<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Neurocrine Biosciences, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No filing fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
NEUROCRINE BIOSCIENCES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
Neurocrine Biosciences, Inc., a Delaware corporation (the "Company"), will be
held on May 27, 1998, at 10:00 a.m. local time, at the Hyatt Regency La Jolla,
located at 3777 La Jolla Village Drive, San Diego, California, 92122 for the
following purposes as more fully described in the Proxy Statement accompanying
this Notice:
1. To elect two Class II Directors to the Board of Directors to serve for a
term of three years.
2. To amend the Company's 1992 Incentive Stock Plan to increase the number
of shares of Common Stock reserved for issuance from 4,100,000 to
4,700,000 shares.
3. To amend the Company's 1996 Director Option Plan to increase the number
of shares of Common Stock reserved for issuance from 100,000 to 200,000
shares.
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1998.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on March 31, 1998 are
entitled to receive notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Stockholders attending the
meeting may vote in person even if they have returned a Proxy.
By Order of the Board of Directors,
Michael J. O'Donnell
Secretary
San Diego, California
April 24, 1998
<PAGE> 3
NEUROCRINE BIOSCIENCES, INC.
------------------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Neurocrine Biosciences, Inc.,
a Delaware corporation (the "Company"), for use at its 1998 Annual Meeting of
Stockholders to be held on May 27, 1998, at 10:00 a.m., local time, or at any
adjournments or postponements thereof, for the purposes set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Hyatt Regency La Jolla, located at 3777 La
Jolla Village Drive, San Diego, California. The telephone number for the
location of the Annual Meeting of Stockholders is (619) 552-1234. The Company's
principal executive offices are located at 3050 Science Park Road, San Diego,
California, 92121. The Company's telephone number is (619) 658-7600.
These proxy solicitation materials were mailed on or about April 27, 1998
to all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on March 31, 1998 (the
"Record Date"), are entitled to receive notice of and vote at the meeting. On
the Record Date, approximately 17,708,815 shares of the Company's Common Stock,
$0.001 par value, were issued and outstanding and held of record by
approximately 227 stockholders. For information regarding holders of more than
five percent of the outstanding Common Stock, see "Stock Ownership of Principal
Stockholders and Management" below.
REVOCABILITY OF PROXIES
Proxies given pursuant to this solicitation may be revoked at any time
before they have been used. Revocation will occur by delivering a written notice
of revocation to the Company or by duly executing a proxy bearing a later date.
Revocation will also occur if the person attends the meeting and votes in
person.
VOTING AND SOLICITATION
Every stockholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the meeting. In the
election of Directors, each stockholder will be entitled to vote for two
nominees and the two nominees with the greatest number of votes will be elected.
The cost of this solicitation will be borne by the Company. The Company may
reimburse expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding solicitation material to beneficial
owners. Proxies may be solicited by certain of the Company's Directors, officers
and regular employees, without additional compensation, personally, by telephone
or by telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") with the assistance of the
Company's Transfer Agent. The Inspector will also determine whether or not a
quorum is present. Except in certain specific circumstances, the affirmative
vote of a majority of shares present in person or represented by proxy at a duly
held meeting at which a quorum is present is required under Delaware law for
approval of proposals presented to stockholders. In general, Delaware law also
provides that a quorum consists of a majority of shares entitled to vote and
present or represented by proxy at the meeting.
1
<PAGE> 4
The Inspector will treat shares that are voted "WITHHELD" or "ABSTAIN" as
being present and entitled to vote for purposes of determining the presence of a
quorum but will not be treated as votes in favor of approving any matter
submitted to the stockholders for a vote. Any proxy which is returned using the
form of proxy enclosed and which is not marked as to a particular item will be
voted for the election of the Directors named in the proxy, for the approval of
the amendment of the 1992 Incentive Stock Plan, for the approval of the
amendment of the 1996 Director Option Plan, for the confirmation of the
appointment of the designated independent auditors and, as the proxy holders
deem advisable, on other matters that may come before the meeting, as the case
may be with respect to the items not marked.
If a broker indicates on the enclosed proxy or its substitute that it does
not have discretionary authority as to certain shares to vote on a particular
matter ("Broker Non-Votes"), those shares will be considered as present with
respect to that matter. The Company believes that the tabulation procedures to
be followed by the Inspector are consistent with the general statutory
requirements in Delaware concerning voting of shares and determination of a
quorum.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals which are intended to be presented at the Company's
1999 Annual Meeting must be received by the Company no later than December 18,
1998 in order that they may be included in the proxy statement and form of proxy
for that meeting.
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 officers and Directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Form 4 or Form 5 with the Securities and Exchange Commission (the "SEC"). Such
officers, Directors and 10% stockholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that,
during the fiscal year ended December 31, 1997, all Section 16(a) filing
requirements applicable to its officers, Directors and 10% stockholders were
complied with, except that reports on Form 3 regarding initial ownership of the
Company's equity securities of Joseph A. Mollica, a Director of the Company, and
Stephen G. Marcus, the Senior Vice President, Medical and Regulatory Affairs and
Chief Medical Officer of the Company, were filed more than 10 days after Messrs.
Mollica and Marcus became reporting persons.
2
<PAGE> 5
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 31, 1998 by (i) each of the executive officers named in
the table under "Executive Compensation -- Summary Compensation Table," (ii)
each Director, (iii) all Directors and executive officers as a group and (iv)
all persons known to the Company to be the beneficial owners of more than 5% of
the Company's Common Stock. A total of 17,708,815 shares of the Company's Common
Stock were issued and outstanding as of March 31, 1998.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) PERCENT
------------------------------------ ------------ -------
<S> <C> <C>
Novartis AG.............................................. 1,463,912 8.3%
Schwarzwaldallee 215
CH-4002 Basel
Switzerland
D. Bruce Campbell........................................ -- --
Errol B. DeSouza(2)...................................... 579,539 3.2%
Paul W. Hawran(3)........................................ 223,760 1.3%
Harry F. Hixson, Jr.(4).................................. 116,927 *
Gary A. Lyons(5)......................................... 703,541 3.9%
Stephen G. Marcus(6)..................................... 44,656 *
Joseph A. Mollica(7)..................................... 3,333 *
David E. Robinson(8)..................................... 31,333 *
Wylie W. Vale(9)......................................... 430,463 2.4%
All executive officers and Directors as a group (9
persons)(10)........................................... 2,133,552 11.5%
</TABLE>
- ---------------
* Represents beneficial ownership of less than one percent (1%) of the
17,708,815 outstanding shares of the Company's Common Stock as of March 31,
1998.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to stock options and warrants currently exercisable or exercisable within
60 days of March 31, 1998 are deemed to be outstanding for computing the
percentage ownership of the person holding such options and the percentage
ownership of any group of which the holder is a member, but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown beneficially owned
by them.
(2) Includes 196,031 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(3) Includes 108,505 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(4) Includes 11,333 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(5) Includes 302,489 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(6) Includes 43,767 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(7) Includes 3,333 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(8) Includes 31,333 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(9) Includes 104,333 shares issuable pursuant to options exercisable within 60
days of March 31, 1998.
(10) Includes an aggregate of 801,124 shares issuable pursuant to options
exercisable within 60 days of March 31, 1998.
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<PAGE> 6
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
The Company's Bylaws provide that the Board of Directors be composed of
seven (7) Directors. The Company's Certificate of Incorporation provides that
the Board of Directors be divided into three classes. As of December 31, 1997,
there were three Directors in Class I (Wylie W. Vale, Joseph A. Mollica and
Errol B. DeSouza), two Directors in Class II (David E. Robinson and Howard C.
Birndorf), and two Directors in Class III (Gary A. Lyons and Harry F. Hixson,
Jr.). Howard C. Birndorf resigned from the Board of Directors on January 1, 1998
and the vacancy was filled on April 16, 1998, with the appointment of Richard F.
Pops as a Class II Director.
The Directors in Class II hold office until the 1998 Annual Meeting of
Stockholders; the Directors in Class III hold office until the 1999 Annual
Meeting of Stockholders; and the Directors in Class I hold office until the 2000
Annual Meeting of Stockholders (or, in each case, until their earlier
resignation, removal from office or death). After each such election, the
Directors in each such case will then serve in succeeding terms of three years
and until their successors are duly elected and qualified. Officers of the
Company serve at the discretion of the Board of Directors. There are no family
relationships among the Company's Directors and executive officers.
