<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
SCIOS INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
Scios Inc.
2450 Bayshore Parkway
Mountain View, California 94043
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 13, 1997
10:00 a.m.
----------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Scios
Inc., a Delaware corporation (the "Company"), will be held at the Company's
principal executive offices, 2450 Bayshore Parkway, Mountain View, California
94043, at 10:00 a.m. on Tuesday, May 13, 1997, to consider and act upon the
following matters:
(1) To elect directors of the Company.
(2) To approve amendments to the Company's 1992 Equity Incentive
Plan.
(3) To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent auditors for fiscal 1997.
(4) To act upon such other matters, including stockholder
proposals, that may properly come before the meeting or any
adjournment or postponement of the meeting.
Only stockholders of record at the close of business on March 17, 1997
will be entitled to notice of and to vote at this meeting and any adjournment or
postponement thereof.
By Order of the Board of Directors
JOHN H. NEWMAN
Secretary
Mountain View, California
March 31, 1997
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THIS MEETING,
PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
Scios Inc.
2450 Bayshore Parkway
Mountain View, California 94043
----------
Proxy Statement
Annual Meeting of Stockholders
May 13, 1997
General
This Proxy Statement is solicited on behalf of the Board of Directors
of Scios Inc., a Delaware corporation (the "Company" or "Scios"), for use at its
Annual Meeting of Stockholders to be held at the Company's principal executive
offices, 2450 Bayshore Parkway, Mountain View, California 94043, at 10:00 a.m.
on Tuesday, May 13, 1997, and at any adjournment or postponement of that
meeting. The approximate mailing date for this Proxy Statement and the enclosed
proxy is March 31, 1997.
The Board of Directors has fixed the close of business on March 17,
1997 as the record date for the determination of stockholders entitled to vote
at the Annual Meeting. At that time, there were 35,833,923 shares of Common
Stock issued and outstanding. In addition, there were 12,632 shares of Nonvoting
Series A Preferred Stock issued and outstanding.
Voting
Each share of Common Stock issued and outstanding on the record date is
entitled to one vote. The Nonvoting Series A Preferred Stock is not entitled to
vote. The proxy holders will vote all proxies in accordance with the
instructions contained in the proxy and, if no choice is specified, the proxy
holders will vote in favor of the proposals to elect directors, to approve the
amendment of the Company's 1992 Equity Incentive Plan and to ratify the
selection of auditors, and against the stockholder proposals. An automated
system administered by the Company's transfer agent tabulates the votes. The
presence at the Annual Meeting in person or by proxy of a majority of the shares
outstanding as of the record date will constitute a quorum. For quorum purposes,
abstentions and broker non-votes are each included in the determination of the
number of shares present and voting. Each matter is tabulated separately.
Abstentions are counted in tabulations of the votes cast on proposals presented
to stockholders, whereas broker non-votes are not counted for any purpose in
determining whether a proposal has been approved.
Revocability of Proxies
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke it at any time before its exercise. It may be revoked by
filing with the Secretary of the Company an instrument of revocation or a duly
executed proxy bearing a later date. It also may be revoked by attendance at the
meeting and election to vote in person. Attendance at the meeting will not
itself revoke a proxy.
Solicitation
The Company will bear the entire cost of preparing, assembling,
printing and mailing this Proxy Statement, the accompanying proxy and any
additional material which may be furnished to stockholders by the Company.
Copies of solicitation material will be furnished without charge to brokerage
houses, fiduciaries and custodians to forward to beneficial owners of stock held
in their names. The solicitation of proxies will be made by the use of the mails
and through direct communication with certain stockholders or their
representatives by officers, directors and employees of the Company, who will
receive no additional compensation therefor. In addition, the Company may
determine to engage D.F. King & Co., Inc. or another proxy solicitor to solicit
proxies and, if it does so, the Company will pay the standard fee for these
services, which is estimated to be approximately $6,000.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
A Board of seven (7) Directors will be elected at the Annual Meeting.
The term of office of each person elected as a Director will continue until the
next Annual Meeting or until a successor has been elected. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
seven nominees of the Board of Directors named below, all of whom are presently
Directors of the Company. The candidates receiving a plurality of the votes of
the shares present in person or by proxy at the meeting and entitled to vote
will be elected. 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. If any nominee for any reason is unable or declines to serve, the
proxies will be voted for any substitute nominee who shall be designated by the
present Board of Directors to fill the vacancy. Stockholders who desire to
nominate persons for election to the Board must comply with the advance notice
procedures specified in the Company's Bylaws.
The following is information regarding the nominees, including
information furnished by them as to their principal occupation for the preceding
five-year period, certain directorships and their ages as of March 17, 1997.
Director
Name Age Since
---- --- -----
Samuel H. Armacost 57 1995
Richard L. Casey 50 1987
Myron Du Bain 73 1989
Robert W. Schrier, M.D. 61 1988
Solomon H. Snyder, M.D. 58 1992
Burton E. Sobel, M.D. 59 1996
Eugene L. Step 68 1993
Mr. Armacost was elected to the Company's Board of Directors in August
1995. Mr. Armacost is a Principal of Weiss, Peck & Greer, L.L.C. Previously, he
served as Managing Director of Merrill Lynch Capital Markets and was President,
Director and Chief Executive Officer of BankAmerica Corporation. Mr. Armacost is
also a member of the Board of Directors of Chevron Corporation, The Failure
Group, Inc. and SRI International. In addition, Mr. Armacost is on the board of
the James Irvine Foundation and the Advisory Board of the California Academy of
Sciences, and he is a member of The Business Council.
Mr. Casey is Chairman of the Board, President and Chief Executive
Officer of Scios Inc. He joined Scios in December 1987 and has served as a
Director since that time. From early 1985 to 1987, he was with ALZA Corporation
as Executive Vice President and President of ALZA Pharmaceuticals. From 1976 to
1985 he worked for Syntex Corporation, in various positions including director
of marketing research, director of sales, vice president and general manager of
Syntex Medical Diagnostics. Mr. Casey began his career in pharmaceuticals as a
sales representative for Eli Lilly and Company. From 1968 to 1970, Mr. Casey
served in the U.S. Peace Corps in Ethiopia. Mr. Casey serves on the boards of
Guilford Pharmaceuticals Inc., an affiliated publicly-held development-stage
neuroscience company located in Baltimore, Maryland; VIVUS, Inc., a
publicly-held medical devices company located in Menlo Park, California; and
Karo Bio AB, an affiliated privately-held Swedish biotechnology company.
Mr. Du Bain was elected a Director of Scios in June 1989. He was
Chairman of the Board of Directors of SRI International until his retirement in
1989. Prior to that, he was President and Chief Executive Officer of Amfac,
Inc., a diversified industry company, Chairman, President and Chief Executive
Officer of Fireman's Fund Corporation and Vice Chairman of American Express
Company. He is a member of the board of directors of SRI International and Wells
Fargo Bank.
2
<PAGE>
Dr. Schrier was elected a Director of Scios in August 1988. He has been
Professor and Chairman, Department of Medicine, University of Colorado School of
Medicine, since 1976. He has held numerous positions in professional societies,
including President of the National Kidney Foundation, President of the American
Society of Nephrology, President of the Association of American Physicians, and
President of the International Society of Nephrology. He received the Pasteur
Award from the University of Strasbourg; the John Phillips Award from the
American College of Physicians; the David Hume Award from the National Kidney
Foundation; the Mayo Soley Award from the Western Society of Clinical
Investigation; and honorary degrees from the University of Colorado and DePauw
University. He has also served on the editorial boards of numerous professional
publications, has authored over 600 scientific articles and has edited numerous
medical texts and reference books. He is a member of the Institute of Medicine
of the National Academy of Sciences.
Dr. Snyder was elected a Director in September 1992. Dr. Snyder is Director
of the Department of Neuroscience and Distinguished Service Professor of
Neuroscience, Pharmacology and Molecular Sciences and Psychiatry at The Johns
Hopkins University, and has been a member of the faculty there since 1966. Dr.
Snyder received the Albert Lasker Award for Basic Biomedical Research and
Honorary Doctor of Science degrees from Northwestern University, Georgetown
University and Ben Gurion University. Dr. Snyder received the Wolfe Award in
Medicine from the government of Israel for research relating to receptors. Dr.
Snyder is a member of the National Academy of Sciences and a Fellow of the
American Academy of Arts and Sciences. Dr. Snyder is also the author of numerous
articles and several books. Dr. Snyder is a founder and a director of Guilford
Pharmaceuticals Inc.
Dr. Sobel was elected a Director in February 1996. Dr. Sobel is
Physician-in-Chief, E.L. Amidon Professor and Chair of the Department of
Medicine at The University of Vermont College of Medicine. Previously, Dr. Sobel
was Professor of Medicine at Barnes Hospital, Washington University and Director
of its Cardiovascular Division. Dr. Sobel has been a consultant to and served on
scientific advisory boards of several pharmaceutical and biotechnology
companies. Dr. Sobel has been the recipient of numerous awards, including the
American Heart Association's James B. Herrick Award and its Scientific Council's
Distinguished Achievement Award, as well as the American College of Cardiology's
Distinguished Scientist award. Dr. Sobel has been the editor of Circulation and,
since 1989, has served as editor of Coronary Artery Disease. His memberships and
fellowships include the American College of Physicians, Royal Society of
Medicine, American Heart Association and American College of Cardiology.
