<PAGE> 1
SCHEDULE 14A INFORMATION
(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
(AMENDMENT NO. )
Filed by the registrant [X]
Filed by a Party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
PHARMACYCLICS, INC.
995 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
NOVEMBER 14, 1997
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
11:30 A.M. on December 17, 1997, at Embassy Suites, 2885 Lakeside Drive, Santa
Clara, California 95054.
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 1998 annual
meeting and until their successors are elected and qualified;
(ii) the amendment of the Company's 1995 Stock Option Plan (the
"Option Plan") in order to increase the total number of shares of common
stock authorized for issuance over the term of the Option Plan by an
additional 500,000 shares and to make such other changes as described
herein;
(iii) the amendment of the Company's Employee Stock Purchase Plan (the
"Purchase Plan") in order to increase the total number of shares of common
stock authorized for issuance over the term of the Purchase Plan by an
additional 50,000 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,
1998.
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 December 5, 1997, 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.
Copies of the Pharmacyclics, Inc. 1997 Annual Report and Annual Report on
Form 10-K for the fiscal year ended June 30, 1997 are also enclosed.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Richard A. Miller, M.D.
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 YOUR SHARES MAY BE VOTED IF
YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING.
<PAGE> 3
PHARMACYCLICS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 17, 1997
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 11:30 A.M. local time on Wednesday, December 17, 1997, at Embassy
Suites, 2885 Lakeside Drive, Santa Clara, California 95054, for the following
purposes:
1. To elect a Board of six (6) directors to serve for the ensuing year
and until their respective successors are elected and qualified.
2. To approve an amendment to the Company's 1995 Stock Option Plan
(the "Option Plan") including an increase in the total number of shares of
common stock authorized for issuance over the term of the Option Plan by an
additional 500,000 shares.
3. To approve an amendment to the Company's Employee Stock Purchase
Plan (the "Purchase Plan") in order to increase the total number of shares
of common stock authorized for issuance over the term of the Purchase Plan
by an additional 50,000 shares.
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending June 30, 1998.
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 20, 1997 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 (10) 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 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 14, 1997
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.
<PAGE> 4
PHARMACYCLICS, INC.
995 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
------------------------
PROXY STATEMENT
------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 17, 1997
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 1997 ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL
MEETING") TO BE HELD AT 11:30 A.M. ON DECEMBER 17, 1997, AT EMBASSY SUITES, 2885
LAKESIDE DRIVE, SANTA CLARA, CALIFORNIA 95054 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 14,
1997.
RECORD DATE AND VOTING
Stockholders of record at the close of business on October 20, 1997 are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, there were 10,159,488 shares of the Company's common
stock (the "Common Stock") outstanding and entitled to vote, held by
approximately 525 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, Vice
President, Finance and Administration, 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 7, 1997.
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.
<PAGE> 5
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. The Company has engaged Corporate Investor
Communications, Inc. ("CIC") to provide routine advice and services for Proxy
solicitation. CIC will receive approximately $4,000 from the Company for such
advice and services, plus reimbursement of costs incurred in forwarding the
solicitation materials to the beneficial owners of Common Stock. To assure that
a quorum will be present in person or by proxy at the Annual Meeting, it may be
necessary for CIC, certain officers, directors, employees or other agents of the
Company to solicit proxies by telephone, facsimile or other means or in person.
Except with respect to CIC, the Company will not compensate such individuals for
any such services. Except as described above, 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 ENVELOPE NO LATER THAN DECEMBER 5, 1997, SO THAT YOUR SHARES MAY
BE VOTED IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING.
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED JUNE
30, 1997 (THE "ANNUAL REPORT") AND THE ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED JUNE 30, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "FORM 10-K"), HAVE BEEN MAILED CONCURRENTLY WITH THE MAILING OF THE NOTICE
OF ANNUAL MEETING AND PROXY STATEMENT TO ALL STOCKHOLDERS ENTITLED TO NOTICE OF
AND TO VOTE AT THE ANNUAL MEETING. NEITHER THE ANNUAL REPORT NOR THE FORM 10-K
IS CONSIDERED PROXY-SOLICITING MATERIAL AND NEITHER IS INCORPORATED INTO THIS
PROXY STATEMENT.
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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 AGE POSITION(S) WITH THE COMPANY DIRECTOR SINCE
- ------------------------- --- ------------------------------- ---------------
<S> <C> <C> <C>
Thomas D. Kiley 54 Director 1991
Joseph S. Lacob 41 Director 1991
Patrick F. Latterell 39 Director 1991
Richard A. Miller, M.D. 46 Director, President and Chief 1991
Executive Officer
Joseph C. Scodari 44 Director 1994
Craig C. Taylor 47 Director 1991
</TABLE>
BUSINESS EXPERIENCE OF DIRECTOR NOMINEES
MR. KILEY was elected 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.
MR. LACOB was elected 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, Inc. and a director of
Heartport, Inc., as well as several private life science companies.
MR. LATTERELL was elected 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 a director of Biocircuits Corporation, Vical, Inc. and 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 1984, Dr. Miller co-founded IDEC
Pharmaceuticals Corporation where he served as Vice President and a director
until February 1992. 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
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CellPro's Scientific Advisory Board until 1993. Dr. Miller also is a Clinical
Professor of Medicine (Oncology) at Stanford University Medical Center.
MR. SCODARI was elected 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, North American Ethicals, 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 elected 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 Metra BioSystems, Inc., 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, 1997, the Board held seven meetings.
As of June 30, 1997, 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, 1997, the Audit Committee consisted of two directors, Messrs.
Latterell and Taylor. The Audit Committee held one meeting during the fiscal
year ended June 30, 1997.
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, 1997, the Compensation Committee
consisted of three directors, Messrs. Lacob, Latterell and Taylor. The
Compensation Committee met six times during the fiscal year ended June 30, 1997.
During the last fiscal year 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.
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 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, 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
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<PAGE> 8
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.
Messrs. Kiley, Lacob, Latterell, Scodari and Taylor each received an option
for 5,000 shares on December 6, 1996. Each such option has an exercise price of
$16.00 per share, the fair market value per share of Common Stock on the grant
date.
PROPOSAL TWO -- 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 "Option Plan") which will effect the following
changes: (i) increase the maximum number of shares available for issuance under
the Option Plan by an additional 500,000 shares, (ii) increase the maximum
number of shares for which options and separately exercisable stock appreciation
rights may be granted to any one individual to 750,000 shares, (iii) eliminate
the restriction that the individuals who serve as Plan Administrator may not
receive any discretionary option grants from the Company, (iv) allow unvested
shares issued under the Option Plan and subsequently repurchased by the Company
at the option exercise price paid per share to be reissued under the Option
Plan, (v) remove certain restrictions on the eligibility of non-employee Board
members to serve as Plan Administrator and (vi) effect a series of additional
changes to the provisions of the Option Plan (including the stockholder approval
requirements) in order to take advantage of the recent amendments to Rule 16b-3
of the Securities and Exchange Commission which exempts certain officer and
director transactions under the Option Plan from the short-swing liability
provisions of the Federal securities laws.
The amendment was adopted by the Board on September 11, 1997, subject to
stockholder approval at the Annual Meeting. The Board believes that the increase
in the share reserve is necessary in order to ensure that the Company will have
a sufficient reserve of Common Stock under the Option Plan to continue to
attract and retain the services of key individuals essential to the Company's
long-term growth and success. The increase in the maximum number of shares for
which any one individual may be granted options and separately exercisable stock
appreciation rights is necessary to ensure that any compensation deemed paid to
the Company's executive officers in connection with the exercise of options
continues to remain deductible by the Company and will be excluded from the $1
million limit on the deductibility of compensation paid to certain officers of
the Company. The Board believes the other amendments are needed in order to
provide the Company with more opportunities to make equity incentives available
to the non-employee Board members as an inducement for their continued service
and to facilitate plan administration in light of the new changes to Rule 16b-3.
The terms and provisions of the Option Plan, as amended through September
11, 1997, are summarized more fully below. This summary, however, does not
purport to be a complete description of all the provisions of the Option Plan. A
copy of the Option 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
Under the Option Plan, 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 Option Plan is currently administered by the
Compensation Committee of the Board. This committee (the "Plan Administrator")
has complete discretion (subject to the provisions of the Option Plan) to
authorize option grants under the Option Plan.
