<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
PHARMACYCLICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PHARMACYCLICS, INC.
995 EAST ARQUES AVENUE
SUNNYVALE, CALIFORNIA 94086
NOVEMBER 9, 1999
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
12:00 P.M. on December 9, 1999, at the Sunnyvale Hilton, 1250 Lakeside Drive,
Sunnyvale, California 94086.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals:
(i) the election of five (5) directors to serve until the 2000
annual meeting or 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;
(iii) the amendment of the Company's Non-Employee Directors Stock
Option Plan (the "Directors Option Plan") in order to (i)
increase the total number of shares of common stock authorized
for issuance over the term of the Directors Option Plan by an
additional 30,000 shares, (ii) allow any unvested shares
reacquired by the Company to be available for future option
grants and (iii) increase the option exercise period from twelve
months to twenty-four months after the cessation of service; and
(iv) the ratification of the appointment of PricewaterhouseCoopers
LLP as the Company's independent accountants for the fiscal year
ending June 30, 2000.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote IN FAVOR OF each
such proposal.
After reading the Proxy Statement, please mark, date, sign and return by
no later than November 26, 1999, 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. 1999 Annual Report and Annual Report
on Form 10-K/A for the fiscal year ended June 30, 1999 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 9, 1999
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 12:00 P.M. local time on Thursday, December 9, 1999, at the Sunnyvale
Hilton, 1250 Lakeside Drive, Sunnyvale, California 94086, for the following
purposes:
1. To elect five (5) directors to serve until the 2000 annual
meeting or until their successors are elected and qualified.
2. To approve an amendment to 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.
3. To approve amendments to the Company's Non-Employee Directors
Stock Option Plan (the "Directors Option Plan") in order to (i) increase
the total number of shares of common stock authorized for issuance over
the term of the Directors Option Plan by an additional 30,000 shares,
(ii) allow any unvested shares reacquired by the Company to be available
for future option grants and (iii) increase the option exercise period
from twelve months to twenty-four months after the cessation of service.
4. To ratify the appointment of PricewaterhouseCoopers LLP as
the Company's independent accountants for the fiscal year ending June
30, 2000.
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.
Only stockholders of record at the close of business on October 21, 1999
are entitled to receive notice of and to vote at the Annual Meeting and any
adjournment thereof. The stock transfer books of the Company will remain open
between the record date and the date of the meeting. 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 signed and returned to ensure that all your shares will be voted. You may
revoke your proxy at any time prior to the Annual Meeting. 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 9, 1999
YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. 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 9, 1999
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 1999 ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL
MEETING") TO BE HELD AT 12:00 P.M. ON DECEMBER 9, 1999, AT THE SUNNYVALE HILTON,
1250 LAKESIDE DRIVE, SUNNYVALE, CALIFORNIA 94086 AND AT ANY ADJOURNMENT THEREOF.
This Proxy Statement and the accompanying form of Proxy was first mailed
to all stockholders entitled to vote at the Annual Meeting on or about November
9, 1999.
RECORD DATE AND VOTING
Stockholders of record at the close of business on October 21, 1999 are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on October 21, 1999, there were 15,092,173 shares of the Company's
common stock (the "Common Stock") outstanding and entitled to vote, held by
approximately 105 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.
All votes will be tabulated by the inspector of election appointed for
the Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Stockholders may not cumulate votes in the
election of directors. 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 Leiv Lea, 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 1,
1999.
<PAGE> 5
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation may revoke
it at any time prior to the meeting by filing with the Secretary of the Company
at its principal executive offices at 995 East Arques Avenue, Sunnyvale,
California 94086, a written notice of such revocation or a duly executed Proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of the Notice of Annual Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished to
brokerage houses, fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. 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 NOVEMBER 26, 1999, 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, 1999 (THE "ANNUAL REPORT") AND THE ANNUAL REPORT ON FORM 10-K/A FOR THE
FISCAL YEAR ENDED JUNE 30, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "FORM 10-K/A"), 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/A IS CONSIDERED PROXY-SOLICITING MATERIAL AND NEITHER IS
INCORPORATED INTO THIS PROXY STATEMENT.
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<PAGE> 6
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE -- ELECTION OF DIRECTORS
At the Annual Meeting, a Board of five directors will be elected to
serve until the Company's next Annual Meeting or until their successors shall
have been duly elected and qualified or until their earlier death, resignation
or removal. The Board has selected five 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 five
candidates receiving the highest number of affirmative votes of all the shares
entitled to vote at the Annual Meeting will be elected. By voting for the five
nominees, the stockholders also approve the reduction in the size of the Board
from six members to five members. 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>
Phyllis I. Gardner, M.D. 49 Director 1999
Joseph S. Lacob 43 Director 1991
Richard A. Miller, M.D. 48 Director, President and 1991
Chief Executive Officer
Joseph C. Scodari 46 Director 1994
Craig C. Taylor 49 Director 1991
</TABLE>
BUSINESS EXPERIENCE OF DIRECTOR NOMINEES
DR. GARDNER was elected as a Director of the Company in June 1999. She
is currently the Senior Associate Dean for Education and Associate Professor of
Molecular Pharmacology and Medicine at Stanford University School of Medicine,
where she has been a faculty member since 1984. From 1996 to 1998, she was the
vice president of research and head of ALZA Technology Institute of ALZA
Corporation in Palo Alto, California. Dr. Gardner received her M.D. from Harvard
Medical School in 1976.
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 a Director of
Corixa Corporation, Sportsline USA, Inc., and Heartport, Inc., as well as
several private life science and internet companies. Mr. Lacob holds a B.S.
degree in Biochemistry from the University of California, Irvine, an M.S. in
Public Health from the University of California, Los Angeles, and an M.B.A. from
Stanford University.
DR. MILLER has served as President, Chief Executive Officer and a
Director since he co-founded the company in April 1991. Dr. Miller was a
co-founder of IDEC Pharmaceuticals Corporation and from 1984 to February 1992
served as Vice President and a Director. Dr. Miller also is a Clinical Professor
of Medicine (Oncology) at Stanford University Medical Center. Dr. Miller
received his M.D., summa cum laude, from the State University of New York
Medical School and is board certified in both Internal Medicine and Medical
Oncology.
3
<PAGE> 7
MR. SCODARI was elected as a Director of the Company in December 1994.
He is President and Chief Operating Officer of Centocor, Inc., a biotechnology
company. Prior to joining Centocor, he was Senior Vice President and General
Manager, The Americas for Rhone-Poulenc Rorer Pharmaceuticals, Inc., a
pharmaceutical company, where he held various positions from 1989. From 1987 to
1989, Mr. Scodari was Executive Vice President of Sterling Drugs' U.S.
