<PAGE>
SCHEDULE 14A INFORMATION
------------------------
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
SYSTEMIX, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as specified in its charter)
- - --------------------------------------------------------------------------------
(Name of person(s) filing proxy statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(j)(1) or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(A)
--------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
- - --------------------
(A) Set forth the amount on which the filing fee is calculated and state
how it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------
(3) Filing Party:
---------------------------------------------------------
(4) Date Filed:
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<PAGE>
SYSTEMIX
[LOGO]
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
NOTICE OF 1996 ANNUAL MEETING
AND
PROXY STATEMENT
- - ----------------------------------------------------------------------
- - ----------------------------------------------------------------------
IMPORTANT
Whether or not you plan to be present at the
1996 Annual Meeting, please complete, sign, and
date the accompanying proxy and return it promptly
in the enclosed prepaid envelope.
<PAGE>
SYSTEMIX
[LOGO]
3155 Porter Drive
Palo Alto, California 94304
May 31, 1996
Dear Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of SyStemix, Inc. to be held on Thursday, June 27, 1996 at 10:00 a.m. Pacific
Daylight Savings Time, at the offices of Ernst & Young LLP, 1451 California
Avenue, Palo Alto, California.
Whether or not you plan to attend the 1996 Annual Meeting, please complete,
sign, and date the accompanying proxy and return it promptly in the enclosed
prepaid envelope. If you attend the Annual Meeting, you may vote in person if
you wish, even if you have previously returned your proxy.
Sincerely,
John J. Schwartz, Ph.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 27, 1996
Notice is hereby given that the 1996 Annual Meeting of Stockholders (the
"Annual Meeting") of SyStemix, Inc., a Delaware corporation (the "Company"),
will be held on June 27, 1996, at the offices of Ernst & Young LLP, 1451
California Avenue, Palo Alto, California, commencing at 10:00 a.m. Pacific
Daylight Savings Time, for the following purposes:
(1) To elect four directors, each to hold office for a three-year term as
Class II directors and until their successors are duly elected and
qualified.
(2) To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1996.
(3) To transact such other matters as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on May 17, 1996 as
the record date for determining the stockholders entitled to receive notice of,
and to vote at, the Annual Meeting and any adjournment or postponement thereof.
A list of such stockholders will be available at the time and place of the
meeting and, for any purpose germane to the meeting, during the ten days prior
to the meeting, at the office of the Secretary of the Corporation at 1651 Page
Mill Road, Palo Alto, California, during ordinary business hours.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, AND
DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED PREPAID
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
By Order of the Board of Directors,
Iris Brest
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Palo Alto, California
May 31, 1996
<PAGE>
SYSTEMIX, INC.
3155 PORTER DRIVE
PALO ALTO, CALIFORNIA 94304
------------------------
PROXY STATEMENT
FOR THE 1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 27, 1996
---------------------
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of SyStemix,
Inc., a Delaware corporation (the "Company" or "SyStemix"), in connection with
the solicitation by its Board of Directors from holders of outstanding shares of
the Company's common stock, par value $.01 per share (the "Common Stock"), of
proxies to be voted at the 1996 Annual Meeting of Stockholders of the Company to
be held on Thursday, June 27, 1996 at 10:00 a.m. Pacific Daylight Savings Time,
at the offices of Ernst & Young LLP, 1451 California Avenue, Palo Alto,
California, and at any adjournment or postponement thereof (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of 1996 Annual
Meeting of Stockholders. The Company's principal executive offices are located
at 3155 Porter Drive, Palo Alto, California 94304.
This Proxy Statement and the form of proxy are first being mailed to
stockholders of the Company on or about May 31, 1996.
All proxies duly executed and received prior to or at the Annual Meeting,
and not revoked, will be voted on all matters presented at the meeting in
accordance with the instructions indicated on such proxies. In the absence of
specified instructions, proxies so received will be voted FOR (1) the named
nominees to the Company's Board of Directors, and FOR (2) the ratification of
the selection of Ernst & Young LLP as independent auditors for the Company's
fiscal year ending December 31, 1996. If any other matters are properly
presented at the Annual Meeting for consideration, the persons named in the
enclosed form of proxy and acting thereunder will have discretion to vote on
such matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) delivering to the Secretary of the Company a proxy bearing a later
date relating to the same shares before the taking of the vote at the Annual
Meeting, or (iii) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute the
revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to 3155 Porter Drive, Palo Alto, California
94304, Attention: Secretary, or hand delivered to Iris Brest of the Company at
or before the taking of the vote at the Annual Meeting. The persons named as
proxies on the enclosed form of proxy, John J. Schwartz and Wendy R. Hitchcock,
were selected by the Board of Directors of the Company and are officers of the
Company.
RECORD DATE FOR THE ANNUAL MEETING
The Board of Directors of the Company has fixed the close of business on May
17, 1996, as the record date for the determination of the stockholders entitled
to notice of, and to vote at, the Annual Meeting. Accordingly, only holders of
record of Common Stock on the record date will be entitled to such notice and to
vote at the Annual Meeting. On May 17, 1996, 14,470,149 shares of Common Stock
were outstanding. Each stockholder on the Record Date is entitled to one vote
per share on each
1
<PAGE>
matter to be considered at the Annual Meeting. The holders of a majority of the
shares issued and outstanding, whether present in person or represented by
proxy, will constitute a quorum for the transaction of business at the Annual
Meeting.
SANDOZ LTD. TRANSACTION
On February 19, 1992, Sandoz Ltd. acquired a 60% interest (on a fully
diluted basis) in the Company. The acquisition was effected through two
simultaneous transactions. In the first, Sandoz Biotech Holdings Corporation, an
indirect wholly owned subsidiary of Sandoz Ltd. (collectively with Sandoz Ltd.,
"Sandoz") purchased, pursuant to a tender offer, 4,011,684 shares or 49.13% of
the Company's Common Stock (on a fully diluted basis) for $70 per share. In the
second, the Company sold 1,982,143 shares of the Company's Common Stock to
Sandoz, at a price of $56 per share or an aggregate of approximately $111
million, thereby raising Sandoz's aggregate ownership to 60% of the Company's
Common Stock on a fully diluted basis. Sandoz provided such funds from its
working capital.
On January 30, 1995, the Company and Sandoz entered into a stock and warrant
purchase agreement whereby the Company issued to Sandoz, on February 2, 1995, an
additional 4,616,272 shares of Common Stock and warrants to purchase an
additional 1,367,600 shares of Common Stock, in exchange for proceeds of $80.0
million. The warrants have an exercise price of $27.50 per share and are
exercisable during a three-year period ending February 2, 1998. Certain portions
of the original acquisition agreement, entered into between the Company and
Sandoz on December 16, 1991 (the "Acquisition Agreement"), were amended to allow
this transaction.
The Acquisition Agreement, as amended, provides that until December 16,
1998, Sandoz is prohibited from increasing its share holding above 71.6% of the
Common Stock on a fully-diluted basis (73.9% if the warrants are exercised in
full), and from December 17, 1998 to February 18, 2002 above 75%. Sandoz is,
however, permitted to bid for 100% of the Company at any time after December 16,
1994, but only if such action is recommended by a majority of the Company's
"Independent Directors" as defined in the Acquisition Agreement.
The Acquisition Agreement, as amended, also provides that Sandoz has certain
rights to purchase (at its option either from the Company or on the market)
additional shares of Common Stock to maintain its level of ownership in the
event of an increase in the number of shares of Common Stock outstanding
(including through the issuance of securities, such as options or warrants that
may be exercised for Common Stock) (the "Top-Up Right"). Until February 19,
1999, Sandoz has a Top-Up Right, with certain limitations, to maintain ownership
of 71.6% (73.9% if the warrants are exercised in full) of the Common Stock on a
fully diluted basis. From February 19, 1999 until 2002 Sandoz has a Top-Up
Right, with certain limitations, to maintain its then aggregate ownership of the
Common Stock on a fully diluted basis which may not exceed 75%. The Top-Up Right
may be exercised with respect to options granted under employee benefit plans
only when such options are exercised.
