<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box: / /
/ / Preliminary proxy Statement
/X/ Definitive proxy statement
/ / Confidential, for use of the Commission only as permitted by Rule
14a-6(e)(2)
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CYGNUS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of Securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------------
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:
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4) Date filed:
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<PAGE>
[LOGO]
November 10, 1998
Dear Cygnus Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Cygnus, Inc. ("Cygnus" or the "Company"), which will be
held on December 1, 1998, at 10:00 a.m., at 400 Penobscot Drive, Redwood City,
California 94063.
At the Special Meeting, you will be asked to amend the Company's Certificate
of Incorporation to effect a one-for-three reverse stock split of the Company's
outstanding Common Stock in order to attempt to comply with the Nasdaq Stock
Market $5 minimum bid price requirement for continued listing on the Nasdaq
National Market. Please take this opportunity to participate in the affairs of
the Company. Complete details of the business to be conducted at the Special
Meeting are given in the attached Notice of Special Meeting and Proxy Statement.
I urge you to review the proposal in the Proxy Statement carefully, and I
solicit your support of the Board's recommendation on the proposal. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE ACCOMPANYING REPLY ENVELOPE. Returning the proxy does not
deprive you of your right to attend the meeting and to vote your shares in
person for the matters acted upon at the meeting.
I hope to see you at the Special Meeting. Should you require directions to
the Special Meeting, please contact the Company's headquarters at (650)
369-4300.
Sincerely yours,
[SIGNATURE]
John C. Hodgman
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
<PAGE>
CYGNUS, INC.
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 1, 1998
------------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Cygnus,
Inc., a Delaware corporation (the "Company"), will be held on Tuesday, December
1, 1998 at 10:00 a.m., local time, at the Company's offices located at 400
Penobscot Drive, Redwood City, California 94063 for the following purposes:
1. To amend the Company's Certificate of Incorporation to effect a
one-for-three reverse stock split of the Company's outstanding Common
Stock.
2. To transact such other business as may properly come before the meeting
or the adjournment or postponement thereof.
These items of business are more fully described in the Proxy Statement
accompanying this notice.
Only stockholders of record at the close of business on November 6, 1998 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed Proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if the stockholder has returned a proxy.
By order of the Board of Directors
[SIGNATURE]
John C. Hodgman
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
Redwood City, California
November 10, 1998
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE>
CYGNUS, INC.
----------------
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 1, 1998
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy ("Proxy") is solicited on behalf of Board of Directors of
Cygnus, Inc., a Delaware corporation (the "Company"), for use at the Special
Meeting of Stockholders (the "Special Meeting") to be held on Tuesday, December
1, 1998, at 10:00 a.m., local time, or at any adjournment thereof, for the
purposes set forth in this Proxy Statement and in the accompanying Notice of
Special Meeting of Stockholders. The Special Meeting will be held at the
Company's principal executive offices located at 400 Penobscot Drive, Redwood
City, California 94063. The Company's telephone number at that address is (650)
369-4300.
These proxy solicitation materials were mailed on or about November 10, 1998
to all stockholders entitled to vote at the Special Meeting. The Company's Board
of Directors has unanimously approved the matters being submitted for
stockholder approval at the Special Meeting.
PROXIES AND SOLICITATION COSTS
The enclosed Proxy is solicited by the Company's Board of Directors and,
when the proxy card is properly completed and returned, it will be voted as
directed by the stockholders on the proxy card. Stockholders are urged to
specify their choices on the enclosed proxy card. If a proxy card is signed and
returned without choices specified, in the absence of contrary instructions, the
shares of the Company's common stock, par value $0.001 (the "Common Stock")
represented by such proxy will be voted "FOR" Proposal No. 1 described in the
accompanying Notice and Proxy Statement and will be voted in the proxy holders'
discretion as to other matters that may properly come before the Special
Meeting. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by (i) delivering to the Company at
the Company's principal executive office, 400 Penobscot Drive, Redwood City,
California 94063, Attention: Senior Vice-President, Finance, a written notice of
revocation or duly executed proxy bearing a later date, or (ii) attending the
Special Meeting and voting in person.
The cost of soliciting proxies will be borne by the Company. The Company may
retain the services of a proxy solicitation firm to solicit proxies, for which
the Company expects it will pay a fee not to exceed $10,000. The Company expects
to reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may be solicited by certain of the Company's
directors, officers and regular employees in person or by telephone or
facsimile. No additional compensation will be paid to directors, officers or
other regular employees for such services.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on November 6, 1998 (the
"Record Date") are entitled to notice of and to vote at the Special Meeting. As
of the Record Date, 20,499,813 shares of Common Stock were issued and
outstanding held of record by approximately 558 stockholders.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Senior Vice-President,
Finance at the Company a written notice of revocation or a duly executed proxy
bearing a later date or by attending the Special Meeting and voting in person.