Diagnostic Imaging Division, where he held responsibilities for all marketing
and sales and business development activities for Sterling's imaging agent
business. Mr. Scodari received a B.A. degree in Political Science from
Youngstown State University.
MR. TAYLOR was elected as a Director of the Company in June 1991. He is
a General Partner of AMC Partners 89, L.P., and the General Partner of Asset
Management Associates 1989, L.P., a private venture capital partnership. Mr.
Taylor has been with Alloy Ventures, Inc., a venture management firm which
succeeded Asset Management Company, the prior management firm for the Asset
Management funds, since 1998. Mr. Taylor had been with Asset Management Company
from 1977 to 1998. Mr. Taylor is a Director of Lynx Therapeutics, Inc. and
several private companies. Mr. Taylor holds B.S. and M.S. degrees in Physics
from Brown University and an M.B.A. from Stanford University.
There are no family relationships among executive officers or directors
of the Company.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended June 30, 1999, the Board held five
meetings. As of June 30, 1999, 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 independent accountants regarding the Company's accounting practices
and systems of internal accounting controls. During the fiscal year ended June
30, 1999, the Audit Committee consisted of two directors, Messrs. Lacob and
Taylor. The Audit Committee held one meeting during the fiscal year ended June
30, 1999.
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 and the Company's
Employee Stock Purchase Plan. During the fiscal year ended June 30, 1999, the
Compensation Committee consisted of three directors, Messrs. Lacob, Scodari and
Taylor. The Compensation Committee met five times during the fiscal year ended
June 30, 1999.
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.
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<PAGE> 8
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, Board members
are reimbursed for travel expenses incurred in attending Board or Committee
meetings.
Under the Company's Non-Employee Directors Stock Option Plan (the
"Directors Option Plan"), each new non-employee Board member will receive an
automatic option grant for 10,000 shares of Common Stock 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
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. Lacob, Scodari and Taylor each received an option for 5,000
shares on December 11, 1998, the date of the last Annual Meeting of the
Company's stockholders, with an exercise price of $20.25 per share. Dr. Gardner
received an option for 10,000 shares on June 15, 1999, the date of her
appointment to the Board, with an exercise price of $23.75. The exercise price
of options granted to directors represented the fair market value per share of
Common Stock on the grant dates.
5
<PAGE> 9
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 increase the maximum
number of shares available for issuance under the Option Plan by an additional
500,000 shares.
The amendment was adopted by the Board on October 14, 1999, 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 terms and provisions of the Option Plan, as amended through October
14, 1999, 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.
SHARE RESERVE
The maximum number of shares of Common Stock issuable over the term of
the Option Plan may not exceed 3,387,460 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, 1999 was in an amount equal to
123,856 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.
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.
6
<PAGE> 10
As of September 30, 1999, 1,835,023 shares were subject to outstanding
option grants under the Option Plan, 1,240,905 shares remained available for
future grants (assuming approval of this Proposal Two), and 311,532 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, 1999 approximately five executive officers, 96 other
employees and four non-employee Board members were eligible to participate in
the Option Plan and four non-employee Board members were eligible to participate
in the Directors Option 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, 1999, the fair
market value per share of the Common Stock was $40.875 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 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.
7
<PAGE> 11
The Plan Administrator has 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 withholding 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 withholding tax
liability.
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.
8
<PAGE> 12
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 and the Directors Option
Plan between July 1, 1998 and September 30, 1999, together with the weighted
average exercise price payable per share.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
OPTIONS
GRANTED
(NUMBER OF WEIGHTED AVERAGE
NAME SHARES) EXERCISE PRICE
---- ---------- ----------------
<S> <C> <C>
Richard A. Miller, M.D., President and Chief Executive Officer.... 55,000 $17.63
Phyllis I. Gardner, M.D., Director ............................... 10,000 $23.75
Joseph S. Lacob, Director ........................................ 5,000 $20.25
Joseph C. Scodari, Director ...................................... 5,000 $20.25
Craig C. Taylor, Director ........................................ 5,000 $20.25
Marc L. Steuer, Senior Vice President, Business Development....... 38,000 $17.63
Leiv Lea, Vice President, Finance and Administration and
Chief Financial Officer ........................................ 30,000 $18.33
David A. Lowin, Esq., Vice President, Intellectual Property
Counsel ........................................................ 20,000 $17.63
Hugo Madden, Ph.D., Vice President, Chemical Operations........... 70,000 $19.14
All current executive officers as a group (5 persons)............. 213,000 $18.22
All current non-employee Board members as a group (4 persons)..... 25,000 $21.65
All employees, excluding executive officers (84 persons).......... 422,700 $19.72
</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.
9
<PAGE> 13
If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company, at the original exercise price paid per
share, in the event the optionee's service terminates prior to vesting in the
shares, then the optionee will not recognize any taxable income at the time of
exercise. The optionee will have to report as ordinary income, as and when the
Company's repurchase right lapses, an amount equal to the difference between the
fair market value of the shares on the date the repurchase right lapses and the
option exercise price paid for those shares. The optionee may, however, elect
under Section 83(b) of the Internal Revenue Code to include as ordinary income
in the year of exercise an amount equal to the difference between the fair
market value of the purchased shares on the date of exercise (determined as if
the shares were not subject to the Company's repurchase right) and the option
exercise price paid for the shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the Company's
repurchase right lapses.
The Company will be entitled to a business expense deduction equal to
the amount of ordinary income recognized by the optionee in connection with the
exercise of the non-statutory option. The deduction will in general be allowed
for the taxable year of the Company in which such ordinary income is recognized
by the optionee.
Stock Appreciation Rights. An optionee who is granted a stock
appreciation right will recognize ordinary income in the year of exercise equal
to the amount of the appreciation distribution. The Company will be entitled to
an income tax deduction equal to such distribution for the taxable year in which
the ordinary income is recognized by the optionee.
Deductibility of Executive Compensation. The Company anticipates that
any compensation deemed paid by it in connection with disqualifying dispositions
of incentive stock option shares or exercises of non-statutory options granted
with exercise prices equal to the fair market value of the shares on the grant
date will qualify as performance-based compensation for purposes of Code Section
162(m) and will not have to be taken into account for purposes of the $1 million
limitation per covered individual on the deductibility of the compensation paid
to certain executive officers of the Company.
ACCOUNTING TREATMENT
Option grants or stock issuances 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 at 100% of fair market value will not result in any charge to the
Company's earnings, but the Company must provide pro forma disclosure in its
financial statements regarding 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 diluted basis. Options or stock appreciation rights
granted other than to employees and non-employee Board members will result in a
charge to the Company's earnings.
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, 1999, 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.
10
<PAGE> 14
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. 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.
