SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ONYX PHARMACEUTICALS, INC.
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[LOGO]
ONYX PHARMACEUTICALS, INC.
3031 RESEARCH DRIVE
RICHMOND, CALIFORNIA 94806
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2000
TO THE STOCKHOLDERS OF ONYX PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ONYX
PHARMACEUTICALS, INC., a DELAWARE corporation (the "Company"), will be held on
Thursday, June 8, 2000 at 10:00 a.m., local time, at the Company's executive
offices located at 3031 Research Drive, Richmond, California 94806, for the
following purposes:
1. To elect two directors to hold office until the 2003 Annual Meeting of
Stockholders.
2. To approve an amendment to the Company's 1996 Equity Incentive Plan, as
amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 400,000 shares.
3. To approve an amendment to the Company's 1996 Non-Employee Directors'
Stock Option Plan, as amended, to increase the aggregate number of shares
of Common Stock authorized for issuance under such plan by 75,000 shares.
4. To approve an amendment to the Company's Employee Stock Purchase Plan,
as amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 75,000 shares.
5. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the authorized number of shares
of Common Stock from 25,000,000 to 50,000,000 shares.
6. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 2000.
7. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 25, 2000 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Robert L. Jones
Robert L. Jones
SECRETARY
Richmond, California
April , 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
ONYX PHARMACEUTICALS, INC.
3031 RESEARCH DRIVE
RICHMOND, CALIFORNIA 94806
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 8, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of ONYX
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on Thursday, June 8, 2000 at
10:00 a.m., local time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting. The Annual Meeting will be held at the Company's
executive offices, 3031 Research Drive, Richmond, California. The Company
intends to mail this proxy statement and accompanying proxy card on or about
May 3, 2000 to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
April 25, 2000, will be entitled to notice of and to vote at the Annual Meeting.
At the close of business on April 25, 2000, the Company had outstanding and
entitled to vote shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted toward the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Except for Proposal 5, broker non-votes
are counted toward a quorum, but are not counted for any purpose in determining
whether a matter has been approved. With respect to Proposal 5, abstentions and
broker non-votes will have the same effect as negative votes.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 3031
Research Drive, Richmond, California 94806, a written notice of revocation or a
duly
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executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
The deadline for submitting a stockholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 2001 annual
meeting of stockholders pursuant to Rule 14a-8 of the Securities and Exchange
Commission is December 22, 2000. Stockholders are also advised to review the
Company's By-laws, which contain additional requirements with respect to advance
notice of stockholder proposals.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and By-laws
provide that the Board of Directors shall be divided into three classes:
Class I, Class II and Class III, each class consisting, as nearly as possible,
of one-third of the total number of directors, with each class having a
three-year term. Vacancies on the Board may be filled only by persons elected by
a majority of the remaining directors. A director elected by the Board to fill a
vacancy (including a vacancy created by an increase in the Board of Directors)
shall serve for the remainder of the full term of the class of directors in
which the vacancy occurred and until such director's successor is elected and
qualified.
The Board of Directors is presently composed of six members with three
vacancies. There are two directors in Class I whose term of office expires in
2000. Each of the nominees for election to Class I is currently a director of
the Company who was previously elected by stockholders. If elected at the Annual
Meeting, each of the nominees would serve until the annual meeting of
stockholders in 2003 and until his successor is elected and has qualified, or
until such director's earlier death, resignation or removal. If the nominees are
elected at the Annual Meeting, the Board of Directors shall be composed of six
members with three vacancies. Mr. Samuel D. Colella, one of our Class III
directors, has notified the Company that he does not intend to stand for
reelection when his term of office expires in 2002.
Bayer Corporation has the right to have a nominee elected to the Company's
Board of Directors until such time as the parties do not have a compound in
clinical development under the collaboration agreement between the parties.
Dr. Michael J. Berendt currently serves as the Bayer nominee on the Board of
Directors.
International Biotechnology Trust plc ("IBT") has the right to have its
nominee elected to the Company's Board of Directors as long as it continues to
own more than 66 2/3% of the Common Stock purchased by it from the Company on
January 12, 1998. Ms. Nicole Vitullo currently serves as the IBT nominee on the
Board of Directors.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the two nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2003 ANNUAL
MEETING--CLASS I
PAUL GODDARD, PH.D., age 50, has served as a director since February 1997.
Dr. Goddard is currently a consultant and advisor to Elan Pharmaceuticals, a
biotechnology company and a division of Elan Corporation plc. From August 1998
to March 2000, Dr. Goddard served as President and Chief Executive Officer of
Elan Pharmaceuticals. From March 1991 to August 1998, Dr. Goddard served as
Chief Executive Officer and Chairman of the Board of Neurex Corporation, a
biotechnology company, until Neurex Corporation was acquired by Elan Corporation
plc. Dr. Goddard serves on the Board of Directors of Molecular Devices
Corporation. He completed his Ph.D. in the area of Etiology and Pathophysiology
of colon cancer at St. Mary's Hospital, University of London.
WENDELL WIERENGA, PH.D., age 52, has served as a director since
December 1996. Dr. Wierenga has served as Senior Vice President, Worldwide
Pharmaceutical Sciences, Technologies and Development for the Parke-Davis
Pharmaceutical Research division of Warner-Lambert since February 1999 and
served as
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Senior Vice President Research from 1990 to February 1999. Dr. Wierenga has also
served as Vice President of the Medtech division of Warner-Lambert since 1992.
Dr. Wierenga holds a B.A. from Hope College and a Ph.D. in Chemistry from
Stanford University.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING--CLASS II
MICHAEL J. BERENDT, PH.D., age 52, has served as a director since
December 1996. Dr. Berendt has served as a Senior Vice President for Research
for the Pharmaceutical Division of Bayer Corporation, since December 1996. From
November 1993 to November 1996, Dr. Berendt held various research and management
positions at the Pharmaceutical Division of Bayer Corporation including Vice
President, Institute for Bone & Joint Disorders and Cancer. Dr. Berendt is on
the Board of Directors of Myriad Genetics, Inc. and the Waters Corporation.
Dr. Berendt holds a B.S. from Ohio Dominican College, an M.S. in Microbiology
from Miami University and a Ph.D. in Microbiology/Immunology from Hahnemann
Medical College and University. Dr. Berandt serves as Bayer's representative on
the Company's Board.
NICOLE VITULLO, age 42, has served as a director since February 1998.
Ms. Vitullo is Managing Director, Domain Associates, L.L.C., a private venture
capital firm. Prior to joining Domain in 1999, Ms. Vitullo was Senior Vice
President of Rothchild Asset Management from 1992 until 1999. Rothchild Asset
Management managed International Biotechnology Trust plc. and has been advisor
to Biotechnology Investments Limited. Ms. Vitullo serves on the Board of
Directors of Corvas International and Epimmune Inc. Ms. Vitullo holds a B.A. in
Mathematics and an M.B.A. from the University of Rochester.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2002 ANNUAL MEETING--CLASS III
SAMUEL D. COLELLA, age 60, has served as the Company's Chairman of the Board
since February 1993 and as a director since the Company's inception.
Mr. Colella has been a partner in Institutional Venture Partners, a private
venture capital firm, since 1984. Mr. Colella holds a B.S. in Business and
Engineering from the University of Pittsburgh and an M.B.A. from Stanford
University.
HOLLINGS C. RENTON, age 53, has served as President and Chief Executive
Officer and a director since March 1993. Prior to joining the Company,
Mr. Renton served as President and Chief Operating Officer of Chiron Corporation
from December 1991 to March 1993 following Chiron Corporation's acquisition of
Cetus Corporation, a biopharmaceutical company. Prior to the acquisition,
Mr. Renton served as President of Cetus Corporation from August 1990 to
December 1991 and as Chief Operating Officer of Cetus Corporation from 1987 to
August 1990. Mr. Renton holds a B.S. in Mathematics from Colorado State
University and an M.B.A. from the University of Michigan.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1999, the Board of Directors held
seven meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers the accountants' comments as to controls, adequacy of
staff and management performance and procedures in connection with audit and
financial controls. The Audit Committee is currently composed of three
non-employee directors: Mr. Colella, Dr. Wierenga and Ms. Vitullo. The Audit
Committee met once during 1999.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as
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the Board may delegate. In 1999, the Compensation Committee was composed of
three non-employee directors: Mr. Colella, Dr. Goddard and Dr. Edward E.
Penhoet. In December 1999, Dr. Penhoet resigned as a director of the Company and
as a member of the Compensation Committee. Ms. Vitullo, a non-employee director,
was appointed as a member of the Compensation Committee in February 2000. The
Compensation Committee met twice during 1999.
During the fiscal year ended December 31, 1999, all directors except Drs.
Berendt and Wierenga attended at least 75% of the aggregate of the meetings of
the Board and of the committees on which they served, held during the period for
which they were a director or committee member, respectively.
PROPOSAL 2
APPROVAL OF THE AMENDMENT TO THE 1996 EQUITY INCENTIVE PLAN, AS AMENDED
In March 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1996 Equity Incentive Plan (the "1996
Plan"). As a result of a series of amendments, as of February 29, 2000, there
were 2,925,000 shares of the Company's Common Stock authorized and reserved for
issuance under the 1996 Plan. As of February 29, 2000, options (net of canceled
or expired options) covering an aggregate of 2,501,457 shares of Common Stock
had been granted under the 1996 Plan and approximately 423,543 shares of Common
Stock (plus any shares that might in the future be returned to the plan as a
result of cancellation or expiration of options) remained available for future
grants under the 1996 Plan. During the last fiscal year, the Company granted
options to purchase 183,000 shares of Common Stock under the 1996 Plan to
current executive officers and directors at exercise prices ranging from $5.88
to $8.88 per share and granted to all employees and consultants (excluding
executive officers) as a group options to purchase 608,850 shares at exercise
prices ranging from $5.88 to $9.50 per share.
In February 2000, the Board of Directors approved an amendment to the 1996
Plan, subject to stockholder approval, to increase the number of shares
authorized for issuance under the 1996 Plan by 400,000 shares of Common Stock
from a total of 2,925,000 shares to 3,325,000 shares. The Board of Directors
adopted this amendment to ensure that the Company can continue to grant stock
options under the 1996 Plan at levels determined appropriate by the Board of
Directors and the Compensation Committee.
Stockholders are requested in this Proposal 2 to approve the amendment to
the 1996 Plan, as amended. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the 1996 Plan, as amended. Abstentions will
be counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the 1996 Plan are outlined below:
GENERAL
The 1996 Plan provides for the grant of incentive stock options,
nonstatutory stock options, stock appreciation rights, stock bonuses and
restricted stock purchase awards (collectively "awards"). Incentive stock
options granted under the 1996 Plan are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Code. Nonstatutory stock
options granted under the 1996 Plan are not intended to qualify as incentive
stock options under the Code. Stock appreciation rights granted under the 1996
Plan may be tandem rights, concurrent rights or independent rights. See "Federal
Income Tax Information" for a discussion of the tax treatment of awards.
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PURPOSE
The Board adopted the 1996 Plan to provide a means by which employees,
directors and consultants of the Company and its affiliates may be given an
opportunity to purchase stock in the Company, to assist in retaining the
services of such persons, to secure and retain the services of persons capable
of filling key positions and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its affiliates. All of the
approximately 120 employees, directors and consultants of the Company and its
affiliates are eligible to participate in the 1996 Plan.
ADMINISTRATION
The Board administers the 1996 Plan. Subject to the provisions of the 1996
Plan, the Board has the power to construe and interpret the 1996 Plan and to
determine the persons to whom and the dates on which awards will be granted, the
number of shares of Common Stock to be subject to each award, the time or times
during the term of each option within which all or a portion of such option may
be exercised, the exercise price of each option, the type of consideration and
other terms of the option or award.