Under the terms of the Acquisition Agreement, Sandoz is entitled to
designate up to the number (rounded up to the next whole number) of the
Company's Board of Directors that will give Sandoz representation equal to the
product of the total number of members of the Company's Board of Directors
multiplied by the percentage that the aggregate number of shares of Common Stock
then beneficially owned by Sandoz or any affiliate of Sandoz bears to the total
number of shares of Common Stock then outstanding. Sandoz has agreed to vote all
shares of Common Stock directly or indirectly beneficially owned by them (the
"Sandoz Shares"), and the Company has agreed, at such time, to promptly take all
actions necessary to cause the designees of Sandoz to be elected as directors of
the Company. The Acquisition Agreement provides that the directors nominated by
Sandoz shall be divided evenly, as nearly as possible, among the three classes
of directors. The Acquisition Agreement further provides that Sandoz will vote
the Sandoz Shares, and the Company shall promptly take all actions necessary, to
ensure that the Board of Director's membership shall include three Independent
Directors, and Sandoz has agreed to vote the Sandoz Shares, and the Company has
agreed that it shall
2
<PAGE>
promptly take all actions necessary, to ensure that any successors to such
Independent Directors shall be nominated by the remaining Independent Directors
and shall be elected, provided Sandoz consents to such election, which consent
shall not be unreasonably withheld.
The percentage of the Company's Common Stock beneficially owned by Sandoz
(which includes 1,367,600 shares purchasable upon exercise of warrants) is
75.6%. Because of its ownership of more than a majority of the outstanding
shares of Common Stock, Sandoz will control the outcome of any matter to be
voted on at the 1996 Annual Meeting.
PRINCIPAL STOCKHOLDERS OF SYSTEMIX
The following table sets forth, as of March 1, 1996, the names and principal
business addresses of each person known by SyStemix to be the beneficial owner
of more than five percent of the Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME AND OF COMMON STOCK COMMON STOCK
ADDRESS OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
- - ------------------------------------------------------------------ ----------------- ---------------
<S> <C> <C>
Sandoz Biotech Holdings Corporation (1) 11,977,699(2) 75.6%
608 Fifth Avenue
New York, New York 10020
Morgan Guaranty Trust Company
of New York 1,251,871 8.7%
60 Wall Street
New York, New York 10260
</TABLE>
- - ------------------------
(1) Sandoz Biotech Holdings Corporation is an indirect and wholly-owned
subsidiary of Sandoz Ltd. The address of the principal executive offices of
Sandoz Ltd. is Lichtstrasse 35, CH-4056, Basle, Switzerland.
(2) Represents 10,610,099 shares of Common Stock and warrants to purchase
1,367,600 shares of Common Stock.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 1996, the number of shares of
Common Stock beneficially owned by directors, the executive officers listed in
the Summary Compensation Table, and directors and all executive officers as a
group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENTAGE OF
NAME OF BENEFICIALLY COMMON STOCK
BENEFICIAL OWNER OWNED BENEFICIALLY OWNED
- - --------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Linda M. Burch 31,327(1) *
Harold Edgar 42,714(2) *
Edgar J. Fullagar -- (3) --
Stephan Guttmann, Ph.D. -- (3) --
Paul Herrling, Ph.D. -- (3) --
Wendy R. Hitchcock 8,687(4) *
Didier L. Lanson, Ph.D. 10,667(5) *
Hugh Lewis 11,252(6) *
Fred J. Meyer 5,959(3,7) *
Ulrich Oppikofer, Ph.D. -- (3) --
Joseph J. Ruvane, Jr. 48,362(8) *
John J. Schwartz, Ph.D. 120,037(9) *
Daniel L. Vasella, M.D. -- (3) --
Irving L. Weissman, M.D. 150,562(10) 1.0%
All directors and executive officers as
a group (18 persons) 435,592(11) 3.0%
</TABLE>
- - ------------------------
* Represents less than 1%.
(1)Includes 28,327 shares of Common Stock purchasable upon the exercise of
stock options granted pursuant to the Company's stock option plans, which
are exercisable or become so within 60 days of March 1, 1996 ("Presently
Exercisable Options"). Ms. Burch also holds options to purchase 22,986
shares of common stock which are not Presently Exercisable Options.
(2)Represents 34,439 shares of Presently Exercisable Options. Mr. Edgar also
holds options to purchase 7,500 shares of Common Stock which are not
Presently Exercisable Options.
(3)Excludes 11,977,699 shares of Common Stock beneficially held by Sandoz
Biotech Holdings Corporation of which such person may be considered an
affiliate. Such person disclaims beneficial ownership of any shares held by
Sandoz Biotech Holding Corporation or its affiliates.
(4)Includes 6,687 shares of Presently Exercisable Options. Ms. Hitchcock also
holds options to purchase 20,063 shares of Common Stock which are not
Presently Exercisable Options.
(5)Represents Presently Exercisable Options. Dr. Lanson also holds options to
purchase 11,005 shares of Common Stock which are not Presently Exercisable
Options.
(6)Represents Presently Exercisable Options. Mr. Lewis also holds options to
purchase 20,760 shares of Common Stock which are not Presently Exercisable
Options.
(7) Represents Presently Exercisable Options. Mr. Meyer also holds options to
purchase 7,500 shares of Common Stock which are not Presently Exercisable
Options.
(8) Represents Presently Exercisable Options. Mr. Ruvane also holds options to
purchase 7,500 shares of Common Stock which are not Presently Exercisable
Options.
4
<PAGE>
(9) Includes 89,037 shares of Presently Exercisable Options. Dr. Schwartz also
holds options to purchase 120,450 shares of Common Stock which are not
Presently Exercisable Options.
(10) Includes 5,959 shares of Presently Exercisable Options. Dr. Weissman also
holds options to purchase 7,500 shares of Common Stock which are not
Presently Exercisable Options.
(11) Includes 244,914 shares of Presently Exercisable Options.
PROPOSAL 1 -- ELECTION OF DIRECTORS
SyStemix has a classified Board of Directors consisting of three classes of
directors serving staggered three-year terms and until their respective
successors are duly elected and appointed. Class I consists of four directors,
Class II of four directors and Class III of three directors. Four Class II
directors are to be elected at the Annual Meeting for three-year terms expiring
on the date of the annual meeting of stockholders in 1999 and until each such
director's successor shall have been duly elected or appointed. The Class I and
Class III directors will serve until the annual meeting of stockholders to be
held in 1998 and 1997, respectively, and in each case until their successor
shall have been duly elected or appointed.
The nominees for Class II directors are HAROLD EDGAR, PAUL L. HERRLING,
ULRICH OPPIKOFER AND IRVING L. WEISSMAN.
The following table sets forth certain information, as of March 1, 1996
unless otherwise noted, concerning each of the four nominees for directors and
each current director in the classes continuing in office.
