SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Confidential, for Use of the Commission Only (as permitted by
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[X] Definitive Proxy Statement
[X] 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)
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[X] No fee required.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: *
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:__________________________________________
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(4) Date Filed:__________
VIROPHARMA INCORPORATED
76 Great Valley Parkway
Malvern, PA 19355
-----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 28, 1997
-----------------------------
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of ViroPharma Incorporated (the "Company") will be held on May 28,
1997 at 10:00 a.m., local time, at the Wyndham Franklin Plaza Hotel, 17th and
Race Streets, Philadelphia, Pennsylvania for the following purposes:
(1) To elect two directors to Class I of the Board of Directors, each to
serve for a three-year term and until the election and qualification of his
successor; and
(2) To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 1, 1997 are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting and
any adjournments thereof. A complete list of such stockholders will be
available at the Company's headquarters, 76 Great Valley Parkway, Malvern,
Pennsylvania, for ten days before the meeting.
By Order of the Board of Directors,
Thomas F. Doyle
Executive Director, Counsel and
Secretary
April 23, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
VIROPHARMA INCORPORATED
76 Great Valley Parkway
Malvern, PA 19355
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1997
--------------------
This Proxy Statement is being furnished to the stockholders of ViroPharma
Incorporated (the "Company") in connection with the Annual Meeting of
Stockholders of the Company to be held on May 28, 1997 and any adjournments
thereof (the "Annual Meeting"). This Proxy Statement and the enclosed Proxy
Card are being mailed to stockholders on or about April 23, 1997.
Execution and return of the enclosed Proxy Card are being solicited by and
on behalf of the Board of Directors of the Company for the purposes set forth in
the foregoing notice of meeting. The costs incidental to the solicitation and
obtaining of proxies, including the cost of reimbursing banks and brokers for
forwarding proxy materials to their principals, will be borne by the Company.
Proxies may be solicited, without extra compensation, by officers and employees
of the Company by mail, telephone, telefax, personal interviews and other
methods of communication.
The Annual Report to Stockholders for the fiscal year ended December 31,
1996, including financial statements and other information with respect to the
Company, is being mailed to stockholders with this Proxy Statement. Such Annual
Report is not part of this Proxy Statement.
VOTING AT THE MEETING
Record Date; Vote Required; Proxies
Only stockholders of record at the close of business on April 1, 1997 are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting. As
of that date, the Company had outstanding 9,077,116 shares of Common Stock, par
value $.002 per share ("Common Stock"). The holders of a majority of such
shares, represented in person or by proxy, shall constitute a quorum at the
Annual Meeting. A quorum is necessary before business may be transacted at the
Annual Meeting except that, even if a quorum is not present, the stockholders
present in person or by proxy shall have the power to adjourn the meeting from
time to time until a quorum is present. Each stockholder entitled to vote shall
have the right to one vote for each share of Common Stock outstanding in such
stockholder's name.
The shares of Common Stock represented by each properly executed Proxy Card
will be voted at the Annual Meeting in the manner directed therein by the
stockholder signing such Proxy Card. The Proxy Card provides spaces for a
stockholder to withhold authority to vote for either nominee for the Board of
Directors. The nominees are to be elected by a plurality of the votes cast at
the Annual Meeting. With respect to any other matter that may properly be
brought before the Annual Meeting, the affirmative vote of a majority of the
shares represented in person or by proxy at the Annual Meeting and entitled to
vote is required to take action, unless a greater percentage is required either
by law or by the Company's Second Amended and Restated Certificate of
Incorporation or By-Laws.
With regard to the election of directors, votes may be cast in favor of or
withheld from any or all nominees. Votes that are withheld will be excluded
entirely from the vote and will have no effect, other than for
purposes of determining the presence of a quorum. Brokers who hold shares in
street name for customers have the authority under the rules of the various
stock exchanges to vote on certain items when they have not received
instructions from beneficial owners. The Company believes that brokers that do
not receive instructions are entitled to vote those shares with respect to the
election of directors. A failure by brokers to vote those shares will have no
effect on the outcome of the election of directors, as the directors are to be
elected by a plurality of the votes cast.
