SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Neurocrine Biosciences, Inc.
(Name of Registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No filing fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined.):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NEUROCRINE BIOSCIENCES, INC.
-------------------
Notice of Annual Meeting of Stockholders
To Be Held on May 21, 1999
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of
Neurocrine Biosciences, Inc., a Delaware corporation (the "Company"), will be
held on May 21, 1999, at 8:30 a.m. local time, at the Company's corporate
headquarters, located at 10555 Science Center Drive, San Diego, California,
92121 for the following purposes as more fully described in the Proxy Statement
accompanying this Notice:
1. To elect two Class III Directors to the Board of Directors to serve for a
term of three years.
2. To amend the Company's 1992 Incentive Stock Plan to increase the number of
shares of Common Stock reserved for issuance from 4,700,000 to 5,300,000
shares.
3. To ratify the appointment of Ernst & Young LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1999.
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Only stockholders of record at the close of business on April 15, 1999 are
entitled to receive notice and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy card as promptly as possible in the
prepaid-postage envelope enclosed for that purpose. Stockholders attending the
meeting may vote in person even if they have returned a Proxy.
By Order of the Board of Directors,
Margaret Valeur-Jensen
Secretary
San Diego, California
April 23, 1999
NEUROCRINE BIOSCIENCES, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Neurocrine Biosciences,
Inc., a Delaware corporation (the "Company"), for use at its 1999 Annual Meeting
of Stockholders to be held on May 21, 1999, at 8:30 a.m., local time, or at any
adjournments or postponements thereof, for the purposes set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Company's corporate headquarters, located at
10555 Science Center Drive, San Diego, California 92121. The Company's telephone
number is (619) 658-7600.
These proxy solicitation materials were mailed on or about April 28,
1999 to all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on April 15, 1999 (the
"Record Date"), are entitled to receive notice of and vote at the meeting. On
the Record Date, 18,960,581 shares of the Company's Common Stock, $0.001 par
value, were issued and outstanding. The Company has approximately 4,900
shareholders, of which approximately 216 are shareholders of record. For
information regarding holders of more than five percent of the outstanding
Common Stock, see "Stock Ownership of Principal Stockholders and Management"
below.
REVOCABILITY OF PROXIES
Proxies given pursuant to this solicitation may be revoked at any time
before they have been used. Revocation will occur by delivering a written notice
of revocation to the Company or by duly executing a proxy bearing a later date.
Revocation will also occur if the person attends the meeting and votes in
person.
VOTING AND SOLICITATION
Every stockholder of record on the Record Date is entitled, for each
share held, to one vote on each proposal or item that comes before the meeting.
In the election of Directors, each stockholder will be entitled to vote for two
nominees and the two nominees with the greatest number of votes will be elected.
The cost of this solicitation will be borne by the Company. The Company
may reimburse expenses incurred by brokerage firms and other persons
representing beneficial owners of shares in forwarding solicitation material to
beneficial owners. Proxies may be solicited by certain of the Company's
Directors, officers and regular employees, without additional compensation,
personally, by telephone or by telegram.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspector of Elections (the "Inspector") with the assistance of
the Company's Transfer Agent. The Inspector will also determine whether or not a
quorum is present. Except in certain specific circumstances, the affirmative
vote of a majority of shares present in person or represented by proxy at a duly
held meeting at which a quorum is present is required under Delaware law for
approval of proposals presented to stockholders. In general, Delaware law also
provides that a quorum consists of a majority of shares entitled to vote and
present or represented by proxy at the meeting.
The Inspector will treat shares that are voted "WITHHELD" or "ABSTAIN"
as being present and entitled to vote for purposes of determining the presence
of a quorum but will not be treated as votes in favor of approving any matter
submitted to the stockholders for a vote. Any proxy which is returned using the
form of proxy enclosed and which is not marked as to a particular item will be
voted for the election of the Directors named in the proxy, for the approval of
the amendment of the 1992 Incentive Stock Plan, for the confirmation of the
appointment of the designated independent auditors and, as the proxy holders
deem advisable, on other matters that may come before the meeting, as the case
may be with respect to the items not marked.
If a broker indicates on the enclosed proxy or its substitute that it
does not have discretionary authority as to certain shares to vote on a
particular matter ("Broker Non-Votes"), those shares will be considered as
present with respect to that matter. The Company believes that the tabulation
procedures to be followed by the Inspector are consistent with the general
statutory requirements in Delaware concerning voting of shares and determination
of a quorum.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals which are intended to be presented at the
Company's 2000 Annual Meeting must be received by the Company no later than
December 30, 1999 in order that they may be included in the proxy statement and
form of proxy for that meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's officers and Directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Form 4 or Form 5 with the SEC. Such officers, Directors and 10% stockholders are
also required by SEC rules to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, Directors and 10%
stockholders were complied with.
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock as of April 15, 1999 by (i) each of the executive
officers named in the table under "Compensation of Executive Officers -- Summary
Compensation Table," (ii) each Director, (iii) all Directors and executive
officers as a group and (iv) all persons known to the Company to be the
beneficial owners of more than 5% of the Company's Common Stock. A total of
18,960,581 shares of the Company's Common Stock were issued and outstanding as
of April 15, 1999.
Shares
Name and Address Beneficially
of Beneficial Owner (2) Owned (1) Percent
- ------------------------ ---------- -------
T Rowe Price Associates ................................ 2,211,643 11.7%
100 East Pratt Street
Baltimore, MD
Novartis AG ............................................ 1,463,912 7.7%
Schwarzwaldallee 215
CH-4002 Basel
Switzerland
D. Bruce Campbell (3) .................................. 47,928 *
Paul W. Hawran (4) ..................................... 284,276 1.5%
Harry F. Hixson, Jr. (5) ............................... 124,874 *
Gary A. Lyons (6) ...................................... 808,714 4.3%
Stephen G. Marcus (7) .................................. 89,613 *
Joseph A. Mollica (8) .................................. 15,415 *
Richard F. Pops (9) .................................... 3,611 *
Wylie W. Vale (10) ..................................... 422,003 2.2%
Margaret Valeur-Jensen ................................. -- --
Stephen A. Sherwin ..................................... -- --
All executive officers and Directors as a
group (10 persons) (11) ................................ 1,796,434 9.5%
- ---------------------
* Represents beneficial ownership of less than one percent (1%) of the
18,960,581 outstanding shares of the Company's Common Stock as of
April 15, 1999.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to stock options and warrants currently exercisable or
exercisable within 60 days of April 15, 1999 are deemed to be
outstanding for computing the percentage ownership of the person
holding such options and the percentage ownership of any group of which
the holder is a member, but are not deemed outstanding for computing
the percentage of any other person. Except as indicated by footnote,
and subject to community property laws where applicable, the persons
named in the table have sole voting and investment power with respect
to all shares of Common Stock shown beneficially owned by them.
(2) The address of each individual named is c/o Neurocrine Biosciences,
Inc., 10555 Science Center Drive, San Diego, CA 92121, unless otherwise
indicated.
(3) Includes 47,928 shares issuable pursuant to options exercisable within
60 days of April 15, 1999.
(4) Includes 166,401 shares issuable pursuant to options exercisable within
60 days of April 15, 1999.
(5) Includes 17,999 shares issuable pursuant to options exercisable within
60 days of April 15, 1999.
(6) Includes 391,358 shares issuable pursuant to options exercisable within
60 days of April 15, 1999.
(7) Includes 86,728 shares issuable pursuant to options exercisable within
60 days of April 15, 1999.
(8) Includes 15,415 shares issuable pursuant to options exercisable within
60 days of April 15, 1999.
(9) Includes 3,611 shares issuable pursuant to options exercisable within
60 days of April 15, 1999.
(10) Includes 112,873 shares issuable pursuant to options exercisable within
60 days of April 15, 1999.
