UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
VIROPHARMA INCORPORATED
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(Name of Registrant as Specified In Its Charter)
VIROPHARMA INCORPORATED
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, Pennsylvania 19341
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To Be Held June 11, 2001
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To Our Stockholders:
Our annual stockholders' meeting will be held on Monday, June 11, 2001 at
10:00 a.m., local time, at The Desmond Great Valley Hotel, One Liberty
Boulevard, Malvern, Pennsylvania for the following purposes:
1. To elect two (2) directors to Class II of our board of directors. Each
director elected by the stockholders will serve for a three-year term
and until the election and qualification of his successor.
2. To approve our stock option plan, as amended, to:
. increase the number of shares of common stock available for issuance
under our stock option plan by 1,000,000 shares; and
. authorize the grant or sale of restricted shares to selected
employees.
3. To transact any other business that may arise at the meeting.
Any action may be taken on these matters at the annual meeting, or on the
date to which the annual meeting may be adjourned. Our board of directors has
chosen April 16, 2000 as the record date for determining the stockholders who
will be entitled to receive notice of our annual meeting and to vote at that
meeting. We will maintain a complete list of our stockholders entitled to vote
at the annual meeting at our headquarters, located at 405 Eagleview Boulevard,
Exton, Pennsylvania, for ten days before the annual meeting. If we have to
adjourn the meeting, then we will take action on the items described above on
the date to which the meeting is adjourned.
The proxy statement included with this notice discusses each of our
proposals to be considered at the annual meeting. We also have included a copy
of our annual report to stockholders for the year ended December 31, 2000 for
your review.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE SO THAT WE CAN COUNT YOUR
VOTE. WE HAVE INCLUDED A POSTAGE-PREPAID ENVELOPE FOR YOUR USE.
RETURNING THE PROXY CARD WILL NOT AFFECT YOUR RIGHT TO ATTEND THE
MEETING AND VOTE.
By order of the board of directors,
Thomas F. Doyle
Vice President, General Counsel and
Secretary
May 8, 2001
Exton, Pennsylvania
VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, Pennsylvania 19341
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 2001
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We are sending you this proxy statement and the enclosed proxy card because
our board of directors is soliciting your proxy to vote your shares at our
2001 annual meeting of stockholders. The annual meeting will be held on June
11, 2001 at 10:00 a.m., local time, at The Desmond Great Valley Hotel, One
Liberty Boulevard, Malvern, Pennsylvania. We began mailing this proxy
statement and the proxy card on or about May 8, 2001. We have also included
our annual report for the year ended December 31, 2000 for your review. The
annual report is not part of this proxy statement.
ABOUT THE ANNUAL MEETING
Who is entitled to vote at the annual meeting?
Only our stockholders of record at the close of business on April 16, 2001
are entitled to receive notice of our annual meeting and to vote at the
meeting. On April 1, 2001, we had 16,275,712 shares of our common stock
outstanding, and 2,300,000 shares of series A convertible participating
preferred stock outstanding. The series A preferred stock was convertible into
2,346,295 shares of common stock on that date. Each common stockholder that is
entitled to vote will have the right to one vote for each share of common
stock outstanding in such stockholder's name on the record date. The holders
of the series A preferred stock will have the right to one vote for each share
of common stock into which the preferred stock is convertible on the record
date.
Do I have to attend the meeting in order to vote?
No. If you want to have your vote count at the meeting, but not actually
attend the meeting in person, you may vote by granting a proxy or, for shares
held in street name, by submitting voting instructions to your broker or
nominee. In most instances, you will be able to do this over the Internet or
by mail. Please refer to the summary instructions below and those included on
your proxy card or, for shares held in street name, the voting instruction
card included by your broker or nominee.
By Internet -- If you have Internet access, you may submit your proxy from
any location in the world by following the "Vote by Internet" instructions on
the proxy card.
By Mail -- You may do this by signing your proxy card or, for shares held in
street name, the voting instruction card included by your broker or nominee
and mailing it in the accompanying enclosed, pre-addressed envelope. If you
provide specific voting instructions, your shares will be voted as you
instruct. If you sign but do not provide instructions, your shares will be
voted as described below.
Your shares will be voted in the manner that you indicate in your proxy. The
proxy card provides spaces for you to withhold your authority to vote your
shares for the nominees for the board of directors. The proxy card also
provides spaces for you to vote "for" or "against" or "abstain" from voting in
connection with our proposal to amend our stock option plan to (i) increase
the number of shares of common stock available under our plan and (ii)
authorize the grant or sale of restricted shares to selected employees.
If you return a signed proxy card but do not indicate how you wish to vote
your shares, your shares will be voted by the management proxies set forth on
the proxy card in the manner recommended by our board of directors in this
proxy statement.
1
What if my shares are held in "street name?"
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. For example, we believe that
brokers that do not receive instructions are entitled to vote those shares for
the election of the directors. However, we believe that brokers are not
entitled to vote those shares on the proposal to approve the amendments to our
option plan. Thus, if you do not give your broker or nominee specific
instructions, your shares may not be voted on that matter and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in
determining whether there is a quorum.
How many votes are required to conduct business at the annual meeting?
We need to receive votes from holders of a majority of the common stock
outstanding or issuable upon conversion of the series A preferred stock and
entitled to vote, either in person or by proxy, in order to have a quorum at
the meeting. If a quorum is present, we will be able to conduct business at
the meeting.
The nominees for director will be elected by a plurality of the votes cast
at the annual meeting. You can cast your vote in favor of the nominees for
director, or you can withhold your votes from these persons. If you withhold
your authority, then your votes will be excluded from the vote and will have
no effect, other than for purposes of determining the presence of a quorum.
Any other matter submitted to the stockholders will require the affirmative
vote of a majority of the shares represented and entitled to vote, in person
or by proxy, at the annual meeting, unless a greater percentage is required
either by law or by our certificate of incorporation or bylaws. If you
"abstain" from voting on any of these matters, your abstention will be
considered as present and entitled to vote for purposes of determining the
presence of a quorum, but will have the effect of a vote "against" the
particular matter.
Can I change my vote after I return the proxy card?
Yes. You may change your proxy instructions at any time prior to the vote at
the annual meeting. For shares held directly in your name, you may accomplish
this by sending a written revocation or granting a new proxy bearing a later
date (which automatically revokes the earlier proxy) before the annual meeting
to Thomas F. Doyle, our corporate secretary, or by attending the annual
meeting and voting in person. Attendance at the meeting will not cause your
previously granted proxy to be revoked unless you specifically so request. For
shares held beneficially by you, you may accomplish this by submitting new
voting instructions to your broker or nominee.
How can I get additional information about the company?
We will be happy to provide you (without charge) with a copy of our annual
report on Form 10-K for the fiscal year ended December 31, 2000 and other
documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934. Please address your requests for such
documents to Thomas F. Doyle, Vice President, General Counsel and Secretary of
ViroPharma Incorporated, 405 Eagleview Boulevard, Exton, Pennsylvania 19341,
telephone number (610) 458-7300.
2
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial
ownership of our common stock as of April 1, 2001, except as otherwise
indicated in the relevant footnote, by (1) each person or group that we know
beneficially owns more than 5% of our common stock, (2) each of our directors
and director nominees, (3) persons serving as our Chief Executive Officer
during 2000 and our four most highly compensated executive officers other than
our Chief Executive Officer for the fiscal year ended December 31, 2000,
collectively referred to in this proxy statement as the "named executive
officers," and (4) all current executive officers and directors as a group.
Unless otherwise indicated, the address of each person identified below is c/o
ViroPharma Incorporated, 405 Eagleview Boulevard, Exton, Pennsylvania 19341.
The percentages of beneficial ownership shown below are based on 16,275,712
shares of Common Stock outstanding as of April 1, 2001, unless otherwise
stated. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes those securities
over which a person may exercise voting or investment power. In addition,
shares of common stock which a person has the right to acquire upon the
conversion of preferred stock or the exercise of stock options and warrants
within 60 days of the date of this table are deemed outstanding for the
purpose of computing the percentage ownership of that person, but are not
deemed outstanding for computing the percentage ownership of any other person.
Except as indicated in the footnotes to this table or as affected by
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned.
Number of Shares Percentage of
of Common Stock Shares
Beneficial Owner Beneficially Owned Beneficially Owned
---------------- ------------------ ------------------
5% Stockholders
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PSV, LP (1)............................. 2,941,295 15.31%
Arnold H. Snider (2).................... 1,000,000 5.79
The Prudential Insurance Company of
America (3)............................ 957,940 5.56
T. Rowe Price Associates, Inc. (4)...... 904,951 5.27
Directors and Executive Officers
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Claude H. Nash (5)...................... 537,304 3.28
Marc S. Collett (6)..................... 288,336 1.76
Mark A. McKinlay (7).................... 216,130 1.32
Vincent J. Milano (8)................... 82,442 *
Frank Baldino, Jr. (9).................. 69,000 *
Thomas F. Doyle (10).................... 64,509 *
Michel de Rosen (11).................... 55,300 *
Robert J. Glaser (9).................... 39,500 *
David J. Williams (9)................... 20,000 *
Howard Pien (12)........................ 13,333 *
Dennis Purcell (13)..................... 10,603 *
Paul A. Brooke.......................... 10,000 *
All directors and executive officers as
a group (14 persons) (14).............. 1,437,382 8.58%
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* Represents less than 1% of the outstanding shares of our common stock.
(1) Includes 2,300,000 shares of series A convertible participating
preferred stock purchased by PSV, LP which are convertible into
2,346,295 shares of common stock, and 595,000 shares of common stock
issuable upon exercise of warrants. The address of PSV, LP is c/o
Perseus Capital LLC, 2099 Pennsylvania Avenue N.W., Washington, D.C.
20006.
(2) As reflected in a Schedule 13G dated March 27, 2001. Includes 705,999
shares held by Deerfield Capital, L.P. and Deerfield Partners, L.P., as
well as 294,001 shares held by Deerfield Management Company and
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Deerfield International Limited. Mr. Snider is the President of Snider
Capital Corp., which serves as the general partner of Deerfield Capital
L.P. and Deerfield Partners, L.P. Mr. Snider also is the President of
Snider Management Corporation which serves as the general partner of
Deerfield Management Company. The address of Mr. Snider, Deerfield
Capital, L.P., Deerfield Partners, L.P. and Deerfield Management Company
is 450 Lexington Avenue, Suite 1450, New York, NY 10017. The address of
Deerfield International Limited is c/o Hemisphere Management (B.V.I.)
Limited, Bison Court, Columbus Court, P.O. Box 3460, Road Town, Tortola,
British Virgin Islands.
(3) As reflected in a Schedule 13G dated February 5, 2001. In that Schedule
13G, Prudential reported that it had sole voting and dispositive power
over 91,400 shares, and shared voting and dispositive power over 866,540
shares. The address of The Prudential Insurance Company of America is
751 Broad Street, Newark, New Jersey 07102-3777. In a Schedule 13G dated
February 10, 2000 filed by Jennison Associates LLC, Jennison reported
sole voting power and shared dispositive power over 955,300 shares.
Jennison reported that Prudential controls Jennison through its indirect
ownership of Jennison. Jennison further reported that it does not file
jointly with Prudential, and that shares of our common stock reported on
Jennison's Schedule 13G may be included in the Schedule 13G filed by
Prudential. Jennison's address is 466 Lexington Avenue, New York, NY
10017.
(4) As reflected in a Schedule 13G dated February 14, 2001. In that Schedule
13G, T. Rowe Price Associates, Inc. (Price Associates) reported that it
had sole voting power over 146,351 shares and sole dispositive power
over 904,951 shares. Price Associates stated in that Schedule 13G that
these securities are owned by various individual and institutional
investors for which Price Associates serves as an investment advisor
with the power to direct investment and/or power to vote the securities.
Price Associates disclaims that it is the beneficial owner of such
securities. The address of T. Rowe Price Associates, Inc. is 100 East
Pratt Street, Baltimore, MD 21202.
(5) Includes 800 shares of common stock held by Mr. Nash as custodian for
two minor children, and 113,888 shares of common stock issuable upon the
exercise of stock options which are exercisable within 60 days of the
date of this table.
(6) Includes 1,000 shares of common stock held by Dr. Collett as custodian
for a minor child, and 95,590 shares of common stock issuable upon the
exercise of stock options which are exercisable within 60 days of the
date of this table.
(7) Includes 61,930 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(8) Includes 53,318 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(9) Includes 20,000 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(10) Includes 60,900 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table.
(11) Includes 50,000 unvested shares of common stock issued to Mr. de Rosen
in August 2000.
(12) Represents shares of common stock issuable upon the exercise of stock
options which are exercisable within 60 days of the date of this table.
(13) Includes 1,603 shares of common stock issuable upon the conversion of
$175,000 in principal amount of 6% convertible subordinated notes.
(14) Includes 479,885 shares of common stock issuable upon the exercise of
stock options which are exercisable within 60 days of the date of this
table, and 1,603 shares of common stock issuable upon the conversion of
$175,000 in principal amount of 6% convertible subordinated notes.
4
PROPOSAL 1
ELECTION OF CLASS II DIRECTORS
Our board of directors currently consists of 8 directors. The board consists
of three classes of directors, with each director serving a three-year term.
Each year, one class of directors is subject to stockholder vote. At the
annual meeting, stockholders will vote on the election of two class II
directors. Each class II director elected at the annual meeting will serve
until the 2004 annual meeting of stockholders and until such director's
successor has been elected and qualified, except if the director resigns, is
removed or dies before such time.
Class II members presently are Michel de Rosen and Howard Pien. Mr. de Rosen
and Mr. Pien are the director nominees for election to the board of directors
at the annual meeting. Class I members are Paul A. Brooke, Robert J. Glaser
and David J. Williams, and Class III members are and Frank Baldino, Jr.,
Ph.D., Claude H. Nash and Dennis Purcell.
