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Viropharma Inc · DEF 14A · For 5/21/98

Filed On 4/15/98 · SEC File 0-21699 · Accession Number 1036050-98-615

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 4/15/98  Viropharma Inc                    DEF 14A     5/21/98    1:34                                     1036050

Definitive Proxy Solicitation Material · Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Notice & Proxy                                        34    184K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Certain Transactions Compensation Arrangements Security Ownership of Certain Beneficial Owners and Management Warrant Exercises
1	1st Page
4	Security Ownership of Certain Beneficial Owners and Management
8	Compensation Arrangements
11	Certain Transactions
"	Warrant Exercises

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================================================================================

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement

[X] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 14a-11(c) or Section 14a-12

ViroPharma Incorporated
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

ViroPharma Incorporated
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: *

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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* Set forth the amount on which the filing fee is calculted and state how it
was determined.

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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DEF 14A 2nd Page of 34 TOC 1st Previous Next Bottom Just 2nd

VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, PA 19341

----------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998

----------------

To Our Stockholders:

Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of ViroPharma Incorporated (the "Company") will be held on May 21,
1998 at 10:00 a.m., local time, at the Company's headquarters at 405 Eagleview
Boulevard, Exton, Pennsylvania for the following purposes:

(1) To elect a director to Class II of the Board of Directors to serve for
a three-year term and until the election and qualification of her
successor;

(2) To approve the amendment and restatement of the Company's 1995 Stock
Option Plan; and

(3) To transact such other business as may properly come before the
meeting.

Only stockholders of record at the close of business on April 10, 1998 are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting and
any adjournments thereof. A complete list of such stockholders will be
available at the Company's headquarters, 405 Eagleview Boulevard, Exton,
Pennsylvania, for ten days before the meeting.

By Order of the Board of Directors,

Thomas F. Doyle
Vice President, General Counsel and
Secretary

April 16, 1998

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE.

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VIROPHARMA INCORPORATED
405 Eagleview Boulevard
Exton, PA 19341

----------------

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998

----------------

This Proxy Statement is being furnished to the stockholders of ViroPharma
Incorporated (the "Company") in connection with the Annual Meeting of
Stockholders of the Company to be held on May 21, 1998 and any adjournments
thereof (the "Annual Meeting"). This Proxy Statement and the enclosed Proxy
Card are being mailed to stockholders on or about April 16, 1998.

Execution and return of the enclosed Proxy Card are being solicited by and
on behalf of the Board of Directors of the Company for the purposes set forth
in the foregoing notice of meeting. The costs incidental to the solicitation
and obtaining of proxies, including the cost of reimbursing banks and brokers
for forwarding proxy materials to their principals, will be borne by the
Company. Proxies may be solicited, without extra compensation, by officers and
employees of the Company by mail, telephone, facsimile, personal interviews
and other methods of communication.

The Annual Report to Stockholders for the fiscal year ended December 31,
1997, including financial statements and other information with respect to the
Company, is being mailed to stockholders with this Proxy Statement. Such
Annual Report is not part of this Proxy Statement.

VOTING AT THE MEETING

RECORD DATE; VOTE REQUIRED; PROXIES

Only stockholders of record at the close of business on April 10, 1998 are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting. As
of that date, the Company had outstanding 11,480,820 shares of Common Stock,
par value $.002 per share ("Common Stock"). The holders of a majority of such
shares, represented in person or by proxy, shall constitute a quorum at the
Annual Meeting. A quorum is necessary before business may be transacted at the
Annual Meeting except that, even if a quorum is not present, the stockholders
present in person or by proxy shall have the power to adjourn the meeting from
time to time until a quorum is present. Each stockholder entitled to vote
shall have the right to one vote for each share of Common Stock outstanding in
such stockholder's name.

The shares of Common Stock represented by each properly executed Proxy Card
will be voted at the Annual Meeting in the manner directed therein by the
stockholder signing such Proxy Card. The Proxy Card provides spaces for a
stockholder to withhold authority to vote for the nominee for the Board of
Directors and to vote for or against or abstain from voting with respect to
the approval of the amendment and restatement of the Company's 1995 Stock
Option Plan (the "Amended Plan"). The nominee for director is to be elected by
a plurality of the votes cast at the Annual Meeting. With respect to any other
matter that may properly be brought before the Annual Meeting, including the
approval of the Amended Plan, the affirmative vote of a majority of the shares
represented in person or by proxy at the Annual Meeting and entitled to vote
is required to take action, unless a greater percentage is required either by
law or by the Company's Second Amended and Restated Certificate of
Incorporation or Bylaws.

With regard to the election of the director, votes may be cast in favor of
or withheld from the nominee. Votes that are withheld will be excluded
entirely from the vote and will have no effect, other than for purposes of
determining the presence of a quorum. Abstentions may be specified on the
proposal to approve the Amended Plan (but not for the election of the
director). Abstentions will be considered present and entitled to vote at the

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Annual Meeting, but will not be counted as votes cast in the affirmative.
Abstentions on the proposal to approve the Amended Plan will have the effect
of a negative vote because this proposal requires the affirmative vote of a
majority of the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote. Brokers who hold shares in street name for
customers have the authority under the rules of the various stock exchanges to
vote on certain items when they have not received instructions from beneficial
owners. The Company believes that brokers that do not receive instructions are
entitled to vote those shares with respect to the election of the director;
however, the Company believes that brokers are not entitled to vote such
shares with respect to the proposal to approve the Amended Plan. A failure by
brokers to vote those shares will have no effect on the outcome of the
election of the director, as the director is to be elected by a plurality of
the votes cast.

If a signed Proxy Card is returned and the stockholder has given no
direction with respect to a voting matter, the shares will be voted with
respect to that matter by the proxy agents as recommended by the Board of
Directors. Execution and return of the enclosed Proxy Card will not affect a
stockholder's right to attend the Annual Meeting and vote in person. Any
stockholder giving a proxy has the right to revoke it by giving notice of
revocation to the Secretary of the Company at any time before the proxy is
voted.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 1, 1998, except as otherwise
indicated in the relevant footnote, by (i) each person or group who is known
by the Company to own beneficially more than 5% of the Common Stock, (ii) each
of the Company's directors, (iii) the Company's chief executive officer and
the four other most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers") and (iv) all current executive
officers and directors as a group.

· Download Table

PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING SHARES
BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
--------------------- --------------------

5% STOCKHOLDERS
---------------
Oak Investment Partners VI, Limited 1,573,003 13.7
Partnership(2)....................
One Gorham Island
Westport, Connecticut 06880
Sevin Rosen Fund IV L.P.(3)........ 1,264,962 11.0
550 Lytton Avenue, Suite 200
Palo Alto, CA 94301
FMR Corp.(4)....................... 980,500 8.5
82 Devonshire Street
Boston, Massachusetts 02109
Technology Leaders II L.P.(5)...... 766,700 6.7
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
UBS Asset Management (New York) 590,000 5.1
Inc.(6)...........................
1345 Avenue of the Americas
West 54th & 55th Streets
New York, New York 10105
Frazier Healthcare II L.P.(7)...... 574,581 5.0
Two Union Square
601 Union Street, Suite 2110
Seattle, Washington 98101

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DIRECTORS AND EXECUTIVE OFFICERS

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Ann H. Lamont(2)....................................... 1,573,003 13.7
Claude H. Nash(8)...................................... 458,134 4.0
Marc S. Collett(9)..................................... 211,022 1.8
Mark A. McKinlay(10)................................... 141,245 1.2
Johanna A. Griffin(11)................................. 104,858 *
Frank Baldino, Jr.(12)................................. 49,000 *
Jon M. Rogers(13)...................................... 16,537 *
Robert J. Glaser....................................... 3,400 *
David J. Williams...................................... -- --
All directors and executive officers as a group (13
Persons)(14).......................................... 2,682,300 23.4

--------
* Less than one percent.

