a choice as to the matters coming before
the Annual Meeting has been specified by a stockholder on the Proxy, the shares
will be voted accordingly. If no choice is specified, the shares will be voted
IN FAVOR OF the approval of the proposals described in the Notice of Annual
Meeting of Stockholders and in this Proxy Statement. Abstentions and broker
non-votes (i.e., the submission of a Proxy by a broker or nominee specifically
indicating the lack of discretionary authority to vote on the matter) are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions will be counted towards the tabulation of
votes cast on proposals presented to the stockholders and will have the same
effect as negative votes, whereas broker non-votes will not be counted for
purposes of determining whether a proposal has been approved or not.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Cheryl B. Jaszewski in writing at
995 East Arques Avenue, Sunnyvale, California 94086 or by telephone at (408)
774-0330. To provide the Company sufficient time to arrange for reasonable
assistance, please submit such requests by December 2, 1996.
<PAGE> 6
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation may revoke
it at any time prior to the meeting by filing with the Secretary of the Company
at its principal executive offices at 995 East Arques Avenue, Sunnyvale,
California 94086, a written notice of such revocation or a duly executed Proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of the Notice of Annual Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished to
brokerage houses, fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. To assure that a quorum will be present in
person or by proxy at the Annual Meeting, it may be necessary for certain
officers, directors, employees or other agents of the Company to solicit proxies
by telephone, facsimile or other means or in person. The Company will not
compensate such individuals for any such services. The Company does not
presently intend to solicit proxies other than by mail.
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING POSTAGE-PREPAID, RETURN ENVELOPE BY NO LATER THAN NOVEMBER 27,
1996, SO THAT IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE
VOTED.
THE ANNUAL REPORT OF THE COMPANY FOR THE FISCAL YEAR ENDED JUNE 30,
1996, HAS BEEN MAILED TO ALL STOCKHOLDERS ENTITLED TO RECEIVE NOTICE OF AND TO
VOTE AT THE ANNUAL MEETING CONCURRENTLY WITH THE MAILING OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT. THE ANNUAL REPORT IS NOT INCORPORATED INTO THIS
PROXY STATEMENT AND IS NOT CONSIDERED PROXY SOLICITING MATERIAL.
2.
<PAGE> 7
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE - ELECTION OF DIRECTORS
At the Annual Meeting, a Board of six directors will be elected, to
serve until the Company's next Annual Meeting and until their successors shall
have been duly elected and qualified or until their earlier death, resignation
or removal. The Board has selected six nominees, all of whom are current
directors of the Company. Each person nominated for election has agreed to serve
if elected, and management has no reason to believe that any nominee will be
unavailable to serve. Unless otherwise instructed, the Proxy holders will vote
the Proxies received by them IN FAVOR OF the nominees named below. The six
candidates receiving the highest number of affirmative votes of all the shares
entitled to vote at the Annual Meeting will be elected. If any nominee is unable
to or declines to serve as a director, the Proxies may be voted for a substitute
nominee designated by the current Board. As of the date of this Proxy Statement,
the Board is not aware of any nominee who is unable or will decline to serve as
a director.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE ELECTION OF
EACH OF THE FOLLOWING NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY UNTIL THE
NEXT ANNUAL MEETING AND UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND
QUALIFIED OR UNTIL THEIR EARLIER DEATH, RESIGNATION OR REMOVAL.
INFORMATION WITH RESPECT TO DIRECTOR NOMINEES
Set forth below is information regarding the nominees.
<TABLE>
<CAPTION>
Name Position(s) with the Company Age Director Since
---- ---------------------------- --- --------------
<S> <C> <C> <C>
Thomas D. Kiley.................. Director 53 1991
Joseph S. Lacob.................. Director 40 1991
Patrick F. Latterell............. Director 38 1991
Richard A. Miller, M.D........... Director, President and Chief Executive 45 1991
Officer
Joseph C. Scodari................ Director 43 1994
Craig C. Taylor.................. Director 46 1991
</TABLE>
BUSINESS EXPERIENCE OF DIRECTOR NOMINEES
MR. KILEY was appointed as a Director of the Company in June 1991. He
has been self-employed since 1988 as an attorney, consultant and investor. From
1980 to 1988, he was an officer of Genentech, Inc., serving variously as Vice
President and General Counsel, Vice President for Legal Affairs and Vice
President for Corporate Development. Mr. Kiley is also a Director of
Cardiogenesis Corporation, a medical device company, Connective Therapeutics,
Inc. and Geron Corporation, pharmaceutical companies, and certain private
biotechnology and other companies.
3.
<PAGE> 8
MR. LACOB was appointed as a Director of the Company in June 1991. He
is a General Partner of Kleiner Perkins Caufield & Byers, a venture capital
investment firm, which he joined in 1987. Mr. Lacob is currently Chairman of the
Board of CellPro, Inc. and Microcide Pharmaceuticals and a director of
Heartport, Inc., as well as several private life science companies.
MR. LATTERELL was appointed as a Director of the Company in June 1991.
He is a General Partner of Venrock Associates and Venrock Associates II, L.P.,
venture capital investment groups, which he joined in April 1989. Mr. Latterell
is currently Chairman of the Board of Oratec Interventions, Inc, and a director
of Biocircuits Corporation, Geron Corporation, Vical, Inc. as well as several
private biomedical companies.
DR. MILLER has served as President, Chief Executive Officer and a
Director since the Company was founded in April 1991. In 1989, Dr. Miller
co-founded CellPro, Inc. ("CellPro"), a public biotechnology company, and served
as a Director of CellPro from 1989 to 1991, and Chairman of CellPro's Scientific
Advisory Board until 1993. He continues to serve on CellPro's Scientific
Advisory Board. In 1984, Dr. Miller co-founded IDEC Pharmaceuticals Corporation
where he served as Vice President and a Director until February 1992. Dr. Miller
also is a Clinical Associate Professor of Medicine (Oncology) at Stanford
University Medical Center.
MR. SCODARI was appointed as a Director of the Company in December
1994. He is Corporate Executive Vice President, and President Pharmaceutical
Division for Centocor, Inc. Prior to joining Centocor, he was Senior Vice
President and General Manager, The Americas, for Rhone-Poulenc Rorer
Pharmaceuticals, Inc. where he held various positions since 1989. From 1987 to
1989, Mr. Scodari was Executive Vice President of Sterling Drug's U.S.
Diagnostic Imaging Division ("Sterling") where he held responsibilities for all
marketing and sales and business development activities for Sterling's imaging
agent business.
MR. TAYLOR was appointed as a Director of the Company in June 1991. He
is a General Partner of AMC Partners '89, L.P., the general partner of Asset
Management Associates 1989, L.P., a private venture capital partnership. Mr.
Taylor has been with Asset Management Company, a venture management group, since
1977. Mr. Taylor is a Director of Occupational Health & Rehabilitation, Inc.
(formerly, Telor Ophthalmic Pharmaceuticals, Inc.), Metra BioSystems, Inc. and
Lynx Therapeutics, Inc. and several private companies.
There are no family relationships among executive officers or directors
of the Company.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended June 30, 1996, the Board held seven
meetings and took action by unanimous written consent on one occasion. As of
June 30, 1996, the Company had two standing Committees: an Audit Committee and a
Compensation Committee. The Company does not have a standing Nominating
Committee.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent accountants and reviewing reports of the
Company's internal and external auditors regarding the Company's accounting
practices and systems of internal accounting controls. During the fiscal year
ended June 30, 1996, the Audit Committee consisted of two directors, Messrs.
Latterell and Taylor. The Audit Committee held one meeting during the fiscal
year ended June 30, 1996. Furthermore, the Audit Committee took action by
unanimous written consent on one occasion.
The Compensation Committee reviews and approves the Company's general
compensation policies, sets compensation levels for the Company's executive
officers and administers the Company's 1995 Stock Option Plan, successor to the
Company's 1992 Stock Option Plan, and the Company's Employee Stock Purchase
Plan. During the fiscal year ended June 30, 1996, the Compensation Committee
consisted of three directors, Messrs. Lacob, Latterell and Taylor. The
Compensation Committee met three times during the fiscal year ended June 30,
1996.
4.
<PAGE> 9
During the last fiscal year, except as described below, no director
attended fewer than 75% of the aggregate number of meetings of the Board and
meetings of Committees of the Board on which such director serves, which were
held during the period that such individual was a member of the Board. Messrs.
Kiley and Scodari each attended five of the seven meetings of the Board and Mr.
Latterell attended two of the three meetings of the Compensation Committee.
DIRECTOR COMPENSATION
The non-employee Board members do not receive any cash compensation for
their service on the Board or any Committee of the Board. However, Mr. Scodari
is reimbursed for travel expenses incurred in attending Board or Committee
meetings.
Under the Company's Non-Employee Directors Stock Option Plan (the
"Directors Plan"), each individual serving as a non-employee Board member on the
effective date of the Company's initial public offering was automatically
granted a non-statutory option to purchase 5,000 shares of Common Stock.
Accordingly, Messrs. Kiley, Lacob, Latterell, Scodari and Taylor each received
an option for 5,000 shares on October 23, 1995. Each such option has an exercise
price of $12.00 per share, the fair market value per share of Common Stock on
the grant date. In addition, each new non-employee Board member will receive an
automatic option grant for 10,000 shares of Common Stock under the Directors
Plan on the date of his or her initial election or appointment to the Board.
Furthermore, on the date of each Annual Stockholders Meeting beginning with the
1996 Meeting, each individual re-elected as a non-employee Board member will
receive an automatic option grant for an additional 5,000 shares of Common
Stock, provided such individual has served as a Board member for at least six
months. The exercise price per share of Common Stock subject to each automatic
option grant will be equal to the fair market value per share on the automatic
grant date. Each automatic grant will have a term of ten years, subject to
earlier termination following the optionee's cessation of Board service. Each
automatic grant will be immediately exercisable; however, any shares purchased
upon exercise of the option will be subject to repurchase should the optionee's
service as a non-employee Board member cease prior to vesting in the shares.
Each 10,000-share grant will vest in five equal and successive annual
installments over the optionee's period of Board service. Each 5,000-share grant
will vest in 12 equal and successive monthly installments over the optionee's
period of Board service. However, each outstanding option will immediately vest
upon (i) certain changes in the ownership or control of the Company or (ii) the
death or disability of the optionee while serving as a Board member.
5.