Mr. Step was elected a Director in February 1993. From May 1956 until he
retired in December 1992, Mr. Step was employed by Eli Lilly and Company, most
recently as Executive Vice President, President of the Pharmaceutical Division,
where he was responsible for U.S. pharmaceutical operations and for the
operations of Eli Lilly International. In addition, Mr. Step served on Eli
Lilly's board of directors and executive committee. Mr. Step was chairman of the
board of directors of the Pharmaceutical Manufacturers Association and president
of the International Federation of Pharmaceutical Manufacturers Associations. He
is a member of the board of directors of Cell Genesys Inc., Guidant Corporation,
Medco Research Inc. and Pathogenesis Corporation.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
Compensation of Directors -- Standard Arrangements
Fees. Directors who are not otherwise employed by the Company receive
an annual retainer of $12,000 and an additional fee of $1,000 for attendance at
each meeting of the Board of Directors, and $500 for attendance at each
committee meeting not occurring within 24 hours of a Board meeting. In the
fiscal year ended December 31, 1996, the aggregate compensation paid to eligible
non-employee Directors (8 individuals) under standard arrangements was $102,000.
This amount includes payments to William F. Miller and Donald E. O'Neill, who
served as Directors of the Company until May 1996. Directors are also eligible
for reimbursement of expenses incurred in connection with attendance at Board
meetings in accordance with Company policy.
3
<PAGE>
Stock Options. Upon election to the Board, each non-employee Director
is automatically granted an option to purchase 20,000 shares of Common Stock.
These options are currently granted under the Company's 1992 Equity Incentive
Plan (the "Equity Plan"), which contains provisions for automatic grants to
non-employee Directors. Prior to its expiration on June 30, 1994, option grants
to Directors were also made under the Company's 1989 Non-Employee Director Stock
Option Plan. These plans were approved by the Company's stockholders in May 1992
and May 1990, respectively. Only non-employee Directors of the Company are
eligible to receive options under the applicable provisions of the Equity Plan,
and Mr. Armacost, Mr. Du Bain, Dr. Schrier, Dr. Sobel and Mr. Step have each
received option grants. Dr. Snyder voluntarily declined to accept the grants to
which he was entitled upon his elections to the Board in September 1992 in
connection with the merger of Nova Pharmaceutical Corporation into the Company.
See "Proposal 2, Approval of Amendment of 1992 Equity Incentive Plan - Terms of
Non-Employee Director Options".
Board of Directors. During fiscal 1996, there were five meetings of the
Board of Directors.
Audit Committee. The Audit Committee consists of three non-employee
Directors: Mr. Step (Chairman), Mr. Armacost and Dr. Sobel. The Audit Committee
met four times in fiscal 1996. Among the committee's functions are recommending
engagement of the Company's independent auditors, approving services performed
by such auditors, and reviewing and evaluating the Company's accounting systems
and its system of internal accounting controls.
Compensation Committee. The Compensation Committee consists of three
non-employee Directors: Mr. Armacost (Chairman), Mr. Du Bain and Mr. Step. Mr.
The committee met five times during fiscal 1996. Among the committee's functions
are establishing the Company's compensation programs for all employees, fixing
the compensation levels of executive officers of the Company, and administering
and making awards under the Company's incentive programs.
Nominating Committee. The Nominating Committee consists of three
non-employee Directors: Mr. Du Bain (Chairman), Dr. Schrier and Dr. Snyder. The
committee met one time in fiscal 1996. Among the committee's functions are
recommending nominees to serve on the Board of Directors, recommending size and
composition of the Board based on studies conducted by the committee, making
recommendations to the Board regarding stockholders' comments as to composition
of the Board, making recommendations concerning membership of Board committees
and Board and committee fees, and consulting with the Board of Directors and
management to determine criteria for nominations. The Nominating Committee will
consider nominees recommended by stockholders. Any such recommendations,
together with the nominee's qualifications and consent to being considered as a
nominee, should be sent to the Secretary of the Company no later than November
30, 1997 in order to be considered for election at the 1998 Annual Meeting of
Stockholders.
In fiscal 1996, all Directors attended at least 75% of the meetings of
the Board and all committees of the Board of which they were members.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
Beneficial Ownership
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock at March 17, 1997 by (i) all
persons known by the Company to be beneficial owners of more than 5% of its
Common Stock, (ii) each Director, (iii) each of the executive officers named in
the Summary Compensation Table included herein and (iv) all Directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Beneficial Ownership(1)
------------------------------
Beneficially Approximate
Officers, Directors & Owned Percent
5% Stockholders Shares (2) of Class
- ----------------------------------------------------------------------------
<S> <C> <C>
State of Wisconsin Investment Board 2,009,100 (3) 5.6%
P. O. Box 78432
Madison, WI 53707
Samuel H. Armacost 17,000 *
Richard L. Casey 534,760 (4) 1.5%
Myron Du Bain 40,500 (4) *
Robert W. Schrier, M.D. 15,800 *
Solomon H. Snyder, M.D. 10,000 *
Burton E. Sobel, M.D. 5,000 *
Eugene L. Step 18,000 *
Elliott B. Grossbard, M.D. 170,616 *
John A. Lewicki, Ph.D. 172,567 *
John H. Newman 181,118 (4) *
Armin H. Ramel, Ph.D. 66,142 *
All officers and directors as a
group (13 persons) 1,274,668 (4) 3.5%
<FN>
- ----------
* less than 1%
(1) Unless otherwise indicated below and subject to community property laws,
each stockholder has sole voting and investment power with respect to the
shares beneficially owned.
(2) For Mr. Armacost, Mr. Casey, Mr. Du Bain, Dr. Schrier, Dr. Sobel, Mr. Step,
Dr. Grossbard, Dr. Lewicki, Mr. Newman and Dr. Ramel, and all officers and
directors as a group, includes 7,000, 500,000; 20,500; 15,500; 5,000;
17,000; 168,332; 156,666; 121,833; 64,554; and 1,113,050 shares,
respectively, issuable upon exercise of outstanding options exercisable
within sixty days of March 17, 1997.
(3) Information is as of December 31, 1996 as provided by the holder on
Schedule 13G filed with the Securities and Exchange Commission.
(4) With respect to Mr. Casey, includes 8,737 shares held in a trust for the
benefit of Mr. Casey's children, of which Mr. Casey and his wife are
trustees. With respect to Mr. Du Bain, includes 10,000 shares held in a
revocable living trust for the benefit of Mr. Du Bain and his wife; Mr. Du
Bain is a trustee of such trust. With respect to Mr. Newman, includes 7,000
shares held in his spouse's IRA account and 2,000 shares held in a trust
for the benefit of Mr. Newman's children, of which Mr. Newman and his wife
are trustees.
</FN>
</TABLE>
The Company is not aware of any material proceeding to which any Director
or executive officer of the Company or any associate of any such Director or
executive officer is a party adverse to the Company or any of its subsidiaries
or has a material interest adverse to the Company or any of its subsidiaries.
5
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's Directors, executive officers and
holders of more than ten percent (10%) of the Company's Common Stock ("10%
Holders") to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Directors, executive officers and
10% Holders are required by SEC regulation to furnish the Company with copies of
all Section 16(a) forms they file.
The Company believes that during the fiscal year ended December 31,
1996, its Directors, executive officers and 10% Holders complied with all
Section 16(a) filing requirements. In making this statement, the Company has
relied upon the written representations of its Directors, executive officers and
certain other reporting persons.
EXECUTIVE COMPENSATION
The following table discloses compensation received by the Company's
Chief Executive Officer and each of its four other most highly compensated
executive officers at December 31, 1996 for the fiscal years ended December 31,
1996, 1995 and 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- ------------
Securities
Name Underlying All Other
and Stock Compen-
Principal Salary Bonus (1) Options sation (2)
Position Year ($) ($) (#) ($)
- -------- ---- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Richard L. Casey 1996 $400,000 $120,000 100,000 $3,000
Chairman of the 1995 $400,000 -- 120,000 $3,000
Board, President 1994 $400,000 $104,000 -- $3,000
and Chief Executive
Officer
Elliott B. Grossbard, M.D. 1996 $218,500 $105,000 (3) 9,375 $3,000
Vice President of 1995 $208,000 $60,577 (3) 39,000 $3,000
Medical and 1994 $208,000 $80,000 (3) -- $3,000
Regulatory Affairs
John A. Lewicki, Ph.D. 1996 $215,500 $40,000 6,250 $3,000
Vice President 1995 $208,000 $24,904 39,000 $3,000
of Research 1994 $208,000 $40,000 -- $3,000
John H. Newman 1996 $185,500 $65,000 9,375 $3,000
Vice President of 1995 $178,500 $24,425 39,000 $3,000
Legal Affairs; General 1994 $178,500 $60,000 -- $3,000
Counsel & Secretary
Armin H. Ramel, Ph.D. 1996 $202,000 $42,000 6,250 $3,000
Vice President of 1995 $195,700 $20,084 37,000 $3,000
Development 1994 $195,700 $35,000 -- $3,000
<FN>
- ---------------
(1) Except as is further described in footnote 3 below, bonus amounts represent
the value of awards under the Company's Employee Incentive Plan. Awards to
executive officers under this plan are determined annually by the
Compensation Committee.