(1) Applicable percentage of ownership is based on 11,480,565 shares of
Common Stock outstanding as of April 1, 1998. In accordance with the
rules of the Securities and Exchange Commission (the "Commission"),
shares underlying options to purchase Common Stock that are exercisable
as of April 1, 1998 or within 60 days thereafter are deemed outstanding
and to be beneficially owned by the person holding such options for
purposes of computing such person's percentage ownership, but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.

(2) Includes 1,537,139 shares of Common Stock owned by Oak Investment
Partners VI, Limited Partnership and 35,864 shares of Common Stock owned
by Oak VI Affiliates Fund, Limited Partnership. Ms. Lamont is a managing
member of Oak Associates VI, LLC and Oak VI Affiliates, LLC, the general
partners of Oak Investment Partners VI Limited Partnership and Oak VI
Affiliates Fund, Limited Partnership, respectively. Ms. Lamont shares
voting and investment power with respect to the limited partnerships with
the other managing members of Oak Associates VI, LLC and Oak VI
Affiliates, LLC, respectively. Ms. Lamont disclaims beneficial ownership
of shares in which she has no pecuniary interest.

(3) Includes 1,258,728 shares of Common Stock owned by Sevin Rosen Fund IV
L.P. and 6,234 shares of Common Stock owned by Sevin Rosen Bayless
Management Company.

(4) As reflected in a Schedule 13G dated February 14, 1998. According to such
Schedule 13G, FMR Corp. is the parent holding company of Fidelity
Management & Research Company, a registered investment company under the
Investment Advisors Act of 1940 ("Fidelity") that acts as investment
advisor to various other investment companies (the "Funds"), and Fidelity
Management Trust Company, a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934 ("FMT Co."). Fidelity is the beneficial
owner of 901,900 shares of Common Stock. FMR Corp., through its control
of Fidelity, and the Funds each has the power to dispose of the shares of
Common Stock owned by the Funds. The Funds have the sole power to vote
such shares. FMT Co. is the beneficial owner of 78,600 shares of Common
Stock as a result of it serving as investment manager of certain
institutional accounts (the "Institutional Accounts"). FMR Corp., through
its control of FMT Co., has the sole power to dispose of the shares of
Common Stock beneficially owned by FMT Co., and the sole power to vote
63,900 shares of such Common Stock. Certain Institutional Accounts have
the sole power to vote 14,700 shares of Common Stock beneficially owned
by FMT Co.

(5) As reflected in a Schedule 13G dated February 8, 1998 and in information
provided to the Company in connection with the sale by Technology Leaders
II L.P. ("TL II") of certain restricted securities. According to TL II,
each of TL II, Technology Leaders II Offshore C.V. and Technology Leaders
II Management L.P. has the shared voting and dispositive power for such
shares.

(6) As reflected in a Schedule 13G dated February 13, 1998. According to UBS
Asset Management (New York) Inc., it has the sole power to dispose or
direct the disposition of such shares.

(7) As reflected in a Schedule 13G dated February 10, 1998 and in information
provided to the Company in connection with the sale by Frazier Healthcare
II L.P. ("Frazier") of certain restricted securities. According to
Frazier, each of Frazier, FMH II, L.L.C., Frazier Management, L.L.C.,
Frazier & Company, Inc. and Alan D. Frazier share the voting and
dispositive power for such shares.

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(8) Includes 82,875 issued but unvested shares of Common Stock purchased by
Dr. Nash upon the founding of the Company in December 1994 and 400 shares
Common Stock held by Dr. Nash as custodian for two minor children. Also
includes 15,713 shares of Common Stock issuable upon exercise of
currently exercisable options.
(9) Includes 25,500 issued but unvested shares of Common Stock purchased by
Dr. Collett upon the founding of the Company in December 1994. Also
includes 27,670 shares of Common Stock issuable upon exercise of
currently exercisable options.
(10) Includes 25,500 issued but unvested shares of Common Stock purchased by
Dr. McKinlay upon the founding of the Company in December 1994. Also
includes 34,045 shares of Common Stock issuable upon exercise of
currently exercisable options.
(11) Includes 15,938 issued but unvested shares of Common Stock purchased by
Dr. Griffin upon the founding of the Company in December 1994. Also
includes 9,941 shares of Common Stock issuable upon exercise of currently
exercisable options.
(12) Includes 12,750 issued but unvested shares of Common Stock purchased by
Dr. Baldino in January 1996.
(13) Represents 16,537 shares of Common Stock issuable upon exercise of
exercisable options.
(14) Includes 178,501 issued but unvested shares of Common Stock purchased by
the founders of the Company. Includes options to purchase 141,409 shares
of Common Stock, which either are exercisable as of April 1, 1998 or will
be exercisable within 60 days of April 1, 1998.

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PROPOSAL 1

ELECTION OF DIRECTORS

The By-laws of the Company permit up to seven persons to serve as members of
the Board of Directors. The Board of Directors currently consists of five
directors and is classified with respect to terms of office into three
classes. Only one person has been nominated to serve as a Class II director.
Mr. Steve Dow was a Class II director and resigned from the Board in March
1998. Given the proximity of Mr. Dow's resignation to date that this proxy was
mailed, the Company has not yet found a replacement for Mr. Dow. The Class II
director elected at the Annual Meeting will serve until the 2001 annual
meeting of stockholders and until such director's successor has been elected
and qualified, except in the event of such director's earlier death,
resignation or removal. The terms of office for the Class I Directors will
expire at the annual meeting to be held in the year 2000, upon the election
and qualification of their successors. The terms of office of the Class III
directors will expire at the annual meeting to be held in 1999, upon the
election and qualification of their successors.

Dr. Baldino, Ms. Lamont and Claude Nash were elected to the Board of
Directors pursuant to an Amended and Restated Shareholders' Voting Agreement,
dated as of May 31, 1996, by and among the Company and certain of its
stockholders and executive officers. Pursuant to the agreement, Ms. Lamont was
designated to be a director by Oak Investment Partners VI, Limited
Partnership, Dr. Baldino was designated to be a director by the holders of all
outstanding shares of redeemable preferred stock and Common Stock voting as a
single class, and Claude Nash was designated to be a director by the holders
of Common Stock.

The Board of Directors has nominated Ann Lamont for election as a Class II
director.

