<PAGE> 1
PRELIMINARY COPIES
SIBIA NEUROSCIENCES, INC.
505 COAST BOULEVARD SOUTH
SUITE 300
LA JOLLA, CALIFORNIA 92037-4641
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 4, 1997
TO THE STOCKHOLDERS OF SIBIA NEUROSCIENCES, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") of SIBIA NEUROSCIENCES, INC., a Delaware corporation (the
"Company"), will be held on Wednesday, June 4, 1997 at 5:00 p.m., Pacific
Daylight Savings Time, at Lieb Auditorium, 505 Coast Boulevard South, Suite 300,
La Jolla, California 92037 for the following purposes:
1. To elect directors to serve either for (i) if the stockholders approve
the amendment to the Company's Certificate of Incorporation to provide
for a classified Board of Directors as set forth in Proposal 2, one, two
or three years, as the case may be, as described in the Proxy Statement,
or (ii) if the stockholders do not approve Proposal 2, the ensuing year,
and in each either case until their successors are elected.
2. To amend the Company's Certificate of Incorporation and Bylaws to
provide for a classified Board of Directors and to eliminate the ability
of stockholders of the Company to remove a director without cause.
3. To amend the Company's Certificate of Incorporation and Bylaws to
eliminate the ability of stockholders of the Company to call special
stockholders' meetings.
4. To ratify the selection of Price Waterhouse LLP as independent auditors
of the Company for its fiscal year ending December 31, 1997.
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 18, 1997,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
Frederick T. Muto,
Secretary
La Jolla, California
April 25, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE.
EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND
THE ANNUAL MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD
BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE ANNUAL MEETING,
YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 2
SIBIA NEUROSCIENCES, INC.
505 COAST BOULEVARD SOUTH
SUITE 300
LA JOLLA, CALIFORNIA 92037-4641
------------------------
PROXY STATEMENT
FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
JUNE 4, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
SIBIA NEUROSCIENCES, INC., a Delaware corporation (the "Company"), for use at
the 1997 Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Wednesday, June 4, 1997, at 5:00 p.m., Pacific Daylight Savings Time, or at any
adjournment or postponement thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting. The Annual Meeting will be held at
Lieb Auditorium, 505 Coast Boulevard South, Suite 300, La Jolla, California
92037. The Company intends to mail this proxy statement and accompanying proxy
card on or about April 25, 1997, to all stockholders entitled to vote at the
Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company
or, at the Company's request, a professional proxy solicitation firm. No
additional compensation will be paid to directors, officers or other regular
employees for such services, but any professional proxy solicitation firm used
by the Company will be paid its customary fee.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
18, 1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 18, 1997, the Company had outstanding and entitled to
vote shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes will be
counted towards a quorum, and, except with respect to Proposals 2 and 3, will
not be counted for any purpose in determining whether a matter has been
approved. With respect to Proposals 2 and 3, abstentions and broker non-votes
will have the same effect as negative votes.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 505 Coast
Boulevard South, Suite 300, La Jolla, California 92037-4641, a written notice of
revocation
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or a duly executed proxy bearing a later date, or it may be revoked by attending
the Annual Meeting and voting in person. Attendance at the Annual Meeting will
not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than December 26, 1997 in order to be included in the proxy statement
and proxy relating to such annual meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors has approved, effective upon the date of the Annual
Meeting, a reduction in the number of directors authorized by the Company's
Bylaws from seven to six.(1) There are six nominees for the six Board positions
authorized in the Company's Bylaws. Each nominee listed below is currently a
director of the Company who has previously been elected by the stockholders.
The stockholders are being asked in Proposal 2 contained in this proxy
statement to approve an amendment to the Company's Certificate of Incorporation
to provide for a classified Board of Directors. In the event Proposal 2 is
approved by the stockholders, each nominee elected by the stockholders will be
assigned to one of Class I, Class II or Class III, as set forth below. Directors
assigned to Class I shall serve until the 1998 Annual Meeting of Stockholders,
directors assigned to Class II shall serve until the 1999 Annual Meeting of
Stockholders and directors assigned to Class III shall serve until the 2000
Annual Meeting of Stockholders and, in each case, until such director's
successor is elected and has qualified, or until such director's earlier death,
resignation or removal.
In the event the stockholders do not approve Proposal 2, each director to
be elected will hold office until the next annual meeting of stockholders and
until his successor is elected and has qualified, or until such director's
earlier death, resignation or removal.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the six nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unable to serve.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Annual Meeting.
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1Dr. Francis H.C. Crick, a current director of the Company, has stated that
he does not intend to stand for reelection to the Board of Directors of the
Company at the Annual Meeting. However, Dr. Crick plans to continue his service
on the Company's Scientific Advisory Board.
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BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees, the class to which each will be assigned(1), and
certain other information about them are set forth below:
<TABLE>
<CAPTION>
NAME CLASS AGE PRINCIPAL OCCUPATION
- ------------------------------- ----- --- --------------------------------------------------
<S> <C> <C> <C>
William T. Comer, Ph.D. I 61 President and Chief Executive Officer of the
Company
Gunnar Ekdahl I 54 Chairman of the Board of Skandigen AB
Frederick B. Rentschler II 57 Chairman of the Board of Trustees of The Salk
Institute
James D. Watson, Ph.D. II 69 President of Cold Spring Harbor Laboratory
William R. Miller III 68 Chairman of the Board of Directors of the Company
Stanley T. Crooke, M.D., Ph.D. III 52 Chief Executive Officer and Chairman of the Board
of Isis Pharmaceuticals, Inc.
</TABLE>
Dr. William T. Comer has been President, Chief Executive Officer and a
director of the Company since April 1991. Prior to joining the Company, Dr.
Comer worked for Bristol-Myers Squibb Company, a pharmaceutical company
("Bristol-Myers Squibb"), for nearly 30 years in various scientific and
management positions. He served as Executive Vice President, Science &
Technology, and then President, Pharmaceutical Research & Licensing, at
Bristol-Myers Squibb from April 1989 until April 1990. Thereafter, he served as
Senior Vice President, Strategic Management -- Pharmaceuticals and Nutritionals
at Bristol-Myers Squibb until March 1991. Dr. Comer received a B.A. from
Carleton College and a Ph.D. in Organic Chemistry and Pharmacology from the
University of Iowa. Dr. Comer is currently a director of Cytel Corporation, the
San Diego Chamber Orchestra, and the University of California San Diego ("UCSD")
Cancer Center Foundation. He is also a member of the Governor's Council on
Biotechnology and the UCSD Industrial Advisory Committee for the Department of
Chemistry.
Mr. Gunnar Ekdahl has been a director of the Company since 1995. He was
appointed Chairman of the Board of Directors of Skandigen AB in 1995. Mr. Ekdahl
has extensive experience with Swedish finance and investment companies and was
President and Chief Executive Officer of Latour AB from 1985 to 1992, with
controlling holdings in large Swedish industrial companies. Mr. Ekdahl has been
active as a non-executive board member of several Swedish companies, including
Chairman of Arcona AB, G&L Beijer AB, Lofbergs Lila AB, and Philipson Bil AB.
Mr. Ekdahl received his B.A. degree from the Stockholm School of Economics.
Mr. Frederick B. Rentschler has been a director of the Company since
January 1993. Since 1990, he has been a director of several U.S. companies,
including The Salk Institute for Biological Studies ("The Salk Institute"). In
addition, during 1990, he was President and Chief Executive Officer of Northwest
Airlines. From 1986 to 1987, Mr. Rentschler held several positions at Beatrice
Company, the most recent being President and Chief Executive Officer. From 1980
to 1984, Mr. Rentschler was President and Chief Executive Officer of Hunt-Wesson
Foods, Inc. Prior to joining Hunt-Wesson Foods, Inc., Mr. Rentschler was
President and a director of Armour International from 1976 to 1977 and President
of Armour-Dial from 1977 to 1979. In addition, Mr. Rentschler is a director of
International Game Technology, Inc. and Bionutrics, Inc. Mr. Rentschler received
his B.A. degree from Vanderbilt University and his M.B.A. from Harvard Business
- ---------------
1 In the event the stockholders approve Proposal 2 contained in this proxy
statement relating to the adoption of a classified Board, each director will be
assigned to the Class opposite his name. Directors assigned to Class I shall
serve until the 1998 Annual Meeting of Stockholders, directors assigned to Class
II shall serve until the 1999 Annual Meeting of Stockholders and directors
assigned to Class III shall serve until the 2000 Annual Meeting of Stockholders
and, in each case, until such director's successor is elected and has qualified
or until such director's earlier death, resignation or removal. In the event
Proposal 2 is not approved, each nominee for director elected by the stockholder
under this Proposal 1 will hold office until the next annual meeting of
stockholders and until his successor is elected and has qualified or until such
director's earlier death, resignation or removal.
3
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School. He joined The Salk Institute Board of Trustees in 1988 and has been
Chairman of the Board of Trustees since November 1995.
Dr. James D. Watson has been a director of the Company since July 1992. Dr.
Watson was a founder of the Cold Spring Harbor Laboratory and since its
inception in 1968 served as a director until his appointment as President in
1994. Prior to founding Cold Spring Harbor Laboratory, Dr. Watson was a member
of the Department of Biology (then Molecular Biology) at Harvard University.
Between 1988 and 1992, he directed the National Center for Human Genome Research
at the National Institute of Health. In 1962, Dr. Watson, along with Drs.
