SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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|_| Definitive Additional Materials
AXONYX INC
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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PROXY STATEMENT FOR ANNUAL MEETING
TO BE HELD JUNE 22, 2004
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GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Axonyx
Inc. (the "Board" or "Board of Directors") with its principal executive offices
at 500 Seventh Avenue, 10th Floor, New York, New York 10018 ("Axonyx" or the
"Company") to be voted at the 2004 Annual Meeting of Stockholders (the "Annual
Meeting") to be held on June 22, 2004 at the offices of Eisner LLP, 750 Third
Avenue, 16th Floor, New York, NY 10017 at 10:00am Eastern Standard Time, and any
adjournment thereof. When a proxy is properly executed and returned to Axonyx in
time for the Annual Meeting, the shares it represents will be voted by the proxy
holders in accordance with the instructions given in the proxy. If no direction
is given in the proxy, the votes represented thereby will be voted in accordance
with the recommendation of the Board of Directors with respect to each matter
submitted to the Company's stockholders for approval. With respect to any other
item of business that may come before the Annual Meeting, the proxy holders will
vote in accordance with their best judgment. This Proxy Statement and the
accompanying proxy are being sent to stockholders on or about May 27, 2004.
PROXY REVOCATION PROCEDURE
A proxy may be revoked at any time before it has been exercised by written
notice of revocation given to the Secretary of the Company, by executing and
delivering to the Secretary a proxy dated as of a later date than the enclosed
proxy; provided, however, that such action must be taken in sufficient time to
permit the necessary examination and tabulation of the subsequent proxy before
the vote is taken, or by attending the Annual Meeting and voting in person.
Attendance at the Annual Meeting will not in and of itself revoke a proxy.
ABSTENTIONS, BROKER NON-VOTES
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to constitute a quorum. Votes withheld from any nominee for election as a
director, abstentions and broker "non-votes" are counted as present for purposes
of determining the presence or absence of a quorum for the transaction of
business. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because, in
respect of such other proposal, the nominee does not have discretionary voting
power and has not received instructions from the beneficial owner.
The election of directors by the stockholders shall be determined by a
plurality of the votes cast by stockholders entitled to vote at the Meeting, and
votes withheld will not be counted toward the achievement of a plurality. The
amendment of the Company's Restated Articles of Incorporation to increase the
number of authorized shares of the Company's Common Stock requires the
affirmative vote of a majority of the shares entitled to vote at the Meeting. On
all other matters being submitted to the stockholders, the affirmative vote of a
majority of the shares present in person or represented by proxy at the Meeting
and entitled to vote on such matter is required for approval. The vote on each
matter submitted to stockholders is tabulated separately. Abstentions are
included in the number of shares present and voting on each matter. Broker
non-votes are not considered for the particular matter and have
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the practical effect of reducing the number of affirmative votes required to
achieve a majority for such matter by reducing the total number of votes from
which the majority is calculated.
HOLDERS OF RECORD, QUORUM
Holders of record of our shares of common stock, par value $0.001 per
share ("Common Stock"), our only class of issued and outstanding voting
securities, at the close of business on May 6, 2004 are entitled to vote at the
Annual Meeting. There were 51,233,773 shares of Common Stock outstanding as of
the record date. The presence, in person or by proxy, of stockholders entitled
to cast at least a majority of the votes entitled to be cast by all stockholders
will constitute a quorum for the transaction of business at the Annual Meeting.
Stockholders are entitled to cast one vote per share on each matter presented
for consideration by the stockholders. A list of stockholders entitled to vote
at the Annual Meeting will be available for examination by any stockholder for a
proper purpose during normal business hours at the executive offices of the
Company for a period of at least 10 days preceding the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors
The Company's business is managed under the direction of its Board of
Directors. The Board of Directors has designated as nominees for election all of
the directors currently serving on the Board. See "Nominees for Director" below
for profiles of the nominees. After the election of the directors at the
meeting, the Company will have six directors.
The Board believes that the incumbent directors, all of whom have
indicated a willingness to continue serving as directors, continue to satisfy
the eligibility requirements. The Board believes that re-electing the incumbent
directors will promote stability and continuity and that such directors are
expected to continue making substantial contribution to the Company by virtue of
the familiarity and insight into the Company's affairs accumulated during their
tenure.
All of the nominees have indicated a willingness to continue serving as
directors, but if any of them should decline or be unable to act as a director,
the proxy holders will vote for the election of another person or persons as the
Board of Directors recommends. The Company has no reason to believe that any
nominee will be unavailable.
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Nominees for Directors
The following persons have been nominated by the Board of Directors for
re-election to the Board of Directors:
Name Age Position
---- --- --------
Marvin S. Hausman, M.D. 62 Chairman & Chief Executive Officer Director
Gosse B. Bruinsma, M.D. 49 President & Chief Operating Officer,
President of Axonyx Europe BV,
Director
Louis G. Cornacchia (1)(2)(3) 70 Director
Steven H. Ferris, Ph.D. (1)(2)(3) 60 Director
Gerard J. Vlak, Ph.D. (1)(2)(3) 70 Director
Ralph Snyderman, M.D. 64 Director
----------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Nominating Committee
Marvin S. Hausman, M.D. Marvin Hausman has served as a director and
President & CEO of Axonyx since January 1997. At the 2002 Annual Meeting of
Stockholders held on June 11, 2002, Dr. Hausman was reelected as a director of
Axonyx to serve until the 2003 Annual Meeting of Stockholders. At a Board
Meeting on June 11, 2002, Dr. Hausman was reelected as President and Chief
Executive Officer of Axonyx to serve until the Board of Directors meeting to be
held as soon as possible after the 2003 Annual Meeting of Stockholders. Dr.
Hausman was a co-founder of Medco Research Inc., a pharmaceutical biotechnology
company specializing in adenosine products. He has thirty years experience in
drug development and clinical care. Dr. Hausman received his medical degree from
New York University School of Medicine in 1967 and has done residencies in
General Surgery at Mt. Sinai Hospital in New York, and in Urological Surgery at
U.C.L.A. Medical Center in Los Angeles. He also worked as a Research Associate
at the National Institutes of Health, Bethesda, Maryland. He has been a
Lecturer, Clinical Instructor and Attending Surgeon at the U.C.L.A. Medical
Center Division of Urology and Cedars-Sinai Medical Center, Los Angeles. He has
been a Consultant on Clinical/Pharmaceutical Research to various pharmaceutical
companies, including Bristol-Meyers International, Mead-Johnson Pharmaceutical
Company, Medco Research, Inc., and E.R. Squibb. Since October 1995, Dr. Hausman
has been the President of Northwest Medical Research Partners, Inc., a medical
technology and transfer company. Dr. Hausman served on the Board of Directors of
Oxis International, Inc. ("Oxis") from March 2002 to November 2003. The Company
currently owns approximately 53% of the outstanding common stock of Oxis. He was
a member of the Board of Directors of Medco Research, Inc. from inception (1978)
through 1992 and from May 1996 to July 1998. Dr. Hausman was a member of the
Board of Directors of Regent Assisted Living, Inc., a company specializing in
building assisted living centers including care of senile dementia residents,
from March 1996 to April 2001.
Gosse B. Bruinsma, M.D. Gosse Bruinsma has served as President of Axonyx
Europe BV since its formation in October 2000. Dr. Bruinsma has served as the
Chief Operating Officer of Axonyx since February 2001 and was Treasurer of
Axonyx until September 2003. At the 2003 Annual Meeting of Stockholders held on
July 1, 2003, Dr. Bruinsma was elected as a director of Axonyx to serve until
the 2004 Annual Meeting of Stockholders. At a Board Meeting on July 1, 2003, Dr.
Bruinsma was elected as Chief Operating Officer of Axonyx to serve until the
Board of Directors meeting to be held as soon as
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possible after the 2004 Annual Meeting of Stockholders. In September 2003, Dr.
Bruinsma was appointed President of Axonyx Inc. Dr. Bruinsma has over 15 years
experience in the medical, pharmaceutical and biotechnology fields. Dr. Bruinsma
received his undergraduate degree from McGill University, Montreal and received
his medical degree from the University of Leiden, the Netherlands. He joined the
pharmaceutical industry to become European Medical Director for Zambon, Milan.
He subsequently joined the international contract research organization,
ClinTrials Research, to become their Vice President for Medical and Regulatory
Affairs. In September 1995 Dr. Bruinsma joined Forest Laboratories in New York
as Medical Director, with medical responsibility for their anti-hypertensive
product launch, HRT program, Cervidil(R), and their urological disease projects.
From September 1997 to 1999, Dr. Bruinsma was General Manager and Vice-President
Development for Chrysalis Clinical Services Europe based in Switzerland. From
November 1999 until he joined Axonyx Europe BV, Dr. Bruinsma was the Vice
President Development for Crucell BV (formerly IntroGene), a biotechnology
company based in the Netherlands. In April 2004 Dr. Bruinsma became a director
of Oxis.
Louis G. Cornacchia. Mr. Cornacchia has served as a director of Axonyx
since February 21, 2003. Mr. Cornacchia has extensive experience in managing
several engineering consultancy companies. Mr. Cornacchia received a bachelors
degree in Electrical Engineering from Manhattan College in 1955. Between 1955
and 1963, Mr. Cornacchia was employed as an RF engineer at Hazeltine Electronics
Corp. and at the Loral Systems Design Team where he worked on design of
countermeasures/reconnaissance systems He was subsequently employed as Chief
Engineer at Victory Electronics developing light imaging scopes for the U.S.
Army. In 1963, Mr. Cornacchia joined Norden Systems where he worked as a Test
Equipment Manager for the F111D avionics program. In 1969, Mr. Cornacchia formed
Collins Consultants International, Ltd., an engineering consultancy firm, which
provides services to Norden Systems and multiple defense engineering companies.
In 1974, Mr. Cornacchia formed Charger Tech Services, another engineering
services company. In 1987, Mr. Cornacchia formed Scinetics, an engineering
consultancy firm that provides microwave wireless engineering services.
Scinetics provides engineering services for mobile cellular and PCS wireless
companies, assisting them in obtaining approvals for seamless wireless networks.
Mr. Cornacchia is presently the President of Scinetics. Mr. Cornacchia has also
served as Chairman of the Board of Directors of Reliance Bank, White Plains, New
York (1992-1995) and as a member of the Advisory Board of Patriot National Bank,
Stamford, Connecticut (1995-2000).
Steven H. Ferris, Ph.D. Dr. Ferris has served as a director of Axonyx
since January 6, 2003. Dr. Ferris is a neuropsychologist, psychopharmacologist
and gerontologist who has been studying brain aging and Alzheimer's disease for
over thirty years. Dr. Ferris is the Friedman Professor of the Alzheimer's
Disease Center in the Department of Psychiatry at New York University (NYU)
School of Medicine, Executive Director of NYU's Silberstein Institute for Aging
and Dementia and Principal Investigator of their Alzheimer's Disease Center. Dr.
Ferris has been at the NYU School of Medicine since 1973, where he has conducted
a major research program focusing on cognitive assessment, early diagnosis and
treatment of brain aging and Alzheimer's disease. He has served as the Associate
Editor-in-Chief of Alzheimer Disease and Associated Disorders, is a member of
the Medical and Scientific Affairs Council of the national Alzheimer's
Association, has served on several NIH peer review panels, and has been a member
of the FDA Advisory Committee which reviews new drugs for Alzheimer's disease.
He has conducted more than 50 clinical trials in aging and dementia and has been
a consultant to numerous pharmaceutical companies who are developing new
treatments for Alzheimer's disease. In April 2004, Dr. Ferris became a director
of Oxis.
Gerard J. Vlak, Ph.D. Gerard Vlak has served as a director of Axonyx since
February 21, 2003. Mr. Vlak has more than thirty years experience in corporate
management and has considerable experience serving on corporate boards. Dr. Vlak
received a doctorate in Macro-Economics from the University of Tilburg in The
Netherlands in 1967. He has served as a Full Professor of Monetary Economics at
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Erasmus University in Rotterdam, The Netherlands and as a part-time Professor of
Monetary Economics at V.E.H. Economic University in Brussels, Belgium. From 1969
to 1988, Dr. Vlak was a member of the Executive Board of Rabobank Nederland. At
Rabobank Nederland, Dr. Vlak managed the corporate and international banking
departments and was the Chairman of the Credit Committee. He also set up and
managed the U.S. operations of the bank through a new Federal Branch in New
York. After retirement from Rabobank in 1988, Dr. Vlak became a Regional Manager
for the United States and Canada at the Amsterdam-Rotterdam Bank, N.V., and
later, was the Executive Vice President and Chief Financial Officer of ABN-AMRO
Bank USA. From 1992 to the present, Dr. Vlak has been a member of the Board of
Trustees of Bank Julius Baer Investment Funds and a member of the Board of
Directors of The Rouse Company and Oce'-USA Holding, Inc. In April 2004, Dr.
Vlak became a director of Oxis.
Ralph Snyderman, M.D. Dr. Ralph Snyderman was appointed a Director of the
Company on March 8, 2004, to serve in such capacity until the annual meeting.
Dr. Snyderman serves as Chancellor for Health Affairs, Executive Dean of the
School of Medicine, and James B. Duke Professor of Medicine, Duke University
Medical Center. He also serves as President and Chief Executive Officer of the
Duke University Health System, one of the few fully integrated health systems in
the country. Additionally, Dr. Snyderman serves as a member of the Board of
Directors of Proctor and Gamble Inc., Cardiome Pharma Corporation, and SAIC. Dr.
