[LOGO]
Scios Inc.
820 West Maude Avenue
Sunnyvale, CA 94086
_____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 28, 2000
9:00 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 office
located at 749 North Mary Avenue, Sunnyvale, California 94086, at 9:00 a.m. on
February 28, 2000, to consider and act upon the following matters:
(1) To elect directors of the Company to serve for the ensuing year and
until their successors are elected.
(2) To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent auditors for fiscal 2000.
(3) To act upon such other matters that may properly come before the
meeting or any adjournment or postponement of the meeting.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice. Only stockholders of record at the close of
business on January 11, 2000 will be entitled to notice of and to vote at this
meeting and any adjournment or postponement thereof. For ten days prior to the
meeting, a complete list of stockholders entitled to vote at the meeting will be
available for examination by any stockholder for purposes relating to the
meeting, during ordinary business hours at the Company's office located at 749
North Mary Avenue, Sunnyvale, California 94086.
By Order of the Board of Directors
JOHN H. NEWMAN
Secretary
Sunnyvale, California
January [__], 2000
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED GOLD PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PRE-PAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE.
THE BOARD OF DIRECTORS URGES YOU NOT TO SIGN ANY WHITE PROXY CARD SENT TO YOU BY
THE KIRK GROUP. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PREVIOUSLY
SIGNED WHITE PROXY BY DELIVERING A WRITTEN NOTICE OF REVOCATION OR A LATER DATED
GOLD PROXY CARD IN THE ENCLOSED ENVELOPE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU
MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT
IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU
WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY
ISSUED IN YOUR NAME.
<PAGE>
Scios Inc.
820 West Maude Avenue
Sunnyvale, California 94086
_____________________
Proxy Statement
Annual Meeting of Stockholders
February 28, 2000
General
The enclosed proxy 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 office located at 749
North Mary Avenue, Sunnyvale, California 94086 at 9:00 a.m. on February 28,
2000, and at any adjournment or postponement of that meeting, for the purposes
set forth herein and in the accompanying Notice of Annual Meeting. The
approximate mailing date for this Proxy Statement and the enclosed proxy is
January [__], 2000.
The Board of Directors has fixed the close of business on January 11, 2000
as the record date for the determination of stockholders entitled to vote at the
Annual Meeting. At that time, there were 38,468,652 shares of Common Stock
issued and outstanding (not including any treasury shares).
Voting
Each share of Common Stock issued and outstanding on the record date is
entitled to one vote. In the election of directors, the seven candidates
receiving the highest number of affirmative votes of the shares present and
voting at the Annual Meeting at which a quorum is present will be elected
directors. See "Nominations by the Kirk Group" below. With respect to the
election of directors, where no vote is specified on a proxy, the votes
represented by the GOLD proxy card will be cast, at the discretion of the
proxies named therein, for all the candidates nominated by the Board. An
affirmative vote of a majority of the shares present and voting at the meeting
is generally required for approval of any other items properly submitted to the
stockholders for their consideration.
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.
Abstentions and broker non-votes are counted towards a quorum. Abstentions are
counted in tabulations of the votes cast on proposals presented to stockholders
and have the effect of negative votes, 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 attending the
meeting and voting in person. Attendance at the meeting will not itself revoke a
proxy.
Solicitation of Proxies
Solicitation of proxies may be made by directors, officers and other
employees of the Company named on Appendix A by personal interview, telephone,
telegraph, telefax or electronic communications. No additional compensation will
be paid for any such services. Costs of solicitation will be borne by the
Company. Upon request, the Company will reimburse the reasonable fees and
expenses of banks, brokerage houses or other nominees or fiduciaries for
forwarding proxy materials to, and obtaining authority to execute proxies from,
beneficial owners for whose accounts they hold shares of Common Stock.
The Company has retained MacKenzie Partners, Inc. ("MacKenzie") to assist
in the solicitation of proxies. Pursuant to the Company's agreement with
MacKenzie, it will provide various proxy advisory and solicitation services for
the Company at a fee estimated not to exceed $125,000, plus reasonable
out-of-pocket expenses and indemnification against certain liabilities. It is
expected that MacKenzie will use approximately 35 persons in such solicitation.
<PAGE>
Certain information concerning the directors, officers and other employees
of the Company who may solicit proxies is attached to this Proxy Statement as
Appendix A. Certain information concerning the Common Stock held by the persons
listed in Appendix A and certain transactions between any of them and the
Company is set forth in Appendix B.
Although no precise estimate can be made at this time, the Company
anticipates that the aggregate amount to be spent by the Company in connection
with the solicitation of proxies by the Company will be approximately $625,000,
of which approximately $205,000 has been incurred to date. This amount includes
the fees payable to MacKenzie but excludes (i) the salaries and expenses of
officers, directors, and employees of the Company; and (ii) the normal expenses
of an uncontested election. The aggregate amount to be spent will vary depending
on, among other things, any developments that may occur in the proxy contest
described below.
Please complete, date and sign the enclosed GOLD proxy card and return it
promptly in the envelope provided. If your shares are held in "street name,"
only your bank or broker can vote your shares and only upon your specific
instructions. Please contact the person responsible for your account and
instruct him or her to vote the GOLD proxy card as soon as possible.
The Board of Directors urges you NOT TO SIGN any WHITE proxy card sent to
you by the Kirk Group. See "Nominations by the Kirk Group" below. If you have
already done so, you may revoke your previously signed WHITE proxy by delivering
a written notice of revocation or a later dated GOLD proxy card in the enclosed
envelope.
<PAGE>
NOMINATIONS BY THE KIRK GROUP
In a letter dated December 2, 1999 (the "Kirk Group Notice"), Randal J.
Kirk, and certain entities (the "Kirk Group") notified the Company that it
intended to nominate eight individuals for election to the Board. The Kirk Group
consists of Mr. Kirk and each of the following entities that Mr. Kirk directly
controls: RJK, LLC, a Virginia limited liability company, Kirkfield, LLC, a
Virginia limited liability company, and The Kirk Family Investment Plan, a joint
account. Mr. Kirk has filed the Kirk Group Notice with the Securities and
Exchange Commission in an amendment to a Schedule 13D dated December 3, 1999.
That Schedule 13D contains his information regarding his nominees.