If a signed Proxy Card is returned and the stockholder has given no
direction with respect to a voting matter, the shares will be voted with respect
to that matter by the proxy agents as recommended by the Board of Directors.
Execution and return of the enclosed Proxy Card will not affect a stockholder's
right to attend the Annual Meeting and vote in person. Any stockholder giving a
proxy has the right to revoke it by giving notice of revocation to the Secretary
of the Company at any time before the proxy is voted.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 1, 1997, except as otherwise indicated
in the relevant footnote, by (i) each person or group who is known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each of the
Company's directors, (iii) each of the executive officers and (iv) all current
executive officers and directors as a group.
Percentage of
Number of Shares Outstanding Shares
5% Stockholders Beneficially Owned(1) Beneficially Owned(1)
- --------------- --------------------- ---------------------
Oak Investment Partners VI, Limited Partnership(2)......... 1,576,067 17.3
One Gorham Island
Westport, Connecticut 06880
Technology Leaders II L.P.(3).............................. 1,269,763 14.0
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
Sevin Rosen Fund IV L.P.(4)................................ 1,268,024 13.9
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
Frazier Healthcare II L.P.(5).............................. 765,000 8.4
Two Union Square
601 Union Street, Suite 2110
Seattle, Washington 98101
New York Life Insurance Company(6)......................... 619,397 6.8
51 Madison Avenue
New York, New York 10016
Putnam Investments(7)...................................... 500,000 5.5
One Post Office Square
Boston, MA 02109
Wellington Management Company, LLP(8)...................... 508,000 5.6
75 State Street
Boston, MA 02109
-2-
Executive Officers
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Ann H. Lamont(2)........................................ 1,576,067 17.3
Steve Dow(4)(9)......................................... 1,282,024 14.1
Christopher Moller(3)................................... 1,269,763 14.0
Jon N. Gilbert(5)....................................... 765,000 8.4
Claude H. Nash(10)...................................... 443,634 4.9
Marc S. Collett(11)..................................... 192,914 2.1
David I. Scheer(12)..................................... 175,850 1.9
Mark A. McKinlay(13).................................... 124,950 1.4
Johanna A. Griffin(14).................................. 94,917 1.1
Guy D. Diana(15)........................................ 81,474 *
Frank Baldino, Jr.(16).................................. 51,000 *
Vincent J. Milano(17)................................... 9,422 *
Thomas F. Doyle......................................... 714 *
Jon M. Rogers........................................... -- --
All directors and executive officers as a group (14
persons)(18)............................................ 6,067,729 65.9
- ----------------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 9,077,116 shares of Common
Stock outstanding as of April 1, 1997. In accordance with the rules of the
Securities and Exchange Commission, shares underlying options or warrants
to purchase Common Stock that are exercisable as of April 1, 1997 or within
60 days thereafter are deemed outstanding and to be beneficially owned by
the person holding such option or warrant for purposes of computing such
person's percentage ownership, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Includes 1,515,215 shares of Common Stock owned by Oak Investment Partners
VI, Limited Partnership and 35,353 shares of Common Stock owned by Oak VI
Affiliates Fund, Limited Partnership. Also includes an aggregate of 25,499
shares of Common Stock issuable upon the exercise of currently exercisable
warrants to purchase Common Stock owned by Oak Investment Partners VI,
Limited Partnership and Oak VI Affiliates Fund, Limited Partnership. Ms.
Lamont is a managing member of Oak Associates VI, LLC and Oak VI
Affiliates, LLC, the general partners of Oak Investment Partners VI,
Limited Partnership and Oak VI Affiliates Fund, Limited Partnership,
respectively. Ms. Lamont shares voting and investment power with respect
to the limited partnerships with the other managing members of Oak
Associates VI, LLC and Oak VI Affiliates, LLC, respectively. Ms. Lamont
disclaims beneficial ownership of shares in which she has no pecuniary
interest.