<PAGE>
VOTING AND SOLICITATION
Only holders of Common Stock of record at the close of business on November
6, 1998, the record date and time fixed by the Board of Directors, are entitled
to notice of and to vote at the Special Meeting. Each holder of shares of Common
Stock is entitled to one vote for each share of Common Stock held on the Record
Date on each of the proposals presented in this proxy statement.
A majority of the shares of Common Stock entitled to vote, whether present
in person or represented by proxy, will constitute a quorum for the transaction
of business at the Special Meeting. Approval of Proposal No. 1, "Reverse Stock
Split," requires an affirmative vote of a majority of the Company's outstanding
voting shares. Any other matters submitted for stockholder approval at the
Special Meeting will be decided by the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or represented by proxy
and entitled to vote at the Special Meeting. While there is no definitive
statutory or case law authority in Delaware as to the proper treatment of
abstentions in the counting of votes with respect to a proposal such as the
Reverse Stock Split, the Company believes that abstentions should be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. In a 1988 Delaware case,
BERLIN V. EMERALD PARTNERS, the Delaware Supreme Court held that, while broker
non-votes may be counted for purposes of determining the presence or absence of
a quorum for the transaction of business, broker non-votes should not be counted
for purposes of determining the number of votes cast with respect to the
particular proposal on which the broker has expressly not voted. Accordingly,
broker non-votes with respect to this proposal will not be counted as votes
cast.
PROPOSAL NO. 1
REVERSE STOCK SPLIT
GENERAL
The Board of Directors of the Company has approved a proposal (the "Reverse
Stock Split Proposal") to amend the Company's Certificate of Incorporation to
effect a one-for-three reverse stock split of the Company's outstanding Common
Stock, each share having a par value of one-tenth of one cent (the "Common
Stock"), subject to the approval by the stockholders of the Company. The Reverse
Stock Split Proposal provides for the combination and reclassification of the
presently issued and outstanding shares of Common Stock, into a smaller number
of shares of identical Common Stock, on the basis of one share of Common Stock
for each three shares of Common Stock previously issued and outstanding (the
"Reverse Stock Split"). Except as may result from the payment of cash for
fractional shares as described below, each stockholder will hold the same
percentage of Common Stock outstanding immediately following the Reverse Stock
Split as each stockholder did immediately prior to the Reverse Stock Split. If
approved by the stockholders of the Company as provided herein, the Reverse
Stock Split will be effected by an amendment and restatement of the Company's
Certificate of Incorporation in substantially the form attached to this Proxy
Statement as Appendix A (the "Reverse Stock Split Amendment"), and will become
effective upon the filing of the Reverse Stock Split Amendment with the
Secretary of State of Delaware (the "Effective Time"). The following discussion
is qualified in its entirety by the full text of the Reverse Stock Split
Amendment, which is incorporated by reference herein.
At the Effective Time, each share of Common Stock issued and outstanding
will automatically be reclassified and converted into one-third of a share of
Common Stock. Fractional shares of Common Stock will not be issued as a result
of the Reverse Stock Split. Stockholders entitled to receive a fractional share
of Common Stock as a consequence of the Reverse Stock Split will, instead,
receive from the Company a cash payment in U.S. dollars equal to such fraction
multiplied by three times the arithmetic mean average closing bid price per
share of the Common Stock on the Nasdaq Stock Market, Inc. ("Nasdaq") for the
five trading days immediately preceding the Effective Date.
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<PAGE>
The Company expects that, if the Reverse Stock Split Proposal is approved by
the stockholders at the Special Meeting, the Reverse Stock Split Amendment will
be filed promptly. However, notwithstanding approval of the Reverse Stock Split
Proposal by the stockholders of the Company, the Board of Directors of the
Company may elect not to file, or to delay the filing of, the Reverse Stock
Split Amendment, if the Board of Directors determines that filing the Reverse
Stock Split Amendment would not be in the best interest of the Company's
stockholders at such time. Factors leading to such a determination could
include, without limitation, any possible effect on Nasdaq listing or future
securities offerings (see "Reasons for the Reverse Stock Split Proposal,"
below).
REASONS FOR THE REVERSE STOCK SPLIT PROPOSAL
The primary purpose of the Reverse Stock Split is to combine the outstanding
shares of Common Stock so that the Common Stock outstanding after giving effect
to the Reverse Stock Split trades at a significantly higher price per share than
the Common Stock outstanding before giving effect to the Reverse Stock Split.
