<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
COMBICHEM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
COMBICHEM, INC.
9050 Camino Santa Fe
San Diego, California 92121
June 25, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of CombiChem, Inc., which will be held in the Aventine #F Ballroom at the Hyatt
Regency La Jolla Aventine, 3777 La Jolla Village Drive, San Diego, California on
July 23, 1998 at 10:00 a.m.
Details of the business to be conducted at the Annual Meeting are given
in the attached Notice of Annual Meeting of Stockholders and Proxy Statement
which you are urged to read carefully.
If you do not plan to attend the Annual Meeting, please sign, date, and
return the enclosed proxy promptly in the accompanying reply envelope. If you
decide to attend the Annual Meeting and wish to change your proxy vote, you may
do so automatically by voting in person at the Annual Meeting.
We look forward to seeing you on July 23, 1998.
Sincerely,
/s/ VICENTE ANIDO, JR.
-----------------------------------------------
Vicente Anido, Jr.
President, Chief Executive Officer and Director
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested
to complete, sign and date the enclosed proxy as promptly as possible and return
it in the enclosed envelope. No postage need be affixed if mailed in the United
States.
<PAGE> 3
COMBICHEM, INC.
9050 Camino Santa Fe
San Diego, California 92121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
July 23, 1998
The Annual Meeting of Stockholders of CombiChem, Inc. ("CombiChem" or
the "Company") will be held in the Aventine #F Ballroom at the Hyatt Regency La
Jolla Aventine, 3777 La Jolla Village Drive, San Diego, California on Thursday,
July 23, 1998 at 10:00 a.m. for the following purposes:
1. To elect a Board of Directors. The Board has nominated the
following persons for election at the Annual Meeting: Vicente
Anido, Jr., Philippe O. Chambon, Pierre R. Lamond, Peter L.
Myers, Arthur Reidel and William Scott.
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31,
1998.
3. To transact such other business which may properly come before
the Annual Meeting or any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. All stockholders of record at the close of
business on June 8, 1998 will be entitled to vote at the Annual Meeting and at
any adjournment thereof. The transfer books will not be closed. A list of
stockholders entitled to vote at the Annual Meeting will be available for
inspection at the offices of the Company.
By Order of the Board of Directors
Dated: June 25, 1998 /s/ KARIN EASTHAM
-------------------------------------------------
Karin Eastham
Vice President, Finance and Administration, Chief
Financial Officer and Assistant Secretary
ABSTENTIONS AND BROKER NONVOTES WILL BE COUNTED FOR PURPOSES OF DETERMINING
WHETHER A QUORUM IS PRESENT AT THE ANNUAL MEETING AND ABSTENTIONS WILL HAVE THE
EFFECT OF NEGATIVE VOTES. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON, IF YOU WISH
TO DO SO, EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY.
<PAGE> 4
COMBICHEM, INC.
9050 CAMINO SANTA FE
SAN DIEGO, CALIFORNIA 92121
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 23, 1998
The enclosed proxy is solicited on behalf of the Board of Directors of
CombiChem, Inc., a Delaware corporation ("CombiChem" or the "Company"), for use
at the annual meeting of stockholders to be held on July 23, 1998, and at any
adjournment or postponement of the annual meeting (the "Annual Meeting"). The
Annual Meeting will be held at 10:00 a.m. in the Aventine #F Ballroom at the
Hyatt Regency La Jolla Aventine, 3777 La Jolla Village Drive, San Diego,
California. All stockholders of record on June 8, 1998 will be entitled to
notice of and to vote at the Annual Meeting. This Proxy Statement and
accompanying proxy (the "Proxy") were first mailed to stockholders on or about
June 25, 1998.
The mailing address of the principal executive office of the Company is
9050 Camino Santa Fe, San Diego, California 92121.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders (collectively, the "Proposals"). Each Proposal is described in more
detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
VOTING
On June 8, 1998, the record date for determination of stockholders
entitled to vote at the Annual Meeting, there were 13,299,391 shares of Common
Stock outstanding. Each holder of Common Stock is entitled to one vote on all
matters brought before the Annual Meeting.
Abstentions and broker nonvotes will be counted for purposes of
determining whether a quorum is present at the Annual Meeting and abstentions
will have the effect of negative votes.
REVOCABILITY OF PROXIES
Any person giving a proxy has the power to revoke it at any time before
its exercise. It may be revoked by filing with the Secretary of the Company at
the Company's principal executive office, 9050 Camino Santa Fe, San Diego,
California 92121, a notice of revocation or another signed Proxy with a later
date. You may also revoke your Proxy by attending the Annual Meeting and voting
in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional soliciting materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward the solicitation materials to such beneficial owners.
In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram or other means by directors, officers, employees or agents
of the Company. No additional compensation will be paid to these individuals for
any such services. Except as described above, the Company does not presently
intend to solicit proxies other than by mail.
<PAGE> 5
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company is currently composed of six
members. The Company's Amended and Restated Certificate of Incorporation
provides that, beginning with this Annual Meeting, the Board of Directors will
be classified into three classes of directors serving staggered three-year
terms, with one class of directors to be elected at each subsequent annual
meeting of stockholders. All of the current members of the Board of Directors
have been nominated to continue to serve on the Board. Mr. Lamond and Dr. Myers
have been nominated to stand for election to the Board for terms to expire at
the 1999 annual meeting of stockholders or until their successors are elected
and have been qualified, Drs. Chambon and Scott have been nominated to stand for
election to the Board for terms to expire at the 2000 annual meeting of
stockholders or until their successors are elected and have qualified, and Dr.
Anido and Mr. Reidel have been nominated to stand for election to the Board for
terms to expire at the 2001 annual meeting of stockholders or until their
successors are elected and have qualified. Each person nominated for election
has agreed to serve if elected, and management has no reason to believe that any
nominee will be unavailable to serve.
VOTE REQUIRED
The two candidates for each of the class of directors whose terms expire
at the 1999 annual meeting of stockholders, the 2000 annual meeting of
stockholders and the 2001 annual meeting of stockholders receiving the highest
number of affirmative votes of the stockholders entitled to vote at the Annual
Meeting will be elected directors of CombiChem. Unless otherwise instructed, the
proxyholders will vote each returned proxy for the nominees named below for
election to the class indicated below, or for as many nominees of the Board of
Directors as possible, such votes to be distributed among such nominees in the
manner as the proxyholders see fit.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the nominees
listed below.