(3) Includes 693,428 shares of Common Stock owned by Technology Leaders II L.P.
and 550,836 shares of Common Stock owned by Technology Leaders II Offshore
C.V. Also includes an aggregate of 25,499 shares of Common Stock issuable
upon the exercise of currently exercisable warrants to purchase Common
Stock owned by Technology Leaders II L.P. and Technology Leaders II
Offshore C.V. Dr. Moller is Managing Director of Technology Leaders II
Management L.P., which is the general partner of Technology Leaders II L.P.
and of Technology Leaders II Offshore C.V. Dr. Moller shares voting and
investment power with the other managing directors of the general partner
of the stockholders and disclaims beneficial ownership of shares in which
he has no pecuniary interest.
(4) Includes 1,236,291 shares of Common Stock owned by Sevin Rosen Fund IV L.P.
and 6,234 shares of Common Stock owned by Sevin Rosen Bayless Management
Company. Also includes 25,499 shares of Common Stock issuable upon the
exercise of currently exercisable warrants to purchase Common Stock owned
by Sevin Rosen Fund IV L.P. Mr. Dow is general partner of SRB Associates
IV L.P., general partner of Sevin Rosen Fund IV L.P., and an officer of
Sevin Rosen Bayless Management Company. He
-3-
shares voting and investment power with the other general partners and
officers, as applicable, and disclaims beneficial ownership of shares in
which he has no pecuniary interest.
(5) Mr. Gilbert is a member of Frazier Management, L.L.C., which is the
managing member of FHMII, LLC, which, in turn, is the general partner of
Frazier Healthcare II, L.P. Mr. Gilbert shares voting and investment power
with the other members of Frazier Management, L.L.C. and disclaims
beneficial ownership of shares in which he has no pecuniary interest.
(6) As reflected in a Schedule 13G dated January 22, 1997.
(7) As reflected in a Schedule 13G dated January 27, 1997. According to Putnam
Investments, Inc. ("PII"), it (i) is an investment company registered under
Section 8 of the Investment Company Act, and a registered investment
advisor under the Investment Advisors Act of 1940, (ii) shares the power to
dispose such shares with Putnam Investment Management, Inc., and (iii)
shares the power to dispose 492,000 of such shares with Putnam Emerging
Health Science Fund.
(8) As reflected in a Schedule 13G dated January 24, 1997. According to
Wellington Management Company, LLP ("WMC"), it (i) is a registered
investment advisor under the Investment Advisors Act of 1940, (ii) has the
sole power to dispose or direct the disposition of all such shares, and
(iii) has shared power to vote 492,700 shares.
(9) Includes 14,000 shares of Common Stock owned by The Dow Family Trust, of
which Mr. Dow and his spouse are trustees and he and members of his family
are beneficiaries.
(10) Includes 165,750 issued but unvested shares of Common Stock purchased by
Dr. Nash upon the founding of the Company in December 1994. Also includes
5,100 shares of Common Stock issuable upon the exercise of currently
exercisable warrants to purchase Common Stock, and 200 shares of Common
Stock held by Dr. Nash as custodian for two minor children.
(11) Includes 51,000 issued but unvested shares of Common Stock purchased by Dr.
Collett upon the founding of the Company in December 1994. Also includes
9,562 shares of Common Stock issuable upon exercise of currently
exercisable options.
(12) All 175,850 shares are owned by Scheer & Company, Inc., of which Mr.
Scheer is a co-founder and president.
(13) Includes 51,000 issued but unvested shares of Common Stock purchased by Dr.
McKinlay upon the founding of the Company in December 1994. Also includes
12,750 shares of Common Stock issuable upon exercise of currently
exercisable options.
(14) Includes 31,875 issued but unvested shares of Common Stock purchased by Dr.
Griffin upon the founding of the Company in December 1994.
(15) Includes 31,875 issued but unvested shares of Common Stock purchased by Dr.
Diana upon the founding of the Company in December 1994.
(16) Includes 25,500 issued but unvested shares of Common Stock purchased by Dr.
Baldino in January 1996.
(17) Represents 1,134 shares of Common Stock and currently exercisable options
to purchase 8,288 shares of Common Stock.
(18) Includes 331,500 issued but unvested shares of Common Stock purchased by
the founders of the Company. Includes options to purchase 30,600 shares of
Common Stock, which either are exercisable as of April 1, 1997 or will be
exercisable within 60 days of April 1, 1997. Also includes 81,597 shares of
Common Stock issuable upon exercise of currently exercisable warrants to
purchase Common Stock.