The affirmative vote of a plurality of shares of the common stock present or
represented by proxy at the annual meeting and entitled to vote is required
for the election of Mr. de Rosen and Mr. Pien as directors. If either of them
should become unable to accept nomination or election, a circumstance which we
do not expect, the proxy agents intend to vote for any alternate nominees
designated by the board of directors or, in the discretion of the board, the
positions may be left vacant.
Described below is certain information regarding each director, including
the nominees.
Class II -- Nominees for Terms Continuing until 2004
Michel de Rosen. Mr. de Rosen has served as our President and Chief
Executive Officer since August 2000, and as a director since May 2000. From
1993 to 1999, Mr. de Rosen held several key positions in Rhone-Poulenc Pharma
and Rhone-Poulenc Rorer (now Aventis), including Chairman and Chief Executive
Officer from May 1995 until December 1999. Mr. de Rosen began his career at
the French Ministry of Finance and subsequently served in several leading
government positions. Mr. de Rosen also served in various executive roles in
industry prior to 1993. Mr. de Rosen is 50 years of age.
Howard Pien. Mr. Pien has served as one of our directors since August 1998.
Mr. Pien is President, Pharmaceuticals International GlaxoSmithKline (GSK) and
has overall responsibility for the commercial operations of the company's
international pharmaceuticals business. Since joining SmithKline (SB), the
predecessor to GSK, in 1991, Mr. Pien has held key positions in SB's
pharmaceutical business in the United States, the United Kingdom, China and
Korea. Mr. Pien is 43 years of age.
Class I -- Directors with Terms Continuing until 2003
Paul A. Brooke. Mr. Brooke has served as one of our directors since February
2001. Mr. Brooke currently is a managing member of PMSV Holdings LLC, a
partner of MPM Bioventures and an advisory director for Morgan Stanley Dean
Witter. He was a managing director at Tiger Management LLC from April 1999 to
May 2000. Mr. Brooke was a managing director at Morgan Stanley Dean Witter and
was global head of healthcare research and strategy from March 1983 to April
1999. Mr. Brooke also is a director of WebMD.com. Mr. Brooke is 55 years of
age.
Robert J. Glaser. Mr. Glaser has served as one of our directors since August
1997. Mr. Glaser is currently President of the McKesson HBOC Pharmaceutical
Services division of McKesson HBOC. He was President and Chief Operating
Officer of Ostex International from 1996-1997. Mr. Glaser was Senior Vice
President of Marketing for Merck U.S. Human Health from 1994-1996, Vice
President of Marketing from 1993-1994 and Vice President of Merck's Vaccine
Division from 1991-1993. Mr. Glaser is 49 years of age.
David J. Williams. Mr. Williams has served as one of our directors since
November 1997. Mr. Williams has been President and Chief Operating Officer of
Aventis Pasteur, and its predecessor Pasteur Merieux
5
Connaught USA, since 1988. Mr. Williams also is a director of Blue Cross of
Northeastern Pennsylvania. Mr. Williams is 51 years of age.
Class III -- Directors with Terms Continuing until 2002
Frank Baldino, Jr., Ph.D. Dr. Baldino has served as one of our directors
since June 1995. Since 1987, he has served as President, Chief Executive
Officer and director of Cephalon, Inc., an integrated specialty
biopharmaceutical company committed to the discovery, development and
marketing of products to treat neurological disorders and cancer. Dr. Baldino
is also a director of Pharmacopeia, Inc. Dr. Baldino is 47 years of age.
Claude H. Nash. Mr. Nash, a co-founder of ViroPharma, has served as Chairman
of our board of directors since February 1997, and as Chief Executive Officer
and President from December 1994 until August 2000, and as one of our
directors since our commencement of operations in December 1994. From 1983
until 1994, Mr. Nash served as Vice President, Infectious Disease and Tumor
Biology at Schering-Plough Corporation, a pharmaceutical company. Mr. Nash
received his Ph.D. from Colorado State University. Mr. Nash also is a director
of Adolor Corporation. Mr. Nash is 58 years of age.
Dennis J. Purcell. Mr. Purcell has served as one of our directors since June
2000. Since February 2000, Mr. Purcell has been a senior managing partner of
Perseus-Soros BioPharmaceutical Fund, LP, a healthcare fund based in New York
City. From August 1994 to January 2000, Mr. Purcell was managing director of
life sciences investment banking at Chase H&Q (formerly Hambrecht & Quist),
where he was responsible for a majority of the company's financing, mergers
and acquisitions and other transactions for the pharmaceutical, biotechnology
and medical products industries. Mr. Purcell is 45 years of age.
Committees and Meetings of the Board
The board of directors has a compensation committee and an audit committee.
During 2000, the board of directors held 6 meetings, the compensation
committee held 1 meeting, and the audit committee held 2 meetings. Mr.
Williams attended 5 of 8 meetings of the board of directors and its committees
held in 2000. Mr. Pien attended 6 of 9 meetings of the board of directors and
its committees held in 2000.
The compensation committee makes recommendations concerning salaries and
incentive compensation for our employees and consultants. The audit committee
reviews the results and scope of the audit and other services provided by our
independent auditors. The current members of the compensation committee are
Mr. Glaser and Mr. Pien, and the current members of the audit committee are
Dr. Baldino, Mr. Purcell and Mr. Williams.
Compensation of Directors
Non-employee directors not affiliated with any of our investors receive
$10,000 per year, plus travel expenses for each meeting of the board of
directors they attend. These directors also receive options to purchase 20,000
shares of our common stock upon their election, or reelection, to the board of
directors. Each of Mr. Glaser and Mr. Williams received a grant of options to
purchase 20,000 shares of our common stock after he was reelected to the board
at our 2000 annual meeting. Mr. de Rosen received a grant of options to
purchase 20,000 shares of our common stock after he was elected to the board
in May 2000.
Each of our directors and officers are parties to indemnification agreements
with us. Under these agreements, they will be indemnified against liabilities
and expenses incurred in connection with their services to us to the fullest
extent permitted by Delaware law. Their indemnification rights are subject to
each director and officer meeting the applicable standard of care and to a
determination to indemnify by a majority of disinterested directors or by
independent counsel.
Compensation Committee Interlocks and Insider Participation
None.
6
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES FOR
CLASS II DIRECTORS AS DESCRIBED IN PROPOSAL NO. 1.
EXECUTIVE COMPENSATION
The following table provides information on compensation paid or earned
during the fiscal years ended December 31, 1998, December 31, 1999 and
December 31, 2000 to the named executive officers.
Summary Compensation Table
Annual Compensation
Long-term
Compensation
------------------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Position Year Salary Bonus(1) Compensation(2) Awards($) Options Compensation
----------------- ---- -------- -------- --------------- ---------- ---------- ------------
Claude H. Nash.............. 2000 $302,256 $297,628 -- -- 30,000 $ 22,500(3)
Chief Executive Officer and 1999 $241,805 $ 19,344 -- -- 40,500 22,500(3)
President 1998 241,805 33,000 -- -- 27,000 22,500(3)
Michel de Rosen (4)......... 2000 138,462 5,940 -- $1,056,250(5) 300,000 $354,974(6)
Chief Executive Offiicer and
President
Mark McKinlay............... 2000 233,688 238,821 -- -- 21,000 $ 2,500(7)
Vice President, Research & 1999 194,740 15,579 -- -- 22,500 $ 2,500(7)
Development 1998 194,740 28,300 -- -- 15,000 2,500(7)
Marc S. Collett............. 2000 204,798 209,296 -- -- 21,000 $ 2,500(7)
Vice President, Discovery 1999 170,665 13,653 -- -- 22,500 $ 2,500(7)
Research 1998 170,665 23,925 -- -- 15,000 $ 2,500(7)
Vincent J. Milano........... 2000 174,720 166,032 -- -- 21,000 $ 10,165(8)
Vice President, Chief 1999 134,400 10,752 -- -- 22,500 $ 6,487(8)
Financial Officer and 1998 134,400 18,500 -- -- 12,000 $ 9,681(8)
Treasurer
Thomas F. Doyle............. 2000 167,640 157,119 -- -- 21,000 $ 2,500(7)
Vice President, General 1999 127,000 10,160 -- -- 22,500 $ 1,905(7)
Counsel and Secretary 1998 125,350 16,850 -- -- 12,000 $ 1,880(7)
- --------
(1) Other than the amount paid to Mr. de Rosen, the amounts for 2000 include
bonuses paid in early 2000 in connection with our Stockholder Value Reward
program for the increase in our market capitalization in 1999.
(2) Excludes perquisites and other personal benefits, securities or property
which are, in the aggregate, less than 10% of the total annual salary and
bonus.
(3) Represents premiums of $20,000 paid by us for life insurance of which we
are not the beneficiary and contributions to our 401(k) plan of
approximately $2,500 made by us on behalf of Mr. Nash.
(4) Mr. de Rosen joined the company as its Chief Executive Officer and
President in August 2000.
(5) Based on 50,000 shares granted to Mr. de Rosen and the closing price of
the company's common stock ($21.125) on the date of grant. The value of
these shares at December 31, 2000, based on a closing price of $14.48 on
that date, was $724,000. These shares vest in equal increments over a four
year period commencing in August 2001. If any dividends are paid on the
company's common stock, such dividends also will be paid on the restricted
shares granted to Mr. de Rosen.
7
(6) Represents taxes paid by the company on Mr. de Rosen's behalf when Mr. de
Rosen made an 83(b) election with the Internal Revenue Service after the
company issued 50,000 shares of common stock to Mr. de Rosen when he
commenced his employment with the Company.
(7) Represents contributions made by us on behalf of such person to our
401(k) plan.
(8) Represents debt forgiveness of $7,665 in 2000, $4,471 in 1999 and $7,665
in 1998 that otherwise would have been due under a promissory note that
Mr. Milano signed in favor of us in connection with his relocation
expenses that were reimbursed by us in 1997, and contributions to our
401(k) plan of $2,500 in 2000 and $2,061 in 1999 and 1998.
Stock Option Grants
The following table summarizes stock options granted to the named executive
officers during the fiscal year ended December 31, 2000. These options vest in
four annual installments commencing on the first anniversary of the date of
grant. The percentage of total options granted is based on an aggregate of
910,832 options granted to employees in 2000, including options granted to our
named executive officers.
The potential realizable value of each grant, as set forth in the table
below, is calculated assuming that the market price of the underlying security
appreciates at annualized rates of 5% and 10% over the ten-year term of the
option. The results of these calculations are based on rates set forth by the
Securities and Exchange Commission and are not intended to forecast possible
future appreciation of the price of our common stock.
Option Grants in Last Fiscal Year
Individual Grants
Potential Realizable
Value at Assumed
Annual Rates of Stock
Number of Price Appreciation of
Securities Percentage of Exercise Option Term
Underlying Total Options Price Expiration ---------------------
Name Options Granted Granted ($/share) Date 5% 10%
---- --------------- ------------- --------- ---------- ---------- ----------
Claude H. Nash.......... 30,000 3.3% $37.125 1/1/10 $ 700,431 $1,775,031
Michel de Rosen......... 20,000 2.2% 12.00 6/1/10 150,935 382,498
Michel de Rosen......... 280,000 30.7% 21.125 8/21/10 3,719,912 9,426,987
Mark McKinlay........... 21,000 2.3% 37.125 1/1/10 490,302 1,242,521
Marc S. Collett......... 21,000 2.3% 37.125 1/1/10 490,302 1,242,521
Vincent J. Milano....... 21,000 2.3% 37.125 1/1/10 490,302 1,242,521
Thomas F. Doyle......... 21,000 2.3% 37.125 1/1/10 490,302 1,242,521
8
Aggregated Fiscal Year-End Option Values
The following table shows options exercised by our named executive officers
in 2000 and the value of shares of our common stock issued upon exercise of
such options. The table also shows 2000 year-end amounts and value of shares
of our common stock underlying outstanding options for our named executive
officers.
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at The-Money Options at
Shares Value December 31, 2000 December 31, 2000(2)
Acquired on Realized ------------------------- -------------------------
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Claude H. Nash.......... 4,462 $311,626 70,763 85,125 $387,464 $151,350
Michel de Rosen......... -- -- 0 300,000 0 49,680
Mark McKinlay........... -- -- 92,055 51,625 965,213 144,122
Marc S. Collett......... 4,590 58,362 74,715 51,625 726,525 144,122
Vincent J. Milano....... 10,000 166,750 34,443 48,875 211,326 136,955
Thomas F. Doyle......... 1,000 7,000 42,775 48,875 204,908 114,592
- --------
(1) Reflects the difference between the aggregate fair market value of the
shares of common stock issued upon exercise of the options and the closing
price of our common stock on the date of exercise.
(2) Based on the difference between the closing price per share of $14.48 on
December 31, 2000, and the exercise price of the option.
Severance Agreements
In August 2000, we entered into severance agreements with Mr. de Rosen,
President and Chief Executive Officer, and Mr. Nash, the chairman of our board
of directors. Provided that each of Mr. de Rosen and Mr. Nash agrees to
release us from any obligations we may have incurred in connection with their
employment with us, we will pay each of Mr. de Rosen and Mr. Nash, under
various circumstances, certain amounts upon their termination of employment
with us. Depending on his length of service with us at the time of
termination, Mr. de Rosen will receive from us up to two years salary and
benefits, as well any bonus amount which has been awarded to him but not yet
paid, and a pro rata portion of the aggregate value of all contingent bonus
awards to which Mr. de Rosen might otherwise have been entitled, if any. Mr.
Nash will receive two years salary, benefits (certain of which continue until
Dr. Nash reaches age 65), any bonus which has been awarded to him but not yet
paid, and a pro rata portion of the aggregate value of all contingent bonus
awards to which Mr. Nash might otherwise have been entitled, if any.