The Board is convinced that the election of new directors nominated by the
Kirk Group would run directly counter to the best interests of the Company's
stockholders. The Board is intimately familiar with the Company and the industry
in which it operates. The Board is fully committed to maximizing value for all
of the Company's stockholders; and the Company has made significant strides in
restructuring its business since the hiring of Richard Brewer as President and
CEO in September 1998. The Board believes that a change in the Board at this
time would be highly disruptive to the strategy the Company is actively pursuing
and could raise significant concerns with current and future business partners,
and that uncertainties arising from such a change could result in the loss of
key personnel, who are unique and important assets to the Company, thereby
disrupting or delaying completion of the important Natrecor(R) clinical trial
now underway.
The Company is not responsible for the accuracy of any information provided
by or relating to the Kirk Group contained in its notice to the Company, in any
proxy materials filed or disseminated by the Kirk Group or any other statement
it may make.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN
FAVOR OF THE NOMINEES OF THE BOARD DESCRIBED IN PROPOSAL 1 BELOW AND NOT VOTE IN
FAVOR OF THE NOMINEES OF THE KIRK GROUP.
PROPOSAL 1
ELECTION OF DIRECTORS
As noted below, Myron Du Bain is retiring as a Director of the Company upon
the election of the Board at the Annual Meeting. Accordingly, pursuant to the
procedure set forth in the Company's Certificate of Incorporation, the number of
Directors of the Company has been reduced from eight to seven effective
immediately prior to the election of directors at the Annual Meeting and
accordingly a Board of seven (7) Directors will be elected. The term of office
of each person so 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 GOLD proxy cards 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 represented 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. 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 past five years,
certain directorships and their ages as of December 31, 1999.
<TABLE>
<CAPTION>
Director
Name Age Since
---- --- -----
<S> <C> <C>
Samuel H. Armacost 60 1995
Richard B. Brewer 48 1998
Donald B. Rice, Ph.D. 60 1997
Charles A. Sanders, M.D. 67 1997
Solomon H. Snyder, M.D. 61 1992
Burton E. Sobel, M.D. 62 1996
Eugene L. Step 70 1993
</TABLE>
<PAGE>
Mr. Armacost was elected to the Company's Board of Directors in August
1995. In July 1998, Mr. Armacost became Chairman of the Board of Directors of
SRI International. From 1990 to 1998, he was a Managing Director of Weiss, Peck
& Greer, LLC, an investment firm. He was a Managing Director of Merrill Lynch
Capital Markets from 1987 to August 1990, and was President, Director and Chief
Executive Officer of BankAmerica Corporation from 1981 to 1986. Mr. Armacost is
a member of the Board of Directors of Chevron Corporation and Exponent, Inc. In
addition, Mr. Armacost is on the Board of Directors of the James Irvine
Foundation and the Advisory Board of the California Academy of Sciences, and he
is a member of the International Advisory Group for Toshiba Corporation and The
Business Council.
Mr. Brewer is President and Chief Executive Officer of Scios Inc. He joined
Scios in September 1998 and has served as a Director since that time. From early
1996 to 1998, he was with Heartport Inc., first as Executive Vice President of
Operations and then, Chief Operating Officer. Prior to that, Mr. Brewer served
in various capacities with Genentech, Inc. from 1984 to 1995, most recently as
Senior Vice President, U.S. Sales and Marketing, Genentech Europe Ltd., and
Genentech Canada, Inc. Mr. Brewer earned a B.S. from Virginia Polytechnic
Institute and a M.B.A. from Northwestern University.
Dr. Rice was elected Chairman of the Board in November 1998 and has served
as a Director of Scios since August 1997. Dr. Rice is the President, Chief
Executive Officer and Director of UroGenesys, Inc. Previously, he served
Teledyne, Inc. as President, Chief Operating Officer and Director from 1993 to
1996, the U.S. Department of Defense as Secretary of the Air Force from 1989 to
1993, and The RAND Corporation as President and Chief Executive Officer from
1972 to 1989. He was also Assistant Director of the Office of Management and
Budget, The White House. Dr. Rice is a member of the Board of Directors of Wells
Fargo & Company, Vulcan Materials Company and Unocal Corporation.
Dr. Sanders was elected a Director of Scios in September 1997. He served as
Chief Executive Officer of Glaxo Inc. from 1989 to 1994, and was Chairman of the
Board from 1992 to 1995. He also served on the Board of Directors of Glaxo plc.
Previously, he held a number of positions at Squibb Corporation, a multinational
pharmaceutical corporation, including Vice Chairman, Chief Executive Officer of
the Science and Technology Group and Chairman of the Science and Technology
Committee of the Board. Dr. Sanders is a member of the Board of Directors of
Magainin Pharmaceuticals, Vertex Pharmaceuticals, Staff Mark, Inc., Kendle
International, Trimeris, Pharmacopeia, Genentech, Inc. and Biopure.
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, served as a director of Squibb Corporation from 1986 to 1989 and is
also a member of the Board of Directors of Fletcher Allen Healthcare. 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, American College of Cardiology and Fellowship and Council
membership in the American Association for the Advancement of Science.
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.
<PAGE>
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.,
Pathogenesis Corporation and DBT Online Inc.
In accordance with his longstanding personal plans, Myron Du Bain (age 76),
a director of the Company since 1989, will retire from the Board upon the
election of the new slate of directors at the Annual Meeting. The Board
sincerely thanks Mr. Du Bain for the guidance and wisdom he has provided to the
Company.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND
COMMITTEES OF THE BOARD
Compensation of Directors
General.
Fees. Directors who are not otherwise employed by the Company receive an
annual retainer of $8,000 and a fee of $1,000 per day for attendance at meetings
of the Board of Directors or committee meetings, and $500 for attendance at a
telephonic meeting. Directors are also eligible for reimbursement of expenses
incurred in connection with attendance at Board meetings in accordance with
Company policy.
Stock Options. In May 1998, the stockholders of the Company approved an
amendment of the Company's 1992 Equity Incentive Plan (the "Equity Plan") to
provide that each non-employee Director shall automatically be granted, at each
annual meeting where the Director is elected to the Company's Board, a
supplemental stock option to purchase 10,000 shares of the Company's Common
Stock. Such options are granted with exercise prices equal to the current full
market price. 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. Rice, Dr. Sanders, Dr. Snyder, Dr. Sobel and Mr. Step each
received an automatic option grant at the time of re-election to the Board in
May 1999.