The Board has the power to delegate administration of the 1996 Plan to a
committee composed of two or more members of the Board. In the discretion of the
Board, a committee may consist solely of two or more "non-employee directors"
within the meaning of Rule 16b-3 of the Exchange Act or solely of two or more
"outside directors" within the meaning of Section 162(m) of the Code. For this
purpose, a "non-employee director" generally is a director who does not receive
remuneration from the Company other than compensation for service as a director
(except for amounts not in excess of specified limits applicable pursuant to
Rule 16b-3 under the Exchange Act). An "outside director" generally is a
director who is neither a current or former officer of the Company nor a current
employee of the Company, does not receive any remuneration from the Company
other than compensation for service as a director, and is not employed by or
have certain ownership interests in an entity that receives remuneration from
the Company (except within specified limits applicable under regulations issued
pursuant to Section 162(m) of the Code). If administration is delegated to a
committee, the committee has the power to delegate certain administrative powers
to a subcommittee of one or more members. As used herein with respect to the
1996 Plan, the "Board" refers to any committee the Board appoints or, if
applicable, any such subcommittee, as well as to the Board itself. In accordance
with the foregoing provisions, the Board has delegated administration of the
1996 Plan to the Compensation Committee.
ELIGIBILITY
Incentive stock options and stock appreciation rights related thereto may be
granted under the 1996 Plan only to employees (including officers) of the
Company and its affiliates. Employees (including officers), directors, and
consultants of the Company and its affiliates are eligible to receive all other
types of awards under the 1996 Plan.
No incentive stock option may be granted under the 1996 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company unless the exercise price of such option is at least 110% of the
fair market value of the stock subject to the option on the date of grant and
the term of the option does not exceed five years from the date of grant. In
addition, the aggregate fair market value, determined at the time of grant, of
the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by a participant during any calendar year (under
the 1996 Plan and all other such plans of the Company and its affiliates) may
not exceed $100,000.
No person may be granted options and/or stock appreciation rights under the
1996 Plan exercisable for more than 300,000 shares of Common Stock during any
calendar year. This limitation is referred to herein as the "Section 162(m)
Limitation."
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STOCK SUBJECT TO THE 1996 PLAN
Subject to this Proposal, an aggregate of 3,325,000 shares of Common Stock
is reserved for issuance under the 1996 Plan. If awards granted under the 1996
Plan expire or otherwise terminate without being exercised, the shares of Common
Stock not acquired pursuant to such awards again become available for issuance
under the 1996 Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1996 Plan. Individual option grants may be more restrictive as to any or all of
the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options may
not be less than 100% of the fair market value of the stock subject to the
option on the date of the grant and, in some cases (see "Eligibility" above),
may not be less than 110% of such fair market value. The exercise price of
nonstatutory options may not be less than 85% of the fair market value of the
stock on the date of grant. As of , 2000, the closing price of the
Company's Common Stock as reported on the Nasdaq National Market System was
$ per share.
The exercise price of options granted under the 1996 Plan must be paid
either in cash at the time the option is exercised or, at the discretion of the
Board, (i) by delivery of other Common Stock of the Company, (ii) pursuant to a
deferred payment arrangement or (iii) in any other form of legal consideration
acceptable to the Board.
REPRICING. In the event of a decline in the value of the Company's Common
Stock, the Board has the authority to offer participants the opportunity to
replace outstanding higher priced options with new lower priced options. To the
extent required by Section 162(m) of the Code, a repriced option is deemed to be
canceled and a new option granted. Under such circumstances, both the option
deemed to be canceled and the new option deemed to be granted will be counted
against the Section 162(m) Limitation.
OPTION EXERCISE. Options granted under the 1996 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Vesting typically
will occur during the optionholder's continued service with the Company or an
affiliate, whether such service is performed in the capacity of employee,
director or consultant (collectively, "service") and regardless of any change in
the capacity of such service. Shares covered by different options granted under
the 1996 Plan may be subject to different vesting terms. The Board has the power
to accelerate the time during which an option may vest or be exercised. In
addition, options granted under the 1996 Plan may permit exercise prior to
vesting, but in such event the participant may be required to enter into an
early exercise stock purchase agreement that allows the Company to repurchase
unvested shares, generally at their exercise price, should the participant's
service terminate before vesting. To the extent provided by the terms of an
option, a participant may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such option by a cash payment upon
exercise, by authorizing the Company to withhold a portion of the stock
otherwise issuable to the participant, by delivering already-owned Common Stock
of the Company or by a combination of these means.
TERM. The maximum term of options under the 1996 Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1996 Plan generally terminate three months after termination
of the participant's service unless (i) such termination is due to the
participant's disability, in which case the option may, but need not, provide
that it may be exercised (to the extent the option was exercisable at the time
of the termination of service) at any time within 12 months of such termination;
(ii) the participant dies before the participant's service has terminated, or
within three months after termination of such service, in which case the option
may, but need not, provide that it may be exercised (to the extent the option
was exercisable at the time of the participant's death) within 18 months of the
participant's death by the person or persons to whom the rights to such option
have passed; or
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(iii) the option by its terms specifically provides otherwise. A participant may
designate a beneficiary who may exercise the option following the participant's
death. Individual option grants by their terms may provide for exercise within a
longer period of time following termination of service.
The option term may be extended in the event that exercise of the option
within these periods is prohibited by law, particularly applicable securities
law.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
PAYMENT. The Board determines the purchase price under a restricted stock
purchase agreement, but the purchase price may not be less than 85% of the fair
market value of the Company's Common Stock on the date of grant. The Board may
award stock bonuses in consideration of past services without a purchase
payment.
The purchase price of stock acquired pursuant to a restricted stock purchase
agreement under the 1996 Plan must be paid either in cash at the time the award
is exercised or, at the discretion of the Board, (i) by delivery of other Common
Stock of the Company, (ii) pursuant to a deferred payment arrangement or
(iii) in any other form of legal consideration acceptable to the Board.
VESTING. Shares of stock sold or awarded under the 1996 Plan may, but need
not be, subject to a repurchase option in favor of the Company in accordance
with a vesting schedule as determined by the Board. The Board has the power to
accelerate the vesting of stock acquired pursuant to a restricted stock purchase
agreement under the 1996 Plan.
RESTRICTIONS ON TRANSFER. Rights under a stock bonus or restricted stock
bonus agreement may not be transferred other than by will or by the laws of
descent and distribution or except where required by law.
STOCK APPRECIATION RIGHTS
The 1996 Plan authorizes three types of stock appreciation rights:
TANDEM STOCK APPRECIATION RIGHTS. Tandem stock appreciation rights are tied
to an underlying option and require the participant to elect whether to exercise
the underlying option or to surrender the option for an appreciation
distribution equal to the market price of the vested shares purchasable under
the surrendered option less the aggregate exercise price payable for such
shares. Appreciation distributions payable upon exercise of tandem stock
appreciation rights shall generally be made in cash.
CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent stock appreciation rights
are tied to an underlying option and are exercised automatically at the same
time the underlying option is exercised. The participant receives an
appreciation distribution equal to the market price of the vested shares
purchased under the option less the aggregate exercise price payable for such
shares. Appreciation distributions payable upon exercise of concurrent stock
appreciation rights shall generally be made in cash.
INDEPENDENT STOCK APPRECIATION RIGHTS. Independent stock appreciation
rights are not tied to any underlying option, but instead are denominated in
"share equivalents." A share equivalent for this purpose is equal to a share of
Common Stock. Independent stock appreciation rights entitle the participant to
receive, upon exercise, a distribution for each exercised share equivalent that
is equal to the current fair market value of a share of Common Stock, less the
value of the share on the original date of grant. Distributions payable upon
exercise of independent stock appreciation rights may, at the Board's
discretion, be made in cash, in shares of stock or a combination thereof.
RESTRICTIONS ON TRANSFER
The participant may not transfer an incentive stock option other than by
will or by the laws of descent and distribution. A participant may also
designate a beneficiary who may exercise the option following the
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participant's death. During the lifetime of the participant, only the
participant may exercise an incentive stock option. The Board may grant
nonstatutory stock options that are transferable in certain limited instances.
Shares subject to repurchase by the Company under an early exercise stock
purchase agreement may be subject to restrictions on transfer that the Board
deems appropriate.
ADJUSTMENT PROVISIONS
Transactions not involving receipt of consideration by the Company, such as
a merger, consolidation, reorganization, stock dividend or stock split, may
change the class and number of shares of Common Stock subject to the 1996 Plan
and outstanding awards. In that event, the 1996 Plan will be appropriately
adjusted as to the class and the maximum number of shares of Common Stock
subject to the 1996 Plan and the Section 162(m) Limitation, and outstanding
awards will be adjusted as to the class, number of shares and price per share of
Common Stock subject to such awards.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1996 Plan provides that, in the event of a dissolution, liquidation or
sale of substantially all of the assets of the Company, specified types of
merger or other corporate reorganization ("change in control"), then to the
extent permitted by law, any surviving corporation will be required to either
assume or continue awards outstanding under the 1996 Plan or substitute similar
awards for those outstanding under the 1996 Plan or such outstanding awards will
continue in full force and effect. If any surviving corporation declines to
assume or continue awards outstanding under the 1996 Plan, or to substitute
similar awards, then, with respect to participants whose service has not
terminated, the vesting and the time during which their options may be exercised
will be accelerated and for all awards any repurchase rights or acquisition
rights shall lapse. In such event, an outstanding award will terminate if the
participant does not exercise it before a change in control. The acceleration of
an award in the event of an acquisition or similar corporate event may be viewed
as an anti-takeover provision, which may have the effect of discouraging a
proposal to acquire or otherwise obtain control of the Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1996 Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1996 Plan will terminate on March 26, 2006.
The Board also may amend the 1996 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company if the amendment would (i) modify the requirements as to eligibility
for participation (to the extent such modification requires stockholder approval
in order for the 1996 Plan to satisfy Section 422 of the Code, if applicable, or
Rule 16b-3 of the Exchange Act); or (ii) change the 1996 Plan in any other way
if such change requires stockholder approval in order to comply with Rule 16b-3
of the Exchange Act or to satisfy the requirements of Section 422 of the Code or
any Nasdaq or other applicable securities exchange listing requirements. The
Board may submit any other amendment to the 1996 Plan for stockholder approval,
including, but not limited to, amendments intended to satisfy the requirements
of Section 162(m) of the Code regarding the exclusion of performance-based
compensation from the limitation on the deductibility of compensation paid to
certain employees.
FEDERAL INCOME TAX INFORMATION
Long-term capital gains currently are generally subject to lower tax rates
than ordinary income or short-term capital gains. The maximum long-term capital
gains rate for federal income tax purposes is currently 20% while the maximum
ordinary income rate and short-term capital gains rate is effectively 39.6%.
Slightly different rules may apply to participants who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
9
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1996 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the participant or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the
participant's alternative minimum tax liability, if any.
If a participant holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
more than one year from the date on which the shares are transferred to the
participant upon exercise of the option, any gain or loss on a disposition of
such stock will be a long-term capital gain or loss.
Generally, if the participant disposes of the stock before the expiration of
either of these holding periods (a "disqualifying disposition"), then at the
time of disposition the participant will realize taxable ordinary income equal
to the lesser of (i) the excess of the stock's fair market value on the date of
exercise over the exercise price or (ii) the participant's actual gain, if any,
on the purchase and sale. The participant's additional gain or any loss upon the
disqualifying disposition will be a capital gain or loss, which will be
long-term or short-term depending on whether the stock was held for more than
one year.
To the extent the participant recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS, RESTRICTED STOCK PURCHASE AWARDS AND STOCK
BONUSES. Nonstatutory stock options, restricted stock purchase awards and stock
bonuses granted under the 1996 Plan generally have the following federal income
tax consequences:
There are no tax consequences to the participant or the Company by reason of
the grant. Upon acquisition of the stock, the participant normally will
recognize taxable ordinary income equal to the excess, if any, of the stock's
fair market value on the acquisition date over the purchase price. However, to
the extent the stock is subject to certain types of vesting restrictions, the
taxable event will be delayed until the vesting restrictions lapse unless the
participant elects to be taxed on receipt of the stock. With respect to
employees, the Company is generally required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness, the provisions of Section 162(m)
of the Code and the satisfaction of a tax reporting obligation, the Company will
generally be entitled to a business expense deduction equal to the taxable
ordinary income realized by the participant.