Francis H.C. Crick and Maurice Wilkins, was awarded the Nobel Prize in
Physiology or Medicine for discovering the structure of deoxyribonucleic acid
("DNA"). Dr. Watson has won numerous awards in addition to the Nobel Prize and
is a member of the U.S. National Academy of Sciences, the Royal Society in
London, the Danish Academy of Arts and Sciences and the Academy of Sciences of
Russia. Dr. Watson holds a B.S. degree from the University of Chicago and a
Ph.D. from Indiana University and he has also received honorary degrees from 15
colleges and universities. He is a director of the Pall Corporation and a
director of Diagnostic Products Corporation.
Mr. William R. Miller has been a director of the Company since August 1991
and Chairman of the Board of Directors since August 1992. In January 1991, he
retired as Vice Chairman of the Board of Directors of Bristol-Myers Squibb; he
had been a director of Bristol-Myers Squibb since 1985. Mr. Miller is Vice
Chairman of the Board of Trustees of the Cold Spring Harbor Laboratory and a
past Chairman of the Board of Directors of Pharmaceutical Manufacturers
Association. Mr. Miller is Chairman of the Board of Directors of Vion
Pharmaceuticals, Inc. and a director of Isis Pharmaceuticals, Inc., St. Jude
Medical, Inc., Westvaco Corporation, Xomed Surgical Products, Inc.,
Transkaryoptic Therapies, Inc. and an Advisory Director of Chugai
Pharmaceuticals, Inc.
Dr. Stanley T. Crooke has been a director of the Company since April 1992.
He is the founder of Isis Pharmaceuticals, Inc., a biotechnology company, and
has been its Chief Executive Officer since its inception in January 1989 and
Chairman of the Board of Directors since February 1991. From 1980 until January
1989, Dr. Crooke was employed by SmithKline Beckman Corporation, a
pharmaceutical company, most recently as President of Research and Development
of SmithKline & French Laboratories. Dr. Crooke received a Ph.D. and an M.D.
degree from Baylor College of Medicine. He is Chairman of the Board of Directors
of GeneMedicine, Inc. a biotechnology company, and EPIX Medical, Inc. and is an
Adjunct Professor of Pharmacology at the Baylor College of Medicine and UCSD.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996 the Board of Directors held
five meetings. The Board of Directors has an Audit Committee and a Compensation
and Stock Option Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements, recommends to the Board the independent auditors to be retained, and
receives and considers the auditors' comments as to controls, adequacy of staff
and management performance and procedures in connection with audit and financial
controls. The Audit Committee is composed of two non-employee directors: Dr.
Crooke and Mr. Rentschler. The Audit Committee met two times during 1996.
The Compensation and Stock Option Committee makes recommendations
concerning salaries and incentive compensation, awards stock options to
employees and consultants under the Company's stock option plan and otherwise
determines compensation levels and performs such other functions regarding
compensation as the Board of Directors may delegate. The Compensation Committee
is composed of three non-employee directors: Messrs. Ekdahl and Miller and Dr.
Watson. The Compensation and Stock Option Committee met three times during 1996.
During the fiscal year ended December 31, 1996, all directors except Drs.
Crooke and Watson attended 75% or more of the aggregate meetings of the Board of
Directors, and of the committees on which they served, held during the period
for which they were a director or a committee member, respectively.
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PROPOSAL 2
TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS AND TO ELIMINATE THE
ABILITY OF STOCKHOLDERS TO REMOVE A DIRECTOR WITHOUT CAUSE
In March 1997, the Board of Directors unanimously adopted, subject to
stockholder approval, an Amended and Restated Certificate of Incorporation of
the Company (the "Restated Certificate") as set forth in Appendix A, and Amended
and Restated Bylaws of the Company (the "Restated Bylaws") as set forth in
Appendix B which include various amendments to the Company's current Certificate
of Incorporation (the "Certificate") and current Bylaws (the "Bylaws") designed
to make hostile takeovers of the Company more difficult (the "Anti-Takeover
Measures"). The Board of Directors believes the amendments to the Certificate
and Bylaws to be in the best interests of the Company and its stockholders.
Stockholders are requested in this Proposal 2 to approve Articles V.A.2 and
V.B.3 of the Restated Certificate and Sections 17 and 20 of the Restated Bylaws.
Under the Company's Certificate, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of the
Company's Common Stock is required for approval of Articles V.A.2 and V.B.3 of
the Restated Certificate. Abstentions and broker non-votes will be counted
toward the tabulation of votes cast on Proposal 2 and will have the same effect
as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
GENERAL
The Board of Directors believes that it would be advisable to adopt
measures designed to deter hostile takeover attempts. Takeover attempts that
have not been negotiated or approved by the Board of Directors can seriously
disrupt the business and management of the Company and generally present to the
stockholders the risk of terms which may be less than favorable to all of the
stockholders than would be available in a Board-approved transaction.
Board-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the Company and all of its
stockholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring entity and maximum strategic deployment of corporate assets. Since
the effect of the Anti-Takeover Measures is to make management more difficult to
remove involuntarily, the AntiTakeover Measures may force those seeking to
assume control of the Company to negotiate with management which may lead to a
more favorable price for stockholders in any transaction to assume control.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the stockholders, providing all of the stockholders
with considerable value for their shares. The overall effect of this proposal
and the related Proposal 3 may render more difficult the accomplishment of
mergers or the assumption of control by a principal stockholder because it makes
it more difficult to remove the Company's management. The effect of making
removal of management more difficult may be the continuation of management
tenure even if the removal of management is desired by more than a majority of
the stockholders and would be beneficial to stockholders.
The Board of Directors has considered the potential disadvantages and has
unanimously concluded that the potential benefits of the proposed changes
outweigh the possible disadvantages. The proposals set forth for stockholder
approval are part of a plan by the Board of Directors to ensure that the
Company, its management and the stockholders are protected to the maximum extent
possible from the negative effects of an unapproved change in control of the
Company. Management has no current intention to propose other measures designed
to discourage takeovers apart from those already adopted, discussed or proposed
in this proxy statement, although additional measures may be proposed if
warranted from time to time in the judgment of the Board of Directors.
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<PAGE> 7
CURRENT ANTI-TAKEOVER MEASURES
Currently, the Company has several provisions in its Certificate and Bylaws
and is a party to a Rights Agreement (as defined below) and certain stockholder
agreements that have potential anti-takeover effects.
No Provision for Cumulative Voting. Under Delaware law, unless a company's
certificate of incorporation specifies otherwise, stockholders may not cumulate
votes for election of directors. Cumulative voting permits the holder of each
share of stock entitled to vote in the election of directors to cast that number
of votes equal to the number of directors to be elected. The holder may allocate
all votes represented by a share to a single candidate or may allocate those
votes among as many candidates as he or she chooses. To invoke cumulative
voting, stockholders must provide the company with notice of their intention to
cumulate their votes at the meeting prior to the vote. Thus, a stockholder with
a significant minority percentage of the outstanding shares may be able to elect
one or more directors if voting is cumulative. Absent cumulative voting, a
stockholder may vote no more than one vote per share for any one candidate. The
Company's current Certificate does not provide for cumulative voting.
Advance Notice Required for Stockholder Proposals and Director
Nominations. The Company's Bylaws provide that, in the event a stockholder would
like to nominate an individual as a director or include a proposal in the
Company's proxy statement, a stockholder must provide notice not less than one
hundred twenty (120) calendar days in advance of the date specified in the
corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders. However, in the event that no
annual meeting was held in the previous year, or the date of the annual meeting
has been changed by more than thirty (30) days from the date contemplated at the
time of the previous year's proxy statement, notice by the stockholder to be
timely must be so received a reasonable time before the solicitation is made.
The requirement is designed to give the Board of Directors adequate time to
evaluate any stockholder proposal and include it in the Company's proxy
statement and would guarantee all stockholders adequate time to consider any
stockholder nominations and proposals.
Ability to Issue Preferred Stock. The Board of Directors has authority
under the Company's Certificate to issue up to 5,000,000 shares of Preferred
Stock with the voting and rights, preferences and privileges designated solely
by the Board of Directors. The Board of Directors may issue such shares to any
third party without seeking stockholder approval for the issuance. The existence
of this authorized but unissued class of Preferred Stock may make it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company, thereby delaying, deferring or preventing a change in
control of the Company. Furthermore, such Preferred Stock may have other rights,
including economic rights senior to the Common Stock and, as a result, the
issuance thereof could have a material adverse effect on the market value of the
Common Stock. In March 1997, the Company designated 150,000 shares of Preferred
Stock as Series A Junior Participating Preferred Stock and issued rights to
purchase shares of such Preferred Stock under certain circumstances to holders
of Common Stock. See "Preferred Share Purchase Rights Plan." The Company has no
present plans to designate or issue any other shares of Preferred Stock.
Actions by Written Consent of Stockholders Not Permitted. Under Delaware
law, unless a company's certificate of incorporation specifies otherwise,
stockholders may execute an action by written consent in lieu of a stockholder
meeting. The Company's current Certificate provides that actions by written
consent of the stockholders are prohibited.
Elimination of the ability to act by written consent may lengthen the
amount of time required to take stockholder actions since actions by written
consent are generally not subject to the minimum notice requirement of a
stockholders' meeting. The elimination of the ability to act by written consent
may deter hostile takeover attempts. Without the ability to act by written
consent, a holder or group of holders controlling a majority in interest of the
Company's capital stock will not be able to amend the Company's Certificate or
remove directors pursuant to a written consent. Any such holder or group of
holders would have to wait until the annual meeting of stockholders to take any
such action.
