-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AR5aNfXW0QsCMQEhbW4b1eOjhupQCwbewhXOrecpeG4ujRMsqUd4S9QOz2xUNrxe 7L7cb/G8ztOnQZ7dDsHxQw== 0000891618-96-002526.txt : 19961107 0000891618-96-002526.hdr.sgml : 19961107 ACCESSION NUMBER: 0000891618-96-002526 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961111 FILED AS OF DATE: 19961106 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHARMACYCLICS INC CENTRAL INDEX KEY: 0000949699 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 913148201 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26658 FILM NUMBER: 96654783 BUSINESS ADDRESS: STREET 1: 995 EAST ARQUES AVE CITY: SUNNYVALE STATE: CA ZIP: 94086 BUSINESS PHONE: 4087743345 MAIL ADDRESS: STREET 1: 995 EAST ARQUES AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94086 DEF 14A 1 DEFINITIVE PROXY MATERIALS 1 SCHEDULE 14A (RULE 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the registrant \X\ Filed by a party other than the registrant \ \ Check the appropriate box: \ \ Preliminary Proxy Statement \\ Confidential, for Use of the Com- mission Only (as permitted by Rule 14a-6(e)(2)) \X\ Definitive Proxy Statement \ \ Definitive Additional Materials \ \ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 Pharmacyclics, Inc. (Name of Registrant as Specified in Its Charter) ________________________________________________________________________________ (Name of Person(s) Filing Proxy Statement, if other than Registrant) Payment of Filing Fee (Check the appropriate box): \ \ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2), or Item 22(a)(2) of Schedule 14A. \ \ $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). \ \ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transactions applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: \X\ Fee paid previously with preliminary materials. \ \ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: 2 PHARMACYCLICS, INC. 995 EAST ARQUES AVENUE SUNNYVALE, CALIFORNIA 94086 NOVEMBER 11, 1996 Dear Stockholder: You are cordially invited to attend the Annual Meeting of Stockholders ("Annual Meeting") of Pharmacyclics, Inc. (the "Company") which will be held at 9:00 A.M. on December 6, 1996, at the Company's headquarters, 995 East Arques Avenue, Sunnyvale, California 94086. At the Annual Meeting, you will be asked to consider and vote upon the following proposals: (i) the election of six (6) directors to serve until the 1997 annual meeting and until their successors are elected and qualified; (ii) the amendment and restatement of the Company's Certificate of Incorporation to increase the number of authorized shares of common stock thereunder from 12,000,000 shares to 24,000,000 shares; (iii) the amendment of the Company's 1995 Stock Option Plan (the "Plan") in order to increase the total number of shares of common stock authorized for issuance over the term of the Plan by an additional 750,000 shares; and (iv) the ratification of the appointment of Price Waterhouse LLP as the Company's independent accountants for the fiscal year ending June 30, 1997. The enclosed Proxy Statement more fully describes the details of the business to be conducted at the Annual Meeting. After careful consideration, the Company's Board of Directors has unanimously approved the proposals and recommends that you vote IN FAVOR OF each such proposal. After reading the Proxy Statement, please mark, date, sign and return by no later than November 27, 1996, the enclosed proxy card in the accompanying reply envelope. If you decide to attend the Annual Meeting, please notify the Secretary of the Company that you wish to vote in person and your proxy will not be voted. YOUR SHARES CANNOT BE VOTED UNLESS YOU MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY, OR ATTEND THE ANNUAL MEETING IN PERSON. A copy of the Pharmacyclics, Inc. 1996 Annual Report is also enclosed. We look forward to seeing you at the Annual Meeting. Sincerely, Richard A. Miller, President and Chief Executive Officer IMPORTANT PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE SO THAT IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING YOUR SHARES MAY BE VOTED. 3 PHARMACYCLICS, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS DECEMBER 6, 1996 TO THE STOCKHOLDERS OF PHARMACYCLICS, INC.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual Meeting") of Pharmacyclics, Inc., a Delaware corporation (the "Company"), will be held at 9:00 A.M. local time on Friday, December 6, 1996, at the Company's headquarters, 995 East Arques Avenue, Sunnyvale, California 94086, for the following purposes: 1. To elect a Board of six directors to serve for the ensuing year and until their respective successors are elected and qualified. 2. To approve an amendment and restatement of the Company's Certificate of Incorporation to increase the number of authorized shares of common stock thereunder from 12,000,000 shares to 24,000,000 shares. 3. To approve an amendment to the Company's 1995 Stock Option Plan (the "Plan") in order to increase the total number of shares of common stock authorized for issuance over the term of the Plan by an additional 750,000 shares. 4. To ratify the appointment of Price Waterhouse LLP as the Company's independent accountants for the fiscal year ending June 30, 1997. 5. To transact such other business as may properly come before the Annual Meeting and any adjournment or adjournments thereof. The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. Stockholders of record at the close of business on October 23, 1996 are entitled to receive notice of and to vote at the Annual Meeting and any adjournment thereof. A list of the stockholders entitled to vote at the Annual Meeting will be available for inspection at the Company's offices for a period of ten days immediately prior to the Annual Meeting. All stockholders are cordially invited to attend the Annual Meeting. However, to assure your representation at the meeting, please carefully read the accompanying Proxy Statement which describes the matters to be voted upon at the Annual Meeting and mark, date, sign and return the enclosed proxy card in the accompanying reply envelope. Should you receive more than one proxy because your shares are registered in different names and addresses, each proxy should be returned to ensure that all your shares will be voted. If you decide to attend the 4 Annual Meeting, please notify the Secretary of the Company that you wish to vote in person and your proxy will not be voted and only your vote at the Annual Meeting will be counted. The prompt return of your proxy card will assist us in preparing for the Annual Meeting. Sincerely, J. Stephan Dolezalek, Secretary Sunnyvale, California November 11, 1996 YOUR VOTE IS VERY IMPORTANT. PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY. IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. 2. 5 PHARMACYCLICS, INC. 995 East Arques Avenue Sunnyvale, California 94086 ------------------------------- PROXY STATEMENT ------------------------------- FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 6, 1996 GENERAL INFORMATION FOR STOCKHOLDERS THE ENCLOSED PROXY ("PROXY") IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS (THE "BOARD") OF PHARMACYCLICS, INC., A DELAWARE CORPORATION (THE "COMPANY"), FOR USE AT THE 1996 ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL MEETING") TO BE HELD AT 9:00 A.M. ON DECEMBER 6, 1996, AT THE COMPANY'S HEADQUARTERS, 995 EAST ARQUES AVENUE, SUNNYVALE, CALIFORNIA 94086 AND AT ANY ADJOURNMENT THEREOF. This Proxy Statement and the accompanying form of Proxy was first mailed to the stockholders entitled to vote at the Annual Meeting on or about November 11, 1996. RECORD DATE AND VOTING Stockholders of record at the close of business on October 23, 1996 are entitled to notice of and to vote at the Annual Meeting. As of the close of business on such date, there were 8,556,150 shares of the Company's common stock (the "Common Stock") outstanding and entitled to vote, held by 95 stockholders of record. No shares of the Company's preferred stock are outstanding. Each stockholder is entitled to one vote for each share of Common Stock held by such stockholder as of the record date. If a choice as to the matters coming before the Annual Meeting has been specified by a stockholder on the Proxy, the shares will be voted accordingly. If no choice is specified, the shares will be voted IN FAVOR OF the approval of the proposals described in the Notice of Annual Meeting of Stockholders and in this Proxy Statement. Abstentions and broker non-votes (i.e., the submission of a Proxy by a broker or nominee specifically indicating the lack of discretionary authority to vote on the matter) are counted for purposes of determining the presence or absence of a quorum for the transaction of business. Abstentions will be counted towards the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes, whereas broker non-votes will not be counted for purposes of determining whether a proposal has been approved or not. Any stockholder or stockholder's representative who, because of a disability, may need special assistance or accommodation to allow him or her to participate at the Annual Meeting may request reasonable assistance or accommodation from the Company by contacting Cheryl B. Jaszewski in writing at 995 East Arques Avenue, Sunnyvale, California 94086 or by telephone at (408) 774-0330. To provide the Company sufficient time to arrange for reasonable assistance, please submit such requests by December 2, 1996. 6 REVOCABILITY OF PROXIES Any stockholder giving a Proxy pursuant to this solicitation may revoke it at any time prior to the meeting by filing with the Secretary of the Company at its principal executive offices at 995 East Arques Avenue, Sunnyvale, California 94086, a written notice of such revocation or a duly executed Proxy bearing a later date, or by attending the Annual Meeting and voting in person. SOLICITATION The Company will bear the entire cost of solicitation, including the preparation, assembly, printing and mailing of the Notice of Annual Meeting, this Proxy Statement, the Proxy and any additional solicitation materials furnished to stockholders. Copies of solicitation materials will be furnished to brokerage houses, fiduciaries and custodians holding shares in their names that are beneficially owned by others so that they may forward this solicitation material to such beneficial owners. To assure that a quorum will be present in person or by proxy at the Annual Meeting, it may be necessary for certain officers, directors, employees or other agents of the Company to solicit proxies by telephone, facsimile or other means or in person. The Company will not compensate such individuals for any such services. The Company does not presently intend to solicit proxies other than by mail. IMPORTANT PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE-PREPAID, RETURN ENVELOPE BY NO LATER THAN NOVEMBER 27, 1996, SO THAT IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED. THE ANNUAL REPORT OF THE COMPANY FOR THE FISCAL YEAR ENDED JUNE 30, 1996, HAS BEEN MAILED TO ALL STOCKHOLDERS ENTITLED TO RECEIVE NOTICE OF AND TO VOTE AT THE ANNUAL MEETING CONCURRENTLY WITH THE MAILING OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT. THE ANNUAL REPORT IS NOT INCORPORATED INTO THIS PROXY STATEMENT AND IS NOT CONSIDERED PROXY SOLICITING MATERIAL. 2. 7 MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING PROPOSAL ONE - ELECTION OF DIRECTORS At the Annual Meeting, a Board of six directors will be elected, to serve until the Company's next Annual Meeting and until their successors shall have been duly elected and qualified or until their earlier death, resignation or removal. The Board has selected six nominees, all of whom are current directors of the Company. Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee will be unavailable to serve. Unless otherwise instructed, the Proxy holders will vote the Proxies received by them IN FAVOR OF the nominees named below. The six candidates receiving the highest number of affirmative votes of all the shares entitled to vote at the Annual Meeting will be elected. If any nominee is unable to or declines to serve as a director, the Proxies may be voted for a substitute nominee designated by the current Board. As of the date of this Proxy Statement, the Board is not aware of any nominee who is unable or will decline to serve as a director. THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE ELECTION OF EACH OF THE FOLLOWING NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY UNTIL THE NEXT ANNUAL MEETING AND UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED OR UNTIL THEIR EARLIER DEATH, RESIGNATION OR REMOVAL. INFORMATION WITH RESPECT TO DIRECTOR NOMINEES Set forth below is information regarding the nominees.