Upon disposition of the stock, the participant will recognize a capital gain
or loss equal to the difference between the selling price and the sum of the
amount paid for such stock plus any amount recognized as ordinary income upon
acquisition (or vesting) of the stock. Such gain or loss will be long-term or
short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to participants who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
STOCK APPRECIATION RIGHTS. No taxable income is realized upon the receipt
of a stock appreciation right, but upon exercise of the stock appreciation right
the fair market value of the shares (or cash in lieu of shares) received must be
treated as compensation taxable as ordinary income to the participant in the
year of such exercise. Generally, with respect to employees, the Company is
required to withhold from the payment made on exercise of the stock appreciation
right or from regular wages or supplemental wage payments an amount based on the
ordinary income recognized. Subject to the requirement of reasonableness,
Section 162(m) of the Code and the satisfaction of a reporting obligation, the
Company will be entitled to a business expense deduction equal to the taxable
ordinary income recognized by the participant.
10
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. Section 162(m) of the Code
denies a deduction to any publicly-held corporation for compensation paid to
certain "covered employees" in a taxable year to the extent that compensation to
such covered employee exceeds $1 million. It is possible that compensation
attributable to awards, when combined with all other types of compensation
received by a covered employee from the Company, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options and stock appreciation rights will qualify as
performance-based compensation if the award is granted by a compensation
committee comprised solely of "outside directors" and either (i) the plan
contains a per-employee limitation on the number of shares for which such awards
may be granted during a specified period, the per-employee limitation is
approved by the stockholders, and the exercise price of the award is no less
than the fair market value of the stock on the date of grant or (ii) the award
is granted (or exercisable) only upon the achievement (as certified in writing
by the compensation committee) of an objective performance goal established in
writing by the compensation committee while the outcome is substantially
uncertain, and the award is approved by stockholders.
Compensation attributable to restricted stock purchases will qualify as
performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors," (ii) the number
of shares subject to the award is within the per-employee limitation described
above, and (iii) the purchase price of the award is no less than the fair market
value of the stock on the date of grant. Stock bonuses and restricted stock
purchases with a purchase price below fair market value qualify as
performance-based compensation under the Treasury regulations only if (i) the
award is granted by a compensation committee comprised solely of "outside
directors," (ii) the award is granted (or exercisable) only upon the achievement
of an objective performance goal established in writing by the compensation
committee while the outcome is substantially uncertain, (iii) the compensation
committee certifies in writing prior to the granting (or exercisability) of the
award that the performance goal has been satisfied and (iv) prior to the
granting (or exercisability) of the award, stockholders have approved the
material terms of the award (including the class of employees eligible for such
award, the business criteria on which the performance goal is based, and the
maximum amount--or formula used to calculate the amount--payable upon attainment
of the performance goal).
11
PROPOSAL 3
APPROVAL OF THE AMENDMENT TO THE
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN, AS AMENDED
In March 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1996 Non-Employee Directors' Stock Option
Plan ("Directors' Plan"). As of February 29, 2000, there were 175,000 shares of
Common Stock reserved for issuance under the Directors' Plan. As of
February 29, 2000, options (net of canceled or expired options) covering an
aggregate of 140,000 shares of the Company's Common Stock had been granted under
the Directors' Plan. Only 35,000 shares of Common Stock (plus any shares that
might in the future be returned to the Directors' Plan as a result of
cancellations or expiration of options) remained available for future grant
under the Directors' Plan.
In February 2000, the Board of Directors amended the Directors' Plan,
subject to stockholder approval, to increase the number of shares of Common
Stock authorized for issuance under the Directors' Plan by 75,000 shares of
Common Stock, from a total of 175,000 shares to a total of 250,000 shares. The
Board adopted this amendment in order to ensure that the Company can continue to
grant stock options at levels in accordance with the Company's automatic grant
policy.
Stockholders are requested in this Proposal 3 to approve the amendment to
the Directors' Plan. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the amendment to the Directors' Plan.
Abstentions will be counted toward the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3
The essential features of the Directors' Plan are outlined below:
GENERAL
The Directors' Plan provides for the automatic grant of nonstatutory stock
options. Options granted under the Directors' Plan are not intended to qualify
as "incentive stock options" within the meaning of Section 422 of the Code. See
"Federal Income Tax Information" for a discussion of the tax treatment of
nonstatutory stock options.
PURPOSE
The Board adopted the Directors' Plan to provide a means by which
non-employee directors of the Company may be given an opportunity to purchase
stock in the Company, to assist in retaining the services of such persons, to
secure and retain the services of persons capable of filling such positions and
to provide incentives for such persons to exert maximum efforts for the success
of the Company. Under the Directors' Plan, five of the current directors of the
Company are eligible to participate.
ADMINISTRATION
The Board administers the Directors' Plan. The Board has the power to
construe and interpret the Directors' Plan but not to determine the persons to
whom or the dates on which options will be granted, the number of shares to be
subject to each option, the time or times during the term of each option within
which all or a portion of such option may be exercised, the exercise price, and
the type of consideration or the other terms of the option.
12
The Board has the power to delegate administration of the Directors' Plan to
a committee composed of not fewer than two members of the Board. The Board has
delegated administration of the Directors' Plan to the Compensation Committee of
the Board. As used herein with respect to the Directors' Plan, the "Board"
refers to any committee the Board appoints as well as to the Board itself.
ELIGIBILITY
The Directors' Plan provides that options may be granted only to
non-employee directors of the Company. A "non-employee director" is defined in
the Directors' Plan as a director of the Company who is not otherwise an
employee of the Company or any affiliate.
STOCK SUBJECT TO THE DIRECTORS' PLAN
Subject to this Proposal, an aggregate of 250,000 shares of Common Stock is
reserved for issuance under the Directors' Plan. If options granted under the
Directors' Plan expire or otherwise terminate without being exercised, the
shares of Common Stock not acquired pursuant to such options again become
available for issuance under the Directors' Plan. If the Company reacquires
unvested stock issued under the Directors' Plan, the reacquired stock will again
become available for reissuance under the Directors' Plan.
TERMS OF OPTIONS
The following is a description of the terms of options under the Directors'
Plan. Individual option grants may not be more restrictive as to the terms
described below except as otherwise noted.
AUTOMATIC GRANTS. Pursuant to the Directors' Plan, each person who was
serving as a non-employee director at the time of the initial public offering of
the Company's Common Stock was granted an option to purchase 20,000 shares of
the Company's Common Stock. In addition, each person who was first elected to be
a non-employee director after that time is granted an option to purchase 20,000
shares of the Company's Common Stock on the date of his or her initial election
as a non-employee director. Further, the Directors' Plan provides for the
automatic, non-discretionary grant of an option to purchase 5,000 shares of the
Company's Common Stock to each non-employee director on each anniversary of his
or her initial grant, if such non-employee director continues to serve as a
director on such anniversary date.
EXERCISE PRICE; PAYMENT. The exercise price of each option granted under
the Directors' Plan is 100% of the fair market value of the stock subject to the
option on the date of the grant. At , the closing price of the
Company's Common Stock as reported on the Nasdaq National Market System was
$ per share.
The exercise price of options granted under the Directors' Plan must be paid
either in cash at the time the option is exercised or, under certain conditions,
by delivery of other Common Stock of the Company or by a combination of cash and
Common Stock of the Company. In addition, the exercise price of an option may be
paid pursuant to a "same day sale" program established under Regulation T as
promulgated by the Federal Reserve Board.
OPTION EXERCISE. Options granted under the Directors' Plan become
exercisable in cumulative increments ("vest") during the optionholder's service
as a director of the Company or during any subsequent employment of the
optionholder and/or service by the optionholder as a consultant to the Company
or an affiliate (collectively, "service"). Options granted under the Directors'
Plan upon the initial public offering or upon a non-employee director's initial
election become exercisable over a four-year period from the date of grant.
Twenty-five percent of such options become exercisable on the anniversary of the
date of grant and the reminder of such options vest in equal monthly
installments over the subsequent thirty-six months. Options granted to
non-employee directors on the anniversaries of their
13
initial grants become exercisable in full on the first anniversary of the date
of their grant. Options granted under the Directors' Plan do not permit exercise
prior to vesting.
TERM. The term of options under the Directors' Plan is 10 years. Options
under the Directors' Plan terminate 12 months after termination of the
optionholder's service unless such termination is due to the optionholder's
death, in which case the option may be exercised (to the extent the option was
exercisable at the time of the optionholder's death) within 18 months of the
optionholder's death by the person or persons to whom the rights to such option
pass by will or by the laws of descent and distribution. An optionholder may
designate a beneficiary who may exercise the option following the optionholder's
death.
OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Plan as
determined by the Board.
RESTRICTIONS ON TRANSFER
The optionholder may not transfer an option except by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order
satisfying the requirements of 16b-3 of the Exchange Act. During the lifetime of
the optionholder, an option may be exercised only by the optionholder or
guardian, legal representative or permitted transferee.
ADJUSTMENT PROVISIONS
Transactions not involving receipt of consideration by the Company, such as
a merger, consolidation, reorganization, stock dividend or stock split, may
change the class and number of shares of Common Stock subject to the Directors'
Plan and outstanding options. In that event, the Directors' Plan will be
appropriately adjusted as to the class and the maximum number of shares of
Common Stock subject to the Directors' Plan, and outstanding options will be
adjusted as to the class, number of shares and price per share of Common Stock
subject to such options.
EFFECT OF CERTAIN CORPORATE EVENTS
The Directors' Plan provides that, in the event of a dissolution,
liquidation or sale of substantially all of the assets of the Company, specified
types of merger, certain securities acquisitions or other corporate
reorganization ("change in control"), then, the vesting and the time during
which outstanding options may be exercised will be accelerated. Outstanding
options will terminate if the optionholder does not exercise before a change in
control. The acceleration of an option in the event of an acquisition or similar
corporate event may be viewed as an anti-takeover provision, which may have the
effect of discouraging a proposal to acquire or otherwise obtain control of the
Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Directors' Plan without stockholder
approval or ratification. Unless sooner terminated, the Directors' Plan will
terminate at the time that all shares of Common Stock reserved for issuance
under the Directors' Plan have been issued.
The Board may also amend the Directors' Plan and the options outstanding
thereunder at any time or from time to time; PROVIDED, HOWEVER, that the Board
may not amend the Plan more than once every six months with respect to the
provisions of the Plan that relate to the amount, price and timing of grants,
other than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the rules thereunder. Moreover,
no amendment of the Directors' Plan may impair the rights and obligations of an
optionholder under any stock options granted under the Directors' Plan prior to
such amendment unless the optionholder consents to such impairment in writing.
In addition, no amendment will be effective unless approved by the stockholders
of the Company within 12 months before or after its adoption by the Board if the
amendment would (i) modify the requirements as to
14
eligibility for participation (to the extent such modification requires
stockholder approval in order for the Directors' Plan to satisfy Rule 16b-3 of
the Exchange Act); (ii) increase the number of shares reserved for issuance upon
exercise of options or (iii) change any other provision of the Directors' Plan
in any other way if such modification requires stockholder approval in order to
comply with Rule 16b-3 of the Exchange Act or satisfy the requirements of
Section 162(m) of the Code or any securities exchange listing requirements. The
Board may submit any other amendment to the Directors' Plan for stockholder
approval.
FEDERAL INCOME TAX INFORMATION
Long-term capital gains currently are generally subject to lower tax rates
than ordinary income or short-term capital gains. The maximum long-term capital
gains rate for federal income tax purposes is currently 20% while the maximum
ordinary income rate and short-term capital gains rate is effectively 39.6%.
Slightly different rules may apply to optionholders who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Exchange
Act.
NONSTATUTORY STOCK OPTIONS. Options granted under the Directors' Plan
generally have the federal income tax consequences of nonstatutory stock options
as described under "Federal Income Tax Information" in Proposal 2 above.
15
PROPOSAL 4
APPROVAL OF THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In March 1996, the Board of Directors adopted, and in April 1996 the
stockholders subsequently approved, the Company's Employee Stock Purchase Plan
(the "Purchase Plan"), and authorized and reserved up to 100,000 shares of the
Company's Common Stock for issuance under such plan. In February 1998, the Board
of Directors adopted, and in May 1998 the stockholders subsequently approved, an
amendment to the Purchase Plan to increase the number of shares of Common Stock
authorized for issuance under such plan by 75,000 shares to an aggregate total
of 175,000 shares. As of February 29, 2000, an aggregate of 126,921 shares of
Common Stock has been issued under the Purchase Plan and 48,079 shares of Common
Stock remained for the grant of future rights under the Purchase Plan.