-4-
MATTERS CONCERNING DIRECTORS
Election of Directors
The Board of Directors currently consists of seven directors and is
classified with respect to terms of office into three classes. Each Class I
director elected at the Annual Meeting will serve until the 2000 annual meeting
of stockholders and until such director's successor has been elected and
qualified, except in the event of such director's earlier death, resignation or
removal. The terms of office of the Class II and Class III directors will
expire at the annual meetings to be held in 1998 and 1999, respectively, upon
the election and qualification of their successors.
All of the current directors of the Company were elected to the Board
of Directors pursuant to an Amended and Restated Shareholders' Voting Agreement,
dated as of May 31, 1996, by and among the Company and certain of its
stockholders and executive officers. Pursuant to the agreement, Ms. Lamont was
designated to be a director by Oak Investment Partners VI, Limited Partnership,
Mr. Dow was designated to be a director by Sevin Rosen Fund IV, L.P., Dr. Moller
was designated to be a director by TL Ventures and Mr. Gilbert was designated to
be a director by Frazier & Company, Inc. In addition, Dr. Baldino and Mr.
Scheer were designated to be directors by the holders of all outstanding shares
of redeemable preferred stock and Common Stock voting as a single class, and Dr.
Nash was designated to be a director by the holders of Common Stock.
The Board of Directors has nominated Dr. Christopher Moller and Mr.
David I. Scheer for election as the Class I directors.
The persons named as proxy agents in the enclosed Proxy Card intend
(unless instructed otherwise by a stockholder) to vote for the election of Dr.
Christopher Moller and Mr. David I. Scheer as the Class I directors. In the
event that a nominee should become unable to accept nomination or election (a
circumstance which the Board of Directors does not expect), the proxy agents
intend to vote for any alternate nominee designated by the Board of Directors
or, in the discretion of the Board, the position may be left vacant.
The Board of Directors unanimously recommends a vote FOR each Class I
nominee.
Set forth below is certain information with respect to each nominee
for director and each other person currently serving as a director of the
Company whose term of office will continue after the Annual Meeting, including
the class and term of office of each such person. This information has been
provided by each director at the request of the Company.
Class I -- Nominees for Terms Continuing until 2000
---------------------------------------------------
Christopher Moller, Ph.D. Dr. Moller has served as a director of the
Company since June 1995. Since January 1990, he has served as managing director
of Technology Leaders II Management L.P. and its predecessors, venture capital
limited partnerships whose affiliates are principal stockholders in the Company.
Dr. Moller received his Ph.D. from the University of Pennsylvania School of
Medicine. He is 43 years of age.
David I. Scheer. Mr. Scheer, a co-founder of the Company, has served
as a director of the Company since June 1995. Mr. Scheer has served as president
of Scheer & Company, Inc., a research, analytical and strategic consulting
services firm which he founded in 1981. He is 44 years of age.
-5-
Class II -- Directors with Terms Continuing until 1998
------------------------------------------------------
Steve Dow. Mr. Dow has served as a director of the Company since June
1995. Since 1983, he has been a general partner of Sevin Rosen Funds, a venture
capital firm whose affiliates are principal stockholders in the Company. Mr. Dow
also serves on the Board of Directors of Citrix Systems and Arqule, Inc. He is
41 years of age.
Ann H. Lamont. Ms. Lamont, a co-founder of the Company, has served as
director of the Company since June 1995. Since 1986, Ms. Lamont has served as
general partner and managing member of certain limited partnerships affiliated
with Oak Investment Partners, a venture capital organization whose affiliates
are principal stockholders in the Company. Ms. Lamont also serves on the Board
of Directors of Avecor Cardiovascular, Inc. She is 40 years of age.
Class III -- Directors with Terms Continuing until 1999
-------------------------------------------------------
Claude H. Nash, Ph.D. Dr. Nash, a co-founder of the Company, has
served as Chairman of the Board of Directors since February 1997, and as Chief
Executive Officer, President and director since the Company's commencement of
operations in December 1994. From 1983 until 1994, Dr. Nash served as Vice
President, Infectious Disease and Tumor Biology at Schering-Plough Research
Institute. Dr. Nash received his Ph.D. from Colorado State University. He is
54 years of age.
