-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tc+bEIfeWCZYMhX/8YC3JeOufk4XvjkoZPe4RT58/bVEQ1HORxW8NWvwZScuF9Wm RKHMif0Na64PO1cE6S/WTg== 0001140361-08-010862.txt : 20080501 0001140361-08-010862.hdr.sgml : 20080501 20080501172444 ACCESSION NUMBER: 0001140361-08-010862 CONFORMED SUBMISSION TYPE: SC TO-C PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20080501 DATE AS OF CHANGE: 20080501 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SYMYX TECHNOLOGIES INC CENTRAL INDEX KEY: 0001095330 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770397908 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-C SEC ACT: 1934 Act SEC FILE NUMBER: 005-58389 FILM NUMBER: 08795755 BUSINESS ADDRESS: STREET 1: 3100 CENTRAL EXPRESS WAY CITY: SANTA CLARA STATE: CA ZIP: 95051 BUSINESS PHONE: 4087642000 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SYMYX TECHNOLOGIES INC CENTRAL INDEX KEY: 0001095330 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770397908 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-C BUSINESS ADDRESS: STREET 1: 3100 CENTRAL EXPRESS WAY CITY: SANTA CLARA STATE: CA ZIP: 95051 BUSINESS PHONE: 4087642000 SC TO-C 1 formscto-c.htm SYMYX TECHNOLOGIES SC TO-C 4-23-2008 formscto-c.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________

SCHEDULE TO
(Rule 14d-100)
 
Tender Offer Statement Under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934
____________________

SYMYX TECHNOLOGIES, INC.
(Name of Subject Company (Issuer) and Filing Person (Offeror))
____________________

Options to Purchase Common Stock, $0.001 Par Value Per Share
(Title of Class of Securities)
____________________

87155s108
(CUSIP Number of Class of Securities)
____________________

Rex Jackson
Executive Vice President and Chief Financial Officer
Symyx Technologies, Inc.
3100 Central Expressway
 Santa Clara, California 95051
(408) 764-2000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications On Behalf of Filing Person)
____________________

Copy to:
 
Timothy J. Moore, Esq.
Brett D. White, Esq.
Cooley Godward Kronish LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
(650) 843-5000
 
CALCULATION OF FILING FEE
 
 
Transaction Valuation*
 
Amount of Filing Fee
 
         
 
Not applicable
 
Not applicable
 
 
*
No filing fee is required because this filing relates solely to preliminary communications made before the commencement of a tender offer.
 


 
 

 

¨
Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
Amount Previously Paid:  Not Applicable
 
Form or Registration No.:  Not Applicable
 
Filing Party:  Not Applicable
 
Date Filed:  Not Applicable
 
ý
Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
 
Check the appropriate boxes below to designate any transactions to which the statement relates:
 
 
¨
third-party tender offer subject to Rule 14d-1.
 
ý
issuer tender offer subject to Rule 13e-4.
 
¨
going-private transaction subject to Rule 13e-3.
 
¨
amendment to Schedule 13D under Rule 13d-2.
 
Check the following box if the filing is a final amendment reporting the results of the tender offer:  ¨

 
 

 
 
Attached is a preliminary proxy statement and related materials (collectively, the “Proxy Materials”) filed on May 1, 2008 by Symyx Technologies, Inc. (the “Company”) with the Securities and Exchange Commission, relating to the Company’s Annual Meeting of Stockholders to be held on June 16, 2008. At the annual meeting, we will ask our stockholders to approve a voluntary stock option exchange program (the “Option Exchange Program”). Also attached is an electronic mail communication sent on May 1, 2008 to the Company’s employees from Isy Goldwasser, the Company’s Chief Executive Officer, regarding the Option Exchange Program (the “Employee Communication”). The Proxy Materials and Employee Communication do not constitute an offer to holders of our outstanding stock options to exchange those options. The exchange program will only be commenced, if at all, following such time as our stockholders approve the Option Exchange Program.
 
The tender offer described in the Proxy Materials and the Employee Communication has not yet commenced.   At the time the Option Exchange Program has commenced, the Company will provide option holders who are eligible to participate in the exchange with written materials explaining the precise terms and timing of the Option Exchange Program, free of charge. Persons who are eligible to participate in the Option Exchange Program should read these written materials carefully when they become available because they will contain important information about the Option Exchange Program. The Company will also file these written materials with the Securities and Exchange Commission as part of a tender offer statement upon the commencement of the Option Exchange Program. The Company’s stockholders and option holders will be able to obtain these written materials and other documents filed by the Company with the Securities and Exchange Commission free of charge from the Securities and Exchange Commission's website at www.sec.gov.
 
ITEMS 1-11, 13.
 
Not applicable.
 
ITEM 12. EXHIBITS.
 
Exhibit
   
Number
 
Description
 
Preliminary Proxy Statement and related materials for 2008 Annual Stockholders Meeting.
 
Communication to employees, dated May 1, 2008, from Isy Goldwasser.
 
 

EX-99.1 2 ex99_1.htm EXHIBIT 99.1 formpre14a.htm


SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant    ý
Filed by a Party other than the Registrant    ¨
Check the appropriate box:
 
ý
Preliminary Proxy Statement
 
¨
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 
¨
Definitive Proxy Statement
 
¨
Definitive Additional Materials
 
¨
Soliciting Material Pursuant to §240.14a-12

SYMYX TECHNOLOGIES, 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):

ý
No fee required.
¨
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
 
Title of each class of securities to which transaction applies:
     
(2)
 
Aggregate number of securities to which transaction applies:
     
(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:
     
     
 


 
 

 
 
Logo
 
SYMYX TECHNOLOGIES, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 16, 2008


TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of SYMYX TECHNOLOGIES, INC., a Delaware corporation, will be held on Monday, June 16, 2008, at 9:00 a.m., Pacific Daylight Time, at 1263 East Arques Avenue, Sunnyvale, CA 94085 for the following purposes:

 
1.
To elect one Class III director nominated by our Board of Directors to serve until the 2011 Annual Meeting of Stockholders or until his successor is elected.

 
2.
To approve a proposed exchange of certain outstanding stock options for a reduced number of replacement stock options to be granted under our 2007 Symyx Technologies, Inc. Stock Incentive Plan, as amended (the “2007 Plan”) with an exercise price equal to the fair market value of our common stock at the time of the exchange.

 
3.
To approve amendments to the 2007 Plan which:

 
·
increase the aggregate number of shares of common stock authorized for issuance under the 2007 Plan by 4,700,000 shares; and

 
·
reduce the number of shares available for issuance under the 2007 Plan (a) by one share for each share of common stock subject to a stock option or stock appreciation right and (b) by one and sixty-five hundredths (1.65) shares for each share of common stock subject to any other type of award issued under the 2007 Plan.
 
 
4.
To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

 
5.
To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.

The Record Date for the Annual Meeting is April 17, 2008.  Only stockholders of record at the close of business on April 17, 2008 are entitled to notice of and to vote at the Annual Meeting or any postponement or adjournment thereof.

 
FOR THE BOARD OF DIRECTORS
   
   
 
ISY GOLDWASSER
 
Chief Executive Officer
   
Santa Clara, California
 
May ___, 2008
 
 
 
To ensure your representation at the meeting, we urge you to mark, sign, date and return the enclosed proxy card in the enclosed postage-prepaid envelope or vote over the internet or by telephone as instructed on the proxy card, as promptly as possible. Any stockholder attending the meeting may vote in person even if he or she has returned a proxy.  Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from the record holder.

 
 

 
 
SYMYX TECHNOLOGIES, INC.

PROXY STATEMENT FOR THE 2008
ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 16, 2008

INFORMATION CONCERNING SOLICITATION AND VOTING

General

The enclosed Proxy is solicited on behalf of the Board of Directors (the “Board”) of Symyx Technologies, Inc. (“Symyx,” “we,” “us” or “our”), for use at the Annual Meeting of Stockholders to be held Monday, June 16, 2008 at 9:00 a.m. Pacific Daylight Time, or at any postponement or adjournment thereof (“Annual Meeting”), for the purposes described below and in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at our offices at 1263 East Arques Avenue, Sunnyvale, California 94085. Our telephone number there is (408) 764-2000.  You are invited to attend the Annual Meeting to vote on the proposals described in this proxy statement, but you do not need to attend the meeting to vote your shares.  Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or on the Internet.

We intend to mail these proxy solicitation materials on or about May 19, 2008 to all stockholders of record entitled to vote at the Annual Meeting.

Record Date and Principal Share Ownership

Stockholders of record at the close of business on April 17, 2008 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting. As of the Record Date, 33,628,570 shares of our common stock were outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name

Our transfer agent is Wells Fargo Bank, N.A. If, as of the Record Date, your shares were registered directly in your name with our transfer agent, then you are a stockholder of record.  As a stockholder of record, you may vote in person at the meeting or vote by proxy.  Whether or not you plan to attend the meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy over the telephone or on the Internet as instructed below to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization on the Record Date, rather than in your name, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization.  The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting.  As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account.  You are also invited to attend the Annual Meeting.  However, since you are not the stockholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.

Matters Scheduled for a Vote

 
There are four matters scheduled for a vote:

 
(1)
To elect one Class III director nominated by our Board to serve until the 2011 Annual Meeting of Stockholders or until his successor is elected. The nominee receiving the most “For” votes (from the holders of votes of shares present in person or represented by proxy and entitled to vote on the election of directors) will be elected.  Only votes “For” or “Withheld” will affect the outcome.

 
1

 

 
(2)
To approve a proposed exchange of certain outstanding stock options for a reduced number of replacement stock options to be granted under the 2007 Plan. To be approved, this proposal must receive “For” votes from the holders of a majority of shares present and entitled to vote, either in person or by proxy.  If you “Abstain” from voting, it will have the same effect as an “Against” vote.  Broker non-votes will have no effect.

 
(3)
To approve amendments to the 2007 Plan to (a) increase the aggregate number of shares of common stock authorized for issuance under the 2007 Plan by 4,700,000 shares and (b) reduce the number of shares available for issuance under the 2007 Plan by one share for each share of common stock subject to a stock option or stock appreciation right and by one and sixty-five hundredths (1.65) shares for each share of common stock subject to any other type of award issued pursuant to the 2007 Plan.  To be approved, this proposal must receive “For” votes from the holders of a majority of shares present and entitled to vote, either in person or by proxy.  If you “Abstain” from voting, it will have the same effect as an “Against” vote.  Broker non-votes will have no effect.
 
 
(4)
To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008. To be approved, this proposal must receive “For” votes from the holders of a majority of shares present and entitled to vote, either in person or by proxy.  If you “Abstain” from voting, it will have the same effect as an “Against” vote.  Broker non-votes will have no effect.

Voting

Each stockholder is entitled to one vote for each share of common stock held as of the Record Date. Stockholders may not cumulate their votes in the election of the director.

You may vote “For” or “Against” the nominee to the Board of Directors, or you may “Withhold” your vote.  For each of the other matters, you may vote “For” or “Against” or abstain from voting.  The procedures for voting are as follows

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record, you may vote in person at the Annual Meeting, by proxy using the enclosed proxy card, by proxy over the telephone, or by proxy on the Internet.  Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted.  You may still attend the meeting and vote in person even if you have already voted by proxy.

Ø
To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.

Ø
To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided.  If we receive your signed proxy card before the Annual Meeting, we will vote your shares as you direct.

 
2

 

Ø
To vote over the telephone, dial toll-free 1-800-560-1965 using a touch-tone phone and follow the recorded instructions.  You will be asked to provide the company number and control number from the enclosed proxy card.  Your vote must be received by 10:00 a.m. Pacific Daylight Time on June 13, 2008 to be counted.

Ø
To vote on the Internet, go to http://www.eproxy.com/smmx to complete an electronic proxy card.  You will be asked to provide the company number and control number from the enclosed proxy card.  Your vote must be received by 10:00 a.m. Pacific Daylight Time on June 13, 2008 to be counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from us.  Simply complete and mail the proxy card to ensure that your vote is counted.  Alternatively, you may vote by telephone or over the Internet as instructed by your broker or bank. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank, or other agent.  Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.
 
We provide Internet and telephone proxy voting to allow you to vote your shares on-line or by telephone, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions.  However, please be aware that you must bear any costs associated with your Internet or telephone or access, such as usage charges from Internet access providers and telephone companies.

Counting Votes

Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count “For” and “Withhold” votes, and, with respect to proposals other than the election of the Class III director, “Against,” “Abstain” and broker non-votes. A broker non-vote occurs when a nominee, such as a broker or bank, holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial owner. If a broker, bank, custodian, nominee or other record holder of our common stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, then those shares will be treated as broker non-votes with respect to that proposal. Accordingly, if you own shares through a nominee, such as a broker or bank, please be sure to instruct your nominee how to vote to ensure that your vote is counted on each of the proposals.

Abstentions and broker non-votes will be treated as shares present for the purpose of determining the presence of a quorum for the transaction of business at the Annual Meeting.

Multiple Proxy Cards

If you receive more than one proxy card, it is because your shares are registered in more than one name or are registered in different accounts.  Please complete, sign and return each proxy card to ensure that all of your shares are voted.

Failure to Indicate Choice on Proxy Card

If you return a signed and dated proxy card without marking any voting selections, your shares will be voted “For” each proposal, and in the case of the election of directors, “For” the nominee. If any other matter is properly presented at the meeting, your proxy holder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

Revocability of Proxies

You may revoke any proxy given pursuant to this solicitation at any time before its use at the Annual Meeting.  If you are the record holder of your shares, you can revoke your proxy by delivering timely written notice to our Secretary indicating that that you are revoking your proxy.  You may contact our Secretary at 415 Oakmead Parkway, Sunnyvale, CA 94085, United States. Alternatively, you may submit a duly executed proxy bearing a date later than your last executed proxy or attend the Annual Meeting and vote in person.  Simply attending the Annual Meeting will not, by itself, revoke your proxy.  If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

 
3

 
 
Solicitation

We will bear the entire cost of soliciting proxies. We expect to reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to those beneficial owners. Certain of our directors, officers, and regular employees and The Altman Group may also solicit proxies personally or by telephone, facsimile or other means of communication without being paid any additional compensation for soliciting proxies, but The Altman Group will be paid its customary fee of approximately $6,000 plus out-of-pocket expenses if it solicits proxies.

Quorum

A quorum of stockholders is necessary to hold a valid meeting.  Holders of a majority of the outstanding shares entitled to vote must be present, in person or represented by proxy, at the Annual Meeting in order to have the quorum required to transact business. On the Record Date, there were 33,628,570 shares outstanding and entitled to vote.  Thus, the holders of 16,814,286 shares must be present, in person or represented by proxy, to have a quorum. If the shares present, in person and by proxy, at the Annual Meeting do not constitute the required quorum, we may adjourn the Annual Meeting to a later date in order to obtain a quorum.

Voting Results

Preliminary voting results will be announced at the Annual Meeting.  Final voting results will be published in our quarterly report on Form 10-Q for the second quarter of 2008.

Deadline for Receipt of Stockholder Proposals

If a stockholder intends to present a proposal at our 2009 Annual Meeting of Stockholders, the proposal must be in writing and received by us no later than January 19, 2009, including any proposals to be included in next year’s proxy materials; provided, however, that if our 2009 Annual Meeting of Stockholders is held before May 12 or after July 11, 2009, then the deadline is a reasonable amount of time prior to the date we begin to print and mail our proxy statement for the 2009 Annual Meeting of Stockholders. Stockholders are also advised to review our Bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominations.