Board of Directors. During 1999, there were 12 meetings of the Board of
Directors and 10 meetings of the various committees.
Chairman of the Board. On November 9, 1999, Donald B. Rice was re-elected
Chairman of the Board, a nonexecutive position, and for serving in this role the
Board awarded Dr. Rice additional cash compensation of $7,500 per quarter and a
supplemental stock option to purchase 15,000 shares of the Company's Common
Stock at the then current market price.
Audit Committee. The Audit Committee consists of four non-employee
Directors: Mr. Step (Chairman), Mr. Armacost, Dr. Sanders and Dr. Sobel. The
Audit Committee met four times in 1999. 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.
Management Development and Compensation Committee. The Management
Development and Compensation Committee consists of five non-employee Directors:
Mr. Armacost (Chairman), Mr. Du Bain, Dr. Rice, Dr. Sanders and Mr. Step. The
committee met five times during 1999. 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. Rice and Dr. Snyder. The
committee met one time in fiscal 1999. Among the committee's functions are
recommending nominees to serve on the Board of Directors, recommending the size
and composition of the Board, making recommendations concerning membership of
Board committees and Director compensation, and consulting with the Board of
Directors and management to determine criteria for nominations. The Nominating
Committee will consider nominees recommended by stockholders.
<PAGE>
In 1999, all Directors attended at least 75% of the meetings of the
Board and Committees of the Board of which they were members, with the exception
of Dr. Sanders, who attended 8 of 12 meetings of the Board and 6 of 9 meetings
of Committees of the Board of which he was a member.
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 December 31, 1999, 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>
Samuel H. Armacost 60,500 *
Richard B. Brewer 285,000 *
Myron Du Bain 63,500(3) *
Donald B. Rice, Ph.D. 66,250 *
Charles A. Sanders, M.D. 27,166 *
Solomon H. Snyder, M.D. 42,333 *
Burton E. Sobel, M.D. 33,500 *
Eugene L. Step 42,500 *
Elliott B. Grossbard, M.D. 291,865 *
David W. Gryska 69,666 *
John A. Lewicki, Ph.D. 222,773 *
John H. Newman 272,173(3) *
All officers and directors as a
group (12 persons) 1,477,226 3.8%
Randal J. Kirk(4)
Third Security LLC
The Governor Tyler
Radford, VA 24141 2,000,000 5.2%
<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. Brewer, Mr. Du Bain, Dr. Rice, Dr. Sanders, Dr.
Snyder, Dr. Sobel, Mr. Step, Dr. Grossbard, Mr. Gryska, Mr. Newman, Dr.
Lewicki, and all officers and directors as a group, includes 35,500;
180,000; 33,500; 46,250; 27,166; 22,333; 33,500; 41,500; 284,081; 29,166;
178,123; 204,872; and 1,115,991 shares, respectively, issuable upon
exercise of outstanding options exercisable within sixty days of December
31, 1999.
(3) With respect to Mr. Du Bain, includes 25,000 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 for the benefit of
Mr. Newman's children.
<PAGE>
(4) Based solely on information contained in a Schedule 13D dated July 3, 1999,
and includes 387,000 shares reported to be beneficially owned by RJK, LLC,
225,000 shares reported to be beneficially owned by Kirkfield LLC, and
251,400 shares reported to be beneficially owned by The Kirk Family
Investment Plan.
</FN>
</TABLE>
There are no family relationships between any of the Directors or executive
officers of the Company. 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.
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.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during 1999 its officers,
directors and greater than ten percent beneficial owners complied with all
applicable filing requirements.
<PAGE>
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, 1999 for the fiscal years ended December 31, 1999, 1998
and 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Name Securities
and Restricted Underlying All Other
Principal Stock Stock Compensa-
Position Year Salary ($) Bonus (1)($) Award (2)($) Options(#) sation (3)($)
- -------- ---- ---------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard B. Brewer 1999 $400,000 $200,000 -- 200,000 $4,538
President and Chief 1998 $103,000(4) $ 50,000 $596,775 275,000 $3,000
Executive Officer 1997 N/A
Elliott B. Grossbard, M.D. 1999 $270,000 -- -- 40,000 $3,000
Senior Vice President 1998 $260,000 $100,000 -- 68,500 $3,000
of Development 1997 $246,064 -- -- 19,000 $3,000
David W. Gryska 1999 $195,000 $ 60,000 $152,460 -- $3,000
Vice President of Finance 1998 $ 8,860(5) $ 5,000 -- 100,000 --
and Chief Financial Officer1997 N/A
John A. Lewicki, Ph.D. 1999 $230,000 $ 20,000 -- 20,000 $13,553
Vice President 1998 $222,000 $ 50,000 -- 50,000 $3,000
of Research 1997 $222,000 -- -- 12,000 $3,000
John H. Newman 1999 $228,000 $ 47,500 -- 20,000 $8,923
Senior Vice President, 1998 $220,000 $ 50,000 -- 53,500 $3,000
General Counsel & 1997 $212,500 -- -- 19,000 $3,000
Secretary
<FN>
- ---------------
(1) 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 Management Development and Compensation Committee. The
bonus to Mr. Brewer is the minimum provided for in his employment
agreement. In addition, the 1999 amount for Mr. Gryska includes a $5,000
award under the Company's Spot Bonus Award program to recognize his role in
the sale of the Company's Mountain View real estate.
(2) Mr. Brewer received 100,000 shares of Common Stock valued on the grant
date at $5.96875 per share upon becoming President and Chief Executive
Officer (See Note 4). 50% of the shares vested on the first anniversary of
his employment (September 9, 1999) triggering an income tax withholding
obligation of $73,206.25 which Mr. Brewer has paid and 50% of the shares
will vest on the second anniversary of his employment with a similar tax
obligation due from Mr. Brewer at that time. The aggregate value of such
shares on December 31, 1999 was $418,750. Mr. Gryska, the Company's Vice
President of Finance and Chief Financial Officer, received 40,000 shares
of Common Stock valued on the grant date at $3.8125 per share. 25% of the
shares vest on August 9, 2000 and 75% of the shares vest on August 9,
2002. The aggregate value of such shares on December 31, 1999 was
$167,500. No dividends will be paid by the Company with respect to the
restricted stock awards.