Preferred Share Purchase Rights Plan. In March 1997, the Board of Directors
authorized and adopted a Preferred Share Purchase Rights Plan (the "Rights
Plan"). Under the Rights Plan, the Company issued
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<PAGE> 8
rights (the "Rights") to the holders of Common Stock of the Company to purchase
one one-hundredth of a share of the Company's Series A Junior Participating
Preferred Stock for a purchase price equal to $60.00 per Right. The Rights
detach from the Common Stock and become exercisable (by persons other than the
Acquiror) following the announcement of an acquisition by a person or group (the
"Acquiror") of 15% of the Company's outstanding Common Stock or ten business
days (or later if delayed by the Board of Directors) after the announcement of
an intention on the part of the Acquiror to tender for at least 15% of the
Company's outstanding Common Stock. When the Rights Plan was adopted, certain
stockholders of the Company either beneficially owned more than 15% of the
outstanding Common Stock of the Company or had contractual obligations to
purchase additional shares of Common Stock of the Company that could result in
their ownership of more than 15% of the Company's Common Stock. In order to
prevent such stockholders from triggering the detachment and exercisability of
the Rights, the Rights Plan provides that such stockholders would not trigger
the detachment and exercisability of the Rights so long as such stockholders do
not acquire additional shares of the Company's Common Stock without the prior
consent of the Company, and no person will trigger the detachment and
exercisability of the Rights as the result of exceeding the 15% threshold
through the purchase of shares of Common Stock directly from the Company.
Pursuant to the Rights Plan, the Board of Directors has the ability to redeem
the Rights at a price of $.001 per Right at any time prior to a person exceeding
the 15% threshold.
The principal purpose for the Rights Plan is to improve the bargaining
power of the Board of Directors in seeking to protect and maximize stockholder
value when an unsolicited takeover attempt occurs. Although adoption of the
Rights Plan will not prevent a takeover of the Company, it may discourage
abusive and coercive takeover tactics that can result in a rapid, forced sale of
the Company at a lower price than might otherwise be obtainable. On the other
hand, the existence of a Rights Plan may confront the Board of Directors with
difficult decisions with respect to redemption or amendment of the outstanding
Rights. Once a hostile bidder crosses a certain threshold, the Rights become
nonredeemable and the Board of Directors' ability to enter into a negotiated
acquisition would be impaired.
Management Change of Control Plan. The Company's Management Change of
Control Plan (as amended, the "Change of Control Plan") generally provides for
the payment of benefits to its participants upon the occurrence of certain
defined change of control events ("Change of Control"). Among the benefits
provided are: (i) cash bonuses of up to 25% of annual base salary, depending on
the valuation of the Company at the time of the Change of Control; (ii)
acceleration of vesting of certain stock options granted to each participant;
(iii) severance payments of up to two times annual base salary, depending on the
participant's position with the Company at the time of a Change of Control; and
(iv) the payment of health insurance premiums and outplacement expenses incurred
upon a Change of Control.
Under the Change of Control Plan, Dr. Comer received an option to purchase
94,000 shares of Common Stock and each of Messrs. Dunn and Reed and Drs.
Harpold, Lloyd, and McDonald received an option to purchase 58,750 shares of
Common Stock at an exercise price of $.85 per share. Such options vested as to
25% of the shares subject to the option on May 9, 1996, with the remaining 75%
of the shares subject to the option vesting in three equal installments on each
anniversary thereafter. Such vesting will be accelerated in whole or in part
upon a change of control, depending on the valuation of the Company at the time
of such change of control.
The primary purpose of the Change of Control Plan is to provide the
participants with certain defined levels of compensation in the event of a
Change of Control. The Change of Control Plan may also serve as a deterrent to
hostile takeovers in that a potential acquiror may effect a Change of Control
that would trigger the rights to which the participants are entitled under the
Change of Control Plan.
Rights of First Refusal. The Company is a party to certain stockholder
agreements (the "Stockholder Agreements") that provide the Company with a right
of first refusal to purchase shares of the Company's Common Stock held by
certain major stockholders (the "Major Stockholders") in the event such
stockholders desire to sell or transfer their shares. Pursuant to such rights,
the Company may purchase any shares proposed to be sold or transferred by the
Major Stockholders at a price and on terms no less favorable than those proposed
by a third party. As of January 31, 1997, the Company had such rights of first
refusal with
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<PAGE> 9
respect to 3,827,406, or approximately 41.7% of the total outstanding shares of
Common Stock of the Company on such date.
The right of first refusal provides the Company with the ability to
consider and, if appropriate, intervene in any proposed sale by the Major
Stockholders of shares of Common Stock of the Company held by them to a
potential hostile acquiror of such shares.
The provisions being voted upon in this Proposal 2 are described below:
Classified Board. Currently, each elected director holds office until the
next annual meeting and until his or her successor is duly elected and
qualified.
Article V.A.2 of the Restated Certificate provides for a classified Board
of Directors with staggered three-year terms. Directors are to be divided into
three classes designated as Class I, Class II and Class III, respectively, by
resolution of the Board of Directors. The Board of Directors will have authority
to reallocate directors among Classes from time to time, and to appoint new
directors to any Class, so long as the total number of directors in each Class
remains equal as nearly as practicable. The term of office of Class I directors
will expire on the first annual meeting of stockholders following adoption of
the Restated Certificate while the terms of Class II and Class III directors
expire on the second and third annual meetings, respectively, following adoption
of the Restated Certificate. If adopted, the provision would be applicable to
every subsequent election of directors and have the effect of requiring at least
two annual meetings to gain control of the Board of Directors versus only one
under the current system.
No Removal Without Cause. Under Delaware law, unless otherwise set forth in
a company's certificate of incorporation, a director on a non-classified Board
of Directors, (i.e., a Board of Directors such as the Company's which is not
split into multiple classes) can be removed from office during his term by
stockholders with or without cause by the affirmative vote of a majority of the
then-outstanding shares of voting stock entitled to vote at an election of
directors (the "Voting Stock"). Under the Company's current Certificate and
Bylaws, a director can be removed with cause by the stockholders with the
affirmative vote of a majority of the outstanding Voting Stock, and without
cause by the stockholders with the affirmative vote of sixty-six and two-thirds
percent (66 2/3%) of the outstanding Voting Stock. Article V.A.3 of the Restated
Certificate and Section 20 of the Restated Bylaws provides that the Company's
directors cannot be removed without cause and can only be removed with cause by
the affirmative vote of the holders of a majority of the outstanding Voting
Stock.
The term "cause" with respect to the removal of directors is not defined in
the Delaware General Corporation Law and its meaning has not been precisely
delineated by the Delaware courts.
ADVANTAGES AND DISADVANTAGES
The provisions described in this Proposal 2 were adopted by the Board of
Directors because it believes that, taken together, such provisions enable the
Board of Directors to preserve control of the process for an orderly sale of the
Company. The Board of Directors believes that takeover attempts that have not
been negotiated or approved by the Board of Directors could seriously disrupt
the business and management of the Company and result in terms which may be less
favorable to the stockholders as a group than would be available in a
Board-approved transaction. Board-approved transactions may be carefully planned
and undertaken at an opportune time in order to obtain maximum value for the
Company and its stockholders.
The provisions set forth in Proposal 2 also help to ensure the continuity
of the Board of Directors and management. Although the Company has not
experienced any problems with continuity on the Board of Directors in the past,
the Board of Directors feels that it is prudent to provide for continuity in the
event of a major change in ownership of the Company.
These provisions were also proposed to help prevent "creeping acquisitions"
in which a person or group seeks to acquire a controlling position in the
Company without paying a control premium to the stockholders or acquires a block
of stock large enough to force a proxy contest or tries to force the Company to
repurchase
8
<PAGE> 10
the block of stock at a premium. The Board of Directors feels that the
provisions set forth in this Proposal 2 will force potential acquirors to
carefully assess their goals prior to buying a block of stock.
If the stockholders approve Proposal 2, the members of the Board of
Directors and management will be somewhat insulated from a sudden change in
control caused by a hostile acquiror. This will permit them the necessary
latitude to implement long-term strategic plans for the benefit of the Company's
stockholders. Furthermore, members of the Board of Directors will serve
three-year terms rather than one-year terms and will be able to be removed from
office only with cause and with the affirmative vote of the holders of at least
a majority of the voting power of all the Voting Stock. The Board of Directors
believes that the continuity caused by these measures will benefit the Company
and its stockholders.
Conversely, the provisions, particularly the classified Board of Directors
structure, may be disadvantageous to stockholders because they may limit their
flexibility to determine the composition of the Board of Directors or to make
other changes even in circumstances where a majority of the stockholders may be
dissatisfied with the performance of the incumbent directors or otherwise desire
to make changes. The provisions may also be disadvantageous because they could
discourage future attempts to acquire control of the Company even though a
majority of the stockholders might believe it is in their best interests or in
which they might receive a substantial premium. The provisions may enable the
Board of Directors to resist change and otherwise thwart the desires of a
majority of the stockholders. Under Delaware law, however, the Board of
Directors has a fiduciary duty to act in the best interests of the stockholders.
This duty offsets to a great extent the potential disadvantages to stockholders
of any of the measures proposed under Proposal 2.
9
<PAGE> 11
PROPOSAL 3
TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
TO ELIMINATE THE ABILITY OF THE STOCKHOLDERS TO CALL SPECIAL
STOCKHOLDERS' MEETINGS
In March 1997, the Board of Directors unanimously adopted, subject to
stockholder approval, the Restated Certificate as set forth in Appendix A and
the Restated Bylaws as set forth in Appendix B which include certain amendments
to the Certificate and Bylaws that are designed to make hostile takeovers of the
Company more difficult. The Board of Directors believes the changes to be in the
best interests of the Company and its stockholders.