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<PAGE> 9
SHARE RESERVE
The maximum number of shares of Common Stock issuable over the term of the
Option Plan may not exceed 2,261,565 shares, including the 500,000-share
increase for which stockholder approval is sought under this Proposal Two. On
the first trading date of each calendar year beginning with the 1996 calendar
year, the share reserve will automatically increase by an amount equal to one
percent (1%) of the number of shares of Common Stock outstanding on the last day
of the preceding calendar year; provided that such annual increase may not
exceed 500,000 shares. The increase on January 2, 1997 was in an amount equal to
91,503 shares.
The maximum number of shares as to which any one individual participating
in the Option Plan may be granted stock options and separately exercisable stock
appreciation rights may not exceed 750,000 shares in the aggregate over the term
of the Option Plan (assuming approval of this Proposal Two).
Should any option terminate prior to exercise in full, the shares subject
to the unexercised portion of that option will be available for subsequent
option grants. In addition, any unvested shares issued under the Option Plan and
subsequently repurchased by the Company at the original exercise price paid per
share pursuant to the Company's repurchase rights under the Option Plan will be
added back to the number of shares of Common Stock reserved for issuance under
the Option Plan and will accordingly be available for reissuance through one or
more subsequent option grants made under the Option Plan.
In the event any change is made to the Common Stock issuable under the
Option 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 number and/or class of securities available for issuance (in the
aggregate and to each optionee) under the Option Plan.
As of September 30, 1997, 1,278,600 shares were subject to outstanding
option grants under the Option Plan, 982,965 shares remained available for
future grants (assuming approval of this Proposal Two), and 567,241 shares have
been issued under the Option Plan.
ELIGIBILITY
Officers, other employees of the Company and its parent or subsidiaries,
non-employee members of the Board and the board of directors of its parent or
subsidiaries and independent consultants of the Company and its parent or
subsidiary corporations are eligible to participate in the Option Plan.
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, 1997 approximately four executive officers, 46 other
employees and five non-employee Board members were eligible to participate in
the Option Plan (assuming approval of this Proposal Two), 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 Option 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, 1997, the fair
market value per share of the Common Stock was $24.75 per share, as reported on
the Nasdaq National Market.
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
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<PAGE> 10
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 Option 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 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 Option 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 Option 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
Option Plan either at the time of such change in control or upon the subsequent
termination of the individual's service.
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 Option 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.
7
<PAGE> 11
AMENDMENT AND TERMINATION
The Board may amend or modify the Option Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the Option Plan at any time, and the Option 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 Option Plan between July 1, 1996 and
September 30, 1997, together with the weighted average exercise price payable
per share.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
OPTIONS GRANTED WEIGHTED AVERAGE
NAME (NUMBER OF SHARES) EXERCISE PRICE
- ------------------------------------------------------------- ------------------ ----------------
<S> <C> <C>
Richard A. Miller, President and Chief Executive Officer..... 60,000 $15.75
Marc L. Steuer, Vice President, Business Development and
Chief Financial Officer.................................... 55,000 $16.43
William C. Dow, Ph.D., Vice President, Chemical Research and
Development................................................ 30,000 $15.75
Cheryl B. Jaszewski, Vice President, Finance and
Administration............................................. 20,000 $15.75
All current executive officers as a group (4 persons)........ 165,000 $15.98
All current non-employee Board members as a group............ 25,000 $16.00
All employees, including current officers who are not
executive officers as a group (27 persons)................. 183,501 $16.44
</TABLE>
FEDERAL TAX CONSEQUENCES OF OPTIONS
Options granted under the Option 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.
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
8
<PAGE> 12
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 to employees 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 recognized 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. Options
or stock appreciation rights granted other than to employees and Board members
will result in a charge to the Company's earnings based upon the Black-Schoales.
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.
NEW PLAN BENEFITS
As of September 30, 1997, no stock options have been granted on the basis
of the 500,000-share increase for which stockholder approval is sought as part
of this Proposal Two.
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 Option Plan which will increase
the maximum number of shares of Common Stock authorized for issuance over the
term of the Option Plan by an additional 500,000 shares. Should such stockholder
approval not be obtained, then the 500,000-share increase to the share reserve
will not be implemented and the maximum number of shares
9
<PAGE> 13
of Common Stock for which any one individual may be granted options and
separately exercisable stock appreciation rights will remain at 333,334. In
addition, members of the Plan Administrator will not become eligible to
participate in the Option Plan, and any unvested shares repurchased by the
Company at the option exercise price paid per share will not be added back to
the share reserve for reissuance. The Option Plan will, however, continue to
remain in effect, and option grants may continue to be made pursuant to the
provisions of the Option Plan in effect prior to the amendment summarized in
this Proposal Two, until the available reserve of Common Stock as last approved
by the stockholders has been issued pursuant to option grants made under the
Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF
THE AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN.
PROPOSAL THREE -- APPROVAL OF AN
AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN
The Company's stockholders are also being asked to approve an amendment to
the Employee Stock Purchase Plan (the "Purchase Plan") to increase the number of
shares of the Company's Common Stock authorized for issuance under the Purchase
Plan by an additional 50,000 shares.
The Purchase Plan was originally adopted by the Board of Directors on
August 2, 1995, approved by the Company's stockholders on September 11, 1995 and
became effective on October 23, 1995. The Purchase Plan is intended to provide
eligible employees of the Company and its participating affiliates with the
opportunity to acquire a proprietary interest in the Company through
participation in a payroll-deduction based employee stock purchase plan designed
to operate in compliance with Section 423 of the Internal Revenue Code.
The Board amended the Purchase Plan on September 11, 1997, subject to
stockholder approval at the Annual Meeting. The Board believes that it is in the
best interests of the Company to continue a program of stock ownership for the
Company's employees in order to provide them with a meaningful opportunity to
acquire a substantial proprietary interest in the Company and thereby encourage
such individuals to remain in the Company's service and more closely align their
interests with those of the stockholders.
The following is a summary of the principal features of the Purchase Plan
as amended through September 11, 1997. The summary, however, does not purport to
be a complete description of all the provisions of the Purchase Plan. Any
stockholder of the Company who wishes to obtain a copy of the actual plan
document may do so upon written request to the Corporate Secretary at the
Company's principal executive offices in Sunnyvale, California.
SHARE RESERVE
A total of 100,000 shares of Common Stock have been reserved for issuance
under the Purchase Plan, inclusive of the 50,000 share increase for which
stockholder approval is sought under this Proposal Three. In the event any
change is made to the outstanding shares of Common Stock by reason of any
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares or other change in corporate structure effected without the Company's
receipt of consideration, appropriate adjustments will be made to (i) the class
and maximum number of securities issuable under the Purchase Plan, including the
class and maximum number of securities issuable per participant on any one
purchase date, and (ii) the class and number of securities subject to each
outstanding purchase right and the purchase price payable per share thereunder.
ADMINISTRATION
The Purchase Plan will be administered by the Compensation Committee of the
Board. Such committee, as Plan Administrator, will have full authority to adopt
such rules and procedures as it may deem necessary for proper plan
administration and to interpret the provisions of the Purchase Plan. All costs
and expenses incurred in plan administration will be paid by the Company without
charge to participants.
10
<PAGE> 14
OFFERING PERIODS AND PURCHASE PERIODS
The Purchase Plan is comprised of a series of successive offering periods,
each with a maximum duration (not to exceed twenty-four (24) months) designated
by the Plan Administrator prior to the start date. The current offering period
began on November 1, 1997 and will end on October 31, 1999, and the next
offering period is scheduled to commence on November 1, 1999.
Shares will be purchased during the offering period at successive
semi-annual intervals. Each such interval will constitute a purchase period.
Purchase periods under the Purchase Plan will begin on the first business day in
May and November each year and end on the last business day in the immediately
succeeding October and April, respectively, each year. The first purchase period
under the current offering period began on November 1, 1997 and will end on the
last business day in April 1998.
ELIGIBILITY
Any individual who customarily works for more than twenty (20) hours per
week for more than five (5) months per calendar year in the employ of the
Company or any participating affiliate will become eligible to participate in an
offering period on the start date of any purchase period (within that offering
period) which begins on or after such individual's completion of ninety (90)
days of continuous service with the Company or any affiliate. The date such
individual enters the offering period will be designated his or her entry date
for purposes of that offering period.
Participating affiliates include any parent or subsidiary corporations of
the Company, whether now existing or hereafter organized, which elect, with the
approval of the Plan Administrator, to extend the benefits of the Purchase Plan
to their eligible employees.
As of September 30, 1997, approximately 37 employees, including three
executive officers, were eligible to participate in the Purchase Plan.
PURCHASE PROVISIONS
Each participant will be granted a separate purchase right for each
offering period in which he or she participates. The purchase right will be
granted on his or her entry date into that offering period and will be
automatically exercised on the last business day of each purchase period within
that offering period on which he or she remains an eligible employee.