Frank Baldino, Jr., Ph.D. Dr. Baldino has served as a director of the
Company since June 1995. Since 1987, he has served as President, CEO and
director of Cephalon, Inc., an integrated specialty biopharmaceutical company
that discovers, develops, and markets products to treat neurological disorders.
Dr. Baldino is also a director of Integrated Systems Consulting Group, Inc. and
Pharmacopeia, Inc. He received his Ph.D. from Temple University and is 43 years
of age.
Jon N. Gilbert. Mr. Gilbert has served as a director of the Company
since September 1996. He is a general partner of Frazier & Company L.P., a
private equity firm specializing in health care which he joined at its inception
in 1991 and whose affiliate is a principal stockholder in the Company. Mr.
Gilbert received his M.B.A. from Dartmouth College. He is 34 years of age.
Committees and Meetings
The Board of Directors has a Compensation Committee and an Audit
Committee. During fiscal year 1996, the Board of Directors held four meetings,
and the Compensation Committee held two meetings. The Audit Committee held its
first meeting in January 1997. Each director attended at least 75% of the
aggregate of the meetings of the Board of Directors held during 1996 and of the
committee or committees on which he or she served during the year.
The Compensation Committee makes recommendations concerning salaries
and incentive compensation for employees of and consultants to the Company, and
the Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent auditors.
The current members of the Compensation Committee are Ms. Lamont and
Mr. Dow, and the current members of the Audit Committee are Drs. Baldino and
Moller and Mr. Scheer.
Compensation Arrangements
Non-employee directors not affiliated with investors in the Company
receive $1,000 plus travel costs for each meeting of the Board of Directors they
attend.
-6-
Pursuant to a right granted in December 1994, Dr. Baldino purchased
51,000 shares of Common Stock in January 1996 at $0.10 per share. The shares
vest in four equal annual installments commencing on the date of issuance. See
"Certain Transactions--Right Grant and Exercise; Option Grants."
Dr. Baldino, Mr. Dow, Mr. Gilbert, Ms. Lamont, Dr. Moller and Mr.
Scheer are parties to indemnification agreements with the Company. Pursuant to
the agreements, the directors are to be indemnified against liabilities and
expenses incurred in connection with their services to the Company to the
fullest extent permitted by Delaware law. Such indemnification is subject to the
director's meeting the applicable standard of care and to a determination to
indemnify by a majority of disinterested directors (as defined in the
agreements) or by independent counsel (also as defined in the agreements).
Compensation Committee Interlocks and Insider Participation
Mr. Dow and Ms. Lamont are parties to certain transactions with the
Company. See "--Compensation Arrangements" for a description of Mr. Dow's and
Ms. Lamont's indemnification agreements with the Company and "Certain
Transactions--Financings" for information regarding participation by Oak and
Sevin Rosen, of which Ms. Lamont and Mr. Dow are principals, and The Dow Family
Trust in certain of the Company's financings.
-7-
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or earned during the fiscal years ended December 31, 1995 and
December 31, 1996 to the Company's chief executive officer and the four other
most highly compensated executive officers of the Company (collectively, the
"Named Executive Officers").
Summary Compensation Table
Annual Compensation
-----------------------------------------
Other
Annual All Other
Name and Position Year Salary($) Bonus($) Compensation $(1)(2) Compensation
- ------------------------------- ---- --------- -------- -------------------- --------------
Claude H. Nash................. 1996 $180,000 $18,000 -- $20,000(3)
Chief Executive Officer and 1995 180,000 -- -- --
President
Mark McKinlay.................. 1996 165,000 16,500 -- --
Vice President, Research & 1995 165,000 -- -- --
Development
Marc S. Collett................ 1996 145,000 14,500 -- --
Vice President, Discovery 1995 145,000 -- -- --
Research
Johanna A. Griffin............ 1996 125,000 12,500 -- --
Vice President, Business 1995 125,000 -- -- --
Development
Guy D. Diana.................. 1996 125,000 12,500 -- --
Vice President, Chemistry 1995 125,000 -- -- --
Research
- ----------------
(1) In 1995, each Named Executive Officer also received cash payments for
deferred compensation for services performed in December 1994. Drs. Nash,
McKinlay, Collett, Griffin and Diana received payments of $6,923, $6,346,
$5,576, $4,807 and $4,807, respectively.