(11) Includes an aggregate of 842,313 shares issuable pursuant to options
exercisable within 60 days of April 15, 1999.
PROPOSAL ONE:
ELECTION OF DIRECTORS
GENERAL
The Company's Bylaws provide that the Board of Directors is composed of
seven (7) Directors. The Company's Certificate of Incorporation provides that
the Board of Directors is divided into three classes. As of December 31, 1998,
there were two Directors in Class I (Wylie W. Vale and Joseph A. Mollica), two
Directors in Class II (David E. Robinson and Richard F. Pops), and two Directors
in Class III (Gary A. Lyons and Harry F. Hixson, Jr.). Errol DeSouza served as a
Class I Director until his resignation from the Company on August 31, 1998. This
vacancy has not been filled. David E. Robinson resigned from the Board of
Directors on March 2, 1999. This vacancy was filled on April 22, 1999, with the
appointment of Stephen A. Sherwin as a Class II Director.
The Directors in Class III hold office until the 1999 Annual Meeting of
Stockholders, the Directors in Class I hold office until the 2000 Annual Meeting
of Stockholders and the Directors in Class II hold office until the 2001 Annual
Meeting of Stockholders (or, in each case, until their earlier resignation,
removal from office or death). After each such election, the Directors in each
such case will then serve in succeeding terms of three years and until their
successors are duly elected and qualified. Officers of the Company serve at the
discretion of the Board of Directors. There are no family relationships among
the Company's Directors and executive officers.
The term of office of Directors Gary A. Lyons and Harry F. Hixson, Jr.
expire at the 1999 Annual Meeting. At the 1999 Annual Meeting, the stockholders
will elect two Class III Directors for a term of three years.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of
the shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of Directors shall be elected to the Board of
Directors.
Votes withheld from any Director are counted for purposes of
determining the presence or absence of a quorum, but have no legal effect under
Delaware law. While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions and broker non-votes in the
election of Directors, the Company believes that both abstentions and broker
non-votes should be counted for purposes of whether a quorum is present at the
Annual Meeting. In the absence of precedent to the contrary, the Company intends
to treat abstentions and broker non-votes with respect to the election of
Directors in this manner.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's two nominees named below. If any nominee of
the Company is unable or declines to serve as a Director at the time of the
Annual Meeting, the proxies will be voted for any nominee who is designated by
the present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a Director. The Board of
Directors recommends that stockholders vote "FOR" the nominees listed below.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Both of the nominees (Gary A. Lyons and Harry F. Hixson, Jr.) are
presently Class III Directors of the Company. Certain information about the
nominees is set forth below:
Position in Director
Name Age the Company Since
- ------------------- --- ------------- -------
Harry F. Hixson, Jr. (1)(2) ... 60 Director 1992
Gary A. Lyons ................. 48 President, Chief Executive
Officer and Director 1993
- -----------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Harry F. Hixson, Jr., Ph.D., served as a Director of the Company since
September 1992 and was Chairman of the Board from September 1992 to April 1998.
Dr. Hixson is Chairman and Chief Executive Officer of Elitra Pharmaceuticals, a
privately held biopharmaceutical company, a position he has held since June
1998. Dr. Hixson worked with Amgen Inc. ("Amgen") from July 1985 through
February 1991, most recently as President, Chief Operating Officer and Director.
While at Amgen, he was responsible for pharmaceutical development, manufacturing
and United States and international marketing and sales. Dr. Hixson is a
Director of Signal Pharmaceuticals, Inc., a privately held biopharmaceutical
company. He holds a Ph.D. in Physical Biochemistry from Purdue University and an
M.B.A. from the University of Chicago.
Gary A. Lyons has served as President, Chief Executive Officer and a
Director of the Company since joining the Company in February 1993. Prior to
joining the Company, Mr. Lyons held a number of senior management positions at
Genentech including Vice President of Business Development and Vice President of
Sales. At Genentech, he was responsible for international licensing,
acquisitions and partnering. He was also responsible for Genentech's Corporate
Venture Program which participated in early financing and/or formation of a
number of biotechnology companies. In addition, Mr. Lyons had operating
responsibility for Genentech's two subsidiaries, Genentech Canada, Inc. and
Genentech Limited (Japan). Previously he served as Vice President of Sales and
was responsible for building the marketing and sales organization for the
commercial introduction of Genentech's first two pharmaceutical products,
Protropin (human growth hormone) and Activase (TPA). My Lyons holds a B.S. in
Marine Biology from the University of New Hampshire and an M.B.A. from
Northwestern University's J.L. Kellogg Graduate School of Management.
INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
The Class I and II Directors will remain in office after the 1999
Annual Meeting. The Class I Directors are Wylie W. Vale and Joseph A. Mollica.
The Class II Directors are Richard F. Pops and Stephen A. Sherwin. The names and
certain other current information about the Directors whose terms of office
continue after the Annual Meeting are set forth below:
Director
Name of Director Age Position/Principal Occupation Since
- ---------------- --- ----------------------------- -------
Stephen A. Sherwin (2) 50 Director 1999
Joseph A. Mollica (1)(2) 58 Chairman of the Board 1997
Richard F. Pops (1) 37 Director 1998
Wylie W. Vale (1) 56 Chief Scientific Advisor,
Neuroendocrinology and Director 1992
- --------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Stephen A. Sherwin, M.D., was elected to the Board of Directors on
April 22, 1999 as a Class II Director. Since March 1990, Dr. Sherwin has served
as President, Chief Executive Officer and Director of Cell Genesys, Inc. ("Cell
Genesys"). In March 1994, he was elected as Chairman of the Board of Cell
Genesys. From 1983 to 1990, Dr. Sherwin held various positions at Genentech,
Inc., a biotechnology company, most recently as Vice President of Clinical
Research. Prior to 1983, Dr. Sherwin held various positions on the staff of the
National Cancer Institute. Dr. Sherwin is Chairman of the Board for Abgenix,
Inc. and a Director of the California Healthcare Institute, a non-profit
institution. Dr. Sherwin also currently serves as an Associate Clinical
Professor of Medicine at the University of California, San Francisco, a position
he has held since 1986. Dr. Sherwin holds a B.A. from Yale and an M.D. from
Harvard Medical School.
Joseph A. Mollica, Ph.D., has served as a Director of the Company since
June 1997 and became Chairman of the Board in April 1998. He currently serves as
the Chairman of the Board of Directors, President and Chief Executive Officer of
Pharmacopeia, Inc., a biopharmaceutical company focusing on combinatorial
chemistry, high through-put discovery, molecular modeling and bioinformatics,
since February 1994. From 1987 to December 1993, Dr. Mollica was employed
initially by the DuPont Company and then by The DuPont Merck Pharmaceutical
Company, most recently as President and Chief Executive Officer. Dr. Mollica is
a Director of Pharmacopeia, Inc., USP, Inc. and ImPath, Inc. Dr. Mollica
received a Ph.D. from the University of Wisconsin and a Doctor of Science, h.c.,
from the University of Rhode Island.
Richard F. Pops became a Director of the Company in April 1998. Since
1991, he has served as Chief Executive Officer of Alkermes, Inc. ("Alkermes"), a
publicly traded company involved in the development of advanced drug delivery
systems. Mr. Pops currently serves on the board of directors of Alkermes,
ImmuLogic Pharmaceutical Corp., the Biotechnology Industry Organization and The
Brain Tumor Society. He is President of the Massachusetts Biotechnology Council.
He received a B.A. degree in Economics from Stanford University in 1983.
