SCHEDULE 14a
Information Required in Proxy Statement
Reg. Section 240.14a-101.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SYNAPTIC PHARMACEUTICAL CORPORATION
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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SYNAPTIC PHARMACEUTICAL CORPORATION
April 13, 1998
To the Stockholders of SYNAPTIC PHARMACEUTICAL CORPORATION:
On behalf of the Board of Directors, I cordially invite you to attend
the 1998 Annual Meeting of Stockholders of Synaptic Pharmaceutical Corporation.
The Annual Meeting will be held on Tuesday, May 12, 1998, at 10:00 a.m., local
time, at the offices of the Company located at 215 College Road, Paramus, New
Jersey 07652.
A description of the business to be conducted at the Annual Meeting is
set forth in the attached Notice of Annual Meeting and Proxy Statement. Also
enclosed is a copy of our 1997 Annual Report to Stockholders.
It is important that your views be represented at the Annual Meeting
whether or not you are able to be present. Accordingly, please mark, sign, date
and return promptly in the accompanying envelope (to which no postage need be
affixed if mailed in the United States) the enclosed proxy card. By returning
the proxy card, you can help the Company avoid the expense of duplicate proxy
solicitations and possibly having to reschedule the Annual Meeting if a quorum
of outstanding shares is not present or represented by proxy. If you attend the
Annual Meeting and wish to change your proxy vote, you may do so simply by
voting in person at the Annual Meeting.
Sincerely,
/s/Kathleen P. Mullinix
Chairman, President and
Chief Executive Officer
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
215 College Road
Paramus, New Jersey 07652-1431
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------------
To the Stockholders of SYNAPTIC PHARMACEUTICAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Synaptic Pharmaceutical Corporation (the "Annual Meeting") will be held on
Tuesday, May 12, 1998, at 10:00 a.m., local time at the offices of the Company
located at 215 College Road, Paramus, New Jersey 07652, for the following
purposes:
1. To elect three Class II directors to the Board of Directors
to hold office until the 2001 Annual Meeting of Stockholders or until
such directors' respective successors shall have been elected and
qualified or until their earlier resignation, removal, death or
incapacity;
2. To amend the Company's 1996 Incentive Plan in order to
increase the number of shares of Common Stock available for awards
under such Plan and to bring the Plan into compliance with Section
162(m) of the Internal Revenue Code of 1986, as amended;
3. To ratify the appointment by the Board of Directors of
Ernst & Young LLP as the independent auditors of the Company for the
fiscal year ending December 31, 1998; and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
This Notice is accompanied by a form of proxy, a Proxy Statement and
the Company's 1997 Annual Report to Stockholders. The foregoing items of
business are more fully described in the Proxy Statement.
Stockholders entitled to notice of and to vote at the Annual Meeting
shall be determined as of the close of business on Friday, March 13, 1998, the
record date fixed by the Board of Directors for such purpose. To ensure your
representation at the Annual Meeting, you are urged to mark, sign, date and
return the enclosed proxy as promptly as possible in the postage-paid envelope
provided. If you attend the Annual Meeting and vote in person, your proxy will
be revoked automatically and only your vote at the Annual Meeting will be
counted. The prompt return of your proxy will assist us in preparing for the
Annual Meeting.
By Order of the Board of Directors,
/s/Lisa L. Reiter
Secretary
Paramus, New Jersey
April 13, 1998
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
215 College Road
Paramus, New Jersey 07652-1431
------------------------------------
PROXY STATEMENT
------------------------------------
For the Annual Meeting of Stockholders
To Be Held
May 12, 1998
GENERAL
This Proxy Statement is furnished to stockholders of Synaptic
Pharmaceutical Corporation (the "Company") in connection with the solicitation
by the Board of Directors of the Company of proxies to be voted at the Annual
Meeting of Stockholders to be held on Tuesday, May 12, 1998, at 10:00 a.m.,
local time, or at any adjournment thereof (the "Annual Meeting"). The Annual
Meeting will be held at the offices of the Company located at 215 College Road,
Paramus, New Jersey 07652.
This Proxy Statement, together with the Notice of Annual Meeting of
Stockholders, the form of proxy and Synaptic's Annual Report to Stockholders,
are being mailed on or about April 13, 1998, to all stockholders of record at
the close of business on March 13, 1998 (the "Record Date").
Record Date, Outstanding Shares and Voting
Only stockholders of record at the close of business on the Record Date
will be entitled to vote at the Annual Meeting and any adjournment thereof. At
the Record Date, 10,675,570 shares of the Company's Common Stock, par value $.01
per share (the "Common Stock"), were outstanding. Each share outstanding as of
the Record Date will be entitled to one vote, and stockholders may vote in
person or by proxy. Cumulative voting is not permitted with respect to any
proposal to be acted upon at the Annual Meeting. For information concerning
stock ownership of certain stockholders, see "Security Ownership of Certain
Beneficial Owners and Management."
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Votes withheld from any nominee for election
as director, abstentions and broker "non-votes" are counted as present for
purposes of determining the presence or absence of a quorum for the transaction
of business. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because, in
respect of such other proposal, the nominee does not have discretionary voting
power and has not received instructions from the beneficial owner.
The election of directors by the stockholders shall be determined by a
plurality of the votes cast by stockholders entitled to vote, and votes withheld
will not be counted toward the achievement of a plurality. On all other matters
being submitted to the stockholders, the affirmative vote of a majority of the
shares present in person or represented by proxy at the meeting and entitled to
vote on each such matter is required for approval.
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An automated system administered by the Company's transfer agent tabulates the
votes. The vote on each matter submitted to stockholders is tabulated
separately. Abstentions are included in the number of shares present and voting
on each matter. Broker non-votes are not considered for the particular matter
and have the practical effect of reducing the number of affirmative votes
required to achieve a majority for such matter by reducing the total number of
votes from which the majority is calculated.
If properly executed and received by the Company before the Annual
Meeting, any proxy representing shares of Common Stock entitled to be voted at
the Annual Meeting and specifying how it is to be voted will be voted
accordingly. Any proxy representing shares of Common Stock entitled to be voted
at the Annual Meeting which fails to specify how it is to be voted on a proposal
for which a specification may be made will be voted on such proposal in
accordance with the recommendation of the Board of Directors.
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 Company a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person.
Solicitation
The cost of soliciting proxies will be borne by the Company. In
addition, the Company expects to reimburse brokerage firms and other persons
representing beneficial owners of Common Stock for their expenses in forwarding
solicitation materials to such beneficial owners. The original solicitation of
proxies by mail may be supplemented by solicitation by certain of the Company's
directors, officers and regular employees, without additional compensation, in
person or by mail, telephone, facsimile or telegram.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation, as
amended (the "Certificate"), provides that the authorized number of directors
shall be not less than three nor more than fifteen and that the number of
directors within this range shall be stated in the Company's Amended and
Restated By-laws, as they may be amended from time to time (the "By-laws"). In
addition, the Certificate divides the Board of Directors into three classes as
nearly equal in size as possible. The term of office of the Class II directors
expires at the Annual Meeting, the term of office of the Class III directors
expires at the 1999 Annual Meeting of Stockholders and the term of office of the
Class I directors expires at the 2000 Annual Meeting of Stockholders. Vacancies
on the Board of Directors and newly created directorships resulting from any
increase in the authorized number of directors constituting the whole Board of
Directors may be filled by a majority of the directors then in office. A
director elected to fill a vacancy or newly created directorship shall serve for
the remainder of the full term of the class of directors in which the vacancy
occurred or the directorship is created and until such director's successor is
elected and qualified, or until such director's earlier resignation, removal,
death or incapacity.
The By-laws provide that the number of directors constituting the whole
Board is seven. The Board of Directors is presently composed of seven members,
two of whom are Class I directors, three of whom are Class II directors and two
of whom are Class III directors. All of the Class II directors, Messrs. Jonathan
Fleming and John Lyons and Dr. Eric Kandel, have agreed to serve as directors
for an additional term, if elected. If elected at the Annual Meeting, the three
nominees will serve until the 2001 Annual Meeting and until their respective
successors have been elected and qualified, or until their earlier resignation,
removal, death or incapacity.
Directors are elected by a plurality of the votes present in person or
by proxy and entitled to vote at the Annual Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
nominees named below. Proxy holders will not vote the proxies received by them
for more than three nominees. In the event that any nominee of the Company is
unavailable to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any substitute nominee who shall be designated by the
present Board of Directors. Management has no reason to believe that any nominee
will be unavailable to serve. The three individuals receiving the highest number
of affirmative votes will be elected as Class II directors of the Company.
Nominees for Election for a Three-Year Term Expiring at the 2001 Annual Meeting
Jonathan J. Fleming, 40, has served as a director of the Company since
October 1989. Mr. Fleming served as Chairman of the Board from October 1989
through March 1996. He has been a general partner of Oxford Bioscience Partners
II Management Corp., a venture capital fund manager, since 1996, and a general
partner of Medica Venture Partners, L.P., a venture capital fund, since 1994.
Mr. Fleming has also been a general partner of MVP Ventures, an international
venture capital group active in both Europe and North America, since 1988. From
1985 to 1988, Mr. Fleming was a Vice President of TVM Techno Venture Management,
a venture capital firm. Mr. Fleming is a director of Selfcare Inc., a healthcare
company, and is also a director of several private companies. Mr. Fleming
received a B.A. from The University of California at Berkeley and an M.P.A.
in Industrial Economics from Princeton University.
Eric R. Kandel, M.D., 68, is one of the founders of the Company. He
has been a director of and consultant to the Company since 1987. Dr. Kandel has
been University Professor of Columbia University in the City of New York since
1983, and a Senior Investigator of the Howard Hughes Institute since 1984. In
addition,
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Dr. Kandel is the founding director of the Center for Neurobiology and Behavior
of Columbia University in the City of New York, a member of the National Academy
of Sciences and the winner of numerous awards and honors, including the National
Medal of Science (1988) and the Lasker Award. Dr. Kandel is the co-author with
James H. Schwartz and Thomas J. Jessel of Principles of Neural Science, the
standard textbook in neurobiology, and a leading figure in neuroscience.
John E. Lyons, 72, became a director of the Company in October 1991.
From 1987 until his retirement in 1991, Mr. Lyons served as Vice Chairman and
Executive Vice President of Merck and Co., Inc. During the 35 years prior to
becoming Executive Vice President, Mr. Lyons served Merck in a variety of
positions. Mr. Lyons is also a director of Matrix Pharmaceutical Corporation and
Immunex Corporation. Mr. Lyons holds a B.Sc. in Chemistry from Fordham
University.
Directors Continuing in Office Until the 1999 Annual Meeting of Stockholders
Zola P. Horovitz, Ph.D., 63, became a director of the Company in
September 1994. Since 1994, Dr. Horovitz has served as a consultant to
biotechnology and pharmaceutical companies. From August 1991 to May 1994, Dr.
Horovitz served as Vice President, Business Development and Planning,
Pharmaceutical Group of Bristol-Myers Squibb ("BMS"). From 1989 to 1991, Dr.
Horovitz served as Vice President, Licensing of BMS, and from 1987 to 1989, Dr.
Horovitz served as Vice President, Scientific Liaison of E.R. Squibb, Inc. Prior
to 1987, Dr. Horovitz spent approximately 30 years in various management
positions in biological research. Dr. Horovitz is also a director of Avigene
Inc., Biocryst Pharmaceuticals, Clinicor Inc., Diacrin, Inc., Magainin
Pharmaceuticals, Procept, Inc. and Roberts Pharmaceutical Corporation and a
number of private companies.
Kathleen P. Mullinix, Ph.D., 54, Chairman of the Board, President and
Chief Executive Officer, is one of the founders of the Company. Dr. Mullinix
joined the Company in October 1987 as its Senior Vice President and Treasurer
and became a director in November 1987. In November 1988, Dr. Mullinix became
the Company's President, in October 1989, Dr. Mullinix became the Company's
Chief Executive Officer and in April 1996, Dr. Mullinix became the Chairman of
the Board. From 1981 until 1987, Dr. Mullinix was Vice Provost of Columbia
University in the City of New York. Dr. Mullinix holds a Ph.D. in Chemical
Biology from Columbia University in the City of New York, completed a
Postdoctoral Fellowship at Harvard University and received a B.A. in Chemistry
from Trinity College.
Directors Continuing in Office Until the 2000 Annual Meeting of Stockholders
Alison Taunton-Rigby, Ph.D., 53, became a director of the Company in
October 1993. Since 1996, Dr. Taunton-Rigby has been the President and Chief
Executive Officer of Aquila Biopharmaceuticals, Inc., the successor-in-interest
of the therapeutics business of Cambridge Biotech Corporation. From 1995 to
1996, Dr. Taunton-Rigby was the President and Chief Executive Officer of
Cambridge Biotech Corporation. In 1995, prior to Dr. Taunton-Rigby's joining the
company, Cambridge Biotech filed a Chapter 11 petition in Federal Bankruptcy
Court. From 1993 to 1994, Dr. Taunton-Rigby was the Chief Executive Officer of
Mitotix, Inc., another biotechnology company. From 1987 to 1993, Dr.
Taunton-Rigby was Senior Vice President, Biotherapeutics at Genzyme Corporation.
Dr. Taunton-Rigby is also a director of Aquila Biopharmaceuticals, Inc. and CML
Group. Dr. Taunton-Rigby is a graduate of the Advanced Management Program at
Harvard Business School and holds a Ph.D. in Chemistry and a B.Sc. in Chemistry
from the University of Bristol in England.