Name Position(s) with the Company Age Director Since ---- ---------------------------- --- -------------- Thomas D. Kiley.................. Director 53 1991 Joseph S. Lacob.................. Director 40 1991 Patrick F. Latterell............. Director 38 1991 Richard A. Miller, M.D........... Director, President and Chief Executive 45 1991 Officer Joseph C. Scodari................ Director 43 1994 Craig C. Taylor.................. Director 46 1991
BUSINESS EXPERIENCE OF DIRECTOR NOMINEES MR. KILEY was appointed as a Director of the Company in June 1991. He has been self-employed since 1988 as an attorney, consultant and investor. From 1980 to 1988, he was an officer of Genentech, Inc., serving variously as Vice President and General Counsel, Vice President for Legal Affairs and Vice President for Corporate Development. Mr. Kiley is also a Director of Cardiogenesis Corporation, a medical device company, Connective Therapeutics, Inc. and Geron Corporation, pharmaceutical companies, and certain private biotechnology and other companies. 3. 8 MR. LACOB was appointed as a Director of the Company in June 1991. He is a General Partner of Kleiner Perkins Caufield & Byers, a venture capital investment firm, which he joined in 1987. Mr. Lacob is currently Chairman of the Board of CellPro, Inc. and Microcide Pharmaceuticals and a director of Heartport, Inc., as well as several private life science companies. MR. LATTERELL was appointed as a Director of the Company in June 1991. He is a General Partner of Venrock Associates and Venrock Associates II, L.P., venture capital investment groups, which he joined in April 1989. Mr. Latterell is currently Chairman of the Board of Oratec Interventions, Inc, and a director of Biocircuits Corporation, Geron Corporation, Vical, Inc. as well as several private biomedical companies. DR. MILLER has served as President, Chief Executive Officer and a Director since the Company was founded in April 1991. In 1989, Dr. Miller co-founded CellPro, Inc. ("CellPro"), a public biotechnology company, and served as a Director of CellPro from 1989 to 1991, and Chairman of CellPro's Scientific Advisory Board until 1993. He continues to serve on CellPro's Scientific Advisory Board. In 1984, Dr. Miller co-founded IDEC Pharmaceuticals Corporation where he served as Vice President and a Director until February 1992. Dr. Miller also is a Clinical Associate Professor of Medicine (Oncology) at Stanford University Medical Center. MR. SCODARI was appointed as a Director of the Company in December 1994. He is Corporate Executive Vice President, and President Pharmaceutical Division for Centocor, Inc. Prior to joining Centocor, he was Senior Vice President and General Manager, The Americas, for Rhone-Poulenc Rorer Pharmaceuticals, Inc. where he held various positions since 1989. From 1987 to 1989, Mr. Scodari was Executive Vice President of Sterling Drug's U.S. Diagnostic Imaging Division ("Sterling") where he held responsibilities for all marketing and sales and business development activities for Sterling's imaging agent business. MR. TAYLOR was appointed as a Director of the Company in June 1991. He is a General Partner of AMC Partners '89, L.P., the general partner of Asset Management Associates 1989, L.P., a private venture capital partnership. Mr. Taylor has been with Asset Management Company, a venture management group, since 1977. Mr. Taylor is a Director of Occupational Health & Rehabilitation, Inc. (formerly, Telor Ophthalmic Pharmaceuticals, Inc.), Metra BioSystems, Inc. and Lynx Therapeutics, Inc. and several private companies. There are no family relationships among executive officers or directors of the Company. BOARD MEETINGS AND COMMITTEES During the fiscal year ended June 30, 1996, the Board held seven meetings and took action by unanimous written consent on one occasion. As of June 30, 1996, the Company had two standing Committees: an Audit Committee and a Compensation Committee. The Company does not have a standing Nominating Committee. The Audit Committee is primarily responsible for approving the services performed by the Company's independent accountants and reviewing reports of the Company's internal and external auditors regarding the Company's accounting practices and systems of internal accounting controls. During the fiscal year ended June 30, 1996, the Audit Committee consisted of two directors, Messrs. Latterell and Taylor. The Audit Committee held one meeting during the fiscal year ended June 30, 1996. Furthermore, the Audit Committee took action by unanimous written consent on one occasion. The Compensation Committee reviews and approves the Company's general compensation policies, sets compensation levels for the Company's executive officers and administers the Company's 1995 Stock Option Plan, successor to the Company's 1992 Stock Option Plan, and the Company's Employee Stock Purchase Plan. During the fiscal year ended June 30, 1996, the Compensation Committee consisted of three directors, Messrs. Lacob, Latterell and Taylor. The Compensation Committee met three times during the fiscal year ended June 30, 1996. 4. 9 During the last fiscal year, except as described below, no director attended fewer than 75% of the aggregate number of meetings of the Board and meetings of Committees of the Board on which such director serves, which were held during the period that such individual was a member of the Board. Messrs. Kiley and Scodari each attended five of the seven meetings of the Board and Mr. Latterell attended two of the three meetings of the Compensation Committee. DIRECTOR COMPENSATION The non-employee Board members do not receive any cash compensation for their service on the Board or any Committee of the Board. However, Mr. Scodari is reimbursed for travel expenses incurred in attending Board or Committee meetings. Under the Company's Non-Employee Directors Stock Option Plan (the "Directors Plan"), each individual serving as a non-employee Board member on the effective date of the Company's initial public offering was automatically granted a non-statutory option to purchase 5,000 shares of Common Stock. Accordingly, Messrs. Kiley, Lacob, Latterell, Scodari and Taylor each received an option for 5,000 shares on October 23, 1995. Each such option has an exercise price of $12.00 per share, the fair market value per share of Common Stock on the grant date. In addition, each new non-employee Board member will receive an automatic option grant for 10,000 shares of Common Stock under the Directors Plan on the date of his or her initial election or appointment to the Board. Furthermore, on the date of each Annual Stockholders Meeting beginning with the 1996 Meeting, each individual re-elected as a non-employee Board member will receive an automatic option grant for an additional 5,000 shares of Common Stock, provided such individual has served as a Board member for at least six months. The exercise price per share of Common Stock subject to each automatic option grant will be equal to the fair market value per share on the automatic grant date. Each automatic grant will have a term of ten years, subject to earlier termination following the optionee's cessation of Board service. Each automatic grant will be immediately exercisable; however, any shares purchased upon exercise of the option will be subject to repurchase should the optionee's service as a non-employee Board member cease prior to vesting in the shares. Each 10,000-share grant will vest in five equal and successive annual installments over the optionee's period of Board service. Each 5,000-share grant will vest in 12 equal and successive monthly installments over the optionee's period of Board service. However, each outstanding option will immediately vest upon (i) certain changes in the ownership or control of the Company or (ii) the death or disability of the optionee while serving as a Board member. 5. 10 PROPOSAL TWO - APPROVAL OF AN AMENDMENT TO CERTIFICATE OF INCORPORATION The present capital structure of the Company authorizes 12,000,000 shares of Common Stock, par value $0.0001, and 1,000,000 shares of undesignated preferred stock, par value $0.0001 ("Undesignated Preferred Stock"). The Board believes this capital structure is inadequate for the present and future needs of the Company. Therefore the Board has unanimously approved the amendment and restatement of the Company's Restated Certificate of Incorporation to increase the number of shares of Common Stock authorized for issuance by Article IV of the Restated Certificate of Incorporation from 12,000,000 shares to 24,000,000 shares. The Board believes this capital structure more appropriately reflects the present and future needs of the Company and recommends such amendment and restatement to the Company's stockholders for adoption. The Undesignated Preferred Stock may be issued from time to time in one or more series with such rights, preferences and privileges as may be determined by the Board. On September 30, 1996, 8,554,750 shares of Common Stock were outstanding. On September 30, 1996, approximately 9,858,380 shares of Common Stock would be outstanding on a fully diluted basis, which assumes the exercise of all outstanding warrants and options, including 226,000 option shares granted to employees that have been granted on the basis of the 750,000 share increase and are, therefore, subject to stockholder approval of Proposal Three at the Annual Meeting. PURPOSE OF AUTHORIZING ADDITIONAL COMMON STOCK The authorization of an additional 12,000,000 shares of Common Stock would give the Board the express authority, without further action of the stockholders, to issue such shares of Common Stock from time to time as the Board deems necessary. The Board believes it is necessary to have the ability to issue such additional shares of Common Stock for general corporate purposes. The time frame necessary to achieve market success for any individual product in the biotechnology industry is lengthy. Consequently, the Company will expend substantial funds on research and development, expanding manufacturing capacity, preclinical and clinical testing of its products and manufacturing and marketing of its products prior to commercialization. The Company plans to fund such development activities through several different means including equity financings. Other potential uses of the additional authorized shares of Common Stock may include acquisition transactions, stock dividends or distributions, and having Common Stock available for any future designation of preferred stock to be convertible into Common Stock. The additional Common Stock would be available for issuance by the Board without future action by the stockholders, unless such action were specifically required by applicable law or rules of any stock exchange on which the Company's securities may then be listed. The proposed increase in the authorized number of shares of Common Stock could have a number of effects on the Company's stockholders depending upon the exact nature and circumstances of any actual issuances of authorized but unissued shares. The increase could have an anti-takeover effect, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover of the Company more difficult. For example, additional shares could be issued by the Company so as to dilute the stock ownership or voting rights of persons seeking to obtain control of the Company. Similarly, the issuance of additional shares to certain persons allied with the Company's management could have the effect of making it more difficult to remove the Company's current management by diluting the stock ownership or voting rights of persons seeking to cause such removal. In addition, an issuance of additional shares by the Company could have an effect on the potential realizable value of a stockholder's investment. In the absence of a proportionate increase in the Company's earnings and book value, an increase in the aggregate number of outstanding shares of the Company caused by the issuance of the additional shares would dilute the earnings per share and book value per share of all outstanding shares of the 6. 