<PAGE> 10
PROPOSAL TWO - APPROVAL OF AN
AMENDMENT TO CERTIFICATE OF INCORPORATION
The present capital structure of the Company authorizes 12,000,000
shares of Common Stock, par value $0.0001, and 1,000,000 shares of undesignated
preferred stock, par value $0.0001 ("Undesignated Preferred Stock"). The Board
believes this capital structure is inadequate for the present and future needs
of the Company. Therefore the Board has unanimously approved the amendment and
restatement of the Company's Restated Certificate of Incorporation to increase
the number of shares of Common Stock authorized for issuance by Article IV of
the Restated Certificate of Incorporation from 12,000,000 shares to 24,000,000
shares. The Board believes this capital structure more appropriately reflects
the present and future needs of the Company and recommends such amendment and
restatement to the Company's stockholders for adoption. The Undesignated
Preferred Stock may be issued from time to time in one or more series with such
rights, preferences and privileges as may be determined by the Board. On
September 30, 1996, 8,554,750 shares of Common Stock were outstanding. On
September 30, 1996, approximately 9,858,380 shares of Common Stock would be
outstanding on a fully diluted basis, which assumes the exercise of all
outstanding warrants and options, including 226,000 option shares granted to
employees that have been granted on the basis of the 750,000 share increase and
are, therefore, subject to stockholder approval of Proposal Three at the Annual
Meeting.
PURPOSE OF AUTHORIZING ADDITIONAL COMMON STOCK
The authorization of an additional 12,000,000 shares of Common Stock
would give the Board the express authority, without further action of the
stockholders, to issue such shares of Common Stock from time to time as the
Board deems necessary. The Board believes it is necessary to have the ability to
issue such additional shares of Common Stock for general corporate purposes. The
time frame necessary to achieve market success for any individual product in the
biotechnology industry is lengthy. Consequently, the Company will expend
substantial funds on research and development, expanding manufacturing capacity,
preclinical and clinical testing of its products and manufacturing and marketing
of its products prior to commercialization. The Company plans to fund such
development activities through several different means including equity
financings. Other potential uses of the additional authorized shares of Common
Stock may include acquisition transactions, stock dividends or distributions,
and having Common Stock available for any future designation of preferred stock
to be convertible into Common Stock. The additional Common Stock would be
available for issuance by the Board without future action by the stockholders,
unless such action were specifically required by applicable law or rules of any
stock exchange on which the Company's securities may then be listed.
The proposed increase in the authorized number of shares of Common
Stock could have a number of effects on the Company's stockholders depending
upon the exact nature and circumstances of any actual issuances of authorized
but unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management by
diluting the stock ownership or voting rights of persons seeking to cause such
removal.
In addition, an issuance of additional shares by the Company could have
an effect on the potential realizable value of a stockholder's investment. In
the absence of a proportionate increase in the Company's earnings and book
value, an increase in the aggregate number of outstanding shares of the Company
caused by the issuance of the additional shares would dilute the earnings per
share and book value per share of all outstanding shares of the
6.
<PAGE> 11
Company's Common Stock. If such factors were reflected in the price per share of
Common Stock, the potential realizable value of a stockholder's investment could
be adversely affected.
VOTE REQUIRED FOR STOCKHOLDER APPROVAL
The affirmative vote of a majority of all shares of the Company's
Common Stock outstanding at the time of voting is required for approval of the
amendment and restatement of the Restated Certificate of Incorporation of
Pharmacyclics, Inc. to increase the number of authorized shares of Common Stock
issuable thereunder from 12,000,000 shares to 24,000,000 shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR
OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION AUTHORIZING AN ADDITIONAL 12,000,000 SHARES OF COMMON STOCK.
7.
<PAGE> 12
PROPOSAL THREE - APPROVAL OF AN
AMENDMENT TO 1995 STOCK OPTION PLAN
INTRODUCTION
The Company's stockholders are being asked to approve an amendment to
the 1995 Stock Option Plan (the "Plan") to increase the maximum number of shares
available for issuance thereunder by an additional 750,000 shares. The amendment
was adopted by the Board on August 1, 1996, subject to stockholder approval at
the Annual Meeting. The affirmative vote of a majority of the Common Stock
present or represented and entitled to vote on this Proposal Three at the Annual
Meeting is required for approval of the amendment.
The Plan was originally adopted by the Board on August 2, 1995 as the
successor to the 1992 Stock Option Plan (the "1992 Plan"), and the stockholders
approved the Plan on September 11, 1995. The Plan became effective as of October
23, 1995, the effective date of the Company's initial public offering. The
options outstanding under the 1992 Plan were incorporated into the Plan on such
date and, thereafter, no further option grants were made under the 1992 Plan.
The purpose of the Plan is to provide employees (including officers),
non-employee Board members and consultants of the Company with an opportunity to
acquire an equity interest in the Company as an incentive for them to remain in
the Company's service. The Board believes that equity interests are a
significant factor in the Company's ability to attract and retain key employees,
non-employee Board members and consultants who are critical to the Company's
long-range success. The new amendment is intended to provide the Company with a
sufficient reserve of Common Stock under the Plan to attract and retain the
services of key individuals essential to the Company's long-term growth and
success.
The terms and provisions of the Plan, as amended through August 1,
1996, are summarized more fully below. This summary, however, does not purport
to be a complete exposition of all the provisions of the Plan. A copy of the
Plan will be furnished by the Company to any stockholder upon written request to
the Secretary of the Company at the Company's principal offices in Sunnyvale,
California.
PLAN STRUCTURE
The Plan is comprised of an option grant program pursuant to which
eligible persons may, at the discretion of the Plan Administrator (as defined
below), be granted options to purchase shares of Common Stock at an exercise
price not less than 85% of the fair market value of such shares on the grant
date.
The Plan also authorizes stock appreciation rights, which provide the
holders with the election to surrender their outstanding options for an
appreciation distribution from the Company equal to the excess of (i) the fair
market value of the vested shares of Common Stock subject to the surrendered
option over (ii) the aggregate exercise price payable for such shares. Such
appreciation distribution may be made in cash or in shares of Common Stock.
ADMINISTRATION
The Plan is currently administered by the Compensation Committee of the
Board. This committee (the "Plan Administrator") has full authority to determine
the eligible individuals to whom option and stock appreciation right grants are
to be made, the number of shares to be covered by each such grant, the maximum
term for which any granted option or stock appreciation right is to remain
outstanding, the time or times at which the granted
8.
<PAGE> 13
options or stock appreciation rights are to become exercisable, and all other
terms and conditions of awards under the Plan. In addition, the Plan
Administrator has full authority to accelerate the exercisability of outstanding
options and to terminate the Company's outstanding repurchase rights with
respect to unvested shares, all upon such terms and conditions as it deems
appropriate. All expenses incurred in administering the Plan will be paid by the
Company.
SHARE RESERVE
The maximum number of shares of Common Stock issuable over the term of
the Plan may not exceed 1,670,059 shares, including the 750,000-share increase
for which stockholder approval is sought under this Proposal Three. Such shares
will be made available either from the Company's authorized but unissued Common
Stock or from Common Stock reacquired by the Company. On the first trading date
of each calendar year beginning with the 1996 calendar year, the share reserve
automatically increases by an amount equal to one percent of the number of
shares of Common Stock outstanding on the last day of the preceding calendar
year; provided that such annual increase shall not exceed 500,000 shares. The
increase on January 2, 1996 totaled 85,178 shares.
The maximum number of shares which any one individual participating in
the Plan may be granted stock options and separately exercisable stock
appreciation rights may not exceed 333,334 shares in the aggregate over the term
of the Plan.
In the event any change is made to the Common Stock issuable under the
Plan (by reason of any stock dividend, stock split, combination of shares,
recapitalization, or other change affecting the outstanding Common Stock as a
class without receipt of consideration), appropriate adjustments will be made to
the aggregate number and/or class of securities available for issuance (in the
aggregate and to each optionee) under the Plan.
ELIGIBILITY
The persons eligible to participate in the Plan are limited to (i)
employees (including officers), (ii) non-employee members of the Board (other
than those serving as members of the Compensation Committee) and (iii)
independent consultants of the Company or its parent or subsidiary corporations.
Non-employee Board members are also eligible to receive automatic option grants
under the Non-Employee Directors Stock Option Plan (the "Directors Plan").
As of September 30, 1996 approximately five executive officers, 37
other employees and two non-employee Board members were eligible to participate
in the Plan, and five non-employee Board members were eligible to participate in
the Directors Plan.
VALUATION
For purposes of establishing the option exercise price and for all
other valuation purposes under the Plan, the fair market value per share of
Common Stock on any relevant date will be the closing selling price per share as
reported on the Nasdaq National Market. As of September 30, 1996, the fair
market value per share of the Common Stock was $16.50 per share, as reported on
the Nasdaq National Market.
9.
<PAGE> 14
TERMS OF OPTION GRANT PROGRAM
Options may be granted at an exercise price per share not less than
eighty five percent (85%) of the fair market value per share of Common Stock on
the option grant date. No granted option will have a term in excess of ten
years.
Upon cessation of service, the optionee will have a limited period of
time in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under Plan:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the
Company equal in amount to the excess of (a) the fair market value of
the vested shares of Common Stock subject to the surrendered option
over (b) the aggregate exercise price payable for such shares. Such
appreciation distribution may, at the discretion of the Plan
Administrator, be made in cash or in shares of Common Stock.
Limited stock appreciation rights may be granted to officers of the
Company as part of their option grants. Any option with such a limited
stock appreciation right in effect for at least six (6) months may be
surrendered to the Company upon the successful completion of a hostile
take-over of the Company. In return for the surrendered option, the
officer will be entitled to a cash distribution from the Company in an
amount per surrendered option share equal to the excess of (a) the
take-over price per share over (b) the exercise price payable for such
share.
The Plan Administrator will have the authority to effect the
cancellation of outstanding options under the Plan which have exercise prices in
excess of the then current market price of Common Stock and to issue replacement
options with an exercise price based on the market price of Common Stock at the
time of the new grant.