Wylie W. Vale, Ph.D., is a Founder and Chairman of the Company's
Founding Board of Scientific and Medical Advisors. Dr. Vale was elected a
Director of the Company in September 1992. He is a Professor and former Chairman
of the Faculty at The Salk Institute for Biological Studies ("The Salk
Institute") and is the Senior Investigator and Head of The Clayton Foundation
Laboratories for Peptide Biology at The Salk Institute, where he has been
employed for 29 years. He is also an Adjunct Professor of Medicine at the
University of California at San Diego. Dr. Vale is recognized for his work on
the molecular, pharmacological and biomedical characterization of neuroendocrine
factors including somatostatin, growth hormone releasing factor, gonadotropin
releasing hormone activin and the activin receptor (the first receptor serine
kinase), corticotropin releasing factor, CRF-binding protein, the CRF1 receptor
and urocortin, the native ligand for the CRF2 receptor. In recognition of his
discoveries, he has received numerous awards and is a member of the National
Academy of Arts and Sciences and the National Academy of Sciences. He is a past
President of the American Endocrine Society and is the current President of the
International Society of Endocrinology. Dr. Vale received a B.A. in Biology from
Rice University, and a Ph.D. in Physiology and Biochemistry from the Baylor
College of Medicine.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of 6 meetings and
took action by written consent on 3 occasions during 1998. During 1998, the
Board of Directors had an Audit Committee and a Compensation Committee. No
Director attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors and the total number of meetings held by all
committees of the Board of Directors on which he served.
The Audit Committee in 1998 consisted of Directors Richard F. Pops,
Harry F. Hixson, Jr. and Wylie W. Vale and met once during 1998. This committee
is primarily responsible for approving the services performed by the Company's
independent auditors and for reviewing and evaluating the Company's accounting
principles and its system of internal accounting controls.
The Compensation Committee in 1998 consisted of Directors Joseph A.
Mollica, David E. Robinson and Harry F. Hixson, Jr. This committee met twice and
took action by written consent once during 1998. The Compensation Committee
reviewed and recommended to the Board the compensation of executive officers and
other employees of the Company.
BOARD COMPENSATION
Non-employee Directors are reimbursed for expenses incurred in
connection with performing their respective duties as Directors of the Company.
The Company did not pay cash compensation to any Director prior to February
1997. Directors, who are not employees or consultants of the Company, receive
$1,750 for each regular meeting of the Board of Directors (the Chairman of the
Board receives $2,500), $750 for each special meeting, $600 for each committee
meeting and $600 for each telephone meeting lasting more than one hour, which
such Director attends.
Each non-employee Director participates in the 1996 Director Stock
Option Plan (the "Director Plan"). Options granted under the Director Plan are
automatic and non-discretionary and have a term of ten years. The Director Plan
provides for the grant of nonstatutory options to purchase 10,000 shares of the
Company's Common Stock to each non-employee Director at each annual meeting of
the stockholders commencing in 1997, provided that such non-employee Director
has been a non-employee Director of the Company for at least six months prior to
the date of such annual meeting of the stockholders. Each new non-employee
Director is automatically granted nonstatutory stock options to purchase 10,000
shares of the Company's Common Stock upon the date such person joins the Board
of Directors. In addition to the options granted under the Director Plan, the
Company has agreed to grant Dr. Mollica, as Chairman of the Board, an option to
purchase an additional 5,000 shares at each annual meeting of the stockholders
commencing in 1999.
All options granted to non-employee Directors shall vest over the
three-year period following the date of grant and shall be exercisable at the
fair market value of the Company's Common Stock on the date of the grant.
PROPOSAL TWO:
APPROVAL OF AMENDMENT OF
THE 1992 INCENTIVE STOCK PLAN
INCREASE OF 600,000 SHARES
The Company's 1992 Incentive Stock Plan, as amended (the "Plan") was
approved by the Board of Directors and the stockholders of the Company in 1992.
Currently there are a total of 4,700,000 shares of Common Stock reserved for
issuance under the Plan. In March 1999, the Board of Directors approved a
further increase of 600,000 shares issuable under the Plan, which, if approved
by the stockholders, would increase the total shares reserved for issuance under
the Plan to 5,300,000 shares.
The Board believes the proposed increase in the number of shares
reserved for issuance under the Plan is in the best interests of the Company. In
particular, the Board has determined that the proposed increase will provide an
additional reserve of shares for issuance under the Plan and thus enable the
Company to attract and retain valuable employees.
As of April 15, 1999, there were options outstanding to purchase
3,026,540 shares of Common Stock pursuant to the 1992 Stock Plan; 148,451 shares
remained available for future option grants subject to stockholder approval; and
1,525,009 options were exercised and are now outstanding shares of Common Stock.
SUMMARY OF THE PLAN
The essential features of the Plan, as amended and restated, are
summarized below. This summary does not purport to be complete and is subject
to, and qualified by, reference to all provisions of the Plan, as amended and
restated.
General. The purpose of the Plan is to attract and retain the best
available personnel, to provide additional incentive to the employees and
consultants of the Company and to promote the success of the Company's business.
Options and stock purchase rights may be granted under the Plan. Options granted
under the Plan may be either "incentive stock options," as defined in Section
422 of the Internal Revenue Code (the "Code"), or nonstatutory stock options.
Administration. The Plan may generally be administered by the Board or
a Committee appointed by the Board. The administrators of the Plan are referred
to herein as the "Administrator." The Administrator may make any determinations
deemed necessary or advisable for the Plan.
Eligibility. Nonstatutory stock options and stock purchase rights may
be granted under the Plan to employees and consultants (including Directors) of
the Company and any parent or subsidiary of the Company. Incentive stock options
may be granted only to employees. The Administrator, in its discretion, selects
the employees and consultants to whom options and stock purchase rights may be
granted, the time or times at which such options and stock purchase rights shall
be granted, and the number of shares subject to each such grant.
Limitations. Section 162(m) of the Code places limits on the
deductibility for federal income tax purposes of compensation paid to certain
executive officers of the Company. In order to preserve the Company's ability to
deduct the compensation income associated with options and stock purchase rights
granted to such persons, the Plan provides that no employee may be granted, in
any fiscal year of the Company, options and stock purchase rights to purchase
more than 250,000 shares of Common Stock. Notwithstanding this limit, however,
in connection with an employee's initial employment, he or she may be granted
options or stock purchase rights to purchase up to an additional 250,000 shares
of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Common
Stock on the date such option is granted; provided, however, the exercise price
of an incentive stock option granted to a 10% shareholder may not be less than
110% of the fair market value of the Common Stock on the date such option is
granted. The exercise price of a nonstatutory stock option may not be less than
85% of the fair market value of the Common Stock on the date such option is
granted; provided, however, the exercise price of a nonstatutory stock option
granted to a 10% shareholder may not be less than 110% of the fair market value
of the Common Stock on the date such option is granted. The fair market value of
the Common Stock is generally determined with reference to the closing sale
price for the Common Stock (or the closing bid if no sales were reported) on the
last market trading day prior to the date the option is granted.
(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable and may, in its discretion,
accelerate the vesting of any outstanding option. The means of payment for
shares issued upon exercise of an option is specified in each option agreement.
The Plan permits payment to be made by cash, check, promissory note, other
shares of Common Stock of the Company (with some restrictions), cashless
exercise, any other form of consideration permitted by applicable law, or any
combination thereof.
(c) Term of Option. The term of option may be no more than ten (10)
years from the date of grant; provided that in the case of an incentive stock
option granted to a 10% shareholder, the term of the option may be no more than
five (5) years from the date of grant. No option may be exercised after the
expiration of its term.
(d) Termination of Employment. If an optionee's employment or
consulting relationship terminates for any reason (other than death or
disability), then all options held by the optionee under the Plan expire on the
earlier of (i) the date set forth in his or her notice of grant (which date is
typically 30 days after the date of such termination), or (ii) the expiration
date of such option. To the extent the option is exercisable at the time of the
optionee's termination, the optionee may exercise all or part of his or her
option at any time before it terminates.