11
<PAGE> 15
PROPOSAL THREE - APPROVAL OF AMENDMENTS TO
THE 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
INTRODUCTION
The Company's stockholders are being asked to approve amendments to the
1995 Non-Employee Directors Stock Option Plan (the "Directors Option Plan")
which will increase the maximum number of shares available for issuance under
Directors Option Plan by an additional 30,000 shares, allow any unvested shares
reacquired by the Company to be available for future option grants, and increase
the option exercise period from twelve months to twenty-four months after a
Board member's cessation of service.
The amendment to increase the maximum number of shares and to allow any
unvested shares reacquired by the Company to be available for future option
grants was adopted by the Board on October 14, 1999 and the amendment to
increase the exercise period was adopted by the Board on December 11, 1998, both
subject to stockholder approval at the Annual Meeting. The Board believes that
these amendments to the Directors Option Plan are necessary in order to ensure
that the Company will be able to attract and retain the services of qualified
Board members.
The terms and provisions of the Directors Option Plan, as amended
through October 14, 1999, are summarized more fully below. This summary,
however, does not purport to be a complete description of all the provisions of
the Directors Option Plan.
ADMINISTRATION
The terms and conditions of each automatic option grant (including the
timing and pricing of the option grant) are determined by the express provisions
of the Directors Option Plan. Neither the Board nor any committee of the Board
will perform any discretionary functions under the Directors Option Plan.
SHARE RESERVE
The maximum number of shares of Common Stock issuable over the term of
the Directors Option Plan may not exceed 196,667 shares, including the
30,000-share increase for which stockholder approval is sought under this
Proposal Three.
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. Assuming approval of this Proposal Three, unvested
shares issued under the Directors 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 Directors Option Plan will be added back
to the number of shares of Common Stock reserved for issuance under the
Directors Option Plan and will be available for reissuance through one or more
subsequent option grants made under the Directors Option Plan. Shares subject to
any option surrendered in accordance with the option surrender provision of the
Directors Option Plan will not be available for subsequent issuance.
In the event any change is made to the Common Stock issuable under the
Directors 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 (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and or class of securities for which option grants are to
be subsequently made per eligible director, and (iii) the number and /or class
of securities and the exercise price per share in effect under each outstanding
option.
As of September 30, 1999, 89,917 shares were subject to outstanding
option grants under the Directors Option Plan, 101,750 shares remained available
for future grants (assuming approval of the Proposal Three), and 5,000 shares
have been issued under the Directors Option Plan.
12
<PAGE> 16
ELIGIBILITY
Only non-employee Board members will be eligible to receive option
grants under the Directors Option Plan. As of September 30, 1999, four (4)
non-employee Board members were eligible to participate in the Directors Option
Plan.
VALUATION
The fair market value per share of Common Stock on any relevant date
under the Directors Option Plan will be the closing selling price per share on
that date on the Nasdaq National Market. On September 30, 1999, the closing
selling price per share was $40.875.
TERMS OF OPTION GRANT PROGRAM
Under the Directors Option Plan, each new non-employee Board member will
receive an automatic option grant for 10,000 shares of Common Stock on the date
of his or her initial election or appointment to the Board, provided such
individual has not previously been in the Company's service. 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. There is no limit on the number of
annual 5,000-share option grants any one non-employee Board member may receive
over his or her period of continued Board service. The exercise price will be
payable in cash or in shares of Common Stock or through a same-day sale program
with no cash outlay by the optionee. The option will have a maximum term of ten
(10) years measured from the grant date, subject to earlier termination at the
end of the twenty-four (24)-month period measured from the date of the
optionee's cessation of Board service. The Directors Option Plan currently
provides that the optionee will have a twelve (12) month period following a
cessation of Board service term in which to exercise any outstanding options.
Each option will be immediately exercisable for any or all of the option
shares. However, any shares purchased under the option will be subject to
repurchase by the Company, at the exercise price paid per share, upon the
optionee's cessation of Board service prior to vesting in those shares. The
shares subject to each initial 10,000-share option grant will vest in five (5)
successive equal annual installments upon the optionee's completion of each year
of Board service over the five (5) year period measured from the grant date. The
shares subject to each annual 5,000-share option grant will vest in a series of
twelve (12) successive equal monthly installments upon the optionee's completion
each month of Board service measured from the grant date.
During the lifetime of the optionee the option will be exercisable only
by the optionee and will not be assignable or transferable other than by will or
by the laws of descent and distribution following the optionee's death. However,
an option may be assigned in accordance with the terms of a qualified domestic
relations order.
VESTING ACCELERATION
The shares subject to each option will immediately vest upon (i) the
optionee's death or permanent disability while a Board member, (ii) and
acquisition of the Company by merger or asset sale, (iii) the successful
completion of a tender offer for more than fifty percent (50%) of the Company's
outstanding voting stock or (iv) a change in the majority of the Board effected
through one or more proxy contests for Board membership. In addition, upon the
successful completion of a hostile tender offer for more than fifty percent
(50%) of the Company's outstanding voting stock, each outstanding automatic
option grant may be surrendered to the Company for a cash distribution per
surrendered option share in an amount equal to the excess of (a) the highest
price per share of Common Stock paid in connection with such tender offer over
(b) the exercise price payable for such share.
13
<PAGE> 17
The acceleration of vesting upon 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.
STOCK AWARDS
The table below shows, as to each of the Company's non-employee Board
members, the number of shares of Common Stock subject to options granted under
the Directors Option Plan between July 1, 1998 and September 30, 1999, together
with the weighted average exercise price payable per share. Only non-employee
Board members received option grants under the Directors Option Plan.
<TABLE>
<CAPTION>
OPTIONS
GRANTED
(NUMBER OF WEIGHTED AVERAGE
NAME SHARES) EXERCISE PRICE
---- ----------- -----------------
<S> <C> <C>
Phyllis I. Gardner, M.D., Director ............................... 10,000 $23.75
Joseph S. Lacob, Director ........................................ 5,000 $20.25
Joseph C. Scodari, Director ...................................... 5,000 $20.25
Craig C. Taylor, Director ........................................ 5,000 $20.25
All current non-employee Board members as a group (4 persons)..... 25,000 $21.65
</TABLE>
AMENDMENT AND TERMINATION
The Board may amend or modify the provisions of the Directors Option
Plan at any time. Certain amendments to the Directors Option Plan may require
stockholder approval pursuant to applicable laws or regulations. The Board may
terminate the Directors Option Plan at any time, and the Directors Option Plan
will in all events terminate on August 1, 2005.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the Directors Option Plan are all non-statutory
options, which are not intended to satisfy the requirements of Section 422 of
the Internal Revenue Code. The Federal income tax treatment for non-statutory
options is as follows: 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 on the exercise date over the exercise
price paid for the shares.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when those shares vest, an amount equal to the excess
of (i) the fair market value of the shares at time of vesting over (ii) the
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 in which the option is exercised, an amount equal to the excess of (i) the
fair market value of the purchased shares on the exercise date over (ii) the
exercise price paid for such shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the shares
subsequently vest.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised 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.