NOMINEES
The following table sets forth information regarding the nominees.
<TABLE>
<CAPTION>
YEAR FIRST CLASS
ELECTED TERMINATION
NAME DIRECTOR AGE YEAR POSITION
---- -------- --- ---- --------
<S> <C> <C> <C> <C>
Vicente Anido, Jr., Ph.D............ 1996 45 2001 President, Chief Executive
Officer and Director
Philippe O. Chambon, M.D., Ph.D.(1). 1995 40 2000 Director
Pierre R. Lamond(1)................. 1995 67 1999 Chairman of the Board and
Director
Peter L. Myers, Ph.D................ 1995 54 1999 Director
Arthur Reidel(2).................... 1997 47 2001 Director
William Scott, Ph.D.(2)............. 1997 58 2000 Director
</TABLE>
- -------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
-2-
<PAGE> 6
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION TO TERMS EXPIRING IN 1999
Pierre R. Lamond. Mr. Lamond has served as Chairman of the Board and a
Director of the Company since May 1995. Mr. Lamond is a General Partner of
Sequoia Capital, a venture capital limited partnership with over $500 million
under management. Prior to joining Sequoia Capital in 1981, Mr. Lamond was a
Vice President and Technical Director of National Semiconductor Corporation
("National Semiconductor") from 1976 to 1981. He began his career in 1957 at
Transitron Corporation and joined Fairchild Semiconductor Company in 1961. In
1967, he was one of the co-founders of National Semiconductor where he managed
the semiconductor division until 1974. From 1974 through 1975, he was President
of Coherent, Inc., a laser company. He served as President of Advent, an early
pioneer of projection television from 1975 through 1976. Mr. Lamond is Chairman
of Cypress Semiconductor Corporation and Vitesse Semiconductor Corporation,
Director of CKS Group, and a director of a number of private companies.
Peter L. Myers, Ph.D. Dr. Myers has served as a Director, Vice President
and Chief Scientific Officer of the Company since joining the Company in March
1995. Dr. Myers has also served as Chief Operating Officer of the Company since
September 1995 and served as the acting Chief Executive Officer from September
1995 to March 1996. Prior to joining the Company, Dr. Myers served as Vice
President, Drug Discovery and Development at Onyx Pharmaceuticals Inc. from
November 1993 through March 1995, where he was responsible for all aspects of
drug discovery and development leading to potential novel classes of anti-cancer
drugs. Prior to that, Dr. Myers served as Vice President, Chemistry Research of
Glaxo Inc. Research Institute from January 1991 through December 1993. Dr. Myers
holds a B.S. in Chemistry and a Ph.D. in Organic Chemistry from Leeds
University.
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2000
Philippe O. Chambon, M.D., Ph.D. Dr. Chambon has served as a Director of
the Company since August 1995. Dr. Chambon is a General Partner of the Sprout
Group. He joined Sprout in May 1995. From May 1993 to April 1995, Dr. Chambon
served as Manager in the Healthcare Practice of The Boston Consulting Group, a
leading management consulting firm. Previously, Dr. Chambon was an executive
with Sandoz Pharmaceuticals Corporation, a leading pharmaceutical company, from
September 1987 to April 1993. In his last capacity there, he was the Executive
Director of New Product Management. He is currently a director of Transcend
Therapeutics and of several private companies. Dr. Chambon received an M.D.
(with honors) and Ph.D. from the University of Paris and an M.B.A. from Columbia
University.
William Scott, Ph.D. Dr. Scott has served as a Director of the Company
since January 1997. Since March 1997, Dr. Scott has served as the Chief
Executive Officer of Physiome Sciences, Inc. From 1983 until December 1996, Dr.
Scott served in various executive positions with Bristol-Myers Squibb
Pharmaceutical Research Institute and as its Senior Vice President, Drug
Discovery Research since 1991. Dr. Scott received a B.S. in Chemistry from the
University of Illinois and a Ph.D. in Biochemistry from the California Institute
of Technology and was an NIH Postdoctoral Fellow at The Rockefeller University.
Dr. Scott serves on the Board of Directors of a private company.
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2001
Vicente Anido, Jr., Ph.D. Dr. Anido has served as President and Chief
Executive Officer and as a Director of the Company since joining the Company in
March 1996. Prior to that, Dr. Anido served as President of the Americas Region
at Allergan, Inc. from June 1993, where he was responsible for that company's
commercial operations for North and South America with approximately $500
million in revenue. Prior to that, Dr. Anido spent almost 18 years at Marion
Laboratories and Marion Merrell Dow, Inc. and served as Vice President, Business
Management of its U.S. Prescription Products Division from 1991 until June 1993.
Dr. Anido holds a B.S. in Pharmacy from West Virginia University, an M.S. in
Pharmaceutical Sciences from West Virginia University and a Ph.D. in Pharmacy
Administration from the University of Missouri, Kansas City.
-3-
<PAGE> 7
Arthur Reidel. Mr. Reidel has served as a Director of the Company since
September 1997. He currently serves as President, Chief Executive Officer and
Chairman of the Board of Pharsight Corporation, a privately held software
corporation, a position he has held since April 1996, and as a director from
April 1995. Prior to that, he was a private investor/consultant from April 1995
to March 1996. From October 1994 to March 1995, he served as Vice President,
Business Development of Viewlogic Systems, Inc., a publicly held software firm.
Mr. Reidel has served as a director of MacNeil Schwendler from December 1993 and
as a director of Formation Systems, Inc. from 1996 to the present. Mr. Reidel
has also served as President and Chief Executive Officer, Sunrise Test Systems,
Inc., a privately held software firm, from December 1992 to March 1994
(Viewlogic Systems, Inc. acquired Sunrise Test Systems, Inc. in September 1994),
and Vice President of Weitek Corporation from July 1991 to December 1992. Mr.
Reidel received an B.S. in mathematics from Massachusetts Institute of
Technology.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors met a total of six times and acted by
unanimous written consent a total of 16 times during the year ended December 31,
1997. Each of the directors nominated for reelection attended at least 75% of
the aggregate of (i) total meetings of the Board and (ii) the total number of
meetings held by all committees of the Board on which he served (during the
periods that he served).
The Company has a standing Audit Committee composed of Dr. Chambon and
Mr. Lamond. The Audit Committee met one time in 1997. The Audit Committee
assists in selecting the independent auditors, designating the services they are
to perform and in maintaining effective communication with those auditors.