Promissory Note
In September 2000, Mr. de Rosen signed a promissory note in favor of us in
the principal amount of $354,974 bearing an interest rate of 6.05%. The
principal amount of the note represents taxes paid by the company on Mr. de
Rosen's behalf when he made an 83(b) election with the Internal Revenue
Service after we issued 50,000 shares of common stock to Mr. de Rosen when he
commenced his employment with us. 25% of the principal amount of the note is
forgiven on each anniversary of the date of the note, provided that Mr. de
Rosen is then still employed by us. In the event of a change of control of the
company, any remaining balance due under the note is forgiven. If Mr. de Rosen
resigns from the company, any remaining balance due under the note is due and
payable by him. If Mr. de Rosen is terminated by us, any remaining balance due
under the note is payable to us in monthly installments beginning on the date
of termination and extending over a period of between 18 months and 72 months,
depending upon when the termination of his employment occurs.
Restricted Stock Agreements
In August 2000, we granted Mr. De Rosen 50,000 shares of our common stock,
and in November 2000, we granted Mr. Martin Driscoll 10,000 shares of our
common stock. Under both agreements, the shares vest in equal
9
increments over a four year period. Both agreements also state that in the
event of a change of control, if Mr. de Rosen or Mr. Driscoll is not offered
substantially equivalent employment with the successor corporation or a
related employer, or terminated from such comparable employment within 6
months after the change of control, then their respective shares become fully
vested and nonforfeitable.
Confidentiality and Inventions Agreements
We have entered into confidentiality and inventions agreements with each of
our employees. The agreements provide that, among other things, all
inventions, discoveries and ideas made or conceived by an employee during
employment which are useful to us or related to our business or which were
made or conceived with the use of our time, material, facilities or trade
secret information, belong exclusively to us, without additional compensation
to the employee. The agreements also have confidentiality provisions in favor
of us and noncompetition provisions in favor of us during employment.
10
The Following Report of the Compensation Committee and the Performance
Graph on page 14 will not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the
Securities Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate this information by reference. The following
report shall not otherwise be deemed filed under such acts.
REPORT OF THE
COMPENSATION COMMITTEE
The compensation committee of the board of directors is composed of two non-
employee directors. The compensation committee is responsible for setting and
administering the policies that govern annual executive salaries, bonuses, if
any, and stock ownership programs. The compensation committee annually
evaluates the performance, and determines or recommends to the full board the
compensation, of the Chief Executive Officer, or CEO, and our other executive
officers based upon a mix of the achievement of corporate goals, individual
performance and comparisons with other biopharmaceutical companies.
The goals of the compensation committee with respect to executive officers,
including the CEO, are to provide compensation designed to attract, motivate
and retain executives of outstanding ability and potential and to align the
interests of executive officers with the interests of our stockholders. We
seek to provide incentives for superior individual performance by paying
competitive compensation, and to base a significant portion of compensation
upon our performance. To meet these goals, the compensation committee has
adopted a mix among the compensation elements of salary, bonus and stock
option grants with exercise prices set at the fair market value at the time of
grant.
Many traditional measures of corporate performance for mature pharmaceutical
companies or companies in other industries, such as earnings per share or
sales growth, are not useful in the evaluation of pharmaceutical companies in
our stage of development. Accordingly, the compensation committee evaluates
other indications of performance, such as our progress in achieving milestones
in the development of our drug candidates, in obtaining rights to drug
candidates and in raising the capital needed for our operations as the basis
in making executive compensation decisions.
The compensation committee also considers salary and other compensation data
from an analysis of certain comparable companies, and from a relevant industry
survey(s), for similar executive positions. Bonuses are awarded on a company-
wide basis upon the achievement of corporate milestones. Executive officers
also are eligible to receive an additional bonus in connection with the
Stockholder Value Reward program adopted by us in 1998 that emphasizes the
link between executive incentives and the creation of stockholder value as
measured by the equity markets. In awarding stock options, the compensation
committee considers individual performance, overall contribution to us,
officer retention, the number of unvested stock options and the total number
of stock options to be awarded. Historically, the compensation committee
generally did not award stock options to executive officers more frequently
than once every year. Beginning in 2001, however, the compensation committee
has elected to make smaller grants twice each year.
The compensation committee met in December 2000 to review and approve base
salary increases and option grants for the CEO and other executive officers
for 2001. Because Mr. de Rosen was hired in August 2000, he proposed, and the
compensation committee agreed, that his salary in 2001 should remain at his
$400,000 salary for 2000. Because our market capitalization in 2000 did not
exceed our market capitalization in 1999, none of our executives, including
the CEO, received a bonus under our Stockholder Value Reward program. In
addition, after considering the criteria relating to awarding stock options,
and consistent with our general policies, the committee granted options to
those employees recommended by management, and to all executive officers,
including the CEO.
11
Deductibility of Certain Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a federal income tax deduction for certain compensation exceeding
$1,000,000 paid to the CEO or any of the other named executive officers,
excluding, among other things, certain performance-based compensation. Through
December 31, 2000, this provision has not affected our tax deductions, and the
compensation committee believes that, at the present time, it is quite
unlikely that the compensation paid to any of our employees in a taxable year
which is subject to the deduction limit will exceed $1,000,000. The
compensation committee intends to continue to evaluate the effects of the
statute and any applicable regulations and to comply with Internal Revenue
Code Section 162(m) in the future to the extent consistent with our best
interests.
MEMBERS OF THE COMPENSATION COMMITTEE
Robert J. Glaser
Howard Pien
April 1, 2001
12
The following Report of the Audit Committee will not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or
under the Securities Exchange Act of 1934, as amended, except to the extent
that we specifically incorporate this information by reference. The
following report shall not otherwise be deemed filed under such acts.
REPORT OF THE
AUDIT COMMITTEE
The audit committee of the board of directors is composed of three non-
employee directors. The role of the audit committee is to assist the board of
directors in its oversight of the company's financial reporting process. The
board of directors, in its business judgment, has determined that all members
of the committee are "independent", as required by applicable listing
standards of the Nasdaq National Market. The Committee operates pursuant to a
charter that was approved by the Board on April 5, 2001, a copy of which is
attached to this Proxy Statement as Annex A. As set forth in the charter,
management of the company is responsible for the preparation, presentation and
integrity of the company's financial statements, the company's accounting and
financial reporting principles and internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations. The independent auditors are responsible for auditing the
company's financial statements and expressing an opinion as to their
conformity with generally accepted accounting principles.
In the performance of its oversight function, the committee has reviewed and
discussed the audited financial statements with management and the independent
auditors. The committee has also discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. Finally, the
committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as currently in effect, and
has considered whether the provision of non-audit services by the independent
auditors to the company is compatible with maintaining the auditor's
independence and has discussed with the auditors the auditors' independence.
The members of the audit committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members
of the committee rely without independent verification on the information
provided to them and on the representations made by management and the
independent accountants. Accordingly, the audit committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal control and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the audit
committee's considerations and discussions referred to above do not assure
that the audit of the company's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the company's auditors are in fact "independent".
Based upon the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the committee referred
to above and in the charter, the committee recommended to the board that the
audited financial statements be included in the company's annual report on
Form 10-K for the year ended December 31, 2000 to be filed with the Securities
and Exchange Commission.
MEMBERS OF THE AUDIT COMMITTEE
Dr. Frank Baldino
Dennis Purcell
David Williams
March 14, 2001
13
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return on
our common stock, based on its market price, with the cumulative total
stockholder return of the Nasdaq National Market-US and the Nasdaq
Pharmaceutical Index. Dividend reinvestment has been assumed. The graph
commences as of November 19, 1996, the date our common stock first started
trading on the Nasdaq National Market.
ViroPharma Nasdaq US Nasdaq Pharm.
---------- --------- -------------
11/19/96 $100.00 $100.00 $100.00
12/31/96 $125.00 $102.53 $105.83
12/31/97 $251.79 $125.58 $109.37
12/31/98 $133.04 $177.09 $139.22
12/31/99 $528.57 $329.11 $261.67
12/31/00 $206.91 $198.02 $325.48
14
PROPOSAL NO. 2
APPROVAL OF AMENDED STOCK OPTION AND RESTRICTED SHARE PLAN
In March 2000, our board unanimously adopted an amended and restated stock
option plan, which was approved by our stockholders in May 2000. This plan
amended and restated our original 1995 stock option plan, which had previously
been amended and restated in May 1998. Under the plan, rights to acquire
shares of our common stock may be granted which are either:
. options intended to qualify as incentive stock options, or ISOs, under
Section 422(b) of the Internal Revenue Code; or
. non-qualified stock options, or NSOs.
We can grant stock options under the plan to our employees, directors,
consultants and advisors.
Amendments to the Plan
Our board believes that performance-based awards, such as stock options, are
an effective method of attracting and retaining talented individuals.
Importantly, they also serve to ensure that our employees' overall
compensation is tied to increases in stockholder value. This has been and will
continue to be essential to our company's growth and success. To further
motivate and reward individuals who are employed by our company or any
subsidiary, the board has decided to enhance our stock option plan by
authorizing our company to grant or sell restricted shares to such valuable
employees. As a means of achieving this objective, the board has amended and
restated our stock option plan, effective April 5, 2001. Subject to
shareholder approval, the newly renamed Stock Option and Restricted Share Plan
will advance our company's ability to recruit and retain high-quality
individuals through the use of both stock options and restricted shares.
On April 5, 2001, our board of directors adopted an amendment to our plan to
increase the number of shares of common stock reserved for issuance upon the
exercise of stock options or the grant of restricted shares by 1,000,000
shares from 2,750,000 to 3,750,000. In the past, our board of directors has
increased shares available under our plan every two or three years. Beginning
with the March 2000 increase of 750,000 shares, our board decided to increase
the shares available under our plan on an annual basis, in amounts
approximating the number of shares required for the awards that we anticipate
granting the following year. We made several significant additions to our
management team last year, including the hiring of Michel de Rosen as our
President and Chief Executive Officer. As of March 1, 2001, only 171,655
shares of our common stock remain available under our plan for the granting of
options and to assist us in our employee recruiting and retention efforts.
In March 2001, we announced positive results from a preliminary analysis of
data from our two pivotal clinical studies of Picovir(TM) (pleconaril) in
adult patients suffering from viral respiratory infection (VRI) due to
picornaviruses. As we prepare for the anticipated commercialization of
Picovir(TM), we will need to hire additional personnel to build our marketing
and sales force and the related infrastructure. We will face intense
competition in recruiting high quality personnel, and our success in this
hiring activity will be crucial to our success. We also will need to hire
additional personnel to support our manufacturing, quality assurance,
preclinical development and research activities. Stock options are a vital
component of employment compensation packages that we can offer to attract
high-caliber individuals. Our board adopted this amendment to ensure that, as
we grow over the coming year, we can compete effectively in our recruitment
efforts, and create incentives for the retention of our employees, by granting
stock options and restricted shares to employees at levels determined
appropriate by the compensation committee.
Our stock option and restricted share plan, as amended and restated,
provides an overall limit of 10% of the shares authorized for issuance under
the plan for the shares of common stock that may be awarded as restricted
shares. Additionally, the aggregate number of options and restricted shares
that may be granted under the option and restricted share plan to any one
person is limited to 1,000,000 shares, subject to proportionate adjustment for
changes in capitalization. Eligible recipients of restricted shares include
individuals employed by our company or any of our subsidiaries and directors
of our company and of our subsidiaries.
15
Restricted shares may be issued either alone or in addition to other awards
granted under our plan. The provisions of restricted share awards need not be
the same with respect to each participant. The compensation committee may
require participants to pay for their restricted shares, and a specific method
of payment, including the use of cash, or a personal or certified check, may
be required. If the compensation committee approves, the participant also may
elect to purchase restricted shares using a combination of common stock and
cash. After our compensation committee authorizes an award, the recipient of
restricted shares must execute an award agreement which states the terms and
conditions of the award. A share certificate will be issued in connection with
each award of restricted shares. This certificate will bear a legend marking
the shares as restricted shares and will be held in custody by our company or
an escrow agent until the restrictions on the award have lapsed.
During the restriction period set by the compensation committee, the
participant will not be permitted to transfer or encumber the restricted
shares. The participant will be entitled to vote and to receive any cash
dividends with respect to restricted shares. Dividends paid in the form of
securities will be subject to the same conditions as the restricted shares
with respect to which they were paid. Unless there is a forfeiture of the
restricted shares, a change of control of the company, or a waiver of the
restrictions, the restrictions on restricted shares generally lapse in
accordance with the conditions stipulated in the award agreement, which may
include continued employment, engagement or service of the participant for a
specified time period, attainment of specific performance goals, or any other
factor that our compensation committee selects. Forfeitures occur during the
restriction period either when the participant's relationship with our company
is terminated for any reason, if specified performance goals are not attained,
or if our company and the participant agree to the forfeiture. Under certain
circumstances, forfeitures also occur when there is a change of control.
Participants will receive a refund of their purchase price if they paid for
the restricted shares that were forfeited.
When the restrictions on restricted shares lapse, the certificates for the
restricted shares will be replaced by new certificates that do not bear a
restrictive legend. These new certificates will be delivered to the
participant subject to the terms of our plan.
A copy of our option and restricted share plan, as amended and restated by
our board of directors in the manner described above, can be found at the end
of this proxy statement as Annex B.
As of March 1, 2001, 171,655 shares of our common stock remained available
for the granting of options under our option and restricted share plan, and
2,274,224 shares of our common stock were reserved for issuance under
outstanding, unexercised options under our plan. The number of shares subject
to our option and restricted share plan is subject to adjustment in the case
of a stock split, stock dividend, combination, recapitalization or similar
transaction.