14
<PAGE> 18
ACCOUNTING TREATMENT
Under current accounting principles, option grants to non-employee Board
members with exercise prices equal to the fair market value of the shares on the
grant date will not result in any charge to the Company's earnings, but the
Company must disclose, in footnotes to the company's financial statements, the
impact those options would have upon the company's reported earnings were the
fair value of those options at the time of grant treated as compensation
expense. The number of outstanding options may be a factor in determining the
Company's earnings per share on a fully-diluted basis.
NEW PLAN BENEFITS
No option grants have been made on the basis of the 30,000-share
increase to the Directors Option Plan which forms part of this Proposal. At the
1999 Annual Meeting, each of the following non-employee Board members who will
continue to serve in such capacity will automatically be granted an option to
purchase 5,000 shares of Common Stock at an exercise price per share equal to
the closing selling price per share of Common Stock on that grant date: Ms.
Gardner, M.D. and Messrs: Lacob, Scodari and Taylor.
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 to approve the amendment to the Directors Option Plan. Should such
stockholder approval not be obtained, then the changes to the Directors Option
Plan will not be implemented. Accordingly, the share reserve will not be
increased by 30,000 shares, any unvested shares reacquired by the company will
not be available for future option grants, and the optionees will have a twelve
(12) month period following cessation of Board service during which to exercise
outstanding options. The Directors Option Plan will, however, continue to remain
in effect, and option grants may continue to be made pursuant to the provision
of the Directors Option Plan in effect prior to the amendment summarized in this
Proposal Three, until the available reserve of Common Stock as last approved by
the stockholders has been issued pursuant to option grants made under the
Directors Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF
THE AMENDMENTS TO THE COMPANY'S 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN.
15
<PAGE> 19
PROPOSAL FOUR -- RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
The Board has appointed the firm of PricewaterhouseCoopers LLP,
independent accountants, to audit the financial statements of the Company for
the fiscal year ending June 30, 2000, 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 PricewaterhouseCoopers LLP.
PricewaterhouseCoopers LLP has served as independent accountants to the
Company for the fiscal year ended June 30, 1999. A representative of
PricewaterhouseCoopers 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 PRICEWATERHOUSECOOPERS LLP TO SERVE AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 2000.
16
<PAGE> 20
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain compensation earned during the
fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997 for services
rendered in all capacities to the Company, by (i) the Company's Chief Executive
Officer, and (ii) the four other highest paid executive officers whose salary
and bonus for fiscal 1999 were in excess of $100,000. The individuals named in
the table will be hereinafter referred to as the "Named Executive Officers." No
other executive officers who would otherwise have been includable in such table
on the basis of salary and bonus earned for the 1999 fiscal year has been
excluded by reason of his or her termination or change in executive status
during the year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS ALL OTHER
SALARY SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) OPTIONS/SARS(#) ($)
- --------------------------- ----- ------------ -------------------- ------------
<S> <C> <C> <C> <C>
Richard A. Miller, M.D. 1999 279,637 55,000 --
President and Chief Executive Officer 1998 252,500 62,000 --
1997 229,833 60,000 --
Marc L. Steuer 1999 242,504 38,000 --
Senior Vice President, Business Development 1998 218,800 40,000 --
1997 199,200 55,000 --
Leiv Lea(2) 1999 164,167 30,000 --
Vice President, Finance and Administration and 1998 84,000 60,000 --
Chief Financial Officer 1997 -- -- --
David A. Lowin, Esq.(3) 1999 201,615 20,000 --
Vice President, Intellectual Property Counsel 1998 44,500 60,000 --
1997 -- -- --
Hugo Madden, Ph.D.(4) 1999 161,508 70,000 --
Vice President, Chemical Operations 1998 4,307 -- --
1997 -- -- --
</TABLE>
- ----------
(1) Includes amounts earned but not paid in the fiscal years ended June 30,
1997 and June 30, 1999.
(2) Mr. Lea joined the Company in December 1997.
(3) Mr. Lowin joined the Company in April 1998.
(4) Dr. Madden joined the Company in June 1998.
17
<PAGE> 21
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,
1999. Except for the limited stock appreciation rights described in footnote (1)
below, no stock appreciation rights were granted during such fiscal year to the
Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(5)
------------------------------------------------------- ---------------------------
NUMBER OF
SECURITIES PERCENTAGE OF
UNDERLYING TOTAL OPTIONS EXERCISE
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. ...... 55,000 8.3% $17.63 03/17/09 $609,635 $1,554,934
Marc L. Steuer................ 38,000 5.7% $17.63 03/17/09 $421,202 $1,067,409
Leiv Lea ..................... 10,000 1.5% $19.75 07/07/08 $124,207 $ 314,764
20,000 3.0% $17.63 03/17/09 $221,685 $ 561,794
David A. Lowin, Esq. ......... 20,000 3.0% $17.63 03/17/09 $221,685 $ 561,794
Hugo Madden, Ph.D. ........... 50,000 7.5% $19.75 07/07/08 $621,033 $1,573,821
20,000 3.0% $17.63 03/17/09 $221,685 $ 561,794
</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 option for 55,000 shares granted to Dr. Miller on March 18, 1999
vests as follows: (i) an aggregate of 20,000 shares shall vest ratably
on a monthly basis beginning July 1, 2000 and (ii) the remaining 35,000
shares shall vest ratably on a monthly basis over twenty-four months
beginning July 1, 2002.
The option for 38,000 shares granted to Mr. Steuer on March 18, 1999
vests as follows: (i) an aggregate of 4,000 shares shall vest ratably on
a monthly basis over twelve months beginning July 1, 1999, (ii) an
aggregate of 10,000 shares shall vest ratably on a monthly basis over
twelve months beginning July 1, 2000, (iii) an aggregate of 10,000
shares shall vest ratably on a monthly basis over twelve months
beginning July 1, 2001, and (iv) the remaining 14,000 shares shall vest
ratably on a monthly basis over twelve months beginning July 1, 2002.
The option for 10,000 shares granted to Mr. Lea on July 8, 1998 vests in
equal monthly installments over the five year period beginning July 8,
1998.
The option for 20,000 shares granted to Mr. Lea on March 18, 1999 vests
as follows: (i) an aggregate of 9,000 shares shall vest ratably on a
monthly basis over thirty-six months beginning July 1, 1999 and (ii) the
remaining 11,000 shares shall vest ratably on a monthly basis over
twelve months beginning July 1, 2002.
The option for 20,000 shares granted to Mr. Lowin on March 18, 1999
vests as follows: (i) an aggregate of 12,000 shares shall vest ratably
on a monthly basis over thirty-six months beginning on July 1, 1999 and
(ii) the remaining 8,000 shares shall vest ratably on a monthly basis
over twelve months beginning July 1, 2002.