 
4

 

PROPOSAL NO. 1

ELECTION OF DIRECTORS

This Proposal No. 1 is to elect one Class III director nominated by our Board. Our Board currently consists of eight members, divided into three classes serving staggered terms of three years, and there are no vacancies. However, two of our directors, Kenneth J. Nussbacher and Mario M. Rosati, will not stand for reelection and have resigned effective as of the date of the annual meeting.  Our Board has reduced the size of the Board, effective as of the annual meeting, so that there will not be any vacancies on the Board.  As a result, our Board will consist of six directors effective at the annual meeting, and no vacancies.  Vacancies on the Board may be filled only by the affirmative vote of a majority of the remaining directors, even if the remaining directors constitute less than a quorum of the Board. A director elected by the Board to fill a vacancy in a class shall serve for the remainder of the full term of that class and until the director’s successor is elected and qualified. This also applies to vacancies created by an increase in the authorized number of directors.

There is one director in Class III whose term of office expires at the Annual Meeting and who is standing for reelection.  Mr. Pasternack, who was appointed in June 2007 to fill a then-existing vacancy on the Board, has not previously been elected by our stockholders.   In early 2007, the Governance Committee engaged Russell Reynolds Associates, an executive search firm, to assist in the process of identifying director candidates. Mr. Pasternack was identified by Russell Reynolds Associates and recommended by the Governance Committee for election to the Board.  The Governance Committee has also recommended Mr. Pasternack for reelection to the Board at the Annual Meeting.  If elected at the Annual Meeting, Mr. Pasternack would serve until the 2011 Annual Meeting of Stockholders and until his successor is elected and has qualified, or until his death, resignation or removal.

Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors.  The nominee receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of Mr. Pasternack.  Mr. Pasternack has agreed to serve if elected, and we have no reason to believe that he will be unable to serve. If Mr. Pasternack becomes unavailable for election unexpectedly, your shares will be voted for the election of a substitute nominee nominated by our Board.

The following is a brief biography of the nominee and each director whose term will continue after the Annual Meeting.
 
Name
 
Age
 
First Became a Director
 
Principal Occupation /
Position Held with us
Continuing Class I Directors
           
Isy Goldwasser(1)
 
38
 
2007
 
Chief Executive Officer
David C. Hill(2)
 
61
 
2007
 
Former President and CEO, Sun Chemical Corporation
Chris van Ingen(3)
 
61
 
2008
 
Former President, Bio-Analytical Measurement business of Agilent Technologies, Inc.
             
Continuing Class II Directors
           
Steven D. Goldby(4)
 
68
 
1998
 
Executive Chairman
Timothy Harkness(5)
 
41
 
2008
 
Former Senior Vice President and CFO, Nektar Therapeutics, Inc.
             
Nominee for Class III Director
         
 
Bruce Pasternack(6)
 
60
 
2007
 
Venture Partner, CMEA Ventures
 
______________________________
(1)
Appointed to the Board effective July 2, 2007.
(2)
Appointed to the Board effective August 30, 2007.
(3)
Appointed to the Board effective March 18, 2008.
(4)
Steven D. Goldby became our Executive Chairman effective June 12, 2007.
(5)
Appointed to the Board effective March 18, 2008.
(6)
Appointed to the Board effective June 29, 2007.  The Board appointed Mr. Pasternack as lead independent director on April 23, 2008.

 
5

 

Nominee for Election for a Three-Year Term Expiring at the 2011 Annual Meeting

Bruce Pasternack has served as a director since June 2007. Mr. Pasternack is a Venture Partner at CMEA Ventures. From May 2005 to May 2007, Mr. Pasternack served as the President and Chief Executive Officer of Special Olympics, Inc., a global non-profit organization for athletes with intellectual disabilities. Prior to that, Mr. Pasternack spent more than 28 years at Booz Allen Hamilton, Inc. where his last position was Senior Vice President and Managing Partner of its San Francisco office. He serves as a director of BEA Systems, Inc., Codexis, Inc. and Quantum Corporation and at several non-profit organizations. Mr. Pasternack holds a B.E. from The Cooper Union and a M.S.E. from the University of Pennsylvania.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE NOMINEE SET FORTH ABOVE.

Directors Continuing in Office until the 2009 Annual Meeting

Isy Goldwasser has served as a director since July 2007 and has been with Symyx since our founding. He was appointed President and Chief Operating Officer in 1998 and was appointed Chief Executive Officer in June 2007. Mr. Goldwasser received a B.S. in chemical engineering from the Massachusetts Institute of Technology and an M.S. in engineering from Stanford University.

Dr. David C. Hill has served as a director since August 2007. He served as President and Chief Executive Officer of Sun Chemical Corporation, a producer of printing inks and pigments, from 2006 to 2007. Prior to joining Sun Chemical Corporation in 2001, Dr. Hill spent four years at JM Huber Corporation as President of Engineered Materials. From 1980 to 1997, Dr. Hill was employed at AlliedSignal Inc., where his last position was President of Specialty Chemicals. Dr. Hill began his career at Union Carbide Corporation in 1970, and he has also been Director of Exploratory and New Ventures Research at Occidental Petroleum Corporation. Dr. Hill holds a Ph.D. in Materials Science and Engineering, a M.S. in Engineering and a B.S. in Materials Science and Engineering, all from the Massachusetts Institute of Technology.

Chris van Ingen has served as a director since March 2008. He recently retired from his position as President of the Bio-Analytical Measurement business of Agilent Technologies, Inc., a position he had held since May 2001. Prior to assuming that position, Mr. van Ingen held a number of positions in the Chemical Analysis Group of the Hewlett Packard Company and at Agilent Technologies, including Vice President of Sales and Marketing from 1996 to April 2001, Americas Marketing Center Manager from 1989 to 1996, Product Marketing Manager at the Avondale Division from 1986 to 1989, and Business Development Manager at the Avondale Division from 1984 to 1986.

Directors Continuing in Office until the 2010 Annual Meeting

Steven D. Goldby joined us in 1998 as our Chief Executive Officer. Mr. Goldby has served as a director and Chairman of the Board since July 1998, and has served as our Executive Chairman since June 2007. Prior to joining us, Mr. Goldby served as Chief Executive Officer and Chairman of the Board of MDL Information Systems, Inc. from 1987 to July 1998. Currently, Mr. Goldby serves as a director of Sunesis Pharmaceuticals, Inc. and Intermolecular, Inc. He is also a partner at Venrock.  Mr. Goldby holds an A.B. from the University of North Carolina and a J.D. from Georgetown University Law School.

Timothy Harkness has served as a director since March 2008. Mr. Harkness was most recently Senior Vice President and Chief Financial Officer at Nektar Therapeutics, Inc., a biopharmaceutical company. From 1998 through April 2007, Mr. Harkness served as Chief Financial Officer of Molecular Devices Corporation, an international life sciences tools company, which was acquired by MDS, Inc. Previously, Mr. Harkness was in the health care investment banking group at Montgomery Securities and at Arthur Andersen. He serves as a director of FortéBio, Inc., a life sciences tools company. Mr. Harkness holds a B.B.A. from the University of Wisconsin, and an M.B.A. from Stanford University.

 
6

 

CORPORATE GOVERNANCE AND BOARD MATTERS

Board and Committees of the Board

Board Independence; Lead Independent Director

As required under the Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors.  Our Board consults with our counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of Nasdaq, as in effect from time to time.

Consistent with these considerations, after review of all relevant transactions or relationships among each director, or any of his or her family members, and us, our senior management and our independent registered public accounting firm, the Board has affirmatively determined that Messrs. Hill, Nussbacher, Pasternack, Rosati, Harkness and van Ingen are independent directors within the meaning of the applicable Nasdaq listing standards.  In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with us.   In determining the independence of Dr. Hill, the Board took into account the consulting services Dr. Hill provided to us in fiscal 2007 and continues to provide in fiscal 2008.  The maximum amount for which he will be paid for his services is $3,500, of which $1,172 was paid in fiscal 2007.  The Board does not believe that this consulting arrangement interfered or will interfere with Dr. Hill’s exercise of independent judgment in carrying out his responsibilities as a director.  In determining the independence of Mr. Harkness, the Board took into account the consulting services Mr. Harkness provided to us in fiscal 2007, prior to his appointment to our Board, in connection with our acquisition of MDL Information Systems, Inc., for which he was paid an aggregate of $21,750.  The Board does not believe that this consulting arrangement interfered or will interfere with Dr. Hill’s exercise of independent judgment in carrying out his responsibilities as a director.  Mr. Goldby, our Executive Chairman, and Mr. Goldwasser, our Chief Executive Officer and President, are not independent directors by virtue of their employment with us.

Our Board has a designated lead independent director who chairs and may call formal closed sessions of the outside directors and leads Board meetings in the absence of the Chairman.  Mr. Gambrell held the position of lead independent director until his resignation in October 2007.  In April 2008 the Board approved the appointment of Mr. Pasternack to the position of lead independent director.  No lead independent director had been appointed during the interim period between Mr. Gambrell’s resignation and Mr. Pasternack’s appointment.

Board Meeting Attendance

Our Board held 14 meetings during the fiscal year ended December 31, 2007. All of our current directors attended at least 75% of the aggregate of the meetings of the Board and of the committees on which they served that were held while they were directors or committee members, respectively.

Committees of the Board

The Board has three standing committees:  an Audit Committee, a Compensation Committee and a Governance Committee. From time to time, the Board may create ad hoc committees for special purposes. No such ad hoc committee was formed in fiscal 2007.

The following table provides membership and meeting information for fiscal 2007 for each of the Board’s three standing committees:

 
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Audit Committee
 
Compensation Committee
 
Governance Committee
Thomas R. Baruch(1)
 
X
 
X
 
X
Samuel D. Colella(2)
     
X
 
X
Edwin F. Gambrell(4)
     
X
 
X
David C. Hill
 
X
 
X
 
X
Anthony R. Muller(3)
 
X*
     
X
Kenneth J. Nussbacher
 
X
     
X*
Bruce Pasternack
     
X*
 
X
Mario M. Rosati
           
             
Total Meetings in fiscal 2007
 
4
 
8
 
0

*     Committee Chairperson as of December 31, 2007.
(1) Resigned from the Board effective March 17, 2008.
(2) Resigned from the Board effective June 26, 2007.
(3) Resigned from the Board effective March 17, 2008
(4) Resigned from the Board effective October 19, 2007
 
A description of each standing committee of the Board follows. Each committee has authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities. The Board has determined that each member of each committee meets the applicable Nasdaq rules and regulations regarding “independence” and that each member is free of any relationship that would impair his individual exercise of independent judgment with regard to us.

Audit Committee

The Audit Committee is currently composed of three directors: Messrs. Nussbacher, Harkness and van Ingen.  As Mr. Nussbacher will not be standing for reelection, Mr. Pasternack will replace Mr. Nussbacher on the Audit Committee effective at the Annual Meeting.  Mr. Harkness is the current chairperson of the Audit Committee. The Board has determined that Messrs. Nussbacher, Pasternack, Harkness and van Ingen meet the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Nasdaq listing standards with respect to audit committee members.  The Board determined that the services Mr. Harkness provided to us as a consultant preceded his appointment to the Board and were not such that his ability to exercise independent judgment with regard to us would be impaired.  Our Board has also determined that Mr. Harkness meets the definition of “audit committee financial expert” as defined in Item 407(d)(5) of regulation S-K of the Exchange Act. The Board made a qualitative assessment of Mr. Harkness’s level of knowledge and experience based on a number of factors, including his experience as a chief financial officer for public reporting companies and his status as a Certified Public Accountant.  Information regarding the functions performed by the Audit Committee is set forth in the “Report of the Audit Committee,” included in this proxy statement. The Audit Committee is governed by a written charter approved by the Board, a copy of which is available to stockholders on our website at www.symyx.com under the section entitled “Investors” at “Corporate Governance.” Pursuant to this charter, the purpose of the Audit Committee is: to oversee our accounting and financial reporting processes and audits of our financial statements; to provide assistance to the Board in oversight and monitoring of (i) the integrity of our financial statements, (ii) the effectiveness of our internal control over financial reporting, (iii) our compliance with legal and regulatory requirements under applicable securities laws, and (iv) the independent registered public accounting firm’s qualifications, independence and performance; present a report in accordance with the rules of the SEC in our proxy statement; and to provide the Board with such additional information and materials as it may deem necessary to make the Board aware of significant financial matters that come to its attention and that require the attention of the Board.  The Audit Committee held four meetings during the fiscal year ended December 31, 2007.

Compensation Committee

The Compensation Committee is currently composed of three directors: Dr. Hill and Messrs. Pasternack and van Ingen. Mr. Pasternack is the current chairperson of the Compensation Committee.  All members of the Compensation Committee are independent (as independence is currently defined in Rule 4200(a)(15) of the Nasdaq listing standards).  Information regarding the functions performed by the Compensation Committee is set forth in the “Compensation Discussion and Analysis,” included in this proxy statement. The Compensation Committee is governed by a written charter approved by the Board, a copy of which is available to stockholders on our website at www.symyx.com under the section entitled “Investors” at “Corporate Governance.”  Pursuant to this charter, the purpose of the Compensation Committee is:  to develop compensation policies designed to attract and retain key employees necessary to our growth and success; to review and approve the CEO’s performance and compensation level and the compensation levels of the other executive officers; to approve all employment, severance or change of control agreements with any executive officers or directors; to review annually a report disclosing all perquisites and benefits to executive officers; to review the compensation of the members of the Board; to design, implement and administer all equity-based compensation plans; to make annual recommendations regarding stock award pools; to review and advise the Board on current trends in industry-wide compensation practices; to retain and terminate any compensation consultant(s) and approve such consultants’ fees and obtain advice from outside legal, accounting or other advisors; and to make regular reports to the Board summarizing its recommendations and decisions. The Compensation Committee held eight meetings during the fiscal year ended December 31, 2007.

 
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Governance Committee

The Governance Committee is currently composed of three directors: Dr. Hill and Messrs. Nussbacher and Pasternack.  Mr. Nussbacher is the current chairperson of the Governance Committee.  All members of the Governance Committee are independent (as independence is currently defined in Rule 4200(a)(15) of the Nasdaq listing standards).  The Governance Committee is governed by a written charter approved by the Board, a copy of which is available to stockholders on our website at www.symyx.com under the section entitled “Investors” at “Corporate Governance.”  Pursuant to this charter, the functions of the  Governance Committee include identifying, reviewing and evaluating individuals qualified to become Board members; reviewing and making recommendations concerning membership on each of the Board’s committees; affirming that the requisite number of board members meet applicable independence standards; considering and making recommendations regarding stockholders comments relating to Board composition; reviewing and approving charters for all committees of the Board; developing a system for annual Board and committee evaluation; ensuring that the Board and its committees are conducting regular executive sessions; assisting the Board with executive development and succession programs; obtaining, as necessary, advice and assistance from legal, accounting and other advisors, including consultants, as needed to conduct new director searches. The Governance Committee approved all actions brought forth before the committee in 2007 by unanimous written consent and, therefore, did not hold any meetings during the fiscal year ended December 31, 2007.

