Intended Release Date April 29, 1998
(Rule 14a-6(d))
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as
[ ] Definitive Additional Materials permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AVAX TECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant):
Not Applicable
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
not applicable
(2) Aggregate number of securities to which transaction applies: not
applicable
(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):
not applicable
(4) Proposed maximum aggregate value of transaction: not applicable
(5) Total fee paid: not applicable
[ ] 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: not applicable
(2) Form, Schedule or Registration Statement No.: not applicable
(3) Filing Party: not applicable
(4) Date Filed: not applicable
<PAGE>
[LOGO]
AVAX TECHNOLOGIES, INC.
4520 Main Street, Suite 930
Kansas City, Missouri 64111
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on Wednesday, June 3, 1998
To the Stockholders of AVAX TECHNOLOGIES, INC.:
The Annual Meeting of Stockholders of AVAX TECHNOLOGIES, INC., a Delaware
corporation (the "Corporation"), will be held on Wednesday, June 3, 1998, at
10:00 a.m. at Loch Lloyd Country Club, 16750 Country Club Drive, Belton,
Missouri, 64012, for the following purposes:
I. To elect five members to the Board of Directors to serve for
the ensuing year and until their respective successors have
been duly elected and qualified;
II. To consider and approve an amendment to the Corporation's 1992
Stock Option Plan (the "AVAX Option Plan") to increase the
number of shares of Common Stock available for issuance under
the AVAX Option Plan from 437,500 shares of Common Stock to
1,500,000 shares of Common Stock;
III. To consider and approve an amendment to the Corporation's
Certificate of Incorporation to decrease the number of
authorized shares of Common Stock available for issuance by
the Corporation from 50,000,000 to 30,000,000.
IV. To ratify the selection of the firm of Ernst & Young, LLP, as
auditors for the fiscal year ending December 31, 1998; and
V. To transact such other business as may properly come before
the meeting and any adjournments or postponements thereof.
Only stockholders of record of the Corporation's Common Stock and Series B
Convertible Preferred Stock at the close of business on April 22, 1998 are
entitled to notice of, and to vote at, the meeting and any adjournment or
postponements thereof. A complete list of those stockholders will be open to
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours at the Corporation's executive offices at 4520 Main
Street, Suite 930, Kansas City, MO 64111, for a period of 10 days prior to the
meeting. The stock transfer books of the Corporation will not be closed.
By Order of the Board of Directors
/s/ Michael S. Weiss
--------------------
Michael S. Weiss
Corporate Secretary
Kansas City, Missouri
April 29, 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. IF YOU
DO ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE BY BALLOT.
<PAGE>
AVAX TECHNOLOGIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 27, 1998
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors of AVAX TECHNOLOGIES, Inc., a Delaware corporation ("AVAX" or
the "Corporation"), with its principal executive offices at 4520 Main Street,
Suite 930, Kansas City, Missouri, 64111, for use at the Annual Meeting of
Stockholders and any adjournment thereof (the "Annual Meeting"), to be held on
Wednesday, June 3, 1998 at 10:00 a.m. at Loch Lloyd Country Club, 16750 Country
Club Drive, Belton, Missouri, 64012. It is expected that this Proxy Statement
and the form of proxy will be mailed to stockholders on or about April 29, 1998.
Only holders of shares of Common Stock, par value $.004 per share (the "Common
Stock") and holders of shares of Series B Convertible Preferred Stock, par value
$.01 per share (the "Series B Preferred Stock"), of the Corporation, of record
as of April 22, 1998 (the "Record Date") will be entitled to vote at the Annual
Meeting and any adjournments or postponements thereof. As of April 7, 1998,
4,874,658 shares of Common Stock and 192,952 shares of Series B Preferred Stock
were issued and outstanding. Each share of Common Stock outstanding as of the
Record Date will be entitled to one vote and each share of Series B Preferred
Stock will be entitled to approximately 26.0875 votes. As of April 7, 1998, the
192,952 shares of Series B Preferred Stock are entitled to 5,033,511 shares in
the aggregate on all matters to be voted on.