GENERAL PROVISIONS
Acceleration. In the event that the Company is acquired by merger or
asset sale, each outstanding option under the Plan which is not to be assumed by
the successor corporation or replaced with a comparable option to purchase
shares of the capital stock of the successor corporation will automatically
accelerate in full. Any options assumed or replaced in connection with such
acquisition will be subject to immediate acceleration, and any unvested shares
which do not vest at the time of such acquisition will be subject to full and
immediate vesting, in the event the individual's service is subsequently
terminated within 18 months following the acquisition. In connection with a
hostile change in control of the Company (whether by successful tender offer for
more than 50% of the outstanding voting stock or by proxy contest for the
election of Board members), the Plan Administrator will have the discretionary
authority to provide for automatic acceleration of outstanding options under the
Plan either at the time of such change in control or upon the subsequent
termination of the individual's service.
10.
<PAGE> 15
The acceleration of vesting in the event of a change in the ownership
or control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Financial Assistance. The Plan Administrator may permit one or more
participants to pay the exercise price of outstanding options or the purchase
price of shares under the Plan by delivering a promissory note payable in
installments. The Plan Administrator will determine the terms of any such
promissory note. However, the maximum amount of financing provided any
participant may not exceed the cash consideration payable for the issued shares
plus all applicable taxes incurred in connection with the acquisition of the
shares. Any such promissory note may be subject to forgiveness in whole or in
part, at the discretion of the Plan Administrator, over the participant's period
of service.
Special Tax Election. The Plan Administrator may provide one or more
holders of options or unvested shares with the right to have the Company
withhold a portion of the shares otherwise issuable to such individuals in
satisfaction of the tax liability incurred by such individuals in connection
with the exercise of those options or the vesting of those shares.
Alternatively, the Plan Administrator may allow such individuals to deliver
previously acquired shares of Common Stock in payment of such tax liability.
AMENDMENT AND TERMINATION
The Board may amend or modify the Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the Plan at any time, and the Plan will in all events terminate on August 1,
2005.
STOCK AWARDS
The table below shows, as to each of the Company's executive officers
named in the Summary Compensation Table elsewhere in this Proxy Statement and
the various indicated individuals and groups, the number of shares of Common
Stock subject to options granted under the Plan and the 1992 Plan between July
1, 1995 and September 30, 1996, together with the weighted average exercise
price payable per share. The option grants disclosed in the New Plan Benefits
table are also included in the following table.
11.
<PAGE> 16
<TABLE>
<CAPTION>
OPTION TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------------
Options Granted Weighted Average
Name (Number of Shares) Exercise Price
===============================================================================================================
<S> <C> <C>
Richard A. Miller, President and Chief Executive
Officer 246,667 $11.66
Marc L. Steuer, Vice President, Business
Development and Chief Financial Officer 95,000 $13.51
Stuart W. Young, M.D., Vice President, Medical
Research 33,334 $7.50
James D. Mutch, Vice President, Regulatory
Affairs and Product Development(1) 6,667 $7.50
William C. Dow, Ph.D., Vice President, Chemical
Research and Development 67,667 $13.71
Cheryl B. Jaszewski, Vice President, Finance and
Administration 43,334 $14.60
All current executive officers as a group
(5 persons) 486,002 $12.28
==========================================================================================================
All current non-employee Board members as a
group 65,000 $9.23
==========================================================================================================
All employees, including current officers who are
not executive officers as a group (29 persons) 144,346 $14.62
==========================================================================================================
</TABLE>
(1) Mr. Mutch resigned from the Company effective as of April 29, 1996.
FEDERAL TAX CONSEQUENCES OF OPTIONS
Options granted under the Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to satisfy such requirements. The
Federal income tax treatment for the two types of options differ as follows:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize regular
taxable income in the year in which the purchased shares are sold or otherwise
made the subject of disposition. For Federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two years after the option grant date and more
than one year after the exercise date. If either of these two holding periods is
not satisfied, then a disqualifying disposition will result.
12.
<PAGE> 17
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i) the
fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Non-statutory Options. No taxable income is recognized by an optionee
upon the grant of a non-statutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the excess
of the fair market value of the purchased shares at the date of exercise over
the exercise price, and the optionee will be required to satisfy the tax
withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company, at the original exercise price paid per
share, in the event the optionee's service terminates prior to vesting in the
shares, then the optionee will not recognize any taxable income at the time of
exercise. The optionee will have to report as ordinary income, as and when the
Company's repurchase right lapses, an amount equal to the difference between the
fair market value of the shares on the date the repurchase right lapses and the
option exercise price paid for those shares. The optionee may, however, elect
under Section 83(b) of the Internal Revenue Code to include as ordinary income
in the year of exercise an amount equal to the difference between the fair
market value of the purchased shares on the date of exercise (determined as if
the shares were not subject to the Company's repurchase right) and the option
exercise price paid for the shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the Company's
repurchase right lapses.
The Company will be entitled to a business expense deduction equal to
the amount of ordinary income recognized by the optionee in connection with the
exercise of the non-statutory option. The deduction will in general be allowed
for the taxable year of the Company in which such ordinary income is recognized
by the optionee.
Stock Appreciation Rights. An optionee who is granted a stock
appreciation right will recognize ordinary income in the year of exercise equal
to the amount of the appreciation distribution. The Company will be entitled to
an income tax deduction equal to such distribution for the taxable year in which
the ordinary income is recognized by the optionee.
Deductibility of Executive Compensation. The Company anticipates that
any compensation deemed paid by it in connection with disqualifying dispositions
of incentive stock option shares or exercises of non-statutory options granted
with exercise prices equal to the fair market value of the shares on the grant
date will qualify as performance-based compensation for purposes of Code Section
162(m) and will not have to be taken into account for purposes of the $1 million
limitation per covered individual on the deductibility of the compensation paid
to certain executive officers of the Company.
ACCOUNTING TREATMENT
Option grants or stock issuances with exercise or issue prices less
than the fair market value of the shares on the grant or issue date will result
in a compensation expense to the Company's earnings equal to the difference
between the exercise or issue price and the fair market value of the shares on
the grant or issue date. Such expense will be accruable by the Company over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances at 100% of fair market value will not result in any charge to
the Company's earnings, but the Company must disclose, in pro-forma statements
to the Company's financial statements, the impact those options would have upon
the Company's reported earnings were the value of those options at the time of
grant treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining the Company's
earnings per share on a fully-diluted basis.
13.
<PAGE> 18
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in compensation expense to the
Company's earnings.
In May 1996, the Company granted options to purchase 211,000 shares of
Common Stock at $17.75 (the then fair market value of such shares) per share to
the Named Executive Officers. Subsequent to June 30, 1996, the Company granted
an option to purchase 15,000 shares of Common Stock at $18.25 (the then fair
market value of such shares) per share to one of the Named Executive officers.
All such option grants are subject to stockholder approval at the Annual
meeting. As a result, the Company will be required to record compensation
expense in the event the fair market value of the Company's common stock on the
date of the Annual Meeting exceeds the exercise price of the respective stock
options, in an amount equal to such difference multiplied by the number of
shares subject to such option and recognized on a straight-line basis over the
vesting period of the option, generally five years.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the outstanding voting shares of
the Company present or represented and entitled to vote at the Annual Meeting is
required for approval of the amendment to the Plan which will increase the
maximum number of shares of Common Stock authorized for issuance over the term
of the Plan by an additional 750,000 shares. Should such stockholder approval
not be obtained, then the 750,000-share increase to the share reserve will not
be implemented, and any stock options granted on the basis of such 750,000-share
increase will immediately terminate without becoming exercisable for the shares
of Common Stock subject to those options. No additional options will be granted
on the basis of such share increase, and the Plan will terminate as to future
issuances once the existing share reserve as last approved by the stockholders
has been issued.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR
OF THE AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN.
NEW PLAN BENEFITS
On May 29, 1996, option grants were made to Richard A. Miller, William
C. Dow, Cheryl B. Jaszewski and Marc L. Steuer for 100,000, 41,000, 30,000 and
40,000 shares, respectively, with an exercise price of $17.75 per share. In
addition, on September 19, 1996, an option grant was made to Marc L. Steuer for
15,000 shares with an exercise price of $18.25. Each of these option grants is
subject to stockholder approval of this Proposal Three and will not become
exercisable for any of such option shares unless such stockholder approval is
obtained. The following table shows, as to each of the Named Executive Officers,
and the various indicated groups, the number of shares of Common Stock subject
to options granted under the Plan, assuming the 750,000-share increase which the
stockholders are being asked to approve under this Proposal Three and the
average exercise price payable per share for such options. The option grants
disclosed in the following table are also included in the Stock Awards table
above.
14.
<PAGE> 19
<TABLE>
<CAPTION>
Weighted
Number of Average
Name Option Shares Exercise Price
<S> <C> <C>
Richard A. Miller, M.D., President and Chief
Executive Officer 100,000 $17.75
Mark L. Steuer, Vice President, Business
Development and Chief Financial Officer 55,000 $17.89
William C. Dow, Ph.D., Vice President,
Chemical Research and Development 41,000 $17.75
Cheryl B. Jaszewski, Vice President, Finance
and Administration 30,000 $17.75
All current executive officers as a group
(5 persons) 226,000 $17.78
</TABLE>
15.
<PAGE> 20
PROPOSAL FOUR - RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
The Board has appointed the firm of Price Waterhouse LLP, independent
accountants, to audit the financial statements of the Company for the fiscal
year ending June 30, 1997, and is asking the stockholders to ratify this
appointment.
In the event the stockholders fail to ratify the appointment, the Board
will reconsider its selection. Even if the selection is ratified, the Board in
its discretion may direct the appointment of a different independent accounting
firm at any time during the year if the Board feels that such a change would be
in the best interest of the Company and its stockholders. The affirmative vote
of the holders of a majority of the Company's Common Stock present or
represented by Proxy at the Annual Meeting and entitled to vote is required to
ratify the selection of Price Waterhouse LLP.
Price Waterhouse LLP has served as independent auditors to the Company
for the fiscal year ended June 30, 1996. A representative of Price Waterhouse
LLP is expected to be present at the Annual Meeting to respond to appropriate
questions, and will be given the opportunity to make a statement if he or she so
desires.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP TO SERVE AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 1997.
16.