The persons named as proxy agents in the enclosed Proxy Card intend (unless
instructed otherwise by a stockholder) to vote for the election of Ann Lamont
for election as a Class II director. In the event that the nominee should
become unable to accept nomination or election (a circumstance which the Board
of Directors does not expect), the proxy agents intend to vote for any
alternate nominee designated by the Board of Directors or, in the discretion
of the Board, the position may be left vacant.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE CLASS II
NOMINEE.

Set forth below is certain information with respect to the nominee for
director and each other person currently serving as a director of the Company
whose term of office will continue after the Annual Meeting, including the
class and term of office of each such person. This information has been
provided by each director at the request of the Company.

CLASS I -- DIRECTORS WITH TERMS CONTINUING UNTIL 2000

ROBERT J. GLASER. Mr. Glaser has served as a director of the Company since
August 1997. Mr. Glaser is currently President of the McKesson Pharmaceutical
Services division of McKesson Corporation. He was President and COO of Ostex
International from 1996-1997. Mr. Glaser was Senior Vice President of
Marketing for Merck U.S. Human Health from 1994-1996, Vice President of
Marketing from 1993-1994 and Vice President of Merck's Vaccine Division from
1991-1993. Mr. Glaser is 46 years of age.

DAVID J. WILLIAMS. Mr. Williams has served as a director of the Company
since November 1997. Mr. Williams has been President and Chief Operating
Officer of Pasteur Merieux Connaught USA since 1988. Mr. Williams also serves
on the Board of Directors of Blue Cross of Northeastern Pennsylvania. Mr.
Williams is 48 years of age.

CLASS II -- NOMINEE FOR TERM CONTINUING UNTIL 2001

ANN H. LAMONT. Ms. Lamont, a co-founder of the Company, has served as a
director of the Company since June 1995. Since 1986, Ms. Lamont has served as
general partner and managing member of certain limited partnerships affiliated
with Oak Investment Partners, a venture capital organization whose affiliates
are principal stockholders in the Company. Ms. Lamont also serves on the Board
of Directors of Avecor Cardiovascular, Inc. She is 41 years of age.

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CLASS III -- DIRECTORS WITH TERMS CONTINUING UNTIL 1999

CLAUDE H. NASH, PH.D. Claude Nash, a co-founder of the Company, has served
as Chairman of the Board of Directors since February 1997, and as Chief
Executive Officer, President and director since the Company's commencement of
operations in December 1994. From 1983 until 1994, Claude Nash served as Vice
President, Infectious Disease and Tumor Biology at Schering-Plough Research
Institute. He is 55 years of age.

FRANK BALDINO, JR., PH.D. Dr. Baldino has served as a director of the
Company since June 1995. Since 1987, he has served as President, CEO and
director of Cephalon, Inc., an integrated specialty biopharmaceutical company
that discovers, develops, and markets products to treat neurological
disorders. Dr. Baldino is also a director of Integrated Systems Consulting
Group, Inc. and Pharmacopeia, Inc. Dr. Baldino is 44 years of age.

COMMITTEES AND MEETINGS

The Board of Directors has a Compensation Committee and an Audit Committee.
During 1997, the Board of Directors held five meetings, the Compensation
Committee held one meeting, and the Audit Committee held four meetings. Each
director attended at least 75% of the aggregate of the meetings of the Board
of Directors held during 1997 and of the committee or committees on which he
or she served during the year.

The Compensation Committee makes recommendations concerning salaries and
incentive compensation for employees of and consultants to the Company, and
the Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent auditors.

The current members of the Compensation Committee are Mr. Glaser and Ms.
Lamont, and the current members of the Audit Committee are Dr. Baldino and Mr.
Williams. With respect to the Compensation Committee, Mr. Glaser replaced Mr.
Steve Dow, who resigned from the Compensation Committee and the Board of
Directors in March 1998.

COMPENSATION ARRANGEMENTS

Non-employee directors not affiliated with investors in the Company receive
$10,000 per year, plus travel expenses for each meeting of the Board of
Directors they attend.

In July 1997 the Company entered into Agreements with each of Dr. Baldino
and Mr. Glaser, and in November 1997 the Company entered into an Agreement
with Mr. Williams, in connection with their participation on the Company's
Board of Directors. Pursuant to such Agreements, Dr. Baldino, Mr. Glaser and
Mr. Williams were granted options to purchase 13,334, 20,000 and 20,000 shares
of the Company's Common Stock, respectively, at an exercise price equal to the
fair market value of the Common Stock on the date of grant, and are each to be
paid $5,000 per year, payable in equal, quarterly installments and credited
against the director fees payable to them as described above.

Dr. Baldino, Mr. Dow and Ms. Lamont are parties to indemnification
agreements with the Company. Pursuant to the agreements, the directors are to
be indemnified against liabilities and expenses incurred in connection with
their services to the Company to the fullest extent permitted by Delaware law.
Such indemnification is subject to the director's meeting the applicable
standard of care and to a determination to indemnify by a majority of
disinterested directors (as defined in the agreements) or by independent
counsel (also as defined in the agreements).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Dow and Ms. Lamont are parties to certain transactions with the Company.
See "--Compensation Arrangements" for a description of Mr. Dow's and Ms.
Lamont's indemnification agreements with the Company; and "Certain
Transactions- Warrant Exercises" for a description of cashless exercises of
warrants by Oak Investment Partners VI Limited Partnership and Oak VI
Affiliates Fund, Limited Partnership (collectively, "Oak"), Sevin Rosen Fund
IV, LP, of which Mr. Dow is a partner ("Sevin Rosen") and Claude Nash.

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EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to
compensation paid or earned during the fiscal
years ended December 31, 1995, December 31, 1996 and December 31, 1997 to the
Company's chief executive officer and the Named Executive Officers.

SUMMARY COMPENSATION TABLE
Annual Compensation

· Enlarge/Download Table

LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1)(2) OPTIONS COMPENSATION
----------------- ---- --------- -------- --------------------- ------------ ------------

Claude H. Nash.......... 1997 $220,000 $55,000 -- 45,000 $20,000(3)
Chief Executive Officer 1996 180,000 18,000 -- 17,850 20,000
and President 1995 180,000 -- -- --

Jon M. Rogers(4)........ 1997 189,000 45,250 -- 30,000 --
Vice President, Clinical 1996 104,218 10,500 -- 36,147 --
Research 1995 -- -- --

Mark McKinlay........... 1997 181,500 46,375 -- 25,000
Vice President, Research 1996 165,000 16,500 -- 60,180 --
& Development 1995 165,000 --

Marc S. Collett......... 1997 159,500 39,875 -- 25,000 --
Vice President, Discov- 1996 145,000 14,500 -- 47,430 --
ery Research 1995 145,000 -- --

Johanna A. Griffin...... 1997 139,750 34,938 -- 20,000 --
Vice President, Business 1996 125,000 12,500 -- 19,763 --
Development 1995 125,000 -- --

--------
(1) In 1995, certain of the Named Executive Officers also received cash
payments for deferred compensation for services performed in December
1994. Drs. Nash, McKinlay, Collett and Griffin received payments of
$6,923, $6,346, $5,576 and $4,807, respectively.
(2) Excludes perquisites and other personal benefits, securities or property
which are, in the aggregate, less than 10% of the total annual salary and
bonus.
(3) Represents premiums paid by the Company for life insurance of which the
Company is not the beneficiary. The Company currently intends to continue
paying these premiums in future years and does not expect such premiums to
exceed $20,000 per year.
(4) Dr. Rogers joined the Company in June 1996.