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Sandra Panem, Ph.D., 51, became a director of the Company in April
1996. Since August 1994, Dr. Panem has been the President of Vector Fund
Management, L.P., an affiliate of Vector Securities International, Inc., and is
responsible for managing the day-to-day operations of the Vector Later-Stage
Equity Fund, L.P. and the Vector Later-Stage Equity Fund II, L.P., funds the
principal focus of which is investing in emerging life science companies. From
1992 to 1994, Dr. Panem served as Vice President and Portfolio Manager for the
Oppenheimer Global BioTech Fund, a mutual fund that invested in biotechnology
companies. She received a B.S. degree in Biochemistry and a Ph.D. in
Microbiology from the University of Chicago. Dr. Panem is a director of Martek
Biosciences Corporation and IBAH, Inc.
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" the nominees for
director listed above.
Committees of the Board of Directors
The Company has an Audit Committee, a Compensation Committee, a
Nominating Committee and a Pricing Committee.
The Audit Committee oversees actions taken by the Company's independent
auditors and reviews the Company's internal accounting controls. The Audit
Committee currently consists of Mr. Fleming and Dr. Horovitz. The Audit
Committee held two meetings during the fiscal year ended December 31, 1997.
The Compensation Committee makes recommendations to the Board of
Directors regarding compensation for directors and certain employees of and
consultants to the Company and administers the Company's 1988 Amended and
Restated Incentive Plan and 1996 Incentive Plan. The Compensation Committee
currently consists of Mr. Fleming and Drs. Panem and Taunton-Rigby. The
Compensation Committee held eight meetings during the fiscal year ended December
31, 1997.
The Nominating Committee is authorized to define and recommend to the
Board of Directors criteria for the selection of potential candidates to serve
on the Board of Directors and to identify, when appropriate, potential
candidates who satisfy such criteria. The Nominating Committee considers
nominees recommended by stockholders on a case-by-case basis. Any stockholder
desiring to nominate a qualified individual for election to the Board of
Directors at the 1999 Annual Meeting of Stockholders should submit the name and
credentials of such nominee to the Secretary of the Company no later than
January 1, 1999. The Nominating Committee currently consists of Drs. Horovitz,
Panem and Taunton-Rigby. The Nominating Committee did not hold any meetings
during the fiscal year ended December 31, 1997.
The Pricing Committee was established in September 1997 in connection
with the Company's proposed follow-on public offering. The Pricing Committee
determined, among other things relating to the offering, the number of shares of
Common Stock to be offered in the public offering, the offering price of such
shares, the commencement date of the offering and the amount of the underwriting
discount. The members of the Pricing Committee are Mr. Fleming and Drs. Horovitz
and Mullinix. During the fiscal year ended December 31, 1997, the Pricing
Committee held two meetings.
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Attendance at Meetings of the Board of Directors and Committees Thereof
The Board of Directors of the Company held a total of seven meetings
during the fiscal year ended December 31, 1997. Each incumbent director attended
at least 75% of the aggregate of: (i) the total number of meetings of the Board
of Directors held during the period in 1997 for which such director served as a
director; and (ii) the total number of meetings of the committees of the Board
of Directors on which such director served that were held during the period in
1997 for which such director served as a member of such committee.
Compensation Committee Interlocks and Insider Participation
Mr. Fleming and Drs. Panem and Taunton-Rigby serve on the Compensation
Committee of the Board of Directors. Dr. Panem is the President of Vector Fund
Management, L.P. ("Vector Management"), the asset management affiliate of Vector
Securities International, Inc. ("Vector Securities"). Vector Securities served
as one of the Company's managing underwriters in the Company's initial public
offering consummated in December 1995, and in the Company's public offering
consummated in November 1997, and, in connection therewith, received customary
underwriters' fees from the Company in December 1995, in January 1996 (when the
underwriters exercised the over-allotment option) and again in November 1997.
Dr. Panem received certain benefits in respect of certain of the fees paid by
the Company to Vector Securities in December 1995 and in January 1996.
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COMPENSATION AND OTHER INFORMATION
CONCERNING OFFICERS, DIRECTORS AND CERTAIN STOCKHOLDERS
Executive Officers
The executive officers of the Company are appointed annually by the
Board of Directors and serve at the discretion of the Board of Directors. Set
forth below are the names of and certain biographical information regarding the
executive officers of the Company.
Name Age Position
- -------------------------- --- ------------------------------------
Kathleen P. Mullinix 54 Chairman of the Board, President and
Chief Executive Officer
Robert L. Spence 51 Senior Vice President, Chief Financial
Officer and Treasurer
Theresa A. Branchek, Ph.D. 44 Vice President for Research
Lisa L. Reiter 38 Vice President, General Counsel and
Secretary
Richard L. Weinshank 41 Vice President of Business Development
Effective as of April 1, 1998, Robert I. Taber resigned his position as
the Company's Senior Vice President for Research and Development, and Theresa A.
Branchek was promoted to the position of Vice President for Research.
Robert L. Spence, Senior Vice President, Chief Financial Officer and
Treasurer, joined the Company in March 1990 as the Company's Controller. In June
1991, Mr. Spence became the Company's Chief Financial Officer, Treasurer and
Secretary. Mr. Spence held the position of Secretary until February 1994. In
December 1996, Mr. Spence became a Senior Vice President of the Company. During
the twenty years prior to his joining the Company, Mr. Spence held various
financial and operating positions with Becton Dickinson & Company, a medical
supplies manufacturing and distribution company. His last position with Becton
Dickinson before he joined the Company was Director of Finance and Operations of
the Primary Care Diagnostics Division. Mr. Spence holds an M.B.A. in Accounting
and a B.S. in Business Management from Fairleigh Dickinson University.
Theresa A. Branchek, Ph.D., Vice President for Research, joined the
Company in April 1989 as Staff Scientist in the Company's Molecular Pharmacology
Department. In September 1989, Dr. Branchek became the Company's Director,
Department of Pharmacology and in January 1997, Dr. Branchek became the
Company's Vice President, Pharmacology and New Technologies. Dr. Branchek became
the Company's Vice President for Research in April 1998. From 1985 until she
joined the Company, Dr. Branchek served as Associate Research Scientist in the
Department of Anatomy and Cell Biology at Columbia University in the City of New
York. Dr. Branchek holds an A.B. in Biology from Cornell University and a Ph.D.
in Biology from the University of Oregon. Her postdoctoral training was at
Columbia University in the City of New York, where she was a Pharmacology and
Morphology Fellow of the Pharmaceutical Manufacturer's Foundation, Inc.
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Lisa L. Reiter, Vice President, General Counsel and Secretary, joined
the Company in February 1994 as General Counsel and Secretary. In September
1995, Ms. Reiter became a Vice President of the Company. From 1985 to 1994, Ms.
Reiter was an attorney with the law firm of O'Sullivan Graev & Karabell in New
York City. Ms. Reiter holds an LL.M. in Taxation from New York University School
of Law, a J.D. from The University of Houston Law Center and a B.A. from
Vanderbilt University.
Richard L. Weinshank, Ph.D., Vice President of Business Development,
joined the Company in October 1988 as Staff Scientist in the Company's Molecular
and Cell Biology Department. In March 1990, Dr. Weinshank assumed the position
of Director, Department of Molecular and Cell Biology, and in February 1995,
became Director of Business Development. In January 1996, Dr. Weinshank became
Vice President of Business Development. From April 1985 to September 1988, Dr.
Weinshank was a Postdoctoral Fellow at Memorial Sloan-Kettering Cancer Center.
Dr. Weinshank holds a B.A. in Philosophy from The State University of New York
at Buffalo and a Ph.D. in Biochemistry from The University of California at
Riverside.
See "Proposal No.1- Election of Directors" for biographical information
regarding Dr. Kathleen P. Mullinix, who is also a director.
Certain Relationships and Related Transactions
Novartis Produkte AG, an owner of more than five percent of the
Company's outstanding shares of Common Stock at December 31, 1997, is an
affiliate of Novartis Pharma AG ("Novartis"). Both companies are subsidiaries of
Novartis AG, the company that was formed through the consolidation of Ciba-Geigy
Limited and Sandoz Limited. Novartis provided research funding to the Company
during the fiscal year ended December 31, 1997, pursuant to the terms of the
Research and License Agreement dated as of August 4, 1994, as amended, and the
Research and License Agreement dated as of May 31, 1996. The aggregate amount of
such research funding in 1997 was $3,406,000 and the aggregate amount of
research funding which the Company expects to receive pursuant to such
agreements in 1998 is $2,000,000.
See also "Compensation Committee Interlocks and Insider Participation"
above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and ten
percent stockholders to file reports of ownership of equity securities of the
Company and changes in such ownership with the Securities and Exchange
Commission (the "SEC") and The Nasdaq Stock Market and to furnish copies of such
reports to the Company. Based solely upon a review of copies of such reports
furnished to the Company during or with respect to the fiscal year ended
December 31, 1997, or written representations that no such filings were
required, the Company believes that, during the fiscal year ended December 31,
1997, all such filing requirements were met, except one filing by Richard L.
Weinshank, who inadvertently made one filing late.
Director Compensation
Each nonemployee director is entitled to receive $1,500 for each
meeting of the Board of Directors attended by such director and each nonemployee
director who is a member of a committee of the Board of
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Directors is entitled to receive $250 for each meeting of such committee
attended by such director. Each nonemployee director is also entitled to
reimbursement for all of such director's reasonable out-of-pocket expenses
incurred in connection with attending such meetings. In addition, each
nonemployee director is automatically granted, on June 1 of each year (or on
such later date as of which he or she is first elected as director) for so long
as such individual is a nonemployee director of the Company, a nonstatutory
stock option to purchase 2,500 shares of Common Stock. Each such option has an
exercise price per share equal to the last trade price of the Common Stock as
reported on The Nasdaq Stock Market on the date of grant. The option becomes
exercisable as to 1/24th of the shares covered thereby at the end of each full
calendar month following the grant date and has a term of ten years beginning on
such date, subject to earlier termination upon the optionee's cessation of
service on the Board of Directors.
Dr. Eric R. Kandel, a director of and consultant to the Company,
provides general consulting services to the Company, including services relating
to its ongoing and projected activities and research proposals, on an ad hoc
basis. In consideration for these services, Dr. Kandel is entitled to receive
$1,500 of cash compensation per day from the Company. For the period from
January 1, 1997, through December 31, 1997, Dr. Kandel received a total of
$1,500 of cash compensation for consulting services rendered to the Company.
In December 1994, the Compensation Committee approved the sale to Dr.
Zola P. Horovitz, a director of the Company, of 4,500 shares of Common Stock at
a per share purchase price of $2.00, subject to and in consideration for Dr.
Horovitz's entering into a consulting agreement with the Company. In January
1995, Dr. Horovitz entered into a consulting agreement with the Company and
purchased all of such shares. Pursuant to the terms of the consulting agreement,
which was terminated as of January 1998, Dr. Horovitz provided general
consulting and advisory services to the Company with respect to its business
policies and affairs. Dr. Horovitz was not entitled to additional compensation
for these services, but was entitled to reimbursement for all of his reasonable
out-of-pocket expenses incurred in connection therewith.
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Executive Compensation
Summary of Cash and Certain Other Compensation
The following tables set forth certain information concerning the
compensation paid or accrued by the Company for services rendered to the Company
in all capacities for each of the fiscal years ended December 31, 1997, 1996 and
1995, by the Company's Chief Executive Officer and its four other executive
officers (collectively, the "Named Executive Officers"):
Long-Term
Name and Compen-
Principal sation
Position Annual Compensation Awards
-------- ------------------- ------
Securi-
Other ties All
Annual Under- Other
Compen- lying Compen-
Year Salary Bonus sation(1) Options sation(2)
---- ------ ----- --------- ------- -----------
Kathleen P. Mullinix
Chairman of the Board,
President and Chief
Executive Officer 1997 $250,000 $115,000 -- 124,800 $ 4,095 (3)
1996 218,400 115,000 -- 35,000(4) 4,061 (3)
1995 206,938 100,000 -- 250 1,751 (3)
Robert I. Taber(5)
Senior Vice President
for Research
and Development 1997 207,000 45,000 -- 21,200(6) 4,095 (7)
1996 196,560 30,000 -- 5,000 4,061 (7)
1995 186,244 30,000 -- 10,250 1,751 (7)
Robert L. Spence
Senior Vice President,
Chief Financia1
Officer and Treasurer 1997 160,000 40,000 -- 37,400 340 (8)
1996 145,600 45,000 -- 30,000(4) 306 (8)
l995 137,958 25,000 -- 250 306 (8)
Lisa L. Reiter
Vice President, General
Counsel and Secretary
1997 158,000 35,000 -- 27,800 4,090 (9)
1996 137,280 45,000 -- 25,000(4) 4,061 (9)
1995 130,075 35,000 -- 250 2,249 (9)
Richard L. Weinshank(10)
Vice President of
Business Development 1997 131,250 25,000 21,278(11) 25,000 33,231(12)
1996 125,000 10,000 -- 15,500 47,441(12)
1995 103,469 37,000 26,035(11) 2,750 1,061(12)
(1) Other Annual Compensation for each Named Executive Officer does not
include perquisites and other personal benefits for 1997, 1996 and 1995,
the aggregate annual amount of which for such Officer was less than the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
such Officer.
(2) All Other Compensation of a Named Executive Officer includes matching
contributions, if any, made by the Company to the account of such Named
Executive Officer pursuant to the Company's 401(k) plan, which was adopted
by the Company in 1990. From 1990 through 1995, the Company made matching
contributions in an amount equal to the lesser of 25% of the participant's
contributions and 5% of such participant's compensation. Beginning in
January 1996,the Company increased its matching contributions to an amount
equal to the lesser of (i) 50% of the participant's contributions and (ii)
the lesser of 5% of such participant's compensation and $7,500. Each
participant becomes fully vested in the Company's contributions allocated
to his or her account upon completion of six years of service (not
including any service prior to the time an employee attained 18 years of
age).
(3) All Other Compensation for 1997, 1996 and 1995 includes: $3,750, $3,750
and $1,440, respectively, in matching contributions by the Company to the
401(k) account of Dr. Mullinix; and $345, $311 and $311, respectively, in
life insurance premiums.