Stockholders are requested in this Proposal 3 to approve Article V.B.4 of
the Restated Certificate and Section 6 of the Restated Bylaws. Under the
Company's Certificate, the affirmative vote of the holders of at least sixty-six
and two-thirds percent (66 2/3%) of the outstanding shares of the Company's
Common Stock is required for approval of Article V.B.4 of the Restated
Certificate. Abstentions and broker non-votes will be counted toward the
tabulation of votes cast on Proposal 3 and will have the same effect as negative
votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
GENERAL
Under Delaware law and the Company's current Certificate and Bylaws, a
special meeting of stockholders may be called by the Chairman of the Board of
Directors, the President, the Board of Directors or, upon written request, any
stockholder or stockholders holding at least 10% of the voting power of all
stockholders. The Restated Certificate provides that such a meeting may be
called only by the Board of Directors, the Chairman of the Board of Directors or
the President.
Elimination of the ability of stockholders holding 10% of the voting power
of all stockholders to call a special meeting may lengthen the amount of time
required to take stockholder actions since the Company and the Board of
Directors are only required to hold one meeting of stockholders per year. The
elimination of the power of stockholders holding 10% of the voting power to call
a special meeting may deter hostile takeover attempts. Without the ability to
call a special meeting, a holder or group of holders controlling a majority in
interest of the Company's capital stock will not be able to amend the Company's
Restated Certificate or remove directors until the annual meeting of
stockholders is held.
ADVANTAGES AND DISADVANTAGES
The Board of Directors has adopted the provision described in Proposal 3
because it believes that this provision allows the Board of Directors to
preserve control of the process for the orderly sale of the Company. The Board
of Directors believes that takeover attempts that have not been negotiated or
approved by the Board of Directors could seriously disrupt the business and
management of the Company and result in terms which may be less favorable to the
stockholders as a group than would be available in a Board-approved transaction.
Board-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the Company and its
stockholders. In addition, the members of the Board of Directors and management
will have the advantage of being insulated from a sudden change in control
because they cannot be removed until an annual meeting or a meeting called by
the Board of Directors, the Chairman of the Board of Directors or the President.
Conversely, the provisions may be disadvantageous to stockholders because
they may limit their flexibility to determine the composition of the Board of
Directors or to make other changes even in circumstances where a majority of the
stockholders may be dissatisfied with the performance of the incumbent directors
or otherwise desire to make changes. The provisions may also be disadvantageous
because they could discourage future attempts to acquire control of the Company
even though a majority of the stockholders may believe that such an acquisition
is in their best interests.
10
<PAGE> 12
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Representatives of
Price Waterhouse LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Price Waterhouse LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board of Directors is submitting the selection of Price
Waterhouse LLP to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the selection, the Audit
Committee and the Board of Directors will reconsider whether or not to retain
that firm. Even if the selection is ratified, the Audit Committee and the Board
of Directors in their discretion may direct the appointment of different
independent auditors at any time during the year if they determine that such a
change would be in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be required
to ratify the selection of Price Waterhouse LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
11
<PAGE> 13
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of January 31, 1997 (except as noted below) by:
(i) each director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all directors and executive officers of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-----------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
--------------------------------------------------------- ---------- ----------
<S> <C> <C>
The Salk Institute for Biological Studies
10010 North Torrey Pines Road
La Jolla, CA 92037 1,983,461 21.6%
Novartis AG
CH-4002 Basel
Switzerland 1,035,324 11.3%
Skandigen AB
Norrlandsgatan 15
111 43 Stockholm, Sweden 986,696 10.8%
Bristol-Myers Squibb Company
345 Park Avenue
New York, NY 10154 658,000 7.2%
Wellington Management Company LLP (2)
75 State Street
Boston, MA 02109 513,800 5.6%
State of Wisconsin Investment Board (3)
P.O. Box 7842
Madison, WI 53707 482,300 5.3%
William T. Comer, Ph.D. (4) 299,273 3.2%
Michael M. Harpold, Ph.D. (5) 113,538 1.2%
William R. Miller (6) 55,375 *
G. Kenneth Lloyd, Ph.D. (7) 52,903 *
Ian A. McDonald, Ph.D. (8) 46,414 *
Thomas A. Reed (9) 45,074 *
David E. McClure (10) -- --
Stanley T. Crooke, M.D., Ph.D. (11) 36,750 *
James D. Watson, Ph.D. (12) 36,750 *
Michael J. Dunn (13) 35,475 *
Francis H. C. Crick, Ph.D. (14) 18,250 *
Frederick B. Rentschler (15) 18,250 *
Gunnar Ekdahl (16) 12,500 *
All executive officers and directors as a group (13
persons)(17) 770,552 8.1%
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes to this
table and subject to community property laws where applicable, the Company
believes that each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned. Applicable percentages are based on 9,178,077 shares outstanding on
January 31, 1997, adjusted as required by the rules promulgated by the
Securities and Exchange Commission (the "SEC").
12
<PAGE> 14
(2) Wellington Management Company LLP ("WMC") is an investment adviser
registered with the SEC under the Investment Advisers Act of 1940, as
amended. WMC may be deemed to have beneficial ownership of 513,800 shares
of Common Stock of the Company, that are owned by numerous investment
advisory clients of WMC, none of which is known to have ownership of more
than 5% of the total outstanding shares of Common Stock of the Company. As
of December 31, 1996, WMC had shared voting power over 225,200 shares and
shared dispositive power over 513,800 shares. The foregoing information is
derived from information provided to the Company by WMC.
(3) Information provided is to the best of the Company's knowledge.
(4) Includes 40,773 shares subject to options exercisable within 60 days of
January 31, 1997.
(5) Includes 31,728 shares subject to options exercisable within 60 days of
January 31, 1997.
(6) Includes 2,500 shares subject to options exercisable within 60 days of
January 31, 1997.
(7) Includes 51,124 shares subject to options exercisable within 60 days of
January 31, 1997.
(8) Includes 46,414 shares subject to options exercisable within 60 days of
January 31, 1997.
(9) Includes 5,288 shares subject to options exercisable within 60 days of
January 31, 1997.
(10) Dr. David E. McClure joined the Company in September, 1996 as Vice
President, Clinical Development and Regulatory. Upon joining the Company,
Dr. McClure received an option to purchase upon to 33,500 shares of Common
Stock of the Company (no portion of which will be exercisable within 60
days of January 31, 1997).
(11) Includes 36,750 shares subject to options exercisable within 60 days of
January 31, 1997.
(12) Includes 7,375 shares subject to options exercisable within 60 days of
January 31, 1997.
(13) Includes 19,565 shares subject to options exercisable within 60 days of
January 31, 1997.
(14) Includes 18,250 shares subject to options exercisable within 60 days of
January 31, 1997. Dr. Crick will not stand for reelection to the Board of
Directors at the Annual Meeting.
(15) Includes 18,250 shares subject to options exercisable within 60 days of
January 31, 1997. Does not include 1,983,461 shares beneficially owned by
The Salk Institute. Mr. Rentschler is currently the Chairman of the Board
of Trustees for The Salk Institute for Biological Studies.
(16) Includes 6,500 shares subject to options exercisable within 60 days of
January 31, 1997. Does not include 986,696 shares beneficially owned by
Skandigen AG, of which Mr. Ekdahl is the Chairman of the Board.
(17) Includes 284,517 shares subject to options exercisable within 60 days of
January 31, 1997.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms 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, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
13
<PAGE> 15
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Prior to May 9, 1996 (the effective date of the Company's initial public
offering), each non-employee director was entitled to receive an annual retainer
of $12,000 and an additional amount of $1,000 for each meeting of the Board of
Directors such non-employee director attended. Currently, each non-employee
director of the Company receives an annual retainer of $15,000, while the
Chairman of the Board of Directors receives $25,000. The members of the Board of
Directors are also eligible for reimbursement for their expenses incurred in
connection with attendance at Board meetings in accordance with Company policy.
Furthermore, during fiscal year 1996, certain non-employee directors also
received compensation for their services as members of the Company's Scientific
Advisory Board.
In the fiscal year ended December 31, 1996, the total compensation paid to
non-employee directors for service on the Board of Directors and/or committees
of the Board of Directors was as follows: Dr. Crick -- $7,500; Dr.
Crooke -- $12,500; Mr. Ekdahl -- $7,500; Mr. Miller -- $21,500; Mr.
Rentschler -- $7,500; Dr. Watson -- $16,500. In addition, each of Drs. Crick and
Watson received $10,000 for their service on the Company's Scientific Advisory
Board.
In addition to cash compensation, non-employee directors are eligible to
receive annual grants of options to purchase Common Stock of the Company. Each
person who for the first time becomes a non-employee director shall be granted
upon the date of his or her initial election to the Board of Directors, an
option to purchase 10,000 shares of Common Stock of the Company. In addition, on
the date of each annual meeting of stockholders, each non-employee director who
is reelected at such meeting shall be granted an option to purchase 3,000 shares
of Common Stock of the Company; provided, however, that a non-employee director
who is then serving as the Chairman of the Board shall be granted an option to
purchase 5,000 shares of Common Stock of the Company.
During fiscal year 1996, the Company granted an option to purchase 3,000
shares of Common Stock of the Company to each non-employee director and an
option to purchase 5,000 shares of Common Stock of the Company to the Chairman
of the Board of Directors an exercise price per share of $9.75. The fair market
value of the Company's Common Stock on the date of grant was $9.75 per share
(based upon the closing sales price reported in the National Market System on
the date of grant). As of January 31, 1997, no options granted to the
non-employee directors had been exercised. In addition, during fiscal year 1996,
each of Messrs. Gunnar and Rentschler and Dr. Crick received an option to
purchase 10,000 shares of Common Stock of the Company, which reflected the
option each was entitled to receive upon his initial election to the Board of
Directors.