The closing bid price for the Common Stock on the National Market tier of The
Nasdaq Stock Market, Inc. (the "Nasdaq National Market") on October 22, 1998,
was $4.6875 per share. Pursuant to new Nasdaq National Market rules that went
into effect on February 23, 1998 (the "New Nasdaq Listing Requirements") the
minimum bid price for the Company's Common Stock must be at least $5.00 per
share for continued inclusion of the Common Stock on the Nasdaq National Market.
On September 30, 1998, Nasdaq notified the Company that if the Company is unable
to demonstrate compliance with the $5.00 minimum bid price requirement on or
before the end of the ninety day period ended December 29, 1998, the Company's
securities will be delisted at the opening of business on January 2, 1999. The
Company believes, but cannot assure, that the Reverse Stock Split will enable
the Common Stock to trade above the minimum bid price established by the New
Nasdaq Listing Requirements. Additionally, the Company believes that a low
quoted market price per share may discourage potential new investors, increase
market price volatility and decrease the liquidity of the Common Stock.
Furthermore, if the Company's Common Stock is delisted from the Nasdaq National
Market, the Company will be in default under certain material contracts
including certain debt arrangements. Such a default under such subordinated debt
arrangements could obligate the Company to redeem such debt at an amount equal
to 110% of the principal amount thereof plus accrued interest.
The Company believes that maintaining the listing of the Common Stock on
Nasdaq is in the best interests of the Company and its stockholders. Inclusion
on Nasdaq increases liquidity and may potentially minimize the spread between
the "bid" and "asked" prices quoted by market makers. Further, continued Nasdaq
listing will avoid the Company being in default under certain material contracts
including certain debt arrangements and may enhance the Company's access to
capital and increase the Company's flexibility in responding to anticipated
capital requirements. The Company believes that prospective investors will view
an investment in the Company more favorably if its shares qualify for listing on
Nasdaq.
For the above reasons, the Company believes that the Reverse Stock Split is
in the best interests of the Company and its stockholders. However, there can be
no assurances that the Reverse Stock Split will have the desired consequences.
The Company anticipates that, following the consummation of the Reverse Stock
Split, the Common Stock will trade at a price per share that is significantly
higher than the current market price of the Common Stock. However, there can be
no assurance that, following the Reverse Stock Split, the Common Stock will
trade at three times the market price of the Common Stock prior to the Reverse
Stock Split.
EFFECT OF THE REVERSE STOCK SPLIT PROPOSAL
Subject to stockholder approval, the Reverse Stock Split will be effected by
filing the Reverse Stock Split Amendment to the Company's Certificate of
Incorporation, and will be effective immediately upon such filing. Although the
Company expects to file the Reverse Stock Split Amendment with the Delaware
Secretary of State's office promptly following approval of the Reverse Stock
Split Proposal at the Special
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<PAGE>
Meeting, the actual timing of such filing will be determined by the Company's
management based upon their evaluation as to when such action will be most
advantageous to the Company and its stockholders. The Company reserves the right
to forego or postpone filing the Reverse Stock Split Amendment, if such action
is determined to be in the best interests of the Company and its stockholders.
Each stockholder that owns fewer than three shares of Common Stock will have
such stockholder's fractional share of Common Stock converted into the right to
receive cash as set forth below in "Exchange of Stock Certificates and Payment
for Fractional Shares." The interest of such stockholder in the Company will
thereby be terminated, and such stockholder will have no right to share in the
assets or future growth of the Company. Each stockholder that owns three or more
shares of Common Stock will continue to own shares of Common Stock and will
continue to share in the assets and future growth of the Company as a
stockholder. Such interest will be represented by one-third as many shares as
such stockholder owned before the Reverse Stock Split, subject to the adjustment
for fractional shares in which case such stockholder shall receive cash in lieu
of such fractional share. The number of shares of Common Stock that may be
purchased upon the exercise of outstanding options, warrants, and other
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock (collectively, "Convertible Securities") and the per share exercise
or conversion prices thereof, will be adjusted appropriately as of the Effective
Date, so that the aggregate number of shares of Common Stock issuable in respect
of Convertible Securities immediately following the Effective Date will be
one-third of the number issuable in respect thereof immediately prior to the
Effective Date, the per share exercise price immediately following the Effective
Date will be 300% of the per share exercise or conversion price immediately
prior to the Effective Date, and the aggregate exercise or conversion prices
thereunder shall remain unchanged.