<PAGE>
(3) Consists of Company matching contributions under the 401(k) Profit Sharing
Plan and Trust, which was established in 1986 and unused vacation time
redeemed for cash (Mr. Brewer, $1,538; Dr. Lewicki, $10,553 and Mr.
Newman, $5,923). As of December 31, 1999, 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.
(4) Mr. Brewer became President and Chief Executive Officer of the Company at
an annual salary of $400,000 in September 1998.
(5) Mr. Gryska became Vice President of Finance and Chief Financial Officer of
the Company at an annual salary of $195,000 in December 1998.
</FN>
</TABLE>
Stock Option Grants and Exercises
In the Company's efforts to recruit the best available talent in a
competitive labor market, the Company grants stock options to provide equity
incentives. The Company currently grants stock options under the 1992 Equity and
Incentive Plan and the 1996 Non-Officer Stock Option Plan.
The following table provides certain information on stock options granted
to the executive officers named in the Summary Compensation Table, in the fiscal
year ended December 31, 1999. The Company did not grant any stock appreciation
rights in the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term(1)
----------------- -------------------------------------
No. of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted(2)(#) Fiscal Year ($/Sh)(2) Date 0%($) 5%($) 10%($)
- ---- ------------- ----------- --------- -------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Brewer 200,000(3) 9.83 $4.09 05/02/09 0 $514,907 $1,304,877
E. Grossbard 40,000(4) 1.97 $8.75 02/08/09 0 $220,113 $ 557,810
D. Gryska -0- -- -- -- -- -- --
J. Lewicki 20,000(4) 0.98 $8.75 02/08/09 0 $110,057 $ 278,905
J. Newman 20,000(4) 0.98 $8.75 02/08/09 0 $110,057 $ 278,905
<FN>
- ---------
(1) The potential realizable value is based on the assumption that the price of
the Common Stock appreciates at the annual rate shown, compounded annually,
from the date of grant until the end of the ten-year option term. The
numbers are calculated based on requirements promulgated by the Securities
and Exchange Commission, which did not reflect the Company's estimate of
future stock price growth.
(2) See "management development and compensation committee report" for
additional information on these stock options. All grants in this table
were made pursuant to the 1992 Equity Incentive Plan. All options are
granted at fair market value on the date of grant.
<PAGE>
(3) These options vest in 4 annual installments commencing on May 3, 1999 and
ending on May 3, 2002.
(4) 75% of these options vest in monthly installments commencing on January 1,
1999 and ending on December 31, 2001; 25% vest in monthly installments
commencing January 1, 2002 and ending on December 31, 2002.
</FN>
</TABLE>
The following table sets forth certain information with respect to options
exercised and options held at December 31, 1999 by the executive officers named
on the Summary Compensation Table.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fy-End Option Values
Value of Unexercised,
Shares Number of Securities Underlying In-the-Money Options
Acquired on Value Unexercised Options at FY-End at FY-End
Name Exercise(#) Realized($) Exercisable(#) Unexercisable(#) Exercisable(1)($) Unexercisable(1)($)
- ---- ----------- ---------- -------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
R. Brewer 0 0 180,000 295,000 $4,687.50 $14,062.50
E. Grossbard 1,500 $7,031.25 277,750 76,625 0.00 0.00
D. Gryska 0 0 25,000 75,000 0.00 0.00
J. Lewicki 0 0 200,000 57,250 0.00 0.00
J. Newman 0 0 173,250 54,125 0.00 0.00
<FN>
- ---------
(1) Based on the amount, if any, by which the market value of the Company's
Common Stock at December 31, 1999 ($4.1875) exceeds the exercise price of
the options.
</FN>
</TABLE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
See "Management Development and Compensation Committee Report - Chief
Executive Officer Compensation" for a description of Mr. Brewer's employment
agreement.
In January 2000, the Company entered into individual agreements (the
"Agreements") with Mr. Brewer and each of the Company's other officers (other
than Dr. Grossbard who elected not to participate). The Agreements are intended
to encourage the Company's officers to remain with the Company during a period
of uncertainty with respect to the Company's governance created by the
nominations by the Kirk Group.
The Agreements provide various severance benefits to such officers in the
event their employment is terminated involuntarily (other than for cause (as
defined in the Agreements), disability or death) or voluntarily for Good Reason
(defined below), in either case within one year after a Change of Control
(defined below). In general, a Change of Control will occur if on or prior to
December 31, 2001, (i) any person acquires fifty percent (50%) or more of the
voting power of the Company's stock, (ii) any person acquires twenty percent
(20%) or more of the voting power of the Company's stock unless approved in
advance by the Board, (iii) the individuals who comprised the Company's Board of
Directors on January 11, 2000 cease to comprise a majority of the Board, (iv) a
merger, consolidation, reorganization or sale of all or substantially all of the
Company's assets occurs and the Company's stockholders do not own at least fifty
percent (50%) of the voting securities of the entity resulting from such merger,
consolidation or reorganization or which acquires such assets, or (v) there is a
complete liquidation of the Company. The Agreements will automatically expire if
a Change of Control has not occurred by December 31, 2001, unless extended by
the Board for up to two additional years. In general, Good Reason means (a)
relocation of the Company's executive offices by more than 40 miles, (b)
assignment of duties inconsistent with the officer's position or substantial
adverse alteration in the officer's responsibilities from those in effect before
the Change of Control, or (c) reduction in the officer's total annual cash
salary and bonus opportunity.
<PAGE>
The Agreements provide for the following severance benefits to each
officer: (i) a lump sum payment based on a multiple of his or her annualized
cash compensation, including target bonus, (ii) continuation of the health care
benefits that were being provided by the Company to such officer and his or her
family immediately prior to termination, and (iii) outplacement services at the
Company's expense (up to a maximum of $10,000). Each of the Agreements is
substantially identical, except that the severance compensation multiple for Mr.
Brewer is 2.25 and the multiple for the other officers is 1.5, and the
continuation of health care benefits is for twenty-four (24) months for Mr.
Brewer and eighteen (18) months for the other officers. In addition, consistent
with Mr. Brewer's Employment Agreement, his Agreement includes within the
meaning of Good Reason a material change in the principal line of business of
the Company without his concurrence, while the other Agreements do not. All
benefits payable under the Agreements would be reduced to the extent necessary
to preserve the ability of the Company to deduct the severance benefits paid and
to prevent payments to any officer from exceeding the limit of Section 4999 of
the Code applicable to "excess parachute payment" (as defined in Section 280G of
the Code). The Agreements are not employment contracts and the Agreement with
Mr. Brewer is intended to supplement his Employment Agreement only with respect
to severance payments in the event of termination of employment following a
Change of Control (as described above) and otherwise does not amend or modify
his Employment Agreement.