In February 2000, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Purchase Plan to increase the number of shares
authorized for issuance under such plan by 75,000 shares of the Company's Common
Stock, from 175,000 shares to 250,000 shares.
This amendment is intended to continue to afford the Company the opportunity
to provide employees of the Company and its affiliates with stock incentives and
to ensure that the Company can continue to provide such incentives at levels
determined appropriate by the Board of Directors to retain the services of its
employees, secure and retain the services of new employees and provide
incentives for such persons to exert maximum efforts for the success of the
Company. During the last completed fiscal year, shares were purchased in the
amounts and at the weighted average prices per share under the Purchase Plan as
follows: Hollings C. Renton, 4,801 shares ($5.21); Norman Hardman, 2,145 shares
($7.23); Gregory L. Giotta, no shares; Mary Ann Rafferty, 536 shares ($5.21);
Marilyn E. Wortzman, 187 shares ($5.84); all executive officers as a group,
7,669 shares ($5.79); and all employees (excluding executive officers) as a
group, 18,978 shares ($5.31).
Stockholders are requested in this Proposal 4 to approve the amendment to
the Purchase Plan. The affirmative vote of the holders of a majority of the
shares present in person or represented by proxy and entitled to vote at the
meeting will be required to approve the Purchase Plan. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
The essential features of the Purchase Plan are outlined below:
PURPOSE
The Purchase Plan provides a means by which employees of the Company (and
any parent or subsidiary of the Company designated by the Board of Directors to
participate in the Purchase Plan) may be given an opportunity to purchase Common
Stock of the Company through payroll deductions, assist the Company in retaining
the services of its employees, secure and retain the services of new employees
and provide incentives for such persons to exert maximum efforts for the success
of the Company. All of the Company's employees are eligible to participate in
the Purchase Plan.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
16
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power to delegate
administration of such plan to a committee of not less than two Board members.
The Board may abolish any such committee at any time and revest in the Board the
administration of the Purchase Plan.
OFFERINGS
The Purchase Plan is implemented by offerings of rights (an "offering") to
all eligible employees from time to time by the Board. Each offering shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate. Generally, each offering is of 24 months' duration. The current
offering commenced on July 1, 1998 and ends on June 30, 2000. Thereafter, a new
offering will commence every other July 1, beginning on July 1, 2000.
ELIGIBILITY
Any person who is customarily employed at least twenty (20) hours per week
and five (5) months per calendar year by the Company (or by any parent or
subsidiary of the Company designated from time to time by the Board) on the
first day of an offering is eligible to participate in that offering under the
Purchase Plan, provided such employee has been in the continuous employment of
the Company for such continuous period preceding the first day of the offering
period as the Board may require, but in no event shall the required period of
continuous employment be greater than two (2) years. The Board may provide in
any offering that certain employees of the Company who are "highly compensated"
as defined in the Code are not eligible to be granted rights under the Purchase
Plan.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or of any parent or subsidiary of the Company (including any stock which such
employee may purchase under all outstanding rights and options), nor will any
employee be granted rights that would permit such employee to buy more than
$25,000 worth of stock (determined at the fair market value of the shares at the
time such rights are granted) under all employee stock purchase plans of the
Company in any calendar year.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by delivering to
the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions of up to a percentage
designated by the Board not exceeding fifteen percent (15%) of such employees'
total base compensation during the purchase period.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering under
the Purchase Plan shall be the lower of (a) 85% of the fair market value of a
share of Common Stock on the date of commencement of the offering (or the date
an employee first becomes eligible to receive rights under such offering, if
later) or (b) 85% of the fair market value of a share of Common Stock on the
specified purchase date.
17
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the offering period. A participant may reduce or increase such payroll
deductions, and an eligible employee may begin such payroll deductions, after
the beginning of any offering only to the extent specified by the Board for such
offering. All payroll deductions made for a participant are credited to his or
her account under the Purchase Plan and deposited with the general funds of the
Company. A participant may make additional payments into such account only as
specifically provided for in the offering and only if the participant has not
had the maximum amount withheld during such offering period.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under such plan. In connection with offerings
made under the Purchase Plan, the Board may specify a maximum number of shares
any employee may be granted the right to purchase and the maximum aggregate
number of shares which may be purchased pursuant to such offering by all
participants. If the aggregate number of shares to be purchased upon exercise of
rights granted in the offering would exceed the maximum aggregate number, the
Board would make a pro rata allocation of shares available in a uniform and
equitable manner. Unless the employee's participation is discontinued, his right
to purchase shares is exercised automatically at the end of the purchase period
at the applicable price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a given
offering by terminating his or her payroll deductions and by delivering to the
Company a notice of withdrawal from the Purchase Plan. Such withdrawal may be
elected at any time prior to the end of an offering except as provided by the
Board in such offering.
Upon any withdrawal from an offering by an employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering will be automatically terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan, but the employee
will be required to deliver a new participation agreement in order to
participate in subsequent offerings under the Purchase Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable otherwise than
by will or the laws of descent and distribution, and may be exercised only by
the person to whom such rights are granted.
18
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, such plan will terminate at the time that all of the shares
subject to the Purchase Plan's share reserve, as increased and/or adjusted from
time to time, have been issued under the terms of the Purchase Plan.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (a) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (b) modify the
requirements relating to eligibility for participation in the Purchase Plan or
(c) modify any other provision of the Purchase Plan in a manner that would
materially increase the benefits accruing to participants under the Purchase
Plan.
Rights granted before amendment or termination of the Purchase Plan will not
be altered or impaired by any amendment, suspension or termination of such plan,
except as expressly provided in the Purchase Plan or with consent of the person
to whom such rights were granted, or except as necessary to ensure that the
Purchase Plan and/or rights granted under the Purchase Plan comply with any
laws, governmental regulation or the requirements of Section 423 of the Code.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving corporation, a reverse
merger in which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise or any other capital reorganization in which more than 50% of
the shares of the Company entitled to vote are exchanged, then, as determined by
the Board in its sole discretion, any successor corporation may assume such
outstanding rights or substitute similar rights for those outstanding under the
Purchase Plan, such rights may continue in full force and effect or
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to the transaction described above and the participants'
rights under the ongoing offering terminated immediately following such
purchase.
SHARES SUBJECT TO THE PURCHASE PLAN
If rights granted under the Purchase Plan expire, lapse or otherwise
terminate without being exercised, the Common Stock not purchased under such
rights again becomes available for issuance under such plan. The stock subject
to the Purchase Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for favorable
federal income tax treatment associated with rights granted under an employee
stock purchase plan which qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchased shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (a) the excess of the fair market value of the
stock at the time of such disposition over the purchase price or (b) the excess
of the fair market value of the stock as of the beginning of the offering period
over the purchase price (determined as of the beginning of the offering period)
will be treated as ordinary income. Any further gain or any loss will
19
be taxed as a capital gain or loss. Capital gains currently are generally
subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the purchase date over the purchase price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain will be treated as a
capital gain. Even if the stock is later disposed of for less than its fair
market value on the purchase date, the same amount of ordinary income is
attributed to the participant, and a capital loss is recognized equal to the
difference between the sales price and the fair market value of the stock on
such purchase date. Any capital gain or loss will be long-term or short-term
depending on the length of time the stock has been held.
There are no federal income tax consequences to the Company by reason of the
grant or exercise of rights under the Purchase Plan. However, the Company may in
the future be required to withhold employment taxes (E.G., FICA and FUTA) from
employees' compensation upon the exercise of rights under the Purchase Plan. The
Company is entitled to a deduction to the extent amounts are taxed as ordinary
income to a participant (subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code and the satisfaction of a tax reporting
obligation).
20
PROPOSAL 5
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted, subject to stockholder approval, an
amendment to the Company's Amended and Restated Certificate of Incorporation to
increase the Company's authorized number of shares of Common Stock by 25,000,000
shares from 25,000,000 shares to 50,000,000 shares.
The additional Common Stock authorized by adoption of the amendment would
have rights identical to the currently outstanding Common Stock of the Company.
Adoption of the proposed amendment and issuance of the Common Stock would not
affect the rights of the holders of currently outstanding Common Stock of the
Company, except for effects incidental to increasing the number of shares of the
Company's Common Stock outstanding, such as dilution of the earnings per share
and voting rights of current holders of Common Stock. If the amendment is
adopted, it will become effective upon filing of a Certificate of Amendment of
the Company's Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
As of February 29, 2000, there were 14,064,509 shares of Common Stock
outstanding and 1,576,278 shares reserved for issuance upon exercise of
outstanding options granted under the Company's 1996 Plan and Directors' Plan.
Although at present the Board of Directors has no other plans to reserve or
issue the additional 25,000,000 shares of Common Stock, it desires to have such
shares available to provide additional flexibility to use its capital stock for
business and financial purposes in the future. The additional shares may be
used, without further stockholder approval, for various purposes including,
without limitation, raising capital, providing equity incentives to employees,
officers or directors, establishing strategic relationships with other companies
and expanding the Company's business or product lines through the acquisition of
other businesses or products.
The additional shares of Common Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further stockholder approval,
the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although this proposal to increase the authorized Common Stock has been
prompted by business and financial considerations and not by the threat of any
hostile takeover attempt (nor is the Board currently aware of any such attempts
directed at the Company), nevertheless, stockholders should be aware that
approval of the proposal could facilitate future efforts by the Company to deter
or prevent changes in control of the Company, including transactions in which
the stockholders might otherwise receive a premium for their shares over then
current market prices.
The affirmative vote of the holders of a majority of the shares of the
common stock, will be required to approve this amendment to the Company's
Amended and Restated Certificate of Incorporation. As a result, abstentions and
broker non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5.
21
PROPOSAL 6
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 1992.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 6.
22
MANAGEMENT
EXECUTIVE OFFICERS AND KEY EMPLOYEES
Information with respect to the executive officers and two key employees of
the Company is set forth below:
NAME AGE POSITION
- ------------------------------------------ -------- ------------------------------------------
Hollings C. Renton........................ 53 Chief Executive Officer, President and
Director
Judith I. Blakemore....................... 51 Acting Chief Operating Officer
Ali Fattaey, Ph.D......................... 35 Vice President, Discovery Research
Gregory J. Giotta, J.D., Ph.D............. 53 Vice President and Chief Legal Counsel
Helen S. Kim.............................. 37 Vice President, Corporate Development
Mary Ann Rafferty......................... 51 Vice President, Organizational Development
Lawrence A. Romel......................... 43 Vice President, Clinical Operations and
Regulatory Affairs
Marilyn E. Wortzman, C.P.A................ 53 Controller
HOLLINGS C. RENTON has served as President and Chief Executive Officer and
as a director since March 1993. Prior to joining the Company, Mr. Renton served
as President and Chief Operating Officer of Chiron Corporation from
December 1991 to March 1993 following Chiron Corporation's acquisition of Cetus
Corporation, a biopharmaceutical company. Prior to the acquisition, Mr. Renton
served as President of Cetus Corporation from August 1990 to December 1991 and
as Chief Operating Officer of Cetus Corporation from 1987 to August 1990.
Mr. Renton holds a B.S. in Mathematics from Colorado State University and an
M.B.A. from the University of Michigan.
JUDITH I. BLAKEMORE has served as acting Chief Operating Officer since
January 2000, as our acting Vice President, Strategic Programs from April 1998
to January 2000 and as a consultant to the Company since its inception.
Ms. Blakemore has served as an independent consultant within the
biopharmaceutical industry, helping companies with product development and
corporate strategy, from 1991 to 1992 and from 1994 to the present. From 1992 to
1994, Ms. Blakemore was the President and Chief Operating Officer of XTL
Biopharmaceuticals, Ltd., a biopharmaceutical company based in Israel.
Ms. Blakemore holds a B.A. in Biochemistry from the University of California at
Berkeley and an M.B.A. from St. Mary's College in Moraga, California.
ALI FATTAEY, PH.D. joined the Company in January 1994 as a scientist.
