Neurobiological Technologies DEF 14A 2008
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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NEUROBIOLOGICAL TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
NEUROBIOLOGICAL TECHNOLOGIES, INC.
2000 Powell Street, Suite 800
Emeryville, CA 94806
October 9, 2008
You are cordially invited to attend the 2008 Annual Meeting of Stockholders of Neurobiological Technologies, Inc. (the Company). The meeting will be held at the Grand Hyatt San Francisco, 345 Stockton Street, San Francisco, California, on Thursday, November 13, 2008, at 10:00 a.m., local time.
The matters to be considered at the meeting are described in detail in the attached proxy statement. We will also report on the activities of the Company immediately following the meeting, and you will have an opportunity to submit questions or comments on matters of interest to stockholders generally. Included with the proxy statement is a copy of the Companys 2008 Annual Report to Stockholders for the fiscal year ended June 30, 2008.
Please use this opportunity to take part in the affairs of the Company by voting on the business to come before this meeting. Regardless of whether you plan to attend the meeting, I urge you to vote your proxy as soon as possible. Returning the proxy card does not deprive you of your right to attend the meeting and to vote your shares in person, and may save the Company from incurring additional proxy solicitation costs.
The Board of Directors and management look forward to seeing you at the meeting.
/s/ Paul E. Freiman
Paul E. Freiman
President and Chief Executive Officer
TABLE OF CONTENTS
NEUROBIOLOGICAL TECHNOLOGIES, INC.
We will hold our 2008 Annual Meeting of Stockholders (the Annual Meeting) at the Grand Hyatt San Francisco, 345 Stockton Street, San Francisco, California, on Thursday, November 13, 2008, at 10:00 a.m. local time for the following purposes:
1. To elect three Class III directors, as nominated by our Board of Directors, to hold office until the 2011 Annual Meeting of Stockholders.
2. To ratify the selection of Odenberg, Ullakko, Muranishi & Co. LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2009.
3. To transact any other business that may properly come before the meeting or any adjournment or postponement of the meeting.
The foregoing items of business are more fully described in the proxy statement accompanying this notice. Proposal 1 relates solely to the election of three Class III directors nominated by the Board of Directors and does not include any other matters relating to the election of directors, including without limitation, the election of directors nominated by any stockholder of the Company.
Only stockholders of record at the close of business on September 30, 2008 will be entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.
We cordially invite each of our stockholders to attend and vote at the Annual Meeting in person. However, to assure your representation at the Annual Meeting, we urge you to mark, sign, date and return the enclosed proxy as promptly as possible in the enclosed postage prepaid envelope. Any stockholder attending the meeting may vote in person even if he or she returns a proxy.
By Order of the Board of Directors,
/s/ Stephen C. Ferruolo
Stephen C. Ferruolo
October 9, 2008
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY. A MAJORITY OF THE SHARES MUST BE REPRESENTED AT THE MEETING, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM. IF YOU PLAN TO ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU SEND IN YOUR PROXY.
NEUROBIOLOGICAL TECHNOLOGIES, INC.
2000 Powell Street, Suite 800
Emeryville, CA 94806
PROXY STATEMENT FOR
2008 ANNUAL MEETING OF STOCKHOLDERS
November 13, 2008, 10:00 a.m., local time
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Neurobiological Technologies, Inc. (the Company) for use at the Companys 2008 Annual Meeting of Stockholders (the Annual Meeting), to be held on Thursday, November 13, 2008, at 10:00 a.m., local time. The meeting will be held at the Grand Hyatt San Francisco, 345 Stockton Street, San Francisco, California. This proxy statement and the accompanying form of proxy will be mailed to our stockholders on or about October 9, 2008.
The purposes of the annual meeting are to elect three Class III directors, as nominated by our Board of Directors, and to ratify the appointment of the Companys independent registered public accounting firm. Only stockholders of record at the close of business on September 30, 2008 (the record date) are entitled to notice of, and to vote at, the Annual Meeting. At the close of business on the record date, 26,924,124 shares of Common Stock, par value $0.001 per share (Common Stock), were issued and outstanding, and 494,000 shares of Series A Preferred Stock, par value $0.001 per share (Preferred Stock), were issued and outstanding. Each share of Common Stock is entitled to one vote on all matters to be voted upon at the annual meeting. Each share of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Preferred Stock could be converted on the record date, which is one (1) share of Common Stock for every seven (7) shares of Preferred Stock. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of capital stock on the record date will constitute a quorum for the transaction of business at the Annual Meeting and any adjournment or postponement thereof.
We will provide copies of this proxy statement, notice of annual meeting and accompanying materials to brokerage firms, fiduciaries and custodians for forwarding to beneficial owners and will reimburse these persons for their costs of forwarding these materials. Our directors, officers and employees may solicit proxies by telephone, facsimile or personal solicitation. We will not pay additional compensation for any of these services. In addition, we may retain a proxy solicitation firm or other third party to assist us in collecting or soliciting proxies from our stockholders. We expect that the costs of these services, exclusive of out-of-pocket costs, will not exceed $10,000.
If your shares are held in your name, you must either return the enclosed proxy card or attend the Annual Meeting in person in order to vote on the proposals. If your shares are held through a brokerage firm, bank or other institution and you do not return your proxy, the brokerage firm, bank or other institution holding your shares may vote your shares for you or may return a proxy leaving your shares unvoted (a broker non-vote).
Abstentions and broker non-votes will be counted for the purpose of determining the presence or absence of a quorum, but their effect on the outcome of the proposals will vary depending on the vote required to approve each proposal. With respect to Proposal No. 1, directors will be elected by a plurality vote, which means that abstentions
and broker non-votes will be disregarded and will have no effect on the outcome. Proposal No. 2 must be approved by a majority of the shares present and entitled to vote either in person or by proxy. As a result, abstentions will have the same effect as a vote against that proposal and broker non-votes will have no effect on the outcome of the proposal.
In order for a proxy to be effective, it must be properly executed and received prior to the close of voting at the Annual Meeting or any adjournment or postponement thereof. Each proxy properly tendered will, unless otherwise directed by the stockholder, be voted for each of the nominees for director set forth in Proposal No. 1, for the ratification of the selection of Odenberg, Ullakko, Muranishi & Co. LLP as our independent registered public accounting firm as set forth in Proposal No. 2 and at the discretion of the proxy holders with regard to all other matters that may properly come before the Annual Meeting. As of the date of this proxy statement, the Company was unaware of any other matters that are expected to come before the meeting. Any stockholder of record may attend the Annual Meeting in person and may revoke the enclosed proxy at any time by:
If you hold shares of our stock through a brokerage firm, bank or other institution, you must contact that institution in order to revoke or change your proxy or to vote at the Annual Meeting in person.
PROPOSAL NO. 1
Our Board of Directors is currently composed of seven directors. We have a classified Board of Directors consisting of three Class III directors, two Class I directors and two Class II directors (all listed below), who will serve until the annual meetings of stockholders to be held in 2008, 2009 and 2010, respectively, and until their respective successors are duly elected and qualified, unless they resign or their seats become vacant due to death, removal or other cause in accordance with the bylaws of the Company. At each annual meeting of stockholders, directors are elected for a term of three years to succeed those directors whose terms expire at the annual meeting dates. The terms of the Class III directors will expire on the date of the upcoming Annual Meeting. Accordingly, three persons are to be elected to serve as Class III directors of the Board of Directors at the Annual Meeting.
The Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, has nominated each of the current Class III members of the Board of Directors, Abraham D. Cohen, Paul E. Freiman and F. Van Kasper, and recommended that they be reelected to the Board of Directors. If any of the nominees declines to serve or becomes unavailable for any reason, or if a vacancy occurs before the election (although we know of no reason to anticipate that this will occur), the proxies may be voted for such substitute nominee(s) as the Board of Directors may recommend. The proxy holders cannot vote for more than three persons. If a quorum is present and voting, the three nominees for Class III director receiving the highest number of votes will be elected as Class III directors.
Each of the nominees for director was recommended by the Nominating and Corporate Governance Committee of the Board of Directors and each nominee is an incumbent director. In recommending these nominees, the Nominating and Corporate Governance Committee considered their experience, skills, judgment, integrity and understanding of the Companys business and prospects. Additionally, following the retirement of Drs. Cape and Callaway in fiscal 2008, the Nominating and Corporate Governance Committee has determined that it would be beneficial to have one or more directors with a medical or relevant science background and additional pharmaceutical or biotechnology industry experience. In anticipation of the Annual Meeting, the Nominating and Corporate Governance Committee also wrote to the Companys largest institutional investors, asking for suggested
potential nominees to serve on the Companys board of directors. No persons were nominated by these stockholders. This year, the Nominating and Corporate Governance Committee also considered the two stockholder nominations that were received, and concluded that these candidates did not have the medical or relevant science background that the Nominating and Corporate Governance Committee believes would be beneficial. It is the policy of the Nominating and Corporate Governance Committee to consider stockholder nominees using the same criteria that are used to assess candidates nominated by the Company. Additional information regarding the Nominating and Corporate Governance Committees policies and procedures for handling stockholder nominees is provided below under the caption Stockholder Proposals.
The three nominees who receive the greatest number of affirmative votes of the shares present and entitled to vote in person or by proxy will be elected as Class III directors. Neither the holders of Common Stock nor the holders of Preferred Stock have the right to cumulative voting in the election of directors. Any shares that are not voted, whether by abstention, broker non-votes or otherwise, will not affect the election of directors, except to the extent that the failure to vote for an individual will result in other nominees receiving a larger proportion of the votes cast. Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, then FOR the election of the nominees named in this proxy statement.
The following table sets forth both the nominees to be voted upon at the Annual Meeting, as well as the continuing directors, the year each such nominee or continuing director was first elected a director, the age of each nominee and continuing director, the positions with the Company currently held by each nominee and continuing director, the year each nominee or continuing directors current term will expire and each nominee and continuing directors current class:
The following persons have been nominated by the Company to be elected as Class III directors at the 2008 annual meeting.
Abraham E. Cohen has served as a director of the Company since March 1993 and has been Chairman of the Board since August 1993. From 1982 to 1992, Mr. Cohen served as Senior Vice President of Merck & Co., or Merck, and from 1977 to 1988 as President of the Merck Sharp & Dohme International Division, or MSDI. While at Merck, he played a key role in the development of Mercks international business, initially in Asia, then in Europe and, subsequently, as President of MSDI, which manufactures and markets human health products outside the United States. Since his retirement from Merck and MSDI in January 1992, Mr. Cohen has been active as an international business consultant. He is currently Chairman and President of Kramex Company and is also chairman
of the board of Vasomedical, Inc. Mr. Cohen serves as a director of the following public companies: Chugai Pharmaceutical Co., MannKind Corporation and Teva Pharmaceutical Industries, Ltd.
Paul E. Freiman joined the Company as a director in April 1997 and was appointed President and Chief Executive Officer in May 1997. Mr. Freiman has informed the Board of Directors of his intention to retire as President and Chief Executive Officer, effective as of December 31, 2008. The Company expects that Mr. Freiman will continue to serve as a member of the Board following his retirement. Mr. Freiman is the former chairman and chief executive officer of Syntex Corporation, where he was instrumental in the sale of Syntexs lead product, Naprosyn, and was responsible for moving the product to over-the-counter status, where it is now marketed by Procter & Gamble Co. as Aleve. Mr. Freiman currently serves as chairman of the board of Penwest Pharmaceuticals Co. He also serves on the boards of Calypte Biomedical Corporation, NeoPharm, Inc., NovaBay Pharmaceuticals, Inc., Otsuka America Pharmaceuticals, Inc. and SciGen Pte. Ltd. He has been chairman of the Pharmaceutical Manufacturers Association of America, or PhRMA, and has also chaired a number of key PhRMA committees. Mr. Freiman is also an advisor to Burrill & Company, a San Francisco merchant bank. Mr. Freiman holds a B.S. degree from Fordham University and an honorary doctorate from the Arnold & Marie Schwartz College of Pharmacy.
F. Van Kasper has served as a director of the Company since January 2004. Mr. Kasper served as Chairman of Wells Fargo Securities, the institutional brokerage and investment bank for Wells Fargo & Company, prior to his retirement in March 2003. Mr. Kasper entered the brokerage business in 1964 with Merrill Lynch and Co., Inc. and in 1978 co-founded Van Kasper and Company, a regional investment bank. As Chairman and Chief Executive Officer of Van Kasper and Company, he guided its growth from a handful of employees to a bank with over 350 employees in 15 offices in 4 states when it was sold in 1999. During his investment career, Mr. Kasper was elected as a Governor of the National Association of Securities Dealers and as a Director and Vice Chairman of the Securities Industry Association. Mr. Kasper is active in the San Francisco, California area non-profit community, most recently as a director and member of the Investment Committee for the University of California San Francisco Foundation, and serves as Chairman Emeritus for San Franciscos Exploratorium Museum. Mr. Kasper holds a B.S. degree from California State University.
Theodore L. Eliot, Jr. has served as a director of the Company since August 1992. Previously, he served as a director of the Company from September 1988 until April 1992, and as a Vice President from September 1988 until September 1991. Mr. Eliot retired from the United States Department of State in 1978, after a 30-year career in which he held senior posts in Washington and was Ambassador to Afghanistan. He was Dean of the Fletcher School of Law and Diplomacy from 1978 to 1985 and a director of Raytheon Co. from 1983 to 1998. He is currently a director of several non-profit organizations. Mr. Eliot holds B.A. and M.P.A. degrees from Harvard University.
William A. Fletcher has served as a director of the Company since February 2007. Mr. Fletcher has been Chairman, Teva Pharmaceuticals North America since December 2004. Prior to that, he was President and Chief Executive Officer of Tevas North American activities from 1985 until the end of 2004. Mr. Fletcher served as Vice President, Sales and Marketing of the Pennsylvania-based Lemmon Company (1980 to 1983) and then as President (1983-1985) following the companys acquisition by Teva and WR Grace. Prior to 1980, Mr. Fletcher was Business Development Manager and International Marketing Manager of Synthelabo, a pharmaceutical subsidiary of LOreal in Paris. From 1970 to 1977 he served in various international sales and marketing positions for Hoffman-LaRoche. He serves as a board member for several Teva subsidiary companies in North America and Europe, and is a director of Sportwall International Inc., a growth company in the interactive fitness industry. Mr. Fletcher graduated in International Marketing from Woolwich Polytechnic, London (now Greenwich University) in 1969.
Abraham D. Sofaer has served as a director of the Company since April 1997. Mr. Sofaer is the first George P. Shultz Distinguished Scholar & Senior Fellow at the Hoover Institution, Stanford University, appointed in 1994. He has also been a Professor of Law (by courtesy) at Stanford Law School. From 1990 to 1994, Mr. Sofaer was a partner at the law firm of Hughes, Hubbard & Reed in Washington, D.C., where he represented several major U.S. public
companies. From 1985 to 1990, he served as the Legal Adviser to the United States Department of State, where he was principal negotiator on several international disputes. From 1979 to 1985, he served as a federal judge in the Southern District of New York. Mr. Sofaer is registered as a qualified arbitrator with the International Chamber of Commerce Arbitration Committee and the American Arbitration Association and is a member of the National Panel of the Center for Public Resolution of Disputes. Mr. Sofaer is on the boards of directors of Gen-Probe, Inc., and Rambus, Inc. and the International Advisory Committee of Chugai Biopharmaceuticals, Inc. He is president of the American Friends of the Koret Israel Economic Development Fund and a director of the Koret Foundation. He also serves as chairman of the National Museum of Jazz in Harlem. Mr. Sofaer holds a B.A. degree from Yeshiva College and an L.L.B. degree from New York University.