(2) Consists of Company matching contributions under the 401(k) Profit Sharing
Plan and Trust, which was established in 1986. As of December 31, 1996, the
Company made matching contributions of 100% of participant contributions,
up to a maximum of $3,000 per participant per plan year. Employee
contributions are at all times 100% vested. The Company's contributions
vest based on years of service: 0% for less than one year; 25% for one but
less than two years; 50% for two but less than three years; and 100% for
three or more years. Federal tax laws impose an overall limit on the amount
that may be contributed by participants each year under 401(k) plans.
(3) Dr. Grossbard's bonuses for 1996, 1995 and 1994 include forgiveness of
$30,000, $25,000 and $25,000, respectively, in each year under a loan made
to him at the time he joined the Company.
</FN>
</TABLE>
6
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
In the Company's efforts to recruit the best available talent in a
competitive labor market, the Company grants stock options to provide equity
incentives. The Company has granted stock options under the 1983 Incentive Stock
Option Plan (expired by its terms on March 5, 1993), the 1986 Supplemental Stock
Option Plan (expired by its terms on January 16, 1996), the 1989 Non-Employee
Director Stock Option Plan (expired by its terms on June 30, 1994), the Equity
Plan and the 1996 Non-Officer Stock Option Plan.
The following table provides information on stock options held by the
executive officers named in the Summary Compensation Table, including
information as to grants and exercises for the fiscal year ended December 31,
1996.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
- --------------------------------------------------------------------------- ----------------------------------
No. of % of
Securities Total
Under- Options
lying Granted to Exercise
Options Employees or Base Expira-
Granted (1) in Fiscal Price tion
Name (#) Year ($/Sh) Date 0%($) 5%($) 10%($)
- ---- -------- --------- -------- -------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Casey 36,000 5.93% $4.56 01/11/06 0 $103,260 $261,661
64,000 10.54% $5.44 02/04/06 0 $218,780 $554,387
E. Grossbard 9,375 1.54% $5.44 02/04/06 0 $ 32,048 $ 81,208
J. Lewicki 6,250 1.03% $5.44 02/04/06 0 $ 21,365 $ 54,139
J. Newman 9,375 1.54% $5.44 02/04/06 0 $ 32,048 $ 81,208
A. Ramel 6,250 1.03% $5.44 02/04/06 0 $ 21,365 $ 54,139
<FN>
- ---------
(1) These options vest in equal monthly installments commencing on January 1,
2000 and ending on December 31, 2000. See "Compensation Committee Report"
for additional information on these stock options. Mr. Casey's grant of
36,000 shares was made under the 1986 Supplemental Stock Option Plan (which
plan expired January 16, 1996); all other grants in this table were made
pursuant to the 1992 Equity Incentive Plan.
</FN>
</TABLE>
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised,
Shares Unexercised Options at FY-End In-the-Money Options at FY-End
Acquired on Value ------------------------------- -----------------------------------------
Name Exercise (#) Realized ($) Exercisable (#) Unexercisable (#) Exercisable (1)($) Unexercisable (1)($)
- ---- ------------ ------------ --------------- ----------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
R. Casey 0 0 480,000 280,000 0 $101,812
E. Grossbard 0 0 160,000 68,375 0 $6,592
J. Lewicki 0 0 156,000 65,250 0 $4,395
J. Newman 0 0 124,500 60,375 0 $6,592
A. Ramel 0 0 56,944 61,306 $889.75 $4,677
<FN>
- ----------
(1) Based on the fair market value of the Company's Common Stock at
December 31, 1996 ($6.14) minus the exercise price of the options.
</FN>
</TABLE>
7
<PAGE>
COMPENSATION COMMITTEE REPORT (1)
The Compensation Committee of the Board of Directors (the "Committee")
is responsible for establishing the Company's compensation programs for all
employees, including executives. For executive officers, the Committee evaluates
performance and determines compensation policies and levels. In 1996, the
Committee was composed of Mr. Armacost, Mr. Du Bain and Mr. Step, none of whom
were officers or employees of the Company.
Compensation Philosophy
The goals of the compensation program are to align compensation with
business objectives and performance, and to enable the Company to attract,
retain and reward executive officers and other key employees who contribute to
the long-term success of the Company and to motivate them to enhance long-term
stockholder value. Key elements of this philosophy are:
- The Company pays competitively with leading biotechnology companies
with which the Company competes for talent. To ensure that pay is
competitive, the Company regularly compares its pay practices with
these companies and sets its pay parameters based on this review.
- The Company maintains annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to generate
rewards that bring total compensation to competitive levels.
- The Company provides significant equity-based incentives for
executives and other key employees to ensure that they are motivated
over the long term to respond to the Company's business challenges and
opportunities as owners and not just as employees.
The primary components of executive compensation are base salary,
annual incentives and long-term equity incentives. Over the last four years, the
Committee has not granted a salary increase to the CEO and has granted modest
salary increases over the last two years to other executives. These actions
reflect the Committee's intent to lower the relative percentage of fixed
compensation (base salary) and increase the relative percentage of variable pay
or pay based on performance (annual and long-term equity incentives).
The Committee's objective in general is to set each component of
executive compensation at the market average when compared to a group of leading
companies in the biotechnology industry of comparable size who compete in the
job market for individuals with the skills desired by the Company (the
"comparator group"). The companies chosen for the comparator group used for
compensation purposes include several of the companies which comprise the
published industry index in the Performance Graph included in this Proxy
Statement. Because the Committee believes that the Company's most direct
competitors for executive talent are not necessarily all of the companies in the
broad industry index, many smaller or earlier stage companies included in the
index are not included in the comparator group.
- --------
1 Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as
amended, or the Exchange Act that might incorporate by reference future
filings in whole or in part, including this Proxy Statement, neither
this Report nor the Performance Graph in this Proxy Statement shall be
incorporated by reference into any such filings.
8
<PAGE>
Base Salary. The Committee annually reviews each executive officer's
base salary against the base salaries paid for similar positions by companies
within the comparator group. A range of salary levels is established by this
comparison centered on the 50th percentile salary in the comparator group for
comparable positions. Within this range, the Committee subjectively considers
individual factors, including individual performance, level of responsibility,
prior experience, breadth of knowledge and competitive pay practices, as well as
the extent to which the Company achieved its corporate objectives described in
the section below entitled Annual Incentive. From year to year, the relative
weighting of the individual components and the corporate performance component
may differ from officer to officer, and can be expected to change over time in
response to the Company's development stage and the evolution of the
biotechnology industry. Actual base salaries in 1996 remained at the median
level for the comparator group.
Annual Incentive. The Employee Incentive Plan, an annual incentive
award plan, is the variable pay program for officers and other employees of the
Company to earn additional annual compensation. The actual incentive award
earned depends on the extent to which Company and individual performance
objectives are achieved. At the start of each year, the Committee and the full
Board of Directors review and approve the annual performance objectives for the
Company and individual officers. The Company objectives consist of operating,
strategic and financial goals that are considered to be critical to the
Company's fundamental long-term goal -- building stockholder value. For fiscal
1996, these objectives, listed in order of relative importance, were:
- - completing the key development benchmarks for the Company's lead products -
AURICULIN(R) anaritide, NATRECOR(R) hBNP and FIBLAST(R) trafermin -
that had been identified for accomplishment in 1996
- - securing commercial partners for certain of the Company's technologies and
commercial operations
- - financial performance related to the Company's cash utilization and
expanding the sales and profits derived from the Company's commercial
operations group, which markets certain products to psychiatrists and
mental health clinics
- - understanding, identifying and developing additional products from the
Company's research pipeline as candidates for clinical testing
After the end of the year, the Committee evaluates the degree to which
the Company has met its objectives and, at the discretion of the Committee,
establishes a total incentive award pool under the Employee Incentive Plan.
Individual awards are determined by evaluating the Company's overall performance
and by evaluating each participant's performance against objectives for the
year. The incentive award pool is then allocated based on the assessment of each
participant's contribution to achievement of corporate and individual
objectives. Awards are paid in cash and distributions are made in the February
following the performance year.
In February, the Committee determined that the Company had achieved or
exceeded almost all of its key corporate objectives for fiscal 1996 that are
outlined above. The Committee concluded that the following goals were met or
exceeded: patient enrollment targets in both the AURICULIN and NATRECOR clinical
programs; advancing NATRECOR into Phase III trials; manufacture of the required
qualification lots for both these products; extensive preparations for the NDA
filings and inspections that would follow successful completion of clinical
programs; assistance to Kaken Pharmaceutical Co., Ltd., the Company's FIBLAST
licensee in Japan, in filing an NDA in Japan for wound healing; establishment of
a major collaboration on FIBLAST with American Home Products Corporation for
stroke and vascular disease; initiation and completion of the initial Phase II
safety study of FIBLAST in stroke and initiation of clinical investigation of
FIBLAST in peripheral vascular disease; securing for the commercial operations
division an additional product (EFFEXOR(R) venlaflaxine HCl) to co-promote; and
financial objectives, including the contribution from the commercial operations
division and bettering cash utilization targets. The Committee determined that
the Company had been only partially successful in achieving the 1996 goals of
the research division. Based on the Company's performance, the Committee
determined that the total incentive pool for participants in the Employee
Incentive Plan would be 85% of the maximum possible pool. Based on its
assessment of individual contribution to achievement of corporate and individual
objectives, the Committee then determined the 1996 incentive award for each of
the seven executives on the Company's corporate management committee.