Dr. Fattaey has served as the Vice President, Discovery Research since
September 1998. Dr. Fattaey received a Ph.D. degree at Kansas State University
working on the biology of polyoma virus, a small DNA tumor virus. Dr. Fattaey
completed his postdoctoral training at the Massachusetts General Hospital cancer
center in Boston, where he was involved in investigating the mechanisms of cell
growth control by the protein product of the retinoblastoma tumor suppressor
gene.
GREGORY J. GIOTTA, PH.D., J.D. joined us in June 1995 as Vice President and
Chief Legal Counsel. Prior to joining us, Dr. Giotta served as Vice President
and Chief Intellectual Property Attorney at Glycomed Corporation, a
biotechnology company, from October 1992 to June 1995. Dr. Giotta earned a Ph.D.
from the University of California at Santa Cruz and a J.D. from the University
of San Diego.
HELEN S. KIM has served as Vice President, Corporate Development since
December 1999. Prior to joining us, Ms. Kim was employed at Protein Design
Labs, Inc. as the Vice President of Marketing and Project Management from
July 1998 to December 1999. From 1989 to 1998, Ms. Kim was employed at Chiron
Corporation where she held numerous positions in planning, marketing and
business development and served as the Vice President of Strategic Marketing for
Chiron Therapeutics, Vaccines and Technologies. Ms. Kim holds a B.S. in Chemical
Engineering from Northwestern University and an M.B.A. from the University of
Chicago.
23
MARY ANN RAFFERTY has served as Vice President, Organizational Development
since November 1999. From February 1998 to November 1999, Ms. Rafferty served as
Vice President, Human Resources and previously as Director, Human Resources from
April 1996 to February 1998. Prior to joining us, Ms. Rafferty served as
Director, Human Resources at Biogenex, Inc., a biopharmaceutical company, from
June 1995 to April 1996. Ms. Rafferty holds a B.A. in Communications and
Linguistics from State University New York, Albany.
LAWRENCE A. ROMEL has served as Vice President, Clinical Operations and
Regulatory Affairs since August 1999. From November 1997 until August 1999,
Mr. Romel was our Director of Clinical Operations and Project Management. From
November 1996 to November 1997, Mr. Romel served as Senior Director of Clinical
Operations for Sequus Pharmaceuticals, Inc. and served as Project Manager for
Sequus Pharmaceuticals, Inc. from March 1995 until November 1996. Mr. Romel
received his Master of Science degree in Organic Biochemistry and a B.S. in
Chemistry from the University of Illinois at Chicago.
MARILYN E. WORTZMAN, C.P.A. was appointed our Controller in August 1998
after performing that function in an acting capacity since April 1997. From
April 1992 to September 1996, Ms. Wortzman served as Finance Manager for
AutoDesk, Inc., a software company. Ms. Wortzman holds a B.A. in Political
Science from Syracuse University.
24
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 29, 2000 by:
- each person, or group of affiliated persons, who is known by the Company
to own beneficially 5% or more of its Common Stock;
- each executive officer named in the Summary Compensation Table;
- each director and nominee for director; and
- all current directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are currently
exercisable within 60 days of February 29, 2000 are deemed outstanding. These
shares, however, are not deemed outstanding for the purposes of computing the
percentage ownership of each other person.
The table below is based on information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities and
Exchange Commission. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, each stockholder named in the
table has sole voting and investment power with respect to the shares shown as
beneficially owned by them. Percentage of ownership is based on 14,064,509
shares of Common Stock outstanding on February 29, 2000.
25
SHARES ISSUABLE
PURSUANT TO OPTIONS
EXERCISABLE WITHIN 60
OUTSTANDING SHARES DAYS OF FEBRUARY 29,
NAME OF BENEFICIAL OWNER OF COMMON STOCK 2000 PERCENT OF TOTAL
- ------------------------ ------------------ --------------------- ----------------
5% STOCKHOLDERS
International Biotechnology Trust plc
Five Arrows House
St. Swithins Lane
London EC4N 8NR
United Kingdom............................ 1,345,029 -- 9.6%
Entities Affiliated with Alta Partners (1)
One Embarcadero Center, Suite 4050
San Francisco, CA 94111................... 1,111,111 -- 7.9
Bayer Corporation (2)
400 Morgan Lane
Westhaven, CT 96516....................... 945,510 -- 6.7
Warner-Lambert Company (3)
201 Tabor Road
Morris Plains, NJ 07950................... 937,207 -- 6.7
DIRECTORS AND EXECUTIVE OFFICERS
Michael J. Berendt, Ph.D. (2)............... -- -- *
Samuel D. Colella (4)....................... 43,928 43,590 *
Paul Goddard, Ph.D. (5)..................... -- 27,333 *
Hollings C. Renton (6)...................... 131,642 343,145 3.3
Nicole Vitullo (7).......................... 666,667 15,833 4.8
Wendell Wierenga, Ph.D. (3)................. -- 36,000 *
Norman Hardman, Ph.D........................ 2,145 50,000 *
Gregory Giotta, Ph.D., J.D. (8)............. -- 65,101 *
Mary Ann Rafferty (9)....................... 3,492 73,509 *
Marilyn E. Wortzman, C.P.A. (10)............ 187 28,900 *
All executive officers and directors
as a group (12 persons) (11).............. 851,361 736,411 10.7
- ------------------------
* Less than one percent.
(1) Includes 690,651 shares beneficially owned by Alta BioPharma Partners L.P.,
394,428 beneficially owned by Onyx Chase Partners (AltaBio) LLC and 26,032
beneficially owned by Alta Embarcadero BioPharma Partners, LLC.
(2) Dr. Berendt is Senior Vice President for Research at Bayer. Dr. Berendt
disclaims beneficial ownership of the shares held by Bayer Corporation, a
wholly-owned subsidiary of Bayer AG.
(3) Dr. Wierenga is Senior Vice President, Worldwide Pharmaceutical Sciences,
Technologies and Development for Parke-Davis Pharmaceutical Research
division of Warner-Lambert Company. Dr. Wierenga disclaims beneficial
ownership of the shares held by Warner-Lambert.
(4) Includes 5,733 shares held by Institutional Venture Management V, L.P., of
which Mr. Colella is a partner. Also includes 2,255 shares held by The
Colella Family Partnership and 3,000 shares held by The Colella Family
Trust. Included in the shares exercisable within 60 days of February 29,
2000, is an option to purchase 14,007 shares held by Institutional Venture
Management V, L.P. Mr. Colella disclaims beneficial ownership of the shares
held by Institutional Venture Management V, L.P., except to the extent of
his pecuniary interest therein.
26
(5) Of the shares exercisable within 60 days of February 29, 2000, 5,667 would
be subject to repurchase by the Company if exercised.
(6) Includes 124,292 shares held by The Renton Family Trust and 1,200 shares
held by Mr. Renton's spouse. Of the shares exercisable within 60 days of
February 29, 2000, 191,531 would be subject to repurchase by the Company if
exercised.
(7) Includes 651,065 shares held by Domain Partners IV, L.P. and 15,602 shares
held by DP IV Associates, L.P. Ms. Vitullo is Managing Director of Domain
Associates, L.L.C. which is the manager of Domain Partners IV, L.P. and DP
IV Associates, L.P. Ms. Vitullo disclaims beneficial ownership of the shares
held by Domain Partners IV, L.P. and DP IV Associates, L.P., except to the
extent of her pecuniary interest therein. Of the shares exercisable within
60 days of February 29, 2000, 9,167 would be subject to repurchase by the
Company if exercised.
(8) Of the shares exercisable within 60 days of February 29, 2000, 44,781 would
be subject to repurchase by the Company if exercised.
(9) Of the shares exercisable within 60 days of February 29, 2000, 65,903 would
be subject to repurchase by the Company if exercised.
(10) Of the shares exercisable within 60 days of February 29, 2000, 23,750 would
be subject to repurchase by the Company if exercised.
(11) See footnotes 2 through 10 above, as applicable.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Directors' Plan, as amended, provides that each member of the Board at
the initial public offering of the Company's Common Stock was granted an option
to purchase 20,000 shares of the Company's Common Stock, and each new member of
the Company's Board will be granted an option to purchase 20,000 shares of the
Company's Common Stock on the date of his or her initial election to the Board.
Further, the Directors' Plan provides for the automatic, non-discretionary grant
of options to purchase 5,000 shares of the Company's Common Stock, on the
anniversary of each non-employee director's initial grant, if such non-employee
director is continuing to serve as a director on such date.
During the last fiscal year, the Company granted options to purchase an
aggregate of 20,000 shares of Common Stock to non-employee directors of the
Company pursuant to the Directors' Plan, at a weighted average exercise price
per share of $7.61 (based on the closing sales prices reported on the Nasdaq
National Market for the date of each grant). As of February 29, 2000, no options
had been exercised under
27
the Directors' Plan nor had any options granted to non-employee directors under
the 1996 Plan been exercised.
Dr. Wierenga and Dr. Goddard each entered into a consulting agreement with
the Company in November 1998 and in January 1999, respectively. Pursuant to
their consulting agreements, Dr. Wierenga and Dr. Goddard each receives an
annual retainer of $10,000. In addition, Dr. Wierenga and Dr. Goddard are each
paid $1,200 per day for consulting services, up to a maximum of 12 days per
annum. Each of the consulting agreements also provides that the Board of
Directors of the Company shall grant the consultant an option to purchase 1,500
shares of Common Stock per annum. Each consulting agreement is for a term of two
years, but may be terminated earlier with 30 days notice by either party.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain compensation awarded or paid by the
Company during the years ended December 31, 1999, 1998 and 1997 to its President
and Chief Executive Officer, the Company's other three most highly paid
executive officers who earned more than $100,000 during the year ended
December 31, 1999, and one former executive officer who earned more than
$100,000 during the year ended December 31, 1999 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARD
------------
ANNUAL COMPENSATION NUMBER OF
----------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION OPTIONS COMPENSATION
- --------------------------- -------- -------- ------------ ------------ ------------
Hollings C. Renton.................... 1999 $299,066 $81,900 100,000 $ 2,321(1)
President and Chief Executive 1998 272,600 -- -- 2,592(1)
Officer 1997 258,080 387 109,454 2,707(1)
Norman Hardman, Ph.D.................. 1999 241,539 -- 200,000 161,674(2)
Former Chief Operating Officer 1998 -- -- -- --
1997 -- -- -- --
Gregory L. Giotta, Ph.D., J.D......... 1999 196,670 37,500 20,000 1,461(1)
Vice President and Chief Legal 1998 187,154 -- 7,500 1,871(1)
Counsel 1997 175,433 387 1,800 1,768(1)
Mary Ann Rafferty..................... 1999 141,646 30,000 60,000 974(1)
Vice President, Organizational 1998 127,119 10,000 27,000 1,181(1)
Development 1997 108,367 387 2,336 626(1)
Marilyn E. Wortzman, C.P.A............ 1999 109,827 20,000 -- 722(1)
Controller 1998 99,651 5,000 17,000 307(1)
1997 36,253 -- 1,000 --
- ------------------------
(1) Represents the taxable portion of group life insurance paid by the Company.
(2) Includes $26,308 of mortgage assistance payments and $133,875 for relocation
expenses. Also includes the taxable portion of group life insurance paid by
the Company, which was $1,491.
28
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED PRICE TERM (3)
OPTIONS IN FISCAL PER EXPIRATION --------------------
NAME GRANTED YEAR (1) SHARE(2) DATE 5% 10%
- ---- ---------- ---------- -------- ---------- -------- ---------
Hollings C. Renton....................... 100,000 12.63% $5.88 4/1/09 $369,476 $ 936,324
President and Chief Executive Officer
Norman Hardman, Ph.D..................... 200,000 25.26% 6.00 3/29/09 754,674 1,912,491
Former Chief Operating Officer
Gregory L. Giotta, Ph.D., J.D............ 20,000 2.53% 6.13 3/19/09 77,040 195,233
Vice President and Chief Legal Counsel
Mary Ann Rafferty........................ 20,000 2.53% 6.13 3/19/09 77,040 195,233
Vice President, Organizational 40,000 5.05% 8.88 11/24/09 223,258 565,779
Development
Marilyn E. Wortzman, C.P.A............... -- -- -- -- -- --
Controller
- ------------------------
(1) Based on an aggregate of 791,850 options granted to employees and
consultants of the Company in fiscal 1999 including the Named Executive
Officers.