John B. Stuppin is a founder of the Company and has served as a director of the Company since September 1988. From September 1987 until October 1990, Mr. Stuppin served as President of the Company, from November 1990 to August 1993 as co-chairman of the Board, from October 1990 until September 1991 as Executive Vice President, and from April 1991 until July 1994 as Treasurer. He also served as the acting Chief Financial Officer of the Company from the Companys inception through December 1993 and served as a part-time employee of the Company in a business development capacity from December 1990 to December 2005. Mr. Stuppin is an investment banker and a venture capitalist. He has over 40 years experience in the start up and management of companies active in emerging technologies and has been the president of a manufacturing company. He is chairman of the board of Energy Focus, Inc. Mr. Stuppin holds an A.B. degree from Columbia University.
PROPOSAL NO. 2
The Audit Committee of our Board of Directors has selected Odenberg, Ullakko, Muranishi & Co. LLP (OUM) as our independent registered public accounting firm for the fiscal year ending June 30, 2009, and has directed that we submit the selection of OUM for ratification by our stockholders at the Annual Meeting.
The Company is not required to submit the selection of our independent registered public accounting firm for stockholder ratification. However, if the stockholders do not ratify this selection, the Audit Committee will reconsider its selection of OUM. Even if the selection is ratified, our Audit Committee may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that the change would be in the best interests of the Company.
Representatives of OUM are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.
The following is a summary of the fees billed to the Company by OUM for professional services:
There were no audit-related fees or other fees billed by OUM in addition to the fees noted in the schedule above. The Audit Committee reviews audit and non-audit services performed by our independent registered public accounting firm, as well as the fees charged for such services. In its review of non-audit service fees, the Audit Committee considers, among other things, the possible impact of the performance of such services on our independent registered accounting firms independence. All audit-related fees, tax fees and other fees are pre-approved by the Audit Committee or its Chairman. Additional information concerning the Audit Committee and its activities can be found in the following sections of this proxy statement: Board Meetings and Committees and Report of the Audit Committee.
Ratification of the selection of the independent registered public accounting firm requires the affirmative vote of a majority of the shares present in person or by proxy and voting on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
Our Board of Directors annually determines the independence of each of our directors and nominees in accordance with the independence standards set forth in the NASDAQ Marketplace Rules. These rules provide that independent directors are those who are independent of management and free from any relationship that, in the judgment of the Board of Directors, would interfere with their exercise of independent judgment. No director qualifies as independent unless the Board of Directors affirmatively determines that the director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). Members of the Audit Committee must be independent and must also satisfy a separate independence requirement pursuant to the Exchange Act, which requires, among other things, that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from us, other than their directors compensation.
Based on its review, our Board of Directors has determined that all directors, other than Messrs. Freiman (who is the Companys President and Chief Executive Officer) and Stuppin (who served as a part-time employee until December 2005), are independent directors as defined by the rules of The NASDAQ Stock Market. In making its determination regarding the independence of the non-employee directors, the Board of Directors considered,
among other things, the stock holdings of the non-employee directors and to what extent such holdings may affect their ability to exercise independent judgment. None of these independent directors is a party to any transaction, relationship or arrangement not disclosed pursuant to Item 404(a) of Regulation S-K. There are no family relationships among any of our directors or executive officers.
We have adopted a Code of Business Conduct and Ethics (Code of Conduct) that applies to all of our directors, officers and employees. We have posted a copy of the Code of Conduct on our website at www.ntii.com. You may also request a printed copy of the Code of Conduct, without charge, by writing us at 2000 Powell Street, Suite 800, Emeryville, California 94608, Attn: Investor Relations. In the event of an amendment to, or a waiver from, any provision of the Code of Conduct that applies to any director or executive officer, we will publicly disclose any such amendment or waiver as required by applicable law or regulations or NASDAQ.
Our Nominating and Corporate Governance Committee has adopted Corporate Governance Guidelines (Guidelines) to assist our Board of Directors in exercising its responsibilities. These Guidelines reflect our Board of Directors commitment to building long-term stockholder value with an emphasis on corporate governance. You may request a printed copy of the Guidelines, without charge, by writing us at 2000 Powell Street, Suite 800, Emeryville, California 94608, Attn: Investor Relations.
Generally, stockholders who have questions or concerns regarding the Company should write to us at 2000 Powell Street, Suite 800, Emeryville, California 94608, Attn: Investor Relations. However, any stockholders who wish to address questions regarding the business or affairs of the Company directly with the Board of Directors, or any individual director, should direct his or her questions in writing to the Chairman of the Board at the address set forth above.
During the fiscal year ended June 30, 2008, our Board of Directors held eleven meetings. Each director attended at least 75% of the meetings of the Board of Directors and meetings of the committees of which he was a member in our last fiscal year. Our Board of Directors has standing Audit, Compensation, and Nominating and Corporate Governance committees. All members of our Board of Directors serving at the time of the 2007 Annual Meeting of Stockholders attended that meeting. Although the Company has no formal policies regarding director attendance at annual meetings, we expect that most of the members of the Board of Directors will attend the upcoming Annual Meeting.
Audit Committee. Our Audit Committee is comprised of Messrs. Kasper (Chairman), Eliot and Sofaer. Our Audit Committee oversees the accounting and financial reporting processes of the Company and audits of our financial statements and reviews the effectiveness of our internal control over financial reporting. In that regard, the Audit Committees responsibilities are, among other things, to appoint and provide for the compensation of our independent registered public accounting firm, to oversee and evaluate its performance, to review our interim and annual financial statements, independent audit reports and management letters, and to perform other duties specified in the Audit Committee Charter. The Audit Committee met five times in fiscal 2008. Our Board of Directors has determined that all members of the Audit Committee satisfy the current independence standards promulgated by both The NASDAQ Stock Market (including independence standards for audit committee members) and the SEC. Our Board of Directors has also determined that Mr. Kasper is an audit committee financial expert, as the SEC has defined that term in Item 407 of Regulation S-K.
Compensation Committee. Our Compensation Committee is comprised of Messrs. Sofaer (Chairman), Cohen and Eliot. Our Compensation Committee assists the Board of Directors with respect to compensation for our executive officers and independent directors and administers our equity-based compensation plans. In that regard, the Compensation Committees responsibilities are, among other things, to determine the level and form of compensation for our executive officers, including the Chief Executive Officer, and directors, to oversee administration of our equity-based compensation plans, to report annually to our stockholders on executive compensation, and to perform other duties specified in the Compensation Committee Charter. The Compensation Committee met three times in fiscal 2008. Our Board of Directors has determined that all members of the Compensation Committee satisfy the current independence standards promulgated by The NASDAQ Stock Market.
Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee is comprised of Messrs. Stuppin (Chairman), Fletcher and Sofaer. Our Nominating and Corporate Governance Committee identifies, evaluates and recommends individuals for election as directors at each annual or special meeting of the stockholders, oversees the evaluation of the Boards performance, develops and recommends to the Board corporate governance guidelines, and provides oversight with respect to corporate governance and ethical conduct. Procedures for the consideration of director nominees recommended by stockholders are set forth in our amended and restated bylaws. The Nominating and Corporate Governance Committee met once in fiscal 2008. Our Board of Directors has determined that all members of the Nominating and Corporate Governance Committee, other than Mr. Stuppin, satisfy the current independence standards promulgated by The NASDAQ Stock Market. Although Mr. Stuppin does not currently satisfy the independence standards promulgated by The NASDAQ Stock Market, the Board of Directors appointed Mr. Stuppin to the Nominating and Corporate Governance Committee in February 2008 because it determined that Mr. Stuppins membership on the Committee was required in the best interests of the Company and its stockholders due to his experience in business and corporate governance matters, and the Board of Directors did not believe that his previous part-time employment with the Company would interfere with his exercise of independent judgment in carrying out the responsibilities of a member of the Nominating and Corporate Governance Committee. Mr. Stuppin is expected to satisfy the independence standards promulgated by The NASDAQ Stock Market starting in December 2008.
Charters for our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are posted on our website at www.ntii.com.
No member of the Compensation Committee was an officer or employee of the Company, nor was any member of the Compensation Committee formerly one of our officers during fiscal 2008. None of our executive officers served (i) as a member of the compensation committee (or board of directors serving the compensation function) of another entity, one of whose executive officers served on the compensation committee or (ii) as a member of the compensation committee (or board of directors serving the compensation function) of another entity, one of whose executive officers served on our Board of Directors.
Our current executive officers and their respective positions are set forth in the following table. Biographical information regarding each executive officer who is not also a director is set forth following the table.
David E. Levy, M.D. was appointed Vice President, Clinical Development in September 2004 following the Companys acquisition of Empire Pharmaceuticals, Inc. (Empire). From June 2003 to August 2004, Dr. Levy was
international project team leader at Eisai Medical Research, Inc., where he directed a clinical program to develop a novel, new therapy in Alzheimers disease as well as acute ischemic stroke programs. He was a co-founder of Empire and previously served as an advisor to Empire and as senior director of medical research at DOV Pharmaceutical, Inc., where he directed several clinical development programs from June 2001 to May 2002. From 1991 to 2001, Dr. Levy was with Knoll Pharmaceuticals, serving initially as senior director and therapeutic head of clinical CNS and then as senior director of cardiovascular/ internal medicine. Dr. Levy served as executive vice chair of neurology from 1988 to 1991 at Weill-Cornell Medical College and New York Presbyterian Hospital and continues to serve as adjunct associate professor of neurology and adjunct associate attending neurologist at these institutions. Dr. Levy is a fellow of the American Academy of Neurology, the American College of Physicians, and the Stroke Counsel of the American Heart Association. Dr. Levy holds a B.A. degree from Harvard College and an M.D. degree from Harvard Medical School.
Matthew M. Loar was appointed Vice President and Chief Financial Officer in April 2008. Mr. Loar is licensed in California as a certified public accountant and has over 20 years of financial management experience. Mr. Loar joined the Company from Osteologix, Inc., where he served as Chief Financial Officer from September 2006 to April 2008. Prior to his tenure at Osteologix, Mr. Loar was Chief Financial Officer of Genelabs Technologies, Inc. beginning in 2001. Prior to being appointed CFO at Genelabs, Mr. Loar was Vice President, Finance and Controller for approximately six years. Earlier, Mr. Loar held finance positions with an international manufacturing company and was audit manager with a major public accounting firm. Mr. Loar holds a B.A. degree from the University of California, Berkeley.
Karl G. Trass was appointed Vice President, Regulatory Affairs & Quality Assurance in September 2005. Mr. Trass has over 15 years of regulatory affairs experience, including supervising the preparation and filing of both new drug applications and biologics applications, which resulted in four compounds receiving FDA marketing approval. Mr. Trass has extensive experience in a variety of therapeutic areas, including oncology and cardiovascular, and has had significant regulatory experience outside of the United States. From March 2004 to October 2004, Mr. Trass was Director of Regulatory Affairs with Sangamo BioSciences. He held the same position at Gilead Sciences, Inc. in Foster City, California from January 2003 to July 2003, and was Associate Director of Regulatory Affairs for Tularik, Inc. from December 2000 to December 2002. Earlier, he was Senior Manager for Regulatory Affairs at Genentech, Inc. and Senior Associate for Regulatory Affairs with Syntex of Palo Alto. Mr. Trass holds a B.S. degree from Indiana University.
Warren W. Wasiewski, M.D. was appointed Chief Medical Officer in November 2007, and previously served the Company as Vice President, Clinical Programs beginning in February 2007. He is a board certified pediatric neurologist with an extensive clinical career, including 19 years in pediatric neurology. Prior to joining the Company, Dr. Wasiewski was employed with AstraZeneca LP from December 2001 to February 2007, where he began as an Associate Medical Director and was promoted to Senior Medical Director of Clinical Research CNS/Emerging Products. Before joining AstraZeneca, Dr. Wasiewski was Chairman of Pediatrics at Lancaster General Hospital from 1998 to 2001, and from 1991 to 2001 he was a Consultant Neurologist at Pediatric Neurology Associates in Lancaster, Pennsylvania, a practice he founded in 1991. Prior to founding Pediatric Neurology Associates, he was an assistant professor of pediatrics at Penn State Medical School in Hershey, Pennsylvania. Among his professional affiliations, Dr. Wasiewski is a Fellow of the American Academy of Neurology, Fellow of the American Academy of Pediatrics, a member of Alpha Omega Alpha, the national Medical Honor Society and a member of the American Heart Association. He is widely published in areas of disease of the central nervous system including migraine and stroke. Dr. Wasiewski holds a B.A. degree from Rutgers College, an M.S. degree from State University of New York Downstate Medical Center and an M.D. degree from the State University of New York at Buffalo.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Our Board of Directors has adopted policies and procedures for the review and approval of related party transactions and has delegated to the Audit Committee the authority to review and approve the material terms of any proposed related party transactions.
Pursuant to our Code of Business Conduct and Ethics, each of our executive officers, directors and employees must disclose transactions involving actual or apparent conflicts of interests, such as related party transactions, to his or her direct supervisor or the Chief Executive Officer. In order to avoid such conflicts, our executive officers, directors and employees may not receive any payments, compensation or gifts, other than gifts of nominal value, from any entity that does business or seeks to do business with us. Furthermore, our executive officers, directors and employees may not use property or information belonging to us or their position with us for improper personal gain.
In determining whether to approve or ratify a related-party transaction, the Audit Committee may consider, among other factors it deems appropriate, the potential benefits to us, the impact on a directors or nominees independence or an executive officers relationship with or service to us, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related partys interest in the transaction. In deciding to approve a transaction, the Audit Committee may, in its sole discretion, impose such conditions as it deems appropriate on us or the related party in connection with its approval of any transaction. Any transactions involving the compensation of executive officers, however, are to be reviewed and approved by the Compensation Committee. If a related-party transaction will be ongoing, the Audit Committee may establish guidelines to be followed in our ongoing dealings with the related party. Thereafter, the Audit Committee, on at least an annual basis, will review and assess ongoing relationships with the related party to see that they are in compliance with the committees guidelines and that the related-party transaction remains appropriate.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our common stock as of September 30, 2008 based on information available to us and filings with the SEC by:
Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC and include voting or investment power with respect to shares of stock. This information does not necessarily indicate beneficial ownership for any other purpose. Under these rules, shares of common stock issuable under stock options that are exercisable within 60 days of September 30, 2008 and upon conversion of shares of Series A Preferred Stock are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options or Series A Preferred Stock, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting and investment power over their shares of common stock, except for those jointly owned with that persons spouse. Percentage of beneficial ownership of common stock is based on 26,924,124 shares of common stock outstanding as of September 30, 2008. Percentage of beneficial ownership of Series A Preferred Stock is based on 494,000 shares of Series A Preferred Stock outstanding as of September 30, 2008. Unless otherwise noted below, the address of each person listed on the table is c/o Neurobiological Technologies, Inc., 2000 Powell Street, Suite 800, Emeryville, California 94608.