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The following table summarizes stock options granted during fiscal 1997 to
the Named Executive Officers.

OPTION GRANTS IN LAST FISCAL YEAR

· Enlarge/Download Table

INDIVIDUAL GRANTS
----------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
NUMBER OF STOCK PRICE APPRECIATION FOR
SECURITIES PERCENTAGE OF OPTION TERM(3)
UNDERLYING TOTAL OPTIONS EXERCISE EXPIRATION -----------------------------
NAME OPTIONS GRANTED(1) GRANTED(2) PRICE DATE 5% 10%
---- ----------------- ------------- -------- ---------- -------------- --------------

Claude H. Nash.......... 45,000 13.5% $8.75 1/1/07 $ 247,628 $ 627,536
Jon M. Rogers........... 30,000 9.0 8.75 1/1/07 165,085 418,357
Mark McKinlay........... 25,000 7.5 8.75 1/1/07 137,571 348,631
Marc S. Collett......... 25,000 7.5 8.75 1/1/07 137,571 348,631
Johanna A. Griffin...... 20,000 6.0 8.75 1/1/07 110,057 278,905

--------
(1) These options are exercisable in four annual installments commencing on
the first anniversary of the date of grant.
(2) Based on an aggregate of 332,434 options granted to employees in 1997,
including options granted to the Named Executive Officers.
(3) Represents the hypothetical gains or "option spreads" that would exist for
the options at the end of their ten year term. These gains are based on
assumed rates of annual compound stock price appreciation of 5% and 10%
from the date the option was granted to the end of the option term (which
calculated assumed prices are less than the closing price on the Nasdaq
National Market on April 1, 1998; see also "Fiscal Year-End Options
Values" below) and are calculated based on the exercise price per share on
the date of grant. Such 5% and 10% assumed annual compound rates of stock
price appreciation are mandated by the rules of the Commission and do not
represent the Company's estimate or projection of the future Common Stock
price.

The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers on
December 31, 1997.

FISCAL YEAR-END OPTION VALUES

· Download Table

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS(#) ($)
------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
---- ----------- ------------- -------------- ----------------

Claude H. Nash....... 4,462 58,388 $ 69,005 $606,420
Jon M. Rogers........ 9,037 57,110 154,467 729,651
Mark McKinlay........ 15,045 70,135 257,661 994,858
Marc S. Collett...... 11,858 60,572 202,119 828,223
Johanna A. Griffin... 4,940 34,823 76,397 406,738

--------
(1) Based on the difference between $17.625, which was the closing price per
share on December 31, 1997, and the exercise price of the option.

CONFIDENTIALITY AND INVENTIONS AGREEMENTS

The Company has entered into confidentiality and inventions agreements with
each of its employees. The agreements provide that, among other things, all
inventions, discoveries and ideas made or conceived by an employee during
employment which are useful to the Company or related to the business of the
Company or which were made or conceived with the use of the Company's time,
material, facilities or trade secret information, belong exclusively to the
Company, without additional compensation to the employee. The agreements also
have confidentiality provisions in favor of the Company and a noncompetition
provision in favor of the Company during employment.

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CERTAIN TRANSACTIONS

See "Matters Concerning Directors-Compensation Arrangements" for a
description of the Company's indemnification and other agreements with certain
directors and "Executive Compensation-Confidentiality and Inventions
Agreements" for a description of the Company's confidentiality and inventions
agreements with all employees.

PROMISSORY NOTE

On June 12, 1997, the Company loaned $104,107 to Jon M. Rogers, M.D., Vice
President-Clinical Research of the Company, in connection with the relocation
of his residence required by his employment with the Company. The loan is
evidenced by a promissory note (the "Rogers Note"), which bears interest at an
annual rate of 6.8% and comes due in full on the date of Dr. Rogers'
resignation from the Company or in monthly installments beginning on the date
of termination of Dr. Rogers' employment with the Company (other than by
resignation), and extending over a period of between 48 months and 192 months
thereafter, depending upon when the termination of employment occurs. The
Rogers Note provides that on each of the first four anniversaries of the date
of the Rogers Note, 25% of the original principal amount of the loan will be
forgiven by the Company so long as Dr. Rogers is then in the Company's employ.

FINANCINGS

For information regarding beneficial ownership of the Company's securities
by officers, directors and greater than 5% stockholders of the Company, see
"Security Ownership of Certain Beneficial Owners and Management."

WARRANT EXERCISES

In June 1997, Oak (of which Ms. Lamont is a principal) exercised warrants to
purchase 22,435 shares of Common Stock; Sevin Rosen exercised warrants to
purchase 22,437 shares of Common Stock; Technology Leaders II L.P. and
Technology Leaders II Offshore C.V. collectively exercised warrants to
purchase 22,436 shares of Common Stock; and Claude Nash exercised warrants to
purchase 4,487 shares of Common Stock. The foregoing warrants were exercised
on a cashless basis and were otherwise exercisable on a cash basis for 81,597
shares of Common Stock in the aggregate.

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NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH ON PAGE 16 SHALL NOT
BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT
OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors (the "Committee") is
composed of two non-employee directors. The Committee is responsible for
setting and administering the policies which govern annual executive salaries,
bonuses (if any) and stock ownership programs. The Committee annually
evaluates the performance, and determines or recommends to the full board, the
compensation of the Chief Executive Officer ("CEO") and the other executive
officers of the Company based upon a mix of the achievement of corporate
goals, individual performance and comparisons with other bio-pharmaceutical
companies.

The policies of the Committee with respect to executive officers, including
the CEO, are to provide compensation designed to attract, motivate and retain
executives of outstanding ability and potential and to align the interests of
executive officers with the interest of the Company's stockholders. The
Company seeks to provide incentives for superior individual performance by
paying competitive compensation, and to base a significant portion of
compensation upon the Company's performance. To meet these goals, the
Committee has adopted a mix among the compensation elements of salary, bonus
and stock options. In 1998, the Stockholder Value Reward program discussed
below will emphasize the link between executive incentives and the creation of
stockholder value as measured by the equity markets. In general, the salaries
and stock option awards of executive officers, including the CEO, are not
determined by the Company's achievement of specific corporate performance
criteria. Instead, the Committee determines the salaries for executive
officers based upon an evaluation of compensation data from an analysis of
certain comparable companies, and from a relevant industry survey(s), for
similar executive positions. In awarding stock options, the Committee
considers individual performance, overall contribution to the Company, officer
retention, the number of unvested stock options and the total number of stock
options to be awarded. In addition, the Committee generally does not award
stock options to executive officers more frequently than once every year.