(2) Exercise prices are equal to the closing price of the Company's Common Stock
on the Nasdaq National Market on the date of grant.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (10 years) and is calculated by assuming that the stock
price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated price.
The 5% and 10% assumed rates of appreciation are derived from the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
29
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE MONEY OPTIONS
OPTIONS AT AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
ACQUIRED ON VALUE ------------------- ---------------------
NAME EXERCISE REALIZED VESTED UNVESTED VESTED UNVESTED
- ---- ----------- -------- -------- -------- --------- ---------
Hollings C. Renton...................... -- -- 136,764 156,381 $771,551 $394,433
President and Chief Executive Officer
Norman Hardman, Ph.D.................... -- -- 16,666 183,334 66,664 733,376
Former Chief Operating Officer
Gregory Giotta, Ph.D., J.D.............. -- -- 30,550 27,350 157,378 77,275
Vice President and Chief Legal Counsel
Mary Ann Rafferty....................... -- -- 26,051 73,390 41,315 152,770
Vice President, Organizational
Development
Marilyn E. Wortzman, C.P.A.............. 4,100 $16,913 3,900 10,000 10,488 51,250
Controller
- ------------------------
(1) Determined using the December 31, 1999 closing price of $10.00 per share,
minus the exercise price, multiplied by the number of shares underlying the
option.
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has employment arrangements with each of Dr. Gregory Giotta,
Helen Kim and Mary Ann Rafferty. Each of these arrangements specifies the
individual's salary and bonus upon joining the Company or entering into the
arrangement, and provides for severance pay equal to six months salary in the
event the individual's employment is terminated by reason of a change of control
of the Company or, in some cases, other downsizing initiatives.
30
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of three non-employee
directors: Samuel D. Colella, Paul Goddard, Ph.D., and Nicole Vitullo.
Mr. Colella, Dr. Goddard, and Ms. Vitullo are not officers or employees of the
Company.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
COMPENSATION PHILOSOPHY
The primary goal of the Company is to align compensation with the Company's
business objectives and performance. The Company's aim is to attract, retain and
reward executive officers and other employees who contribute to the long-term
success of the Company and to motivate those individuals to enhance long-term
stockholder value. To establish this relationship between employee compensation
and the creation of stockholder value, the Board of Directors has adopted a
total compensation package comprised of base salary, cash bonus and stock option
awards. Key elements of this compensation package are:
- The Company pays salaries at least competitive with those of leading
biotechnology companies with which the Company competes for talent.
- The Company maintains incentive opportunities designed to motivate and
reward achievement of specific company and individual goals. The
availability of these incentives is designed to ensure that the total
compensation for employees is competitive with the industry.
- The Company provides significant equity-based incentives for executives
and other employees to ensure that individuals are motivated over the long
term to respond to the Company's business challenges and opportunities as
owners.
SALARY COMPENSATION
The salary compensation for all employees, including executive officers, is
based upon the compensation of employees in similar positions in other
biotechnology companies, in accordance with published biotechnology compensation
survey information and based upon the advice of consultants to the Company.
Salary adjustments for 1999 were based on each individual's performance. In
establishing base salaries for the executive officers other than the Chief
Executive Officer, the Compensation Committee carefully reviewed the progress
made in the programs headed by each officer and the role of these officers in
the scientific and business development of the programs of the Company. In
addition, the Compensation Committee relied on market survey information.
COMPANY PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer joined the Company in 1993. His initial salary
and stock option grants were determined on the basis of negotiations between the
Board of Directors and the Chief Executive Officer with due regard to his
experience, competitive salary information and market conditions at the time.
Mr. Renton's 1999 salary was set by the Board of Directors. As with the other
executive officers, the amount of Mr. Renton's total compensation in 1999 was
based on the Company's 1998 accomplishments and the Chief Executive Officer's
significant contributions thereto, including, among other things, achievement of
research and development goals and objectives under the Company's ongoing
collaborations.
- ------------------------
(1) The material in this report is not "soliciting materials," is not deemed
"filed" with the SEC and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933 as amended (the
"Securities Act") or the Exchange Act, whether made before or after the date
hereof and irrespective of any general incorporation language contained in
such filing.
31
INCENTIVE COMPENSATION
The Company's primary incentive programs presently consist of the 1996 Plan,
the Purchase Plan and the incentive variable cash plan.
The 1996 Plan utilizes vesting periods to encourage employees to continue in
the employ of the Company. Through option grants, employees receive equity
incentives to build long-term stockholder value. At the time of hiring, each
employee receives a standard initial stock option grant for such employee's job
position at the Company. Such options vest ratably over four years. Beginning in
1997, the Compensation Committee began granting additional options to certain
key employees for as much as 50% to 75% of their position grant in order to
retain such key employees. Such option grants "back-end" vest over 4 years so
that 10% vest in the first year, 15% vest in the second year, 25% vest in the
third year and 50% vest in the fourth year. The exercise price of options
granted under the 1996 Plan is 100% of the fair market value of the underlying
stock on the date of grant. Employees receive value from these grants only to
the extent that the Company's Common Stock appreciates in the long term.
In 1999, the Board of Directors granted stock options to three of the Named
Executive Officers, not including the Chief Executive Officer. The grant of the
options was based on the prior performance of each executive officer and the
need to retain these officers in light of the key roles played by such executive
officers in the growth and success of the Company. In reaching its decisions,
the Compensation Committee relied on its experience and the vesting status of
the executive officers' previously issued stock options.
The Company established the Purchase Plan both to encourage employees to
continue in the employ of the Company and to motivate employees through an
ownership interest in the Company. Under the Purchase Plan, employees, including
officers, may have up to 15% of their earnings withheld for purchases of Common
Stock on certain dates specified by the Purchase Plan. The price of Common Stock
purchased will be equal to 85% of the lower of the fair market value of the
Common Stock on the date of commencement of participation in each 24-month
offering period or on each specified purchase date.
In April 1997, the Compensation Committee adopted a broad-based annual
incentive cash bonus plan. Under such program, awards are tied to the Company
meeting certain goals which are set by the Board. Individual bonuses would vary
based on the performance of such employee.
The Chief Executive Officer, the other executive officers and all other
employees of the Company are eligible to receive incentive variable cash payouts
under the incentive variable cash plan. However, the Compensation Committee is
allowed to distinguish between certain officers and other employees in
determining whether or not performance criteria are met. For fiscal 1999, the
Compensation Committee determined that the performance criteria were met at the
target level of performance and set aside an aggregate 100% of the incentive
variable cash pool for distribution to employees of the Company at the
discretion of the management of the Company. An aggregate of approximately
$640,000 was paid as incentive variable cash payouts to employees under this
program.
32
CERTAIN TAX CONSIDERATIONS
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of not more than $1 million of compensation paid to certain
executive officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The Compensation Committee has determined that the stock options granted
under the 1996 Plan with an exercise price at least equal to the fair market
value of the Company's Common Stock on the date of grant should be treated as
"performance-based compensation."
From the members of the Compensation Committee of ONYX
Pharmaceuticals, Inc.
Samuel D. Colella
Paul Goddard, Ph.D.
Nicole Vitullo
33
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on May 8, 1996 (the day immediately preceding the Company's initial
public offering) for (i) the Company's Common Stock, (ii) the Nasdaq Stock
Market-US Index and (iii) the Nasdaq Pharmaceutical Index. All values assume
reinvestment of full amount of all dividends:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ONYX PHARMACEUTICALS, INC. NASDAQ STOCK MARKET (U S) NASDAQ PHARMACEUTICAL
5/8/96 $100.00 $100.00 $100.00
6/96 $66.07 $100.48 $95.25
9/96 $94.79 $104.05 $97.44
12/96 $92.71 $109.20 $94.53
3/97 $100.00 $103.28 $89.78
6/97 $85.42 $122.19 $96.92
9/97 $72.92 $142.87 $108.72
12/97 $64.58 $133.80 $97.61
3/98 $62.50 $156.59 $107.30
6/98 $51.06 $160.89 $99.30
9/98 $61.46 $145.29 $93.68
12/98 $58.33 $188.54 $124.17
3/99 $50.00 $210.90 $136.26
6/99 $73.96 $230.72 $138.67
9/99 $68.75 $236.02 $158.46
12/99 $83.33 $340.62 $232.04
- ------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
34
CERTAIN TRANSACTIONS
In 1999, pursuant to an offer letter dated March 1999, the Company paid
relocation expenses to Dr. Hardman of $133,875, and provided mortgage assistance
payments of $26,308. The Company and Dr. Hardman entered into a letter agreement
dated January 17, 2000 under which the Company agreed to pay severance of
6 months of base salary, and make mortgage assistance payments through July 31,
2000. In addition, the agreement provides for the acceleration of vesting of
options to purchase 33,334 shares of Common Stock.
The Company has entered into indemnity agreements with certain officers,
directors and other key employees which provide, among other things, that the
Company will indemnify such officer or director, under the circumstances and to
the extent provided for therein, for expenses, damages, judgments, fines and
settlements he or she may be required to pay in actions or proceedings which he
or she is or may be made a party by reason of his or her position as a director,
officer or other agent of the Company, and otherwise to the full extent
permitted under Delaware law and the Company's By-laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Robert L. Jones
Robert L. Jones
Secretary
April , 2000
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, ONYX
PHARMACEUTICALS, INC. 3031 RESEARCH DRIVE, RICHMOND, CALIFORNIA 94806.
35
ONYX PHARMACEUTICALS, INC.
1996 EQUITY INCENTIVE PLAN
ADOPTED ON MARCH 26, 1996
APPROVED BY THE STOCKHOLDERS ON APRIL 30, 1996
AMENDED DECEMBER 13, 1996
APPROVED BY STOCKHOLDERS ON MAY 22, 1997
AMENDED FEBRUARY 4, 1998
APPROVED BY THE STOCKHOLDERS ON MAY 28, 1998
AMENDED APRIL 1, 1999
APPROVED BY THE STOCKHOLDERS ON MAY 27, 1999
AMENDED FEBRUARY 9, 2000
APPROVED BY THE STOCKHOLDERS ON JUNE , 2000
1. PURPOSES.
(A) In 1992, the Board adopted the Onyx Pharmaceuticals, Inc. 1992
Incentive Stock Plan, which plan was subsequently approved by the Company's
stockholders. On March 26, 1996 the Board hereby amends and restates the
Company's 1992 Incentive Stock Plan in the form of this 1996 Equity Incentive
Plan. On December 13, 1996, the Board amended the Plan to comport with the
requirements of amended Rule 16b-3. The purpose of the Plan is to provide a
means by which selected Employees and Directors of and Consultants to the
Company, and its Affiliates, may be given an opportunity to benefit from
increases in value of the stock of the Company through the granting of
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock
bonuses, (iv) rights to purchase restricted stock, and (v) Stock Appreciation
Rights, all as defined below.
(B) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(C) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) Stock
Appreciation Rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(A) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(B) "BOARD" means the Board of Directors of the Company.
(C) "CODE" means the Internal Revenue Code of 1986, as amended.
(D) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(E) "COMPANY" means Onyx Pharmaceuticals, Inc., a Delaware corporation.
(F) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.
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(G) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(H) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
individual's service relationship with the Company, whether through employment
or as a Director or Consultant, is not interrupted or terminated. The Board, in
its sole discretion, may determine whether Continuous Status as an Employee,
Director or Consultant shall be considered interrupted in the case of: (i) any
leave of absence approved by the Board, including sick leave, military leave, or
any other personal leave; or (ii) transfers between locations of the Company or
between the Company, Affiliates or their successors.
(I) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(J) "DIRECTOR" means a member of the Board.