(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 paid by the Company for life insurance of which the
Company is not the beneficiary. The Company currently intends to continue
paying these premiums in future years and does not expect such premiums to
exceed $20,000 per year.
-8-
The following table summarizes stock options granted during fiscal 1996 to
the Named Executive Officers.
Option Grants in Last Fiscal Year
Individual Grants
--------------------------------------------
Potential Realizable Value
at Assumed Annual Rates of
Number of Stock Price Appreciation
Securities Percentage of for Option Term(3)
Underlying Total Options Exercise Expiration --------------------------
Name Options Granted(1) Granted(2) Price Date 5% 10%
- ---- ------------------ ------------- -------- ---------- ----- -------
Claude H. Nash......... 17,850 6.1% $2.16 7/1/06 $24,248 $61,448
Mark McKinlay.......... 51,000 17.3 0.20 1/1/06 6,415 16,256
9,180 3.1 2.16 7/1/06 12,470 31,602
Marc S. Collett........ 38,250 13.0 0.20 1/1/06 4,811 12,192
9,180 3.1 2.16 7/1/06 12,470 31,602
Johanna A. Griffin..... 19,763 6.7 2.16 7/1/06 26,846 68,034
Guy D. Diana........... 8,288 2.8 2.16 7/1/06 11,259 28,531
- ------------------
(1) These options are exercisable in four annual installments commencing on the
first anniversary of the date of grant.
(2) Based on an aggregate of 294,104 options granted to employees in 1996,
including options granted to the Named Executive Officers.
(3) Represents the hypothetical gains or "option spreads" that would exist for
the options at the end of their ten year term. These gains are based on
assumed rates of annual compound stock price appreciation of 5% and 10%
from the date the option was granted to the end of the option term (which
calculated assumed prices are less than the closing price on the Nasdaq
National Market on April 1, 1997; see also "Fiscal Year-End Options Values"
below) and are calculated based on the exercise price per share on the date
of grant. Such 5% and 10% assumed annual compound rates of stock price
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Common Stock price.
The following table sets forth certain information concerning the number
and value of unexercised options held by each of the Named Executive Officers on
December 31, 1996.
Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options(#) In-The-Money Options ($)
--------------------------- -----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable(1)
- ---- ------------ ------------- --------------- -----------------
Claude H. Nash......... -- 17,850 -- $117,632
Mark McKinlay.......... -- 60,180 -- 496,546
Marc S. Collett........ -- 47,430 -- 387,534
Johanna A. Griffin..... -- 19,763 -- 130,238
Guy D. Diana........... -- 8,288 -- 54,618
- ---------------------
(1) Based on the difference between $8.75, which was the closing price per
share on December 31, 1996, the exercise price of the and option.
-9-
Confidentiality and Inventions Agreements
The Company has entered into confidentiality and inventions agreements
with each of its 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 the Company or related to the business of the
Company or which were made or conceived with the use of the Company's time,
material, facilities or trade secret information, belong exclusively to the
Company, without additional compensation to the employee. The agreements also
have confidentiality provisions in favor of the Company and a noncompetition
provision in favor of the Company during employment.
CERTAIN TRANSACTIONS
See "Matters Concerning Directors -- Compensation Arrangements" for a
description of the Company's indemnification agreements with certain directors
and "Executive Compensation--Confidentiality and Inventions Agreements" for a
description of the Company's confidentiality and inventions agreements with all
employees.
Financings
For information regarding beneficial ownership of the Company's
securities by officers, directors and greater than 5% stockholders of the
Company, see "Security Ownership of Certain Beneficial Owners and Management."