The term of office of Directors David E. Robinson and Richard F. Pops
expire at the 1998 Annual Meeting. At the 1998 Annual Meeting the stockholders
will elect two Class II Directors for a term of three years.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of Directors shall be elected to the Board of
Directors.
Votes withheld from any Director are counted for purposes of determining
the presence or absence of a quorum, but have no legal effect under Delaware
law. While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions and broker non-votes in the election of
Directors, the Company believes that both abstentions and broker non-votes
should be counted for purposes of whether a quorum is present at the Annual
Meeting. In the absence of precedent to the contrary, the Company intends to
treat abstentions and broker non-votes with respect to the election of Directors
in this manner.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's two nominees named below. If any nominee of
the Company is unable or declines to serve as a Director at the time of the
Annual Meeting, the proxies will be voted for any nominee who is designated by
the present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a Director. THE BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES LISTED BELOW.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Both of the nominees (Richard F. Pops and David E. Robinson) are presently
Directors of the Company. Certain information about the nominees is set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION IN THE COMPANY SINCE
---- --- ----------------------- --------
<S> <C> <C> <C>
Richard F. Pops(1)...................... 36 Director 1998
David E. Robinson(2).................... 49 Director 1994
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
4
<PAGE> 7
Richard F. Pops became a Director of the Company in April 1998. Since 1991,
he has served as Chief Executive Officer of Alkermes, Inc. ("Alkermes"), a
publicly traded company involved in the development of pharmaceutical products
based on advanced drug delivery technologies. Prior to joining Alkermes, from
1984 to 1991 Mr. Pops was employed by PaineWebber, Inc. ("PaineWebber"), in New
York City as Vice President of PaineWebber Development Corporation, a subsidiary
of PaineWebber providing product development financing for the country's leading
biotechnology and high technology companies. Mr. Pops currently serves on the
board of directors of Alkermes, ImmuLogic Pharmaceutical Corp., the
Biotechnology Industry Organization, The Brain Tumor Society and as President of
Massachusetts Biotechnology Council. He received a B.A. degree in Economics from
Stanford University in 1983.
David E. Robinson became a Director of the Company in May 1994. Since 1991,
he has served as President and Chief Executive Officer of Ligand Pharmaceuticals
Incorporated ("Ligand"), a biotechnology company. Prior to joining Ligand in
1991, he was Chief Operating Officer at Erbamont N.V. ("Erbamont"), a
pharmaceutical company. Prior to that, Mr. Robinson was President of Adria
Laboratories, Erbamont's North American subsidiary. He also was employed in
various executive positions for more than 10 years by Abbott Laboratories, most
recently as Regional Director of Abbott Europe. Mr. Robinson received his M.B.A.
from the University of New South Wales, Australia.
INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
The Class I and III Directors will remain in office after the 1998 Annual
Meeting. The Class I Directors are Wylie W. Vale, Joseph A. Mollica and Errol B.
DeSouza. The Class III Directors are Gary A. Lyons and Harry F. Hixson, Jr. The
names and certain other current information about the Directors whose terms of
office continue after the Annual Meeting are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE POSITION/PRINCIPAL OCCUPATION SINCE
---------------- --- ----------------------------- --------
<S> <C> <C> <C>
Errol B. DeSouza................... 44 Executive Vice President, Research and Development 1997
and Director
Harry F. Hixson, Jr.(1)(2)......... 59 Director 1992
Gary A. Lyons...................... 47 President, Chief Executive Officer and Director 1993
Joseph A. Mollica(2)............... 57 Chairman of the Board 1997
Wylie W. Vale(1)................... 55 Chief Scientist, Neuroendocrinology and Director 1992
</TABLE>
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(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Errol B. DeSouza, Ph.D., is a Founder, Director and Executive Vice
President, Research and Development for the Company. Prior to joining the
Company in October 1992, Dr. DeSouza was Director of Central Nervous System
Diseases Research for The Du Pont Merck Pharmaceutical Company ("Du Pont
Merck"), where he directed the discovery efforts of over 100 scientists in the
fields of neurobiology, molecular biology, pharmacology and chemistry commencing
in May 1990. Prior to joining Du Pont Merck, Dr. DeSouza was Chief of the
Laboratory of Neurobiology at the National Institute on Drug Abuse, and he was
an Associate Professor in the Department of Pathology at The Johns Hopkins
University School of Medicine. Dr. DeSouza received a B.A. in Physiology and a
Ph.D. in Endocrinology from the University of Toronto and pursued post-doctoral
training at The Johns Hopkins University School of Medicine and the University
of Kentucky.
Harry F. Hixson, Jr., Ph.D., served as a Director of the Company since
September 1992 and was Chairman of the Board from September 1992 to April 1998.
Dr. Hixson worked with Amgen, Inc. ("Amgen") from July 1985 through February
1991, most recently as President, Chief Operating Officer and Director. While at
Amgen, he was responsible for pharmaceutical development, manufacturing and
United States and international marketing and sales. Dr. Hixson is a Director of
Signal Pharmaceuticals, Inc., a privately held biopharmaceutical company. Dr.
Hixson holds a Ph.D. in Physical Biochemistry from Purdue University and an
M.B.A. from the University of Chicago.
5
<PAGE> 8
Gary A. Lyons has served as President, Chief Executive Officer and a
Director of the Company since February 1993. Prior to joining the Company in
February 1993, Mr. Lyons was Vice President of Business Development at
Genentech, Inc. ("Genentech") since 1989. At Genentech, he was responsible for
international licensing, acquisitions and partnering. He was also responsible
for Genentech's Corporate Venture Program which participated in early financing
and/or formation of a number of biotechnology start-up companies and had
operating responsibility for Genentech's two subsidiaries, Genentech Canada,
Inc. and Genentech Limited (Japan). Previously, he served as Vice President of
Sales and was responsible for the commercial introduction of Genentech's first
two pharmaceutical products, Protropin (human growth hormone) and Activase
(TPA). Mr. Lyons is a director of Vical, Inc., a gene therapy biopharmaceutical
company. Mr. Lyons holds a B.S. in Marine Biology from the University of New
Hampshire and an M.B.A. from Northwestern University's J.L. Kellogg Graduate
School of Management.
Joseph A. Mollica, Ph.D., has served as a Director of the Company since
June 1997 and became Chairman of the Board in April 1998. He currently serves as
the Chairman of the Board of Directors, President and Chief Executive Officer of
Pharmacopeia, Inc., a biopharmaceutical and combinatorial chemistry company,
since February 1994. From 1987 to December 1993, Dr. Mollica was employed
initially by the DuPont Company and then by The DuPont Merck Pharmaceutical
Company, most recently as President and Chief Executive Officer. Dr. Mollica is
a Director of Pharmacopeia, Inc., USP, Inc. and ImPath, Inc. Dr. Mollica
received a Ph.D. from the University of Wisconsin and a Doctor of Science, h.c.,
from the University of Rhode Island.
Wylie W. Vale, Ph.D., is a Founder and Chairman of the Company's Founding
Board of Scientific and Medical Advisors. Dr. Vale was elected a Director of the
Company in September 1992. He is a Professor and former Chairman of the Faculty
at The Salk Institute for Biological Studies ("The Salk Institute") and is the
Senior Investigator and Head of The Clayton Foundation Laboratories for Peptide
Biology at The Salk Institute, where he has been employed for 28 years. He is
also an Adjunct Professor of Medicine at the University of California at San
Diego. Dr. Vale is recognized for his work on the chemical and biomedical
characterization of neuroendocrine factors including somatostatin, growth
hormone releasing factor, activin and the activin receptor (the first receptor
serine kinase), corticotropin releasing factor, CRF-binding protein, the CRF(1)
receptor and urocortin, the native ligand for the CRF(2) receptor. In
recognition of his discoveries, he has received numerous awards and is a member
of the National Academy of Arts and Sciences and the National Academy of
Sciences. He is a past President of the American Endocrine Society and is the
current President of the International Society of Endocrinology. Dr. Vale
received a B.A. in Biology from Rice University, and a Ph.D. in Physiology and
Biochemistry from the Baylor College of Medicine.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of seven meetings and
took action by written consent on two occasions during 1997. During 1997 the
Board of Directors had an Audit Committee and a Compensation Committee and did
not have a nominating committee. No Director attended fewer than 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings held by all committees of the Board of Directors on
which he served other than David Schnell, who attended two of three meetings of
the Board of Directors prior to the expiration of his term at the 1997 Annual
Meeting of Stockholders.