(K) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(L) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(M) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the National Market
of the Nasdaq Stock Market, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange
with the greatest volume of trading in common stock) on the last market
trading day prior to the day of determination, or such other date or average
of a range of dates as shall be selected by the Board and consistently
applied, as reported in the Wall Street Journal or such other source as the
Board deems reliable;
(2) If the common stock is quoted on the Nasdaq Stock Market (but not
on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a share of common stock shall be the mean between the bid and asked
prices for the common stock on the last market trading day prior to the day
of determination, or such other date or average of a range of dates as shall
be selected by the Board and consistently applied, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(N) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(O) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means a
right granted pursuant to subsection 8(b)(3) of the Plan.
(P) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an
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interest in any other transaction as to which disclosure would be required under
Item 404(a) of Regulation S-K, and is not engaged in a business relationship as
to which disclosure would be required under Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a "non-employee director" for purposes of
Rule 16b-3.
(Q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(R) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(S) "OPTION" means a stock option granted pursuant to the Plan.
(T) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(U) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(V) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(W) "PLAN" means this Onyx Pharmaceuticals, Inc. 1996 Equity Incentive
Plan.
(X) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(Y) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(Z) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(AA) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(BB) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
3. ADMINISTRATION.
(A) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(B) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock Award shall
be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical),
including the time or times when a person shall be
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permitted to receive stock pursuant to a Stock Award; whether a person shall
be permitted to receive stock upon exercise of an Independent Stock
Appreciation Right; and the number of shares with respect to which a Stock
Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(C) The Board may delegate administration of the Plan to a committee of the
Board composed of not fewer than two (2) members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding
anything in the Section 3 to the contrary, at any time the Board or the
Committee may delegate to a committee of one or more members of the Board the
authority to grant Stock Awards to eligible persons who (i) are not then subject
to Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (ii) not persons with
respect to whom the Company wishes to avoid the application of Section 162(m) of
the Code.
4. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate three million three hundred twenty five thousand
(3,325,000) shares of the Company's common stock. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award shall
revert to and again become available for issuance under the Plan. Shares subject
to Stock Appreciation Rights exercised in accordance with Section 8 of the Plan
shall not be available for subsequent issuance under the Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(A) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(B) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent
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(110%) of the Fair Market Value of such stock at the date of grant and such
Incentive Stock Option is not exercisable after the expiration of five
(5) years from the date of grant.
(C) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options and Stock
Appreciation Rights covering more than three hundred thousand (300,000) shares
of Common Stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(A) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(B) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of an
Incentive Stock Option or prior to the exercise of a Nonstatutory Stock Option,
(A) by delivery to the Company of other common stock of the Company,
(B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board. In the case of any
deferred payment arrangement, interest shall be payable at least annually and
shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(D) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Option is granted only
by such person. A Nonstatutory Stock Option may be transferred to the extent
provided in the Option Agreement; provided that if the Option Agreement does not
expressly permit the transfer of a Nonstatutory Stock Option, the Nonstatutory
Stock Option shall not be transferable except by will or by the laws of descent
and distribution or pursuant to a domestic relations order satisfying the
requirements of Rule 16a-12 and the rules thereunder, and shall be exercisable
during the lifetime of the person to whom the Option is granted only by such
person or any transferee pursuant to such domestic relations order. The person
to whom the Option is granted may, by delivering written notice to the Company,
in a form satisfactory to the Company, designate a third party who, in the event
of the death of the Optionee, shall thereafter be entitled to exercise the
Option.
(E) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest")
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with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(F) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, or comparable requirements of other applicable securities laws, then
the Option shall terminate on the earlier of (i) the expiration of the term of
the Option set forth in the first paragraph of this subsection 6(f), or
(ii) the expiration of a period of three (3) months after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant during which
the exercise of the Option would not be in violation of such registration
requirements.
(G) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as
an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve
(12) months following such termination (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(H) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date eighteen
(18) months following the date of death (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of such
Option as set forth in the Option Agreement. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the shares
covered by
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the unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(I) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(J) RE-LOAD OPTIONS. Without in any way limiting the authority of the Board
or Committee to make or not to make grants of Options hereunder, the Board or
Committee shall have the authority (but not an obligation) to include as part of
any Option Agreement a provision entitling the Optionee to a further Option (a
"Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
common stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the common stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and is
granted to a 10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five
(5) years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; PROVIDED, HOWEVER, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 12(d) of the Plan and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under subsection 4(a)
and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(A) PURCHASE PRICE. The purchase price under each restricted stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such agreement, but in no event shall the purchase price be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made. Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
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(B) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or pursuant to a domestic relations order satisfying the
requirements of Rule 16a-12 and any administrative interpretations or
pronouncements thereunder, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Board or the Committee, according to a deferred
payment or other arrangement with the person to whom the stock is sold; or
(iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(D) VESTING. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(E) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of stock held by that person which have not vested as of the
date of termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(A) The Board or Committee shall have full power and authority, exercisable
in its sole discretion, to grant Stock Appreciation Rights under the Plan to
Employees, Directors of or Consultants to, the Company or its Affiliates. To
exercise any outstanding Stock Appreciation Right, the holder must provide
written notice of exercise to the Company in compliance with the provisions of
the Stock Award Agreement evidencing such right. If a Stock Appreciation Right
is granted to an individual who is at the time subject to Section 16(b) of the
Exchange Act (a "Section 16(b) Insider"), the Stock Award Agreement of grant
shall incorporate all the terms and conditions at the time necessary to assure
that the subsequent exercise of such right shall qualify for the safe-harbor
exemption from short-swing profit liability provided by Rule 16b-3 promulgated
under the Exchange Act (or any successor rule or regulation). No limitation
shall exist on the aggregate amount of cash payments the Company may make under
the Plan in connection with the exercise of a Stock Appreciation Rights.
(B) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation Rights
will be granted appurtenant to an Option, and shall, except as specifically
set forth in this Section 8, be subject to the same terms and conditions
applicable to the particular Option grant to which it pertains. Tandem Stock
Appreciation Rights will require the holder to elect between the exercise of
the underlying Option for shares of stock and the surrender, in whole or in
part, of such Option for an appreciation distribution. The appreciation
distribution payable on the exercised Tandem Right shall be in cash (or, if
so provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the Option surrender) in an amount up to the excess of
(A) the Fair Market Value (on the date of the Option surrender) of the
number of shares of stock covered by that portion of the surrendered Option
in which the Optionee is vested over (B) the aggregate exercise price
payable for such vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised
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automatically at the same time the underlying Option is exercised with
respect to the particular shares of stock to which the Concurrent Right
pertains. The appreciation distribution payable on an exercised Concurrent
Right shall be in cash (or, if so provided, in an equivalent number of
shares of stock based on Fair Market Value on the date of the exercise of
the Concurrent Right) in an amount equal to such portion as shall be
determined by the Board or the Committee at the time of the grant of the
excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over
(B) the aggregate exercise price paid for such shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will be
granted independently of any Option and shall, except as specifically set
forth in this Section 8, be subject to the same terms and conditions
applicable to Nonstatutory Stock Options as set forth in Section 6. They
shall be denominated in share equivalents. The appreciation distribution
payable on the exercised Independent Right shall be not greater than an
amount equal to the excess of (A) the aggregate Fair Market Value (on the
date of the exercise of the Independent Right) of a number of shares of
Company stock equal to the number of share equivalents in which the holder
is vested under such Independent Right, and with respect to which the holder
is exercising the Independent Right on such date, over (B) the aggregate
Fair Market Value (on the date of the grant of the Independent Right) of
such number of shares of Company stock. The appreciation distribution
payable on the exercised Independent Right shall be in cash or, if so
provided, in an equivalent number of shares of stock based on Fair Market
Value on the date of the exercise of the Independent Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect, at any time
and from time to time, (i) the repricing of any outstanding Options and/or any
Stock Appreciation Rights under the Plan and/or (ii) with the consent of the
affected holders of Options and/or Stock Appreciation Rights, the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of stock,
but having an exercise price per share not less than eighty-five percent (85%)
of the Fair Market Value (one hundred percent (100%) of the Fair Market Value in
the case of an Incentive Stock Option) or, in the case of an Incentive Stock
Option granted to a 10% stockholder (as described in subsection 5(b)), not less
than one hundred ten percent (110%) of the Fair Market Value) per share of stock
on the new grant date. Notwithstanding the foregoing, the Board or the Committee
may grant an Option and/or Stock Appreciation Right with an exercise price lower
than that set forth above if such Option and/or Stock Appreciation Right is
granted as part of a transaction to which section 424(a) of the Code applies.
Shares subject to an Option or Stock Appreciation Right canceled under this
Section 9 shall continue to be counted against the maximum award of Options and
Stock Appreciation Rights permitted to be granted pursuant to the Plan. The
repricing of an Option and/or Stock Appreciation Right hereunder resulting in a
reduction of the exercise price, shall be deemed to be a cancellation of the
original Option and/or Stock Appreciation Right and the grant of a substitute
Option and/or Stock Appreciation Right; in the event of such repricing, both the
original and the substituted Options and Stock Appreciation Rights shall be
counted against the maximum awards of Options and Stock Appreciation Rights
permitted to be granted pursuant to the Plan, to the extent required by
Section 162(m) of the Code.
10. COVENANTS OF THE COMPANY.
(A) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
A-9
(B) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(A) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e), 7(d) or 8(b), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(B) Neither an Employee, Director or Consultant, nor any person to whom a
Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be deemed
to be the holder of, or to have any of the rights of a holder with respect to,
any shares subject to such Stock Award unless and until such person has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(C) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee, with or without cause, the right of the Company's Board of Directors
and/or the Company's stockholders to remove any Director pursuant to the terms
of the Company's By-Laws and the provisions of the Delaware General Corporation
Law, or the right to terminate the relationship of any Consultant pursuant to
the terms of such Consultant's agreement with the Company or Affiliate.
(D) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(E) The Company may require any person to whom a Stock Award is granted, or
any person to whom a Stock Award is transferred pursuant to subsection 6(d),
7(b) or 8(b), as a condition of exercising or acquiring stock under any Stock
Award, (1) to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any
A-10
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(F) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state, local,
or other tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination of
such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of the
common stock of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)
(B) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving or acquiring corporation or an Affiliate of such surviving or
acquiring corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar Stock Awards for those outstanding under the Plan,
or (ii) such Stock Awards shall continue in full force and effect. In the event
any surviving or acquiring corporation and its Affiliates refuse to assume or
continue such Stock Awards, or to substitute similar options for those
outstanding under the Plan, then, with respect to Stock Awards held by persons
then performing services as Employees, Directors or Consultants, the time during
which such Stock Awards may be exercised shall be accelerated and the Stock
Awards terminated if not exercised prior to such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 under the
Exchange Act or any Nasdaq or securities exchange listing requirements.
(B) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of
A-11
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(C) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(D) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(E) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on March 26, 2006, which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(B) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the effective date of the initial public
offering of the Company's common stock, but no Stock Awards granted under the
Plan shall be exercised unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.
A-12
ONYX PHARMACEUTICALS, INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON MARCH 26, 1996
APPROVED BY STOCKHOLDERS ON APRIL 30, 1996
AMENDED ON APRIL 1, 1997
APPROVED BY STOCKHOLDERS ON MAY 22, 1997
AMENDED ON FEBRUARY 9, 2000
APPROVED BY STOCKHOLDERS ON JUNE , 2000
1. PURPOSE.
(A) The purpose of the 1996 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of Onyx
Pharmaceuticals, Inc. (the "Company") who is not otherwise at the time of grant
an employee of the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company.
(B) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(C) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(A) The Plan shall be administered by the Board of Directors of the Company
(the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(B) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"), all
of the members of which Committee may (but need not) be, in the discretion of
the Board, "non-employee directors" within the meaning of Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
"outside directors" within the meaning of Section 162(m) of the Code. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate two hundred fifty thousand (250,000)
shares of the Company's common stock. If any option granted under the Plan shall
for any reason expire or otherwise terminate without having been exercised in
full, the stock not purchased under such option shall again become available for
the Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
B-1
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(A) Upon the effective date of the initial public offering of the Company's
common stock (the "IPO Date"), each person who is then an eligible Non-Employee
Director automatically shall be granted an option to purchase twenty thousand
(20,000) shares of common stock of the Company on the terms and conditions set
forth herein.