11 Company's Common Stock. If such factors were reflected in the price per share of Common Stock, the potential realizable value of a stockholder's investment could be adversely affected. VOTE REQUIRED FOR STOCKHOLDER APPROVAL The affirmative vote of a majority of all shares of the Company's Common Stock outstanding at the time of voting is required for approval of the amendment and restatement of the Restated Certificate of Incorporation of Pharmacyclics, Inc. to increase the number of authorized shares of Common Stock issuable thereunder from 12,000,000 shares to 24,000,000 shares. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AUTHORIZING AN ADDITIONAL 12,000,000 SHARES OF COMMON STOCK. 7. 12 PROPOSAL THREE - APPROVAL OF AN AMENDMENT TO 1995 STOCK OPTION PLAN INTRODUCTION The Company's stockholders are being asked to approve an amendment to the 1995 Stock Option Plan (the "Plan") to increase the maximum number of shares available for issuance thereunder by an additional 750,000 shares. The amendment was adopted by the Board on August 1, 1996, subject to stockholder approval at the Annual Meeting. The affirmative vote of a majority of the Common Stock present or represented and entitled to vote on this Proposal Three at the Annual Meeting is required for approval of the amendment. The Plan was originally adopted by the Board on August 2, 1995 as the successor to the 1992 Stock Option Plan (the "1992 Plan"), and the stockholders approved the Plan on September 11, 1995. The Plan became effective as of October 23, 1995, the effective date of the Company's initial public offering. The options outstanding under the 1992 Plan were incorporated into the Plan on such date and, thereafter, no further option grants were made under the 1992 Plan. The purpose of the Plan is to provide employees (including officers), non-employee Board members and consultants of the Company with an opportunity to acquire an equity interest in the Company as an incentive for them to remain in the Company's service. The Board believes that equity interests are a significant factor in the Company's ability to attract and retain key employees, non-employee Board members and consultants who are critical to the Company's long-range success. The new amendment is intended to provide the Company with a sufficient reserve of Common Stock under the Plan to attract and retain the services of key individuals essential to the Company's long-term growth and success. The terms and provisions of the Plan, as amended through August 1, 1996, are summarized more fully below. This summary, however, does not purport to be a complete exposition of all the provisions of the Plan. A copy of the Plan will be furnished by the Company to any stockholder upon written request to the Secretary of the Company at the Company's principal offices in Sunnyvale, California. PLAN STRUCTURE The Plan is comprised of an option grant program pursuant to which eligible persons may, at the discretion of the Plan Administrator (as defined below), be granted options to purchase shares of Common Stock at an exercise price not less than 85% of the fair market value of such shares on the grant date. The Plan also authorizes stock appreciation rights, which provide the holders with the election to surrender their outstanding options for an appreciation distribution from the Company equal to the excess of (i) the fair market value of the vested shares of Common Stock subject to the surrendered option over (ii) the aggregate exercise price payable for such shares. Such appreciation distribution may be made in cash or in shares of Common Stock. ADMINISTRATION The Plan is currently administered by the Compensation Committee of the Board. This committee (the "Plan Administrator") has full authority to determine the eligible individuals to whom option and stock appreciation right grants are to be made, the number of shares to be covered by each such grant, the maximum term for which any granted option or stock appreciation right is to remain outstanding, the time or times at which the granted 8. 13 options or stock appreciation rights are to become exercisable, and all other terms and conditions of awards under the Plan. In addition, the Plan Administrator has full authority to accelerate the exercisability of outstanding options and to terminate the Company's outstanding repurchase rights with respect to unvested shares, all upon such terms and conditions as it deems appropriate. All expenses incurred in administering the Plan will be paid by the Company. SHARE RESERVE The maximum number of shares of Common Stock issuable over the term of the Plan may not exceed 1,670,059 shares, including the 750,000-share increase for which stockholder approval is sought under this Proposal Three. Such shares will be made available either from the Company's authorized but unissued Common Stock or from Common Stock reacquired by the Company. On the first trading date of each calendar year beginning with the 1996 calendar year, the share reserve automatically increases by an amount equal to one percent of the number of shares of Common Stock outstanding on the last day of the preceding calendar year; provided that such annual increase shall not exceed 500,000 shares. The increase on January 2, 1996 totaled 85,178 shares. The maximum number of shares which any one individual participating in the Plan may be granted stock options and separately exercisable stock appreciation rights may not exceed 333,334 shares in the aggregate over the term of the Plan. In the event any change is made to the Common Stock issuable under the Plan (by reason of any stock dividend, stock split, combination of shares, recapitalization, or other change affecting the outstanding Common Stock as a class without receipt of consideration), appropriate adjustments will be made to the aggregate number and/or class of securities available for issuance (in the aggregate and to each optionee) under the Plan. ELIGIBILITY The persons eligible to participate in the Plan are limited to (i) employees (including officers), (ii) non-employee members of the Board (other than those serving as members of the Compensation Committee) and (iii) independent consultants of the Company or its parent or subsidiary corporations. Non-employee Board members are also eligible to receive automatic option grants under the Non-Employee Directors Stock Option Plan (the "Directors Plan"). As of September 30, 1996 approximately five executive officers, 37 other employees and two non-employee Board members were eligible to participate in the Plan, and five non-employee Board members were eligible to participate in the Directors Plan. VALUATION For purposes of establishing the option exercise price and for all other valuation purposes under the Plan, the fair market value per share of Common Stock on any relevant date will be the closing selling price per share as reported on the Nasdaq National Market. As of September 30, 1996, the fair market value per share of the Common Stock was $16.50 per share, as reported on the Nasdaq National Market. 9. 14 TERMS OF OPTION GRANT PROGRAM Options may be granted at an exercise price per share not less than eighty five percent (85%) of the fair market value per share of Common Stock on the option grant date. No granted option will have a term in excess of ten years. Upon cessation of service, the optionee will have a limited period of time in which to exercise any outstanding option to the extent such option is exercisable for vested shares. The Plan Administrator will have complete discretion to extend the period following the optionee's cessation of service during which his or her outstanding options may be exercised and/or to accelerate the exercisability or vesting of such options in whole or in part. Such discretion may be exercised at any time while the options remain outstanding, whether before or after the optionee's actual cessation of service. The Plan Administrator is authorized to issue two types of stock appreciation rights in connection with option grants made under Plan: Tandem stock appreciation rights provide the holders with the right to surrender their options for an appreciation distribution from the Company equal in amount to the excess of (a) the fair market value of the vested shares of Common Stock subject to the surrendered option over (b) the aggregate exercise price payable for such shares. Such appreciation distribution may, at the discretion of the Plan Administrator, be made in cash or in shares of Common Stock. Limited stock appreciation rights may be granted to officers of the Company as part of their option grants. Any option with such a limited stock appreciation right in effect for at least six (6) months may be surrendered to the Company upon the successful completion of a hostile take-over of the Company. In return for the surrendered option, the officer will be entitled to a cash distribution from the Company in an amount per surrendered option share equal to the excess of (a) the take-over price per share over (b) the exercise price payable for such share. The Plan Administrator will have the authority to effect the cancellation of outstanding options under the Plan which have exercise prices in excess of the then current market price of Common Stock and to issue replacement options with an exercise price based on the market price of Common Stock at the time of the new grant. GENERAL PROVISIONS Acceleration. In the event that the Company is acquired by merger or asset sale, each outstanding option under the Plan which is not to be assumed by the successor corporation or replaced with a comparable option to purchase shares of the capital stock of the successor corporation will automatically accelerate in full. Any options assumed or replaced in connection with such acquisition will be subject to immediate acceleration, and any unvested shares which do not vest at the time of such acquisition will be subject to full and immediate vesting, in the event the individual's service is subsequently terminated within 18 months following the acquisition. In connection with a hostile change in control of the Company (whether by successful tender offer for more than 50% of the outstanding voting stock or by proxy contest for the election of Board members), the Plan Administrator will have the discretionary authority to provide for automatic acceleration of outstanding options under the Plan either at the time of such change in control or upon the subsequent termination of the individual's service. 10. 15 The acceleration of vesting in the event of a change in the ownership or control of the Company may be seen as an anti-takeover provision and may have the effect of discouraging a merger proposal, a takeover attempt or other efforts to gain control of the Company. Financial Assistance. The Plan Administrator may permit one or more participants to pay the exercise price of outstanding options or the purchase price of shares under the Plan by delivering a promissory note payable in installments. The Plan Administrator will determine the terms of any such promissory note. However, the maximum amount of financing provided any participant may not exceed the cash consideration payable for the issued shares plus all applicable taxes incurred in connection with the acquisition of the shares. Any such promissory note may be subject to forgiveness in whole or in part, at the discretion of the Plan Administrator, over the participant's period of service. Special Tax Election. The Plan Administrator may provide one or more holders of options or unvested shares with the right to have the Company withhold a portion of the shares otherwise issuable to such individuals in satisfaction of the tax liability incurred by such individuals in connection with the exercise of those options or the vesting of those shares. Alternatively, the Plan Administrator may allow such individuals to deliver previously acquired shares of Common Stock in payment of such tax liability. AMENDMENT AND TERMINATION The Board may amend or modify the Plan in any or all respects whatsoever subject to any required stockholder approval. The Board may terminate the Plan at any time, and the Plan will in all events terminate on August 1, 2005. STOCK AWARDS The table below shows, as to each of the Company's executive officers named in the Summary Compensation Table elsewhere in this Proxy Statement and the various indicated individuals and groups, the number of shares of Common Stock subject to options granted under the Plan and the 1992 Plan between July 1, 1995 and September 30, 1996, together with the weighted average exercise price payable per share. The option grants disclosed in the New Plan Benefits table are also included in the following table. 11. 16