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all reports filed under Section 16(a). To the Companys knowledge, based solely on the review of copies of the reports furnished to the Company, all executive officers, directors and greater than 10% stockholders were in compliance with all applicable Section 16(a) filing requirements in fiscal 2008, except that (i) a Form 4 was not timely filed for Dr. Levy in connection with his purchase of 10,000 shares of Common Stock that occurred on October 30, 2007. The Form 4 was subsequently filed on November 13, 2007, and (ii) a Form 3 was not timely filed for Dr. Wasiewski in connection with his becoming a Section 16 reporting person on September 17, 2007. The Form 3 was subsequently filed on May 16, 2008.
The following compensation discussion and analysis describes the material elements of compensation awarded to, earned by, or paid in fiscal 2008 to each of the executive officers identified below in the Summary Compensation Table, who are referred to collectively as our named executive officers. The Compensation Committee assists our Board of Directors in the discharge of its responsibilities regarding compensation of our executives, including the named executive officers. Our Chief Executive Officer generally makes recommendations to the Compensation Committee regarding the corporate goals and objectives relevant to executive compensation and executives performance in light of such goals and objectives, and recommends the executives compensation levels to the Compensation Committee based on such evaluations. Regarding officer compensation for fiscal 2008, the Compensation Committee, after considering the report regarding equity compensation at peer companies provided by Radford Surveys & Consulting and after considering peer company compensation data, then made recommendations to our Board of Directors for final approval.
Our compensation program is designed to attract, inspire, motivate and reward executives responsible for attaining the financial and strategic objectives essential to our long-term success and growth in stockholder value. The key objectives of the compensation program are to:
The Compensation Committee evaluates individual executive performance with a goal of setting compensation at levels the committee believes are comparable with executives in other companies of similar size and stage of development operating in the biopharmaceutical industry, while taking into account our relative performance and our own strategic goals. We strive to provide a total compensation package to senior management that is competitive in the marketplace, recognizes individual performance and provides opportunities to earn rewards based on achievement of short-term and long-term corporate objectives.
In the biopharmaceutical industry, many traditional measures of corporate performance, such as earnings per share or sales growth, may not readily apply in reviewing performance of executives. Because of our current stage of development, we have not used profitability or short-term market value of our stock as a significant factor in review of executives performance and setting compensation. As such, we evaluate other indications of performance, such as progress of our drug development programs and corporate development activities, our success in recruiting and retaining highly qualified personnel and our success in securing capital sufficient to enable us to continue drug development activities. These considerations necessarily involve an assessment by the Compensation Committee of both individual and corporate performance.
The primary elements of our executive compensation program are (i) base compensation or salary, (ii) annual cash bonuses and (iii) equity-based awards granted pursuant to our 2003 Equity Incentive Plan. In addition, we provide our executive officers a variety of benefits that are available generally to all salaried employees, including participation in our 2003 Employee Stock Purchase Plan. We view these components as related but distinct. The Compensation Committee determines the appropriate level for each compensation component based in part, but not exclusively, on competitive benchmarking consistent with recruiting and retention goals, its view of internal equity and consistency, and individual performance. We believe that, as is common in the biotechnology and pharmaceutical industries, stock-based awards, salary and cash bonuses are all necessary to attract and retain employees. We have not adopted any formal or informal policies or guidelines for allocating compensation between long-term and short-term compensation, or between cash and non-cash compensation.
While we do not believe that it is appropriate to establish compensation levels based solely on benchmarking, we believe that information regarding pay practices at other companies is nevertheless useful in two respects. First, we recognize that compensation practices must be competitive in the marketplace. Second, independent marketplace information is one of the many factors that we consider in assessing the reasonableness of compensation. Accordingly, our Compensation Committee retained Radford Surveys & Consulting (Radford), a compensation consultant recognized in the biotechnology industry to review our policies and procedures with respect to executive compensation for fiscal 2008.
Additionally, the Compensation Committee conducts an annual benchmark review of the benefits of our executive officers, based on the Radford Benefits Survey. This survey provides data on cost of benefits, health and welfare plans, flexible benefits, retirement plans, paid time off, HR practices, relocation practices and other benefits.
Base Salary. We seek to provide our executive officers with competitive annual base salaries in order to attract and retain talented individuals. The base salary component of our executive officer compensation program is not designed to incentivize our near-term performance (as performance-based cash bonuses are designed to do), but rather to provide the baseline level of compensation to executive officers. In most cases, the base salary component will represent the largest annual form of compensation to executive officers, although we have no formal policy regarding the allocation between base salary and other forms of compensation. In making decisions regarding base salary levels, the Compensation Committee will consider and evaluate the total compensation package, including possible performance-based cash bonuses and periodic equity awards, received or to be received by a particular executive officer, and seek to ensure that the executive officers total compensation package is fair, reasonable and
competitive. In determining appropriate salary levels for a given executive officer, the Compensation Committee considers the following factors:
Salaries for executive officers are determined on an individual basis at the time of hire and are set to be competitive with comparable businesses in our industry. Adjustments to base salary are considered annually in light of each officers performance, our performance and compensation levels at other companies within our industry, as well as upon promotion or other change in job responsibilities. The Chief Executive Officer assists the Compensation Committee in its annual review of the base salaries of other executive officers based on the foregoing criteria.
The base salaries actually paid to each of the named executive officers in fiscal 2008 is set forth below in the Summary Compensation Table.
Cash Bonus. We also provide executive officers with discretionary annual cash bonuses, which are specifically designed to reward executives for our overall performance as well as their individual performance in a given year. The Compensation Committee considers the performance of the officer, as well as the Companys performance, for the preceding fiscal year in deciding whether to award a discretionary bonus and, if one is to be awarded, the size of the bonus. All cash bonuses are awarded retrospectively. We currently have no formal policy regarding the payment of discretionary cash bonuses, and such bonuses are only paid if and when the Compensation Committee or the Board deems appropriate based upon the circumstances, although the Compensation Committee may establish targeted payouts and performance goals that would be considered by the Committee in making its determination.
For fiscal 2008 the Board approved a bonus plan for Mr. Freiman and Drs. Wasiewski and Levy, wherein specified cash bonus payments would be tied to the Companys ability to complete its analysis of interim clinical trial data from the ongoing ASP trials of Viprinex for the treatment of acute ischemic stroke. If the interim data analysis were completed by September 30, 2008, then the Company would pay bonuses of up to 100% of base salary for Mr. Freiman and Dr. Wasiewski and up to 50% of base salary for Dr. Levy, if not completed by September 30, 2008, then the Compensation Committee and the Board would have the discretion to determine an appropriate bonus payout. Because the enrollment of patients into the Companys clinical trial was not sufficient to complete the interim analysis by September 30, 2008, the Company did not award any bonus amounts relating to these goals. However, the Compensation Committee determined that other specific progress regarding enrollment into the clinical trials had been made, although not to the level that would qualify for the higher bonus percentages. The Compensation Committee and Board of Directors also determined that other key business objectives were met, and on September 11, 2008, the Board of Directors awarded bonuses of 25% of base salary for Mr. Freiman and Dr. Wasiewski, and 10% of base salary for Dr. Levy.
