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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
/X/ Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Exchange Act Rule 240.14a-11 or 14a-12
PHARMAPRINT INC.
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(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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(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.)
------------------------------------------------------------------------
(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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PHARMAPRINT INC.
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NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
AUGUST 19, 1997
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To the Shareholders of PharmaPrint Inc:
On behalf of the Board of Directors, you are hereby notified of and
cordially invited to attend the Annual Meeting of Shareholders of PharmaPrint
Inc. (the "Company") to be held on Tuesday August 19, 1997 at 9:00 a.m., local
time, at the Hyatt Regency Hotel, 17900 Jamboree Road, Irvine, California,
92614. At the meeting you are being asked to:
1. Elect seven (7) directors to hold office until the Company's next Annual
Meeting of Shareholders;
2. Approve the amendment of the Company's 1995 Stock Plan, As Amended (the
"Plan"), to, among other things, increase the number of shares of common
stock authorized for issuance thereunder, from 800,000 shares to
2,200,000 shares;
3. Approve a change in the Company's state of incorporation from California
to Delaware through the merger of PharmaPrint Inc., a California
corporation, with and into a wholly-owned Delaware subsidiary of
PharmaPrint Inc.;
4. Approve the appointment of Arthur Andersen LLP as independent public
accountants for the Company for the fiscal year ending March 31, 1998;
and
5. Transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on July 3, 1997 as
the record date for the determination of shareholders entitled to notice of and
to vote at this Annual Meeting. Only holders of Common Stock at the close of
business on the record date will be entitled to vote at the Annual Meeting. A
list of the shareholders entitled to vote at the Annual Meeting will be
available for inspection at the offices of the Company.
Whether or not you plan to attend the Annual Meeting in person, please sign,
date, and return your proxy in the enclosed envelope so that your shares may be
voted at the meeting. If the shares are held in more than one name, all holders
of record must sign. If you plan to attend the Annual Meeting, please notify me
so that identification can be prepared for you. Thank you for your interest and
consideration.
By Order of the Board of Directors,
Tasneem A. Khwaja, Ph.D.
SECRETARY
Irvine, California
July 11, 1997
SHAREHOLDERS OR OMNIBUS PROXIES ARE URGED TO SIGN, DATE, AND PROMPTLY MAIL THE
CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING.
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PHARMAPRINT INC.
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 19, 1997
------------------------
This Proxy Statement is furnished in connection with the solicitation, on
behalf of the Board of Directors of PharmaPrint Inc., a California corporation
("PharmaPrint" or the "Company"), of proxies for use at the Annual Meeting of
Shareholders of the Company ("Annual Meeting"), to be held at the Hyatt Regency
Hotel, 17900 Jamboree Road, Irvine California, 92614, on Tuesday, August 19,
1997 at 9:00 a.m., and at any and all adjournments thereof. This Proxy Statement
and the enclosed form of proxy are first being mailed on or about July 11, 1997.
The mailing address of the principal executive offices of the Company is 4 Park
Plaza, Suite 1900, Irvine, California 92614.
RECORD DATE AND VOTING
Only the shareholders of record at the close of business on July 3, 1997
will be entitled to vote at the meeting. At the close of business on July 3,
1997 there were 11,000,000 shares of the Company's Common Stock, without par
value ("Common Stock") outstanding and entitled to vote, held by
shareholders of record. No shares of the Company's preferred stock are
outstanding. Each shareholder is entitled to one vote for each share of Common
Stock held as of the record date.
If a choice as to matters coming before the Annual Meeting has been
specified by a shareholder in a Proxy, the shares will be voted accordingly. If
no choice has been specified, the shares will be voted FOR the proposals
described in the Notice of Annual Meeting and in this Proxy Statement.
Abstentions and broker non-votes (i.e., the submission of a Proxy by a broker or
nominee, indicating the lack of discretion or authority to vote on the matter)
are each included in the determination of the presence or absence of a quorum
for the transaction of business. An affirmative vote of the majority of the
votes cast at the meeting is required for the election of each director and for
the approval of the other proposals. Abstentions are counted in all tabulations
of the votes cast and will have the same effect as a vote "against". Broker non-
votes are not counted purposes of determining whether a proposal has been
approved or not.
PLEASE MARK, DATE, SIGN, AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
POSTAGE-PAID, RETURN ENVELOPE NO LATER THAN AUGUST 9, 1997 SO THAT, IF YOU ARE
UNABLE TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
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MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation and Bylaws provide for the election
of all Directors at each Annual Meeting and for each Director elected to serve
until the next Annual Meeting and until their successors shall have been duly
elected and qualified or until their earlier death, resignation, or removal. The
Board has selected seven nominees, all of whom are current directors of the
Company. All nominees have consented to being named herein and to serve if
elected.
Shares represented by proxies solicited hereby will be voted FOR the
election of the Board's nominees unless authority to so vote is withheld. If any
or all of the nominees should become unable to or declines to serve as a
director prior to the Annual Meeting, the proxies may be voted for a substitute
nominee designated by the Board of Directors.
The following sets forth, for each of the nominees, their principal
occupation or employment during at least the last five years, and the period
during which they have served as a Director of the Company.
JOHN H. ABELES, MD, age 52, has been a director of the Company since August
1996. Dr. Abeles has served as President of MedVest, Inc., a venture capital and
consulting firm, since 1980. He serves as a director of Encore Medical Corp.,
I-Flow Corporation, DUSA Pharmaceuticals, Inc., and Oryx Technology, Inc.
LYLE ANDERSON, age 42, has been a director of the Company since August 1996.
Mr. Anderson has been a private investor and financial consultant for the past
17 years. He serves as a financial principal in several privately held entities
and provides financial analysis, debt/equity investment due diligence, and
complex and varied financial negotiation assistance as an advisor to a large
number and variety of ventures.
HOWARD R. ASHER, age 50, has been a director of the Company since August
1996. Mr. Asher is the founder and has served as President of Advanced
Bioresearch Associates ("ABA"), a clinical research organization providing Food
and Drug Administration ("FDA") strategic consulting and professional services,
from 1979 to 1996, and as President and Chief Executive Officer since 1996. Mr.
Asher is Regulatory Affairs Certified ("RAC") by the Regulatory Affairs
Professional Society for Regulatory Affairs.
ELLIOT P. FRIEDMAN, age 43, has been a director of the Company since
November 1994. Mr. Friedman has been the Chairman of the Board of Directors and
Chief Executive Officer since April 1997 and was the President and Chief
Executive Officer of the Company from October 1995 to April 1997. He was also
the Chief Financial Officer of the Company from November 1994 to December 1996.
From July 1990 to July 1994, Mr. Friedman was co-founder and Chief Executive
Officer of BioTek Solutions, a provider of systems used by pathologists to
conduct diagnosis of cancer through the use of monoclonal antibodies and DNA
probes.
TASNEEM A. KHWAJA, Ph.D., age 61, has been a director of the Company since
September 1994. Dr. Khwaja has been the Secretary of the Company since September
1994 and the Chief Scientific Officer of the Company since October 1995. From
November 1994 to October 1995, Dr. Khwaja served as the Company's President and
Chief Executive Officer and from September 1994 to April 1997 he served as the
Chairman of the Board of Directors. Dr. Khwaja has been a Professor of Pathology
at the University of Southern California ("USC") School of Medicine for the past
24 years.
PHILLIP G. TRAD, age 48, has been a director of the Company since November
1995. Since 1988, Mr. Trad has operated his own law practice in California. Mr.
Trad has more than 17 years of experience in general civil and commercial
litigation.
NATHAN F. TROUM, MD, age 77, has been a director of the Company since August
1996. Since 1946, Dr. Troum has engaged in private medical practice specializing
in general medicine and rheumatology.
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COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives $10,000 per year for
serving on the Company's Board of Directors. In addition, pursuant to the Plan,
each non-employee director of the Company annually receives options to purchase
10,000 shares of Common Stock of the Company, although Dr. Abeles and Mr. Asher
have agreed that in connection with their initial appointment to the Board of
Directors in August 1996, the Company would issue each of them options to
purchase 75,000 shares of Common Stock, such options to vest over three years,
in lieu of an additional grant of options to purchase 10,000 shares pursuant to
the Plan in years two and three of their service, if elected. The options to
purchase Common Stock are granted at the fair market value of the Common Stock
on the date of grant. The options are subject to certain vesting requirements
and expire ten years from the date of grant.
Following the election of directors at this Annual Meeting of Shareholders,
the Company will change its method of compensating directors. Each Director will
receive $2,500 per each meeting attended in person and $1,750 for any telephonic
meeting of the Board of Directors. The Company is also, as part of this Proxy
Statement, requesting that the shareholders approve a proposal to amend the Plan
to provide that the options to purchase 10,000 shares of Common Stock granted to
each non-employee director of the Company vest quarterly over one year instead
of vesting over a two-year period. Additionally, each non-employee director,
including Dr. Abeles and Mr. Asher, who serves on the Audit or Compensation
Committees of the Board of Directors, and who provides significant services to
the Company in such capacity, shall receive an additional grant of options to
purchase 20,000 shares of Common Stock. Such options shall vest quarterly over
one year and expire ten years from the date of grant.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held nine meetings during fiscal 1997. The Board of
Directors currently has three committees: an Audit Committee, an Executive
Committee, and a Compensation Committee. The Audit Committee makes
recommendations to the Board of Directors as to the engagement or discharge of
the independent public accountants; reviews the scope and results of the
Company's internal auditing procedures; reviews the adequacy of the Company's
system of accounting controls; and directs and supervises investigations into
matters within the scope of its duties. Presently, the Audit Committee is
composed of Dr. Abeles and Messrs. Anderson and Friedman. The Audit Committee
met one time during fiscal 1997 and Dr. Abeles was not present at the meeting.
The Executive Committee performs the functions delegated to it by the Board of
Directors acting as a whole. The Executive Committee did not hold any meetings
during fiscal 1997. Presently, the Executive Committee is composed of Messrs.
Asher, Friedman, and Trad. The Compensation Committee reviews and approves the
compensation for the Company's executive officers and administers the Plan. The
Compensation Committee held four meetings during fiscal 1997. Presently, this
Committee is composed of Messrs. Asher and Trad. Other than as noted above, all
Directors attended all Board Meetings held during the period in which such
Director was a Director, and all Committee Meetings of which such Director is a
member.
BOARD RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by Proxy and voting at the
Annual Meeting (and the affirmative vote of the holders of a majority of the
shares necessary for a quorum at the Annual Meeting) is required for the
election of each Director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES TO
SERVE AS DIRECTORS OF THE COMPANY UNTIL THE NEXT ANNUAL MEETING AND UNTIL THEIR
SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED OR UNTIL THEIR EARLIER DEATH,
RESIGNATION, OR REMOVAL.
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PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN, AS AMENDED, TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER FROM 800,000
SHARES TO 2,200,000 SHARES AND TO AMEND THE PROVISIONS REGARDING AUTOMATIC
OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
AMENDMENT
The shareholders are being asked to vote on a proposal to amend the
Company's Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 800,000 shares to 2,200,000 shares and to amend the
provisions of the Plan relating to automatic option grants to non-employee
directors.
As of June 10, 1997, the Company had outstanding non-qualified options for
the purchase of an aggregate 782,078 shares of the Company's Common Stock with
an average exercise price of $3.11 per share granted under the Plan, and
non-qualified options for the purchase of an aggregate 566,800 shares of the
Company's Common Stock with an average exercise price of $4.75 granted outside
the Plan. No options granted either under the Plan or outside the Plan have been
exercised as of June 10, 1997. In order to provide sufficient shares for future
options, and in order to encompass the options granted outside the Plan, on June
9, 1997 the Board of Directors approved a resolution authorizing an increase of
the number of shares reserved for issuance under the Plan from 800,000 to
2,200,000 shares. The Board believes that granting fairly-priced stock options
to employees and directors is an effective means to promote the future growth
and development of the Company. Such options, among other things, increase
employees', directors', and consultants' proprietary interest in the Company's
success and will assist the Company in attracting and retaining such individuals
who can contribute significantly to the Company's success.
Currently, the Plan provides for automatic option grants to each director
who is not an employee of the Company (a "Non-Employee Director"). Each person,
who has not otherwise received a grant of options upon such person's initial
appointment or election as a Non-Employee Director of the Company, shall
automatically receive nonqualified options to purchase 10,000 shares of Common
Stock upon such person's initial appointment or election as a Non-Employee
Director of the Company and shall automatically receive options to purchase
10,000 shares of Common Stock each time re-elected to the Board of Directors as
a Non-Employee Director. Such options shall have an exercise price equal to 100%
of the fair market value of the Common Stock on the date of grant, and one third
of each grant of such options shall vest on the date of grant and each of the
first two anniversaries of the date of grant, respectively. Subject to earlier
termination, each option shall expire ten years from the date of grant, and no
option, even if vested, will be exercisable within six months of the date of
grant of such option. Because the Board of Directors believes that the purpose
of the automatic grant provision of the Plan is to compensate non-employee
directors for their service to the Company on a yearly basis, on June 9, 1997
the Board approved a resolution to amend the Plan to provide that the automatic
grant of options to purchase 10,000 shares of Common Stock vest quarterly over a
one-year period.
SUMMARY OF 1995 STOCK OPTION PLAN, AS AMENDED
A general description of the basic features of the Plan is presented below.
Such description is qualified in its entirety by reference to the full text of
the Plan, a copy of which may be obtained without charge upon written request to
James R. Wodach, Chief Financial Officer, PharmaPrint Inc., 4 Park Plaza, Suite
1900, Irvine, California 92614.
PURPOSE
The purpose of the Plan is to enable the Company to obtain and retain
competent personnel who will contribute to the Company's success and to provide
incentives to the participating directors, officers, key employees, consultants,
scientific advisors and other personnel working directly or indirectly for the
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Company that are linked directly to increases in shareholder value and will
therefore inure to the benefit of all shareholders of the Company.
TERM
The term of each stock option shall be fixed by the Administrator (either
the Board of Directors or a Committee thereof), but no stock option shall be
exercisable more than ten (10) years after the date such stock option is
granted; provided, however, that if an employee owns or is deemed to own more
than 10% of the combined voting powers of all classes of stock of the Company
and an incentive stock option is granted to such employee, the term of the
Incentive Stock Option shall be no more than five (5) years from the date of
grant.
ADMINISTRATION
The Plan was administered by the Board until November 5, 1996, when the
Board appointed the Compensation Committee and authorized it to administer the
Plan. With the exception of the stock options automatically issued to
Non-Employee Directors as described below, the Plan is administered by the
Compensation Committee of the Board of Directors, all of the members of which
are "non-employee directors" under Rule 16b-3 of the 1934 Act. The Plan gives
broad powers to the Committee to administer and interpret the Plan, including
the authority to select the individuals to be granted options and to prescribe
the particular form and conditions of each option granted.
ELIGIBILITY
Directors, officers, key employees, consultants, scientific advisors, and
other personnel working directly or indirectly for the benefit of the Company
who are responsible for or contribute to the management, growth and/or
profitability of the business of the Company are eligible to be granted stock
options under the Plan. As of May 31, 1997, the Company had 13 employees and two
full-time consultants, of which seven are officers, and five directors who are
not employees.
OPTIONS
The option price per share of Common Stock purchasable under a stock option
shall be determined by the Compensation Committee at the time of grant but shall
not be less than 100% of the fair market value of the Company's Common Stock on
the date of grant, as that term is defined in the Plan. If an employee owns or
is deemed to own more than 10% of the combined voting power of all classes of
stock of the Company and an incentive stock option is granted to such employee,
the option price of such incentive stock option shall be no less than 110% of
the fair market value on the date of grant.
The term of each stock option shall be fixed by the Compensation Committee,
but no stock option shall be exercisable more than ten years after the date such
stock option is granted; provided, however, that if an employee owns or is
deemed to own more than 10% of the combined voting powers of all classes of
stock of the Company and an incentive stock option is granted to such employee,
the term of such incentive stock option shall be no more than five years from
the date of grant.
Stock options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Compensation Committee at or
after grant. If the Compensation Committee provides, in its discretion, that any
stock option is exercisable only in installments, the Compensation Committee may
waive such installment exercise provisions at any time in whole or in part based
on such factors as the Compensation Committee may determine in its sole
discretion.
Generally, under the form of the option agreement that the Committee is
currently using for options granted under the Plan, if the optionee's
affiliation with the Company terminates before expiration of the option for
reasons other than death, the optionee has a right to exercise the option for
three months after termination of such affiliation or until the option's
original expiration date, whichever is earlier. If the termination is because of
death, the option typically is exercisable until its original stated expiration
or
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until the 12-month anniversary of the optionee's death, whichever is earlier.
The Committee may impose additional or alternative conditions and restrictions
on the incentive or nonqualified stock options granted under the Plan; however,
each incentive option must contain such limitations and restrictions upon its
exercise as are necessary to ensure that the option will be an incentive stock
option as defined under the Internal Revenue Code.
GRANTS TO NON-EMPLOYEE DIRECTORS
Currently the Plan provides for automatic option grants to each director who
is not an employee of the Company (a "Non-Employee Director"). Each person, who
has not otherwise received a grant of options upon such person's initial
appointment or election as a Non-Employee Director of the Company, shall
automatically receive nonqualified options to purchase 10,000 shares of Common
Stock upon such person's initial appointment or election as a Non-Employee
Director of the Company and shall automatically receive options to purchase
10,000 shares of Common Stock each time re-elected to the Board of Directors as
a Non-Employee Director. Such options shall have an exercise price equal to 100%
of the fair
market value of the Common Stock on the date of grant, and one third of each
grant of such options shall vest on the date of grant and each of the first two
anniversaries of the date of grant, respectively. Subject to earlier
termination, each option shall expire ten years from the date of grant, and no
option, even if vested, will be exercisable within six months of the date of
grant of such option. The Company is proposing that the shareholders approve an
amendment to the Plan to provide that automatic grants of options to non-
employee directors vest quarterly over a one-year period.
AMENDMENT AND TERMINATION
The Board of Directors of the Company may amend, alter, or discontinue the
Plan, but no amendment, alteration, or discontinuation shall be made that would
impair the rights of the optionee under any award theretofore granted without
such optionee's consent.
