SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Scios Inc.
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(Name of Registrant as Specified In Its Charter)
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<PAGE>
On January 12, we announced a Company-wide retention program. The following
Q & A has additional information about this program. The full text of the actual
retention agreements have been filed with the Securities and Exchange
Commission, and can be viewed here
(http://www.freeedgar.com/search/WL.asp?C=726512&F=8-K&D=1/24/2000).
You can also read additional information about the program in our Proxy
Statement for the February 28, 2000 Annual Meeting
(http://www.freeedgar.com/search/WL.asp?C=726512&F=DEFC14A&D=1/20/2000).
We have also provided the retention agreements to Mr. Kirk, per his request. To
see our response to Mr. Kirk, click here (Internet link to document attached as
Exhibit 99.1 below)
Q: What is our retention program?
A: Our retention program is designed to keep employees focused
on the business of the company during a time of instability.
The Board decided a retention program was necessary to
protect the ongoing business interests of Scios in light of
Mr. Kirk's proxy contest to replace the Board. In recent
correspondence, Mr. Kirk has stated plans to eliminate
certain functions of Scios, heightening the necessity of the
program.
This program is important for stockholders because it
stabilizes the company's most valuable assets -- our
workforce.
Q: Why does the Board believe that the employees need
protection at this time?
A: A proxy contest creates uncertainty about the direction of
the Company. And, Mr. Kirk's stated plans are to eliminate
several functions of Scios. In light of this uncertainty,
the Board felt employees needed protection for three
reasons.
o Job Security: As we anticipated, Kirk's ideas for Scios
include eliminating R&D, evaluating management, and
separating the Psychiatric Sales and Marketing Division.
These statements create a sense of insecurity within the
management team and with all employees.
o Research & Development: Kirk's recent letter states that he
will eliminate Scios' unfunded R&D functions. This places
many highly valued employees in immediate jeopardy of losing
their jobs at Scios. The proliferation of high-paying jobs
in Silicon Valley offers our employees job choices which can
impact employee retention, especially when someone like Mr.
Kirk has threatened to eliminate your position.
<PAGE>
o Work Environment and Career Opportunity: We need all our
employees but their career prospects at Scios have been
threatened by this proxy contest. Many Scios employees are
dedicated to discovering new therapies to advance the
medical community. Companies that Kirk has been involved
with do not contribute to the future of medicine in this
way. Kirk has interests in a lot of private companies
engaged in different kinds of activities. None appear to be
based on a drug discovery model. For example, Lotus
Biochemical, which Kirk wanted to sell to Scios last summer,
is a very different type of company than Scios.
Q: How much is this protection costing and what benefits do
employees receive?
A: It doesn't have to cost anything. The retention program is
designed with a "double trigger". This means that two things
must happen before the program costs a dime. There must
first be a change of control of Scios. Even after a change
of control, nothing happens unless an employee is forced out
of the company. Then, and only then, the employee receives a
severance payment. Employees fired for cause or who leave
voluntarily without good reason do not receive any benefits
under the program.
For information on the benefits for employees if a change
of control AND involuntary termination occurs, click here
(Internet link to chart immediately below).
Q: How does this protection help Scios employees?
A: The only way Scios can continue to fully and efficiently
implement its aggressive new business plan is to ensure that
our employees remain committed to Scios and focused on their
jobs without being induced to look for a new job in a very
competitive job market.
Q: Why is this important to stockholders?
A: Employee retention is a key component of building
stockholder value.
Q: How long does this program continue?
A: This program will end December 31, 2001 if a change of
control has not occurred by then, or unless extended by the
Board. It has been very carefully designed to create a
stable job environment during the next two years when
programs for Natrecor and a p38 kinase inhibitor are in
critical phases.
Q: How do you respond to Mr. Kirk's criticism of the retention
program?
<PAGE>
A: We believe that Mr. Kirk's attack on the program is not
supported by the facts.
o The Scios Board, after consultation with independent
compensation advisors, instituted a very reasonable and
effective program to assure stability of the Scios work
force during implementation of the company's aggressive new
business plan and time of instability because of Kirk. The
Board has not dispensed "multi-year golden parachutes" to
every employee as Mr. Kirk alleges.
o Kirk suggests the program raises the question whether the
Scios Board and management hold stockholder interests as a
priority, implying the program is an act of careless
disregard of our stockholders' trust. To the contrary, it is
precisely because Scios stockholders are the Board's
priority that this program has been put in place. Any threat
to our workforce is a threat to stockholder value.
<TABLE>
<CAPTION>
Individual Flex-Time Sr ICs Directors Dick Brewer
Contributors Sales Force and Sr Dirs VPs CEO
Sr Mgrs
<S> <C> <C> <C> <C> <C> <C>
Level: 0-17 18-20 21- 24 25+
Seniority 2 wks/yr of 2 wks/yr of 3 wks/yr of 4 wks/yr of 1.5 x Annual 2.25 x Annual
Severance Pay service service service service Salary* Salary*
Minimum 3 months 3 months 3 months 4 months N/A N/A
Severance
COBRA - 3 months 3 months 3 months 3 months 18 months 24 months
Medical
Insurance
Out Placement Yes - Yes - Yes - Yes - Yes Yes
Services Group Wkshops Group Wkshops Consultant Consultant Consultant Consultant
1 month 1 month 2 months 3 months 6 months 6 months
Value: $1,800 Value: $1,800 Value: $5,000 Value: $6,500 Value: $10,000 Value: $10,000
<FN>
* including target bonus
</FN>
</TABLE>
January 24, 2000
VIA FACSIMILE AND FEDERAL EXPRESS
Mr. Randal J. Kirk
The Governor Tyler
1902 Downey Street
Radford, VA 24141
Re: Scios Inc.
Dear Mr. Kirk:
Enclosed are the forms of retention agreements recently entered into by
Scios requested by your attorney. The Company has today filed copies of these
agreements with the Securities and Exchange Commission.
Your characterization of these retention agreements as providing
"multi-year golden parachutes" to all employees is inaccurate. The retention
agreements will be in place for two years through December 31, 2001, to protect
our employees during the period when the programs for Natrecor and p38 kinase
inhibitor are in critical phases of development. But, because the retention
agreements have double triggers, the program will cost nothing and an employee
will be entitled to no benefits unless and until there is both a change of
control and the employee is forced out of the Company.
Additionally, your characterization inaccurately implies that all
employees will receive multi-year severance payments. This is not true. As it
effects senior executives, the program is clearly and accurately described in
our proxy statement. As for the rest of our workforce, the program provides for
lump sum payments and these employees are entitled to from two to four weeks of
pay for each year of service. The average payment would be equivalent to less
than four months cash compensation for employees below the vice president level.
This program is similar in scope to the reduction in force program we put in
place at the time our work force was reduced in March of 1999.
<PAGE>
Mr. Randal J. Kirk
January 24, 2000
In light of the threats to our employees in your announced plans to
evaluate management, and more recently to eliminate several functions of Scios,
the Board believes it has instituted, after consultation with independent
compensation advisors, a very reasonable and effective program to retain our
valuable employees during implementation of the Company's aggressive new
business plan.
Sincerely,
/s/
Donald B. Rice
Chairman of the Board
Enclosure