As of March 1, 2001, ISOs to purchase 1,374,033 shares of our common stock
were outstanding under our plan, with exercise prices ranging from $0.20 to
$81.75. NSOs to purchase 900,191 shares of common stock were outstanding under
our plan on that date, with exercise prices ranging from $0.10 to $22.50.
Outstanding options have expiration dates ranging from December 2004 to
February 2011. On April 1, 2001, the last sale price for our common stock
reported on the Nasdaq National Market was $28.875.
16
The table below sets forth the number of shares of our common stock
underlying options granted under our plan as of March 1, 2001 to: (1) the
named executive officers who hold options, (2) our current executive officers
as a group, (3) our current nonemployee directors as a group, (4) the director
nominees and (5) our employees, including current officers who are not
executive officers, as a group.
Shares of
Common Stock
Underlying
Name Option
- ---- ------------
Michel de Rosen.................................................. 320,000
Claude H. Nash................................................... 160,350
Mark McKinlay.................................................... 153,680
Marc S. Collett.................................................. 140,930
Vincent J. Milano................................................ 120,308
Thomas F. Doyle.................................................. 102,900
All current executive officers as a group........................ 978,643
All current nonexecutive directors as a group.................... 333,684
Michel de Rosen -- director nominee.............................. 320,000
Howard Pien -- director nominee.................................. 20,000
All employees, including all current officers who are not
executive officers, as a group.................................. 1,152,818
Description of Plan
Our plan may be administered by our board of directors or by a committee of
the board. Currently, the compensation committee of the board administers our
stock option and restricted share plan. Subject to the terms of the option and
restricted share plan recently approved by our board, the compensation
committee has the authority to:
. determine the persons to whom options or restricted shares will be
awarded and the number of shares to be covered by each award;
. determine the exercise price per share subject to a stock option and/or
the purchase price for restricted shares, if any;
. determine the time or times within which restricted shares may be
subject to forfeiture and all other conditions of such awards;
. prescribe, amend and rescind rules and regulations relating to the
option and restricted share plan;
. determine the conditions which must be satisfied in order for an option
to vest and become exercisable and/or for the restrictions on restricted
shares to lapse;
. accelerate the vesting or exercise date of any option and/or waive, in
whole or in part, any or all remaining restrictions on any restricted
shares; and
. interpret the plan and any agreement entered into with respect to an
award.
Our option and restricted share plan provides that the compensation
committee must establish an exercise price for ISOs and NSOs that is not less
than the fair market value per share of our common stock at the date of grant.
We cannot reprice outstanding options granted under our option and restricted
share plan without the consent of our stockholders. The option exercise price
must be paid in full at the time the notice of exercise of the option is
delivered to us and must be tendered in cash, or by personal or certified
check. The compensation committee has the discretion to permit a participant
to exercise by delivering a combination of shares and cash.
Each option expires within 10 years of the date of grant. However, if ISOs
are granted to persons owning more than 10% of our voting stock, the exercise
price may not be less than 110% of the fair market value per share at the date
of grant, and the term of the ISOs may not exceed five years. The aggregate
number of options
17
which may be granted under the plan to any one person is limited to 1,000,000
shares, subject to proportionate adjustment for changes in capitalization.
Options vest upon satisfaction of vesting conditions, which may include
attainment of performance goals, completion of specified periods of service,
or other conditions specified by the compensation committee.
Generally, if a participant is an employee or director and the participant's
relationship with us ceases for any reason, other than termination for cause,
death or disability, the participant may exercise options that are then vested
within the three-month period following the end of our relationship. Options
may terminate or expire sooner, however, by their terms. If the participant
commences competitive employment within the three-month period, all
unexercised options will terminate immediately. If a participant is an advisor
or consultant, termination of the relationship with us does not cause
acceleration of the expiration of the option. However, if the advisor or
consultant violates the terms of a non-competition covenant in an agreement
that he or she may have with us, all unexercised options will terminate
immediately.
If a participant's relationship with us ends due to disability or death, the
option may be exercised by the participant or executor, as appropriate, for a
period following 12 months from the date of termination. However, if our
relationship ends because of a disability, unexercised options will terminate
if a participant who is an employee or director commences competitive
employment or service or, in the case of a consultant or advisor, violates the
terms of his or her non-competition covenant, in the 12-month period following
termination. If a participant is terminated for cause, all unexercised options
are forfeited, including options that have been exercised but for which no
share certificates have been issued, provided that we refund the exercise
price paid by the participant.
Our stock option and restricted share plan also has provisions that take
effect if we experience a change of control. As used in the plan, a change of
control means:
. the approval of a plan or other arrangement to dissolve or liquidate us;
. the approval of an agreement to sell or otherwise dispose of all or
substantially all of our assets;
. the approval of an agreement to merge or consolidate us with or into
another corporation. A merger or consolidation will not result in a
change of control, however, if our stockholders will own at least 50%,
on a fully diluted basis, of the voting capital stock of the surviving
corporation immediately after the merger or consolidation, in the same
proportion as our stockholders' ownership of our stock immediately
before the merger or consolidation;
. either the acquisition by a third party of voting control over more than
50% of the outstanding shares of our voting capital stock (on a fully
diluted basis), or our board's determination that such an event is
reasonably likely to occur. These will not result in a change of
control, however, if:
. the transaction results from our original issuance of stock; and
. the transaction was approved by at least a majority of our directors
who were either members of the board on the date that this plan was
originally adopted by the board or members of the board for at least
12 months before the date that the transaction is approved; or
. a significant change in the composition of the board occurs, such that a
majority of the directors shall have been board members for less than 12
months. This change in board composition will not result in a change of
control, however, if the nomination for election of each director who
was not a director at the beginning of that 12 month period was approved
by a vote of at least 60% of the directors who are both still in office
and who were directors at the beginning of that twelve 12 month period.
If a change of control occurs and our stock option and restricted share plan
is not continued by a successor corporation, and if our participants do not
receive equivalent, substituted stock options or restricted shares in a
successor corporation, then our stock option and restricted share plan will be
terminated. In this case, for participants who are employees or members of the
board of directors:
18
. if the employee or board member has been employed by us or has served on
our board for at least two years as of the change of control, then all
of his or her unvested options will be fully vested and the restrictions
on all of his or her restricted shares will lapse; or
. if the employee or board member has been employed by us or has served on
our board for less than two years as of the change of control, then 50%
of all of his or her unvested options will be fully vested and the
restrictions on 50% of all of his or her restricted shares will lapse.
The remaining portion of such options and restricted shares will be
forfeited.
If a change of control occurs and our plan is continued by a successor
corporation, or if our participants receive equivalent, substituted options or
restricted shares in a successor corporation, then for participants who are
employees or members of the board of directors shall vest as follows:
. if at the time of the change of control the participant is a member of
our management team or is a board member and is not offered
substantially equivalent employment with the successor corporation, both
in terms of duties and compensation, then, in the manner described
above, unvested options will become fully vested and the restrictions on
restricted shares will lapse (i.e., all options will vest and the
restrictions on all restricted shares will lapse if the participant was
employed for at least two years; 50% of the options will vest and the
restrictions on 50% of the restricted shares will lapse if the
participant was employed for less than two years); and
. if any participant, without regard to such participant's title, is
offered substantially equivalent employment with the successor
corporation, both in terms of duties and compensation, then his or her
options will not be subject to accelerated vesting and the restrictions
on his or her restricted shares will not lapse. If that participant's
employment with the successor corporation is terminated during the six
month period following the change of control, however, then any unvested
options and restricted shares held as of the date of termination will be
treated in the manner described above (i.e., all options will vest and
the restrictions on all restricted shares will lapse if the participant
was employed for at least two years; 50% of the options will vest and
the restrictions on 50% of the restricted shares will lapse if the
participant was employed for less than two years).
The board may suspend, amend or terminate the option and restricted share
plan. However, stockholder approval must be obtained for amendments that
would:
. increase the number of shares which are to be reserved for the issuance
of options or restricted shares under our option and restricted share
plan;
. permit the granting of options to a class of employees other than those
presently permitted to receive options under our option and restricted
share plan;
. permit repricing of options; or
. permit us to grant options at less than the fair market value of our
common stock on the date of grant.
The following is a brief description of the federal income tax consequences
of stock options and restricted shares that may be granted under our option
and restricted share plan under present tax laws. The following description
does not address all of the tax consequences that may be applicable to us or
to any particular participant. In addition, the discussion does not address
foreign, state or local taxes, nor does it address federal taxes other than
federal income tax. The discussion is based upon applicable statutes,
regulations, case law, and administrative interpretations in effect as of the
date of this proxy statement.
Incentive Stock Options. There are no federal income tax consequences to
either the participant or us upon the grant of an ISO. Upon a sale of the
shares obtained from the exercise of an ISO, the participant will recognize a
long-term capital gain (or loss) measured by the excess (or deficit) of the
amount realized from such sale over the option price of such shares, but no
deduction will be allowed to us, if the following holding period requirement
is satisfied:
. the participant does not dispose of the shares within two years from the
date the ISO was granted; or
19
. the participant does not dispose of the shares within one year from the
date the shares were issued to the participant.
If a participant disposes of shares before the holding period requirement is
satisfied, the participant will recognize ordinary income in the year of
disposition, and we will be entitled to a corresponding deduction, in an
amount equal to the lesser of:
. the excess of the fair market value of the shares on the date of
exercise over the option price of the shares; or
. the excess of the amount realized from such disposition over the option
price of the shares.
Where shares are sold before the holding period requirement is satisfied,
the participant will also recognize a capital gain to the extent that the
amount realized from the disposition of the shares exceeds the fair market
value of the shares on the date of exercise. Upon exercise of an ISO, the
excess, if any, of the fair market value over the exercise price will be an
item of tax preference for purposes of the participant's alternative minimum
tax.
Non-Qualified Stock Options. There are no federal income tax consequences to
either the participant or to us upon the grant of an NSO. Upon the exercise of
an NSO, the participant will recognize ordinary compensation income in an
amount equal to the excess of the fair market value of each share on the date
of exercise over the option price, and we generally will be entitled to a
federal income tax deduction of the same amount.
In general, if previously owned shares are used to pay the exercise price of
options, the participant's tax basis and holding period of such previously
owned shares will be carried over to the equal number of shares received on
exercise. The fair market value of any additional shares received upon the
exercise of an option will be recognized by the participant as ordinary
income. The tax basis of the additional shares will be equal, in the
aggregate, to the ordinary income recognized by the participant. The holding
period will begin on the day after the tax basis of the shares is determined.
However, if the previously owned shares had been acquired on the exercise of
an ISO and the holding period requirement for those shares was not satisfied
at the time they were used to exercise an option, such use would constitute a
disposition of such previously owned shares resulting in the recognition of
ordinary income as described above.
Restricted Shares. Unless the participant elects to recognize income at the
time of an award of restricted shares, the participant will not recognize
taxable income until the shares are no longer subject to a substantial risk of
forfeiture. The participant's recognized income will equal the amount that the
fair market value of such shares--measured at the time of grant if an election
is made, or otherwise at the time the restrictions lapse or are removed--
exceeds any sum paid for such shares (the "bargain element"). We will
generally be entitled to a deduction in the same amount, and in the same year
as the participant of restricted shares has income. We will comply with all
applicable withholding requirements with respect to such income.
The aforementioned election allows the participant to recognize the bargain
element as income in the year of the award (as opposed to when the
restrictions lapse or are removed) by making an election with the Internal
Revenue Service within 30 days after the award is made. If the participant
subsequently forfeits the restricted shares, the participant would not be
entitled to any tax deduction for the value of the shares on which the
participant previously paid tax. Dividends received by a participant on
restricted shares during the restriction period are taxable to the participant
as ordinary compensation income and will be deductible by us unless the
aforementioned election is made, rendering dividends taxable as dividends and
nondeductible.
Special rules apply if a participant uses previously owned shares to pay for
restricted shares, but, in general, the participant's tax basis and holding
period of such previously owned shares will be carried over to the equal
number of restricted shares for which a purchase price is paid in the form of
previously owned shares.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDED STOCK OPTION AND RESTRICTED SHARE PLAN AS DESCRIBED IN PROPOSAL NO. 2.
20
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG LLP has served as our independent certified public accountants since
1995. KPMG LLP has been selected to continue as our independent certified
public accountants for the current year. A representative of that firm is
expected to be present at the annual meeting, will have the opportunity to
make a statement if he or she desires to do so and will be available to
respond to appropriate questions.
The following additional information is provided as required by the
Securities and Exchange Commission:
Fees billed to Company by KPMG LLP during 2000
Audit Fees:
Audit fees billed to the company by its public accountants, KPMG LLP, during
the Company's 2000 fiscal year for review of the Company's annual report on
Form 10-K and its quarterly reports on Form 10-Q, including the financial
statements included in those reports, totaled $72,000.
Financial Information Systems Design and Implementation Fees:
The Company did not engage KPMG LLP to provide advice to the Company
regarding financial information systems design and implementation during the
fiscal year ended December 31, 2000.
All Other Fees:
Fees billed to the Company by KPMG LLP during the Company's 2000 fiscal year
for all other non-audit services rendered to the Company, including tax
related services, totaled $135,600.
STOCKHOLDER PROPOSALS--FOR THE 2002 ANNUAL MEETING
We intend to mail next year's proxy statement to our stockholders on or
about April 15, 2002. Applicable law requires any stockholder proposal
intended to be presented at our 2002 annual meeting of stockholders to be
received by us at our office in Exton, Pennsylvania on or before December 15,
2001 in order to be considered for inclusion in our proxy statement and form
of proxy for that annual meeting.
On May 21, 1998, the Securities and Exchange Commission adopted an amendment
to Rule 14a-4, issued under the Securities Exchange Act of 1934. The amendment
to Rule 14a-4(c)(1) governs our use of discretionary proxy voting authority
for a stockholder proposal which the stockholder has not sought to include in
our proxy statement. The amendment provides that if a proponent of a proposal
fails to notify us at least 45 days prior to the month and day of mailing of
the prior year's proxy statement (or any date specified in an advance notice
provision), then the management proxies will be allowed to use their
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.