Stockholders may vote at the annual meeting in person or by proxy. Execution of
a proxy will not in any way affect a stockholder's right to attend the Annual
Meeting and vote in person. Any stockholder giving a proxy has the right to
revoke it by written notice to the Secretary of the Corporation at any time
before it is exercised, by executing a proxy with a later date, or by attending
and voting at the Annual Meeting. The persons named as proxies in the form of
proxy are directors and/or officers of the Corporation. All properly executed
proxies that are returned in time to be counted at the Annual Meeting will be
voted as stated below under "Voting Procedures." Any stockholder giving a proxy
has the right to withhold authority to vote for any individual nominee to the
Board of Directors by writing that nominee's name in the space provided on the
proxy. In addition to the election of directors, the stockholders will consider
and vote upon (i) a proposal to amend the Corporation's 1992 Stock Option Plan
(the "AVAX Option Plan") to increase the number of shares of Common Stock
available for issuance under the AVAX Option Plan from 437,500 to 1,500,000
shares of Common Stock, and (ii) a proposal to ratify the selection of auditors,
as further described in this Proxy Statement. Where a choice has been specified
on the proxy with respect to the foregoing matters, the shares represented by
the proxy will be voted in accordance with the specifications and will be voted
FOR a respective matter if no specification is indicated.
The Board of Directors of the Corporation knows of no other matters to be
presented at the Annual Meeting. If any other matter should be presented at the
Annual Meeting upon which a vote properly may be taken, shares represented by
all proxies received by the Board of Directors will be voted with respect
thereto in accordance with the judgment of the persons named as proxies in the
form of proxy.
The Annual Report of the Corporation, containing financial statements for the
fiscal year ended December 31, 1997, is being mailed together with this Proxy
Statement and the related proxy card to all stockholders of record as of the
close of business on April 22, 1998 for delivery beginning on or about April 29,
1998. Although the Annual Report and Proxy Statement are being mailed together,
the Annual Report should not be deemed to be part of the Proxy Statement.
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
At the Annual Meeting, five directors will be elected by the stockholders to
hold office until the next annual meeting of stockholders and until their
successors have been elected and qualified, or until their earlier resignation
or removal. Management recommends that the persons named below be elected as
directors of the Corporation and it is intended that the accompanying proxy will
be voted for their election as directors, unless the proxy contains contrary
instructions. Shares represented by all proxies received by the Board of
Directors and not so marked as to withhold authority to vote for any individual
nominee or for all nominees will be voted (unless one or more nominees are
unable to serve) for the election of the nominees named below. The Board of
Directors knows of no reason why any such nominee should be unable or unwilling
to serve, but if such should be the case, proxies will be voted for the election
of some other person or for fixing the number of directors at a lesser number.
The persons nominated for election to the Corporation's Board of Directors are:
Jeffrey M. Jonas, M.D., Mr. Edson D. DeCastro, John K.A. Prendergast, Ph.D.,
Carl Spana, Ph.D., Michael S. Weiss, Esq. Each of the nominees currently serves
as a director of the Corporation. A plurality of the votes cast by the
stockholders present or represented by proxy and entitled to vote at the Annual
Meeting is required for the election of directors. See "Voting Procedures."
General Information Concerning the Board of Directors and its Committees
The Board of Directors met three times and acted by unanimous written consent
three times during the fiscal year ended December 31, 1997. Each incumbent
director attended, in person or by telephone, all the meetings of the Board of
Directors and committees of the Board of Directors on which he served during
such fiscal year.
The Board of Directors has an Audit Committee and a Compensation Committee. The
Audit Committee met one time during the last fiscal year and the Compensation
Committee met one time during the last fiscal year, and otherwise their
respective responsibilities were assumed by the full Board of Directors. The
Corporation does not have a Nominating Committee.
Audit Committee. The Audit Committee of the Board of Directors, consisting of
Jeffrey M. Jonas, M.D., Mr. Edson D. DeCastro and Carl Spana, Ph.D., oversees
the accounting and tax functions of the Corporation, including recommendation to
the Corporation of independent auditors to conduct the annual audit of the
Corporation's financial statements, review of the scope and costs of the audit
plans of the independent auditors, review of the independent auditors' internal
accounting controls, advising and assisting the Board of Directors in evaluating
the auditor's review and supervising the Corporation's financial and accounting
organization and financial reporting
Compensation Committee. The Board of Directors also has a Compensation
Committee, of which Carl Spana, Ph.D. and Michael S. Weiss, Esq. are members.