(e) Disability. If an optionee's employment or consulting relationship
terminates as a result of disability, then all options held by such optionee
under the Plan expire on the earlier of (i) 6 months from the date of such
termination (or such longer period of time not exceeding 12 months as determined
by the Administrator) or (ii) the expiration date of such option. The optionee
(or the optionee's estate or a person who has acquired the right to exercise the
option by bequest or inheritance), may exercise all or part of the option at any
time before such expiration to the extent that the option was exercisable at the
time of such termination.
(f) Death. In the event of an optionee's death: (i) during the
optionee's employment or consulting relationship with the Company, the option
may be exercised, at any time within 6 months of the date of death (but no later
than the expiration date of such option) by the optionee's estate or a person
who has acquired the right to exercise the option by bequest or inheritance, but
only to the extent that the optionee's right to exercise the option would have
accrued if he or she had remained an employee or consultant of the Company 6
months after the date of death; or (ii) within 30 days (or such other period of
time not exceeding 3 months as determined by the Administrator) after the
optionee's employment or consulting relationship with the Company terminates,
the option may be exercised at anytime within 6 months (or such other period of
time as determined by the Administrator) following the date of death (but in no
event later than the expiration date of the option) by the optionee's estate or
a person who has acquired the right to exercise the option by bequest or
inheritance, but only to the extent of the optionee's right to exercise the
option at the date of termination.
(g) Nontransferability of Options: Unless otherwise determined by the
Administrator, options granted under the Plan are not transferable other than by
will or the laws of descent and distribution, and may be exercisable during the
optionee's lifetime only by the optionee.
(h) Other Provisions: The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
Stock Purchase Rights. A stock purchase right gives the purchaser a
period of no longer than 6 months from the date of grant to purchase Common
Stock. The purchase price of Common Stock purchased pursuant to a stock purchase
right is determined in the same manner as for nonstatutory stock options. A
stock purchase right is accepted by the execution of a restricted stock purchase
agreement between the Company and the purchaser, accompanied by the payment of
the purchase price for the shares. Unless the Administrator determines
otherwise, the restricted stock purchase agreement shall give the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment or consulting relationship with the Company for any
reason (including death and disability). The purchase price for any shares
repurchased by the Company shall be the original price paid by the purchaser.
The repurchase option lapses at a rate determined by the Administrator. A stock
purchase right is nontransferable other than by will or the laws of descent and
distribution, and may be exercisable during the optionee's lifetime only by the
optionee.
Adjustments Upon Changes in Capitalization. In the event that the stock
of the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options
or stock purchase rights will terminate. The Administrator shall notify the
optionee fifteen (15) days prior to the consummation of the liquidation or
dissolution.
In connection with any merger, consolidation, acquisition of assets or
like occurrence involving the Company, each outstanding option or stock purchase
right may be assumed or an equivalent option or right may be substituted by the
successor corporation. The vesting of each outstanding option or stock purchase
right shall accelerate (i.e. become exercisable immediately in full) in any of
the following events: (1) if the successor corporation refuses to assume the
option or stock purchase rights, or to substitute substantially equivalent
options or rights, (2) if the employment of the optionee is involuntarily
terminated without cause within one year following the date of closing of the
merger or acquisition, or (3) if the merger or acquisition is not approved by
the members of the board of directors in office prior to the commencement of
such merger or acquisition.
Amendment and Termination of the Plan. The Board may amend, alter,
suspend or terminate the Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain shareholder approval for any amendment
to the Plan to the extent necessary to comply with applicable laws, rules and
regulations. No such action by the Board or shareholders may alter or impair any
option or stock purchase right previously granted under the Plan without the
consent of the optionee. Unless terminated earlier, the Plan shall terminate ten
years from the date of its approval by the shareholders or the Board of the
Company, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the optionee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and one year after exercise of the option, any gain or loss is treated as
long-term capital gain or loss. Net capital gains on shares held one year or
less may be taxed at a maximum federal rate of 28%, while net capital gains on
shares held for more than one year may be taxed at a maximum federal rate of
20%. Capital losses are allowed in full against capital gains and up to $3,000
against other income. If these holding periods are not satisfied, the optionee
recognizes ordinary income at the time of disposition equal to the difference
between the exercise price and the lower of (i) the fair market value of the
shares at the date of the option exercise or (ii) the sale price of the shares.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, Director, or 10% shareholder of the Company.
Unless limited by Section 162(m) of the Code, the Company is entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. Unless limited by
Section 162(m) of the Code, the Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. Upon a disposition of
such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
provided above, is treated as long-term or short-term capital gain or loss,
depending on the holding period. Net capital gains on shares held one year or
less may be taxed at a maximum federal rate of 28%, while net capital gains on
shares held for more than one year may be taxed at a maximum federal rate of
20%. Capital losses are allowed in full against capital gains and up to $3,000
against other income.
Stock Purchase Rights. Stock purchase rights will generally be taxed in
the same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code, because the Company may repurchase
the stock when the purchaser ceases to provide services to the Company. As a
result of this substantial risk of forfeiture, the purchaser will not recognize
ordinary income at the time of purchase. Instead, the purchaser will recognize
ordinary income on the dates when the stock is no longer subject to a
substantial risk of forfeiture (i.e., when the Company's right of repurchase
lapses). The purchaser's ordinary income is measured as the difference between
the purchase price and the fair market value of the stock on the date the stock
is no longer subject to right of repurchase.
The purchaser may accelerate to the date of purchase his or her
recognition of ordinary income, if any, and begin his or her capital gains
holding period by timely filing, (i.e., within thirty days of the purchase), an
election pursuant to Section 83(b) of the Code. In such event, the ordinary
income recognized, if any, is measured as the difference between the purchase
price and the fair market value of the stock on the date of purchase, and the
capital gain holding period commences on such date. The ordinary income
recognized by a purchaser who is an employee will be subject to tax withholding
by the Company. Different rules may apply if the purchaser is also an officer,
Director, or 10% shareholder of the Company.
The foregoing is only a summary of the effect of federal income
taxation upon optionees, holders of stock purchase rights, and the Company with
respect to the grant and exercise of options and stock purchase rights under the
Plan. It does not purport to be complete, and does not discuss the tax
consequences of the employee's or consultant's death or the provisions of the
income tax laws of any municipality, state or foreign country in which the
employee or consultant may reside.
VOTE REQUIRED
At the Annual Meeting, the shareholders are being asked to approve the
amendment of the 1992 Incentive Stock Plan to increase the number of shares
reserved for issuance thereunder. The affirmative vote of the holders of a
majority of the shares casting their votes at the Annual Meeting will be
required to approve the amendment of the 1992 Incentive Plan. The Board of
Directors recommends voting "FOR" the amendment of the 1992 Incentive Stock
Plan.
PROPOSAL THREE:
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP ("Ernst &
Young"), to audit the financial statements of the Company for the current fiscal
year ending December 31, 1999. Ernst & Young has audited the Company's financial
statements since 1992. Representatives of Ernst & Young are expected to be
present at the meeting, will have the opportunity to make a statement if they so
desire, and are expected to be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares
represented and voting at the meeting will be required to approve and ratify the
Board's selection of Ernst & Young. The Board of Directors recommends voting
"FOR" approval and ratification of such selection. In the event of a negative
vote on such ratification, the Board of Directors will reconsider its selection.
OTHER INFORMATION REGARDING THE COMPANY
PERFORMANCE GRAPH
The following is a line graph comparing the cumulative total return to
stockholders of the Company's Common Stock from May 23, 1996 (the date of the
Company's initial public offering) through December 31, 1998 to the cumulative
total return over such period of: (i) The Nasdaq Stock Market (U.S. Companies)
Index and (ii) the Nasdaq Pharmaceutical Index. The performance shown is not
necessarily indicative of future price performance. The information contained in
the Performance Graph shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission (the "SEC"), nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), except to the extent that
the Company specifically incorporates it by reference into any such filing.