Each participant may authorize period payroll deductions in any multiple of
1% of his or her total cash earnings per pay period, up to a maximum of ten
percent (10%).
On the last business day of each purchase period, the accumulated payroll
deductions of each participant will automatically be applied to the purchase of
whole shares of Common Stock at the purchase price in effect for the participant
for that purchase period. However, the maximum number of shares of Common Stock
a participant may purchase on any purchase date may not exceed 1,000 shares.
PURCHASE PRICE
The purchase price per share at which Common Stock will be purchased on the
participant's behalf on each purchase date within the offering period will be
equal to eighty-five percent (85%) of the lower of (i) the fair market value per
share of Common Stock on the participant's entry date into that offering period
or (ii) the fair market value per share of Common Stock on that purchase date.
However, for each participant whose entry date is other than the start date of
the offering period, the clause (i) amount will not be less than the fair market
value per share of Common Stock on the start date of that offering period.
VALUATION
The fair market value per share of Common Stock on any relevant date will
be deemed equal to the closing selling price per share on such date on the
Nasdaq National Market. On September 30, 1997, the fair market value per share
of Common Stock was $24.75 per share.
11
<PAGE> 15
SPECIAL LIMITATIONS
The Purchase Plan imposes certain limitations upon a participant's rights
to acquire Common Stock, including the following limitations:
(i) No purchase right may be granted to any individual who owns stock
(including stock purchasable under any outstanding purchase rights)
possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company of any of its affiliates.
(ii) No purchase right granted to a participant may permit such
individual to purchase Common Stock at a rate greater than $25,000 worth of
such Common Stock (valued at the time such purchase right is granted) for
each calendar year the purchase right remains outstanding at any time.
TERMINATION OF PURCHASE RIGHTS
The purchase right will immediately terminate upon the participant's loss
of eligible employee status or upon his or her affirmative withdrawal from the
offering period. The payroll deductions collected for the purchase period in
which the purchase right terminates may, at the participant's election, be
immediately refunded or applied to the purchase of Common Stock at the end of
that purchase period.
STOCKHOLDER RIGHTS
No participant will have any stockholder rights with respect to the shares
of Common Stock covered by his or her purchase right until the shares are
actually purchased on the participant's behalf. No adjustment will be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
ASSIGNABILITY
No purchase right will be assignable or transferable other than in
connection with the participant's death and will be exercisable only by the
participant during his or her lifetime.
ACQUISITION
Should the Company be acquired by merger or asset sale during an offering
period, all outstanding purchase rights will automatically be exercised
immediately prior to the effective date of such acquisition. The purchase price
will be 85% of the lower of (i) the fair market value per share of Common Stock
on the participant's entry date into that offering period or (ii) the fair
market value per share of Common Stock immediately prior to such acquisition.
However, the clause (i) amount will not, for any participant whose entry date
for the offering period is other than the start date of that offering period, be
less than the fair market value per share of Common Stock on such start date.
AMENDMENT AND TERMINATION
The Purchase Plan will terminate upon the earliest to occur of (i) the last
business day in October, 2005, (ii) the date on which all available shares are
issued or (iii) the date on which all outstanding purchase rights are exercised
in connection with an acquisition of the Company.
The Board of Directors may at any time alter, suspend or discontinue the
Purchase Plan. However, the Board of Directors may not, without stockholder
approval, (i) materially increase the number of shares issuable under the
Purchase Plan or the number purchasable per participant on any one purchase
date, except in connection with certain changes in the Company's capital
structure, (ii) alter the purchase price formula so as to reduce the purchase
price, (iii) materially increase the benefits accruing to participants or (iv)
materially modify the requirements for eligibility to participate in the
Purchase Plan.
12
<PAGE> 16
STOCK ISSUANCES
The table below shows, as to each of the executive officers named in the
Summary Compensation Table elsewhere in this Proxy Statement and the various
indicated groups, the following information with respect to transactions under
the Purchase Plan effected during the period from July 1, 1996 to September 30,
1997: (i) the number of shares of Common Stock purchased under the Purchase Plan
during that period and (ii) the weighted average purchase price paid per share
of Common Stock in connection with such purchases.
<TABLE>
<CAPTION>
NUMBER OF
SHARES WEIGHTED AVERAGE
NAME PURCHASED PURCHASE PRICE
------------------------------------------------------ --------------- ----------------
<S> <C> <C>
Cheryl B. Jaszewski, Vice President, Finance and
Administration...................................... 1,132 $10.20
All current executive officers as a group (1
person)............................................. 1,132 $10.20
All employees, including current officers who are not
executive officers, as a group (31 persons)......... 13,425 $10.52
</TABLE>
NEW PLAN BENEFITS
As of September 30, 1997, no purchase rights had been granted under the
Purchase Plan on the basis of the 50,000-share increase subject to approval
under this Proposal Three.
FEDERAL TAX CONSEQUENCES
The Purchase Plan is intended to be an "employee stock purchase plan"
within the meaning of Section 423 of the Internal Revenue Code. Under a plan
which so qualifies, no taxable income will be recognized by a participant, and
no deductions will be allowable to the Company, in connection with the grant or
the exercise of an outstanding purchase right. Taxable income will not be
recognized until there is a sale or other disposition of the shares acquired
under the Purchase Plan or in the event the participant should die while still
owning the purchased shares.
If the participant sells or otherwise disposes of the purchased shares
within two (2) years after his or her entry date into the offering period in
which such shares were acquired or within one (1) year after the actual purchase
date of those shares, then the participant will recognize ordinary income in the
year of sale or disposition equal to the amount by which the fair market value
of the shares on the purchase date exceeded the purchase price paid for those
shares, and the Company will be entitled to an income tax deduction, for the
taxable year in which such sale or disposition occurs, equal in amount to such
excess.
If the participant sells or disposes of the purchased shares more than two
(2) years after his or her entry date into the offering period in which such
shares were acquired and more than one (1) one year after the actual purchase
date of those shares, then the participant will recognize ordinary income in the
year of sale or disposition equal to the lesser of (i) the amount by which the
fair market value of the shares on the sale or disposition date exceeded the
purchase price paid for those shares or (ii) 15% of the fair market value of the
shares on his or her entry date into the offering period, and any additional
gain upon the disposition will be taxed as a long-term capital gain. The Company
will not be entitled to any income tax deduction with respect to such sale or
disposition.
If the participant still owns the purchased shares at the time of death,
the lesser of (i) the amount by which the fair market value of the shares on the
date of death exceeds the purchase price or (ii) 15% of the fair market value of
the shares on his or her Entry Date into the offering period in which those
shares were acquired will constitute ordinary income in the year of death.
ACCOUNTING TREATMENT
Under current accounting rules, the issuance of shares of Common Stock
under the Purchase Plan will not result in a compensation expense chargeable
against the Company's operations. However, the Company must disclose, in notes
to the Company's financial statements, the pro forma impact which the purchase
rights
13
<PAGE> 17
granted under the Purchase Plan would have upon the Company's reported earnings
were the value of those purchase rights treated as compensation expense.
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 amendment to increase the number of shares issuable under the
Purchase Plan by an additional 50,000 shares. If such stockholder approval is
not be obtained, then any purchase rights granted on the basis of the 50,000
share increase will terminate. The Purchase Plan will, however, continue to
remain in effect, and purchase rights may be granted and stock purchases may
continue to be made pursuant to the provisions of that plan until the available
reserve of Common Stock under that plan as last approved by the stockholders has
been issued.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT OF THE PURCHASE PLAN.
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, 1998, 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, 1997. 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, 1998.
14
<PAGE> 18
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, 1997, for services rendered in all capacities to the
Company and its subsidiaries, by (i) the Company's Chief Executive Officer, (ii)
the three other highest paid executive officers whose salary and bonus for
fiscal 1997 were in excess of $100,000 and (iii) one other executive officer who
resigned during that fiscal year. The individuals named in the table will be
hereinafter referred to as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL
COMPENSATION AWARDS
------------ --------------------- ALL OTHER
SALARY SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) OPTIONS/SARS (#) ($)
- --------------------------------------------- ---- ------------ --------------------- ------------
<S> <C> <C> <C> <C>
Richard A. Miller 1997 229,833 60,000 --
President and Chief 1996 215,865 246,667 --
Executive Officer
Marc L. Steuer 1997 199,200 55,000 --
Vice President, Business Development 1996 181,827 80,000 --
and Chief Financial Officer
Stuart W. Young, M.D.(2) 1997 150,816 -- 90,273
Vice President, Medical Research 1996 160,303 33,334 --
William C. Dow, Ph.D. 1997 140,237 30,000 --
Vice President, Chemical Research and 1996 130,098 67,667 --
Development
Cheryl B. Jaszewski 1997 117,987 20,000 --
Vice President, Finance and Administration 1996 110,375 43,334 --
</TABLE>
- ---------------
(1) Includes amounts earned but not paid in the fiscal year ended June 30, 1997.