<PAGE> 21
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain compensation earned during the
fiscal year ended June 30, 1996, for services rendered in all capacities to the
Company and its subsidiaries, by (i) the Company's Chief Executive Officer, (ii)
the four other highest paid executive officers whose salary and bonus for fiscal
1996 were in excess of $100,000 and (iii) one other executive officer who
resigned during that fiscal year. The individuals named in the table will be
hereinafter referred to as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION SECURITIES UNDERLYING ALL OTHER
SALARY(1) OPTIONS(2) COMPENSATION
------------ --------------------- ------------
<S> <C> <C> <C>
NAME AND PRINCIPAL POSITION
Richard A. Miller, M.D $215,865 246,667 $ --
President and Chief
Executive Officer
Marc L. Steuer(3) 181,827 80,000 --
Vice President, Business
Development and Chief
Financial Officer
Stuart W. Young, M.D 160,303 33,334 --
Vice President,
Medical Research
James D. Mutch(4) 134,870 6,667 8,000
Vice President,
Regulatory Affairs and
Product Development
William C. Dow, Ph.D 130,098 67,667 --
Vice President, Chemical
Research and Development
Cheryl B. Jaszewski 110,375 43,334 --
Vice President, Finance and
Administration
</TABLE>
(1) Includes amounts earned but not paid in the fiscal year ended June 30,
1996.
(2) Includes options to purchase Common Stock to the Named Executive
Officers: Richard A. Miller, 100,000; William C. Dow, 41,000; Marc L.
Steuer, 40,000 and Cheryl B. Jaszewski, 30,000 which are subject to
stockholder approval of an increase in the number of shares authorized
for grant under the Plan.
17.
<PAGE> 22
(3) Subsequent to June 30, 1996, the Company issued an option to purchase
15,000 shares of Common Stock to Marc L. Steuer. Such option is subject
to stockholder approval of an increase in the number of shares
authorized for grant under the Plan.
(4) Mr. Mutch resigned from the Company effective as of April 29, 1996 and
currently serves the Company as a part-time consultant in the area of
regulatory affairs. The amount reported under "Other Compensation" for
fiscal 1996 represents consulting fees earned by Mr. Mutch since the
date of his resignation.
STOCK OPTIONS, EXERCISES AND HOLDINGS
The following table provides certain information regarding stock
options granted to the Named Executive Officers during the fiscal year ended
June 30, 1996. Except for the limited stock appreciation rights described in
footnote (1) below, no stock appreciation rights were granted during such fiscal
year to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(6)
- --------------------------------------------------------------------------------------------------------------------------
Number of
Securities Percentage of
Underlying Total Options Exercise
Options Granted Granted to Price per Expiration
Name (#)(1)(2)(3) Employees(4) Share(5) Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Miller, M.D 146,667 23.4% $ 7.50 08/01/05 $ 691,786 $1,753,121
100,000(8) 15.9% $ 17.75 05/28/06 $1,116,288 $2,828,893
Marc L. Steuer 40,000 6.4% $ 7.50 08/01/05 $ 188,668 $ 478,123
40,000(8) 6.4% $ 17.75 05/28/06 $ 446,515 $1,131,557
Stuart W. Young, M.D 33,334 5.3% $ 7.50 08/01/05 $ 157,227 $ 398,444
James D. Mutch(7) 6,667 1.1% $ 7.50 08/01/05 $ 31,446 $ 79,691
William C. Dow, Ph.D 26,667 4.2% $ 7.50 08/01/05 $ 125,780 $ 318,752
41,000(8) 6.5% $ 17.75 05/28/06 $ 457,678 $1,159,846
Cheryl B. Jaszewski 13,334 2.1% $ 7.50 08/01/05 $ 62,892 $ 159,382
30,000(8) 4.8% $ 17.75 05/28/06 $ 334,886 $ 848,668
==========================================================================================================================
</TABLE>
(1) Each option includes a limited stock appreciation right that allows the
optionee to surrender his or her option with such a right in effect for six
months, to the extent exercisable for vested shares of Common Stock, upon
the successful completion of a hostile tender offer for more than 50% of
the Company's outstanding securities. In return, the optionee will be
entitled to a cash distribution from the Company in an amount per
surrendered option share equal to the highest price per share of Common
Stock paid in the tender offer less the exercise price payable per share.
(2) Subsequent to June 30, 1996, the Company issued an option to purchase
15,000 shares of Common Stock to Marc L. Steuer. Such option is subject to
stockholder approval of an increase in the number of shares authorized for
grant under the Plan.
18.
<PAGE> 23
(3) The dates on which the options were granted are as follows:
<TABLE>
<CAPTION>
Name Number Shares Grant Date
---- ------------- ----------
<S> <C> <C> <C>
Richard A. Miller, M.D. 146,667 08/02/95
100,000 05/29/96
Marc L. Steuer 40,000 08/02/95
40,000 05/29/96
Stuart W. Young, M.D. 33,334 08/02/95
James D. Mutch 6,667 08/02/95
William C. Dow, Ph.D. 26,667 08/02/95
41,000 05/29/96
Cheryl B. Jaszewski 13,334 08/02/95
30,000 05/29/96
</TABLE>
The option for 146,667 shares granted to Dr. Miller on August 2, 1995
vests in 60 equal successive monthly installments; 93,334 shares were
immediately exercisable as of the grant date, an additional 13,334
shares were exercisable on January 1, 1996, an additional 13,333 shares
will become exercisable on January 1, 1997, an additional 13,333 shares
will become exercisable on January 1, 1998 and the remaining 13,333
shares will become exercisable on January 1, 1999. The 100,000 share
option granted to Dr. Miller on May 29, 1996 vests in 60 equal monthly
installments. The option is, however, subject to stockholder approval
of an increase in the number of shares authorized for grant under the
Plan. If such stockholder approval is granted, the option will become
immediately exercisable.
The option for 40,000 shares granted to Mr. Steuer on August 2, 1995
vests in 60 equal successive monthly installments. Such option is
immediately exercisable in its entirety. The 40,000 share option
granted to Mr. Steuer on May 29, 1996 vests over 60 months as follows:
(i) 5,000 shares vest in successive equal monthly installments over
each of the first, second, third and fourth years of Mr. Steuer's
service with the Company and (ii) 20,000 shares shall vest in
successive equal monthly installments over the fifth year of Mr.
Steuer's service with the Company. The option is, however, subject to
stockholder approval of an increase in the number of shares authorized
for grant under the Plan. If such stockholder approval is granted, the
option will become immediately exercisable.
The option granted to Dr. Young vests in 60 equal successive monthly
installments, 13,334 shares were immediately exercisable as of the
grant date, an additional 13,334 shares became exercisable on January
1, 1996 and the remaining 6,666 shares will become exercisable on
January 1, 1997.
The option granted to Mr. Mutch was to vest in 60 equal successive
monthly installments. Such option was immediately exercisable in its
entirety. However, in connection with Mr. Mutch's resignation, the
unvested shares subject to such stock option accelerate and become
exercisable in 12 equal monthly installments measured from May 30,
1996.
The option for 26,667 shares granted to Dr. Dow on August 2, 1995 vests
in 60 equal successive monthly installments, 13,334 shares were
immediately exercisable as of the grant date and the remaining 13,333
shares became exercisable on January 1, 1996. The 41,000 share option
granted to Dr. Dow on May 29, 1996 vests as follows: (i) 5,000 shares
vest in 12 successive equal monthly installments with the first such
installment vesting on January 31, 1997; (ii) 10,000 shares vest in 12
successive equal monthly installments with the first such installment
vesting on January 31, 1998 and (iii) 26,000 shares vest in 24
successive equal monthly installments with the first such installment
vesting on January 31, 1999. The option is, however, subject to
stockholder approval of an increase in the number of shares authorized
for grant under the Plan. If such stockholder approval is granted, the
option will become immediately exercisable.
The option for 13,334 shares granted to Ms. Jaszewski on August 2, 1995
vests in 60 equal successive monthly installments. Such option is
immediately exercisable in its entirety. The 30,000 share option
granted to Ms. Jaszewski on May 29, 1996 vests as follows: (i) 12,000
shares vest in 24 successive equal monthly installments with the first
such installment vesting on January 31, 1997 and (ii) 18,000 shares
vest in 24 successive equal monthly installments with the first such
installment vesting on January 31, 1999.
19.
<PAGE> 24
The option is, however, subject to stockholder approval of an increase
in the number of shares authorized for grant under the Plan. If such
stockholder approval is granted, the option will become immediately
exercisable.
Each of the granted options will immediately become exercisable for all
of the option shares in the event the Company is acquired by a merger
or asset sale, unless the options are assumed by the acquiring entity.
Any assumed options granted under the Plan will accelerate and assigned
repurchase rights will terminate upon the optionee's involuntary
termination within 18 months following the acquisition. The Plan
Administrator also has discretion to provide for the acceleration of
one or more outstanding options assumed upon a merger, consolidation or
asset sale. Furthermore, the Plan Administrator also has discretion to
provide for the acceleration of one or more outstanding options under
the Plan (including options incorporated from the 1992 Plan) and the
vesting of shares subject to outstanding options upon the occurrence of
certain hostile tender offers. Such accelerated vesting may be
conditioned upon the subsequent termination of the affected optionee's
service. The Plan Each option has a maximum term of ten years, subject
to earlier termination in the event of the optionee's cessation of
service with the Company.
(4) Based on an aggregate of approximately 628,046 options granted to
employees in fiscal 1996, including options granted to the Named
Executive Officers.
(5) The exercise price may be paid in cash, in shares of the Company's
Common Stock valued at fair market value on the exercise date or
through a cashless exercise procedure involving a same day sale of the
purchased shares. The Company may also finance the option exercise by
loaning the optionee sufficient funds to pay the exercise price for the
purchased shares and the federal and state income or employment tax
liability incurred by the optionee in connection with such exercise.
The optionee may be permitted, subject to the approval of the Plan
Administrator, to apply a portion of the shares purchased under the
option (or to deliver existing shares of Common Stock) in satisfaction
of such tax liability. The Plan Administrator has the discretionary
authority to reprice outstanding options under the Plan through the
cancellation of those options and the grant of replacement options with
an exercise price equal to the lower fair market value of the option
shares on the regrant date.
(6) Potential realizable value is based on the assumption that the price
per share of Common Stock appreciates at the assumed annual rate of
stock appreciation for the option term. The assumed 5% and 10% annual
rates are set forth in accordance with the rules and regulations
adopted by the Securities and Exchange Commission and do not represent
the Company's estimate of stock price appreciation. There can be no
assurance that the assumed 5% and 10% annual rates of appreciation
(compounded annually) will actually be realized over the term of the
option. Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option grants made
to the executive officers.
(7) Mr. Mutch resigned from the Company effective as of April 29, 1996, and
currently serves the Company as a part-time consultant in the area of
regulatory affairs.