The Company also has a standing Compensation Committee currently
composed of Mr. Reidel and Dr. Scott. The Compensation Committee met one time
and acted by unanimous written consent one time in 1997. The Compensation
Committee reviews and acts on matters relating to compensation levels and
benefit plans for executive officers and key employees of the Company, including
salary and stock options. The Compensation Committee is also responsible for
granting stock awards, stock options and stock appreciation rights and other
awards to be made under the Company's existing incentive compensation plans.
The Company does not have a standing Nominating Committee or any other
committee performing similar functions, and such matters are considered at
meetings of the full Board of Directors.
DIRECTOR COMPENSATION
The Company reimburses its directors for all reasonable and necessary
travel and other incidental expenses incurred in connection with their
attendance at meetings of the Board. Directors are not currently compensated for
serving on the Board. Each non-employee Board member was granted an option to
purchase 20,000 shares of Common Stock. Each individual not previously serving
on the Board who becomes a non-employee Board member will receive a 20,000-share
option grant on the date such individual joins the Board. In addition, each such
non-employee Board member who continues to serve as a non-employee Board member
will automatically be granted an option to purchase 5,000 shares of Common Stock
at each subsequent annual meeting, provided such individual has served on the
Board for at least six months. These options will have an exercise price equal
to 100% of the fair market value of the Common Stock on the grant date. The
shares subject to each 20,000-share automatic option grant will vest over a
four-year period, with 25% of the option shares vesting upon completion of one
year of Board service from the grant date and the balance of the option shares
vesting in equal monthly installments over the optionee's continued period of
Board service over the next three years. The shares subject to each 5,000-share
annual automatic option will vest upon the optionee's completion of one year of
Board service measured from the grant date.
-4-
<PAGE> 8
PROPOSAL 2
APPROVAL OF
SELECTION OF INDEPENDENT AUDITORS
The Company is asking the stockholders to ratify the selection of Ernst
& Young LLP as the Company's independent auditors for the year ending December
31, 1998.
VOTE REQUIRED
The affirmative vote of a majority of the stockholders represented and
voting at the Annual Meeting will be required to ratify the selection of Ernst &
Young LLP. In the event the stockholders fail to ratify the appointment, the
CombiChem Board will reconsider its selection. Even if the selection is
ratified, the CombiChem Board, in its discretion, may direct the appointment of
a different independent accounting firm at any time during the year if the
CombiChem Board believes such a change would be in CombiChem's and its
stockholders' best interests.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the
ratification and approval of the selection of Ernst & Young LLP to serve as
CombiChem's independent auditors for the year ending December 31, 1998.
-5-
<PAGE> 9
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Common Stock as of May 31, 1998, by
(i) all persons who are beneficial owners of 5% or more of the Company's Common
Stock, (ii) each director of the Company, (iii) each of the Company's officers
named under "Executive Compensation and Other Information--Summary of Cash and
Certain Other Compensation" and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(1) OWNED(2)
--------------------------------------- -------- --------
<S> <C> <C>
Sprout Capital VII, L.P. and affiliated
entities(3) 1,501,729 11.3%
3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Sequoia Capital VI and affiliated entities(4)... 1,237,999 9.3%
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Elan International Services Ltd................. 1,250,000 9.4%
102 St. James Court
Flatts
Smiths, FL04
Bermuda
Brinson MAP Venture Capital Fund III and
affiliated entities(5)........................ 956,453 7.2%
209 S. LaSalle Street
Chicago, IL 60604-1295
Sorrento Growth Partners I, L.P. and affiliated
entities(6)................................... 750,867 5.6%
4370 La Jolla Village Dr., Suite 1040
San Diego, CA 92122
Pierre R. Lamond(4)(7).......................... 1,257,999 9.4%
Vicente Anido, Jr., Ph.D.(8).................... 580,418 4.3%
Peter L. Myers, Ph.D.(9)........................ 272,501 2.0%
Philippe O. Chambon, M.D., Ph.D.(3)(10)......... 1,521,729 11.4%
Arthur Reidel(11)............................... 20,000 *
William Scott, Ph.D.(12)........................ 20,000 *
Lee R. McCracken(13)............................ 93,750 *
John Saunders, Ph.D.(14)........................ 88,017 *
Steven L. Teig(15).............................. 268,501 2.0%
All directors and executive officers as a
group (10 persons)(16)........................ 4,214,790 31.0%
</TABLE>
- -------------------
* Represents beneficial ownership of less than one percent of the
outstanding shares of the Company's Common Stock.
-6-
<PAGE> 10
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them. Share
ownership in each case includes shares issuable upon exercise of certain
outstanding options as described in the footnotes below. The address for
those individuals for which an address is not otherwise indicated is:
9050 Camino Santa Fe, San Diego, CA 92121.
(2) Percentage of ownership is calculated pursuant to Commission Rule
13d-3(d)(1).
(3) Includes 1,386,331 shares purchased by Sprout Capital VII, L.P., which
are held in a voting trust of which First Union Trust Company, National
Association ("First Union"), is the voting trustee. First Union has sole
voting power of these shares. The address for First Union is One Rodney
Square, 920 King Street, Wilmington, Delaware 19801. Also includes
115,398 shares purchased by DLJ Capital Corporation. DLJ Capital
Corporation is the managing general partner of Sprout Capital VII, L.P.
Dr. Chambon is a Director of the Company, a general partner of Sprout
Capital VII, L.P. and Divisional Vice President of DLJ Capital
Corporation. Dr. Chambon disclaims beneficial ownership of the 1,386,331
shares and the 115,398 shares except to the extent of his pecuniary
interest therein.
(4) Includes 1,109,962 shares held by Sequoia Capital VI, 60,988 shares held
by Sequoia Technology Partners VI, 33,012 shares held by Sequoia XXIV
and 15,780 shares held by Sequoia 1995, each of which is affiliated with
Sequoia Partners. Sequoia Partners is the general partner of Sequoia
Capital VI. Sequoia Partners has eight general partners, who are also
the general partners of Sequoia Technology Partners VI. Also includes
16,613 shares, 913 shares and 731 shares held by Sequoia Capital VI,
Sequoia Technology Partners VI and Sequoia XXIV, respectively, issuable
upon exercise of warrants exercisable within 60 days of February 28,
1998. Mr. Lamond is a Director of the Company and a general partner of
Sequoia Partners. Mr. Lamond disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(5) Includes 134,113 shares purchased by the First National Bank of Chicago
as Custodian to the Brinson Trust Company as Trustee of the Brinson MAP
Venture Capital Fund III and 822,340 shares purchased by The First
National Bank of Chicago as Custodian to the Brinson Venture Capital
Fund III, L.P.