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN*
AMONG NEUROCRINE BIOSCIENCES, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
NASDAQ
Measurement Period Neurocrine Stock Market NASDAQ
(Fiscal Year Covered) Biosciences, Inc. (U.S.) Pharmaceutical
- -------------------- ----------------- ----------------- --------------
05/23/96 100 100 100
12/31/96 95 103 87
12/31/97 75 127 90
12/31/98 65 178 119
EXECUTIVE OFFICERS
As of April 15, 1999, the executive officers of the Company were as
follows:
Name Age Position
- ---- --- --------
Gary A. Lyons....................... 48 President, Chief Executive
Officer and Director
Paul W. Hawran...................... 47 Senior Vice President and Chief
Financial Officer
Stephen G. Marcus, M.D.............. 45 Senior Vice President, Medical
and Regulatory Affairs and
Chief Medical Officer
D. Bruce Campbell, Ph.D............. 54 Vice President, Development
Margaret Valeur-Jensen, J.D., Ph.D.. 42 Vice President, General Counsel
and Corporate Secretary
See Proposal One above for biographical information concerning Gary A.
Lyons.
Paul W. Hawran became Senior Vice President and Chief Financial
Officer of the Company in February 1996. In this capacity, Mr. Hawran directs
strategic planning, finance, investor relations, human resources, information
technologies and operations. Mr. Hawran was employed by SmithKline Beecham
Corporation from July 1984 to May 1993, most recently as Vice President and
Treasurer. Prior to joining SmithKline in 1984, Mr. Hawran held various
financial positions at Warner Communications (now Time Warner) where he was
involved in corporate finance, financial planning and domestic and international
budgeting and forecasting. Mr. Hawran received a B.S. in Finance from St. John's
University and an M.S. in Taxation from Seton Hall University. He is a Certified
Public Accountant and a member of the American Institute of Certified Public
Accountants, California and Pennsylvania Institute of Certified Public
Accountants and the Financial Executives Institute.
Stephen G. Marcus, M.D., has served as Senior Vice President, Medical
and Regulatory Affairs and Chief Medical Officer since February 1997. Prior to
joining the Company, Dr. Marcus served as Vice President, Clinical and
Regulatory Affairs for Genetic Therapy, Inc., since 1993. Dr. Marcus was
responsible for clinical and regulatory activities at Genetic Therapy, Inc.,
where he filed numerous INDs, led clinical and regulatory activities leading to
human gene therapy trials, and developed a gene therapy product for malignant
brain tumors from Phase I clinical trials to Phase III trials in the U.S.,
Canada and Europe. From 1992 to 1993, Dr. Marcus was Vice President, Medical and
Regulatory Affairs for SyStemix, Inc., and from 1990 to 1992 was Director,
Oncology Research Worldwide for Schering-Plough Corporation. Dr. Marcus received
a B.S. from Brooklyn College in 1973 and an M.D. from New York Medical College
in 1976. He is certified by the American Board of Internal Medicine and the
American Board of Medical Examiners.
D. Bruce Campbell, Ph.D., joined the Company as Vice President,
Development in February 1998. Prior to that, he was employed by Sevier United
Kingdom ("Sevier"), a subsidiary of an international pharmaceutical company
based in France, where he served as Director of International Scientific Affairs
since 1991. At Sevier, Dr. Campbell was involved in all aspects of drug
development and was responsible for the registration of eight drugs and vaccines
in the U.K. and English-speaking countries worldwide. Dr. Campbell currently
serves as the European Chairman of the Drug Information Association steering
committee and is a member of the European ICH Safety Working Party, a visiting
Professor in Pharmacology at Kings College of London, and a member of the
editorial boards of various international scientific journals. He has published
more than 100 papers and written standard texts on regulatory aspects of
kinetics and toxicology in new drug development. Dr. Campbell has a Ph.D. in
Biochemistry from the (Guys Hospital) London University.
Margaret Valeur-Jensen, J.D., Ph.D., became Vice President, General
Counsel and Corporate Secretary of the Company in October 1998. Dr.
Valeur-Jensen has recognized experience in legal transactions for licensing,
corporate partnerships, and product commercialization as well as in building
intellectual property portfolios. She is responsible for all corporate and
patent law practices at Neurocrine, serves as Corporate Secretary and is a
member of the senior management committee. Dr. Valeur-Jensen joined Neurocrine
after almost eight years at Amgen, where she served most recently as Associate
Counsel and Director. Prior to joining Amgen, Dr. Valeur-Jensen practiced law at
Davis, Polk & Wardell, a leading corporate law firm. She earned a J.D. degree
with honors from Stanford University, a Ph.D. in Biochemistry and Molecular
Biology from Syracuse University, and was Post-Doctoral Fellow at Harvard
Medical School.
ADDITIONAL INFORMATION
Officers of the Company serve at the discretion of the Board of
Directors. There are no family relationships among any of the Directors,
executive officers or key employees. No executive officer, key employee,
promoter, or control person of the Company has, in the last five years, been
subject to bankruptcy proceedings, criminal proceedings, or legal proceedings
related to the violation of state or federal commodities or securities laws.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following table sets forth the
compensation paid by the Company for each of the three fiscal years in the
period ended December 31, 1998 to the Chief Executive Officer and each of the
other executive officers of the Company as of December 31, 1998 (the "Named
Executive Officers"):
Long-term
Annual Compensation Compensation Awards
------------------------------------- ------------------------
Other Restricted
Annual Stock Securities Other
Salary Bonus Compensation Awards Underlying Compensation
Name and Principal Position Year ($) (1) ($) (1) ($) ($) Options (#) ($)
- ------------------------------- ----- ------------------------------------- ------------------------ --------------
Gary A. Lyons 1998 349,369 (2) 50,000 - - 40,000 44,652 (3)
President and Chief 1997 325,296 (2) 55,000 - - 175,000 -
Executive Officer 1996 290,000 (2) 55,000 - - - 6,531 (3)
Errol B. De Souza 1998 188,953 (4) - - - 30,000 41,241 (5)
Executive Vice President, 1997 257,771 (4) 42,000 - - 130,000 -
Research and Development 1996 227,700 (4) 35,000 - - - 4,524 (5)
Paul W. Hawran 1998 224,667 (6) 35,000 - - 25,000 59,716 (7)
Senior Vice President and 1997 209,073 (6) 40,000 - - 115,000 -
Chief Financial Officer 1996 190,500 (6) 35,000 - - 20,000 10,236 (7)
Stephen Marcus (8) 1998 231,000 (9) 42,500 - - - 31,755 (10)
Senior Vice President, 1997 184,598 (9) 40,000 - - 150,000 133,119 (10)
Clinical & Regulatory Affairs
and Chief Medical Officer
Bruce Campbell (11) 1998 178,846 (12) 46,500 - - 135,000(13) 40,000 (14)
Vice President Development
Margaret Valeur-Jensen 1998 5,000 (15) - - - 115,000 -
Vice President and
General Counsel
- ----------------
(1) Salary and bonus figures are amounts earned during each respective
fiscal year, regardless of whether part or all of such amounts were
paid in subsequent fiscal year(s).
(2) Represents amounts actually paid to Mr. Lyons for the corresponding
fiscal years. Starting on January 1, 1998, Mr. Lyons' annualized salary
became $346,375.
(3) The total for 1996 represents payments by the Company of premiums for
the term life insurance policies for the benefit of Mr. Lyons. The
total for 1998 represents forgiveness of 1/3rd of Mr. Lyons' loan
pursuant to his employment agreement dated March 1, 1997.
(4) Represents amounts actually paid to Dr. DeSouza for the corresponding
fiscal years. Starting on January 1, 1998, Dr. De Souza's annualized
salary became $261,720. He resigned from the Company effective August
31, 1998.