The Committee may amend the terms of any award theretofore granted,
prospectively or retroactively, however, no such amendment shall impair the
rights of any optionee without his or her consent.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1995 PLAN
Under present law, an optionee will not realize any taxable income on the
date a nonqualified stock option is granted to the optionee pursuant to the 1995
Plan. Upon exercise of the nonqualified stock option, however, the optionee will
realize, in the year of exercise, ordinary income to the extent of the
difference between the option price and the fair market value of the Company's
Common Stock on the date of exercise. Upon the sale of the shares, any resulting
gain or loss will be treated as capital gain or loss. The Company will be
entitled to a tax deduction in its fiscal year in which nonqualified stock
options are exercised, equal to the amount of compensation required to be
included as ordinary income by those optionee's exercising such options. The
Company is not entitled to any tax deduction with respect to any capital gains
realized by an optionee.
Incentive stock options granted pursuant to the Plan are intended to qualify
for favorable tax treatment to the optionee under Code Section 422. Under Code
Section 422, an employee realizes no taxable income when the incentive stock
option is granted. If the employee has been an employee of the Company at all
times from the date of grant until three months before the date of exercise, the
employee will realize no taxable income when the option is exercised. The
difference between the option exercise price and the fair market value of the
shares issuable upon exercise of the option is an "item of adjustment" for
alternative minimum tax purposes. If the employee does not dispose of the shares
acquired upon exercise for a period of two years from the granting of the
incentive stock option and one year after receipt of the shares, the employee
may sell the shares and report any gain as capital gain. The Company will not be
entitled to a tax deduction in connection with either the grant or exercise of
an incentive stock option. If the employee should dispose of the shares prior to
the expiration of the two-year or one-year periods described above, the employee
will be deemed to have received compensation taxable
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as ordinary income in the year of the early sale in an amount equal to the
lesser of (i) the difference between the fair market value of the Company's
Common Stock on the date of exercise and the option price of the shares, or (ii)
the difference between the sale price of the shares and the option price of the
shares. In the event of such an early sale, the Company will be entitled to a
tax deduction equal to the amount recognized by the employee as ordinary income.
PLAN BENEFITS
Because future grants of stock options are subject to the discretion of the
Committee, all of the future benefits under the Plan cannot be determined at
this time, except that for the automatic grants to Non-Employee Directors as set
forth above. The table below shows the total number of shares underlying stock
options that will be granted under the Plan, as of June 10, 1997, to the
executive officers and the executive officers as a group if this proposal is
approved. Approval of this proposal shall constitute approval of the grants set
forth below.
<TABLE>
<CAPTION>
OPTIONS GRANTED WEIGHTED AVERAGE
NAME AND TITLE (NUMBER OF SHARES) EXERCISE PRICE PER SHARE
- --------------------------------------------------------------------- ------------------ -------------------------
<S> <C> <C>
Elliot P. Friedman .................................................. 150,000 $ 6.00
Chairman of the Board of Directors and Chief Executive Officer
Robert J. Burgess ................................................... 150,000 $ 6.00
President and Chief Operating Officer
Executive Officers as a Group (2 persons)............................ 300,000 $ 6.00
</TABLE>
BOARD RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock present in person or represented by Proxy at the
Annual Meeting (and the affirmative vote of the holders of a majority of the
shares necessary for a quorum at the Annual Meeting) is required for approval of
this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENTS TO
THE PLAN DESCRIBED ABOVE.
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PROPOSAL 3
REINCORPORATION OF THE COMPANY IN DELAWARE
AND RELATED CHANGES TO THE RIGHTS
OF SHAREHOLDERS
GENERAL
The Board of Directors has unanimously approved a proposal to change the
Company's state of incorporation from California to Delaware. The Board of
Directors believes the change in domicile to be in the best interests of the
Company and its shareholders for several reasons. Principally, the Board of
Directors believes that reincorporation will enhance the Company's ability to
attract and retain qualified members of the Company's Board of Directors as well
as encourage directors to continue to make independent decisions in good faith
on behalf of the Company. The Company believes that the more favorable corporate
environment afforded by Delaware will enable it to compete more effectively with
other public companies, many of which are incorporated in Delaware, to attract
new directors, and to retain its current directors. Reincorporation in Delaware
will allow the Company increased flexibility and predictability afforded by
Delaware law. Concurrent with the reincorporation, the Company proposes to adopt
or maintain certain measures to make hostile takeovers of the Company more
difficult. The Board believes that adoption or maintenance of these measures
will enable the Board to consider fully any proposed takeover attempt and to
negotiate terms that maximize the benefit to the Company and its shareholders.
In recent years, a number of major public companies have obtained the
approval of their shareholders to reincorporate in Delaware. For the reasons
explained below, the Company believes it is beneficial and important that the
Company likewise avail itself of Delaware law.
For many years Delaware has followed a policy of encouraging incorporation
in that state. In furtherance of that policy, Delaware has adopted comprehensive
corporate laws that are revised regularly to meet changing business
circumstances. The Delaware legislature is particularly sensitive to issues
regarding corporate law and is especially responsive to developments in modern
corporate law. The Delaware courts have developed expertise in dealing with
corporate issues as well as a substantial body of case law construing Delaware's
corporate law. As a result of these factors, it is anticipated that Delaware law
will provide greater predictability in the Company's legal affairs than is
presently available under California law.
In 1986, Delaware amended its corporate law to allow corporations to limit
the personal monetary liability of its directors for their conduct as directors
under certain circumstances. The directors have elected to adopt such a
provision in the Delaware certificate and bylaws. It should be noted that
Delaware law does not permit a Delaware corporation to limit or eliminate the
liability of its directors for intentional misconduct, bad faith conduct or any
transaction from which the director derives an improper personal benefit or for
violations of federal laws. The Board of Directors believes that Delaware
incorporation will enhance the Company's ability to recruit and retain directors
in the future, however, the shareholders should be aware that such a provision
inures to the benefit of the directors, and the interest of the Board of
Directors in recommending the reincorporation may therefore be in conflict with
the interest of the shareholders. See "Indemnification and Limitation of
Liability" for a more complete discussion of these issues.
In 1987, California amended its corporate law in a manner similar to
Delaware to permit a California corporation to limit the personal monetary
liability of its directors for their conduct as directors under certain
circumstances. Nonetheless, the Board of Directors believes that the protection
from liability for directors is somewhat greater under the Delaware law than
under the California law and therefore that the Company's objectives in adopting
this type of provision can be better achieved by reincorporation in Delaware.
The interests of the Board of Directors of the Company, management, and
affiliated shareholders in voting on the reincorporation proposal may not be the
same as those of unaffiliated shareholders.
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Delaware law does not afford minority shareholders some of the rights and
protections available under California law. Reincorporation of the Company in
Delaware may make it more difficult for minority shareholders to elect directors
and influence Company policies. A discussion of the principal differences
between California and Delaware law as they affect shareholders begins on page
17 of this Proxy Statement.
In addition, portions of the reincorporation proposal may have the effect of
deterring hostile takeover attempts. A hostile takeover attempt may have a
positive or a negative effect on the Company and its shareholders, depending on
the circumstances surrounding a particular takeover attempt. Takeover attempts
that have not been negotiated or approved by the board of directors of a
corporation can seriously disrupt the business of a corporation and generally
present to the shareholders the risk of terms that may be less than favorable to
all of the shareholders than would be available in a board approved transaction.
Board approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation, and maximum strategic deployment of corporate assets.
The Board of Directors recognizes that hostile takeover attempts do not
always have unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts are
sufficiently great that prudent steps to reduce the likelihood of such takeover
attempts are in the best interests of the Company and its shareholders.
Accordingly, the reincorporation plan includes certain proposals that may have
the effect of discouraging or deterring hostile takeover attempts. See
"Anti-Takeover Measures" for a more complete discussion of these issues.
Notwithstanding the belief of the Board of Directors as to the benefits to
shareholders of the changes, shareholders should recognize that one of the
effects of such changes may be to discourage a future attempt to acquire control
of the Company that is not presented to and approved by the Board of Directors,
but which a substantial number and perhaps even a majority of the Company's
shareholders might believe to be in their best interests or in which
shareholders might receive a substantial premium for their shares over the
current market prices. As a result, shareholders who might desire to participate
in such a transaction may not have the opportunity to do so.
The proposed reincorporation would be accomplished by merging the Company
into a newly-formed Delaware corporation which, just before the merger, will be
a wholly-owned subsidiary of the Company (the "Delaware Company"), pursuant to
an Agreement and Plan of Merger (the "Merger Agreement"), a copy of which is
attached as Exhibit A to this Proxy Statement. Upon the effective date of the
merger, the Delaware Company's name will be PharmaPrint Inc. The reincorporation
will not result in any change in the Company's business, assets or liabilities,
will not cause its corporate headquarters to be moved, and will not result in
any relocation of management or other employees.
On the effective date of the proposed reincorporation, each outstanding
share of Common Stock of the Company will automatically convert into one share
of Common Stock of the Delaware Company, and shareholders of the Company will
automatically become shareholders of the Delaware Company. On the effective date
of the reincorporation, the number of outstanding shares of Common Stock of the
Delaware Company will be equal to the number of shares of Common Stock of the
Company outstanding immediately prior to the effective date of the
reincorporation. In addition, each outstanding option, warrant, or right to
acquire shares of Common Stock of the Company will be converted into an option,
warrant, or right to acquire an equal number of shares of Common Stock of the
Delaware Company, under the same terms and conditions as the original options,
warrants, or rights. All of the Company's employee benefit plans, including the
1995 Stock Option Plan, as amended, will be adopted and continued by the
Delaware Company following the reincorporation. Shareholders should recognize
that approval of the proposed reincorporation will constitute approval of the
adoption and assumption of those plans by the Delaware Company.
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<PAGE>
No action need to be taken by shareholders to exchange their stock
certificates now; this will be accomplished at the time of transfer by the
shareholder. Certificates for shares in the Company will automatically represent
an equal number of shares in the Delaware Company upon completion of the merger.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by proxy and voting at the
Annual Meeting (and the affirmative vote of the holders of a majority of the
shares necessary for a quorum at the Annual Meeting) is required for approval of
the reincorporation. A vote FOR the reincorporation proposal will constitute
approval of the merger, the Delaware Certificate, the Delaware Bylaws,
assumption of the indemnification agreements, the adoption and assumption by the
Delaware Company of each of the Company's stock option, stock purchase, and
employee benefit plans and all other aspects of this Proposal 3. For purposes of
the vote, abstentions and broker non-votes will not be counted for any purpose
in determining whether this matter has been approved. If approved by the
shareholders, it is anticipated that the reincorporation would be completed as
soon thereafter as practicable. The reincorporation may be abandoned or the
Merger Agreement may be amended (with certain exceptions), either before or
after shareholder approval has been obtained, if in the opinion of the Board of
Directors, circumstances arise that make such action advisable; provided, that
any amendment that would effect material changes from charter provisions
discussed in this Proxy Statement would require further approval by the holders
of a majority of the outstanding shares of Common Stock.
CHANGES IN CAPITAL STRUCTURE CAUSED BY REINCORPORATION
Currently, the Company's capital stock consists of 19,000,000 authorized
shares of Common Stock, without par value, of which 11,000,000 shares were
issued and outstanding as of May 31, 1997, and 1,000,000 authorized shares of
Preferred Stock, without par value, none of which are issued and outstanding as
of May 31, 1997. The Delaware Company's capital stock consisted of 24,000,000
authorized shares of Common Stock, par value $.001 per share, and 1,000,000
authorized shares of Preferred Stock, par value $.001 per share. Accordingly,
approval of this proposal will constitute the approval to increase the
authorized shares of Common Stock of the Company from 19,000,000 to 24,000,000.
The Board believes the capital structure of the Delaware Company more
appropriately reflects the present and future needs of the Company and
recommends that the Company's shareholders approve this proposal. The Company's
undesignated preferred stock may be issued from time to time in one or more
series with such rights, preferences and privileges, including dividend rates,
conversion and redemption prices, and voting rights, as may be determined by the
Board. On June 10, 1997, 11,000,000 shares of Common Stock were outstanding. On
June 10, 1997, approximately 12,698,878 shares of Common Stock would be
outstanding on a fully diluted basis, assuming the exercise of all outstanding
options and warrants. The exercise price of all such options and warrants are
less than the closing bid price of the Common Stock on June 10, 1997.
PURPOSE OF AUTHORIZATION OF ADDITIONAL COMMON STOCK
The authorization of an additional 5,000,000 shares of Common Stock would
give the Board the express authority, without further action of the
shareholders, to issue such shares of Common Stock from time to time as the
Board deems necessary. The Board believes it is necessary to have the ability to
issue such additional shares of Common Stock for general corporate purposes. The
time frame necessary to achieve market success for any individual product in the
biotechnology industry is lengthy. Consequently, the Company will expend
substantial funds on research and development, expanding manufacturing capacity,
preclinical and clinical testing of its products and manufacturing and marketing
of its products prior to commercialization. The Company plans to fund such
development activities through several different means including equity
financings. Other potential uses of the additional authorized shares of Common
Stock may include acquisition transactions, stock dividends or distributions,
and having Common Stock available for any future designation and issuance of
preferred stock convertible into Common Stock. The additional Common Stock would
be available for issuance by the Board without future action by the
11
<PAGE>
shareholders, unless such action were specifically required by applicable law or
rules of any stock exchange or quotation system on which the Company's
securities may then be listed.
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's shareholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management by
diluting the stock ownership or voting rights of persons seeking to cause such
removal.
In addition, an issuance of additional shares by the Company could have an
effect on the potential realizable value of a shareholder's investment. In the
absence of a proportionate increase in the Company's earnings and book value, an
increase in the aggregate number of outstanding shares of the Company caused by
the issuance of the additional shares would dilute the earnings per share and
book value per share of all outstanding shares of the Company's capital stock.
If such factors were reflected in the price per share of Common Stock, the
potential realizable value of a shareholder's investment could be adversely
affected.
Under the Delaware Certificate, as under the California Articles, the Board
of Directors has the authority to determine or alter the rights, preferences,
privileges, and restrictions to be granted to or imposed upon any wholly
unissued series of Preferred Stock and to fix the number of shares constituting
any such series and to determine the designation thereof.
The Board of Directors may authorize the issuance of Preferred Stock for the
purpose of adopting shareholder rights plans or in connection with various
corporate transactions, including corporate partnering arrangements. If the
reincorporation is approved, it is not the present intention of the Board of
Directors to seek shareholder approval prior to any issuance of Preferred Stock,
except as required by law or regulation. See "Anti-Takeover Measures".
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are governed at present by the
corporate law of California, the Company's state of incorporation, and by the
Company's Amended and Restated Articles of Incorporation (the "California
Articles") and the Company's Restated Bylaws (the "California Bylaws"), which
have been adopted pursuant to California law. The California Articles and the
California Bylaws are available for inspection during business hours at the
principal executive offices of the Company. In addition, copies may be obtained
by writing to the Company at 4 Park Plaza, Suite 1900, Irvine, California,
92614, Attention: Corporate Secretary.
If the reincorporation proposal is adopted, the Company will merge with and
into, and its business will be continued by, the Delaware Company. Following the
merger, issues of corporate governance and control would be controlled by
Delaware, rather than California law (however, see "Application of California
Law After Reincorporation"). The California Articles and California Bylaws,
will, in effect, be replaced by the Certificate of Incorporation of the Delaware
Company (the "Delaware Certificate") and the Bylaws of the Delaware Company (the
"Delaware Bylaws"), copies of which are attached as Exhibits C and D to this
Proxy Statement. Accordingly, the differences among these documents and between
Delaware and California law are relevant to your decision whether to approve the
reincorporation proposal.
A number of significant differences between California and Delaware law and
among the various charter documents are summarized in the chart below.
Shareholders are requested to read the following chart in conjunction with the
discussion following the chart and the Merger Agreement, the Delaware
12
<PAGE>
Certificate, and the Delaware Bylaws attached to this Proxy Statement. The
following discussion is an attempt to summarize the more important differences
in the corporation laws of Delaware and California and does not purport to be an
exhaustive discussion of all of the differences. Such differences can be
determined in full by reference to the California Corporations Code and to the
Delaware General Corporation Law. In addition, both California and Delaware law
provide that some of the statutory provisions as they affect various rights of
shares may be modified by provisions in the charter or bylaws of the
corporation. For each item summarized in the chart, there is a reference to a
page in this Proxy Statement on which a more detailed discussion appears.
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
LIMITATION OF LIABILITY OF DIRECTORS Delaware law permits the limitation California law contains additional
AND OFFICERS (SEE PAGE 15) of liability of directors and exceptions to the liability limita-
officers to the Company except in tions of directors and officers.
connection with (i) breaches of the
duty of loyalty; (ii) acts or
omissions not in good faith or
involving intentional misconduct or
knowing violations of law; (iii) the
payment of unlawful dividends or
unlawful stock repurchases or
redemptions; or (iv) transactions in
which a director received an
improper personal benefit.
- ----------------------------------------------------------------------------------------------------------------
INDEMNIFICATION OF DIRECTORS AND Delaware law permits somewhat California Law permits indemni-
OFFICERS (SEE PAGE 16) broader indemnification and could fication under certain circum-
result in indemnification of stances, subject to certain limita-
directors and officers in circum- tions.
stances where California law would
not permit indemnification.
- ----------------------------------------------------------------------------------------------------------------
CUMULATIVE VOTING FOR DIRECTORS (SEE Cumulative voting is not available Cumulative voting is mandatory upon
PAGE 17) under Delaware law unless provided notice given by a shareholder at a
in the Certificate of Incorporation. shareholders' meeting at which
The Delaware Certificate does not directors are to be elected.
provide for cumulative voting. California law permits NASDAQ
National Market System (NASDAQ)
corporations with over 800 equity
security holders to eliminate
cumulative voting. The California
Articles do not provide for
cumulative voting.
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF DIRECTORS (SEE PAGE 18) Determined solely by resolution of Determined by the Board of Directors
the Board of Directors. within a range set in the California
Bylaws. Changes in the authorized
range must be approved by the
shareholders.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REMOVAL OF DIRECTORS BY SHARE- Removal with or without cause by Removal with or without cause by
HOLDERS (SEE PAGE 18) affirmative vote of a majority of affirmative vote of a majority of
the outstanding shares. the outstanding shares, provided
that shares voting against removal
could not elect such director under
cumulative voting.
- ----------------------------------------------------------------------------------------------------------------
FILLING BOARD VACANCIES (SEE PAGE Delaware law provides for the California law permits (a) any
18) Delaware Court of Chancery to order holder of 5% or more of the cor-
an election to fill vacancies or poration's voting stock (Voting
newly created directorships upon the Stock) or (b) the superior court of
application of the holders of 10% of the appropriate county to call a
the outstanding shares having a special meeting of shareholders to
right to vote for such directors if, elect the entire board if, after
at the time of filling such filling any vacancy, the directors
vacancies or directorships, the then in office who have been elected
directors then in office constitute by the shareholders constitute less
less than a majority of the entire than a majority of the directors
board as constituted immediately then in office.
prior to any increase.