The Audit Committee in 1997 consisted of Directors Harry F. Hixson, Jr. and
Wylie W. Vale and met once during 1997. This committee is primarily responsible
for approving the services performed by the Company's independent auditors and
for reviewing and evaluating the Company's accounting principles and its system
of internal accounting controls.
The Compensation Committee in 1997 consisted of Directors Howard C.
Birndorf, David E. Robinson and Harry F. Hixson, Jr., and met six times during
1997. The Compensation committee reviewed and recommended to the Board the
compensation of executive officers and other employees of the Company.
6
<PAGE> 9
BOARD COMPENSATION
Non-employee Directors are reimbursed for expenses incurred in connection
with performing their respective duties as Directors of the Company. The Company
paid no cash compensation to any Director prior to February 1997. Beginning in
February 1997, the Company paid each Director who is not an employee or
consultant of the Company $1,750 for each regular meeting of the Board of
Directors, $750 for each special meeting, $600 for each committee meeting, and
$600 for each telephone meeting lasting more than one hour, which such Director
attends.
Beginning in April 1998, the Company will pay the Chairman of the Board
$2,500 for each regular meeting of the Board of Directors, $750 for each special
meeting, $600 for each committee meeting, and $600 for each telephone meeting
lasting more than one hour, which the Chairman of the Board attends. In April
1998, the Board of Directors determined that the new Chairman of the Board, Dr.
Joseph A. Mollica, shall be entitled to options to purchase an aggregate of
25,000 shares of Common Stock (composed of the annual grant of an option to
purchase 10,000 shares pursuant to the 1996 Director Option Plan as described in
Proposal Three below and an additional option to purchase 15,000 shares pursuant
to a grant by the Board of Directors in April 1998). The option granted in April
1998 vests over the three year period ending in April 2001 and is exercisable at
an exercise price equal to the fair market value of the Company's Common Stock
at the time of grant. In addition to the annual options which Dr. Mollica will
receive under the 1996 Director Option Plan (see Proposal Three below), the
Company has agreed to grant Dr. Mollica as Chairman of the Board an option to
purchase an additional 5,000 shares at each annual meeting of the stockholders
commencing in 1999. Such options shall vest over the three year period following
the date of grant and shall be exercisable at an exercise price equal to the
fair market value of the Company's Common Stock at the time of grant.
1996 Director Stock Option Plan. Each non-employee Director participates in
the 1996 Director Stock Option Plan. For further information and a summary of
the essential features and provisions of the 1996 Director Option Plan, please
see Proposal Three below.
7
<PAGE> 10
PROPOSAL TWO
APPROVAL OF AMENDMENT OF
THE 1992 INCENTIVE STOCK PLAN
INCREASE OF 600,000 SHARES
The Company's 1992 Incentive Stock Plan, as amended (the "Plan") was
approved by the Board of Directors and the stockholders of the Company in 1992.
Currently there are a total of 4,100,000 shares of Common Stock reserved for
issuance under the Plan. In March 1998, the Board of Directors approved a
further increase of 600,000 shares issuable under the Plan, which, if approved
by the stockholders, would increase the total shares reserved for issuance under
the Plan to 4,700,000 shares.
The Board believes the proposed increase in the number of shares reserved
for issuance under the Plan is in the best interests of the Company. In
particular, the Board has determined that the proposed increase will provide an
additional reserve of shares for issuance under the Plan and thus enable the
Company to attract and retain valuable employees.
As of March 31, 1998, there were options outstanding to purchase 2,618,573
shares of Common Stock pursuant to the Plan; 16,067 shares remained available
for future option grants; and 1,465,360 options had been exercised and are now
outstanding shares of Common Stock.
SUMMARY OF THE PLAN
The essential features of the Plan, as amended and restated, are summarized
below. This summary does not purport to be complete and is subject to, and
qualified by, reference to all provisions of the Plan, as amended and restated.
General. The purpose of the Plan is to attract and retain the best
available personnel, to provide additional incentive to the employees and
consultants of the Company and to promote the success of the Company's business.
Options and stock purchase rights may be granted under the Plan. Options granted
under the Plan may be either "incentive stock options," as defined in Section
422 of the Internal Revenue Code (the "Code"), or nonstatutory stock options.
Administration. The Plan may generally be administered by the Board or a
Committee appointed by the Board. The administrators of the Plan are referred to
herein as the "Administrator." The Administrator may make any determinations
deemed necessary or advisable for the Plan.
Eligibility. Nonstatutory stock options and stock purchase rights may be
granted under the Plan to employees and consultants (including Directors) of the
Company and any parent or subsidiary of the Company. Incentive stock options may
be granted only to employees. The Administrator, in its discretion, selects the
employees and consultants to whom options and stock purchase rights may be
granted, the time or times at which such options and stock purchase rights shall
be granted, and the number of shares subject to each such grant.
Limitations. Section 162(m) of the Code places limits on the deductibility
for federal income tax purposes of compensation paid to certain executive
officers of the Company. In order to preserve the Company's ability to deduct
the compensation income associated with options and stock purchase rights
granted to such persons, the Plan provides that no employee may be granted, in
any fiscal year of the Company, options and stock purchase rights to purchase
more than 250,000 shares of Common Stock. Notwithstanding this limit, however,
in connection with an employee's initial employment, he or she may be granted
options or stock purchase rights to purchase up to an additional 250,000 shares
of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value
8
<PAGE> 11
of the Common Stock on the date such option is granted; provided, however, the
exercise price of an incentive stock option granted to a 10% stockholder may not
be less than 110% of the fair market value of the Common Stock on the date such
option is granted. The exercise price of a nonstatutory stock option may not be
less than 85% of the fair market value of the Common Stock on the date such
option is granted; provided, however, the exercise price of a nonstatutory stock
option granted to a 10% stockholder may not be less than 110% of the fair market
value of the Common Stock on the date such option is granted. The fair market
value of the Common Stock is generally determined with reference to the closing
sale price for the Common Stock (or the closing bid if no sales were reported)
on the last market trading day prior to the date the option is granted.
(b) Exercise of Option; Form of Consideration. The Administrator determines
when options become exercisable and may, in its discretion, accelerate the
vesting of any outstanding option. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The Plan permits
payment to be made by cash, check, promissory note, other shares of Common Stock
of the Company (with some restrictions), cashless exercise, any other form of
consideration permitted by applicable law, or any combination thereof.
(c) Term of Option. The term of option may be no more than ten (10) years
from the date of grant; provided that in the case of an incentive stock option
granted to a 10% stockholder, the term of the option may be no more than five
(5) years from the date of grant. No option may be exercised after the
expiration of its term.
(d) Termination of Employment. If an optionee's employment or consulting
relationship terminates for any reason (other than death or disability), then
all options held by the optionee under the Plan expire on the earlier of (i) the
date set forth in his or her notice of grant (which date is typically 30 days
after the date of such termination), or (ii) the expiration date of such option.
To the extent the option is exercisable at the time of the optionee's
termination, the optionee may exercise all or part of his or her option at any
time before it terminates.
(e) Disability. If an optionee's employment or consulting relationship
terminates as a result of disability, then all options held by such optionee
under the Plan expire on the earlier of (i) 6 months from the date of such
termination (or such longer period of time not exceeding 12 months as determined
by the Administrator) or (ii) the expiration date of such option. The optionee
(or the optionee's estate or a person who has acquired the right to exercise the
option by bequest or inheritance), may exercise all or part of the option at any
time before such expiration to the extent that the option was exercisable at the
time of such termination.