Snyderman received his M.D., magna cum laude, in 1965 from the Downstate Medical
Center of the State University of New York and he served his internship and
residency in medicine at Duke. Pre-eminent in his field of immunology, Dr.
Snyderman is internationally recognized for his research contributions to our
understanding of inflammation that have led to numerous important discoveries
published in nearly 350 manuscripts over the last 25 years.
There are no family relationships between any of the officers and
directors.
Vote required. The holders of Common Stock of the Company are entitled to
one vote per share equal to the number of shares held by such person at the
close of business on the record date. As there is no cumulative voting, each
stockholder shall cast all of his/her votes for each nominee of his/her choice
or withhold votes from any or all nominees. Unless a stockholder requests that
voting of the proxy be withheld for any one or more of the nominees for
directors by so directing on the proxy card, the shares represented by the
accompanying proxy will be voted FOR election, as directors, of the
above-mentioned six nominees. If any nominee becomes unavailable for any reason
(which event is not anticipated) to serve as a director at the time of the
meeting, then the shares represented by such proxy may be voted for such other
person as may be determined by the holders of such proxy. Directors will be
elected at the meeting by a plurality of the votes cast. Directors are to be
elected to hold office until the next annual meeting of stockholders and until
their successors are elected and qualified, or until their earlier resignation
or removal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR AND SOLICITS PROXIES IN FAVOR OF THE NOMINEES LISTED ABOVE (ITEM 1 ON THE
ENCLOSED PROXY CARD).
5
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES THEREOF
During the year ended December 31, 2003, the Board of Directors met on
seven occasions and took action by unanimous written consent on eight occasions.
Each director attended or participated in 75% or more of the meetings held by
the Board of Directors and each committee member attended 75% or more of the
meetings held by committees on which he served.
The Board of Directors created the Compensation, Audit and Nominating
Committees at the Board Meeting on January 13, 1999. Prior to that neither the
Company nor its predecessors had any Board Committees.
The Nominating/Governance Committee. The Nominating/Governance Committee
(the "Nominating Committee") of the Board of Directors, currently consisting of
Messrs. Ferris (Chairman), Cornacchia and Vlak, makes proposals to the full
Board of Directors concerning the hiring or engagement of directors, officers
and certain employee positions. The Nominating Committee met once in 2003.
Following the annual meeting and assuming the election of the nominated
directors, the members of the Nominating Committee will be Messrs. Cornacchia
(Chairman), Ferris and Vlak. Each member of the Nominating Committee meets the
independence requirements under the marketplace rules of the Nasdaq Stock Market
(Rule 4200).
The Nominating Committee operates pursuant to a written charter, which
complies with the corporate governance standards of the Nasdaq Stock Market. A
copy of this charter is attached to this proxy statement as Appendix A. You can
also access this document on our website at www.axonyx.com*.
The Compensation Committee. The Compensation Committee of the Board of
Directors, currently consisting of Messrs. Cornacchia (Chairman), Ferris and
Vlak, administers the Company's 1998 and 2000 Stock Option Plans, and makes
proposals to the full Board of Directors for officer compensation programs,
including salaries, option grants and other forms of compensation. The
Compensation Committee met on two occasions in 2003. Following the annual
meeting and assuming the election of the nominated directors, the members of the
Compensation Committee will be Messrs. Cornacchia, Ferris and Vlak. Each member
of the Compensation Committee member meets the independence requirements under
the marketplace rules of the Nasdaq Stock Market (Rule 4200).
The Compensation Committee operates pursuant to an amended and restated
charter, approved by the Board of Directors on March 30, 2004, that complies
with the corporate governance standards of the Nasdaq Stock Market. A copy of
this amended and restated charter is attached to this proxy statement as
Appendix B. You can also access this document on our website at www.axonyx.com.
* This website address is not intended to function as a hyperlink, and the
information contained on the Company's website is not intended to be part of
this proxy statement. The foregoing applies to all references in this proxy
statement to the Company's website.
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The Audit Committee. The Audit Committee of the Board of Directors,
currently consisting of Messrs. Vlak (Chairman), Cornacchia and Ferris,
recommends the firm to be employed as the Company's independent public
accountants, and oversees the Company's audit activities and certain financial
matters to protect against improper and unsound practices and to furnish
adequate protection to all assets and records. The Nominating Committee met on
three occasions in 2003. Following the annual meeting and assuming the election
of the nominated directors, the members of the Audit Committee will be Messrs.
Cornacchia, Ferris and Vlak.
Each current member of the Audit Committee meets the independence
requirements under the marketplace rules of the Nasdaq Stock Market (Rule 4200).
Each prospective member of the committee will meet such requirements and, in
addition, will also meet the additional independence requirements for audit
committees specified by Rule 10A-3 under the Securities Exchange Act of 1934.
The Board of Directors has determined that Dr. Vlak qualifies as an "audit
committee financial expert" as defined by the Securities and Exchange
Commission.
The Audit Committee operates under an amended and restated charter,
approved by the Board of Directors on September 23, 2003. A copy of this amended
and restated charter is attached to this proxy statement as Appendix C. You can
also access this document on our website at www.axonyx.com.
Compensation of Directors
Directors who are executive officers of our Company are not paid
additional compensation for serving as directors. The compensation for the other
directors is as follows:
o We did not pay our non-employee directors (Messrs. Cornacchia,
Ferris and Vlak) for attending Board meetings in 2003.
o Non-employee directors were reimbursed for some of their
out-of-pocket expenses incurred to attend meetings.
o The non-employee directors were granted stock options in fiscal year
2003 as set forth in the table below. The exercise price of such
options is the market value of our common stock at the time of
grant.
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Number of Stock Options Exercise or base
Name Granted in 2003 Grant Date price ($/Sh)
-------------------------------------------------------------------------------------------
Louis G. Cornacchia(1) 50,000 09/23/03 $4.24
50,000 02/21/03 $0.83
Steven H. Ferris, Ph.D.(2) 50,000 09/23/03 $4.24
50,000 02/21/03 $0.83
Gerard J. Vlak, Ph.D.(3) 75,000 09/23/03 $4.24
50,000 01/14/03 $1.11
(1) Of the options exercisable at $0.83 per share, 30,000 are vested and
10,000 will vest on January 3, 2005 and 2006; Of the options exercisable
at $4.24 per share, 12,500 are vested and 12,500 will vest on September
23, 2004, 2005 and 2006.
(2) Of the options exercisable at $0.83 per share, 30,000 are vested and
10,000 will vest on January 1, 2005 and 2006; Of the options exercisable
at $4.24 per share, 12,500 are vested and 12,500 will vest on September
23, 2004, 2005 and 2006.
(3) Of the options exercisable at $1.11 per share, 30,000 are vested and
10,000 will vest on January 3, 2005 and 2006; Of the options exercisable
at $4.24 per share, 18,750 are vested and 18,750 will vest on September
23, 2004, 2005 and 2006.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Cornacchia, Ferris and
Vlak. There are no Compensation Committee Interlocks.
7
Director Attendance At Annual Meeting
In March 2004, the Company adopted a policy encouraging members of the
Board of Directors to attend annual meetings. Last year, all of the directors
attended the annual meeting.
CORPORATE GOVERNANCE MATTERS
Corporate Governance Principles
We have adopted corporate governance principles to promote the effective
functioning of our board. You can access this document on our website at
www.axonyx.com.
The policies described in our corporate governance principles and in this
proxy statement are intended to set forth general guidance for the functioning
of our Board and should not be viewed as a set of legally binding obligations.
The Board may, from time to time, modify these principles and policies or
approve deviations therefrom as it deems appropriate.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics for our employees,
officers and directors. You can access this document on our website at
www.axonyx.com. This code constitutes a "code of ethics" as defined by the rules
of the Securities and Exchange Commission. This code also contains "whistle
blower" procedures adopted by our Audit Committee regarding the receipt,
retention and treatment of complaints related to accounting, internal accounting
controls or auditing matters and procedures for confidential anonymous employee
complaints related to questionable accounting or auditing matters.
Director Independence
The revised marketplace rules of the Nasdaq Stock Market require that a
majority of a company's directors be independent.
We currently have four independent directors and two non-independent
directors, who are employees of the Company. As of the annual meeting date, and
assuming election of the directors nominated hereby, we will continue to have a
majority of independent directors and be in full compliance with the revised
marketplace rules of the Nasdaq Stock Market. In assessing director
independence, we follow the criteria of the Nasdaq Stock Market. Our current
independent directors are: Louis G. Cornacchia, Steven H. Ferris, Ph.D., Gerard
J. Vlak, Ph.D and Ralph Snyderman, M.D.
Director Nomination Process
General
The Board has established a Nominating Committee as described above. The
responsibilities of the Nominating Committee include among others: (i)
identifying individuals qualified to become Board members; (ii) recommending to
the Board those individuals that should be nominees for election or re-
8
election to the Board or otherwise appointed to the Board (with authority for
final approval remaining with the Board); and (iii) developing criteria for
evaluating prospective candidates to the Board.
Process For Identifying and Evaluating Candidates
The Nominating Committee may identify potential Board candidates from a
variety of sources, including recommendations from current directors or
management or any other source the Nominating Committee deems appropriate. The
Nominating Committee may also engage a search firm or consultant to assist it in
identifying, screening and evaluating potential candidates. The Nominating
Committee has been given sole authority to retain and terminate any such search
firm or consultant.
In considering candidates for the Board, the Nominating Committee
evaluates the entirety of each candidate's credentials. The Nominating Committee
considers, among other things: (i) business or other relevant experience; (ii)
expertise, skills and knowledge; (iii) integrity and reputation; (iv) the extent
to which the candidate will enhance the objective of having directors with
diverse viewpoints, backgrounds, expertise, skills and experience; (v)
willingness and ability to commit sufficient time to Board responsibilities; and
(vi) qualification to serve on specialized Board committees--such as the audit
committee or compensation committee.
The Nominating Committee has not yet adopted procedures to evaluate
recommendations for potential Board candidates from stockholders.
The nominees for election at the upcoming annual meeting are Marvin S.
Hausman, M.D., Gosse B. Bruinsma, M.D., Louis G. Cornacchia, Steven H. Ferris,
Ph.D., Gerard J. Vlak and Ralph Snyderman, M.D.
Communications with the Board of Directors
The Board currently does not yet have a formal process for stockholders to
send communications to the Board or to its Audit Committee or Nominating
Committee. Nevertheless, the Board desires that the views of stockholders will
be heard by the Board, its committees or individual directors, as applicable,
and that appropriate responses are provided to stockholders on a timely basis.
The Board believes that informal communications are currently sufficient to
communicate questions, comments and observations that could be useful to the
Board. However, stockholders wishing to formally communicate with the Board may
send communications directly to the Company, at 500 Seventh Avenue, 10th Floor,
New York, New York 10018, Attention: Corporate Secretary. Such communications
will be screened by the Corporate Secretary for appropriateness before either
forwarding to or notifying the members of the Board of receipt of a
communication.
Please note that the foregoing procedure does not apply to (i) stockholder
proposals pursuant to Exchange Act Rule 14a-8 and communications made in
connection with such proposals or (ii) service of process or any other notice in
a legal proceeding. For information concerning stockholder proposals, see
"--Stockholder Proposals For The 2005 Annual Meeting."
9
PROPOSAL 2
TO APPROVE AN AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF INCORPORATION
INCREASING THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S
COMMON STOCK TO 150,000,000 SHARES
The Company's Restated Articles of Incorporation, as amended, (the
Restated Articles) currently authorizes the issuance of up to 90,000,000 shares
of stock of which, the total number of shares of Common Stock that are
authorized to be issued is 75,000,000. The Board of Directors of the Company has
approved, subject to stockholder approval, an amendment (the Amendment) to the
Restated Articles to increase the number of authorized shares of stock to
165,000,000, of which, the total number of shares of Common Stock that are
authorized to be issued is 150,000,000. The additional authorized shares of
Common Stock, if and when issued, would have the same rights and privileges as
the shares of Common Stock previously authorized. A copy of the proposed
amendment to the Restated Articles is attached to this proxy statement as
Appendix D.
As of May 6, 2004 there were 51,233,773 shares of Common Stock
outstanding.
The additional shares of Common Stock authorized by the Amendment could be
issued at the direction of the Board of Directors from time to time for any
proper corporate purpose, including, without limitation, the acquisition of
other businesses, the raising of additional capital for use in the Company's
business, a split of or dividend on then outstanding shares or in connection
with any employee stock plan or program. The holders of shares of Common Stock
do not presently have preemptive rights to subscribe for any of the Company's
securities and holders of Common Stock will not have any such rights to
subscribe for the additional Common Stock proposed to be authorized. Any future
issuances of authorized shares of Common Stock may be authorized by the Board of
Directors without further action by the stockholders.
Although the Board of Directors will issue Common Stock only when required
or when the Board considers such issuance to be in the best interests of the
Company, the issuance of additional Common Stock may, among other things, have a
dilutive effect on the earnings per share (if any) and on the equity and voting
rights of stockholders. Furthermore, since Nevada law requires the vote of a
majority of shares of each class of stock in order to approve certain mergers
and reorganizations, the proposed amendment could permit the Board to issue
shares to persons supportive of management's position. Such persons might then
be in a position to vote to prevent a proposed business combination that is
deemed unacceptable to the Board, although perceived to be desirable by some
stockholders, including, potentially, a majority of stockholders. This could
provide management with a means to block any majority vote which might be
necessary to effect a business combination in accordance with applicable law,
and could enhance the ability of Directors of the Company to retain their
positions. Additionally, the presence of such additional authorized but unissued
shares of Common Stock could discourage unsolicited business combination
transactions that might otherwise be desirable to stockholders.