- ----------------------------------------------------------------------------------------------------------------
WHO MAY CALL SPECIAL SHAREHOLDER The Board of Directors, the Chairman The Board of Directors, the Chairman
MEETING (SEE PAGE 19) of the Board, or the Chief Executive of the Board, the President, or
Officer or any other person holders of 10% of the shares
authorized to do so under the entitled to vote at the special
Delaware Certificate of meeting.
Incorporation or Bylaws.
- ----------------------------------------------------------------------------------------------------------------
TENDER OFFER STATUTE (SEE PAGE 19) Restricts hostile two-step take- No comparable statute. The Cali-
overs. fornia Articles include a fair price
provision similar in effect to the
Delaware statute.
- ----------------------------------------------------------------------------------------------------------------
LOANS TO OFFICERS AND DIRECTORS (SEE Board of Directors may authorize if Loans must be approved or ratified
PAGE 21) expected to benefit the Company. by a majority of the outstanding
shares.
- ----------------------------------------------------------------------------------------------------------------
CLASS VOTE FOR REORGANIZATIONS (SEE Generally not required unless a A reorganization transaction must
PAGE 21) reorganization adversely affects a generally be approved by a majority
specific class of shares. vote of each class of shares
outstanding.
- ----------------------------------------------------------------------------------------------------------------
RIGHT OF SHAREHOLDERS TO INSPECT Permitted for any purpose rea- Permitted for any purpose rea-
SHAREHOLDER LIST (SEE PAGE 22) sonably related to such share- sonably related to such share-
holder's interest as a shareholder. holder's interest as a shareholder.
Also, an absolute right to 5%
shareholders and certain 1%
shareholders.
- ----------------------------------------------------------------------------------------------------------------
APPRAISAL RIGHTS (SEE PAGE 22) Generally available if shareholders Available in certain circumstances
receive cash in exchange for the if the holders of 5% of the class
shares and in certain other assert such rights.
circumstances.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DIVIDENDS (SEE PAGE 22) Paid from surplus (including paid-in Generally limited to the greater of
and earned surplus or net profits). (i) retained earnings or (ii) an
amount which would leave the Company
with assets of 125% of liabilities
and current assets of 100% or
current liabilities.
- ----------------------------------------------------------------------------------------------------------------
OTHER Responsive legislature and larger
body of corporate case law in
Delaware provides more predictable
corporate legal environment in
Delaware.
</TABLE>
INDEMNIFICATION AND LIMITATION OF LIABILITY
LIMITATIONS ON DIRECTOR LIABILITY
Both California and Delaware permit a corporation to limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of certain duties as a director. The California and Delaware
laws adopt a self-governance approach by enabling a corporation to take
advantage of these provisions only if an amendment to the charter limiting such
liability is approved by a majority of the outstanding shares or such language
is included in the original charter.
The California Articles eliminate the liability of the directors to the
corporation to the fullest extent permissible under California law. California
law does not permit the elimination of monetary liability where such liability
is based on: (a) intentional misconduct or knowing and culpable violation of
law; (b) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders, or that involve the absence of
good faith on the part of the director; (c) receipt of an improper personal
benefit; (d) acts or omissions that show reckless disregard for the director's
duty to the corporation or its shareholders, where the director in the ordinary
course of performing a director's duties should be aware of a risk of serious
injury to the corporation or its shareholders; (e) acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the corporation and its shareholders; (f) interested
transactions between the corporation and a director in which a director has a
material financial interest; and (g) liability for improper distributions,
loans, or guarantees.
The Delaware Certificate also eliminates the liability of directors to the
fullest extent permissible under Delaware law, as such law exists currently or
as it may be amended in the future. Under Delaware law, such provision may not
eliminate or limit director monetary liability for; (a) breaches of the
director's duty of loyalty to the corporation or its shareholders; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit. Such limitation of liability provision also may
not limit director's liability for violation of, or otherwise relieve the
Delaware Company or its directors from the necessity of complying with, federal
or state securities laws or affect the availability of non-monetary remedies
such as injunctive relief or rescission.
Shareholders should recognize that a proposed reincorporation and associated
measures are designed to shield a director from suits by the Delaware Company or
its shareholders for monetary damages for negligence or gross negligence by the
director in failing to satisfy the director's duty of care. As a result, an
action for monetary damages against a director predicated on a breach of the
duty of care would be available only if the Delaware Company or its shareholders
were able to establish that the director was disloyal in his conduct, failed to
act in good faith, engaged in intentional misconduct, knowingly violated the
law, derived an improper personal benefit, or approved an illegal dividend or
stock repurchase. Consequently, the effect of such measures may be to limit or
eliminate an effective remedy that might otherwise be available to a shareholder
who is dissatisfied with the Board of Directors' decisions. Although
15
<PAGE>
a aggrieved shareholder could sue to enjoin or rescind an action taken or
proposed by the Board of Directors, such remedies may not be timely or adequate
to prevent or redress injury in all cases.
The Company believes that directors are motivated to exercise due care in
managing the Company's affairs primarily by concern for the best interests of
the Company and its shareholders rather than by the fear of potential monetary
damage awards. As a result, the Company believes that the reincorporation
proposal should sustain the Board of Directors' continued high standard of
corporate governance without any decrease in accountability by directors to the
Company and its shareholders.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The California Bylaws and Delaware Bylaws relating to indemnification
similarly require that the Company and the Delaware Company, respectively,
indemnify its directors and its executive officers to the fullest extent
permitted by the respective state law, provided, that the Company may modify the
extent of such indemnification by individual contracts with its directors and
executive officers, and, provided, further, that the Company will not be
required to indemnify any director or executive officer in connection with a
proceeding initiated by such person, with certain exceptions. Such Bylaws permit
the Company and the Delaware Company to provide indemnification to their other
officers, employees, and agents as set forth in the respective state law. Such
indemnification is intended to provide the full flexibility available under such
laws. The Delaware Bylaws contain provisions similar to the California Bylaws
with respect to advances in that the Delaware Company is required to advance
expenses related to any proceeding contingent on such persons' commitment to
repay any advances unless it is determined ultimately that such persons are
entitled to be indemnified.
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees, and other agents. There are
nonetheless certain differences between the laws of the two states.
California law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions; (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine; and (b) no indemnification
may be made under California law, without court approval, in respect of amounts
paid or expenses incurred in setting or otherwise disposing of a threatened or
pending action or amounts incurred in defending a pending action that is settled
or otherwise disposed of without court approval. Delaware allows indemnification
of such expenses without court approval.
Indemnification is permitted by both California and Delaware law providing
that requisite standard of conduct is met, as determined by a majority vote of a
disinterested quorum of the directors, independent legal counsel (if a quorum of
independent directors is not obtainable), a majority vote of a quorum of the
shareholders (excluding shares owned by the indemnified party), or the court
handling the action.
California law requires indemnification when an individual has successfully
defended the action on the merits (as opposed to Delaware law that requires
indemnification relating to a successful defense on the merits or otherwise).
Delaware generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel, or by a majority vote of a quorum of the shareholders that the person
seeking indemnification acted in good faith and in a manner believed to be or
(in contrast to California law as described above) not opposed to the best
interests of the corporation. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of his
or her duty to the corporation. Delaware law requires indemnification of
expenses when the individual being indemnified has successfully defended the
action on the merits or otherwise.
16
<PAGE>
California corporations may include in their articles of incorporation a
provision that extends the scope of indemnification through agreements, bylaws,
or other corporate action beyond that specifically authorized be statute. The
California Articles include such a provision.
A provision of Delaware law states that the indemnification provided by
statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise. Under
Delaware law, rights to indemnification and expenses are non-exclusive, in that
they need not be limited to those expressly provided by statute. California law
is similar in that it permits non-exclusive indemnification if authorized in the
Company's charter. The California Articles contain such an enabling provision.
Under Delaware law and the Delaware Certificate, the Delaware Company is
permitted to indemnify its directors, officers, employees, and other agents,
within the limits established by law and public policy, pursuant to an express
contract, bylaw provision, shareholder vote or otherwise, any or all of which
could provide indemnification rights broader than those currently available
under the California Bylaws or the California indemnification statutes. If the
reincorporation is approved, the Company may enter into new indemnification
agreements with its officers and directors to replace those indemnification
agreements entered into under the California Articles and California law.
The indemnification and limitation provisions of California law, and not
Delaware law, will apply to actions of the directors and officers of the Company
made prior to the proposed reincorporation. Nevertheless, the Board of Directors
has recognized in considering this reincorporation proposal that the individuals
have a personal interest in obtaining the application of Delaware law to such
indemnity and limitation of liability issues affecting them and the Company in
the event they arise from a potential future case, and that the application of
Delaware law, to the extent that any director or officer is actually indemnified
in circumstances where indemnification would not be available under California
law, would result in expense to the Company that the Company would not incur if
the Company were not reincorporated. The Board of Directors believes, however,
that the overall effect of reincorporation is to provide a corporate legal
environment that enhances the Company's ability to attract and retain high
quality directors and thus benefits the interest of the Company and its
shareholders.
There is no pending or, to the Company's knowledge, threatened litigation to
which any of its directors is a party in which the rights of the Company or its
shareholders would be affected if the Company currently were subject to the
provisions of Delaware law rather than California law.
California and Delaware corporate law, the California Bylaws and the
Delaware Bylaws, as well as any indemnity agreements, may permit indemnification
for liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Board of Directors has been advised that, in the opinion of
the Securities and Exchange Commission (the "SEC"), indemnification for
liabilities arising under the Securities Act is contrary to public policy and is
therefore unenforceable, absent a decision to the contrary by a court of
appropriate jurisdiction.
CUMULATIVE VOTING FOR DIRECTORS
Cumulative voting permits the holder of each share of stock entitled to vote
in the election of directors to cast that number of votes which equal the number
of directors to be elected. The holder may allocate all votes represented by a
share to a single candidate or may allocate those votes among as many candidates
as he chooses. Thus, a shareholder with a significant minority percentage of the
outstanding shares may be able to elect one or more directors if voting is
cumulative. In contrast, under non-cumulative voting, the holder or holders of a
majority of the shares entitled to vote in an election of directors will be able
to elect all directors of the Company.
Under California law, cumulative voting in the election of directors is
mandatory upon notice given by a shareholder at a shareholder's meeting at which
directors are to be elected. In order to cumulate votes a shareholder must give
notice at the meeting, prior to the voting, of the shareholder's intention to
vote cumulatively. If any one shareholder gives such a notice, all shareholders
may cumulate their votes. However, California law permits a company, by amending
its articles of incorporation or bylaws, to
17
<PAGE>
eliminate cumulative voting when the Company's shares are listed on a national
stock exchange or traded in the NASDAQ and are held by at least 800 equity
security holders. The California Articles do not include such a provision.
Cumulative voting is not available under Delaware law unless so provided in
the corporation's certificate of incorporation. The Delaware Certificate does
not provide for cumulative voting.
The elimination of cumulative voting could deter investors from acquiring a
minority block in the Company with a view toward obtaining a board seat and
influencing Company policy. It is also conceivable that the absence of
cumulative voting might deter efforts to seek control of the Company on a basis
that some shareholders might deem favorable.
OTHER MATTERS RELATING TO DIRECTORS
NUMBER OF DIRECTORS
California law allows the number of persons constituting the board of
directors of a corporation to be fixed by the bylaws or the articles of
incorporation, or permits the bylaws to provide that the number of directors may
vary within a specified range, the exact number to be determined by the board of
directors. California law further provides that, in the case of a variable
board, the maximum number of directors may not exceed two times the minimum
number minus one. The California Bylaws provide for a Board of Directors that
may vary between five and nine members, inclusive, and the Board of Directors
has fixed the exact number of directors at seven. California law also requires
that any change in the range of a variable Board of Directors specified in the
articles and bylaws must be approved by a majority in interest of the
outstanding shares entitled to vote (or such greater proportion of the
outstanding shares as may be required by the articles of incorporation),
provided that a change reducing the minimum number of directors to less than
three cannot be adopted if votes cast against its adoption are equal to more
than 16 2/3% of the outstanding shares entitled to vote. The California Bylaws
require the aforementioned voting provisions for such changes.
Delaware law permits a board of directors to change the authorized number of
directors by amendment to the bylaws unless the number of directors is fixed in
the certificate of incorporation or the manner of fixing the number of directors
is set forth in the certificate of incorporation, in which case the number of
directors may be changed only by amendment of the certificate of incorporation
or consistent with the manner specified in the certificate of incorporation, as
the case may be. The Delaware Certificate provides that the exact number of
directors shall be fixed from time to time exclusively by the Board of Directors
by resolution.
REMOVAL OF DIRECTORS
Under California law, a director may be removed with or without cause by the
affirmative vote of a majority of the outstanding shares, provided that the
shares voted against removal would not be sufficient to elect the director by
cumulative voting. Under Delaware law, unless the board is classified or
cumulative voting is permitted, a director can be removed from office during his
term by shareholders with or without cause by the holders of a majority of the
shares then entitled to vote at an election of directors. The Delaware
Certificate provides that the Company's directors may be removed from office at
any time with or without cause by the affirmative vote of the holders of a
majority of the voting power of the then-outstanding shares of Voting Stock. The
term "cause" with respect to the removal of directors is not defined in the
Delaware General Corporation Law and its meaning has not been precisely
delineated in Delaware courts.
FILLING BOARD VACANCIES
Under California law, if, after the filling of any vacancy by the directors
of a corporation, the directors then in office who have been elected by the
corporation's shareholders constitute less than a majority of the directors then
in office, then: (i) any holder of more than 5% of the corporation's Voting
Stock may
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call a special meeting of shareholders, or (ii) the superior court of the
appropriate county may order a special meeting of the shareholders to elect the
entire board of directors of the corporation. Delaware law provides that if, at
the time of filling any vacancy or newly created directorship, the directors
then in office constitute less than a majority of the entire board of directors
as constituted immediately prior to any increase, the Delaware Court of Chancery
may, upon application of any shareholder or shareholders holding at least 10% of
the total number of shares at the time outstanding have the right to vote for
such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships or to replace the directors chosen by
the directors then in office.
The Delaware Bylaws provide that vacancies shall, unless the Board of
Directors determines by resolution that any such vacancies be filled by the
shareholders or as otherwise provided by law, be filled only by the affirmative
vote of a majority of directors then in office, even if such directors comprise
less than a quorum of the Board of Directors.
SHAREHOLDER POWER TO CALL SPECIAL SHAREHOLDERS' MEETING
Under California law, a special meeting of shareholders may be called by the
Board of Directors, the Chairman of the Board of Directors, the President, or
the holders of shares entitled to cast not less than 10% of the votes at such
meeting and such persons as are authorized by the articles of incorporation or
bylaws. Under Delaware law, a special meeting of shareholders may be called by
the Board of Directors or by any other person authorized to do so in the
certificate of incorporation or the bylaws. The Delaware Bylaws provide that
such a meeting may be called by the Board of Directors, the Chairman of the
Board of Directors, or the Chief Executive Officer. Pursuant to the Delaware
Bylaws, if the meeting is called by a person or persons other than the Board of
Directors, (i.e. by the Chairman of the Board of Directors or the Chief
Executive Officer) the Board of Directors shall determine the time and the place
of such meeting which shall be from 35 to 120 days after the receipt of the
request for the meeting.
ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
There is no statutory requirement under either California or Delaware law
with regard to advance notice of director nominations and shareholder proposals.
Absent a bylaw restriction, director nominations and shareholder proposals may
be made without notice at the annual meeting. However, federal securities laws
generally provide that shareholder proposals that the proponent wishes to
include in the Company's proxy materials must be received not less than 120 days
in advance of the date stated in the proxy statement released in connection with
the previous year's annual meeting.
The Delaware Bylaws provide that, in order for director nominations or
shareholder proposals to be properly brought before the annual meeting, the
shareholder must have delivered timely notice to the Secretary of the
corporation. To be timely under the Delaware Bylaws, notice must be delivered
not less than 120 days prior to the date of the Company's proxy statement
released to stockholders in connection with the previous year's annual meeting.
If no meeting was held in the previous year or the date of the annual meeting
has been changed by more than 30 days from the date contemplated at the time of
the previous year's proxy statement, the Delaware Bylaws provide that notice
must be given not more than 90 days nor less than 60 days prior to the annual
meeting. Proper notice under federal securities laws for a proposal to be
included in the Company's proxy materials will constitute proper notice under
the Delaware Bylaws. These notice requirements help ensure that shareholders are
aware of all proposals to be voted on at the annual meeting and have the
opportunity to consider each proposal in advance of the annual meeting.
ANTI-TAKEOVER MEASURES
Delaware law has been widely viewed to permit a corporation greater
flexibility in governing its internal affairs and its relationships with
shareholders and other parties than do the laws of many other states, including
California. In particular, Delaware law permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to hostile takeover
attempts. Such measures are
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either not currently permitted or are more narrowly drawn under California law.
Among these measures are the elimination of the right of shareholders to call
special shareholders' meetings which is described above. In addition, certain
types of "poison pill" defenses (such as shareholder rights plans) have been
upheld by Delaware courts, while California courts have yet to decide on the
validity of such defenses, thus rendering their effectiveness in California less
certain.
As discussed above, numerous differences between California and Delaware
law, effective without additional action by the Delaware Company, could have a
bearing on unapproved takeover attempts. One such difference is the existence of
a Delaware statute regulating tender offers, which statute is intended to limit
coercive takeovers of companies incorporated in that state. California has no
comparable statute and the California Articles contain no provision similar to
the Delaware statute. Delaware law provides that a corporation may not engage in
any business combination with any interested shareholder for a period of three
years following the date that such shareholder became an interested shareholder,
unless (i) prior to the date the shareholder became an interested shareholder
the Board of Directors approved the business combination or the transaction that
resulted in the shareholder becoming an interested shareholder, or (ii) upon
consummation of the transaction that resulted in the shareholder becoming an
interested shareholder, the interested shareholder owned at least 85% of the
Voting Stock, or (iii) the business combination is approved by the Board of
Directors and authorized by 66 2/3% of the outstanding Voting Stock that is not
owned by the interested shareholder. An interested shareholder means any person
that is the owner of 15% or more of the outstanding Voting Stock, however, the
statute provides for certain exceptions to parties who otherwise would be
designated interested shareholders, including an exception for parties that held
15% or more of the outstanding Voting Stock as of December 23, 1987. Any
corporation may decide to opt out of the statute in its original certificate of
incorporation or, at any time, by action of its shareholders. The Company has no
present intention of opting out of this statute.