(f) Death. In the event of an optionee's death: (i) during the optionee's
employment or consulting relationship with the Company, the option may be
exercised, at any time within 6 months of the date of death (but no later than
the expiration date of such option) by the optionee's estate or a person who has
acquired the right to exercise the option by bequest or inheritance, but only to
the extent that the optionee's right to exercise the option would have accrued
if he or she had remained an employee or consultant of the Company 6 months
after the date of death; or (ii) within 30 days (or such other period of time
not exceeding 3 months as determined by the Administrator) after the optionee's
employment or consulting relationship with the Company terminates, the option
may be exercised at anytime within 6 months (or such other period of time as
determined by the Administrator) following the date of death (but in no event
later than the expiration date of the option) by the optionee's estate or a
person who has acquired the right to exercise the option by bequest or
inheritance, but only to the extent of the optionee's right to exercise the
option at the date of termination.
(g) Nontransferability of Options: Unless otherwise determined by the
Administrator, options granted under the Plan are not transferable other than by
will or the laws of descent and distribution, and may be exercisable during the
optionee's lifetime only by the optionee.
(h) Other Provisions: The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator.
Stock Purchase Rights. A stock purchase right gives the purchaser a period
of no longer than 6 months from the date of grant to purchase Common Stock. The
purchase price of Common Stock purchased pursuant
9
<PAGE> 12
to a stock purchase right is determined in the same manner as for nonstatutory
stock options. A stock purchase right is accepted by the execution of a
restricted stock purchase agreement between the Company and the purchaser,
accompanied by the payment of the purchase price for the shares. Unless the
Administrator determines otherwise, the restricted stock purchase agreement
shall give the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment or consulting relationship
with the Company for any reason (including death and disability). The purchase
price for any shares repurchased by the Company shall be the original price paid
by the purchaser. The repurchase option lapses at a rate determined by the
Administrator. A stock purchase right is nontransferable other than by will or
the laws of descent and distribution, and may be exercisable during the
optionee's lifetime only by the optionee.
Adjustments Upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator shall notify the
optionee fifteen (15) days prior to the consummation of the liquidation or
dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right may be assumed or an equivalent option or right may be substituted by the
successor corporation. The vesting of each outstanding option or stock purchase
right shall accelerate (i.e. become exercisable immediately in full) in any of
the following events: (1) if the successor corporation refuses to assume the
option or stock purchase rights, or to substitute substantially equivalent
options or rights, (2) if the employment of the optionee is involuntarily
terminated without cause within one year following the date of closing of the
merger or acquisition, or (3) if the merger or acquisition is not approved by
the members of the board of directors in office prior to the commencement of
such merger or acquisition.
Amendment and Termination of the Plan. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain stockholder approval for any amendment to the
Plan to the extent necessary to comply with applicable laws, rules and
regulations. No such action by the Board or stockholders may alter or impair any
option or stock purchase right previously granted under the Plan without the
consent of the optionee. Unless terminated earlier, the Plan shall terminate ten
years from the date of its approval by the stockholders or the Board of the
Company, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the optionee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and one year after exercise of the option, any gain or loss is treated as
long-term capital gain or loss. Net capital gains on shares held between 12 and
18 months may be taxed at a maximum federal rate of 28%, while net capital gains
on shares held for more than 18 months may be taxed at a maximum federal rate of
20%. Capital losses are allowed in full against capital gains and up to $3,000
against other income. If these holding periods are not satisfied, the optionee
recognizes ordinary income at the time of disposition equal to the difference
between the exercise price and the lower of (i) the fair market value of the
shares at the date of the option exercise or (ii) the sale price of the shares.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, Director, or 10% stockholder of the Company.
Unless limited by Sec-
10
<PAGE> 13
tion 162(m) of the Code, the Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. Unless limited by
Section 162(m) of the Code, the Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. Upon a disposition of
such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
provided above, is treated as long-term or short-term capital gain or loss,
depending on the holding period. Net capital gains on shares held between 12 and
18 months may be taxed at a maximum federal rate of 28%, while net capital gains
on shares held for more than 18 months may be taxed at a maximum federal rate of
20%. Capital losses are allowed in full against capital gains and up to $3,000
against other income.
Stock Purchase Rights. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code, because the Company may repurchase
the stock when the purchaser ceases to provide services to the Company. As a
result of this substantial risk of forfeiture, the purchaser will not recognize
ordinary income at the time of purchase. Instead, the purchaser will recognize
ordinary income on the dates when the stock is no longer subject to a
substantial risk of forfeiture (i.e., when the Company's right of repurchase
lapses). The purchaser's ordinary income is measured as the difference between
the purchase price and the fair market value of the stock on the date the stock
is no longer subject to right of repurchase.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and begin his or her capital gains holding period by
timely filing, (i.e., within thirty days of the purchase), an election pursuant
to Section 83(b) of the Code. In such event, the ordinary income recognized, if
any, is measured as the difference between the purchase price and the fair
market value of the stock on the date of purchase, and the capital gain holding
period commences on such date. The ordinary income recognized by a purchaser who
is an employee will be subject to tax withholding by the Company. Different
rules may apply if the purchaser is also an officer, Director, or 10%
stockholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS, AND THE COMPANY WITH RESPECT
TO THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE PLAN.
IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF
THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT
MAY RESIDE.
VOTE REQUIRED
At the Annual Meeting, the stockholders are being asked to approve the
amendment of the 1992 Incentive Stock Plan to increase the number of shares
reserved for issuance thereunder. The affirmative vote of the holders of a
majority of the shares casting their votes at the Annual Meeting will be
required to approve the amendment of the 1992 Incentive Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE AMENDMENT OF THE 1992
INCENTIVE STOCK PLAN.
11
<PAGE> 14
PROPOSAL THREE
APPROVAL OF AMENDMENT OF 1996 DIRECTOR OPTION PLAN
INCREASE OF 100,000 SHARES
The Company's 1996 Director Option Plan (the "Director Plan") was approved
by the Board of Directors in March 1996 and by the stockholders of the Company
at the 1996 Annual Meeting of Stockholders. Currently there are a total of
100,000 shares of Common Stock reserved for issuance under the Director Plan. In
April 1998, the Board of Directors approved a further increase of 100,000 shares
issuable under the Director Plan, which, if approved by the stockholders, would
increase the total shares reserved for issuance under the Director Plan to
200,000 shares.
The Board believes the proposed increase in the number of shares reserved
for issuance under the Director Plan is in the best interests of the Company. In
particular, the Board has determined that the proposed increase will provide an
additional reserve of shares for issuance under the Director Plan and thus
enable the Company to attract and retain valuable individuals to serve as
outside Directors on the Company's Board of Directors.
As of March 31, 1998, there were options outstanding to purchase 50,000
shares of Common Stock pursuant to the Director Plan; 50,000 shares remained
available for future option grants; and no options had been exercised.
SUMMARY OF THE DIRECTOR PLAN
The essential features of the Director Plan are summarized below. This
summary does not purport to be complete and is subject to, and qualified by,
reference to all provisions of the Director Plan.
Each non-employee Director participates in the Director Plan. A total of
100,000 shares of Common Stock is currently reserved for issuance under the
Director Plan; if Proposal Three is approved by the stockholders at the 1998
Annual Meeting, then the number of shares reserved for issuance under the
Director Plan will be increased to 200,000. The option grants under the Director
Plan are automatic and non-discretionary, and the exercise price of the options
are 100% of the fair market value of the Common Stock on the grant date.
The Director Plan provides for the grant of options to purchase 10,000
shares of Common Stock to each non-employee Director of the Company at each
annual meeting of the stockholders commencing in 1997, provided that such
non-employee Director has been a non-employee Director of the Company for at
least six months prior to the date of such annual meeting of the stockholders.
Each new non-employee Director is automatically granted a nonstatutory stock
option to purchase 10,000 shares of Common Stock upon the date such person joins
the Board of Directors. The term of such options is ten years. Any option
granted to a non-employee Director becomes exercisable over a three-year period
following the date of grant.
The Director Plan prohibits any transfer by the optionee other than by will
or the laws of descent or distribution. Any optionee whose relationship with the
Company or any related corporation ceases for any reason (other than by death or
permanent and total disability) may exercise options only during a 90-day period
following such cessation (unless such options terminate or expire sooner by
their terms). Any optionee whose relationship with the Company or any related
corporation ceases due to death or permanent and total disability, or such
person's estate or the person who acquires the right to exercise the option by
bequest or inheritance upon the optionee's death, may exercise all or part of
the option for up to twelve (12) months following the termination.