9
<PAGE>
Long-Term Incentives. The Company's long-term incentive program for
officers consists of the 1983 Incentive Stock Option Plan, (expired March 5,
1993), the 1986 Supplemental Stock Option Plan (expired January 16, 1996) and
the 1992 Equity Incentive Plan. The option program utilizes vesting periods
(generally four to five years) to encourage key employees to continue in the
employ of the Company. Through option grants, executives receive significant
equity incentives to build long-term stockholder value. Grants have been made at
or above 100% of fair market value on the date of grant. Executives receive
value from these grants only if the Company's Common Stock appreciates over the
long term. The size of option grants is determined based on competitive
practices at companies in the comparator group and the Company's philosophy of
significantly linking executive compensation with stockholder interests. In
addition, the Committee considers the terms and number of options previously
awarded in determining the size of option grants.
In 1992, the Committee granted stock options that vested over a
five-year period ending December 31, 1997 to executives then employed by the
Company. Executives who received grants in 1992 did not receive additional stock
option grants until 1995. In 1995 and 1996, the Committee reviewed the equity
incentives of executive officers and made additional grants in each year to
remain competitive with the comparator group and maintain appropriate long-term
incentives for key individuals. These grants will vest during 1997 through 2000.
The Committee believes the approach of making grants that vest over an extended
time period creates an appropriate focus on longer term objectives and promotes
executive retention.
Section 162(m) of the Internal Revenue Code limits the federal income
tax deductibility of compensation paid to the Company's CEO and to each of the
other four most highly compensated executive officers. The Company intends that
the long-term incentive compensation paid to these executives will be deductible
by the Company under Section 162(m). The proposed amendments to the 1992 Equity
Incentive Plan are intended to meet the requirements of Section 162(m). If the
proposed amendment to the Equity Plan is not approved, then there is a
possibility that certain compensation will not be deductible by the Company for
tax purposes. See "Proposal No.2, Approval of Amendment of 1992 Equity Incentive
Plan."
Chief Executive Officer Compensation
In the fall of 1992, the Committee retained Hewitt Associates (an
international employee compensation and benefits consulting firm) to conduct a
comprehensive review of the base salaries and incentive compensation of all
continuing executive officers as compared to the comparator group. Following the
Hewitt Associates review, the Committee set Mr. Casey's 1993 base annual salary
at $400,000. This amount, in addition to the annual incentive provided by the
Employee Incentive Plan, was estimated to provide an annual cash compensation
level at the average of the comparator group. In setting this amount, the
Committee took into account (i) its belief that Mr. Casey is one of the CEOs of
leading biotechnology companies with significant and broad-based experience in
the pharmaceutical industry, (ii) the scope of Mr. Casey's responsibility,
especially following the merger with Nova Pharmaceutical Corporation, and (iii)
the Board's confidence in Mr. Casey to lead the Company's continued development.
For 1994 through 1997, the Committee elected to maintain Mr. Casey's
base salary at $400,000, the same level as 1993. In doing so, the Committee has
intended to increase the relative portion of Mr. Casey's total compensation that
is variable pay, which is based on achievement of the corporate objectives
annually established by the Board and on increases in the Company's stock price.
See "Compensation Philosophy-Annual Incentive" above.
10
<PAGE>
In 1996, the Committee determined that Mr. Casey should receive an
award of $120,000 (30% of his Base Salary) under the Employee Incentive Plan
based on the Company's 1996 achievements against objectives and Mr. Casey's role
in producing the 1996 results. In February 1996, the Committee determined that
it would enhance Mr. Casey's incentive to build long-term stockholder value by
granting Mr. Casey an option to purchase 100,000 shares of stock that will vest
in the year 2000. At the time of this grant, the Committee determined that it
would not make an additional grant to Mr. Casey during 1997.
Conclusion
In summary, the Compensation Committee believes that, through the plans
and actions described above, a significant portion of the Company's compensation
program and, in particular, Mr. Casey's compensation are contingent on Company
performance, and that realization of benefits is closely linked to achievement
of key corporate objectives that will produce increases in long-term stockholder
value. The Company remains committed to this philosophy of pay for performance,
recognizing that the competitive market for talented executives and the
volatility of the Company's business may result in highly variable compensation
for a particular time period. We will continue to monitor closely the
effectiveness and appropriateness of each of the components of compensation to
reflect changes in the Company's business environment.
COMPENSATION COMMITTEE
Samuel H. Armacost, Chairman
Myron Du Bain
Eugene L. Step
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, Scios paid $33,932 in portfolio management fees to Weiss, Peck
& Greer, L.L.P., an investment firm of which Mr. Armacost is a principal. Such
fees were paid in the normal course of business.
11
<PAGE>
PERFORMANCE GRAPH
The rules of the Securities and Exchange Commission require that the
Company include in this Proxy Statement a line-graph presentation comparing
five-year stockholder returns on an indexed basis with the Nasdaq Stock Market
(U.S.) and either a nationally recognized industry standard index or an index of
peer companies selected by the Company. The Company has elected to use the
Nasdaq Pharmaceutical Stocks Index for purpose of the performance comparison
that appears below. The graph assumes the investment of $100 in the Company's
Common Stock, the Nasdaq Stock Market (U.S.) and the Nasdaq Pharmaceutical
Stocks Index on December 31, 1991. The stock price performance shown on the
graph below is not necessarily indicative of future price performance.
Comparison of Five Year Cumulative Total Return
Among Scios Inc., Nasdaq Stock Market (U.S.) and
Nasdaq Pharmaceutical Stocks Index
EDGAR representation of data points used in printed graphic
<TABLE>
<CAPTION>
Scios Nasdaq Stock Market Nasdaq Pharm
----- ------------------- ------------
<S> <C> <C> <C>
12/31/91 100.000 100.000 100.000
1/31/92 92.222 105.847 104.360
2/28/92 75.556 108.246 95.319
3/31/92 66.111 103.137 86.573
4/30/92 54.444 98.714 72.476
5/29/92 62.222 99.996 75.173
6/30/92 46.111 96.086 72.620
7/31/92 45.000 99.490 76.552
8/31/92 39.444 96.449 69.683
9/30/92 36.111 100.034 68.385
10/30/92 35.000 103.974 72.872
11/30/92 48.333 112.247 84.050
12/31/92 41.111 116.378 83.217
1/29/93 33.889 119.691 77.348
2/26/93 30.000 115.226 59.368
3/31/93 31.111 118.561 59.903
4/30/93 26.667 113.501 60.532
5/28/93 26.667 120.281 63.012
6/30/93 25.000 120.837 63.128
7/30/93 25.556 120.980 61.317
8/31/93 30.000 127.233 64.584
9/30/93 33.333 131.022 68.440
10/29/93 48.889 133.967 74.492
11/30/93 46.111 129.972 72.857
12/31/93 45.556 133.595 74.173
1/31/94 41.667 137.650 76.428
2/28/94 38.333 136.363 69.548
3/31/94 32.778 127.976 60.497
4/29/94 35.000 126.315 58.063
5/31/94 29.722 126.624 57.279
6/30/94 28.333 121.993 52.805
7/29/94 28.333 124.495 54.403
8/31/94 33.889 132.432 60.306
9/30/94 30.000 132.094 59.474
10/31/94 30.000 134.689 57.442
11/30/94 26.667 130.221 57.695
12/30/94 29.444 130.587 55.825
1/31/95 34.444 131.318 58.916
2/28/95 36.667 138.263 61.141
3/31/95 33.889 142.360 60.267
4/28/95 30.000 146.842 61.960
5/31/95 15.833 150.628 62.741
6/30/95 18.056 162.835 70.092
7/31/95 18.889 174.804 76.127
8/31/95 18.333 178.347 85.131
9/29/95 18.333 182.448 87.581
10/31/95 16.111 181.403 84.307
11/30/95 17.222 185.662 88.537
12/29/95 19.167 184.674 102.133
1/31/96 23.889 185.587 111.004
2/29/96 21.944 192.660 108.912
3/29/96 20.278 193.300 106.282
4/30/96 21.111 209.334 111.773
5/31/96 32.500 218.945 115.557
6/28/96 29.444 209.078 103.273
7/31/96 25.000 190.458 92.030
8/30/96 25.556 201.130 98.696
9/30/96 27.500 216.524 105.600
10/31/96 25.556 214.151 100.854
11/29/96 25.556 227.423 99.361
12/31/96 27.292 227.164 102.243
</TABLE>
12
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In 1993, the Company formed Guilford Pharmaceuticals Inc. ("Guilford"). Mr.
Casey and Dr. Snyder are directors of Guilford. The Company currently owns
approximately 10% of the outstanding stock of Guilford. In 1996, Guilford rented
space from the Company, for which it paid $228,323.
In November 1991, the Company made a commitment to loan up to $80,000
to Dr. Elliott B. Grossbard in connection with his joining the Company as Vice
President of Medical and Regulatory Affairs. The commitment was made to permit
Dr. Grossbard to purchase a residence. In June 1993, the Company loaned Dr.