Except for (i) shares of Common Stock reserved for issuance under the
Company's stock option plans (including under the proposed amendment and
restatement to the Company's 2000 Amended and Restated Stock Option Plan) and
other non-plan stock options (granted prior to June 30, 2003) and (ii) shares of
Common Stock which the Company would be required to issue upon the exercise of
outstanding warrants, the Board of Directors has no current plans to issue
additional shares of Common Stock. However, the Board believes that the benefits
of providing it with the flexibility to issue shares without delay for any
proper business purpose, including as an alternative to an unsolicited business
combination opposed by the Board, outweigh the possible disadvantages of
dilution and discouraging unsolicited
10
business combination proposals and that it is prudent and in the best interests
of stockholders to provide the advantage of greater flexibility which will
result from the Amendment.
Vote required. Approval of the Amendment to increase the number of authorized
shares of the Company's stock requires the affirmative vote of a majority of the
shares entitled to vote at the Meeting. Abstentions will have the same effect as
a vote against such ratification, whereas broker non-votes and shares not
represented at the meeting will not be counted for purposes of determining
whether such ratification has been approved.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF INCORPORATION
INCREASING THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S STOCK (ITEM 2 ON THE
ENCLOSED PROXY CARD).
PROPOSAL 3
TO APPROVE AND ADOPT
OUR SECOND AMENDED AND RESTATED 2000 STOCK OPTION PLAN
Shareholders will be asked at the annual meeting to vote on a proposal to
approve and adopt the amendment and restatement of our 2000 Amended and Restated
Stock Option Plan (the "2000 Plan"), which was adopted as of June 14, 2000 and
was amended and restated as of March 20, 2002. The complete text of the Second
Amended and Restated 2000 Stock Option Plan, as proposed to be amended and
restated, is attached to this proxy statement as Appendix E.
The plan, as proposed to be amended and restated, will (i) increase the
number of options available under the plan from 3,500,000 shares of Common Stock
to 7,500,000 shares of Common Stock and (ii) remove the "evergreen" provision
that provides for the automatic increase of the share reserve on the first day
of January of each calendar year, beginning in January 2003, by a number of
shares equal to 4% of the total number of shares of Common Stock outstanding on
the last trading day of the prior calendar year, subject to a maximum annual
increase of 750,000 shares.
The Board believes that increasing the number of shares of Common Stock
reserved for issuance under the 2000 Plan is necessary to ensure that a
sufficient reserve of Common Stock remains available for issuance to allow the
Company to continue to utilize stock options to attract and retain the services
of key individuals essential to the Company's long-term growth and financial
success. The Company relies on equity incentives in the form of stock option
grants in order to attract and retain key employees, consultants and
non-employee directors and believes that such equity incentives are necessary
for the Company to remain competitive in the marketplace for executive talent
and other key individuals. Option grants made to newly-hired and continuing
employees, non-employee directors, consultants will be based on competitive
market conditions, experience and individual performance. Without the proposed
increase to the share reserve under the 2000 Plan, there will be only 216,380
shares remaining available for issuance under the 2000 Plan.
The Board recommends the removal of the "evergreen" provision in
accordance with the new regulations proposed by the Internal Revenue Service
("IRS") in 2003. Under Proposed Treasury Regulations 1.421, 1.422 and 1.424
promulgated by the IRS, the requirement of a maximum share cap must apply to the
entire option plan and therefore a plan that provides for the grant of incentive
stock options cannot include an evergreen provision. Although the new
regulations are not yet in effect as of the
11
date of this proxy statement and it is difficult to predict when final
regulations will be issued, the Board recommends amending the current option
plan to comply with the proposed regulations in contemplation thereof.
Vote Required. Under the marketplace rules of the Nasdaq Stock Market, the
proposal to approve the plan will be considered approved if a majority of the
votes cast are in favor of approval. Abstentions will have the same effect as a
vote against such approval, whereas broker non-votes and shares not represented
at the meeting will not be counted for purposes of determining whether this
matter has been approved.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE COMPANY'S SECOND AMENDED AND RESTATED 2000 STOCK OPTION PLAN
(ITEM 3 ON THE ENCLOSED PROXY CARD).
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF EISNER LLP
AS INDEPENDENT AUDITORS OF THE COMPANY
Eisner LLP (formerly Richard A. Eisner & Company, LLP) has served as the
Company's independent accountants since 1998. On March 30, 2004, the Board of
Directors, subject to stockholder ratification, approved the continued
appointment of Eisner LLP, independent auditors, to audit the accounts of the
Company for the 2004 fiscal year.
The Audit Committee intends to meet with Eisner LLP in 2004 on a quarterly
or more frequent basis. At such times, the Audit Committee will review the
services performed by Eisner LLP, as well as the fees charged for such services.
A representative of Eisner LLP is expected to be present at the Annual
Meeting and will have an opportunity to make a statement if he or she desires.
The representative is also expected to be available to respond to appropriate
questions from stockholders.
Fees Billed to the Company by Eisner LLP during Fiscal 2003.
Set forth below is certain information concerning fees billed to us by
Eisner LLP in respect of services provided in 2003 and 2002. As indicated below,
in addition to auditing and reviewing our financial statements, Eisner LLP
provided us with other services in 2003 and 2002. The audit committee has
determined that the provision of these other services is compatible with
maintaining the independence of Eisner LLP.
Audit Fees. Audit fees consist of fees paid for the audit of our annual
financial statements, review of the financial statements included in our reports
on forms 10-Q, and other services that are normally provided by the independent
auditor in connection with statutory and regulatory filings or engagements. The
aggregate audit fees billed to us by Eisner LLP for services rendered to us in
fiscal years 2003 and 2002 were $74,000 and $52,630, respectively.
Audit Related Fees. Audit related fees consist of fees for services, other
than the services described under "Audit Fees," that are reasonably related to
the audit of our annual financial statements and review of the financial
statements included in our Reports on form 10-Q. The aggregate audit related
fees billed to us by Eisner LLP for services rendered to us in the fiscal year
2003 were $1,400. These fees were primarily for Sarbanes-Oxley Section 404
planning. No such fees were incurred in 2002.
12
Tax Fees. Tax fees consist of fees for professional services rendered for
tax compliance, tax advice and tax planning. The aggregate tax fees billed to us
by Eisner LLP for services rendered to us in fiscal years 2003 and 2002 were
$13,500 and $14,990, respectively. The tax fees included (1) tax return
preparation fee, (2) New York City desk audit and amended return and (3)
assistance with the filing of a withdrawal from Connecticut.
All Other Fees. No other professional services were rendered to us by
Eisner LLP and therefore no other fees were incurred in 2003 or 2002.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditor
The charter of the audit committee requires that the committee pre-approve
all auditing services and permitted non-audit services (including the fees and
terms thereof) to be performed for the company by its independent auditor,
subject to any exception permitted by law or regulation. The Audit Committee
pre-approved all auditing services and permitted non-audit services rendered by
Eisner LLP in 2003.
Vote required. Submission of the appointment to stockholders is not required.
However, the Board of Directors will reconsider the appointment if it is not
approved by stockholders. The appointment will be deemed ratified if a majority
of the shares of Common Stock present, either in person or by proxy, and voting
on the matter, votes in favor of the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE RATIFICATION OF EISNER LLP AS INDEPENDENT AUDITORS OF THE COMPANY'S
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004 (ITEM 4 ON THE
ENCLOSED PROXY CARD).
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The following is the report of the Audit Committee of the Board of
Directors of Axonyx with respect to Axonyx's audited financial statements for
the fiscal year ended December 31, 2003, included in the Company's Annual Report
on Form 10-K, filed with the Securities and Exchange Commission on March 30,
2004. The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference in such filing.
Review With Management
The members of the Audit Committee reviewed and discussed the audited
financial statements with certain members of the management of the Company.
Review and Discussions With Independent Accountants
The Audit Committee of the Board of Directors of Axonyx met on March 26,
2004 to review the financial statements for the fiscal year ended December 31,
2003 audited by Eisner LLP, Axonyx's independent auditors. The Audit Committee
discussed with a representative of Eisner LLP the matters required to be
discussed by SAS 61. The Audit Committee received the written disclosures and
the letter
13
from Eisner LLP required by Independence Standards Board Standard No. 1 and has
discussed with Eisner LLP its independence.
Conclusion
Based on the above review and discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements for the fiscal
year ended December 31, 2003 be included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2003 for filing with the Securities
and Exchange Commission.
The Audit Committee of the Board of Directors:
Gerard J. Vlak, Ph.D., Chairman
Louis G. Cornacchia
Steven H. Ferris, Ph.D.
14
EXECUTIVE COMPENSATION
Executive Officers
The executive officers of the Company are Marvin S. Hausman, M.D.,
Chairman and Chief Executive Officer, Gosse B. Bruinsma, M.D., President, Chief
Operating Officer and President of Axonyx Europe BV, S. Collin Neill, Chief
Financial Officer, Treasurer and Secretary. Michael R. Espey, the former Vice
President, General Counsel and Secretary, left the Company effective December
31, 2002.
Summary Compensation
The table below sets forth the aggregate annual and long-term compensation
paid by us during our last three fiscal years ended December 31, 2001, December
31, 2002 and December 31, 2003 to our Chief Executive Officer and each of the
four highest paid executive officers of Axonyx whose annual salary and bonus for
fiscal year 2003 exceeded $100,000 (collectively, the "Named Executive
Officers").
Annual Compensation (5) Long Term Compensation Awards
----------------------- -----------------------------
Name and Salary Bonus Other Securities underlying
principal position Year ($) ($) ($) Options (#)(6)
--------------------------------------------------------------------------------------------------------------------
Marvin S. Hausman 2003 $250,000 $175,000 $ 31,719(8) 325,000(7)
Dir., Chairman & CEO 2002 $246,000 -- $ 54,376 75,000
2001 $225,000 -- $ 55,626 250,000
Gosse B. Bruinsma 2003 $253,120 $100,000 $ 28,250 300,000(7)
Dir., President & COO(1) 2002 $197,000 -- $ 23,750 140,000
2001 $170,000 $ 20,000 $ 22,500 200,000
S. Colin Neill CFO(2) 2003 $ 52,000 $ 10,000 $ 2,915 210,000(7)
Robert G. Burford V.P.(3) 2003 -- -- -- --
2002 $182,000 -- -- 22,000
2001 $175,000 -- -- 100,000
Michael R. Espey 2003 $149,000 $ 75,000 -- 100,000
Dir., V.P., Sec.(4) 2002 $147,000 -- -- 30,000
2001 $125,000 -- -- 40,000
15
(1) Gosse B. Bruinsma, M.D. became an employee of Axonyx in October 2000. Dr.
Bruinsma resides and operates from the Axonyx Europe BV offices in Leiden,
The Netherlands. Dr. Bruinsma's salary for 2003 was Euro 224,000 and his
expense allowance was Euro 25,000. These amounts are reflected in the
table above at the average dollar/euro exchange rate of 1.13 for 2003,
0.95 for 2002 and 0.90 for 2001.
(2) S. Colin Neill became an employee of the Company in September 2003. Mr.
Neill was reimbursed $2,915 for various business expenses including life
insurance.
(3) Robert G. Burford ceased to be an officer and an employee of the Company
on December 31, 2002.
(4) Michael R. Espey ceased to be an officer and an employee of the Company,
effective December 31, 2003.
(5) No Named Executive Officer was paid other annual compensation in an amount
exceeding the lesser of either $50,000 or 10% of the total annual salary
and bonus for the Named Executive Officer.
(6) The number of options granted for each Named Executive Officer in 2001
have been adjusted to include options granted on December 1, 2001 under
our 2000 Amended and Restated Stock Option Plan which were contingent upon
stockholder approval of an increase in the number of shares reserved for
issuance under the 2000 Amended and Restated Stock Option Plan. In June
2002, the stockholders of the Company approved the 2000 Amended and
Restated Stock Option Plan, increasing the number of shares reserved for
issuance under that Plan. The increase in options granted for each Named
Executive Officer in 2001 due to this adjustment are as follows: Marvin S.
Hausman, M.D. 155,000; Gosse B. Bruinsma, M.D. 124,000; Robert G. Burford
62,000; Michael R. Espey 24,800.
(7) The number of options granted for certain Executive Officers in 2003 have
been adjusted to include options granted in 2003 under our 2000 Amended
and Restated Stock Option Plan which were contingent upon the January 1,
2004 increase in the number of shares reserved for issuance under the 2000
Amended and Restated Stock Option Plan by 750,000 shares per the evergreen
provision. The increase in options granted for each Executive Officer in
2003 due to this adjustment are as follows: Marvin S. Hausman, M.D.
125,000; Gosse B. Bruinsma, M.D. 100,000; S. Colin Neill 93,620.
(8) The Company reimburses the Chairman and CEO to cover costs of maintaining
an office and related support costs in Portland, Oregon.
16
B. Option Grants in Fiscal Year 2003
The following table sets forth certain information with respect to option
grants to our Named Executive Officers in 2003. All of the grants were made
under the 2000 Amended and Restated Stock Option Plan. We have not granted any
stock appreciation rights.