14
<PAGE> 16
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended December 31, 1995 and
1996, compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and its six other most highly compensated executive officers
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS(2)
------------------------------- -------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#)(3) ($)(4)
- ---------------------------------- ------ ------- ------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
William T. Comer, Ph.D. .......... 1996 249,000 28,800 -- 15,040 4,491
Chief Executive Officer and 1995 237,200 18,000 -- 12,925 3,608
President
Michael M. Harpold, Ph.D. ........ 1996 182,500 16,000 -- 8,225 5,253
Vice President, 1995 174,875 9,650 -- 7,050 5,530
Research
G. Kenneth Lloyd, Ph.D. .......... 1996 178,000 15,200 10,000(5) 8,225 5,248
Vice President, 1995 170,250 9,000 10,000(5) 6,815 5,505
Pharmaceuticals -- Biology
Ian A. McDonald, Ph.D. ........... 1996 153,250 13,300 10,000(5) 7,050 5,144
Vice President, 1995 146,000 9,150 10,000(5) 5,875 5,139
Pharmaceuticals -- Chemistry
Michael J. Dunn................... 1996 113,000 7,500 -- 4,700 3,865
Vice President, 1995 86,100 4,700 -- 15,275(6) 3,027
Business Development
Thomas A. Reed.................... 1996 123,500 9,700 -- 4,700 4,224
Vice President, 1995 98,000 5,200 -- 15,745(6) 3,447
Finance/Administration and
Chief Financial Officer
David E. McClure, M.D., 1996 51,667 10,000 -- 33,500 --
Ph.D.(7)........................
Vice President, 1995 -- -- -- -- --
Clinical Development and
Regulatory
</TABLE>
- ---------------
(1) As permitted by rules promulgated by the SEC, no amounts are shown with
respect to certain perquisites where such amounts do not exceed the lesser
of 10% of the sum of the amount in the salary and bonus columns or $50,000.
(2) None of the Named Executive Officers held restricted stock awards as of
January 31, 1997.
(3) Unless otherwise noted, all options were granted under the Company's 1996
Plan or 1992 Plan.
(4) All amounts include the value of excess group term life insurance premiums
and matching 401(k) Plan contributions paid on behalf of the Named Executive
Officers.
(5) Includes forgiveness of $10,000 of principal amount owed to the Company for
certain indebtedness.
(6) Includes options to purchase up to 11,750 shares of the Company's Common
Stock granted pursuant to the Company's Management Change of Control Plan.
(7) Dr. McClure joined the Company in September, 1996. Salary amount represents
the total amount of base salary actually paid to Dr. McClure in 1996. Dr.
McClure's annual base salary for 1996 was $155,000. Bonus amount of $10,000
represents Dr. McClure's sign-on bonus. Upon joining the Company, Dr.
McClure was granted an option to purchase 33,500 shares of Common Stock of
the Company at an exercise price of $6.63 per share. The option vests and
becomes exercisable in four equal annual installments commencing on
September 1, 1997.
15
<PAGE> 17
STOCK OPTION GRANTS AND EXERCISES
The Company currently grants options to its executive officers under its
1996 Equity Incentive Plan (the "1996 Plan"). The following tables show, for the
fiscal year ended December 31, 1996, certain information regarding options
granted to, exercised by, and held at year end by, the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
--------------------------------------------------------------- AT
% OF ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR MARKET FOR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE VALUE ON EXPIRATION ------------------
NAME (#)(1) YEAR(2) ($/SH)(3) GRANT DATE DATE 5%($) 10%($)
- -------------------------- ---------- ---------- ----------- ---------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
William T. Comer, Ph.D. 15,040 5.2% $1.91 $ 1.91 2/21/01 $7,937 $17,538
Michael M. Harpold, Ph.D. 8,225 2.9% 1.91 1.91 2/21/01 4,340 9,591
G. Kenneth Lloyd, Ph.D. 8,225 2.9% 1.91 1.91 2/21/01 4,340 9,591
Ian A. McDonald, Ph.D 7,050 2.5% 1.91 1.91 2/21/01 3,720 8,221
Michael J. Dunn 4,700 1.6% 1.91 1.91 2/21/01 2,480 5,481
Thomas A. Reed 4,700 1.6% 1.91 1.91 2/21/01 2,480 5,481
</TABLE>
- ---------------
(1) Options were granted under the Company's 1992 Plan prior to the Company's
initial public offering of Common Stock in May 1996. The options vest at an
annual rate of 25% over a period of four years.
(2) Based on options to purchase 286,757 shares of the Company's Common Stock
granted to employees, including Named Executive Officers, under the 1996
Plan and the Company's 1992 Plan during fiscal year 1996.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (5 or 10 years). It is calculated assuming that the
stock price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option and that the option is
exercised and sold on the last day of its term for the appreciated stock
price. These amounts represent certain assumed rates of appreciation only,
in accordance with the rules of the SEC, and do not reflect the Company's
estimate or projection of future stock price performance. Actual gains, if
any, are dependent on the actual future performance of the Company's Common
Stock and no gain to the optionee is possible unless the stock price
increases over the option term, which will benefit all stockholders.
16
<PAGE> 18
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1996 DECEMBER 31, 1996
ACQUIRED ON VALUE (#)(2) ($)(3)
EXERCISE REALIZED ------------------------------ -------------------------
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------- ----------- -------- ------------------------------ -------------------------
<S> <C> <C> <C> <C>
William T. Comer, Ph.D. .... 258,500 0 31,432/99,933 $203,089/$638,801
Michael M. Harpold,
Ph.D. .................... 138,650 808,400 26,439/60,511 133,278/388,011
G. Kenneth Lloyd, Ph.D. .... 1,636 8,425 45,894/60,335 291,581/386,947
Ian A. McDonald, Ph.D. ..... 0 0 42,007/57,868 267,578/372,708
Michael J. Dunn............. 24,910 167,555 16,863/52,697 110,511/342,769
Thomas A. Reed.............. 16,098 79,315 2,409/53,168 14,222/345,589
David E. McClure, Ph.D. .... 0 0 0/33,500 0/29,145
</TABLE>
- ---------------
(1) Calculation of value realized is based on the fair market value of the
Company's Common Stock on the date of exercise minus the exercise price.
Includes (i) the value of shares acquired upon the exercise of options prior
to the Company's initial public offering of Common Stock in May 1996,
whereby the fair market value of the Company's shares was determined solely
by the Board of Directors on such date, and (ii) the value of shares
acquired upon exercise of options after the Company's initial public
offering whereby the fair market value on the date of exercise was equal to
the closing sales price of the Company's Common Stock as reported on the
Nasdaq SmallCap Market. Does not reflect any losses that may have been
incurred as a result of exercises of "out-of-the-money" options.
(2) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with an exercise price below the fair market value of
the Company's Common Stock.
(3) Calculation based on the fair market value of the Company's Common Stock at
December 31, 1996 ($7.50), minus the exercise price.
CHANGE IN CONTROL ARRANGEMENTS
The Change of Control Plan is applicable to William T. Comer, Michael J.
Dunn, Michael M. Harpold, G. Kenneth Lloyd, Ian A. McDonald and Thomas A. Reed.
The Change of Control Plan generally provides for the payment of benefits to its
participants upon the occurrence of certain defined change of control events.
Among the benefits provided are: (i) cash bonuses of up to 25% of annual base
salary, depending on the valuation of the Company at the time of the change of
control; (ii) acceleration of vesting of certain stock options granted to each
participant; (iii) severance payments of up to two times annual base salary,
depending on the participant's position with the Company at the time of a change
of control; and (iv) the payment of health insurance premiums and outplacement
expenses incurred upon a change of control.
Under the Change of Control Plan, a "change of control" of the Company is
deemed to have occurred upon the consummation of a merger or consolidation in
which the Company is not the surviving entity (other than a transaction the
principal purpose of which is to change the jurisdiction of the Company's
incorporation), the sale, transfer or other disposition of all or substantially
all of the assets of the Company or a reverse merger in which the Company is the
surviving entity, but in which 50% or more of the Company's outstanding voting
stock is transferred to holders different from those who held such stock
immediately prior to such merger.
17
<PAGE> 19
EMPLOYEE BENEFIT PLANS
1996 EQUITY INCENTIVE PLAN
In February 1996, the Board of Directors adopted the Company's 1996 Equity
Incentive Plan (the "1996 Plan") under which 1,513,141 shares of Common Stock
are reserved for issuance pursuant to the exercise of stock awards granted to
employees, directors and consultants. The 1996 Plan was adopted by the Board to
replace the Company's 1981 Employee Stock Option Plan (the "1981 Plan") and its
1992 Stock Option and Restricted Stock Plan (the "1992 Plan," and, together with
the 1981 Plan, the "Prior Plans"). The 1981 Plan terminated by its terms in
1991; provided, however, that options outstanding under the 1981 Plan will be
exercisable according to their terms. The 1992 Plan was terminated upon the
closing of the Company's initial public offering and no further options were to
be issued thereunder; provided, however, that options outstanding under the 1992
Plan would be exercisable according to their terms. The 1996 Plan will terminate
in February 2006, unless sooner terminated by the Board.