(6) Includes 249,803 shares held by Sorrento Ventures II, L.P. and 501,064
shares held by Sorrento Growth Partners I, L.P.
(7) Includes 20,000 shares issuable upon exercise of options within 60 days
of May 31, 1998.
(8) Includes 100,001 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1998.
(9) Includes 50,001 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1998.
(10) Includes 20,000 shares issuable upon exercise of options within 60 days
of May 31, 1998.
(11) Includes 20,000 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1998.
(12) Includes 20,000 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1998.
(13) Includes 8,750 shares held by the Rufus L. McCracken Trust, dated
6/21/91, of which Mr. McCracken is the sole Trustee.
(14) Includes 4,192 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1998.
(15) Includes 80,626 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1998.
(16) Includes 274,820 shares issuable upon the exercise of options or
warrants exercisable within 60 days of May 31, 1998.
-7-
<PAGE> 11
MANAGEMENT
The executive officers and key employees of the Company as of May 31,
1998, are as follows:
<TABLE>
<CAPTION>
NAME Age Position
- ---- --- --------
<S> <C> <C>
Vicente Anido, Jr., Ph.D............ 45 President, Chief Executive Officer and Director
Peter L. Myers, Ph.D................ 54 Vice President, Chief Scientific Officer, Chief
Operating Officer and Director
Karin Eastham....................... 48 Vice President, Finance and Administration and
Chief Financial Officer
Klaus Gubernator, Ph.D.............. 44 Vice President, Special Projects
Lee R. McCracken.................... 40 Vice President, Business Development
John Saunders, Ph.D................. 50 Vice President, Medicinal Chemistry
Steven L. Teig...................... 37 Vice President, Advanced Technology
</TABLE>
Vicente Anido, Jr., Ph.D. Dr. Anido has been nominated to serve as a
director at the Company. See "Election of Directors" for a discussion of Dr.
Anido's business experience.
Peter L. Myers, Ph.D. Dr. Myers has been nominated to serve as a
director of the Company. See "Election of Directors" for a discussion of Dr.
Myers' business experience.
Karin Eastham. Ms. Eastham joined the Company as Vice President, Finance
and Administration and Chief Financial Officer in April 1997. Prior to joining
the Company, Ms. Eastham served as Vice President, Finance and Administration
and Chief Financial Officer of Cytel Corporation, a drug research and
development company, from October 1992 through April 1997. Prior to that, Ms.
Eastham was Vice President, Finance and Administration of Pritsker Corporation,
a simulation-based computer software company, from May 1990 through October
1992. Ms. Eastham received a B.S. in Accounting and an M.B.A. from Indiana
University. She is a Certified Public Accountant.
Klaus Gubernator, Ph.D.. Dr. Gubernator joined the Company in August
1997 as Vice President, Special Projects. Prior to joining the Company, he
served as Research Section Head in Pharmaceutical Research at F. Hoffmann-La
Roche Ltd. in Basel, Switzerland from 1987 to 1997, contributing to
cardiovascular and antibacterial projects as well as developing structure-based
design and bioinformatics technologies. Dr. Gubernator received his Ph.D. degree
in Chemistry from the University of Heidelberg.
Lee R. McCracken. Mr. McCracken has served as Vice President, Business
Development since joining the Company in May 1996. Prior to joining the Company,
Mr. McCracken served as Vice President, Business Development at Watson
Laboratories, the operating subsidiary of Watson Pharmaceuticals, from January
1996 through May 1996. Prior to that, Mr. McCracken served as Managing Director
of Pacific Pharma and as Director, Business Development, for the Americas Region
at Allergan, Inc. from May 1992 through December 1995. Prior to entering the
pharmaceutical industry, Mr. McCracken was a venture capitalist with 3i Capital
and Union Venture Corporation. Mr. McCracken received a B.S. in Marketing from
Santa Clara University, an M.S. in Computer Science from the University of
Dayton and an M.B.A. from The Anderson School at UCLA.
John Saunders, Ph.D. Dr. Saunders joined the Company in October 1995 as
Vice President, Medicinal Chemistry. Prior to joining the Company, Dr. Saunders
served as Head of Medicinal Chemistry II from August 1989 through September 1995
and also as Head of the Antiviral Research Management Committee from July 1995
through September 1995 at Glaxo-Wellcome, plc. Dr. Saunders received a first
class honors degree in Chemistry from Newcastle University in England and a
Ph.D. from Cambridge University.
-8-
<PAGE> 12
Steven L. Teig. Mr. Teig has served as Vice President, Advanced
Technology since February 1997 and previously served as Vice President, Design
Technology from July 1995. Prior to joining the Company, Mr. Teig co-founded
BioCAD Corp., a commercial developer of drug discovery software for medicinal
chemists, in June 1989 and served as its Chief Technical Officer until its
merger with Molecular Simulations, Inc. ("MSI"). Thereafter, Mr. Teig served as
President and Chief Technical Officer of Entropix Corporation, a subsidiary of
MSI, from August 1994 through July 1995. Prior to pursuing drug discovery
technology, Mr. Teig co-founded Tangent Systems Corporation, a developer of
integrated circuit design software, which was subsequently acquired by Cadence
Design Systems, Inc. Mr. Teig holds a B.S.E. in Electrical Engineering and
Computer Science from Princeton University.