Option Grants in Fiscal Year 2003
---------------------------------------------------------------------------------------------------------------
Individual Grants
----------------------------------------------------------------------------------- Potential Realizable
Number Percent of Value at Assumed
of total Annual Rates of Stock
securities options Price Appreciation for
underlying granted to Exercise Option Term (1)
Options employees or base -----------------------
Granted in fiscal price Expiration
Name (#) year ($/Sh) date 5% ($) 10% ($)
---------------------------------------------------------------------------------------------------------------
Marvin S. Hausman (2) 200.000 34.6% $1.18 3/16/13 $148,419 $ 367,123
125,000 $3.61 11/17/13 $283,789 $ 719,176
Gosse B. Bruinsma (3) 200,000 31.9% $1.07 3/16/13 $134,583 $ 341,061
100,000 $3.61 11/17/13 $227,031 $ 575,341
S. Colin Neill (4) 200,000 22.3% $3.76 9/14/13 $472,929 $1,198,494
10,000 $3.61 11/17/13 $ 22,703 $ 57,534
Michael R. Espey (5) 100,000 10.6% $1.07 3/16/13 $ 67,292 $ 170,530
(1) These amounts represent hypothetical gains that could be achieved for the
respective options at the end of the ten-year option term. The assumed 5%
and 10% rates of compounded stock price appreciation are mandated by rules
of the Securities and Exchange Commission and do not represent Axonyx's
estimate of the future market price of the common stock.
(2) On March 17, 2003, Axonyx granted 200,000 Incentive Stock Options
exercisable at $1.18 per share to Marvin S. Hausman, M.D., with 50,000
options vesting on March 17, 2003, 2004, 2005 and 2006. On November 18,
2003, Axonyx granted 125,000 Non-Statutory Stock Options exercisable at
$3.61 per share to Marvin S. Hausman, MD, with 31,250 options vesting on
November 18, 2003, 2004, 2005 and 2006. The November 18, 2003 grant was
contingent upon the effectiveness of the evergreen provisions adding
750,000 additional shares to the 2000 Amended and Restated Stock Option
Plan effective January 1, 2004.
(3) On March 17, 2003, Axonyx granted 200,000 Incentive Stock Options
exercisable at $1.07 per share to Gosse B. Bruinsma, M.D., with 50,000
options vesting on March 17, 2003, 2004, 2005 and 2006. On November 18,
2003, Axonyx granted 100,000 Non-Statutory Stock Options exercisable at
$3.16 per share to Gosse B. Bruinsma, M.D., with 25,000 options vesting on
November 18, 2003, 2004, 2005 and 2006. The November 18, 2003 grant was
contingent upon the effectiveness of the evergreen provisions adding
750,000 additional shares to the 2000 Amended and Restated Stock Option
Plan effective January 1, 2004.
(4) On September 15, 2003 Axonyx granted 106,380 Incentive Stock Options and
93,620 Non-Statutory Options exercisable at $3.76 per share to S. Colin
Neill, with 50,000 options vesting on September 15, 2003, 2004, 2005 and
2006. The September 15, 2003 grant for 93,620 options was contingent upon
the effectiveness of the evergreen provisions adding 750,000 additional
shares to the 2000 Amended and Restated Stock Option Plan effective
January 1, 2004. On November 18,
17
2003, Axonyx granted 10,000 Non-Statutory Stock Options exercisable at
$3.61 per share to S. Colin Neill with 2,500 options vesting November 18,
2003, 2004, 2005 and 2006.
(5) On March 17, 2003, Axonyx granted 100,000 Incentive Stock Options
exercisable at $1.07 per share to Michael R. Espey, with 25,000 options
vesting on March 17, 2003 and 2004. Since Mr. Espey ceased to be an
officer and employee of the Company on December 31, 2003, no further
vesting of such options will occur.
C. Aggregate Option Exercises in Fiscal Year 2003 Year End Option Values
The following table sets forth the number and value of unexercised options
held by the Named Executive Officers as of December 31, 2003.
Aggregated Option Exercises in Fiscal Year 2003 and Year-End Option Values
Number of securities
underlying unexercised Value of unexercised
options at fiscal year in-the-money options at
end # (2) fiscal year end ($) (3)
---------------------------------------------------------------
Name Exercisable/ unexercisable Exercisable/ unexercisable
--------------------------------------------------------------------------------------------------------------
Marvin S. Hausman, M.D., Chairman & CEO 718,750/ $973,750/
381,250 $984,000
Gosse B. Bruinsma, M.D., Pres. & COO 440,000/ $620,600/
400,000 $977,700
S. Colin Neill, C.F.O. 52,500/ $ 58,650/
157,900 $175,950
Robert G. Burford, V.P. 286,000/ $166,705/
46,000 $ 91,780
Michael R. Espey, V.P. & Secretary 164,000/ $194,090/
106,000 $370,410
(1) There were no exercises of options by Named Executive Officers in
fiscal year 2003.
(2) The number of options granted for certain Executive Officers in 2003
have been adjusted to include options granted in 2003 under our 2000
Amended and Restated Stock Option Plan which were contingent upon
the January 1, 2004 increase in the number of shares reserved for
issuance under the 2000 Amended and Restated Stock Option Plan by
750,000 shares per the evergreen provision. The increase in options
granted for each Executive Officer in 2003 due to this adjustment
are as follows: Marvin S. Hausman, M.D. 125,000; Gosse B. Bruinsma,
M.D. 100,000; S. Colin Neill 93,620.
(3) Dollar amounts reflect the net values of outstanding stock options
computed as the difference between $4.87 (the fair market value at
December 31, 2003) and the exercise price of the options.
Employment Contracts with Executive Officers and Termination of Employment and
Change-in-Control Arrangements
Axonyx does not have employment contracts with any of its Named Executive
Officers, except as follows:
18
Gosse B. Bruinsma, M.D., President, Chief Operating Officer and Director.
On September 21, 2002, Axonyx signed an Employment Agreement with Dr. Bruinsma
under which Dr. Bruinsma agreed to serve as President of Axonyx Europe BV, a
wholly owned subsidiary of Axonyx Inc, and Chief Operating Officer of Axonyx
Inc. and was to be paid an annual salary of US$200,000. In addition, $25,000 per
year is available to Dr. Bruinsma for reimbursement of expenses, including for
the use of a home office and personal equipment, health insurance, disability
insurance, life insurance, pension distribution and auto lease premium. This
agreement has been renewed and now extends through September 2006. The salary
has been determined at Euro 260,000 and the expense reimbursement at Euro
25,000.
In March 2004, following approval of the Compensation Committee and the
Board, Axonyx entered into change of control agreements with Marvin S. Hausman,
Gosse Bruinsma and S. Colin Neill. Each agreement provides that if the
executive's employment is terminated without "cause," as defined in the
agreement, within 90 days prior to, or one year following, a "change of
control," he will receive severance pay equal to 200% of his annual base salary
for the then-current year, plus the greater of the annual bonus he received for
the prior year or the then-current annual target bonus. Such payments are also
required to be made in connection with a change of control if the executive has
"good reason" to terminate his employment, as defined in the agreement. A
"change of control" involves an acquisition of at least 50% of the voting power
of the Company's securities, a change in at least a majority of the members of
the current Board of Directors, or approval by the Board of Directors or
stockholders of the Company of a transaction where such change of voting control
or composition of the Board would occur, where the Company would be liquidated
or where all or substantially all of its assets would be sold.
In addition, all options granted under the 1998 Stock Option Plan and the
2000 Amended and Restated Stock Option Plan, including those to its executive
officers, provide for accelerated vesting upon a change in control, among other
events.
Equity Compensation Plan Information
The following table sets forth information about the common stock
available for issuance under compensatory plans and arrangements as of December
31, 2003.
(a) (b) (c)
--- --- ---
Number of securities
remaining available for
Number of securities to be Weighted-average future issuance under
issued upon exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights. warrants, and rights reflected in column (a))
--------------------------------------------------------------------------------------------------------------------
Equity compensation
plan approved by
security holders (1) 1,374,600 $5.72 --
Equity compensation
plan approved by
security holders (2) 2,738,380 $2.86 11,620
Equity compensation
plans not approved by
security holders 375,000(3) $4.41 --
Total 4,487,980 $3.87 11,620
19
(1) As of December 31, 2003, we have granted options to purchase an aggregate
of 1,374,600 shares of common stock under our 1998 Stock Option Plan. As
of December 31, 2003, no options are available for future grant under the
1998 plan. The plan terminated on January 15, 2003.
(2) As of December 31, 2003, we have granted options to purchase an aggregate
of 3,212,000 shares of common stock under our 2000 Amended and Restated
Stock Option Plan. As approved by stockholders, we may grant additional
options to purchase up to 579,000 shares under our 2000 Amended and
Restated Stock Option Plan. The number of shares reserved for issuance
pursuant to options under the 2000 Amended and Restated Stock Option Plan,
as amended on June 14, 2002, was increased by 750,000 shares on January 1,
2003 pursuant to an evergreen provision in the stock option plan. 318,620
options in 2003 were issued contingent upon the January 1, 2004 evergreen
provision increasing the 2000 Stock Option Plan shares by 750,000 shares.
(3) As of December 31, 2003, we have outstanding an aggregate of 375,000
options to consultants and advisors outside of our 1998 and 2000 stock
option plans.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors, which is composed of
outside directors, is responsible for setting and administering the policies and
programs that govern compensation. The Compensation Committee was originally
formed in January 1999. Prior to that time no executive compensation, other than
limited consultant fees, was paid. For 2003, the Company's executive
compensation consisted of two components: (1) an annual component, i.e.,
salaries, and the potential for year end bonuses, and (2) a long-term component,
i.e., stock options. The Compensation Committee bases its decisions on executive
compensation based on individual assessments of the amount of compensation
required to attract individuals to fill positions in the Company and motivate
those individuals to focus on achieving the objectives of the Company. The
Compensation Committee seeks to reward the management team if the Company
achieves its corporate objectives, and it also recognizes meaningful differences
in individual performance and offers the opportunity for executives to earn
rewards when merited by individual performance.
Annual Component. Salaries for executive officers are determined by the
Committee with reference to the job description and a general assessment of the
executive's performance, experience and potential. Year-end bonuses may be
granted subject to an assessment of an executive's performance against
established objectives. The Committee establishes these salaries annually or
semi-annually, depending upon the individual.
Long-Term Component. The Compensation Committee awarded stock options or
contingent stock options to its executive officers in November 2003 based on the
Committee's assessment of the accomplishment of corporate and individual
objectives. These options provide the opportunity to buy a number of shares of
the Company's Common Stock at a price equal to the market price of the stock on
the date of Committee approval of the grant. These options are generally subject
to four year vesting, so that they become exercisable in annual installments
during the participant's period of service with the Company. The Committee
believes that, because these options gain value only to the extent that the
price of the Company's Common Stock increases above the option exercise price
during the term of the optionee's service, management's equity participation
offers a significant incentive and helps to create a long-term partnership
between management/owners and other stockholders. The Committee believes that
the grant of stock options should reflect the Company's success in meeting
objectives established by the Board, each individual officer's ability to attain
such objectives and such officer's contribution towards the attainment of past
objectives.
20
Compliance with Internal Revenue Code Section 162(m). As a result of
Section 162(m) of the Internal Revenue Code of 1986, as amended, the Company
will not be allowed a federal income tax deduction for compensation paid to
certain executive officers, to the extent that compensation exceeds $1 million
per officer in any one calendar year. This limitation will apply to all
compensation which is not considered to be performance-based. Compensation which
does qualify as performance-based compensation will not have to be taken into
account for purposes of this limitation. The Amended and Restated 2000 Stock
Option Plan (as well as the Second Amended and Restated 2000 Stock Option Plan),
contains certain provisions which permit the Company, on a grant-by-grant basis,
to make awards of stock options (with an exercise price equal to or greater than
fair market value of the Common Stock on the date of grant) that will qualify as
performance-based compensation so that any compensation deemed paid in
connection with those options will be excluded from the 162(m) limitation. The
Company's 1998 Stock Option Plan does not contain provisions to qualify stock
options under that plan as performance-based compensation. The Compensation
Committee considers this among all factors taken into account when setting
compensation policy and making individual compensation decisions.
The Compensation Committee does not expect that the compensation to be
paid to any of the Company's executive officers for 2003 will exceed the $1
million limit per officer; however, it is possible that in the future the
deductibility of compensation may be limited by Internal Revenue Code Section
162(m).
The Compensation Committee of the Board of Directors:
Louis G. Cornacchia, Chairman
Steven H. Ferris, Ph.D.
Gerard J. Vlak, Ph.D.
21
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total stockholder
return of $100 invested in our Common Stock on January 4, 1999 (the day our
shares commenced trading) through December 31, 2003 with the cumulative total
return of $100 invested in the Nasdaq Stock Market (U.S.) Index and the Nasdaq
Biotechnology Index calculated similarly for the same period.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG AXONYX INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ BIOTECHNOLOGY INDEX
[THE FOLLOWING TABLE WAS DEPICTED AS LINE GRAPH IN THE PRINTED MATERIAL.]