<TABLE>
<CAPTION>
CLASS OF DIRECTOR
NAME AGE POSITIONS HELD DIRECTORS SINCE
- - ------------------------------------------- --- --------------------------- ---------- ---------
<S> <C> <C> <C> <C>
Joseph J. Ruvane, Jr. 70 Chairman of the Board Class I 1990
John J. Schwartz, Ph.D. 61 President, CEO Class I 1995
Stephan Guttmann, Ph.D. 67 Director Class I 1992
Fred J. Meyer 65 Director Class I 1994
Harold Edgar 53 Director Class II 1989
Paul L. Herrling, Ph.D. 49 Director Class II 1994
Ulrich Oppikofer, Ph.D. 61 Director Class II 1992
Irving L. Weissman, M.D. 56 Director Class II 1988
Edgar J. Fullagar 56 Director Class III 1996
Daniel L. Vasella, M.D. 42 Director Class III 1995
Edgar H. Schollmaier 62 Director (1) Class III 1996
</TABLE>
- - ------------------------
(1) As of March 15, 1996
JOSEPH J. RUVANE, JR., has served as a director of the Company since
December 1990 and was elected Chairman of the Board in April 1991. From 1988 to
1990, Mr. Ruvane was Vice Chairman of Glaxo Inc., and from 1986 to 1988, Chief
Executive Officer and Chairman of that company. Mr. Ruvane also served as a
director for Glaxo Inc.'s parent company, Glaxo Holdings P.L.C. Mr. Ruvane is a
director on the boards of Intercardia Inc. and Connective Therapeutics Inc.
JOHN J. SCHWARTZ, PH.D., was appointed President and Chief Executive Officer
of the Company on March 29, 1995. From December 1994 to March 1995, Dr. Schwartz
served as the Company's Acting President and Chief Executive Officer. From
January 1993 to December 1994, Dr. Schwartz was the Company's Senior Vice
President, General Counsel and Secretary. From 1969 through 1992, Dr. Schwartz
was employed by Stanford University, most recently as the University's Vice
President and General Counsel.
5
<PAGE>
EDGAR J. FULLAGAR has served as a director of the Company since January
1996. Mr. Fullagar is Vice Chairman and Chief Executive Officer of Sandoz
Corporation New York, Chairman of Sandoz Pharmaceuticals Corporation, and
President of Sandoz Biotech Holdings Corp. From 1994 through 1995, Mr. Fullagar
was a member of the Executive Committee of Sandoz Pharma Ltd., as well as Senior
Vice President, Marketing, of Sandoz Pharma, and Chairman of the Board of Sandoz
Pharma's Swiss operating company. From 1980 to 1993, Mr. Fullagar was Chief
Executive Officer of Sandoz Pharmaceuticals in the United Kingdom and the
Republic of Ireland.
STEPHAN GUTTMANN, PH.D., has served as a director of the Company since
February 1992. From 1956 until 1993, Dr. Guttman was employed by Sandoz Ltd.,
most recently as Head of Pharma Research and Development.
FRED J. MEYER has served as a director of the Company since December 1994.
Mr. Meyer has been Chief Financial Officer and a director of the Omnicom Group
Inc. since 1988. Mr. Meyer was employed by Sandoz from 1971 to 1981, from 1978
to 1981 as President and Chief Executive Officer of Sandoz United States, Inc.,
a holding company. Between 1981 and 1982, Mr. Meyer was Managing Director and
Chief Executive Officer of Wander Ltd., Berne. Mr. Meyer is also a director on
the boards of Zurich-American Insurance Companies, SoGen International Fund,
SoGen Funds, Inc., and Sandoz Corp.
HAROLD EDGAR has served as a director of the Company since March 1989 and as
interim part-time Secretary of the Company from September 1991 to December 1992.
In 1991 and 1992, Mr. Edgar was also retained by the Company to provide outside
legal counsel. Since 1985, Mr. Edgar has been the Julius Silver Professor of
Law, Science and Technology and Director of the Program in Law, Science and
Technology at Columbia University School of Law.
PAUL L. HERRLING, PH.D., has served as a director of the Company since March
1994. Dr. Herrling is head of Corporate Research for Sandoz Pharma Ltd. From
1992 to 1994, Dr. Herrling was head of Preclinical Research, and from 1987 to
1992, head of the Sandoz Research Institute (Berne), both at Sandoz Pharma Ltd.
Dr. Herrling is also a director on the board of Genetic Therapy Inc.
ULRICH OPPIKOFER, PH.D., has served as a director of the Company since March
1992. Dr. Oppikofer is Executive Vice President of Sandoz Pharma Ltd. From 1985
to 1990, Dr. Oppikofer was Executive Vice President of Sandoz Ltd. Dr. Oppikofer
also serves as a director of Swiss Life, a life insurance cooperative located in
Zurich, Switzerland.
EDGAR H. SCHOLLMAIER has served as a director of the Company since March 15,
1996. Mr. Schollmaier is President and Chief Executive Officer of Alcon
Laboratories, Inc., where he has been employed since 1958, serving in his
present position since 1977. Mr. Schollmaier is also a director on the board of
Stevens International, Inc.
DANIEL L. VASELLA, M.D., has served as a director of the Company since June
1995. Dr. Vasella is Chief Executive Officer of Sandoz Pharma Ltd. and a member
of the Sandoz Group Executive Committee. Prior to his appointment as CEO in
1995, Dr. Vasella was Chief Operating Officer of Sandoz Pharma from 1994 to 1995
and Senior Vice President and Head of Worldwide Development from 1993 to 1994.
From 1988 until 1992, Dr. Vasella was with Sandoz Pharmaceuticals Corp., the
U.S. affiliate of Sandoz Pharma, most recently as Director and Department Head
in Marketing. Dr. Vasella serves on several Sandoz boards and also on the board
of Genetic Therapy Inc.
IRVING L. WEISSMAN, M.D., a co-founder of the Company, has served as a
director of the Company and Chairman of its Scientific Advisory Board since May
1988. Since 1988, Dr. Weissman has been the Karel and Avis Beekhuis Professor of
Cancer Biology, a Professor in the Departments of Pathology and Developmental
Biology, and Associate Director for the Center of Molecular and Genetic
Medicine, all at Stanford University. From 1988 to 1992, Dr. Weissman was an
Investigator in the Howard Hughes Medical Institute at Stanford University.
Since 1986, Dr. Weissman has been the Director of the Immunology Program at
Stanford University. Dr. Weissman is a Member of the National Academy of
6
<PAGE>
Sciences, a Fellow of the American Association for the Advancement of Science,
and a Member of the American Academy of Arts and Sciences; he received the
Pasarow Prize in cancer immunology in 1989.
Election of directors shall be determined by a plurality of the votes cast
in person or by proxy at the Annual Meeting. Under applicable Delaware law, in
tabulating the vote, abstentions will be counted and will have the same effect
as negative votes, whereas broker non-votes will not be counted (which will have
the effect of reducing the absolute number, but not the percentage, of the
affirmative votes needed for election of the directors). The Company's
Certificate of Incorporation allows voting by proxy on this matter.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION TO THE BOARD OF DIRECTORS OF EACH OF THE FOUR NOMINEES.
It is the intention of the persons named in the enclosed form of proxy to
vote such proxy "FOR" the election of the four nominees for Class II directors,
HAROLD EDGAR, PAUL L. HERRLING, ULRICH OPPIKOFER AND IRVING L. WEISSMAN, unless
otherwise directed by the stockholders. Management does not contemplate that any
of the nominees will become unable to serve, but if for any reason that should
occur before the Annual Meeting, it is expected that the persons named in the
proxy will vote for another nominee or nominees to be selected by the Board of
Directors.
BOARD COMMITTEES AND MEETINGS HELD
The Company's Board of Directors has the following standing Committees:
Executive, Audit, Nominating, Compensation and, through 1995, Special (to
administer the Stock Option Plan). Beginning in 1996, the functions of the
Special Committee were assumed by the Compensation Committee.
The members of the Executive Committee are Harold Edgar, Edgar J. Fullagar
and Fred J. Meyer. This committee has been delegated all of the powers of the
Board of Directors with customary and statutory exceptions. Management also
solicits advice from the members of the Executive Committee on an ongoing basis
throughout the year. The Executive Committee held one meeting in 1995.