10
<PAGE>
(4) The number of securities underlying options includes 10,000 shares of
Common Stock subject to an option granted in March 1996 to compensate the
Named Executive Officer for performance during the fiscal year ended
December 31, 1995.
(5) Effective as of April 1, 1998, Dr. Taber resigned his position as the
Company's Senior Vice President for Research and Development and Dr.
Theresa A. Branchek was promoted to the position of Vice President for
Research. Dr. Taber is currently serving as a consultant to the Company.
(6) As a result of Dr. Taber's resignation as the Company's Senior Vice
President for Research and Development, options to purchase 20,000 of
these 21,200 shares of Common Stock terminated on April 1, 1998, the
effective date of such resignation.
(7) All Other Compensation for 1997, 1996 and 1995 includes: $3,750, $3,750
and $1,440, respectively, in matching contributions by the Company to the
401(k) account of Dr. Taber; and $345, $311 and $311, respectively, in
life insurance premiums.
(8) All Other Compensation for 1997, 1996 and 1995 represents life insurance
premiums.
(9) All Other Compensation for 1997,1996 and 1995 includes: $3,750, $3,750 and
$1,938, respectively, in matching contributions by the Company to the
401(k) account of Ms. Reiter; and $340, $311 and $311, respectively, in
life insurance premiums.
(10) Dr. Weinshank became an executive officer of the Company in April 1995.
Prior to that time, Dr. Weinshank served as the Company's Director of
Molecular and Cell Biology.
(11) Other Annual Compensation for 1997 and 1995 includes $21,728 and $26,035,
respectively, in health care premiums and reimbursements.
(12) All Other Compensation for 1997, 1996 and 1995 includes: $29,600, $44,000
and $0, respectively, in tuition costs; $3,286, $3,130 and $750,
respectively, in matching contributions by the Company to the 401(k)
account of Dr. Weinshank; and $345, $311 and $311, respectively, in life
insurance premiums.
11
<PAGE>
Option Grants In Last Fiscal Year
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1997, by the Company to the
Named Executive Officers:
Potential Realizable
Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (1)
---------------------------------------- -----------------------
% of
Total
(#) Options Exer-
Secur- Granted cise
ities to or
Under- Employ- Base
lying ees in Price Expir-
Options Fiscal ($/per ation
Name Granted 1997 share) Date 5%($) 10%($)
- ----------- ------- ------ ------ -------- ------- ---------
Kathleen P.
Mullinix 100,000(2) 19.85% 14.25 10/02/07 896,175 2,271,083
20,000(3) 3.97% 11.93 12/02/07 150,149 380,506
4,800(4) 0.95% 11.31 12/04/07 34,149 86,540
Robert I.
Taber 10,000(5) 1.98% 14.25 10/02/07 89,617 227,108
10,000(6) 1.98% 11.93 12/02/07 75,074 190,253
1,200(4) 0.24% 11.31 12/04/07 8,537 21,635
Robert L.
Spence 15,000(7) 2.98% 14.25 10/02/07 134,426 340,662
20,000(3) 3.97% 11.93 12/02/07 150,149 380,506
2,400(4) 0.48% 11.31 12/04/07 17,074 43,270
Lisa L.
Reiter 10,000(7) 1.98% 14.25 10/02/07 89,617 227,108
15,000(3) 2.98% 11.93 12/02/07 112,611 285,380
2,800(4) 0.56% 11.31 12/04/07 19,920 50,482
Richard L.
Weinshank 10,000(7) 1.98% 14.25 10/02/07 89,617 227,108
15,000(3) 2.98% 11.93 12/02/07 112,611 285,380
(1) The potential realizable value of each option grant is calculated by
assuming that the market price of the underlying securities at the date of
grant appreciates in value from such date to the end of the option term at
the annual rates of five percent and ten percent, respectively, and then
subtracting the aggregate exercise price of the option.
(2) These options became exercisable as to 25% of the total shares covered
thereby on January 1, 1998, and become exercisable as to an additional 25%
of the shares on October 1 of each of 1999, 2000, and 2001. Exercisability
of these options is subject to acceleration on the occurrence of certain
events.
(3) These options become exercisable as to 25% of the shares on January 1 of
each of 1999, 2000, 2001, and 2002. Exercisability of these options is
subject to acceleration on the occurrence of certain events.
(4) These options became exercisable as to 100% of the total shares covered
thereby on December 4, 1997. (5) These options terminated on April 1, 1998,
the effective date of Dr. Taber's resignation as the Company's Senior
Vice President for Research and Development, prior to becoming exercisable.
(6) These options terminated on April 1, 1998, the effective date of Dr.
Taber's resignation as the Company's Senior Vice President for Research and
Development, prior to becoming exercisable.
(7) These options become exercisable as to 25% of the total shares covered
thereby on October 1 of each of 1998, 1999, 2000, and 2001. Exercisability
of these options is subject to acceleration on the occurrence of certain
events.
12
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
The following table sets forth certain information concerning each
exercise of stock options during the fiscal year ended December 31, 1997, by the
Named Executive Officers and unexercised stock options held by the Named
Executive Officers as of the end of such fiscal year.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at
12/31/97 (#) 12/31/97 ($)(1)
---------------- ------------------
Shares
Acquired Aggregate
on Value Exer- Unexer- Exer- Unexer-
Name Exercise Realized($) cisable cisable cisable cisable
- -------------------- -------- ----------- ------- ------- --------- -------
Kathleen P. Mullinix. -- -- 124,498 150,125 1,045,442 1,109
Robert I. Taber...... -- -- 14,862 41,162 123,599 145,787
Robert L. Spence..... -- -- 12,047 62,625 42,327 23,897
Lisa L. Reiter....... -- -- 22,003 51,162 129,430 56,137
Richard L. Weinshank. -- -- 14,939 43,975 130,142 37,042
(1) Value of each unexercised in-the-money option was determined by multiplying
the number of shares underlying the option by the excess of the fair market
value of the Common Stock on December 31, 1997 ($10.875 per share, the last
trade price on such date, as reported by The Nasdaq Stock Market), over the
per share exercise price of the option.
All of the agreements pursuant to which options have been granted to
the Named Executive Officers include provisions pursuant to which such options
become immediately exercisable in connection with the occurrence of certain
types of corporate transactions specified therein.
Employment Agreements
Kathleen P. Mullinix
Dr. Mullinix is employed under a four-year employment agreement with
the Company entered into effective as of October 1, 1997. The employment
agreement permits either Dr. Mullinix or the Company to terminate Dr. Mullinix's
employment upon 90 days' prior written notice. If the termination is initiated
by the Company without "cause" or by Dr. Mullinix for "good reason" (as such
terms are defined in the employment agreement), Dr. Mullinix is entitled to
receive severance compensation equal to her base salary for a period of 12
months following her termination, as well as continuation of benefits during
such period and immediate vesting of any restricted stock and/or options then
held by her. If the termination is initiated by Dr. Mullinix other than for good
reason, Dr. Mullinix is entitled to receive severance compensation equal to her
base salary for a period of nine months following her termination, as well as
continuation of benefits during such period, but all further vesting of any
restricted stock and/or options then held by her ceases as of the date of
termination. In addition, if Dr. Mullinix's employment with the Company is
terminated under certain circumstances in connection with a "change in control"
(as such term is defined in the employment agreement), Dr. Mullinix is entitled
to receive severance compensation equal to her base salary for a period of 12
months following such termination, as well as continuation of benefits during
such period and immediate vesting of any restricted stock and/or options then
held by her.
13
<PAGE>
Other Named Executive Officers
Each of Mr. Spence, Ms. Reiter and Dr. Weinshank is employed under a
four-year employment agreement with the Company effective as of January 1, 1998,
February 7, 1998, and April 6, 1995, respectively. The three employment
agreements are in substantially the same form, except for terms relating to
compensation and duties and responsibilities. Each of such agreements provides
that if the Named Executive Officer is terminated by the Company without cause,
such officer will be entitled to receive severance compensation equal to such
officer's base salary for a period of six months following his or her
termination. In addition, if the employment of any such Named Executive Officer
is terminated under certain circumstances in connection with a "Change in
Control" (as defined in his or her employment agreement), then such Named
Executive Officer is entitled to receive severance compensation equal to such
officer's base salary for a period of six months following such termination, and
all of the stock options, stock bonus awards and restricted stock grants then
held by such Named Executive Officer will immediately become exercisable or
vest, as the case may be.
In addition to their current base salaries of $170,000, $170,000 and
$165,000, Mr. Spence, Ms. Reiter and Dr. Weinshank are eligible to receive cash
bonuses each year based upon their achievement of performance milestones set by
the President of the Company. See "Compensation Committee Report on Executive
Compensation" below. Dr. Weinshank is also entitled to receive reimbursement of
business school tuition costs. In 1996 and in 1997, the Company paid $44,000 and
$29,600, respectively, of such costs.
Dr. Taber was employed by the Company under an employment agreement
similar to the employment agreements of the other Named Executive Officers. As a
result of his resignation as the Company's Senior Vice President for Research
and Development, Dr. Taber's unvested options terminated on April 1, 1998. The
Company was not required to pay Dr. Taber any severance compensation in
connection with his resignation, but will pay Dr. Taber consulting fees in
consideration for consulting services which he provides to the Company.
In addition to the Named Executive Officers, Dr. Theresa A. Branchek
was promoted to the position of Vice President for Research effective as of
April 1, 1998. In connection with such promotion, Dr. Branchek entered into a
one-year employment agreement with the Company. This employment agreement is in
substantially the same form as the employment agreements of Mr. Spence, Ms.
Reiter and Dr. Weinshank, except for terms relating to compensation and duties
and responsibilities. Such employment agreement provides for an initial base
salary of $200,000 and the grant of an option to purchase 25,000 shares of
Common Stock. Such option will, when granted, have an exercise price equal to
the fair market value of the Common Stock on the date of grant and be subject to
four-year vesting. In addition, Dr. Branchek received a signing bonus of $25,000
and is eligible to receive a cash bonus each year based upon her achievement of
performance milestones set by the President of the Company.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has furnished the
following report on its policies with respect to the compensation of executive
officers of the Company. The report is not deemed to be "soliciting material" or
to be "filed" with the SEC or subject to the SEC's proxy rules or to the
liabilities of Section 18 of the Exchange Act, and the report shall not be
deemed to be incorporated by reference into any prior or subsequent filing by
the Company under the Securities Act of 1933, as amended, or the Exchange Act.
Decisions regarding compensation of the Company's executive officers
generally are made by the Compensation Committee of the Board of Directors. The
Compensation Committee consists entirely of outside directors. During the fiscal
year ended December 31, 1997, Jonathan J. Fleming, Sandra Panem and Alison
14
<PAGE>
Taunton-Rigby served as members of the Compensation Committee. All decisions of
the Compensation Committee regarding the compensation of the Company's executive
officers are reviewed by the Board of Directors, except for decisions regarding
grants under the Company's option plans, which must be made solely by the
Compensation Committee.
General Executive Compensation Policy
The Company's executive compensation policy is designed to attract to
the Company qualified individuals who have the potential as executive officers
to contribute to the long-term growth and success of the Company and thereby
enhance stockholder value, to motivate such executive officers to perform at the
highest of professional levels so as to maximize their contribution to the
Company and to retain such executive officers. Accordingly, the Company's
executive compensation policy is to offer the Company's executive officers
competitive compensation opportunities which are tied to their contribution to
the growth and success of the Company and their personal performance. Each
executive officer's compensation package is comprised of three elements: (i)
base salary which reflects individual performance and, together with annual
bonus awards, is designed primarily to be competitive with compensation levels
in the industry, (ii) annual bonus awards which are payable in cash and tied to
corporate performance for the year, as well as individual performance goals, and
(iii) periodic stock option grants which strengthen the mutuality of interests
between the executive officer and the Company's stockholders.
Implementation of Executive Compensation Policy
The following describes the manner in which the Compensation
Committee's executive compensation policy was implemented with respect to the
fiscal year ended December 31, 1997. Also summarized below are several of the
more important factors which were considered in establishing the components of
each executive officer's compensation package for the 1997 fiscal year.
Additional factors were also taken into account, and the Compensation Committee
may, in its discretion, apply entirely different factors, particularly different
measures of performance, in setting executive compensation for future fiscal
years, but all compensation decisions will be designed to further the general
compensation policy set forth above.
Base Salary. Each year, the Chief Executive Officer recommends to the
Compensation Committee new base salary levels for the Company's executive
officers (such new base salary levels being subject to the floor provided in the
respective employment agreements of such officers). In formulating such
recommendations, the Chief Executive Officer considers industry, peer group and
national surveys, as well as the past and expected future contributions of the
individual executive officers. The Compensation Committee then reviews the
recommendations in light of its assessment of each officer's past performance
and its expectation as to future contributions, as well as the survey data, and
arrives at new base salary levels for each of the Named Executive Officers,
including the Chief Executive Officer. These new base salary levels are then
recommended by the Compensation Committee to the Board of Directors for
approval.
Annual Bonus Awards. Annual bonus awards are earned by each of the
Company's executive officers based upon his or her satisfaction of performance
milestones set at the beginning of the year. These milestones may be based upon
corporate performance or individual performance, or both. The minimum amount of
such awards, assuming satisfaction of the performance milestones, may be set
forth in the executive officer's employment agreement. The Compensation
Committee may determine that such bonus awards should be higher than the minimum
amounts set forth in the employment agreements based upon any number of factors,
including those factors (such as past and expected future contributions and
survey data) which it considers in arriving at new base salary levels and other
indicia of performance that may not have been taken into account in
15
<PAGE>
setting the performance milestones. Such other indicia of performance may
include, among other things, the progress of the Company's research and
development programs and business development activities, as well as the
Company's success in securing capital sufficient to assist it in furthering its
research activities. Each year, the Chief Executive Officer determines whether
each of the other executive officers has satisfied his or her performance
milestones, whether, in light of such determination, cash bonus awards should be
made to such executive officers and if such awards should be made, whether the
amounts thereof should be higher than the minimum amounts set forth in the
employment agreements. Thereafter, the Chief Executive Officer makes
recommendations to the Compensation Committee. The Compensation Committee then
reviews the Chief Executive Officer's recommendations and determines the amount
of each bonus award to recommend to the Board of Directors for approval. With
respect to the fiscal year ended December 31, 1997, each of the Named Executive
Officers earned a cash bonus award based upon his or her satisfaction of
performance milestones, combined with a subjective assessment of individual
performance. In determining the amount of each cash bonus award, the
Compensation Committee also considered survey data to ensure, where appropriate,
that the total compensation of each executive officer was competitive within the
industry. These cash bonus awards ranged from approximately 19% to 46% of the
base salaries of the Named Executive Officers.