(2) Dr. Young resigned from the Company effective as of June 8, 1997. The amount
reported under "All Other Compensation" for fiscal 1997 represents
consulting fees earned by Dr. Young since the date of his resignation.
15
<PAGE> 19
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,
1997. 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
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ------------------------------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENTAGE OF APPRECIATION
UNDERLYING TOTAL OPTIONS EXERCISE FOR OPTION TERM(5)
OPTIONS GRANTED GRANTED TO PRICE PER EXPIRATION ---------------------
NAME (1)(2) EMPLOYEES(3) SHARE(4) DATE 5% 10%
- ---------------------------- --------------- ------------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Miller, M.D...... 60,000 17.0% $ 15.75 06/11/07 $594,305 $1,506,089
Marc L. Steuer.............. 15,000 4.3% $ 18.25 09/18/06 $172,160 $ 436,287
40,000 11.0% $ 15.75 06/11/07 $396,204 $1,004,058
Stuart W. Young, M.D.(6).... -- -- -- -- -- --
William C. Dow, Ph.D........ 30,000 8.3% $ 15.75 06/11/07 $297,153 $ 753,043
Cheryl B. Jaszewski......... 20,000 5.6% $ 15.75 06/11/07 $198,102 $ 502,029
</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) The dates on which the options were granted are as follows:
<TABLE>
<CAPTION>
NAME NUMBER SHARES GRANT DATE
--------------------------------------------- ------------- ----------
<S> <C> <C>
Richard A. Miller, M.D....................... 60,000 06/12/97
Marc L. Steuer............................... 15,000 09/19/96
40,000 06/12/97
William C. Dow, Ph.D......................... 30,000 06/12/97
Cheryl B. Jaszewski.......................... 20,000 06/12/97
</TABLE>
The option for 60,000 shares granted to Dr. Miller on June 12, 1997 is
immediately exercisable subject to the Company's right to repurchase any
unvested shares upon termination of Dr. Miller's services. Such option will
vest in a series of 36 successive equal monthly installments beginning on
January 1, 2000.
The option for 15,000 shares granted to Mr. Steuer on September 19, 1996
vests in 12 successive equal monthly installments over the one year period
beginning January 1, 1999.
The option for 40,000 shares granted to Mr. Steuer on June 12, 1997 is
immediately exercisable. Such option will vest as follows: (i) 10,000
shares will vest in 120 successive equal monthly installments with
acceleration based upon meeting fiscal year 1998 goals; (ii) 5,000 shares
will vest in 12 successive equal monthly installments over the one year
period beginning January 1, 2000; (iii) 10,000 shares will vest in 12
successive equal monthly installments over the one year period beginning
January 1, 2001; and (iv) 15,000 shares will vest in 12 successive equal
monthly installments over the one year period beginning January 1, 2002.
16
<PAGE> 20
The option for 30,000 shares granted to Dr. Dow on June 12, 1997 is
immediately exercisable. Such option shall vest as follows: (i) 4,000
shares shall vest in 12 successive equal monthly installments over the one
year period beginning January 1, 1999; (ii) 6,000 shares shall vest in 12
successive equal monthly installments over the one year period beginning
January 1, 2000; and (iii) 20,000 shares shall vest in 24 successive equal
monthly installments over the two year period beginning January 1, 2001.
The option for 20,000 shares granted to Ms. Jaszewski on June 12, 1997 is
immediately exercisable. Such option will vest as follows: (i) 4,000 shares
will vest in 24 successive equal monthly installments over the two year
period beginning January 1, 1999 and (ii) 16,000 shares will vest in 24
successive equal monthly installments over the two year period beginning
January 1, 2001.
Each of the granted options will immediately become exercisable for all of
the option shares in the event of certain acquisitions or hostile
take-overs of the Company as described in Proposal Two. 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.
(3) Based on an aggregate of approximately 359,000 options granted to employees
in fiscal 1997, including options granted to the Named Executive Officers.
(4) 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 price as described in Proposal
Two. 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.
(5) 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.
(6) Dr. Young resigned from the Company effective as of June 8, 1997.
17
<PAGE> 21
OPTION HOLDINGS
The table below sets forth certain information concerning the exercise of
options during the fiscal year ending June 30, 1997 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 1997
AND 1997 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NO. OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Miller, M.D...... -- -- 65,667 241,000 $ 352,000 $ 821,336
Marc L. Steuer.............. -- -- 77,695 150,639 $ 804,267 $ 612,408
Stuart W. Young, M.D.(2).... 18,001 $279,241(3) 11,109 22,224 $ 88,872 $ 177,792
William C. Dow, Ph.D........ 20,000 $375,250(3) 31,611 92,723 $ 344,679 $ 214,619
Cheryl B. Jaszewski......... -- -- 13,667 59,667 $ 110,337 $ 113,835
</TABLE>
- ---------------
(1) Determined by subtracting the exercise price from the market price of the
Common Stock on June 30, 1997 ($15.50).
(2) Dr. Young resigned from the Company effective as of June 8, 1997.
(3) Based upon fair market value on date of exercise less exercise price.
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, 1997, the Company paid Dr. Dow $140,237
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,
1997, the Company paid Dr. Miller $229,833 under the agreement.
In October 1992, the Company entered into an employment agreement with
Cheryl B. Jaszewski, which remains in effect unless and until terminated by
either the Company or Ms. Jaszewski at any time and for any reason, with or
without cause. During the fiscal year ended June 30, 1997, the Company paid Ms.
Jaszewski $117,987 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. During the fiscal year ended June 30, 1997, the
Company paid Dr. Young $159,800 under the agreement. This employment agreement
was terminated upon Dr. Young's resignation. In May 1997, the Company entered
into an agreement with Dr. Young. Under the terms of the agreement, Dr. Young is
to be paid a monthly consulting fee of $13,900.00 through August 30, 1997 as
well as severance payments totaling $41,730.00 to be paid in September, October
and November 1997. Furthermore, Dr. Young continued to vest in certain
outstanding options through the termination of the consulting period.
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
18
<PAGE> 22
reason, with or without cause. During the fiscal year ended June 30, 1997, the
Company paid Mr. Steuer $199,200 under the agreement.
The Company has entered into agreements with each of Dr. Miller, Mr.
Steuer, Dr. Dow and Ms. Jaszewski that provide for certain payments and
accelerated vesting of the shares of common stock subject to the outstanding
options held by each officer under the Company's 1995 Stock Option Plan in the
event of certain changes in control of the Company or a subsequent termination
of employment. In the event of such officer's involuntary termination within 36
months following the change in control, the officer will be entitled to receive
severance payments for a period of 12 months in an aggregate amount equal to the
officer's base salary at the time of termination plus the bonus paid to the
officer in the fiscal year preceding the year of termination. The payments will
be made in installments over the 12-month period unless the officer elects to
receive a lump-sum payment equal to the present value of the installment
payments. In addition, in the event of a change in control, all outstanding
options held by the officer which would fully vest or become fully exercisable
at least 18 months after the change in control will accelerate as follows: 50%
of the unvested or unexercisable portion immediately upon the change in control;
25% of the portion unexercisable or unvested at the time of the change in
control one year after the change in control (if the officer is then still
employed by the Company or its successor); and 25% of the portion unexercisable
or unvested at the time of the change in control 18 months after a change in
control (if the officer is then still employed by the Company or its successor).
All Options held by the officer at the time of a change in control which
otherwise become fully exercisable or fully vest within 18 months following the
change in control will become exercisable and vest in accordance with the
following schedule: 50% of the previously unexercisable or unvested portion
immediately upon the change in control; the remaining portion will continue to
become exercisable and vest in accordance with the exercise/vesting schedule
applicable to those options at the time of the change in control. Similarly, any
repurchase rights exercisable by the Company with respect to shares of Common
Stock held by the officer will lapse depending upon when the repurchase rights
would have otherwise lapsed. In the event of the officer's involuntary
termination during the 18 month period after the change in control, all
previously unexercisable options (including options which did not accelerate at
the time of the change in control) will become immediately exercisable and the
repurchase rights will lapse as to all shares then held by the officer.