The option for 50,000 shares granted to Dr. Madden on July 8, 1998 vests
as follows: (i) 10,000 shares on June 15, 1999 and (ii) 40,000 shares in
equal monthly installments over the four year period beginning June 16,
1999.
18
<PAGE> 22
The option for 20,000 shares granted to Dr. Madden on March 18, 1999
vests as follows: (i) an aggregate of 10,500 shares shall vest ratably
on a monthly basis over thirty-six months beginning July 1, 1999 and
(ii) the remaining 9,500 shares shall vest ratably on a monthly basis
over the twelve months beginning July 1, 2002.
Each of the granted options will immediately become vested 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 665,700 options granted to
employees and directors of the Company in fiscal 1999 under the 1995
Stock Option Plan and Directors Option Plan.
(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.
OPTION HOLDINGS
The table below sets forth certain information concerning the exercise
of options during the fiscal year ending June 30, 1999 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 1999
AND 1999 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 VESTED UNVESTED VESTED UNVESTED
---- ------------ ----------- ------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Richard A. Miller, M.D. -- -- 163,972 259,695 $2,688,731 $2,710,568
Marc L. Steuer -- -- 155,917 150,417 $3,181,718 $1,382,132
Leiv Lea -- -- 16,834 63,166 $ 71,376 $ 406,124
David A. Lowin, Esq. -- -- 14,001 65,999 $ 14,001 $ 253,499
Hugo Madden, Ph.D. -- -- 10,000 60,000 $ 82,500 $ 537,500
</TABLE>
- ----------
(1) Determined by subtracting the exercise price from the market price of
the Common Stock on June 30, 1999 ($28.00).
19
<PAGE> 23
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
In June 1992, the Company entered into an employment agreement with
Richard A. Miller, M.D., 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, 1999, Dr. Miller earned $279,637 under the agreement.
In October 1994, the Company entered into an employment agreement with
Marc L. Steuer, which remains in effect unless and until terminated by either
the Company or Mr. Steuer at any time and for any reason, with or without cause.
During the fiscal year ended June 30, 1999, Mr. Steuer earned $242,504 under the
agreement.
In December 1997, the Company entered into an employment agreement with
Leiv Lea, which remains in effect unless and until terminated by either the
Company or Mr. Lea at any time and for any reason, with or without cause. During
the fiscal year ended June 30, 1999, Mr. Lea earned $164,167 under the
agreement.
In April 1998, the Company entered into an employment agreement with Mr.
David A. Lowin, Esq., which remains in effect unless and until terminated by
either the Company or Mr. Lowin at any time and for any reason, with or without
cause. During the fiscal year ended June 30, 1999, Mr. Lowin earned $201,615
under the agreement.
In June 1998, the Company entered into an employment agreement with Hugo
Madden, Ph.D., which remains in effect unless and until terminated by either the
Company or Dr. Madden at any time and for any reason, with or without cause.
During the fiscal year ended June 30, 1999, Dr. Madden earned $161,508 under the
agreement.
The Company has entered into agreements with each of Dr. Miller, Mr.
Steuer and Mr. Lea 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.
20
<PAGE> 24
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, 1998 to June 30, 1999.
In June 1999, the Compensation Committee set the compensation payable to
Dr. Miller for the 12-month period ending April 30, 2000. Dr. Miller in turn
recommended, subject to the Compensation Committee's review and approval, the
compensation to be paid for such 12-month period to the Company's other
executive officers. For those executive officers, the Compensation Committee had
previously established performance factors to be considered by Dr. Miller in
making his recommendations with respect to the compensation level to be in
effect for each such officer. Dr. Miller provided the Compensation Committee
with his evaluation of the performance of each officer with respect to those
factors and his recommendation as to the compensation to be paid to that
individual on the basis of such performance. The Compensation Committee reviewed
and approved the recommendations of Dr. Miller.
General Compensation Policy. The Compensation Committee's overall policy
as to executive compensation is to ensure that an appropriate relationship
exists between the total compensation package established for each executive
officer and the creation of stockholder value, while at the same time assuring
that compensation is sufficiently competitive to motivate and retain key
executives. In furtherance of this goal, executive compensation 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 1999 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.
21
<PAGE> 25
- 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 1999
fiscal year to the Company's President and Chief Executive Officer, Richard A.
Miller, the Committee reviewed a detailed performance evaluation compiled for
Dr. Miller. Such review considered Dr. Miller's qualifications, the level of
experience brought to his position and gained while in the position, Company
goals for which Dr. Miller had responsibility, specific accomplishments to date,
and the importance of Dr. Miller's individual achievement in meeting company
goals and objectives set during the prior fiscal year. In addition, the
Compensation Committee surveyed the salary levels in effect for chief executive
officers at the peer group companies, which were taken into account for
comparative compensation purposes for all of the Company's other executive
officers.
In determining Dr. Miller's compensation level, the Committee sought to
establish a competitive rate of base salary, while at the same time tying a
significant percentage of his overall compensation package to individual and
Company performance, such as the attainment of certain milestones in the testing
of clinical products and Dr. Miller's achievements in recruiting individuals to
serve in key positions in the Company. Based on these factors, the Committee
increased Dr. Miller's base salary level to $295,231. The level of base salary
set for Dr. Miller was in the 29th percentile of the surveyed salary for the
peer group companies.
In fiscal 1999, the Company also granted Dr. Miller options to purchase
55,000 shares of the Company's Common Stock under the Plan, at an exercise price
of $17.63 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.
22
<PAGE> 26
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 1999 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 2000 will
exceed that limit. The 1995 Stock Option 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
Joseph C. Scodari
Craig C. Taylor
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of June 30, 1999, the Compensation Committee of the Board was
comprised of Messrs. Lacob, Scodari and Taylor.
No current 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.
23
<PAGE> 27
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.
COMPARISON OF 44 MONTH CUMULATIVE TOTAL RETURN*
AMONG PHARMACYCLICS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
<TABLE>
<CAPTION>
NASDAQ NASDAQ
Measurement Period (Fiscal Pharmaceutical Stock Market
Year Covered) Pharmacyclics, Inc. Index (U.S.) Index
-------------------------- ------------------- -------------- ------------
<S> <C> <C> <C>
10/24/95 100 100 100
06/30/96 147 125 115
06/30/97 129 127 140
06/30/98 198 130 184
06/30/99 233 181 264
</TABLE>
* $100 INVESTED ON 10/24/95 IN STOCK OR INDEX- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might incorporate future
filings made by the Company under those statutes, the preceding Compensation
Committee Report on Executive Compensation and the Company Stock Performance
Graph will not be incorporated by reference into any of those prior filings, nor
will such report or graph be incorporated by reference into any future filings
made by the Company under those statutes.