(5) The total for 1996 represents payments by the Company of premiums for
the term life insurance policies for the benefit of Dr. DeSouza. The
total for 1998 represents forgiveness of 1/3rd of Dr. De Souza's loan
pursuant to his employment agreement dated March 1, 1997.
(6) Represents amounts actually paid to Mr. Hawran for the corresponding
fiscal years. Starting on January 1, 1998, Mr. Hawran's annualized
salary became $224,000.
(7) The total for 1996 represents payments by the Company of premiums for
the term life insurance policies for the benefit of Hawran ($4,431) and
the mortgage equalization payments on Mr. Hawran's residence ($5,805).
The total for 1998 represents forgiveness of 1/3rd of Mr. Hawran's loan
pursuant to his employment agreement dated March 1, 1997.
(8) Dr. Marcus joined the Company as Senior Vice President, Medical and
Regulatory Affairs and Chief Medical Officer on March 1, 1997. No
information prior to that time is provided.
(9) Represents amounts actually paid to Dr. Marcus. Starting on January 1,
1998, Dr. Marcus' annualized salary became $231,000.
(10) Represents payments by the Company in 1997 for moving, housing and
other expenses and selling costs incurred by Dr. Marcus in connection
with selling his prior residence and relocating to the Company's
geographic region ($224,227), mortgage equalization payments ($8,000)
and a sign-on bonus ($25,000), as well as reimbursement for taxes
incurred by Dr. Marcus in connection with relocation payments ($6,845).
The total for 1998 represents mortgage equalization payments.
(11) Dr. Campbell joined the Company as Vice President, Development on
February 22, 1998. No information prior to that time is provided.
(12) Represents amounts actually paid to Dr. Campbell. Starting on February
22, 1998, Dr. Campbell's annualized salary was $200,000.
(13) Represents options granted to Dr. Campbell pursuant to his consulting
agreement dated September 1997 but contingent upon full-time
employment in 1998 (125,000) and additional options granted during
1998 (10,000).
(14) Represents a sign-on bonus ($20,000) and reimbursement of moving
expenses ($20,000) paid to Dr. Campbell in connection with his
relocation to the Company's geographic region.
(15) Represents amounts actually paid to Dr. Valeur-Jensen during her
part-time employment with the Company from October 1, 1998 through
December 31, 1998. Starting on January 4, 1999, Dr. Valeur-Jensen's
annualized salary was $212,000.
Option Grants in Last Fiscal Year. The following table sets forth
certain information concerning grants of options made during the year ended
December 31, 1998 by the Company to each of the Named Executive Officers:
% of Total Potential Realizable Value at
Options Assumed Annual Rate of Stock
Options Granted to Appreciation for Option Term(2)
Granted Employees in Exercise ---------------------------------
Name # (1) Fiscal Year Price Expiration Date 0% 5% 10%
- --------------------------- ----------- ---------------- ------------ ---------------- ---------- ----------- ----------
Gary Lyons ................ 40,000 7.6% $7.75 04/16/08 - $194,957 $494,060
Errol DeSouza ............. 30,000 5.7% $7.75 09/30/98 - $146,218 $370,545
Paul Hawran ............... 25,000 4.8% $7.75 04/16/08 - $121,848 $308,788
Stephen Marcus ............ - - - - - - -
Bruce Campbell ............ 10,000 1.9% $6.50 08/19/08 - $40,878 $103,593
Margaret Valeur-Jensen .... 115,000 18.0% $5.0625 10/01/08 $64,687 $366,135 $927,857
- ---------------
(1) All options shown granted in 1998 to Messrs. Lyons, DeSouza, Hawran and
Campbell become exercisable as to 1/48th of the option shares each
month following the vesting start date, with full vesting occurring on
the fourth anniversary of the vesting start date. Options granted to
Dr. Valeur-Jensen become exercisable as to 1/4th of the option shares
on December 31, 1999 and 1/48th per month thereafter. All options shown
granted in 1998 to Messrs. Lyons, DeSouza, Hawran and Campbell were
granted at an exercise price equal to the fair market value of the
Company's Common Stock as determined by the Board of Directors on the
date of grant. The fair market value of options granted to Dr.
Valeur-Jensen on October 1, 1998 was $5.625. The exercise price may be
paid in cash, promissory note, by delivery of already owned shares
subject to certain conditions, or pursuant to a cashless exercise
procedure under which the optionee provides irrevocable instructions to
a brokerage firm to sell the purchased shares and remit to the Company,
out of sale proceeds, an amount equal to the exercise price plus all
applicable withholding taxes.
(2) Potential realizable value is based on the assumption that the Common
Stock of the Company appreciates at the annual rate shown (compounded
annually) from the date of the grant until the expiration of the
ten-year option term. These numbers are calculated based on the
requirements promulgated by the Securities and Exchange Commission and
do not reflect the Company's estimate of future stock price growth.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Values. The following table sets forth certain information regarding the stock
options held at December 31, 1998 by each of the Named Executive Officers.
During 1998, no such stock options were exercised by any of the Named Executive
Officers. The Company has not granted any stock appreciation rights.
Value of In-the Money
Number of Options at Options
Year-End at Year-End ($) (1)
--------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- ---------------- ---------------- ----------------- ---------------
Gary Lyons ..................... 351,110 213,390 $960,661 $90,962
Paul Hawran .................... 138,839 116,461 $254,843 $48,345
Stephen Marcus ................. 68,763 81,237 - -
Bruce Campbell ................. 833 134,167 $312 $3,438
Margaret Valeur-Jensen ......... - 115,000 - $208,437
- ---------------
(1) "In-the-money" options are those for which the fair market value of the
underlying securities exceeds the exercise or base price of the option.
These columns are based upon the closing price of $6.8750 per share on
December 31, 1998, minus the per share exercise price, multiplied by
the number of shares underlying the option.
EMPLOYMENT AGREEMENTS
Gary A. Lyons has an employment contract that provides that: (i) Mr.
Lyons serves as the Company's President and Chief Executive Officer for a term
of three years commencing on March 1, 1997 at an initial annual salary of
$328,300, subject to annual adjustment by the Board of Directors (Mr. Lyons'
base salary for 1998 was set at $346,375 and $365,000 for 1999); (ii) the
agreement will automatically renew for three-year periods thereafter unless the
Company or Mr. Lyons gives 90 days notice of termination; (iii) Mr. Lyons is
eligible for a discretionary annual bonus as determined by the Board of
Directors, based upon achieving certain performance criteria; (iv) the Company
has provided a one-time contract renewal bonus in the form of an option to
purchase 75,000 shares of the Company's Common Stock, exercisable at a price per
share equal to fair market value on the date of grant, which stock option will
vest over a four-year period, (v) the Company has agreed to forgive the loan of
$67,500 made to reimburse Mr. Lyons for 50% of the loss on sale of his former
residence over a three-year period (based on continued employment); and (vi) Mr.
Lyons is entitled to continue to receive his salary for twelve months in the
event that the Company terminates his employment without cause, or materially
reduces the power and duties of his employment without cause, which will be
deemed to be a termination.
Paul W. Hawran has an employment contract that provides that: (i) Mr.
Hawran serves as the Company's Senior Vice President and Chief Financial Officer
for a term of three years commencing on March 1, 1997 at a current annual salary
of $209,740, subject to annual adjustment by the Board of Directors (Mr.
Hawran's base salary for 1998 was set at $224,000 and $235,200 for 1999), (ii)
the agreement will automatically renew for three-year periods thereafter unless
the Company or Mr. Hawran gives 90 days notice of termination, (iii) Mr. Hawran
is eligible for a discretionary annual bonus as determined by the Board of
Directors based upon achieving certain performance criteria, (iv) the Company
has agreed to forgive over a three-year period ending on March 1, 2000 (based on
continued employment) the loan of $87,500 made to reimburse Mr. Hawran for
certain housing and relocation expenses, and (v) Mr. Hawran is entitled to
continue to receive his salary for twelve months in the event that the Company
terminates his employment without cause, or materially reduces the power and
duties of his employment without cause, which will be deemed to be a
termination.