With respect to our 2002 annual meeting of stockholders, if we are not
provided notice of a stockholder proposal, which the stockholder has not
previously sought to include in our proxy statement, by March 1, 2002, the
management proxies will be allowed to use their discretionary authority.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our
directors, certain of our officers and persons who own more than 10% of our
common stock, file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of such common stock. These
directors, officers and greater than 10% stockholders are required by
regulation to furnish us with copies of all Section 16(a) forms which they
file.
21
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were
required, our directors, officers and greater than 10% stockholders complied
with all fiscal year 2000 Section 16(a) filing requirements applicable to
them, other than one report that was filed late by each of Dr. Johanna Griffin
(who is no longer employed with the company), Dr. Ellen Cooper, Dr. Jeffrey
Hincks and Mr. Dennis Purcell.
OTHER MATTERS
Our board of directors does not intend to bring any other matters before the
annual meeting and has no reason to believe any other matters will be
presented. If other matters properly do come before the meeting, however, it
is the intention of the persons named as proxy agents in the enclosed proxy
card to vote on such matters as they deem appropriate.
The costs of preparing, assembling, mailing and soliciting the proxies will
be borne by us. Proxies may be solicited, without extra compensation, by our
officers and employees by mail, telephone, facsimile, personal interviews and
other methods of communication.
Thomas F. Doyle
Vice President, General Counsel and
Secretary
May 8, 2001
22
Annex A
AUDIT COMMITTEE CHARTER
Audit Committee Charter
VIROPHARMA INCORPORATED
Purpose
The Audit Committee (the "Committee") of ViroPharma Incorporated (the
"Company") shall assist the Board of Directors (the "Board") in undertaking
and fulfilling its responsibilities for accurate financial reporting to the
public in compliance with Securities and Exchange Commission (the "SEC") and
any other regulatory requirements; shall provide support for management's
efforts to enhance the quality of the Company's internal control structure;
and shall work to provide effective communication between the Board and the
Company's independent public accountants.
Composition and Term
The Committee shall be comprised of three or more independent Directors as
determined by the Board. Independent Directors shall possess the requisite
knowledge and experience to fulfill their duties. The members of the Committee
shall be appointed by the Board.
Relationship with Independent Accountants
The Company's independent public accountants shall be accountable to the
Board and the Committee, and the Board and Committee shall have ultimate
authority to select, evaluate and replace the Company's independent public
accountants.
Meetings
The Committee shall meet at such times and from time to time as it deems to
be appropriate, but not less than two times a year. The Committee shall report
to the Board at the first board meeting following each such audit Committee
meeting.
The Company's independent public accountants shall attend at least one of
the Committee's meetings each year. The Committee may request members of
management or others to attend meetings and to provide pertinent information
as necessary. The Committee shall provide management and the independent
public accountants with appropriate opportunities to meet privately with the
Committee.
Duties and Responsibilities
The duties of the Committee shall include the following:
. Make recommendations to the Board as to:
. The selection of independent public accountants to examine the books
and accounts of the Company for each fiscal year, including a review
of the independence of the independent public accountants;
. The proposed scope of services for the independent public
accountants for each fiscal year, including a review of the
independent public accountant's risk assessment process in
establishing the scope of the examination, proposed fees, and the
reports to be rendered; and
. The advisability of having the independent public accountants make
specified studies and reports as to auditing matters, accounting
procedures, tax, or other matters.
A-1
. Review the results of the quarterly reviews and year-end audit of the
Company, including:
. The Annual Report on Form 10-K, the management recommendation letter
on accounting procedures and controls prepared by the independent
public accountants, and any other reports and management's responses
concerning such reports;
. Any material accounting issues identified by management or the
independent public accountants;
. Any related party transactions; and
. Other matters required to be communicated by the independent public
accountants to the Committee under generally accepted auditing
standards, as amended.
. Review with management and the independent public accountants such
accounting policies (and changes therein) of the Company, including any
financial reporting issues which could have a material impact on the
Company's financial statements, as are deemed appropriate for review by
the Committee prior to any interim or year-end filings with the SEC or
other regulators.
. Ensure that the Company's independent public accountants submit on a
periodic, but not less than annual, basis to the Committee a written
statement delineating all relationships between the accountants and the
Company, and discuss with the accountants any disclosed relationships
that may impact the objectivity and independence of the accountants with
the objective of ensuring the continuing objectivity and independence of
the accountants.
. Meet annually with counsel when appropriate to review legal and
regulatory matters, if any, that could have a material impact on the
financial statements.
. Make a periodic, but not less than annual, review of this Charter.
. Prepare a report to the stockholders of the Company to be included in
the Company's annual proxy statement.
The Committee shall also undertake such additional activities within the
scope of its primary function as the Committee from time to time determines.
The Committee may retain independent counsel, accountants or others to assist
it in the conduct
A-2
ANNEX B
VIROPHARMA INCORPORATED
STOCK OPTION AND RESTRICTED SHARE PLAN
Originally Effective September 20, 1995
Amended and Restated, Effective March 3, 1998
Amended, Restated, and Renamed, Effective April 5, 2001
B-1
VIROPHARMA INCORPORATED
STOCK OPTION AND RESTRICTED SHARE PLAN
ViroPharma Incorporated adopted its 1995 Stock Option Plan effective
September 20, 1995. This plan was amended and restated effective March 13,
1998, and then again on March 13, 2000. Effective April 5, 2001, the plan is
amended, restated and renamed the ViroPharma Incorporated Stock Option and
Restricted Share Plan (the "Plan"). The purposes of the Plan are to: (a)
further the growth and success of ViroPharma Incorporated (the "Company") and
its Subsidiaries by enabling selected employees, directors, consultants and
advisors of the Company and any Subsidiaries to acquire shares of common stock
of the Company, thereby increasing their personal interest in such growth and
success and (b) to provide a means of rewarding outstanding performance of
such persons. The terms of the Plan shall be incorporated in the Award
Agreement to be executed by the Participant.
1. Definitions
1.1 "Affiliate" means, with respect to a Person, another Person that
directly or indirectly controls, or is controlled by, or is under common
control with such Person.
1.2 "Award" means a grant of Options or Restricted Shares to an Eligible
Person pursuant to the provisions of this Plan. Each separate grant of Options
or Restricted Shares to an Eligible Person and each group of Options that
vests on a separate date, or a group of Restricted Shares with respect to
which restrictions lapse on a separate date, is treated as a separate Award.
1.3 "Award Agreement" means a written agreement substantially in the form of
Exhibit A-1, A-2, A-3 or A-4, or such other form or forms as the Board or the
Committee (subject to the terms and conditions of this Plan) may from time to
time approve evidencing and reflecting the terms of an Award.
1.4 "Board" means the Board of Directors of the Company, as constituted from
time to time.
1.5 "Change of Control" means the happening of an event, which shall be
deemed to have occurred upon the earliest to occur of the following events:
a. the date the stockholders of the Company (or the Board, if stockholder
action is not required) approve a plan or other arrangement pursuant to
which the Company will be dissolved or liquidated;
b. the date the stockholders of the Company (or the Board, if stockholder
action is not required) approve a definitive agreement to sell or otherwise
dispose of all or substantially all of the assets of the Company;
c. the date the stockholders of the Company (or the Board, if stockholder
action is not required) and the stockholders of the other constituent
corporations (or their respective boards of directors, if and to the extent
that stockholder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into another
corporation, other than, in either case, a merger or consolidation of the
Company in which holders of shares of the Company's voting capital stock
immediately prior to the merger or consolidation will have at least 50% of
the ownership of voting capital stock of the surviving corporation
immediately after the merger or consolidation (on a fully diluted basis),
which voting capital stock is to be held in the same proportion (on a fully
diluted basis) as such holders' ownership of voting capital stock of the
Company immediately before the merger or consolidation;
d. the date any entity, Person or group (within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Exchange Act), other than (i) the
Company, or (ii) any of its Subsidiaries, or (iii) any employee benefit
plan (or related trust) sponsored or maintained by the Company or any of
its Subsidiaries, or (iv) any Affiliate (as such term is defined in Rule
405 promulgated under the Securities Act) of any of the foregoing, shall
have acquired beneficial ownership of, or shall have acquired voting
control over, more than 50% of the outstanding shares of the Company's
voting capital stock (on a fully diluted basis), unless the transaction
B-2
pursuant to which such Person, entity or group acquired such beneficial
ownership or control resulted from the original issuance by the Company of
shares of its voting capital stock and was approved by at least a majority
of Directors who were either members of the Board on the date that this
Plan was originally adopted by the Board or members of the Board for at
least twelve (12) months before the date of such approval;
e. the date the Board determines (in its sole discretion) that based on
then-currently available information, the events described in Section
1.5(d) are reasonably likely to occur; or
f. the first day after the date of this Plan when Directors are elected
such that there is a change in the composition of the Board such that a
majority of Directors have been members of the Board for less than twelve
(12) months, unless the nomination for election of each new Director who
was not a Director at the beginning of such twelve (12) month period was
approved by a vote of at least sixty percent (60%) of the Directors then
still in office who were Directors at the beginning of such period.
1.6 "Code" means the Internal Revenue Code of 1986, as amended.
1.7 "Committee" means a committee appointed by the Board in accordance with
Section 3.1 of the Plan, and if one is appointed, then such committee shall
possess all of the power and authority of, and shall be authorized to take any
and all actions required to be taken hereunder by, and make any and all
determinations required to be taken hereunder by, the Board.
1.8 "Common Stock" means common stock of the Company, $.002 par value per
Share.
1.9 "Company" means ViroPharma Incorporated.
1.10 "Director" means an individual who is a member of the Board of
Directors of the Company.
1.11 "Disability" means a mental or physical disability of an Eligible
Person that renders such Eligible Person unable to perform the full extent of
his duties and responsibilities by reason of his illness or incapacity for a
period of 90 consecutive days or longer, or for 90 days during any six-month
period.
1.12 "Eligible Person" means:
a. with respect to Awards of Incentive Stock Options, any person employed
by the Company or by any of its Subsidiaries;
b. with respect to Awards of non-qualified stock options, any person
employed by the Company or by any of its Subsidiaries, advisors and
consultants to the Company or any Subsidiary, Directors and members of the
board of directors of a Subsidiary;
c. with respect to any Award of Restricted Shares, any person employed by
the Company or by any of its Subsidiaries, and Directors and members of the
board of directors of a Subsidiary.
1.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.14 "Fair Market Value Per Share" means:
a. If shares of Common Stock are traded in the over-the-counter market:
the mean of the bid and asked prices for a share of Common Stock on the
relevant valuation date as reported in The Wall Street Journal (or, if not
so reported, as otherwise reported by the National Association of
Securities Dealers Automated Quotations ("NASDAQ") System), as applicable
or, if there is no trading on such date, on the next preceding date on
which there were reported share prices.
b. If shares of Common Stock are listed on a national or regional
securities exchange or traded through the NASDAQ National Market: the
closing price for a share of Common Stock on the exchange or on the NASDAQ
National Market, as reported in The Wall Street Journal on the relevant
valuation date, or if there is no trading on that date, on the next
preceding date on which there were reported share prices.
B-3
c. If neither of Sections 1.14(a-b) apply, then the Fair Market Value Per
Share of Common Stock shall be determined in good faith by the Board or the
Committee in its sole discretion.
1.15 "Incentive Stock Option" means an Option that is an incentive stock
option as described in Section 422 of the Code.
1.16 "Non-Employee Director" shall have the meaning set forth in Rule 16b-
3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and
Exchange Commission; provided, however, that the Board or the Committee may,
to the extent it deems it necessary or desirable to comply with Section 162(m)
of the Code and applicable regulations thereunder, ensure that each Non-
Employee Director also qualifies as an outside director as that term is
defined in the regulations under Section 162(m) of the Code.
1.17 "Option" means an Incentive Stock Option or a non-qualified stock
option to purchase Shares that is awarded pursuant to the Plan.
1.18 "Other Available Shares" means, as of any date:
a. the total number of Shares owned by a Participant; in excess of
b. the sum of:
i. the number of Shares owned by such Participant for less than six
months; plus
ii. the number of Shares owned by such Participant that has, within
the preceding six months, been surrendered as payment in full or in
part, of the exercise price for an option to purchase any securities of
the Company or an Affiliate under any restricted stock, stock bonus,
stock option or other compensation plan, program or arrangement
established or maintained by the Company or an Affiliate.
If 1.18(a) is not greater than 1.18(b), the amount of "Other Available
Shares" shall be zero.
1.19 "Participant" means an Eligible Person to whom an Award is granted
pursuant to the Plan.
1.20 "Person" means an individual, partnership, corporation, limited
liability company, trust, joint venture, unincorporated association, or other
entity or association.
1.21 "Plan" means this ViroPharma Incorporated Stock Option and Restricted
Share Plan, as amended from time to time.
1.22 "Pool" means the pool of Shares subject to the Plan, as described in
Article 4, and as adjusted in accordance with Article 7 of the Plan.
1.23 "Restricted Shares" means Shares that are subject to restrictions
pursuant to Article 6 of the Plan.
1.24 "Securities Act" means the Securities Act of 1933, as amended.
1.25 "Shares" means shares of Common Stock including, without limitation,
Restricted Shares.
1.26 "Subsidiary" means a subsidiary corporation, whether now or hereafter
existing, as defined in Sections 424(f) and (g) of the Code.
2. Participation
The Board or the Committee will select Participants from among the Eligible
Persons. The Board or the Committee may make Awards at any time and from time
to time to Eligible Persons. Any Award may include or exclude any Eligible
Person, as the Board or the Committee shall determine in its sole discretion.