Stock Option Grants. Beginning as of January 1, 1996, all grants of
stock options by the Company to its executive officers are made pursuant to its
1996 Incentive Plan (the "1996 Incentive Plan"). On October 2, 1997, the
Compensation Committee approved four grants of stock options to the Company's
executive officers under the 1996 Incentive Plan. All of such grants were made
to such executive officers in recognition of their service to the Company during
the fiscal year ending December 31, 1997, and to provide further incentive for
their continued services. On December 2, 1997, and December 4, 1997, the
Compensation Committee also approved the grant of stock options to all of its
executive officers in respect of their performance during the fiscal year ending
December 31, 1997. In determining the number of shares of Common Stock covered
by each of these grants, the Compensation Committee considered the same factors
which it generally considers in determining the salaries and cash bonus awards
of executive officers. These grants were also designed to further the Company's
executive compensation policy.
CEO Compensation
In setting the compensation payable to Kathleen P. Mullinix, the
Compensation Committee has sought to be competitive with other companies in the
industry, while at the same time tying a significant portion of such
compensation to Company performance. An employment agreement dated as of October
1, 1997, sets forth the terms and conditions of Dr. Mullinix's employment with
the Company.
Dr. Mullinix's base salary for the fiscal year ended December 31, 1997,
was established based upon the Compensation Committee's evaluation of the
Company's performance and Dr. Mullinix's personal performance, as well as its
objective of having Dr. Mullinix's base salary remain competitive with salaries
being paid to similarly situated chief executive officers. Accordingly, her 1997
base salary was set by the Compensation Committee at $250,000.
The remaining components of Dr. Mullinix's compensation in respect of
the fiscal year ended December 31, 1997, were entirely dependent upon Dr.
Mullinix's performance during such year, which was in turn tied directly to the
Company's performance. The Compensation Committee determined to award Dr.
Mullinix a $115,000 cash bonus, as well as stock options to purchase 124,800
shares of Common Stock. These awards reflected the Compensation Committee's
assessment of her favorable performance, which included her satisfaction of the
performance goals established by the Compensation Committee at the beginning of
the fiscal year ended December 31, 1997, as well as the corporate performance of
the Company during such year. In
16
<PAGE>
particular, the Compensation Committee considered the consummation of the
Company's collaboration with the Warner-Lambert Company and the extension of the
Company's collaboration with Merck & Co., Inc., as well as the scientific
progress made in each of the Company's collaborations and in internal programs.
In addition, the Compensation Committee considered the Company's successful
consummation of a follow-on public offering of its Common Stock in which the
Company raised $33,822,000 in capital, net of underwriter commissions and
offering costs. The stock options were granted at exercise prices equal to the
fair market value of the Common Stock on the date of grant and, with the
exception of stock options covering 4,800 shares of Common Stock which are
immediately exercisable, are subject to vesting.
Submitted by the
Members of the Compensation Committee
Jonathan J. Fleming
Sandra Panem
Alison Taunton-Rigby
17
<PAGE>
Stock Performance Graph
The following graph compares the percentage change in the cumulative
stockholder return on the Company's Common Stock with the cumulative total
return on The Nasdaq Stock Market Index and the BioCentury 100 Index (the
"Line-Of-Business Index"). The Line-Of-Business Index, which is calculated and
published on a weekly basis, represents the cumulative weekly close of 100
bioscience stocks. The comparison assumes that $100 was invested in each of the
following: (i) the Company's Common Stock at the initial public offering price
prior to trading on December 14, 1995, (ii) the Nasdaq Market Index prior to
trading on December 14, 1995, and (iii) the Line-Of-Business Index after closing
on December 15, 1995. (This date was chosen for the Line-Of-Business Index since
it was the date nearest the Company's initial public offering date for which the
Line-Of-Business Index was published.) Total return assumes reinvestment of
dividends. However, the Company has not paid dividends on its Common Stock and
no dividends are included in the representation of Company stock performance.
The stock price performance on the graph is not necessarily indicative of future
price performance.
[GRAPHIC OMITTED]
Actual values expressed in the above performance graph are disclosed in
the following table:
Beginning
of ----------December 31,---------
Period 1995 1996 1997
------- ------- ------- -------
Company $100.00 $106.00 $ 96.00 $ 87.00
Nasdaq Market Index $100.00 $ 99.63 $122.55 $150.45
Line-Of-Business Index $100.00 $114.30 $105.50 $ 84.00
18
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of March 2, 1998, with respect to
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Executive Officers and (iv) all directors and officers as a group.
Amount
and Nature
of Beneficial Percentage
Name and Address of Beneficial Owner(1) Ownership of Total(2)
- --------------------------------------- ------------ -----------
Wanger Asset Management, L.P........... 1,051,000(3) 9.8%
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
BVF Partners L.P....................... 1,022,192(4) 9.6%
333 West Wacker Drive, Suite 1600
Chicago, Illinois 60606
T. Rowe Price Associates, Inc.......... 779,000(5) 7.3%
100 East Pratt Street
Baltimore, Maryland 21202
Novartis Produkte A.G.................. 695,715(6) 6.5%
Schwarzwaldallee 215
CH-4002 Basle
Switzerland
Jonathan J. Fleming.................... 274,539(7) 2.6%
Zola P. Horovitz, Ph.D................. 7,936(8) *
Eric R. Kandel, M.D.................... 40,283(9) *
John E. Lyons.......................... 7,833(10) *
Kathleen P. Mullinix, Ph.D............. 251,167(11) 2.3%
Sandra Panem, Ph.D..................... 4,236(12) *
Alison Taunton-Rigby, Ph.D............. 7,936(13) *
Lisa L. Reiter......................... 34,955(14) *
Robert L. Spence....................... 60,939(15) *
Robert I. Taber, Ph.D.................. 48,951(16) *
Richard L. Weinshank, Ph.D............. 27,000(17) *
All officers and directors as a group
(11 persons).......................... 765,775(18) 7.0%
* Less than 1%.
(1) Except as otherwise indicated above, the address of each stockholder
identified above is c/o the Company, 215 College Road, Paramus, New Jersey
07652. Except as indicated in the other footnotes to this table, the
persons named in this table have sole voting and investment power with
respect to all shares of Common Stock.
(2) Share ownership in the case of each person listed above includes shares
issuable upon the exercise of options held by such person as of March 2,
1998, that may be exercised within 60 days after such date for purposes of
computing the percentage of Common Stock owned by such person, but not for
purposes of computing the percentage of Common Stock owned by any other
person.
19
<PAGE>
(3) These shares are beneficially owned by Wanger Asset Management, L.P.
("WAM"), Wanger Asset Management Ltd. ("WAM Ltd."), and Acorn Investment
Trust ("Acorn"). WAM is an investment advisor registered under the
Investment Advisers Act of 1940. WAM Ltd. is the general partner of WAM.
Acorn is an investment company registered under the Investment Company Act
of 1940. The information relating to WAM, WAM Ltd. and Acorn contained
herein was obtained from a Schedule 13G filed with the SEC on February 6,
1998.
(4) These shares are beneficially owned by BVF Partners L.P. ("Partners"), and
BVF Inc. ("BVF Inc."), the general partner and investment advisor to
Partners. Partners is the general partner of Biotechnology Value Fund,
L.P. ("BVF, L.P."), an investment limited partnership which beneficially
owns 515,592 of such shares. The information relating to Partners, BVF
Inc. and BVF, L.P. contained herein was obtained from Amendment No. 2 to a
Schedule 13D filed with the SEC on February 27, 1998.
(5) These shares are owned by various individual and institutional investors
to which T. Rowe Price Associates, Inc. ("Price Associates") serves as
investment adviser with power to direct investments and/or sole power to
vote the shares. For purposes of the reporting requirements of the
Exchange Act, Price Associates is deemed to be a beneficial owner of such
shares; however, Price Associates expressly disclaims that it is, in fact,
the beneficial owner of such shares. The information relating to Price
Associates contained herein was obtained from a Schedule 13G filed by such
entity with the SEC on February 12, 1998.
(6) The information relating to Novartis Produkte AG was obtained from
Amendment No. 1 to a Schedule 13G filed with the SEC on March 6, 1998.
(7) Consists of an aggregate of (a) 269,703 shares of Common Stock held by
Chestnut III Limited Partnership ("CIII"), Chestnut Capital International
III Limited Partnership ("CCI"), MVP Investors Limited Partnership
("MVP"), Late Stage Fund 1990 Limited Partnership ("LSFI") and Late Stage
Fund 1991 Limited Partnership ("LSFII"), (b) 200 shares of Common Stock
owned by the individual retirement account of Amy Fleming, Mr. Fleming's
spouse, (c) 200 shares of Common Stock owned by the individual retirement
account of Mr. Fleming, (d) 1,000 shares of Common Stock owned jointly by
Mr. Fleming and his spouse, Amy Fleming and (e) 3,436 shares of Common
Stock which Mr. Fleming has the right to acquire within 60 days after
March 2, 1998. Mr. Fleming, a director of the Company, is a general
partner of each of (i) MVP Capital Limited Partnership, which is
investment general partner of CCI, LSFI and LSFII, (ii) Chestnut III
Management Limited Partnership, which is investment general partner of
CIII and (iii) MVP. Mr. Fleming has shared voting and investment power
with respect to the shares referred to in the foregoing clause (a) and may
be deemed to be the beneficial owner of such shares. Mr. Fleming disclaims
beneficial ownership of all of such shares, except those shares
representing his pro rata interest in the partnerships referred to
therein. Mr. Fleming may also be deemed to be the beneficial owner of the
other shares referred to in the foregoing clauses (b) through (e). Mr.
Fleming expressly disclaims beneficial ownership of the shares referred to
in clause (b).
(8) Consists of an aggregate of (a) 4,500 shares of Common Stock and (b) 3,436
shares of Common Stock which Dr. Horovitz has the right to acquire within
60 days after March 2, 1998.
(9) Consists of an aggregate of (a) 36,847 shares of Common Stock and (b)
3,436 shares of Common Stock which Dr. Kandel has the right to acquire
within 60 days after March 2, 1998.
(10) Consists of an aggregate of (a) 4,397 shares of Common Stock and (b) 3,436
shares of Common Stock which Mr. Lyons has the right to acquire within 60
days after March 2, 1998.
(11) Consists of an aggregate of (a) 92,415 shares of Common Stock, (b) 379
shares of Common Stock owned by the individual retirement account of Dr.
Mullinix and (c) 158,373 shares of Common Stock which Dr. Mullinix has the
right to acquire within 60 days after March 2, 1998.
(12) Consists of an aggregate of (a) 800 shares of Common Stock and (b) 3,436
shares of Common Stock which Dr. Panem has the right to acquire within 60
days after March 2, 1998.
(13) Consists of an aggregate of (a) 4,500 shares of Common Stock and (b) 3,436
shares of Common Stock which Dr. Taunton-Rigby has the right to acquire
within 60 days after March 2, 1998.
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(14) Consists of (a) 853 shares of Common Stock and (b) 34,102 shares of Common
Stock which Ms. Reiter has the right to acquire within 60 days after March
2, 1998.
(15) Consists of (a) 31,708 shares of Common Stock, (b) 7,684 shares of Common
Stock held by Linda Spence, Mr. Spence's spouse, as custodian for Blake
Spence, Mr. Spence's son, under the Uniform Gifts to Minors Act, and (c)
21,547 shares of Common Stock which Mr. Spence has the right to acquire
within 60 days after March 2, 1998. Mr. Spence disclaims beneficial
ownership of the shares held by Linda Spence.
(16) Consists of (a) 30,214 shares of Common Stock and (b) 18,737 shares of
Common Stock which Dr. Taber has the right to acquire within 60 days after
March 2, 1998.
(17) Consists of (a) 5,684 shares of Common Stock and (b) 21,316 shares of
Common Stock which Dr. Weinshank has the right to acquire within 60 days
after March 2, 1998.