OPTION TRANSACTIONS - --------------------------------------------------------------------------------------------------------------- Options Granted Weighted Average Name (Number of Shares) Exercise Price =============================================================================================================== Richard A. Miller, President and Chief Executive Officer 246,667 $11.66 Marc L. Steuer, Vice President, Business Development and Chief Financial Officer 95,000 $13.51 Stuart W. Young, M.D., Vice President, Medical Research 33,334 $7.50 James D. Mutch, Vice President, Regulatory Affairs and Product Development(1) 6,667 $7.50 William C. Dow, Ph.D., Vice President, Chemical Research and Development 67,667 $13.71 Cheryl B. Jaszewski, Vice President, Finance and Administration 43,334 $14.60 All current executive officers as a group (5 persons) 486,002 $12.28 ========================================================================================================== All current non-employee Board members as a group 65,000 $9.23 ========================================================================================================== All employees, including current officers who are not executive officers as a group (29 persons) 144,346 $14.62 ==========================================================================================================
(1) Mr. Mutch resigned from the Company effective as of April 29, 1996. FEDERAL TAX CONSEQUENCES OF OPTIONS Options granted under the Plan may be either incentive stock options which satisfy the requirements of Section 422 of the Internal Revenue Code or non-statutory options which are not intended to satisfy such requirements. The Federal income tax treatment for the two types of options differ as follows: Incentive Options. No taxable income is recognized by the optionee at the time of the option grant, and no taxable income is generally recognized at the time the option is exercised. The optionee will, however, recognize regular taxable income in the year in which the purchased shares are sold or otherwise made the subject of disposition. For Federal tax purposes, dispositions are divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made after the optionee has held the shares for more than two years after the option grant date and more than one year after the exercise date. If either of these two holding periods is not satisfied, then a disqualifying disposition will result. 12. 17 If the optionee makes a disqualifying disposition of the purchased shares, then the Company will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal to the excess of (i) the fair market value of such shares on the option exercise date over (ii) the exercise price paid for the shares. In no other instance will the Company be allowed a deduction with respect to the optionee's disposition of the purchased shares. Non-statutory Options. No taxable income is recognized by an optionee upon the grant of a non-statutory option. The optionee will in general recognize ordinary income in the year in which the option is exercised equal to the excess of the fair market value of the purchased shares at the date of exercise over the exercise price, and the optionee will be required to satisfy the tax withholding requirements applicable to such income. If the shares acquired upon exercise of the non-statutory option are subject to repurchase by the Company, at the original exercise price paid per share, in the event the optionee's service terminates prior to vesting in the shares, then the optionee will not recognize any taxable income at the time of exercise. The optionee will have to report as ordinary income, as and when the Company's repurchase right lapses, an amount equal to the difference between the fair market value of the shares on the date the repurchase right lapses and the option exercise price paid for those shares. The optionee may, however, elect under Section 83(b) of the Internal Revenue Code to include as ordinary income in the year of exercise an amount equal to the difference between the fair market value of the purchased shares on the date of exercise (determined as if the shares were not subject to the Company's repurchase right) and the option exercise price paid for the shares. If the Section 83(b) election is made, the optionee will not recognize any additional income as and when the Company's repurchase right lapses. The Company will be entitled to a business expense deduction equal to the amount of ordinary income recognized by the optionee in connection with the exercise of the non-statutory option. The deduction will in general be allowed for the taxable year of the Company in which such ordinary income is recognized by the optionee. Stock Appreciation Rights. An optionee who is granted a stock appreciation right will recognize ordinary income in the year of exercise equal to the amount of the appreciation distribution. The Company will be entitled to an income tax deduction equal to such distribution for the taxable year in which the ordinary income is recognized by the optionee. Deductibility of Executive Compensation. The Company anticipates that any compensation deemed paid by it in connection with disqualifying dispositions of incentive stock option shares or exercises of non-statutory options granted with exercise prices equal to the fair market value of the shares on the grant date will qualify as performance-based compensation for purposes of Code Section 162(m) and will not have to be taken into account for purposes of the $1 million limitation per covered individual on the deductibility of the compensation paid to certain executive officers of the Company. ACCOUNTING TREATMENT Option grants or stock issuances with exercise or issue prices less than the fair market value of the shares on the grant or issue date will result in a compensation expense to the Company's earnings equal to the difference between the exercise or issue price and the fair market value of the shares on the grant or issue date. Such expense will be accruable by the Company over the period that the option shares or issued shares are to vest. Option grants or stock issuances at 100% of fair market value will not result in any charge to the Company's earnings, but the Company must disclose, in pro-forma statements to the Company's financial statements, the impact those options would have upon the Company's reported earnings were the value of those options at the time of grant treated as compensation expense. Whether or not granted at a discount, the number of outstanding options may be a factor in determining the Company's earnings per share on a fully-diluted basis. 13. 18 Should one or more optionees be granted stock appreciation rights which have no conditions upon exercisability other than a service or employment requirement, then such rights will result in compensation expense to the Company's earnings. In May 1996, the Company granted options to purchase 211,000 shares of Common Stock at $17.75 (the then fair market value of such shares) per share to the Named Executive Officers. Subsequent to June 30, 1996, the Company granted an option to purchase 15,000 shares of Common Stock at $18.25 (the then fair market value of such shares) per share to one of the Named Executive officers. All such option grants are subject to stockholder approval at the Annual meeting. As a result, the Company will be required to record compensation expense in the event the fair market value of the Company's common stock on the date of the Annual Meeting exceeds the exercise price of the respective stock options, in an amount equal to such difference multiplied by the number of shares subject to such option and recognized on a straight-line basis over the vesting period of the option, generally five years. STOCKHOLDER APPROVAL The affirmative vote of a majority of the outstanding voting shares of the Company present or represented and entitled to vote at the Annual Meeting is required for approval of the amendment to the Plan which will increase the maximum number of shares of Common Stock authorized for issuance over the term of the Plan by an additional 750,000 shares. Should such stockholder approval not be obtained, then the 750,000-share increase to the share reserve will not be implemented, and any stock options granted on the basis of such 750,000-share increase will immediately terminate without becoming exercisable for the shares of Common Stock subject to those options. No additional options will be granted on the basis of such share increase, and the Plan will terminate as to future issuances once the existing share reserve as last approved by the stockholders has been issued. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN. NEW PLAN BENEFITS On May 29, 1996, option grants were made to Richard A. Miller, William C. Dow, Cheryl B. Jaszewski and Marc L. Steuer for 100,000, 41,000, 30,000 and 40,000 shares, respectively, with an exercise price of $17.75 per share. In addition, on September 19, 1996, an option grant was made to Marc L. Steuer for 15,000 shares with an exercise price of $18.25. Each of these option grants is subject to stockholder approval of this Proposal Three and will not become exercisable for any of such option shares unless such stockholder approval is obtained. The following table shows, as to each of the Named Executive Officers, and the various indicated groups, the number of shares of Common Stock subject to options granted under the Plan, assuming the 750,000-share increase which the stockholders are being asked to approve under this Proposal Three and the average exercise price payable per share for such options. The option grants disclosed in the following table are also included in the Stock Awards table above. 14. 19
Weighted Number of Average Name Option Shares Exercise Price Richard A. Miller, M.D., President and Chief Executive Officer 100,000 $17.75 Mark L. Steuer, Vice President, Business Development and Chief Financial Officer 55,000 $17.89 William C. Dow, Ph.D., Vice President, Chemical Research and Development 41,000 $17.75 Cheryl B. Jaszewski, Vice President, Finance and Administration 30,000 $17.75 All current executive officers as a group (5 persons) 226,000 $17.78