The members of the Audit Committee are Harold Edgar, Fred J. Meyer and
Joseph J. Ruvane, Jr. This committee meets with representatives of the Company's
independent auditors during the course of their audit,reviews audit procedures,
and receives recommendations and reports from the auditors. The Audit Committee
held two meetings in 1995.
The members of the Compensation Committee are Edgar J. Fullagar, Joseph J.
Ruvane, Jr., and Daniel L. Vasella. This committee, composed exclusively of
outside directors, is responsible for reviewing and recommending to the Board of
Directors the compensation of certain executives as well as reviewing and
recommending the overall Company-wide compensation plan and strategy. The
Compensation Committee held five meetings in 1995. Beginning in 1996, the
Compensation Committee also has the authority to administer the Company's Stock
Option Plans, a function that was performed by the Special Committee in 1995.
The Special Committee held six meetings in 1995.
The members of the Nominating Committee are Edgar J. Fullagar, Joseph J.
Ruvane, Jr., and Daniel L. Vasella. This committee considers and makes
recommendations to the Board of Directors as to persons whom it concludes should
be considered for membership and matters relating to the selection, tenure and
retirement of directors. The Nominating Committee did not meet during 1995. The
Nominating Committee will consider nominees recommended by SyStemix
stockholders. Stockholders wishing to recommend a person for consideration as a
nominee to the Board of Directors should send a letter to the Company stating
the name and qualifications of the proposed nominee. The letter must be sent
prior to January 20 of the year of the annual meeting at which the proposed
nominee would be considered. Stockholders are also entitled to nominate
candidates for director at the Annual Meeting if they have complied with the
advance notice provisions contained in the Company's Bylaws.
7
<PAGE>
The Board of Directors held ten meetings during 1995. Incumbent director
Daniel L. Vasella attended less than 75% of the meetings of the Board and the
Compensation Committee, on which he served, during his period of service in
1995.
DIRECTORS' COMPENSATION
With the exception of Mr. Edgar and Mr. Ruvane, and except as stated
elsewhere in this Proxy Statement, no director received remuneration for
services provided as a member of the Board of Directors before March 17, 1995.
Effective as of March 17, 1995, each member of the Board of Directors who is not
an employee of either SyStemix, Sandoz, or a SyStemix or Sandoz affiliate (a
"Non-Employee Director") is compensated with a $6,000 annual retainer (prorated
for the portion of the calendar year served after March 17, 1995) and $1,000 for
each Board of Directors' meeting attended. Effective as of March 17, 1995, each
Non-Employee Director also receives an automatic annual grant of nonqualified
stock options to purchase 7,500 shares of the Company's Common Stock, priced at
the fair market value of the Company's Common Stock on the date of the grant
(prorated for the portion of the calendar year served after March 17, 1995).
For 1995 services as a member of the Board of Directors, Mr. Ruvane and Mr.
Edgar were compensated with a $6,000 annual retainer, $1,000 for each Board of
Directors meeting attended, and the grant of options to purchase 7,500 shares of
the Company's Common Stock, priced at the fair market value of the Company's
Common Stock on the date of the grant. Mr. Meyer was compensated for services
after March 17, 1995 as a Non-Employee Director with a $4,768 prorated annual
retainer, $1,000 for each Board of Directors meeting attended after March 17,
1995, and the grant of options to purchase 5,959 shares of the Company's Common
Stock, priced at the fair market value of the Company's Common Stock on the date
of the grant. Dr. Weissman was compensated for services after March 17, 1995 as
a Non-Employee Director with a grant of options to purchase 5,959 shares of the
Company's Common Stock, priced at the fair market value of the Company's Common
Stock on the date of the grant; Dr. Weissman also received compensation for
services as a consultant (see, "Directors' Affiliations").
Directors who are employees of SyStemix, Sandoz, or a SyStemix or Sandoz
affiliate, do not receive fees or stock options for their services as directors.
All Directors continue to be reimbursed for their expenses relating to their
attendance at Board of Directors' meetings.
DIRECTORS' AFFILIATIONS
The following affiliations exist between the Company and its directors:
Dr. Weissman is chairman of the Company's Scientific Advisory Board. In
addition, Dr. Weissman is retained by the Company as an exclusive consultant to
advise the Company in connection with developments in his area of expertise, to
the extent permitted by Stanford University, Dr. Weissman's full-time employer.
During 1995, Dr. Weissman received in cash $127,829 for his consulting services.
In connection with the Sandoz transaction in February 1992, certain stock
options were repurchased. As a result of this transaction, Mr. Edgar and Mr.
Ruvane received in cash $202,238 and $108,100, respectively. (The latter also
received a cash payment of $141,782 for repurchase of stock held by Mr. Ruvane,
pursuant to this transaction).
Additional affiliations are discussed at "Certain Relationships and Related
Transactions."
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation, for
each of the last three years ended December 31, 1995, for the Company's Chief
Executive Officer, the former Vice President, Process and Product Development,
and the four other highest paid executive officers in the last fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL POSITION YEAR
- - ---------------------------------- --------- LONG-TERM
ANNUAL COMPENSATION COMPENSATION ALL OTHER
----------------------------------- --------------------------- COMPENSATION
SALARY BONUS OTHER ANNUAL -------------
--------- --------- COMPENSATION AWARDS
------------- --------------------------- ($)
($) ($) SECURITIES
($) RESTRICTED UNDERLYING
STOCK OPTIONS/SARS
AWARDS (A) -------------
------------ (#)
($)
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Schwartz, Ph.D. (b) 1995 288,521 75,000 17,691(c) 249,800(d) 80,000 --
President & CEO 1994 237,743 150,375(e) 3,329 -- 59,487 --
1993 207,119 78,750 -- 224,890(d) 70,000 --
Linda M. Burch 1995 156,200 43,299 690 -- -- --
Vice President, Business 1994 134,447 37,988 -- -- 16,313 --
Development 1993 149,204 26,227 -- -- 20,000 --
John N. Gardner, D. Phil. (f) 1995 155,856 6,691 2,716 -- -- 82,925(f)
Former Vice President, Process 1994 155,691 68,680 31,099(g) 16,365(h) 9,750 --
and Product Development 1993 19,971 -- 3,400(g) 40,600(h) 20,000 --
Wendy R. Hitchcock 1995 161,200 44,685 7,702 -- -- --
Vice President, Chief Financial 1994 103,569 29,760 -- 32,730(i) 26,750 --
Officer 1993 -- -- -- -- -- --
Didier L. Lanson, Ph.D. (j) 1995 169,222 32,630 18,413(k) -- 4,550 --
Vice President, Europe 1994 158,901 23,477 126,759(l) -- 5,122 --
1993 146,683 9,717 43,030(m) -- --
Hugh Lewis 1995 148,200 47,772 1,685 -- 5,250 --
Vice President, Operations 1994 132,540 40,133 18,023(n) -- 16,762 --
1993 80,000 26,498 3,274(n) -- 10,000 --
</TABLE>
- - ------------------------
(a) The dollar value of restricted stock is calculated by multiplying the
closing price of the Company's Common Stock on the NASDAQ National Market
System on the date of grant by the number of shares awarded net any
consideration paid by the named executive. Dividends will be paid with
respect to restricted stock at the same time and on the same terms as
dividends are paid on the Common Stock generally.
(b) Dr. Schwartz has been the Company's President and CEO since March 29, 1995.
From December 2, 1994 to March 28, 1995, Dr. Schwartz was the Company's
Acting President and CEO. Prior to December 2, 1994, Dr. Schwartz was the
Company's Senior Vice President and General Counsel.
(c) Represents cash payments for car allowances and supplemental life insurance.
(d) Represents an aggregate of 31,000 shares of restricted stock, 20,000 of
which vesting monthly and 11,000 of which vesting annually over four years.