In the event that the stock of the Company changes by reason of any stock
split, reverse stock split, stock dividend, combination, reclassification or
other similar change in the capital structure of the Company effected without
the receipt of consideration, appropriate adjustments shall be made in the
number and class of shares of stock subject to the Director Plan, the number and
class of shares of stock subject to any option outstanding under the Director
Plan, and the exercise price of any such outstanding option. In the event of a
proposed
12
<PAGE> 15
liquidation or dissolution, any unexercised options will terminate prior to such
action. Upon a merger or asset sale, all outstanding options under the Director
Plan will be assumed or replaced with an equivalent option by the successor
corporation. In the event that the successor corporation does not agree to
assume the outstanding options or substitute an equivalent option, each
outstanding option shall become fully vested and exercisable, including shares
not otherwise exercisable. Each optionee will be given 30 days' notice of the
merger or asset sale and be given the opportunity to fully exercise all
outstanding options. All options not exercised within the 30 day notice period
will expire.
The Board may amend, alter, suspend or terminate the Director Plan, or any
part thereof, at any time and for any reason. However, the Company shall obtain
stockholder approval for any amendment to the Director Plan to the extent
necessary to comply with applicable laws or regulations. No such action by the
Board or stockholders may alter or impair any option previously granted under
the Director Plan without the written consent of the optionee. The Director Plan
will terminate in March 2006, unless sooner terminated by the Board of
Directors.
FEDERAL INCOME TAX CONSEQUENCES
An optionee generally does not recognize any taxable income at the time he
or she is granted a nonstatutory stock option. Upon exercise, the optionee
recognizes taxable income generally measured by the excess of the then fair
market value of the shares over the exercise price. The Company is generally
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period. Net capital
gains on shares held between 12 and 18 months may be taxed at a maximum federal
rate of 28%, while net capital gains on shares held for more than 18 months may
be taxed at a maximum federal rate of 20%. Capital losses are allowed in full
against capital gains and up to $3,000 against other income.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE DIRECTOR PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE TAX CONSEQUENCES OF THE DIRECTOR'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
DIRECTOR MAY RESIDE.
VOTE REQUIRED
At the Annual Meeting, the stockholders are being asked to approve the
amendment of the 1996 Director Option Plan to increase the number of shares
reserved for issuance thereunder. The affirmative vote of the holders of a
majority of the shares casting their votes at the Annual Meeting will be
required to approve the amendment of the Director Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE AMENDMENT OF THE 1996
DIRECTOR OPTION PLAN.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP ("Ernst & Young") to
audit the financial statements of the Company for the current fiscal year ending
December 31, 1998.
The affirmative vote of the holders of a majority of the shares represented
and voting at the meeting will be required to approve and ratify the Board's
selection of Ernst & Young. THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
APPROVAL AND RATIFICATION OF SUCH SELECTION. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
13
<PAGE> 16
OTHER INFORMATION REGARDING THE COMPANY
PERFORMANCE GRAPH
The following is a line graph comparing the cumulative total return to
stockholders of the Company's Common Stock from May 23, 1996 (the date of the
Company's initial public offering) through December 31, 1997 to the cumulative
total return over such period of: (i) The Nasdaq Stock Market (U.S. Companies)
Index and (ii) the Nasdaq Pharmaceutical Index. The performance shown is not
necessarily indicative of future price performance. The information contained in
the Performance Graph shall not be deemed to be "soliciting material" or to be
"filed" with the SEC, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into any such filing.
COMPARISON OF 19 MONTH CUMULATIVE TOTAL RETURN*
AMONG NEUROCRINE BIOSCIENCES, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 'NEUROCRINE NASDAQ STOCK NASDAQ
(FISCAL YEAR COVERED) BIOSCIENCES, INC.' MARKET (U.S.) PHARMACEUTICAL
<S> <C> <C> <C>
5/23/96 100 100 100
12/96 95 103 87
12/97 75 127 90
</TABLE>
- ---------------
* $100 Invested on 5/23/96 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
14
<PAGE> 17
EXECUTIVE OFFICERS
As of March 31, 1998, the executive officers of the Company were as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary A. Lyons............ 47 President, Chief Executive Officer and
Director
Errol B. DeSouza, 44 Executive Vice President, Research and
Ph.D................... Development and Director
Paul W. Hawran........... 46 Senior Vice President and Chief Financial
Officer
Stephen G. Marcus, 44 Senior Vice President, Medical and
M.D.................... Regulatory Affairs and Chief Medical
Officer
D. Bruce Campbell........ 53 Vice President, Development
</TABLE>
See Proposal One above for biographical information concerning Errol B.
DeSouza and Gary A. Lyons.
D. Bruce Campbell, Ph.D., joined the Company as Vice President, Development
in February 1998. Prior to that, he was employed by Sevier United Kingdom
("Sevier"), a subsidiary of an international pharmaceutical company based in
France, where he served as Director of International Scientific Affairs since
1991. At Sevier, Dr. Campbell was involved in all aspects of drug development
and was responsible for the registration of eight drugs and vaccines in the U.K.
and English-speaking countries worldwide. Dr. Campbell currently serves as the
European Chairman of the Drug Information Association steering committee and is
a member of the European ICH Safety Working Party, a visiting Professor in
Pharmacology at Kings College of London, and a member of the editorial boards of
various international scientific journals. He has published more than 100 papers
and written standard texts on regulatory aspects of kinetics and toxicology in
new drug development. Dr. Campbell has a Ph.D. in Biochemistry from the (Guys
Hospital) London University.
Paul W. Hawran became Senior Vice President and Chief Financial Officer of
the Company in February 1996. Prior to joining the Company in May 1993 as Vice
President, Mr. Hawran was employed by SmithKline Beecham Corporation
("SmithKline") from July 1984 to May 1993, most recently as Vice President and
Treasurer. Prior to joining SmithKline in 1984, Mr. Hawran held various
financial positions at Warner Communications (now Time Warner) where he was
involved in corporate finance, financial planning and domestic and international
budgeting and forecasting. Mr. Hawran received a B.S. in Finance from St. John's
University and an M.S. in Taxation from Seton Hall University. He is a Certified
Public Accountant and a member of the American Institute of Certified Public
Accountants, California and Pennsylvania Institute of Certified Public
Accountants and the Financial Executives Institute.
Stephen G. Marcus, M.D., has served as Senior Vice President, Medical and
Regulatory Affairs and Chief Medical Officer since February 1997. Prior to
joining the Company, Dr. Marcus served as Vice President, Clinical and
Regulatory Affairs for Genetic Therapy, Inc., since 1993. Dr. Marcus was
responsible for clinical and regulatory activities at Genetic Therapy, Inc.,
where he filed numerous INDs, led clinical and regulatory activities leading to
human gene therapy trials, and developed a gene therapy product for malignant
brain tumors from Phase I clinical trials to Phase III trials in the U.S.,
Canada and Europe. From 1992 to 1993, Dr. Marcus was Vice President, Medical and
Regulatory Affairs for SyStemix, Inc., and from 1990 to 1992 was Director,
Oncology Research Worldwide for Schering-Plough Corporation. Dr. Marcus received
a B.S. from Brooklyn College in 1973 and an M.D. from New York Medical College
in 1976. He is certified by the American Board of Internal Medicine and the
American Board of Medical Examiners.
ADDITIONAL INFORMATION
Officers of the Company serve at the discretion of the Board of Directors.
There are no family relationships among any of the Directors, executive officers
or key employees. No executive officer, key employee, promoter, or control
person of the Company has, in the last five years, been subject to bankruptcy
proceedings, criminal proceedings, or legal proceedings related to the violation
of state or federal commodities or securities laws.