Under the Option 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
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 July 1, 1996 to June 30, 1997.
In May 1996, the Compensation Committee set the compensation payable to Dr.
Miller for the 12-month period ending April 30, 1997. Similarly, in June 1997,
the Compensation Committee set the compensation payable to Dr. Miller for the
12-month period ending April 30, 1998. 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
19
<PAGE> 23
compensation is sufficiently competitive to motivate and retain key executives.
In furtherance of this goal, executive compensation 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.
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 1997 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). 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.
CEO Compensation. In setting the compensation payable for the 1997 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
20
<PAGE> 24
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 two private placements and
stock price appreciation. Based on these factors, the Committee increased Dr.
Miller's base salary level to $247,500. The level of base salary set for Dr.
Miller was in the 42nd percentile of the surveyed salary for the peer group
companies.
In fiscal 1997, the Company also granted Dr. Miller options to purchase
60,000 shares of the Company's Common Stock under the Plan, at an exercise price
of $15.75 per share. 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 1997 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 1998 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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of June 30, 1997, the Compensation Committee of the Board was comprised
of Messrs. Lacob, Latterell and Taylor.
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.
21
<PAGE> 25
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 CUMULATIVE TOTAL RETURN*
AMONG PHARMACYCLICS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
<TABLE>
<CAPTION>
NASDAQ NASDAQ STOCK
MEASUREMENT PERIOD PHARMACYCLICS, PHARMACEUTICAL MARKET (U.S.)
(FISCAL YEAR COVERED) INC. INDEX INDEX
<S> <C> <C> <C>
10/23/95 100 100 100
06/30/96 147 125 115
06/30/97 129 127 140
</TABLE>
* $100 invested on 10/23/95 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.
22
<PAGE> 26
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.
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 of Common Stock
pursuant to his exercise of a non-statutory stock option grant under the
Company's 1992 Stock Option Plan. Dr. Young fully repaid both notes, plus all
accrued interest, during fiscal year 1997.
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 July 1, 1996 to June 30, 1997, 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,
1997 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,
23
<PAGE> 27
based upon such information furnished by such owners, have sole investment power
with respect to such shares, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL SHARES
NAME AND ADDRESS SHARES OUTSTANDING(1)(2)
--------------------------------------------------------- --------- -----------------
<S> <C> <C>
Asset Management Associates 1989, L.P.(3)................ 1,194,628 11.8%
2275 East Bayshore, Suite 150
Palo Alto, CA 94303
Kleiner Perkins Caufield & Byers V(4).................... 610,794 6.0
2750 Sand Hill Road
Menlo Park, CA 94025
Richard A. Miller, M.D (5)............................... 601,077 5.9
Quantum Partners LDC(6).................................. 600,000 5.9
Kaya Flamboyan 9
Willemstad
Curacao, Netherlands Antilles
Venrock Associates(7).................................... 352,554 3.4
30 Rockefeller Plaza, Suite 5508
New York, NY 10112
Craig C. Taylor(8)....................................... 1,194,628 11.8
Joseph S. Lacob(9)....................................... 610,794 6.0
Patrick F. Latterell(10)................................. 352,554 3.4
Thomas D. Kiley(11)...................................... 170,075 1.7
Joseph C. Scodari(12).................................... 26,667 *
Marc L. Steuer(13)....................................... 176,150 1.7
William C. Dow, Ph.D.(14)................................ 138,469 1.4
Cheryl B. Jaszewski(15).................................. 92,287 *
All officers and directors as a group (9 persons)(16).... 3,972,183 39.2
</TABLE>
- ---------------
* Less than 1%.
(1) Percentage of beneficial ownership is calculated assuming 10,140,287 shares
of Common Stock were outstanding as of September 30, 1997. 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 entities affiliated with Asset Management,
including options exercisable for 20,000 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.
24
<PAGE> 28
(4) Includes shares held by persons and entities affiliated with Kleiner
Perkins, including 67,655 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 interest in
Kleiner Perkins. Also includes options exercisable for 20,000 shares held
by Mr. Lacob and warrants exercisable for 28,839 shares held by Kleiner
Perkins.
(5) 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 306,667 shares within
60 days of September 30, 1996.
(6) Excludes 24,500 shares held by Quasar International Partners C.V. Soros
Fund Management LLC may be deemed the beneficial owner of the shares held
by each of Quantum Partners LDC and Quasar International Partners C.V.
(7) Includes shares held by persons and entities affiliated with Venrock,
including 49,715 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 20,000 shares held by Mr.
Latterell.
(8) Includes options exercisable for 20,000 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 3 above.
(9) Includes options exercisable for 20,000 shares. Also includes 481,144
(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 4 above.
(10) Includes 49,715 shares held in trust by the Patrick Latterell Living Trust
and options exercisable for 20,000 shares. Also includes 282,839 shares
held by persons and entities affiliated with Venrock, as to which shares
Mr. Latterell disclaims beneficial ownership except as set forth in Note 7
above.
(11) Includes 150,075 shares held in the Kiley Revocable Trust, Thomas D. Kiley,
TEE, Nancy L. Kiley, TEE. Also, includes options exercisable for 20,000
shares within 60 days of September 30, 1996.
(12) Represents options exercisable for 26,667 shares.
(13) Represents options exercisable for 213,334 shares.
(14) Includes options exercisable for 101,802 shares.
(15) Includes 334 shares held by Kristina Hulett. Also includes options
exercisable for 54,600 shares.
(16) Includes options and warrants exercisable for 783,070 and 48,877 shares,
respectively. Also includes 1,154,590 shares held by persons and entities
affiliated with Asset Management, 481,144 shares held by persons and
entitles affiliated with Kleiner Perkins and 292,321 shares held by persons
and entities affiliated with Venrock. Certain directors may be deemed to be
the beneficial owners of such shares, but disclaim such beneficial
ownership, as discussed in Notes 3, 4, 7, 8, 9 and 10 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
Under the present rules of the United States Securities and Exchange
Commission, the deadline for stockholders to submit proposals to be considered
for inclusion in the Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders is expected to be July 20, 1998. Such proposals may be included in
next year's Proxy Statement if they comply with certain rules and regulations
promulgated by the United States Securities and Exchange Commission.
25
<PAGE> 29
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended June
30, 1997 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 (the "Form 10-K") with the
Securities and Exchange Commission. A copy of the Form 10-K has been mailed
concurrently with this Proxy Statement to all stockholders entitled to notice of
and to vote at the Annual Meeting. The Form 10-K is not incorporated into this
Proxy Statement and is not considered proxy-soliciting material. Stockholders
may obtain additional copies of the Form 10-K, 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 14, 1997
26
<PAGE> 30
APPENDIX A
PHARMACYCLICS, INC.
PROXY
Annual Meeting of Stockholders, December 17, 1997
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 17, 1997
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 Embassy Suites, 2885 Lakeside Drive, Santa Clara, California 95054 on
Wednesday, December 17, 1997 at 11:30 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>
<CAPTION>
WITHHOLD
AUTHORITY
FOR TO VOTE
<S> <C> <C>
Thomas D. Kiley _____ _____
Joseph S. Lacob _____ _____
Patrick F. Latterell _____ _____
Richard A. Miller _____ _____
Joseph C. Scodari _____ _____
Craig C. Taylor _____ _____
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
2. FOR AGAINST ABSTAIN To approve an amendment to the Company's 1995 Stock Option Plan (the
"Option Plan") in order to increase the maximum number of shares of common
stock authorized for issuance under the Plan by an additional 500,000 shares.
3. FOR AGAINST ABSTAIN To approve an amendment to the Company's Employee Stock Purchase Plan (the
Purchase Plan") in order to increase the maximum number of shares of common
stock authorized for issuance under the Plan by an additional 50,000 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,
1998.
</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:
------------------------------------------------
(Authorized Signature(s))
Date:
--------------------------------
<PAGE> 31
APPENDIX B
PHARMACYCLICS, INC.
1995 STOCK OPTION PLAN
(AS AMENDED AND RESTATED THROUGH SEPTEMBER 11, 1997)
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 under the Plan or
any stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
<PAGE> 32
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 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 and the vesting schedule (if any) applicable to the option shares
and the maximum term for which the option is to remain outstanding.
2.
<PAGE> 33
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 2,261,565
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, (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 and (iv) the 500,000-share increase approved by the Board on September
11, 1997, subject to approval by the stockholders at the 1997 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 750,000
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, 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. However, should the exercise
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.
3.
<PAGE> 34
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> 35
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> 36
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.
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:
6.
<PAGE> 37
(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, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion 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.