The Compensation Committee reviews and makes recommendations concerning
executive compensation, and administers the AVAX Option Plan together with the
Board of Directors. The Compensation Committee also administers the Director
Plan.
Nominating Committee. The Corporation does not have a standing Nominating
Committee. The functions customarily performed by a nominating committee are
performed by the Board of Directors as a whole. Any stockholder who wishes to
make a nomination at an annual or special meeting for election of directors must
do so in compliance with the applicable procedures set forth in the
Corporation's Bylaws. The Corporation will furnish copies of such Bylaw
provision upon written request to the Corporation, Attention: Erika Rich, 4520
Main Street, Suite 930, Kansas City, MO 64111.
Page 2
<PAGE>
Executive Officers
Executive officers of the Corporation are elected annually and hold office until
the first meeting of the Board of Directors after each annual meeting of
stockholders and until their successors are elected and qualified, or until
their earlier resignation or removal.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Corporation's directors, executive officers and holders of more than 10% of the
Corporation's Common Stock (collectively, "Reporting Persons") to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock. The Reporting Persons are
required by regulations of the SEC to furnish the Corporation with copies of all
such filings. Specific due dates for these reports have been established and the
Corporation is required to identify in this Proxy Statement those persons who
failed to timely file these reports. Based on its review of the copies of such
filings received by it with respect to the fiscal year ended December 31, 1997,
and written representations from certain Reporting Persons, the Corporation
believes that all Reporting Persons complied with the Section 16(a) filing
requirements in the fiscal year ended December 31, 1997.
Nominees for Election to the Board of Directors
The following table sets forth the names and ages, as of April 24, 1998, of the
nominees to be elected at the Annual Meeting, their respective principal
occupations during the past five years and the period during which each has
served as a director of the Corporation. For information concerning the number
of shares of Common Stock beneficially owned by each nominee, see "Principal
Stockholders."
Name Age Position with the Corporation
- ---- --- -----------------------------
Jeffrey M. Jonas, M.D. 45 Chief Executive Officer, President and
Director
Edson D. de Castro 59 Director
John K.A. Prendergast, Ph.D. 44 Director
Carl Spana, Ph.D. 35 Director
Michael S. Weiss, Esq. 32 Secretary and Director
Jeffrey M. Jonas, M.D., has been the Chief Executive Officer, President and
Director of the Corporation since June 1, 1996. Prior to joining the
Corporation, from 1994 to 1996, Dr. Jonas was the Vice President of Clinical
Development and the Chief Medical Officer of Upjohn Laboratories. From 1991 to
1994, he was the Vice President of Worldwide Pharmaceutical Regulatory Affairs,
the Director of Psychopharmacology and the Director of Clinical Development III
for Upjohn Corporation. Prior thereto, Dr. Jonas was a research and clinical
psychopharmacologist in the Boston area. Dr. Jonas has authored a book on
Prozac(TM), and over 100 scientific articles, abstracts and book chapters. Dr.
Jonas received his M.D. from Harvard Medical School in 1979 and a B.A. in
Biology and English from Amherst College in 1975.
Mr. Edson D. de Castro has been a member of the Board of Directors of the
Corporation since October 1993. Since 1990, Mr. de Castro has been consulting
for companies and participating as a member of certain Boards of Directors. Mr.
de Castro was one of five co-founders of Data General Corporation in 1968 for
which, from 1968 to 1989, he served as its President and Chief Executive
Officer, and from 1989 to 1990, he served as its Chairman of the Board of
Directors. From 1995 to 1997, Mr. de Castro was the Chief Executive Officer and
Chairman of the Board of Directors of Xenometrix, Inc. Mr. de Castro was a
founder and Executive Committee Member of the Massachusetts High Tech Council.
Mr. de Castro is a Trustee of Boston University. In addition, Mr. de Castro
Page 3
<PAGE>
serves on the Board of Directors of Boston Life Sciences, Inc. Mr. de Castro
received his B.S. in Electrical Engineering from the University of Lowell in
1960.
John K.A. Prendergast, Ph.D., has been a director of the Corporation since July
1996. Dr. Prendergast has served as President and principal of Summercloud Bay,
Inc., a biotechnology-consulting firm, since 1993. He is a co-founder and/or a
member of the Board of Ingenex, Inc., Atlantic Pharmaceuticals, Inc., Optex
Ophthamologics, Inc., Gemini Gene Therapies, Inc., Channel Therapeutics, Inc.,
Xenometrix, Inc., Avigen, Inc., and Palatin Technologies, Inc. From October 1991
through December 1997, Dr. Prendergast was a Managing Director of Paramount
Capital Investments, LLC and a Managing Director of The Castle Group Ltd. Dr.