15
<PAGE> 18
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table sets forth the compensation
paid by the Company for each of the three fiscal years in the period ended
December 31, 1997 to the Chief Executive Officer and each of the other executive
officers of the Company as of December 31, 1997 (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- -----------------------
OTHER RESTRICTED
ANNUAL STOCK SECURITIES OTHER
BONUS COMPENSA- AWARDS UNDERLYING COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) ($)(1) TION($) ($) OPTIONS(#) TION($)
--------------------------- ---- ------------ ------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary A. Lyons......................... 1995 275,000(2) 25,000 -- -- 148,000 17,757(3)
President and Chief 1996 290,000(2) 55,000 -- -- -- 6,531(3)
Executive Officer 1997 325,296(2) 55,000 -- -- 175,000 --
Errol B. DeSouza...................... 1995 215,700(4) 15,000 -- -- 92,000 12,745(5)
Executive Vice President, 1996 227,700(4) 35,000 -- -- -- 4,524(5)
Research and Development 1997 257,771(4) 42,000 -- -- 130,000 --
Paul W. Hawran........................ 1995 180,000(6) 15,000 -- -- 65,000 29,379(7)
Senior Vice President and 1996 190,500(6) 35,000 -- -- 20,000 10,236(7)
Chief Financial Officer 1997 209,073(6) 40,000 -- -- 115,000 --
Stephen G. Marcus, M.D.(8)............ 1995 -- -- -- -- -- --
Senior Vice President 1996 -- -- -- -- -- --
Clinical and Regulatory 1997 184,598(9) 40,000 -- -- 150,000 264,072(10)
Affairs and Chief Medical Officer
</TABLE>
- ---------------
(1) Salary and bonus figures are amounts earned during each respective fiscal
year, regardless of whether part or all of such amounts were paid in
subsequent fiscal year(s).
(2) Represents amounts actually paid to Mr. Lyons for the corresponding fiscal
year. Starting on March 1, 1997, Mr. Lyons' annualized salary became
$328,300.
(3) 1995 figure represents reimbursement for taxes incurred by Mr. Lyons as a
result of the payments by the Company in 1995 of moving, housing and other
expenses incurred in connection with relocating to the Company's geographic
region ($14,636) and the premium paid for the term life insurance policies
for the benefit of Mr. Lyons ($3,121). 1996 figure represents payments by
the Company of premiums for the term life insurance policies for the
benefit of Mr. Lyons.
(4) Represents amounts actually paid to Dr. DeSouza for the corresponding
fiscal year. Starting on March 1, 1997, Dr. DeSouza's annualized salary
became $261,716.
(5) 1995 figure represents reimbursement for taxes incurred by Dr. DeSouza as a
result of the payments by the Company in 1995 of moving, housing and other
expenses incurred in connection with relocating to the Company's geographic
region ($10,297) and the premium paid for the term life insurance policies
for the benefit of Dr. DeSouza ($2,448). 1996 figure represents payments by
the Company of premiums for the term life insurance policies for the
benefit of Dr. DeSouza.
(6) Represents amounts actually paid to Mr. Hawran for the corresponding fiscal
year. Starting on March 1, 1997, Mr. Hawran's annualized salary became
$209,740.
(7) 1995 figure represents reimbursement for taxes incurred by Mr. Hawran as a
result of the payments by the Company in 1995 of moving, housing and other
expenses incurred in connection with relocating to the Company's geographic
region ($21,645), payments relating to relocation costs ($6,289) and the
premium paid for the term life insurance policies for the benefit of Mr.
Hawran ($1,445). 1996 figure represents payments by the Company of premiums
for the term life insurance policies for the benefit of Hawran ($4,431) and
the mortgage equalization payments on Mr. Hawran's residence ($5,805).
(8) Dr. Marcus joined the Company as Senior Vice President, Medical and
Regulatory Affairs and Chief Medical Officer on March 1, 1997. No
information prior to that time is provided.
(9) Represents amounts actually paid to Dr. Marcus in 1997. Dr. Marcus started
on March 1, 1997, at an initial annualized salary of $220,000.
(10) Represents payments by the Company in 1997 of moving, housing and other
expenses and selling costs incurred by Dr. Marcus in connection with
selling his prior residence and relocating to the Company's geographic
region ($224,227), mortgage equalization payments ($8,000) and a sign-on
bonus ($25,000), as well as reimbursement for taxes incurred by Dr. Marcus
in connection with relocation payments ($6,845).
16
<PAGE> 19
Option Grants in Last Fiscal Year. The following table sets forth certain
information concerning grants of options made during the year ended December 31,
1997 by the Company to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATE OF
OPTIONS STOCK APPRECIATION FOR
OPTIONS GRANTED OPTION TERM(2)
GRANTED TO EMPLOYEES IN EXERCISE EXPIRATION ------------------------------
NAME #(1) FISCAL YEAR PRICE DATE 5% 10%
---- ------- --------------- -------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Gary Lyons............. 175,000 17.1% $7.375 4/29/07 $811,667 $2,056,924
Errol DeSouza.......... 130,000 12.7% $7.375 4/29/07 $602,953 $1,528,001
Paul Hawran............ 115,000 11.3% $7.375 4/29/07 $533,381 $1,351,693
Stephen Marcus......... 150,000 14.7% $ 7.86 4/10/07 $741,467 $1,879,022
</TABLE>
- ---------------
(1) All options shown granted in 1997 to Messrs. Lyons, DeSouza and Hawran
become exercisable as to 1/48th of the option shares each month following
the vesting start date, with full vesting occurring on the fourth
anniversary of the vesting start date. All options shown granted in 1997 to
Dr. Marcus become exercisable as to 1/4th of the option shares on March 1,
1998 and as to 1/48th of the option shares each month thereafter, with full
vesting occurring on March 1, 2001. All options shown granted in 1997 to
Messrs. Lyons, DeSouza and Hawran were granted at an exercise price equal to
the fair market value of the Company's Common Stock as determined by the
Board of Directors on the date of grant. All options shown granted in 1997
to Dr. Marcus were granted at an exercise price equal to 85% of the fair
market value of the Company's Common Stock as determined by the Board of
Directors on the date of grant. The exercise price may be paid in cash,
promissory note, by delivery of already owned shares subject to certain
conditions, or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and remit to the Company, out of sale proceeds, an amount
equal to the exercise price plus all applicable withholding taxes.
(2) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of the grant until the expiration of the ten-year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price growth.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Values. The following table sets forth certain information regarding the stock
options held at December 31, 1997 by each of the Named Executive Officers.
During 1997, no such stock options were exercised by any of the Named Executive
Officers. The Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF OPTIONS VALUE OF IN-THE-MONEY
AT YEAR-END OPTIONS AT YEAR-END($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary Lyons................................ 270,263 204,237 $1,135,780 $302,535
Errol DeSouza............................. 174,999 148,001 $ 704,459 $236,916
Paul Hawran............................... 89,820 140,480 $ 294,029 $161,961
Stephen Marcus............................ -- 150,000 -- $ 2,250
</TABLE>
- ---------------
(1) "In-the-money" options are those for which the fair market value of the
underlying securities exceeds the exercise or base price of the option.
These columns are based upon the closing price of $7.875 per share on
December 31, 1997, minus the per share exercise price, multiplied by the
number of shares underlying the option.
EMPLOYMENT AGREEMENTS
Gary A. Lyons has an employment contract that provides that: (i) Mr. Lyons
serves as the Company's President and Chief Executive Officer for a term of
three years commencing on March 1, 1997 at an initial annual salary of $328,300,
subject to annual adjustment by the Board of Directors (Mr. Lyons' base salary
for
17
<PAGE> 20
1998 was set at $346,375); (ii) the agreement will automatically renew for
three-year periods thereafter unless the Company or Mr. Lyons gives 90 days
notice of termination; (iii) Mr. Lyons is eligible for a discretionary annual
bonus as determined by the Board of Directors, based upon achieving certain
performance criteria; (iv) the Company has provided a one-time contract renewal
bonus in the form of an option to purchase 75,000 shares of the Company's Common
Stock, exercisable at a price per share equal to fair market value on the date
of grant, which stock option will vest over a four-year period, (v) the Company
has agreed to forgive the loan of $67,500 made to reimburse Mr. Lyons for 50% of
the loss on sale of his former residence over a three-year period (based on
continued employment); and (vi) Mr. Lyons is entitled to continue to receive his
salary for 12 months in the event that the Company terminates his employment
without cause, or materially reduces the power and duties of his employment
without cause, which will be deemed to be a termination.