(18) Includes (a) 491,084 shares of Common Stock and (b) 274,691 shares of
Common Stock which such persons have the right to acquire within 60 days
of March 2, 1998. Included are shares held by venture capital funds with
which directors and officers listed above are associated.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO
THE 1996 INCENTIVE PLAN
The Company in the past has used stock options to attract and retain
employees and consultants in the belief that stock ownership and stock-related
compensation devices encourage a community of interest between employees and
consultants, on the one hand, and stockholders, on the other hand. Under the
1996 Incentive Plan, the maximum number of shares of Common Stock that may be
the subject of awards is 1,100,000 (plus any shares that are the subject of
canceled or forfeited awards). As fewer than 247,000 of such shares remained
available for awards under the 1996 Incentive Plan at March 2, 1998, in the
opinion of the Board of Directors it is appropriate to consider an amendment to
the 1996 Incentive Plan to increase the number of shares that may be the subject
of awards under such Plan. Accordingly, the Board of Directors has adopted,
subject to approval by the Company's stockholders, an amendment to increase the
maximum number of shares available for awards under the 1996 Incentive Plan from
1,100,000 to 2,100,000. Options under the 1996 Incentive Plan may be granted
from time to time to employees and consultants of the Company. As of March 2,
1998, there were approximately 135 employees and consultants of the Company,
including executive officers and certain other high-ranking employees of the
Company, who were eligible to participate in the 1996 Incentive Plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a Federal income tax deduction to any publicly held
corporation for certain compensation paid to any covered executive officer to
the extent such compensation for the taxable year exceeds $1,000,000. An
exception to this deduction limitation is provided for qualified
"performance-based" compensation. Compensation attributable to stock options and
stock appreciation rights granted by the Company through May 1999 is not subject
to the deduction limitation due to certain transition rules under Section
162(m). However, in order for compensation attributable to stock options and
stock appreciation rights that may subsequently be awarded under the Company's
1996 Incentive Plan to qualify as performance-based compensation under Section
162(m), the 1996 Incentive Plan must be amended to state the maximum number of
shares with respect to which stock options or stock appreciation rights may be
granted during a specified period to any individual participant, and such
amendment must be disclosed to and approved by the Company's stockholders before
the awards are made. Accordingly, the Board of Directors has adopted, subject to
approval by the Company's stockholders, an additional amendment to the 1996
Incentive Plan. This amendment limits the aggregate number of shares of Common
Stock with respect to which stock options and stock appreciation rights may be
granted to any individual participant under the 1996 Incentive Plan during any
two-year period to 250,000 shares.
Stockholders are being asked to consider and vote upon the two
amendments.
The 1996 Incentive Plan was adopted by the Board of Directors and
approved by the stockholders of the Company in October 1995. The principal terms
of the 1996 Incentive Plan (including the proposed amendments) are summarized
below.
General; Eligibility; Maximum Number of Shares
The 1996 Incentive Plan provides for the grant of options to purchase
shares of Common Stock and the sale of shares of Common Stock to employees and
consultants of the Company. The 1996 Incentive Plan also provides for the grant
of stock appreciation rights and the award of tax offset payments. The maximum
number of shares of Common Stock that may be the subject of awards under the
1996 Incentive Plan is 1,100,000 (plus any shares that are the subject of
canceled or forfeited awards), subject to adjustment upon the occurrence of
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certain events. The Board of Directors is proposing to increase such maximum
number of shares of Common Stock that may be the subject of awards under the
1996 Incentive Plan to 2,100,000. In addition, the Board of Directors is
proposing that the aggregate number of shares of Common Stock that may be
represented by grants of stock options or stock appreciation rights to any
individual during any two-year period be limited to 250,000 shares, subject to
adjustment under certain circumstances pursuant to Article 12 of the 1996
Incentive Plan.
Administration
The 1996 Incentive Plan is administered by the Compensation Committee,
which has the power and authority under the 1996 Incentive Plan to determine
which of the Company's employees and consultants will receive awards, the time
or times at which awards will be made, the nature and amount of the awards, the
exercise or purchase price, if any, of such awards, and such other terms and
conditions applicable to awards as it determines to be appropriate or advisable.
Nature of Awards
Options granted under the 1996 Incentive Plan may be either
nonstatutory stock options or options intended to qualify as incentive stock
options under Section 422 of the Code. The term of incentive stock options
granted under the 1996 Incentive Plan cannot extend beyond ten years from the
date of grant (or in the case of incentive stock options granted to an
individual who is a holder of more than 10% of the total combined voting power
of all classes of stock of the Company on the date of grant (a "10% Person"),
five years from the date of grant).
Shares of Common Stock may either be awarded or sold under the 1996
Incentive Plan and may be issued or sold with or without vesting and other
restrictions, as determined by the Compensation Committee.
The Compensation Committee may also grant, in combination with
nonstatutory stock options and incentive stock options, stock appreciation
rights ("Tandem SARs"), or may grant Tandem SARs as an addition to outstanding
nonstatutory stock options. A Tandem SAR permits the participant, in lieu of
exercising the corresponding option, to elect to receive any appreciation in the
value of the shares subject to such option directly from the Company in shares
of Common Stock. The amount payable by the Company upon the exercise of a Tandem
SAR is measured by the difference between the market value of such shares at the
time of exercise and the option exercise price. Generally, Tandem SARs may be
exercised at any time after the underlying option vests. Upon the exercise of a
Tandem SAR, the corresponding portion of the related option must be surrendered
and cannot thereafter be exercised. Conversely, upon exercise of an option to
which a Tandem SAR is attached, the Tandem SAR may no longer be exercised to the
extent that the corresponding option has been exercised. Nontandem stock
appreciation rights ("Nontandem SARs") may also be awarded by the Compensation
Committee. A Nontandem SAR permits the participant to elect to receive from the
Company that number of shares of Common Stock having an aggregate market value
equal to the excess of the market value of the shares covered by the Nontandem
SAR on the date of exercise over the aggregate base price of such shares as
determined by the Compensation Committee. With respect to both Tandem and
Nontandem SARs, the Compensation Committee may determine to cause the Company to
settle its obligations arising out of the exercise of such rights in cash or a
combination of cash and shares, in lieu of issuing shares only.
Under the 1996 Incentive Plan, the Compensation Committee may also
award tax offset payments to assist employees in paying income taxes incurred as
a result of their participation in the 1996 Incentive Plan. The amount of the
tax offset payments will be determined by applying a percentage established from
time to time by the Compensation Committee to all or a portion of the taxable
income recognizable by the employee upon: (i)
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the exercise of a nonstatutory stock option or an SAR; (ii) the disposition of
shares received upon exercise of an incentive stock option; (iii) the lapse of
restrictions on restricted shares; or (iv) the award of unrestricted shares.
Vesting
Under the 1996 Incentive Plan, the Compensation Committee may establish
with respect to each option or shares awarded or sold such vesting provisions as
it determines to be appropriate or advisable. Unvested options will
automatically terminate within a specified period of time following the
termination of the holder's relationship with the Company and in no event beyond
the expiration of the term. The Company may either repurchase unvested shares of
Common Stock at their original purchase price upon the termination of the
holder's relationship with the Company or cause the forfeiture of such shares,
as determined by the Compensation Committee. All options granted and shares sold
under the 1996 Incentive Plan to employees of the Company may, in the discretion
of the Committee, become fully vested upon the occurrence of certain corporate
transactions if the holders thereof are terminated in connection therewith.
Exercise Price; Purchase Price
The exercise price of options granted and the purchase price of shares
sold under the 1996 Incentive Plan are determined by the Compensation Committee,
but may not, in the case of incentive stock options, be less than the fair
market value of the Common Stock on the date of grant (or, in the case of
incentive stock options granted to a 10% Person, 110% of such fair market
value), as determined by the Compensation Committee.
Adjustments; Amendments; Termination
The number and class of shares available under the 1996 Incentive Plan
may be adjusted by the Compensation Committee to prevent dilution or enlargement
of rights in the event of various changes in the capitalization of the Company.
At the time of grant of any award, the Compensation Committee may provide that
the number and class of shares issuable in connection with such award be
adjusted in certain circumstances to prevent dilution or enlargement of rights.
The Board of Directors may suspend, amend, modify or terminate the 1996
Incentive Plan. However, the Company's stockholders must approve any amendment
that would (i) materially increase the aggregate number of shares issuable under
the 1996 Incentive Plan, (ii) materially increase the benefits accruing to
employees under the 1996 Incentive Plan or (iii) materially modify the
requirements for eligibility to participate in the 1996 Incentive Plan. Awards
made prior to the termination of the 1996 Incentive Plan shall continue in
accordance with their terms following such termination. No amendment, suspension
or termination of the 1996 Incentive Plan shall adversely affect the rights of
an employee or consultant in awards previously granted without such employee's
or consultant's consent.
Federal Income Tax Consequences
The following is only a summary of certain Federal income tax
consequences to recipients of awards under the 1996 Incentive Plan and to the
Company with respect to such awards.
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Nonstatutory Stock Options
The following general rules are applicable with respect to nonstatutory
stock options granted pursuant to the 1996 Incentive Plan, but assume that such
options do not have a "readily ascertainable fair market value" (as such term is
defined in the regulations promulgated under Section 83 of the Code) at the time
of grant:
1. The optionee will not recognize any income on the grant of
a nonstatutory stock option.
2. The optionee will recognize ordinary compensation income on
the date of exercise of a nonstatutory stock option in an amount equal
to the excess, if any, of the fair market value of the shares acquired
on the date of exercise over the exercise price paid therefor.
3. When an optionee sells shares acquired through the exercise
of a nonstatutory stock option, he or she will recognize gain or loss
in an amount equal to the difference between the fair market value of
the shares on the date of exercise and his or her selling price. Such
gain or loss will be characterized as capital gain or loss if the
shares are held as a capital asset immediately before their sale. If
the optionee holds the shares for the requisite one-year statutory
holding period, this gain or loss will be treated as long-term capital
gain or loss.
4. In general, the Company will be entitled to a tax deduction
in the year in which compensation income is recognized by the optionee.
The amount of the Company's allowable deduction will be equal to the
compensation income recognized by the optionee.
Incentive Stock Options
The following general rules are applicable with respect to incentive
stock options granted pursuant to the 1996 Incentive Plan:
1. If the optionee is not a 10% Person (or if the optionee is
a 10% Person and the exercise price is at least 110% of the fair market
value of the shares at the date of grant), no taxable income results to
the optionee upon the grant of an incentive stock option or upon the
issuance of shares to him or her upon exercise of such option.
2. No tax deduction is allowed to the Company upon either
grant or exercise of an incentive stock option.
3. If shares acquired upon exercise of an incentive stock
option are not disposed of (i) within two years following the date the
incentive stock option was granted or (ii) within one year following
the date the shares are transferred to him or her pursuant to the
option exercise, the difference between the amount realized on any
disposition of the shares thereafter and the exercise price will be
treated as long-term capital gain or loss to the optionee provided that
such shares are held as a capital asset immediately before their sale.
4. If shares acquired upon exercise of an incentive stock
option are disposed of before the expiration of either of the requisite
holding periods, then the lower of (i) any excess of the fair market
value of the shares at the time of exercise of the incentive stock
option over the exercise price and (ii) the actual gain on disposition,
will be treated as compensation to the optionee and will be taxed as
ordinary income.
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5. In any year that an optionee recognizes ordinary
compensation income on the disposition of an incentive stock option,
the Company will generally be entitled to a corresponding tax deduction
in the same amount.
6. Upon the disposition of shares prior to the expiration of
the requisite holding period, any excess of the amount realized by the
optionee on disposition over the sum of (i) the exercise price and (ii)
the amount of ordinary income recognized under the above rules will be
treated as either long-term or short-term capital gain (provided such
shares are held as capital assets immediately prior to such
disposition), depending upon the time elapsed between receipt and
disposition of such shares.
In addition to the tax consequences described above, incentive stock
options granted to an optionee may result in a further "alternative minimum tax"
to the optionee under the Code. In such case, an amount equal to the excess, if
any, of the fair market value of the shares acquired on the date of exercise
over the exercise price will be included as a positive adjustment to income in
determining the alternative minimum taxable income of the optionee as of the
date of exercise.
Stock Awards
The following general rules are applicable with respect to stock awards
made pursuant to the 1996 Incentive Plan:
1. If the shares acquired are subject to repurchase by the
Company at the original purchase price in the event of the individual's
termination of service prior to vesting in such shares, the individual
will not recognize any taxable income at the time of the award but will
have to report as ordinary income, as and when the Company's repurchase
right lapses, an amount equal to the excess of (i) the fair market
value of the shares on the date the Company's repurchase right lapses
with respect to such shares over (ii) the purchase price paid for the
shares.
2. The individual may, however, elect under Section 83(b) of
the Code to include as ordinary income in the year of his or her
purchase of the shares an amount equal to the excess of (i) the fair
market value of the purchased shares on the date of purchase
(determined as if the shares were not subject to the Company's
repurchase right) over (ii) the purchase price paid for such shares. If
the Section 83(b) election is made, the individual will not recognize
any additional income as and when the Company's repurchase right
lapses.
3. The Company will be entitled to a business expense
deduction equal to the amount of ordinary income recognized by the
individual with respect to the purchased shares. The deduction will in
general be allowed for the taxable year of the Company in which such
ordinary income is recognized by the individual. In the event, however,
that the shares are repurchased by the Company at the original purchase
price prior to the date that such shares vest and the individual made a
Section 83(b) election with respect to such shares, no deduction will
be allowed to such individual in respect of such Company repurchase.
Stock Appreciation Rights
An individual who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to (i) in the case of a Tandem
SAR, the amount of the appreciation distribution and (ii) in the case of a
Nontandem SAR, the aggregate market value of the shares of Common Stock received
upon exercise thereof.
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The Company will generally be entitled to a business expense deduction equal to
the amount recognized by the individual for the taxable year of the Company in
which such amount is so recognized by the individual.
Tax Offset Payments
An individual who is awarded a tax offset payment will recognize
ordinary income in the year of such award equal to the amount of such payment.
The Company will be entitled to a business expense deduction equal to the amount
recognized by the individual for the taxable year of the Company in which such
amount is so recognized by the individual.
Miscellaneous
The 1996 Incentive Plan is not an employee benefit plan which is
subject to the provisions of the Employee Retirement Income Security Act of
1974. The provisions of Section 401(a) of the Code are therefore not applicable
to the 1996 Incentive Plan.
Allocation of Benefits
The following table illustrates the allocation of benefits to be made
over the life of the 1996 Incentive Plan:
Plan Benefits
1996 Incentive Plan
Named Executive Officer or Group Number of Options(1)
- -------------------------------- --------------------
Kathleen P. Mullinix not determinable
Robert I. Taber not determinable
Robert L. Spence not determinable
Lisa L. Reiter not determinable
Richard L. Weinshank not determinable
Executive Group not determinable
Non-Executive Director Group -0-
Non-Executive Officer Employee Group not determinable
(1) The allocation of awards under the 1996 Incentive Plan is not currently
determinable as such allocation is dependent upon future decisions to
be made by the Compensation Committee in its sole discretion, subject
to applicable provisions of the 1996 Incentive Plan. As of March 2,
1998, stock option grants had been made under the 1996 Incentive Plan
covering the following number of shares of Common Stock at exercise
prices ranging from $2.00 to $16.75 per share: Dr. Mullinix, 159,800
shares; Dr. Taber, 26,200 shares; Mr. Spence, 67,400 shares; Ms.