15. 20 PROPOSAL FOUR - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS The Board has appointed the firm of Price Waterhouse LLP, independent accountants, to audit the financial statements of the Company for the fiscal year ending June 30, 1997, and is asking the stockholders to ratify this appointment. In the event the stockholders fail to ratify the appointment, the Board will reconsider its selection. Even if the selection is ratified, the Board in its discretion may direct the appointment of a different independent accounting firm at any time during the year if the Board feels that such a change would be in the best interest of the Company and its stockholders. The affirmative vote of the holders of a majority of the Company's Common Stock present or represented by Proxy at the Annual Meeting and entitled to vote is required to ratify the selection of Price Waterhouse LLP. Price Waterhouse LLP has served as independent auditors to the Company for the fiscal year ended June 30, 1996. A representative of Price Waterhouse LLP is expected to be present at the Annual Meeting to respond to appropriate questions, and will be given the opportunity to make a statement if he or she so desires. THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP TO SERVE AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE 30, 1997. 16. 21 EXECUTIVE COMPENSATION AND OTHER INFORMATION SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following table sets forth certain compensation earned during the fiscal year ended June 30, 1996, for services rendered in all capacities to the Company and its subsidiaries, by (i) the Company's Chief Executive Officer, (ii) the four other highest paid executive officers whose salary and bonus for fiscal 1996 were in excess of $100,000 and (iii) one other executive officer who resigned during that fiscal year. The individuals named in the table will be hereinafter referred to as the "Named Executive Officers." SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ANNUAL AWARDS COMPENSATION SECURITIES UNDERLYING ALL OTHER SALARY(1) OPTIONS(2) COMPENSATION ------------ --------------------- ------------ NAME AND PRINCIPAL POSITION Richard A. Miller, M.D $215,865 246,667 $ -- President and Chief Executive Officer Marc L. Steuer(3) 181,827 80,000 -- Vice President, Business Development and Chief Financial Officer Stuart W. Young, M.D 160,303 33,334 -- Vice President, Medical Research James D. Mutch(4) 134,870 6,667 8,000 Vice President, Regulatory Affairs and Product Development William C. Dow, Ph.D 130,098 67,667 -- Vice President, Chemical Research and Development Cheryl B. Jaszewski 110,375 43,334 -- Vice President, Finance and Administration
(1) Includes amounts earned but not paid in the fiscal year ended June 30, 1996. (2) Includes options to purchase Common Stock to the Named Executive Officers: Richard A. Miller, 100,000; William C. Dow, 41,000; Marc L. Steuer, 40,000 and Cheryl B. Jaszewski, 30,000 which are subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. 17. 22 (3) Subsequent to June 30, 1996, the Company issued an option to purchase 15,000 shares of Common Stock to Marc L. Steuer. Such option is subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. (4) Mr. Mutch resigned from the Company effective as of April 29, 1996 and currently serves the Company as a part-time consultant in the area of regulatory affairs. The amount reported under "Other Compensation" for fiscal 1996 represents consulting fees earned by Mr. Mutch since the date of his resignation. STOCK OPTIONS, EXERCISES AND HOLDINGS The following table provides certain information regarding stock options granted to the Named Executive Officers during the fiscal year ended June 30, 1996. Except for the limited stock appreciation rights described in footnote (1) below, no stock appreciation rights were granted during such fiscal year to the Named Executive Officers. OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Individual Grants Option Term(6) - -------------------------------------------------------------------------------------------------------------------------- Number of Securities Percentage of Underlying Total Options Exercise Options Granted Granted to Price per Expiration Name (#)(1)(2)(3) Employees(4) Share(5) Date 5% 10% - -------------------------------------------------------------------------------------------------------------------------- Richard A. Miller, M.D 146,667 23.4% $ 7.50 08/01/05 $ 691,786 $1,753,121 100,000(8) 15.9% $ 17.75 05/28/06 $1,116,288 $2,828,893 Marc L. Steuer 40,000 6.4% $ 7.50 08/01/05 $ 188,668 $ 478,123 40,000(8) 6.4% $ 17.75 05/28/06 $ 446,515 $1,131,557 Stuart W. Young, M.D 33,334 5.3% $ 7.50 08/01/05 $ 157,227 $ 398,444 James D. Mutch(7) 6,667 1.1% $ 7.50 08/01/05 $ 31,446 $ 79,691 William C. Dow, Ph.D 26,667 4.2% $ 7.50 08/01/05 $ 125,780 $ 318,752 41,000(8) 6.5% $ 17.75 05/28/06 $ 457,678 $1,159,846 Cheryl B. Jaszewski 13,334 2.1% $ 7.50 08/01/05 $ 62,892 $ 159,382 30,000(8) 4.8% $ 17.75 05/28/06 $ 334,886 $ 848,668 ==========================================================================================================================
(1) Each option includes a limited stock appreciation right that allows the optionee to surrender his or her option with such a right in effect for six months, to the extent exercisable for vested shares of Common Stock, upon the successful completion of a hostile tender offer for more than 50% of the Company's outstanding securities. In return, the optionee will be entitled to a cash distribution from the Company in an amount per surrendered option share equal to the highest price per share of Common Stock paid in the tender offer less the exercise price payable per share. (2) Subsequent to June 30, 1996, the Company issued an option to purchase 15,000 shares of Common Stock to Marc L. Steuer. Such option is subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. 18. 23 (3) The dates on which the options were granted are as follows:
Name Number Shares Grant Date ---- ------------- ---------- Richard A. Miller, M.D. 146,667 08/02/95 100,000 05/29/96 Marc L. Steuer 40,000 08/02/95 40,000 05/29/96 Stuart W. Young, M.D. 33,334 08/02/95 James D. Mutch 6,667 08/02/95 William C. Dow, Ph.D. 26,667 08/02/95 41,000 05/29/96 Cheryl B. Jaszewski 13,334 08/02/95 30,000 05/29/96
The option for 146,667 shares granted to Dr. Miller on August 2, 1995 vests in 60 equal successive monthly installments; 93,334 shares were immediately exercisable as of the grant date, an additional 13,334 shares were exercisable on January 1, 1996, an additional 13,333 shares will become exercisable on January 1, 1997, an additional 13,333 shares will become exercisable on January 1, 1998 and the remaining 13,333 shares will become exercisable on January 1, 1999. The 100,000 share option granted to Dr. Miller on May 29, 1996 vests in 60 equal monthly installments. The option is, however, subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. If such stockholder approval is granted, the option will become immediately exercisable. The option for 40,000 shares granted to Mr. Steuer on August 2, 1995 vests in 60 equal successive monthly installments. Such option is immediately exercisable in its entirety. The 40,000 share option granted to Mr. Steuer on May 29, 1996 vests over 60 months as follows: (i) 5,000 shares vest in successive equal monthly installments over each of the first, second, third and fourth years of Mr. Steuer's service with the Company and (ii) 20,000 shares shall vest in successive equal monthly installments over the fifth year of Mr. Steuer's service with the Company. The option is, however, subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. If such stockholder approval is granted, the option will become immediately exercisable. The option granted to Dr. Young vests in 60 equal successive monthly installments, 13,334 shares were immediately exercisable as of the grant date, an additional 13,334 shares became exercisable on January 1, 1996 and the remaining 6,666 shares will become exercisable on January 1, 1997. The option granted to Mr. Mutch was to vest in 60 equal successive monthly installments. Such option was immediately exercisable in its entirety. However, in connection with Mr. Mutch's resignation, the unvested shares subject to such stock option accelerate and become exercisable in 12 equal monthly installments measured from May 30, 1996. The option for 26,667 shares granted to Dr. Dow on August 2, 1995 vests in 60 equal successive monthly installments, 13,334 shares were immediately exercisable as of the grant date and the remaining 13,333 shares became exercisable on January 1, 1996. The 41,000 share option granted to Dr. Dow on May 29, 1996 vests as follows: (i) 5,000 shares vest in 12 successive equal monthly installments with the first such installment vesting on January 31, 1997; (ii) 10,000 shares vest in 12 successive equal monthly installments with the first such installment vesting on January 31, 1998 and (iii) 26,000 shares vest in 24 successive equal monthly installments with the first such installment vesting on January 31, 1999. The option is, however, subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. If such stockholder approval is granted, the option will become immediately exercisable. The option for 13,334 shares granted to Ms. Jaszewski on August 2, 1995 vests in 60 equal successive monthly installments. Such option is immediately exercisable in its entirety. The 30,000 share option granted to Ms. Jaszewski on May 29, 1996 vests as follows: (i) 12,000 shares vest in 24 successive equal monthly installments with the first such installment vesting on January 31, 1997 and (ii) 18,000 shares vest in 24 successive equal monthly installments with the first such installment vesting on January 31, 1999. 19. 24 The option is, however, subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. If such stockholder approval is granted, the option will become immediately exercisable. Each of the granted options will immediately become exercisable for all of the option shares in the event the Company is acquired by a merger or asset sale, unless the options are assumed by the acquiring entity. Any assumed options granted under the Plan will accelerate and assigned repurchase rights will terminate upon the optionee's involuntary termination within 18 months following the acquisition. The Plan Administrator also has discretion to provide for the acceleration of one or more outstanding options assumed upon a merger, consolidation or asset sale. Furthermore, the Plan Administrator also has discretion to provide for the acceleration of one or more outstanding options under the Plan (including options incorporated from the 1992 Plan) and the vesting of shares subject to outstanding options upon the occurrence of certain hostile tender offers. Such accelerated vesting may be conditioned upon the subsequent termination of the affected optionee's service. The Plan Each option has a maximum term of ten years, subject to earlier termination in the event of the optionee's cessation of service with the Company. (4) Based on an aggregate of approximately 628,046 options granted to employees in fiscal 1996, including options granted to the Named Executive Officers. (5) The exercise price may be paid in cash, in shares of the Company's Common Stock valued at fair market value on the exercise date or through a cashless exercise procedure involving a same day sale of the purchased shares. The Company may also finance the option exercise by loaning the optionee sufficient funds to pay the exercise price for the purchased shares and the federal and state income or employment tax liability incurred by the optionee in connection with such exercise. The optionee may be permitted, subject to the approval of the Plan Administrator, to apply a portion of the shares purchased under the option (or to deliver existing shares of Common Stock) in satisfaction of such tax liability. The Plan Administrator has the discretionary authority to reprice outstanding options under the Plan through the cancellation of those options and the grant of replacement options with an exercise price equal to the lower fair market value of the option shares on the regrant date. (6) Potential realizable value is based on the assumption that the price per share of Common Stock appreciates at the assumed annual rate of stock appreciation for the option term. The assumed 5% and 10% annual rates are set forth in accordance with the rules and regulations adopted by the Securities and Exchange Commission and do not represent the Company's estimate of stock price appreciation. There can be no assurance that the assumed 5% and 10% annual rates of appreciation (compounded annually) will actually be realized over the term of the option. Unless the market price of the Common Stock appreciates over the option term, no value will be realized from the option grants made to the executive officers. (7) Mr. Mutch resigned from the Company effective as of April 29, 1996, and currently serves the Company as a part-time consultant in the area of regulatory affairs. (8) Options are subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. 