Stock Options and Restricted Stock. As an additional component of our compensation program, executive officers are eligible to receive equity compensation in the form of stock options or restricted stock awards. The Compensation Committee grants stock options to executive officers to aid in their retention, to motivate them to assist with the achievement of corporate objectives and to align their interests with those of our stockholders by creating a return tied to the performance of our stock price. In determining the timing and size of stock option grants, the Compensation Committee considers the contributions and responsibilities of each executive, appropriate incentives for the promotion of our long-term growth, grants made to other executives in the industry holding comparable positions, our performance relative to corporate objectives, and recent growth or decline in stockholder value.
Under the terms of our 2003 Equity Incentive Plan, or the Plan, pursuant to which all new equity grants are currently made, the exercise price of any stock options awarded under the Plan must be equal to at least 100% of the fair market value of our common stock (the closing sales price on the NASDAQ Capital Market) on the date of grant. We do not have any program, plan or obligation that requires us to grant equity awards on specified dates, although we usually make annual grants to existing officers and employees during the first quarter of each fiscal year and to new hires upon commencement of their employment, nor do we have in place any program, plan or practice to time stock option grants to our executive officers in coordination with the release of material nonpublic information. Stock option grants may occasionally be considered following a significant change in job responsibilities or to meet other special retention or performance objectives. No such grants were made during fiscal 2008. Authority to make equity grants to non-executive employees rests with the Compensation Committee. With respect to executive officers, recommendations for equity grants are made by our Chief Executive Officer to the Compensation Committee, which in turn makes recommendations to the Board for final approval. The Compensation Committee considers recommendations of the Chief Executive Officer in all such decisions, except for compensation of the Chief Executive Officer.
We believe that periodic equity awards serve as useful performance recognition mechanisms with respect to key employees, as most awards are subject to time-based vesting provisions. Occasionally the granting or vesting of a stock award may be made contingent on achievement of certain specific performance conditions. We believe that such periodic equity awards encourage executive officers to remain with us and also focus on our long-term performance.
In November 2007, following the completion of an underwritten stock offering, our Board of Directors, upon recommendation of the Compensation Committee, considered the retentive value of the Companys outstanding equity awards following our one-for-seven reverse-split, which had the effect of reducing the number of shares underlying outstanding equity awards and increasing the exercise price of outstanding options. The Board of Directors and the Compensation Committee also considered the underlying value of the outstanding equity awards and data regarding outstanding and authorized equity awards at other biotechnology companies. Following these considerations, the Compensation Committee and Board of Directors made proposals for special one-time option grants to our directors and employees, including our executive officers, which would be granted following stockholder approval of an amendment to the Plan, increasing the number of shares authorized for issuance thereunder. This amendment to the Plan was submitted to the stockholders for approval in April 2008. In May 2008, based on feedback received from certain stockholders, the proposed awards to our directors and Chief Executive Officer were reduced in size, and a minimum exercise price above the then-current market price was also established for certain grants. On May 30, 2008, the amendment to the Plan was approved by the stockholders and the proposed option grants were awarded to the directors and employees.
Our Plan also permits the award of restricted stock. No restricted stock awards were granted to officers in fiscal 2008.
Employee Stock Purchase Plan. Our 2003 Employee Stock Purchase Plan, or the Purchase Plan, provides eligible employees, including executive officers, with the opportunity to purchase common stock at a discount through payroll deductions during defined six-month accumulation periods. The price at which the stock is purchased is equal to the lower of 85% of the fair value of the stock on the last trading day before the commencement of the applicable offering period or 85% of the fair value of the common stock on the last trading day of the accumulation period. Participating employees may end their participation at any time during an offering period, and they will be paid their payroll deductions accumulated to that date. Participation ends automatically upon termination of employment and payroll deductions credited to the participating employees account are returned to such employee without interest. In fiscal 2008, none of the named executive officers purchased shares under the Purchase Plan.
Executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, disability and accidental death and dismemberment insurance, in each case on the same basis as other employees, subject to applicable law. We also provide vacation and other paid holidays to all employees,
including executive officers, all of which we believe to be comparable to those provided at peer companies. These benefit programs are designed to enable us to attract and retain our workforce in a competitive marketplace. Health, welfare and vacation benefits ensure that we have a productive and focused workforce through reliable and competitive health and other benefits.
Our retirement savings plan (401(k) Plan) is a tax-qualified retirement savings plan, pursuant to which all employees, including the named executive officers, are able to contribute a portion of their annual compensation, subject to limits prescribed by the Internal Revenue Service. In fiscal 2008, we contributed $500 to the 401(k) accounts of Dr. Levy and Mr. Carlson.
Additionally, we have agreed to reimburse up to $10,000 of Dr. Levys annual professional insurance fees. We also maintain an apartment in Edgewater, New Jersey for Dr. Wasiewski, our Vice President and Chief Medical Officer, in lieu of paying relocation expenses upon his commencement of employment with us.
Our Plan provides that the time-based (but not performance-based) vesting of all outstanding equity awards will fully accelerate in the event of a change in control, which term is defined below under the heading Potential Payments Upon Termination or Change in Control.
Information regarding the potential value of these payments is provided below for the named executive officers under the heading Potential Payments Upon Termination or Change in Control.
Mr. Freiman, our President and Chief Executive Officer, is compensated with a base salary and, depending on performance and our financial condition, an annual cash bonus and/or stock option award. After conducting its annual review in September 2008, in which it considered the report provided by Radford and peer-company compensation data as well as Company performance in fiscal 2008, the Board of Directors awarded Mr. Freiman a bonus of $100,000. The Board of Directors also increased Mr. Freimans base salary by 5%, from $400,000 to $420,000. In May 2008, Mr. Freiman was awarded an option under the Plan for the purchase of 300,000 shares of common stock. The exercise price of Mr. Freimans option was set at $3.00 per share, which price was above the closing price of the Companys common stock on the date of grant, as quoted on the Nasdaq Capital Market ($2.08). The option grant was intended only to provide a return to Mr. Freiman if and to the extent the Companys stock price increased above $3.00 per share. The option has a term of seven years and vests and becomes exercisable in equal monthly installments over four years, subject to a six-month cliff.
Dr. Wasiewski, our Vice President and Chief Medical Officer, is compensated with a base salary and, depending on performance and our financial condition, an annual cash bonus and/or stock option award. Dr. Wasiewskis base salary was set at $305,000 upon his promotion to Chief Medical Officer in November 2007. In May 2008, Dr. Wasiewski was awarded an option to purchase 250,000 shares of our common stock under the Plan. The option has an exercise price of $2.08 per share, has a term of seven years and vests and becomes exercisable in equal monthly installments over four years, subject to a six-month cliff. In September 2008, Dr. Wasiewski was awarded a bonus of $76,250 for his performance in fiscal 2008 and his annual salary was increased approximately 5% to $320,000.
Dr. Levy, our Vice President, Clinical Development, is compensated with a base salary and, depending on performance and our financial condition, an annual cash bonus and/or stock option award. In May 2008, Dr. Levy was awarded an option to purchase 125,000 shares of our common stock under our 2003 Equity Incentive Plan. The option has an exercise price of $2.08 per share, has a term of seven years and vests and becomes exercisable in equal monthly installments over four years, subject to a six-month cliff. In September 2008, Dr. Levy was awarded a bonus of $25,625 for his performance in fiscal 2008 and his annual salary was increased approximately 2% to $261,500.
At the time of his resignation in March 2008, Mr. Carlsons base salary was $250,000. He received a one-time severance payment of $125,000. Mr. Carlson was not employed by the Company in September 2008 when fiscal 2008 bonus determinations were made, and accordingly was not awarded a bonus for performance in fiscal 2008.