Prendergast received his M.Sc. and Ph.D. from the University of New South Wales,
Sydney, Australia and a C.S.S. in Administration and Management from Harvard
University.
Carl Spana, Ph.D., has been a Director of the Corporation since September 1995
and was its Interim President from August 1995 to June 15, 1996. Dr. Spana is
currently an Executive Vice President and Chief Technology Officer of Palatin
Technologies, Inc. Since June 1996, Dr. Spana has served as Executive Vice
President and Chief Technology Officer of RhoMed Incorporated. From 1993 to
1996, Dr. Spana was responsible for discovering, evaluating, and commercializing
new biotechnologies through his work at Paramount Capital Investments, LLC where
he was an Associate Director. Dr. Spana has been a co-founder of several private
biotechnology firms. From 1991 to 1993, Dr. Spana was a Research Associate at
Bristol-Myers Squibb where he was involved in scientific research in the field
of immunology that led to the initiation of several new drug discovery programs.
Dr. Spana currently is a member of the Board of Directors of Palatin
Technologies, Inc. Dr. Spana received his Ph.D. in Molecular Biology from The
Johns Hopkins University and a B.S. in Biochemistry from Rutgers University.
Michael S. Weiss, Esq., has been a Director of the Corporation since March 1996
and Secretary of the Corporation since September 1995. Mr. Weiss is Senior
Managing Director of Paramount Capital, Inc. and certain of its affiliates, and
has been employed by Paramount Capital, Inc. since 1993. Prior to that, Mr.
Weiss was an attorney with Cravath, Swaine & Moore. Mr. Weiss is a Director of
Pacific Pharmaceuticals, Inc. and Palatin Technologies, Inc., Vice Chairman of
the Board of Genta, Inc., Chairman of the Board of Directors of Procept, Inc.,
and Secretary of Atlantic Pharmaceuticals, Inc., each of which is a publicly
traded biotechnology company. In addition, Mr. Weiss is a Director of several
privately-held biotechnology companies. Mr. Weiss received his J.D. from
Columbia University School of Law and a B.S. in Finance from the State
University of New York at Albany.
Page 4
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the names and positions of the executive officers
of the Corporation:
Name Age Position with the Corporation
- ---- --- -----------------------------
Jeffrey M. Jonas, M.D. 45 Chief Executive Officer, President and
Director
David L. Tousley, C.P.A. 42 Chief Financial Officer
Ernest W. Yankee, Ph.D. 54 Executive Vice President
Additional information relating to Jeffrey M. Jonas, M.D., is included in the
preceding pages under "Election of Directors."
David L. Tousley, C.P.A., has been the Chief Financial Officer of the
Corporation since October 1, 1996. Prior to joining the Corporation, from 1989
to 1996, Mr. Tousley was the Controller and then the Vice President for Finance
and Administration of Connaught Laboratories, Inc. Mr. Tousley received his
M.B.A. in Accounting from Rutgers University Graduate School of Business in 1978
and his B.A. in English from Rutgers College in 1977.
Ernest W. Yankee, Ph.D., has been an Executive Vice President of the Corporation
since October 1, 1996. Prior to joining the Corporation, he served as the
Director of Clinical Development of the Upjohn Company from 1994 to 1996. From
1990 to 1994, he was the Director of Preclinical Development-Scientific Affairs
of the Upjohn Company. Dr. Yankee received his Ph.D. from the University of
California at Los Angeles in 1970 and his B.A. in Chemistry from La Sierra
University in 1965.
All directors hold office until the next annual meeting of stockholders of the
Corporation and until their successors have been elected and qualified. Officers
serve at the discretion of the Board of Directors. The Corporation's bylaws
provide that directors and officers shall be indemnified against liabilities
arising from their service as directors or officers to the fullest extent
permitted by the laws of the State of Delaware, which generally requires that
the individual act in good faith and in a manner he or she reasonably believes
to be in, or not opposed to, the Corporation's best interests.
Family Relationships
There are no family relationships among directors or executive officers of AVAX.