In May 1996, the Company sold 3,222,222 shares of Series C Preferred
Stock at $2.25 per share to a limited number of accredited investors in a
private placement. In connection with the financing, Oak Investment Partners VI,
Limited Partnership and Oak VI Affiliates Fund, Limited Partnership purchased
497,830 and 11,615 shares of Series C Preferred Stock, respectively, Sevin Rosen
Fund IV L.P. and Sevin Rosen Bayless Management Company purchased 424,099 and
2,222 shares of Series C Preferred Stock, respectively, Technology leaders II
L.P. and Technology Leaders II Offshore C.V. purchased 245,062 and 194,669
shares of Series C Preferred Stock, respectively, and Frazier Healthcare II L.P.
and New York Life Insurance Company purchased 1,500,000 and 214,503 shares of
Series C Preferred Stock, respectively. In addition, Drs. Nash and Collett
purchased 28,889 and 31,112 shares of Series C Preferred Stock, respectively.
All outstanding shares of Series C Preferred Stock converted into an aggregate
of 1,643,333 shares of Common Stock upon closing of the Company's initial public
offering.
Oak Investment Partners VI, Limited Partnership and Oak VI Affiliates
Fund, Limited Partnership purchased 102,606 shares of Common Stock and 2,394
shares of Common Stock, respectively, in connection with the Company's initial
public offering in November 1996. The Dow Family Trust purchased 14,000 shares
of Common Stock in connection with the Company's initial public offering. Mr.
Dow and his spouse are trustees of The Dow Family Trust, and he and members of
his immediate family are the beneficiaries.
Right Grant and Exercise; Option Grants
Pursuant to a right granted in December 1994, Dr. Baldino purchased
51,000 shares of Common Stock under a January 1996 restricted stock purchase
agreement at $0.10 per share. The shares vest in four equal annual installments
commencing on the date of issuance. The Company has the option to repurchase all
unvested shares for $0.10 per share.
-10-
Notwithstanding anything to the contrary, the following Report
of the Compensation Committee and the Performance Graph on page
13 shall 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 the Company specifically incorporates this
information by reference, and shall not otherwise be deemed
filed under such Acts.
REPORT OF THE
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two non-employee directors. The Committee is responsible for setting
and administering the policies which govern annual executive salaries, bonuses
(if any) and stock ownership programs. The Committee annually evaluates the
performance, and determines or recommends to the full Board the compensation, of
the Chief Executive Officer ("CEO") and the other executive officers of the
Company based upon a mix of the achievement of the corporate goals, individual
performance and comparisons with other bio-pharmaceutical companies.
The policies of the Committee with respect to executive officers, including
the CEO, are to provide compensation sufficient to attract, motivate and retain
executives of outstanding ability and potential and to establish an appropriate
relationship between executive compensation and the creation of stockholder
value. To meet these goals, the Committee has adopted a mix among the
compensation elements of salary, bonus and stock options, with an emphasis on
stock options to emphasize the link between executive incentives and the
creation of stockholder value as measured by the equity markets. In general, the
salaries and stock option awards of executive officers, including the CEO, are
not determined by the Company's achievement of specific corporate performance
criteria. Instead, the Committee determines the salaries for executive officers
based upon a review of salary surveys of other bio-pharmaceutical companies
performed for the Committee. In awarding stock options, the Committee considers
individual performance, overall contribution to the Company, officer retention,
the number of unvested stock options and the total number of stock options to be
awarded. In addition, the Committee generally does not award stock options to
executive officers more frequently than once every year.
None of the executive officers, including the CEO, received an increase in
base salary in 1996. The Committee met in December 1996 to review and approve
base salary increases and option grants for executive officers, including the
CEO, for 1997. The Committee considered the successful completion of the
Company's initial public offering in November 1996 ("IPO"), together with the
other factors described above. Consistent with the policies described in this
report, the Committee increased 1997 base salaries for all executive officers
other than the CEO by an average of 10%.
In determining the CEO's salary, the Committee considered the CEO's
performance in 1996, the fact that the CEO had not received an increase in base
salary since the Company's inception, and the pivotal role played by the CEO in
consummating the IPO. The Committee increased the CEO's base salary for 1997 by
22%.
After considering the criteria relating to awarding stock options and
consistent with the Company's general policies, the Committee granted options to
those employees recommended by management, and to all executive officers other
than one (who was excluded due to the proximity of his date of hire to the grant
date of these options).