Severance arrangements also are in effect for all other regular employees
of the Company, conditional on involuntary termination or voluntary termination
upon reductions in the compensation for such employees following a Change of
Control, with the amount of severance benefits based on an employee's level with
the Company.
<PAGE>
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT(1)
The Management Development and 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 specific
compensation policies and levels. In 1999, the Committee was composed of Mr.
Armacost, Mr. Du Bain, Dr. Rice, Dr. Sanders and Mr. Step. None of these
directors were officers or employees of the Company.
Compensation Philosophy
The goals of the compensation program are to link 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 build long-term stockholder value.
Key elements of this philosophy are:
o The Company pays competitively with leading biotechnology and other
companies with which the Company competes for management or employee
talent. To ensure that pay is competitive, the Company regularly compares
its pay practices with these companies and sets its compensation parameters
based on this review.
o The Company maintains annual incentive opportunities sufficient to provide
motivation to achieve specific business goals and to generate rewards that
bring total compensation to competitive levels.
o 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 strategic opportunities as
owners as well as employees.
The primary components of executive compensation are base salary, annual
incentives and long-term equity incentives. Over the last five years, the
Committee has not granted a salary increase to the CEO and has only granted
modest or no salary increases over the last three years to other executives.
These actions reflect the Committee's intent to lower the relative percentage of
fixed compensation and increase the relative percentage of pay at risk based on
performance.
The Committee's objective in general is to set each component of executive
compensation at the market average when compared to a nationwide survey of the
biotechnology industry (the "comparator group"). In 1999, the comparator group
contained approximately 300 companies. Many of the companies in the comparator
group are included in the indices used in the Performance Graph included in this
Proxy Statement.
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
targeted at the survey weighted average salary for comparable positions. Within
this range, the Committee subjectively considers individual factors, including
individual performance, level of responsibility, prior experience and breadth of
knowledge, as well as competitive pay Practices and 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 evolution.
Annual Incentive. The Employee Incentive Plan, an annual award plan, offers
variable pay for officers and other employees of the Company based 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
- --------
(1) The material in this report and the chart on page 13 is not "Soliciting
Material", is not deemed "filed" under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, or the
Exchange Act and is not to be incorporated by reference into any filing of
the Company whether made before or after the date hereof, regardless of any
general incorporation language in such filing.
<PAGE>
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 long-term goal of building stockholder value.
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 that assessment.
Awards are paid in cash and distributions are made in February following the
performance year.
The annual performance objectives established for 1999 included:
o completing development benchmarks for the Company's lead products -
NATRECOR(R)(nesiritide) and p38-kinase inhibitors - that had been
identified for accomplishment in 1999;
o implementing the Company's 1999 restructuring plan, including sale of
certain real estate, a staff reduction and other organizational goals, and
consolidation of facilities;
o identifying and developing additional products from the Company's research
pipeline as candidates for clinical testing; and
o financial goals for top line revenues, operating expenses, and year end
cash position.
In January 2000, the Committee determined that despite the FDA's
nonapproval of Natrecor(R) the Company made important progress in 1999, and that
many of its corporate objectives were met. Specifically, the Committee
determined that Company had accomplished some but not all of its development
benchmarks for its products; successfully implemented its restructuring plan,
including effecting a 30% staff reduction, the sale of the Mountain View campus
and Baltimore building, closing the Company's protein manufacturing facility on
schedule after making sufficient quantities of FGF to fulfill contractual
obligations to Kaken, and successful consolidation of operations in facilities
in Sunnyvale, following a significant construction project to expand laboratory
facilities; demonstrated efficacy in animal models of compounds being considered
as product candidates; and achieved most of its financial objectives,
particularly management to budget and a year-end cash position exceeding $100
million. The Company was not successful in obtaining the approval of Natrecor
but the Committee noted that following the FDA's decision, the Company moved
quickly to design and initiate a new clinical trial addressing the questions
raised by the FDA and to create a highly qualified steering committee to oversee
the trial with the Company. The Committee also noted that the Company had
secured Chiron Corporation as a partner for FGF under favorable terms and
conducted two major studies further assessing the Natrecor market opportunity
and the best strategy to commercialize Natrecor. The Committee took into account
that in 1999, the Psychiatric Sales and Marketing Division made a net cash
contribution to the Company of more than $10 million, its largest annual
contribution ever. Based on the Company's performance, the Committee determined
that a modest incentive pool under the Employee Incentive Plan was appropriate
and then determined the cash incentive award for each of the executives on the
Company's corporate management committee reflecting individual 1999 performance
against objectives.
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 years) to encourage key employees to continue in the employ of
the Company and to look to achieve the Company's long-term strategic goals.
Through option grants, executives receive significant equity incentives to build
long-term stockholder value. Annually, the Committee reviews the equity
incentives of executive officers and has made additional grants to remain
competitive with the comparator group and maintain appropriate long-term
incentives for key individuals. All 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 generally 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. 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.
<PAGE>
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). In 1998, the Board and stockholders approved
amendments to the 1992 Equity Incentive Plan intended to meet the requirements
of Section 162(m).
Chief Executive Officer Compensation
Richard B. Brewer became the Company's President and Chief Executive
Officer in September 1998. Pursuant to his employment agreement with the
Company, Mr. Brewer's base salary is $400,000 per annum, subject to increase by
the Board. Mr. Brewer is also eligible to receive a cash bonus, at the Board's
discretion, which bonus will equal 50% of his base salary if he meets defined
performance criteria and up to a maximum of 100% of his base salary if his
performance substantially exceeds the targeted level; provided that the
guaranteed minimum level of Mr. Brewer's bonus is $50,000 in 1998, $200,000 in
1999 and $100,000 in 2000. Mr. Brewer also received the stock option grants and
restricted stock grant described under "Executive Compensation." The employment
agreement also provides that if Mr. Brewer's employment is terminated "without
cause" or "for good reason" (as defined in the agreement), he will receive his
salary for twelve months from termination, an annual bonus for such period equal
to the lesser of his previous year's bonus or his guaranteed bonus, and an
additional two years of vesting on his stock options and restricted stock. Upon
a "change of control" of the Company (as defined in the agreement), the vesting
of all of Mr. Brewer's outstanding stock options, restricted shares and share
units will be accelerated. The Committee believes Mr. Brewer's compensation is
consistent with the special demands of the position, the compensation of chief
executive officers in the comparator group and in accord with the compensation
philosophy articulated above. See "Compensation Philosophy-Annual Incentive" and
"Compensation Philosophy-Long-Term Incentive" above.