The Board of Directors recommends a vote FOR the nominees to the Board of
Directors set forth above.
Page 5
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 7, 1998, certain information
regarding the beneficial ownership of the Common Stock (i) by each person known
by the Corporation to be the beneficial owner of more than five percent of the
outstanding shares of the Common Stock, (ii) by each of the named executive
officers and directors of the Corporation and (iii) by all officers and
directors of the Corporation as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Number of Percentage of Class
Owner (1) Title of Stock Shares Beneficially Owned
------------------------------- ---------------------- ------------ ------------------
<S> <C> <C> <C>
Lindsay A. Rosenwald, M.D. (2) Common Stock 773,056 15.86%
787 Seventh Avenue, Series B Preferred 10,000 (3) *
48th Floor
New York, NY 10019
Peter K. Hilal, M.D. (4) Common Stock 280,500 5.75%
60 East 42nd Street Suite 1946
New York, NY 10165
Jeffrey M. Jonas, M.D. (5) Common Stock 196,936 3.88%
Carl Spana, Ph.D. (6) Common Stock 73,707 1.51%
John K.A. Prendergast, Ph.D. (7) Common Stock 73,707 1.51%
Edson D. de Castro (8) Common Stock 38,790 *
Michael S. Weiss, Esq. (9) Common Stock 109,507 2.24%
David L. Tousley, C.P.A. (10) Common Stock 58,125 1.18%
Ernest W. Yankee, Ph.D. (10) Common Stock 58,125 1.18%
All officers and directors as a group Common Stock 608,897 11.59%
(7 persons) Series B Preferred -0- *
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents less than 1%.
(1) Beneficial ownership is determined in accordance with rules promulgated by
the Securities and Exchange Commission, and includes voting and investment power
with respect to shares of Common Stock. Shares of Common Stock subject to
options or warrants currently exercisable or exercisable within 60 days of April
7, 1998, are deemed outstanding for computing the percentage ownership of the
person holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(2) Includes 199,314 shares of Common Stock owned by Dr. Rosenwald's wife and
trusts in favor of his minor children. Dr. Rosenwald disclaims beneficial
ownership of such shares. Excludes (i) 17,000 shares of Common Stock issuable
upon exercise of warrants issued to the designees of Paramount Capital, Inc.,
the placement agent (the "Placement Agent") for certain bridge financing
transactions of the Corporation from August 1995 to February 1996 (the "Bridge
Placement Warrants") and (ii) approximately 320,949 shares of Common Stock
issuable upon conversion of shares of Series B Preferred Stock issuable upon
exercise of warrants issued to the designees of the Placement Agent in
connection with services rendered during a private offering of Series B
Preferred Stock held by the Corporation in May and June 1996 (the "Series B
Placement Warrants"). Includes 61,250 shares of Common
Page 6
<PAGE>
Stock owned by The Aries Fund, A Cayman Island Trust and The Aries Domestic
Fund, L.P. (collectively, the "Funds"), two private investment funds that are
managed by a company of which Dr. Rosenwald is President, but excludes an
aggregate of 298,211 shares of Common Stock issuable upon conversion of shares
of Series B Preferred Stock held directly by such entities or issuable upon
exercise of Series B Placement Warrants and Bridge Placement Warrants held by
such entities. Dr. Rosenwald disclaims beneficial ownership of such shares owned
by the Funds, except to the extent of his pecuniary interest, if any.
(3) Represents shares of Series B Preferred Stock owned by the Funds. Dr.
Rosenwald disclaims beneficial ownership of such shares owned by the Funds,
except to the extent of his pecuniary interest therein, if any.
(4) Includes 25,050 shares of Common Stock owned directly by Hilal Capital, LP,
77,340 shares of Common Stock owned directly by Hilal Capital, QP, LP, and
178,110 shares of Common Stock managed by Hilal Capital Management, LLC and
owned directly by Hilal Capital International, Ltd. and a third party account of
Hilal Capital Management, LLC, based solely upon the Company's review of a
Schedule 13G as filed with the Securities and Exchange Commission on April 6,
1998.
(5) Represents shares that Dr. Jonas may acquire within 60 days of April 7,
1998, upon the exercise of options granted pursuant to his letter of employment.
Excludes 271,936 shares of Common Stock issuable upon exercise of options
granted pursuant to his letter of employment which are not exercisable within 60
days of April 7, 1998.