An Eligible Person who has received an Award, if he or she is otherwise
eligible, may receive additional Awards.
B-4
3. Administration
3.1 Procedure. The Board shall administer the Plan. The Board may at any
time appoint a Committee of Non-Employee Directors of at least two persons to
administer the Plan on behalf of the Board subject to such terms and
conditions as the Board may prescribe. Members of the Committee shall serve
for such period of time as the Board may determine. Members of the Board or
the Committee who are eligible for Awards or who have received Awards may vote
on any matters affecting the administration of the Plan or the granting of
Awards pursuant to the Plan, except that no such member shall act upon an
Award to himself or herself, but any such member may be counted in determining
the existence of a quorum at any meeting of the Board or the Committee during
which action is taken with respect to an Award to himself or herself.
From time to time the Board may increase the size of the Committee and
appoint additional members thereto, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies however caused,
or remove all members of the Committee and thereafter directly administer the
Plan.
3.2 Powers of the Board and the Committee. Subject to the provisions of the
Plan, the Board or the Committee shall have the authority, in its discretion:
a. to make Awards;
b. to determine the Fair Market Value Per Share;
c. to determine the exercise price of the Options to be awarded in
accordance with Article 5 of the Plan;
d. to determine the purchase price, if any, for Restricted Shares awarded
in accordance with Article 6 of the Plan;
e. to determine the Eligible Persons to whom, and the time or times at
which, Awards shall be made, and the number of Shares to be subject to each
Award;
f. to prescribe, amend and rescind rules and regulations relating to the
Plan;
g. to determine the terms and provisions of each Award under the Plan and
each Award Agreement (which need not be identical with the terms of other
Awards and Award Agreements) and, with the consent of the Participant, to
modify or amend an outstanding Award or Award Agreement;
h. to determine the conditions that must be satisfied under any Award in
order for an Option to vest and become exercisable, or, for the
restrictions on any Restricted Share to lapse, which conditions may include
satisfaction of performance goals, passage of set periods of time and/or
other criteria as determined by the Board or the Committee;
i. to accelerate the vesting or exercise date of any Option and/or to
waive, in whole or in part any or all remaining restrictions on any
Restricted Shares;
j. to interpret the Plan or any agreement entered into with respect to an
Award, the exercise of Options, or the removal of restrictions on
Restricted Shares;
k. to authorize any person to execute on behalf of the Company any
instrument required to effectuate an Award or to take such other actions
that may be necessary or appropriate with respect to the Company's rights
pursuant to Awards or Award Agreements; and
l. to make such other determinations and establish such other procedures
as it deems necessary or advisable for the administration of the Plan.
3.3 Effect of Decisions. All decisions, determinations and interpretations
of the Board or the Committee shall be final and binding with respect to all
Awards and Award Agreements under the Plan.
B-5
3.4 Limitation of Liability. Notwithstanding anything herein to the
contrary, no member of the Board or the Committee shall be liable for any good
faith determination, act or failure to act in connection with the Plan, any
Award, or any Award Agreement hereunder.
4. Stock Subject to the Plan
4.1 Subject to the provisions of this Article 4 and the provisions of
Article 7 of the Plan, no more than 3,750,000 Shares of Common Stock
(collectively, the "Pool"), may be awarded and sold under the Plan, of which a
maximum of 10% of the Shares reserved for issuance hereunder may be awarded
and sold or granted as Restricted Shares. No more than 1,000,000 Shares of
Common Stock may be awarded and sold (or, in the case of Restricted Shares
with no purchase price, granted) under the Plan to any individual Participant.
Options awarded from the Pool may be either Incentive Stock Options or non-
qualified stock options, as determined by the Board or the Committee. If an
Option expires or becomes unexercisable for any reason without having been
exercised in full, the unexercised Shares shall be returned to the Pool and
become available for future award under the Plan, unless the Plan was
terminated earlier. Similarly, if and to the extent that any Restricted Share
is canceled, repurchased or forfeited for any reason, that Share will again
become available for grant under the Plan.
4.2 Shares to be delivered under the Plan will be made available, at the
discretion of the Board or the Committee, from authorized but unissued Shares
and/or from previously issued Shares reacquired by the Company.
5. Terms and Conditions of Options
5.1 Option Awards. Options may be granted either alone or in conjunction
with other Awards. Each Option awarded pursuant to the Plan shall be
authorized by the Board or the Committee and shall be evidenced by an Award
Agreement in such form as the Board or the Committee may from time to time
determine. The provisions of Awards need not be the same with respect to each
Participant. The prospective recipient of an Award of Options will not have
any rights with respect to such Award, unless and until such recipient has
executed an Award Agreement and has delivered a fully executed copy thereof to
the Company, and has otherwise complied with the applicable terms and
conditions of such Award.
5.2 Option Award Agreements. Each Award Agreement shall incorporate by
reference all other terms and conditions of the Plan, including the following
terms and conditions:
a. Number of Shares. The Award Agreement shall state the number of Shares
subject to the Option, which shall not include fractional Shares.
b. Option Price. The price per Share payable on the exercise of any
Option shall be stated in the Award Agreement and shall be no less than the
Fair Market Value Per Share on the date such Option is awarded, without
regard to any restriction other than a restriction that will never lapse.
Notwithstanding the foregoing, if an Incentive Stock Option is awarded
under this Plan to any person who, at the time of the award of such
Incentive Stock Option, owns stock possessing more than 10% of the total
combined voting power of all classes of the Company's stock, the price per
Share payable upon exercise of such Incentive Stock Option shall be no less
than 110 percent (110%) of the Fair Market Value Per Share on the date such
Option is awarded. Neither the Board nor the Committee may reprice any
outstanding Options.
c. Form of Option. The Award Agreement will state whether the Option
awarded is an Incentive Stock Option or a non-qualified stock option, and
will constitute a binding determination as to the form of Option awarded,
subject to the provisions of Section 5.5(c) below.
The Award Agreement may contain such other provisions as the Board or the
Committee in its discretion deems advisable and which are not inconsistent
with the provisions of this Plan.
B-6
5.3 Consideration. The Board or the Committee shall determine the method of
payment for the Shares to be issued upon the exercise of an Option, which may
consist entirely of cash, personal or certified check, or, at the election of
the Participant and as the Board or the Committee may, in its sole discretion,
approve, by surrendering Shares with an aggregate Fair Market Value per Share
equal to the aggregate Option price, or by delivering such combination of
Shares and cash as the Board or the Committee may, in its sole discretion,
approve; provided, however, that Shares may be surrendered in satisfaction of
the Option price only if the Participant certifies in writing to the Company
that the Participant owns a number of Other Available Shares as of the date
the Option is exercised that is at least equal to the number of Shares to be
surrendered in satisfaction of the Option price; provided further, that the
Option price may not be paid in Shares if the Board or the Committee
determines that such method of payment would result in liability under Section
16(b) of the Exchange Act to a Participant.
Except as otherwise provided by the Board or the Committee, if payment is
made in whole or in part in Shares, the Participant shall deliver to the
Company certificates registered in the name of such Participant representing
Shares legally and beneficially owned by such Participant, free of all liens,
claims and encumbrances of every kind and having an aggregate Fair Market
Value per Share on the date of delivery that is not greater than the aggregate
Option price accompanied by stock powers duly endorsed in blank by the record
holder of the Shares represented by such certificates. If the Board or the
Committee, in its sole discretion, should refuse to accept Shares in payment
of the Option price, any certificates representing Shares which were delivered
to the Company shall be returned to the Participant with notice of the refusal
of the Board or the Committee to accept such Shares in payment of the option
price. The Board or the Committee may impose such limitations and prohibitions
on the use of Shares to exercise an Option as it deems appropriate.
5.4 Exercise of Options. Any Option awarded hereunder shall be exercisable
at such times and under such conditions as shall be set forth in the Award
Agreement (as may be determined by the Board or the Committee and as shall be
permissible under the terms of the Plan), which may include performance
criteria with respect to the Company and/or the Participant, and as shall be
permissible under the terms of the Plan.
An Option may be exercised in accordance with the provisions of this Plan as
to all or any portion of the Shares then exercisable under an Option from time
to time during the term of the Option. If an Option is exercised for a
fraction of a Share, the Fair Market Value of such fractional Share, as of the
date of exercise, will be paid in cash.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company at its principal executive office in
accordance with the terms of the Award Agreement by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company, accompanied by any
agreements required by the terms of the Plan and/or Award Agreement. Full
payment may consist of such consideration and method of payment allowable
under this Article 5 of the Plan. No adjustment shall be made for a dividend
or other right for which the record date is earlier than the date the Option
is exercised, except as provided in Article 7 of the Plan.
As soon as practicable after any proper exercise of an Option in accordance
with the provisions of the Plan, the Company shall, without transfer or issue
tax to the Participant, deliver to the Participant at the principal executive
office of the Company or such other place as shall be mutually agreed upon
between the Company and the Participant, a certificate or certificates
representing the Shares for which the Option shall have been exercised.
Exercise of an Option in any manner shall result in a decrease in the number
of Shares that thereafter may be available for sale under the Option by the
number of Shares as to which the Option is exercised.
5.5 Term and Vesting of Options.
a. Except as provided in Section 5.6(d), Options awarded hereunder shall
vest and become exercisable in whole or in part, in accordance with such
vesting conditions as the Board or the Committee shall determine, which
conditions shall be stated in the Award Agreement. Vested Options may be
exercised in
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any order elected by the Participant whether or not the Participant holds
any unexercised Options under this Plan or any other plan of the Company.
b. Notwithstanding any other provision of this Plan, no Option shall be:
(i) awarded under this Plan after ten (10) years from the date on which
this Plan is adopted by the Board, or (ii) exercisable more than ten (10)
years from the date of award; provided, however, that if an Option that is
intended to be an Incentive Stock Option shall be awarded under this Plan
to any person who, at the time of the award of such Option, owns stock
possessing more than 10% of the total combined voting power for all classes
of the Company's stock, the foregoing clause (ii) shall be deemed modified
by substituting "five (5) years" for the term "ten (10) years" that appears
therein.
c. No Option awarded to any Participant shall be treated as an Incentive
Stock Option, to the extent such Option would cause the aggregate Fair
Market Value Per Share (determined as of the date of award of each such
Option) of the Shares with respect to which Incentive Stock Options are
exercisable by such Participant for the first time during any calendar year
to exceed $100,000. For purposes of determining whether an Incentive Stock
Option would cause such aggregate Fair Market Value Per Share to exceed the
$100,000 limitation, such Incentive Stock Options shall be taken into
account in the order awarded. For purposes of this subsection, Incentive
Stock Options include all Incentive Stock Options under all plans of the
Company and of any Subsidiary that are Incentive Stock Option plans within
the meaning of Section 422 of the Code.
d. The awarding or vesting of an Option shall impose no obligation upon
the Participant to exercise such Option.
e. A recipient of an Option shall have no rights as a stockholder of the
Company and shall neither have the right to vote nor receive dividends with
respect to any Shares subject to an Option until such Option has been
exercised and a certificate with respect to the Shares purchased upon such
exercise has been issued to him.
5.6 Termination of Options.
a. Unless sooner terminated as provided in this Plan, each Option shall
be exercisable for such period of time as shall be determined by the Board
or the Committee and set forth in the Award Agreement, and shall be void
and unexercisable thereafter.
b. Except as otherwise provided herein or by the terms of any Award, with
respect to a Participant who is an employee or Director, upon the
termination of such Participant's employment or other relationship with the
Company for any reason, Options exercisable on the date of such termination
shall be exercisable by the Participant (or in the case of the
Participant's death subsequent to termination of employment or such other
relationship, by the Participant's executor(s) or administrator(s)) for a
period of three (3) months from the date of the Participant's termination.
Except as otherwise provided herein or by the terms of any Award, with
respect to a Participant who is an advisor or consultant, the termination
of such Participant's relationship with the Company for any reason shall
not accelerate the expiration date of Options exercisable on the date of
termination; provided however, that if such Participant dies following such
termination, the Option shall be exercisable for a period of twelve (12)
months commencing on the date of the Participant's death by such
Participant's executor(s) or administrator(s).
c. Except as otherwise provided herein or by the terms of any Award, upon
the Disability or death of a Participant while in the service of the
Company, Options held by such Participant which are exercisable on the date
of Disability or death shall be exercisable for a period of twelve (12)
months commencing on the date of the Participant's Disability or death, by
the Participant or his legal guardian or representative or, in the case of
death, by his executor(s) or administrator(s).
d. Options may be terminated at any time by agreement between the Company
and the Participant.
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5.7 Forfeiture.
a. Termination for Cause. Notwithstanding any other provision of this
Plan, if the Participant's employment or engagement is terminated by the
Company, and the Board or the Committee makes a determination that the
Participant:
i. has engaged in any type of disloyalty to the Company, including
without limitation, fraud, embezzlement, theft, or dishonesty in the
course of his employment or engagement, or has otherwise breached any
fiduciary duty owed to the Company;
ii. has been convicted of a felony;
iii. has disclosed trade secrets or confidential information of the
Company; or
iv. has breached any agreement with or duty to the Company in respect
of confidentiality, non-disclosure, non-competition or otherwise;
then all unexercised Options shall terminate upon the date of such a
finding, or, if earlier, the date of termination of employment or
engagement for such a finding, and the Participant shall forfeit all
Shares for which the Company has not yet delivered share certificates
to the Participant and the Company shall refund to the Participant the
Option purchase price paid to it, if any, in the same form as it was
paid (or in cash at the Company's discretion). Notwithstanding anything
herein to the contrary, the Company may withhold delivery of share
certificates pending the resolution of any inquiry that could lead to a
finding resulting in forfeiture.
b. Non-Competition. Notwithstanding any other provision of this Plan, if,
during the 3-month period following a termination of service, which period
shall be extended to 12 months in the event of a termination due to
Disability, a Participant who is not a consultant or advisor commences any
employment or engagement with or by a competitor of the Company (including,
but not limited to, full or part-time employment or independent consulting
work), as determined in the sole discretion of the Board or the Committee,
all unexercised Options shall terminate immediately upon the commencement
thereof. In the event a Participant who is a consultant or advisor has
entered into an agreement with the Company that contains non-competition
covenants and such consultant or advisor violates the terms of his or her
non-competition covenant, all unexercised Options shall terminate
immediately upon the date of such violation.