During 1996, the Committee also approved bonuses to all employees and
executive officers. The first bonus, equal to 6% of each person's base salary,
was approved in August 1996 for the completion of the
-11-
Company's Collaborative Research Agreement with Boehringer Ingelheim
Pharmaceuticals, Inc. The second bonus, equal to 4% of each person's base
salary, was approved in November 1996 for the closing of the IPO.
Deductibility of Certain Compensation
Section 162(m) of the Internal Revenue Code generally denies a federal
income tax deduction for certain compensation exceeding $1,000,000 paid to the
CEO or any of the four other highest paid executive officers, excluding (among
other things) certain performance-based compensation. Through December 31, 1996,
this provision has not affected the Company's tax deductions, but the Committee
will continue to monitor the potential impact of Section 162(m) on the Company's
ability to deduct executive compensation.
COMPENSATION COMMITTEE
Ann H. Lamont
Steve Dow
April 14, 1997
-12-
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return
on the Company's Common Stock 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 the Company's Common Stock first started trading on the Nasdaq National
Market.
[PERFORMANCE GRAPH APPEARS HERE]
11/19/96 11/30/96 12/31/96 1/31/97 2/28/97
ViroPharma $ 100.00 $ 103.57 $ 125.00 $ 180.36 $ 187.50
Nasdaq US $ 100.00 $ 102.58 $ 102.49 $ 109.76 $ 103.77
Nasdaq Pharm $ 100.00 $ 102.66 $ 105.61 $ 114.69 $ 115.48
-13-
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP has served as the Company's independent
certified public accountants since 1995. KPMG Peat Marwick LLP has been
selected to continue in such capacity for the current year. A representative of
that firm is expected to be present at the Annual Meeting with the opportunity
to make a statement if he or she desires to do so and to be available to respond
to appropriate questions.
STOCKHOLDER PROPOSALS -- 1998 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for
shareholder action at annual meetings in accordance with regulations adopted by
the Securities and Exchange Commission. Any proposal which an eligible
stockholder desires to have presented at the 1998 annual meeting of stockholders
concerning a proper subject for inclusion in the proxy statement and for
consideration at the annual meeting, will be included in the Company's proxy
statement and related proxy card if it is received by the Company no later than
December 24, 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that directors and certain officers of the Company, and persons who own
more than ten percent of the Company's Common Stock, file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of such Common Stock. Such directors, officers and more than ten
percent shareholders are required by regulation to furnish the Company with
copies of all Section 16(a) forms which they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all fiscal year 1996 Section 16(a) filing requirements
applicable to its directors, officers and more than ten percent shareholders
were complied with, except that four reports, covering an aggregate of three
transactions, were filed late, including one report by each of Ann H. Lamont,
Oak Investment Partners VI, Limited Partnership, Oak VI Affiliates Fund, Limited
Partnership and Steve Dow.
OTHER MATTERS
The Board of Directors of the Company 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, however, other matters properly do come before
the meeting, it is the intention of the persons named as proxy agents in the
enclosed Proxy Card to vote upon such matters in accordance with their judgment.
By Order of the Board of Directors,
Thomas F. Doyle
Executive Director, Counsel
and Secretary
April 23, 1997
-14-
VIROPHARMA INCORPORATED
1997 ANNUAL MEETING OF STOCKHOLDERS -- MAY 28, 1997
SOLICITED ON BEHALF OF THE COMPANY AND APPROVED BY THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Claude H. Nash 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 the
28th day of May, 1997 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 I DIRECTORS FOR A TERM OF THREE YEARS
1. Christopher Moller, Ph.D.
FOR [_] WITHHOLD AUTHORITY [_]
2. David I. Scheer
FOR [_] WITHHOLD AUTHORITY [_]
(Please date and sign on reverse side)
(Continued from other side)
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 OF THE AFOREMENTIONED NOMINEES AS DIRECTORS.
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 1996 Annual Report to Stockholders and the Notice of
the 1997 Annual Meeting and Proxy Statement relating thereto is hereby
acknowledged.
Date: ________________________, 1997
(Please date this Proxy)
____________________________________
____________________________________
(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.