24
<PAGE> 28
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 believes that the transactions set forth above were made on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and its
officers, directors, principal stockholders and affiliates will be approved by a
majority of the independent and disinterested members of the Board and will be
on terms no less favorable to the Company than could be 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, 1998 to June 30, 1999, all
officers, directors and beneficial owners of more than ten percent of the
outstanding Common Stock complied with all Section 16(a) requirements.
25
<PAGE> 29
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,
1999 by (i) all persons who are beneficial owners of five percent or more of the
Company's Common Stock, (ii) each director and nominee for director, (iii) the
Named Executive Officers in the Summary Compensation Table above and (iv) all
current directors and executive officers as a group. The number of shares
beneficially owned by each director or executive officer is determined under
rules of the SEC and the information is not necessarily indicative of beneficial
ownership for any other purpose. Shares of Common Stock subject to convertible
securities that are currently exercisable or convertible or which will become
exercisable or convertible within the next 60 days are deemed to be beneficially
owned by the person holding such convertible security for computing the
percentage ownership of such person, but are not treated as outstanding for
computing the percentage of any other person. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based upon such information furnished by such owners, have sole investment power
with respect to such shares, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES TOTAL SHARES
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING(1)(2)
- ---------------- ------------------ -----------------
<S> <C> <C>
Wellington Management Company LLP(3) 1,702,800 11.6%
Capital Research and Management Company(4) 815,000 5.5%
Entities affiliated with Integral Capital Partners(5) 799,934 5.4%
Richard A. Miller, M.D.(6) 492,286 3.3%
Phyllis I. Gardner, M.D.(7) 1,000 *
Joseph S. Lacob(8) 142,115 *
Craig C. Taylor(9) 98,926 *
Joseph C. Scodari(10) 31,250 *
Marc L. Steuer(11) 171,166 1.1%
Leiv Lea(12) 22,833 *
David A. Lowin, Esq.(13) 21,110 *
Hugo Madden, Ph.D.(14) 15,334 *
All executive officers and directors as a group
(9 persons)(15) 995,020 6.5%
</TABLE>
- --------
* Less than 1%.
(1) Percentage of beneficial ownership is calculated assuming 14,742,173
shares of Common Stock were outstanding as of September 30, 1999.
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, 1999, 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.
26
<PAGE> 30
(3) Represents 1,702,800 shares held by Wellington Management Company, LLP,
based solely on a Schedule 13G filed April 9, 1999.
(4) Represents 815,000 shares held by Capital Research and Management
Company, based solely on a Schedule 13G filed February 11, 1999.
(5) Includes 78,394 shares held by Integral Capital Partners International
II C.V., 290,285 shares held by Integral Capital Partners III, L.P.,
66,155 shares held by Integral Capital Partners International III, L.P.,
363,350 shares held by Integral Capital Partners IV, L.P. and 1,750
shares held by Integral Capital Partners IV MS Side Fund, L.P., based
solely on a Schedule 13G filed March 16, 1999.
(6) Includes 13,334, 13,334, and 279,008 shares held in trust for Jordan
Andrew Miller Jared David Miller and the Mill-Horning Trust,
respectively. Also, includes vested options exercisable for 186,610
shares within 60 days of September 30, 1999.
(7) Includes 1,000 shares held in trust by the Perlman Gardner Family Trust.
(8) Includes 114,718 held directly by Mr. Lacob, 147 shares held in trust by
the Lacob Children's Trust and vested options exercisable for 27,250
shares within 60 days of September 30, 1999.
(9) Includes 70,276 shares held by Mr. Taylor, 700 shares held by Mr.
Taylor's son and 700 shares held by Mr. Taylor's daughter. Mr. Taylor
disclaims beneficial ownership of the shares held by his children, also,
includes vested options exercisable for 27,250 shares within 60 days of
September 30, 1999.
(10) Represents vested options exercisable for 31,250 shares within 60 days
of September 30, 1999.
(11) Represents vested options exercisable for 171,166 shares within 60 days
of September 30, 1999.
(12) Represents vested options exercisable for 22,833 shares within 60 days
of September 30, 1999.
(13) Includes 777 shares held by Mr. Lowin and vested options exercisable for
20,333 shares within 60 days of September 30, 1999.
(14) Represents vested options exercisable for 15,334 shares within 60 days
of September 30, 1999.
(15) Includes vested options exercisable for 502,026 shares within 60 days
of September 30, 1999.
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 and the National Association of
Securities Dealers, Inc.
27
<PAGE> 31
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 2000 Annual Meeting of
Stockholders is expected to be July 20, 2000. 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.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
June 30, 1999 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/A
The Company filed an Annual Report on Form 10-K/A (the "Form 10-K/A")
with the Securities and Exchange Commission. A copy of the Form 10-K/A 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/A is not incorporated
into this Proxy Statement and is not considered proxy-soliciting material.
Stockholders may obtain additional copies of the Form 10-K/A, without charge, by
writing to Leiv Lea, 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 9, 1999
28
<PAGE> 32
APPENDIX A
PROXY
PHARMACYCLICS, INC.
Annual Meeting of Stockholders, December 9, 1999
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 9, 1999 and
the Proxy Statement and appoints Richard A. Miller, M.D. and Leiv Lea and each
of them, the Proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of Pharmacyclics, Inc. (the "Company") which the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
any entity or entities, at the Annual Meeting of Stockholders of the Company to
be held at the Sunnyvale Hilton, 1250 Lakeside Drive, Sunnyvale, California
94086 on Thursday, December 9, 1999 at 12:00 P.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.
The Board of Directors recommends a vote FOR each of the directors
listed below and a vote FOR the other proposals. This Proxy, when properly
executed, will be voted as specified below. If no specification is made, this
proxy will be voted IN FAVOR OF the election of the directors listed below and
IN FAVOR OF the other proposals.
1. To elect the following directors to serve until the next annual
meeting of stockholders or until their successors are elected
and qualified: Nominees: Phyllis I. Gardner, M.D., Joseph S.
Lacob, Richard A. Miller, M.D., Joseph C. Scodari, Craig C.
Taylor.
FOR WITHHELD
--------------------------------------
For all nominees except as noted above
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 amendments to the Company's
Non-Employee Directors Stock Option Plan
in order to (i) increase the total
number of shares of common stock
authorized for issuance over the term of
the Option Plan by an additional 30,000
shares, (ii) allow any unvested shares
reacquired by the Company to be
available for future option grants and
(iii) increase the option exercise
period from twelve months to twenty-four
months after the cessation of service;
and
4. FOR AGAINST ABSTAIN To ratify the Board of Directors'
selection of PricewaterhouseCoopers LLP
to serve as the Company's independent
accountants for the fiscal year ending
June 30, 2000.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
MARK HERE IF YOU PLAN TO ATTEND THE MEETING
Please sign your name(s) exactly as it appears on
the share certificate(s) over which you have
voting authority.