Errol B. DeSouza, Ph.D., has an employment contract that provides that: (i)
Dr. DeSouza serves as the Company's Executive Vice President of Research and
Development for a term of three years commencing on March 1, 1997 at an initial
annual salary of $261,716, subject to annual adjustment by the Board of
Directors (Dr. DeSouza's base salary for 1998 was set at $277,500), (ii) the
agreement will automatically renew for three-year periods thereafter unless the
Company or Dr. DeSouza gives 90 days notice of termination, (iii) Dr. DeSouza is
eligible for a discretionary annual bonus as determined by the Board of
Directors, based upon achieving certain performance criteria, (iv) the Company
has provided a one-time contract renewal bonus in the form of an option to
purchase 50,000 shares of the Company's Common Stock, exercisable at a price per
share equal to fair market value on the date of grant, which stock option will
vest over a four-year period, (v) the Company has agreed to forgive over a
period ending October 15, 1999 (based on continued employment) 50% of the
$70,500 loan made to reimburse Dr. DeSouza for the loss on the sale of his
former residence, and (vi) Dr. DeSouza is entitled to continue to receive his
salary for up to twelve months in the event that the Company terminates his
employment without cause.
Paul W. Hawran has an employment contract that provides that: (i) Mr.
Hawran serves as the Company's Senior Vice President and Chief Financial Officer
for a term of three years commencing on March 1, 1997 at a current annual salary
of $209,740, subject to annual adjustment by the Board of Directors (Mr.
Hawran's base salary for 1998 was set at $224,000), (ii) the agreement will
automatically renew for three-year periods thereafter unless the Company or Mr.
Hawran gives 90 days notice of termination, (iii) Mr. Hawran is eligible for a
discretionary annual bonus as determined by the Board of Directors based upon
achieving certain performance criteria, (iv) the Company has agreed to forgive
over a three-year period ending on March 1, 2000 (based on continued employment)
the loan of $87,500 made to reimburse Mr. Hawran for certain housing and
relocation expenses, and (v) Mr. Hawran is entitled to continue to receive his
salary for 12 months in the event that the Company terminates his employment
without cause, or materially reduces the power and duties of his employment
without cause, which will be deemed to be a termination.
Stephen G. Marcus, M.D., has an employment contract that provides that: (i)
Dr. Marcus serves as the Company's Senior Vice President, Clinical and
Regulatory Affairs and Chief Medical Officer for a term of three years
commencing on March 1, 1997 at an initial annual salary of $220,000, subject to
annual adjustment by the Board of Directors (Dr. Marcus' base salary for 1998
was set at $231,000); (ii) the agreement will automatically renew for three-year
periods thereafter unless the Company or Dr. Marcus gives 90 days notice of
termination; (iii) Dr. Marcus is eligible for a discretionary annual bonus as
determined by the Board of Directors, based upon achieving certain performance
criteria; (iv) the Company has granted an option to purchase 150,000 shares of
Common Stock, exercisable at a price per share equal to fair market value on the
date of grant, which stock option will vest over a four-year period, (v) the
Company has agreed to provide certain relocation costs and expenses associated
with Dr. Marcus' relocation from Maryland to San Diego; and (vi) Dr. Marcus is
entitled to continue to receive his salary for 9 months in the event that the
Company terminates his employment without cause, or materially reduces the power
and duties of his employment without cause, which will be deemed to be a
termination.
18
<PAGE> 21
REPORT OF THE COMPENSATION COMMITTEE
The following is a report of the Compensation Committee of the Company
describing the compensation policies and rationale applicable to the Company's
executive officers with respect to the compensation paid to such executive
officers for the year ended December 31, 1997. The information contained in this
report shall not be deemed to be "soliciting material" or to be "filed" with the
SEC nor shall such information be incorporated by reference into any future
filing under the Securities Act or the Exchange Act, except to the extent that
the Company specifically incorporates it by reference into any such filing.
The Compensation Committee (the "Committee") of the Board of Directors
reviews and recommends to the Board of Directors for approval the Company's
executive compensation policies. The Committee is responsible for reviewing the
salary and benefits structure of the Company at least annually to insure its
competitiveness within the Company's industry. The following is the report of
the Committee describing the compensation policies and rationales applicable to
the Company's executive officers with respect to the compensation paid to such
executive officers for the fiscal year ended December 31, 1997. In 1997, the
members of the Committee were Howard C. Birndorf, David E. Robinson, and Harry
F. Hixson, Jr. Howard C. Birndorf resigned as a member of the Company's Board of
Directors and the Compensation Committee as of January 1, 1998.
COMPENSATION PHILOSOPHY
The Company's philosophy in establishing its compensation policy for
executive officers and other employees is to create a structure designed to
attract and retain highly skilled individuals by establishing salaries,
benefits, and incentive compensation which compare favorably with those for
similar positions in other biotechnology companies. Compensation for the
Company's executive officers consists of a base salary and potential incentive
cash bonuses, as well as potential incentive compensation through stock options
and stock ownership.
BASE SALARY
The base salary component of compensation is designed to compensate
executive officers competitively at levels necessary to attract and retain
qualified executives in the pharmaceutical and biotechnology industry. The base
salaries have been targeted at or above the average rates paid by competitors to
enable the Company to attract, motivate, reward and retain highly skilled
executives. In order to evaluate the Company's competitive position in the
industry, the Committee reviewed and analyzed the compensation packages,
including base salary levels, offered by other biotechnology and pharmaceutical
companies. The competitive information was obtained from surveys prepared by
consulting companies or industry associations (e.g., the Radford Biotechnology
Compensation Survey). As a general matter, the base salary for each executive
officer is initially established through negotiation at the time the officer is
hired taking into account such officer's qualifications, experience, prior
salary, and competitive salary information. Year-to-year adjustments to each
executive officer's base salary are based upon personal performance for the
year, changes in the general level of base salaries of persons in comparable
positions within the industry, and the average merit salary increase for such
year for all employees of the Company established by the Compensation Committee,
as well as other factors the Compensation Committee judges to be pertinent
during an assessment period. In making base salary decisions, the Committee
exercises its judgment to determine the appropriate weight to be given to each
of these factors.
ANNUAL INCENTIVE COMPENSATION
A portion of the cash compensation paid to the Company's executive
officers, including the Chief Executive Officer, is in the form of discretionary
bonus payments that are paid on an annual basis as part of the Company's
Incentive Compensation Plan. Bonus payments are linked to the attainment of
overall corporate goals established by the Board of Directors and individual
goals established for each executive officer. The maximum potential amount of
each officer's bonus payment is established annually by the Board
19
<PAGE> 22
of Directors based upon the recommendation of the Committee. The appropriate
weight to be given to each of the various goals used to calculate the amount of
each officer's bonus payment is determined by the Committee. The goal of the
Company's Incentive Compensation Plan is to support the achievement of Company
goals and objectives by basing compensation on a pay for performance basis.
LONG-TERM INCENTIVES
The Committee provides the Company's executive officers with long-term
incentive compensation through grants of stock options under the Company's 1992
Incentive Stock Plan and the opportunity to purchase stock under the 1996
Employee Stock Purchase Plan (the "Purchase Plan"). The Board believes that
stock options provide the Company's executive officers with the opportunity to
purchase and maintain an equity interest in the Company and to share in the
appreciation of the value of the Company's Common Stock. The Board believes that
stock options directly motivate an executive to maximize long-term stockholder
value. The options also utilize vesting periods (generally four years) that
encourage key executives to continue in the employ of the Company. The Board
considers the grant of each option subjectively, considering factors such as the
individual performance of the executive officer and the anticipated contribution
of the executive officer to the attainment of the Company's long-term strategic
performance goals. Long-term incentives granted in prior years are also taken
into consideration.
The Company established the Purchase Plan both to encourage employees to
continue in the employ of the Company and to motivate employees through
ownership interest in the Company. Under the Purchase Plan, employees, including
officers, may have up to 15% of their earnings withheld for purchases of Common
Stock on certain dates specified by the Board. The price of Common Stock
purchased will be equal to 85% of the lower of the fair market value of the
Common Stock on the date of commencement of participation in each six-month
offering period or on each specified purchase date.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of the Chief Executive Officer is reviewed annually on the
same basis as discussed above for all executive officers. Gary A. Lyons' base
salary for 1997 was $310,000 until March 1, 1997, when it became $328,300. Mr.
Lyons' base salary for 1998 was set at $346,375. Mr. Lyons joined the Company in
February 1993. His initial salary, potential bonus, and stock grants were
determined on the basis of negotiation between the Board of Directors and Mr.