Reiter, 52,800 shares; Dr. Weinshank, 40,500 shares; all executive
officer employees as a group, 346,700 shares; and all non-executive
officer employees as a group, 507,488 shares, net of all forfeitures.
In order to continue the Company's objectives of providing important
incentives to retain in the employ of the Company persons of training,
experience and ability, of attracting new employees and consultants whose
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services are considered unusually valuable and of encouraging the sense of
proprietorship and stimulating the active interest of such persons in the
development and financial success of the Company, the Board of Directors
recommends approval of the amendment to the 1996 Incentive Plan so as to make
additional shares of Common Stock available for the granting of awards under
such Plan. In addition, the Board of Directors recommends approval of the
amendment to the 1996 Incentive Plan imposing a limit on the maximum number of
shares of Common Stock with respect to which awards may be granted to any
individual participant during any two-year period so as to bring the 1996
Incentive Plan into compliance with Section 162(m) of the Code. The 1996
Incentive Plan, as proposed to be amended pursuant to this Proposal No. 2, is
set forth in its entirety as Exhibit A hereto. The proposed amendments are set
forth in italics on said Exhibit A. In accordance with SEC Rule 16b- 3(a),
approval of the 1996 Incentive Plan will require the affirmative vote of a
majority of the shares of Common Stock present in person or represented by proxy
and entitled to vote at the meeting.
If the stockholders approve this Proposal No. 2 at the Annual Meeting,
the amendments will become effective immediately. In the absence of stockholder
approval of this Proposal No. 2, such amendments will not take effect. In such
event, however, the Board of Directors may determine to reconsider such
amendments and re-present the amendments to stockholders for their approval at
the 1999 Annual Meeting of Stockholders. If this Proposal No. 2 is not approved,
then (i) the Company expects that by December 31, 1998, there will no longer be
any shares of Common Stock available for awards under the 1996 Incentive Plan
and (ii) compensation attributable to awards granted under the 1996 Incentive
Plan after the 1999 Annual Meeting of Stockholders will not qualify as
performance-based compensation and, as a result, under certain circumstances the
Company may be denied a business expense deduction for such compensation.
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" this proposal.
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PROPOSAL NO. 3
RATIFICATION OF
INDEPENDENT AUDITORS
The Company is asking the stockholders to ratify the appointment of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending December 31, 1998. The affirmative vote of the holders of a majority of
the shares represented and voting at the Annual Meeting will be required to
ratify the appointment of Ernst & Young LLP.
In the event the stockholders fail to ratify the appointment, the Board
of Directors will reconsider the appointment. Even if the appointment is
ratified, the Board of Directors, in its discretion, may direct the appointment
of a different independent auditing firm at any time during the year if the
Board of Directors believes that such a change would be in the Company's and its
stockholders' best interests.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote "FOR" the
ratification of the appointment of Ernst & Young LLP to serve as the Company's
independent auditors for the fiscal year ending December 31, 1998.
STOCKHOLDER PROPOSALS FOR 1999 PROXY STATEMENT
Stockholder proposals that are intended to be presented at the
Company's annual meeting of stockholders to be held in 1999 must be received by
the Company no later than January 1, 1999, in order to be included in the proxy
statement and related proxy materials.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND LIST OF EXHIBITS. THE COMPANY WILL FURNISH A COPY OF ANY EXHIBIT
TO SUCH REPORT UPON WRITTEN REQUEST AND PAYMENT OF THE COMPANY'S REASONABLE
EXPENSES IN FURNISHING SUCH EXHIBIT. REQUESTS SHOULD BE SENT TO THE CHIEF
FINANCIAL OFFICER OF THE COMPANY AT 215 COLLEGE ROAD, PARAMUS, NEW JERSEY 07652.
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OTHER BUSINESS
The Board of Directors knows of no other business that will be
presented for consideration at the Annual Meeting. If other matters are properly
brought before the Annual Meeting, however, it is the intention of the persons
named in the accompanying proxy to vote the shares represented thereby on such
matters in accordance with their best judgment.
Dated: April 13, 1998
By Order of the Board of Directors
/s/Lisa L. Reiter
Secretary
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Exhibit A
SYNAPTIC PHARMACEUTICAL CORPORATION
1996 INCENTIVE PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment and Effective Date. Synaptic Pharmaceutical
Corporation, a Delaware corporation (the "Corporation"), hereby establishes a
stock incentive plan to be known as the "Synaptic Pharmaceutical Corporation
1996 Incentive Plan" (the "Plan"). The Plan shall become effective as of January
1, 1996, subject to the approval of the stockholders of the Corporation. In the
event that such stockholder approval is not obtained, any awards made hereunder
shall be cancelled and all rights of employees and consultants with respect to
such awards shall thereupon cease. Upon approval of the Plan by the Board of
Directors of the Corporation (the "Board"), awards may be made by the Board's
Compensation Committee (the "Committee"), as provided herein.
1.2 Purpose. The purpose of the Plan is to encourage and enable key
employees and consultants (subject to such requirements as may be prescribed by
the Committee) of the Corporation and its subsidiaries to acquire a proprietary
interest in the Corporation through the ownership of the Corporation's common
stock, par value $0.01 per share ("Common Stock"), and other rights with respect
to the Common Stock. Such ownership will provide such employees and consultants
with a more direct stake in the future welfare of the Corporation and encourage
them to remain with the Corporation and its subsidiaries. It is also expected
that the Plan will encourage qualified persons to seek and accept employment
with the Corporation and its subsidiaries.
ARTICLE 2
AWARDS
2.1 Form of Awards. Awards under the Plan may be granted in any one or
all of the following forms: (i) incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"); (ii) non-qualified stock options
("Non-qualified Stock Options") (unless otherwise indicated, references in the
Plan to "Options" shall include both Incentive Stock Options and Non-qualified
Stock Options); (iii) stock appreciation rights ("Stock Appreciation Rights"),
as described in Article 6 hereof, which may be awarded either in tandem with
Options ("Tandem Stock Appreciation Rights") or on a stand-alone basis
("Nontandem Stock Appreciation Rights"); (iv) shares of Common Stock which are
subject to vesting requirements as provided in Article 9 hereof ("Restricted
Shares"); (v) shares of Common Stock that are not subject to any vesting
requirements ("Unrestricted Shares"); and (vi) tax offset payments ("Tax Offset
Payments"), as described in Article 11 hereof.
2.2 Maximum Shares Available. The maximum aggregate number of shares of
Common Stock available for award under the Plan is 2,100,000 (as constituted on
March 6, 1998), subject to adjustment pursuant to Article 12 hereof. Shares of
Common Stock issued pursuant to the Plan may be either authorized but
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unissued shares or issued shares reacquired by the Corporation. In the event
that prior to the end of the period during which Options may be granted under
the Plan, any Option or any Nontandem Stock Appreciation Rights under the Plan
expires unexercised or is terminated, surrendered or cancelled (other than in
connection with the exercise of Stock Appreciation Rights) without being
exercised in whole or in part for any reason, or any Restricted Shares are
forfeited, or if such awards are settled in cash in lieu of shares of Common
Stock, then such shares shall be available for subsequent awards under the Plan,
upon such terms as the Committee may determine. The aggregate number of shares
of Common Stock that may be represented by grants of Options or Stock
Appreciation Rights made to any individual during any two-year period may not
exceed 250,000 shares, subject to adjustment pursuant to Article 12 hereof.
2.3 Return of Prior Awards. As a condition to any subsequent award, the
Committee shall have the right, in its sole discretion, to require employees to
return to the Corporation awards previously granted under the Plan. Subject to
the provisions of the Plan, such new award shall be upon such terms and
conditions as are specified by the Committee at the time the new award is
granted.
ARTICLE 3
ADMINISTRATION
3.1 Committee. Awards shall be determined, and the Plan shall be
administered, by the Committee as appointed from time to time by the Board,
which Committee shall consist of not less than two (2) members of the Board;
provided, however, that from and after the consummation of the initial public
offering of the Common Stock and so long as the Plan shall be required to comply
with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in order to permit transactions pursuant to the Plan by
employees of the Corporation to be exempt from the provisions of Section 16(b)
of the 1934 Act, each member of the Committee, at the effective date of his
appointment to the Committee, shall be a "disinterested person," as that term is
defined in subparagraph (c)(2)(i) of Rule 16b-3, as in effect from time to time,
under the 1934 Act.
3.2 Powers of the Committee. Subject to the express provisions of the
Plan, the Committee shall have the power and authority (i) to grant Options and
to determine the purchase price of the Common Stock covered by each Option, the
term of each Option, the number of shares of Common Stock to be covered by each
Option, the time or times at which each Option shall become exercisable and the
duration of the exercise period applicable to each Option; (ii) to designate
Options as Incentive Stock Options or Non-qualified Stock Options and to
determine which Options, if any, shall be accompanied by Tandem Stock
Appreciation Rights, (iii) to grant Tandem Stock Appreciation Rights and
Nontandem Stock Appreciation Rights and to determine the terms and conditions of
such rights; (iv) to grant or cause to be sold Restricted Shares and to
determine the purchase price, if any, of such shares and the vesting period and
other conditions and restrictions applicable to such shares; (v) to grant or
cause to be sold Unrestricted Shares and to determine the purchase price, if
any, of such shares; (vi) to determine the amount of, and to make, Tax Offset
Payments; (vii) to determine the employees and the consultants to whom, and the
time or times at which, Options, Stock Appreciation Rights, Restricted Shares,
Unrestricted Shares and Tax Offset Payments shall be granted or made and (viii)
to take all other actions contemplated to be taken by the Committee under the
Plan, including, but not limited to, authorizing the amendment of any written
agreement relating to any award made hereunder. Without limiting the foregoing,
in the event of a merger, consolidation, combination, exchange of shares,
separation, spin-off, reorganization, liquidation or other similar transaction,
the Committee may, in its sole discretion, accelerate the lapse of
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Restricted Periods and other vesting periods and waiting periods and extend the
exercise periods applicable to any award made under the Plan.
3.3 Delegation. The Committee may delegate to one or more of its
members or to any other person or persons such ministerial duties as it may deem
advisable; provided, however, that the Committee may not delegate any of its
responsibilities hereunder if such delegation would cause the Plan to fail to
comply with the "disinterested administration" rules under Section 16 of the
Act. The Committee may also employ attorneys, consultants, accountants or other
professional advisors and shall be entitled to rely upon the advice, opinions or
valuations of any such advisors.
3.4 Interpretations. The Committee shall have sole discretionary
authority to interpret the terms of the Plan, to adopt and revise rules,
regulations and policies to administer the Plan and to make any other factual
determinations which it believes to be necessary or advisable for the
administration of the Plan. All actions taken and interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Corporation, all employees and consultants who have received awards
under the Plan and all other interested persons.
3.5 Liability; Indemnification. No member of the Committee, nor any
person to whom ministerial duties have been delegated, shall be personally
liable for any action, interpretation or determination made with respect to the
Plan or awards made thereunder, and each member of the Committee shall be fully
indemnified and protected by the Corporation with respect to any liability he or
she may incur with respect to any such action, interpretation or determination,
to the extent permitted by applicable law and to the extent provided in the
Corporation's Certificate of Incorporation and Bylaws, as amended from time to
time, or under any agreement between any such member and the Corporation.
ARTICLE 4
ELIGIBILITY
Awards may be made to all employees and consultants of the
Corporation or any of its subsidiaries (subject to such requirements as may be
prescribed by the Committee). Awards may be made to a director of the
Corporation who is not also a member of the Committee, provided that the
director is also an employee. In determining the employees and consultants to
whom awards shall be granted and the number of shares to be covered by each
award, the Committee shall take into account the nature of the services rendered
by such employees and consultants, their present and potential contributions to
the success of the Corporation and its subsidiaries and such other factors as
the Committee in its sole discretion shall deem relevant.
Notwithstanding the foregoing, only employees of the
Corporation and any present or future corporation which is or may be a
"subsidiary corporation" of the Corporation (as such term is defined in Section
424 (f) of the Code) shall be eligible to receive Incentive Stock Options.
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ARTICLE 5
STOCK OPTIONS
5.1 Grant of Options. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards, as the Committee
shall from time to time determine.
5.2 Designation as Non-qualified Stock Option or Incentive Stock
Option. In connection with any grant of Options, the Committee shall designate
in the written agreement required pursuant to Article 14 hereof whether the
Options granted shall be Incentive Stock Options or Non-qualified Stock Options,
or in the case both are granted, the number of shares of each.
5.3 Option Price. The purchase price per share under each Incentive
Stock Option shall be the Market Price (as hereinafter defined) of the Common
Stock on the date the Incentive Stock Option is granted. The purchase price per
share under each Non-qualified Stock Option shall be determined by the
Committee. In no case, however, shall the purchase price per share of either an
Incentive Stock Option or Non-qualified Stock Option be less than the par value
of the Common Stock ($0.01). In the case of an Incentive Stock Option granted to
an employee owning (actually or constructively under Section 424(d) of the
Code), more than 10% of the total combined voting power of all classes of stock
of the Corporation or of a subsidiary (a "10% Stockholder"), the option price
shall not be less than 110% of the Market Price of the Common Stock on the date
of grant.