(8) Options are subject to stockholder approval of an increase in the
number of shares authorized for grant under the Plan.
20.
<PAGE> 25
OPTION HOLDINGS
The table below sets forth certain information concerning the exercise
of options during the fiscal year ending June 30, 1996 by the Named Executive
Officers and unexercised options held as of the end of such year by such
individuals. No stock appreciation rights were exercised by the Named Executive
Officers during such fiscal year, and, except to the extent described in
footnote (1) to the Option Grants table above, no stock appreciation rights
were held by such individuals at the end of such fiscal year.
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND 1996 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
No. of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options at
End Fiscal Year End(1)
Shares -----------------------------------------------------------
Acquired on Value Exercis- Unexercis- Exercis- Unexercis-
Name Exercise Realized able(2) able able able
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Miller, M.D. -- -- 206,668 39,999 1,067,514 404,990
Marc L. Steuer -- -- 173,334 -- 1,695,009 --
Stuart W. Young, M.D. -- -- 44,668 6,666 578,489 67,493
James D. Mutch(3) 20,000 $249,999 -- -- -- --
William C. Dow, Ph.D. -- -- 114,334 -- 2,015,137 --
Cheryl B. Jaszewski -- -- 53,334 -- 270,007 --
=================================================================================================================================
</TABLE>
(1) Determined by subtracting the exercise price from the market price of the
Common Stock on June 28, 1996 ($17.625).
(2) Includes options to purchase Common Stock to the Named Executive Officers:
Richard A. Miller, 100,000; William C. Dow, 41,000; Marc L. Steuer, 40,000
and Cheryl B. Jaszewski, 30,000 which are subject to stockholder approval
of an increase in the number of shares authorized for grant under the Plan.
(3) Mr. Mutch resigned from the Company effective as of April 29, 1996, and
currently serves the Company as a part-time consultant in the area of
regulatory affairs.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
In May 1992, the Company entered into an employment letter agreement
with William C. Dow, which remains in effect unless and until terminated by
either the Company or Dr. Dow at any time and for any reason, with or without
cause. During the fiscal year ended June 30, 1996, the Company paid Dr. Dow
$130,098 under the agreement.
In June 1992, the Company entered into an employment agreement with
Richard A. Miller which either party may terminate at any time upon 90 days'
prior written notice of an intent to terminate. During the fiscal year ended
June 30, 1996, the Company paid Dr. Miller $215,865 under the agreement.
21.
<PAGE> 26
In August 1992, the Company entered into an employment agreement with
James D. Mutch which was terminated on April 29, 1996 when he left the employ of
the Company and became a part-time consultant to the Company. During the fiscal
year ended June 30, 1996, the Company paid Mr. Mutch $134,870 under the
agreement.
In April 1993, the Company entered into an employment agreement with
Stuart W. Young which either party may terminate at any time upon 30 days
written notice of intent to terminate. If Dr. Young is terminated without cause
by the Company during the second or third year of employment, the Company is
obligated to compensate Dr. Young with his salary as severance pay for one year
after termination. During the fiscal year ended June 30, 1996, the Company paid
Dr. Young $160,303 under the agreement.
In October 1994, the Company entered into an employment agreement with
Marc L. Steuer, which remains in effect unless and until terminated by either
the Company or Mr. Steuer at any time and for any reason, with or without cause.
If Mr. Steuer is discharged without cause during the first two years of
employment, the Company is obligated to compensate Mr. Steuer with six months of
severance benefits and pay. During the fiscal year ended June 30, 1995, the
Company paid Mr. Steuer $181,827 under the agreement.
In April 1996, the Company entered into a consulting agreement with
James D. Mutch, which remains in effect until April 27, 1997. Under the terms of
the agreement, Mr. Mutch was to be paid a monthly consulting fee of $4,000 for a
period of five months and the vesting of the options held by Mr. Mutch were
also accelerated.
Under the Plan, the Plan Administrator has the authority to accelerate
outstanding options in the event of certain changes in control of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Effective October 23, 1995 (the date of the Company's initial public
offering), decisions on compensation matters relating to the Company's President
and Chief Executive Officer, Richard A. Miller, and the Company's other
executive officers are generally made by the Compensation Committee. The
Compensation Committee also administers the Company's 1995 Stock Option Plan
(the "Plan") under which grants may be made to executive officers and other key
employees. The Compensation Committee has furnished the following report on the
compensation established for Dr. Miller and the Company's other executive
officers for the period from October 23, 1995 to June 30, 1996. Prior to October
23, 1995, executive officer compensation was determined by the Board and/or a
committee comprised of Dr. Miller and Messrs. Lacob and Latterell. It is the
Compensation Committee's understanding that they used criteria similar to those
described below in determining officer compensation.
The Compensation Committee set the compensation payable to Dr. Miller
for the 12-month period ending April 30, 1997. Dr. Miller in turn recommended,
subject to the Compensation Committee's review and approval, the compensation to
be paid for such 12-month period to the Company's other executive officers. For
those executive officers, the Compensation Committee had previously established
performance factors to be considered by Dr. Miller in making his recommendations
with respect to the compensation level to be in effect for each such officer.
Dr. Miller provided the Compensation Committee with his evaluation of the
performance of each officer with respect to those factors and his recommendation
as to the compensation to be paid to that individual on the basis of such
performance. The Compensation Committee reviewed and approved the
recommendations of Dr. Miller.
General Compensation Policy. The Compensation Committee's overall
policy as to executive compensation is to ensure that an appropriate
relationship exists between the total compensation package established for each
executive officer and the creation of stockholder value, while at the same time
assuring that compensation is sufficiently competitive to motivate and retain
key executives. In furtherance of this goal, executive compensation
22.
<PAGE> 27
is structured so as to integrate competitive levels of annual base salary with
discretionary stock options based upon individual and corporate performance.
This annual cash compensation, together with the payment of equity incentives in
the form of stock option grants, is designed to attract and retain qualified
executives and to ensure that such executives have a continuing stake in the
long-term success of the Company.
For fiscal year 1996, each executive officer's compensation package was
comprised of two elements: (i) a base salary that reflects individual
performance and is designed primarily to be competitive with salary levels paid
by a peer group of companies in the industry with which the Company competes for
executive talent and (ii) long-term stock- based incentives designed to
strengthen the mutuality of interests between the executive officers and the
Company's stockholders.
Factors. Since the Company is in the development stage, the use of
traditional performance standards (such as profit levels and return on equity)
are not appropriate in evaluating the performance of the executive officers. In
particular, the unique nature of the biotechnology industry, specifically the
absence of revenues and the fact that the Company's stock performance is often
more a consequence of larger market forces than of actual Company achievements,
makes it impossible to tie performance objectives to standard financial
considerations. The primary factors which were considered in establishing the
components of each executive officer's compensation package for the 1996 fiscal
year are summarized below. The Compensation Committee may, however, in its
discretion apply entirely different factors, such as different measures of
strategic performance, for future fiscal years.
- BASE SALARY. When establishing or reviewing base compensation levels
for each executive officer, the Committee considers numerous factors, including
the qualifications of the executive and his or her level of relevant experience,
strategic goals for which the executive has responsibility, specific
accomplishments of the executive during the last fiscal year and the
compensation levels in effect at companies in the Company's industry which
compete with the Company for business and executive talent.
Base salaries are reviewed annually, and adjustments to each
executive officer's base salary are made to reflect individual performance and
salary increases effected by the peer group companies. A major objective,
accordingly, is to have base salary levels commensurate with those of comparable
positions with the peer group companies, given the level of seniority and skills
possessed by the executive officer in question and the Committee's assessment of
such executive's performance over the year.
- LONG-TERM INCENTIVE COMPENSATION. The Compensation Committee has the
authority under the Plan to provide executives and other key employees with
equity incentives primarily in the form of stock option grants. Generally, the
size of each option grant is set at a level which the Compensation Committee
deems appropriate to create a meaningful opportunity for stock ownership based
upon the individual's current position with the Company, but there is also taken
into account comparable awards made to individuals in similar positions in the
industry, as reflected in external surveys, the individual's potential for
future responsibility and promotion and the individual's performance in the
recent period. The Compensation Committee has also established general
guidelines for maintaining the unvested option holdings of each executive
officer at a targeted level based upon his or her position with the Company, and
option grants are periodically made to maintain the targeted levels. However,
the Committee does not strictly adhere to these guidelines, and the relative
weight given to each of the foregoing factors varies from individual to
individual as the Compensation Committee deems appropriate under the
circumstances.
The grants are designed to align the interests of the
executive officer with those of the stockholders and provide each individual
with a significant incentive to manage the Company from the perspective of an
owner with an equity stake in the business. Each grant allows the officer to
acquire shares of Common Stock at a fixed price per share (the market price on
the grant date) over a specified period (up to ten years). The option will vest
in periodic installments over a five-year period, contingent upon the executive
officer's continued employment with the Company. Accordingly, the option will
provide a return to the executive officer only if he or she remains in the
Company's employ, and then only if the market price appreciates over the option
term.
23.
<PAGE> 28
CEO Compensation. In setting the compensation payable for the 1996
fiscal year to the Company's President and Chief Executive Officer, Richard A.
Miller, the Committee reviewed a detailed performance evaluation compiled for
Dr. Miller. Such review considered Dr. Miller's qualifications, the level of
experience brought to his position and gained while in the position, Company
goals for which Dr. Miller had responsibility, specific accomplishments to date,
and the importance of Dr. Miller's individual achievement in meeting Company
goals and objectives set during the prior fiscal year. In addition, the
Compensation Committee surveyed the salary levels in effect for chief executive
officers at the peer group companies which were taken into account for
comparative compensation purposes for all of the Company's other executive
officers.
In determining Dr. Miller's compensation level, the Committee sought to
establish a competitive rate of base salary, while at the same time tying a
significant percentage of his overall compensation package to individual and
Company performance, such as the attainment of certain milestones in the testing
of clinical products, the successful completion of the Company's initial public
offering and stock price appreciation. Based on these factors, the Committee
increased Dr. Miller's base salary level to $225,000. The level of base salary
set for Dr. Miller was in the 18th percentile of the surveyed salary for
comparable companies.