Stephen G. Marcus, M.D., has an employment contract that provides that:
(i) Dr. Marcus serves as the Company's Senior Vice President, Clinical and
Regulatory Affairs and Chief Medical Officer for a term of three years
commencing on March 1, 1997 at an initial annual salary of $220,000, subject to
annual adjustment by the Board of Directors (Dr. Marcus' base salary for 1998
was set at $231,000 and $243,700 for 1999); (ii) the agreement will
automatically renew for three-year periods thereafter unless the Company or Dr.
Marcus gives 90 days notice of termination; (iii) Dr. Marcus is eligible for a
discretionary annual bonus as determined by the Board of Directors, based upon
achieving certain performance criteria; (iv) the Company has granted an option
to purchase 150,000 shares of Common Stock, exercisable at a price per share
equal to fair market value on the date of grant, which stock option will vest
over a four-year period, (v) the Company has agreed to provide certain
relocation costs and expenses associated with Dr. Marcus' relocation from
Maryland to San Diego; and (vi) Dr. Marcus is entitled to continue to receive
his salary for nine months in the event that the Company terminates his
employment without cause, or materially reduces the power and duties of his
employment without cause, which will be deemed to be a termination.
Bruce Campbell, Ph.D., has an employment contract that provides that:
(i) Dr. Campbell serves as the Company's Vice President, Development for a term
of three years commencing on January 1, 1998 at an initial annual salary of
$200,000, subject to annual adjustment by the Board of Directors (Dr. Campbell's
base salary for 1999 was set at $212,000); (ii) the agreement will automatically
renew for three-year periods thereafter unless the Company or Dr. Campbell gives
90 days notice of termination; (iii) Dr. Campbell is eligible for a
discretionary annual bonus as determined by the Board of Directors, based upon
achieving certain performance criteria; (iv) the Company has granted an option
to purchase 125,000 shares of Common Stock, exercisable at a price per share
equal to fair market value on the date of grant, which stock option will vest
over a four-year period, (v) the Company has agreed to provide certain
relocation costs and expenses associated with Dr. Campbell's relocation from
United Kingdom to San Diego, California; (vi) in connection with the purchase of
a home in the San Diego area, the Company extended a loan of $250,000 bearing
annual interest of 1%; and (vii) Dr. Campbell is entitled to continue to receive
his salary for nine months in the event that the Company terminates his
employment without cause, or materially reduces the power and duties of his
employment without cause, which will be deemed to be a termination.
Margaret Valeur-Jensen, J.D., Ph.D., has an employment contract that
provides that: (i) Dr. Valeur-Jensen serves as the Company's Vice President,
General Counsel and Corporate Secretary for a term of three years commencing on
January 4, 1999 at an initial annual salary of $212,000, subject to annual
adjustment by the Board of Directors; (ii) the agreement will automatically
renew for three-year periods thereafter unless the Company or Dr. Valeur-Jensen
gives 90 days notice of termination; (iii) Dr. Valeur-Jensen is eligible for a
discretionary annual bonus as determined by the Board of Directors, based upon
achieving certain performance criteria; (iv) the Company has granted an option
to purchase 115,000 shares of Common Stock, exercisable at a price per share
equal to fair market value on the date of grant, which stock option will vest
over a four-year period, (v) the Company has agreed to provide certain
relocation costs and expenses associated with Dr. Valeur-Jensen's relocation to
San Diego, California; and (vi) Dr. Valeur-Jensen is entitled to continue to
receive her salary for nine months in the event that the Company terminates her
employment without cause, or materially reduces the power and duties of her
employment without cause, which will be deemed to be a termination.
REPORT OF THE COMPENSATION COMMITTEE
The following is a report of the Compensation Committee of the Company
describing the compensation policies and rationale applicable to the Company's
executive officers with respect to the compensation paid to such executive
officers for the year ended December 31, 1998. The information contained in this
report shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission nor shall such information be incorporated by
reference into any future filing under the Securities Act or the Exchange Act,
except to the extent that the Company specifically incorporates it by reference
into any such filing.
The Compensation Committee (the "Committee") of the Board of Directors
reviews and recommends to the Board of Directors for approval the Company's
executive compensation policies. The Committee is responsible for reviewing the
salary and benefits structure of the Company at least annually to insure its
competitiveness within the Company's industry. The following is the report of
the Committee describing the compensation policies and rationales applicable to
the Company's executive officers with respect to the compensation paid to such
executive officers for the fiscal year ended December 31, 1998. In 1998, the
members of the Committee were David E. Robinson, and Harry F. Hixson, Jr. David
Robinson resigned as a member of the Company's Board of Directors and the
Compensation Committee as of March 2, 1999.
COMPENSATION PHILOSOPHY
The Company's philosophy in establishing its compensation policy for
executive officers and other employees is to create a structure designed to
attract and retain highly skilled individuals by establishing salaries,
benefits, and incentive compensation which compare favorably with those for
similar positions in other biotechnology companies. Compensation for the
Company's executive officers consists of a base salary and potential incentive
cash bonuses, as well as potential incentive compensation through stock options
and stock ownership.
BASE SALARY
The base salary component of compensation is designed to compensate
executive officers competitively at levels necessary to attract and retain
qualified executives in the pharmaceutical and biotechnology industry. The base
salaries have been targeted at or above the average rates paid by competitors to
enable the Company to attract, motivate, reward and retain highly skilled
executives. In order to evaluate the Company's competitive position in the
industry, the Committee reviewed and analyzed the compensation packages,
including base salary levels, offered by other biotechnology and pharmaceutical
companies. The competitive information was obtained from surveys prepared by
consulting companies or industry associations (e.g., the Radford Biotechnology
Compensation Survey). As a general matter, the base salary for each executive
officer is initially established through negotiation at the time the officer is
hired taking into account such officer's qualifications, experience, prior
salary, and competitive salary information. Year-to-year adjustments to each
executive officer's base salary are based upon personal performance for the
year, changes in the general level of base salaries of persons in comparable
positions within the industry, and the average merit salary increase for such
year for all employees of the Company established by the Compensation Committee,
as well as other factors the Compensation Committee judges to be pertinent
during an assessment period. In making base salary decisions, the Committee
exercises its judgment to determine the appropriate weight to be given to each
of these factors.
ANNUAL INCENTIVE COMPENSATION
A portion of the cash compensation paid to the Company's executive
officers, including the Chief Executive Officer, is in the form of discretionary
bonus payments that are paid on an annual basis as part of the Company's
Incentive Compensation Plan. Bonus payments are linked to the attainment of
overall corporate goals established by the Board of Directors and individual
goals established for each executive officer. The maximum potential amount of
each officer's bonus payment is established annually by the Board of Directors
based upon the recommendation of the Committee. The appropriate weight to be
given to each of the various goals used to calculate the amount of each
officer's bonus payment is determined by the Committee. The goal of the
Company's Incentive Compensation Plan is to support the achievement of Company
goals and objectives by basing compensation on a pay for performance basis.
LONG-TERM INCENTIVES
The Committee provides the Company's executive officers with long-term
incentive compensation through grants of stock options under the Company's 1992
Incentive Stock Plan and the opportunity to purchase stock under the 1996
Employee Stock Purchase Plan (the "Purchase Plan"). The Board believes that
stock options provide the Company's executive officers with the opportunity to
purchase and maintain an equity interest in the Company and to share in the
appreciation of the value of the Company's Common Stock. The Board believes that
stock options directly motivate an executive to maximize long-term shareholder
value. The options also utilize vesting periods (generally four years) that
encourage key executives to continue in the employ of the Company. The Board
considers the grant of each option subjectively, considering factors such as the
individual performance of the executive officer and the anticipated contribution
of the executive officer to the attainment of the Company's long-term strategic
performance goals.