The "Market Price" of the Common Stock on any day shall be
determined as follows: (i) if the Common Stock is listed on a national
securities exchange or quoted through the NASDAQ National Market System, the
Market Price on any day shall be, in the sole discretion of the Committee,
either (x) the average of the high and low reported Consolidated Trading sales
prices, or if no such sale is made on such day, the average of the closing bid
and asked prices reported on the Consolidated Trading listing for such day or
(y) the closing price reported on the Consolidated Trading listing for such day;
(ii) if the Common Stock is quoted on the NASDAQ interdealer quotation system,
the Market Price on any day shall be the average of the representative bid and
asked prices at the close of business for such day; or (iii) if the Common Stock
is not listed on a national stock exchange or quoted on NASDAQ, the Market Price
on any day shall be the average of the high bid and low asked prices reported by
the National Quotation Bureau, Inc. for such day. In no event shall the Market
Price of a share of Common Stock subject to an Incentive Stock Option be less
than the fair market value as determined for purposes of Section 422(b)(4) of
the Code.
The Option price so determined shall also be applicable in
connection with the exercise of any Tandem Stock Appreciation Rights granted
with respect to such Option.
5.4 Limitation on Amount of Incentive Stock Options. In the case of
Incentive Stock Options, the aggregate Market Price (determined at the time the
Incentive Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Corporation and any subsidiary)
shall not exceed $100,000.
5.5 Limitation on Time of Grant. No grant of an Incentive Stock Option
shall be made under the Plan more than ten (10) years after the date the Plan is
approved by the stockholders of the Corporation.
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5.6 Exercise and Payment. Options may be exercised in whole or in part.
Common Stock purchased upon the exercise of Options shall be paid for at the
time of purchase. Such payment shall be made in cash or, in the sole discretion
of the Committee, through delivery of shares of Common Stock, installment
payments under the optionee's promissory note or a combination of cash, Common
Stock and/or installment payments, in accordance with procedures to be
established by the Committee. Any shares so delivered shall be valued at their
Market Price on the date of exercise. Upon receipt of a notice of exercise and
payment in accordance with procedures to be established by the Committee, the
Corporation or its agent shall deliver to the person exercising the Option (or
his or her designee) a certificate for such shares.
The Committee in its sole discretion may, on an individual
basis or pursuant to a general program established by the Committee in
connection with the Plan, lend money to an optionee to exercise all or a portion
of an Option granted hereunder. If the exercise price is paid in whole or part
with an optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the shares of
Common Stock that the optionee purchases upon exercise of such Option, (iii)
bear interest at a rate no less than the applicable Federal rate (within the
meaning of Section 1274 of the Code), and (iv) contain such other terms as the
Committee in its sole discretion shall require. In the event that payment for
exercised Options is made through the delivery of shares of Common Stock, the
Committee, in accordance with procedures established by the Committee, may grant
Non-qualified Stock Options ("Restoration Options") to the person exercising the
Option for the purchase of a number of shares equal to the number of shares of
Common Stock delivered to the Corporation in connection with the payment of the
exercise price of the Option and the payment of or surrender of shares for any
withholding taxes due upon such exercise. The purchase price per share under
each Restoration Option shall be the Market Price of the Common Stock on the
date the Restoration Option is granted.
5.7 Term. The term of each Option granted hereunder shall be determined
by the Committee; provided, however, that, notwithstanding any other provision
of the Plan, in no event shall an Incentive Stock Option be exercisable after
ten (10) years from the date it is granted, or in the case of an Incentive Stock
Option granted to a 10% Stockholder, five (5) years from the date it is granted.
5.8 Rights as a Stockholder. A recipient of Options shall have no
rights as a stockholder with respect to any shares issuable or transferable upon
exercise thereof until the date a stock certificate representing such shares is
issued to such recipient. Except as otherwise expressly provided in the Plan or
by the Committee, no adjustment shall be made for cash dividends or other rights
for which the record date is prior to the date such stock certificate is issued.
5.9 General Restrictions. Each Option granted under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its sole discretion, that the listing, registration or qualification of the
shares issuable or transferable upon exercise thereof upon any securities
exchange or under any state or Federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such Option or the issue, transfer, or purchase
of shares thereunder, such Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.
The Board or the Committee may, in connection with the
granting of any Option, require the individual to whom the Option is to be
granted to enter into an agreement with the Corporation stating that as a
condition precedent to each exercise of the Option, in whole or in part, such
individual shall if then required by the Corporation represent to the
Corporation in writing that such exercise is for investment only and not with a
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view to distribution, and also setting forth such other terms and conditions as
the Board or the Committee may prescribe.
5.10 Cancellation of Stock Appreciation Rights. Upon exercise of all or
a portion of an Option, the related Tandem Stock Appreciation Rights shall be
cancelled with respect to an equal number of shares of Common Stock.
ARTICLE 6
STOCK APPRECIATION RIGHTS
6.1 Grants of Stock Appreciation Rights. Tandem Stock Appreciation
Rights may be awarded by the Committee in connection with any Option granted
under the Plan, either at the time the Option is granted or thereafter at any
time prior to the exercise, termination or expiration of the Option. Nontandem
Stock Appreciation Rights may also be granted by the Committee at any time. At
the time of grant of Nontandem Stock Appreciation Rights, the Committee shall
specify the number of shares of Common Stock covered by such right and the base
price of shares of Common Stock to be used in connection with the calculation
described in Section 6.4 below. The base price of any Nontandem Stock
Appreciation Rights shall be not less than 100% of the Market Price of a share
of Common Stock on the date of grant. Stock Appreciation Rights shall be subject
to such terms and conditions not inconsistent with the other provisions of the
Plan as the Committee shall determine.
6.2 Limitations on Exercise. Tandem Stock Appreciation Rights shall be
exercisable only to the extent that the related Option is exercisable and shall
be exercisable only for such period as the Committee may determine (which period
may expire prior to the expiration date of the related Option). Upon the
exercise of all or a portion of Tandem Stock Appreciation Rights, the related
Option shall be cancelled with respect to an equal number of shares of Common
Stock. Shares of Common Stock subject to Options, or portions thereof,
surrendered upon exercise of Tandem Stock Appreciation Rights shall not be
available for subsequent awards under the Plan. Nontandem Stock Appreciation
Rights shall be exercisable during such period as the Committee shall determine.
6.3 Surrender or Exchange of Tandem Stock Appreciation Rights. Tandem
Stock Appreciation Rights shall entitle the recipient to surrender to the
Corporation unexercised the related Option, or any portion thereof, and to
receive from the Corporation in exchange therefor that number of shares of
Common Stock having an aggregate Market Price equal to (A) the excess of (i) the
Market Price of one (1) share of Common Stock as of the date the Tandem Stock
Appreciation Rights are exercised over (ii) the option price per share specified
in such Option, multiplied by (B) the number of shares of Common Stock subject
to the Option, or portion thereof, which is surrendered. Cash shall be delivered
in lieu of any fractional shares.
6.4 Exercise of Nontandem Stock Appreciation Rights. The exercise of
Nontandem Stock Appreciation Rights shall entitle the recipient to receive from
the Corporation that number of shares of Common Stock having an aggregate Market
Price equal to (A) the excess of (i) the Market Price of one (1) share of Common
Stock as of the date on which the Nontandem Stock Appreciation Rights are
exercised over (ii) the base price of the shares covered by the Nontandem Stock
Appreciation Rights, multiplied by (B) the number of shares of Common Stock
covered by the Nontandem Stock Appreciation Rights, or the portion thereof being
exercised.
Cash shall be delivered in lieu of any fractional shares.
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6.5 Settlement of Stock Appreciation Rights. As soon as is reasonably
practicable after the exercise of any Stock Appreciation Rights, the Corporation
shall (i) issue, in the name of the recipient, stock certificates representing
the total number of full shares of Common Stock to which the recipient is
entitled pursuant to Section 6.3 or 6.4 hereof and cash in an amount equal to
the Market Price, as of the date of exercise, of any resulting fractional
shares, and (ii) if the Committee causes the Corporation to elect to settle all
or part of its obligations arising out of the exercise of the Stock Appreciation
Rights in cash pursuant to Section 6.6 hereof, deliver to the recipient an
amount in cash equal to the Market Price, as of the date of exercise, of the
shares of Common Stock it would otherwise be obligated to deliver.
6.6 Cash Settlement. The Committee, in its sole discretion, may cause
the Corporation to settle all or any part of its obligation arising out of the
exercise of Stock Appreciation Rights by the payment of cash in lieu of all or
part of the shares of Common Stock it would otherwise be obligated to deliver in
an amount equal to the Market Price of such shares on the date of exercise.
ARTICLE 7
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Rights may be transferred,
assigned, pledged or hypothecated (whether by operation of law or otherwise),
except as provided by will or the applicable laws of descent and distribution,
and no Option or Stock Appreciation Rights shall be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of an Option or Stock Appreciation Rights not
specifically permitted herein shall be null and void and without effect. An
Option or Stock Appreciation Rights may be exercised by the recipient only
during his or her lifetime, or following his or her death pursuant to Section
8.3 hereof.
Notwithstanding anything to the contrary in the preceding
paragraph, the Committee may, in its sole discretion, cause the written
agreement relating to any Non-qualified Stock Options or Stock Appreciation
Rights granted hereunder to provide that the recipient of such Non-qualified
Stock Options or Stock Appreciation Rights may transfer any of such
Non-qualified Stock Options or Stock Appreciation Rights other than by will or
the laws of descent and distribution in any manner authorized under applicable
law; provided, however, that in no event may the Committee permit any transfers
which would cause the Plan to fail to satisfy the applicable requirements of
Rule 16b-3 under the 1934 Act or which would cause any recipient of awards
hereunder to fail to be entitled to the benefits Rule 16b-3 or other exemptive
rules under Section 16 of the 1934 Act or be subject to liability thereunder.
ARTICLE 8
EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, OR DEATH
8.1 General Rule. Except as expressly provided in the written agreement
relating to any Option or Stock Appreciation Rights or as otherwise expressly
determined by the Committee in its sole discretion, in the event that a
recipient of Options or Stock Appreciation Rights ceases to be an employee or
consultant of the Corporation and its subsidiaries (a "Terminated Person") for
any reason other than Disability or Retirement (as hereinafter defined) or
death, any Options or Stock Appreciation Rights which were held by such Person
on the
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date on which he or she ceased to be an employee or consultant (the "Termination
Date") and which were otherwise exercisable on such Date shall expire unless
exercised within the period of 30 days following the Termination Date, but in no
event after the expiration of the exercise period of such Options or Stock
Appreciation Rights.
Except as expressly provided in the written agreement relating
to the Options or Stock Appreciation Rights or as otherwise expressly determined
by the Committee in its sole discretion, the Committee may, in its sole
discretion, cause any Option or Stock Appreciation Rights to be forfeited upon
an employee's termination of employment or the termination of a consultant's
consulting arrangement if the employee or consultant was terminated for one (or
more) of the following reasons: (i) the employee's or consultant's conviction,
or plea of guilty or nolo contendere to the commission, of a felony, (ii) the
employee's or consultant's commission of any fraud, misappropriation or
misconduct which causes demonstrable injury to the Corporation or a subsidiary,
(iii) an act of dishonesty by the employee or consultant resulting or intended
to result, directly or indirectly, in gain or personal enrichment at the expense
of the Corporation or a subsidiary, (iv) any breach of the employee's or
consultant's fiduciary duties to the Corporation, (v) the employee's or
consultant's willful failure to perform those duties which the employee or
consultant is required to perform as an employee or consultant of the
Corporation or a subsidiary, (vi) in the case of an employee, a failure to
devote his full time and attention exclusively to the business and affairs of
the Corporation or a subsidiary; provided, however, that "cause," in the case of
an employee or consultant who has an employment or consulting agreement with the
Corporation or a subsidiary thereof, shall have the meaning, if any, set forth
in such employment or consulting agreement. It shall be within the sole
discretion of the Committee to determine whether an employee's or consultant's
termination was for one of the foregoing reasons, and the decision of the
Committee shall be final and conclusive.
8.2 Disability or Retirement. Except as expressly provided otherwise in
the written agreement relating to any Option or Stock Appreciation Rights
granted under the Plan or as otherwise determined by the Committee in its sole
discretion, in the event of a termination of employment or consulting
arrangement of a Terminated Person due to the Disability or Retirement of such
Person, any Options or Stock Appreciation Rights which were held by such Person
on the Termination Date and which were otherwise exercisable on such Date shall
expire unless exercised within the period of 180 days following such Date, but
in no event after the expiration date of the exercise period of such Options or
Stock Appreciation Rights; provided, however, that any Incentive Stock Option of
such Terminated Person shall no longer be treated as an Incentive Stock Option
unless exercised within three (3) months of the Termination Date (or within one
(1) year in the case of an employee who is "disabled" within the meaning of
Section 22(e)(3) of the Code).
"Disability" shall mean any termination of employment or
consulting arrangement with the Corporation or a subsidiary because of a
long-term or total disability, as determined by the Committee in its sole
discretion. "Retirement" shall mean a termination of employment or consulting
arrangement with the Corporation or a subsidiary with the written consent of the
Committee in its sole discretion. The decision of the Committee shall be final
and conclusive.
8.3 Death. Except as expressly provided in the written agreement
relating to the Options or Stock Appreciation Rights or as otherwise expressly
determined by the Committee in its sole discretion, in the event of the death of
a recipient of Options or Stock Appreciation Rights while an employee or
consultant of the Corporation or any subsidiary, any Options or Stock
Appreciation Rights which were held by such Person at the date of death and
which were otherwise exercisable on such date shall be exercisable by the
beneficiary designated by the employee or consultant for such purpose (the
"Designated Beneficiary") or if no Designated Beneficiary shall be appointed or
if the Designated Beneficiary shall predecease the employee, by the employee's
personal
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representatives, heirs or legatees for a period of one (1) year from the date of
death, but in no event later than the expiration date of the exercise period of
such Options or Stock Appreciation Rights, at which time such Options or Stock
Appreciation Rights shall expire; provided, however, that any Incentive Stock
Option of such recipient shall no longer be treated as an Incentive Stock Option
unless exercised within three (3) months of the date of the recipient's death.