Consideration of Director Nominees

Stockholder Recommendations

The policy of the Governance Committee is to consider properly submitted stockholder recommendations for candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Directors.” In evaluating such recommendations, the Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board. The Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth below under “Director Qualifications,” based on whether or not the candidate was recommended by a stockholder.  Any stockholder recommendations proposed for consideration by the Governance Committee should be in writing and delivered to the Governance Committee at the following address:

Investor Relations
Symyx Technologies, Inc.
415 Oakmead Parkway
Sunnyvale, CA 94085
United States

Submissions must include the full name of the proposed nominee, a description of the proposed nominee’s business experience for at least the previous five years, relevant biographical information, a description of the proposed nominee’s qualifications as a director and a representation that the nominating stockholder is a beneficial or record holder of our stock and has been a holder for at least one year.  Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected.  In addition, procedures for stockholder recommendations of directors are discussed under “Deadline for Receipt of Stockholder Proposals” and are discussed in detail in our Bylaws, which we will provide to stockholders upon written request sent to the address set forth above.

 
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Director Qualifications

Members of the Board should have the highest professional and personal ethics and values, consistent with our Code of Conduct and Ethics posted on our website at www.symyx.com under the section entitled “Investors” at “Corporate Governance.”  They should have broad experience at the policy-making level in business and technology. They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. The Governance Committee retains the right to modify these qualifications from time to time.  Each director must represent the interests of all stockholders.

Identifying and Evaluating Nominees for Directors

Candidates for director nominees are reviewed in the context of the Board’s existing composition, our operating requirements and the long-term interests of stockholders. The Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Governance Committee periodically assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. If vacancies are anticipated, or otherwise arise, the Governance Committee considers various potential candidates for director. Candidates may come to the attention of the Governance Committee through current members of the Board, professional search firms, stockholders or others. These candidates are evaluated by the Governance Committee, and may be considered at any point during the year. As described above, the Governance Committee considers properly submitted stockholder recommendations for candidates for the Board. Following verification of the stockholder status of persons proposing candidates, the Governance Committee aggregates the recommendations and considers them at a regularly scheduled meeting prior to the issuance of the proxy statement for our next annual meeting of stockholders. If any materials are provided by a stockholder in connection with the recommendation of a director candidate, such materials are forwarded to the Governance Committee. The Governance Committee may also review materials provided by professional search firms or other parties in connection with a candidate who is not recommended by a stockholder. In evaluating such recommendations, the Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board.  In fiscal 2007, the Governance Committee paid a fee to Russell Reynolds Associates, an executive search firm, to assist in the process of identifying or evaluating director candidates.

Annual Meeting Attendance

We do not have a formal policy regarding attendance by members of the Board at our annual meetings of stockholders, however we encourage our nominees for director to attend the annual meeting. Two directors attended the 2007 Annual Meeting of Stockholders.

Stockholder Communication

We have not adopted a formal process related to stockholder communications with the Board.  Nevertheless, every effort has been made to ensure that the views of stockholders are heard by the Board or individual directors, as applicable, and that appropriate responses are provided to stockholders in a timely manner.  We believe that our responsiveness to stockholder communications to the Board has been excellent.  During the upcoming year, the Governance Committee will give full consideration to the adoption of a formal process for stockholder communications with the Board and, if adopted, promptly post it to our website.  Stockholders may communicate with the Board by submitting a letter to the attention of Executive Chairman, c/o Symyx Technologies, Inc., 415 Oakmead Parkway, Sunnyvale, CA 94085, United States.

 
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Code of Conduct and Ethics

We adopted our Code of Conduct and Ethics on January 8, 2004 and revised it on July 17, 2007; it applies to all officers, directors and employees.  The Code of Conduct and Ethics is available on our website at www.symyx.com under the section entitled “Investors” at “Corporate Governance.”  If we make any substantive amendments to the Code of Conduct and Ethics or grant any waiver from a provision of the Code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.

Compensation Committee Interlocks and Insider Participations

During fiscal 2007, the following individuals served as members of our Compensation Committee:  Messrs. Baruch, Colella, Pasternack, Gambrell and Dr. Hill.  None of them has at any time been an officer or employee of ours.  None of our executive officers serves, or in the past fiscal year has served, as a member of the board of directors or the compensation committee of any entity that has one or more of its executive officers serving on our Board or Compensation Committee.

Mr. Baruch, a former member of our Compensation and Audit Committees, is the founder and Managing Director of CMEA Ventures.  Mr. Pasternack, the current chairperson of our Compensation Committee is also a Venture Partner of CMEA Ventures.  CMEA Ventures holds a 17.5% interest in Intermolecular, Inc.  Mr. Baruch serves on Intermolecular’s board of directors and compensation committee. We entered into a Collaborative Development and License Agreement with Intermolecular in March 2005, and an Alliance Agreement in December 2005. Under these agreements, the two companies work together to conduct R&D and other activities with respect to materials and high-throughput technology for use in semiconductor applications. Generally, each party bears its own expenses. These agreements were amended in November 2007. Under these agreements, as amended, we committed to fund $2,057,000 in research and capital equipment expenditures. We expect to satisfy the remaining $643,000 of this commitment in 2008. Further, in August 2006, we invested $13,500,000 in exchange for approximately 13% of Intermolecular’s outstanding shares. For the years ended December 31, 2007, 2006 and 2005, we recognized revenue from Intermolecular of $912,000, $52,000 and $88,000, respectively. In 2005, we also recognized a $20,000 gain from the sale of a fixed asset with a $130,000 net book value, which was sold to Intermolecular for its original cost of $150,000. As of December 31, 2007 and 2006, we had deferred revenue of $84,000 and $27,000 from Intermolecular, respectively.

Mr. Baruch is also a director of Solyndra, Inc. CMEA Ventures holds a minority interest in Solyndra. We are parties to a Collaborative Research and License Agreement with Solyndra.  For the years ended December 31, 2007, 2006 and 2005, we recognized revenue of $409,000, $1,228,000 and $43,000, respectively, from providing research services to Solyndra. As of December 31, 2007 and 2006, we had recorded $0 and $24,000, respectively of deferred revenue related to Solyndra. Development activities under that agreement ceased as of February 28, 2007.

In November 2006, we invested $400,000 in cash and licensed certain sensor technology in exchange for approximately 38% of the outstanding shares of Visyx Technologies Inc.  We have a 45% voting right in relation to its shareholdings. CMEA Ventures holds approximately 42% of the outstanding shares of Visyx and has a 49% voting right in relation to its shareholdings.  In July 2007, we provided Visyx a $100,000 loan in exchange for a convertible promissory note on the same terms and conditions as the other principal investor.  In November 2007, MeasurementSpecialties, Inc. acquired the assets of Visyx. We will share in future distributions, if any, subject to certain preferred stock liquidation preferences.

We believe each of the transactions described above have terms no less favorable to us than we could have obtained from unaffiliated third parties.

Compensation Committee Report*

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

 
11

 
 
Respectfully submitted,

The Compensation Committee of the Board of Directors


David C. Hill
Bruce Pasternack
Chris van Ingen
 
 
_________________

*  The material in this Compensation Committee Report is not “soliciting material” is not deemed “filed” with the Commission and is not to be incorporated by reference in any filing of Symyx Technologies, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Audit Committee Report**

The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2007 with management.  The Audit Committee has discussed with the independent auditors the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1.  AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T.  The Audit Committee has also received the written disclosures and the letter from the independent accountants required by the Independence Standards Board Standard No. 1, (Independence Discussions with Audit Committees), as adopted by the PCAOB in Rule 3600T, and has discussed the independent accountants’ independence with them. Based on the foregoing, the Audit Committee has recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Respectfully submitted,

The Audit Committee of the Board of Directors

Timothy Harkness (1)
Kenneth Nussbacher
Chris van Ingen (1)

 
_________________
 
(1)
Messrs. Harkness and van Ingen joined the Audit Committee on March 18, 2008. Prior to that time, Thomas R. Baruch and Anthony R. Muller served on the Audit Committee.  Messrs. Baruch and Muller left the Board of Directors on March 17, 2008.
 
** The material in this Audit Committee Report is not “soliciting material” is not deemed “filed” with the Commission and is not to be incorporated by reference in any filing Symyx Technologies, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 
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PROPOSAL NO. 2

APPROVAL OF STOCK OPTION EXCHANGE PROGRAM

On April 23, 2008, our Board and Compensation Committee authorized, subject to stockholder approval, a stock option exchange program that will permit our eligible employees to exchange outstanding stock options with exercise prices equal to or greater than $12.00 per share for a reduced number of replacement stock options with an exercise price equal to the fair market value of our common stock at the time of the exchange, such replacement stock options to be granted under our 2007 Stock Incentive Plan, as amended (the “2007 Plan”). The $12.00 threshold is intended to ensure that only outstanding stock options that for the past year have been, and now are substantially “out of the money” are eligible for the exchange program. On April 23, 2008, the closing price of our common stock on the Nasdaq Global Market was $7.91 per share. Our Board authorized our Compensation Committee to adjust the threshold for options eligible to participate in the exchange program if there is a significant change in the market price for our common stock preceding the start of the exchange program.

If approved by the stockholders, the exchange program will be open to all employees of Symyx and any of our subsidiaries that our Compensation Committee designates for inclusion; however, members of our Board, our executive officers, consultants to Symyx and our employees who work outside the United States will not be eligible to participate. If Proposal No. 3 is approved by our stockholders and we implement the exchange program, the portion of the eligible options surrendered and cancelled under the program that are not replaced by the replacement options will not be returned to the 2007 Plan. Further, replacement options will not count against the burn rate policy described under  “Equity Compensation Plans – Burn Rate Policy,” beginning on page 48.

The exchange ratios of shares subject to eligible options cancelled to shares subject to replacement stock options issued will generally range from 2-to-1 to 30-to-1, depending on our stock price at the time of commencement of the exchange offer. These exchange ratios are intended to result in the issuance of replacement stock options that, in the aggregate, have a fair value estimated to be approximately equal to the fair value of the cancelled options they replace as of the date of the exchange offer, determined using a binomial option valuation model established by a third party. Our Compensation Committee retains the discretion to adjust the exchange ratios if there is a significant change in the market price for our common stock preceding the start of the exchange program or if our Compensation Committee decides to reduce the expected compensation expense associated with the exchange program, and approval of this Proposal No. 2 includes approval of the exercise of that discretion.

The replacement stock options will be nonstatutory stock options (that is, they will not qualify for the tax-favored treatment of incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)). The term of each replacement stock option shall equal the remaining term of the cancelled option that it replaced, and will vest twenty-five percent after six months and then monthly thereafter over a period of up to two years from the date of the exchange, provided that such vesting will be accelerated, if necessary, so that the replacement stock options vest in full not later than one month before the expiration of their term.

We believe that the exchange program, if approved by the stockholders, will permit us:

 
·
to meaningfully reduce the option “overhang” represented by outstanding options that have high exercise prices, that no longer incentivize their holders to remain as our employees, and that may be viewed by investors as potentially dilutive; and

 
·
to re-incentivize the employees who participate in the exchange program by issuing them replacement stock options that will vest over a period of up to two years depending on expiration of the term of the replacement stock option following the exchange if they remain employed with us.

The exchange program is an important component in our strategy for rationalizing our equity incentive plan structure and updating our compensation practices.

 
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Background

When our Compensation Committee approves the grant of a stock option, it establishes the exercise price that the employee must pay to purchase shares of common stock when the option is exercised. The exercise price per share is typically equal to or greater than the market price of a share of our common stock on the date the option is granted. Thus, an employee receives value only if he or she exercises an option and later sells the purchased shares at a price that exceeds the option’s exercise price.
 
Like many technology companies, our stock price has experienced a significant decline during the last several years. In  particular, in early 2007, as we recognized the needs to transition our business model, strengthen our management team and improve the Company’s operational efficiency, we reduced our financial forecast for the rest of fiscal 2007.  As a result, our stock price declined significantly and has remained well below prior levels.  Through the remainder of 2007, we reinforced our management team and embarked on an integrated technology platform strategy based on Symyx Software (electronic laboratory notebooks, content, laboratory logistics and analysis), Symyx Tools (modular and integrated workflows that can be enhanced by Symyx Software) and Symyx Research (collaborative research and directed services) to support the entire R&D process in the life science, chemical and energy markets.  Further, in October 2007, we acquired MDL Information Systems, Inc., a leading provider of innovative informatics software, databases and services that can accelerate successful scientific research and development by improving the speed and quality of scientists’ decision making.  We are continuing to pursue our revised business strategy aggressively, but these efforts have not yet translated into a substantial improvement in our stock price.  Consequently, many of our employees hold options with exercise prices significantly higher than the current market price of our common stock.

As of April 17, 2008, eligible employees held options for approximately 4,805,869 shares with exercise prices ranging from $12.00 per share to $58.25 per share, while the closing price of our common stock on the Nasdaq Global Market on April 17, 2008 was $8.31 per share. We believe that to enhance long-term stockholder value we need to maintain competitive employee compensation and incentive programs, and that an equity stake in our success is a critical component of these programs. Options that are “out of the money” are no longer effective as performance and retention incentives. We believe the exchange program will provide us with a renewed opportunity to give eligible employees an economic stake in our future growth and success.

Many of the eligible options have been out of the money for an extended period of time and, therefore, have not been exercised by our employees. As a result, we have developed a significant stock option “overhang” consisting of options that we believe are not serving their intended purpose of incentivizing employees. The exchange program is designed to significantly reduce this “overhang.” If Proposal No. 3 is approved by our stockholders and we implement the exchange program, the portion of the eligible options surrendered and cancelled under the program that are not replaced by the replacement options will not be returned to the 2007 Plan. Further, replacement options will not count against the burn rate policy described under “Equity Compensation Plans – Burn Rate Policy,” beginning on page 48.

Description of the Exchange Program

Implementation of the Exchange Program

Our Board and Compensation Committee authorized the exchange program on April 23, 2008, subject to stockholder approval. The terms of the exchange program as approved by the Board and the Compensation Committee are described in this proxy statement.  At the start of the exchange program, eligible employees holding eligible stock options will receive a written offer to exchange that will set forth the precise terms and timing of the exchange program. Eligible employees will be given at least 20 business days to elect to surrender their eligible stock options in exchange for replacement stock options. Before or at the start of the exchange program, we will file the offer to exchange with the SEC as part of a tender offer statement on Schedule TO. Eligible employees, as well as stockholders and members of the public, will be able to obtain the offer to exchange and other documents filed by us with the SEC free of charge from the SEC’s website at www.sec.gov.

 
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Eligible Options
 
As of April 17, 2008, there were no shares of restriced stock and restricted stock units covering 159,333 shares of our common stock outstanding under all of our equity incentive plans. In addition, as of April 17, 2008 there were options to purchase approximately 6,638,719 shares of our common stock outstanding under all of our equity incentive plans at a weighted average exercise price of $22.93 per share and with a weighted average remaining life of 4.26 years. Of these, options to purchase approximately 3,308,631 shares of common stock, having exercise prices equal to or greater than $12.00, are held by eligible employees and would be eligible for exchange under the exchange program. If 100% of the eligible options are exchanged and replacement stock options are granted in accordance with the exchange ratios described under “Exchange Ratios” below, options for approximately 4,186,024 shares of common stock would be outstanding with a weighted average exercise price of $15.72 per share and with a weighted average remaining life of 4.16 years. In addition, the number of shares underlying outstanding options, after accounting for the replacement stock options granted under the exchange program, would be reduced by approximately 2,452,695 shares, representing approximately 7.3% of the number of shares of our common stock issued and outstanding as of April 17, 2008.