The Reverse Stock Split will also result in some stockholders owning "odd
lots" of less than 100 shares of Common Stock received as a result of the
Reverse Stock Split. Brokerage commissions and other costs of transactions in
odd lots may be higher, particularly on a per-share basis, than the cost of
transactions in even multiples of 100 shares.
The Company is authorized to issue 40,000,000 shares of Common Stock, of
which 20,499,813 shares were issued and outstanding at the close of business on
the Record Date. The Company is also authorized to issue 5,000,000 shares of
Preferred Stock, each share having a par value of one-tenth of one cent (the
"Preferred Stock"), of which none were issued and outstanding at the close of
business on the Record Date.
Adoption of the Reverse Stock Split will reduce the shares of Common Stock
outstanding on the Record Date from 20,499,813 to approximately 6,833,271 but
will not effect the number of authorized shares of Common Stock. After the
Reverse Stock Split, the Company estimates that it will have approximately the
same number of stockholders. Except for the receipt of cash in lieu of
fractional interests, the reverse stock split will not affect any stockholder's
proportionate equity interest in the company.
As a result of the Reverse Stock Split, the Company will have a greater
number of authorized but unissued shares of Common Stock than prior to the
Reverse Stock Split. The increase in the authorized but unissued shares of
Common Stock could make a change in control of the Company more difficult to
achieve. Under certain circumstances, such shares of Common Stock could be used
to create voting impediments to frustrate persons seeking to effect a takeover
or otherwise gain control of the Company. Such shares could be sold privately to
purchasers who might side with the Board of Directors in opposing a takeover bid
that the Board determines is not in the best interests of the Company and its
stockholders.
The increase in the authorized but unissued shares of Common Stock also may
have the effect of discouraging an attempt by another person or entity, through
acquisition of a substantial number of shares of Common Stock, to acquire
control of the Company with a view to effecting a merger, sale of assets or a
similar transaction, since the issuance of new shares could be used to dilute
the stock ownership of such person or entity. Shares of authorized but unissued
Common Stock could be issued to a holder who would
4
<PAGE>
thereby have sufficient voting power to assure that any such business
combination or any amendment to the Company's Certificate of Incorporation would
not receive the stockholder vote required for approval thereof. The Board of
Directors has no current plans to issue any shares of Common Stock for any such
or other purpose, and does not intend to issue any stock except on terms or for
reason which the Board of Directors deems to be in the best interests of the
Company.
The Common Stock is currently listed on the Nasdaq National Market, under
the trading symbol CYGN.
EXCHANGE OF STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
The combination and reclassification of shares of Common Stock pursuant to
the Reverse Stock Split will occur automatically on the Effective Date without
any action on the part of stockholders of the Company and without regard to the
date certificates representing shares of Common Stock prior to the Reverse Stock
Split are physically surrendered for new certificates. If the number of shares
of Common Stock to which a holder is entitled as a result of the Reverse Stock
Split would otherwise include a fraction, the Company will pay to the
stockholder, in lieu of issuing fractional shares of the Company, cash in an
amount equal to the same fraction multiplied by three times the average closing
price of the Common Stock on the Nasdaq National Market for the five days
immediately preceding the Effective Date. A change in the closing price of the
Common Stock will affect the amount received by stockholders in lieu of
fractional shares.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of certificates for shares of Common Stock to be
used in forwarding such certificates for surrender and exchange for certificates
representing the number of shares of Common Stock such stockholder is entitled
to receive as a consequence of the Reverse Stock Split. The transmittal forms
will be accompanied by instructions specifying other details of the exchange.
Upon receipt of such transmittal form, each stockholder should surrender the
certificates representing shares of Common Stock prior to the Reverse Stock
Split, in accordance with the applicable instructions. Each holder who
surrenders certificates will receive new certificates representing the whole
number of shares of Common Stock that he or she holds as a result of the Reverse
Stock Split and any cash payable in lieu of a fractional share. STOCKHOLDERS
SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
After the Effective Date, each certificate representing shares of Common
Stock outstanding prior to the Effective Date (an "Old Certificate") will, until
surrendered and exchanged as described above, be deemed, for all corporate
purposes, to evidence ownership of the whole number of shares of Common Stock,
and the right to receive from the Company the amount of cash for any fractional
shares, into which the shares of Common Stock evidenced by such certificate have
been converted by the Reverse Stock Split, except that the holder of such
unexchanged certificates will not be entitled to receive any dividends or other
distributions payable by the Company after the Effective Date, until the Old
Certificates have been surrendered. Such dividends and distributions, if any,
will be accumulated, and at the time of surrender of the Old Certificates, all
such unpaid dividends or distributions will be paid without interest.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes certain material federal income tax
considerations relating to the Reverse Stock Split. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder, legislative history, judicial decisions, and
current administrative rulings and practices, all as amended and in effect on
the date hereof. Any of these authorities could be repealed, overruled, or
modified at any time. Any such change could be retroactive and, accordingly,
could cause the tax consequences to vary substantially from the consequences
described herein. No ruling from the Internal Revenue Service (the "IRS") with
respect to the matters discussed
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<PAGE>
herein has been requested, and there is no assurance that the IRS would agree
with the conclusions set forth in this discussion.