The Committee met in December 1997 and January 1998 to review and approve
base salary increases and option grants for executive officers, including the
CEO, for 1998. The Committee considered the results of the Company's Phase II
clinical trial for viral meningitis and the Company's successful completion of
a follow-on public offering in July 1997, together with the other factors
described above. Consistent with the policies described in this report, the
Committee increased 1998 base salaries for all executive officers other than
the CEO by an average of 8.6% over 1997 salaries. In determining the CEO's
salary, the Committee considered the CEO's performance in 1997, the Company's
performance in 1997, and the fact that the CEO was below the average salaries
for his position when compared to the salary data and industry surveys
described above. The Committee recommended to the Board, and the full Board
approved, an increase to the CEO's base salary of 10%. In addition, after
considering the criteria relating to awarding stock options and consistent
with the Company's general policies, the Committee granted options to those
employees recommended by management, and to all executive officers, including
the CEO.

During 1997, the Committee also approved bonuses to all employees and
executive officers. The bonus, equal to 10% of each person's base salary, was
approved in August 1997 for the completion of the Company's Phase II clinical
trials in viral meningitis and the Company's follow-on public offering
described above. In January 1998, the Committee also approved an additional
bonus for each executive officer, including the CEO, equal to an average of
15% of each executive's 1997 annual salary.

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In December 1997 and January 1998, the Committee also reviewed and approved
the Executive Compensation Guidelines (the "Guidelines"). The Guidelines will
be effective in 1998. In addition to the compensation objectives and
strategies discussed above, the Guidelines call for a significant portion of
executive officers' cash compensation to be linked directly to the performance
of the Company stock, thus establishing a direct correlation between increases
in stockholder value and executive compensation. Under the Guidelines, and
until such time following the Company's launch of its first commercial product
that an alternative measurement of financial performance is adopted by the
Committee (for example, earnings per share), increases in stockholder value
will be measured with reference to the amount by which the Company's adjusted
market capitalization for the applicable year (the "Evaluation Period")
exceeds the Company's adjusted market capitalization for the year immediately
preceding the Evaluation Period. For the purpose of the foregoing evaluation,
the Company's adjusted market capitalization will be determined by computing
the Company's average market capitalization during the last five business days
in June and December of each year.

If the Company's adjusted market capitalization for an Evaluation Period
increases over its adjusted market capitalization for the immediately
preceding year, then each executive may be eligible (at the discretion of the
Committee after considering the Company's then-current cash position, among
other factors) to participate in the Company's "Stockholder Value Reward"
program. The Stockholder Value Reward component of each executive's
compensation is determined by multiplying a percentage figure to be determined
each year by the Committee times the product of the executive's annual base
salary in the Evaluation Period multiplied by the Company's percentage
increase in adjusted market capitalization for the Evaluation Period.

To assist the Company in meeting its goals of executive retention and long-
term increases in stockholder value, the Stockholder Value Reward for any
Evaluation Period is to be paid in three equal, annual increments, and is
subject to reevaluation. The first one-third of an executive's Stockholder
Value Reward is payable immediately after the end of the Evaluation Period.
Thereafter, the full amount of the remaining portions of the Stockholder Value
Reward for the Evaluation Period may be paid only if the Company's adjusted
market capitalization increases from year to year over the next two years. If
the Company's adjusted market capitalization decreases in the year following
the Evaluation Period ("Performance Year 1"), or decreases in the year
following Performance Year 1 ("Performance Year 2") when compared to the
Company's adjusted market capitalization for Performance Year 1, the portions
of the Stockholder Value Reward deferred to Performance Year 1 or Performance
Year 2 (as the case may be) will be proportionately decreased. Except in
certain limited circumstances, if an Executive leaves the Company, he or she
will forfeit any then-unpaid Stockholder Value Reward.

DEDUCTIBILITY OF CERTAIN COMPENSATION

Section 162(m) of the Internal Revenue Code generally denies a federal
income tax deduction for certain compensation exceeding $1,000,000 paid to the
CEO or any of the four other highest paid executive officers, excluding (among
other things) certain performance-based compensation. Through December 31,
1997, this provision has not affected the Company's tax deductions, but the
Committee will continue to monitor the potential impact of Section 162(m) on
the Company's ability to deduct executive compensation.

COMPENSATION COMMITTEE

Ann H. Lamont
Steve Dow*

February 27, 1998

* Mr. Dow resigned from the Compensation Committee and the Board of Directors
in March 1998.

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PROPOSAL 2

APPROVAL OF STOCK OPTION PLAN

In March 1998, the Company's Board of Directors approved and adopted the
Amended Plan, subject to stockholder approval. The Amended Plan is an
amendment and restatement of the Company's 1995 Stock Option Plan (the "Prior
Plan"). The purpose of the Amended Plan is to (i) further the growth and
success of the Company by enabling selected employees, directors, consultants
and advisors of the Company and any subsidiaries, including non-employee
directors, to acquire shares of common stock of the Company, thereby
increasing their personal interest in such growth and success, and (ii)
provide a means of rewarding outstanding performance of such persons to the
Company and any subsidiaries.

The Prior Plan provided for the grant of options to acquire a maximum of
1,200,000 shares of Common Stock. As of April 1, 1998, 198,419 shares remained
available for grant under the Prior Plan and will remain available for grant
under the Amended Plan. Because the Amended Plan is an amendment and
restatement of the Prior Plan, options awarded under the Prior Plan will be
governed by the Amended Plan, except to the extent that certain provisions of
the Amended Plan may constitute a modification of outstanding option
agreements that may not be implemented without the optionee's consent.

A copy of the Amended Plan is included herein as Annex A, and the following
description of the principal features of the Amended Plan is qualified in its
entirety by reference thereto.

The Amended Plan provides for the grant of options to acquire a maximum of
2,000,000 shares of Common Stock, which includes 1,200,000 shares of Common
Stock authorized for award under the Prior Plan as well as an additional
800,000 shares of Common Stock (the "Additional Shares"). As of April, 1 1998,
1,001,581 shares were subject to outstanding options, and 998,419 shares,
including all of the Additional Shares, remained available for grant. As of
April 1, 1998, option grants have been made under the Amended Plan (including
grants under the Prior Plan) to the following persons and groups (with
underlying share amounts to each person or group): Dr. McKinlay (100,180); Dr.
Nash (89,850); Dr. Collett (87,430); Dr. Rogers (78,147); Dr. Griffin
(51,763); all current executive officers as a group (581,366); all current
directors who are not executive officers as a group (53,334); and all other
employees as a group (289,184). All such options were granted at exercise
prices equal to the fair market value of the Company's Common Stock on the
date of grant. As of April 1, 1998, the market value of a share of Common
Stock was $21.625.

The Amended Plan permits the granting of qualified incentive stock options
("ISOs") or nonqualified stock options ("NSOs") (collectively, "Options"), at
the discretion of the Board of Directors of the Company (the "Board") or the
Compensation Committee of the Board (the "Committee"). Options granted under
the Amended Plan are evidenced by written agreements which contain such terms,
conditions, limitations and restrictions as the Committee deems advisable and
which are not inconsistent with the Amended Plan. Under the Amended Plan, ISOs
may be granted to individuals who, at the time of grant, are employees of the
Company or its affiliates, and NSOs may be granted to directors, employees,
consultants or advisors of the Company or its affiliates. The Amended Plan
confirms that non-employee directors are eligible to receive option grants.