-9-
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the aggregate compensation earned by the
Company's President and Chief Executive Officer and each of the other four most
highly compensated executive officers whose salary and bonus for 1997 exceeded
$100,000 (the "Named Executive Officers") for services rendered in all
capacities to the Company for the year ended December 31, 1997:
Summary Compensation Table(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------------------------------
NAME AND OTHER SECURITIES
PRINCIPAL ANNUAL UNDERLYING ALL OTHER
POSITION YEAR(1) SALARY(2) BONUS(3) COMPENSATION OPTIONS/SARS(#) COMPENSATION
-------- ------- --------- -------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
VICENTE ANIDO, JR., PH.D. 1997 $273,593 $58,227 $ -0- 100,001 $ -0-
President, Chief Executive
Officer and Director
PETER L. MYERS, PH.D. 1997 225,582 42,297 -0- 50,001 3,855(4)
Chief Scientific Officer and
Chief Operating Officer and
Director
JOHN SAUNDERS, PH.D. 1997 153,700 26,129 15,952(5) 4,192 -0-
Vice President, Medicinal
Chemistry
LEE R. MCCRACKEN 1997 150,510 33,112 59,739(6) 12,500 -0-
Vice President, Business
Development
STEVEN L. TEIG 1997 143,191 24,342 -0- 50,001 3,364(4)
Vice President,
Advanced Technology
</TABLE>
- --------------
(1) Pursuant to Instruction to Item 402(b) of Regulation S-K promulgated by
the Securities and Exchange Commission (the "Commission"), information
with respect to fiscal years prior to 1997 has not been included as the
Company was not a reporting company pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the information has not been previously reported to the Commission in
response to a filing requirement.
(2) Includes amounts deferred pursuant to the Company's 401(k) Plan.
(3) Includes cash payments for bonuses earned by the Named Executive Officers
during the fiscal year. (4) Payments for life insurance premiums.
(5) Amounts reimbursed for the payment of taxes.
(6) Payments to cover relocation expenses.
-10-
<PAGE> 14
Stock Options
The following table sets forth information concerning stock option grants
made to each of the Named Executive Officers for the year ended December 31,
1997. The Company granted no stock appreciation rights ("SARs") to Named
Executive Officers during 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Exercise Price Appreciation for
Underlying Granted to Price Option Term(3)
Options/SARS Employees in Per Expiration ----------------------
Name Granted(1) Fiscal Year Share(2) Date 5% 10%
- ---- ------------ ------------- -------- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Vicente Anido, Jr., Ph.D...... 100,001 13.9% $4.00 09/16/07 $251,560 $637,503
Peter L. Myers, Ph.D.......... 50,001 6.9 4.00 09/16/07 125,781 468,759
John Saunders, Ph.D........... 4,192 0.6 5.00 10/07/07 13,181 33,405
Lee R. McCracken.............. 12,500 1.7 4.00 09/16/07 31,445 79,687
Steven L. Teig................ 50,001 6.9 4.00 09/16/07 125,781 318,755
</TABLE>
- ---------------------
(1) The grant dates for these options are as follows: September 17, 1997 for
Dr. Anido's, Dr. Myers', Mr. McCracken's and Mr. Teig's options and
October 8, 1997 for Dr. Saunders' option. Each option has a maximum term
of 10 years measured from the grant date, subject to earlier termination
upon the optionee's cessation of service with the Company. Each option is
immediately exercisable for all the option shares; however, any shares
purchased under the option will be subject to repurchase by the Company,
at the option exercise price paid per share, should the optionee leave
the Company prior to vesting in the shares. The shares subject to these
options vest as follows: (a) for Dr. Anido's, Dr. Myers' and Mr. Teig's
options, 50% upon their completion of 24 months of service measured from
the grant date with the remaining 50% upon the completion of an
additional 24 months of service, and (b) for all other optionees, 25%
upon completion of one year of service measured from the grant date and
the balance in a series of 36 successive equal monthly installments over
a continued period of service thereafter. The options were granted under
the 1995 Stock Option/Stock Issuance Plan and were incorporated into the
1997 Stock Incentive Plan, but continue to be governed by their existing
terms.
(2) The exercise price per share of options granted represented the fair
market value of the underlying shares of Common Stock on the dates the
respective options were granted as determined by the Board, considering
all relevant factors. The exercise price may be paid in cash or in shares
of Common Stock valued at fair market value on the exercise date or a
combination of cash and shares or any other form of consideration
approved by the Board. The fair market value of shares of Common Stock
was determined in accordance with certain provisions of the Company's
1995 Stock Option/Stock Issuance Plan based on the closing selling price
per share of Common Stock on the date in question on the Nasdaq National
Market. If shares of the Common Stock are not listed or admitted to
trading on any stock exchange nor traded on the Nasdaq National Market,
then the fair market value shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall
deem appropriate.
(3) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Commission. The price used in
this table for computing this appreciation is the exercise price of the
-11-
<PAGE> 15
options. There is no assurance provided to any executive officer or any
other holder of the Company's securities that the actual stock price
appreciation over the 10-year option term will be at the assumed 5% or
10% levels or at any other defined level. Option Exercises and Holdings
The following table provides information concerning option exercises
during 1997 by the Named Executive Officers and the value of unexercised options
held by each of the Named Executive Officers as of December 31, 1997. No SARs
were exercised during 1997 or outstanding as of December 31, 1997.
Aggregate Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Shares Unexercised Options at in-the-Money Options
Acquired December 31, 1997 at December 31, 1997(3)
on Value ------------------------------- ------------------------------
Name Exercise(#) Realized(1) Exercisable(2) Unexercisable Exercisable(2) Unexercisable
- ---- ----------- ----------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Vicente Anido, Jr., Ph.D...... 422,417 $ 42,242 100,001 -- $400,004 $ --
Peter L. Myers, Ph.D.......... 135,000 13,500 50,001 -- 200,004 --
John Saunders, Ph.D........... 83,825 12,741 4,192 -- 12,576 --
Lee R. McCracken.............. 12,500 0 0 -- 0 --
Steven L. Teig................ 111,250 11,125 50,001 30,625 200,004 241,938
</TABLE>
- ---------------------
(1) "Value realized" is calculated on the basis of the fair market value of
the Common Stock on the date of exercise minus the exercise price and
does not necessarily indicate that the optionee sold such stock.
(2) The options are immediately exercisable, but any shares purchased
thereunder will be subject to repurchase by the Company, at the original
option exercise price paid per share, should the employee leave the
Company prior to vesting in the shares. As of February 28, 1998, none of
these shares had vested.
(3) "Value" is calculated in this table as the fair market price of the
Common Stock at fiscal year-end ($8.00) less exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1997, the Compensation Committee of
the Company's Board established the levels of compensation for the Company's
executive officers. The current members of the Company's Compensation Committee
are Mr. Reidel and Dr. Scott. See "Certain Transactions."