As of April 17, 2008, options for approximately 3,330,088 shares of our common stock that would be ineligible for the exchange program were outstanding under all of our equity incentive plans at a weighted average exercise price of $17.66 per share and with a weighted average remaining life of 4.05 years.

Eligible Employees

The exchange program will be open to all persons who, at the start of the exchange program, are employed by us and those of our subsidiaries that are designated for participation by our Compensation Committee.  Members of our Board, our executive officers, our consultants and our employees working outside the United States will not be able to participate. As of April 17, 2008, eligible options were held by approximately 214 eligible employees.  As of April 17, 2008, we had a total of 585 employees.

In addition to being employed at the start of the exchange program, an employee must continue to be employed by us or one of our designated subsidiaries on the date the surrendered options are cancelled and replacement stock options are granted in exchange for them. Any employee holding eligible options who elects to participate in the exchange program but whose employment terminates for any reason before the date the replacement stock options are granted, including voluntary resignation, retirement, involuntary termination, layoff, death or disability, would retain his or her eligible options subject to their existing terms.

Exchange Ratios

Our intent is to establish exchange ratios that will result in the issuance of replacement stock options in the exchange program with a fair value, in the aggregate, estimated to be approximately equal to the fair value of the stock options surrendered in the exchange program, determined using a binomial option valuation model established by a third party.  If 100% of the eligible options are exchanged and replacement stock options are granted in accordance with the exchange ratios described in the table below, we anticipate an additional compensation expense under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (Revised), or FAS 123R, based on the Black-Scholes option valuation model, a common method used for estimating the fair value of a stock option. The compensation expense will be spread over a two-year vesting period (or shorter if the remaining term shortens the vesting period). For this purpose, we used the following factors: (i) the option’s exercise price; (ii) an assumed value of $8.16 per share of our common stock; (iii) an expected volatility of our common stock price of 46%; (iv) a term equal to the lesser of (A) the remaining contractual life of the stock option and (B) a fixed expected term of 3.42 years; (v) risk-free interest rates ranging from 1.30% to 2.61% (depending on the term of the option); and (vi) no expected dividends and a fair market value of $8.16 per share.

The following table sets forth the five exchange ratios as well as the total number of shares underlying eligible options for each ratio (as of April 17, 2008) and the maximum number of replacement stock options that may be issued with respect to such eligible options in the exchange program:

 
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Exercise Price Range
   
Weighted
Average
Exercise Price
   
Weighted
Average
Remaining Life
   
Total Shares
Underlying
Options
 
Exchange Ratio:
Option Shares per
Replacement Stock Option
 
Total Replacement
Stock Options
to be Granted(1)
 
$ 12.00-$18.00     $ 14.08       3.76       811,138  
2 to 1
    405,569  
$ 18.01-$25.49     $ 22.99       5.43       533,362  
3.5 to 1
    152,389  
$ 25.50-$30.00     $ 27.00       5.36       1,045,263  
4.5 to 1
    232,280  
$ 30.01-$35.00     $ 31.49       5.78       382,578  
8 to 1
    47,822  
$ 35.01-$58.25     $ 54.94       1.88       536,290  
30 to 1
    17,876  
 
_________________
(1)                 Assuming 100% participation in the exchange program.

The total number of shares of common stock issuable upon exercise of replacement stock options a participating employee will receive with respect to a surrendered eligible option will be determined by dividing the number of shares underlying the surrendered option by the applicable exchange ratio and rounding to the nearest whole share. For example, if an eligible employee holds an option to purchase 1,000 shares of our common stock at an exercise price of $15.00 per share, he or she would be entitled to exchange that option for a replacement stock options to purchase 500 shares of our common stock, with such replacement stock option having an exercise price equal to the fair market value of our common stock at the time of the exchange (i.e., after applying the applicable 2 to 1 exchange ratio set forth in the table above).

Compensation Committee Adjustment

Our Board authorized the Compensation Committee to adjust the threshold for options eligible to participate in the exchange program if there is a significant change in the market price for our common stock preceding the start of the exchange program. Our Compensation Committee also retains the discretion to adjust the exchange ratios if there is a significant change in the market price of our common stock preceding the start of the exchange program in comparison to the average market price used in determining the exchange ratios set forth in the table above, or if our Compensation Committee decides to reduce the expected compensation expense associated with the exchange program. If our Compensation Committee adjusts the exchange ratios, it will do so to cause the exchange to result in the excess of the fair value of the replacement stock options over the fair value of the stock options surrendered to be no greater than the excess based on the exchange ratios set forth in the table above, determined using the same valuation methodologies as were used to determine the exchange ratios set forth in the table above.

Election to Participate

Participation in the exchange program will be voluntary. Eligible employees will have at least 20 business days from the start of the offer to exchange to determine whether they wish to participate.

Vesting of Replacement Stock Options

Replacement stock options issued in the exchange program will be completely unvested when granted and will become vested on the basis of the participant’s continued employment with us or one of our subsidiaries. The replacement stock options will generally vest twenty-five percent after six months and then in equal monthly installments thereafter over a two year period, provided that such vesting will be accelerated, if necessary, so that the replacement stock options vest in full not later than one month before the expiration of their term. A participant in the exchange program will forfeit any replacement stock options received that remain unvested when his or her employment with us or one of our subsidiaries terminates for any reason. Under the terms of the 2007 Plan, all stock awards, including replacement stock options, held by persons whose service with us has not terminated generally have one year of additional vesting in the event of certain change-of-control transactions.

Other Terms and Conditions of Replacement Stock Options

Replacement stock options issued in the exchange program will be nonstatutory stock options granted pursuant to the 2007 Plan. Each replacement stock option represents a right to acquire one share of our common stock at a fixed exercise price. The term of each replacement stock option shall equal the remaining term of the cancelled option that it replaced.  Employees generally will recognize taxable income upon the exercise of replacement stock options granted under the 2007 Plan, and the taxable income is subject to income and employment tax withholding. All other terms and conditions of the replacement stock options issued in the exchange program will be substantially the same as those that apply generally to replacement stock options granted under the 2007 Plan.

 
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Potential Modification to Exchange Program Terms to Comply with Governmental Requirements

The terms of the exchange program will be described in an offer to exchange we will file with the SEC. Although we do not anticipate that the SEC will require us to materially modify the terms of the offer to exchange, it is possible that we may need to alter the terms of the exchange program to comply with SEC comments.

U.S. Federal Income Tax Consequences

We anticipate the exchange of eligible options for replacement stock options pursuant to the exchange program will be treated as a non-taxable exchange and neither we nor any of our U.S. employees will recognize any income for U.S. federal income tax purposes based upon the surrender of eligible options and the grant of replacement stock options.

Accounting Treatment

As of January 1, 2006, we have adopted the provisions of FAS 123R on accounting for share-based payments. Under FAS 123R, we will recognize the incremental compensation cost of the replacement stock options granted in the exchange. The incremental compensation cost will be measured as the excess, if any, of the fair value of each award of replacement stock options granted to employees in exchange for surrendered stock options, measured as of the date the replacement stock options are granted, over the fair value of the stock options surrendered in exchange for the replacement stock options, measured immediately prior to the cancellation. This incremental compensation cost will be recognized ratably over the two-year vesting period of the replacement stock options (or shorter if the remaining term shortens the vesting period).

New Plan Benefits

Because the decision whether to participate in the exchange program is completely voluntary, we are unable to predict which or how many employees will elect to participate, how many eligible options will be surrendered for exchange, or how many replacement stock options may be issued. As indicated above, members of our Board, our executive officers and consultants are not eligible to participate in the exchange program.

Effect on Stockholders

We have designed the proposed exchange program so that the replacement stock options will result in the fair value of the replacement options approximately the same as the fair value of the options cancelled calculated using a binomial option valuation model; however, we expect we will recognize a non-cash compensation expense under FAS 123R. The exchange program is intended to restore competitive and appropriate equity incentives for our employees and those of our subsidiaries and to reduce our existing overhang. While we cannot predict which or how many employees will elect to participate in the exchange program, assuming that 100% of eligible employees participate in the exchange program and that the exchange ratios described in the table set forth under “Exchange Ratios” above are applied, eligible options exercisable in exchange for approximately 3,308,631 shares as of April 17, 2008 would be surrendered and cancelled, while stock options exercisable in exchange for 855,936 shares would be issued, resulting in a net reduction in our overhang of approximately 2,452,695 shares.

Required Vote

Approval of Proposal No. 2 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will be counted toward the tabulation of votes cast on the proposal for quorum purposes and will have the same effect as “Against” votes. Broker non-votes will have no effect on the outcome of the vote.


OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE APPROVAL OF THE STOCK OPTION EXCHANGE PROGRAM.

 
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PROPOSAL NO. 3

APPROVAL OF AMENDMENTS TO THE 2007 SYMYX TECHNOLOGIES, INC. STOCK INCENTIVE PLAN

General

The Board has unanimously approved for submission to a vote of the stockholders a proposal to approve amendments to the Symyx Technologies, Inc. 2007 Stock Incentive Plan (the “2007 Plan”) to (i) increase the aggregate number of shares of common stock authorized for issuance under the 2007 Plan by 4,700,000 shares and (ii) reduce the number of shares available for issuance under the 2007 Plan by one share for each share of common stock subject to a stock option or stock appreciation right and by one and sixty-five hundredths (1.65) shares for each share of common stock subject to any other type of award issued pursuant to the 2007 Plan. The purpose of the 2007 Plan is to retain key employees, consultants and directors, to attract new employees, consultants and directors, to encourage a sense of proprietorship and to stimulate the active interest of such persons in the development and financial success of us and our subsidiaries. The Board believes that option grants and other forms of equity participation are vital to our efforts to remain competitive in our compensation practices. Our 1997 Stock Plan (the “1997 Plan”) expired in February 2007 and substantially all authorized shares under our 2001 Nonstatutory Stock Option Plan (the “2001 Plan”), a non-stockholder-approved plan, have been issued or are subject to outstanding options.

If approved by the stockholders, a total of 4,700,000 additional shares of common stock will be reserved for issuance under the 2007 Plan. Capitalized terms used but not defined in this Proposal No. 3 shall have the same meaning as in the 2007 Plan unless otherwise indicated.

A general description of the principal terms of the 2007 Plan as proposed is set forth below. This description is qualified in its entirety by the terms of the 2007 Plan, a copy of which is attached to this proxy statement as Appendix A and incorporated herein by reference.

Vote Required

Approval of Proposal No. 3 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will be counted toward the tabulation of votes cast on the proposal and will have the same effect as “Against” votes. Broker non-votes will have no effect on the outcome of the vote.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE APPROVAL OF THE AMENDMENT TO THE 2007 PLAN.

Description of the 2007 Plan

Purpose

The purpose of the 2007 Plan is to help us compete effectively with other enterprises for the services of qualified individuals whose present and potential contributions are important to our success by motivating our employees, consultants and directors to continue in service to us, through ownership of our common stock.

Shares Reserved for Issuance under the 2007 Plan

If this proposal is approved by the stockholders, a total of 5,450,000 shares of common stock will be reserved for issuance under the 2007 Plan, plus any shares of common stock that would otherwise return to either the 1997 Plan or 2001 Plan as a result of forfeiture, termination or expiration of awards previously granted under those plans (notwithstanding any termination or expiration of such plans); provided, however, that the maximum aggregate number of shares of common stock that may be issued pursuant to incentive stock options will be 5,450,000 shares. Notwithstanding the foregoing, any shares of common stock issued in connection with awards other than options and stock appreciation rights will be counted against the total share limit reserved under the 2007 Plan by applying the Multiplier to the shares of common stock covered by each award; conversely, shares of common stock returned to or deemed not to have been issued from the 2007 Plan under awards other than options and stock appreciation rights will return to the share reserve at a rate determined by multiplying such number of shares by the Multiplier.  The “Multiplier” for awards other than options and stock appreciation rights will be 1.65 shares of common stock for every 1.0 share of common stock in connection with such award.  For example, a grant of a restricted stock award for 1,000 shares would count as 1,650 shares against the reserve, and if returned to the 2007 Plan would count as 1,650 shares returned to the 2007 Plan.  However, if we conduct the exchange offer described in Proposal No. 2 and this Proposal No. 3 is approved by our stockholders, the portion of the eligible options surrendered and cancelled under the program that are not replaced by the replacement options will not be returned to the 2007 Plan. As of April 17, 2008 there were no shares of restricted stock and restricted stock units covering 159,333 shares of our common stock outstanding under all of our equity incentive plans. In addition, as of April 17, 2008 there were options to purchase approximately 6,638,719 shares of our common stock outstanding under all of our equity incentive plans at a weighted average exercise price of $22.93 per share with a weighted average remaining life of 4.26 years. In addition, as of April 17, 2008, there were 1,557,813 shares available for issuance under future grants under the 2007 Plan.
 
 
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Administration

The Board has designated the Compensation Committee (“Administrator”) to administer the 2007 Plan. With respect to grants to officers and directors, the Compensation Committee shall be constituted in such a manner as to satisfy applicable laws, including Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and Section 162(m) of the Code.  Our Board has also adopted a revised burn rate policy it intends to govern our equity compensation granting practices as described under “Equity Compensation Plans – Burn Rate Policy” beginning on page 48.

Terms and Conditions of Awards

The 2007 Plan provides for the grant of stock options, restricted stock, restricted stock units and stock appreciation rights (collectively referred to as “awards”). Stock options granted under the 2007 Plan may be either incentive stock options under the provisions of Section 422 of the Code or nonstatutory stock options. Incentive stock options may be granted only to employees. Awards other than incentive stock options may be granted to our employees, directors and consultants and to those providing services to our related entities. To the extent that the aggregate fair market value of shares of our common stock that are subject to options designated as incentive stock options and that become exercisable for the first time by a participant during any calendar year exceeds $100,000, the excess options shall be treated as nonqualified stock options. Under the 2007 Plan, awards may be granted to employees, directors or consultants located outside the United States as the Administrator may determine from time to time. Each award granted under the 2007 Plan shall be designated in an award agreement.

The Administrator may issue awards under the 2007 Plan in settlement, assumption or substitution for outstanding awards or obligations to grant future awards in connection with us or a related entity acquiring another entity, an interest in another entity or an additional interest in a related entity whether by merger, stock purchase, asset purchase or other form of transaction. Subject to applicable laws, the Administrator has the authority, in its discretion, to select employees and directors to whom awards may be granted from time to time, to determine whether and to what extent awards are granted, to determine the number of shares of our common stock or the amount of other consideration to be covered by each award (subject to the limitations set forth under the above sub-section of this Proposal No. 3 “Description of the 2007 Stock Incentive Plan—Shares Reserved for Issuance under the 2007 Plan”), to approve award agreements for use under the 2007 Plan, to determine the terms and conditions of any award (including the vesting schedule applicable to the award), to amend the terms of any outstanding award granted under the Plan, to construe and interpret the terms of the 2007 Plan and awards granted, to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable non-U.S. jurisdictions and to take such other action not inconsistent with the terms of the 2007 Plan, as the Administrator deems appropriate.