20. 25 OPTION HOLDINGS The table below sets forth certain information concerning the exercise of options during the fiscal year ending June 30, 1996 by the Named Executive Officers and unexercised options held as of the end of such year by such individuals. No stock appreciation rights were exercised by the Named Executive Officers during such fiscal year, and, except to the extent described in footnote (1) to the Option Grants table above, no stock appreciation rights were held by such individuals at the end of such fiscal year. AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND 1996 FISCAL YEAR-END OPTION VALUES
No. of Securities Underlying Unexercised Value of Unexercised Options at Fiscal Year In-the-Money Options at End Fiscal Year End(1) Shares ----------------------------------------------------------- Acquired on Value Exercis- Unexercis- Exercis- Unexercis- Name Exercise Realized able(2) able able able - --------------------------------------------------------------------------------------------------------------------------------- Richard A. Miller, M.D. -- -- 206,668 39,999 1,067,514 404,990 Marc L. Steuer -- -- 173,334 -- 1,695,009 -- Stuart W. Young, M.D. -- -- 44,668 6,666 578,489 67,493 James D. Mutch(3) 20,000 $249,999 -- -- -- -- William C. Dow, Ph.D. -- -- 114,334 -- 2,015,137 -- Cheryl B. Jaszewski -- -- 53,334 -- 270,007 -- =================================================================================================================================
(1) Determined by subtracting the exercise price from the market price of the Common Stock on June 28, 1996 ($17.625). (2) Includes options to purchase Common Stock to the Named Executive Officers: Richard A. Miller, 100,000; William C. Dow, 41,000; Marc L. Steuer, 40,000 and Cheryl B. Jaszewski, 30,000 which are subject to stockholder approval of an increase in the number of shares authorized for grant under the Plan. (3) Mr. Mutch resigned from the Company effective as of April 29, 1996, and currently serves the Company as a part-time consultant in the area of regulatory affairs. EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS In May 1992, the Company entered into an employment letter agreement with William C. Dow, which remains in effect unless and until terminated by either the Company or Dr. Dow at any time and for any reason, with or without cause. During the fiscal year ended June 30, 1996, the Company paid Dr. Dow $130,098 under the agreement. In June 1992, the Company entered into an employment agreement with Richard A. Miller which either party may terminate at any time upon 90 days' prior written notice of an intent to terminate. During the fiscal year ended June 30, 1996, the Company paid Dr. Miller $215,865 under the agreement. 21. 26 In August 1992, the Company entered into an employment agreement with James D. Mutch which was terminated on April 29, 1996 when he left the employ of the Company and became a part-time consultant to the Company. During the fiscal year ended June 30, 1996, the Company paid Mr. Mutch $134,870 under the agreement. In October 1992, the Company entered into an employment agreement with Cheryl B. Jaszewski, which remains in effect unless and until terminated by either the Company or Ms. Jaszewski at any time and for any reason, with or without cause. During the fiscal year ended June 30, 1996, the Company paid Ms. Jaszewski $110,375 under the agreement. In April 1993, the Company entered into an employment agreement with Stuart W. Young which either party may terminate at any time upon 30 days written notice of intent to terminate. If Dr. Young is terminated without cause by the Company during the second or third year of employment, the Company is obligated to compensate Dr. Young with his salary as severance pay for one year after termination. During the fiscal year ended June 30, 1996, the Company paid Dr. Young $160,303 under the agreement. In October 1994, the Company entered into an employment agreement with Marc L. Steuer, which remains in effect unless and until terminated by either the Company or Mr. Steuer at any time and for any reason, with or without cause. If Mr. Steuer is discharged without cause during the first two years of employment, the Company is obligated to compensate Mr. Steuer with six months of severance benefits and pay. During the fiscal year ended June 30, 1995, the Company paid Mr. Steuer $181,827 under the agreement. In April 1996, the Company entered into a consulting agreement with James D. Mutch, which remains in effect until April 27, 1997. Under the terms of the agreement, Mr. Mutch was to be paid a monthly consulting fee of $4,000 for a period of five months and the vesting of the options held by Mr. Mutch were also accelerated. Under the Plan, the Plan Administrator has the authority to accelerate outstanding options in the event of certain changes in control of the Company. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Effective October 23, 1995 (the date of the Company's initial public offering), decisions on compensation matters relating to the Company's President and Chief Executive Officer, Richard A. Miller, and the Company's other executive officers are generally made by the Compensation Committee. The Compensation Committee also administers the Company's 1995 Stock Option Plan (the "Plan") under which grants may be made to executive officers and other key employees. The Compensation Committee has furnished the following report on the compensation established for Dr. Miller and the Company's other executive officers for the period from October 23, 1995 to June 30, 1996. Prior to October 23, 1995, executive officer compensation was determined by the Board and/or a committee comprised of Dr. Miller and Messrs. Lacob and Latterell. It is the Compensation Committee's understanding that they used criteria similar to those described below in determining officer compensation. The Compensation Committee set the compensation payable to Dr. Miller for the 12-month period ending April 30, 1997. Dr. Miller in turn recommended, subject to the Compensation Committee's review and approval, the compensation to be paid for such 12-month period to the Company's other executive officers. For those executive officers, the Compensation Committee had previously established performance factors to be considered by Dr. Miller in making his recommendations with respect to the compensation level to be in effect for each such officer. Dr. Miller provided the Compensation Committee with his evaluation of the performance of each officer with respect to those factors and his recommendation as to the compensation to be paid to that individual on the basis of such performance. The Compensation Committee reviewed and approved the recommendations of Dr. Miller. General Compensation Policy. The Compensation Committee's overall policy as to executive compensation is to ensure that an appropriate relationship exists between the total compensation package established for each executive officer and the creation of stockholder value, while at the same time assuring that compensation is sufficiently competitive to motivate and retain key executives. In furtherance of this goal, executive compensation 22. 27 is structured so as to integrate competitive levels of annual base salary with discretionary stock options based upon individual and corporate performance. This annual cash compensation, together with the payment of equity incentives in the form of stock option grants, is designed to attract and retain qualified executives and to ensure that such executives have a continuing stake in the long-term success of the Company. For fiscal year 1996, each executive officer's compensation package was comprised of two elements: (i) a base salary that reflects individual performance and is designed primarily to be competitive with salary levels paid by a peer group of companies in the industry with which the Company competes for executive talent and (ii) long-term stock- based incentives designed to strengthen the mutuality of interests between the executive officers and the Company's stockholders. Factors. Since the Company is in the development stage, the use of traditional performance standards (such as profit levels and return on equity) are not appropriate in evaluating the performance of the executive officers. In particular, the unique nature of the biotechnology industry, specifically the absence of revenues and the fact that the Company's stock performance is often more a consequence of larger market forces than of actual Company achievements, makes it impossible to tie performance objectives to standard financial considerations. The primary factors which were considered in establishing the components of each executive officer's compensation package for the 1996 fiscal year are summarized below. The Compensation Committee may, however, in its discretion apply entirely different factors, such as different measures of strategic performance, for future fiscal years. - BASE SALARY. When establishing or reviewing base compensation levels for each executive officer, the Committee considers numerous factors, including the qualifications of the executive and his or her level of relevant experience, strategic goals for which the executive has responsibility, specific accomplishments of the executive during the last fiscal year and the compensation levels in effect at companies in the Company's industry which compete with the Company for business and executive talent. Base salaries are reviewed annually, and adjustments to each executive officer's base salary are made to reflect individual performance and salary increases effected by the peer group companies. A major objective, accordingly, is to have base salary levels commensurate with those of comparable positions with the peer group companies, given the level of seniority and skills possessed by the executive officer in question and the Committee's assessment of such executive's performance over the year. - LONG-TERM INCENTIVE COMPENSATION. The Compensation Committee has the authority under the Plan to provide executives and other key employees with equity incentives primarily in the form of stock option grants. Generally, the size of each option grant is set at a level which the Compensation Committee deems appropriate to create a meaningful opportunity for stock ownership based upon the individual's current position with the Company, but there is also taken into account comparable awards made to individuals in similar positions in the industry, as reflected in external surveys, the individual's potential for future responsibility and promotion and the individual's performance in the recent period. The Compensation Committee has also established general guidelines for maintaining the unvested option holdings of each executive officer at a targeted level based upon his or her position with the Company, and option grants are periodically made to maintain the targeted levels. However, the Committee does not strictly adhere to these guidelines, and the relative weight given to each of the foregoing factors varies from individual to individual as the Compensation Committee deems appropriate under the circumstances. The grants are designed to align the interests of the executive officer with those of the stockholders and provide each individual with a significant incentive to manage the Company from the perspective of an owner with an equity stake in the business. Each grant allows the officer to acquire shares of Common Stock at a fixed price per share (the market price on the grant date) over a specified period (up to ten years). The option will vest in periodic installments over a five-year period, contingent upon the executive officer's continued employment with the Company. Accordingly, the option will provide a return to the executive officer only if he or she remains in the Company's employ, and then only if the market price appreciates over the option term. 23. 