EMPLOYMENT ARRANGEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
In March 1996, the Company and Dr. Anido entered into an agreement
whereby Dr. Anido is employed as President and Chief Executive Officer of the
Company. Pursuant to his agreement, Dr. Anido receives an annual base salary of
$260,000, which is reviewed annually by the Board of Directors, and is eligible
for a bonus of up to 25% of his annual base salary to be awarded at the
discretion of the Board of Directors. In the event the Company terminates Dr.
Anido's employment without "cause," Dr. Anido will be entitled to receive an
aggregate severance benefit of 12 months of his base salary and benefits less
amounts received by Dr. Anido from other full-time employment during that
period. In addition, pursuant to his employment agreement Dr. Anido received
options to purchase 420,000 shares of Common Stock with an exercise price of
$0.30 per share. The shares subject to the option vest over Dr. Anido's
four-year period of service with the Company measured from the option grant
date. Dr. Anido's employment agreement also provides Dr. Anido with a right to
maintain his pro rata interest in the Company by purchasing new securities
issued in a financing other than a public offering, subject to certain
exceptions.
-12-
<PAGE> 16
In March 1995, the Company and Dr. Myers entered into an agreement
whereby Dr. Myers is employed as Chief Scientific Officer and Chief Operating
Officer of the Company. Pursuant to his agreement, Dr. Myers (i) received a
signing bonus of $26,250 towards the purchase of Company stock, (ii) receives an
annual base salary of $210,000, which is reviewed annually by the President and
Chief Executive Officer, and (iii) is eligible for a bonus of up to 25% of his
annual base salary to be awarded at the discretion of the Board of Directors. In
connection with the employment agreement, Dr. Myers was provided a home loan. In
the event the Company terminates Dr. Myers' employment without "cause," Dr.
Myers will be entitled to receive an aggregate severance benefit of nine months
of his base salary and benefits, unless he obtains full-time employment prior to
the end of that period, and nine months accelerated vesting to be applied to any
vesting requirements under any stock option or stock purchase agreements
outstanding between Dr. Myers and the Company at the time of his termination
without cause. Simultaneous with the execution of Dr. Myers' employment
agreement, the Company and Dr. Myers entered into a Stock Purchase Agreement
whereby Dr. Myers purchased 87,500 shares of Common Stock at $0.30 per share.
Those shares vest over Dr. Myers' four-year period of service with the Company
measured from the option grant date.
In March 1997, the Company and Ms. Eastham entered into an agreement
whereby she is employed as Vice President, Finance and Administration and Chief
Financial Officer. Pursuant to her agreement, Ms. Eastham (i) receives an annual
base salary of $186,000, which is reviewed annually by the Chief Executive
Officer and Board of Directors, and (ii) is eligible for a bonus of up to 20% of
her annual base salary to be awarded at the discretion of the Board of
Directors. In the event the Company terminates Ms. Eastham's employment without
"cause" within two years after her date of hire, Ms. Eastham will be entitled to
receive an aggregate severance benefit of her base salary and benefits for six
months, unless she obtains full-time employment prior to the end of that
six-month period. Simultaneous with the execution of Ms. Eastham's employment
agreement, the Company and Ms. Eastham entered into a Stock Option Agreement
granting her an option to purchase 87,500 shares of Common Stock with an
exercise price of $0.40 per share. The shares subject to the option vest over
her four-year period of service with the Company measured from the grant date.
In January 1996, the Company and Dr. Saunders entered into an agreement
whereby Dr. Saunders is employed as Vice President, Medicinal Chemistry of the
Company. Pursuant to his agreement, Dr. Saunders receives an annual base salary
of $145,000, which is reviewed annually by the President and Chief Executive
Officer, and is eligible for a bonus of up to 20% of his annual base salary to
be awarded at the discretion of the Board of Directors. Simultaneous with the
execution of the employment agreement, the Company and Dr. Saunders entered into
a stock option agreement granting him an option to purchase 83,825 shares of the
Company's common stock with an exercise price of $0.248 per share. The shares
subject to that option vest over Dr. Saunders' four-year period of service with
the Company measured from the option grant date.
In May 1996, the Company and Mr. McCracken entered into an agreement
whereby he is employed as Vice President, Business Development of the Company.
Pursuant to his agreement, Mr. McCracken received a signing bonus of $10,000 and
receives an annual base salary of $145,000, which is reviewed annually by the
President and Chief Executive Officer. In addition, Mr. McCracken is eligible
for a bonus of up to 20% of his annual base salary. In the event the Company
terminates Mr. McCracken's employment without "cause," Mr. McCracken will be
entitled to receive an aggregate severance benefit of nine months of his base
salary and benefits. Simultaneous with the execution of Mr. McCracken's
employment agreement, the Company and Mr. McCracken entered into a stock option
agreement granting Mr. McCracken an option to purchase 72,500 shares of Common
Stock with an exercise price of $0.30 per share. The shares subject to the
option vest over Mr. McCracken's four-year period of service measured from the
option grant date.
In July 1995, the Company and Mr. Teig entered into an agreement whereby
he is employed as Vice President of the Company. Pursuant to his agreement, Mr.
Teig receives an annual base salary of $135,000, which is reviewed annually by
the Board of Directors. In addition, Mr. Teig is eligible for a bonus of up to
20% of his annual base salary to be awarded at the discretion of the Board of
Directors. Simultaneous with the execution of the employment agreement, the
Company and Mr. Teig entered into a stock purchase agreement whereby Mr. Teig
purchased 50,000 shares of Common Stock at $0.30 per share. Under such stock
purchase agreement, the shares will vest, and the Company's repurchase rights
will accordingly lapse over Mr. Teig's four-year period of employment measured
from the date of issuance. Pursuant to his employment agreement, Mr. Teig was
granted an option to
-13-
<PAGE> 17
purchase 61,250 shares of Company's Series J convertible preferred stock with an
exercise price of $0.40 per share. Those shares vest over Mr. Teig's four-year
period of service beginning on the fifth anniversary of the option grant date,
with provisions for early vesting upon meeting certain milestones. All of the
shares are currently vested.
In connection with an acquisition of the Company by merger or asset sale,
each outstanding option held by individuals in the Company's employ or service,
including the Chief Executive Officer and the other Named Executive Officers,
under the 1995 Stock Option/Stock Issuance Plan and any options granted to such
individuals under the 1997 Stock Incentive Plan will automatically accelerate in
full, except to the extent such options are to be assumed by the successor
corporation. In addition, the Compensation Committee as Plan Administrator has
provided for the accelerated vesting of the shares of Common Stock subject to
outstanding options, or any unvested shares of Common Stock subject to direct
issuances, in connection with the termination of employment following: (i) a
merger or asset sale in which these options are assumed or the repurchase rights
applicable to those shares are assigned or (ii) certain changes in control of
the Company.