As of December 31, 1995, the aggregate of 31,000 shares of restricted stock
valued at $310,149 was held.
(e) Represents $84,375 bonus for achievement of 1994 goals, and $66,000 one-time
performance share award for achievement of specific corporate goals in 1994
in accordance with the terms of his promotion to Senior Vice President.
9
<PAGE>
(f) Dr. Gardner retired from SyStemix effective December 8, 1995. Under the
terms of Dr. Gardner's amended offer of employment, he received six months'
severance pay which was paid in 1996.
(g) Represents primarily payments for relocation of $28,383 in 1994 and $3,400
in 1993.
(h) Represents an aggregate of 3,500 shares of restricted stock vesting annually
over four years. As of December 31, 1995, 2,125 shares of restricted stock
valued at $31,875 were held (the balance of the restricted shares was
canceled as of December 8, 1995, as a result of Dr. Gardner's retirement).
(i) Represents 2,000 shares of restricted stock vesting annually over four
years. As of December 31, 1995, 1,500 shares of restricted stock valued at
$22,350 were held.
(j) Prior to February 1, 1995, Dr. Lanson was an employee of SyStemix
International S.A.R.L., a wholly-owned subsidiary of the Company.
(k) Represents cash payment for relocation to France ($12,436), supplemental
life insurance ($1,698) and tax equalization ($4,279).
(l) Represents cash payments for tax equalization ($96,401), tax preparation
fees ($5,700), interim living costs ($23,674) and supplemental life
insurance ($684).
(m) Represents cash payments for relocation from France ($34,670) and tax
equalization ($8,360).
(n) Represents primarily relocation expenses of $14,965 in 1994 and $3,225 in
1993.
EMPLOYMENT AGREEMENTS
Dr. Schwartz was appointed President and Chief Executive Officer of the
Company on March 29, 1995, and entered into an employment agreement that
superseded his prior employment agreement with the Company. Dr. Schwartz'
employment agreement generally provides for, among other things, an initial term
of four years (automatically extended for an additional one-year period absent
six-months' prior notice not to extend), an initial annual base salary of
$300,000, which annual salary may be increased (but not decreased) pursuant to
an annual review by the Board of Directors, initial equity award (this and all
other equity awards referenced in Employment Agreements with the Company are
granted under the Company's 1991 Stock Option and Incentive Plan, described in
"1991 Stock Option Plan" below), annual bonus (not less than 25% of base salary
for highly effective performance of the corporate goals) and equity awards
(under a formula, for highly effective performance of the corporate goals)
pursuant to the Company's bonus and incentive program, percentage cash awards
for the achievement of certain financial transactions, employee welfare
benefits, vacation in accordance with Company policy but not less than four
weeks per year, a $150,000 interest-free housing loan (none of which is
outstanding), and provision of an automobile. In the event of a specified change
in control, the executive's stock options will become fully vested immediately
prior to such change in control. In the event of termination without cause or
resignation for good reason, the executive will receive his base salary and 100%
of his target bonus, together with certain other benefits including employee
welfare benefits, for a severance period of not less than two years, and all
stock options will become vested and non-forfeitable.
Ms. Burch entered into an employment agreement with the Company effective
September 1, 1993. Ms. Burch's employment agreement, as amended, generally
provides for, among other things, an initial term of three years (automatically
extended for an additional one-year period absent six-months' prior notice not
to extend), an initial annual base salary of $145,707, which annual salary may
be increased (but not decreased) pursuant to an annual review by the Board of
Directors, annual bonus and equity awards pursuant to the Company's bonus and
incentive program, employee welfare benefits, and a vacation of fifteen business
days per year. In the event of termination without cause, the executive will
receive her base salary, together with certain employee welfare benefits, for a
severance period of not less than six months.
Ms. Hitchcock entered into an employment agreement with the Company
effective May 2, 1994. Ms. Hitchcock's employment agreement, as amended,
generally provides for, among other things, an
10
<PAGE>
initial term of three years (automatically extended for an additional one-year
period absent six-months' prior notice not to extend), an initial annual base
salary of $155,000, which annual salary may be increased (but not decreased)
pursuant to an annual review by the Board of Directors, annual bonus and equity
awards pursuant to the Company's bonus and incentive program, employee welfare
benefits, and a vacation of fifteen business days per year. In the event of
termination without cause, the executive will receive her base salary, together
with certain employee welfare benefits, for a severance period of not less than
six months.
Dr. Lanson entered into an employment agreement with the Company effective
February 1, 1995. Dr. Lanson's employment agreement, as amended, generally
provides for, among other things, an initial term of two years (automatically
extended for an additional one-year period absent six-months' prior notice not
to extend), an initial annual base salary of $164,800 (25% of which is at a
guaranteed exchange rate of 5.5 French francs per U.S. dollar), which annual
salary may be increased (but not decreased) pursuant to an annual review by the
Board of Directors, annual bonus and equity awards pursuant to the Company's
bonus and incentive program, employee welfare benefits, a vacation of fifteen
business days per year, certain French-U.S. tax equalization benefits, and
relocation expenses.
Mr. Lewis entered into an employment agreement with the Company effective
September 1, 1993. Mr. Lewis' employment agreement, as amended, generally
provides for, among other things, an initial term of three years (automatically
extended for an additional one-year period absent six-months' prior notice not
to extend), an initial annual base salary of $120,000, which annual salary may
be increased (but not decreased) pursuant to an annual review by the Board of
Directors, annual bonus and equity awards pursuant to the Company's bonus and
incentive program, employee welfare benefits, and a vacation of fifteen business
days per year. In the event of termination without cause, the executive will
receive his base salary, together with certain employee welfare benefits, for a
severance period of not less than six months.
Mr. Gardner, who resigned his employment with the Company effective December
8, 1995, did not have an employment agreement with the Company. However, under
the terms of the Company's October 1993 offer of employment, as amended, Dr.
Gardner received severance in the amount of six months' pay upon termination of
his employment with the Company.
1991 STOCK OPTION PLAN
In June 1991, the Board of Directors of the Company approved the Company's
1991 Stock Option and Incentive Plan (as amended, the "Stock Option Plan")
pursuant to which the committee administering the Stock Option Plan (the
"Committee") may grant incentive stock options, nonqualified stock options,
stock appreciation rights, restricted stock awards and performance share awards
to eligible employees of the Company, including executive officers, and may
grant nonqualified stock options to eligible consultants to the Company. The
grant of stock options and other awards under the Stock Option Plan to employees
and consultants is subject to the discretion of the Committee. Directors who are
not employees of either the Company, Sandoz, or their affiliates ("Non-Employee
Directors") receive automatic annual grants of nonqualified stock options to
purchase 7,500 shares of the Company's Common Stock at an exercise price of not
less than the fair market value of such stock on the date of the grant
(generally, the first day of the calendar year or such later date of appointment
as a director, in which case the number of shares is prorated for the remaining
portion of the calendar year). The grant of nonqualified stock options under the
Stock Option Plan to Non-Employee Directors is not subject to the discretion of
the Committee.
Awards in the aggregate of up to 4,000,000 shares of the Company's common
stock ("Common Stock") may be granted under the Stock Option Plan (less the
number of shares awarded under the Company's 1988 Stock Option Plan), which
aggregate number of shares represents an aggregate market value of $55.0 million
based on a fair market value of $13.75 per share of Common Stock on March 1,
1996.
11
<PAGE>
Stock options granted under the Stock Option Plan may be either (i) options
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), which may be granted
only to employees of the Company, or (ii) nonqualified stock options, which may
be granted to employees, consultants and Non-Employee Directors. Under the Stock
Option Plan, in the case of any incentive stock option (and any nonqualified
stock option awarded to a Non-Employee Director), the exercise price of the
option granted may not be less than 100% (110% in the case of any options
granted to a person who owns more than 10% of the total combined voting power of
all classes of stock of the Company) of the fair market value of the Common
Stock on the date of grant of the option as defined in the Stock Option Plan.