6. Terms and Conditions of Restricted Shares
6.1 Restricted Share Awards. Restricted Shares may be granted either alone
or in conjunction with other Awards. Restricted Shares granted under an Award
will be issued for such consideration, if any, as the Board or the Committee
shall determine. Any Restricted Shares awarded pursuant to the Plan shall be
authorized by the Board or the Committee and shall be evidenced by an Award
Agreement in such form as the Board or the Committee may from time to time
determine. The Board or Committee will determine the time or times within
which Restricted Shares may be subject to forfeiture, and all other conditions
of such Awards. The provisions of Awards need not be the same with respect to
each Participant. The prospective recipient of an Award of Restricted Shares
will not have any rights with respect to such Award, unless and until such
recipient has executed an Award Agreement and has delivered a fully executed
copy thereof to the Company, and has otherwise complied with the applicable
terms and conditions of such Award.
6.2 Restricted Share Award Agreements. Each Award Agreement shall
incorporate by reference all other terms and conditions of the Plan, including
the following terms and conditions:
a. Number of Shares. The Award Agreement shall state the number of
Restricted Shares subject to the Award, which shall not include fractional
Shares.
b. Price. The price per Restricted Share, if any, and the time of payment
for the awarding of the Restricted Shares shall be stated in the Award
Agreement.
B-9
The Award Agreement may contain such other provisions as the Board or the
Committee in its discretion deems advisable and which are not inconsistent
with the provisions of this Plan.
6.3 Consideration. The Board or the Committee shall determine the method of
payment, if any payment is required, for the Restricted Shares to be granted
under an Award, which may consist entirely of cash, personal or certified
check, or, at the election of the Participant and as the Board or the
Committee may, in its sole discretion, approve, by surrendering Shares with an
aggregate Fair Market Value per Share equal to the aggregate price payable for
the restricted Shares, or by delivering such combination of Shares and cash as
the Board or the Committee may, in its sole discretion, approve; provided,
however, that Shares may be surrendered in satisfaction of the Restricted
Share price only if the Participant certifies in writing to the Company that
the Participant owns a number of Other Available Shares as of the date on
which payment is due that is at least equal to the number of Shares to be
surrendered in satisfaction of the Restricted Share price; provided further,
that the Restricted Share price may not be paid in Shares if the Board or the
Committee determines that such method of payment would result in liability
under Section 16(b) of the Exchange Act to a Participant.
Except as otherwise provided by the Board or the Committee, if payment is
made in whole or in part in Shares, the Participant shall deliver to the
Company certificates registered in the name of such Participant representing
Shares legally and beneficially owned by such Participant, free of all liens,
claims and encumbrances of every kind and having an aggregate Fair Market
Value per Share on the date of delivery that is not greater than the aggregate
Restricted Share price accompanied by stock powers duly endorsed in blank by
the record holder of the Shares represented by such certificates. If the Board
or the Committee, in its sole discretion, should refuse to accept Shares in
payment of the Restricted Share price, any certificates representing Shares
which were delivered to the Company shall be returned to the Participant with
notice of the refusal of the Board or the Committee to accept such Shares in
payment of the Restricted Share price. The Board or the Committee may impose
such limitations and prohibitions on the use of Shares to satisfy a Restricted
Share price as it deems appropriate.
6.4 Restricted Share Certificates and Legends. A share certificate will be
issued in connection with each Award of Restricted Shares. Such certificate
will be registered in the name of the Participant receiving the Award, and
will bear the following legend and/or any other legend required by this Plan,
the Award Agreement, any other applicable agreement, or by applicable law:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED
HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE VIROPHARMA
INCORPORATED STOCK OPTION AND RESTRICTED SHARE PLAN AND AN AGREEMENT
ENTERED INTO BETWEEN THE PARTICIPANT AND VIROPHARMA INCORPORATED (WHICH
TERMS AND CONDITIONS MAY INCLUDE, WITHOUT LIMITATION, CERTAIN TRANSFER
RESTRICTIONS, REPURCHASE RIGHTS AND FORFEITURE CONDITIONS). COPIES OF THAT
PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF VIROPHARMA
INCORPORATED AND WILL BE MADE AVAILABLE TO THE HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY.
Share certificates evidencing Restricted Shares will be held in custody by
the Company or in escrow by an escrow agent until the restrictions thereon
have lapsed. As a condition to any Restricted Share Award, the Participant may
be required to deliver to the Company a share power, endorsed in blank,
relating to the Restricted Shares covered by such Award.
6.5 Restrictions and Conditions. Restricted Shares awarded pursuant to this
Article 6 will be subject to the following restrictions and conditions:
a. Except as provided in Section 6.6, the restrictions on Restricted
Shares shall lapse in accordance with such conditions as the Board or the
Committee shall determine, which conditions shall be stated in the Award
Agreement and which may include the continued employment, engagement or
service of the
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recipient for a period of time, the attainment of specified individual or
corporate performance goals, or any other factors that the Board or
Committee selects, in its sole and absolute discretion. During the period
beginning on the date of an Award of Restricted Shares and ending when the
restrictions on such Restricted Shares lapse as set forth in the Award
Agreement or pursuant to Section 3.2(i) or Article 12 (the "Restriction
Period"), the Participant will not be permitted to sell, transfer, pledge,
assign or otherwise encumber such Restricted Shares.
b. During the Restriction Period, the Participant will be entitled to
receive any cash distributions or dividends paid with respect to Restricted
Shares and will be entitled to vote such Restricted Shares. Consistent with
Article 7, a Participant will be entitled to receive any distributions or
dividends paid in the form of securities with respect to Restricted Shares,
but such securities will be subject to the same terms and conditions as the
Restricted Shares with respect to which they were paid, including, without
limitation, the same Restriction Period.
c. If and when the restrictions on Restricted Shares lapse through the
expiration of the Restriction Period or pursuant to Section 3.2(i) or
Article 12, the certificates for such Restricted Shares will be replaced
with new certificates, without the restrictive legends described in Section
6.4 applicable to such lapsed restrictions, and such new certificates will
be promptly delivered to the Participant, the Participant's representative
(if the Participant has suffered a Disability), or the Participant's estate
or heir (if the Participant has died) at the principal executive office of
the Company or such other place as shall be mutually agreed upon between
the Company and the Participant, the Participant's representative (if the
Participant has suffered a Disability), or the Participant's estate or heir
(if the Participant has died).
6.6 Forfeiture.
a. Except as otherwise provided herein or by the terms of any Award
Agreement, upon the termination of a Participant's employment or other
relationship with the Company for any reason, all of that Participant's
Restricted Shares then subject to a Restriction Period will be forfeited.
b. Except as otherwise provided herein or by the terms of any Award
Agreement, if an individual or corporate performance goal specified in an
Award Agreement is not attained, and if it is not possible later to attain
such goal, all of a Participant's Restricted Shares then subject to a
Restriction Period linked to the attainment of such goal will be forfeited.
c. Restricted Shares may be forfeited at any time during the applicable
Restriction Period by agreement between the Company and the Participant.
d. If a Participant has paid the Company for Restricted Shares that are
subsequently forfeited, the Company shall refund to the Participant the
amounts paid to it for the forfeited Restricted Shares in the same form as
it was paid (or in cash at the Company's discretion).
7. Adjustments
7.1 Subject to required action by the stockholders, if any, the number of
Shares that may be granted under this Plan, including the individual limit
specified in Article 4, and the number of Shares subject to outstanding Awards
of Options and Restricted Shares and the exercise or, if applicable, purchase
prices thereof shall be adjusted proportionately for any increase or decrease
in the number of outstanding Shares of Common Stock of the Company resulting
from stock splits, reverse stock splits, stock dividends, reclassifications
and recapitalizations, merger, consolidation, exchange of shares, or any
similar change affecting Common Stock.
7.2 No fractional Shares shall be issuable on account of any action
mentioned in Section 7.1, and the aggregate number of Shares into which Shares
then covered by the Award, when changed as the result of such action, shall be
increased to the next highest whole number of Shares resulting from such
action, provided that no such increase shall be made if such increase would
cause an Incentive Stock Option to lose its status as such without the consent
of the Participant.
B-11
8. Time of Award
The date of an Award shall, for all purposes, be the date which the Board or
the Committee specifies when the Board or the Committee makes its
determination that an Award is made, or if none is specified, then the date of
such determination. Notice of the determination shall be given to each
Eligible Person to whom an Award is made within a reasonable time after the
date of such Award.
9. Modification, Extension and Renewal of Award
Subject to the terms and conditions of the Plan, the Board or the Committee
may modify, extend or renew an Award, or accept the surrender of an Award to
the extent that an Option under the Award has not already been exercised, or
the restrictions on Restricted Shares under the Award have not already lapsed.
Notwithstanding the foregoing: (a) no modification of an Award that adversely
affects the Participant shall be made without the consent of the Participant,
and (b) no Incentive Stock Option may be modified, extended or renewed if such
action would cause it to cease to be an "Incentive Stock Option" within the
meaning of Section 422 of the Code, unless the Participant specifically
acknowledges and consents to the tax consequences of such action.
10. Purchase for Investment and Other Restrictions
10.1 The obligation of the Company to issue Shares to a Participant upon the
exercise of an Option or upon the Award of Restricted Shares granted under the
Plan is conditioned upon such issuance complying with all relevant provisions
of applicable law, including, without limitation, the Securities Act, the
Exchange Act, the rules and regulations promulgated thereunder and any
applicable foreign laws.
10.2 At the option of the Board or the Committee, the obligation of the
Company to issue Shares to a Participant upon the exercise of an Option or
upon the Award of Restricted Shares granted under the Plan may be conditioned
upon obtaining appropriate representations, warranties, restrictions and
agreements of the Participant. Among other representations, warranties,
restrictions and agreements, the Participant may be required to represent and
agree that the purchase or receipt of Shares shall be for investment, and not
with a view to the public resale or distribution thereof, unless the Shares
are registered under the Securities Act and the issuance and sale of the
Shares complies with all other laws, rules and regulations applicable thereto.
Unless the issuance of such Shares is registered under the Securities Act (and
any similar law of a foreign jurisdiction applicable to the Participant), the
Participant shall acknowledge that the Shares purchased are not registered
under the Securities Act (or any such other law) and may not be sold or
otherwise transferred unless the Shares have been registered under the
Securities Act (or any such other law) in connection with the sale or other
transfer thereof, or that counsel satisfactory to the Company has issued an
opinion satisfactory to the Company that the sale or other transfer of such
Shares is exempt from registration under the Securities Act (or any such other
law), and unless said sale or transfer is in compliance with all other
applicable laws, rules and regulations, including all applicable federal,
state and foreign securities laws, rules and regulations. Unless the Shares
subject to an Award are registered under the Securities Act, the certificates
representing such Shares issued shall contain the following legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE SECURITIES
LAWS. THESE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF, BY GIFT OR
OTHERWISE, OR IN ANY WAY ENCUMBERED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES LAWS, OR A SATISFACTORY OPINION OF
COUNSEL SATISFACTORY TO VIROPHARMA INCORPORATED THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT AND UNDER APPLICABLE STATE SECURITIES LAWS.
B-12
If required under the laws of any jurisdiction in which the Participant
resides, the certificate or certificates may bear any such legend.
11. Transferability
No Award shall be assignable or transferable otherwise than by will or by
the laws of descent and distribution. During the lifetime of the Participant,
the Participant's rights regarding Awards shall be exercisable only by such
Participant, or, in the event of the legal incapacity or Disability of such
Participant, then by the Participant's legal guardian or representative.
12. Change of Control
12.1 Discontinuation of Plan and Non-Substitution of Shares. Notwithstanding
anything to the contrary set forth in this Plan other than Section 12.3, if
there is a Change of Control in which the Plan is not continued by a successor
corporation, and in which equivalent, substituted options for common stock and
substituted restricted shares in a successor corporation are not provided to
Participants, then the Plan shall be terminated and, for a Participant who is
an employee of the Company or any of its Subsidiaries or who is a Director,
all unvested options shall vest and restrictions on Restricted Shares shall
lift, as follows:
a. if the Participant has been employed by the Company or a Subsidiary or
has been a Director for at least two years as of the Change of Control,
then: (i) all of the Participant's unvested Options shall be fully and
immediately vested and exercisable, and (ii) the restrictions on all of the
Participant's Restricted Shares shall lapse and the Shares shall become
nonforfeitable; and
b. if the Participant has been employed by the Company or a Subsidiary or
has been a Director for less than two years as of the Change of Control,
then: (i) fifty percent (50%) of the Participant's unvested Options as of
the date of the Change of Control shall be immediately vested and
exercisable and the remaining portion of the Options which are not vested
shall lapse and be forfeited, and (ii) the restrictions on fifty percent
(50%) of all of the Participant's Restricted Shares subject to a
Restriction Period as of the date of the Change of Control shall lapse and
the remaining portion of such Restricted Shares shall be forfeited.