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, the program for executive officers, is contingent on
Company performance, and that the 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 Company is still in a developmental stage and
that the competitive market for talented executives and the volatility of the
Company's business may result in highly variable compensation for any 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.
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
Samuel H. Armacost, Chairman
Myron Du Bain
Donald B. Rice, Ph.D.
Charles A. Sanders, M.D.
Eugene L. Step
<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. The Company has elected to
use the Russell 2000 Index and the Amex Biotechnology Index for the purpose of
the performance comparison that appears below. The graph assumes the investment
of $100 in the Company's Common Stock, the Russell 2000 Index and the Amex
Biotechnology Index on December 30, 1994. The stock price performance shown on
the graph below is not necessarily indicative of future price performance.
<TABLE>
<CAPTION>
Comparison of Five Year Cumulative Total Return
Among Scios Inc., Russell 2000 Index and
Amex Biotechnology Index
Date Amex Biotech Russell Scios
<S> <C> <C> <C>
31-Dec-99 477.0169 201.6097 63.2076
30-Nov-99 351.0725 181.3709 57.5472
29-Oct-99 320.1926 171.2095 59.4340
30-Sep-99 307.9942 170.6743 55.6604
31-Aug-99 327.5652 170.8860 55.6604
30-Jul-99 305.2523 177.6522 60.3774
30-Jun-99 261.1992 182.8048 49.0566
28-May-99 245.0647 175.2197 54.7170
30-Apr-99 232.9150 172.8751 58.4906
31-Mar-99 227.8211 158.8233 136.7925
26-Feb-99 215.4643 156.6784 139.6227
29-Jan-99 239.4224 170.6423 149.0566
31-Dec-98 225.6032 168.5413 156.6038
30-Nov-98 199.4029 158.8713 114.1510
30-Oct-98 199.9757 151.0465 79.2453
30-Sep-98 169.8635 145.2269 85.8491
31-Aug-98 127.3580 134.9857 71.6981
31-Jul-98 168.1453 167.6586 115.0944
30-Jun-98 178.9422 182.6930 133.9623
29-May-98 196.5269 182.3854 141.5095
30-Apr-98 213.4536 192.8783 177.3586
31-Mar-98 212.7224 191.9956 183.9623
27-Feb-98 195.8323 184.4664 150.9435
30-Jan-98 191.8596 171.7727 143.3963
31-Dec-97 197.9283 174.5567 150.9435
28-Nov-97 201.6451 171.7207 114.1510
31-Oct-97 206.3246 173.0548 123.5850
30-Sep-97 215.1231 181.2670 147.1700
29-Aug-97 185.6690 169.1285 113.2076
31-Jul-97 168.2062 165.5536 120.7548
30-May-97 181.3551 152.0850 95.2830
30-Apr-97 159.9927 137.0027 70.7547
31-Mar-97 170.0463 136.8270 102.8302
28-Feb-97 199.5491 143.8129 108.4906
31-Jan-97 202.4494 147.5676 89.6227
31-Dec-96 175.8469 144.8355 92.6887
29-Nov-96 164.3432 141.4404 86.7925
31-Oct-96 161.5282 136.0322 86.7925
<PAGE>
30-Sep-96 170.6312 138.3568 93.3963
30-Aug-96 156.7268 133.3600 86.7925
31-Jul-96 141.5793 126.2183 84.9057
28-Jun-96 171.4355 138.4487 100.0000
31-May-96 189.6783 144.5319 110.3774
30-Apr-96 182.3422 139.1117 71.6981
29-Mar-96 164.3066 132.1178 68.8679
29-Feb-96 168.6936 129.7851 74.5283
31-Jan-96 175.8469 125.9706 81.1321
29-Dec-95 163.0148 126.2063 65.0944
30-Nov-95 132.7443 123.2545 58.4906
31-Oct-95 127.7358 118.3296 54.7170
29-Sep-95 139.1543 123.9735 62.2642
31-Aug-95 134.7307 121.9484 62.2642
31-Jul-95 118.9496 119.7156 64.1510
30-Jun-95 109.6027 113.2889 61.3208
31-May-95 94.7599 107.9446 53.7736
28-Apr-95 97.6846 106.3149 101.8868
31-Mar-95 94.5162 104.1580 115.0944
28-Feb-95 101.0968 102.4804 124.5283
31-Jan-95 98.5864 98.5980 116.9811
30-Dec-94 100.0000 100.0000 100.0000
</TABLE>
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In 1993, the Company formed Guilford Pharmaceuticals Inc. ("Guilford"). Dr.
Snyder is a director of Guilford. Until March 9, 1999, the Company owned
approximately 7% of the outstanding stock of Guilford. In March 1999, the
Company sold substantially all of its holdings in Guilford, reducing its
ownership to less than 1% of Guilford's outstanding stock.
In 1998, in connection with the exercise of a stock option, the Company
extended a loan to Mr. Newman in the amount of $137,500. The loan bears interest
at the rate of 5.59% per annum and is repayable over four years. The current
principal balance is $98,020. Interest has been paid through March 3, 1999.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, the Board of Directors of the
Company appointed PricewaterhouseCoopers LLP to be the Company's independent
auditors for the fiscal year ending December 31, 2000.
Services provided to the Company and its subsidiaries by
PricewaterhouseCoopers with respect to the fiscal year ended December 31, 1999
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.
PricewaterhouseCoopers has audited the Company's financial statements
annually since the Company's inception in 1982. Representatives of
PricewaterhouseCoopers 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 PricewaterhouseCoopers as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of
PricewaterhouseCoopers 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 PricewaterhouseCoopers as the Company's
independent auditors for fiscal year 2000 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 2.
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.