Stock options generally become exercisable over a four-year period and generally
expire ten years from the date of grant.
Stock appreciation rights, with or without accompanying options, may be
granted under the Stock Option Plan to employees of the Company, and the holder
is entitled to a payment equal to the increase in value of the Common Stock from
the date of grant to the date of exercise. The payment made to holders of stock
appreciation rights may be made in cash or in Common Stock at the discretion of
the Committee. In the event a stock appreciation right is granted concurrently
with a stock option, the number of shares subject to the underlying stock option
shall be reduced accordingly by the exercise of such stock appreciation right. A
stock appreciation right granted independently of a stock option becomes
exercisable on the date or dates determined by the Committee, but not earlier
than 6 months after the date awarded, except in the case of death or disability.
Restricted stock may be awarded under the Stock Option Plan to employees of
the Company. The Committee determines the number of shares subject to the award,
the price to be paid for such shares, and the restrictions to be imposed on such
shares (which restrictions cannot terminate earlier than 6 months after the date
awarded). A holder of restricted stock may not transfer the shares so long as
any restrictions remain and if the employment of a holder is terminated prior to
the lapse of the restrictions, the Company may be entitled to repurchase the
restricted shares at the price paid by the participant. Holders of restricted
stock are entitled to vote such shares.
Performance share awards may be granted under the Stock Option Plan to
employees of the Company and entitle the holder to receive a specified amount of
cash or Common Stock (at the discretion of the Committee) based on achieving
some predetermined objective established by the Committee. Such cash or Common
Stock cannot be issued earlier than 6 months after the date the performance
share award was granted.
In the event of a change in control of the Company (as defined in the Stock
Option Plan), the vesting of outstanding awards granted under the Stock Option
Plan would be accelerated, unless the Board of Directors (as constituted prior
to the change in control) determined otherwise. For purposes of the Stock Option
Plan, a change in control includes, among other things, the acquisition by any
person or group (as defined) of 20% or more of the combined voting power of the
Company or a change in a majority of the members of the Board of Directors
during any two-year period (unless approved by three-fourths of the members of
the Board of Directors then still in office who were in office at the beginning
of such period). The acceleration of outstanding awards under the Stock Option
Plan under certain circumstances could have the effect of delaying or preventing
a change in control of the Company or other corporate action.
Pursuant to the Stock Option Plan, if the outstanding shares of Common Stock
are increased, decreased, or changed into a different number or kind of shares
or securities of the Company (E.G., through a capital change or adjustment), an
appropriate and proportionate adjustment must be made in the number and kind of
shares for which options may be granted. A corresponding adjustment changing the
number or kind of shares and the exercise price per share allocated to
unexercised options, or portions thereof, granted prior to any such change, will
also be made. Any such adjustment, however, will be made without any change in
the total price applicable to the unexercised portion of the option but with a
corresponding adjustment in the price for each share.
12
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Based on existing federal income tax laws, the following is a summary
description of the general federal income tax consequences that may obtain with
respect to the incentive stock options, nonqualified stock options, stock
appreciation rights and restricted stock that may be granted pursuant to the
Company's 1991 Stock Option and Incentive Plan ("Stock Option Plan").
INCENTIVE STOCK OPTIONS ("ISOS"). No taxable income will be realized by an
option holder upon the grant of an ISO, or upon the exercise of an ISO unless
the exerciser is subject to alternative minimum tax. If shares are issued to an
option holder pursuant to the exercise of an ISO and if a disqualifying
disposition of such shares is not made by such option holder (I.E., no
disposition is made within two years after the date of grant or within one year
after the receipt of such shares by such option holder), then (i) upon sale of
such shares, any amount realized in excess of the exercise price of the ISO will
be taxed to such option holder as a long-term capital gain and any loss
sustained will be a long-term capital loss, and (ii) no deduction will be
allowed to the Company. However, if shares acquired upon the exercise of an ISO
are disposed of prior to the expiration of either holding period described
above, generally (i) the option holder will realize ordinary income in the year
of disposition in an amount equal to the excess (if any) of the fair market
value of the shares at the time of exercise (or, if less, the amount realized on
the disposition of the shares), over the exercise price thereof, and (ii) the
Company will be entitled to deduct an amount equal to such income. Any
additional gain recognized by the option holder upon a disposition of such
shares prior to the expiration of the holding period described above will be
taxed as a short-term or long-term capital gain, as the case may be, and will
not result in any deduction by the Company. If an ISO is exercised at the time
when it no longer qualifies as an ISO, such option will be treated as a
nonqualified stock option. Subject to certain exceptions, an ISO generally will
not be eligible for the federal income tax treatment described above if it is
exercised more than three months following termination of employment. The amount
by which the fair market value of the stock on the exercise date of an ISO
exceeds the exercise price generally will constitute an item which increases the
option holder's "alternative minimum taxable income" in the year of exercise.
NONQUALIFIED STOCK OPTIONS ("NQSOS"). In general, an optionee will not be
subject to tax at the time a NQSO is granted. Upon exercise of a NQSO, the
optionee generally must include in ordinary income at the time of exercise an
amount equal to the excess, if any, of the fair market value of the stock at the
time of exercise over the exercise price. The Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of an option. Any subsequent gain
or loss recognized upon disposition of the shares will be taxed as short-term or
long-term capital gains, as the case may be.
STOCK APPRECIATION RIGHTS ("SARS"). An employee will not recognize income,
and the Company will not be entitled to a deduction, upon the grant of a SAR. On
the exercise of a SAR for cash, the holder will be taxed at ordinary income
rates on the amount of cash received. On the exercise of a SAR for shares, the
holder will be taxed at that time on the fair market value of the shares
received and will have a tax basis in such shares equal to their fair market
value. The Company will be entitled to a deduction at the same time and in the
same amount as the ordinary income recognized by the holder upon exercise of a
SAR.
RESTRICTED STOCK AWARDS ("RSAS"). An employee will not recognize income,
and the Company will not be entitled to a deduction, upon the grant of a RSA
(unless, within 30 days after the date of receipt of the RSA, the holder files
an election under Section 83(b) of the Code to include the value of the stock in
income when awarded). Absent a Section 83(b) election, a holder generally will
recognize ordinary income equal to the excess of the fair market value of the
restricted stock, at the time the restrictions lapse, over the amount, if any,
which the holder paid for the restricted stock. The Company generally will be
entitled to a deduction equal to the amount of ordinary income recognized
13
<PAGE>
by the holder, at the time the holder recognizes the income. (The tax treatment
upon disposition of restricted stock after lapse of the restrictions will vary,
depending upon whether the holder made a Section 83(b) election with respect to
the stock.)
THE DISCUSSION SET FORTH ABOVE IS INTENDED ONLY AS A SUMMARY AND DOES NOT
PURPORT TO BE A COMPLETE ENUMERATION OR ANALYSIS OF ALL POTENTIAL TAX EFFECTS
RELEVANT TO RECIPIENTS OF AWARDS UNDER THE PLANS. AMONG OTHER ITEMS, SUCH
DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES ARISING AS THE RESULT OF A
PARTICIPANT'S DEATH, OR UNDER THE LAW OF ANY STATE, LOCALITY OR FOREIGN
JURISDICTION. SUCH DISCUSSION IS FOR GENERAL INFORMATION ONLY AND DOES NOT APPLY
TO THE SPECIFIC FACTS OR CIRCUMSTANCES THAT MAY APPLY TO A PARTICULAR AWARD
RECIPIENT.