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.
7.
<PAGE> 38
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
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
8.
<PAGE> 39
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 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.
9.
<PAGE> 40
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.
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
10.
<PAGE> 41
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 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 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.
11.
<PAGE> 42
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 Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
12.
<PAGE> 43
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; the increase was approved by the stockholders at the 1996 Annual
Stockholders Meeting.
B. The Plan was amended and restated by the Board on September
11, 1997 (the "1997 Restatement") to effect the following changes: (i) increase
the maximum number of shares of Common Stock authorized for issuance over the
term of the Plan by 500,000 shares, (ii) increase the maximum number of shares
of Common Stock for which options and separately exercisable stock appreciation
rights may be granted to any one individual to 750,000 shares, (iii) render the
non-employee Board members who are serving on the Primary Committee eligible to
receive option grants under the Plan, (iv) allow unvested shares issued under
the Plan and subsequently repurchased by the Corporation at the option exercise
price or direct issue price paid per share to be reissued under the Plan, (v)
remove certain restrictions on the eligibility of non-employee Board members to
serve on the Primary Committee and (vi) effect a series of additional changes to
the provisions of the Plan (including the stockholder approval requirements and
the transferability of Non-Statutory Options) in order to take advantage of the
recent amendments to Rule 16b-3 of the Securities and Exchange Commission which
exempts certain officer and director transactions under the Plan from the
short-swing liability provisions of the federal securities laws. The 1997
Restatement is subject to stockholder approval at the 1997 Annual Meeting, and
no option grants made on the basis of the 500,000-share increase shall become
exercisable in whole or in part unless and until the 1997 Restatement is
approved by the stockholders. Should such stockholder approval not be obtained,
then (i) any options granted on the basis of the 500,000-share increase shall
terminate without ever becoming exercisable for those shares, and no further
option grants shall be made on the basis of such share increase and (ii) the
maximum number of shares of Common Stock for which any one individual may be
granted options and separately exercisable stock appreciation rights shall
remain at 335,334 shares. In addition, none of the other changes effected by
1997 Restatement shall be implemented, except to the extent the Plan
Administrator otherwise deems it advisable to do so. However, in the absence of
such stockholder approval, option grants may continue to be made pursuant to the
provisions of the Plan as in effect immediately prior to the 1997 Restatement.
All option grants made prior to the 1997 Restatement shall remain outstanding in
accordance with the terms and conditions of the respective instruments
evidencing those options, and nothing in the 1997 Restatement shall be deemed to
modify or in any way affect those outstanding options. Subject to the foregoing
limitations, the Plan Administrator may make option grants under the Plan at any
time before the date fixed herein for the termination of the Plan.
C. 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
13.
<PAGE> 44
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.
D. 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.
E. 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.
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, certain amendments shall be subject to stockholder approval as
required by applicable laws or regulations.
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.
14.
<PAGE> 45
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 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.
15.
<PAGE> 46
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
(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.
A-1.
<PAGE> 47
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. 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.
I. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
J. 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.
(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.
K. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through 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
A-2.
<PAGE> 48
made directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept.
L. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
M. 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.
N. 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 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).
O. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
Q. OPTIONEE shall mean any person to whom an option is granted under the
Plan.
R. 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.
A-3.
<PAGE> 49
S. 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.
T. PLAN shall mean the Corporation's 1995 Stock Option Plan, as set
forth in this document.
U. 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.
V. 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.
W. PREDECESSOR PLAN shall mean the Corporation's existing 1992 Stock
Option Plan.
X. 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.
Y. 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.
Z. 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.
AA. 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.
AB. 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.
AC. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
AD. 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
A-4.
<PAGE> 50
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.
AE. 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.
AF. 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.
AG. 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).
AH. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-5.
<PAGE> 51
APPENDIX C
PHARMACYCLICS, INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED THROUGH SEPTEMBER 11, 1997)
I. PURPOSE
This Pharmacyclics, Inc. Employee Stock Purchase Plan (the
"Plan") is intended to provide eligible employees of the Corporation and one or
more of its Corporate Affiliates with the opportunity to acquire a proprietary
interest in the Corporation through participation in a plan designed to qualify
as an employee stock purchase plan under Section 423 of the Code.
II. DEFINITIONS
For purposes of administration of the Plan, the following terms
shall have the meanings indicated:
BOARD means the Board of Directors of the Corporation.
CODE means the Internal Revenue Code of 1986, as amended.
COMMON STOCK means shares of the Corporation's common stock.
CORPORATE AFFILIATE means any parent or subsidiary corporation of
the Corporation (as determined in accordance with Code Section 424), including
any parent or subsidiary corporation which becomes such after the Effective
Time.
CORPORATION means Pharmacyclics, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of Pharmacyclics, Inc.
which shall by appropriate action adopt the Plan.
EFFECTIVE TIME means the time at which the Underwriting Agreement
for the initial public offering of the Common Stock is executed and finally
priced. The initial offering period under the Plan shall start at the time of
such execution and pricing of the Underwriting Agreement. Any Corporate
Affiliate which becomes a Participating Corporation in the Plan after such
Effective Time shall designate a subsequent Effective Time with respect to its
employee- Participants.
ELIGIBLE EARNINGS means the (i) regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in the Plan, plus (ii) any pre-tax contributions made by
the Participant to any Code Section 401(k) salary deferral
<PAGE> 52
plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Corporation or any Corporate Affiliate, plus (iii) all of the
following amounts to the extent paid in cash: overtime payments, bonuses,
commissions, profit-sharing distributions and other incentive-type payments.
However, Eligible Earnings shall NOT include any contributions (other than Code
Section 401(k) or Code Section 125 contributions) made on the Participant's
behalf by the Corporation or any Corporate Affiliate to any deferred
compensation plan or welfare benefit program now or hereafter established.
ELIGIBLE EMPLOYEE means any person who is on a regular basis
expected to work more than twenty (20) hours per week for more than five (5)
months per calendar year for the Corporation or any other Participating
Corporation as an employee for earnings considered wages under Section 3121(a)
of the Code.
ENTRY DATE means the date an Eligible Employee first joins the
offering period in effect under the Plan. The earliest Entry Date under the Plan
shall be the Effective Time.
FAIR MARKET VALUE means, for the Effective Time at which the
initial offering period under the Plan begins, the price per share at which the
Common Stock is to be sold in the initial public offering of the Common Stock
pursuant to the Underwriting Agreement. For any subsequent date under the Plan
on which the Common Stock is registered under Section 12(g) of the 1934 Act and
traded on the open market, Fair Market Value means the closing selling price per
share of the Common Stock on such date, as officially quoted on the principal
securities exchange on which the Common Stock is at the time traded or, if not
traded on any securities exchange, the closing selling price per share of the
Common Stock on such date, as reported on the Nasdaq National Market. If there
are no sales of the Common Stock on such day, then the closing selling price per
share on the next preceding day for which such closing selling price is quoted
shall be determinative of Fair Market Value.
1933 ACT means the Securities Act of 1933, as amended.
1934 ACT means the Securities Exchange Act of 1934, as amended.
PARTICIPANT means any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
PARTICIPATING CORPORATION means the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan, as of the Effective Time, are listed in
attached Schedule A.
PLAN ADMINISTRATOR shall have the meaning given such term in
Article III.
2.
<PAGE> 53
SEMI-ANNUAL ENTRY DATE means the first business day of May and
November each calendar year within an offering period in effect under the Plan.
The earliest Semi-Annual Entry Date under the Plan shall be the Effective Time.
SEMI-ANNUAL PERIOD OF PARTICIPATION means each semi-annual period
for which the Participant actually participates in an offering period in effect
under the Plan. There shall be a maximum of four (4) semi-annual periods of
participation within each offering period. The first such semi-annual period
(which may actually be more or less than six (6) months for the initial offering
period) shall extend from the Effective Time through the last business day in
April 1996. Subsequent semi-annual periods shall be measured from the first
business day of November to the last business day of April and from the first
business day of May to the last business day of October.
SEMI-ANNUAL PURCHASE DATE means the last business day of April
and October each calendar year on which shares of Common Stock are automatically
purchased for Participants under the Plan. The initial Semi-Annual Purchase Date
shall be April 30, 1996.
III. ADMINISTRATION
The Plan shall be administered by a committee of two (2) or more
non-employee Board members appointed by the Board (the "Plan Administrator").
The Plan Administrator shall have sole and exclusive authority to administer the
Plan, interpret and construe any provision of the Plan and adopt such rules and
regulations for administering the Plan as it may deem necessary in order to
comply with the requirements of Code Section 423. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated in
accordance with Subsection I of Article VII, Subsection A of Article IX or
Subsection B of Article X.