The 1996 Plan provides a means by which selected officers and employees of
and consultants to the Company and its affiliates could be given an opportunity
to receive stock in the Company, to assist in retaining the services of
employees holding key positions, to secure and retain the services of persons
capable of filling such positions and to provide incentives for such persons to
exert maximum efforts for the success of the Company. As of January 31, 1997,
all of the Company's 110 employees were eligible to participate in the 1996
plan.
The 1996 Plan permits the granting of options intended to qualify as
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986 (the "Code") to employees (including
officers and employee directors) and options that do not so qualify
("Nonstatutory Options," and, together with Incentive Options, the "Options") to
employees (including officers and employee directors) and consultants (including
non-employee directors). In addition, the 1996 Plan permits the granting of
stock appreciation rights ("SARs") appurtenant to or independently of Options,
as well as stock bonuses and rights to purchase restricted stock (Options, SARs,
stock bonuses and rights to purchase restricted stock are hereinafter referred
to as "Stock Awards"). No person shall be eligible to be granted Options and
SARs covering more than 500,000 shares of Common Stock in any 12-month period.
As of January 31, 1997, the Company had granted Options to purchase up to
161,525 shares of Common Stock under the 1996 Plan. No other Stock Awards have
been granted or awarded under the 1996 Plan.
EMPLOYEE STOCK PURCHASE PLAN
In February 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Employee Stock Purchase Plan (the "Purchase Plan").
The purpose of the Purchase Plan is to assist the Company in retaining the
services of its employees, to secure and retain the services of new employees
and to provide incentives for such persons to exert maximum efforts for the
success of the Company. The Purchase Plan provides a means by which employees of
the Company and its affiliates may purchase Common Stock of the Company at a
discount through accumulated payroll deductions. The rights to purchase Common
Stock granted under the Purchase Plan are intended to qualify as options issued
under an "employee stock purchase plan" as that term is defined in Section
423(b) of the Code. The maximum number of shares of Common Stock that may be
issued under the Purchase Plan is 500,000. As of January 31, 1997, all of the
Company's 110 employees were eligible to participate in the Purchase Plan.
Under the Purchase Plan, the Board may provide for the grant of rights to
purchase Common Stock to eligible employees (an "Offering") on a date or dates
to be selected by the Board of Directors. The first Offering under the Purchase
Plan began May 9, 1996, the effective date of the Company's initial public
offering, and extends until April 30, 1998. Subsequent Offerings will commence
on May 1 every year, beginning with calendar year 1998 and shall end on the day
prior to the first anniversary of the date the Offering commences.
18
<PAGE> 20
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In February 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Directors' Plan. The purpose of the Directors' Plan
is to attract and retain the services of persons capable of serving as
non-employee directors on the Board of Directors and to provide incentives for
such persons to exert maximum efforts to promote the success of the Company. The
Directors' Plan provides for the automatic grant of nonstatutory stock options
to purchase shares of Common Stock to non-employee directors of the Company. The
maximum number of shares of Common Stock that may be issued pursuant to options
granted under the Directors' Plan is 235,000. Option grants under the Directors'
Plan are non-discretionary.
Under the Directors' Plan, each person who for the first time becomes a
non-employee director shall be granted upon the date of his or her initial
election to the Board of Directors, an option to purchase 10,000 shares of
Common Stock of the Company. In addition, on the date of each annual meeting of
stockholders, each non-employee director who is reelected at such meeting shall
be granted an option to purchase 3,000 shares of Common Stock of the Company;
provided, however, that a non-employee director who is then serving as the
Chairman of the Board shall be granted an option to purchase 5,000 shares of
Common Stock of the Company. As of January 31, 1997, options to purchase 20,000
shares had been granted under the Directors' Plan. Options granted under the
Directors' Plan are not intended to qualify as Incentive Options.
401(K) PLAN
The Company adopted a tax-qualified employee savings and retirement plan
under Section 401(k) of the Code (the "401(k) Plan") covering all of the
Company's employees. Pursuant to the 401(k) Plan, employees may elect to reduce
their current compensation by up to 9% of their salaries, but not in excess of
the statutory prescribed annual limit ($9,500 in 1996) and have the amount of
such reduction contributed to the 401(k) Plan. The Company currently matches 50%
of employee contributions up to 6% of an employee's salary, limited to the
maximum contribution allowable for income tax purposes. Employer contributions
vest proportionally over five years of service. Contributions to the 401(k) Plan
made by employees or by the Company, and income earned on such contributions
made by the Company, if any, will be deductible by the Company when made. The
401(k) Plan may be amended or discontinued at any time by the Company.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(1)
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee (the "Committee") of the Board of
Directors. The Committee is appointed by the Board of Directors and is comprised
of three non-employee directors. The non-employee directors that served on the
Committee during fiscal year 1996 were Messrs. Miller and Ekdahl and Dr. Watson.
The Committee is responsible for establishing and maintaining the Company's
policies governing employee compensation and administering the Company's
employee benefit plans. More specifically, the Committee establishes
compensation packages, bonus programs and employee benefit plans. In addition,
the Committee reviews proposals made by management with respect to the adoption
of new plans or modification to existing plans, compensation packages involving
amounts over $100,000 per year and modifications to the bonus programs.
COMPENSATION PHILOSOPHY
The Company's executive compensation philosophy strongly links management
pay with both the individual's and the Company's annual and long-term
performance. The Company's current compensation
- ---------------
1The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any filing
of the Company under the 1933 Act or 1934 Act whether made before or after the
date hereof and irrespective of any general incorporation language contained in
such filing.
19
<PAGE> 21
programs are designed to attract, motivate, and retain senior management by
providing compensation packages that are competitive with local and national
biotech companies. The Company engages outside consultants to advise it with
respect to its compensation programs and consults various industry compensation
surveys including the Biotechnology Employee Development Coalition and Radford
National Salary and Benefits surveys.(1)
During the first quarter of each year, the Company's management proposes to
the Committee specific Company-wide objectives to be used as benchmark
performance indicators for that year. The Committee uses such objectives to
evaluate the Company's overall performance for the year, and subjectively
assesses each individual's contribution to such performance. Corporate
objectives for 1996 included: (i) completing an initial public offering of the
Company's capital stock; (ii) securing additional research support by renewing
certain important collaboration agreements; (iii) making certain regulatory
filings with respect to certain of the Company's compounds; and (iv) engaging
additional corporate partners to further research and develop certain of the
Company's compounds.
COMPONENTS OF EXECUTIVE COMPENSATION
The components of the Company's executive compensation packages and the
objective criteria on which they are based are as follows:
Base Salary. With respect to determining the base salary of executive
officers, the Committee considers a variety of factors including the executive's
prior relevant experience, the level of responsibility, the individual's
performance, and the salaries of similar positions in the Company compared with
the salaries set forth in the local Biotechnology Employee Development Coalition
and Radford National Salary and Benefits surveys. Based on the foregoing factors
and the data generated in the surveys, the Committee then sets target salary
levels applicable to each executive officer. For fiscal 1996, the Committee set
established target salaries for each executive officer at levels within the
range of salary levels reflected in the surveys. The Committee made its target
salary determinations subjectively after considering the competitive nature of
the biotechnology industry and the Company's need to attract and retain talented
executive officers.
The Committee believes that its process for determining and adjusting the
base salary of executive officers is consistent and equitable with sound
personnel practices and the Company's general compensation philosophy. Annual
adjustments in base salaries are determined consistent with the foregoing and
typically are made at the end of the first quarter.
Annual Cash Bonuses. Annual cash bonus awards are an integral component of
an executive's overall compensation package and are intended to maintain
competitive compensation levels with other leading biotechnology companies as
well as to reinforce team building and provide a merit-based means of earning
additional compensation. The amount of each executive's cash bonus is determined
each year subjectively by the Committee based upon the factors outlined above
for base salary with the goal of establishing combined base salary and bonus
within the range of salary levels determined using the surveys. Cash bonuses are
also awarded if certain minimum corporate earning thresholds are met, even if
certain other objectives are not met. During the fiscal year 1996, cash bonuses
were paid to all executive officers of the Company.
Equity Incentive Awards. Generally, the Company grants equity incentive
awards in the form of stock options to executive officers concurrent with their
joining the Company. The amount of such grants are intended to reflect a new
hires level of experience and position for which such person was hired. In
addition, annual grants of stock options are made with the objective to
strengthen the mutuality of interest between management and the Company's
stockholders. Grants made under the 1996 Plan generally have a term of
- ---------------
(1) The companies included in the survey are not necessarily the same as the
companies included in the market indices included in the performance graph
in this Proxy Statement. Although the compensation (salary and bonus)
surveys referred to above and the market indices included in the performance
graph are broad and include companies in related industries, the surveys and
indices were created for different purposes and accordingly are not
comparable.
20
<PAGE> 22
10 years and are normally tied to the market valuation of the Company's Common
Stock, thereby providing an additional incentive for executives to build
stockholder value. In addition, grants are generally subject to vesting over
four years, with vesting tied to continued employment. Executives receive value
from these grants only if strategic goals are achieved and the Company's Common
Stock appreciates accordingly. This component of an executive's compensation
package is intended to retain and motivate executives to improve long-term stock
market performance. Additional long-term incentives are provided through the
Company's Employee Stock Purchase Plan in which all eligible employees may
participate.