There can be no assurances that the Board of Directors would not adopt any
further anti-takeover measures available under Delaware law (some of which may
not require shareholder approval). Moreover, the availability of such measures
under Delaware law, whether or not implemented, may have the effect of
discouraging a future takeover attempt that a majority of the Delaware Company's
shareholders may deem to be in their best interests or in which shareholders may
receive a premium for their shares over then current market prices. As a result,
shareholders who might desire to participate in such transactions may not have
the opportunity to do so. Shareholders should recognize that, if adopted, the
effect of such measures, along with the possibility of discouraging takeover
attempts, may be to limit in certain respects the rights of shareholders of the
Delaware Company compared with the rights of the shareholders of the Company.
The Board of Directors recognizes that hostile takeover attempts do not
always have unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts (such
as disruption of the Company's business and the possibility of terms that may be
less favorable to all of the shareholders than would be available in a
board-approved transaction) are sufficiently great such that prudent steps to
reduce the likelihood of such takeover attempts and to enable the Board of
Directors to fully consider the proposed takeover attempt and actively negotiate
its terms are in the best interests of the Company and its shareholders.
In addition to the various anti-takeover measures that would be available to
the Delaware Company after the reincorporation due to the application of
Delaware law, the Delaware Company would retain the rights currently available
to the Company under California law to issue shares of its authorized but
unissued capital stock. Following the effectiveness of the proposed
reincorporation, shares of authorized and unissued Common Stock and Preferred
Stock of the Delaware Company could (within limits imposed by applicable law) be
issued in one or more transactions, or Preferred Stock could be issued with
terms, provisions, and rights that would make more difficult and, therefore,
less likely, a takeover of the Delaware Company. Any such issuance of additional
stock could have the effect of diluting the earnings per share and book value
per share of existing shares of Common Stock and Preferred Stock, and such
additional
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shares could be used to dilute the stock ownership of persons seeking to obtain
control of the Delaware Company.
It should be noted that the voting rights to be accorded to any unissued
series of Preferred Stock of the Delaware Company ("Delaware Preferred Stock")
remain to be fixed by the Delaware Board of Directors. Accordingly, if the
Delaware Board of Directors so authorizes, the holders of Delaware Preferred
Stock may be entitled to vote separately as a class in connection with approval
of certain extraordinary corporate transactions in circumstances where Delaware
law does not ordinarily require such a class vote, or might be given a
disproportionately larger number of votes. Such Delaware Preferred Stock could
also be convertible into a large number of shares of Common Stock of the
Delaware Company under certain circumstances or have other terms that might make
acquisition of a controlling interest in the Delaware Company more difficult or
more costly, including the right to elect additional directors to the Delaware
Board of Directors. Potentially, the Delaware Preferred Stock could be used to
create voting impediments or to frustrate persons seeking to effect a merger or
otherwise to gain control of the Delaware Company. Also, the Delaware Preferred
Stock could be privately placed with purchasers who might side with the
management of the Delaware Company in opposing a hostile tender offer or other
attempt to obtain control.
If the reincorporation is approved it is not the present intention of the
Board of Directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Common Stock of the Delaware Company, except as
required by law or regulation. Frequently, opportunities arise that require
prompt action, and it is the belief of the Board of Directors that the delay
necessary for shareholder approval of a specific issuance would be a detriment
to the Delaware Company and its shareholders. The Board of Directors does not
intend to issue any Preferred Stock except on terms that the Board of Directors
deem to be in the best interests of the Delaware Company and its then existing
shareholders.
LOANS TO OFFICERS, DIRECTORS, AND EMPLOYEES
California law provides that any loan or guaranty (other than loans to
permit the purchase of shares under certain stock purchase plans) for the
benefit of any officer or director, or any employee benefit plan authorizing
such loan or guaranty (except certain employee stock purchase plans), must be
approved by the shareholders of a California corporation.
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when, in the judgment of the board
of directors, the loan or guaranty may reasonable be expected to benefit the
corporation. Both California law and Delaware law permit such loans or
guaranties to be unsecured and without interest. The Delaware Bylaws permit the
making of such loans or guarantees by the Delaware Company.
CLASS VOTE FOR CERTAIN REORGANIZATIONS
With certain exceptions, California law requires that mergers,
reorganizations, certain sales of assets, and similar transactions be approved
by a majority of each class of shares outstanding. Delaware law generally does
not require class voting for such transactions, except in certain situations
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares.
California law also requires that holders of a California corporation's
common stock receive non-redeemable common stock in a merger of the corporation
with the holder (or an affiliate of the holder) of more than 50% but less than
90% of its common stock, unless all of the holders of its common stock consent
to the merger or the merger has been approved by the California Commissioner of
Corporations at a "fairness" hearing. This provision of California law may have
the effect of making a cash "freezeout" merger by a majority shareholder more
difficult to accomplish. A cash freezeout merger is a transaction whereby a
minority shareholder is forced to relinquish his share ownership in a
corporation in exchange for cash, subject in certain instances to dissenters
rights. Delaware law has no comparable provision.
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INSPECTION OF SHAREHOLDER LISTS
California law provides for an absolute right of inspection of the
shareholder list for shareholders holding more than 5% or more of a
corporation's Voting Stock or shareholders holding 1% or more of such shares who
have filed a Schedule 14B with the SEC. Delaware law provides no such absolute
right of shareholder inspection. However, both California and Delaware law
permit any shareholder of record to inspect the shareholder list for any purpose
reasonably related to that person's interest as a shareholder.
APPRAISAL RIGHTS
Under both California law and Delaware law, a shareholder of a corporation
participating in certain mergers and reorganizations may be entitled to receive
cash in the amount of the "fair value" (Delaware) or "fair value" (California)
of its shares, as determined by a court, in lieu of the consideration it would
otherwise receive in the transaction. The limitations on such dissenters'
appraisal rights are somewhat different in California and Delaware.
Shareholders of a California corporation, the shares of which are listed on
a national securities exchange or on the OTC margin stock list, generally do not
have appraisal rights unless the holders of at least 5% of the class of
outstanding shares assert the appraisal right. In any reorganization in which
one corporation or the shareholders of one corporation own more than 5/6 of the
voting power of the surviving or acquiring corporation, shareholders are denied
dissenters' rights under California law. For this reason, appraisal rights will
not be available to shareholders in connection with the reincorporation
proposal.
Under Delaware law appraisal rights are not available to shareholders with
respect to a merger or consolidation by a corporation, the shares of which are
either listed on a national securities exchange or designated as a national
market system security or an interdealer quotation system security by the
National Association of Securities Dealers, Inc., or are held of record by more
than 2,000 holders if the shareholders receive shares of the surviving
corporation of any other corporation that are similarly listed or dispersed, and
the shareholders do not receive any other property in exchange for their shares
except cash for fractional shares. Appraisal rights are also unavailable under
Delaware law to shareholders surviving a merger if no vote of those shareholders
is required to approve the merger because, among other things, the number of
shares to be issued in the merger does not exceed 20% of the shares of the
surviving corporation outstanding immediately before the merger and certain
other conditions are met.
VOTING AND APPRAISAL RIGHTS IN CERTAIN TRANSACTIONS
Delaware law does not provide shareholders with voting or appraisal rights
when a corporation acquires another business through the issuance of its stock,
whether in exchange for assets or stock or in a merger with a subsidiary.
California law treats these kinds of acquisitions in the same manner as a merger
of the corporation directly with the business to be acquired and provides
appraisal rights in circumstances described in the preceding section.
DIVIDENDS
Under California law, any dividends or other distributions to shareholders,
such as redemptions, are limited to the greater of; (i) retained earnings, or
(ii) an amount that would leave the corporation with assets (excluding certain
intangible assets) equal to at least 125% of its liabilities (excluding certain
deferred items) and current assets equal to at least 100% (or, in certain
circumstances, 125%) of its current liabilities. Delaware law allows the payment
of dividends and redemption of stock out of surplus (including paid-in and
earned surplus) or out of net profits for the current and immediately preceding
fiscal years. The Company has never paid cash dividends and has no present plans
to do so.
APPLICATION OF CALIFORNIA LAW AFTER REINCORPORATION
Under California law, certain foreign corporations (i.e., corporations not
organized under California law) are placed in a special category if they have
characteristics of ownership and operation which indicate
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that they have significant contacts with California. Specifically, California
law provides that so long as the foreign company does not qualify for one of the
statutory exemptions, and if; (i) the average of certain property, payroll, and
sales factors results in a finding that more than 50% of the foreign
corporation's business is conducted in California, and in a particular fiscal
year more than 50% of the foreign corporation's outstanding voting securities
are held of record by persons having addresses in California, then the foreign
corporation is subject to a number of key provisions of the California
Corporations Code. A statutory exemption from the application of California law
to the foreign corporation is provided for companies whose shares are traded as
a national market security on NASDAQ and which shares are held by at least 800
shareholders as of the record date of its most recent annual meeting of
shareholders.
The Company's Common Stock is currently traded on The NASDAQ National
Market, and as of June 12, 1997, the Company's outstanding shares were held by
approximately 1,500 shareholders. On the effective date of the reincorporation,
the shareholders of the Company will automatically become shareholders of the
Delaware Company and the Delaware Company common stock will likely be traded
without interruption on NASDAQ. Accordingly, upon reincorporation the Delaware
Company should meet the statutory exemption. There can be no assurance, however,
that the Delaware Company will be able to continue to meet the statutory
exemption in the future.
If the provisions of the California Corporations Code were enforced by
California courts in a particular case, many of the Delaware laws described in
this Proxy Statement would not apply to the Delaware Company. Among the more
important provisions are those relating to standards of liability and
indemnification of directors, cumulative voting, number and removal of
directors, filling board vacancies, shareholder meetings and actions by
unanimous consent of shareholders, loans to officers, directors and employees,
approval of certain corporation transactions, dissenters' and appraisal rights,
distributions, dividends and inspection of corporation records. See "Significant
Changes Caused by Reincorporation" and the discussion immediately following it,
above.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The reincorporation provided for in the Merger Agreement is intended to be a
tax free reorganization under the Internal Revenue Code of 1986, as amended.
Assuming the reincorporation qualifies as a reorganization, no gain or loss will
be recognized to the holders of capital stock of the Company as a result of
consummation of the reincorporation, and no gain or loss will be recognized by
the Company or the Delaware Company. Each former holder of capital stock of the
Company will have the same basis in the capital stock of the Delaware Company
received by such holder pursuant to the reincorporation as such holder has in
the capital stock of the Company held by such holder at the time of consummation
of the reincorporation. Each shareholder's holding period with respect to the
Delaware Company's capital stock will include the period during which such
holder the corresponding Company capital stock, provided the latter was held by
such holder as a capital asset at the time of consummation of the
reincorporation. The Company has not obtained a ruling from the Internal Revenue
Service or an opinion of legal or tax counsel with respect the consequences of
the reincorporation.
The foregoing is only a summary of certain federal income tax consequences.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE PROPOSED REINCORPORATION, INCLUDING THE APPICABILITY
OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
BOARD RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by proxy and voting at the
Annual Meeting (and the affirmative vote of the holders of a majority of the
shares necessary for a quorum at the Annual Meeting) is required for approval of
the reincorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE REINCORPORATION
OF THE COMPANY IN DELAWARE AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS.
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PROPOSAL 4
TO RATIFY THE SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors of the
Company has selected Arthur Andersen LLP as independent public accountants for
the Company for the fiscal year ending March 31, 1998. A partner of Arthur
Andersen LLP is expected to attend the Annual Meeting. He will have an
opportunity to make a statement if he desires and will be available to respond
to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION OF
THIS PROPOSAL.
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no other
business that will be presented for consideration at the Annual Meeting.
However, if other proper matters are presented at the meeting, it is the
intention of the proxy holders named in the accompanying proxy to take such
action as shall be in accordance with their judgment on such matters. The quorum
requirement for convening the meeting is a majority of the outstanding shares of
Common Stock.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth information for services in
all capacities paid or accrued for the fiscal years ended March 31, 1997 and
1996 and the period from inception (September 15, 1994) to March 31, 1995 by the
Company to its Chief Executive Officer and the other executive officers whose
total annual compensation exceeded $100,000 for such fiscal years and period
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
FISCAL YEAR AND ANNUAL COMPENSATION SECURITIES ALL OTHER
PERIOD ENDED ------------------------ UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION MARCH 31 SALARY($) BONUS($) OPTIONS ($)
- ---------------------------------------- --------------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Elliot Friedman......................... 1997 $ 170,663(1) $ 50,000(2) -- $ --
Chairman of the Board of 1996 89,333 -- 712,708(3) --
Directors and Chief Executive 1995 22,500 -- --
Officer
Robert J. Burgess....................... 1997 $ 163,335(4) $ 50,000(2) 712,708(5) $ --
President and Chief Operating 1996 87,687 -- -- --
Officer 1995 -- -- -- --
Tasneem A. Khwaja, Ph.D................. 1997 $ 168,163(6) $ -- -- $ --
Chief Scientific Officer and 1996 87,633(6) -- -- --
Secretary 1995 23,000(6) -- -- --
</TABLE>
- ------------------------
(1) Amount includes payments representing deferred salary pursuant to Employment
Agreements between the Company and each of Mr. Friedman and Dr. Khwaja. As
regards to Mr. Friedman and Dr. Khwaja, such deferred payments were $39,863
and $39,863, respectively, and which were paid upon consummation of the
Company's initial public offering. See Employment and Personal Services
Agreements.
(2) Amount represents payments made pursuant to a discretionary bonus.
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(3) Pursuant to an Agreement between the Company, Dr. Khwaja, and Mr. Friedman
dated as of May 8, 1996, these options were canceled in connection with the
issuance of 712,708 shares of Common Stock to Mr. Friedman for services to
be rendered.
(4) Represents amounts paid by the Company to Dimension Memory, Inc.
("Dimension") which provides the services of Robert J. Burgess as President
and Chief Operating Officer pursuant to a personal services agreement
between the Company and Dimension. In December 1996, the Company amended its
agreement with Dimension. The amended agreement provided for the accelerated
payment by the Company of all amounts due under the personal services
agreement in exchange for Dimension agreeing to provide additional services
to the Company. As a result, the Company paid Dimension $312,000. Of the
$312,000 paid to Dimension, $35,000 relating to services provided by
Dimension to the Company for the period January 1997 through March 1997 are
included, and $277,000 paid for services to be provided from April 1997
through December 1998 are not included. Amount also includes $50,000 of
deferred payments pursuant to such personal services agreement, which were
paid upon consummation of the Company's initial public offering. See
Employment and Personal Services Agreements.
(5) These options, which were granted to Dimension pursuant to a consulting
agreement between the Company and Dimension, were canceled in connection
with the issuance of 712,708 shares of Common Stock to Dimension for
services to be rendered by Dimension pursuant to the Personal Service
Agreement between the Company and Dimension.
(6) Does not include $70,000 annual salary paid by USC to Dr. Khwaja as a
professor. Approximately $30,000 of such salary is paid indirectly through
payment by the Company to USC of the amount required by the Research
Agreement. See Certain Relationships.
EMPLOYMENT AND PERSONAL SERVICE AGREEMENTS
The Company has entered into an employment agreement with Elliot P.
Friedman, effective November 1, 1995, amended as of May 8, 1996, which expires
on October 31, 1998, unless terminated earlier by the Company or Mr. Friedman.
The agreement provides for the following (i) an annual base salary of $140,000;
and provided further that until such time as the Company has raised $3,000,000
in a series of private placements and public offerings, salary payments will be
paid at the rate of $7,500 per month ($90,000 annually) with the balance, up to
a maximum of $50,000 deferred, (ii) an upward adjustment in the base salary on
November 1 of each year based upon increases in the Consumer Price Index
("CPI"), and (iii) an automobile allowance of $500 per month. In August 1996,
the Company had raised more than $3,000,000 in a series of private placements
and public offerings and, accordingly, Mr. Friedman received $39,863 of deferred
compensation. The agreement also provides that if Mr. Friedman's employment is
terminated, the Company is obligated to pay Mr. Friedman the salary and benefits
earned or accrued through the date of termination, and within 30 days after
termination, a lump sum of the present value of the salary provided for by the
agreement for the (i) 18 months immediately following termination, if
termination is without cause or if the termination is by Mr. Friedman on the
basis of a breach by the Company and (ii) the lesser of six months immediately
following termination or the remainder of the term of the agreement if
termination is due to death. In the event of disability or if the agreement is
voluntarily terminated by Mr. Friedman, or terminated for cause by the Company,
the Company is obligated to pay only salary and benefits earned or accrued
through the date of termination. Effective March 1, 1997, Mr. Friedman's base
compensation was increased to $182,000 per year and the automobile allowance was
eliminated.
The Company has entered into an employment agreement with Tasneem A. Khwaja,
effective November 1, 1995, amended as of May 8, 1996, which expires on October
31, 1998, unless terminated earlier by the Company or Dr. Khwaja. The agreement
provides for the following (i) an annual base salary of $140,000 provided that
in the event Dr. Khwaja's salary of $70,000 received from USC in exchange for
his services as a professor at USC is decreased or terminated by USC, the
Company is obligated to increase Dr. Khwaja's compensation by an equivalent
amount; and provided further that until such time as the Company has raised
$3,000,000 in a series of private placements and public offerings, salary
payments will
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<PAGE>
be paid at the rate of $7,500 per month ($90,000 annually) with the balance, up
to a maximum of $50,000 deferred; (ii) an upward adjustment in the base salary
on November 1 of each year based upon increases in the CPI, and (iii) an
automobile allowance of $500 per month. In August 1996, the Company had raised
more than $3,000,000 in a series of private placements and public offerings and,
accordingly, Dr. Khwaja received $39,863 of deferred compensation. The agreement
also provides that if Dr. Khwaja's employment is terminated, the Company is
obligated to pay Dr. Khwaja the salary and benefits earned or accrued through
the date of termination and, within 30 days after termination, a lump sum of the
present value of the salary provided for by the agreement for the (i) 18 months
immediately following termination, if termination is without cause or if the
termination is by Dr. Khwaja on the basis of a breach by the Company; and (ii)
the lesser of six months immediately following termination or the remainder of
the term of the agreement if termination is due to death. In the event of
disability or if the agreement is voluntarily terminated by Dr. Khwaja or
terminated for cause by the Company, the Company is obligated to pay only salary
and benefits earned and accrued through the date of termination. Effective April
1, 1997, Dr. Khwaja's base salary was increased to $152,000 per year and the
automobile allowance was eliminated.