The term of any award granted under the 2007 Plan may not be for more than seven (7) years (or five (5) years in the case of an incentive stock option granted to any participant who owns stock representing more than 10% of the combined voting power of us or any parent or subsidiary of ours), excluding any period for which the participant has elected to defer the receipt of the shares or cash issuable pursuant to the award pursuant to a deferral program the Administrator may establish in its discretion.

The 2007 Plan authorizes the Administrator to grant incentive stock options and non-qualified stock options at an exercise price not less than 100% of the fair market value of the common stock on the date the option is granted (or 110%, in the case of an incentive stock option granted to any employee who owns stock representing more than 10% of the combined voting power of us or any parent or subsidiary of ours). In the case of stock appreciation rights, the base appreciation amount shall not be less than 100% of the fair market value of the common stock on the date of grant. In the case of awards intended to qualify as performance-based compensation, the exercise or purchase price, if any, shall be not less than 100% of the fair market value per share on the date of grant. In the case of all other awards granted under the 2007 Plan, the exercise or purchase price shall be determined by the Administrator. The exercise or purchase price is generally payable in cash, check, shares of common stock or with respect to options, payment through a broker-dealer sale and remittance procedure or a “net exercise” procedure.

 
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The 2007 Plan provides that any amendment that would adversely affect the participant’s rights under outstanding awards shall not be made without the participant’s written consent; provided, however, that an amendment or modification that may cause an incentive stock option to become a non-qualified stock option shall not be treated as adversely affecting the rights of the participants. The 2007 Plan also provides that stockholder approval is required in order to (i) reduce the exercise price of any option or the base appreciation amount of any stock appreciation right awarded under the 2007 Plan or (ii) cancel any option or stock appreciation right awarded under the 2007 Plan in exchange for another award or cash at a time when exercise price exceeds the fair market value of the underlying shares unless the cancellation and exchange occurs in connection with a Corporate Transaction. However, canceling an option or stock appreciation right in exchange for another option, stock appreciation right, restricted stock or other award, with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original option or stock appreciation right will not require stockholder approval.

Under the 2007 Plan, the Administrator may establish one or more programs under the 2007 Plan to permit selected participants the opportunity to elect to defer receipt of consideration payable under an award. The Administrator also may establish under the 2007 Plan separate programs for the grant of particular forms of awards to one or more classes of grantees.

Termination of Service

An award may not be exercised after the termination date of such award as set forth in the award agreement. If a participant in the 2007 Plan terminates continuous service with us, an award may be exercised only to the extent provided in the award agreement. Where an award agreement permits a participant to exercise an award following termination of service, the award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the award, whichever comes first. Any award designated as an incentive stock option, to the extent not exercised within the time permitted by law for the exercise of incentive stock options following the termination of employment, shall convert automatically to a nonqualified stock option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the award agreement.

Transferability of Awards

Under the 2007 Plan, incentive stock options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised during the lifetime of the participant only by the participant. Other awards shall be transferable only by will and by the laws of descent and distribution and during the lifetime of a participant, to the extent and in the manner authorized by the Administrator, but only to the extent such transfers are made to family members, to family trusts, to family-controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the participant. The 2007 Plan permits the designation of beneficiaries by holders of awards, including incentive stock options.

Section 162(m) of the Code

The maximum number of shares with respect to which options and stock appreciation rights may be granted to a participant during a calendar year is 2,000,000 shares.

Under Code Section 162(m) no deduction is allowed in any taxable year for compensation in excess of $1 million paid to our “covered employees.”  Under current tax laws, a “covered employee” is our Chief Executive Officer and our next three highest paid executive officers, other than our Chief Financial Officer. An exception to this deduction limitation applies to compensation that is paid to a covered employee pursuant to a stock incentive plan approved by stockholders and that specifies, among other things, the maximum number of shares with respect to which options and stock appreciation rights may be granted to eligible participants under such plan during a specified period. Compensation paid pursuant to options or stock appreciation rights granted under such a plan and with an exercise price equal to the fair market value of our common stock on the date of grant is deemed to be inherently performance-based, because such awards provide value to participants only if the stock price appreciates. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitation, if any option or stock appreciation right is canceled, the cancelled award shall continue to count against the maximum number of shares of common stock with respect to which an award may be granted to a participant.

 
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For awards of restricted stock and restricted stock units that are intended to be performance-based compensation under Section 162(m) of the Code, the maximum number of shares subject to such awards that may be granted to a participant during a calendar year is 2,000,000 shares. The foregoing limitations shall be adjusted proportionately by the Administrator in connection with any change in our capitalization due to a stock split, stock dividend or similar event affecting our common stock and our determination shall be final, binding and conclusive. In order for restricted stock and restricted stock units to qualify as performance-based compensation, the Administrator must establish a performance goal with respect to such award in writing not later than 90 days after the commencement of the services to which it relates and while the outcome is substantially uncertain. In addition, the performance goal must be stated in terms of an objective formula or standard.

The 2007 Plan includes the following performance criteria that may be considered by the Administrator when granting performance-based awards: (i) increase in share price; (ii) earnings per share; (iii) total stockholder return; (iv) operating margin; (v) gross margin; (vi) return on equity; (vii) return on assets; (viii) return on investment; (ix) operating income; (x) net operating income; (xi) pre-tax profit; (xii) cash flow; (xiii) revenue; (xiv) expenses; (xv) earnings before interest, taxes and depreciation and amortization; (xvi) economic value added; (xvii) market share; (xviii) relative or absolute share price; and (xix) pro forma net income.

Change in Capitalization

Subject to any required action by our stockholders, the number of shares of common stock covered by outstanding awards, the number of shares of common stock that have been authorized for issuance under the 2007 Plan, the exercise or purchase price of each outstanding award, the maximum number of shares of common stock that may be granted subject to awards to any participant in a calendar year, and the like, shall be proportionally adjusted by the Administrator in the event of (i) any increase or decrease in the number of issued shares of common stock resulting from a stock split, stock dividend, combination or reclassification or similar event affecting our common stock; (ii) any other increase or decrease in the number of issued shares of common stock effected without receipt of consideration by us; or (iii) any other transaction with respect to common stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete), distribution of cash or other assets to stockholders other than a normal cash dividend, or any similar transaction; provided, however, that conversion of any of our convertible securities shall not be deemed to have been “effected without receipt of consideration.”

Corporate Transaction

Upon the consummation of a Corporate Transaction, outstanding awards may be assumed or replaced by the successor entity. Except as provided in an individual award agreement, for the portion of each award that is not assumed or replaced by the successor entity, such portion of the award will automatically vest and become exercisable and be released from any repurchase or forfeiture rights immediately prior to the effective date of the Corporate Transaction. Any awards that have not been assumed, replaced or exercised as of the consummation of a Corporate Transaction shall terminate.

Change in Control

Except as provided in an individual award agreement, in the event of a Change in Control (other than a Change in Control that is also a Corporate Transaction), each outstanding award will automatically vest and become exercisable and be released from any repurchase or forfeiture rights immediately prior to the effective date of the Change in Control.

 
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Under the 2007 Plan, a Corporate Transaction is generally defined as:

 
the acquisition of 50% or more of our stock by any individual or entity including by tender offer or a reverse merger (involving an acquisition of 40% or more of our stock);

 
a sale, transfer or other disposition of all or substantially all of our assets;

 
a merger or consolidation in which we are not the surviving entity; or

 
a complete liquidation or dissolution.

 
Under the 2007 Plan, a Change in Control is generally defined as:

 
acquisition of 50% or more of our stock by any individual or entity which a majority of our Board members (who have served on our Board for at least twelve (12) months) do not recommend our stockholders accept; or

 
a change in the composition of our Board over a period of twelve (12) months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who have either been Board members continuously for a period of at least twelve (12) months or have been Board members for less than twelve (12) months and were elected or nominated for election by at least a majority of Board members who have served on our Board for at least twelve (12) months.

Amendment, Suspension or Termination of the 2007 Plan

The Board may at any time amend, suspend or terminate the 2007 Plan. The 2007 Plan has a term of ten (10) years unless sooner terminated by the Board. To the extent necessary to comply with applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to awards granted to residents therein, we shall seek stockholder approval of any such amendment to the 2007 Plan in such a manner and to such a degree as is required.

Certain Federal Tax Consequences

The following summary of the federal income tax consequences of the 2007 Plan and the awards granted thereunder is based upon federal income tax laws in effect on the date of this proxy statement. This summary does not purport to be complete, and does not discuss non-U.S., state or local tax consequences or additional guidance that is expected to be issued by the Treasury Department under Section 409A of the Internal Revenue Code.

Nonqualified Stock Options

The grant of a nonqualified stock option under the 2007 Plan will not result in any federal income tax consequences to the optionholder or to us. Upon exercise of a nonqualified stock option, the optionholder is subject to income taxes at the rate applicable to ordinary compensation income on the excess of the fair market value of the shares on the date of exercise over the option exercise price. This income is subject to withholding for federal income and employment tax purposes. We are entitled to an income tax deduction in the amount of the income recognized by the option holder, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the appropriate taxes with respect to such income (if required) and the option holder’s total compensation is deemed reasonable in amount. Any gain or loss on the option holder’s subsequent disposition of the shares of common stock will receive long or short-term capital gain or loss treatment, depending on whether the shares are held for more than one year following exercise. We do not receive a tax deduction for any such gain.

 
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If a nonqualified stock option is amended, such option may be considered deferred compensation and subject to the rules of new Section 409A of the Code, which provide rules regarding the timing of payment of deferred compensation. An option subject to Section 409A of the Code which fails to comply with the rules of Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus penalties and interest.

Incentive Stock Options

The grant of an incentive stock option under the 2007 Plan will not result in any federal income tax consequences to the optionholder or to us. An optionholder recognizes no federal taxable income upon exercising an incentive stock option (subject to the alternative minimum tax rules discussed below), and we receive no deduction at the time of exercise. In the event of a disposition of stock acquired upon exercise of an incentive stock option, the tax consequences depend upon how long the optionholder has held the shares of common stock. If the optionholder does not dispose of the shares within two years after the incentive stock option was granted, nor within one year after the incentive stock option was exercised, the optionholder will recognize a long-term capital gain (or loss) equal to the difference between the sale price of the shares and the exercise price. We are not entitled to any deduction under these circumstances.

If the optionholder fails to satisfy either of the foregoing holding periods, he or she must recognize ordinary income in the year of the disposition (referred to as a “disqualifying disposition”). The amount of such ordinary income generally is the lesser of (i) the excess (if any) of the amount realized on the disposition over the exercise price or (ii) the excess of the fair market value of the stock on the exercise date over the exercise price. Any gain in excess of the amount taxed as ordinary income will be treated as a long or short-term capital gain, depending on whether the stock was held for more than one year. We, in the year of the disqualifying disposition, are entitled to a deduction equal to the amount of ordinary income recognized by the optionholder, subject to possible limitations imposed by Section 162(m) of the Code and so long as the option holder’s total compensation is deemed reasonable in amount.

The “spread” under an incentive stock option—i.e., the excess of the fair market value of the shares at exercise over the exercise price—is classified as an item of adjustment in the year of exercise for purposes of the alternative minimum tax. If an option holder’s alternative minimum tax liability exceeds such option holder’s regular income tax liability, the optionholder will owe the larger amount of taxes. In order to avoid the application of alternative minimum tax with respect to incentive stock options, the optionholder must sell the shares within the same calendar year in which the incentive stock options are exercised. However, such a sale of shares within the same year of exercise will constitute a disqualifying disposition, as described above.

In the event an incentive stock option is amended, such option may be considered deferred compensation and subject to the rules of new Section 409A of the Code. An option subject to Section 409A of the Code which fails to comply with the rules of Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus penalties and interest. In addition, the amendment of an incentive stock option may convert the option from an incentive stock option to a nonqualified stock option.

Restricted Stock

The grant of restricted stock will subject the recipient to ordinary compensation income on the excess of the fair market value of the shares on the date that the restrictions lapse over the amount paid, if any, for such stock. For recipients who are employees this income is subject to withholding for federal income and employment tax purposes. We are entitled to an income tax deduction in the amount of the ordinary income recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the appropriate taxes with respect to such income (if required and which may be accomplished by the withholding of a number of shares covered by the award equal to the withholding obligation) and the recipient’s total compensation is deemed reasonable in amount. Any gain or loss on the recipient’s subsequent disposition of the shares will receive long or short-term capital gain or loss treatment depending on how long the stock has been held since the restrictions lapsed. We do not receive a tax deduction for any such gain.

Recipients of restricted stock may make an election under Section 83(b) of the Code (“Section 83(b) Election”) to recognize as ordinary compensation income in the year that such restricted stock is granted, the amount equal to the excess of the fair market value on the date of the issuance of the stock over the amount paid, if any, for such stock. If such an election is made, the recipient recognizes no further amounts of compensation income upon the lapse of any restrictions and any gain or loss on subsequent disposition will be long or short-term capital gain to the recipient based on how long the stock has been held since the date of issuance. The Section 83(b) Election must be made within thirty days from the time the restricted stock is issued.

 
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Stock Appreciation Rights

Recipients of stock appreciation rights (“SARs”) generally should not recognize income until the SAR is exercised (assuming there is no ceiling on the value of the right). Upon exercise, the recipient will normally recognize taxable ordinary income for federal income tax purposes equal to the amount of cash and fair market value of the shares, if any, received upon such exercise. Recipients who are employees will be subject to withholding for federal income and employment tax purposes with respect to income recognized upon exercise of a SAR. Recipients will recognize gain upon the disposition of any shares received on exercise of a SAR equal to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with respect to such shares under the principles set forth above. That gain will be taxable as long or short-term capital gain depending on whether the shares were held for more than one year. We will be entitled to a tax deduction to the extent and in the year that ordinary income is recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the appropriate taxes with respect to such income (if required and which may be accomplished by the withholding of a number of shares covered by the award equal to the withholding obligation) and the recipient’s total compensation is deemed reasonable in amount.

A SAR can be considered non-qualified deferred compensation and subject to the new Section 409A of the Code. A SAR that does not meet the requirements of Code Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus penalties and interest.

Restricted Stock Units

Recipients of restricted stock units generally should not recognize income until such units are converted into cash or shares of stock. Upon conversion, the recipient will normally recognize taxable ordinary income for federal income tax purposes equal to the amount of cash and fair market value of the shares, if any, received upon such conversion. Recipients who are employees will be subject to withholding for federal income and employment tax purposes with respect to income recognized upon conversion of the restricted stock units. Participants will recognize gain upon the disposition of any shares received upon conversion of the restricted stock units equal to the excess of (i) the amount realized on such disposition over (ii) the ordinary income recognized with respect to such shares under the principles set forth above. That gain will be taxable as long or short-term capital gain depending on whether the shares were held for more than one year. We will be entitled to a tax deduction to the extent and in the year that ordinary income is recognized by the recipient, subject to possible limitations imposed by Section 162(m) of the Code and so long as we withhold the appropriate taxes with respect to such income (if required and which may be accomplished by the withholding of a number of shares covered by the award equal to the withholding obligation) and the recipient’s total compensation is deemed reasonable in amount.

Restricted stock units also can be considered non-qualified deferred compensation and subject to the new Section 409A of the Code. A grant of restricted stock units that does not meet the requirements of Code Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus penalties and interest.