In fiscal 1996, the Company also granted Dr. Miller options to purchase
146,667 and 100,000 shares of the Company's Common Stock under the Plan, at
exercise prices of $7.50 and $17.75 per share, respectively. The grant was
intended to provide Dr. Miller with a meaningful incentive to continue in the
Company's employ and contribute to the Company's financial success, as reflected
in the future appreciation in the market price of the Company's Common Stock.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1 million paid to certain of the corporation's executive officers. The
limitation applies only to compensation which is not considered to be
performance-based. The non-performance based compensation to be paid to the
Company's executive officers for the 1996 fiscal year did not exceed the $1
million limit per officer, nor is it expected that the non-performance based
compensation to be paid to the Company's executive officers for fiscal 1997 will
exceed that limit. The Plan is structured so that any compensation deemed paid
to an executive officer in connection with the exercise of option grants made
under that plan with an exercise price equal to the fair market value of the
option shares on the grant date will qualify as performance-based compensation
which will not be subject to the $1 million limitation. Because it is very
unlikely that the cash compensation payable to any of the Company's executive
officers in the foreseeable future will approach the $1 million limit, the
Compensation Committee has decided at this time not to take any other action to
limit or restructure the elements of cash compensation payable to the Company's
executive officers. The Compensation Committee will reconsider this decision
should the individual compensation of any executive officer ever approach the $1
million level.
The above report is submitted by the Compensation Committee of the
Company's Board of Directors.
Joseph S. Lacob
Patrick F. Latterell
Craig C. Taylor
24.
<PAGE> 29
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of June 30, 1996, the Compensation Committee of the Board was
comprised of Messrs. Lacob, Latterell and Taylor. Dr. Miller was a member of the
Compensation Committee from November 5, 1992 until August 2, 1995.
No executive officer of the Company served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board or Compensation Committee.
PERFORMANCE GRAPH
The graph depicted below shows the Company's stock price as an index
assuming $100 invested on October 23, 1995 (the date of the Company's initial
public offering) at the then current market price of $12.00 per share, along
with the composite prices of companies listed in the Nasdaq Pharmaceutical Index
and Nasdaq Total U.S. Stock Market Index. This information has been provided to
the Company by the Nasdaq Stock Market.
COMPARISON OF 8 MONTH CUMULATIVE TOTAL RETURN*
AMONG PHARMACYCLICS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
RESEARCH TOTAL RETURN-DATA SUMMARY
PCYC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------
10/24/95 6/96
<S> <C> <C> <C>
PHARMACYCLICS INC PCYC 100 147
NASDAQ STOCK MARKET - US INAS 100 115
NASDAQ PHARMACEUTICAL INAP 100 125
</TABLE>
* $100 invested on 10/24/95 in stock or index - including reinvestment of
dividends. Fiscal Year ending June 30.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings made by the Company under those statutes, the preceding Compensation
Committee Report on Executive Compensation and the Company Stock Performance
Graph will not be incorporated by reference into any of those prior filings, nor
will such report or graph be incorporated by reference into any future filings
made by the Company under those statutes.
25.
<PAGE> 30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Restated Certificate of Incorporation and Bylaws provide
for indemnification of directors, officers and other agents of the Company. Each
of the current directors, and certain officers and agents of the Company have
entered into separate indemnification agreements with the Company.
In June 1994 and July 1995, the Company issued, in private placement
transactions, 1,536,092 shares of Series C Preferred Stock at $8.63 per share.
An aggregate of 526,753 shares of such Series C Preferred Stock were issued in
exchange for $3.0 million in principal amount of Convertible Promissory Notes,
accrued interest thereon and $2.6 million in cash. These Notes were purchased by
persons and entities associated with Kleiner Perkins Caufield & Byers ("Kleiner
Perkins"), Asset Management Associates 1989, L.P. ("Asset Management"), Venrock
Associates ("Venrock"), and Mayfield VII prior to the July 1995 portion of the
Series C financings. All of such shares of Series C Preferred Stock
automatically converted into an aggregate of 1,536,092 shares of Common Stock
upon the closing of the Company's initial public offering. In addition, the
Company issued warrants to purchase Series C Preferred Stock in connection with
these financings. The following table summarizes the shares of Series C
Preferred Stock purchased by and warrants issued to executive officers,
directors and five percent stockholders of the Company and persons associated
with them in these financings.
<TABLE>
<CAPTION>
Shares of Series C Series C
Investor Preferred Stock Warrants
<S> <C> <C>
Thomas D. Kiley............................................................. 11,594 --
Kleiner Perkins(1).......................................................... 328,090 28,839
Asset Management(2)......................................................... 222,564 20,038
Venrock(3).................................................................. 268,634 23,629
</TABLE>
(1) Includes shares held by Kleiner Perkins Caufield & Byers V. Joseph S.
Lacob, a Director of the Company, is a general partner of Kleiner Perkins
Caufield & Byers.
(2) Craig C. Taylor, a Director of the Company, is a general partner of AMC
Partners 89, L.P., the general partner of Asset Management.
(3) Includes shares held by both Venrock Associates and Venrock Associates II.
Patrick F. Latterell, a Director of the Company, is a general partner of
Venrock Associates and Venrock Associates II.
Holders of certain shares of the Company's Preferred Stock and Common
Stock, including certain of its officers, directors and principal stockholders
and related investment funds, are entitled to certain registration rights in
respect of the Common Stock which have been issued upon conversion thereof.
The Company has entered into a Patent License Agreement with Dr. Stuart
W. Young, dated October 15, 1992, pursuant to which the Company has been granted
an exclusive royalty-bearing license to use and to manufacture and sell products
based on certain patent rights owned by Dr. Young related to certain zeolite and
zeolite-like substances. In consideration for entering into the Patent License
Agreement, the Company issued Dr. Young 16,667 shares of its Common Stock.
In September 1994, the Company entered into a Note Secured by Stock
Pledge Agreement (the "First Note") with Dr. Stuart W. Young, an executive
officer of the Company, for the total principal amount of approximately $65,000.
The First Note bears interest at 5.86%, with interest payable annually and
principal due in full on August 31, 1997. In April 1995, the Company loaned Dr.
Young approximately an additional $30,000 under a similar Note Secured by Stock
Pledge Agreement (the "Second Note"). The Second Note bears interest at 7.19%,
with principal and interest due in full on February 28, 1998. The proceeds of
such Notes were to be used solely to pay federal and state tax liability
incurred by Dr. Young in connection with his acquisition of 50,000 shares
26.
<PAGE> 31
of Common Stock pursuant to his exercise of a non-statutory stock option grant
under the Company's 1992 Stock Option Plan.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who
beneficially own more than 10% of a registered class of the Company's equity
securities, to file with the United States Securities and Exchange Commission
(the "SEC") initial reports of beneficial ownership and reports of changes in
beneficial ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations that no other reports were required, the
Company believes that during the period from October 23, 1995 (the effective
date of the Company's initial public offering) to June 30, 1996, all officers,
directors and beneficial owners of more than ten percent of the outstanding
Common Stock complied with all Section 16(a) requirements.
STOCK OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Common Stock as of September 30,
1996 by (i) all persons who are beneficial owners of five percent or more of the
Company's Common Stock, (ii) each director and nominee for director, (iii) the
Named Executive Officers in the Summary Compensation Table above and (iv) all
current directors and executive officers as a group. The number of shares
beneficially owned by each director or executive officer is determined under
rules of the SEC and the information is not necessarily indicative of beneficial
ownership for any other purpose. Shares of Common Stock subject to convertible
securities that are currently exercisable or convertible or which will become
exercisable or convertible within the next 60 days are deemed to be beneficially
owned by the person holding such convertible security for computing the
percentage ownership of such person, but are not treated as outstanding for
computing the percentage of any other person. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based upon such information furnished by such owners, have sole investment power
with respect to such shares, subject to community property laws where
applicable.
27.
<PAGE> 32
<TABLE>
<CAPTION>
NUMBER PERCENT OF TOTAL
NAME AND ADDRESS OF SHARES SHARES OUTSTANDING(1)(2)
---------------- --------- -----------------------
<S> <C> <C>
Kleiner Perkins Caufield & Byers V(3)........................ 1,515,187 17.6%
2750 Sand Hill Road
Menlo Park, CA 94025
Venrock Associates(4)........................................ 1,239,289 14.4%
30 Rockefeller Plaza, Suite 5508
New York, NY 10112
Asset Management Associates 1989, L.P.(5).................... 1,189,628 13.8%
2275 East Bayshore, Suite 150
Palo Alto, CA 94303
Richard A. Miller, M.D.(6)................................... 452,343 5.2%
Integral Capital Partners II, L.P.(7)........................ 563,258 6.6%
2750 Sand Hill Road
Menlo Park, CA 94025
Thomas D. Kiley(8)........................................... 146,576 1.7%
Patrick F. Latterell(9)...................................... 1,239,289 14.4%
Joseph S. Lacob (10)......................................... 1,515,187 17.6%
Craig C. Taylor(11).......................................... 1,189,628 13.8%
Joseph C. Scodari(12)........................................ 21,667 *
Marc L. Steuer(13)........................................... 133,334 1.5%
William C. Dow, Ph.D.(14).................................... 110,001 1.3%
Stuart W. Young, M.D.(15).................................... 163,334 1.9%
All officers and directors as a group (10 persons)(16)....... 5,056,361 55.2%
</TABLE>
* Less than 1%.
(1) Percentage of beneficial ownership is calculated assuming 8,554,750
shares of Common Stock were outstanding as of September 30, 1996.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of September 30, 1996, are
deemed outstanding for computing the percentage of the person holding
such option or warrant but are not deemed outstanding for computing the
percentage of any other person. Except as indicated in the footnotes to
this table and pursuant to 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.
(2) This table is based upon information supplied to the Company by
executive officers, directors and principal stockholders. The address
of each officer and director identified in this table is that of the
Company's executive offices, 995 East Arques Avenue, Sunnyvale, CA
94086. Unless otherwise indicated in the footnotes to this table and
subject to applicable community property laws, each of the stockholders
named in this table has sole voting and investment power with respect
to the shares shown as beneficially owned by it or him.
(3) Includes shares held by persons and entities affiliated with Kleiner
Perkins, including 31,667 shares held by Joseph Lacob, a Director of
the Company, who is a General Partner of Kleiner Perkins. Mr. Lacob
disclaims beneficial ownership of the shares held by Kleiner Perkins
and its affiliated entities except to the extent of his individual
share ownership and his pecuniary interest arising from his general
partnership
28.
<PAGE> 33
interest in Kleiner Perkins. Also, includes options exercisable for
15,000 shares held by Mr. Lacob and warrants exercisable for 28,839
shares held by Kleiner Perkins.