In making compensation decisions affecting our executive officers, the Compensation Committee considers our ability to deduct under applicable federal corporate income tax law compensation payments made to executives. Specifically, the Compensation Committee considers the requirements and impact of Section 162(m) of the Internal Revenue Code, which limits the tax deductibility to us of compensation in excess of $1.0 million in any year for certain executive officers, except for qualified performance-based compensation under the Section 162(m) rules. The Compensation Committee considers the Section 162(m) rules as a factor in determining compensation, but will not necessarily limit compensation to amounts deductible under Section 162(m). No executive compensation exceeded $1.0 million for fiscal 2008.
Our Compensation Committee reviews the performance and compensation of our Chief Executive Officer on an annual basis and establishes our Chief Executive Officers compensation level. Our Chief Executive Officer is not present for these discussions related to his compensation. For the remaining executives, the Chief Executive Officer makes recommendations to the Compensation Committee based upon individual experience and breadth of knowledge, internal considerations, and other subjective factors that the committee takes into account when determining executive compensation.
There is no pre-established policy or target for the allocation of compensation. The factors described above, as well as the overall compensation philosophy, is reviewed to determine the appropriate level and mix of compensation. Historically, and in fiscal 2008, the largest portion of compensation to named executive officers was granted in the form of base salary.
As discussed elsewhere, compensation, including salary base adjustments, for our named executive officers is reviewed annually, usually in the first quarter of the fiscal year.
There are no minimum stock ownership guidelines for our executives or employees, although executives are encouraged to own shares of the Company and the equity compensation program is designed in part to foster these levels of increased ownership.
Our compensation policies are designed and are continually being developed to retain and motivate our executive officers and to reward them for outstanding individual and corporate performance.
The Compensation Committee of the Company has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Abraham D. Sofaer, Chairman
Theodore L. Eliot, Jr.
The following table summarizes compensation paid, awarded or earned for services rendered during fiscal 2008 by our Chief Executive Officer, our two other most highly compensated executive officers whose salary and bonus for fiscal 2008 exceeded $100,000, and one additional individual who would have been among the Companys two most highly compensated executive officers, other than the Chief Executive Officer, but for the fact that he was not serving as an executive officer at the end of the last completed fiscal year. We refer to these four executive officers as our named executive officers.
The following table shows information regarding outstanding equity awards at June 30, 2008 for our named executive officers.
During the fiscal year ended June 30, 2008, none of our named executive officers or directors exercised any stock options.
We do not have a defined benefit plan. Our named executive officers did not participate in, or otherwise receive any special benefits under, any pension or retirement plan sponsored by us during fiscal 2008.
During fiscal 2008, our named executive officers did not contribute to, or earn any amounts with respect to, any defined contribution or other plan sponsored by us that provides for the deferral of compensation on a basis that is not tax-qualified.
There are no severance or change in control agreements in place for any of our named executive officers. Our 2003 Equity Incentive Plan provides that the time-based (but not performance-based) vesting of all outstanding equity awards will fully accelerate in the event of a change in control, which is defined under the plan as (A) any merger, consolidation or other transaction to which we or an affiliate are a party and in which our beneficial stockholders, immediately before the transaction, beneficially own securities representing 50% or less of our total combined voting power or value immediately after the transaction or (B) any other transaction or corporate event deemed by the Board to constitute a change in control including, but not limited to, (i) a transaction or series of transactions in which any person or entity, including a group as contemplated by Section 13(d)(3) of the Exchange Act, acquires securities holding 30% or more of our total combined voting power or value, or (ii) as a result of or in connection with a contested election of our directors, the persons who were our directors immediately before the election cease to constitute a majority of the Board.
Assuming that a change in control occurred as of the end of fiscal 2008, and based on our closing stock price on the last day of trading that year ($1.42), the named executive officers would have received no change in control benefits because the exercise prices of then outstanding options was higher than the closing price of our stock.
The Company pays the following quarterly cash retainer fees to each non-employee director in lieu of fees based on meeting attendance:
On May 30, 2008, upon the recommendation of the Board, the stockholders of the Company approved an amendment to our Plan to, among other things, provide that non-employee directors will receive an annual automatic grant of an option to purchase 15,000 shares commencing on the date of the 2008 annual meeting of stockholders. Prior to May 30, 2008, each non-employee director annually received an option to acquire 1,428 shares of the Companys common stock upon re-election at the annual meeting of stockholders. The options have an exercise price equal to 100% of the fair market value of the Companys common stock, as reflected by the closing price of our stock on the grant date. The options have ten-year terms and vest and become fully exercisable upon the earlier of (i) the first anniversary of the grant date, provided that the optionee is a director at such time, and (ii) a change in control, as defined in the Plan.
Additionally, upon approval of the amendment to the Plan, the following one-time option grants were made to the each of the non-employee directors:
Each of these options was granted has an exercise price of $3.00 per share and a ten-year term. These options vested 50% upon grant and will vest 25% on each of the first and second anniversaries of the date of grant, such that the shares are fully vested after two years from the date of grant. Because the common stock of the Company traded at $2.08 per share on the date of the grant, the exercise price of the grants was at a 44% premium to the trading price of the common stock at the time of the grants.
The following table shows for fiscal 2008 certain information with respect to the compensation of all of the Companys non-employee directors.
The following table provides certain information as of June 30, 2008 with respect to shares of our common stock that may be issued under our equity compensation plans.
Our equity compensation plans do not contain evergreen provisions.
The following Report of the Audit Committee shall not be deemed to be soliciting material or to be filed with the SEC nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference into a filing.
The Audit Committee is appointed by the Board of Directors to oversee the qualifications, independence and performance of the Companys independent registered public accounting firm, manage relations with the Companys independent registered public accounting firm, pre-approve audit and non-audit services to be performed by the Companys independent registered public accounting firm and evaluate policies and procedures relating to internal accounting functions and controls. We operate under a written Audit Committee Charter that has been adopted by the Board of Directors, and the Audit Committees responsibilities are more fully described in the Audit Committee Charter, a copy of which is attached hereto as Annex A. Each of the members of the Audit Committee, Messrs. Kasper (Chairman), Eliot and Sofaer meets the independence requirements promulgated by the National Association of Securities Dealers and the SEC.
We are not professional accountants or auditors, and our functions are not intended to duplicate or to certify the activities of management or our independent registered public accounting firm, nor can we certify that the independent registered public accounting firm is independent under applicable rules. We serve a board-level oversight role in which we provide advice, counsel and direction to management and the auditors on the basis of the information we receive, our discussions with management and the auditors, and our experience in business, financial and accounting matters.
We oversee the Companys accounting and financial reporting processes on behalf of the Board of Directors. The Companys management has the primary responsibility for the financial statements and the accounting and reporting processes, including the Companys system of internal controls. In fulfilling our oversight responsibilities, we reviewed and discussed with management the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2008. This review included a discussion of the quality and the acceptability of the Companys financial and disclosure reporting and controls, including the nature and extent of disclosures in the financial statements. We also reviewed the progress and results of the testing of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.
We also reviewed with the Companys independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States of America, its judgments as to the quality and the acceptability of the Companys financial reporting and such other matters as are required to be discussed with the Committee under generally accepted auditing standards, including Statement on Auditing Standards No. 114. We have received the written disclosures and the letter from the independent registered public accounting firm required by the Public Company Accounting Oversight Board. We discussed with the independent registered public accounting firm its independence from management and the Company, including the matters required by the applicable rules of the Public Company Accounting Oversight Board.
In addition to matters discussed above, we discussed with the Companys independent registered public accounting firm the overall scope, plans and estimated costs of its audit. We met with representatives from the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluation of the Companys internal controls, and the overall quality of the Companys financial reporting.
In reliance on the reviews and discussions referred to above, we recommended to the Board of Directors that the Companys audited financial statements be included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2008.
F. Van Kasper, Chairman
Theodore L. Eliot, Jr.