Notwithstanding anything to the contrary set forth in the Company's
previous filing under the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, that might incorporate future filings, including
this Proxy Statement, in whole or in part, the following report and the
Performance Graph on page 16 shall not be incorporated into any such filings.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee presents this report regarding compensation
for the Company's executive officers and the Chief Executive Officer of the
Company.
GENERAL COMPENSATION POLICY
The Company's primary objective is to maximize the value of the Company's
shares over time. Accomplishing this objective requires achieving specific
Company milestones and developing and ultimately marketing superior technologies
that accelerate the drug discovery process. The overall goal of the Compensation
Committee is to develop compensation practices that will allow the Company to
attract and retain the people needed to achieve the Company's objectives.
The Company compensates its executive officers with a combination of
salary and incentives designed to focus and balance their efforts on maximizing
both the near-term and long-term financial performance of the Company. In
addition, the Company's compensation structure rewards individual performance
that furthers Company goals. Elements of each officer's compensation include the
following:
- Base Salary
- Annual Incentives
- Long-term Incentives
- Benefits
Each officer's compensation package is designed to provide an
appropriately weighted mix of these elements which cumulatively provides a level
of compensation roughly equivalent to that paid by companies of similar size and
complexity in similar industries.
BASE SALARY. Base salary and increases in base salary are determined by
individual performance and the salary levels in effect for companies of similar
size and complexity in similar industries. The Compensation Committee attempts
to keep the base salaries of the Company's officers at a level broadly in line
with the median of the salaries of officers in comparative companies. The
Compensation Committee also evaluates individual experience and performance and
specific issues particular to the Company, such as success in raising capital,
creation of stockholder value and achievement of specific Company milestones.
ANNUAL INCENTIVES. Annual Incentives are paid under an incentive
compensation program. Bonus awards are set at a level competitive among peer
group companies and early-stage high growth technology companies.
-14-
<PAGE> 18
Potential cash incentive compensation paid under this plan is set as a
significant percentage of each officers' base salary. All of the incentive
compensation is directly tied to performance and is at risk. Each officer earns
incentive compensation based upon a mix of Company performance and personal
performance. Company performance is measured by achievement of specific Company
milestones. Compensation for personal performance under this plan is awarded by
the Compensation Committee based upon both an objective and subjective
evaluation of the performance of each officer. No incentive compensation is paid
for Company performance or personal performance unless specific Company and
individual goals are achieved during the fiscal year. In 1997, incentive
compensation earned by officers was approximately 20% of base salary.
LONG-TERM INCENTIVES. Long-term incentive compensation in the form of
stock options is expected to be the largest element of total compensation over
time. Grants of stock options are designed to align the long-term interests of
each officer with the long-term interests of the Company and its stockholders.
Stock options provide each officer with a significant incentive to manage the
Company from the perspective of an owner with an equity stake in the business.
The size of the option grant to each officer is based on the officer's current
and expected future contributions to the business and vesting position. Awards
of stock options are designed to have an expected aggregate exercise value over
time equal to a multiple of salary which will create a significant opportunity
for stock ownership, motivation to remain with the Company and incentive to
increase stockholder value.
BENEFITS. Benefits offered to the Company's officers are substantially
the same as those offered to all the Company's regular employees and are
consistent with industry practice.
CEO COMPENSATION
In setting compensation payable to the Company's Chief Executive Officer,
Dr. Anido, we have sought to be competitive with companies of similar size and
complexity in similar industries. Dr. Anido's incentive compensation is
dependent upon the Company's performance and our evaluation of his personal
contribution to the Company's performance. No incentive compensation is paid to
Dr. Anido unless progress is made toward specific Company goals or these goals
are achieved during the fiscal year. In 1997, incentive compensation earned by
Dr. Anido was approximately 21% of base salary.
We conclude our report with the acknowledgement that no member of the
Compensation Committee is a current officer or employee of CombiChem or any of
its subsidiaries.
Submitted by the Compensation Committee of the Company's Board of
Directors.
COMPENSATION COMMITTEE
ARTHUR REIDEL
WILLIAM SCOTT
-15-
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares total stockholder returns since the Company
became a reporting company under the Exchange Act to the Nasdaq Composite Index
for the Nasdaq Stock Market and the Nasdaq Biotech Index. The total return for
each of the Company's Common Stock, the Nasdaq Composite Index and the Nasdaq
Biotech Index assumes the reinvestment of dividends, although dividends have not
been declared on the Company's Common Stock. The Nasdaq Composite Index tracks
the aggregate price performance of equity securities traded on the Nasdaq. The
Nasdaq Biotech Index tracks approximately 25 domestic stocks in the
biotechnology sector; companies comprising the Nasdaq Biotech Index are
available upon written request to Investor Relations at the Company's executive
offices. The stockholder return shown on the graph below is not necessarily
indicative of future performance and the Company will not make or endorse any
predictions as to future stockholder returns.
<TABLE>
Cumulative Total Return
-----------------------
5/08/98 6/01/98
------- -------
<S> <C> <C>
COMBICHEM, INC. 100 102
NASDAQ BIOTECH INDEX 100 93
NASDAQ COMPOSITE INDEX 100 94
</TABLE>
-16-
<PAGE> 20
CERTAIN TRANSACTIONS
In June, 1997, the Company issued, in a private placement transaction,
30,625 shares of Series J Preferred Stock to Steven L. Teig at a price of $0.40
per share (as adjusted in price and number of shares to show the number of
shares of Common Stock into which the Preferred Stock was automatically
converted upon the completion of the Company's initial public offering of its
Common Stock).
In October 1997, the Company sold 1,000,000 shares of its Common Stock to
Elan International Services Ltd. in conjunction with entering into a
collaborative agreement.
In May 1998, the Company sold 250,000 shares of its Common Stock to Elan
International Services Ltd. in connection with the Company's initial public
offering.