The Company has entered into a personal services agreement (the "Personal
Services Agreement") with Dimension as of May 8, 1996, which expires on December
31, 1998. Pursuant to the Personal Services Agreement, Dimension is to provide
the services of Robert Burgess as Executive Vice President and Chief Operating
Officer of the Company, and he may not compete with the Company during the term
of the agreement. Under the terms of the Personal Services Agreement, Dimension
is to be paid $140,000 annually, such amount to be paid at the rate of $10,000
per month ($120,000 annually) with the balance deferred until the Company has
raised an aggregate of $3,000,000 by means of a series of private placements and
public offerings subsequent to November 30, 1995. At such time as the Company
has raised an aggregate of $3,000,000 by such offerings, a maximum of $50,000 of
deferred compensation under the Personal Services Agreement and any other
superceded consulting agreements will be paid to Dimension. In August 1996, the
Company had raised more than $3,000,000 in a series of private placements and
public offerings and accordingly, Dimension received $50,000 of deferred
compensation. Additionally the Company issued 712,708 shares of Common Stock to
Dimension and in connection therewith canceled options held by Dimension to
acquire 712,708 shares of Common Stock. In December, 1996, the Company amended
its Personal Services Agreement with Dimension. The amended agreement provides
for the immediate payment by the Company of all amounts due under the Personal
Services Agreement in exchange for Dimension agreeing to provide additional
services to the Company. As a result of this amended agreement, the Company paid
Dimension $312,000. Effective April 15, 1997, Dimension agreed to provide the
services of Mr. Burgess as the Company's President and Chief Operating Officer
and the Company agreed to pay Dimension at the rate of $36,000 per year,
effective March 1, 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors is presently
composed of Howard R. Asher and Phillip G. Trad, who are not employees of the
Company. Mr. Asher is the President, Chief Executive Officer, and majority
shareholder of ABA. ABA is a clinical research organization that provides FDA
strategic consulting and professional services and provides guidance to the
Company in connection with various, clinical, scientific, and regulatory
matters. ABA has offices in San Diego and San Francisco, California, and
Washington DC. ABA's staff has extensive experience and advanced degrees in
science, clinical medicine, law, and business. Many staff members are RAC and
International Standards Organization ("ISO") certified. The Company paid
approximately $880,000 for the year ended March 31, 1997, for services rendered
by ABA. During the year ended March 31, 1997, the Company utilized the services
of Mr. Phillip G. Trad, a member of the Company's Board of Directors, for
various legal and business development matters. The Company paid approximately
$40,000 to Mr. Trad for such services.
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has responsibility for PharmaPrint's executive
compensation policies and practices. The committee approves all elements of
compensation for corporate officers and administers the Plan, under which stock
awards are made to officers, other executives, consultants, and other key
employees. The committee regularly reports on its activities to the Board of
Directors. The committee is comprised of two outside directors who are not
officers or employees of the Company and who are not eligible to participate in
any of the plans or programs that the committee administers.
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are based on the belief that
the interests of the executive should be directly aligned with those of the
shareholders. The programs are strongly oriented towards a pay-at-risk
philosophy that ties individual compensation to both the annual and long-term
development goals of the Company. The committee has established the following
principles to guide development of the Company's compensation programs and to
provide a framework for compensation decisions:
- provide a total compensation package that will attract the best talent to
PharmaPrint, motivate individuals to perform at their highest levels,
reward outstanding performance, and retain executives whose skills are
critical for building long-term shareholder value;
- establish incentives for senior management that are directly tied to both
specific and overall development goals of the Company; and
- implement long-term incentives to focus executives on managing from the
perspective of an owner with an equity stake in the business, and align
executive compensation with benefits realized by the Company's
shareholders.
COMPENSATION PROGRAMS AND PRACTICES
The committee determines salary ranges and incentive award opportunities for
executive officers. Many of these officers are parties to employment agreements
pursuant to which base compensation levels are fixed in amount. The committee
has the discretion to increase such rate of compensation, but not to reduce the
compensation paid.
SALARY AND INCENTIVES
Salaries are established by the committee for those executives who are not
parties to employment agreements based on an executive's scope of
responsibilities, level of experience, individual performance, and contribution
to the business. For the year ended March 31, 1997, executive officers of the
Company were entitled to incentive bonuses based upon specific development goals
of the Company. These incentive bonuses were developed by Elliot P. Friedman,
the Company's then President and Chief Executive Officer, and approved by the
committee.
STOCK OPTIONS
The committee believes that the interests of senior management must be
closely aligned with those of the shareholders. Long-term incentives in the form
of stock options provide a vehicle to reward executives only if there is an
increase in shareholder value. Stock options are granted to officers, other
executives, key consultants, and other selected employees whose contributions
and skills are important to the long-term success of the Company. Stock options
are also granted to newly hired executives and other employees as a method to
attract the best talent to the Company. Options to purchase Common Stock of the
Company are granted at fair market value on the date of grant with varying
terms.
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During the year ended March 31, 1997, the Company only granted stock options
to executives who were hired during the year. Several factors were considered in
determining the size of such stock option grants to the executive officers.
These factors included the expected individual accomplishments and achievements
of certain executives and the experience levels of those executives hired during
the year. No specific weight was given to any factor, nor was the number of
options granted determined on any formula basis.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
Mr. Elliot P. Friedman was the Company's Chief Executive Officer throughout
the year. During the fiscal year ended March 31, 1997, Mr. Friedman's total
salary was $170,663, which included $39,863 of deferred salary payments.
Effective March 1, 1997, Mr. Friedman's salary was increased to $182,000 per
year.
In determining the compensation levels for Mr. Friedman, the Compensation
Committee considered the level of experience, dedication, and unique
qualifications Mr. Friedman has brought to the Company. The Compensation
Committee also analyzed the Company's goals for which Mr. Friedman had
responsibility and the degree to which Mr. Friedman contributed to reaching such
goals. Among the Company's accomplishments in the year ended March 31, 1997 were
the successful completion of the Company's initial public offering, the hiring
of key management personnel, the manufacturing of the initial clinical supplies,
including the Company's T4GEN product for the commencement of overseas Phase I
clinical trials, the commencement of such trials, and the negotiation with
potential corporate partners. The Compensation Committee believes that Mr.
Friedman's contribution to attaining these goals was crucial. Mr. Friedman's
salary was increased by an amount that the Compensation Committee believes
fairly represents his additional contributions to the Company's success. The
salary adjustment brought Mr. Friedman's salary to a level that is approximately
$60,000 below the average base salary and cash bonus received by the most highly
compensated executives during the last fiscal year of each of nine peer group
companies. Additionally, a performance bonus in the amount of $50,000 was
granted to Mr. Friedman because of his contribution to the Company's entering
into letters of intent with two companies for the potential joint development of
pharmaceutical versions of natural medicines.
DISCUSSION OF CORPORATE TAX DEDUCTION ON COMPENSATION IN EXCESS OF $1 MILLION A
YEAR
Internal Revenue Code Section 162(m), enacted in 1993, precludes a public
corporation from taking a federal income tax deduction in 1994 or subsequent
years for compensation in excess of $1 million for its chief executive officer
or any of its four other highest-paid officers. Certain performance-based
compensation, however, is specifically exempt from the deduction limit.
This report is submitted by the Compensation Committee:
Howard R. Asher
Phillip G. Trad
CERTAIN RELATIONSHIPS
As of March 22, 1996, Mr. Friedman, JadiJo, Inc., a California corporation,
Dr. Khwaja, Mr. Burgess, Dimension, and D-RAM Industries PTY, Ltd., an
Australian company ("D-RAM"), entered into a shareholders agreement pursuant to
which Dr. Khwaja contributed 1,336,978 shares of Common Stock to the Company as
a capital contribution and the Company agreed to issue 624,270 shares of Common
Stock to D-RAM, as nominee of Mr. Burgess, the Company's then Executive Vice
President and Chief Operating Officer, and options to acquire 712,708 shares of
Common Stock to Mr. Friedman, at an exercise price of $0.96 per share.
Subsequently, pursuant to an agreement dated as of May 8, 1996 among the
Company, Dr. Khwaja, and Mr. Friedman, the options granted to Mr. Friedman were
canceled and he was issued 712,708 shares of Common Stock. Mr. Friedman has
agreed that the shares issued to him will be canceled on August 20, 2001, unless
prior to that date (i) the Company has received approval of the FDA for the
public sale of any pharmaceutical product; (ii) the Company has reported pretax
earnings per share
28
<PAGE>
of $.50, exclusive of nonrecurring items for two consecutive years; (iii) the
Company has consummated a merger, tender offer, or sale of all or substantially
all of the shares of Common Stock (in excess of 90%) or sale of all of the
assets of the Company or ; (iv) the shares of Common Stock covered by the lock
up agreements entered into by each of Mr. Friedman and Dr. Khwaja with M.H.
Meyerson & Co., Inc. connection with the Company's initial public offering
restricting the resale of shares of Common Stock until August 14, 2001 have not
been released.
In December, 1996, the Company amended its Personal Services Agreement with
Dimension. The amended agreement provides for the immediate payment by the
Company of all amounts due under the Personal Services Agreement in exchange for
Dimension agreeing to provide additional services to the Company. As a result of
this amended agreement, the Company paid Dimension $312,000. Effective April 15,
1997, Dimension agreed to provide the services of Mr. Burgess as the Company's
President and Chief Operating Officer and the Company agreed to pay Dimension at
the rate of $36,000 per year, effective March 1, 1997.
ABA is a clinical research organization that provides FDA strategic
consulting and professional services and provides guidance to the Company in
connection with various clinical, scientific, and regulatory matters. ABA has
offices in San Diego and San Francisco, California, and Washington DC. ABA's
staff has extensive experience and advanced degrees in science, clinical
medicine, law, and business. Many staff members are RAC and ISO certified. Mr.
Howard R. Asher, a member of the Company's Board of Directors, is the President,
Chief Executive Officer, and majority shareholder of ABA. The Company paid
approximately $880,000 for the year ended March 31, 1997, for services rendered
by ABA.
Effective March 1, 1995, the Company and USC entered into a Research
Agreement for the purpose of developing new pharmaceuticals from natural
medicines. The Research Agreement expires on February 29, 2000. The Company paid
USC approximately $116,000 for the year ended March 31, 1997, under the terms of
the Research Agreement. The amount of payments made to USC were determined, in
part, based upon USC's cost of operating Dr. Khwaja's research facilities, which
includes a portion of the annual salary of $70,000 paid by USC to Dr. Khwaja.
Due to the completion of work performed on the Company's initial pharmaceutical
and the underlying science relating to the Pharmaprint-TM- process, effective
March 31, 1997, the Company canceled the Research Agreement.
There are no family relationships among the executive officers or directors
of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of May 31, 1997, with
respect to beneficial ownership of shares of Company Common Stock by any person
who is known by the Company to be the beneficial owner of more than 5% of
Company Common Stock, by directors individually, and by directors and executive
officers of the Company as a group. The information presented is based upon
information furnished to the Company by such beneficial owners.
<TABLE>
<CAPTION>
PHARMAPRINT COMMON STOCK
------------------------------------
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) CLASS
- ------------------------------------------------------------ ----------------------- ----------
<S> <C> <C>
Tasneem A. Khwaja, Ph.D..................................... 2,803,867(3) 25.5%
Elliot P. Friedman.......................................... 1,945,248(4) 17.7%
Robert J. Burgess........................................... 1,961,248(5) 17.8%
JadiJo, Inc.(6)............................................. 115,270(7) 1.0%
D-RAM Industries Pty Ltd.(8)................................ 624,270(7) 5.7%
Dimension Memory, Inc.(9)................................... 712,708(7) 6.5%
Phillip G. Trad............................................. 88,438(10) *
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
PHARMAPRINT COMMON STOCK
------------------------------------
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) CLASS
- ------------------------------------------------------------ ----------------------- ----------
<S> <C> <C>
John H. Abeles, M.D.(11).................................... 32,814(12) *
Lyle Anderson(13)........................................... 10,000(14) *
Howard R. Asher(15)......................................... 32,814(12) *
Nathan F. Troum, M.D.(16)................................... 10,000(14) *
All directors and executive officers as a group (10
people)................................................... 6,988,180(17) 62.0%
</TABLE>
The Company had holders of record of its Common Stock as of May 31, 1997.
- --------------------------
* Less than one percent (1%).
(1) The address of each person listed in this table, except as otherwise noted,
is c/o PharmaPrint Inc., 4 Park Plaza, Suite 1900, Irvine, California 92614.
(2) PharmaPrint Common Stock consists of 11,000,000 shares issued and
outstanding as of May 31, 1997. Includes the beneficial ownership of shares
that the person has a right to acquire within sixty (60) days of May 31,
1997.
(3) Includes 208,090 shares of Common Stock that Dr. Khwaja has agreed to
transfer to John Kirch, a former consultant of the Company, for matters
unrelated to the Company. 104,045 and 104,045 of such shares will be
transferred to Mr. Kirch on August 14, 1997 and 1998, respectively. Also
includes call options (obligations to sell) granted by Dr. Khwaja in the
amount of 200,000, 200,000, and 30,000 to Elliot P. Friedman, Robert J.
Burgess, and Dr. Khwaja's son, respectively.
(4) Does not include 200,000 call options (options to purchase) granted to Mr.
Friedman by Dr. Khwaja.
(5) Consists of 509,000, 115,270, 624,270, and 712,708 shares of Common Stock
owned of record by Mr. Burgess, JadiJo, Inc., D-RAM Industries Pty Ltd., and
Dimension, respectively, also shown separately in this table. Does not
include 200,000 call options (options to purchase) granted to Mr. Burgess by
Dr. Khwaja.
(6) The address of JadiJo, Inc. is 32, EDIF, J.J. Vallarino, 1st Floor, Office
3, Panama City, Panama.
(7) These shares are also included in the shares shown as beneficially owned by
Robert J. Burgess. These entities are controlled by various of the children
and/or sons-in-law of Mr. Burgess: James R. Burgess, Dione Neilson, Jodi
Perkins, Jon Neilson, and Brett Perkins
(8) The address of D-RAM Industries Pty Ltd. Is 98 Edinborough Street, Benowa
Waters, Gold Coast, 4217, Queensland, Australia.
(9) The address of Dimension Memory, Inc. is 17 Baycove Lane, Newport Beach,
California 92661.
(10) Consists solely of options to purchase 88,438 shares of Common Stock.
(11) The address of Dr. Abeles is c/o MedVest, Inc., 2365 N.W. 41st Street, Boca
Raton, Florida 33431.
(12) Consists solely of options to purchase 32,814 shares of Common Stock.
(13) The address of Mr. Anderson is 900 Appolo, Suite 4, Houston, Texas 77058.
(14) Consists solely of options to purchase 10,000 shares of Common Stock.
(15) The address of Mr. Asher is c/o Advanced BioResearch Associates, One
American Plaza, 600 West Broadway, Suite 900, San Diego, California 92101.
(16) The address of Dr. Troum is 3878 43rd Street, San Diego, California 92105.
(17) Includes beneficial ownership of Company Common Stock as follows: Tasneem
A. Khwaja, Ph. D.-- 2,803,867 shares; Elliot P. Friedman--1,945,248 shares;
and Robert J. Burgess--1,961,248 shares. Also includes options held by
directors and executive officers of the Company to purchase the following
number of shares of Common Stock: John H. Abeles, M.D.--32,814 shares; Lyle
Anderson--10,000 shares; Howard Asher--32,814 shares; Phillip G.
Trad--88,438 shares; Nathan F. Troum--10,000 shares; Costas C. Loullis--
70,001 shares; and James R. Wodach--33,750 shares.
30
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MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to Executive
Officers of the Company:
<TABLE>
<CAPTION>
NAME POSITION AGE
- ------------------------------- ----------------------------------------------------------------------- ---
<S> <C> <C>
Elliot P. Friedman(1) Chairman of the Board of Directors and Chief Executive Officer 43
Robert J. Burgess President and Chief Operating Officer 49
Tasneem A. Khwaja Chief Scientific Officer and Secretary 61
Costas C. Loullis Group Senior Vice President of Research and Development 47
James R. Wodach Senior Vice President and Chief Financial Officer 35
</TABLE>
- ------------------------
(1) Member of the Audit Committee and Executive Committee.
Mr. Friedman has been the Chairman of the Board of Directors and Chief
Executive Officer since April 1997, and was the President and Chief Executive
Officer of the Company from October 1995 to April 1997. He was also the Chief
Financial Officer of the Company from November 1994 to December 1996. He has
been a director since November 1994. From July 1990 to July 1994, Mr. Friedman
was co-founder and Chief Executive Officer of BioTek Solutions, a provider of
systems used by pathologists to conduct diagnosis of cancer through the use of
monoclonal antibodies and DNA probes.
Mr. Burgess has been President and Chief Operating Officer of the Company
since April 1997 and was Executive Vice President and Chief Operating Officer of
the Company from May 1996 to April 1997, pursuant to a personal services
contract between Dimension and the Company. From April 1995 to April 1996, Mr.
Burgess provided consulting services to the Company pursuant to consulting
agreements between the Company, Dimension, and Mr. Burgess, respectively. From
April 1994 to April 1995, he served as Chief Operating Officer of Dimension
Memory, a company that trades in computer microchips. From February 1993 to
April 1994, Mr. Burgess served as Chief Executive Officer of J. Micro Trading,
an Australian company that trades in computer microchips. From January 1991 to
January 1993, he was Chief Operating Officer of Integrated Memory Systems, which
manufactured computer memory modules.
Dr. Khwaja has been the Secretary of the Company since September 1994 and
Chief Scientific Officer since October 1995. From September 1994 to April 1997
Dr. Khwaja served as Chairman of the Board of Directors and from November 1994
to October 1995 Dr. Khwaja served as President and Chief Executive Officer of
the Company. Dr. Khwaja has been a Professor of Pathology at the USC School of
Medicine for the past 24 years.
Dr. Loullis has been Group Senior Vice President of Research and Development
since April 1997 and from October 1996 to April 1997 was Senior Vice President
of Research and Development. From November 1992 to October 1996, Dr. Loullis was
Vice President of Development of Houghten Pharmaceuticals. From August 1991 to
November 1992, he was a Section Manager in the Central Research Laboratories of
Rhone-Poulenc Rorer.