AXONYX INC
Cumulative Total Return
------------------------------------------------------
1/99 12/99 12/00 12/01 12/02
AXONYX INC. 100.00 330.00 255.00 140.80 37.20
NASDAQ STOCK MARKET (U.S.) 100.00 185.43 111.83 88.71 61.33
NASDAQ BIOTECHNOLOGY 100.00 226.85 290.67 245.56 150.43
* $100 invested on 1/4/99 in stock or on 12/31/98 in index- including
reinvestment of dividends. Fiscal year ending December 31.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS MADE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE
FILINGS MADE BY THE COMPANY UNDER THOSE STATUTES, THE COMPENSATION COMMITTEE
REPORT, THE AUDIT COMMITTEE REPORT, AUDIT COMMITTEE CHARTER, REFERENCE TO THE
INDEPENDENCE OF THE AUDIT COMMITTEE MEMBERS AND THE STOCK PERFORMANCE GRAPH ARE
NOT DEEMED FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND SHALL NOT BE
DEEMED INCORPORATED BY REFERENCE INTO ANY OF THOSE PRIOR FILINGS OR INTO ANY
FUTURE FILINGS MADE BY THE COMPANY UNDER THOSE STATUTES.
22
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
In 2003, officers, directors and greater than ten percent stockholders were
required by Securities and Exchange Commission regulation to furnish the Company
with copies of all Section 16(a) forms they file. Based on a review of copies of
such forms that have been furnished to the Company in 2003, the Company has
determined that the following reporting persons subject to Section 16(a) failed
to file reports on a timely basis.
Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding beneficial
ownership of our common stock as of May 6, 2004 (a) by each person known by us
to own beneficially 5% or more of any class of our common stock, (b) by each of
our Named Executive Officers and directors and (c) by all executive officers and
directors of the Company as a group. As of May 6, 2004 there were 51,233,773
shares of our common stock issued and outstanding. The numbers of shares
beneficially owned include shares of common stock that the listed beneficial
owners have the right to acquire within 60 days of May 6, 2004 upon the exercise
of all options and other rights beneficially owned on that date. Unless
otherwise noted, we believe that all persons named in the table have sole voting
and investment power with respect to all the shares beneficially owned by them.
Name of Number of Shares
Beneficial Owner (1) Beneficially Owned Percent of Class
-------------------- ------------------ ----------------
Marvin S. Hausman, M.D. (2) 3,143,689 6.04%
Gosse B. Bruinsma, M.D. (3) 535,500 1.03%
S. Colin Neill (4) 52,500 0.10%
Louis G. Cornacchia (5) 216,433 0.42%
Steven H. Ferris, Ph.D. (6) 61,500 0.12%
Gerard J. Vlak, Ph.D. (7) 48,750 0.10%
Ralph Snyderman, M.D. (8) 12,500 0.02%
All directors and executive officers (7 persons)
as a group 4,070,872 7.71%
OrbiMed Advisors LLC (9) 2,947,274 5.75%
(1) Unless otherwise indicated, the address of each of the listed
beneficial owners identified above is c/o 500 Seventh Avenue, 10th
Floor, New York, NY 10018.
(2) Marvin S. Hausman, M.D. Includes: (i) 2,337,439 shares owned by Dr.
Hausman; (ii) 200,000 vested but unexercised options exercisable at
$3.11 per share granted on January 13, 1999, (iii) 100,000 vested
but unexercised options exercisable at $11.50 per share granted on
January 10, 2000, (iv) 150,000 vested but unexercised options
exercisable at $7.91 per share granted on December 15, 2000, and (v)
150,000 vested but unexercised options exercisable at $3.16 per
23
share granted on December 11, 2001, (vi) 75,000 vested but
unexercised options exercisable at $1.10 per share granted on
November 7, 2002 (vii) 100,000 options exercisable at $1.18 per
share granted on March 17, 2003 and (vii) 31,250 vested but
unexercised options exercisable at $ 3.61 per share granted on
November 18, 2003. This grant was contingent upon the 2000 Amended
and Restated Stock Option Plan's evergreen provision effective
January 1, 2004. Does not include: (i) 3,000 shares gifted to Dr.
Hausman's three adult children, with 1,000 to each in October 1999,
(ii) 200 shares gifted to Roberta Matta in October 1999, (iii) 5,000
shares gifted to a religious institution in October 2000, (iv) 5,000
shares gifted to six non-affiliate donees in September 2000, (v)
10,550 shares gifted to six non-affiliate donees, including Dr.
Hausman's three adult children in July 2001, (vi) 4,300 shares
gifted to three non-affiliate donees in October 2001, (vii) 3,000
shares gifted to a non-affiliate donee in October 2001, (viii)
12,300 shares gifted to Dr. Hausman's three adult children and
Roberta Matta in December 2001, (ix) 4,717 shares gifted to two
non-affiliate donees in December 2001, (x) 8,834 shares gifted to
five non-affiliate donees in February 2002, (xi) 4,500 shares gifted
to two non-affiliate donees in March 2002, (xii) 5,832 shares gifted
to five non-affiliate donees, (xiii) 16,000 shares gifted to three
non-affiliate donees in September 2002, (xiv) 20,000 shares gifted
to two non-affiliate donees in February 2003, (xv) 10,000 shares
gifted to a non-affiliate donee in March 2003, (xvi) 60,000 shares
gifted to an non-affiliated donee in April 2003, and (xvii) 1,000
shares gifted to Roberta Matta in April 2003, and (xviii) 2000 share
gifted to a non-affiliated donee, 500 shares gifted to Kevin Matta
and 1,000 shares gifted to Roberta Matta in February 2004, (xix)
100,000 unvested options exercisable at $3.16 per share granted on
December 11, 2001, (xx) 100,000 unvested options exercisable at
$1.07 granted on March 17, 2003, and (xxi) 93,750 unvested options
exercisable at $3.61 per share granted on November 18, 2003. This
grant was contingent upon the 2000 Amended and Restated Stock Option
Plan's evergreen provision effective January 1, 2004.
(3) Gosse B. Bruinsma, M.D. Includes: (i) 500 shares owned by Gosse
Bruinsma, M.D., (ii) 125,000 vested but unexercised options
exercisable at $9.50 per share granted on October 10, 2000; (iii)
50,000 vested but unexercised options exercisable at $4.52 per share
granted on May 11, 2001; (iv) 120,000 vested but unexercised options
exercisable at $3.16 per share granted on December 11, 2001; (v)
75,000 vested but unexercised options exercisable at $2.89 per share
granted on June 11, 2002; (vi) 40,000 vested but unexercised options
exercisable at $1.00 per share granted November 7, 2002 (vii)
100,000 vested but unexercised options exercisable at $1.07 per
share granted on March 17, 2003, and (viii) 25,000 vested but
unexercised options exercisable at $3.61 per share granted November
18, 2003. This grant was contingent upon the 2000 Amended and
Restated Stock Option Plan's evergreen provision effective January
1, 2004. Does not include: (i) 25,000 unvested options exercisable
at $9.50 per share granted on October 10, 2000; (ii) 80,000 unvested
options exercisable at $3.16 per share granted on December 11, 2001;
(iii) 25,000 unvested options exercisable at $2.89 per share granted
on June 11, 2002; (iv) 100,000 unvested options exercisable at $1.07
per share granted on March 17, 2003; (v) 75,000 unvested options
exercisable at $3.61 per share granted November 18, 2003. This grant
was contingent upon the 2000 Amended and Restated Stock Option
Plan's evergreen provision effective January 1, 2004.
(4) S. Colin Neill. Includes: (i) 50,000 vested but unexercised options
exercisable at $3.76 granted on September 15, 2003, of which 23,405
options were contingent upon the 2000 Amended and Restated Stock
Option Plan's evergreen provision effective January 1, 2004, (ii)
2,500 vested but unexercised option exercisable at $3.61 granted on
November 18, 2003. Does not include: (i) 150,000 unvested options
exercisable at $3.76 per share granted on September 15, 2003, of
which
24
70,215 options were contigent upon the 2000 Amended and Restated
Stock Option Plan's evergreen provision effective January 1, 2004,
and (ii) 7,500 unvested options exercisable at $3.61 per share
granted on November 18, 2003.
(5) Louis G. Cornacchia. Includes: (i) 138,622 shares owned by Mr.
Cornacchia; (ii) 33,311 common stock purchase warrants exercisable
at $0.688 per share purchased in a private placement on December 31,
2002; (iii) 2,000 common stock purchase warrants exercisable at
$11.00 per shares purchased in a private placement on October 25,
1999; (iv) 30,000 vested but unexercised options exercisable at
$0.825 per share granted on February 21, 2003 and (v) 12,500 vested
but unexercised options exercisable at $4.24 per share granted
September 23, 2003. Does not include: (i) 20,000 unvested options
exercisable at $0.825 per share granted on February 21, 2003 and
(ii) 37,500 unvested options exercisable at $4.24 per share granted
September 23, 2003.
(6) Steven H. Ferris, Ph.D. Includes: (i) 5,000 vested but unexercised
options exercisable at $7.00 per share granted on March 25, 2000;
(ii) 4,000 vested but unexercised options exercisable at $11.00 per
share granted on March 25, 2000 (iii) 10,000 vested but unexercised
options exercisable at $3.06 per share granted on February 15, 2002,
(iv) 30,000 vested but unexercised options exercisable at $1.11 per
share granted on January 14, 2003 and (v) 12,500 vested but
unexercised options exercisable at $4.24 per share granted September
23, 2003. Does not include: (i) 20,000 unvested options exercisable
at $1.11 per share granted on January 14, 2003 and (ii) 37,500
unvested options exercisable at $4.24 per share granted September
23, 2003.
(7) Gerard J. Vlak, Ph.D. Includes: (i) 30,000 vested but unexercised
options exercisable at $0.825 per share granted on February 21, 2003
and (ii) 18,750 vested but unexercised options exercisable at $4.24
per share granted September 23, 2003. Does not include: (i) 20,000
unvested options exercisable at $0.825 per share granted on February
21, 2003, and (ii) 56,250 unvested options exercisable at $4.24 per
share granted September 23, 2003.
(8) Ralph Snyderman, M.D. Includes: (i) 12,500 vested but unexercised
options exercised at $7.09 per share granted on March 8, 2004. Does
not include: (ii) 37,500 unvested options exercisable at $7.09 per
share granted on March 8, 2004.
(9) OrbiMed Capital LLC. This information is derived from a Schedule 13G
dated February 17, 2004 filed with the Securities and Exchange
Commission by Samuel D. Isaly, Managing Member. Samuel D. Islay
reports beneficial ownership of 2,947,274 common shares. OrbiMed
Capital LLC's address is 767 Third Avenue, 30th floor, New York, NY
10017.
Certain Relationships and Related Transactions.
The Company reimburses the Chairman and Chief Executive Officer for
certain costs incurred in maintaining an office and related support in Portland,
Oregon. The amounts in 2003 and 2002 were $31,719 and $54,736 respectively.
OTHER MATTERS
The management of the Company is not aware of any matter to be acted upon
at the Annual Meeting other than the matters described above. However, if any
other matter properly comes before the Annual Meeting, the proxy holders will
vote the proxies thereon in accordance with their best judgment on such matter.
25
PROXY SOLICITATION
The Company will pay reasonable expenses incurred in forwarding proxy
material to the beneficial owners of shares and in obtaining the written
instructions of such beneficial owners. This Proxy Statement and the
accompanying materials, in addition to being mailed directly to stockholders,
will be distributed through brokers, custodians, nominees and other like parties
to beneficial owners of shares of Common Stock. The Company will bear the
expenses of calling and holding the Annual Meeting and the soliciting of proxies
therefor.
The Company may consider the engagement of a proxy solicitation firm. Our
directors, officers and employees may also solicit proxies by mail, telephone
and personal contact. They will not receive any additional compensation for
these activities.
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Proposals which are the proper subject for inclusion in the proxy
statement and for consideration at an annual meeting may be presented by
stockholders. In order to be eligible to submit a proposal, a stockholder must
have continuously held at least $2,000 in market value, or 1% of the Company's
securities entitled to be voted on the proposal at the meeting for at least one
year by the date the stockholder submits the proposal. In addition, the
stockholder must continue to hold those securities through the date of the
meeting. Under current Securities and Exchange Commission rules, to be included
in the Company's proxy statement and proxy card, any proposal by a stockholder
intended to be presented at the 2005 annual meeting of stockholders must be
received by the Company, subject to certain exceptions, no later than February
23, 2005. Any such proposal, including any accompanying supporting statement,
may not exceed 500 words. Such proposal should be addressed to the Secretary of
the Company, S. Colin Neill. In addition, the proxy solicited by the Board of
Directors for the 2005 annual meeting of stockholders will confer discretionary
authority to vote on any stockholder proposal raised at the 2005 annual meeting
of stockholders that is not described in the 2005 proxy statement unless the
Company has received notice of such proposal on or before the close of business
on February 23, 2005. However, if the Company determines to change the date of
the 2005 annual meeting of stockholders more than 30 days from July 1, 2005, the
Company will provide stockholders with a reasonable time before the Company
begins to print and mail its proxy materials for the 2005 annual meeting of
stockholders in order to allow stockholders an opportunity to make proposals in
accordance with the rules and regulations of the Securities and Exchange
Commission.
26
ANNUAL REPORTS
Our 2004 Annual Report to Stockholders, which contains selected
information from our Annual Report on Form 10-K, including its financial
statements for the year ended December 31, 2003, accompanies this proxy
statement. The Company's Annual Report on Form 10-K, for the year ended December
31, 2003 will also be made available (without exhibits), free of charge, to
interested stockholders upon written request to Victoria Trahan, Office Manager,
500 Seventh Avenue, 10th Floor, New York, New York 10018, telephone (212)
645-7704.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Marvin S. Hausman, M.D.