Signature:_______________ Date:_______ Signature:_________________ Date:________
<PAGE> 33
PHARMACYCLICS, INC.
1995 STOCK OPTION PLAN
(As Amended and Restated through October 14, 1999)
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.
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).
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
1.
<PAGE> 34
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.
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 3,387,460 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, the automatic increase of 91,503
shares effected in January 1997, the automatic increase of 102,042 shares
effected in January, 1998 and the automatic increase of 123,856 shares effected
in January 1999 pursuant to Section V.B. below, (iii) the 750,000-share increase
approved by the Board on August 1, 1996 and approved by the stockholders at the
1996 Annual Meeting, (iv) the 500,000-share increase
2.
<PAGE> 35
approved by the Board on September 11, 1997 and approved by the stockholders at
the 1997 Annual Meeting, (v) the 400,000-share increase approved by the Board on
September 24, 1998 and approved by the stockholders at the 1998 Annual Meeting
and (vi) the 500,000 share increase approved by the Board on October 14, 1999,
subject to approval by the stockholders at the 1999 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.
Unvested shares issued under the Plan (including unvested shares issued under
the Predecessor Plan) and subsequently repurchased by the Corporation, at the
original exercise price paid per share, pursuant to the Corporation's repurchase
rights under the Plan, shall be added back to the number of shares of Common
Stock reserved for issuance under the Plan and shall accordingly be available
for reissuance through one or more subsequent options under the Plan. Shares
subject to any stock appreciation rights exercised under the Plan and all shares
issued under the Plan (included shares issued upon exercise of options
incorporated from the Predecessor 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.
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
3.
<PAGE> 36
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> 37
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.
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.
5.
<PAGE> 38
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:
(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.
6.
<PAGE> 39
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.
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
7.
<PAGE> 40
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 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
8.
<PAGE> 41
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.
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.
9.
<PAGE> 42
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 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.
10.
<PAGE> 43
(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> 44
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> 45
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 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 was approved by the stockholders at the 1997 Annual Meeting.
C. The Plan was amended and restated by the Board on September 24,
1998 (the "1998 Restatement") to increase the maximum number of shares of Common
Stock authorized for issuance over the term of the Plan by 400,000 shares. The
1998 Restatement was approved by the stockholders at the 1998 Annual Meeting.
D. The Plan was amended and restated by the Board on October 14,
1999 (the "1999 Restatement") to increase the maximum number of shares of Common
Stock authorized for issuance over the term of the Plan by 500,000 shares. The
1999 Restatement is subject to stockholder approval at the 1999 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 1998 Restatement is
approved by the stockholders. Should such stockholder approval not be obtained,
then 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. 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
1999 Restatement.
E. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants shall be made under the Predecessor Plan after the
Plan Effective Date. All options outstanding under the Predecessor Plan as of
such date shall be incorporated into the Plan and treated as outstanding options
under the Plan. However, each outstanding option so incorporated shall continue
to be governed solely by the terms of the documents evidencing such option, and
13.
<PAGE> 46
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.
F. 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.
G. 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.
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
14.
<PAGE> 47
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> 48
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.
F. Corporation shall mean Pharmacyclics, Inc., a Delaware
corporation.
G. 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.
A-1.
<PAGE> 49
H. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
I. 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.
J. 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 made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept.
K. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
L. 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
A-2.
<PAGE> 50
(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.
M. 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).
N. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
O. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
P. Optionee shall mean any person to whom an option is granted under
the Plan.
Q. 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.
R. 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.
S. Plan shall mean the Corporation's 1995 Stock Option Plan, as set
forth in this document.
T. 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.
U. 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.
A-3.
<PAGE> 51
V. Predecessor Plan shall mean the Corporation's existing 1992 Stock
Option Plan.
W. 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.
X. 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.
Y. 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.
Z. 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.
AA. 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.
BB. Stock Exchange shall mean either the American Stock Exchange or
the New York Stock Exchange.
CC. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
DD. 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.
EE. 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.
FF. 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).
GG. Underwriting Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-4.
<PAGE> 52
PHARMACYCLICS, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
(As Amended and Restated on October 14, 1999)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This Non-Employee Directors Stock Option Plan is intended to promote
the interests of Pharmacyclics, Inc., a Delaware corporation, by providing the
non-employee members of the Board 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. ADMINISTRATION OF THE PLAN
The terms of each option grant (including the timing and pricing of
the option grant) shall be determined by the express terms of the Plan, and
neither the Board nor any committee of the Board shall exercise any
discretionary functions with respect to option grants made pursuant to the Plan.
III. ELIGIBILITY
The individuals eligible to receive option grants under the Plan shall
be (i) those individuals who are serving as non-employee Board members on the
Plan Effective Date or who are first elected or appointed as non-employee Board
members on or after such date, whether through appointment by the Board or
election by the Corporation's stockholders, and (ii) those individuals who
continue to serve as non-employee Board members after one or more Annual
Stockholders Meetings beginning with the 1996 Annual Meeting. A non-employee
Board member who has previously been in the employ of the Corporation (or any
Parent or Subsidiary) shall not be eligible to receive an option grant under the
Plan on the Plan Effective Date or at the time he or she first becomes a
non-employee Board member, but shall be eligible to receive periodic option
grants under the Plan upon his or her continued service as a non-employee Board
member following one or more Annual Stockholders Meetings.
IV. 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
<PAGE> 53
term of the Plan shall not exceed 196,667 shares. Such authorized share reserve
is comprised of (i) the initial share reserve of 166,667 plus (ii) a
30,000-share increase approved by the Board on October 14, 1999, subject to
approval by the stockholders at the 1999 Annual Meeting.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent the options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently cancelled or repurchased by the
Corporation at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants under the Plan. Shares subject to any option or portion thereof
surrendered in accordance with Section II of Article Two shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent issuance under the Plan. Should the exercise price of an option under
the Plan be paid with shares of Common Stock, 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.
C. 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 number and/or class of securities for which option
grants are to be subsequently made per Eligible Director and (iii) the number
and/or class of securities and the exercise price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments to the outstanding options shall be made by the
Board and shall be final, binding and conclusive.
2
<PAGE> 54
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified
below:
1. Each Eligible Director who is a non-employee Board member on
the Plan Effective Date shall automatically be granted, on the Plan Effective
Date a Non-Statutory Option to purchase 5,000 shares of Common Stock.
2. Each Eligible Director who is first elected or appointed as
a non-employee Board member after the Plan Effective Date shall automatically be
granted a Non-Statutory Option to purchase 10,000 shares of Common Stock.