Mr. Wodach has been Senior Vice President and Chief Financial Officer since
December 1996. From April 1996 to December 1996, Mr. Wodach was Director of
Finance for Paragon Biomedical, Inc. From October 1995 to April 1996, he was an
independent consultant. From April 1994 to October 1995, Mr. Wodach was Senior
Vice President Finance, from April 1993 to April 1994 Senior Vice President and
Chief Financial Officer, from July 1992 to April 1993 Vice President Finance,
and from November 1989 to July 1992 Controller for Regency Health Services, Inc.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors and executive officers of the Company and persons who hold more than
10% of a registered class of the Company's
31
<PAGE>
equity securities ("Reporting Persons") to file with the Securities and Exchange
Commission (the "Commission") initial reports of ownership and reports of
changes in ownership of equity securities of the Company. Reporting Persons are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on
review of the copies of such reports furnished to the Company and written
representations that no other reports were required during the year ended March
31, 1997, all Section 16(a) filing requirements applicable to the Reporting
Persons were complied with except that Messrs. Burgess and Friedman filed late
one report covering one transaction, and Dr. Khwaja filed late two reports
covering two transactions.
GENERAL INFORMATION
REVOCABILITY OF PROXIES
Any proxy solicited hereby by the person giving it at any time before it has
been exercised at the Annual Meeting by giving notice of revocation to the
Secretary of the Company in writing, submitting a later-dated proxy, or by
voting the shares in person at the 1997 Annual Meeting. Holders whose shares are
in street name should consult with their brokers concerning procedures for
revocation. Subject to such revocation, all shares represented by a properly
executed proxy will be voted as directed by the holder on the proxy card. If no
choice is specified, proxies will be voted FOR (i) election of the named
directors to the Board of Directors, and (ii) all such other proposals listed in
this Proxy Statement.
SOLICITATION COSTS
The Company will pay the cost of preparing and mailing this proxy statement
and other costs of the proxy solicitation made by the Company's Board of
Directors. Certain of the Company's officers and employees may solicit the
submission of proxies authorizing the voting of shares in accordance with the
Board of Directors' recommendations, but no additional reimbursement will be
paid by the Company for the solicitation of those proxies. Such solicitation may
by made by personal interview, telephone, and telegram. Arrangements have also
been made with brokerage firms and others for the forwarding of proxy
solicitation materials to the beneficial owners of Common Stock, and the Company
will reimburse them for reasonable out-of-pocket expenses incurred in connection
therewith.
SHAREHOLDER PROPOSALS AND NOMINATIONS FOR 1998 ANNUAL MEETING
The Company's 1998 Annual Meeting is anticipated to occur on or about August
19, 1998. A shareholder desiring to submit a proposal for inclusion in the
Company's Proxy Statement for the 1998 Annual Meeting must deliver the proposal
so that it is received by the Company no later than March 14, 1998. The Company
requests that all such proposals be addressed to Corporate Secretary,
PharmaPrint Inc., 4 Park Plaza, Irvine, California 92614, and mailed certified
mail, return receipt requested.
By order of the Board of Directors
Tasneem A. Khwaja, Ph.D.
SECRETARY
Irvine, California
July 11, 1997
THE COMPANY HAS MAILED A COPY OF ITS 1997 ANNUAL REPORT TO EACH SHAREHOLDER
ENTITLED TO VOTE AT THE ANNUAL MEETING. INCLUDED IN THE 1997 ANNUAL REPORT ARE
THE COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 1997. THE
COMPANY'S 1997 ANNUAL REPORT DOES NOT FORM ANY PART OF THE MATERIAL FOR
SOLICITATION OF PROXIES.
32
<PAGE>
EXHIBIT A
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
PHARMAPRINT INC.
(A CALIFORNIA CORPORATION)
INTO
PHARMAPRINT INC.
(A DELAWARE CORPORATION)
PHARMAPRINT INC., a corporation organized and existing under the laws of
the State of California ("Parent"),
DOES HEREBY CERTIFY:
FIRST: That Parent was incorporated on the 15th day of September, 1994,
pursuant to the General Corporation Law of the State of California, the
provisions of which permit the merger of a corporation of another state and a
corporation organized and existing under the laws of said state.
SECOND: That Parent owns all of the outstanding shares of the stock of
PharmaPrint Inc., a corporation incorporated on the ___ day of _________, 1997
pursuant to the Delaware General Corporation Law of the State of Delaware
("Delaware Sub").
THIRD: That the directors of Parent, by the following resolutions of its
Board of Directors, duly adopted at a meeting held on the ____ day of _______,
1997, determined to merge Parent into Delaware Sub:
RESOLVED, that Parent merge, and it hereby does merge itself into
Delaware Sub which assumes all of the obligations of Parent;
FURTHER RESOLVED, that the merger shall be effective upon filing
with the Secretary of State of the State of Delaware; and
FURTHER RESOLVED, that the proper officers of Parent be and each
of them is hereby directed to make and execute a Certificate of
Ownership and Merger setting forth a copy of the resolutions to merge
Parent into Merger Sub and the date of adoption thereof, and to cause
the same to be filed with the Secretary of State of the State of
Delaware and to do all acts and things whatsoever, whether within or
without the State of Delaware, which may be necessary or proper to
effect said merger.
<PAGE>
FOURTH: That the proposed merger has been adopted, approved, certified,
executed and acknowledged by Parent in accordance with the laws of the State of
California, under which Parent was organized.
IN WITNESS WHEREOF, Parent has caused this Certificate to be signed by
_______________________, its ________________, this _____ day of __________,
1997.
PHARMAPRINT INC.
By:
---------------------------
Name:
Title:
2
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of ________,
1997, is between PharmaPrint Inc., a Delaware corporation ("PharmaPrint
Delaware"), and PharmaPrint Inc., a California corporation ("PharmaPrint
California"). PharmaPrint Delaware and PharmaPrint California are sometimes
collectively referred to herein as the "Constituent Corporations."
RECITALS
A. PharmaPrint Delaware is a corporation duly organized and existing
under the laws of the State of Delaware and has a total authorized capital stock
of 25,000,000 shares. The number of shares of preferred stock authorized to be
issued by PharmaPrint Delaware is 1,000,000, par value $.001 per share
("PharmaPrint Delaware Preferred Stock"). No shares of PharmaPrint Delaware
Preferred Stock were outstanding as of the date hereof and prior to giving
effect to the transactions contemplated hereby. The number of shares of common
stock authorized to be issued by PharmaPrint Delaware is 24,000,000, par value
$.001 per share ("PharmaPrint Delaware Common Stock"). As of the date hereof,
and before giving effect to the transactions contemplated hereby, all shares of
PharmaPrint Delaware Common Stock issued and outstanding were owned by
PharmaPrint California.
B. PharmaPrint California is a corporation duly organized and existing
under the laws of the State of California and has an authorized capital stock of
25,000,000 shares. The number of shares of preferred stock authorized to be
issued by PharmaPrint California is 1,000,000, without par value ("PharmaPrint
California Preferred Stock"), none of which are currently outstanding. The
number of shares of common stock authorized to be issued by PharmaPrint
California is 24,000,000, without par value ("PharmaPrint California Common
Stock"), approximately 11,000,000 shares of which are outstanding.
C. The Board of Directors of PharmaPrint California has determined that
for the purpose of effecting the reincorporation of PharmaPrint California in
the State of Delaware it is advisable and in the best interests of PharmaPrint
California that PharmaPrint California merge with and into PharmaPrint Delaware
upon the terms and conditions herein provided.
D. The respective Boards of Directors of PharmaPrint Delaware and
PharmaPrint California have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective stockholder and
shareholders and executed by the undersigned officers.
E. PharmaPrint Delaware is a wholly-owned subsidiary of PharmaPrint
California.
<PAGE>
I. MERGER
I.1 MERGER. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law (the "DGCL") and the General Corporation Law of
California (the "GCLC"), PharmaPrint California shall be merged with and into
PharmaPrint Delaware (the "Merger"), the separate existence of PharmaPrint
California shall cease and PharmaPrint Delaware shall be, and is herein
sometimes referred to as, the "Surviving Corporation." The name of the
Surviving Corporation shall be PharmaPrint Inc.
I.2 FILING AND EFFECTIVENESS. The Merger shall not become effective until
the following actions shall be completed:
(1) This Agreement and the Merger shall have been adopted and
approved by the shareholders of PharmaPrint California and the sole stockholder
of PharmaPrint Delaware in accordance with the requirements of the DGCL and the
GCLC;
(2) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof; and
(3) An executed Certificate of Ownership and Merger meeting the
requirements of the DGCL shall have been filed with the Secretary of State of
the State of Delaware and the Secretary of State of the State of California.
The date and time when the Merger shall become effective as aforesaid is
herein called the "Effective Date of the Merger."
I.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger, the
separate existence of PharmaPrint California shall cease and PharmaPrint
Delaware, as the Surviving Corporation, (i) shall continue to possess all of its
assets, rights, powers and property as constituted immediately prior to the
Effective Date of the Merger, (ii) shall be subject to all actions previously
taken by its and PharmaPrint California's Board of Directors, (iii) shall
succeed, without other transfer, to all of the assets, rights, powers and
property of PharmaPrint California in the manner more fully set forth in Section
259 of the DGCL, (iv) shall continue to be subject to all of the debts,
liabilities and obligations of PharmaPrint Delaware as constituted immediately
prior to the Effective Date of the Merger and (v) shall succeed, without other
transfer, to all of the debts, liabilities and obligations of PharmaPrint
California in the same manner as of PharmaPrint Delaware had itself incurred
them, all as more fully provided under the applicable provisions of the DGCL and
the GCLC.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2
<PAGE>
II.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of PharmaPrint Delaware as in effect immediately prior to the Effective Date of
the Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
II.2 BYLAWS. The Bylaws of PharmaPrint Delaware as in effect
immediately prior to the Effective Date of the Merger shall continue in full
force and effect as the Bylaws of the Surviving Corporation until duly amended
in accordance with the provisions thereof and applicable law.
II.3 DIRECTORS AND OFFICERS. The directors and officers of
PharmaPrint Delaware immediately prior to the Effective Date of the Merger shall
be the directors and officers of the Surviving Corporation until their
successors shall have been duly elected and qualified or until as otherwise
provided by law, the Certificate of Incorporation of the Surviving Corporation
or the Bylaws of the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
III.1 PHARMAPRINT CALIFORNIA COMMON STOCK. Upon the Effective Date of
the Merger, each share of PharmaPrint California Common Stock issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by the Constituent Corporations, the holder of such share or any
other person, be converted into and exchanged for one fully paid and
nonassessable share of PharmaPrint Delaware Common Stock.
III.2 PHARMAPRINT CALIFORNIA OPTIONS, WARRANTS AND STOCK PURCHASE
RIGHTS. Upon the Effective Date of the Merger, the Surviving Corporation shall
assume and continue the stock option plans (including the 1995 Stock Option
Plan) and all other employee benefit plans of PharmaPrint California. Each
outstanding and unexercised option, warrant or other right to purchase
PharmaPrint California Common Stock shall become an option, warrant or right to
purchase PharmaPrint Delaware Common Stock on the basis of one share of
PharmaPrint Delaware Common Stock for each share of PharmaPrint California
Common Stock issuable pursuant to any such option, warrant or stock purchase
right on the same terms and conditions and at an exercise price per share equal
to the exercise price per share applicable to any such PharmaPrint California
option, warrant or stock purchase right at the Effective Date of the Merger.
There are no options, warrants or purchase rights for PharmaPrint California
Preferred Stock.
A number of shares of PharmaPrint Delaware Common Stock shall be
reserved for issuance upon the exercise of the assumed options, warrants and
stock purchase rights equal to the number of shares of PharmaPrint California
Common Stock so reserved immediately prior to the Effective Date of the Merger.
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III.3 PHARMAPRINT DELAWARE COMMON STOCK. Upon the Effective Date of
the Merger, each share of PharmaPrint Delaware Common Stock issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by PharmaPrint Delaware, the holder of such shares or any other
person, be canceled and returned to the status of authorized but unissued
shares.
III.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the
Merger, each outstanding certificate theretofore representing shares of
PharmaPrint California Common Stock shall be deemed for all purposes to
represent the number of shares of PharmaPrint Delaware Common Stock into which
such shares of PharmaPrint California Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Company's transfer agent (the "Transfer Agent") of any such
outstanding certificate shall, until such certificate shall have been
surrendered for transfer or otherwise accounted for to the Surviving Corporation
or the Transfer Agent, have and be entitled to exercise any voting and other
rights with respect to and to receive dividends and other distributions upon the
shares of PharmaPrint Delaware Common Stock represented by such outstanding
certificate as provided above.
Each certificate representing PharmaPrint Delaware Common Stock of the
Surviving Corporation so issued following any such transfer shall bear the same
legends, if any, with respect to the restrictions on transferability as the
certificates of PharmaPrint California Common Stock so transferred, unless
otherwise determined by the Board of Directors of the Surviving Corporation, in
compliance with applicable laws, or other such additional legends as agreed upon
by the holder and the Surviving Corporation.
If any certificate for shares of PharmaPrint Delaware Common Stock is
to be issued in a name other than that in which the certificate surrendered for
transfer is registered, it shall be a condition of issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
the Transfer Agent any transfer or other taxes payable be reason of issuance of
such new certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of PharmaPrint Delaware
that such tax has been paid or is not payable.
IV. GENERAL
IV.1 COVENANTS OF PHARMAPRINT DELAWARE. PharmaPrint Delaware
covenants and agrees that it will, on or before the Effective Date of the
Merger:
(1) Qualify to do business as a foreign corporation in the State
of California.
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(2) File any and all documents with the California Franchise Tax
Board necessary for the assumption by PharmaPrint Delaware of all of the
franchise tax liabilities of PharmaPrint California.
(3) Take such other actions as may be required by the GCLC.
IV.2 FURTHER ASSURANCES. From time to time, as and when required by
PharmaPrint Delaware or by its successors or assigns, there shall be executed
and delivered on behalf of PharmaPrint California such deeds and other
instruments, and there shall be taken or caused to be taken by it such further
and other actions as shall be taken or caused to be taken by it such further and
other actions as shall be appropriate or necessary in order to vest or perfect
in or conform of record or otherwise by PharmaPrint Delaware the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of PharmaPrint California and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of PharmaPrint Delaware are fully authorized in the name and on behalf
of PharmaPrint California or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
IV.3 ABANDONMENT. At any time before the Effective Date of the
Merger, this Agreement may be terminated and the Merger may be abandoned for any
reason whatsoever by the Board of Directors of PharmaPrint California or
PharmaPrint Delaware, or both, notwithstanding the approval of this Agreement by
the shareholders of PharmaPrint California.
IV.4 AMENDMENT. The Boards of Directors of the Constituent
Corporations may amend this Agreement at any time prior to the filing of the
Certificate of Ownership and Merger with the Secretary of State of the State of
Delaware, provided that an amendment made subsequent to the adoption of this
Agreement by the stockholders or shareholders of either Constituent Corporation
shall not: (1) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such Constituent
Corporation, (2) alter or change any term of the Certificate of Incorporation of
the Surviving Corporation to be effected by the Merger or (3) alter or change
any of the terms and conditions of this Agreement, if such alteration or change
would adversely affect the holders of any class or series of capital stock of
any Constituent Corporation.
IV.5 REGISTERED OFFICE. The registered office of the Surviving
Corporation in the State of Delaware is 1209 Orange Street, Wilmington, Delaware
19801 and the registered agent of the Surviving Corporation at such address is
The Corporation Trust Company.
IV.6 AGREEMENT. Executive copies of this Agreement will be on file at
the principal place of business of the Surviving Corporation at 4 Park Plaza,
Suite 1900, Irvine, California 92614, and copies thereof will be furnished to
any stockholder or shareholder of either
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Constituent Corporation, upon request and without cost.
IV.7 GOVERNING LAW. This Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware and, so far as applicable, the merger provisions of the
General Corporation Law of the State of Delaware.
IV.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Boards of Directors of PharmaPrint Inc., a Delaware
corporation, and PharmaPrint Inc, a California corporation, is hereby executed
on behalf of each by their respective officers thereunto duly authorized.
PHARMAPRINT INC., a Delaware corporation
By:
------------------------------
Name:
Title:
PHARMAPRINT INC., a California corporation
By:
------------------------------
Name:
Title:
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EXHIBIT C
CERTIFICATE OF INCORPORATION
OF
PHARMAPRINT INC.
1. The name of the corporation is:
PHARMAPRINT INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801,
located in the County of New Castle, Delaware. The name of its registered
agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware, as amended (the
"DGCL").
4. The authorized capital stock of the Corporation shall consist of 25,000,000
shares of which 1,000,000 shall be Preferred Stock, par value $.001 per
share, and 24,000,000 shall be Common Stock, par value $.001 per share, and
the voting powers, designations, preferences and relative, participating,
optional or other special qualifications, limitations or restrictions
thereof are set forth hereinafter:
(a) The Preferred Stock may be issued in one or more series, each of which
shall be distinctively designated, shall rank equally and shall be
identical in all respects except as otherwise provided in subsection
(b) of this Section 4.
(b) Authority is hereby vested in the Board of Directors to issue from
time to time the Preferred Stock of any series and to state in the
resolution or resolutions providing for the issuance of shares of any
series the voting powers, if any, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions of such series to the full
extent now or hereafter permitted by the law of the State of Delaware
in respect of the matters set forth in the following clauses (i) to
(viii) inclusive:
(i) the number of shares to constitute such series, and the
distinctive designations thereof;
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(ii) the voting powers, full or limited, if any, of such series;
(iii) the rate of dividends payable on shares of such series, the
conditions on which and the times when such dividends are
payable, the preference to, or the relation to, the payment of
the dividends payable on any other class, classes or series of
stock, whether cumulative or non-cumulative and, if
cumulative, the date from which dividends on shares of such
series shall be cumulative;
(iv) the redemption price or prices, if any, and the terms and
conditions on which shares of such series shall be redeemable;
(v) the requirement of any sinking fund or funds to be applied to
the purchase or redemption of shares of such series and, if
so, the amount of such fund or funds and the manner of
application;
(vi) the rights of shares of such series upon the liquidation,
dissolution or winding up of, or upon any distribution of the
assets of, the Corporation;
(vii) the rights, if any, of the holders of shares of such series to
convert such shares into, or to exchange such shares for,
shares of any other class, classes or series of stock and the
price or prices or the rates of exchange and the adjustments
at which such shares shall be convertible or exchangeable, and
any other terms and conditions of such conversion or exchange;
and
(viii) any other preferences and relative, participating, optional or
other special rights of shares of such series, and
qualifications, limitations or restrictions including, without
limitation, any restriction on an increase in the number of
shares of any series theretofore authorized and any
qualifications, limitations or restrictions of rights or
powers to which shares of any future series shall be subject.