Grossbard $80,000, which loan bore interest at the annual rate of 3.72%. On each
of May 31, 1994, 1995 and 1996, $25,000, $25,000 and $30,000 respectively, of
principal and all interest were forgiven.
PROPOSAL 2
APPROVAL OF AMENDMENT OF 1992 EQUITY INCENTIVE PLAN
In February 1992, the Board of Directors adopted, and the stockholders
subsequently approved, the Company's 1992 Equity Incentive Plan (the "Equity
Plan"). There were originally 2,500,000 shares of the Company's Common Stock
authorized for issuance under the Equity Plan. In May 1992, the Board of
Directors amended the Equity Plan and increased the number of shares reserved
thereunder to 3,500,000 shares. Stockholders approved this increase in September
1992. Since that time, the Company has not sought an increase in the number of
shares reserved under the Equity Plan. In February 1997, the Board reserved an
additional 1,500,000 shares for issuance under the Equity Plan, extended the
term of the Equity Plan to February 2, 2007 and adopted a 300,000 share per
person per calendar year limit pursuant to Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
At March 17, 1997, options (net of canceled or expired options)
covering an aggregate of 2,721,724 shares of the Company's Common Stock had been
granted under the Equity Plan. At that date, 203,674 shares remained available
for future grant out of the of the original 3,500,000 shares authorized under
the Equity Plan in 1992. During the last fiscal year, under the Equity Plan, the
Company has granted to all current executive officers as a group options to
purchase 201,500 shares at exercise prices of $5.44 to $6.88 per share
(including the 95,250 shares granted under the Equity Plan to the named
executive officers listed in the table entitled Option Grants in Last Fiscal
Year), to all employees as a group (excluding executive officers) options to
purchase 350,409 shares at exercise prices of $5.44 to $6.13 per share, and to
one eligible non-employee Director an option to purchase 20,000 shares at an
exercise price of $5.85 per share.
The Board amended the Equity Plan to increase the number of shares
available in order to ensure that the Company can continue to grant stock
options to employees at levels determined appropriate by the Board, and
anticipates that this increase will be an adequate reserve for at least the next
several years.
Section 162(m) of the Code denies a deduction to any publicly-held
corporation for certain compensation paid to specified employees in a taxable
year to the extent that the compensation exceeds $1,000,000 for any covered
employee. See "Federal Income Tax Information" below for a discussion of the
application of Section 162(m). In light of the Section 162(m) requirements, the
Equity Plan was amended to provide that no individual may be granted options to
purchase more than 300,000 shares of Common Stock during any one fiscal year.
Previously no such formal limitation was placed on the number of shares
available for option grants to an individual during a fiscal year.
Stockholders are requested in this Proposal to approve the additional
1,500,000 shares reserved under the Equity Plan, the extension of the Equity
Plan's term and the adoption of the Section 162(m) limit. The affirmative vote
of the holders of a majority of the shares present in person or represented by
proxy and entitled to vote at the meeting will be required to approve the
amendment of the Equity Plan.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
13
<PAGE>
The essential features of the Equity Plan are outlined below:
GENERAL
The Equity Plan provides for the grant or issuance of incentive stock
options, nonstatutory stock options, restricted stock purchase awards and stock
bonuses to employees, directors and consultants. Incentive stock options granted
under the Equity Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Code. Nonstatutory (or supplemental)
stock options granted under the Equity Plan are intended not to qualify as
incentive stock options under the Code. See "Federal Income Tax Information" for
a discussion of the tax treatment of the various awards included in the Equity
Plan.
PURPOSE
The Equity Plan provides a means by which selected employees, directors
and consultants to the Company, and its affiliates, may be given an opportunity
to purchase Common Stock of the Company. The Company, by means of the Equity
Plan, seeks to retain the services of persons who are now employees, directors
or consultants to the Company or its affiliates, to secure and retain the
services of new employees, directors and consultants, and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
affiliates.
FORMS OF BENEFIT
The Equity Plan provides for incentive stock options, nonstatutory
stock options, restricted stock purchase awards and stock bonuses (collectively
"Stock Awards").
ADMINISTRATION
The Equity Plan is administered by the Board unless and until the Board
delegates administration to a committee composed of two (2) or more Board
members, all of the members of which committee may be non-employee directors (as
defined under the Exchange Act) and may also be, in the discretion of the Board,
outside directors (as defined under the Code). If administration is delegated to
a committee, such committee will have, in connection with the administration of
the Equity Plan, the powers possessed by the Board, subject, however, to such
resolutions, not inconsistent with the provisions of the Equity Plan, as may be
adopted from time to time by the Board. The Board or the committee may delegate
to a subcommittee of one or more members of the Board the authority to grant
Stock Awards to eligible persons who are not then subject to Section 16 of the
Exchange Act and/or who are either (i) not then employees covered by Section
162(m) of the Code and are not expected to be covered by Section 162(m) of the
Code at the time of recognition of income resulting from such Stock Award, or
(ii) not persons with respect to whom the Company wishes to avoid the
application of Section 162(m) of the Code. The Board may abolish a committee or
subcommittee at any time and revest in the Board the administration of the
Equity Plan. The Board has delegated the administration of the Equity Plan to
the Compensation Committee, each member of whom satisfied the requirements set
forth above. References to the Board include any committee or subcommittee
designated by the Board.
The Board has the power to determine from time to time which of the
persons eligible under the Equity Plan shall be granted awards, the type of
awards to be granted, when and how each award shall be granted, to construe and
interpret the Equity Plan and awards granted under it, and to establish, amend
and revoke rules and regulations for its administration. Notwithstanding the
foregoing, options granted to non-employee directors of the Company
("Non-Employee Directors Options") will be governed solely as set forth in
"Terms of Non-Employee Director Options" below. The Board may correct any defect
in the Equity Plan or in any award agreement to make the Equity Plan fully
effective.
14
<PAGE>
SHARES SUBJECT TO THE PLAN
The Common Stock that may be sold pursuant to awards under the Equity
Plan shall not exceed in the aggregate 5,000,000 shares of the Company's Common
Stock, including the additional 1,500,000 shares for which stockholder approval
is being sought. If any award expires or terminates, in whole or in part,
without having been exercised in full, the stock not purchased under such award
will revert to and again become available for issuance under the Equity Plan.
The Common Stock subject to the Equity Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
ELIGIBILITY
Incentive stock options may be granted only to employees. Nonstatutory
stock options, restricted stock purchase awards and stock bonuses may be granted
only to employees, directors or consultants.
No person is eligible for the grant of an incentive stock option if, at
the time of grant, such person owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company unless
the exercise price of such option is at least one hundred ten percent (110%) of
the fair market value of such Common Stock subject to the option at the date of
grant and the option is not exercisable after the expiration of five (5) years
from the date of grant, or in the case of a restricted stock purchase award, the
purchase price is at least one hundred percent (100%) of the fair market value
of Common Stock subject to the award at date of grant. No person shall be
eligible to be granted Stock Awards covering more than three hundred thousand
(300,000) shares of the Company's Common Stock in any calendar year.
TERMS OF STOCK AWARDS UNDER THE PLAN
The following are the terms of Stock Awards under the Equity Plan other
than options granted to non-employee directors. See "Terms of Non-Employee
Director Options" below.
Term and Termination. No option is exercisable after the expiration
of ten (10) years from the date it was granted.
In the event an optionee's continuous status as an employee, director
or consultant is terminated, the optionee may exercise his or her option (to the
extent that the optionee was entitled to exercise it at the time of termination)
but only within the earlier of (i) the date three (3) months after the
termination of the optionee's continuous status as an employee, director or
consultant, or (ii) the expiration of the term of the option as set forth in the
option agreement.
An optionee's option agreement may also provide that if the exercise of
the option following the termination of the optionee's continuous status as an
employee, director, or consultant would result in liability under Section 16(b)
of the Exchange Act, then the option shall terminate on the earlier of (i) the
expiration of the term of the option set forth in the option agreement, or (ii)
the tenth (10th) day after the last date on which such exercise would result in
such liability under Section 16(b) of the Exchange Act. Finally, an optionee's
option agreement may also provide that if the exercise of the option following
the termination of the optionee's continuous status as an employee, director or
consultant would be prohibited at any time solely because the issuance of shares
would violate the registration requirements under the Securities Act of 1933, as
amended, then the option shall terminate on the earlier of (i) the expiration of
the term of the option as set forth in the immediately preceding paragraph, or
(ii) the expiration of a period of three (3) months after the termination of the
optionee's continuous status as an employee, director or consultant during which
the exercise of the option would not be in violation of such registration
requirements.
15
<PAGE>
In the event an optionee's continuous status as an employee, director
or consultant terminates as a result of the optionee's death or disability, the
optionee (or such optionee's estate, heirs or beneficiaries) may exercise his or
her option, but only within the period ending on the earlier of (i) twelve (12)
months following such termination in the case of disability, eighteen (18)
months in the case of death (or such longer or shorter period as specified in
the option agreement) or (ii) the expiration of the term of the option as set
forth in the option agreement.
In the event a stock bonus or restricted stock recipient's continuous
status as an employee, director or consultant terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of stock held by that
person which have not vested as of the date of termination under the terms of
the stock bonus or restricted stock purchase agreement between the Company and
such person.