-----------------------------------------
Marvin S. Hausman, M.D.
Chairman & Chief Executive Officer
May 7, 2004
27
APPENDICES
Appendix A: Nominating/Governance Committee Charter
Appendix B: Amended and Restated Compensation Committee Charter
Appendix C: Amended and Restated Audit Committee Charter
Appendix D: Proposed Amendment to the Axonyx Inc. Restated Articles of
Incorporation
Appendix E: Axonyx Inc. Second Amended and Restated 2000 Stock Option Plan
28
APPENDIX A
Axonyx, Inc.
NOMINATING/GOVERNANCE
COMMITTEE CHARTER
I. Purpose
The primary objectives of the Nominating/Governance Committee are to assist the
Board of Directors by: (a) identifying individuals qualified to become Board
members, evaluating candidates proposed by members of the Board or others, and
recommending that the Board select a group of Director nominees for each annual
meeting of the Company's stockholders; (b) recommending qualified and
experienced Directors for membership on Board committees and assisting the Board
in determining that members of the Audit, Compensation and Nominating/Governance
Committees shall l be independent as required by the Nasdaq Stock Market and
other requirements pertaining to Committee members, or Directors generally,
under applicable law or regulation; and (c) developing and recommending to the
Board, and upon adoption by the Board, overseeing the implementation and review
of, a set of effective corporate governance principles applicable to the
Company.
II. Organization
The Nominating/Governance Committee shall consist of three or more Directors,
each of whom shall satisfy the applicable independence requirements of the
Nasdaq Stock Exchange and any other requirements pertaining to members of the
Committee, or Directors generally, under applicable law or regulation.
Committee members shall be appointed by the Board, and members shall serve until
their successors shall be duly elected and qualified. The Committee's chair
shall be designated by the Board. If the chair is not present at the meeting,
the member with the longest service on the Committee shall serve as the chair
for that meeting.
III. Structure and Meetings
The Committee has four regularly scheduled meetings each year, and shall have
such additional meetings as it deems appropriate in order to carry out its
responsibilities. The chair of the Committee will preside at each meeting and
will approve the agenda of items to be addressed at each regularly scheduled
meeting. Management will circulate a proposed agenda for each regular meeting to
each Committee member in advance of the meeting.
A-1
IV. Goals and Responsibilities
In its capacity as nominating committee, the Committee shall:
A. review possible candidates for Board Membership consistent with the
Board's criteria for selecting new Directors, including a
candidate's professional background, leadership positions,
experience, expertise, reputation for integrity, and potential for
contributions to the Company;
B. annually recommend to the Board a slate of Board nominees for
election at the annual meeting of the Company's stockholders;
C. review the membership of the Board's committees and characteristics
of Directors which are aligned with membership on particular
committees; advise the Board on committee member qualifications; and
periodically recommend to the Board a slate for committee membership
and committee chairs.
In its capacity as governance committee, the Committee shall:
D. develop and recommend to the Board a set of corporate governance
principles applicable to the Company, review and assess the adequacy
of such principles periodically, and recommend to the Board any
changes deemed appropriate;
E. develop and recommend policies on the size and composition of the
Board;
F. make recommendations to the Board as to determinations of Director
independence;
G. review Director compensation levels and practices, and recommend,
from time to time, changes in such compensation levels and practices
to the Board;
H. generally advise the Board on corporate governance matter, committee
structure and operations and committee reporting to the Board;
I. oversee Board performance evaluations on an annual basis;
J. consider questions of possible conflicts of interest of Board
members and senior executives of the Company to the extent these
matters are not the responsibility of other Board Committees.
A-2
The Committee will periodically review and reassess the adequacy of this Charter
and recommend any proposed changes to the Board for approval.
The Committee shall perform any other activities consistent with this Charter,
the Company's By-laws and governing law as the Committee or the Board deems
appropriate.
V. Performance Evaluation
The Nominating/Governance Committee shall conduct an annual self-evaluation with
respect to its performance, and shall share the results of its self-evaluation
with the Board.
VI. Committee Resources
The Nominating/Governance Committee shall have the sole authority to retain and
terminate any consultants, legal counsel or other advisors as it may deem
appropriate in its sole discretion. The Committee shall have sole authority to
approve related fees and terms of employment for any consultants, counsel or
other advisors that it retains. Any consultant retained by the Committee shall
report solely to the Committee.
A-3
APPENDIX B
Axonyx, Inc.
AMENDED AND RESTATED
Compensation Committee Charter
Approved by the Board of Directors on March 30, 2004
I. Purpose
The primary purpose of the Compensation Committee is:
(a) To advise the Board with respect to the Company's compensation
policies.
(b) To assist the Board in discharging its responsibilities in respect of
compensation of the Company's executive officers.
(c) To make recommendations to the Board regarding corporate goals and
objectives relevant to the compensation of the Chief Executive Officer.
(d) To review and/or advise the Board with respect to the Company's
personnel compensation policies.
(e) To review, approve and/or advise the Board with respect to the
Company's personnel policies and plans, including retirement, savings and
benefit plans.
(f) To produce an annual report for inclusion in the Company's proxy
statement on executive compensation.
II. Organization
o The Compensation Committee shall consist of three or more directors,
each of whom shall satisfy the applicable independence requirements
of the Nasdaq Stock Market and any other requirements pertaining to
members of the Committee, or Directors generally, under applicable
law or regulation.
B-1
o Committee members shall be appointed by the Board and shall serve
until their successors shall be duly elected and qualified. The
Committee's chair shall be designated by the Board. If the chair is
not present at a meeting, the member with the longest service on the
Committee will serve as chair for that meeting.
III. Structure and Meetings
o The Committee is required to hold four regularly scheduled meetings
each year, and shall hold such additional meetings as it deems
appropriate in order to carry out its responsibilities.
o The chair of the Committee will preside at each meeting and will
approve the agenda of items to be addressed at each regularly
scheduled meeting.
o Management will circulate a proposed agenda for each regular meeting
to each Committee member in advance of the meeting.
IV. Goals and Responsibilities
o Develop guidelines for and review the compensation policies of the
Company in general and review and approve compensation of senior
officers of the Company;
o Make recommendations to the Board regarding corporate goals and
objectives relevant to the compensation of the Chief Executive
Officer, evaluate the Chief Executive Officer's performance in light
of these goals and objectives and such factors as the Committee
deems appropriate, recommend for approval by the Board the Chief
Executive Officer's compensation based on this evaluation;
o Produce an annual report on executive compensation for inclusion in
the Company's proxy statement, in accordance with applicable rules
and regulations;
o Make recommendations to the Board with respect to
incentive-compensation plans and equity-based plans, establish
criteria for the granting of options and stock grants to the
Company's officers and other employees, and review and approve the
granting of options and stock grants in accordance with such
criteria;
o Review, approve and/or advise the Board with respect to the
Company's personnel policies and plan, including retirement, savings
and benefit plans;
B-2
o Review major organizational and staffing matters, including senior
management employment, promotion, retention and severance matters;
o Periodically review the Company's policies regarding long-term
accumulation of Company stock by senior members of Management and
the alignment of management's interests with those of the Company;
o Periodically review and reassess the adequacy of this Charter and
recommend any proposed changes to the Board for approval; and
o Perform any other activities consistent with this Charter, the
Company's By-laws and governing law as the Committee of the Board
deem appropriate.
V. Performance Evaluation
o The Compensation Committee shall conduct an annual self-evaluation
with respect to its performance, and shall share the results of its
self-evaluation with the Board.
VI. Committee Resources
o The Compensation Committee shall have the sole authority to retain
and terminate any consultants, legal counsel or other advisors as it
may deem appropriate in its sole discretion.
o The Committee shall have sole authority to approve related fees and
terms of employment for any consultants, counsel or any other
advisor that it retains.
o Any consultant retained by the Committee shall report solely to the
Committee.
B-3
APPENDIX C
Axonyx Inc.
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
Approved by the Board of Directors on September 23, 2003
I. PURPOSE
The Audit Committee shall provide assistance to the Board of Directors of Axonyx
Inc. (the "Corporation") in fulfilling its responsibility to:
(1) monitor the integrity of the Corporation's financial statements and
financial reporting process,
(2) monitor the independent auditor's qualifications and independence
(3) monitor the performance of the Corporation's internal control
functions regarding financial reporting and the independent
auditors,
(4) review and approve any conflict-of-interest situation brought to its
attention, and
(5) monitor the Corporation's approach to business ethics and compliance
with legal and regulatory requirements.
II. ORGANIZATION AND MEETINGS
The Audit Committee shall be comprised of independent directors appointed by the
Board of Directors and shall consist of at least three members. The members of
the Audit Committee shall meet the independence, experience and expertise
requirements for members of public Corporation audit committees under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the exchange or market on which the Corporation's securities are traded or
listed. Audit committee members shall not simultaneously serve on the audit
committees of more than two other public companies. The members of the Audit
Committee shall be appointed by the Board on the recommendation of the
Nominating Committee. Audit Committee members may be replaced by the Board.
C-1
The Audit Committee shall meet at least quarterly and may meet more frequently
as necessary to perform its oversight role under this Charter. The Committee
Chairman has the power to call a Committee meeting whenever he or she thinks
that there is a need. Committee members may attend meetings by teleconference. A
Committee member should not vote on any matter in which he or she is not
independent.
The audit committee shall keep minutes of its meetings and shall make regular
reports on its activities to the Board of Directors.
III. AUTHORITY AND RESPONSIBILITIES
In discharging its oversight role, the Audit Committee has the authority to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Corporation. The Audit Committee shall
have the authority to retain independent legal, accounting or other consultants
to advise the Committee. The Corporation shall provide for appropriate funding,
as determined by the Audit Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an audit report and
to any advisors employed by the Audit Committee. The Audit Committee may request
any officer or employee of the Corporation or the Corporation's outside counsel,
accountant or independent auditor to attend a meeting of the Committee or to
meet with any members of, or consultants to, the Committee.
Responsibilities for engaging independent auditors and oversight of the
independence of auditors.
The Audit Committee shall:
1. Have sole authority to appoint, terminate and replace the Corporation's
independent auditor. The Audit Committee shall be directly responsible for
the compensation and oversight of the work of independent auditor
(including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purposes of
preparing or issuing an audit report or related work. The independent
auditor shall report directly to the Audit Committee.
2. Approve in advance all audit and permitted non-audit services (including
the fees and terms thereof) to be provided by the independent auditor,
subject to any exception permitted by law or regulation.
C-2
3. Obtain and review, at least annually, a report by the independent auditor
describing: (i) the auditor's internal quality control procedures; (ii)
any material issues raised by the most recent internal quality control
review or peer review of the auditor, or by any inquiry or investigation
by governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the
auditor, and any steps taken to address these issues; and (iii) all
relationships between the auditor and the Corporation. Evaluate the
qualifications, performance and independence of the independent auditor,
including considering whether the auditor's quality controls are adequate
and the provision of permitted non-audit services is compatible with
maintaining the auditor's independence, and taking into account the
opinions of management of internal auditors. The audit committee shall
present its conclusions with respect to the independent auditor to the
Board.
4. Request from the outside auditors, at least annually, a formal written
statement regarding the auditor's independence consistent with
Independence Standards Board Standard No. 1.
5. Discuss such written statement with the auditor concerning any disclosed
relationships between the auditor and the Corporation, and if so
determined by the Audit Committee, recommend that the Board take
appropriate action to assure the independence of the auditor. Recommend to
the Board policies for the Corporation's hiring of employees or former
employees of the independent auditor who participated in any capacity in
the audit of the Corporation.
6. Review major changes to the Corporation's accounting principles and
practices taking into consideration the views of the independent auditor,
internal or external accountants or management.
7. Ensure the rotation of the audit partners as required by law.
8. Obtain from the independent auditor assurance that Section 10A(b) of the
Exchange Act has not been implicated.
C-3
Responsibilities for reviewing the annual external audit and the review of
quarterly and annual financial statements.
1. The Committee shall review with management and the outside auditors the
audited financial statements and related footnotes to be included in the
Corporation's Annual Report on Form 10-K or 10-KSB (or the Annual Report
to Stockholders if distributed prior to the filing of the Form 10-K or
10-KSB), including the Corporation's disclosure under "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
review and consider with the outside auditors the matters required to be
discussed by the Statement of Auditing Standards ("SAS") No. 61, and
recommend to the Board whether the audited financial statements should be
included in the Company's Form 10-K or 10-KSB.
2. Review and discuss reports from independent auditors on: (a) All critical
accounting policies and practices to be used. (b) All alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management, ramifications of the
use of such alternative disclosures and treatments, and the treatment
preferred by the independent auditor. (c) Other material written
communications between the independent auditor and management, such as any
management letter or schedule of unadjusted differences.
2. Review with the independent auditor the completed audit, including a
review of any major issues regarding accounting and auditing principles
and practices, the adequacy of internal controls that could significantly
affect the Corporation's financial statements, and any management letter
provided by the auditor and the Corporation's response to that letter and
review any difficulties the auditor encountered in the course of its audit
work (including any restrictions on the scope of the auditor's activities
or on access to information, and any significant disagreements with
management) and management's response.
3. Review with management and the independent auditor the Corporation's
quarterly financial statements and the matters required to be discussed by
SAS No. 61 prior to the release of quarterly earnings to the public or the
filing of the financial statements with the SEC or other regulatory
agencies.