(c) The number of authorized shares of Preferred Stock may be increased or
decreased by the affirmative vote of the holders of a majority of the
votes of all classes of voting securities of the Corporation without a
class vote of the Preferred Stock, or any series thereof, except as
otherwise provided in the resolution or resolutions fixing the voting
rights of any series of the Preferred Stock.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter or repeal the
Bylaws of the Corporation.
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Elections of Directors need not be written ballot unless the Bylaws of the
Corporation shall so provide.
7. The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
8. A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director except for liability (i) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv)
for any transaction from which the Director derived any improper personal
benefit. If the DGCL is hereafter amended to further reduce or to
authorize, with the approval of the Corporation's stockholders, further
reductions in the liability of the Director of the Corporation for breach
of fiduciary duty, then a Director of the Corporation shall not be liable
for any such breach to the fullest extent permitted by the DGCL as so
amended.
To the extent permitted by applicable law, this Corporation is also
authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the
Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested Directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the DGCL, subject only to
limits created by applicable Delaware law (statutory or non-statutory),
with respect to actions for breach of duty to the Corporation, its
stockholders and others.
Any repeal or modification of any of the provisions of this Section 8
shall be prospective and shall not adversely affect any right or protection
of a Director, officer, agent or other person existing at the time of, or
increase the liability of any Director of the Corporation with respect to
any acts or omissions of such Director occurring prior to, such repeal or
modification.
9. No holder of shares of stock of the Corporation shall have any preemptive
or other right, except as such rights are expressly provided by contract,
to purchase or subscribe for or receive any shares of any class, or series
thereof, of stock of the Corporation, whether now or hereafter authorized,
or any warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any share of any
class, or series thereof, of stock; but such additional shares of stock and
such warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any shares of any
class, or series thereof, of stock may be issued or disposed of by the
Board of Directors to such persons, and on such terms and
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for such lawful consideration as in its discretion it shall deem advisable
or as the Corporation shall have by contract agreed.
10. Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and
its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of
this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on
the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title
8 of the Delaware Code, order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three fourths in value
of the creditors or class of creditors, and/or of the stockholders or class
of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court
to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
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I, THE UNDERSIGNED, being the sole incorporator, for the purpose of forming
a corporation pursuant to the DGCL, do make this certificate, hereby declaring
and certifying that this is my act and deed and the facts herein stated are
true, and accordingly have hereunto set my hand this ____ day of ________, 1997.
----------------------------------------
, Sole Incorporator
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EXHIBIT D
BYLAWS OF
PHARMAPRINT INC.
ARTICLE I - OFFICES
SECTION 1-1. REGISTERED OFFICE AND REGISTERED AGENT. PharmaPrint Inc.
(the "Corporation") shall maintain a registered office and registered agent
within the State of Delaware, which may be changed by the Board of Directors
from time to time.
SECTION 1-2. OTHER OFFICES. The Corporation may also have offices at
such other places, within or without the State of Delaware, as the Board of
Directors may from time to time determine.
ARTICLE II - STOCKHOLDERS' MEETINGS
SECTION 2-1. PLACE OF STOCKHOLDERS' MEETINGS. Meetings of stockholders
may be held at such place, either within or without the State of Delaware, as
may be designated by the Board of Directors from time to time. If no such place
is designated by the Board of Directors, meetings of the stockholders shall be
held at the registered office of the corporation in the State of Delaware.
SECTION 2-2. ANNUAL MEETING.
(a) DATE AND TIME. A Meeting of the stockholders of the
Corporation shall be held in each calendar year, on such date and time as is
designated by the Board of Directors.
(b) BUSINESS OF MEETING. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors,
(ii) otherwise properly brought before the meeting by or at the direction of
the Board of Directors or (iii) otherwise properly brought before the meeting
by a stockholder. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive
offices of the Corporation no later than the date specified in the
Corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting of stockholders, which date shall be not less
than one hundred twenty (120) calendar days in advance of the date of such
proxy statement; provided, however, that in the event that no annual meeting
was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time
<PAGE>
of the previous year's proxy statement, notice by the stockholder to be timely
must be so received a reasonable time before the solicitation is made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in his capacity as a
proponent to a stockholder proposal. In addition to the foregoing, in order to
include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the Exchange Act
to the extent such regulations require notice that is different from the notice
required above. Notwithstanding anything in these bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b) of this Section 2-2. The chairman of
the annual meeting shall, if the facts warrant, determine and declare at the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this paragraph (b), and, if he should so
determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) BOARD OF DIRECTOR NOMINATIONS. Only persons who are nominated in
accordance with the procedures set forth in this paragraph (c) shall be eligible
for election as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors or by any stockholder of the Corporation
entitled to vote in the election of directors at the meeting who complies with
the notice procedures set forth in this paragraph (c). Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation in
accordance with the provisions of paragraph (b) of this Section 2-2. Such
stockholder's notice shall set forth (i) as to each person, if any, whom the
stockholder proposes to nominate for election or re-election as a director (A)
the name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of the corporation that are beneficially owned by such person, (D) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Exchange Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serve as a director if elected) and (ii)
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as to such stockholder giving notice, the information required to be provided
pursuant to subitems (ii), (iii) and (v) of the fifth (5th) sentence of
paragraph (b) of this Section 2-2. At the request of the Board of Directors,
any person nominated by a stockholder for election as a director shall furnish
to the Secretary that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in accordance
with the procedures set forth in this paragraph (c). The chairman of the
meeting shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures described by these
bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
SECTION 2-3. SPECIAL MEETINGS. Except as otherwise specifically provided
by law, special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called at any time by the Board
of Directors, the Chairman of the Board of Directors, the Chief Executive
Officer or the President and shall be held at such place, on such date and at
such time as the Board of Directors, the Chairman, the Chief Executive Officer
or the President shall fix pursuant to the notice. Business transacted at any
special meeting shall be limited to the purposes stated in the notice.
If a special meeting is called by an person or persons other than the
Board of Directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman, the Chief Executive Officer, the
President or the Secretary. The officer receiving the request shall promptly
cause notice to be given to the stockholders entitled to vote, in accordance
with the provisions of Section 2-4 of this Article II, that a meeting will be
held at the time requested by the person or persons calling the meeting, not
fewer than thirty-five (35) days or more than one hundred twenty (120) days
after the receipt of the request. If such notice is not given within twenty
(20) days after the receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph shall be
construed as limiting, fixing or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
SECTION 2-4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Written notice
stating the place, date and hour of any meeting shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Such notice may be given by or at the direction of the person or persons
authorized to call the meeting.
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When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be give to
each stockholder of record entitled to vote at the meeting.
SECTION 2-5. QUORUM. At all meetings of stockholders, the presence in
person or by proxy, of the holders of a majority of the outstanding shares
entitled to vote shall constitute a quorum. The stockholders present at a duly
organized meeting can continue to do business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. If a meeting
cannot be organized because of the absence of a quorum, those present may,
except as otherwise provided by law, adjourn the meeting to such time and place
as they may determine. At any adjourned meeting at which a quorum is present
any action may be taken which might have been taken at the meeting as originally
called.
SECTION 2-6. VOTING LIST; PROXIES. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. All proxies shall
be executed in writing and shall be filed with the Secretary of the Corporation
not later than the day on which exercised. No proxy shall be voted or acted
upon after three (3) years from its date, unless the proxy provides for a longer
period.
Except as otherwise specifically provided by law, all matters coming before
the meeting shall be determined by a vote by shares. Except as otherwise
specifically provided by law, all other votes may be taken by voice unless a
stockholder demands that it be taken by ballot, in which latter event the vote
shall be taken by written ballot.
SECTION 2-7. INFORMAL ACTION BY STOCKHOLDERS. Unless otherwise provided
by the Certificate of Incorporation, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting of such
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stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or be certified or registered mail, return receipt
requested.
Prompt notice of the taking of corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing, as required by law.
SECTION 2-8. INSPECTORS OF ELECTION. Before any meeting of stockholders,
the Board of Directors may appoint any persons other than nominees for office to
act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may, and on
the request of any stockholder or a stockholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request
of one or more stockholders or proxies, the holders of a majority of shares of
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the chairman of the meeting may, and upon
the request of any stockholder or a stockholder's proxy shall, appoint a person
to fill that vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
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(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
ARTICLE III - BOARD OF DIRECTORS
SECTION 3-1. NUMBER. The business and affairs of the Corporation shall
be managed by a Board of Directors that shall consist of a minimum of five
members and a maximum of nine members, as may be fixed from time to time by the
vote of a majority of the Board of Directors. The initial number of directors
shall be seven.
Whenever the authorized number of directors is increased between the
annual meetings of the stockholders, a majority of the directors then in office
shall have the power to elect such new directors for the balance of the term and
until their successors are elected. Any decrease in the authorized number of
directors shall not become effective until the expiration of the term of the
directors then in office unless, at the time of such decrease, there shall be
vacancies on the Board of Directors which are being eliminated by the decrease.
SECTION 3-2. PLACE OF MEETING. Meetings of the Board of Directors may be
held at such place either within or without the State of Delaware, as a majority
of the Directors may from time to time designate or as may be designated in the
notice calling the meeting.
SECTION 3-3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held annually, immediately following the annual meeting of
stockholders, at the place where such meeting of the stockholders is held or at
such other place, date and hour as a majority of the Directors may from time to
time designate or as may be designated in the notice calling the meeting.
SECTION 3-4. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by the Chairman, the Chief Executive
Officer, the President, the Secretary or any two Directors.
SECTION 3-5. NOTICES OF MEETINGS OF BOARD OF DIRECTORS.
(a) REGULAR MEETINGS. No notice shall be required to be given
of any regular meeting, unless the same be held at other than the time or place
for holding such meetings as fixed in accordance with Section 3-3 of these
bylaws, in which event two (2) days notice shall be given of the time and place
of such meeting.
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(b) SPECIAL MEETINGS. At least one (1) business day's
notice shall be given of the time, place and purpose for which any special
meeting of the Board of Directors is to be held.
SECTION 3-6. QUORUM. A majority of the total number of Directors shall
constitute a quorum for the transaction of business, and the vote of a majority
of the Directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors. If there be less than a quorum present, a
majority of those present may adjourn the meeting from time to time and place to
place and shall cause notice of each such adjourned meeting to be given to all
absent Directors.
SECTION 3-7. INFORMAL ACTION BY THE BOARD OF DIRECTORS. Any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
SECTION 3-8. POWERS.
(a) GENERAL POWERS. The Board of Directors shall have
all powers necessary or appropriate to the management of the business and
affairs of the Corporation, and, in addition to the power and authority
conferred by these bylaws, may exercise all powers of the Corporation and do
all such lawful acts and things as are not by statute, these bylaws or the
Certificate of Incorporation directed or required to be exercised or done by
the stockholders.
(b) SPECIFIC POWERS. Without limiting the general
powers conferred by the last preceding clause and the powers conferred by the
Certificate of Incorporation and bylaws of the Corporation, it is hereby
expressly declared that the Board of Directors shall have the following
powers:
(i) To declare dividends from time to time in
accordance with law.
(ii) To confer upon any officer or officers of the
Corporation the power to choose, remove or suspend assistant officers, agents
or servants.
(iii) To appoint any person, firm or corporation
to accept and hold in trust for the Corporation any property belonging to the
Corporation or in which it is interested, and to authorize any such person,
firm or corporation to execute any documents and
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perform any duties that may be requisite in relation to any such trust.
(iv) To appoint a person or persons to vote shares of
another corporation held and owned by the Corporation.
(v) To adopt, from time to time, such stock option, stock
purchase, bonus or other compensation plans for Directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine.
(vi) To adopt, from time to time, such insurance,
retirement, and other benefit plans for Directors, officers, employees and
agents of the Corporation and its subsidiaries as it may determine.
(vii) By resolution passed by a majority of the whole
Board of Directors, to designate one (1) or more additional committees, each to
consist of one (1) or more Directors, to have such duties, owners and authority
as the Board of Directors shall determine. All committees of the Board of
Directors shall have the authority to adopt their own rules of procedure. Absent
the adoption of specific procedures, the procedures applicable to the Board of
Directors shall also apply to committees thereof.
(viii) To fix the place, time and purpose of meetings of
stockholders.
(ix) To purchase or otherwise acquire for the Corporation
any property, rights or privileges which the Corporation is authorized to
acquire, at such prices, on such terms and conditions and for such consideration
as it shall from time to time see fit, and, at its discretion, to pay any
property or rights acquired by the Corporation, either wholly or partly in money
or in stocks, bonds, debentures or other securities of the Corporation.
(x) To create, make and issue mortgages, bonds, deeds of
trust, trust agreements and negotiable or transferable instruments and
securities, secured by mortgage or otherwise, and to do every other act and
thing necessary to effectuate the same.
(xi) To appoint and remove or suspend such subordinate
officers, agents or servants, permanently or temporarily, as it may from time to
time think fit, and to determine their duties, and fix, and from time to time
change, their salaries or emoluments, and to require security in such instances
and in such amounts as it think fit.
(xii) To determine who shall be authorized on the
Corporation's behalf to sign bills, notes, receipts, acceptances, endorsements,
checks, releases, contracts and
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documents.
SECTION 3-9. COMPENSATION OF DIRECTORS. Compensation of Directors and
reimbursement of their expenses incurred in connection with the business of the
Corporation, if any, shall be as determined from time to time by resolution of
the Board of Directors. This Section 3-9 shall not be construed to preclude any
Director from serving the Corporation in any other capacity as an officer,
agent, employee or otherwise, and receiving compensation for such service.
SECTION 3-10. REMOVAL OF DIRECTORS BY STOCKHOLDERS. The entire Board of
Directors or any individual Director may be removed from office with or without
cause by a majority vote of the holders of the outstanding shares then entitled
to vote at an election of directors. In case the Board of Directors or any one
(1) or more Directors be so removed, new Directors may be elected at the same
time for the unexpired portion of the full term of the Director or Directors so
removed.
SECTION 3-11. RESIGNATIONS. Any Director may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation unless another time be
fixed in the resignation, in which case it shall become effective at the time so
fixed. The acceptance of a resignation shall not be required to make it
effective.
SECTION 3-12. VACANCIES. Vacancies and new created directorships
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, although less than a quorum, or
by a sole remaining Director, and each person so elected shall hold office for a
term expiring at the annual meeting of stockholders at which the term of the
class to which he or she has been elected expires, and until such directors
successor shall have been duly elected and qualified.
SECTION 3-13. PARTICIPATION BY CONFERENCE TELEPHONE. Directors may
participate in regular or special meetings of the Board by telephone or similar
communications equipment by means of which all other persons participating in
the meeting can hear each other, and such participation shall constitute
presence at the meeting.
ARTICLE IV - OFFICERS
SECTION 4-1. ELECTION AND OFFICE. The Corporation shall have a
President, Secretary, Treasurer and Chief Financial Officer, all of whom shall
be elected by the Board of Directors. The Board of Directors may elect such
additional officers as it may deem proper, including a
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Chairman and a Vice Chairman of the Board of Directors, one (1) or more Vice
Presidents, and one (1) or more assistant or honorary officers. Any number of
offices may be held by the same person.
SECTION 4-2. TERM. The term of office of any officer shall be as
specified by the Board of Directors.
SECTION 4-3. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS.
Unless otherwise determined by the Board of Directors, the Chairman of the Board
of Directors, if any, shall preside at all meetings of Directors. He shall have
such other powers and perform such further duties as may be assigned to him by
the Board of Directors.
SECTION 4-4. POWERS AND DUTIES OF THE PRESIDENT. Unless otherwise
determined by the Board of Directors, the President shall be the Chief Executive
Officer of the Corporation and shall have the usual duties of a Chief Executive
Officer with general supervision over and direction of the affairs of the
Corporation. In the exercise of these duties and subject to the limitations of
the laws of the State of Delaware, these bylaws, and the actions of the Board of
Directors, he may appoint, suspend and discharge employees and agents, shall
preside at all meetings of the stockholders at which he shall be present, and,
unless there is a Chairman of the Board of Directors, shall provide at all
meetings of the Board of Directors at which he is present and, unless otherwise
specified by the Board of Directors, shall be a member of all Board of Director
committees. He shall also do and perform such other duties as from time to time
may be assigned to him by the Board of Directors.
Unless otherwise determined by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend and
to act and to vote at any meeting of the stockholders of any corporation in
which the Corporation may hold stock and, at any such meeting, shall possess and
may exercise any and all of the rights and powers incident to the ownership of
such stock and which, as the owner thereof, the Corporation might have possessed
and exercised.
SECTION 4-5. POWERS AND DUTIES OF THE SECRETARY. Unless otherwise
determined by the Board of Directors, the Secretary shall record all proceedings
of the meetings of the Corporation, the Board of Directors and all committees,
in books to be kept for that purpose, and shall attend to the giving and serving
of all notices for the Corporation. He shall have charge of the corporate seal,
the certificate books, transfer books and stock ledgers, and such other books
and papers as the Board of Directors may direct. He shall perform all other
duties ordinarily incident to the office of Secretary and shall have such other
powers and perform such other duties as may be assigned to him by the Board of
Directors.
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SECTION 4-6. POWERS AND DUTIES OF THE TREASURER. Unless otherwise
determined by the Board of Directors, the Treasurer shall have charge of all the
funds and securities or the Corporation which may come into his hands. When
necessary or proper, unless otherwise ordered by the Board of Directors, he
shall endorse for collection on behalf of the Corporation checks, notes and
other obligations, and shall deposit the same to the credit of the Corporation
In such banks or depositories as the Board of Directors may designate and shall
sign all receipts and vouchers for payments made to the Corporation. He shall
sign all checks made by the Corporation, except when the Board of Directors
shall otherwise direct. He shall enter regularly, in books of the Corporation
to be kept by him for that purpose, a full and accurate account of all moneys
received and paid by him on account of the Corporation. Whenever required by the
Board of Directors, he shall render a statement of the financial condition of
the Corporation. He shall at all reasonable times exhibit his books and
accounts to any Director of the Corporation, upon application at the office of
the Corporation during business hours. He shall have such other powers and
shall perform such other duties as may be assigned to him from time to time by
the Board of Directors. He shall give such bond, if any, for the faithful
performance of his duties as shall be required by the Board of Directors and any
such bond shall remain in the custody of the President.