The level of the annual discretionary stock awards are based, in part, on
the executive's level of contribution to the Company during the prior year as
determined by the Committee using the factors specified above. The terms of the
Company's equity incentive plans pursuant to which it grants options to its
executive officers is comparable, in all material respects, to equity incentive
plans generally employed in the industry and the Company believes are
competitive and reasonable.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee uses the same procedures described above in setting the total
compensation package paid to the Company's Chief Executive Officer. The Chief
Executive Officer's total salary is based on comparisons with other companies
included in the surveys referred to above. In awarding annual stock options, the
Committee considers the Chief Executive Officer's performance with respect to
objective criteria established by the Committee and overall contribution to the
Company during the prior year. During 1996, the Chief Executive Officer was paid
a base salary of $249,000, a cash bonus of $28,800 and granted options to
purchase 15,040 shares of Common Stock of the Company. The Committee believes
that the total compensation package received by the Chief Executive Officer for
fiscal year 1996 was competitive within the industry and reflected his overall
contribution to the Company.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The statute containing this law and the applicable regulations offer a
number of transitional exceptions to the 162(m) limitations on deductions for
pre-existing compensation plans, arrangements and binding contracts. As a
result, the Committee believes that at the present time it is quite unlikely
that the compensation paid to any Named Executive Officer in a taxable year
which is subject to the deduction limit will exceed $1 million. Therefore, the
Committee has not yet established a policy for determining which forms of
incentive compensation awarded to its executive officers shall be designed to
qualify as "performance-based compensation." The Committee intends to continue
to evaluate the effects of the statute and to comply with Section 162(m) of the
Code in the future to the extent consistent with the best interests of the
Company and its stockholders.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
Gunnar Ekdahl
William R. Miller
James D. Watson
21
<PAGE> 23
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows a comparison of cumulative total stockholder
returns on an investment of $100 in cash for the period from May 9, 1996 (the
effective date of the Company's initial public offering) to December 31, 1996
for the (i) Company's Common Stock, (ii) Nasdaq Stock Market Index, (iii) Nasdaq
Pharmaceutical Stock Index, and (iv) NeuroInvestment Index.
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) SIBIA NASDAQ-US NASDAQ- PHARM NI NEUROSCI
<S> <C> <C> <C> <C>
10-MAY-96 100.00 100.00 100.00 100.00
31-MAY-96 89.66 104.59 103.38 109.78
28-JUNE-96 71.26 99.88 92.39 88.19
31-JUNE-96 66.67 90.98 82.33 75.65
30-AUG-96 60.92 96.08 88.29 86.51
30-SEP-96 65.52 103.43 94.47 90.50
31-OCT-96 62.07 102.29 90.92 85.37
29-NOV-96 57.47 108.63 88.92 80.23
31-DEC-96 68.97 108.51 91.65 88.92
31-JAN-97 78.16 116.23 99.30 92.62
</TABLE>
- ---------------
(1) This section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
22
<PAGE> 24
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In February 1996, William T. Comer, President, Chief Executive Officer and
a Director of the Company, exercised an option to purchase 258,500 shares of
Common Stock pursuant to the Company's 1981 Employee Stock Option Plan at an
exercise price of $2.13 per share for a total purchase price of $550,000. In
accordance with the terms of the 1981 Employee Stock Option Plan, such purchase
price was paid in cash in the amount of $11,000 and by delivery of a
full-recourse promissory note payable in the principal amount of $539,000 and
bearing interest at 7% per annum. Such note is payable in full after five years
and is secured by the shares of Common Stock issued upon exercise of such
option. As of March 31, 1997, the total amount of principal and interest
outstanding under the note was $579,874.
In July 1992, the Company loaned to Dr. Harpold $43,600 pursuant to a
promissory note bearing interest at the rate of 7.5% per annum. In February
1996, the Company loaned to Dr. Harpold $44,100 as the purchase price for
certain options to purchase Common Stock of the Company pursuant to a promissory
note bearing interest at the rate of 7.0% per annum. As of March 31, 1997, the
total amount of principal and interest outstanding under the promissory notes
was $92,952.
TRANSACTION WITH 5% STOCKHOLDERS
In March 1996, the Company entered into an extension of its collaboration
agreement with Novartis AG (formerly CIBA-GEIGY Limited). Under the agreement as
extended, Novartis AG provided to the Company $500,000 to fund certain capital
expenditures (which may be credited against future milestone payments).
In 1990, the Company entered into a three-year agreement with the Salk
Institute in the area of EAARs. This agreement provided for the support of
research at The Salk Institute by the Company and the transfer of research
materials and research results in the EAAR area from The Salk Institute to the
Company. The Company also received an exclusive worldwide license to certain
EAAR-related patents and patent applications held by The Salk Institute. The
agreement was amended in March 1996. Pursuant to the agreement, as amended, the
Company is required to make certain minimum annual royalty payments to The Salk
Institute beginning in 2002. Failure to pay such royalties will result in the
related license becoming non-exclusive.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
Frederick T. Muto,
Secretary
April 25, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: THOMAS A. REED, CHIEF FINANCIAL OFFICER,
SIBIA NEUROSCIENCES, INC., 505 COAST BOULEVARD SOUTH, SUITE 300, LA JOLLA,
CALIFORNIA 92037-4641
23
<PAGE> 25
APPENDIX A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
SIBIA NEUROSCIENCES, INC.
SIBIA Neurosciences, Inc., a corporation incorporated in the State of
Delaware, hereby certifies as follows:
1. The original Certificate of Incorporation of this corporation was
filed in the Office of the Secretary of State for the State of Delaware on
April 15, 1981 under the name of THE SALK INSTITUTE BIOTECHNOLOGY
CORPORATION.
2. That the amendment and restatement of the Certificate of
Incorporation set forth in paragraph 3 hereof has been duly adopted in
accordance with the provisions of the General Corporation Law of the State
of Delaware by the affirmative votes of the holders of not less than a
majority of the outstanding stock of the corporation entitled to vote
thereon at the annual meeting of stockholders duly called and held on June
5, 1997, following adoption by the Board of Directors of a resolution
setting forth and declaring the advisability of the proposed amendment and
restatement, all in accordance with Section 242 of the General Corporation
Law of the State of Delaware.
3. That the Board of Directors of said corporation at a meeting duly
called, convened and held, duly adopted a resolution proposing and
declaring advisable the following restatement of the Certificate of
Incorporation:
RESOLVED, that the Certificate of Incorporation of this corporation be
restated to read in its entirety as follows:
ARTICLE I.
The name of this corporation is SIBIA Neurosciences, Inc.
ARTICLE II.
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent of the corporation in the State of Delaware at
such address is The Corporation Trust Company.
ARTICLE III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
ARTICLE IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is thirty million
(30,000,000) shares. Twenty-five million (25,000,000) shares shall be Common
Stock, each having a par value of one-tenth of one cent ($.001). Five million
(5,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them;
A-1
<PAGE> 26
and to increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be
decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
ARTICLE V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. BOARD OF DIRECTORS
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed exclusively by one or more resolutions adopted from time to time by
the Board of Directors.
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the
directors shall be divided into three classes designated as Class I, Class
II and Class III, respectively. Directors shall be assigned to each class
in accordance with a resolution or resolutions adopted by the Board of
Directors. At the first annual meeting of stockholders following the
adoption and filing of this Certificate of Incorporation, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the adoption and filing of this Certificate of
Incorporation, the term of office of the Class II directors shall expire
and Class II directors shall be elected for a full term of three years. At
the third annual meeting of stockholders following the adoption and filing
of this Certificate of Incorporation, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full
term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each
director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
3. Subject to the rights of the holders of any series of Preferred
Stock, no director shall be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual
director may be removed from office at any time with cause by the
affirmative vote of the holders of a majority of the voting power of all
the then-outstanding shares of voting stock of the corporation, entitled to
vote at an election of directors (the "Voting Stock").
4. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of
directors, shall, unless the Board of Directors determines by resolution
that any such vacancies or newly created directorships shall be filled by
the stockholders, except as otherwise provided by law, be filled only by
the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors, and not by the
stockholders. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B. GENERAL
1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of
at least sixty-six and two-thirds percent (66 2/3%) of the
A-2
<PAGE> 27
voting power of all of the then-outstanding shares of the Voting Stock. The
Board of Directors shall also have the power to adopt, amend, or repeal
Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance
with the Bylaws and no action shall be taken by the stockholders by written
consent.
4. Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the President, or (iii) the Board of Directors pursuant to
a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to
the Board of Directors for adoption), and shall be held at such place, on
such date, and at such time as the Board of Directors shall fix.
5. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting
of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
ARTICLE VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
ARTICLE VII.
The corporation is to have perpetual existence.
ARTICLE VIII.
A. The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, except as provided in paragraph B. of this
Article VIII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VIII.
A-3
<PAGE> 28
IN WITNESS WHEREOF, SIBIA Neurosciences, Inc. has caused its corporate seal
to be hereunto affixed and this Amended and Restated Certificate of
Incorporation to be signed by Thomas A. Reed, its Chief Financial Officer, and
attested by Frederick T. Muto, its Secretary, this day of June, 1997.
--------------------------------------
Thomas A. Reed
Chief Financial Officer
(Corporate Seal)
Attest:
- ------------------------------------------------------
Frederick T. Muto
Secretary
A-4
<PAGE> 29
APPENDIX B
AMENDED AND RESTATED BYLAWS
OF
SIBIA NEUROSCIENCES, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETING
SECTION 4. Place of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. Annual Meeting.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (A) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (B) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (C) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the one hundred twentieth (120th) day prior to the date specified in
the Corporation's proxy statement released to stockholders in connection with
the previous year's annual meeting of stockholders; provided, however, that in
the event that no annual meeting was held in the previous year or the date of
the annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy
1
<PAGE> 30
statement, notice by the stockholder to be timely must be so received not
earlier than the close of business on the ninetieth (90th) day prior to such
annual meeting and not later than the close of business on the later of the
sixtieth (60th) day prior to such annual meeting or, in the event public
announcement of the date of such annual meeting is first made by the corporation
fewer than seventy (70) days prior to the date of such annual meeting, the close
of business on the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made by the corporation. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a
proponent to a stockholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
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SECTION 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be called,
for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii)
the President, or (iii) the Board of Directors pursuant to a resolution adopted
by a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption) and shall be
held at such place, on such date, and at such time as the Board of Directors
shall fix.