The Amended Plan may be administered by the Board or the Committee.
Currently, the Committee administers the Amended Plan. Subject to the
provisions of the Amended Plan, the Committee has the authority (i) to
determine the persons to whom Options will be granted, the number of shares to
be covered by each Option, and the exercise price per share; (ii) to
prescribe, amend and rescind rules and regulations relating to the Amended
Plan; (iii) to determine the conditions which must be satisfied in order for
an Option to vest and become exercisable; (iv) to accelerate the vesting or
exercise date of any Option; and (v) to interpret the Amended Plan or any
agreement entered into with respect to an Option.

The Amended Plan provides that the Committee must establish an exercise
price for ISOs that is not less than the fair market value per share of the
Common Stock at the date of grant and an exercise price for NSOs of

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not less than par value per share. Each Option expires within 10 years of the
date of grant. However, if ISOs are granted to persons owning more than 10% of
the voting stock of the Company, the exercise price may not be less than 110%
of the fair market value per share at the date of grant and the term of such
ISOs may not exceed five years. The aggregate number of options which may be
granted under the Amended Plan to any individual participant is limited to
500,000 shares (subject to proportionate adjustment for changes in
capitalization). The Prior Plan did not contain this limitation. Options vest
upon satisfaction of vesting conditions, which may include attainment of
performance goals, completion of specified periods of service, or other
conditions specified by the Committee.

Unless provided otherwise in the terms of an option agreement, if an
optionee is an employee or director and the optionee's relationship with the
Company or any related corporation ceases for any reason (other than
termination for cause, death or disability, as such terms are defined in the
Amended Plan), the optionee may exercise options that are then vested within
the three-month period following such cessation (unless such options terminate
or expire sooner by their terms). If the optionee commences competitive
employment or service within the three-month period, all unexercised options
will terminate immediately. Unless provided otherwise in the terms of an
option agreement, if an optionee is an advisor or consultant, termination of
the relationship with the Company or any related corporation does not cause
acceleration of the expiration of the option; however, if the optionee
violates the terms of a non-competition covenant in an agreement that he or
she may have with the Company, all unexercised options will terminate
immediately. In the event an optionee's relationship with the Company or any
related corporation ceases due to disability or death, the option may be
exercised by the optionee or executor, as appropriate, for a period following
12 months from the date of termination; provided, however, that in the event
of termination due to disability, unexercised options will terminate if an
optionee who is an employee or director commences competitive employment or
service (or, in the case of a consultant or advisor, violates the terms of his
or her non-competition covenant) in the 12-month period following termination.
If an optionee is terminated for cause, all unexercised options are forfeited,
including options that have been exercised but for which no share certificates
have been issued (provided, in such instance, that the exercise price paid by
the optionee shall be refunded). The Prior Plan did not include option
forfeiture provisions upon a termination for cause or in connection with a
breach of any post-employment noncompetition agreements.

In the event of a Change of Control (as defined in the Amended Plan) in
which the Amended Plan is not continued by a successor corporation, or in
which equivalent, substituted options for common stock in a successor
corporation are not provided to optionees, the Amended Plan shall be
terminated and, with respect to optionees who are employees or members of the
Board, all unvested Options shall vest as follows: (i) all unvested Options
held by employees and Board members who have been employed by the Company or
who have served on the Board for at least two years as of the Change of
Control shall be fully vested; and (ii) fifty percent (50%) of all Options
held by all other employees and Board members which are not vested as of the
date of the Change of Control shall be fully vested, and the remaining portion
of such Options shall lapse and be forfeited.

In the event of a Change of Control in which the Amended Plan is continued
by a successor corporation or in which equivalent substituted options for
common stock in a successor corporation are provided to optionees, Options
previously granted to employees and Board members shall vest as follows: (i)
if an optionee who is employed by the Company at the Executive Director level
or above (each, an "Executive Officer") or is a member of the Board at the
time of the Change of Control is not offered substantially equivalent
employment with the successor corporation or a related employer (both in terms
of duties and compensation), then any unvested Options as of the date of the
Change of Control held by such Executive Officer or member of the Board shall
be fully and immediately vested and exercisable in the manner described in the
immediately preceding paragraph, taking into account all service performed
with the Company without regard to such optionee's title for purposes of
vesting; and (ii) if any optionee (without regard to such optionee's title) is
offered substantially equivalent employment with the successor corporation or
a related employer (both in terms of duties and compensation), then Options
shall not be subject to accelerated vesting; provided however, that if the
optionee's employment with the successor corporation or related employer is
terminated by the successor corporation or

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related employer during the six month period following such Change of Control,
then any unvested Options or substituted options shall be fully and
immediately vested and exercisable at the date of the optionee's termination
of employment in the manner described in the immediately preceding paragraph.

In addition, in the event of a Change of Control that is a merger,
consolidation or tax free reorganization or sale of substantially all of the
assets of the Company, the Board has the authority to distribute to each
optionee cash and/or other property in an amount equal to and in the same form
as the optionee would have received from the successor corporation if the
optionee had owned the shares subject to the option rather than the option at
the time of the Change of Control, provided that any such amount paid to an
optionee shall reflect the deduction of the exercise price the optionee would
have paid to purchase such shares. The Prior Plan included as an event
constituting a "Change of Control" any transaction resulting in any person or
entity acquiring eighty percent or more of the Company's voting stock, while
the Amended Plan sets this threshold at fifty percent. The Prior Plan did not
contain the provisions in the Amended Plan which condition accelerated vesting
upon a Change of Control on length or service and the availability of
substantially equivalent employment by a successor corporation.

The Option exercise price must be paid in full at the time the notice of
exercise of the Option is delivered to the Company and must be tendered in
cash, or by personal or certified check. In the discretion of the Committee,
Options may also be exercised by delivering a combination of shares and cash.
Unless otherwise provided by the Committee, Options are nontransferable. The
Board may suspend, amend or terminate the Amended Plan. Stockholder approval
must be obtained for amendments which would (i) increase the number of shares
which are to be reserved for the issuance of Options under the Amended Plan or
(ii) permit the granting of options to a class of employees other than those
presently permitted to receive Options under the Amended Plan.

The following is a brief description of the federal income tax consequences
of stock options which may be granted under the Amended Plan under present tax
laws. The following description does not purport to address all of the tax
consequences that may be applicable to any particular optionee or the Company.
In addition, such discussion does not address foreign, state or local taxes,
nor does it address federal taxes other than federal income tax. The
discussion is based upon applicable statutes, regulations, case law, and
administrative interpretations in effect as of the date of this Proxy
Statement.