In February 1997 as incentive for employment, and in June 1997 under an
employee loan program provided for the exercise of options, the Company made
loans in the amounts of $96,000 and $23,044, respectively, to Dr. Anido, the
President, Chief Executive Officer and a Director of the Company, for an
aggregate indebtedness as of May 31, 1998 of $119,751, which includes accrued
interest. Each loan is secured by shares of Common Stock held by Dr. Anido. The
loan for $96,000 is represented by a promissory note which is due and payable on
the earlier of February 23, 2002 or the occurrence of certain events, such as
the expiration of the 190-day period following the completion of an initial
public offering. This loan bears no interest. The loan for $23,044 is
represented by a promissory note which is due and payable in three annual
installments and is due in full upon the third anniversary of the loan. This
loan bears an interest rate of 6.14%. The aggregate indebtedness of $119,751 at
May 31, 1998 represents the largest amount of indebtedness outstanding since the
beginning of the last fiscal year.
In September 1995 as incentive for employment, and in June 1997 under an
employee loan program provided for the exercise of options, the Company made
loans in the amounts of $150,000 and $30,375, respectively, to Dr. Myers, the
Vice President, Chief Scientific Officer and a Director of the Company, for an
aggregate indebtedness as of May 31, 1998 of $205,199, which includes accrued
interest. Each loan is secured by shares of Common Stock held by Dr. Myers. The
loan for $150,000 is represented by a promissory note which is due and payable
on the earlier of September 5, 2000 or the occurrence of certain events, such as
the expiration of the two-year period following the completion of an initial
public offering. This loan bears an interest rate equal to the applicable
minimum Federal rate on the date of the loan. The loan for $30,375 is
represented by a promissory note which is due and payable in three annual
installments and is due in full upon the third anniversary of the loan. This
loan bears an interest rate of 6.14%. The aggregate indebtedness of $205,199 at
May 31, 1998 represents the largest amount of indebtedness outstanding since the
beginning of the last fiscal year.
In August 1996 as incentive for employment, and in June 1997 under an
employee loan program provided for the exercise of options, the Company made
loans in the amounts of $66,125 and $15,591, respectively, to Dr. Saunders, the
Vice President, Medicinal Chemistry of the Company, for an aggregate
indebtedness as of May 31, 1998 of $60,195, which includes accrued interest. The
loan for $66,125, which is secured by a deed of trust, is represented by a
promissory note which is due and payable on the earlier of August 28, 1999 or
the occurrence of certain events, such as the expiration of the 30-day period
following the date Dr. Saunders ceases to be a full-time employee of the
Company. This loan bears no interest. The loan for $15,591, which is secured by
shares of Common Stock held by Dr. Saunders, is represented by a promissory note
which is due and payable in three annual installments and is due in full upon
the third anniversary of the loan. This loan bears an interest rate of 6.14%.
The largest amount of indebtedness outstanding since the beginning of the last
fiscal year was $81,716.
For information regarding employment agreements with Named Executive
Officers, see "Executive Compensation and Other Information."
All of the Company's officers are employed by the Company at will. The
Company has entered into indemnification agreements with each of its directors
and executive officers.
The Company expects that all future transactions between the Company and
its officers, directors and principal stockholders and their affiliates will be
approved in accordance with the Delaware General Corporation Law
-17-
<PAGE> 21
by a majority of the Board, as well as by a majority of the independent and
disinterested directors of the Board, and will be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are currently subject to the reporting requirements of Section 16(a) of
the Exchange Act ("Section 16(a)") which require them to file reports with
respect to their ownership of the Common Stock and their transactions in such
Common Stock, but were not subject to the reporting requirements of Section
16(a) during the fiscal year ended December 31, 1997.
STOCKHOLDER PROPOSALS FOR 1999 PROXY STATEMENT
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's 1999 Annual Meeting must be
received no later than February 26, 1999, in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of an Annual Report of the Company for the 1997 fiscal year has
been attached as an addendum to this Proxy Statement. This Annual Report is not
incorporated into this Proxy Statement and is not considered proxy solicitation
material.
FORM 10-K
The Company was not subject to the periodic reporting requirements of
Section 13 or 15(d) of the Exchange Act, during the fiscal year ended December
31, 1997.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for
action at the meeting other than the matters set forth in this Proxy Statement.
Should any other matter requiring a vote of the stockholders arise, the persons
named as proxies on the enclosed proxy card will vote the shares represented
thereby in accordance with their best judgment in the interest of the Company.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed proxy card.
By Order of the Board of Directors
/s/ KARIN EASTHAM
--------------------------------------------------
Dated: June 25, 1998 Karin Eastham
Vice President, Finance and Administration, Chief
Financial Officer and Assistant Secretary
-18-
<PAGE> 22
COMBICHEM, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Vicente Anido, Jr. and Karin Eastham
jointly and severally, as proxies, with full power of substitution and
resubstitution, to vote all shares of stock which the undersigned is entitled to
vote at the Annual Meeting of Stockholders of CombiChem, Inc. to be held on
Thursday, July 23, 1998, or at any postponements or adjournments thereof, as
specified below, and to vote in his or her discretion on such other business as
may properly come before the Annual Meeting and any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2
1. Election of Directors:
Nominees: Pierre R. Lamond and Peter L. Myers will stand for
election to the Board for terms to expire in 1999.
Philippe O. Chambon and William Scott will stand for
election to the Board for terms to expire in 2000.
Vicente Anido, Jr. and Arthur Reidel will stand for
election to the Board for terms to expire in 2001.
[ ] Vote FOR all nominees above (except as withheld in the space below)
[ ] Vote WITHHELD from all nominees
Instruction: To withhold authority to vote for any individual nominee,
check the box "Vote FOR" and write the nominee's name on the line below.
- --------------------------------------------------------------------------------
2. Ratification of Accountants:
Ratification and approval of the selection of Ernst & Young LLP as
independent accountants for the fiscal year ending December 31, 1998.
[ ] Vote FOR [ ] Vote AGAINST [ ] ABSTAIN
(Please sign and date on reverse side)
UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2 AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR DISCRETION
AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING OR ANY ADJOURNMENTS
THEREOF. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS JUST
SIGN BELOW, NO BOXES NEED BE CHECKED.
Dated: ____________________,19_____
___________________________________
Signature of Stockholder
___________________________________
Printed Name of Stockholder
___________________________________
Title (if appropriate)
Please sign exactly as name appears
hereon. If signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such, and, if signing for a
corporation, give your title. When
shares are in the names of more
than one person, each should sign.
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING. [ ]