Long-term incentives granted in prior years are also taken into consideration.
The Company established the Purchase Plan both to encourage employees
to continue in the employ of the Company and to motivate employees through
ownership interest in the Company. Under the Purchase Plan, employees, including
officers, may have up to 15% of their earnings withheld for purchases of Common
Stock on certain dates specified by the Board. The price of Common Stock
purchased will be equal to 85% of the lower of the fair market value of the
Common Stock on the date of commencement of participation in each six-month
offering period or on each specified purchase date.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of the Chief Executive Officer is reviewed annually on
the same basis as discussed above for all executive officers. Gary A. Lyons'
base salary for 1998 was $328,300 until March 1, 1998, when it became $346,375.
Mr. Lyons' base salary for 1999 was set at $365,000. Mr. Lyons joined the
Company in February 1993. His initial salary, potential bonus, and stock grants
were determined on the basis of negotiation between the Board of Directors and
Mr. Lyons with due regard for his qualifications, experience, prior salary, and
competitive salary information. Mr. Lyons' base salary for 1999 was established
in part by comparing the base salaries of chief executive officers at other
biotechnology and pharmaceutical companies of similar size. Mr. Lyons earned a
$50,000 bonus for 1998. As with other executive officers, Mr. Lyons' total
compensation was based on the Company's accomplishments and the Chief Executive
Officer's contribution thereto.
SECTION 162(M)
The Board has considered the potential future effects of Section 162(m)
of the Code on the compensation paid to the Company's executive officers.
Section 162(m) disallows a tax deduction for any publicly-held corporation for
individual compensation exceeding $1.0 million in any taxable year for any of
the executive officers named in the proxy statement, unless compensation is
performance-based. The Company has adopted a policy that, where reasonably
practicable, the Company will seek to qualify the variable compensation paid to
its executive officers for an exemption from the deductibility limitations of
Section 162(m).
In approving the amount and form of compensation for the Company's
executive officers, the Committee will continue to consider all elements of the
cost to the Company of providing such compensation, including the potential
impact of Section 162(m).
Respectfully submitted by:
COMPENSATION COMMITTEE
Harry F. Hixson, Jr.
Joseph A. Mollica
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of December 31, 1998, the Compensation Committee consisted of Joseph
A. Mollica, David E. Robinson and Harry F. Hixson, Jr. Effective March 2, 1999,
David Robinson resigned from the Company's Board of Directors and the
Compensation Committee and was replaced by Stephen A. Sherwin on April 22, 1999.
No member of the Compensation Committee has a relationship that would constitute
an interlocking relationship with executive officers or directors of another
entity.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1993, the Company loaned to Gary A. Lyons, President, Chief
Executive Officer and Director of the Company, $85,000 for the purchase of stock
in the Company. Pursuant to Mr. Lyons' Employment Agreement dated March 1, 1997,
the loan bears interest at a rate of 4% per annum and is due and payable in full
on March 31, 1999. As of December 31, 1998, $85,500 remained outstanding on the
loan. In December 1993, the Company loaned Mr. Lyons $135,000 in connection with
certain housing relocation expenses. One half of the loan had been forgiven as
of February 1997; pursuant to Mr. Lyons' Employment Agreement, the remaining
half of the loan bears interest at a rate of 6% per annum and is being forgiven
over a three-year period starting on March 1, 1997, subject to repayment in the
event of termination of employment. As of December 31, 1998, $45,000 remained
outstanding on the loan.
In June 1994, the Company loaned Paul W. Hawran, Senior Vice President
and Chief Financial Officer of the Company, $175,000 in connection with certain
housing and relocation expenses. One half of the loan had been forgiven as of
February 1997; pursuant to the Employment Agreement dated March 1, 1997, the
remaining half of the loan bears interest at a rate of 6% per annum and is being
forgiven over a three-year period starting on March 1, 1997, subject to
repayment in the event of termination of employment. As of December 31, 1998,
$58,333 remained outstanding on the loan.
In February 1998, the Company loaned Bruce Campbell, Vice President,
Development of the Company, $250,000 in connection with certain housing and
relocation expenses. The principal balance of the loan will bear interest at a
rate of one percent per annum (1.0% p.a.) and principal and interest will be
payable upon the first to occur of (i) sale of the home, (ii) six (6) months
following voluntary or involuntary termination of Executive's employment with
the Company, (iii) the exercise, pledge or sale of all or part of the stock
options granted by Company to Executive or (iv) December 31, 1999. As of
December 31, 1998, $250,000 remained outstanding on the loan.
Dr. Wylie Vale, a Director of the Company, is a Professor and the
Senior Investigator and Head of the Clayton Foundation Laboratories for Peptide
Biology at The Salk Institute. In 1998, the Company paid $235,054, to The Salk
Institute in connection with various license agreements.
The Company has a consulting agreement with Dr. Vale, pursuant to which
Dr. Vale spends a significant amount of time performing services for the
Company, including attendance at meetings of the Company's Scientific Advisory
Board, and is prohibited from providing consulting services to or participating
in the formation of any company in Neurocrine's field of interest or that may be
competitive with Neurocrine. Dr. Vale's agreement is for a five-year term that
commenced in February 1996 and provides for an annual consulting fee of $42,500
in exchange for his consulting services to the Company.
David Robinson resigned from the Company's Board of Directors on March
2, 1999. The Company plans to enter into a consulting agreement with Mr.
Robinson pursuant to which he will perform services to the Company on a
part-time basis. The agreement is anticipated to be for a one-year term
effective March 1999 and will provide for the continued vesting of options to
purchase 11,668 shares of the Company's Common Stock. These options were
previously granted to Mr. Robinson under the 1996 Director Plan in exchange for
his service as a Director of the Company.
During fiscal 1998, there were no other transactions between the
Company and its Directors, executive officers, or known holders of greater than
five percent of the Company's Common Stock in which the amount involved exceeded
$60,000 and in which any of the foregoing persons had or will have a material
interest.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no other
matters to be submitted to the meeting. If any other matters properly come
before the meeting, it is the intention of the persons named in the enclosed
proxy card to vote the shares they represent as the Board of Directors may
recommend.
BY ORDER OF THE BOARD OF DIRECTORS
San Diego, California
Dated: April 23, 1999
This Proxy is solicited on behalf of the Board of Directors.
NEUROCRINE BIOSCIENCES, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD May 21, 1999
The undersigned stockholder of NEUROCRINE BIOSCIENCES, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 23, 1999 and hereby appoints
Gary A. Lyons and Paul W. Hawran, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1999 Annual Meeting
of Stockholders of NEUROCRINE BIOSCIENCES, INC. to be held on May 21, 1999 at
8:30 a.m. local time, at the Company's corporate headquarters located at10555
Science Center Drive, San Diego, California, 92121, and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth below:
1. ELECTION OF DIRECTORS:
[ ] For all nominees listed below [ ] Against all nominees listed
(except as indicated) below
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below:
Gary A. Lyons and Harry F. Hixson, Jr.
2. PROPOSAL TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR
ISSUANCE UNDER THE 1992 INCENTIVE STOCK PLAN FROM 4,700,000 SHARES TO
5,300,000 SHARES:
[ ] For [ ] Against [ ] Abstain
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY FOR THE FISCAL PERIOD ENDING DECEMBER 31, 1999:
[ ] For [ ] Against [ ] Abstain
and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS NAMED ABOVE, FOR THE AMENDMENT
OF THE 1992 INCENTIVE STOCK PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS INDEPENDENT AUDITORS AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated: ________________, 1999 Signature__________________________________
Dated: ________________, 1999 Signature__________________________________
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)