Incentive Stock Options. There are no federal income tax consequences to
either the optionee or the Company upon the grant of an ISO. Except as
described below, the optionee will not recognize any income upon the exercise
of an ISO, and the Company will not be allowed any deduction, as long as the
optionee does not dispose of the shares within two years from the date the ISO
was granted or within one year from the date the shares were issued to the
optionee (the "holding period requirement"). Upon a sale of the shares after
the holding period requirement is satisfied, the optionee will recognize a
long-term capital gain (or loss) measured by the excess (or deficit) of the
amount realized from such sale over the option price of such shares, but no
deduction will be allowed to the Company. If an optionee disposes of shares
before the holding period requirement is satisfied, the optionee will
recognize ordinary income in the year of disposition, and the Company will be
entitled to a corresponding deduction, in an amount equal to the lesser of (a)
the excess of the fair market value of the shares on the date of exercise over
the option price of the shares or (b) the excess of the amount realized from
such disposition over the option price of the shares. Where shares are sold
before the holding period requirement is satisfied, the optionee will also
recognize a capital gain to the extent that the amount realized from the
disposition of the shares exceeds the fair market value of the shares on the
date of exercise. Upon exercise of an ISO, the excess, if any, of the fair
market value over the exercise price will be an item of tax preference for
purposes of the optionee's alternative minimum tax.

Non-Qualified Stock Options. There are no federal income tax consequences to
either the optionee or the Company upon the grant of an NSO. Upon the exercise
of an NSO, the optionee will recognize ordinary compensation income in an
amount equal to the excess of the fair market value of each share on the date
of exercise over the option price, and the Company generally will be entitled
to a federal income tax deduction of the same amount.

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In general, if previously owned shares are used to pay the exercise price of
options, the optionee's tax basis and holding period of such previously owned
shares will be carried over to the equal number of shares received on
exercise. The fair market value of any additional shares received upon the
exercise of an option will be recognized by the optionee as ordinary income.
The tax basis of the additional shares will be equal, in the aggregate, to the
ordinary income recognized by the optionee. The holding period will begin on
the day after the tax basis of the shares is determined. However, if the
previously owned shares had been acquired on the exercise of an ISO and the
holding period requirement for those shares was not satisfied at the time they
were used to exercise an option, such use would constitute a disposition of
such previously owned shares resulting in the recognition of ordinary income
as described above.

The persons named as proxy agents in the enclosed Proxy Card intend (unless
instructed otherwise by a stockholder) to vote in favor of the adoption of the
Amended Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDED
PLAN AS DESCRIBED ABOVE. A MAJORITY OF THE VOTES CAST IN PERSON OR BY PROXY AT
THE MEETING IS REQUIRED FOR SUCH APPROVAL.

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PERFORMANCE GRAPH

The following line graph compares the cumulative total stockholder return on
the Company's Common Stock with the cumulative total stockholder return of the
Nasdaq National Market--US and the Nasdaq Pharmaceutical Index. Dividends
reinvestment has been assumed. The graph commences as of November 19, 1996,
the date the Company's Common Stock first started trading on the Nasdaq
National Market.

[PERFORMANCE CHART APPEARS HERE]

11/19/96 11/29/96 12/31/96 1/31/97 2/28/97 3/31/97 4/30/97
ViroPharma $100.00 $103.57 $125.00 $180.36 $187.50 $185.71 $148.21
Nasdaq US $100.00 $102.58 $102.49 $109.76 $103.77 $ 96.85 $ 99.88
Nasdaq Pharm $100.00 $102.66 $105.61 $114.69 $115.48 $100.47 $ 94.52

5/30/97 6/30/97 7/31/97 8/29/97 9/30/97 10/31/97 11/28/97
ViroPharma $155.36 $255.36 $214.29 $228.57 $314.29 $314.29 $258.93
Nasdaq US $111.20 $114.61 $126.71 $126.51 $134.00 $127.06 $127.70
Nasdaq Pharm $108.76 $108.46 $111.55 $110.23 $121.67 $115.47 $111.85

12/31/97 1/30/98 2/27/98
ViroPharma $251.79 $267.85 $282.14
Nasdaq US $125.69 $129.72 $141.91
Nasdaq Pharm $109.24 $108.18 $111.74

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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

KPMG Peat Marwick LLP has served as the Company's independent certified
public accountants since 1995. KPMG Peat Marwick LLP has been selected to
continue in such capacity for the current year. A representative of that firm
is expected to be present at the Annual Meeting with the opportunity to make a
statement if he or she desires to do so and to be available to respond to
appropriate questions.

STOCKHOLDER PROPOSALS -- 1999 ANNUAL MEETING

Stockholders may submit proposals on matters appropriate for stockholder
action at annual meetings in accordance with regulations adopted by the
Commission. Any proposal which an eligible stockholder desires to have
presented at the 1999 annual meeting of stockholders concerning a proper
subject for inclusion in the proxy statement and for consideration at the
annual meeting, will be included in the Company's proxy statement and related
proxy card if it is received by the Company no later than December 17, 1998.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that directors and certain officers of the Company, and persons who own more
than ten percent of the Company's Common Stock, file with the Commission
initial reports of ownership and reports of changes in ownership of such
Common Stock. Such directors, officers and more than ten percent stockholders
are required by regulation to furnish the Company with copies of all Section
16(a) forms which they file.

To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all fiscal year 1997 Section 16(a) filing requirements
applicable to its directors, officers and more than ten percent stockholders
were complied with.

OTHER MATTERS

The Board of Directors of the Company does not intend to bring any other
matters before the Annual Meeting and has no reason to believe any other
matters will be presented. If, however, other matters properly do come before
the meeting, it is the intention of the persons named as proxy agents in the
enclosed Proxy Card to vote upon such matters in accordance with their
judgment.

By Order of the Board of Directors,

Thomas F. Doyle
Vice President, General Counsel
and Secretary
April 16, 1998

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ANNEX A TO PROXY STATEMENT

VIROPHARMA INCORPORATED
STOCK OPTION PLAN

SECTION 1. PURPOSES.

The ViroPharma Incorporated 1995 Stock Option Plan was originally effective
September 20, 1995. The ViroPharma Incorporated Stock Option Plan (the "Plan")
is an amendment and restatement of this prior plan and is effective March 3,
1998. The purposes of the Plan are to: (a) further the growth and success of
ViroPharma Incorporated (the "Company") and its Subsidiaries by enabling
selected employees, directors, consultants and advisors of the Company and any
Subsidiaries to acquire shares of common stock of the Company, thereby
increasing their personal interest in such growth and success and (b) to
provide a means of rewarding outstanding performance of such persons to the
Company and/or its Subsidiaries. The Options granted pursuant to the Plan are
intended to constitute either Incentive Stock Options within the meaning of
Section 422 of the Code, or non-qualified stock options, as determined by the
Board or the Committee at the time of award. The type of Options awarded will
be specified in the Option Agreement between the Company and the Optionee. The
terms of the Plan shall be incorporated in the Option Agreement to be executed
by the Optionee.

SECTION 2. DEFINITIONS

(a) "Affiliate" shall mean, with respect to a Person, a Person that directly
or indirectly controls, or is controlled by, or is under common control with
such Person.

(b) "Award" shall mean a grant of an Option or Options to an Eligible Person
pursuant to the provisions of this Plan. Each separate grant of an Option or
Options to an Eligible Person and each group of Options which vests on a
separate date, is treated as a separate Award.