SECTION 4-7. POWERS AND DUTIES OF VICE PRESIDENTS AND ASSISTANT OFFICERS.
Unless otherwise determined by the Board of Directors, each Vice President and
each assistant officer shall have the powers and perform the duties of his
respective superior officer. Vice Presidents and assistant officers shall have
such rank as shall be designated by the Board of Directors and each, in the
order of rank, shall act for such superior officer in his absence, or upon his
disability or when so directed by such superior officer or by the Board of
Directors. Vice Presidents may be designated as having responsibility for a
specific aspect of the Corporation's affairs, in which event each such Vice
President shall be superior to the other Vice Presidents in relation to matters
within his aspect. Except as otherwise set forth herein, the President shall be
the superior officer of the Vice Presidents. The Treasurer and the Secretary
shall be the superior officers of the Assistant Treasurers and Assistant
Secretaries, respectively.
SECTION 4-8. DELEGATION OF OFFICE. The Board of Directors may delegate
the powers or duties of any officer of the Corporation to any other officer or
to any Director from time to time.
SECTION 4-9. VACANCIES. The Board of Directors shall have the power to
fill any vacancies in any office occurring from whatever reason.
SECTION 4-10. RESIGNATIONS. Any officer may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation, unless another time
be fixed in the resignation, in which case it shall become effective at the time
so fixed. The acceptance of a resignation shall lot be required to make it
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effective.
SECTION 4-11. REMOVAL. Subject to the provisions of any employment
agreement approved by the Board of Directors, any officer of the Corporation may
be removed at any time, with or without cause, by the Board of Directors.
ARTICLE V - CAPITAL STOCK
SECTION 5-1. STOCK CERTIFICATES. Shares of the Corporation shall be
represented by certificates signed by or in the name of the Corporation by (a)
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and (b) the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. If such certificate is countersigned (i) by a
transfer agent other than the Corporation or its employee, or (ii) by a
registrar other than the Corporation or its employee, the signatures of the
officers of the Corporation may be facsimiles. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.
SECTION 5-2. DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) The Board of Directors may fix a record date to
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
board of Directors, and which record date shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) The Board of Directors may fix a record date to
determine the stockholders entitled to consent to corporate action in writing
without a meeting, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors,
and which date shall not be more than ten (10) days after the date upon which
the resolution fixing the record date is adopted by the Board of Directors.
If no record date has
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been fixed by the Board of Directors, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
of Directors and prior action by the Board of Directors is required, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on which
the Board of Directors adopts the resolution taking such prior action.
(c) The Board of Directors may fix a record date to
determine the stockholders entitled to receive payment of any dividend or
other dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights with respect of any exchange,
conversion or exchange of stock, or for the purpose of any other lawful
action, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
SECTION 5-3. TRANSFER OF SHARES. Transfer of shares shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation,
or by transfer agents designated to transfer shares of stock of the Corporation.
Except where a certificate is issued in accordance with Section 5-4 of these
bylaws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation duly endorsed and otherwise in proper form for
transfer before a new certificate is issued therefor. No transfer of shares
shall be made on the books of this Corporation if such transfer is in violation
of a lawful restriction noted conspicuously on the certificate.
SECTION 5-4. LOST, STOLEN OR DESTROYED SHARE CERTIFICATES. The
Corporation may issue a new certificate of stock or uncertified shares in place
of any certificate therefor issued by it, alleged to heave been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen, or
destroyed certificate, or his legal representative to give the Corporation a
bond sufficient to indemnify it against claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
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ARTICLE VI - NOTICES
SECTION 6-1. CONTENTS OF NOTICE. Whenever any notice of a meeting is
required to be given pursuant to these bylaws or the Certificate of
Incorporation or otherwise, the notice shall specify the place, day and hour of
the meeting and, in the case of a special meeting or where otherwise required by
law, the general nature of the business to be transacted at such meeting.
SECTION 6-2. METHOD OF NOTICE. All notices shall be given to each person
entitled thereto, either personally or by sending a copy thereof through the
mail or by telegraph, charges prepaid, to his address as it appears on the
records of the Corporation, or supplied by him to the Corporation for the
purpose of notice. Notices of special meetings of stockholders shall conform to
Section 2-4 and notices of special meetings or the Board of Directors shall
conform to Section 3-5. If notice is sent by mail or telegraph, it shall be
deemed to have been given to the person entitled thereto when deposited in the
United States mail or with the telegraph office for transmission. If no address
for a stockholder appears on the books of the Corporation and such stockholder
has not supplied the Corporation with an address for the purpose of notice,
notice deposited in the United States mail addressed to such stockholder care of
General Delivery in the city in which the principal office of the Corporation is
located shall be sufficient.
SECTION 6-3. WAIVER OF NOTICE. Whenever notice is required to be given
under any provision of law or of the Certificate of Incorporation or bylaws of
the Corporation, written waiver, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, Directors, or members of a committee of Directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation.
ARTICLE VII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
AND OTHER PERSONS
SECTION 7-1. PERSONS WHO QUALIFY AS AN INDEMNITEE.
(a) Any individual who is a duly elected or appointed
member of the Board of Directors, a corporate officer, or such employee or
agent as approved by the Board of Directors, shall be deemed a person who
qualifies for indemnification under this Article VII so
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long as said individual was acting within the course and scope of his capacity
as a director, officer, approved employee and/or agent in accordance with the
Certificate of Incorporation and these bylaws. Any such qualified person, an
"Indemnitee."
(b) Any previous member of the Board of Directors,
corporate officer or employee or agent as approved by the Board of Directors,
who are no longer serving in said capacities on behalf of the Corporation at
the time any qualified condition as hereinafter stated in this Article VII
arises, shall be entitled to indemnification under this resolution as though
said individual was still acting in his former capacity on behalf of the
Corporation.
(c) Previous members of the Board of Directors,
corporate officers and employees or agents approved by the Board of
Directors, shall qualify as Indemnitees under this Article VII upon approval
by a resolution of the Board of Directors and upon verification that said
individual terminated or resigned his position with the Corporation in good
standing.
SECTION 7-2. INITIAL INDEMNITY.
(a) The Corporation shall indemnify an Indemnitee when
he is a party or is threatened to be made a party to any pending, threatened
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he is or was or had agreed to
become a director, officer, employee or agent of the Corporation, or is or
was serving or had agreed to serve at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action alleged
to have been taken or omitted in such capacity, against any and all costs,
charges and expenses, including without limitation attorneys' and other fees
and expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such Indemnitee in connection therewith and any appeal
therefrom if such Indemnitee acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent, shall not, of itself, creative a
presumption that such Indemnitee did not satisfy the foregoing standard of
conduct to the extent applicable thereto.
(b) The Corporation shall indemnify an Indemnitee when
he is a party or is threatened to be made party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was or
had agreed to become a director, officer, employee or agent of the
Corporation, or is or was serving or had agreed to serve at the request of
the Corporation as a
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director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against costs, charges and expenses
(including attorneys' and others' fees and expenses) actually and reasonably
incurred by him in connection with the defense or settlement thereof or any
appeal therefrom if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such Indemnitee shall have been adjudged to be liable to the
Corporation unless and only to the extent that the court in which such action,
suit or proceeding was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
the Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which such other court shall deem proper.
(c) Any indemnification under paragraphs (a) or (b) of
this Section 7-2 (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination, in accordance
with Section 7-4 of this Article VII or any applicable provision of any other
agreement, any resolution or otherwise, that an Indemnitee is entitled to
indemnification. Such determination shall be made (i) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding or, (ii) if such a quorum or
disinterested directors is not available or so directs, by independent legal
counsel (designated in the manner provided below in this subsection (c)), in
a written opinion, or (iii) by a majority vote of the stockholders.
Independent legal counsel shall not be any person or firm who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Corporation or an Indemnitee
in an action to determine such Indemnitee's rights under this Article VII.
The Corporation shall pay the reasonable fees and expenses of such
independent legal counsel and indemnify fully such counsel against any and
all expenses (including reasonable attorneys' fees), claims, liabilities and
damages arising out of or relating to the engagement of such counsel pursuant
to this paragraph (c).
(d) To the extent that an Indemnitee has been successful
on the merits or otherwise, including without limitation the dismissal of an
action without prejudice, in defense of any action, suit or proceeding or in
defense of any claim, issue or matter therein, he shall be indemnified
against costs, charges and expenses (including attorneys' and others' fees
and expenses) actually and reasonably incurred by him in connection
therewith.
(e) For purposes of this Article VII, references to
"other enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on the Indemnitee with
respect to any employee benefit plan; and references to "serving at the
request of the Corporation" shall include any service as a director, officer,
employee or agent of the Corporation which imposes duties on, or involves
services by, an Indemnitee with respect to any employee benefit plan, its
participants or beneficiaries; and if an Indemnitee acted in good
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faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan he shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to herein.
SECTION 7-3. ADDITIONAL INDEMNIFICATION.
(a) Without limiting any right which an Indemnitee may
have pursuant to the Certificate of Incorporation, these bylaws, Delaware
law, any other agreement, any resolution, any policy of insurance or
otherwise, but subject to the limitations on the maximum permissible
indemnity which may exist under applicable law at the time of any request for
indemnity under this Article VII determined as contemplated by Section 7-4 of
this Article VII, the Corporation shall pay on behalf of such Indemnitee, and
his executors, administrators or assigns, any amount which he is or becomes
legally obligated to pay relating to or arising out of any claim made against
him because of any act, failure to act or neglect or breach of duty,
including any actual or alleged error, misstatement or misleading statement,
which he commits, suffers, permits or acquiesces in while acting in his
capacity as a director, officer, employee or agent of the Corporation. The
payments which the Corporation is obligated to make pursuant to this Section
7-3 shall include without limitation damages, judgments, fines, settlements
and reasonable charges, costs, expenses, expenses of investigation and
reasonable expenses of defense of legal actions, suits proceedings or claims
and appeals therefrom, and reasonable expenses of appeal, attachment or
similar bonds; provided, however, that the Corporation shall not be obligated
under this Section 7-3 to make any payment in connection with any claim
against such Indemnitee:
(i) for which and to the extent that payment is
actually made to such Indemnitee under a valid and collectible insurance
policy;
(ii) for which and to the extent that such
Indemnitee is indemnified by the Corporation otherwise than pursuant to this
Section 7-3;
(iii)which results in a final, nonappealable order
for such Indemnitee to pay a fine or similar governmental imposition which
the Corporation is prohibited by applicable law from paying; or
(iv) based upon or attributable to such Indemnitee
gaining in fact a personal profit to which he was not legally entitled,
including without limitation profits made from the purchase and sale by such
Indemnitee of equity securities or the Corporation which are recoverable by
the Corporation pursuant to Section 16(b) of the Securities Exchange Act of
1934, as amended, and profits arising from transactions in publicly traded
securities of the Corporation which were effected by such Indemnitee in
violation of Section 10(b) of the
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Securities Exchange Act of 1934, as amended, including Rule 10b-5 promulgated
thereunder.
The determination of whether an Indemnitee shall be entitled to
indemnification under this Section 7-3 may, but shall not be required to, be
made in accordance with paragraph (a) of Section 7-4 of this Article VII. If
that determination is so made, it shall be binding upon the Corporation and such
Indemnitee for all purposes.
(b) Expenses (including without limitation reasonable
attorneys' and others' fees and expenses) incurred by an Indemnitee in
defending any actual or threatened civil or criminal action, suit, proceeding
or claim shall be paid by the Corporation in advance of the final disposition
thereof as authorized in accordance with paragraph (b) of Section 7-4 of this
Article VII.
SECTION 7-4. CERTAIN PROCEDURES RELATING TO INDEMNIFICATION.
(a) For purposes of pursing his rights to indemnification under
this Article VII, an Indemnitee shall submit to the Board of Directors a sworn
statement of request for indemnification (an "Indemnification Statement")
averring that he is entitled to indemnification under this Article VII.
Submission of any Indemnification Statement to the Board of Directors shall
create a presumption that such Indemnitee is entitled to Indemnification under
this Article VII and the Board of Directors shall be deemed to have determined
that such Indemnitee is entitled to such indemnification unless, within thirty
(30) calendar days after submission of the Indemnification Statement, the Board
shall determine, based upon clear and convincing evidence (sufficient to rebut
the foregoing presumption) and such Indemnitee shall have received notice within
such period in writing of such determination, that such Indemnitee is not
entitled to indemnification under this Article VII, which evidence shall be
disclosed to such Indemnitee with particularity in such notice. The foregoing
notice shall be sworn to by all persons who participated in the determination
and voted to deny indemnification.
(b) For purposes of determining whether to authorize advancement
of expenses pursuant to paragraph (b) of Section 7-3 of this Article VII, an
Indemnitee shall be required to submit to the Board of Directors a sworn
statement of request for advancement of expenses substantially (the
"Undertaking"), averring that (i) he has incurred or will incur actual expenses
in defending a civil or criminal action, suit proceeding or claim and (ii) he
undertakes to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation pursuant to this Article VII.
Upon receipt of the Undertaking, the Board shall within ten (10) calendar days
authorize immediate payment of the expenses stated in the Undertaking, whereupon
such payments shall immediately be made by the Corporation. No security shall
be required in connection with any Undertaking and any Undertaking shall be
accepted without reference to such Indemnitee's ability to make repayment.
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SECTION 7-5. INSURANCE. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article VII.
ARTICLE VIII - RELIANCE UPON BOOKS, REPORTS AND RECORDS
Each Director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation, shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account or
other records of the Corporation, including reports made to the Corporation by
any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care.
ARTICLE IX - LOANS TO OFFICERS
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of its
subsidiaries, including any officer or employee who is a Director of the
Corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation. The loan, guarantee or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this bylaw shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the Corporation at common law
or under any statute.
ARTICLE X - SEAL
The form of the seal of the Corporation, called the corporate seal[Form of
Seal] of the Corporation, shall be as impressed adjacent hereto.
ARTICLE XI - FISCAL YEAR
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The Board of Directors shall have the power by resolution to fix the
fiscal year of the Corporation. If the Board of Directors shall fail to do so,
the President shall fix the fiscal year.
ARTICLE XII - AMENDMENTS
The original or other bylaws may be adopted, amended or repealed by
the stockholders entitled to vote thereon at any regular or special meeting or,
if the Certificate of Incorporation so provides, by the Board of Directors. The
fact that such power has been so conferred upon the Board of Directors shall not
divest the stockholders of the power nor limit their power to adopt, amend or
repeal bylaws.
ARTICLE XIII - INTERPRETATION OF BYLAWS
All words, terms and provisions of these bylaws shall be interpreted and
defined by and in accordance with the General Corporation Law of the State of
Delaware, as amended, and as amended from time to time hereafter.
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PHARMAPRINT INC.
FOR THE HOLDERS OF COMMON STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS
1997 ANNUAL MEETING OF THE SHAREHOLDERS--AUGUST 19, 1997
The undersigned shareholder of PHARMAPRINT INC. (the "Company"), revoking
all previous proxies, hereby appoints Elliot P. Friedman and James Wodach and
each of them acting individually, as proxies of the undersigned, and authorizes
either or both of them to vote all shares of the Company's Common Stock held of
record by the undersigned as of the close of business on July 3, 1997 at the
1997 Annual Meeting of Shareholders of the Company to be held on August 19,
1997, at 9:00 a.m., local time, at the Hyatt Regency Hotel, 17900 Jamboree Road,
Irvine, California, 92614, and at any adjournment(s) or postponement(s) thereof
(the "Annual Meeting"), according to the votes the undersigned would be entitled
to cast if then personally present.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL I, "FOR" THE ITEM
LISTED IN PROPOSAL II, "FOR" THE ITEM LISTED IN PROPOSAL III, "FOR" THE ITEM
LISTED IN PROPOSAL IV, AND "FOR" THE FIFTH MATTER SET FORTH BELOW.
PROPOSAL I
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1. / / FOR nominees for director named below.
/ / WITHHOLD AUTHORITY to vote.
/ / FOR nominees for director named below, except WITHHOLD AUTHORITY to vote for the nominee(s) whose name(s) is(are)
lined through.
Nominees: JOHN H. ABELES, M.D., LYLE ANDERSON, HOWARD R. ASHER, ELLIOT P. FRIEDMAN, TASNEEM A. KHWAJA, PH.D., PHILLIP G.
TRAD AND NATHAN F. TROUM, M.D.,will be considered nominees for election at the Annual Meeting.
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PROPOSAL II
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2. The Amendment to the Company's 1995 Stock Option Plan to increase the number of shares of common stock authorized for
issuance thereunder from 800,000 shares to 2,200,000 shares and to amend the provisions regarding automatic option grants
to non-employee directors.
/ / FOR / / AGAINST / / ABSTAIN
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PROPOSAL III
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3. The approval of change in the Company's state of incorporation from California to Delaware.
/ / FOR / / AGAINST / / ABSTAIN
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PROPOSAL IV
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4. The ratification of Arthur Andersen LLP as the Company's independent accountants for the fiscal year ending March 31,
1998.
/ / FOR / / AGAINST / / ABSTAIN
5. The authority of the proxies, in their discretion, to vote on such other business as may properly come before the Annual
Meeting, or any adjournment(s) thereof.
/ / FOR / / AGAINST / / ABSTAIN
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THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF NOTICE OF THE ANNUAL MEETING
AND THE PROXY STATEMENT FURNISHED IN CONNECTION THEREWITH. The undersigned also
hereby ratifies all that the said proxies do by virtue hereof and hereby
confirms that this proxy shall be valid and may be voted regardless of whether
the shareholder's name is signed as set forth below or a seal affixed or the
description, authority or capacity of the person signing is given or any other
defect of signature exists.
Dated: __________________________ 1997
________________________________(SEAL)
(Shareholder's Signature)
________________________________(SEAL)
(Shareholder's Signature)
Please sign this proxy exactly as the
name appears in the address above. If
shares are registered in more than one
name, all owners should sign. If
signing in a fiduciary or
representative capacity, such as
attorney-in-fact, executor,
administrator, trustee or guardian,
please give full title and attach
evidence of authority. If signer is a
corporation, please sign the full
corporate name and an authorized
officer should sign such officer's
name and title and affix the corporate
seal, if any.
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT TO THE COMPANY. Please
complete, sign and date this Proxy and return it promptly regardless of whether
you plan to attend the Annual Meeting.