(4) Includes shares held by persons and entities affiliated with Venrock,
including 16,667 shares held by Patrick Latterell, a Director of the
Company, who is a General Partner of Venrock. Mr. Latterell disclaims
beneficial ownership of the shares held by Venrock and its affiliated
entities except to the extent of his individual share ownership and his
pecuniary interest arising from his general partnership interest in
Venrock. Also, includes options exercisable for 15,000 shares held by
Mr. Latterell and warrants exercisable for 23,629 shares held by
Venrock.
(5) Includes shares held by entities affiliated with Asset Management,
including options exercisable for 15,000 shares held by Craig Taylor, a
Director of the Company, who is a General Partner of AMC Partners 89,
L.P., the general partner of Asset Management. Mr. Taylor disclaims
beneficial ownership of the shares held by Asset Management and its
affiliated entities except to the extent of his individual share
ownership and his pecuniary interest arising from his general
partnership interest in AMC Partners 89, L.P. Also includes warrants
exercisable for 20,038 shares held by Asset Management.
(6) Includes 13,334, 13,334, and 279,008 shares held in trust for Jordan
Andrew Miller, Jared David Miller and the Miller-Homing Family Trust,
respectively. Also, includes options exercisable for 146,667 shares
within 60 days of September 30, 1996.
(7) Includes shares held by entities affiliated with Integral Capital
Partners II, L.P. and warrants exercisable for 20,518 shares within 60
days of September 30, 1996.
(8) Includes 131,576 shares held in the Kiley Revocable Trust, Thomas D.
Kiley, TEE, Nancy L. Kiley, TEE. Also, includes options exercisable for
15,000 shares within 60 days of September 30, 1996.
(9) Includes 16,667 shares held in trust by the Patrick Latterell Living
Trust and options exercisable for 15,000 shares. Also includes
1,207,622 shares (including warrants for 23,629 shares) held by persons
and entities affiliated with Venrock, as to which shares Mr. Latterell
disclaims beneficial ownership except as set forth in Note 4 above.
(10) Includes options exercisable for 15,000 shares. Also includes 1,468,520
shares (including warrants for 28,839 shares) held by persons and
entities affiliated with Kleiner Perkins, as to which shares Mr. Lacob
disclaims beneficial ownership except as set forth in Note 3 above.
(11) Includes options exercisable for 15,000 shares. Also includes 1,174,628
shares (including warrants for 20,038 shares) held by persons and
entities affiliated with Asset Management, as to which shares Mr.
Taylor disclaims beneficial ownership except as set forth in Note 5
above.
(12) Represents options exercisable for 21,667 shares.
(13) Represents options exercisable for 133,334 shares.
(14) Includes options exercisable for 73,334 shares.
(15) Includes options exercisable for 51,334 shares.
(16) Includes options and warrants exercisable for 539,670 and 72,506
shares, respectively. Also includes 1,468,520 shares held by persons
and entities affiliated with Kleiner Perkins, 1,174,628 shares held by
persons and entities
29.
<PAGE> 34
affiliated with Venrock. Certain directors may be deemed to be
beneficial owners of such shares, but disclaim such beneficial
ownership, as discussed in Notes 3, 4, 5, 9, 10 and 11 above.
To the Company's knowledge, each beneficial owner of more than ten
percent of the Company's capital stock filed all reports and reported all
transactions on a timely basis with the SEC, National Association of Securities
Dealers, Inc. and the Company.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's 1997 Annual Meeting must be
received by the Company no later than July 15, 1997 so they may be included in
the proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
June 30, 1996 has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting. The Annual
Report is not incorporated into this Proxy Statement and is not considered proxy
soliciting material.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the Securities and
Exchange Commission. Stockholders may obtain a copy of this report, without
charge, by writing to Cheryl B. Jaszewski, Pharmacyclics, Inc., 995 East Arques
Avenue, Sunnyvale, California 94086.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed Proxy.
THE BOARD OF DIRECTORS
Dated: November 11, 1996
30.
<PAGE> 35
APPENDIX A
PHARMACYCLICS, INC.
PROXY
Annual Meeting of Stockholders, December 6, 1996
This Proxy is Solicited on Behalf of the Board of
Pharmacyclics, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Annual Meeting of Stockholders to be held December 6, 1996 and
the Proxy Statement and appoints Richard A. Miller and Marc L. Steuer and each
of them, the Proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of Pharmacyclics, Inc. (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders of the Company to
be held at the Company's headquarters, 995 East Arques Avenue, Sunnyvale,
California 94086 on Friday, December 6, 1996 at 9:00 A.M. (the "Annual
Meeting"), and at any adjournment or postponement thereof, with the same force
and effect as the undersigned might or could do if personally present thereat.
The shares represented by this Proxy shall be voted in the manner set forth on
the reverse side.
1. To elect the following directors to serve until the next annual
meeting of stockholders and until their successors are elected and qualified:
<TABLE>
<S> <C> <C> <C>
WITHHOLD
AUTHORITY
FOR TO VOTE
Thomas D. Kiley _____ _____
Joseph S. Lacob _____ _____
Patrick F. Latterell _____ _____
Richard A. Miller _____ _____
Joseph C. Scodari _____ _____
Craig C. Taylor _____ _____
2. FOR AGAINST ABSTAIN To approve the amendment and restatement
of the Company's Certificate of
Incorporation to increase the number of
authorized shares of common stock
thereunder from 12,000,000 shares to
24,000,000 shares.
3. FOR AGAINST ABSTAIN To approve an amendment to the Company's
1995 Stock Option Plan (the "Plan") in
order to increase the maximum number of
shares of common stock authorized for
issuance under the Plan by an additional
750,000 shares.
4. FOR AGAINST ABSTAIN To ratify the Board of Director's
selection of Price Waterhouse LLP to
serve as the Company's independent
accountants for the fiscal year ending
June 30, 1997.
</TABLE>
The Board of Directors recommends a vote FOR each of the directors
listed above and a vote FOR the other proposals. This Proxy, when properly
executed, will be voted as specified above. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF THE DIRECTORS LISTED ABOVE AND
IN FAVOR OF THE OTHER PROPOSALS.
Please print the name(s) appearing on each share certificate(s) over
which you have voting authority: _______________________________________
(Print name(s) on certificate)
Please sign your name:____________________________ Date:_________
(Authorized Signature(s))
<PAGE> 36
APPENDIX B
PHARMACYCLICS, INC.
1995 STOCK OPTION PLAN
(AS AMENDED THROUGH AUGUST 1, 1996)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option Plan is intended to promote the
interests of Pharmacyclics, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
Under the Plan, eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of Common Stock.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Plan with respect to Section 16 Insiders. No
non-employee Board member shall be eligible to serve on the Primary Committee if
such individual has, during the twelve (12)- month period immediately preceding
the date of his or her appointment to the Committee or (if shorter) the period
commencing with the Section 12(g) Registration Date and ending with the date of
his or her appointment to the Primary Committee, received an option grant or
direct stock issuance under the Plan or any other stock option, stock
appreciation, stock bonus or other stock plan of the Corporation (or any Parent
or Subsidiary), other than pursuant to the Director Plan.
B. Administration of the Plan with respect to all other
persons may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer the Plan
with respect to all such persons who are not Section 16 Insiders. The members of
the Secondary Committee may be Board members who are Employees eligible to
receive discretionary option grants or direct stock issuances
<PAGE> 37
or any stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and shall be
subject to removal by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all powers and
authority previously delegated to such committee.
D. The Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Plan and to make such determinations under, and issue such
interpretations of, the provisions of the Plan and any outstanding options
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the Plan under
its jurisdiction or any option thereunder.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants made under the Plan.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are
as follows:
(i) Employees,
(ii) non-employee members of the Board (other
than those serving as members of the Primary Committee)
or the board of directors of any Parent or Subsidiary,
and
(iii) consultants and other independent advisors
who provide services to the Corporation (or any Parent
or Subsidiary).
B. The Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine, with respect to the option grants, which
eligible persons are to receive option grants, the time or times when such
option grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times at which each option is to become
exercisable
2.
<PAGE> 38
and the vesting schedule (if any) applicable to the option shares and the
maximum term for which the option is to remain outstanding.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock which may be issued over the term of the Plan shall not exceed 1,670,0591/
shares, subject to adjustment from time to time in accordance with the
provisions of this Section V. Such authorized share reserve is comprised of (i)
the number of shares which remained available for issuance, as of the Plan
Effective Date, under the Predecessor Plan as last approved by the Corporation's
stockholders prior to such date, including the shares subject to the outstanding
options incorporated into the Plan and any other shares which would have been
available for future option grants under the Predecessor Plan, (ii) the
automatic increase of 85,178 shares effected on January 2, 1996 pursuant to
Section V.B. below and (iii) the 750,000-share increase approved by the Board on
August 1, 1996, subject to approval by the stockholders at the 1996 Annual
Meeting.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of each
calendar year during the term of the Plan, beginning with the 1996 calendar
year, by an amount equal to one percent (1%) of the shares of Common Stock
outstanding on December 31 of the immediately preceding calendar year; but in no
event shall any such annual increase exceed 500,000 shares. No Incentive Options
may be granted on the basis of the additional shares of Common Stock resulting
from such annual increases.
C. No one person participating in the Plan may receive options
and separately exercisable stock appreciation rights for more than 333,334
shares of Common Stock in the aggregate over the term of the Plan.
D. Shares of Common Stock subject to outstanding options shall
be available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
All shares issued under the Plan (including shares issued upon exercise of
options incorporated from the Predecessor Plan), whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise
- --------
1/Such share reserve gives effect to the two-for-three reverse stock split
of the Common Stock effected on October 23, 1995.
3.
<PAGE> 39
price of an option under the Plan (including any option incorporated from the
Predecessor Plan) be paid with shares of Common Stock or should shares of Common
Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of Common
Stock issued to the holder of such option.
E. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the maximum number and/or class of securities for
which the share reserve is to increase automatically each year, (iii) the number
and/or class of securities for which any one person may be granted options and
separately exercisable stock appreciation rights over the term of the Plan, and
(iv) the number and/or class of securities and the exercise price per share in
effect under each outstanding option (including any option incorporated from the
Predecessor Plan) in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
4.