(B) Each person who is elected for the first time to be an eligible
Non-Employee Director automatically shall, upon the date of his or her initial
election to be an eligible Non-Employee Director by the Board or stockholders of
the Company, be granted an option to purchase twenty thousand (20,000) shares of
common stock of the Company on the terms and conditions set forth herein.
(C) On the anniversary date of each year following the date an option is
granted to an eligible Non-Employee Director pursuant to subparagraphs (a) or
(b) hereof, each eligible Non-Employee Director automatically shall be granted
an option to purchase five thousand (5,000) shares of common stock of the
Company on the terms and conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(A) The term of each option commences on the date it is granted and, unless
sooner terminated as set forth herein, expires on the date ("Expiration Date")
ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date twelve (12) months following
the date of termination of all such service; provided, however, that if such
termination of service is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or eighteen (18) months
following the date of the optionee's death. In any and all circumstances, an
option may be exercised following termination of the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate only as to that number of shares as to which it was exercisable as of
the date of termination of all such service under the provisions of subparagraph
6(e).
(B) The exercise price of each option shall be one hundred percent 100% of
the fair market value of the stock subject to such option on the date such
option is granted.
(C) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than 1,000 shares. When the number of shares being purchased upon an
exercise is 1,000 or more shares, the optionee may elect to make payment of the
exercise price under one of the following alternatives:
(I) Payment of the exercise price per share in cash at the time of
exercise; or
(II) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned
by the optionee, held for the period required to avoid a charge to the
Company's reported earnings, and owned free and clear of any liens, claims,
encumbrances or security interest, which common stock shall be valued at its
fair market value on the date preceding the date of exercise; or
(III) Payment by a combination of the methods of payment specified in
subparagraph 6(c)(i) and 6(c)(ii) above.
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Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company either prior to
the issuance of shares of the Company's common stock or pursuant to the terms of
irrevocable instructions issued by the optionee prior to the issuance of shares
of the Company's common stock.
(D) An option shall not be transferable except by will or by the laws of
descent and distribution, or pursuant to a domestic relations order satisfying
the requirements of Rule 16a-12 under the Securities Exchange Act of 1934 and
shall be exercisable during the lifetime of the person to whom the option is
granted only by such person (or by his guardian or legal representative) or
transferee pursuant to such an order. Notwithstanding the foregoing, the
optionee may, by delivering written notice to the Company in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
optionee, shall thereafter be entitled to exercise the option.
(E) An option granted pursuant to section 5(a) or 5(b) shall become
exercisable in installments over a period of four years from the date of grant
such that twenty-five percent (25%) of the shares shall vest on the first
anniversary of the date of grant and ( 1/48) of the shares shall vest each month
thereafter; provided, however, that the optionee has, during the entire period
from the grant date to such vesting date, continuously served as a Non-Employee
Director or employee of or consultant to the Company or any Affiliate of the
Company, whereupon such option shall become fully exercisable in accordance with
its terms with respect to that portion of the shares represented by that
installment.
(F) An option granted pursuant to section 5(c) shall become exercisable on
the first anniversary of the date of grant of such option; provided, however,
that the optionee has, during the entire period from the grant date to such
vesting date, continuously served as a Non-Employee Director or employee of or
consultant to the Company or any Affiliate of the Company, whereupon such option
shall become fully exercisable in accordance with its terms with respect to that
portion of the shares represented by that installment.
(G) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
any optionee to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of granting
an option to the optionee or permitting the optionee to exercise the option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(H) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
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7. COVENANTS OF THE COMPANY.
(A) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(B) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(A) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(B) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.
(C) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate in any capacity or shall affect any right of the
Company, its Board or stockholders or any Affiliate to remove any Non-Employee
Director pursuant to the Company's By-Laws and the provisions of the Delaware
General Corporation Law (or the applicable laws of the Company's state of
incorporation if the Company's state of incorporation should change in the
future).
(D) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(E) In connection with each option made pursuant to the Plan, it shall be a
condition precedent to the Company's obligation to issue or transfer shares to a
Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
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(F) As used in this Plan, "fair market value" means, as of any date, the
value of the common stock of the Company determined as follows:
(I) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the National Market
of the Nasdaq Stock Market, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange
with the greatest volume of trading in common stock) on the last market
trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable;
(II) If the common stock is quoted on Nasdaq Stock Market (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a share of common stock shall be the mean between the bid and asked
prices for the common stock on the last market trading day prior to the day
of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(III) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(B) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent not prohibited by
applicable law, the time during which options outstanding under the Plan may be
exercised shall be accelerated prior to such event and the options terminated if
not exercised after such acceleration and at or prior to such event.
11. AMENDMENT OF THE PLAN.
(A) The Board at any time, and from time to time, may amend the Plan and/or
some or all outstanding options granted under the Plan, provided, however, that
the Board shall not amend the Plan more than once every six (6) months, with
respect to the provisions of the Plan which relate to the amount, price and
timing of grants, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules
thereunder. Except as provided in paragraph 10 relating to adjustments upon
changes in stock, no amendment shall be effective unless
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approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment, where the amendment will:
(I) Increase the number of shares which may be issued under the Plan;
(II) Modify the requirements as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order
for the Plan to comply with the requirements of Rule 16b-3 of the Exchange
Act (Rule 16b-3)); or
(III) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to comply with the requirements
of Rule 16b-3 or Section 162(m) of the Internal Revenue Code.
(B) Rights and obligations under any option granted before any amendment of
the Plan shall not be impaired by such amendment unless (i) the Company requests
the consent of the person to whom the option was granted and (ii) such person
consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate at the time that all of the shares of the
Company's common stock reserved for issuance under the Plan have been issued. No
options may be granted under the Plan while the Plan is suspended or after it is
terminated.
(B) Rights and obligations under any option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
(C) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(A) The Plan shall become effective upon adoption by the Board of
Directors.
(B) No option granted under the Plan shall be exercised or become
exercisable unless and until the Plan is approved by the stockholders of the
Company.
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ONYX PHARMACEUTICALS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED MARCH 26, 1996
APPROVED BY THE STOCKHOLDERS ON APRIL 30, 1996
AMENDED FEBRUARY 4, 1998
APPROVED BY THE STOCKHOLDERS ON MAY 28, 1998
AMENDED FEBRUARY 9, 2000
APPROVED BY THE STOCKHOLDERS ON JUNE , 2000
1. PURPOSE.
(A) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Onyx Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(B) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(C) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(D) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(A) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(B) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(I) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which
need not be identical).
(II) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(III) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective.
(IV) To amend the Plan as provided in paragraph 13.
(V) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be
treated as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
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(C) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate two hundred fifty thousand (250,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(A) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
(B) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(A) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be equal to or greater than two
(2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
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(B) The Board or the Committee may provide that each person who, during the
course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(I) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the
exercise price of such right;
(II) the period of the Offering with respect to such right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(III) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that
Offering.
(C) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(D) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(E) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(A) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(B) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the
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Committee shall make a pro rata allocation of the shares available in as nearly
a uniform manner as shall be practicable and as it shall deem to be equitable.
(C) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(I) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(II) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(A) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company
intended to comply with Section 401(k), Section 402(e)(3), Section 125,
Section 402(h), or Section 403(b) of the Code, and also including any deferrals
under a non-qualified deferred compensation plan or arrangement established by
the Company), which shall include or exclude (as provided for each Offering) the
following items of compensation: bonuses, commissions, overtime pay, incentive
pay, profit sharing, other remuneration paid directly to the employee, the cost
of employee benefits paid for by the Company or an Affiliate, education or
tuition reimbursements, imputed income arising under any group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company or an Affiliate under any employee benefit plan, and similar items of
compensation, as determined by the Board or Committee. The payroll deductions
made for each participant shall be credited to an account for such participant
under the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(B) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(C) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
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(D) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(A) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(B) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(A) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(B) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
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10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to rights granted under
the Plan unless and until the participant's shareholdings acquired upon exercise
of rights hereunder are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(B) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan,
(ii) such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(I) Increase the number of shares reserved for rights under the Plan;
(II) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended
("Rule 16b-3")); or
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(III) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under it into
compliance therewith.
(B) Rights and obligations under any rights granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(A) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(B) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(B) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's initial
public offering of shares of common stock becomes effective (the "Effective
Date"), but no rights granted under the Plan shall be exercised unless and until
the Plan has been approved by the stockholders of the Company within twelve
(12) months before or after the date the Plan is adopted by the Board or the
Committee, which date may be prior to the Effective Date.
C-7
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
ONYX PHARMACEUTICALS, INC.
ONYX PHARMACEUTICALS, INC., a corporation organized and existing under and
by virtue of the General Corporation law of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY:
1. The name of the corporation is ONYX Pharmaceuticals, Inc.
2. The Amended and Restated Certificate of Incorporation of the Company was
filed with the Secretary of State of the State of Delaware on May 14, 1996.
The original Certificate of Incorporation of the Company was filed on
April 1, 1996.
3. The Board of Directors of the Company, acting in accordance with the
provisions of Sections 141 and 242 of the General Corporation law of the
State of Delaware, duly adopted resolutions to amend the first paragraph of
Article IV of the Amended and Restated Certificate of Incorporation to read
in its entirety as follows:
"IV.
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to
issue is fifty-five million (55,000,000) shares. Fifty million
(50,000,000) shares shall be Common Stock, each having a par value
of one tenth of one cent ($.001). Five million (5,000,000) shares
shall be Preferred Stock, each having a par value of one tenth of
one cent ($.001)."
4. Thereafter, pursuant to a resolution of the Board of Directors, this
Amendment was submitted to the stockholders of the Company for their
approval and was duly approved by the holders of the necessary number of
shares of the Company's voting securities in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
D-1
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment to
be signed by its duly authorized officer this day of 2000.
ONYX PHARMACEUTICALS, INC
By:
-----------------------------------------
Hollings C. Renton
Chief Executive Officer and President
ATTEST:
By: ---------------------------------------
Robert L. Jones
Secretary
D-2
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COMPANY #
CONTROL #
----------------
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
1. To elect two directors to hold office 01 Paul Goddard
until the 2003 Annual Meeting of Stockholders 02 Wendell Wierenga
/ / FOR all nominees / / WITHHOLD AUTHORITY
listed below (except to vote for all nominees
as marked to the listed below.
contrary below).
(Instructions: To withhold authority to vote --------------------------
for any indicated nominee, write the number(s)
of the nominee(s) in the box provided to the right.) --------------------------
- PLEASE FOLD HERE -
2. To approve an amendment to the Company's 1996 Equity Incentive Plan, as
amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 400,000 shares.
/ / For / / Against / / Abstain
3. To approve an amendment to the Company's 1996 Non-Employee Directors' Stock
Option Plan, as amended, to increase the aggregate number of shares of Common
Stock authorized for issuance under such plan by 75,000 shares.
/ / For / / Against / / Abstain
4. To approve an amendment to the Company's Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 75,000 shares.
/ / For / / Against / / Abstain
5. To approve an amendment to the Company's Amended and Restated Certificate of
Incorporation to increase the authorized number of shares of Common Stock
from 25,000,000 to 50,000,000 shares.
/ / For / / Against / / Abstain
6. To ratify the selection of Ernst & Young LLP as independent auditors of the
Company for its fiscal year ending December 31, 2000.
/ / For / / Against / / Abstain
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
Dated:
----------------
---------------------------------
---------------------------------
Signature(s) in Box
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators,
trustees, guardians and attorneys-
in-fact should add their titles.
If signer is a corporation, please
give full corporate name and have
a duly authorized officer sign,
stating title. If signer is a
partnership, please sign in
partnership name by authorized
person.
ONYX PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 8, 2000
ONYX PHARMACEUTICALS, INC.
PROXY
- --------------------------------------------------------------------------------
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JUNE 8, 2000.
The undersigned hereby appoints Hollings C. Renton and Marilyn E. Wortzman,
and each of them, as attorneys and proxies of the undersigned, with full
power of substitution, to vote all of the shares of stock of ONYX
Pharmaceuticals, Inc. which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders of ONYX Pharmaceuticals to be held at 3031
Research Drive, Richmond, California 94806 on Thursday, June 8, 2000 at 10:00
a.m., (local time), and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as
to any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4, 5 AND 6 AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
SEE REVERSE FOR VOTING INSTRUCTIONS.