 
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PROPOSAL NO. 4

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

General

The Audit Committee has selected Ernst & Young LLP, an independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2008. We are submitting our selection of independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited our historical consolidated financial statements for all annual periods since our incorporation in 1994. We expect that representatives of Ernst & Young LLP will be present at the Annual Meeting, will have an opportunity to make a statement if they wish, and will be available to respond to appropriate questions.

Our Bylaws do not require that the stockholders ratify the selection of Ernst & Young LLP as our independent auditors. However, we are submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders do not ratify the selection, the Board and the Audit Committee will reconsider whether or not to retain Ernst & Young LLP. Even if the selection is ratified, the Board and the Audit Committee, in their discretion, may change the appointment at any time during the year if they determine that such a change would be in our best interests and the best interests of our stockholders.

Vote Required

Approval of Proposal No. 4 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will be counted toward the tabulation of votes cast on the proposal for quorum purposes and will have the same effect as “Against” votes. Broker non-votes will have no effect on the outcome of the vote.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR” THE RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2008.

Principal Accounting Fees and Services

In connection with the audits of the 2007 and 2006 financial statements, we entered into engagement agreements with Ernst & Young LLP which set forth the terms by which Ernst & Young LLP performed audit services for us. Those agreements are subject to alternative dispute resolution procedures and an exclusion of punitive damages.

Pursuant to its policies, the Audit Committee pre-approves all audit and non-audit services provided to us by the independent registered public accounting firm. According to the Audit Committee charter, this pre-approval authority may be delegated to a single member of the Audit Committee and then reviewed by the entire Audit Committee at the Audit Committee’s next meeting.

The following table summarizes the aggregate fees billed to us by Ernst & Young LLP for various services provided for the years ended December 31, 2007 and 2006 (in thousands):

   
Fiscal Year Ended
(in thousands)
 
Service Category
 
2007
   
2006
 
Audit Fees
  $ 1,676     $ 935  
Audit-Related Fees
    185       60  
All Other Fees
    -       2  
Total
  $ 1,861     $ 997  
 
 
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Audit Fees

Aggregate fees were for professional services rendered for the audits of our consolidated financial statements, limited reviews of our unaudited condensed consolidated interim financial statements and internal control over financial reporting, issuances of consents, and assistance with review of documents filed with the SEC. The increase in audit fees in 2007 relates primarily to the Company’s acquisition of MDL.
 
Audit-Related Fees

Aggregate fees were for services related to statutory audits, general accounting consultations, internal control, revenue recognition consultations and services related to a spin-off of our sensor business completed in 2006.
 
All Other Fees

Aggregate fees were for acquisition due diligence and access to an on-line research database.
 
 
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 EXECUTIVE OFFICER AND DIRECTOR COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy and Objectives

The Compensation Committee believes the most effective executive compensation program is designed to reward achievement of our specific long-term and strategic goals, attract and retain executive officers and other key employees who contribute to our long-term success, and align executives’ interests with those of the stockholders by rewarding performance above established goals, with the ultimate objective of improving stockholder value. With this in mind, our Compensation Committee ties at least 40% of executive compensation to company performance.  We design our compensation programs so that the compensation provided to our executives and other key employees remains competitive relative to the compensation paid to similarly situated executives of our peer companies against which we recruit and compete for talent. We recognize that compensation programs must be understandable to be effective and that program administration and decision making must be fair and equitable.

Role of the Compensation Committee

The Compensation Committee establishes, implements and monitors adherence to our compensation strategy. In the course of its annual review of our compensation practices, the Compensation Committee considers whether our current compensation program is consistent with our compensation philosophy and objectives and determines whether to modify it or introduce new elements of compensation to better meet these objectives.  Our Compensation Committee has the authority to select, retain and terminate special counsel and other experts, including compensation consultants, as it deems appropriate to meet these objectives. As discussed below, the Compensation Committee retained Compensia, Inc. in 2005 to provide compensation consulting services, and Compensia has continued to provide compensation consulting services through to present.  Compensia reports directly to the Compensation Committee.

The Compensation Committee meets at least two times per year, with greater frequency if necessary.  In fiscal year 2007, the Compensation Committee held eight meetings.  The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in consultation with the Chief Executive Officer and Chief Financial Officer. The Compensation Committee meets regularly in executive session. However, from time to time, various members of management and other employees, as well as outside advisors or consultants, may be invited by the Compensation Committee to make presentations, provide financial or other background information or advice or otherwise participate in Compensation Committee meetings. The charter of the Compensation Committee grants the Compensation Committee full access to all of our books, records, facilities and personnel, as well as authority to obtain, at our expense, advice and assistance from internal and external legal, accounting or other advisors and consultants and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. For all executive officers, as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executive officers in various hypothetical scenarios, executive and director stock ownership information, company stock performance data, analyses of historical executive compensation levels and current company-wide compensation levels. In determining 2007 and 2008 compensation for our executive officers, the Compensation Committee used a combination of financial reports and projections, publicly available market data regarding the companies we compete with for talent as described below, tally sheets and a review of historical and current compensation levels for our executive officers.  In addition, in setting the compensation of our Chief Executive Officer, the Compensation Committee also relies on a self-assessment submitted by the Chief Executive Officer.

Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels, including equity awards, and the establishment of performance objectives for the current year.  Historically, the Compensation Committee has made its most significant adjustments to annual compensation, determined cash and awards and established new performance objectives at one or more meetings held during the first and fourth quarters of the year.  Generally, adjustments to the base salary of our executive officers are determined by the Compensation Committee in February of each year, with the adjustments becoming effective January 1st.  However, as discussed further below, for 2008 compensation, the Compensation Committee made its determinations in November as it reviewed and revised cash and equity compensation for substantially all of our personnel following our acquisition of MDL Information Systems, Inc. (“MDL”) in October 2007 and the significant restructuring we implemented as a result of that acquisition. Annual short-term performance-based cash bonus awards are generally made in February of the year following the one in which services are performed, while long-term equity incentive compensation is usually determined during the last quarter of each year.  The Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of our compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year.

 
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Role of Executive Officers in Compensation Decisions

Shortly after the end of the year, the Chief Executive Officer reviews the performance of each of the executive officers other than himself. The Chief Executive Officer then provides the Compensation Committee with a summary of the reviews and his recommendations, based on consultation with the Chief Financial Officer, regarding total compensation and the allocation between base salary, short-term performance-based compensation and long-term equity incentive compensation. Typically the Chief Executive Officer solicits the input of the Compensation Committee prior to making his recommendations.  In addition, our Chief Executive Officer, in consultation with our Chief Financial Officer, provides recommendations regarding the determination of annual corporate objectives and goals.  The Chief Executive Officer and Chief Financial Officer have no role in recommending their respective compensation and are specifically excluded from any discussions or deliberations related to their respective compensation.  However, the Chief Executive Officer will include a recommendation regarding the compensation package of the Chief Financial Officer in his presentation to the Compensation Committee, and provide with his review of the Chief Financial Officer’s performance for the preceding performance period. The Chief Executive Officer’s recommendations regarding the compensation packages and annual corporate objective and goals are reviewed and, subject to their input and revision, approved by our Compensation Committee and Board.  The Compensation Committee makes its determination regarding the Chief Executive Officer’s compensation based on company performance, with some adjustment, if any, based the Compensation Committee’s assessment of his personal performance for the performance year.

Other than as described above, no other executive officers participated in recommending the amount or form of executive officer compensation.  Our Compensation Committee does not delegate any of its functions to others in determining executive officer compensation, and, except as described below, the Compensation Committee has not engaged any consultants with respect to executive compensation matters.

 Setting Executive Compensation

To set total compensation guidelines at levels that enable us to attract and retain talent, our Compensation Committee reviews the market data of companies we compete with for talent.  The market data consists of publicly disclosed data from companies in two peer groups: (i) publicly traded, similarly sized technology and life science companies and (ii) regional technology and life science companies that we consider to be labor market competitors (together, the “Compensation Peer Group”).  The composition of the Compensation Peer Group reflects the breadth of industries in which our business units compete. The Compensation Committee continues to periodically review and update the companies that comprise the Compensation Peer Group. As we continue to focus more heavily on our software business unit, we anticipate that the Compensation Peer Group will be revised to reflect a higher percentage of software companies.

In 2007, the Compensation Peer Group consisted of the following companies:

Similarly sized Peer Group:
Broad Bay Area Peer Group:
   
·
Accelrys
·
Adobe
·
Advent
·
Affymetrix
·
Connetics
·
Cypress
·
Cubist Pharmaceuticals
·
Dionex
·
DSP Group
·
Gilead Sciences, Inc.
·
eResearch Technology
·
Hyperion
·
Exelixis
·
Juniper
·
InterMune
·
Openwave
·
Neurocrine Biosciences
·
Protein Design Labs
·
Quality Systems
·
Sybase
·
Tessera
·
VeriSign
·
Trident Microsystems
   

 
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Because we compete with many larger organizations for top executive-level talent, the Compensation Committee generally sets compensation for executive officers at the 75th percentile of the base salary and target cash incentive compensation paid to similarly situated executives of the organizations comprising the Compensation Peer Group. Variations may occur based on the experience level of the individual and market factors.  Our Compensation Committee believes this benchmark is appropriate for several reasons.  We have a complex business model and are pursuing multiple commercial and product development opportunities simultaneously with a relatively small organization. Competition for executive talent is intense in the industries in which we compete and in our geographic area. Our executives have many years of valuable experience in our business, and their continued leadership is critical to our short-term and long-term success.    
 
In 2005, the Compensation Committee engaged Compensia, Inc., an outside human resources consulting firm, to conduct an annual review of our total compensation program for executive officers, and Compensia has remained engaged by the Compensation Committee through to present. The Compensation Committee engaged Compensia to provide the Compensation Committee market data regarding all aspects of executive compensation and alternatives to consider when making compensation decisions for executive officers and when assessing the recommendations being made by our Chief Executive Officer and Chief Financial Officer regarding executive compensation. In addition, the Compensation Committee engaged Compensia to assist us with structuring the stock option exchange program that is the subject of Proposal No. 2 in this proxy statement.

2007 Executive Compensation Components

Our Compensation Committee strives to ensure that the total compensation paid to our executive officers is fair, reasonable and competitive. To that end, our 2007 and 2008 compensation programs consist of:

 
base salary;

 
short-term cash incentive awards;

 
discretionary cash bonuses to reward exemplary effort and achievement; and

 
equity incentive awards.

The Compensation Committee does not have any formal policies for allocating compensation among salary, bonus and cash and equity incentive grants.   In addition, in 2007, significant changes were made to our executive staff.  Mr. Goldwasser, formerly our president, became our Chief Executive Officer as Mr. Goldby, our former Chief Executive Officer, transitioned to his current role as our Executive Chairman.  In addition, our former Chief Financial Officer, Ms. Hilleman, resigned in June 2007 and was replaced by our current Chief Financial Officer, Mr. Jackson, first in an interim role and then officially in October 2007.  We also added three new business unit leaders in 2007, one in February, one in April and the last in July.  Due to the high level of turnover in our executive staff, the compensation arrangements for most of our executive officers are based in large part on the terms negotiated by our executive officers when they were hired.

 
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Base Salary

The base salary we pay to our executive officers and other employees is intended to compensate them for day-to-day services rendered during the fiscal year.  As a result of the turnover in our executive officers discussed above, decisions regarding the base salary paid to our executive officers in 2007 have been, in most cases, based on negotiations in the hiring process rather than the market data and Compensation Peer Group review that the Compensation Committee performed in early 2007.  Base salary ranges for our executive officers are determined for each executive based on his or her position and responsibility.  In setting the compensation for Mr. Goldby, Mr. Goldwasser and Dr. Weinberg, the three named executive officers that were with us in 2006, the Compensation Committee’s decisions regarding base salary were driven largely by the desire to bring the base salary component for these executives in line with one another given the similar nature of their responsibilities and contribution to the achievement of our corporate objectives.

Salary levels are typically considered annually as part of our performance review process and upon a promotion or other change in job responsibility.

During its review of base salaries for our executive officers in 2008, the Compensation Committee considered:

 
market data provided by Compensia discussed above;

 
internal review of each executive’s compensation, both individually and relative to other executive officers; and

 
individual performance of the executive.

The following is a discussion of the 2007 and 2008 base salaries paid to our named executive officers.

 
·
Steven D. Goldby – Mr. Goldby’s annual base salary in 2006 was $400,000.  Effective January 1, 2007, Mr. Goldby’s salary was increased by 5% to $420,000.  The increase was largely based upon adjustments to reflect cost of living increases and his contributions to achieving our strategic objectives.   Effective June 12, 2007, Mr. Goldby stepped down as our Chief Executive Officer and became our Executive Chairman.  In connection with this change, Mr. Goldby’s annual base salary was reduced to $250,000.  His base salary as a part-time employee was a direct reflection of his continued importance to achieving our strategic objectives in his new role.  Effective January 1, 2008, Mr. Goldby’s annual base salary was further reduced to $150,000 as he further reduced the amount of time he spent in his capacity as our part-time employee and focused on his duties as Executive Chairman.

 
·
W. Henry Weinberg – Dr. Weinberg’s annual base salary in 2006 was $400,000.  His salary was increased by 5% to $420,000 effective January 1, 2007.  The increase was largely based upon adjustments to reflect cost of living increases and his contributions to achieving our strategic objectives and the Compensation Committee’s desire to keep Dr. Goldberg’s base salary consistent with Mr. Goldby’s base salary as discussed above.  On January 8, 2008, Mr. Weinberg ceased to be an executive officer and became a part-time employee.  As a result of this change, his base salary was decreased to $252,000.  His base salary as a part-time employee is a direct reflection of his continued importance to achieving our strategic objectives in his new role as our Chief Scientific Officer, but has been adjusted on a proportional basis to reflect his part-time status.

 
·
Isy Goldwasser – Mr. Goldwasser’s annual base salary in 2006 was $375,000.  Effective January 1, 2007, Mr. Goldwasser’s salary was increased by 12% to $420,000.  The increase was largely based upon adjustments to reflect cost of living increases and his contributions to achieving our strategic objectives and the Compensation Committee’s desire to keep Mr. Goldwasser’s base salary consistent with the base salaries paid to Mr. Goldby and Dr. Weinberg as discussed above.  In connection with Mr. Goldby’s transition to Executive Chairman, Mr. Goldwasser became our Chief Executive Officer effective June 12, 2007.  No change was made to Mr. Goldwasser’s base salary at that time as his base salary then in effect was consistent with the salary paid to Mr. Goldby in his role as Chief Executive Officer.  No further adjustments have been made in 2008 to Mr. Goldwasser’s base salary compensation.

 
30

 

 
·
Jeryl L. Hilleman – Ms. Hilleman’s annual base salary in 2006 was $330,000.  Effective January 1, 2007, Ms. Hilleman’s salary increased by 6% to $350,000.  The increase was largely based upon adjustments to reflect cost of living increases and a review of market data provided by Compensia regarding compensation paid to chief financial officers for companies in the technology and life sciences industries in the Bay Area.  Ms. Hilleman resigned effective June 1, 2007.