<PAGE>
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Under the applicable rules of the Securities and Exchange Commission, a
stockholder who wishes to submit a director nomination or a proposal for
inclusion in the proxy statement of the Board of Directors for the annual
meeting of stockholders to be held in the spring of 2001 must submit such
proposal in writing to the Secretary of the Company at the Company's principal
executive offices no later than [____________], 2000. The applicable rules of
the SEC impose certain limitations on the content of the proposals and also
contain certain eligibility and other requirements (including the requirement
that the proponent must have continuously held at least $2,000 in market value
or 1% of the Company's Common Stock for at least one year before the proposal is
submitted).
By Order of the Board of Directors
JOHN H. NEWMAN
Secretary
January [___], 2000
THE BOARD OF DIRECTORS HOPE THAT STOCKHOLDERS WILL ATTEND THIS MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE
ENCLOSED GOLD PROXY IN THE ACCOMPANYING ENVELOPE. THE BOARD OF DIRECTORS URGES
YOU NOT TO SIGN ANY WHITE PROXY SENT TO YOU BY THE KIRK GROUP. STOCKHOLDERS WHO
ATTEND THE MEETING MAY VOTE THEIR SHARES PERSONALLY EVEN THOUGH THEY HAVE SENT
IN THEIR PROXIES. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD
BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
APPENDIX A
INFORMATION CONCERNING DIRECTORS, EXECUTIVES AND EMPLOYEES OF THE COMPANY
WHO MAY SOLICIT PROXIES FROM THE COMPANY'S STOCKHOLDERS
Set forth below are the present principal occupation or employment, and the
name, principal business and address of any corporation or organization in which
such employment is carried on, for (1) each of the Company's directors and (2)
executives and employees of the Company who may solicit proxies from the
Company's stockholders. Except as otherwise provided in this Proxy Statement
(including the Appendices hereto), none of the individuals listed below (i)
directly or indirectly owns any shares of Common Stock or any other securities
of the Company, (ii) is, or was within the past year, a party to any contracts,
arrangements or understandings with any person with respect to any securities of
the Company, including but not limited to joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of proxies, or (iii)
to the knowledge of the Company, has, directly or through an associate, any
arrangement or understanding with any person with respect to future employment
by the Company or its affiliates or with respect to any future transactions to
which the Company or any of its affiliates will or may be a party, nor any
material interest, direct or indirect, in any transaction which has occurred
since January 1, 1999 or any currently proposed transaction, or series of
similar transactions, to which the Company or any of its affiliates was or is to
be a party and in which the amount involved exceeds $60,000.
<TABLE>
<CAPTION>
DIRECTORS, EXECUTIVES AND EMPLOYEES OF THE COMPANY
NAME AND PRINCIPAL PRESENT OFFICE OR OTHER
BUSINESS ADDRESS(1) PRINICIPAL OCCUPATION OR
OTHER EMPLOYMENT
<S> <C>
Donald B. Rice, Ph.D. Chairman of the Board President and Chief Executive Officer of
UroGenesys, Inc. UroGenesys, Inc.
1701 Colorado Avenue
Santa Monica, CA 90404-3436
Richard B. Brewer President and Chief Executive Officer
Samuel H. Armacost Chairman, SRI International
SRI International
333 Ravenswood Avenue
Menlo Park, CA 94025
Myron Du Bain Chairman and Chief Executive Officer (Retired),
Bay Isle Financial Corporation Firemen's Fund Corporation
160 Sansome, 17th floor
San Francisco, CA 94014
Charles A. Sanders, M.D. Chairman and Chief Executive Officer (Retired), Glaxo, Inc.
Europa Center
100 Europa Drive, Suite 170
Chapel Hill, NC 27514
<PAGE>
Solomon H. Snyder, M.D. Director, Department of Neuroscience,
The John Hopkins University Distinguished Service Professor of Neuroscience, Pharmacology and
School of Medicine Molecular Sciences and Psychiatry, The John Hopkins University
Department of Neuroscience
725 No. Wolfe Street
Baltimore, MD 21205
Burton E. Sobel, M.D. E.L. Amidon Professor and Chair, Department of Medicine,
The University of Vermont The University of Vermont
College of Medicine
Fletcher House/MCHV
111 Colchester Avenue
Burlington, VT 05401
Eugene L. Step Executive Vice President, President of the Pharmaceutical Division
P.O. Box 8997 (Retired), Eli Lilly Company
Rancho Santa Fe, CA 92067
Lauretta C. Cesario Vice President of Human Resources
Jack Cohen, Ph.D. Vice President of Quality
Thomas L. Feldman Vice President of Sales and Marketing
Elliott B. Grossbard, M.D. Senior Vice President of Development
David W. Gryska Vice President of Finance and Chief Financial Officer
John A. Lewicki, Ph.D. Vice President of Research
John H. Newman Senior Vice President, General Counsel & Secretary
George F. Schreiner, M.D., Ph.D. Vice President, Cardiorenal Research
Wendy Carhart Senior Manager of Investor Relations
<FN>
(1) The principal business address of each executive officer and employee of
the Company is 820 West Maude Avenue, Sunnyvale, California 94086.
</FN>
</TABLE>
<PAGE>
APPENDIX B
SHARES OF COMMON STOCK HELD BY THE COMPANY'S DIRECTORS, EXECUTIVES AND EMPLOYEES
WHO MAY SOLICIT PROXIES, AND CERTAIN TRANSACTIONS BETWEEN ANY OF THEM AND THE
COMPANY
Dr. Rice beneficially owns 66,250 shares of Company Common Stock (including
46,250 shares subject to stock options exercisable within 60 days of December
31, 1999).
Mr. Brewer beneficially owns 285,000 shares of Company Common Stock
(including 180,000 shares subject to stock options exercisable within 60 days of
December 31, 1999).
Mr. Armacost beneficially owns 60,500 shares of Company Common Stock
(including 35,500 shares subject to stock options exercisable within 60 days of
December 31, 1999).
Mr. Du Bain beneficially owns 63,500 shares of Company Common Stock
(including 33,500 shares subject to stock options exercisable within 60 days of
December 31, 1999 and 25,000 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).
Dr. Sanders beneficially owns 27,166 shares of Company Common Stock (all of
which are subject to stock options exercisable within 60 days of December 31,
1999).
Dr. Snyder beneficially owns 42,333 shares of Company Common Stock
(including 22,333 shares subject to stock options exercisable within 60 days of
December 31, 1999). In 1993, the Company formed Guilford Pharmaceuticals Inc.