28 CEO Compensation. In setting the compensation payable for the 1996 fiscal year to the Company's President and Chief Executive Officer, Richard A. Miller, the Committee reviewed a detailed performance evaluation compiled for Dr. Miller. Such review considered Dr. Miller's qualifications, the level of experience brought to his position and gained while in the position, Company goals for which Dr. Miller had responsibility, specific accomplishments to date, and the importance of Dr. Miller's individual achievement in meeting Company goals and objectives set during the prior fiscal year. In addition, the Compensation Committee surveyed the salary levels in effect for chief executive officers at the peer group companies which were taken into account for comparative compensation purposes for all of the Company's other executive officers. In determining Dr. Miller's compensation level, the Committee sought to establish a competitive rate of base salary, while at the same time tying a significant percentage of his overall compensation package to individual and Company performance, such as the attainment of certain milestones in the testing of clinical products, the successful completion of the Company's initial public offering and stock price appreciation. Based on these factors, the Committee increased Dr. Miller's base salary level to $225,000. The level of base salary set for Dr. Miller was in the 18th percentile of the surveyed salary for comparable companies. In fiscal 1996, the Company also granted Dr. Miller options to purchase 146,667 and 100,000 shares of the Company's Common Stock under the Plan, at exercise prices of $7.50 and $17.75 per share, respectively. The grant was intended to provide Dr. Miller with a meaningful incentive to continue in the Company's employ and contribute to the Company's financial success, as reflected in the future appreciation in the market price of the Company's Common Stock. COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M) Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to publicly held companies for compensation exceeding $1 million paid to certain of the corporation's executive officers. The limitation applies only to compensation which is not considered to be performance-based. The non-performance based compensation to be paid to the Company's executive officers for the 1996 fiscal year did not exceed the $1 million limit per officer, nor is it expected that the non-performance based compensation to be paid to the Company's executive officers for fiscal 1997 will exceed that limit. The Plan is structured so that any compensation deemed paid to an executive officer in connection with the exercise of option grants made under that plan with an exercise price equal to the fair market value of the option shares on the grant date will qualify as performance-based compensation which will not be subject to the $1 million limitation. Because it is very unlikely that the cash compensation payable to any of the Company's executive officers in the foreseeable future will approach the $1 million limit, the Compensation Committee has decided at this time not to take any other action to limit or restructure the elements of cash compensation payable to the Company's executive officers. The Compensation Committee will reconsider this decision should the individual compensation of any executive officer ever approach the $1 million level. The above report is submitted by the Compensation Committee of the Company's Board of Directors. Joseph S. Lacob Patrick F. Latterell Craig C. Taylor 24. 29 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION As of June 30, 1996, the Compensation Committee of the Board was comprised of Messrs. Lacob, Latterell and Taylor. Dr. Miller was a member of the Compensation Committee from November 5, 1992 until August 2, 1995. No executive officer of the Company served on the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of the Company's Board or Compensation Committee. PERFORMANCE GRAPH The graph depicted below shows the Company's stock price as an index assuming $100 invested on October 23, 1995 (the date of the Company's initial public offering) at the then current market price of $12.00 per share, along with the composite prices of companies listed in the Nasdaq Pharmaceutical Index and Nasdaq Total U.S. Stock Market Index. This information has been provided to the Company by the Nasdaq Stock Market. COMPARISON OF 8 MONTH CUMULATIVE TOTAL RETURN* AMONG PHARMACYCLICS, INC., THE NASDAQ STOCK MARKET-US INDEX AND THE NASDAQ PHARMACEUTICAL INDEX RESEARCH TOTAL RETURN-DATA SUMMARY PCYC
CUMULATIVE TOTAL RETURN ------------------------------------- 10/24/95 6/96 PHARMACYCLICS INC PCYC 100 147 NASDAQ STOCK MARKET - US INAS 100 115 NASDAQ PHARMACEUTICAL INAP 100 125
* $100 invested on 10/24/95 in stock or index - including reinvestment of dividends. Fiscal Year ending June 30. Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, which might incorporate future filings made by the Company under those statutes, the preceding Compensation Committee Report on Executive Compensation and the Company Stock Performance Graph will not be incorporated by reference into any of those prior filings, nor will such report or graph be incorporated by reference into any future filings made by the Company under those statutes. 25. 30 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company's Restated Certificate of Incorporation and Bylaws provide for indemnification of directors, officers and other agents of the Company. Each of the current directors, and certain officers and agents of the Company have entered into separate indemnification agreements with the Company. In June 1994 and July 1995, the Company issued, in private placement transactions, 1,536,092 shares of Series C Preferred Stock at $8.63 per share. An aggregate of 526,753 shares of such Series C Preferred Stock were issued in exchange for $3.0 million in principal amount of Convertible Promissory Notes, accrued interest thereon and $2.6 million in cash. These Notes were purchased by persons and entities associated with Kleiner Perkins Caufield & Byers ("Kleiner Perkins"), Asset Management Associates 1989, L.P. ("Asset Management"), Venrock Associates ("Venrock"), and Mayfield VII prior to the July 1995 portion of the Series C financings. All of such shares of Series C Preferred Stock automatically converted into an aggregate of 1,536,092 shares of Common Stock upon the closing of the Company's initial public offering. In addition, the Company issued warrants to purchase Series C Preferred Stock in connection with these financings. The following table summarizes the shares of Series C Preferred Stock purchased by and warrants issued to executive officers, directors and five percent stockholders of the Company and persons associated with them in the July 1995 financing.
Shares of Series C Series C Investor Preferred Stock Warrants Thomas D. Kiley............................................................. 11,594 -- Kleiner Perkins(1).......................................................... 328,090 28,839 Asset Management(2)......................................................... 222,564 20,038 Venrock(3).................................................................. 268,634 23,629
(1) Includes shares held by Kleiner Perkins Caufield & Byers V. Joseph S. Lacob, a Director of the Company, is a general partner of Kleiner Perkins Caufield & Byers. (2) Craig C. Taylor, a Director of the Company, is a general partner of AMC Partners 89, L.P., the general partner of Asset Management. (3) Includes shares held by both Venrock Associates and Venrock Associates II. Patrick F. Latterell, a Director of the Company, is a general partner of Venrock Associates and Venrock Associates II. Holders of certain shares of the Company's Preferred Stock and Common Stock, including certain of its officers, directors and principal stockholders and related investment funds, are entitled to certain registration rights in respect of the Common Stock which have been issued upon conversion thereof. The Company has entered into a Patent License Agreement with Dr. Stuart W. Young, dated October 15, 1992, pursuant to which the Company has been granted an exclusive royalty-bearing license to use and to manufacture and sell products based on certain patent rights owned by Dr. Young related to certain zeolite and zeolite-like substances. In consideration for entering into the Patent License Agreement, the Company issued Dr. Young 16,667 shares of its Common Stock. In September 1994, the Company entered into a Note Secured by Stock Pledge Agreement (the "First Note") with Dr. Stuart W. Young, an executive officer of the Company, for the total principal amount of approximately $65,000. The First Note bears interest at 5.86%, with interest payable annually and principal due in full on August 31, 1997. In April 1995, the Company loaned Dr. Young approximately an additional $30,000 under a similar Note Secured by Stock Pledge Agreement (the "Second Note"). The Second Note bears interest at 7.19%, with principal and interest due in full on February 28, 1998. The proceeds of such Notes were to be used solely to pay federal and state tax liability incurred by Dr. Young in connection with his acquisition of 50,000 shares 26. 31 of Common Stock pursuant to his exercise of a non-statutory stock option grant under the Company's 1992 Stock Option Plan. The Company believes that all of the transactions set forth above were made on terms no less favorable to the Company than could have been obtained from unaffiliated third parties. COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who beneficially own more than 10% of a registered class of the Company's equity securities, to file with the United States Securities and Exchange Commission (the "SEC") initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such forms furnished to the Company and written representations that no other reports were required, the Company believes that during the period from October 23, 1995 (the effective date of the Company's initial public offering) to June 30, 1996, all officers, directors and beneficial owners of more than ten percent of the outstanding Common Stock complied with all Section 16(a) requirements. STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS The following table sets forth certain information known to the Company with respect to the beneficial ownership of the Common Stock as of September 30, 1996 by (i) all persons who are beneficial owners of five percent or more of the Company's Common Stock, (ii) each director and nominee for director, (iii) the Named Executive Officers in the Summary Compensation Table above and (iv) all current directors and executive officers as a group. The number of shares beneficially owned by each director or executive officer is determined under rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Shares of Common Stock subject to convertible securities that are currently exercisable or convertible or which will become exercisable or convertible within the next 60 days are deemed to be beneficially owned by the person holding such convertible security for computing the percentage ownership of such person, but are not treated as outstanding for computing the percentage of any other person. Except as otherwise indicated, the Company believes that the beneficial owners of the Common Stock listed below, based upon such information furnished by such owners, have sole investment power with respect to such shares, subject to community property laws where applicable. 27. 32