 
·
Richard Boehner – Mr. Boehner joined us in April 2007 as our Executive Vice President, Chemicals and Energy.  Based on negotiations with Mr. Boehner in connection with his hire, his base salary was set at $300,000.  In November 2007, Mr. Boehner was promoted to President of Symyx Research.  However, as his compensation was in line with the compensation paid to our other business unit presidents, no change was made in his base salary.  Due to the strong business development component of Mr. Boehner’s position, the Compensation Committee put greater emphasis on the incentive component of his compensation package, as described below.  As a result, Mr. Boehner’s base compensation is slightly less than the base compensation paid to Mr. Campbell.  No adjustments have been made in 2008 to Mr. Boehner’s base salary compensation.

 
·
Timothy E. Campbell – Mr. Campbell joined us in February 2007 as President of Symyx Software.  Based on negotiations with Mr. Campbell in connection with his hire, his base salary was set at $260,400. With the acquisition of MDL Information Systems, Inc. in October 2007 and the resulting increase in Mr. Campbell’s responsibilities, Mr. Campbell’s annual base salary was raised to $310,000, effective November 1, 2007.  No further adjustments have been made in 2008 to Mr. Campbell’s base salary compensation.

 
·
Rex S. Jackson – Mr. Jackson joined us in February 2007 as our Executive Vice President and General Counsel.  Based on negotiations with Mr. Jackson in connection with his hire, his base salary was set at $300,000. He became our acting Chief Financial Officer effective June 1, 2007 and the Board formally appointed Mr. Jackson as our Chief Financial Officer on October 16, 2007.  Effective as of his appointment as Chief Financial Officer, Mr. Jackson resigned as our General Counsel.  As a result of his new responsibilities, Mr. Jackson’s annual base salary was raised to $330,000 effective November 1, 2007. No further adjustments have been made in 2008 to Mr. Jackson’s base salary compensation.

Short-Term Cash Incentive Compensation Awards

The 2007 Executive Annual Cash Incentive Plan (the “Bonus Plan”) is subject to Compensation Committee oversight and modification. The Compensation Committee considers annually, typically before or within the first 90 days of the fiscal year, whether an annual cash incentive program will be established under the Bonus Plan for that fiscal year and, if so, approves the group of executives eligible to participate in the plan for that year. Typically, the executive officers eligible to participate in the Bonus Plan include the Chief Executive Officer, the Chief Financial Officer and each of the business unit presidents.  Additions to the eligible participants in the Bonus Plan are made if we hire a new executive officer or an employee becomes an executive officer as a result of a promotion.

The Bonus Plan provides for an annual cash bonus target based on a percentage of an executive’s annual base salary and our reaching certain specified financial performance goals during the applicable fiscal year.   The salary percentage that an executive officer is eligible to receive is a function of his role in the company and, for certain of our current executive officers, the percentage the executive officer negotiated when he was hired.  In 2007, with the exception of Mr. Boehner and Mr. Campbell, our executive officers were eligible for up to 65% of the base salary if the company performed at plan, and up to 100% of base salary if the company over-performed, in the form of a cash incentive payment as this falls within the 75th percentile of the cash incentive compensation paid to similarly situated executives of the organizations comprising the Compensation Peer Group. Due to the strong business development component of Mr. Boehner’s position, the Compensation Committee put greater emphasis on the incentive component of his compensation package.  As a result, in future periods, Mr. Boehner was eligible to receive up to 150% of his base salary in the form of a cash incentive payment.  In consideration of the time it will take for the strategic initiatives that Mr. Boehner will be working on to reach fruition, for 2007 Mr. Boehner was guaranteed a cash incentive payment equal to 66⅔% of his base salary.  In no event can the amount of an annual cash bonus exceed $1,500,000 for any given year.  The salary percentages for our executive officers in 2007 are set forth in the table below.

 
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Name
 
Salary % at plan
Steven D. Goldby(1)
 
Jeryl L. Hilleman(2)
 
Isy Goldwasser(3)
 
65
W. Henry Weinberg
 
65
Richard Boehner(4)
 
66⅔
Timothy E. Campbell(5)
 
50
Rex Jackson
 
65
 
_________________
 
(1)
Effective June 12, 2007, Mr. Goldby stepped down as our Chief Executive Officer and was no longer eligible to receive payments under the Bonus Plan.
(2)
Ms. Hilleman resigned effective June 1, 2007.
(3)
Effective January 1, 2008, Mr. Goldwasser’s salary percentage was reset at 75% at plan to reflect his role as chief executive officer and the Compensation Committee’s desire to move towards a larger percentage of compensation being incentive-based.
(4)
Mr. Boehner was guaranteed a cash incentive payment equal to 66⅔% of his base salary for 2007.  In future years, Mr. Boehner was eligible to receive up to 100% of his base salary if our financial performance is consistent with our operating plan for the year and up to 150% if our financial performance exceeds our operating plan for the year.  Effective January 1, 2008, Mr. Boehner’s salary percentage was reset at 65% at plan to bring him in line with the other executive officers, other than Mr. Goldwasser.
(5)
Prior to the acquisition of MDL Information Systems, Inc. (“MDL) in October 2007, Mr. Campbell was not an executive officer.  As a result, Mr. Campbell’s salary percentage for 2007 for determination of his cash incentive payment was less than the percentage specified for our other executive officers. Effective January 1, 2008, Mr. Campbell’s salary percentage was reset at 65% at plan to bring him in line with the other executive officers, other than Mr. Goldwasser.

The annual performance goals are set by the Compensation Committee within the first 90 days of the fiscal year and are based on one or more of the following performance-based criteria:

·
Revenue
·
Cash flow
·
Gross margin
·
Relative or absolute share price
·
Operating income or margin
·
Return on equity
·
Earnings before interest, taxes, depreciation and amortization
·
Return on assets
·
Pre-tax profit
·
Return on investments
·
Net income
·
Economic value added
·
Pro forma net income
·
Market share
·
Earnings per share
·
Increase in share price
·
Total stockholder return
·
Expenses

 
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Generally, the Compensation Committee sets the target levels for the financial objectives above our publicly-announced financial guidance. In determining the minimum, target and maximum levels, the Compensation Committee will consider the specific circumstances we expect to face during the coming year. The Compensation Committee meets in the first quarter to determine if the performance goals set for the prior fiscal year have been satisfied.

The financial performance goals set by the Compensation Committee are designed to be aligned our executive officers with our strategic plan and expectations regarding earnings per share and company performance. For 2007, the company-level performance goals established by the Compensation Committee related to revenue for 2007 and non-GAAP (generally accepted accounting principles) earnings per share, which was derived by adjusting our earnings per share calculated in accordance with GAAP to exclude any acquisition-related charges. Within each performance measure, minimum performance was assigned a value of 25, target 50 and maximum 75.

 
Minimum
 
Target
 
Maximum
2007 Revenue
$133 million up to $135 million
 
$135 million up to $140 million
 
greater than $140 million
           
2007 Non-GAAP EPS
$0.38 up to $0.40
 
$0.40 up to $0.43
 
greater than $0.43

Each of the two performance measures set forth above were determined independently and contributes toward the total score used to calculate eligible bonus amount. Individual bonus determinations are based upon the total score from both performance measures and were paid based upon the following:

Total Score
    0       25       50       100       150  
                                         
Bonus as a Percentage of Salary(1)
    0 %     16.25 %(2)     32.5 %(3)     65 %(4)     100 %(5)
 
_________________
 
(1)
Based upon the salary as in effect at the end of the fiscal year.
(2)
Mr. Campbell was eligible to receive 12.5% of his base salary.
(3)
Mr. Campbell was eligible to receive 25% of his base salary.
(4)
Mr. Boehner was eligible to receive 100% of his base salary, and Mr. Campbell was eligible to receive 50% of his base salary.
(5)
Mr. Boehner was eligible to receive 150% of his base salary.

The Compensation Committee has set the total target bonus score at 100, resulting in a payout of typically 65% of base salary for our executive officers, subject to certain adjustments as described above. The bonus score of 100 is attainable if our financial performance is consistent with our operating plan for the year.

For fiscal 2007, the Company did not meet its original revenue targets for the year, but exceeded the earnings per share maximum target.  By formula, this resulted in  a score of 50 with respect to the earnings goal set in the first quarter of 2007, resulting in a bonus payout of one-half of the target bonus for each executive officer, including the Chief Executive Officer.  However, based on negotiations at the time Mr. Boehner was hired, Mr. Boehner was guaranteed a bonus equal to 100% of his salary for his first year of employment.

The payments made under the Bonus Plan in 2008 to our executive officers for performance in 2007 are set forth in the “Summary Compensation Table” on page 39 under the column entitled “”Non-Equity Incentive Plan Compensation.”

Discretionary Cash Bonuses

The Compensation Committee has the discretion to award discretionary cash bonuses outside of the Bonus Plan to reward our executive officers for exemplary efforts and contributions to key strategic goals achieved during the fiscal year.  In 2007, the Compensation Committee made discretionary bonus awards to three of our executive officers to reward them for their contributions to the MDL acquisition and the integration efforts resulting from that acquisition.  In addition, Mr. Jackson was given an additional bonus to reflect the additional responsibilities he took on as acting Chief Financial Officer following Ms. Hilleman’s resignation, in addition to his duties as our general counsel.

 
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These discretionary bonus payments are set forth in the “Summary Compensation Table” on page 39 under the column entitled “Bonus.”

Equity Incentive Awards

The equity-based incentive component of compensation program is designed to focus the efforts of our executive officers on our long-term success. The Compensation Committee also believes that equity-based incentives have been effective in our recruitment and retention of key employees. Equity incentive awards for our executive officers are primarily in the form of stock options and performance-based restricted stock units, with time-based restricted stock units used in specific circumstances. Stock award levels are determined based on market data and vary based on the executive officer’s position.  The Compensation Committee is responsible for administering all of our equity incentive plans.

Before 2006, the Compensation Committee used stock options granted under our 1997 Stock Plan (the “1997 Plan”) and our 2001 Nonstatutory Stock Option Plan (the “2001 Plan”), a non-shareholder-approved plan, as the preferred equity instrument. Our 1997 Plan expired in February 2007 and substantially all authorized shares under our 2001 Plan have been issued or are subject to outstanding options. In 2007, we adopted the 2007 Plan to replace the 1997 Plan and 2001 Plan and to have a means to provide equity incentives to our officers and director who were not eligible for awards under our 2001 Plan. Historically, stock options granted under the 2007 Plan are awarded with the exercise prices equal to the closing price of our common stock on the Nasdaq Global Select Market on the date of the grant. The options issued under the 2007 plan expire no more than seven years after the date of grant or earlier if employment is terminated. The Compensation Committee has the discretion to grant options with different vesting schedules, but generally, grants under the 2007 Plan will provide for annual vesting of at least 20% of the total number of shares subject to the option.

In 2006, we began granting full-value restricted stock units as part of the equity incentive compensation paid to our executive officer employees.  The Compensation Committee’s decision was based on a number of factors, including its desire to increase retention, recognize the volatility of our stock price, and facilitate actual stock ownership. The Compensation Committee also considered the impact on dilution and the accounting consequences associated with performance-based restricted stock units in light of FAS 123R. As a result of this decision, no option grants were made to our executive officers in 2006. The restricted stock units granted included both performance and time-based vesting.  Restricted stock units that vest over time are used as retention tools.  These grants typically vest in annual installments over three years, with 50% vesting on the first anniversary of the grant date, 33% vesting on the second anniversary and the remainder vesting on the third anniversary. The Compensation Committee also grants restricted stock units that vest upon meeting certain performance milestones that the Compensation Committee believes are key drivers of the company’s stock price, such as revenue targets, and are therefore aligned with increasing stockholder value.  The conversation ratio at which employees were granted restricted stock units as opposed to stock options ranged from 1:2 to 1:5.

In late 2007, the Compensation Committee, in consultation with Compensia, re-evaluated its decision to use restricted stock units as the primary means of providing equity incentive compensation.  Beginning in October 2007, the Compensation Committee began granting stock option awards to our employees, including our executive officers.  This decision was based on a number of factors, including the Compensation Committee’s belief that the use of stock options offers the best approach to achieve our compensation goals with respect to long-term compensation for our executive officers while providing tax and other advantages to our executive officers relative to other forms of equity compensation.  We typically grant options at the commencement of employment and annually thereafter.

In awarding stock grants, the Compensation Committee considers individual performance, overall contribution, executive officer retention, the number of unvested stock options and restricted stock units currently held by the employee and the total number of stock options and stock units available for grant.  The Compensation Committee takes all of these factors into account, and therefore does not target any particular peer group percentile.

 
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In 2007, the Compensation Committee awarded the executive officers the restricted stock units set forth in “Grants of Plan Based Awards in 2007” on page 41.  No equity incentive grants have been made to date in 2008.
 
Perquisites and Other Personal Benefits
 
We provide certain executive officers with perquisites and other personal benefits that we and the Compensation Committee believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to executive officers.
 
During 2007, Dr. Weinberg, our Chief Technology Officer, received housing and other living expenses in the aggregate amount of $138,000.  The President of our Symyx Research division received housing and other living expense in the aggregate amount of $21,962, relocation assistance in the aggregate amount of $15,000 and tax reimbursements and gross-up payments in the aggregate amount of $23,639. Payments related to the relocation assistance included amounts to cover resulting income and employment-related taxes.  We offer these perquisites in certain instances in order to attract, in the case of the President of our Symyx Research division, and retain, in the case of our Chief Technology Officer, exception talent and to maintain the high quality of our executive team.  These amounts are included in column entitled “All Other Compensation” of the “Summary Compensation Table” on page 39.
 
Each of our named executive officers is eligible to participate in the Severance Plan (as defined and described below).  Dr. Weinberg is also entitled to severance benefits under an individual Change of Control Severance Agreement. The Change of Control Severance Agreement and the Severance Plan are designed to promote the stability and continuity of senior management. Information regarding applicable payments under such agreements for certain executive officers is provided under the heading “Potential Payments Upon Termination or Change-in-Control” on page 44.
 
All employees in the United States are eligible to participate in the Symyx 401(k) Retirement Plan. We match employee contributions up to the lower of 2% of employee’s salary or $4,500, subject to vesting provisions.

Change of Control and Severance Benefit Plan

In May 2007, we adopted an Executive Change in Control and Severance Benefit Plan (the “Severance Plan”) under which our executive officers participate, as described in the section of this proxy statement entitled “Potential Payments Upon Termination or Change-in-Control.”  The Severance Plan was implemented following a review of practices at comparable companies and was implemented to maintain the competitiveness and effectiveness of our total executive compensation package and to ensure our executive officers were all under a single consistent plan.  The Compensation Committee believes that having such an arrangement in place can help us attract and retain key executive officers in a marketplace where these types of arrangements are commonly offered by our peer companies.  We also believe that such arrangements allow our executives to assess a potential change of control objectively, without regard to the potential impact of the transaction on their own job security.  We sought to implement a plan with terms consistent with those offered at peer companies.  Among its key provisions, the plan includes a double trigger for the payment of benefits in the event of termination of employment following a change of control, but not solely as a result of a change of control. The Compensation Committee considered the double trigger to be industry standard and appropriately protect our executive officers.