("Guilford"). Dr. Snyder is a director of Guilford. Until March 9, 1999, the
Company owned approximately 7% of the outstanding stock of Guilford. In March
1999, the Company sold substantially all of its holdings in Guilford, reducing
its ownership to less than 1% of Guilford's outstanding stock.
Dr. Sobel beneficially owns 33,500 shares of Company Common Stock (all of
which are subject to stock options exercisable within 60 days of December 31,
1999).
Mr. Step beneficially owns 42,500 shares of Company Common Stock (including
41,500 shares subject to stock options exercisable within 60 days of December
31, 1999).
Ms. Cesario beneficially owns 23,757 shares of Company Common Stock (all of
which are subject to stock options exercisable within 60 days of December 31,
1999).
Dr. Cohen beneficially owns 87,235 shares of Company Common Stock
(including 86,902 shares subject to stock options exercisable within 60 days of
December 31, 1999).
Mr. Feldman beneficially owns 107,260 shares of Company Common Stock
(including 104,560 shares subject to stock options exercisable within 60 days of
December 31, 1999). In 1995, Mr. Feldman received a relocation loan in the
amount of $275,000 to assist in his move to California as part of the Company's
decision to bring the management offices for its commercial operations division
to the Company's headquarters. The loan is being forgiven over 5 years of
employment. $110,000 in principal was outstanding under the loan as of December
31, 1999.
Dr. Grossbard beneficially owns 291,865 shares of Company Common Stock
(including 284,081 shares subject to stock options exercisable within 60 days of
December 31, 1999).
Mr. Gryska beneficially owns 69,666 shares of Company Common Stock
(including 29,166 shares subject to stock options exercisable within 60 days of
December 31, 1999).
<PAGE>
Dr. Lewicki beneficially owns 222,773 shares of Company Common Stock
(including 204,872 shares subject to stock options exercisable within 60 days of
December 31, 1999).
Mr. Newman beneficially owns 272,173 shares of Company Common Stock
(including 178,123 shares subject to stock options exercisable within 60 days of
December 31, 1999, 7,000 shares held in Mr. Newman's spouse's IRA account and
2,000 shares held for the benefit of Mr. Newman's children). In 1998, in
connection with the exercise of a stock option, the Company extended a loan to
Mr. Newman in the amount of $137,500. The loan bears interest at the rate of
5.59% per annum and is repayable over four years. The current principal balance
is $98,020. Interest has been paid through March 3, 1999.
Dr. Schreiner beneficially owns 69,925 shares of Company Common Stock, all
of which are subject to stock options exercisable within 60 days of December 31,
1999). Dr. Schreiner received a relocation loan in the amount of $150,000 in
connection with his commencement of employment with the Company in 1997. The
loan is being forgiven over 4 years of employment. $60,000 in principal was
outstanding under the loan as of December 31, 1999.
Ms. Carhart does not beneficially own any shares of Company Common Stock.
TRANSACTIONS IN COMMON STOCK WITHIN THE PAST TWO YEARS
Listed below are the only purchases and sales of Company Common Stock within
the past two years by the directors, executives and employees of the Company
who may solicit proxies on the Company's behalf, and certain information
concerning such transactions. To the Company's knowledge, no director,
executive or employee who may solicit proxies on the Company's behalf made any
other transactions in Company securities within the past two years.
<TABLE>
<CAPTION>
Name Number of Shares Purchased/ Date of Transaction
(Sold)
<S> <C> <C>
Donald B. Rice, Ph.D. 2,000 09/17/98
8,000 10/16/98
Richard B. Brewer 100,000 (1) 09/09/98
5,000 12/20/99
Samuel H. Armacost 0 --
Myron Du Bain 0 --
Charles A. Sanders, M.D. 0 --
Solomon H. Snyder, M.D. 10,000 10/27/98
Burton E. Sobel, M.D. 0 --
Eugene L. Step 0 --
Lauretta C. Cesario 3,500 10/15/98
(1,200) 01/04/99
(2,300) 02/11/99
Jack Cohen 0 --
<PAGE>
Thomas L. Feldman 0 --
Elliott B. Grossbard, M.D. 2,000 10/09/98
1,500 (5) 01/07/99
(1,500) (5) 01/07/99
1,500 12/14/99
David W. Gryska 40,000 (1) 08/09/99
500 12/20/99
John A. Lewicki, Ph.D. 20,000 (2) 02/20/98
(20,000) (2) 02/20/98
20,000 (2) 02/23/98
(20,000) (2) 02/23/98
2,000 12/21/99
John H. Newman 20,000 (3)(4) 03/03/98
5,000 (2) 03/06/98
(5,000) (2) 03/06/98
5,000 (2) 03/09/98
(5,000) (2) 03/09/98
5,000 (3)(4) 03/10/98
5,000 (2) 03/10/98
(5,000) (2) 03/10/98
5,000 09/16/98
2,000 10/08/98
George F. Schreiner, M.D., Ph.D. 0 --
Wendy Carhart 0 --
<FN>
(1) Shares purchased in the form of a Restricted Stock Award.
(2) Shares purchased through exercise of stock options and sold in the same
day.
(3) Shares purchased through exercise of stock options.
(4) The Company extended a loan to Mr. Newman for a portion of the purchase
price of these shares. The loan is described above under Mr. Newman's
beneficial ownership.
(5) Shares purchased through exercise of stock options and given to a charity.
</FN>
</TABLE>
<PAGE>
SCIOS INC. PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD FEBRUARY 28, 2000
SCIOS INC. ANNUAL MEETING TO BE HELD ON FEBRUARY 28, 2000 AT 9:00 a.m.
PLEASE MARK / X / VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. Election of Directors.
NOMINEES: 01- Samuel H. Armacost, 02- Richard B. Brewer, 03 -Donald B. Rice, 04-
Charles A. Sanders, 05- Solomon H. Snyder, 06- Burton E. Sobel, 07- Eugene L.
Step,
FOR ALL NOMINEES / /
WITHHOLD ALL NOMINEES / /
For all nominees except as noted below
Use Number(s) Only__________________________________
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
Independent auditors for fiscal 2000.
FOR / / AGAINST / / ABSTAIN / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
(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:_______________
<PAGE>
[back cover of booklet]
[SCIOS LOGO]
[recycled logo/mark] 954-PS-00