The following table shows, as to the executive officers named in the Summary
Compensation Table, information concerning stock options granted during the year
ended December 31, 1995. In addition, in accordance with the rules of the
Securities and Exchange Commission, the table shows the hypothetical gains or
"option spreads" that would exist for such options based on assumed rates of
annual compound stock appreciation of 5% and 10% per year from the date the
options were granted over the full option term.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED RATES
SECURITIES % OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OPTION TERMS (B)
GRANTED (A) EMPLOYEES PRICE (A) EXPIRATION ----------------------
NAME (#) (%) ($/SHARE) DATE 5% ($) 10% ($)
- - ---------------------------------------- ----------- ------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
John J. Schwartz, Ph.D.................. 80,000 13.3% 12.50 3/29/05 628,895 1,593,742
Linda M. Burch.......................... -- -- -- -- -- --
John N. Gardner, D.Phil. (c)............ -- -- -- -- -- --
Wendy R. Hitchcock...................... -- -- -- -- -- --
Didier L. Lanson, Ph.D.................. 4,550 0.8% 14.75 3/17/05 42,207 106,960
Hugh Lewis.............................. 5,250 0.9% 14.75 3/17/05 48,700 123,415
</TABLE>
- - ------------------------
(a) All grants were of incentive stock options, the exercise price of which may
not be less than 100% of the fair market value of the Company's Common Stock
on the date of grant. Options generally become exercisable in equal annual
installments over a four-year period; pursuant to his employment agreement,
Dr. Schwartz' options vest ratably each month over the four-year period.
(b) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future common stock price.
(c) Dr. Gardner retired from SyStemix effective December 8, 1995.
14
<PAGE>
The following table shows, as to the executive officers named in the Summary
Compensation Table, information concerning stock options exercised and the value
of unexercised options held by the named executives for the year-ended December
31, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END FY-END
ACQUIRED ON VALUE (#) ($)
EXERCISE REALIZED -------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Schwartz, Ph.D............... -- -- 69,871 139,616 47,500 192,500
Linda M. Burch....................... -- -- 25,327 25,986 (1) (1)
John N. Gardner, D.Phil. (2)......... -- -- 12,437 -- (1) --
Wendy R. Hitchcock................... -- -- 6,687 20,063 (1) (1)
Didier L. Lanson, Ph.D............... -- -- 9,530 12,142 (1) 1,138
Hugh Lewis........................... -- -- 9,190 22,822 (1) 1,313
</TABLE>
- - ------------------------
(1) The exercise price of the applicable options was above $15.00, the market
price of the Company's Common Stock on December 31, 1995.
(2) Dr. Gardner retired from SyStemix effective December 8, 1995.
COMPENSATION COMMITTEE REPORT
The Report of the Compensation Committee shall not be deemed to be
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 (the
"Securities Act") or under the Securities Exchange Act of 1934 (the "Exchange
Act"), except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
acts.
The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation policies of the Company for all employees,
including the Company's Chief Executive Officer and certain other executive
officers (collectively, "Executive Officers"). The Committee meets at least
annually to review the annual compensation and bonus plans, and recommends to
the Board of Directors the salaries, bonus and other compensation of the
Executive Officers. The Committee's philosophy for the compensation of the
Company's Executive Officers is to:
- Attract and retain world class talent critical to the achievement of the
Company's strategic goals and mission;
- Focus Executive Officers on key research, development and operational
goals that reflect the strategy and mission of the Company that will bring
an increased value to the stockholders;
- Pay fairly for both results and contributions while recognizing superior
efforts and processes that lead to results;
- Be consistent and equitable in the administration of the compensation
policy;
- Allow Executive Officers to participate in the Company's growth.
In order to recommend the appropriate compensation levels for its Executive
Officers, the Committee considers (i) the salaries of executive officers in
similar positions of comparably-sized companies and their performance according
to data obtained from an independent outside consultant and (ii) the achievement
of certain objectives (consistent with the Company's strategy and mission).
The Company has also established a bonus and incentive program for employees
including Executive Officers. Annually, objectives are established relating to
the Company as a whole and to the Executive Officers' areas of responsibility
and are weighted as to importance. Bonuses are determined
15
<PAGE>
by an arithmetic formula based on the achievement of the defined objectives and
may consist of both cash and stock options. The maximum cash bonus which may be
paid to any participant under the program, or applicable contract, is 40% of
such participant's base salary. The bonuses paid for the last three years to
certain Executive Officers of the Company are described in the Summary
Compensation Table appearing in "Executive Compensation," above.
The Committee believes stock options are a critical component of its
long-term, performance-based compensation policy. The principal items considered
in the granting of stock options to the Executive Officers of the Company are
the executive's ability to influence the Company's long-term growth potential,
and the achievement of the Company's strategic objectives. Since options are
generally granted with exercise prices equal to current market value, the
Committee believes that options motivate Executive Officers to achieve the
desired performance levels in a manner which will also benefit the Company's
stockholders.
In setting compensation for the Chief Executive Officer (the "CEO"), the
Committee and the Board of Directors review the Company's strategic and
operational goals agreed upon by the Committee and the CEO. On March 29, 1995,
John Schwartz was appointed President and CEO, whereupon his base salary
(annualized for 12 months) was increased 26.2% to $300,000 from the base salary
paid to him (as Senior Vice President and General Counsel and then as Acting
CEO) in the prior year. Dr. Schwartz was also paid, in 1996, a bonus of $75,000
for achievement of the Company's 1995 goals, as calculated under the Company's
bonus program in accordance with his employment agreement.
The Company is in the research and development stage and does not receive
revenues from proprietary cellular therapies. Consequently, the Company does not
deem it appropriate to base its compensation decisions on traditional financial
measures of performance, including return on equity or sales.
The Omnibus Budget Reconciliation Act of 1993 amended Section 162(m) of the
Internal Revenue Code and placed a limit on the amount of certain types of
income which may be deductible for tax purposes by the Company. None of the
Company's current Executive Officers have received compensation exceeding the
statutory limit and the Company has not yet determined how this legislation will
impact future compensation decisions or arrangements.
The Committee is composed of three independent, non-employee directors, who,
except as disclosed under "Election of Directors -- Directors' Affiliations,"
have no interlocking relationships as defined by the Securities and Exchange
Commission.
Compensation Committee of the Board of Directors of SyStemix, Inc.
Edgar J. Fullagar
Daniel L. Vasella
Joseph J. Ruvane, Jr.
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below includes information required by the
Securities and Exchange Commission and shall not be deemed incorporated by
reference by any general statement into any filing under the Securities Act or
under the Exchange Act, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
soliciting material or filed under such acts.
The following graph shows a comparison of the cumulative total stockholder
return for the Company, the NASDAQ Stock Market Index (U.S. Companies) and the
NASDAQ Pharmaceutical Index from August 7, 1991 (the date the Company commenced
trading its stock) through December 31, 1995. The graph assumes a $100
investment (including reinvestment of dividends) on August 7, 1991 in the
Company's stock, the NASDAQ Stock Market Index (U.S. Companies) and the NASDAQ
Pharmaceutical Index.
16
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
08/07/91 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
<S> <C> <C> <C> <C> <C> <C>
SYSTEMIX, INC. 100 263.86 111.45 85.54 84.34 72.29
NASDAQ Stock Market 100 116.84 135.99 156.1 152.59 215.62
NASDAQ Pharmaceutical 100 151.44 126.02 112.33 84.56 154.45
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1994, the Company and Sandoz agreed to provide funding for a
portion of the research carried out at Stanford University School of Medicine.
The research is directed by Dr. Irving Weissman as Principal Investigator. Dr.