4. Review disclosures made to the Audit Committee by the Corporation's Chief
Executive Officer and Principal Financial Officer during their
certification process for the Form 10-K or 10-KSB and Form 10-Q or 10-QSB
about any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management
or other employees who have a significant role in the Corporation's
internal controls.
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5. Review any major changes to the Corporation's accounting principles and
practices as may be suggested by management.
Periodic responsibilities.
1. Review and annually reassess the adequacy of this Charter and submit any
amendments to the Board for approval.
2. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Corporation's annual proxy statement.
3. The Committee shall discuss with management and the outside auditors the
quality and adequacy of the Corporation's internal controls.
4. Review and approve all related party transactions.
5. Review the Corporation's approach to business ethics and compliance with
the law.
6. Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Corporation's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles;
this is the responsibility of management and upon completion of the audit by the
independent auditor, subject to their findings, the auditors render their report
on the financial statements. Nor is it the duty of the Audit Committee to
conduct investigations, to resolve disagreements, if any, between management and
the independent auditor or to assure compliance with laws and regulations, this
is the responsibility of the Board.
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APPENDIX D
PROPOSED AMENDMENT TO AXONYX INC. RESTATED ARTICLES OF INCORPORATION:
Article V shall be replaced by the following:
ARTICLE V
The corporation is authorized to issue One Hundred and Sixty Five Million
(165,000,000) shares of par value $0.001 stock, consisting of two classes of
stock, designated "Common Stock" and "Preferred Stock". The total number of
shares of Common Stock authorized to be issued is One Hundred and Fifty Million
(150,000,000), par value $0.001. The total number of shares of Preferred Stock
authorized to be issued is Fifteen Million (15,000,000), par value $0.001. Any
and all shares of stock may be issued, reissued, transferred or granted by the
Board of Directors, as the case may be, to persons, corporations, and
associations, and for such lawful consideration, and on such terms, as the Board
of Directors shall have the authority to issue pursuant to the Nevada Revised
Statutes and the By-Laws of the corporation. The Board of Directors shall have
the authority to set, by resolution, the particular designations, preferences
and the relative, participating, optional or other special rights and
qualifications, limitations or restrictions of any class of stock or any series
of stock within any class of stock issued by this corporation.
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APPENDIX E
AXONYX INC.
SECOND AMENDED AND RESTATED 2000 STOCK OPTION PLAN
(As Amended and Restated Effective as of May___, 2004)
1. Purpose.
This Second Amended and Restated 2000 Stock Option Plan is intended to
encourage stock ownership in Axonyx Inc. by the officers, directors, employees
and consultants of the Company or its affiliates in order to promote their
interest in the success of the Company and to encourage their continued
affiliation. All options granted under this Second Amended and Restated 2000
Stock Option Plan are intended to be either (a) Incentive Stock Options or (b)
Non-Statutory Stock Options.
2. Definitions.
As used herein the following definitions shall apply:
"Act" shall mean the Securities Exchange Act of 1934, as amended from time
to time.
"Affiliate" shall mean any corporation defined as a "parent corporation"
or a "subsidiary corporation" by Code Section 424(e) and (f), respectively.
"Agreement" shall mean either a 2000 Incentive Stock Option Agreement or a
2000 Non-Statutory Stock Option Agreement, embodying the terms of the agreement
between the Company and the Optionee with respect to Optionee's Option.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Company" shall mean Axonyx Inc., a Nevada corporation.
"Consultant" shall mean any person who performs services for the Company
as a consultant or advisor.
"Disability" or "Disabled" shall mean the condition of being "disabled"
within the meaning of Section 422(c)(6) of the Code or any successor provision.
"Director" shall mean an individual member of the Board.
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"Employee" shall mean any person treated as an employee (including
officers and directors) in the records of the Company or any Affiliate and who
is subject to the control and direction of the Company or any Affiliate with
regard to both the work to be performed and the manner and method of
performance. The payment of a director's fee by the Company to a Director shall
not be sufficient to constitute "employment" of the Director by the Company.
"Fair Market Value" per share of Stock on a given date shall mean:
(i) If the Stock is at that time listed on a national
securities exchange, then the Fair Market Value shall
mean the average of the highest and lowest selling price
per share of the Stock on the relevant date on the
exchange determined by the Board to be the primary
market for the Stock, as reported in the composite tape
of transactions for such exchange as published in the
Wall Street Journal or, if there were no sales on that
date, the average of the highest and lowest selling
price per share of Stock on the last preceding date on
which there were sales.
(ii) If the Stock is at that time traded on the Nasdaq
National Market, then the Fair Market Value shall mean
the average of the highest and lowest selling price per
share of Stock on the relevant date, as the price is
reported by the National Association of Securities
Dealers, Inc., on the Nasdaq National Market, or any
successor system and published in the Wall Street
Journal. If there were no sales on the relevant date,
then the Fair Market Value shall mean the average of the
highest and lowest selling price on the last preceding
date for which such quotation exists.(iii) If the Stock
is neither listed on any national securities exchange
nor traded on the Nasdaq National Market, then the Fair
Market Value shall mean the value per share of Stock as
determined by the Board after taking into account such
factors as the Board shall in good faith deem
appropriate.
"Incentive Stock Option" shall mean an option granted pursuant to the Plan
which is designated by the Board or its delegates as an "Incentive Stock Option"
and which qualifies as an incentive stock option under Section 422 of the Code
or any successor provision.
"Non-Statutory Stock Option" shall mean a stock option granted pursuant to
the Plan which is not an Incentive Stock Option.
"Option" shall refer to either or both an Incentive Stock Option or
Non-Statutory Stock Option, as the context shall indicate.
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"Optionee" shall mean the recipient of an Incentive Stock Option or a
Non-Statutory Stock Option.
"Option Price" shall mean the price per share of Stock to be paid by the
Optionee upon exercise of the Option.
"Option Stock" shall mean the total number of shares of Stock the Optionee
shall be entitled to purchase pursuant to the Agreement.
"Plan" shall mean this Axonyx Inc. Second Amended and Restated 2000 Stock
Option Plan, as amended from time to time.
"Reporting Person" shall mean an Optionee who is required to file
statements relating to his or her beneficial ownership of Stock with the SEC
pursuant to Section 16(a) of the Act.
"Rule 16b-3" shall mean Rule 16b-3 (as amended from time to time),
promulgated by the SEC under the Act, and any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Stock" shall mean the $0.001 par value Common Stock of the Company
"10% Stockholder" shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company (or any Affiliate).
"Withholding Taxes" shall mean the applicable income and employment
withholding taxes to which the holder of Non-Statutory Stock Options or unvested
shares of Stock may become subject in connection with the exercise of those
Options or the vesting of those shares.
3. Administration.
The Plan shall be administered by the Board; provided, however, that the
Board may delegate all or any part of its authority to administer the Plan in
its entirety or, with respect to any group or groups of persons eligible to
receive Options hereunder, to such committee as the Board shall in its sole
discretion determine. Such committee shall be composed of not fewer than two
non-Employee Directors (the "Committee"). If and when such a Committee is so
appointed, references herein to the "Board" shall be deemed to be references to
the Board or Committee, to the extent such entity is carrying out its
administrative functions under the Plan with respect to matters under its
jurisdiction. The Board or the Committee may adopt, amend and rescind such rules
and regulations for carrying out the Plan and implementing agreements and take
such actions as it deems proper. The interpretation, construction and
application by the Board or the Committee of
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any of the provisions of the Plan or any Option granted thereunder shall be
final and binding on the Company, all Optionees, their legal representatives,
and any person who may acquire an Option directly from an Optionee by permitted
transfer, bequest or inheritance. Reference to administrative acts by the Board
in the Plan shall also refer to acts by the Committee, unless the context
otherwise indicates. Whether or not the Board has delegated administrative
authority, the Board has the final power to determine all questions of policy or
expediency that may arise in administration of the Plan.
4. Eligibility.
Only Employees are eligible to receive Incentive Stock Options under the
Plan. Employees, Officers, Directors and Consultants of the Company or its
Affiliates are eligible to receive Non-Statutory Stock Options under the Plan.
No person shall be eligible to receive an Option for a larger number of
shares than is recommended for him or her by the Board. Any Optionee may hold
more than one Option (whether Incentive Stock Options, Non-Statutory Stock
Options, or both, but only on the terms and conditions and subject to the
restrictions set forth herein).
5. Stock Subject to the Plan.
(a) Options granted under the Plan shall be for shares of the Company's
authorized but unissued or re-acquired Stock. The aggregate number of shares of
Stock which may be issued over the term of the Plan shall not exceed seven
million and five hundred thousand (7,500,000) shares, subject to adjustment by
the Board as provided herein. Stock issued under other stock option plans of the
Company shall not be counted against the maximum number of shares that can be
issued under the Plan.
(b) No individual shall be granted in any one calendar year Options to purchase
more than 800,000 shares of Stock, subject to adjustment as provided herein.
(c) In the event that any outstanding Option expires or is terminated for any
reason, the shares of Stock allocable to the unexercised portion of such Option
may again be subject to an Option under the Plan. If the Option Price of an
Option under the Plan is paid with shares of Stock or should shares of Stock
otherwise issuable under the Plan be withheld by the Company in satisfaction of
the withholding taxes incurred in connection with the exercise of an Option
under the Plan, then the number of shares of Stock available for issuance under
the Plan shall be reduced by the net number of shares of Stock issued to the
holder of such option, and not by the gross number of shares of Stock for which
the Option is exercised. Stock issued on the exercise of an Option which is
forfeited in accordance with the conditions contained in the grant by the
Optionee after issuance shall be deemed to have never been issued under the Plan
and, accordingly, shall not be counted against the maximum number of shares that
can be issued under the Plan. Notwithstanding the terms of the previous two
sentences, the maximum number of shares which may be issued under the Plan upon
the exercise of Incentive Stock Options shall be seven million and five hundred
thousand (7,500,000) shares, subject to adjustment by the
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Board as provided herein, regardless of the fact that under the terms of the
preceding sentences, a lesser number of shares is deemed to be issued pursuant
to the exercise of Incentive Stock Options. Shares of Stock underlying one or
more stock appreciation rights exercised under Section 6(d)(v) shall not be
available for subsequent issuance under the Plan.
(d) If any change is made to the Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Stock as a class without the Company's receipt
of consideration, appropriate adjustments shall be made by the Board to (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the
maximum number and/or class of securities for which any one person may be
granted stock options and separately exercisable stock appreciation rights under
the Plan per calendar year, (iii) the number and/or class of securities and the
Option Price per share in effect under each outstanding option under the Plan
and. Such adjustments to the outstanding options are to be effected in a manner,
which shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Board shall be final, binding
and conclusive.
6. Terms and Conditions of Options.
The Board or its delegates shall authorize the granting of all Options
under the Plan with such Options to be evidenced by Incentive Stock Option
Agreements or Non-Statutory Stock Option Agreements, as the case may be. Each
Agreement shall be in such form as the Board may approve from time to time. Each
Agreement shall comply with and be subject to the following terms and
conditions:
(a) Type of Option; Number of Shares. Each particular Agreement shall state the
type of Options to be granted (whether Incentive Stock Options or Non-Statutory
Stock Options) and the number of shares to which the Option pertains. Under no
circumstances shall the aggregate Fair Market Value of the Stock (determined as
of the time the Option is granted) with respect to which Incentive Stock Options
are exercisable for the first time by any Employee during any calendar year
(under all incentive stock option plans of the Company and its Affiliates)
exceed $100,000. To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Stock
Options shall be applied on the basis of the order in which such options are
granted.
(b) Option Price. Each particular Agreement shall state the Option
Price. The Option Price for an Incentive Stock Option shall not be
less than one hundred percent (100%) of the Fair Market Value per
share of Stock on the date the Incentive Stock Option is granted.
The Option Price for a Non-Statutory Stock Option shall be the price
per share of Stock set by the Board or its delegates. If any
Employee to whom an Incentive Option is granted is a 10%
Stockholder, then the Option Price shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of
Stock on the date the Option is granted.
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(c) Certificate Legends. Certificates for shares of Stock issued and delivered
to Reporting Persons may be legended, as the Board deems appropriate, if
required by the provisions of any applicable rule or regulation.
(d) Medium and Time of Payment. The aggregate Option Price shall be payable upon
the exercise of the Option and shall be paid in any combination of:
(i) United States cash currency;
(ii) a cashier's or certified check to the order of the Company;
(iii) a personal check acceptable to the Company;
(iv) to the extent permitted by the Board, shares of Stock of the Company
(including previously owned Stock or Stock issuable in connection
with the Option exercise), properly endorsed to the Company, whose
Fair Market Value on the date of exercise equals the aggregate
Option Price of the Option being exercised;
(v) to the extent permitted by the Board, the Optionee's entering into
an agreement with the Company, whereby a portion of the Optionee's
Options are terminated and where the "built-in gain" on any Options
which are terminated as part of such agreement equals the aggregate
Option Price of the Option being exercised. "Built-in gain" means
the excess of the aggregate Fair Market Value of any Stock otherwise
issuable on exercise of a terminated Option, over the aggregate
Option Price otherwise due the Company on such exercise.