Exercise/Purchase Price. The exercise price of each incentive stock
option will not be less than one hundred percent (100%) of the fair market value
of the Company's Common Stock on the date of grant. The exercise price of each
nonstatutory stock option will not be less than eighty-five percent (85%) of the
fair market value on the date of grant. The purchase price of restricted stock
will not be less than eighty-five percent (85%) of the fair market value of the
Company's Common Stock on the date such award is made. Stock bonuses may be
awarded in consideration for past services actually rendered to the Company or
for its benefit.
Consideration. The purchase price of stock acquired pursuant to a Stock
Award is paid either in cash at the time of exercise or purchase, or (if
determined by the Board at the time of grant for an option) by deferred payment
or other arrangement or in any other form of legal consideration that may be
acceptable to the Board. Additionally, in the case of an option (and in the
discretion of the Board at the time of the grant of an option), by delivering to
the Company previously acquired shares of Common Stock of the Company. In the
case of any deferred payment arrangement, interest will be payable at least
annually and will be charged at the minimum rate of interest necessary to avoid
the treatment as interest of amounts that are not stated to be interest.
Regulation T. In connection with the exercise of options under the
Equity Plan, the Company's regular procedures may qualify for certain programs
authorized by Regulation T promulgated by the Federal Reserve Board. If
optionees elect to use such program, the Company intends to comply with the
requirements of Regulation T.
Transferability. An incentive stock option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the incentive stock option
is granted only by such person. A stock bonus or restricted stock award shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a domestic relations order. A nonstatutory stock option shall be
transferable only to the extent specifically provided for in the option
agreement evidencing the nonstatutory stock option, provided that if the
nonstatutory stock option agreement does not provide for transferability, then
the option is not transferable except by will or by the laws of descent and
distribution or pursuant to a domestic relations order. An award holder may
designate a beneficiary who may exercise his or her award after death.
Vesting. The total number of shares of stock subject to an option may,
but need not, be allotted in periodic installments. The option agreement may
provide that from time to time during each of such installment periods, the
option may become exercisable ("vest") with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or all of the
shares allotted to such period and/or any prior period as to which the option
became vested but was not fully exercised. The option agreement may also provide
that an optionee may exercise an option prior to full vesting, provided that the
Company may have a repurchase right with respect to any unvested shares.
16
<PAGE>
Restricted stock purchase awards and stock bonuses granted under the
Equity Plan may be granted pursuant to a repurchase option in favor of the
Company in accordance with a vesting schedule determined by the Board.
Re-Load Options. The Board has the authority to include as part of any
option a provision entitling the optionee to a further option (a "Re-Load
Option") in the event the optionee exercises the original option by surrendering
other shares of Common Stock to the Company. Any such Re-Load Option (i) shall
be for a number of shares equal to the number of shares surrendered; (ii) shall
have an expiration date which is the same as the expiration date of the original
option; and (iii) shall have an exercise price equal to the fair market value of
the Common Stock on the date of exercise of the original option (110% in the
case of certain 10% stockholders if the Re-Load Option is an incentive stock
option). No Re-Load Options have been granted, and it is not anticipated that
any Re-Load Options will be granted in the near future.
TERMS OF NON-EMPLOYEE DIRECTOR OPTIONS
Non-employee directors are only eligible for the grant of nonstatutory
stock options under the Equity Plan. The granting and terms of such options are
subject to the following special provisions of the Equity Plan. Except as
described below, Non-Employee Director Options are subject to the same
provisions of the Equity Plan applicable to other nonstatutory stock options.
Automatic Grants. The Equity Plan provides for the automatic grants of
options to purchase shares of Common Stock of the Company to non-employee
directors. Pursuant to the terms of the Equity Plan:
1. Each person who is elected for the first time to be a
non-employee director shall, upon the date of his initial election by
the Board or stockholders, automatically be granted an option to
purchase 20,000 shares of the Company's Common Stock on such date.
2. Each non-employee director who serves on the Board on the
final vesting date of an option that was automatically granted upon
such person's election as a non-employee director shall automatically
be granted an option to purchase 10,000 shares of the Company's Common
Stock on such date.
Term. Non-Employee Director Options under the Equity Plan have a ten
year term; however, each such option will terminate prior to the expiration date
if the optionee's service as a non-employee director terminates. In that event,
the Non-Employee Director Option will terminate twelve months following the date
of termination of service, unless the termination of service is due to the
optionee's death or disability, in which case the option will terminate on the
earlier of the expiration date or eighteen months following the date of the
optionee's death or disability. The term of a Non-Employee Director Option may
be extended if exercise within the periods is prohibited for specified reasons.
Exercise Price; Payment. The exercise price of each Non-Employee
Director Option under the Equity Plan must be equal to the fair market value of
the Company's Common Stock on the date of grant. Payment of the exercise price
is due in full in cash at the time of exercise when the number of shares being
purchased is less than 1,000 shares; when the number of shares being purchased
is 1,000 or more shares, the optionee may elect to make payment under one of the
following alternatives: (i) in cash at the time of exercise; (ii) payment by
delivery of shares of the Company's Common Stock already owned by the optionee
for at least six months; or (iii) payment by a combination of the methods
specified above.
Exercise. Non-Employee Director Options under the Equity Plan generally
become exercisable in sixty equal monthly installments after the date of grant.
However, an option granted to a person upon his election for the first time as a
non-employee director will become exercisable as follows: 20% on the first
anniversary of that director's election and the balance in equal monthly
installments ever the next forty-eight months. Subject to the satisfaction of
certain conditions, each option will be exercisable with respect to each
installment on or after the date of vesting applicable to such installment.
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ADJUSTMENTS UPON CHANGES IN STOCK
If any change is made in the Common Stock subject to the Equity Plan,
or subject to any Stock Award, without receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the class and maximum number of shares subject to the
Equity Plan, the maximum annual award applicable under the Equity Plan and the
class and number of shares and price per share of stock subject to outstanding
Stock Awards will be appropriately adjusted.
In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than 50% of the shares of the Company entitled to vote are
exchanged, then, at the sole discretion of the Board and to the extent permitted
by applicable law: (i) any surviving corporation shall assume any Stock Awards
outstanding under the Equity Plan or shall substitute similar Stock Awards for
those outstanding under the Equity Plan, (ii) such Stock Awards shall continue
in full force and effect, or (iii) any outstanding unexercised rights under any
Stock Awards shall be terminated if not exercised prior to such event; provided,
however, that with respect to Stock Awards then held by persons performing
services for the Company or an affiliate the time during which such Stock Awards
become vested or may be exercised shall be accelerated prior to such
termination.
In the event a change of control (as hereinafter defined) occurs at the
Company and, within one (1) year of such change in control, (i) an optionee's
employment with the Company or its affiliates is terminated other than for cause
(as hereinafter defined), or (ii) a non-employee director's directorship with
the Company is terminated by the Company or by the Non-Employee Director for any
reason or for no reason, options held by such terminated employee or director
may be exercised in full following such termination without regard to the
vesting limitations to which such options are otherwise subject. For the
purposes of the foregoing, a "change in control" shall have occurred if (1) any
person (as defined in Section 13 of the Exchange Act) acquires shares, other
than directly from the Company, and thereby becomes the owner of more than 30%
of the Company's outstanding shares (on a fully diluted basis) or (2) the
Company enters into a merger (other than one in connection with a voluntary
change of corporate domicile or similar reorganization or recapitalization
transaction) in which the stockholders of the Company (determined immediately
prior to the merger) do not own at least 50% of the outstanding shares of the
surviving entity after the merger. For purposes of the foregoing, a termination
shall be deemed to have been made for "cause" in the event the optionee's
employment is terminated for any of the following reasons: (A) the optionee's
continued failure to substantially perform his duties with the Company or its
affiliates, (B) the engaging by the optionee in gross misconduct materially and
demonstrably injurious to the Company, its affiliates or their employees, (C)
illicit drug use or habitual alcohol use, or (D) the commission by the optionee
of any felony.
AMENDMENT OF THE PLAN
The Board at any time, and from time to time, may amend the Equity
Plan. However, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will increase the number of
shares reserved for issuance under the Equity Plan, modify the requirements as
to eligibility for participation or in any other way if such modification
requires stockholder approval in order for the Equity Plan to satisfy the
requirements of Section 422 of the Code or to comply with the requirements of
Rule 16b-3 of the Exchange Act. The Board may in its sole discretion submit any
other amendment to the Equity Plan for stockholder approval.
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TERMINATION OR SUSPENSION OF THE PLAN
The Board may suspend or terminate the Equity Plan at any time. The
Equity Plan will terminate on February 2, 2007 if this proposal is approved by
the stockholders. No Stock Awards may be granted under the Equity Plan while the
Equity Plan is suspended or after it is terminated.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the Equity Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee
or the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive
stock option for at least two (2) years from the date on which the option is
granted and at least one (1) year from the date on which the shares are
transferred to the optionee upon exercise of the option, any gain or loss on a
disposition of such stock will be long-term capital gain or loss. Generally, if
the optionee disposes of the stock before the expiration of either of these
holding periods (a "disqualifying disposition"), at the time of disposition, the
optionee will realize taxable ordinary income equal to the lesser of (a) the
excess of the stock's fair market value on the date of exercise over the
exercise price, or (b) the optionee's actual gain, if any, on the purchase and
sale. The optionee's additional gain, or any loss, upon the disqualifying
disposition will be a capital gain or loss, which will be long-term or
short-term depending on whether the stock was held for more than one year.