B. Each offering period shall have a maximum duration of
twenty-four (24) months, except that the first offering period may have a
duration of up to twenty-seven (27) months. The duration of each offering period
shall be designated by the Plan Administrator prior to the start date. However,
the initial offering period shall run from the Effective Time to the last
business day of October 1997. The next offering period shall commence on the
first business day of November 1997, and subsequent offering periods shall
commence as designated by the Plan Administrator.
C. The Participant shall be granted a separate purchase right for
each offering period in which he or she participates. The purchase right shall
be granted on the Entry Date on
3.
<PAGE> 54
which such individual first joins the offering period in effect under the Plan
and shall be automatically exercised in successive semi-annual installments on
the last business day of April and October of each year. Accordingly, each
purchase right may be exercised up to two (2) times each year it remains
outstanding.
D. No purchase rights granted under the Plan shall be exercised,
and no shares of Common Stock shall be issued hereunder, until such time as (i)
the Plan shall have been approved by the stockholders of the Corporation and
(ii) the Corporation shall have complied with all applicable requirements of the
1933 Act (including the registration of the shares of Common Stock issuable
under the Plan on a Form S-8 registration statement filed with the Securities
and Exchange Commission), all applicable listing requirements of any securities
exchange on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation.
E. The Participant's acquisition of Common Stock under the Plan
on any Semi-Annual Purchase Date shall neither limit nor require the
Participant's acquisition of Common Stock on any subsequent Semi-Annual Purchase
Date, whether within the same or a different offering period.
V. ELIGIBILITY AND PARTICIPATION
A. Each Eligible Employee of a Participating Corporation shall be
eligible to participate in the Plan in accordance with the following provisions:
- An individual who is an Eligible Employee on the start date of
the initial offering period under the Plan shall be eligible to commence
participation in any offering period under the Plan on the start date of
that offering period or on any subsequent SemiAnnual Entry Date within
that offering period on which he/she remains an Eligible Employee.
- An individual who becomes an Eligible Employee after the start
date of the initial offering period shall be eligible to commence
participation in any offering period under the Plan on any Semi-Annual
Entry Date within that offering period on which he/she remains an
Eligible Employee, provided he/she has completed ninety (90) days of
Service with the Corporation or any Corporate Affiliate on or prior to
such date.
- The date on which an individual first joins an offering period
shall be deemed to be such individual's Entry Date for the offering
period, and on that date such individual shall be granted his/her
purchase right for that offering period.
B. In order to participate in the Plan for a particular offering
period, the Eligible Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his/her scheduled Entry Date. However,
4.
<PAGE> 55
for each Participant whose Entry Date is deemed to be the start date of the
initial offering period, the requisite enrollment forms must be filed within ten
(10) business days following such start date; otherwise, the Entry Date for that
Participant shall be the first Semi-Annual Entry Date following the filing of
such enrollment forms.
C. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any multiple
of one percent (1%) of the Eligible Earnings paid to the Participant during each
Semi-Annual Period of Participation within the offering period, up to a maximum
of ten percent (10%). The deduction rate so authorized shall continue in effect
for the remainder of the offering period, except to the extent such rate is
changed in accordance with the following guidelines:
- The Participant may, at any time during a Semi-Annual Period of
Participation, reduce his/her rate of payroll deduction to become
effective as soon as possible after filing of the requisite reduction
form with the Plan Administrator. The Participant may not, however,
effect more than one (1) such reduction per Semi-Annual Period of
Participation.
- The Participant may, prior to the commencement of any new
Semi-Annual Period of Participation within the offering period, increase
the rate of his/her payroll deduction by filing the appropriate form
with the Plan Administrator. The new rate (which may not exceed the ten
percent (10%) maximum) shall become effective as of the first day of the
first Semi-Annual Period of Participation following the filing of such
form.
D. Payroll deductions will automatically cease upon the
termination of the Participant's purchase right in accordance with the
applicable provisions of Section VII below.
VI. STOCK SUBJECT TO PLAN
A. The Common Stock purchasable by Participants under the Plan
shall, solely in the discretion of the Plan Administrator, be made available
from either authorized but unissued shares of Common Stock or from shares of
Common Stock reacquired by the Corporation, including shares of Common Stock
purchased on the open market. The total number of shares which may be issued
under the Plan shall not exceed 100,000 shares (subject to adjustment under
Section VI.B below). Such share reserve is comprised of (i) the initial
50,000-share reserve approved by the Board and the stockholders prior to the
Effective Time and (ii) the additional 50,000-share increase approved by the
Board, subject to stockholder approval at the 1997 Annual Stockholders Meeting.
B. In the event any change is made to the Corporation's
outstanding Common Stock by reason of any stock dividend, stock split, exchange
or combination of shares, recapitalization or any other change affecting the
Common Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made by the Plan
5.
<PAGE> 56
Administrator to (i) the class and maximum number of securities issuable in the
aggregate over the term of the Plan, (ii) the class and maximum number of
securities purchasable per Participant on any one (1) Semi-Annual Purchase Date
and (iii) the class and number of securities and the price per share in effect
under each purchase right at the time outstanding under the Plan. Such
adjustments shall be designed to preclude the dilution or enlargement of rights
and benefits under the Plan.
VII. PURCHASE RIGHTS
Each Eligible Employee who participates in the Plan for a
particular offering period shall have the right to purchase shares of Common
Stock, in a series of successive semi-annual installments during such offering
period, upon the terms and conditions set forth below and shall execute a
purchase agreement embodying such terms and conditions and such other provisions
(not inconsistent with the Plan) as the Plan Administrator may deem advisable.
A. PURCHASE PRICE. Common Stock shall be purchasable on each
Semi-Annual Purchase Date within the offering period at a purchase price equal
to eighty-five percent (85%) of the lower of (i) the Fair Market Value per share
of Common Stock on the Participant's Entry Date into that offering period or
(ii) the Fair Market Value per share on that Semi-Annual Purchase Date. However,
for each Participant whose Entry Date is other than the start date of the
offering period, the clause (i) amount shall in no event be less than the Fair
Market Value of the Common Stock on the start date of that offering period.
B. NUMBER OF PURCHASABLE SHARES. The number of shares purchasable
per Participant on each Semi-Annual Purchase Date during the offering period
shall be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll deductions during the Semi-Annual Period of
Participation ending with that Semi-Annual Purchase Date (together with any
carryover deductions from the preceding Semi-Annual Period of Participation) by
the purchase price in effect for the Semi-Annual Purchase Date (as determined in
accordance with Subsection A above). However, the maximum number of shares of
Common Stock purchasable per Participant on any Semi-Annual Purchase Date shall
not exceed One Thousand (1,000) shares, subject to periodic adjustment under
Section VI.B.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any of its Corporate Affiliates.
C. PAYMENT. Payment for Common Stock purchased under the Plan
shall be effected by means of the Participant's authorized payroll deductions.
Such deductions shall begin with the first pay day following the Participant's
Entry Date into the offering period and shall (unless sooner terminated by the
Participant) continue through the pay day ending with or immediately prior to
the last day of the offering period. However, for each Participant whose
6.
<PAGE> 57
Entry Date is deemed to be the start date of the initial offering period,
payroll deductions shall begin with the first pay day occurring more than five
(5) days after his/her filing of the requisite enrollment forms. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the outstanding balance credited to such
account. The amounts collected from a Participant will not be held in any
segregated account or trust fund and may be commingled with the general assets
of the Corporation and used for general corporate purposes.
D. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
- A Participant may, at any time on or before the fifth (5th)
business day preceding the next Semi-Annual Purchase Date, terminate
his/her outstanding purchase right under the Plan by filing the
prescribed notification form with the Plan Administrator (or its
designate). No further payroll deductions shall be collected from the
Participant with respect to the terminated purchase right, and any
payroll deductions collected for the Semi-Annual Period of Participation
in which such termination occurs shall, at the Participant's election,
be immediately refunded or held for the purchase of shares on the
Semi-Annual Purchase Date immediately following such termination. If no
such election is made at the time such purchase right is terminated,
then the payroll deductions collected with respect to the terminated
right shall be refunded as soon as possible.
- The termination of such purchase right shall be irrevocable,
and a Participant may not subsequently rejoin the offering period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual must
re-enroll in the Plan (by making a timely filing of a new stock purchase
agreement and enrollment form) on or before the date he or she is first
eligible to join the new offering period.