NUMBER PERCENT OF TOTAL NAME AND ADDRESS OF SHARES SHARES OUTSTANDING(1)(2) ---------------- --------- ----------------------- Kleiner Perkins Caufield & Byers V(3)........................ 1,515,187 17.6% 2750 Sand Hill Road Menlo Park, CA 94025 Venrock Associates(4)........................................ 1,239,289 14.4% 30 Rockefeller Plaza, Suite 5508 New York, NY 10112 Asset Management Associates 1989, L.P.(5).................... 1,189,628 13.8% 2275 East Bayshore, Suite 150 Palo Alto, CA 94303 Richard A. Miller, M.D.(6)................................... 452,343 5.2% Integral Capital Partners II, L.P.(7)........................ 563,258 6.6% 2750 Sand Hill Road Menlo Park, CA 94025 Thomas D. Kiley(8)........................................... 146,576 1.7% Patrick F. Latterell(9)...................................... 1,239,289 14.4% Joseph S. Lacob (10)......................................... 1,515,187 17.6% Craig C. Taylor(11).......................................... 1,189,628 13.8% Joseph C. Scodari(12)........................................ 21,667 * Marc L. Steuer(13)........................................... 133,334 1.5% William C. Dow, Ph.D.(14).................................... 110,001 1.3% Stuart W. Young, M.D.(15).................................... 163,334 1.9% Cheryl B. Jaszewski(16)...................................... 60,556 * All officers and directors as a group (10 persons)(17)....... 5,056,361 55.2%
* Less than 1%. (1) Percentage of beneficial ownership is calculated assuming 8,554,750 shares of Common Stock were outstanding as of September 30, 1996. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of September 30, 1996, are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock beneficially owned. (2) This table is based upon information supplied to the Company by executive officers, directors and principal stockholders. The address of each officer and director identified in this table is that of the Company's executive offices, 995 East Arques Avenue, Sunnyvale, CA 94086. Unless otherwise indicated in the footnotes to this table and subject to applicable community property laws, each of the stockholders named in this table has sole voting and investment power with respect to the shares shown as beneficially owned by it or him. (3) Includes shares held by persons and entities affiliated with Kleiner Perkins, including 31,667 shares held by Joseph Lacob, a Director of the Company, who is a General Partner of Kleiner Perkins. Mr. Lacob disclaims beneficial ownership of the shares held by Kleiner Perkins and its affiliated entities except to the extent of his individual share ownership and his pecuniary interest arising from his general partnership 28. 33 interest in Kleiner Perkins. Also, includes options exercisable for 15,000 shares held by Mr. Lacob and warrants exercisable for 28,839 shares held by Kleiner Perkins. (4) Includes shares held by persons and entities affiliated with Venrock, including 16,667 shares held by Patrick Latterell, a Director of the Company, who is a General Partner of Venrock. Mr. Latterell disclaims beneficial ownership of the shares held by Venrock and its affiliated entities except to the extent of his individual share ownership and his pecuniary interest arising from his general partnership interest in Venrock. Also, includes options exercisable for 15,000 shares held by Mr. Latterell and warrants exercisable for 23,629 shares held by Venrock. (5) Includes shares held by entities affiliated with Asset Management, including options exercisable for 15,000 shares held by Craig Taylor, a Director of the Company, who is a General Partner of AMC Partners 89, L.P., the general partner of Asset Management. Mr. Taylor disclaims beneficial ownership of the shares held by Asset Management and its affiliated entities except to the extent of his individual share ownership and his pecuniary interest arising from his general partnership interest in AMC Partners 89, L.P. Also includes warrants exercisable for 20,038 shares held by Asset Management. (6) Includes 13,334, 13,334, and 279,008 shares held in trust for Jordan Andrew Miller, Jared David Miller and the Miller-Homing Family Trust, respectively. Also, includes options exercisable for 146,667 shares within 60 days of September 30, 1996. (7) Includes shares held by entities affiliated with Integral Capital Partners II, L.P. and warrants exercisable for 20,518 shares within 60 days of September 30, 1996. (8) Includes 131,576 shares held in the Kiley Revocable Trust, Thomas D. Kiley, TEE, Nancy L. Kiley, TEE. Also, includes options exercisable for 15,000 shares within 60 days of September 30, 1996. (9) Includes 16,667 shares held in trust by the Patrick Latterell Living Trust and options exercisable for 15,000 shares. Also includes 1,207,622 shares (including warrants for 23,629 shares) held by persons and entities affiliated with Venrock, as to which shares Mr. Latterell disclaims beneficial ownership except as set forth in Note 4 above. (10) Includes options exercisable for 15,000 shares. Also includes 1,468,520 shares (including warrants for 28,839 shares) held by persons and entities affiliated with Kleiner Perkins, as to which shares Mr. Lacob disclaims beneficial ownership except as set forth in Note 3 above. (11) Includes options exercisable for 15,000 shares. Also includes 1,174,628 shares (including warrants for 20,038 shares) held by persons and entities affiliated with Asset Management, as to which shares Mr. Taylor disclaims beneficial ownership except as set forth in Note 5 above. (12) Represents options exercisable for 21,667 shares. (13) Represents options exercisable for 133,334 shares. (14) Includes options exercisable for 73,334 shares. (15) Includes options exercisable for 51,334 shares. (16) Includes 334 and 667 shares held by Kristina Hulett and Randall Hulett, respectively. Also, includes options exercisable for 23,334 shares. (17) Includes options and warrants exercisable for 539,670 and 72,506 shares, respectively. Also includes 1,468,520 shares held by persons and entities affiliated with Kleiner Perkins, 1,174,628 shares held by persons and entities 29. 34 affiliated with Venrock. Certain directors may be deemed to be beneficial owners of such shares, but disclaim such beneficial ownership, as discussed in Notes 3, 4, 5, 9, 10 and 11 above. To the Company's knowledge, each beneficial owner of more than ten percent of the Company's capital stock filed all reports and reported all transactions on a timely basis with the SEC, National Association of Securities Dealers, Inc. and the Company. DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS Proposals of stockholders of the Company that are intended to be presented by such stockholders at the Company's 1997 Annual Meeting must be received by the Company no later than July 15, 1997 so they may be included in the proxy statement and form of proxy relating to that meeting. ANNUAL REPORT A copy of the Annual Report of the Company for the fiscal year ended June 30, 1996 has been mailed concurrently with this Proxy Statement to all stockholders entitled to notice of and to vote at the Annual Meeting. The Annual Report is not incorporated into this Proxy Statement and is not considered proxy soliciting material. FORM 10-K The Company filed an Annual Report on Form 10-K with the Securities and Exchange Commission. Stockholders may obtain a copy of this report, without charge, by writing to Cheryl B. Jaszewski, Pharmacyclics, Inc., 995 East Arques Avenue, Sunnyvale, California 94086. OTHER MATTERS The Company knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed form of Proxy to vote the shares they represent as the Board may recommend. Discretionary authority with respect to such other matters is granted by the execution of the enclosed Proxy. THE BOARD OF DIRECTORS Dated: November 11, 1996 30. 35 APPENDIX A PHARMACYCLICS, INC. PROXY Annual Meeting of Stockholders, December 6, 1996 This Proxy is Solicited on Behalf of the Board of Pharmacyclics, Inc. The undersigned revokes all previous proxies, acknowledges receipt of the Notice of the Annual Meeting of Stockholders to be held December 6, 1996 and the Proxy Statement and appoints Richard A. Miller and Marc L. Steuer and each of them, the Proxy of the undersigned, with full power of substitution, to vote all shares of Common Stock of Pharmacyclics, Inc. (the "Company") which the undersigned is entitled to vote, either on his or her own behalf or on behalf of any entity or entities, at the Annual Meeting of Stockholders of the Company to be held at the Company's headquarters, 995 East Arques Avenue, Sunnyvale, California 94086 on Friday, December 6, 1996 at 9:00 A.M. (the "Annual Meeting"), and at any adjournment or postponement thereof, with the same force and effect as the undersigned might or could do if personally present thereat. The shares represented by this Proxy shall be voted in the manner set forth on the reverse side. 1. To elect the following directors to serve until the next annual meeting of stockholders and until their successors are elected and qualified: WITHHOLD AUTHORITY FOR TO VOTE Thomas D. Kiley _____ _____ Joseph S. Lacob _____ _____ Patrick F. Latterell _____ _____ Richard A. Miller _____ _____ Joseph C. Scodari _____ _____ Craig C. Taylor _____ _____ 2. FOR AGAINST ABSTAIN To approve the amendment and restatement of the Company's Certificate of Incorporation to increase the number of authorized shares of common stock thereunder from 12,000,000 shares to 24,000,000 shares. 3. FOR AGAINST ABSTAIN To approve an amendment to the Company's 1995 Stock Option Plan (the "Plan") in order to increase the maximum number of shares of common stock authorized for issuance under the Plan by an additional 750,000 shares. 4. FOR AGAINST ABSTAIN To ratify the Board of Director's selection of Price Waterhouse LLP to serve as the Company's independent accountants for the fiscal year ending June 30, 1997.
The Board of Directors recommends a vote FOR each of the directors listed above and a vote FOR the other proposals. This Proxy, when properly executed, will be voted as specified above. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF THE DIRECTORS LISTED ABOVE AND IN FAVOR OF THE OTHER PROPOSALS. Please print the name(s) appearing on each share certificate(s) over which you have voting authority: _______________________________________ (Print name(s) on certificate) Please sign your name:____________________________ Date:_________ (Authorized Signature(s)) -----END PRIVACY-ENHANCED MESSAGE-----