Capital gains currently are generally subject to lower tax rates than ordinary
income. The maximum long-term capital gains rate for federal income tax purposes
is currently 28% while the maximum ordinary income rate is effectively 39.6% at
the present time. Slightly different rules may apply to optionees who acquire
stock subject to certain repurchase options or who are subject to Section 16(b)
of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness and the satisfaction of a tax reporting
obligation) to a corresponding business expense deduction in the tax year in
which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
Equity Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason
of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income equal
to the excess of the stock's fair market value on the date of exercise over the
option exercise price. With respect to employees, the Company is generally
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Generally, the Company will be entitled
to a business expense deduction equal to the taxable ordinary income realized by
the optionee. Upon disposition of the stock, the optionee will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such stock plus any amount recognized as ordinary
income upon exercise of the option. Such gain or loss will be long or short-term
depending on whether the stock was held for more than one year. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
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Restricted Stock Purchase Awards and Stock Bonuses. Restricted stock
purchase awards and stock bonuses granted under the Equity Plan generally have
the following federal income tax consequences:
Upon acquisition of the stock, the recipient normally will recognize
taxable ordinary income equal to the excess of the stock's fair market value
over the purchase price, if any. However, to the extent the stock is subject to
certain types of vesting restrictions, the taxable event will be delayed until
the vesting restrictions lapse unless the recipient elects to be taxed on
receipt of the stock. With respect to employees, the Company is generally
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Generally, the Company will be entitled
to a business expense deduction equal to the taxable ordinary income realized by
the optionee. Upon disposition of the stock, the optionee will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such stock plus any amount recognized as ordinary
income upon acquisition (or vesting) of the stock. Such gain or loss will be
long or short-term depending on whether the stock was held for more than one
year. Slightly different rules may apply to optionees who acquire stock subject
to certain repurchase options or who are subject to Section 16(b) of the
Exchange Act.
Other Tax Consequences. The foregoing discussion is not a complete
description of the federal income tax aspects of Stock Awards granted under the
Equity Plan. In addition, administrative and judicial interpretations of the
application of the federal income tax laws are subject to change. Furthermore no
information is given with respect to state or local taxes that may be
applicable.
Potential Limitation on Company Deductions. As part of the Omnibus
Budget Reconciliation Act of 1993, the U.S. Congress amended the Code to add
Section 162(m) which denies a deduction to any publicly-held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to awards granted in the future under the Equity Plan,
when combined with all other types of compensation received by a covered
employee from the Company, may cause this limitation to be exceeded in any
particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain, and the
option is approved by stockholders.
The Board of Directors unanimously recommends a vote FOR proposal 2.
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, the Board of Directors of
the Company appointed Coopers & Lybrand L.L.P. to be the Company's independent
auditors for the fiscal year ending December 31, 1997.
Services provided to the Company and its subsidiaries by Coopers &
Lybrand with respect to the fiscal year ended December 31, 1996 included
examination of the Company's consolidated financial statements, limited reviews
of quarterly reports, services related to filings with the SEC, and
consultations concerning information systems and various tax matters.
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Coopers & Lybrand has audited the Company's financial statements
annually since the Company's inception in 1982. Representatives of Coopers &
Lybrand are expected to be present at the Annual Meeting. They do not expect to
make a statement, but will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Coopers & Lybrand as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Coopers & Lybrand
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify this selection, the Board will reconsider
whether or not to retain that firm. Even if the selection is ratified, the Board
in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Board feels that such a
change would be in the best interests of the Company and its stockholders.
Ratification of the selection of Coopers & Lybrand as the Company's
independent auditors for fiscal year 1997 will require the affirmative vote of
at least a majority of the shares of Common Stock represented in person or by
proxy and entitled to vote at the Annual Meeting.
The Board of Directors unanimously recommends a vote FOR Proposal 3.
PROPOSAL 4
STOCKHOLDER PROPOSAL:
Appointment of Committee to Seek Buyer for the Company
The Company has received a proposal submitted by Stanley B. Price, 7
Neptune Drive, Mary Esther, Florida 32569, who has indicated that he is the
beneficial owner of 4,500 shares of the Company's Common Stock. The Board of
Directors disclaims any responsibility for the content of the proposal and the
accompanying supporting statement, which are presented as received from the
stockholder. The proposal is as follows:
"RESOLVED, that the stockholders of Scios Inc. (the `Company')
hereby request that the Board of Directors of the Company (the `Board')
take the steps necessary to appoint a special committee for the purpose
of carrying out an exhaustive search for a buyer of the Company. The
committee's activities would include but not be limited to: (i)
soliciting, reviewing and negotiating offers to acquire the Company in
[sic] terms that are fair and in the best interests of the Company's
stockholders, and that maximize the value of the stockholders'
investment in the Company, and (ii) providing the Company's
stockholders with quarterly reports on the committee's progress."
Supporting Statement of Stockholder
"I believe that there is significant inherent value in the Company that
has been unrecognized by the Company's current management, and that the Board
should take active measures to maximize the value of the stockholders'
investment in the Company by seeking a buyer for the Company. I believe that the
creation of a special committee to solicit offers for the Company would best
accomplish this goal, and that a VOTE FOR THIS PROPOSAL would best serve the
interests of stockholders."
Opposing Statement of the Board of Directors
It is the Board's strong belief that the adoption of the foregoing
proposal is not in the best interests of the Company's stockholders and that,
rather than maximizing stockholder value, its adoption would actually reduce
stockholder value. In recommending a vote against the proposal, the Board
recognizes that its inherent mandate is to maximize the value of the
stockholders' investment.
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The proposal would direct the Board to pursue one strategic
alternative: to put the Company up for sale. The Board believes that this
proposal to put the Company "in play" without a strategic plan is inherently bad
business. If the Board is forced to function under a stockholder-imposed mandate
to sell the Company, the Board's ability to negotiate in confidence and from a
position of strength will be seriously compromised. At the same time, the
uncertainty about the Company's future would be likely to adversely impact
business and operations as a result of the loss of potential and existing
corporate partners, customers, vendors, key employees and others. This is likely
to lead to unnecessary stock price volatility and seriously compromise
day-to-day management of the Company. The Board believes that a forced sale,
rather than adding value for stockholders, would actually decrease value for
stockholders.
A nearly identical proposal was submitted to stockholder vote at both
the 1996 and 1994 annual meetings of stockholders. These proposals were defeated
by a vote of approximately 87% of shares voting at the 1996 meeting and 83% of
shares voting at the 1994 meeting. The Board believes that these earlier
rejections by stockholders demonstrate that the overwhelming majority of
stockholders are aligned with the Board in its assessment that this proposal is
not in the best interest of stockholders. In addition, the Board believes that
the current proposal is particularly ill-timed in view of the Company's
expectation that it will be able to announce the results of its pivotal clinical
trials for both AURICULIN(R) anaritide and NATRECOR(R) BNP later this year and
that these results may have a major impact on stockholder value.
The Board and the Company's management will continue to consider all
opportunities for increasing stockholder value. Currently, six out of seven
members of the Board are independent directors. The proposal is not clear as to
why the Board as a whole cannot deal with such matters, as it now does. In
summary, the Board and management believe that by dictating emphasis on a single
course of action the proposal is counterproductive to stockholders' interests
and, if approved, would serve only to inhibit the Board and management from
pursuing their main objective: to maximize stockholder value.
The Board of Directors unanimously recommends a vote AGAINST Proposal 4.
PROPOSAL 5
STOCKHOLDER PROPOSAL:
Independent Chairman of the Board
This proposal was submitted by Don L. Jacks, P.O. Box 2557, Ft. Walton
Beach, Florida 32549-2557, who has indicated that he is the beneficial owner of
1,000 shares of the Company's Common Stock. The Board of Directors disclaims any
responsibility for the content of the proposal and the accompanying supporting
statement, which are presented as received from the stockholder. The proposal is
as follows:
"RESOLVED, that the stockholders of the Company recommend that
the Board of Directors take appropriate steps to require that the
Chairman of the Board be an `Independent Director.' For purposes
hereof, `Independent Director' means a director who: (i) has not been
employed by the Company as an executive within the last five years;
(ii) is not, and is not affiliated with an entity that is an adviser or
consultant to the Company [sic]; (iii) is not affiliated with a
significant customer or supplier of the Company; (iv) has no personal
services contracts with the Company; (v) is not affiliated with a
not-for-profit entity that receives significant contributions from the
Company; (vi) within the last five years, has not had any business
relationship with the Company that the Company has been required to
disclose publicly; (vii) is not employed by a public company at which
an executive officer of the Company serves as a director; (viii) has
not had a relationship described in (i) through (vii) above with any
affiliate of the Company; and (ix) is not a member of the immediate
family of any person described in (i) through (viii) above."
Supporting Statement of Stockholder
"I submit this proposal for an independent Chairman of the Board in
order to promote strong, objective leadership on the Board.
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A board of directors must formulate corporate policies and monitor
management's implementation of those policies. The Chairman of the Board is
responsible for leading the Board and helping to maintain the integrity of Board
decision-making processes, including, among other things, setting agendas and
presiding at Board meetings, and ensuring that directors are given adequate
information. I strongly believe that the Chairman also should take a lead role
in evaluating the performance of management. In my view, an independent Chairman
would best perform this function and would serve the interests of stockholders,
rather than the interests of incumbent management.