(vi) The Company may establish, from time to time, procedures for a
"cashless exercise" of Options, including to the extent the Option
is exercised for vested shares of stock, through a special sale and
remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable instructions to (a) a
Company-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Option Price payable for the purchased shares plus all
applicable income and employment taxes required to be withheld by
the Company by reason of such exercise and (b) the Company to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
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Except to the extent such sale and remittance procedure is
utilized, payment of the Option Price for the purchased shares must
be made on the exercise date.
The Board may permit deemed or constructive transfer of shares in lieu of
actual transfer and physical delivery of certificates. Except to the extent
prohibited by applicable law, the Board may take any necessary or appropriate
steps in order to facilitate the payment of any such Option Price. Without
limiting the foregoing, the Board may cause the Company to loan the aggregate
Option Price to the Optionee or to guarantee that any Stock to be issued will be
delivered to a broker or lender in order to allow the Optionee to borrow the
aggregate Option Price. The Board, in its sole and exclusive discretion, may
require satisfaction of any rules or conditions in connection with payment of
the Option Price at any particular time, in any particular form, or with the
Company's assistance. If Stock used to pay any Option Price is subject to any
prior restrictions imposed in connection with any plan of the Company (including
this Plan), an equal number of the shares of Stock acquired on exercise shall be
made subject to such prior restrictions in addition to any further restrictions
imposed on such Stock by the terms of the Optionee's Agreement or by the Plan.
(e) Vesting. The total number of shares of Stock subject to an Option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). The Agreement may provide that from time to time during each of such
installment periods, the Option may become exercisable ("vest") with respect to
some or all of the shares allotted to that period, and may be exercised with
respect to some or all of the shares allotted to such period and/or any prior
period as to which the Option became vested but was not fully exercised. During
the remainder of the term of the Option (if its term extends beyond the end of
the installment periods), any unexercised Option Stock may be exercised from
time to time.
(f) Duration of Options. Each particular Agreement shall state the term of the
Option; provided, however, that all Incentive Stock Options granted under this
Plan shall expire and not be exercisable after the expiration of ten (10) years
from the date granted; provided, further, that any Incentive Stock Option
granted to an Employee who is a 10% Stockholder shall expire and not be
exercisable after the expiration of five (5) years from the date granted.
Non-Statutory Stock Options shall expire and not be exercisable after the date
set by the Board or its delegates in the particular Agreement, or on any later
date subsequently approved by the Board or its delegates.
(g) Exercise of Options.
(i) Each particular Agreement shall state when the Optionee's
right to purchase Stock pursuant to the terms of an Option are
exercisable in whole or in part. Subject to the earlier
termination of the right to exercise the Options as provided
under this Plan, Options shall be exercisable in whole or in
part as the Board, in its sole and exclusive discretion, may
provide in
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the particular Agreement, as amended. The Board may at any
time increase the percentage of an Option that is otherwise
exercisable under the terms of a particular Agreement. The
Board, in its sole and exclusive discretion, may permit the
issuance of Stock underlying an Option prior to the date the
Option is otherwise exercisable, provided such Stock is
subject to repurchase rights which expire pro rata as the
Option would otherwise have become exercisable.
(ii) If the Optionee does not exercise in any one (1) year period
the full number of shares to which he or she is then entitled
to exercise, the Optionee may exercise those shares in any
subsequent year during the term of the Option.
(h) Transfer of Options. An Option shall not be transferable except by will or
by the laws of decent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person, except
as specifically provided for by the Board. An attempted non-permitted transfer
of an Option shall be void.
(i) Disability of Optionee. In the event an Optionee ceases to provide services
as an Employee, Director or Consultant as a result of the Optionee's Disability,
the Optionee may exercise his or her Option, but only within twelve (12) months
from the date of such termination (or such shorter period specified in the
Agreement and in no event no event later than the expiration of the term of such
Option as set forth in the Agreement), and only to the extent that the Optionee
was entitled to exercise it at the date of such termination (but in no event
later than the expiration of the term of such Option as set forth in the
Agreement). If, at the date of termination, the Optionee is not entitled to
exercise his of her entire Option, the unexercisable portion of Option shall
terminate immediately and the shares covered thereby shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option in full
within the time specified herein, the unexercised portion of the Option shall
terminate, and the shares covered thereby shall revert to the Plan.
(j) Death of Optionee. In the event an Optionee ceases to provide services to as
an Employee, Director or Consultant as a result of his or her death, the Option
may be exercised, at any time within sixteen (16) months following the date of
death (or such other period specified in the Agreement and in no event later
than the expiration of the term of such Option as set forth in the Agreement),
by the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent the Optionee was
entitled to exercise the Option at the date of death. If, at the time of death,
the Optionee was not entitled to exercise his or her entire Option, the
unexercisable portion of the Option shall terminate immediately and the shares
covered thereby shall revert to the Plan. If, after death, the Optionee's estate
or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option in full within the time specified
herein, the unexercised portion of the Option shall terminate, and the shares
covered thereby shall revert to the Plan.
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(k) Other Termination of Employment or Relationship as an Officer, Director or
Consultant. In the event that an Optionee shall cease to be employed by or
perform services for the Company or its Affiliates prior to the Option's
expiration date (other than upon the Optionee's death or Disability), the
exercise of Options held by such Optionee shall be subject to such limitations
on the periods of time during which such Options, may be exercised as may be
specified in the particular Agreement, as amended, between the Optionee and the
Company. Whether authorized leave of absence or absence for military or
governmental service shall constitute termination of employment for purposes of
the Plan or any Agreement shall be determined by the Board in its sole and
exclusive discretion. No provision of the Plan or any Agreement shall be
construed so as to grant any individual the right to remain in the employ or
service of the Company for any period of specific duration.
(l) Corporate Transactions.
(i) The Board, in its sole and exclusive discretion, may make such
equitable adjustments to the Plan and outstanding Options as it
deems appropriate in order to preclude the dilution or enlargement
of benefits under the Plan, upon exchange of all of the outstanding
stock of the Company for a different class or series of capital
stock or the separation of assets of the Company, including a
spin-off or other distribution of stock or property by the Company.
(ii) Except as provided in the following sentence, if the Company shall
be the surviving corporation in any merger or consolidation, each
outstanding Option shall pertain to and apply to the securities to
which a holder of the number of shares of Option Stock would have
been entitled. A dissolution or liquidation of the Company, a merger
(other than a merger the principal purpose of which is to change the
state of the Company's incorporation) or consolidation in which the
Company is not the surviving corporation, a reverse merger in which
the Company is the surviving corporation but the Company's Stock
outstanding immediately preceding the merger is converted by virtue
of the merger into other property, or other capital reorganization
in which more than fifty percent (50%) of the Company's Stock is
exchanged (unless the dissolution or liquidation plan, merger or
consolidation agreement or capital reorganization corporate
documents expressly provide to the contrary) shall cause each
outstanding Option to terminate, provided, that each Optionee shall,
immediately prior to such event, have the right to exercise his or
her Option in whole or in part, unless the Option in connection with
such event is either to be assumed by the successor corporation or
parent thereof, or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or
parent thereof, or the Option is to be replaced by a comparable cash
incentive program of the successor corporation based on the value of
the Option on the date of such event. Notwithstanding the
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preceding, if, within one (1) year from the date of such event, an
Employee's employment is involuntarily terminated, then the
Employee's outstanding Options, if any, shall become immediately
exercisable.(iii) All adjustments required by the preceding
paragraphs shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive, provided, that,
except with respect to any accelerated exercisability, adjustments
shall not be made in a manner that causes an Incentive Stock Option
to fail to continue to qualify as an "incentive stock option" within
the meaning of Code Section 422. The portion of any Incentive Stock
Option accelerated in connection with a transaction pursuant to this
Section 6(l) shall remain exercisable as an Incentive Stock Option
only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall
be exercisable as a Non-Statutory Stock Option under the Federal tax
laws.
(iv) The Board shall have the discretionary authority to structure one or
more outstanding Options so that those Options shall, immediately
prior to the effective date of a corporate transaction, become
exercisable in whole or part for the shares of Stock at the time
subject to those Options and may be exercised for any or all of
those shares as fully vested shares of Stock, whether or not those
options are to be assumed in the corporate transaction or otherwise
continued in effect.
(v) Except as expressly provided in this Paragraph 6(l), an Optionee
shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class, or the payment of any stock
dividend, or any other increase in the number of shares of stock of
any class by reason of any dissolution, liquidation, merger,
consolidation, reorganization, or separation of assets, and any
issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the
number or amount of the Option Stock or the Option Price of
outstanding Options.
(vi) The grant or existence of an Option shall not affect in any way the
right or power of the Company to make adjustments,
reclassifications, reorganizations or changes in its capital or
business structure, or to merge, consolidate, dissolve, liquidate or
sell, or transfer all or any part of its business or assets.
(m) Rights as a Shareholder. An Optionee shall not have rights as a shareholder
with respect to any shares until the date of the issuance of a stock certificate
to him or her for
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such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date of issuance of
such stock certificate, except as provided in Paragraph 6(l) above.
(n) Other Provisions. Each Option Agreement may contain such other provisions,
including without limitation, restrictions upon the exercise or transferability
of the Option, as the Board may deem advisable.
7. Miscellaneous.
(a) Modification, Extension and Renewal of Options. Subject to the terms and
conditions of the Plan, the Board may modify (including lowering the Option
Price or changing Incentive Stock Options into Non-Statutory Stock Options),
extend or renew outstanding Options granted under the Plan, or accept the
surrender of outstanding Options under this Plan and/or other stock option plans
of the Company (to the extent not previously exercised) and authorize the
granting of new Options in substitution therefor. Notwithstanding the foregoing,
no modification of an Option shall, without the consent of the Optionee, alter
or impair any rights or obligations under any Option previously granted under
the Plan.
(b) Securities Compliance. The Company may require any Optionee, or any person
to whom an Option is transferred under subsection 6(d), as a condition of
exercising any such Option, (1) to give written assurances satisfactory to the
Company as to the Optionee's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
Option has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. Unless an Optionee could otherwise exercise a
Stock Option or dispose of Stock delivered upon exercise of a Stock Option
granted under the Plan without incurring liability under Section 16(b) of the
Exchange Act, at least six months shall elapse from the date of acquisition of
the Stock Option to the date of disposition of its underlying Stock.
(c) Withholding Taxes. When the Company becomes required to collect federal and
state income and employment taxes in connection with the exercise of an Option
or the vesting of shares acquired under the Plan, the holder of the Option shall
promptly pay to the Company the amount of such taxes in cash, unless the Board
permits or requires
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payment in another form. Subject to such conditions as it may require, the
Board, in its sole discretion, may provide any or all holders of Non-Statutory
Stock Options or unvested shares of Stock with the right to use shares of Stock
in satisfaction of all or part of the Withholding Taxes to which such holders
may become subject in connection with the exercise of their Options or the
vesting of Stock. Such right may be provided to any such holder in either or
both of the following formats:
Stock Withholding: The election to have the Corporation withhold, from the
shares of Stock otherwise issuable upon the exercise of such Non-Statutory Stock
Option or the vesting of such shares, a portion of those shares with an
aggregate Fair Market Value equal to the percentage of the Withholding Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the time
the Non-Statutory Stock Option is exercised or the shares vest, one or more
shares of Stock previously acquired by such holder (other than in connection
with the option exercise or share vesting triggering the Withholding Taxes) with
an aggregate Fair Market Value equal to the percentage of the Withholding Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
8. Term of Plan.
The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall not extend beyond a date ten (10) years from the date
of adoption hereof by the Board. No Incentive Stock Options or Non-Statutory
Stock Options may be granted under the Plan while the Plan is suspended or after
it is terminated. Rights and obligations under any Option granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Option was granted.
9. Amendment of Plan.
The Board shall have complete and exclusive power and authority to amend
or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
Options at the time outstanding under the Plan unless the Optionee consents to
such amendment or modification. In addition, certain amendments may require
stockholder approval pursuant to applicable laws and regulations.
Options may be granted in excess of the number of shares of Stock then
available for issuance under the Plan, provided any excess shares actually
issued shall be held in escrow until there is obtained stockholder approval of
an amendment sufficiently increasing the number of shares of Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess grants are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Company shall
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promptly refund to the Optionees the Option Price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
10. Application of Funds.
The proceeds received by the Company from the sale of Stock pursuant to
the exercise of an Option will be used for general corporate purposes.
11. No Obligation to Exercise Option.
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
12. Indemnification.
In addition to such other rights of indemnification as they may have as
Directors, Employees or agents of the Company, the Directors, or any individuals
who are delegated authority by the Board to administer the Plan, shall be
indemnified by the Company against: (i) their reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Option granted
thereunder; and (ii) against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company), or paid by them in satisfaction of a judgment in any such action,.
suit or proceeding, except in actions to matters as to which it shall be
adjudged in such action, suit or proceeding that such Director or individual is
liable for negligence or misconduct in the performance of his duties; this
indemnification is expressly conditioned upon the indemnified party, within
ninety (90) days after institution of any such action, suit or proceeding,
offering the Company in writing the opportunity, at its own expense, to handle
and defend the same.
13. Approval of Stockholders.
The portions of the Plan dealing with Incentive Stock Options shall not
take effect unless approved by the stockholders of the Company's preferred (if
any) and common stock, which approval must occur within a period commencing
twelve (12) months before and ending twelve (12) months after the date the Plan
is adopted by the Board. Nothing in the Plan shall be construed to limit the
authority of the Company to exercise its corporate rights and powers, including
the right of the Company to grant Non-Statutory Stock Options for proper
corporate purposes.
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