- Should a Participant cease to remain an Eligible Employee for
any reason (including death, disability or change in status) while
his/her purchase right remains outstanding, then that purchase right
shall immediately terminate, and such individual (or the personal
representative of the estate of a deceased Participant) shall have the
following election with respect to the payroll deductions made to date
in the Semi-Annual Period of Participation in which such cessation of
Eligible Employee status occurs:
1) to withdraw all of those deductions, or
2) to have such funds held for the purchase of shares
on the next Semi-Annual Purchase Date.
If no such election is made within the thirty (30)-day period
following such cessation of Eligible Employee status or (if earlier) prior to
the next Semi-Annual Purchase Date, then the collected payroll deductions shall
be refunded as soon as possible. In no event, however,
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may any payroll deductions be made on the Participant's behalf following his/her
cessation of Eligible Employee status.
E. STOCK PURCHASE. Shares of Common Stock shall automatically be
purchased on behalf of each Participant (other than Participants whose payroll
deductions have previously been refunded in accordance with the Termination of
Purchase Right provisions in Subsection D above) on each Semi-Annual Purchase
Date. The purchase shall be effected by applying each Participant's payroll
deductions for the Semi-Annual Period of Participation ending on such
Semi-Annual Purchase Date (together with any carryover deductions from the
preceding Semi-Annual Period of Participation) to the purchase of whole shares
of Common Stock (subject to the limitation on the maximum number of purchasable
shares imposed under Subsection B of this Article VII) at the purchase price in
effect for that Semi-Annual Purchase Date. Any payroll deductions not applied to
such purchase because they are not sufficient to purchase a whole share shall be
held for the purchase of Common Stock on the next Semi-Annual Purchase Date.
However, any payroll deductions not applied to the purchase of Common Stock by
reason of the limitation on the maximum number of shares purchasable by the
Participant on the Semi-Annual Purchase Date shall be promptly refunded to the
Participant.
F. PRORATION OF PURCHASE RIGHTS. Should the total number of
shares of Common Stock which are to be purchased pursuant to outstanding
purchase rights on any particular date exceed the number of shares then
available for issuance under the Plan, the Plan Administrator shall make a
pro-rata allocation of the available shares on a uniform and nondiscriminatory
basis, and the payroll deductions of each Participant, to the extent in excess
of the aggregate purchase price payable for the Common Stock pro-rated to such
individual, shall be refunded to such Participant.
G. RIGHTS AS STOCKHOLDER. A Participant shall have no stockholder
rights with respect to the shares subject to his/her outstanding purchase right
until the shares are actually purchased on the Participant's behalf in
accordance with the applicable provisions of the Plan. No adjustments shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as
practicable after each SemiAnnual Purchase Date, a stock certificate for the
number of shares purchased on the Participant's behalf. Such certificate may,
upon the Participant's request, be issued in the names of the Participant and
his/her spouse as community property or as joint tenants with right of
survivorship. Alternatively, the Participant may request the issuance of such
certificate in "street name" for immediate deposit in a Corporation-designated
brokerage account.
H. ASSIGNABILITY. No purchase right granted under the Plan shall
be assignable or transferable by the Participant other than by will or by the
laws of descent and distribution following the Participant's death, and during
the Participant's lifetime the purchase right shall be exercisable only by the
Participant.
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I. BENEFICIARY DESIGNATION. A Participant may file a written
beneficiary designation indicating the person entitled to receive any shares
purchased or purchasable on the Participant's behalf at the time of his/her
death or to obtain a cash refund of any existing payroll deductions held on the
deceased Participant's behalf under the Plan. Such beneficiary designation may
be changed by the Participant at any time by filing the appropriate form with
the Plan Administrator. In the event there is no validly-designated beneficiary
under the Plan living at the time of the Participant's death, the Corporation
shall deliver such shares and/or cash refund to the executor or administrator of
the Participant's estate or, if (to the knowledge of the Corporation) no such
executor or administrator has been appointed, the Corporation shall deliver such
shares and/or cash refund to the Participant's spouse or if no spouse is living,
to the children of the Participant in equal shares.
J. CHANGE IN OWNERSHIP. Should any of the following transactions
(a "Change in Ownership") occur during the offering period:
- a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of
which is to change the State in which the Corporation is incorporated,
- the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation, or
- any reverse merger in which the Corporation is the surviving
entity but 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 merger,
then all outstanding purchase rights under the Plan shall
automatically be exercised, immediately prior to the effective date of such
Change in Ownership, by applying the payroll deductions of each Participant for
the Semi-Annual Period of Participation in which such Change in Ownership occurs
to the purchase of whole shares of Common Stock at eighty-five percent (85%) of
the lower of (i) the Fair Market Value of the Common Stock on the Participant's
Entry Date into the offering period in which such Change in Ownership occurs or
(ii) the Fair Market Value of the Common Stock immediately prior to the
effective date of such Change in Ownership. However, the applicable share
limitations of Articles VII and VIII shall continue to apply to any such
purchase, and the clause (i) amount above shall not, for any Participant whose
Entry Date for the offering period is other than the start date of that offering
period, be less than the Fair Market Value of the Common Stock on such start
date.
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Change in Ownership,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights in accordance with the applicable
provisions of this Article VII.
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VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right outstanding under this Plan and
(ii) similar rights accrued under other employee stock purchase plans (within
the meaning of Code Section 423) of the Corporation or its Corporate Affiliates,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value of such stock on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations, the right
to acquire Common Stock pursuant to each purchase right outstanding under the
Plan shall accrue as follows:
- The right to acquire Common Stock under each such purchase
right shall accrue in a series of successive semi-annual installments as
and when the purchase right first becomes exercisable for each such
installment on the last business day of each SemiAnnual Period of
Participation for which the right remains outstanding.
- No right to acquire Common Stock under any outstanding purchase
right shall accrue to the extent the Participant has already accrued in
the same calendar year the right to acquire Common Stock under one (1)
or more other purchase rights at a rate equal to Twenty-Five Thousand
Dollars ($25,000) worth of Common Stock (determined on the basis of the
Fair Market Value on the date or dates of grant) for each calendar year
during which one (1) or more of those purchase rights were at any time
outstanding.
- If by reason of such accrual limitations, any purchase right of
a Participant does not accrue for a particular Semi-Annual Period of
Participation, then the payroll deductions which the Participant made
during that Semi-Annual Period of Participation with respect to such
purchase right shall be promptly refunded.
C. In the event there is any conflict between the provisions of
this Article VIII and one (1) or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. AMENDMENT AND TERMINATION
A. The Board may alter, amend, suspend or discontinue the Plan
following the close of any Semi-Annual Period of Participation. However, the
Board may not, without the approval of the Corporation's stockholders:
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- materially increase the maximum number of shares issuable under
the Plan or the maximum number of shares purchasable per Participant on
any one (1) SemiAnnual Purchase Date, except that the Plan Administrator
shall have the authority, exercisable without such stockholder approval,
to effect adjustments to the extent necessary to reflect changes in the
Corporation's capital structure pursuant to Subsection B of Article VI;
or
- alter the purchase price formula so as to reduce the purchase
price payable for the shares purchasable under the Plan; or
- materially increase the benefits accruing to Participants under
the Plan or materially modify the requirements for eligibility to
participate in the Plan.
B. The Corporation shall have the right, exercisable in the sole
discretion of the Plan Administrator, to terminate all outstanding purchase
rights under the Plan immediately following the close of any Semi-Annual Period
of Participation. Should the Corporation elect to exercise such right, then the
Plan shall terminate in its entirety. No further purchase rights shall
thereafter be granted or exercised, and no further payroll deductions shall
thereafter be collected, under the Plan.
X. GENERAL PROVISIONS
A. The Plan was adopted by the Board on August 2, 1995 and became
effective at the Effective Time. The Plan was amended and restated by the Board
on September 11, 1997 to increase the share reserve by 50,000 shares, subject to
stockholder approval at the 1997 Annual Stockholders Meeting.
B. The Plan shall terminate upon the earlier of (i) the last
business day in October, 2005, (ii) the date on which all shares available for
issuance under the Plan shall have been sold pursuant to purchase rights
exercised under the Plan, or (iii) the date the Board terminates the Plan.
C. All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation.
D. Neither the action of the Corporation in establishing the
Plan, nor any action taken under the Plan by the Board or the Plan
Administrator, nor any provision of the Plan itself shall be construed so as to
grant any person the right to remain in the employ of the Corporation or any of
its Corporate Affiliates for any period of specific duration, and such person's
employment may be terminated at any time, with or without cause.
E. The provisions of the Plan shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
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SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Pharmacyclics, Inc.