Lyons with due regard for his qualifications, experience, prior salary, and
competitive salary information. Mr. Lyons' base salary for 1997 was established
in part by comparing the base salaries of chief executive officers at other
biotechnology and pharmaceutical companies of similar size. Mr. Lyons earned a
$55,000 bonus in 1997. As with other executive officers, Mr. Lyons' total
compensation was based on the Company's accomplishments and the Chief Executive
Officer's contribution thereto.
SECTION 162(M)
The Board has considered the potential future effects of Section 162(m) of
the Code on the compensation paid to the Company's executive officers. Section
162(m) disallows a tax deduction for any publicly-held corporation for
individual compensation exceeding $1.0 million in any taxable year for any of
the executive officers named in the proxy statement, unless compensation is
performance-based. The Company has adopted a policy that, where reasonably
practicable, the Company will seek to qualify the variable compensation paid to
its executive officers for an exemption from the deductibility limitations of
Section 162(m).
20
<PAGE> 23
In approving the amount and form of compensation for the Company's
executive officers, the Committee will continue to consider all elements of the
cost to the Company of providing such compensation, including the potential
impact of Section 162(m).
Respectfully submitted by:
COMPENSATION COMMITTEE
Howard C. Birndorf
Harry F. Hixson, Jr.
David E. Robinson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of December 31, 1997, the Compensation Committee consisted of Howard C.
Birndorf, David E. Robinson and Harry F. Hixson, Jr. Effective January 1, 1998,
Howard C. Birndorf resigned from the Company's Board of Directors and the
Compensation Committee. No member of the Compensation Committee has a
relationship that would constitute an interlocking relationship with executive
officers or directors of another entity.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1993, the Company loaned to Gary A. Lyons, President, Chief
Executive Officer and Director of the Company, $85,000 for the purchase of stock
in the Company. Pursuant to Mr. Lyons' Employment Agreement dated March 1, 1997,
the loan bears interest at a rate of 4% per annum and is due and payable in full
on March 31, 1999. As of December 31, 1997, $85,500 remained outstanding on the
loan. In December 1993, the Company loaned Mr. Lyons $135,000 in connection with
certain housing relocation expenses. One half of the loan had been forgiven as
of February 1997; pursuant to Mr. Lyons' Employment Agreement, the remaining
half of the loan bears interest at a rate of 6% per annum and is being forgiven
over a three-year period starting on March 1, 1997, subject to repayment in the
event of termination of employment. As of December 31, 1997, $67,500 remained
outstanding on the loan.
In June 1994, the Company loaned Paul W. Hawran, Senior Vice President and
Chief Financial Officer of the Company, $175,000 in connection with certain
housing and relocation expenses. One half of the loan had been forgiven as of
February 1997; pursuant to the Employment Agreement dated March 1, 1997, the
remaining half of the loan bears interest at a rate of 6% per annum and is being
forgiven over a three-year period starting on March 1, 1997, subject to
repayment in the event of termination of employment. As of December 31, 1997,
$87,500 remained outstanding on the loan.
Dr. Wylie Vale, a Director of the Company, is a Professor and the Senior
Investigator and Head of the Clayton Foundation Laboratories for Peptide Biology
at The Salk Institute. In 1997 and 1996, the Company paid $92,336 and $262,982,
respectively, to The Salk Institute in connection with various license
agreements.
The Company has a consulting agreement with Dr. Vale, pursuant to which Dr.
Vale spends a significant amount of time performing services for the Company,
including attendance at meetings of the Company's Scientific Advisory Board, and
is prohibited from providing consulting services to or participating in the
formation of any company in Neurocrine's field of interest or that may be
competitive with Neurocrine. Dr. Vale's agreement is for a five-year term that
commenced in February 1996 and provides for an annual consulting fee of $42,500
in exchange for his consulting services to the Company.
During fiscal 1997, there were no other transactions between the Company
and its Directors, executive officers, or known holders of greater than five
percent of the Company's Common Stock in which the amount involved exceeded
$60,000 and in which any of the foregoing persons had or will have a material
interest.
21
<PAGE> 24
TRANSACTION WITH CANADIAN SUBSIDIARY
In March 1996, Neurocrine formed Neuroscience Pharma (NPI) Inc. ("NPI"), a
research and development company. Neurocrine licensed to NPI certain technology
and Canadian marketing rights to the Company's Neurosteroid and Neurogenomics
programs in exchange for 49% of the outstanding Common Stock of NPI. A group of
Canadian institutional investors have invested approximately $9.5 million in NPI
in exchange for Preferred Stock of NPI, which may be exchanged for an aggregate
of approximately 1,279,758 shares of Common Stock of the Company. In December
1997, certain of such Canadian institutional investors exercised their right to
exchange an aggregate of 610,000 shares of Preferred Stock of NPI for warrants
exercisable for an aggregate of 600,502 shares of Common Stock of the Company.
On the same date, such investors exercised the warrants for 600,502 shares of
Common Stock of the Company. Pursuant to a Research and Development Agreement
with a wholly owned subsidiary of the Company, NPI has committed to expend an
aggregate amount of $9.5 million for clinical development of the Neurosteroid
program for Alzheimer's disease and for research activities related to the
Neurogenomics program. Pursuant to such Research and Development Agreement, NPI
is entitled to receive royalties on sales of products developed in these
programs as well as exclusive Canadian marketing rights for such products in the
event that the Company has not terminated the technology license and the
marketing rights or that the investors have not exchanged their NPI Preferred
Stock into shares of the Company's Common Stock. In connection with their
investment in NPI, such investors also received warrants exercisable for 383,875
shares of the Company's Common Stock and are eligible to receive additional
warrants in the future in the event that NPI receives certain Canadian
government incentives for research activities.
ACQUISITION OF NORTHWEST NEUROLOGIC, INC.
On February 27, 1998, the Company signed a binding letter of intent to
acquire Northwest NeuroLogic, Inc. ("NNL"), a Portland-based biotechnology
company. In connection with the acquisition, the Company will issue an aggregate
of approximately 498,024 shares of Company Common Stock and stock options
exercisable for shares of Common Stock to the former stockholders and option
holders of NNL.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no other
matters to be submitted to the meeting. If any other matters properly come
before the meeting, it is the intention of the persons named in the enclosed
proxy card to vote the shares they represent as the Board of Directors may
recommend.
BY ORDER OF THE BOARD OF DIRECTORS
San Diego, California
Dated: April 24, 1998
22
<PAGE> 25
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NEUROCRINE BIOSCIENCES, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1998
The undersigned stockholder of NEUROCRINE BIOSCIENCES, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 24, 1998 and hereby appoints
Gary A. Lyons and Paul W. Hawran, and each of them, proxies and attorneys-
in-fact, with full power to each of substitution, on behalf and in the name of
the undersigned, to represent the undersigned at the 1998 Annual Meeting of
Stockholders of NEUROCRINE BIOSCIENCES, INC. to be held on May 27, 1998 at 10:00
a.m. local time, at the Hyatt Regency La Jolla, 3777 La Jolla Village Drive, San
Diego, California, 92122 and at any adjournment or adjournments thereof, and to
vote all Stocks of Common Stock which the undersigned would be entitled to vote
if then and there personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] AGAINST all nominees
(except as indicated) listed below
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
David E. Robinson and Richard F. Pops
2. AMENDMENT OF 1992 INCENTIVE STOCK PLAN TO INCREASE THE NUMBER OF
SHARES RESERVED FOR GRANT THEREUNDER FROM 4,100,000 SHARES TO
4,700,000 SHARES:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. AMENDMENT OF 1996 DIRECTOR OPTION PLAN TO INCREASE THE NUMBER OF
SHARES RESERVED FOR GRANT THEREUNDER FROM 100,000 SHARES TO 200,000
SHARES:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL PERIOD ENDING
DECEMBER 31, 1998:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS THE DIRECTORS NAMED ABOVE, FOR THE
AMENDMENT OF THE 1992 INCENTIVE STOCK PLAN, FOR THE AMENDMENT OF THE 1996
DIRECTOR OPTION PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG
LLP AS INDEPENDENT AUDITORS AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated: , 1998
----------------
-----------------------------------------
Signature
-----------------------------------------
Signature
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