Weissman, a faculty member at Stanford University, is a director, consultant,
and chairman of the scientific advisory board of the Company. The agreement
provides that the Company and Sandoz have the right to negotiate with Stanford
for a license on commercially reasonable terms for intellectual property, if
any, that results from the funding. As amended, the agreement provides for
funding through December 31, 1995. The Company provided $796,000 of funding in
1995. The parties are negotiating the terms of an amendment extending the
agreement through December 31, 1996.
In April 1993, the Company entered into an agreement with Sandoz
Pharmaceutical Corporation, a wholly-owned affiliate of Sandoz Pharma Ltd.,
(collectively "Sandoz") to form a joint venture ("Progenesys") with a primary
mission to research and develop hematopoietic cell-based, somatic gene therapies
against HIV infection. The Company and Sandoz licensed certain initial
technologies, within the field, to Progenesys. On August 31, 1995, the
Progenesys partnership was dissolved and replaced by a collaborative agreement
(the "HIV Gene Therapy Collaboration") between the Company and Sandoz, with
terms and conditions substantially equivalent to those of the partnership
agreement. For the year ended December 31, 1995 (through the date of
dissolution), the Company's share of Progenesys' operating loss was $2.94
million. Revenue earned under the HIV Gene Therapy Collaboration was $1.94
million for the year ended December 31, 1995.
In November 1993, the Company entered into a two-year collaboration
agreement with Sandoz regarding therapeutic anti-viral agents for HIV infection.
The collaboration focused on the underlying pathogenic mechanisms of HIV
disease, the identification of new potential targets for anti-viral therapy and
the IN-VIVO testing of anti-HIV agents under development. The Company and Sandoz
jointly decided to terminate the Agreement as of March 31, 1995. Revenue earned
under the agreement for the year ended December 31, 1995, was $250,000.
In August 1994, Morgan Guaranty Trust Company of New York acquired 1,251,871
shares of the Company's common stock held by Eli S. Jacobs and affiliates. J.P.
Morgan Investment, an affiliate of Morgan Guaranty Trust Company, provided
investment management services to the Company
17
<PAGE>
through August 31, 1995. Fees for the year ended December 31, 1995 were
approximately $19,000. The Company believes that the fees paid by the Company
were the same as would be paid to a non-related party for such services.
With the exception of the Sandoz transaction and executive compensation
arrangements discussed elsewhere in the Proxy Statement, the Company knows of no
other relationships or transactions with parties related to the Company. For a
full discussion of the Sandoz transactions, see "Sandoz Ltd. Transaction." For a
full discussion of executive compensation, see "Executive Compensation." See
also, "Directors' Affiliations."
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers, and beneficial owners of more than 10% of any class of
registered equity securities of the Company to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company, and the SEC regulations require that they
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, for the time period from January 1, 1995 through December
31, 1995, all Section 16(a) filing requirements applicable to its officers,
directors and the holder of more than 10% of the Company's Common Stock were
complied with, except one report covering three separate transactions for Joseph
M. McCune, a former employee, was inadvertently filed late and one report
covering one transaction for Eli S. Jacobs, a former director, was not filed.
PROPOSAL 2 -- RATIFICATION OF PROPOSAL
TO APPROVE APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1996. This
appointment is subject to the ratification by the Company's stockholders.
Accordingly, the following resolution will be offered at the Annual Meeting:
"RESOLVED, that the appointment, by the Board of Directors of SyStemix,
Inc., of Ernst & Young LLP as the independent auditors of the Company for
the year ending December 31, 1996, is hereby ratified."
Ernst & Young LLP has been serving the Company in this capacity since the
Company's inception in 1988 and has advised the Company that it will have in
attendance at the Annual Meeting a representative who will be afforded an
opportunity to make a statement, if such representative desires to do so, and
will respond to appropriate questions presented at the Annual Meeting.
The affirmative vote of the holders of a majority of the votes cast in
person or by proxy at the Annual Meeting is required to ratify the appointment
of independent auditors. Under applicable Delaware law, in determining whether
the proposal has received the requisite number of affirmative votes, abstentions
will be counted and will have the same effect as a vote against the proposal,
whereas broker non-votes will not be counted (which will have the effect of
reducing the absolute number, but not the percentage, of the affirmative votes
needed for approval of the proposal). The Company's Certificate of Incorporation
does not contain a provision governing the voting by stockholders on this
matter.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR 1996.
18
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OTHER MATTERS
The Board of Directors does not intend to present any other items of
business and knows of no other items of business that are likely to be brought
up at the Annual Meeting except as specified in the Notice of the Annual
Meeting. However, if other matters should properly come before the Annual
Meeting, the persons named in the Proxy will have the discretionary authority to
vote such proxy on such matters in accordance with their best judgment.
STOCKHOLDERS PROPOSALS FOR 1997 ANNUAL MEETING
Stockholders of SyStemix that intend to present proposals at the 1997 Annual
Meeting of SyStemix must submit the proposals in writing and they must be
received by the Company at its principal executive office (3155 Porter Drive,
Palo Alto, California 94304) no later than January 31, 1997, in order for such
proposals to be considered for inclusion in the Company's proxy statement and
proxy relating to the meeting.
COST OF SOLICITATION FOR 1996 ANNUAL MEETING
Copies of solicitation material will be furnished to brokerage houses,
fiduciaries and custodians to forward to beneficial owners of the Common Stock
held in their names. The cost of solicitation of Proxies, including expenses in
connection with preparing and mailing this Proxy Statement, will be borne by
SyStemix. In addition, SyStemix will reimburse brokerage firms and other persons
representing beneficial owners of Common Stock for their expenses in forwarding
solicitation material to such beneficial owners. Original solicitation of
Proxies by mail may be supplemented by telephone, telegram and personal
solicitation by directors, officers or other employees for such services.
By Order of the Board of Directors,
Iris Brest
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Palo Alto, California
May 31, 1996
19
<PAGE>
PROXY
SYSTEMIX, INC
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder hereby appoints Wendy R. Hitchcock and John J.
Schwartz and each of them, the proxies of the undersigned, with full power of
substitution, hereby revoking any proxy heretofore given to vote all shares
registered in the name of the undersigned at the 1996 Annual Meeting of
Stockholders of SYSTEMIX, INC., a Delaware corporation (the "Company"), to be
held on Thursday, June 27, 1996, at 10:00 a.m., at 1451 California Avenue, Palo
Alto, California, and at any adjournments or postponements thereof, with all
powers the undersigned would possess if personally present, and the undersigned
authorizes and instructs said proxies to vote as follows:
The Shares represented by this proxy will be voted as directed by the
stockholder. If no direction is given, such shares will be voted FOR Items 1 and
2.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- - --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
(CONTINUED FROM OTHER SIDE) Please mark your votes as
indicated in this example /X/
FOR all WITHHOLD
nominees for all nominees
1. Election of directors nominated / / / /
Harold Edgar, Paul L. Herrling, Ulrich Oppikofer and Irving L. Weissman
(To withhold authority to vote for any individual nominee, strike a line through
the nominee's name)
FOR AGAINST ABSTAIN
2. To approve the selection of Ernst & / / / / / /
Young LLP as the Company's independent
auditors for the year ending December 31,
1996.
3. In their discretion upon any other
matters that may properly come before
the meeting.
The undersigned hereby acknowledges receipt of a copy of the accompanying
Notice of Meeting, Proxy Statement and Annual Report to Stockholders for the
fiscal year ended December 31, 1995 and hereby revokes any proxy or proxies
heretofore given.
Dated: ______________________________________________________, 1996
__________________________________________________________________________
Signature
__________________________________________________________________________
Signature
Please mark, date and sign as your name appears above and return in the enclosed
envelope. If acting as executor, administrator, trustee, guardian, etc. you
should so indicate when signing. If the signor is a corporation, please sign the
full corporate name by a duly authorized officer. If shares are held jointly,
each shareholder named should sign.
- - --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