(d) "Change of Control" shall mean the happening of an event, which shall be
deemed to have occurred upon the earliest to occur of the following events:

(i) the date the stockholders of the Company (or the Board, if
stockholder action is not required) approve a plan or other
arrangement pursuant to which the Company will be dissolved or
liquidated, or

(ii) the date the stockholders of the Company (or the Board, if
stockholder action is not required) approve a definitive agreement to
sell or otherwise dispose of all or substantially all of the assets
of the Company, or

(iii) the date the stockholders of the Company (or the Board, if
stockholder action is not required) and the stockholders of the other
constituent corporations (or their respective boards of directors, if
and to the extent that stockholder action is not required) have
approved a definitive agreement to merge or consolidate the Company
with or into another corporation, other than, in either case, a
merger or consolidation of the Company in which holders of shares of
the Company's voting capital stock immediately prior to the merger or
consolidation will have at least 50% of the ownership of voting
capital stock of the surviving corporation immediately after the
merger or consolidation (on a fully diluted basis), which voting
capital stock is to be held in the same proportion (on a fully
diluted basis) as such holders' ownership of voting capital stock of
the Company immediately before the merger or consolidation, or

(iv) the date any entity, Person or group (within the meaning of Section
13(d)(3) or Section 14(d)(2) of the Exchange Act), other than (A) the
Company, or (B) any of its Subsidiaries, or (C) any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
of its Subsidiaries or (D) any Affiliate (as such term is defined in
Rule 405 promulgated under the Securities Act) of any of the

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foregoing, shall have acquired beneficial ownership of, or shall have
acquired voting control over more than 50% of the outstanding shares
of the Company's voting capital stock (on a fully diluted basis),
unless the transaction pursuant to which such Person, entity or group
acquired such beneficial ownership or control resulted from the
original issuance by the Company of shares of its voting capital stock
and was approved by at least a majority of Directors who shall have
been either members of the Board on the date that this Plan is adopted
by the Board or members of the Board for at least twelve (12) months
prior to the date of such approval, or

(v) the first day after the date of this Plan when Directors are elected
such that there shall have been a change in the composition of the
Board such that a majority of the Board shall have been members of the
Board for less than twelve (12) months, unless the nomination for
election of each new Director who was not a Director at the beginning
of such twelve (12) month period was approved by a vote of at least
sixty percent (60%) of the Directors then still in office who were
Directors at the beginning of such period, or

(vi) the date upon which the Board determines (in its sole discretion) that
based on then current available information, the events described in
clause (iv) are reasonably likely to occur.

(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(f) "Committee" shall mean a committee appointed by the Board in accordance
with Section 4(a) of the Plan, and if one is appointed, then such committee
shall possess all of the power and authority of, and shall be authorized to
take any and all actions required to be taken hereunder by, and make any and
all determinations required taken hereunder by, the Board.

(g) "Common Stock" shall mean common stock of the Company, $.002 par value
per Share.

(h) "Company" shall mean ViroPharma Incorporated.

(i) "Company Plan" means any restricted stock, stock bonus, stock option or
other compensation plan, program or arrangement established or maintained by
the Company or an Affiliate.

(j) "Director" shall mean an individual who is a member of the Board of
Directors of the Company.

(k) "Disability" shall mean a mental or physical disability of an Eligible
Person which renders such Eligible Person unable to perform the full extent of
his duties and responsibilities by reason of his illness or incapacity for a
period of 90 consecutive days or longer, or for 90 days during any six-month
period.

(l) "Eligible Person" shall mean any person employed by the Company or any
of its Subsidiaries. Additionally, the term "Eligible Person" shall include
advisors and consultants to the Company or any Subsidiary, as well as
Directors and members of the board of directors of a Subsidiary; provided that
Options to Eligible Persons who are not employees of the Company or any of its
Subsidiaries shall be limited to non-qualified stock options.

(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

(n) "Fair Market Value Per Share" shall mean the fair market value of a
share of Common Stock, as determined pursuant to Section 8 hereof.

(o) "Incentive Stock Option" shall mean an Option which is an incentive
stock option as described in Section 422 of the Code.

(p) "Non-Employee Director" shall have the meaning set forth in Rule 16b-
3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and
Exchange Commission; provided, however, that the Board or the Committee may,
to the extent it

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deems it necessary or desirable to comply with Section 162(m) of the Code and
applicable regulations thereunder, ensure that each Non-Employee Director also
qualifies as an "outside director" as that term is defined in the regulations
under Section 162(m) of the Code.

(q) "Option(s)" shall mean an Incentive Stock Option or a non-qualified
stock option to purchase Shares that is awarded pursuant to the Plan.

(r) "Option Agreement" shall mean a written agreement substantially in the
form of Exhibit A-1 or A-2, or such other form or forms as the Board or the
Committee (subject to the terms and conditions of this Plan) may from time to
time approve evidencing and reflecting the terms of an Option.

(s) "Optionee" shall mean an Eligible Person to whom an Option is awarded.

(t) "Other Available Shares" means, as of any date, the excess, if any of:

(i) the total number of Shares owned by an Optionee; over

(ii) the sum of:

(A) the number of Shares owned by such Optionee for less than six
months; plus

(B) the number of Shares owned by such Optionee that has, within the
preceding six months, been surrendered as payment in full or in
part, of the exercise price for an option to purchase any
securities of the Company or an Affiliate under any Company Plan.

(u) "Participant" shall mean each Eligible Person of the Company or a
Subsidiary to whom an Award is granted pursuant to the Plan.

(v) "Person" shall mean an individual, partnership, corporation, limited
liability company, trust, joint venture, unincorporated association, or other
entity or association.

(w) "Plan" shall mean the ViroPharma Incorporated Stock Option Plan, as
amended from time to time.

(x) "Pool" shall mean the pool of Shares subject to the Plan, as described
in Section 6, and as adjusted in accordance with Section 9 of the Plan.

(y) "Securities Act" shall mean the Securities Act of 1933, as amended.

(z) "Shares" shall mean shares of Common Stock.

(aa) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in Sections 424(f) and (g) of the Code.

SECTION 3. PARTICIPATION.

Participants in the Plan shall be selected by the Board or the Committee
from the Eligible Persons. The Board or the Committee may make Awards at any
time and from time to time to Eligible Persons. Any Award may include or
exclude any Eligible Person, as the Board or the Committee shall determine in
its sole discretion.

SECTION 4. ADMINISTRATION.

(a) Procedure. The Plan shall be administered by the Board. The Board may at
any time appoint a Committee consisting of not less than two persons to
administer the Plan on behalf of the Board, each of whom is a Non-Employee
Director, subject to such terms and conditions as the Board may prescribe.
Members of the Committee shall serve for such period of time as the Board may
determine. Members of the Board or the Committee who are eligible for Options
or have been awarded Options may vote on any matters affecting the
administration of the Plan or the award of any Options pursuant to the Plan,
except that no such member shall

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act upon the award of an Option to himself or herself, but any such member may
be counted in determining the existence of a q

Viropharma Inc · DEF 14A · For 5/21/98

Filed On 4/15/98 · SEC File 0-21699 · Accession Number 1036050-98-615

Definitive Proxy Solicitation Material · Schedule 14AFiling Table of Contents

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