The benefits of independent directors are generally well accepted. The
New York Stock Exchange, for example, requires that at least two members of the
board of a listed company, and all members of the company's audit committee,
must meet the Exchange's standards of independence. The Investment Company Act
of 1940 (the law that governs the activities of investment companies) also
includes an independent director provision, generally requiring investment
company boards to be comprised of at least 40 percent `disinterested' directors.
I believe that a board of directors functions best when its Chairman is
an independent director, and that a VOTE FOR THIS PROPOSAL will help provide the
Board with the leadership necessary to address the needs of stockholders."
Opposing Statement of the Board of Directors
Six of the seven members of the Board, including all members of all of
the committees of the Board, are independent (non-management) directors. Each of
the non-management directors is a full participant in the Company's major
strategic and policy decisions. As a result, the independence necessary for
effective Board oversight of management, which is the purpose of the proposal,
already exists at Scios. With six of seven members being independent, the
composition of the Board and its committees more than satisfies the independent
director requirements under the rules cited by the proponent (to which the
Company is not subject), as well as the rules of the National Association of
Securities Dealers (with which the Company must comply). A recent study covering
435 companies in the S&P 500 reported that only seven of these companies (less
than 2%) had an independent Chairman of the Board.
The responsibilities of the Nominating, Audit and Compensation
Committees of the Board are described earlier in this Proxy Statement. It is the
opinion of the board that the key roles played by these committees in the
functioning of the Board make a non-management Chairman unnecessary at Scios.
The Compensation Committee determines executive compensation policies and
evaluates the performance of the Chief Executive Officer and other executive
officers. The Nominating Committee recommends director candidates to the full
Board. The Audit Committee provides oversight on the Company's financial
practices. The Chairman/CEO is not a member of any of these committees. The
Board believes that no meaningful additional measure of independence would be
provided by a non-management Chairman. There is no conflict of interest caused
by the offices of the Chairman and CEO being held by one person.
The Board's view is that it is unwise to impose the proposal's
inflexible rule that under all possible circumstances and at all times the same
person must never be both Chairman and CEO. In addition, the Board believes that
it could cost the Company at least $75,000 per year to employ an independent
Chairman, even on a part-time basis, and does not believe that the benefits
suggested by the proponent justify this additional compensation expense.
Finally, the Board believes that it is important to maintain the ability to
respond to changing circumstances, rather than adopting the rigid mandate of
this proposal.
An identical proposal submitted to stockholder vote in 1994 was opposed by
86% of the shares eligible to vote.
The Board of Directors unanimously recommends a vote AGAINST Proposal 5.
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PROPOSAL 6
STOCKHOLDER PROPOSAL:
Shareholder Advisory Committee
The Company has received a proposal submitted by Karl B. Didricksen,
8361 Calle del Cielo, La Jolla, California 92037, who has indicated that he is
the beneficial owner of 1,000 shares of the Company's Common Stock. The Board of
Directors disclaims any responsibility for the content of the proposal and the
accompanying supporting statement, which are presented as received from the
stockholder. The proposal is as follows:
"RESOLVED, that Scios Inc. shall have a shareholders advisory
committee to advise the board of directors on the interests of
shareholders. The board of directors shall ensure the formation and
effective operation of this committee and shall give due consideration
to such advice and proposals as shall be reported by this committee to
the board. Members of the committee shall serve without costs to the
company, except that the committee shall be reimbursed for normal
travel and operating expenses. The committee shall be composed of at
least five members and shall be reconstituted on an annual basis. The
board shall establish appropriate procedures for selection of members,
provided that (1) each member is a beneficial owner of at least 1,000
shares of the company's voting stock for the entire period of
membership, (2) no member has any affiliation with the company other
than as a shareholder. No member may serve more than two consecutive
terms."
Supporting Statement of Stockholder
"As a shareholder with long term investment objectives, I believe that
the decisions of the board of directors should be made with due consideration of
the view of shareholders. However, there is currently no organized forum through
which shareholders can express those views. This proposal would establish an
advisory committee and institutionalize a procedure for developing and
communicating shareholder input. I believe that this structure will benefit the
company by assuring that the board is aware of the perspective of shareholders
as it makes its decisions. The shareholder advisory committee would have no
authority to bind or act on behalf of the company. It would operate solely in an
advisory capacity. Furthermore, this proposal will not restrict the ability of
the board of directors to take whatever actions it deems best for the company.
The committee structure merely creates a means to enable such actions to be with
full consideration of the views of stockholders. By supporting my proposal, I
believe shareholders will help ensure that the directors will be in a position
to make decisions with a better understanding of the interests of shareholders."
Opposing Statement of the Board of Directors
The Board is elected by all stockholders and is charged with ensuring
that the business and affairs of the Company are managed for the benefit of all
stockholders through the exercise of its business judgment. The views of the
stockholders are carefully considered by the Board as it carries out its legal
duty of care owed to all stockholders. The Company communicates to all
stockholders on a regular basis and believes that the proposal would add
unnecessary cost by duplicating existing management procedures for communicating
with stockholders.
The Board believes that the proposal, if adopted, would create an
expensive, complex and inflexible structure. Among other things, it could compel
the Company to engage in a complicated nomination process and to pay all
expenses related to the undefined activities of the proposed committee.
Furthermore, it is likely to be difficult to recruit stockholders willing to
serve on the committee. At times it may be necessary to disclose to committee
members information that has not yet been made public by the Company, which
would make the members "insiders." As a result, they would not be able to
conduct any transactions in Company stock until the information is made public.
In addition, one or more of stockholders willing to serve could have special
interests or motives contrary to the interests of the stockholders in general.
Other stockholders, who, in the aggregate, may own a majority of the Company's
stock, could be excluded altogether.
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The Board of Directors owes a duty to consider the welfare of all
stockholders, and the Board believes the proposed committee will divert the
Board's attention from that task. More importantly, by duplicating the Board's
existing efforts to communicate with and to consider the views of all of its
stockholders, the Board believes the proposal, if enacted, would divert the
attention of the Board from its primary task, which is to see that the business
and affairs of the Company are run as effectively as possible. In summary, the
Board strongly believes that the proposal, if enacted, could compromise existing
stockholder communications procedures and waste the Company's human and
financial resources for the benefit of only few select stockholders who might
serve on the committee. The Board believes that stockholder communication
committees have not been established by other companies because of the numerous
issues implicit in their use and maintenance.
The Board of Directors unanimously recommends a vote AGAINST Proposal 6.
OTHER MATTERS
The Board of Directors does not know of other matters that may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise to act, in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS - 1998 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a
forthcoming stockholder meeting if they comply with the requirements of the
proxy rules. Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company no
later than November 30, 1997 in order to be included in the proxy statement and
proxy relating to that meeting.
By Order of the Board of Directors
JOHN H. NEWMAN
Secretary
March 31, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THIS MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. STOCKHOLDERS WHO ATTEND THE MEETING
MAY VOTE THEIR SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
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<PAGE>
DETACH HERE
SCIOS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS MAY 13, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R
O The undersigned hereby appoints Richard L. Casey and John H. Newman,
X or either of them, each with full power of substitution, as proxies
Y of the undersigned, to attend the Annual Meeting of Stockholders of
Scios Inc., to be held at the offices of the Company, 2450 Bayshore
Parkway, Mountain View, California, on May 13, 1997 at 10:00 a.m. and at
any adjournment or postponement thereof, to vote the number of shares
the undersigned would be entitled to vote if personally present, and to
vote in their discretion upon any other business that may properly come
before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4, 5 AND 6.
Please sign, date and return this proxy in the envelope provided,
which requires no postage if mailed in the United States.
___________
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
___________
<PAGE>
DETACH HERE
PLEASE MARK
/ X / VOTES AS IN
THIS EXAMPLE
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
- --------------------------------------------------------------------------------
1. Election of Directors.
NOMINEES: Samuel H. Armacost, Richard L. Casey, Myron Du Bain, Robert W.
Schrier, Burton E. Sobel, Solomon H. Snyder, Eugene L. Step
FOR WITHHELD MARK HERE
/ / / / IF YOU PLAN
TO ATTEND
THE MEETING / /
/ / __________________________________________
For all nominees except as noted above
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE BELOW / /
2. To ratify and approve amendments to FOR AGAINST ABSTAIN
the Company's 1992 Equity Incentive Plan. / / / / / /
3. To ratify the selection of Coopers &
Lybrand LLP as the Company's independent FOR AGAINST ABSTAIN
auditors for fiscal 1997. / / / / / /
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote
AGAINST stockholder proposals 4, 5 and 6.
- --------------------------------------------------------------------------------
4. Stockholder proposal to appoint FOR AGAINST ABSTAIN
committee to seek buyer. / / / / / /
5. Stockholder proposal to require FOR AGAINST ABSTAIN
independent chairman of the board. / / / / / /
6. Stockholder proposal to form FOR AGAINST ABSTAIN
shareholder advisory committee. / / / / / /
(Please sign exactly as name appears. When shares are held by joint tenants,
both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.)
Signature:________________ Date:________ Signature:_________________ Date:_____