In the event of the death of a Terminated Person following a
termination of employment due to Disability or Retirement, any Options or Stock
Appreciation Rights which were held by such Person on the Termination Date and
which were exercisable on such Date shall be exercisable by such recipient's
Designated Beneficiary, or if no Designated Beneficiary shall be appointed or if
the Designated Beneficiary shall predecease such recipient, by such recipient's
personal representatives, heirs or legatees for a period of one (1) year from
the date of death but in no event later than the expiration date of the exercise
period of such Options or Stock Appreciation Rights, at which time such Options
or Stock Appreciation Rights shall expire; provided, however, that any Incentive
Stock Option of such Terminated Person shall no longer be treated as an
Incentive Stock Option within three (3) months of the date of such Termination
Date (or within one (1) year in the case of an employee who is "disabled" within
the meaning of Section 22(e)(3) of the Code).
8.4 Termination of Unvested Options. All Options and Stock Appreciation
Rights which were not exercisable by a Terminated Person as of the Termination
Date of such Terminated Person shall terminate as of such Date, except as
expressly provided in the written agreement relating to the Options or Stock
Appreciation Rights or as otherwise expressly determined by the Committee in its
sole discretion. Options and Stock Appreciation Rights shall not be affected by
any change of employment so long as the recipient continues to be employed by
either the Corporation or a subsidiary.
ARTICLE 9
RESTRICTED SHARES
9.1 Grant or Sale of Restricted Shares. The Committee may from time to
time cause the Corporation to grant or to sell Restricted Shares under the Plan
to employees and consultants, subject to such restrictions, conditions and other
terms as the Committee may determine. The purchase price, if any, for Restricted
Shares shall be determined by the Committee in its sole discretion.
9.2 Restrictions. At the time a grant of Restricted Shares is made, the
Committee shall establish a period over which such Restricted Shares will vest
(the "Restricted Period"). Each grant of Restricted Shares may be subject to a
different Restricted Period. The Committee may, in its sole discretion, at the
time a grant is made prescribe restrictions in addition to or other than the
expiration of the Restricted Period, including the satisfaction of corporate or
individual performance objectives, which shall be applicable to all or any
portion of the Restricted Shares. The Committee may also, in its sole
discretion, at any time shorten or terminate the Restricted Period or waive any
other restrictions applicable to all or a portion of such Restricted Shares.
None of the Restricted Shares may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Committee with respect
to such Restricted Shares.
9.3 Restricted Stock Certificates. The Corporation shall issue, in the
name of each employee or consultant to whom Restricted Shares have been granted
or sold, stock certificates representing the total number
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of Restricted Shares granted or sold to the employee or consultant, as soon as
reasonably practicable after the grant or sale. The Corporation, at the
direction of the Committee, shall hold such certificates, properly endorsed for
transfer, for the employee's or consultant's benefit until such time as the
Restricted Shares are forfeited to or repurchased by the Corporation or the
restrictions lapse.
9.4 Rights of Holders of Restricted Shares. Holders of Restricted
Shares shall have the right to vote such shares and the right to receive any
cash dividends with respect to such shares. All distributions, if any, received
by an employee or consultant with respect to Restricted Shares as a result of
any stock split, stock distribution, a combination of shares, or other similar
transaction shall be subject to the restrictions of this Article 9.
9.5 Forfeiture; Repurchase. Except as expressly provided in the written
agreement relating to the Options or Stock Appreciation Rights or as otherwise
expressly determined by the Committee in its sole discretion, any Restricted
Shares held by an employee or consultant pursuant to the Plan shall be forfeited
or subject to repurchase by the Corporation at a price equal to the original
price paid therefor by the employee or consultant upon the termination of his or
her employment or consulting arrangement with the Corporation or its
subsidiaries, as the case may be, prior to the expiration or termination of the
Restricted Period and the satisfaction of any other conditions applicable to
such Restricted Shares. Upon any such forfeiture or repurchase, the Restricted
Shares shall be retained in the treasury of the Corporation and available for
subsequent awards under the Plan, unless the Committee directs that such
Restricted Shares be cancelled.
9.6 Delivery of Restricted Shares. Upon the expiration or termination
of the Restricted Period applicable to any Restricted Shares and the
satisfaction of any other conditions prescribed by the Committee that are
applicable to such Shares, the restrictions applicable to the Restricted Shares
shall lapse and a stock certificate for the number of Restricted Shares with
respect to which the restrictions have lapsed shall be delivered, free of all
such restrictions, to the employee, consultant, beneficiary or estate, as the
case may be.
ARTICLE 10
UNRESTRICTED SHARES
10.1 Grant or Sale of Unrestricted Shares. The Committee may cause the
Corporation to grant or to sell Unrestricted Shares to employees and consultants
at such time or times, in such amounts and for such reasons as the Committee, in
its sole discretion, shall determine. The purchase price, if any, for
Unrestricted Shares shall be determined by the Committee in its sole discretion.
10.2 Delivery of Unrestricted Shares. The Corporation shall issue, in
the name of each employee or consultant to whom Unrestricted Shares have been
granted or sold, stock certificates representing the total number of
Unrestricted Shares granted or sold to the employee or consultant, and shall
deliver such certificates to the employee or consultant as soon as reasonably
practicable after the date of grant or sale or on such later date as the
Committee shall determine at the time of grant or sale.
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ARTICLE 11
TAX OFFSET PAYMENTS
The Committee shall have the authority at the time of any award under
the Plan or anytime thereafter to make Tax Offset Payments to assist employees
in paying income taxes incurred as a result of their participation in the Plan.
The Tax Offset Payments shall be determined by applying a percentage established
by the Committee to all or a portion (as the Committee shall determine) of the
taxable income recognizable by an employee upon (i) the exercise of
Non-qualified Stock Options or Stock Appreciation Rights, (ii) the disposition
of shares received upon exercise of Incentive Stock Options, (iii) the lapse of
restrictions on Restricted Shares or (iv) the award or sale of Unrestricted
Shares. The percentage shall be established, from time to time, by the Committee
at that rate which the Committee, in its sole discretion, determines to be
appropriate and in the best interests of the Corporation to assist employees in
paying income taxes incurred as a result of the events described in the
preceding sentence. Tax Offset Payments shall be subject to the restrictions on
transferability applicable to Options and Stock Appreciation Rights under
Article 7.
ARTICLE 12
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may: (i)
at any time, make or provide for such adjustments to the Plan or to the number
and class of shares available thereunder or (ii) at the time of grant of any
Options, Stock Appreciation Rights or Restricted Shares, provide for such
adjustments to such Options, Stock Appreciation Rights or Restricted Shares, in
each case as the Committee shall deem appropriate to prevent dilution or
enlargement of rights, including, without limitation, adjustments in the event
of stock dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, separations, spin-offs, reorganizations,
liquidations and the like.
ARTICLE 13
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided
that any amendment that would (i) materially increase the aggregate number of
shares which may be issued under the Plan, (ii) materially increase the benefits
accruing to employees under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the Corporation's stockholders, except that any such increase
or modification that may result from adjustments authorized by Article 12 hereof
shall not require such stockholder approval. If the Plan is terminated, the
terms of the Plan shall, notwithstanding such termination, continue to apply to
awards granted prior to such termination. No suspension, termination,
modification or amendment of the Plan may, without the consent of the employee
or consultant to whom an award shall theretofore have been granted, adversely
affect the rights of such employee or consultant under such award.
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ARTICLE 14
WRITTEN AGREEMENT
Each award of Options, Stock Appreciation Rights, Restricted Shares,
Unrestricted Shares and Tax Offset Payments shall be evidenced by a written
agreement containing such restrictions, terms and conditions, if any, as the
Committee may require. In the event of any conflict between a written agreement
and the Plan, the terms of the Plan shall govern.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1 Tax Withholding. The Corporation shall have the right to require
employees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local withholding
tax requirements, or to deduct from all payments under the Plan, including Tax
Offset Payments, amounts sufficient to satisfy all withholding tax requirements.
Whenever payments under the Plan are to be made to an employee in cash, such
payments shall be net of any amounts sufficient to satisfy all Federal, state
and local withholding tax requirements. The Committee may, in its sole
discretion, permit an employee to satisfy his or her tax withholding obligation
either by (i) surrendering shares owned by the employee or (ii) having the
Corporation withhold from shares otherwise deliverable to the employee. Shares
surrendered or withheld shall be valued at their Market Price as of the date on
which income is required to be recognized for income tax purposes.
15.2 Compliance With Section 16(b). In the case of employees who are or
may be subject to Section 16 of the 1934 Act, it is the intent of the
Corporation that the Plan and any award granted hereunder satisfy and be
interpreted in a manner that satisfies the applicable requirements of Rule 16b-3
so that such persons will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the 1934 Act and will not be subjected to
liability thereunder. If any provision of the Plan or any award would otherwise
conflict with the intent expressed herein, that provision, to the extent
possible, shall be interpreted and deemed amended so as to avoid such conflict.
To the extent of any remaining irreconcilable conflict with such intent, such
provision shall be deemed void as applicable to employees who are or may be
subject to Section 16 of the 1934 Act.
15.3 Successors. The obligations of the Corporation under the Plan
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or upon
any successor corporation or organization succeeding to all or substantially all
of the assets and business of the Corporation. In the event of any of the
foregoing, the Committee may, in its discretion prior to the consummation of the
transaction and subject to Article 13 hereof, cancel, offer to purchase,
exchange, adjust or modify any outstanding awards, at such time and in such
manner as the Committee deems appropriate and in accordance with applicable law.
15.4 General Creditor Status. Employees and consultants shall have no
right, title, or interest whatsoever in or to any investments which the
Corporation may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Corporation and any employee, consultant, beneficiary
or legal representative of such employee or consultant. To the extent that any
person
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<PAGE>
acquires a right to receive payments from the Corporation under the Plan, such
right shall be no greater than the right of an unsecured general creditor of the
Corporation. All payments to be made hereunder shall be paid from the general
funds of the Corporation and no special or separate fund shall be established
and no segregation of assets shall be made to assure payment of such amounts
except as expressly set forth in the Plan.
15.5 No Right to Employment. Nothing in the Plan or in any written
agreement entered into pursuant to Article 14 hereof, nor the grant of any
award, shall confer upon any employee any right to continue in the employ of the
Corporation or a subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such written agreement or interfere with or limit
the right of the Corporation or a subsidiary to modify the terms of or terminate
such employee's employment at any time. The preceding sentence shall be equally
applicable with respect to consultants of the Corporation or a subsidiary.
15.6 Other Plans. Effective upon the adoption of the Plan by the
stockholders, no further awards shall be made under the Synaptic Pharmaceutical
Corporation Amended and Restated Incentive Plan, originally adopted on June 3,
1988, and last amended and restated on June 16, 1992 (the "Prior Plan").
Thereafter, all awards made under the Prior Plan prior to the adoption of the
Plan by the stockholders shall continue in accordance with the terms of the
Prior Plan.
15.7 Notices. Notices required or permitted to be made under the Plan
shall be sufficiently made if personally delivered to the employee or sent by
regular mail addressed (a) to the employee at the employee's address as set
forth in the books and records of the Corporation or its subsidiaries, or (b) to
the Corporation or the Committee at the principal office of the Corporation
clearly marked "Attention: Compensation Committee."
15.8 Severability. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
15.9 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of New Jersey.
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<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
215 College Road
Paramus, New Jersey 07652
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Lisa L. Reiter and Robert L. Spence,
the Secretary and the Treasurer, respectively, of Synaptic Pharmaceutical
Corporation (the "Company"), or each of them, as proxies, with all powers of
substitution, to represent and vote, as set forth on the reverse side, the
shares of Common Stock of the Company held of record by the undersigned at the
close of business on March 13, 1998, at the 1998 Annual Meeting of Stockholders
of the Company, which is being held at the offices of the Company at 215 College
Road, Paramus, New Jersey, on Tuesday, May 12, 1998, at 10:00 a.m., local time,
and at any postponements or adjournments of such meeting, with all powers which
the undersigned would possess if personally present at such meeting or at any
such postponement or adjournment, and, in their discretion, to vote such shares
upon any other business that may properly come before the meeting or any
adjournment thereof.
(TO BE MARKED, SIGNED AND DATED ON THE REVERSE SIDE)
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FOLD AND DETACH HERE
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- MAY 12, 1998
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
The Board of Directors recommends a vote "FOR" Items 1,2 and 3 below.
1. Election of Directors
FOR [_] WITHHOLD [_] FOR ALL NOMINEES LISTED BELOW EXCEPT [_]
Nominees: Jonathon J. Fleming, Eric R. Kandel, John E. Lyons
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Nominees Listed Below Except" and write that nominee's name in the
space to the right hereof.)
2. Approval of Amendments to the 1996 Incentive Plan
FOR [_] WITHHOLD [_] ABSTAIN [_]
3. Ratification of Appointment of Independent Auditors
FOR [_] WITHHOLD [_] ABSTAIN [_]
Unless otherwise specified by the undersigned, the proxy will be voted "FOR"
Proposal Nos.1,2 and 3 and will be voted by the proxyholders at their discretion
upon any other business that may properly come before the Annual Meeting or any
adjournment thereof.
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING. [_]
Signature(s) Date
--------------------------------------------- ---------
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
PROPOSALS TO BE VOTED UPON AT THE ANNUAL MEETING
Proposal No. 1. To elect three Class II directors to the Board of Directors.
Proposal No. 2. To amend the Company's 1996 Incentive Plan in order to
increase the number of shares of Common Stock available for
awards under such Plan and to bring the Plan into compliance
with Section 162(m) of the Internal Revenue code of 1996.
Proposal No. 3. To ratify the appointment of Ernst & Young as the independent
auditors of the Company for the fiscal year ending
December 31, 1998.