12.2 Continuation of Plan or Substitution of Shares. If there is a Change of
Control in which the Plan is continued by a successor corporation or in which
equivalent substituted options for common stock and substituted restricted
shares in a successor corporation are provided to Participants, with respect
to Participants who are employees of the Company or any of its Subsidiaries or
who are Directors, Options shall vest and restrictions on Restricted Shares
shall lift as follows:
a. if a Participant who is employed by the Company and serves on the
Company's management team (each, an "Executive Officer") or is a Director
at the time of the Change of Control is not offered substantially
equivalent employment with the successor corporation or a related employer
(both in terms of duties and compensation), then any unvested Options and
Restricted Shares held by such Executive Officer or Director as of the date
of the Change of Control shall be fully and immediately vested and
exercisable and shall have restrictions lifted in accordance with Section
12.1(a) or 12.1(b), as applicable, taking into account all service
performed with the Company in any capacity for purposes of vesting; and
b. if any Participant (without regard to such Participant's title) is
offered substantially equivalent employment with the successor corporation
or a related employer (both in terms of duties and compensation), then
Options and Restricted Shares shall not be subject to accelerated vesting;
provided however, that if the Participant's employment with the successor
corporation or related employer is terminated by the successor corporation
or related employer during the six month period following such Change of
Control, then any unvested Options and Restricted Shares or substituted
options or restricted shares shall be fully and immediately vested and
exercisable and have restrictions lifted at the date of the Participant's
termination of employment in accordance with Section 12.1(a) or 12.1(b), as
applicable, taking
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into account service performed with the Company and the successor
corporation and all related employers for purpose of vesting.
12.3 Notwithstanding Sections 12.1 and 12.2 hereof, any Participant who is a
"disqualified individual," as that term is defined in Section 280G(c) of the
Code, shall be notified by the Board or the Committee of any event that may
constitute a Change of Control in advance of the effective date of such Change
of Control. Notice shall be provided, in the sole discretion of the Committee,
as soon as reasonably practicable before the Change of Control. The
disqualified individual may refuse to accept accelerated vesting of his or her
Award after consideration of the tax consequences to such disqualified
individual resulting from the Change of Control, provided that any such
refusal shall be communicated to the Committee in writing before the Change of
Control. If it is not practicable to provide advance notice of such Change of
Control, the disqualified individual will be deemed to have elected to refuse
such acceleration, but only to the extent that it is determined, as soon as
practicable after the Change of Control, that accelerated vesting will result
in negative tax consequences under Section 280G of the Code.
12.4 In addition to arranging for the exchange of Options for options to
purchase common stock in a successor corporation and the exchange of
Restricted Shares for similarly restricted shares of common stock in a
successor corporation, in the event of a Change of Control of the Company by
reason of a merger, consolidation or tax free reorganization or sale of all or
substantially all of the assets of the Company, the Board shall have the
authority, in its discretion, to terminate this Plan and (i) to distribute to
each Participant cash and/or other property in an amount equal to and in the
same form as the Participant would have received from the successor
corporation if the Participant had owned the Shares subject to the Option
rather than the Option at the time of the Change of Control, provided that any
such amount paid to a Participant shall reflect the deduction of the exercise
price the Participant would have paid to purchase such Shares and (ii) to
redeem any Restricted Share for cash and/or other property in an amount equal
to and in the same form as the Participant would have received from the
successor corporation if the Participant had owned the Restricted Shares at
the time of the Change in Control. The form of payment or distribution to the
Participant pursuant to this Section shall be determined by the Committee.
13. Amendment of the Plan
Insofar as permitted by law and the Plan, and subject to Section 15.3, the
Board or the Committee may from time to time suspend, terminate or discontinue
the Plan or revise or amend it in any respect whatsoever with respect to any
Shares at the time not subject to an Award, including amendments necessary or
advisable to assure that the Incentive Stock Options, non-qualified stock
options and Restricted Shares available under the Plan continue to be treated
as such, respectively, under all applicable laws.
14. Application of Funds
The proceeds received by the Company from the sale of Shares pursuant to the
exercise of Options and any sale of Restricted Shares shall be used for
general corporate purposes or such other purpose as may be determined by the
Board.
15. Approval of Stockholders
15.1 Effective Date of Plan. This amendment, restatement, and renaming of
the Plan shall become effective on the date that it is adopted by the Board;
provided, however, that this amendment, restatement, and renaming shall be
rescinded, and all actions taken pursuant to the Plan, as amended, restated,
and renamed (except the granting of Options with respect to Shares initially
authorized for award under the Plan before this amendment, restatement, and
renaming), shall be null and void as of the first anniversary of the date of
adoption by the Board unless, before such first anniversary, the Plan, as
amended, restated, and renamed, is approved by a majority of the votes cast at
a duly held stockholder meeting at which a quorum representing a majority of
the Company's outstanding voting shares is present, either in person or by
proxy.
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15.2 Awards Prior to Stockholder Approval. The Board or the Committee may
make Awards hereunder before the stockholder meeting at which the Plan, as
amended, restated, and renamed will be presented to the Company's stockholders
for approval; provided, however, that any and all Options awarded for Shares
in excess of 2,750,000 Shares, the number of Shares initially authorized for
award under the Plan prior to this amendment, restatement, and renaming, shall
lapse automatically on the first anniversary of the date of adoption by the
Board if the Plan is not approved by such stockholders on or before such date.
With respect to Awards made before the earlier of the date the Plan is
approved by the Company's stockholders or the first anniversary of the date
the Plan is adopted by the Board, the Board or the Committee shall designate
whether the Award is for Shares previously authorized for award under the
Plan, or is for Shares as to which stockholder approval is pending. Neither
the Board nor the Committee may grant Restricted Shares before the approval by
Company stockholders of the amended, restated, and renamed plan.
15.3 Stockholder Approval of Certain Amendments.
a. If the Board or the Committee amends the Plan to increase the
aggregate number of Shares for which Awards may be awarded hereunder, and
approval of the stockholders by a majority of the votes cast at a duly held
stockholder meeting at which a quorum representing a majority of the
Company's outstanding voting shares is present (either in person or by
proxy), is not obtained within twelve (12) months of the adoption of such
amendment, all Awards with respect to such increased number of shares shall
lapse automatically on the first anniversary of the date of the adoption of
such amendment.
b. If the Board or the Committee amends the Plan to change the
designation of the class of employees eligible to receive Options, and
approval of the stockholders by a majority of the votes cast at a duly held
stockholder meeting at which a quorum representing a majority of the
Company's outstanding voting shares is present (either in person or by
proxy), is not obtained within twelve (12) months of the adoption of such
amendment, all Incentive Stock Options awarded after the date of such
adoption automatically shall be converted into non-qualified stock options
on the first anniversary of the date of the adoption of such amendment.
c. Section 5.2(b) of the Plan may not be amended to permit the grant of
Options with an exercise price below Fair Market Value or to permit
outstanding Options to be repriced unless such amendment is approved by the
stockholders by a majority of the votes cast at a duly held stockholder
meeting at which a quorum representing a majority of the Company's
outstanding voting shares is present (either in person or by proxy).
16. Conditions Upon Issuance of Shares
Shares shall not be issued pursuant to the exercise of an Option or grant of
Restricted Shares unless the exercise of such Option or grant of such
Restricted Shares and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
17. Reservation of Shares
17.1 The Company, during the term of this Plan, shall at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
17.2 The Company, during the term of this Plan, shall use its best efforts
to seek to obtain from appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain from any such regulatory agency having jurisdiction the
requisite authorization(s) deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any Shares hereunder, or the inability of the
Company to confirm to its satisfaction that any issuance and/or sale of any
Shares hereunder will meet applicable legal requirements, shall
B-15
relieve the Company of any liability in respect to the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
18. Taxes, Fees, Expenses and Withholding of Taxes
18.1 The Company shall pay all original issue and transfer taxes (but not
income taxes, if any) with respect to the award of Options and Restricted
Shares and/or the issue and transfer of Shares pursuant to the exercise of
Options, and all other fees and expenses necessarily incurred by the Company
in connection therewith, and will use its best efforts to comply with all laws
and regulations that, in the opinion of counsel for the Company, shall be
applicable thereto.
18.2 The granting of Awards hereunder and the issuance of Shares pursuant to
the grant of Restricted Shares and the exercise of Options is conditioned upon
the Company's reservation of the right to withhold in accordance with any
applicable law, from any compensation or other amounts payable to the
Participant, any taxes required to be withheld under federal, state or local
law as a result of: the grant of an Award, the vesting of an Option, the
exercise of an Option, the lapse of restrictions with respect to Restricted
Shares, or the sale of Shares. To the extent that compensation or other
amounts, if any, payable to the Participant is insufficient to pay any taxes
required to be so withheld, the Company may, in its sole discretion, require
the Participant (or such other person entitled herein to exercise the rights
associated with such Award), as a condition of the exercise of an Option or
grant of Restricted Shares, to pay in cash to the Company an amount sufficient
to cover such tax liability or otherwise to make adequate provision for the
Company's satisfaction of its withholding obligations under federal, state and
local law, provided that such satisfaction of tax liability is made within 60
days of the date on which written notice of exercise has been given to the
Company. With respect to Restricted Shares, the minimum required withholding
obligations may be settled in Shares that are part of the Award that gives
rise to the withholding requirement.
19. Miscellaneous
19.1 Notices. Any notice to be given to the Company pursuant to the
provisions of this Plan shall be addressed to the Company in care of its
Secretary (or such other person as the Company may designate from time to
time) at its principal executive office, and any notice to be given to a
Participant shall be delivered personally or addressed to him or her at the
address given beneath his or her signature on his or her Award Agreement, or
at such other address as such Participant or his or her permitted transferee
(upon the permitted transfer) may hereafter designate in writing to the
Company. Any such notice shall be deemed duly given on the date and at the
time delivered via hand delivery, courier or recognized overnight delivery
service or, if sent via telecopier, on the date and at the time telecopied
with confirmation of delivery or, if mailed, on the date five (5) days after
the date of the mailing (which shall be by regular, registered or certified
mail). Delivery of a notice by telecopy (with confirmation) shall be permitted
and shall be considered delivery of a notice notwithstanding that it is not an
original that is received. It shall be the obligation of each Participant and
each permitted transferee holding Shares purchased upon exercise of an Option
or granted pursuant to an Award of Restricted Shares to provide the Secretary
of the Company, by letter mailed as provided herein, with written notice of
his or her direct mailing address.
19.2 No Enlargement of Participant Rights. This Plan is purely voluntary on
the part of the Company, and the continuance of the Plan shall not be deemed
to constitute a contract between the Company and any Participant, or to be
consideration for or a condition of the employment or service of any
Participant. Nothing contained in this Plan shall be deemed to give any
Participant the right to be retained in the employ or service of the Company
or any Subsidiary, or to interfere with the right of the Company or any such
corporation to discharge or retire any Participant thereof at any time subject
to applicable law. No Participant shall have any right to or interest in
Awards authorized hereunder prior to the award thereof to such Participant,
and upon such Award the Participant shall have only such rights and interests
as are expressly provided herein, subject, however, to all applicable
provisions of the Company's Certificate of Incorporation, as the same may be
amended from time to time.
B-16
19.3 Information to Participants. The Company, upon request, shall provide
without charge to each Participant copies of such annual and periodic reports
as are provided by the Company to its stockholders generally.
19.4 Availability of Plan. A copy of this Plan shall be delivered to the
Secretary of the Company and shall be shown by him to any eligible person
making reasonable inquiry concerning it.
19.5 Section Headings. The descriptive headings of this Plan are for
convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Plan.
19.6 Invalid Provisions. If any provision of this Plan is found to be
invalid or otherwise unenforceable under any applicable law, such invalidity
or unenforceability shall not be construed to render any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid
or unenforceable provision were not contained herein.
19.7 Applicable Law. This Plan shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without regard
to the conflict of law principles of Pennsylvania or any other jurisdiction.
Executed this 5th day of April, 2001.
[Corporate Seal] VIROPHARMA INCORPORATED
/s/ Thomas F. Doyle /s/ Michel de Rosen
Attest: _____________________________ By:__________________________________
B-17
VIROPHARMA INCORPORATED
2001 Annual Meeting of Stockholders - June 11, 2001
SOLICITED ON BEHALF OF THE COMPANY AND APPROVED
BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Michel de Rosen and
Thomas F. Doyle, and each of them, as attorneys and proxies of the undersigned,
with full power of substitution, for and in the name of the undersigned, to
appear at the Annual Meeting of Stockholders of ViroPharma Incorporated to be
held on June 11, 2001 and at any postponement or adjournment thereof, and to
vote all of the shares of ViroPharma Incorporated that the undersigned is
entitled to vote, with all powers and authority the undersigned would possess if
personally present. The undersigned hereby directs that this proxy be voted as
follows:
ELECTION OF CLASS II DIRECTOR FOR A TERM OF THREE YEARS:
Michel de Rosen FOR [_] WITHHOLD AUTHORITY [_]
Howard Pien FOR [_] WITHHOLD AUTHORITY [_]
APPROVE AMENDMENT OF STOCK OPTION PLAN:
FOR [_] AGAINST [_] ABSTAIN [_]
(Please date and sign on reverse side)
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This space intentionally left blank
This proxy, when properly executed, will be voted as directed. If no
directions to the contrary are indicated, the proxy agents intend to vote FOR
the election as directors of the nominees named on this proxy card, and FOR the
approval of the amendment of the Company's Stock Option Plan. Abstentions on
the proposal to approve the amendment of the Company's Stock Option Plan will
have the effect of a negative vote
A majority of the proxy agents present and acting in person, or by their
substitutes (or if only one is present and acting, then that one) may exercise
all the powers conferred hereby. DISCRETIONARY AUTHORITY IS CONFERRED HEREBY AS
TO ALL OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Receipt of the Company's 2001 Annual Report to Stockholders and the Notice of
the 2001 Annual Meeting and Proxy Statement relating thereto is hereby
acknowledged.
Date:___________________________, 2001
______________________________________
______________________________________
Signature (s)
Please sign your name exactly as it appears hereon,
indicating any official position or representative
capacity. If Shares are registered in more than one
name, all owners must sign.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
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cut here
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You can change your vote up to the meeting date by repeating the above process.