(b) If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
SECTION 7. Notice of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the time, place and purpose or purposes of the meeting. Notice
of the time, place and purpose of any meeting of stockholders may be waived in
writing, signed by the person entitled to notice thereof, either before or after
such meeting, and will be waived by any stockholder by his attendance thereat in
person or by proxy, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
SECTION 8. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
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SECTION 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. List of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 13. Action Without Meeting. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, and no action shall be taken by the stockholders
by written consent.
SECTION 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have, the right and authority to prescribe such rules, regulations and
procedures and to do all such acts as, in the judgment of such
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chairman, are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing an agenda or order of
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the corporation and their duly authorized
and constituted proxies and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. Number. The authorized number of directors of the corporation
shall be fixed in accordance with the Certificate of Incorporation. Directors
need not be stockholders unless so required by the Certificate of Incorporation.
SECTION 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. Classes of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the adoption
of this Bylaw, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the adoption of this Bylaw, the term of
office of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the adoption of this Bylaw, the term of office of the
Class III directors shall expire and Class III directors shall be elected for a
full term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this Bylaw in the case of the
death, removal or resignation of any director.
SECTION 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such
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resignation or resignations shall become effective, and each Director so chosen
shall hold office for the unexpired portion of the term of the Director whose
place shall be vacated and until his successor shall have been duly elected and
qualified.
SECTION 20. Removal. Subject to the rights of the holders of any series of
Preferred Stock, no director shall be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual director
may be removed from office at any time with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock").
SECTION 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors shall be
held immediately before or after the annual meeting of stockholders and at the
place where such meeting is held. No notice of an annual meeting of the Board of
Directors shall be necessary and such meeting shall be held for the purpose of
electing officers and transacting such other business as may lawfully come
before it.
(b) Regular Meetings. Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) Waiver of Notice. The transaction of all business at any meeting of the
Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 22. Quorum and Voting.
(a) Unless the Certificate of Incorporation requires a greater number and
except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
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(b) At each meeting of the Board of Directors at which a quorum is present,
all questions and business shall be determined by the affirmative vote of a
majority of the directors present, unless a different vote be required by law,
the Certificate of Incorporation or these Bylaws.
SECTION 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. Fees and Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. Committees.
(a) Executive Committee. The Board of Directors may by resolution passed by
a majority of the whole Board of Directors appoint an Executive Committee to
consist of one (1) or more members of the Board of Directors. The Executive
Committee, to the extent permitted by law and provided in the resolution of the
Board of Directors shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, including without limitation the power or authority to declare a
dividend, to authorize the issuance of stock and to adopt a certificate of
ownership and merger, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
Bylaws of the corporation.
(b) Other Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, from time to time appoint such other
committees as may be permitted by law. Such other committees appointed by the
Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall serve
a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they
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constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the Board of
Directors and until their successors shall have been duly elected and qualified,
unless sooner removed. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors. If the office of
any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the Board
of Directors, when present, shall preside at all meetings of the stockholders
and the Board of Directors. The Chairman of the Board of Directors shall perform
other duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time. If there is no President, then the Chairman of the Board of
Directors shall also serve as the Chief Executive Officer of the corporation and
shall have the powers and duties prescribed in paragraph (c) of this Section 28.
(c) Duties of President. The President shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors, unless the Chairman
of the Board of Directors has been appointed and is
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present. Unless some other officer has been elected Chief Executive Officer of
the corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and perform
the duties of the President in the absence or disability of the President or
whenever the office of President is vacant. The Vice Presidents shall perform
other duties commonly incident to their office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer shall
keep or cause to be kept the books of account of the corporation in a thorough
and proper manner and shall render statements of the financial affairs of the
corporation in such form and as often as required by the Board of Directors or
the President. The Chief Financial Officer, subject to the order of the Board of
Directors, shall have the custody of all funds and securities of the
corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. Delegation of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
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ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. Execution of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. Form and Execution of Certificates. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to
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this section a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Except as otherwise expressly provided by law, the
rights and obligations of the holders of certificates representing stock of the
same class and series shall be identical.
SECTION 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be made
only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
SECTION 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting. If
no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be not more than sixty (60) days prior
to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
SECTION 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. Execution of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial. Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. Declaration of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 41. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
(a) Directors and Executive Officers. The corporation shall indemnify its
directors and executive officers (for the purposes of this Article XI,
"executive officers" shall have the meaning defined in Rule 3b-7
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promulgated under the 1934 Act) to the fullest extent not prohibited by the
Delaware General Corporation Law; provided, however, that the corporation may
modify the extent of such indemnification by individual contracts with its
directors and executive officers; and, provided, further, that the corporation
shall not be required to indemnify any director or executive officer in
connection with any proceeding (or part thereof) initiated by such person unless
(i) such indemnification is expressly required to be made by law, (ii) the
proceeding was authorized by the Board of Directors of the corporation, (iii)
such indemnification is provided by the corporation, in its sole discretion,
pursuant to the powers vested in the corporation under the Delaware General
Corporation Law or (iv) such indemnification is required to be made under
subsection (d).
(b) Other Officers, Employees and Other Agents. The corporation shall have
power to indemnify its other officers, employees and other agents as set forth
in the Delaware General Corporation Law.
(c) Expenses. The corporation shall advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. Neither the failure of the corporation (including its
Board of Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
(e) Non-Exclusivity of Rights. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers,
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employees or agents respecting indemnification and advances, to the fullest
extent not prohibited by the Delaware General Corporation Law.
(f) Survival of Rights. The rights conferred on any person by this Bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony
in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of
any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Bylaw with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner he reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the
best interests of the corporation" as referred to in this Bylaw.
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ARTICLE XII
NOTICES
SECTION 44. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice to directors. Any notice required to be given to any director
may be given by the method stated in subsection (a), or by facsimile, telex or
telegram, except that such notice other than one which is delivered personally
shall be sent to such address as such director shall have filed in writing with
the Secretary, or, in the absence of such filing, to the last known post office
address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method of
giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure to Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) Notice to Person with Whom Communication Is Unlawful. Whenever notice
is required to be given, under any provision of law or of the Certificate of
Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) Notice to Person with Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a
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certificate under any provision of the Delaware General Corporation Law, the
certificate need not state that notice was not given to persons to whom notice
was not required to be given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. Amendments.
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the
then-outstanding shares of the Voting Stock. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE XV
MISCELLANEOUS
SECTION 47. Annual Report.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the Board of
Directors shall cause an annual report to be sent to each stockholder of the
corporation not later than one hundred twenty (120) days after the close of the
corporation's fiscal year. Such report shall include a balance sheet as of the
end of such fiscal year and an income statement and statement of changes in
financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the California Corporations Code, additional information as required by
Section 1501 (b) of the California Corporations Code shall also be contained in
such report, provided that if the corporation has a class of securities
registered under Section 12 of the 1934 Act, that Act shall take precedence.
Such report shall be sent to stockholders at least fifteen (15) days prior to
the next annual meeting of stockholders after the end of the fiscal year to
which it relates.
(b) If and so long as there are fewer than 100 holders of record of the
corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
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PRELIMINARY COPIES
SIBIA NEUROSCIENCES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 4, 1997
The undersigned hereby appoints William T. Comer and Thomas A. Reed,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of SIBIA Neurosciences,
Inc. (the "Company") which the undersigned may be entitled to vote at the 1997
Annual Meeting of Stockholders of the Company to be held at Lieb Auditorium,
505 Coast Boulevard South, Suite 300, La Jolla, California on Wednesday, June
4, 1997 at 5:00 p.m., Pacific Daylight Savings Time, and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH. MANAGEMENT
RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect directors to serve either for (i) if the
stockholders approve the amendment to the Company's
Certificate of Incorporation to provide for a classified
Board of Directors as set forth in Proposal 2, one, two or
three years, as the case may be, as described in the Proxy
Statement, or (ii) if the stockholders do not approve
Proposal 2, the ensuing year, and in each either case until
their successors are elected.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the contrary vote for all nominees
below). listed below.
NOMINEES: CLASS I CLASS II CLASS III
William T. Comer Frederick B. Rentschler William R. Miller
Gunnar Ekdahl James D. Watson Stanley T. Crooke
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) WRITE SUCH
NOMINEE(S)' NAME(S) BELOW:
================================================================================
(Continued and to be signed on other side)
<PAGE> 46
(Continued from other side)
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2, 3 AND 4.
PROPOSAL 2: To amend the Company's Certificate of Incorporation to provide
for a classified Board of Directors and to eliminate the
ability of stockholders of the Company to remove a director
without cause.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3: To amend the Company's Certificate of Incorporation to
eliminate the ability of stockholders of the Company to call
special stockholders' meetings.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 4: To ratify the selection of Price Waterhouse LLP as independent
auditors of the Company for its fiscal year ending December
31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DATED ____________________, 1997 _____________________________________
SIGNATURE(S)
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators, trustees,
guardians and attorneys-in-fact
should add their titles. If signer
is a corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If signer is a partnership,
please sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