This discussion may not address certain federal income tax consequences that
may be relevant to particular stockholders in light of their personal
circumstances (such as persons subject to the alternative minimum tax) or to
certain types of stockholders (such as dealers in securities, insurance
companies, foreign individuals and entities, financial institutions, and
tax-exempt entities) who may be subject to special treatment under the federal
income tax laws. This discussion also does not address any tax consequences
under state, local, or foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT, INCLUDING THE APPLICABILITY
OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS, AND
ANY PENDING OR PROPOSED LEGISLATION.
The Company should not recognize any gain or loss as a result of the Reverse
Stock Split. No gain or loss should be recognized by a stockholder who receives
only Common Stock upon the Reverse Stock Split. A stockholder who receives cash
in lieu of a fractional share of Common Stock that otherwise would be held as a
capital asset generally will recognize capital gain or loss in an amount equal
to the difference between the cash received and the stockholder's basis in such
fractional share of Common Stock. For this purpose, a stockholder's basis in
such fractional share of Common Stock will be determined as if the stockholder
actually received such fractional share. Except as provided with respect to
fractional shares, the aggregate tax basis of the shares of Common Stock held by
a stockholder following the Reverse Stock Split will equal the stockholder's
aggregate basis in the Common Stock held immediately prior to the Reverse Stock
Split and generally will be allocated among the shares of Common Stock held
following the Reverse Stock Split on a pro-rata basis. Stockholders who have
used the specific identification method to identify their basis in shares of
Common Stock combined in the Reverse Stock Split should consult their own tax
advisors to determine their basis in the post-Reverse Stock Split shares of
Common Stock received in exchange therefor.
REQUIRED VOTE
The affirmative vote of a majority of the Company's outstanding voting
shares is required to approve the amendment and restatement of the Company's
Certificate of Incorporation to effect the Reverse Stock Split.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" THE AMENDMENT AND RESTATEMENT OF
THE COMPANY'S CERTIFICATE OF INCORPORATION
TO EFFECT THE REVERSE STOCK SPLIT.
6
<PAGE>
BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of October 15,
1998 by (i) each stockholder known by the Company to be the beneficial owner of
more than 5% of the Company's Common Stock, (ii) each director, (iii) the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers serving in that capacity as of December 31, 1997
and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY APPROXIMATE
NAME OWNED(1) PERCENT OWNED(2)
- -------------------------------------------------------------------------- -------------------- -------------------
<S> <C> <C>
Amerindo Investment Advisors, Inc.(3) .................................... 3,641,000 18.89%
388 Market Street, Suite 950
San Francisco, CA 94111
Arnold H. Snider(4) ...................................................... 1,170,000 5.80%
Deerfield Management
450 Lexington Avenue, #1450
New York, NY 10017
Neil R. Ackerman(5)....................................................... 175,842 *
Frank T. Cary(6).......................................................... 59,295 *
Gary W. Cleary(7)......................................................... 834,485 4.11%
John C. Hodgman(8)........................................................ 180,811 *
Gregory B. Lawless(9)..................................................... 1,022,149 5.03%
Andre F. Marion(10)....................................................... 31,631 *
Richard G. Rogers(11)..................................................... 27,590 *
Alan F. Russell(12)....................................................... 264,330 1.30%
Walter B. Wriston(13)..................................................... 51,495 *
All executive officers and directors as a group (10 persons)(14).......... 1,686,356 8.30%
</TABLE>
- ------------------------
* Less than 1%
(1) Except as indicated in the footnotes to this table, the stockholders named
in the table are known to the Company to have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially
owned by them, subject to community property laws where applicable.
(2) Applicable percent ownership is based on 20,317,313 shares of Common Stock
outstanding as of October 15, 1998.
(3) Information as of December 31, 1997, per Schedule 13G filed pursuant to
Rule 13d-1(b) or 13d-2(b) of the Securities Exchange Act of 1934, as
amended.