Abraham D. Sofaer
We know of no other matters to be submitted to a vote of stockholders at the Annual Meeting. If any other matter is properly brought before the Annual Meeting or any adjournment thereof, it is the intention of the persons named in the enclosed proxy to vote the shares they represent in accordance with their judgment. In order for any stockholder to nominate a candidate or to submit a proposal for other business to be acted upon at the Annual Meeting, he or she must provide timely written notice to Secretary of the Company in the form prescribed by our bylaws.
Stockholder proposals, including director nominees, intended to be included in next years annual meeting proxy materials must be received by the Secretary of the Company at 2000 Powell Street, Suite 800, Emeryville, California 94608, no later than June 11, 2009 (the Proxy Deadline). The form and substance of these proposals must satisfy the requirements established by the Companys bylaws and the SEC.
Additionally, stockholders who intend to present a stockholder proposal at any annual meeting of stockholders must provide the Secretary of the Company with written notice of the proposal not less than 45 or more than 75 days prior to the first anniversary of the date on which the Company first mailed its proxy for the preceding years annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding years annual meeting, notice of the proposed stockholder action must be received on the later of (i) the 90th day prior to such annual meeting or (ii) the 10th day following the day of such notice or disclosure. Notice must be tendered in the proper form prescribed by the Companys bylaws. Proposals not meeting the requirements set forth in our bylaws will not be entertained at the meeting.
Any person who wishes to be considered by the Nominating and Corporate Governance Committee for election to the Board at next years annual meeting must provide the Secretary of the Company with a completed and signed biographical questionnaire on or before the Proxy Deadline. Stockholders can obtain a copy of this questionnaire from the Secretary of the Company upon written request. The Nominating and Corporate Governance Committee is not required to consider director nominations received after this date, or without the required questionnaire.
Our annual report to stockholders for the fiscal year ended June 30, 2008, including audited financial statements, accompanies this proxy statement. Copies of our Annual Report on Form 10-K for fiscal 2008 and the exhibits thereto are available from the Company without charge upon written request of a stockholder. Copies of these materials are also available online through the Securities and Exchange Commission at www.sec.gov. We may satisfy SEC rules regarding delivery of proxy statements and annual reports by delivering a single proxy statement and annual report to an address shared by two or more Company stockholders. This delivery method can result in meaningful cost savings for us. In order to take advantage of this opportunity, we may deliver only one proxy statement and annual report to multiple stockholders who share an address, unless we receive contrary instructions prior to the mailing date. We undertake to deliver promptly upon written or oral request a separate copy of the proxy statement and/or annual report, as requested, to a stockholder at a shared address to which a single copy of these documents was delivered. If you hold stock as a record stockholder and prefer to receive separate copies of a proxy statement or annual report either now or in the future, please notify us at 2000 Powell Street, Suite 800, Emeryville, California 94608, Attn: Investor Relations. If your stock is held through a brokerage firm or bank and you prefer to receive separate copies of a proxy statement or annual report either now or in the future, please contact your brokerage firm or bank.
The SEC has approved a rule governing the delivery of annual disclosure documents. This rule allows the Company to send a single set of its Annual Report and this Proxy Statement to any household at which two or more stockholders of the Company reside, if it believes that the stockholders are members of the same family. Some banks, brokers and other intermediaries may be participating in this practice of householding proxy statements and annual reports. This rule benefits both the Company and its stockholders as it reduces the volume of duplicate information received at a stockholders house and helps reduce the Companys expenses. Each stockholder, however, will continue to receive individual proxy cards or voting instruction forms.
Stockholders who have previously received a single set of disclosure documents may request their own copy this year or in future years by contacting their bank, broker or other nominee record holder. The Company will also deliver a separate copy of the Annual Report and the Proxy Statement to any stockholder upon written request to Neurobiological Technologies, Inc., 2000 Powell Street, Suite 800, Emeryville, California 94608, Attn: Investor Relations, or upon oral request by calling (510) 595-6000.
Similarly, stockholders who have previously received multiple copies of disclosure documents may write to the address or call the phone number listed above to request delivery of a single copy of these materials in the future.
NEUROBIOLOGICAL TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
(Adopted by the Board of Directors on September 11, 2008)
The purpose of the Audit Committee (the Committee) of the board of directors (the Board) of Neurobiological Technologies, Inc. (the Company) is to:
The Committee shall be composed of three or more directors, as determined by the Board, each of whom shall (1) be independent as defined in Rule 4200(a)(15) under the Marketplace Rules of the National Association of Securities Dealers, Inc.; (2) meet the criteria for independence set forth in Rule 10A-3(b)(1) promulgated under Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the Exchange Act) and the applicable rules and regulations (the Regulations) of the SEC, subject to the exemptions provided in Rule 10A-3(c) under the Exchange Act; and (3) not have participated in the preparation of the financial statements of the Company or a current subsidiary of the Company at any time during the past three years.
Each member of the Committee must be able to read and understand fundamental financial statements, including a companys balance sheet, income statement, and cash flow statement. At least one member of the Committee shall be an audit committee financial expert, as that term is defined in the Regulations, and shall have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individuals financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.
The members of the Committee shall be appointed by the Board and may be replaced or removed by the Board with or without cause. Resignation or removal of a director from the Board, for whatever reason, shall automatically and without any further action constitute resignation or removal, as applicable, from the Committee. Any vacancy on the Committee, occurring for whatever reason, may be filled only by the Board. The Board shall designate one member of the Committee to be Chairman of the committee.
A member of the Committee may not, other than in his or her capacity as a member of the Committee, the Board or any other committee established by the Board, receive directly or indirectly from the Company any consulting, advisory or other compensatory fee from the Company.
The Committee shall meet as often as it determines is appropriate to carry out its responsibilities under this charter, but not less frequently than quarterly. A majority of the members of the Committee shall constitute a quorum for purposes of holding a meeting and the Committee may act by a vote of a majority of the members present at such meeting.
The Committee shall meet at least once each year in separate executive sessions with management and the independent auditor to discuss matters that any of them or the Committee believes could significantly affect the financial statements and should be discussed privately.
The Committee shall have such direct and independent interaction with members of management, including the Companys chief financial officer and chief accounting officer, as the Committee believes appropriate.
The Committee is authorized, on behalf of the Board, to do any of the following as it deems necessary or appropriate:
Notwithstanding the responsibilities and powers of the Committee set forth in this Charter, the Committee does not have the responsibility of planning or conducting audits of the Companys financial statements or determining whether the Companys financial statements are complete, accurate and in accordance with GAAP. Such responsibilities are the duty of management and, to the extent of the independent auditors audit responsibilities, the independent auditor. In addition, it is not the duty of the Committee to conduct investigations or to ensure compliance with laws and regulations.
NEUROBIOLOGICAL TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul E. Freiman and Matthew M. Loar proxies, and hereby authorizes each of them to represent and vote as designated on the other side, all the shares of stock of Neurobiological Technologies, Inc. (the Company) standing in the name of the undersigned with all powers which the undersigned would possess if present at the Annual Meeting of Stockholders of the Company to be held on Thursday, November 13, 2008 or any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned. If no direction is made, this proxy will be voted FOR the election of the nominees described in the accompanying proxy statement, FOR the other proposals described therein and in the discretion of the proxy holders on all other matters that may come before the meeting.
(Continued, and to be marked, dated and signed, on the other side)
EACH STOCKHOLDER IS URGED TO COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ENCLOSED PROXY.
ITEM 1 ELECTION OF CLASS III DIRECTORS
Instruction: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold
ITEM 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
and to vote at the discretion of the proxy holders with respect to any other matter that may properly come before the meeting.
Please sign exactly as your name or names appear on this Proxy. When share are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.