3. On the date of each Annual Stockholders Meeting, beginning
with the 1996 Annual Meeting, each individual who is to continue to serve as an
Eligible Director after such meeting, shall automatically be granted, whether or
not such individual is standing for re-election as a Board member at that Annual
Meeting, a Non-Statutory Option to purchase an additional 5,000 shares of Common
Stock, provided such individual has served as a non-employee Board member for at
least six (6) months prior to the date of such Annual Meeting. There shall be no
limit on the number of such annual 5,000-share option grants any one Eligible
Director may receive over his or her period of continued Board service.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred
percent (100%) 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 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
3
<PAGE> 55
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.
C. Option Term. Each option shall have a term of ten (10) years
measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares.
1. Each 10,000-share grant shall vest, and the Corporation's
repurchase right shall lapse, in a series of five (5) equal and successive
annual installments over the Optionee's period of continued service as a Board
member, with the first such installment to vest upon the Optionee's completion
of one (1) year of Board service measured from the option grant date.
2. Each 5,000-share grant shall vest, and the Corporation's
repurchase right shall lapse, in a series of twelve (12) equal and successive
monthly installments over the Optionee's period of continued service as a Board
member, with the first such installment to vest upon the Optionee's completion
of one (1) month of Board service measured from the option grant date.
E. Effect of Termination of Board Service. The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) Should the Optionee cease to serve as a Board member
for any reason (other than death or Permanent Disability), then the
Board member shall have a twenty-four (24)-month period following the
date of such cessation of Board service in which to exercise each such
option. During the twenty-four (24)-month 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 at the time of the
Optionee's cessation of Board service.
(ii) Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that the option may,
during the twenty-four (24)-month exercise period following such
cessation of Board service, be exercised by the Optionee (or in the
event of the Optionee's death, the personal representative of the
Optionee's estate or the person or persons to whom the option is
transferred pursuant to the Optionee's will, or in accordance with the
Optionee's beneficiary designation, or the laws of descent and
distribution) for all or any portion of such shares as fully-vested
shares.
4
<PAGE> 56
(iii) In no event shall the option remain exercisable after
the expiration of the option term. Upon the expiration of the
twenty-four (24)-month 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 Board service, terminate and cease to be outstanding, to
the extent it is not exercisable for vested shares on the date of such
cessation of Board service.
F. 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.
G. 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, an option may be assigned
in accordance with the terms of a Qualified Domestic Relations Order. The
assigned option may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to such Qualified Domestic Relations
Order. The terms applicable to the assigned option (or portion thereof) shall be
the same as those in effect for the option immediately prior to such assignment
and shall be set forth in such documents issued to the assignee as the Plan
Administrator may deem appropriate.
H. Beneficiary Designation. An Optionee may file a written
beneficiary designation indicating the person entitled to exercise Optionee's
outstanding options on the Optionee's behalf at the time of his/her death. Such
beneficiary designation may be changed by the Optionee at any time by filing the
appropriate form with the Plan Administrator.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the specified 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 all or any portion of such shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of such shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares
5
<PAGE> 57
until the expiration of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
option held by him or her for a period of at least six (6) months. The Optionee
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the surrendered option (whether or not the Optionee
is otherwise at the time vested in those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the Corporation.
No approval of the Board or any committee of the Board shall be required in
connection with such option surrender and cash distribution.
D. 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.
6
<PAGE> 58
ARTICLE THREE
MISCELLANEOUS
I. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately on the Plan Effective
Date, and was approved by the Corporation's stockholders on ___________________.
On October 14, 1999 the Plan was amended and restated by the Board to (i)
increase the maximum number of shares of Common Stock authorized for issuance
over the term of the Plan by 30,000 shares (ii) allow any unvested shares
reacquired by the Corporation to be available for future option grants and (iii)
to increase the option exercise period from twelve months (12) to twenty-four
(24) months. The increase is subject to stockholder approval at the 1999 Annual
Meeting. No options granted on the basis of such increase may be exercised until
the increase is approved by the Corporation's stockholders. If such stockholder
approval is not obtained within twelve (12) months after the date of the Board's
approval of the increase, then all options previously granted on the basis of
the amendment shall terminate and cease to be outstanding, any unvested shares
reacquired by the Corporation will not be available for future option grants,
and the optionees will have a twelve (12) month period following cessation of
Board service during which to exercise outstanding options.
B. 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 or cancelled pursuant to the exercise or cash-out of the
options under the Plan or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Upon such Plan termination, all option
grants and unvested stock issuances outstanding on such date shall thereafter
continue to have force and effect in accordance with the provisions of the
documents evidencing such grants or issuances.
II. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, (i) the Plan, together
with the option grants outstanding thereunder, may not be amended at intervals
more frequently than once every six (6) months, other than to the extent
necessary to comply with applicable Federal income tax laws and regulations and
(ii) no such amendment or modification shall adversely affect the rights and
obligations with respect to options at the time outstanding under the Plan
unless the Optionee consents to such amendment or modification. In addition, the
Board shall not, without the approval of the Corporation's stockholders, (i)
materially increase the maximum number of shares issuable under the Plan or the
number of shares for which options may be granted to each Eligible Director,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) materially modify the eligibility
requirements for Plan participation or (iii) materially increase the benefits
accruing to Plan participants.
III. 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.
IV. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under
the Plan and the issuance of any shares of Common Stock upon the exercise of any
option shall be subject
7
<PAGE> 59
to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options 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.
V. 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) and the Corporation's
stockholders 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.
8
<PAGE> 60
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 such election or nomination was approved
by the Board.
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 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.
F. Corporation shall mean Pharmacyclics, Inc., a Delaware
corporation.
G. Domestic Relations Order shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys,
9
<PAGE> 61
pursuant to applicable State domestic relations laws (including community
property laws), marital property rights to any spouse or former spouse of the
Optionee.
H. Eligible Director shall mean a non-employee Board member eligible
to participate in the Plan.
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 which serves as 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.
K. Hostile Take-Over shall mean a change in ownership of the
Corporation effected through the following transaction:
(i) 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)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept, and
(ii) more than fifty percent (50%) of the securities so acquired
are accepted from persons other than Section 16 Insiders.
L. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
M. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
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N. Optionee shall mean any person to whom an option is granted under
the Plan.
O. 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.
P. Permanent Disability shall mean the inability of the Optionee to
perform his or her usual duties as a Board member 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.
Q. Plan shall mean the Corporation's Non-Employee Directors Stock
Option Plan, as set forth in this document.
R. Plan Effective Date shall mean the date on which the Underwriting
Agreement is executed and the initial public offering price of the Common Stock
is established.
S. Qualified Domestic Relations Order shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p).
T. Section 16 Insiders shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
U. Stock Exchange shall mean either the American Stock Exchange or
the New York Stock Exchange.
V. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
W. 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.
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