(4) Information as of February 10, 1998, pursuant to a Schedule 13D filed with
the Securities and Exchange Commission. Includes 1,020,800 shares held by
Deerfield Capital, L.P. and 139,200 shares held by Deerfield Management
Company. Mr. Snider is the sole stockholder, president and director of
Snider Capital Corp., which serves as the general partner of Deerfield
Capital, L.P. Mr. Snider is also the sole stockholder, president and
director of Snider Management Corporation, which serves as the general
partner of Deerfield Management Company.
(5) Includes options to purchase 167,524 shares exercisable within 60 days of
October 15, 1998.
(6) Includes options to purchase 24,449 shares exercisable within 60 days of
October 15, 1998.
(7) Includes options to purchase 158,244 shares exercisable within 60 days of
October 15, 1998. Excludes approximately 32,000 shares previously owned by
Dr. Cleary which were transferred to irrevocable trusts for the benefit of
Dr. Cleary's two children. Dr. Cleary disclaims beneficial ownership of
these
7
<PAGE>
shares and has no rights, benefits of ownership or authority over such
trusts. Dr. Cleary also disclaims beneficial ownership of any shares held
by Margaret Cleary.
(8) Includes options to purchase 172,960 shares exercisable within 60 days of
October 15, 1998.
(9) Includes options to purchase 970,856 shares exercisable within 60 days of
October 15, 1998. Dr. Lawless resigned as President, Chief Executive
Officer and Director of the Company effective October 14, 1998.
(10) Includes options to purchase 30,631 shares exercisable within 60 days of
October 15, 1998.
(11) Includes options to purchase 18,449 shares exercisable within 60 days of
October 15, 1998. Excludes shares previously held by Mr. Rogers, but
subsequently transferred to an irrevocable trust for the benefit of his
grandchildren. Mr. Rogers disclaims beneficial ownership of such shares
and has no rights, benefits of ownership or authority over the trust.
(12) Includes options to purchase 260,892 shares exercisable within 60 days of
October 15, 1998.
(13) Includes options to purchase 46,295 shares exercisable within 60 days of
October 15, 1998.
(14) Includes options to purchase 921,166 shares exercisable within 60 days of
October 15, 1998, including options to purchase 302,614 shares exercisable
within 60 days of October 15, 1998 beneficially owned by three executive
officers of the Company not listed above.
STOCKHOLDER PROPOSALS
Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules promulgated by
the Securities and Exchange Commission. Proposals of stockholders of the Company
intended to be presented for consideration at the Company's 1999 Annual Meeting
of Stockholders must be received by the Company no later than November 18, 1998,
in order that they be included in the proxy statement and form of proxy related
to that meeting.
In connection with the 1999 Annual Meeting of Stockholders, the proxy card
will grant the proxy holders discretionary authority to vote on any matter
raised at the 1999 Annual Meeting of Stockholders. If a stockholder intends to
submit a proposal at the 1999 Annual Meeting of Stockholders, which is not
eligible for inclusion in the proxy statement and form of proxy relating to that
meeting, the stockholder must give written notice to the Secretary of the
corporation not later than the close of business on the sixtieth (60th) day nor
earlier than the close of business on the ninetieth (90th) day prior to the
first anniversary of the preceding year's annual meeting which was held on May
12, 1998. If such stockholder fails to comply with the foregoing notice
provision, the proxy holders will be allowed to use their discretionary voting
authority when the proposal is raised at the 1999 Annual Meeting of
Stockholders.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.
OTHER INFORMATION
The Company files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").
You may read and copy any reports, statements or other information filed by the
Company at the SEC's public reference rooms in Washington, D.C., New York City,
and Chicago, Illinois. The Company's SEC filings are also available from
commercial document retrieval services or on the SEC's web site at
http://www.sec.gov. You may also request a copy of the Company's financial
reports filed with the SEC by contacting the Senior Vice-President, Finance, c/o
Cygnus, Inc. 400 Penobscot Drive, Redwood City, California 94063.
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APPENDIX A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CYGNUS, INC.
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CYGNUS, INC.
CYGNUS, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
FIRST: The original Certificate of Incorporation of CYGNUS THERAPEUTIC
SYSTEMS, INC. was filed with the Secretary of State of Delaware on March 15,
1994. The corporate name was changed to CYGNUS, INC. in the Agreement and Plan
of Merger filed with the Secretary of State of Delaware on September 11, 1995.
SECOND: The Amended and Restated Certificate of Incorporation of CYGNUS,
INC. has been duly adopted in accordance with the provisions of Sections 245 and
242 of the General Corporation Law of the State of Delaware by the directors of
the Corporation and such Amended and Restated Certificate of Incorporation shall
be amended and restated to read in full as follows:
I.
The name of the corporation is CYGNUS, INC. (the "Corporation").
II.