Tax and Accounting Implications

Deductibility of Executive Compensation

As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Code, which provides that we may not deduct compensation of more than $1,000,000 that is paid to certain individuals. We believe that compensation paid under the management incentive plans is generally fully deductible for federal income tax purposes. However, in certain situations, the Compensation Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for our executive officers. To maintain flexibility in compensating our executive officers in a manner designed to promote our objectives, the Compensation Committee has not adopted a policy that requires all compensation to be deductible. However, the Compensation Committee intends to evaluate the effects of the compensation limits of Section 162(m) on any compensation it proposes to grant, and the Compensation Committee intends to provide future compensation in a manner consistent with our best interests and those of our stockholders.

 
35

 

Accounting for Stock-Based Compensation

We accrue our named executive officers’ salaries and incentive awards as an expense when earned, assuming vesting requirements have been met, by the officer. For our equity awards, FAS 123R requires us to recognize compensation expense within our income statement for all share-based payment arrangements, which includes employee stock option plans. In November 2007, the Compensation Committee determined to use stock options as the sole component of its long-term executive compensation program for the foreseeable future, and, therefore, to record this expense on an ongoing basis according to FAS 123R. The Compensation Committee considers the accounting impact of FAS 123R in determining the size of the options grants and grants of restricted stock units made to our executive officers.  The Compensation Committee may in the future consider reinstituting the use of restricted stock or restricted stock units to our executive officers in lieu of or in addition to stock option grants in light of the accounting impact of FAS 123R with respect to stock option grants and other considerations.

 
36

 
 
Summary Compensation Table

The following table sets forth the compensation paid by us during the years ended December 31, 2006 and 2007 to our Chief Executive Officer, Chief Financial Officer and the next three most highly compensated executive officers who received compensation of more than $100,000 during the year ended December 31, 2007:

Name and Principal Position
 
Year
   
Salary ($)
   
Bonus ($)
   
Stock Awards ($)(1)
   
Option Awards ($)(1)
   
Non-Equity Incentive Plan Compensation ($)(2)
   
All Other Compensation ($)(3)
   
Total ($)
 
Steven D. Goldby
Executive Chairman and Former Chief Executive Officer(4)
 
2006
 
2007
   
$
 
$
400,000
 
324,129
   
$
 
$
 
   
$
 
$
806,575
 
$648,606
   
$
 
$
 
   
$
 
$
225,000
 
   
$
 
$
4,400
 
5,051
   
$
 
$
1,435,975
 
977,786
 
                                                               
Jeryl L. Hilleman
Former Executive Vice President and Chief Financial Officer(5)
 
2006
 
2007
    $
330,000
 
$147,159
   
$
 
$
 
   
$
 
$
659,925
 
531,775
   
$
 
$
 
   
$
 
$
185,000
 
   
$
 
$
4,400
 
449,594
   
$
 
$
1,179,325
 
1,128,527
 
                                                               
Isy Goldwasser
Chief Executive Officer(6)
 
2006
2007
   
$
$
375,000
420,000
   
$
$
73,500
    $
806,575
648,606
   
$
$
32,760
   
$
$
211,000
136,500
   
$
$
4,400
5,051
   
$
$
1,396,975
1,316,417
 
                                                               
W. Henry Weinberg
Executive Vice President and Chief Technical Officer
 
2006
2007
   
$
$
400,000
420,000
   
$
$
   
$
$
806,575
648,606
   
$
$
   
$
$
225,000
136,500
   
$
$
142,400
143,051
   
$
$
1,573,975
1,348,157
 
                                                               
Richard Boehner
President, Symyx Research(7)
 
2007
    $ 225,000     $     $ 90,912     $ 16,380     $ 150,000     $ 61,006     $ 543,298  
                                                               
Timothy E. Campbell
President, Symyx Software(8)
 
2007
    $ 231,223     $ 100,000     $ 109,207     $ 19,656     $ 77,500     $ 4,954     $ 542,540  
                                                               
Rex S. Jackson,
Executive Vice President and Chief Financial Officer(9)
 
2007
    $ 267,831     $ 175,000     $ 414,704     $ 19,656     $ 107,250     $ 4,954     $ 989,395  
 
_______________________________
(1)
Represents the proportionate amount of the total fair value of the stock and option awards recognized by us as an expense in 2007 and 2006, respectively, for financial accounting purposes, disregarding for this purposes the estimate of forfeitures related to service-based vesting conditions. The fair value of these awards and the amounts expensed in 2007 and 2006, respectively, were determined in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payments (FAS 123R). See Note 4 to our combined and consolidated financial statements for the year ended December 31, 2006 contained in our Annual Report on Form 10-K for the year ended December 31, 2007 and 2006, respectively, for a discussion of all assumptions made in connection with the computation of these values.

(2)
Represents payments made under our 2006 and 2007 Cash Bonus Plans for Executive Officers.

(3)
Includes perquisites and tax reimbursements/gross-ups outlined in the table below.  Also includes premiums paid for group life insurance and matching contributions by us to a 401(k) qualified retirement plan (subject to a maximum of $4,500 per employee for 2007 and $4,400 per employee for 2006).

 
37

 
 
Name
 
Year
 
Housing Allowance
   
Relocation Expense
   
Tax Reimbursements/Gross-ups
 
W. Henry Weinberg
 
2006
  $ 138.000    
__
 
 
__
 
   
2007
  $ 138,000    
__
   
__
 
Richard Boehner
 
2007
  $ 21,962     $ 15,000     $ 23,639  
 
(4)
Effective June 12, 2007, Mr. Goldby stepped down as our Chief Executive Officer and became our Executive Chairman.  In connection with this change, Mr. Goldby’s annual base salary changed from $400,000 to $250,000.  Effective January 1, 2008, Mr. Goldby’s annual base salary was further reduced to $150,000.

(5)
Ms. Hilleman resigned effective June 1, 2007. Pursuant to the terms of her severance arrangement, she received 15 months of salary and seven months of COBRA reimbursement, for an aggregate amount of $449,358.  Ms. Hilleman’s severance payments are reflected in amounts set forth under the column entitled “Other Compensation.”

(6)
Mr. Goldwasser became our Chief Executive Officer effective June 12, 2007.

(7)
Mr. Boehner joined us in April 2007 as our Executive Vice President, Chemicals and Energy, and was appointed President of Symyx Research in November 2007.

(8)
Mr. Campbell joined us in February 2007.  Effective November 1, 2007, Mr. Campbell’s annual base salary was raised from $260,400 to $310,000.

(9)
Mr. Jackson joined us in February 2007 as our Executive Vice President and General Counsel.  He became our acting Chief Financial Officer effective June 1, 2007.  The Board appointed Mr. Jackson as our Chief Financial Officer on October 16, 2007.  Effective as of his appointment as Chief Financial Officer, Mr. Jackson resigned as our General Counsel.  Mr. Jackson’s annual base salary was raised from $300,000 to $330,000 effective November 1, 2007.
 
 
38

 

Grants of Plan-Based Awards in 2007

The following table sets forth certain information concerning grants of awards made to each executive officer during the fiscal year ended December 31, 2007:
 
       
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)
   
All Other Stock Awards: Number of Shares of Stock or Units (#)
   
All Other Option Awards: Number of Securities Underlying Options (#)
   
Exercise or Base Price of Option Awards ($/Sh)
   
Grant Date Fair Value of Stock and Option Awards(2)
 
Name
 
Grant Date
 
Threshold ($)
   
Target ($)
   
Maximum ($)
                 
Steven D. Goldby
                                             
2007 Plan
 
2/12/2007
                      64,600                 $ 1,160,216  
2007 Plan
 
2/12/2007
                      32,300 (3)                $ 580,108  
Jeryl L. Hilleman
                                                 
2007 Plan
 
2/12/2007
                      53,000                 $ 951,880  
2007 Plan
 
2/12/2007
                      26,500                 $ 475,940  
Isy Goldwasser
 
 
                                             
2007 Plan
 
2/12/2007
                      32,300 (3)                $ 580,108  
2007 Plan
 
2/12/2007
                      64,600                 $ 1,160,216  
2007 Plan
 
11/2/2007
                              200,000     $ 8.58     $ 655,200  
Bonus Plan
 
2/12/2008
  $ 68,250     $ 273,000     $ 420,000                                  
W. Henry Weinberg
                                                           
2007 Plan
 
2/12/2007
                            32,300 (3)                    $ 580,108  
2007 Plan
 
2/12/2007
                            64,600                     $ 1,160,216  
Bonus Plan
 
2/12/2008
  $ 68,250     $ 273,000     $ 420,000                                  
Richard Boehner
                                                           
2007 Plan
 
2/12/2007
                            22,564                     $ 250,009  
2007 Plan
 
11/2/2007
                                    100,000     $ 8.58     $ 327,600  
Bonus Plan
 
2/12/2008
  $ 150,000     $ 225,000     $ 337,500                                  
Timothy Campbell
                                                           
2007 Plan
 
2/12/2007
                            14,116                     $ 260,017  
2007 Plan
 
11/2/2007
                                    120,000     $ 8.58     $ 393,120  
Bonus Plan
 
2/12/2008
  $ 38,750     $ 155,000     $ 310,000                                  
Rex Jackson
                                                           
2007 Plan
 
2/16/2007
                            53,000                     $ 987,390  
2007 Plan
 
11/2/2007
                                    120,000     $ 8.58     $ 393,120  
2007 Plan
 
2/16/2007
                            26,500 (3)                    $ 493,695  
Bonus Plan
 
2/12/2008
  $ 53,625     $ 214,500     $ 330,000                                  
____
(1)
Reflects payments expected as of December 31, 2007 to be made in February 2008 under our 2007 Cash Incentive Plan for services rendered in 2007 (the Summary Compensation Table above shows the cash actually paid out).  See Compensation Discussion and Analysis above for a complete description of the non-equity incentive plan awards and the performance criteria on which such payments were based.  There are no set thresholds (or equivalent items) with respect to payouts under the Bonus Plan.
(2)
Represents the estimated fair value of the award as of the applicable grant date, determined in accordance with FAS 123(R), whereas the amounts shown under the column entitled “Option Awards” in the Summary Compensation Table above reflects the dollar amount recognized for financial statement reporting purposes with respect to the 2007 fiscal year.  See Note 4 to our combined and consolidated financial statements for the year ended December 31, 2007 contained in our Annual Report on Form 10-K for the year ended December 31, 2007 for a discussion of the valuation assumptions made in connection with the computation of these values.
(3)  Performance-based restricted stock units that did not vest were therefore terminated. 
       
Outstanding Equity Awards at December 31, 2007

The following table sets forth certain information concerning unexercised options, stock that has not vested and equity incentive plan awards for each executive officer outstanding as of the end of the fiscal year ended December 31, 2007:

 
39

 


   
Option Awards
   
Stock Awards(7)
 
Name
 
Number of Securities Underlying Unexercised Options
(#)
Exercisable
   
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
   
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options
(#)
   
Option Exercise Price
($)
   
Option Expiration Date
(#)
   
Number of Shares or Units of Stock That Have Not Vested
($)
   
Market Value of Shares or Units of Stock That Have Not Vested
($)
   
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not
Vested
   
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not
Vested
 
Steven D. Goldby(1)
                                  64,600 (3)   $ 496,128              
      8,888 (1)               $ 0.96    
1/4/2009
                           
      50,000 (1)               $ 12.00    
10/21/2009
                           
      216,724 (1)               $ 57.00    
2/28/2010
                           
      50,000 (1)               $ 25.50    
1/11/2011
                           
      50,000 (1)               $ 25.00    
6/18/2011
                           
      50,000 (1)               $ 16.70    
3/1/2012
                           
      150,000 (1)               $ 13.26    
3/3/2013
                           
      12,500 (1)               $ 26.70    
3/1/2014
                           
      12,500 (1)               $ 24.09    
6/1/2014
                           
      12,500 (1)               $ 18.95    
9/1/2014
                           
      12,500 (1)               $ 31.53    
12/1/2014
                           
      50,000 (1)               $ 27.89    
3/1/2015
                           
Jeryl L. Hilleman
                                                     
Isy Goldwasser
                                              32,300 (4)   $ 248,064  
                                    64,600 (5)   $ 496,128                  
      29,369 (1)               $ 0.96    
1/4/2009
                             
      50,000 (1)               $ 12.00    
10/21/2009
                             
      108,390 (1)               $ 57.00    
2/28/2010
                             
      50,000 (1)               $ 25.50    
1/11/2011
                             
      80,000 (1)               $ 25.00    
6/18/2011
                             
      50,000 (1)               $ 16.70    
3/1/2012
                             
      150,000 (1)               $ 13.26    
3/3/2013
                             
      12,500 (1)               $ 26.70    
3/1/2014
                             
      12,500 (1)               $ 24.09    
6/1/2014
                             
      12,500 (1)               $ 18.95    
9/1/2014
                             
      12,500 (1)               $ 31.53    
12/1/2014
                             
      50,000 (1)               $ 27.89    
3/1/2015
                             
      200,000 (4)     200,000           $ 8.58    
11/2/2012
                             
W. Henry Weinberg
                                              32,300 (4)   $ 248,064  
                                    64,600 (3)   $ 496,128                  
      50,000                 $ 12.00    
10/21/2009(4)
                             
      270,890                 $ 57.00    
2/28/2010(5)
                             
      50,000                 $ 25.50    
1/11/2011(6)
                             
      60,000                 $ 25.00    
6/18/2011(7)
                             
      50,000                 $ 16.70    
3/1/2012(8)
                             
      150,000                 $ 13.26    
3/3/2013(9)
                             
      12,500                 $ 26.70    
3/1/2014(10)
                             
      12,500                 $ 24.09    
6/1/2014(10)
                             
      12,500                 $ 18.95    
9/1/2014(10)
                             
      12,500                 $ 31.53    
12/1/2014(10)
                             
      50,000                 $ 27.89    
3/1/2015(11)
                             
Richard Boehner
    100,000 (6)     100,000           $ 8.58    
11/2/2012
                         
                                    22,564 (5)   $ 173,292              
Timothy Campbell
    120,000 (8)     120,000           $ 8.58    
11/2/2012
                         
                                    14,116 (5)   $ 108,411              
Rex Jackson
    120,000 (10)     120,000           $ 8.58    
11/2/2012
                         
                                                26,500 (4)   $ 203,520  
                                    53,000 (5)   $ 407,040              

 
40

 
 
_________________
(1)
Fully vested.
(2)
Shares shall incrementally vest upon successful completion of certain performance-based milestones.
(3)
50% of the shares subject to this award vested on March 1, 2008 and the remaining balance of 32,300 RSUs were cancelled on January 8, 2008.
(4)
Shares were to incrementally vest upon successful completion of certain performance based milestones; milestones not achieved and award forfeited on March 13, 2008
(5)
50% of the shares vested on March 1, 2008, 33% of the shares shall vest on March 1, 2009 and the remaining balance shall vest on March 1, 2010.
(6)
20% of the shares vested on March 1, 2009, 40% of the shares shall vest on March 1, 2010 and the remaining balance shall vest on March 1, 2011.
(7) Does not include performance-based restricted stock units with performance terms based on 2007 financial performance metrics that were not met and therefore did not vest and terminated. 


Option Exercises and Stock Vested in 2007

The following table sets forth certain information concerning each option exercise and vesting of stock, including restricted stock, for each executive officer during the fiscal year ended December 31, 2007 (there were no option exercises by our named executive officers in 2007):
 
   
Option Awards
   
Stock Awards
 
Name
 
Number of Shares Acquired on Exercise (#)
   
Value Realized on Exercise ($)