<PAGE> 40
ARTICLE TWO
GRANT OF OPTIONS
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the
Plan Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I of
Article Three and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iii) to the extent the option is exercised
for vested shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
written instructions to (a) a Corporation- designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income
and employment taxes required to be withheld by the Corporation by
reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
5.
<PAGE> 41
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise
of any options held by the Optionee at the time of cessation of Service or
death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option exercisable in whole or in
part by the Optionee at the time of death may be subsequently exercised
by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution.
(iii) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and cease
to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent it is not exercisable for vested shares on the date of
such cessation of Service.
(iv) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to be outstanding.
(v) In the event of a Corporate
Transaction,the provisions of Section III of this Article Two shall
govern the period for which the outstanding options are to remain
exercisable following the Optionee's cessation of Service and shall
supersede any provisions to the contrary in this section.
6.
<PAGE> 42
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of
Service from the period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more additional installments in
which the Optionee would have vested under the option had the Optionee
continued in Service.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of
the Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in accordance with the terms of a Qualified Domestic Relations
Order. The assigned option may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned option (or portion
thereof) shall be the same as those in effect for the option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
7.
<PAGE> 43
G. Beneficiary Designation. An Optionee may file a written
beneficiary designation indicating the person entitled to exercise Optionee's
outstanding options on the Optionee's behalf at the time of his/her death. Such
beneficiary designation may be changed by the Optionee at any time by filing the
appropriate form with the Plan Administrator.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Three shall be applicable to Incentive
Options. Options which are specifically designated as Non- Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to
Employees.
B. Exercise Price. The exercise price per share shall not be
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
8.
<PAGE> 44
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of Common
Stock subject to those rights) upon the occurrence of a Corporate Transaction,
whether or not those options are to be assumed or replaced (or those repurchase
rights are to be assigned) in the Corporate Transaction.
D. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan on both an aggregate and per
Optionee basis following the consummation of such Corporate Transaction and (ii)
the exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same.
F. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of
9.
<PAGE> 45
Common Stock subject to those terminated rights shall immediately vest in full)
in the event the Optionee's Service should subsequently terminate by reason of
an Involuntary Termination within eighteen (18) months following the effective
date of such Corporate Transaction. Any options so accelerated shall remain
exercisable for fully-vested shares until the earlier of (i) the expiration of
the option term or (ii) the expiration of the one (1)-year period measured from
the effective date of the Involuntary Termination.
G. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of one
or more outstanding options (and the automatic termination of one or more
outstanding repurchase rights with the immediate vesting of the shares of Common
Stock subject to those rights) upon the occurrence of a Change in Control or
(ii) condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent Involuntary Termination of
the Optionee's Service within a specified period following the effective date of
such Change in Control. Any options accelerated in connection with a Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar limitation is not exceeded. To the extent such dollar limitation
is exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.
I. The grant of options under the Plan shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Plan (including
outstanding options incorporated from the Predecessor Plan) and to grant in
substitution new options covering the same or different number of shares of
Common Stock but with an exercise price per share based on the Fair Market Value
per share of Common Stock on the new option grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority
to grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
10.
<PAGE> 46
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the
right, exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option for
shares of Common Stock and the surrender of that option in exchange for
a distribution from the Corporation in an amount equal to the excess of
(A) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such shares.
(ii) No such option surrender shall be
effective unless it is approved by the Plan Administrator. If the
surrender is so approved, then the distribution to which the Optionee
shall be entitled may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole
discretion deem appropriate.
(iii) If the surrender of an option is
rejected by the Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the later of (A) five (5)
business days after the receipt of the rejection notice or (B) the last
day on which the option is otherwise exercisable in accordance with the
terms of the documents evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the option grant
date.
C. The following terms shall govern the grant and
exercise of limited stock appreciation rights:
(i) One or more Section 16 Insiders may be
granted limited stock appreciation rights with respect to their
outstanding options.
(ii) Upon the occurrence of a Hostile
Take-Over, each such individual holding one or more options with such a
limited stock appreciation right in effect for at least six (6) months
shall have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Take-Over) to surrender each such option
to the Corporation, to the extent the option is at the time exercisable
for vested shares of Common Stock. In return for the surrendered
option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price
of the shares of Common Stock which are at the time vested
11.
<PAGE> 47
under each surrendered option (or surrendered portion thereof) over (B)
the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the option
surrender date.
(iii) Neither the approval of the Plan
Administrator nor the consent of the Board shall be required in
connection with such option surrender and cash distribution.
(iv) The balance of the option (if any) shall
continue in full force and effect in accordance with the documents
evidencing such option.
12.
<PAGE> 48
ARTICLE THREE
MISCELLANEOUS
I. FINANCING
A. The Plan Administrator may permit any Optionee to pay the
option exercise price under the Plan by delivering a promissory note payable in
one or more installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Promissory notes may be authorized with or
without security or collateral. In all events, the maximum credit available to
the Optionee may not exceed the sum of (i) the aggregate option exercise price
payable for the purchased shares plus (ii) any Federal, state and local income
and employment tax liability incurred by the Optionee in connection with the
option exercise.
B. The Plan Administrator may, in its discretion, determine
that one or more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan Administrator may
deem appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or stock appreciation rights under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options under the Plan with the right to use
shares of Common Stock in satisfaction of all or part of the Taxes incurred by
such holders in connection with the exercise of their options. Such right may be
provided to any such holder in either or both of the following formats:
(i) Stock Withholding: The election to have
the Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such Non-Statutory Option, a portion of
those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
(ii) Stock Delivery: The election to deliver
to the Corporation, at the time the Non-Statutory Option is exercised,
one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise triggering the
Taxes) with an aggregate
13.
<PAGE> 49
Fair Market Value equal to the percentage of the Taxes (not to exceed
one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on August 2, 1995 and
approved by the Corporation's stockholders on September 11, 1995. The Plan
became effective on the Plan Effective Date and serves as the successor to the
Predecessor Plan. On August 1, 1996, the Board authorized a 750,000-share
increase in the number of shares of Common Stock available for issuance under
the Plan. However, no option granted on the basis of such increase shall become
exercisable, in whole or in part, unless and until the stockholders approve the
increase. If such stockholder approval is not obtained at the 1996 Annual
Meeting, then any options previously granted on the basis of the 750,000-share
increase shall terminate, and no further options based on such increase shall be
granted. All outstanding options under the Plan which have not been granted on
the basis of the 750,000-share increase shall remain outstanding in accordance
with the terms and provisions of the agreements evidencing those grants, whether
or not stockholder approval of the share increase is obtained. Subject to the
foregoing limitations, the Plan Administrator may grant options under the Plan
at any time before the date fixed herein for the termination of the Plan.
B. The Plan shall serve as the successor to the Predecessor
Plan, and no further option grants shall be made under the Predecessor Plan
after the Plan Effective Date. All options outstanding under the Predecessor
Plan as of such date shall be incorporated into the Plan and treated as
outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. The option/vesting acceleration provisions of Article Two
relating to Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise provide for such acceleration.
D. The Plan shall terminate upon the earliest of (i) August 1,
2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options under the Plan,
(iii) the termination of all outstanding options in connection with a Corporate
Transaction, or (iv) termination by the Board. Upon such Plan termination, all
options outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the documents evidencing such
options.
14.
<PAGE> 50
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to options or stock appreciation rights at the time outstanding under
the Plan unless the Optionee consents to such amendment or modification. In
addition, the Board shall not, without the approval of the Corporation's
stockholders, (i) materially increase the maximum number of shares issuable
under the Plan, or the maximum number of shares for which any one person may be
granted options or separately exercisable stock appreciation rights in the
aggregate over the term of the Plan, except for permissible adjustments in the
event of certain changes in the Corporation's capitalization, (ii) materially
modify the eligibility requirements for Plan participation or (iii) materially
increase the benefits accruing to Plan participants.
B. Options to purchase shares of Common Stock may be granted
under the Plan that are in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under the
Plan are held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees the exercise price paid for any excess shares issued
under the Plan and held in escrow, together with interest (at the applicable
Short Term Federal Rate) for the period the shares were held in escrow, and such
shares shall thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
or stock appreciation right under the Plan and the issuance of any shares of
Common Stock upon the exercise of any option or stock appreciation right shall
be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options and stock appreciation rights granted under it and the shares of Common
Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of
15.
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the Form S-8 registration statement for the shares of Common Stock issuable
under the Plan, and all applicable listing requirements of any stock exchange
(or the Nasdaq National Market, if applicable) on which Common Stock is then
listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which rights
are hereby expressly reserved by each, to terminate such person's Service at any
time for any reason, with or without cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction; or
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(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Pharmacyclics, Inc., a Delaware corporation.
G. DIRECTOR PLAN shall mean the Corporation's 1995 Non-Employee
Directors Stock Option Plan.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
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(iii) For purposes of option grants made on the date the
Underwriting Agreement is executed and the initial public offering
price of the Common Stock is established, the Fair Market Value shall
be deemed to be equal to the established initial offering price per
share.
L. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the following transaction:
(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, and
(ii) more than fifty percent (50%) of the securities so
acquired are accepted from persons other than Section 16 Insiders.
M. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
N. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a reduction
in his or her level of compensation (including base salary, fringe
benefits and participation in corporate-performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation
is effected by the Corporation without the individual's consent.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs
A-3.
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of the Corporation (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider as
grounds for the dismissal or discharge of any Optionee or other person in the
Service of the Corporation (or any Parent or Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
R. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
S. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
U. PLAN shall mean the Corporation's 1995 Stock Option Plan, as set
forth in this document.
V. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Plan with respect to one or more classes of eligible persons, to
the extent such entity is carrying out its administrative functions under the
Plan with respect to the persons under its jurisdiction.
W. PLAN EFFECTIVE DATE shall mean October 23, 1995, the date on which
the Underwriting Agreement was executed and the initial public offering price of
the Common Stock was established.
X. PREDECESSOR PLAN shall mean the Corporation's existing 1992 Stock
Option Plan.
Y. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the Plan with
respect to Section 16 Insiders.
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Z. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
AA. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Plan with respect to eligible
persons other than Section 16 Insiders.
AB. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
AC. SECTION 12(g) REGISTRATION DATE shall mean the first date on which
the Common Stock is registered under Section 12(g) of the 1934 Act.
AD. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, or a
consultant or independent advisor, except to the extent otherwise specifically
provided in the documents evidencing the option grant.
AE. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
AF. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
AG. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
AH. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
AI. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-5.
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AJ. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
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