The address of the Corporation's registered office in the State of Delaware
is 32 Loockerman Square, Suite L-100, City of Dover, County of Kent and the name
of its registered agent at such address is the Corporation Service Company.
III.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
IV.
The Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock and Preferred Stock. The total number of
shares of all classes of stock which the Corporation has authority to issue is
Forty-Five Million (45,000,000) shares, consisting of Forty Million (40,000,000)
shares of Common Stock, each having a par value of one-tenth of one cent ($.001)
(the "Common Stock") and Five Million (5,000,000) shares of Preferred Stock,
each having a par value of one-tenth of one cent ($.001) (the "Preferred
Stock").
As to the Preferred Stock of the Corporation, the Board of Directors shall
have the power to issue any additional shares of Preferred Stock from time to
time in one or more series. The Board of Directors is hereby authorized to fix
or alter from time to time the voting powers and such designations, preferences
and relative, participating, optional or other special rights of the shares of
each such series and the qualifications, limitations or restrictions of any
wholly unissued series of Preferred Stock, and to establish from time to time
the number of shares constituting any such series, or any of them.
The Board of Directors is further authorized to increase or decrease (but
not below the number of shares of any such series then outstanding) the number
of shares of any series, the number of which was fixed by it, subsequent to the
issue of shares of such series then outstanding, subject to the limitations and
restrictions stated in the resolution of the Board of Directors originally
fixing the number of shares of such series. If the number of shares of any
series is so decreased, then the shares constituting such decrease shall
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resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
Effective immediately upon the filing of this Amended and Restated
Certificate of Incorporation in the office of the Secretary of State of the
State of Delaware, the outstanding shares of Common Stock shall be and hereby
are combined and reclassified as follows: each share of Common Stock shall be
reclassified as and converted into one-third of a share of Common Stock;
provided, however, that fractional shares of Common Stock will not be issued in
connection with such combination and reclassification, and each holder of a
fractional share of Common Stock shall receive in lieu thereof a cash payment
from the Corporation determined by multiplying such fractional share of Common
Stock by three times the arithmetic mean average closing price per share of
Common Stock on the Nasdaq National Market for the five trading days immediately
preceding the effective date of this Amended and Restated Certificate of
Incorporation, such payment to be made upon such other terms and conditions as
the officers of the Corporation, in their judgment, determine to be advisable
and in the best interests of the Corporation.
Certificates representing shares combined and reclassified as provided in
this Amended and Restated Certificate of Incorporation are hereby canceled, and,
upon presentation of the canceled certificates to the Corporation, the holders
thereof shall be entitled to receive new certificates representing the shares
resulting from such combination and reclassification.
The relative rights, preferences and limitations of the Series A Junior
Participating Preferred Stock are as follows:
A. Designation and Amount. The shares of such series shall be designated as
"Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock")
and the number of shares constituting the Series A Preferred Stock shall be Five
Hundred Thousand (500,000). Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
B. Dividends and Distributions.
1. Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, each holder of a share
of Series A Preferred Stock, in preference to the holders of shares of
Common Stock, par value $.001 per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to receive,
when declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to, subject to the provision for
adjustment hereinafter set forth, One Thousand (1,000) times the aggregate
per share amount of all cash dividends, and One Thousand (1,000) times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of a
share or fraction of Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock,
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then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding immediately
prior to such event.
2. The Corporation shall declare a dividend or distribution on the
shares of Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided, however, that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period between any Quarterly
Distribution Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1,000 per share of Series A Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
3. Dividends shall begin to accrue and be cumulative on each
outstanding share of Series A Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such
share of Series A Participating Preferred Stock, unless the date of issue of
such share is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such share shall begin to accrue
from the date of issue of such share, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be not more than
60 days prior to the date fixed for the payment thereof.
C. Voting Rights. The holders of shares of Series A Preferred Stock shall
have the following voting rights:
1. Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to One
Thousand (1,000) votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the number of votes
per share to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
2. Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
3. Except as set forth herein, or as otherwise provided by law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent
3
<PAGE>
they are entitled to vote with holders of Common Stock as set forth herein)
for taking any corporate action.
D. Certain Restrictions.
1. Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
a. declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
b. declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the shares of Series A Preferred
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
c. redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
or
d. redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
2. The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
E. Reacquired Shares. Any shares of Series A Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.
F. Liquidation, Dissolution or Winding Up.
1. Upon any liquidation, dissolution or winding up of the Corporation,
no distribution shall be made (1) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock unless, prior thereto, the holders of
shares of Series A Preferred Stock shall have received One Thousand Dollars
($1,000) per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision
for adjustment hereinafter
4
<PAGE>
set forth, equal to 1,000 times the aggregate amount to be distributed per
share to holders of shares of Common Stock, or (2) to the holders of shares
of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
In the event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders
of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
2. In the event, however, that there are not sufficient assets
available to permit payment in full to the Series A Liquidation Preference
and the liquidation preferences of all other series of Preferred Stock, if
any, which rank on a parity with the Series A Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common
Stock.
3. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then
in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
G. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to One Thousand (1,000) times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into which
or for which each share of Common Stock is changed or exchanged. In the event
the Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
H. No Redemption. The shares of Series A Preferred Stock shall not be
redeemable.
I. Rank. The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Stock.
5
<PAGE>
J. Amendment. The Certificate of Incorporation of the Corporation shall not
be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series A Preferred Stock, voting together
as a single class.
V.
The Corporation is to have perpetual existence.
VI.
The election of directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
VII.
The number of directors which constitute the whole Board of Directors of the
Corporation shall be designated in the Bylaws of the Corporation. Subject to the
rights of the holders of any series of Preferred Stock, no director shall be
removed without cause. Subject to any limitations imposed by law, the Board of
Directors or any individual director may be removed from office at any time with
cause by the affirmative vote of the holders of a majority of the voting power
of all the then-outstanding shares of voting stock of the Corporation entitled
to vote at an election of directors.
VIII.
In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, alter, amend or repeal the
Bylaws of the Corporation. Subject to Article 8 of the Bylaws, the Bylaws may
also be altered or amended or new Bylaws adopted by the affirmative vote of
least sixty-six and two-third percent (66 2/3%) of the combined voting power of
all the then-outstanding shares of the Corporation entitled to vote.
IX.
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as may hereafter be amended, no director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
Neither any amendment nor repeal of this Article, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article,
shall eliminate or reduce the effect of this Article in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
X.
Each director shall serve until his or her successor is duly elected and
qualified or until his or her death, resignation or removal. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director. No stockholder will be permitted to cumulate votes at
any election of directors.
Subject to the rights of the holders of any series of Preferred Stock, any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes, and any newly created directorships
resulting from any increase in the number of directors, shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by the stockholders, except as otherwise provided
by law, be filled only by the affirmative vote of a majority of the directors
then in office, even though less than a quorum of the Board of Directors, and
not by the
6
<PAGE>
stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which
the vacancy was created or occurred and until such director's successor shall
have been elected and qualified.
XI.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
XII.
No action shall be taken by the stockholders of the Corporation except at an
annual or special meeting of stockholders called in accordance with the Bylaws
and no action shall be taken by the stockholders by written consent in lieu of a
meeting.
XIII.
Notwithstanding any other provisions of this Certificate of Incorporation or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of the capital stock required
by law or this Certificate of Incorporation, the affirmative vote of the holders
of at least two-thirds (2/3) of the combined voting power of all of the
then-outstanding shares of the Corporation entitled to vote shall be required to
alter, amend or repeal Articles VI, VII, VIII, IX, X, XI, XII, XIII or any
provision thereof.
XIV.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, except as provided in Article XIII, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
The undersigned hereby acknowledges that the foregoing Certificate of
Incorporation is his act and deed and that the facts stated herein are true.
--------------------------------------
John C. Hodgman
President and Chief Executive Officer
Dated: December , 1998
7
<PAGE>
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CYGNUS, INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Cygnus, Inc. hereby acknowledges
P receipt of the Notice of Special Meeting of Stockholders and Proxy
Statement for the 1998 Special Meeting of Stockholders of Cygnus, Inc.
to be held on December 1, 1998 and hereby appoints John C. Hodgman,
R Craig Carlson and Barbara G. McClung and each of or any of them, proxy
and attorney-in-fact, with full power of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at such
meeting and at any adjournment or postponement thereof, and to vote all
O shares of Common Stock which the undersigned would be entitled to vote
if then and there personally present, on the matters set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
X INDICATED, WILL BE VOTED FOR THE LISTED PROPOSAL AND AS THE PROXYHOLDERS
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND
ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Y
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COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX
ON REVERSE SIDE
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FOLD AND DETACH HERE
<PAGE>
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Please mark
your choices /X/
like this
1. Proposal to amend the Company's Restated FOR AGAINST ABSTAIN
Certificate of Incorporation to effect a / / / / / /
reverse stock split.
I PLAN TO ATTEND THE MEETING. / /
COMMENT/ADDRESS CHANGE
Please mark this box if you have written
comments/address change on the reverse side. / /
Signature(s)___________________________________________ Dated____________, 1998
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
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FOLD AND DETACH HERE