(6) Includes 8,790 shares of Common Stock that Dr. Spana may acquire within 60
days of April 7, 1998 upon the exercise of options granted as board
compensation. Excludes 36,371 shares of Common Stock issuable to Dr. Spana upon
exercise of options granted as board compensation which are not exercisable
within 60 days of April 7, 1998.
(7) Includes 8,790 shares of Common Stock that Dr. Prendergast may acquire
within 60 days of April 7, 1998 upon the exercise of options granted as board
compensation. Excludes 36,371 shares of Common Stock issuable to Dr. Prendergast
upon exercise of options granted as board compensation which are not exercisable
within 60 days of April 7, 1998.
(8) Represents shares of Common Stock that Mr. de Castro may acquire within 60
days of April 7, 1998, including 8,790 shares of Common Stock that Mr. de Castro
may acquire within 60 days of April 7, 1998 upon the exercise of options granted
as board compensation. Excludes 36,371 shares of Common Stock issuable Mr. de
Castro upon exercise of options granted as board compensation which are not
exercisable within 60 days of April 7, 1998.
(9) Excludes (i) 1,500 shares of Common Stock issuable upon exercise of Bridge
Placement Warrants and (ii) approximately 45,180 shares of Common Stock issuable
upon conversion of shares of Series B Preferred Stock issuable upon exercise of
Series B Placement Warrants. Includes 8,790 shares of Common Stock that Mr.
Weiss may acquire within 60 days of April 7, 1998 upon the exercise of options
granted as board compensation. Excludes 36,371 shares of Common Stock issuable
to Mr. Weiss upon exercise of options granted as board compensation which are
not exercisable within 60 days of April 7, 1998.
(10) Represents shares that Mr. Tousley and Dr. Yankee each may acquire within
60 days of April 7, 1998 and excludes 126,875 shares issuable to each of Mr.
Tousley and Dr. Yankee not exercisable within 60 days of April 7, 1998 upon
exercise of options granted pursuant to their respective letters of employment.
Page 7
<PAGE>
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
Executive Compensation
The following Summary Compensation Table sets forth the compensation earned by
the persons serving as the Corporation's chief executive officer and the other
named executive officers (the "Named Officers") for the last three fiscal years.
Each of the Named Officers joined the Corporation in 1996. The Corporation has
no long-term incentive plans and has made no restricted stock awards.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
Shares of
Restricted Common
Common Stock All Other
Stock Underlying Compensa-
Salary Bonus Awards Options/SARs tion
Name and Principal Position Year ($) ($) ($) (#) ($)
- ------------------------------- --------- ----------------- --------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey M. Jonas, M.D. --
President and Chief Executive
Officer 1997 $214,656.63 $100,000 -0- 150,000.0 -0-
1996 $117,712.29 $12,500(1) -0- 318,872.5 -0-
David L. Tousley, C.P.A. --
Chief Financial Officer 1997 $154,500.00 $50,000 -0- 60,000 $62,570.54(2)
1996 $ 35,288.44 -0- -0- 125,000 -0-
Ernest W. Yankee, Ph.D. -
Executive Vice President 1997 $150,750.10 $50,000 -0- 60,000 $70,631.27(3)
1996 $36,250.02 -0- -0- 125,000 -0-
</TABLE>
1 Represents amount paid to Dr. Jonas as a signing bonus in connection
with his letter of employment. See "Management--Employment Agreements;
Termination and Severance Arrangements."
2 Includes $62,287.04 paid in connection with Mr. Tousley's relocation
and temporary living expenses in accordance with his letter of
employment and $283.50 in group term life insurance premiums for
insurance coverage in excess of $50,000, paid by the Corporation.
3 Includes $69,906.27 paid in connection with Dr. Yankee's relocation and
temporary living expenses in accordance with his letter of employment
and $725.00 in group term life insurance premiums for insurance
coverage in excess of $50,000, paid by the Corporation.
Page 8
<PAGE>
Options
The following table sets forth certain information concerning stock options
granted during the fiscal year ended December 31, 1997 to the Named Officers.
The Corporation does not grant stock appreciation rights.
<TABLE>
<CAPTION>
Option/SAR Grants In Last Fiscal Year
-------------------------------------
Shares of Common Stock % of Total
Underlying Options/SARs Options/SARs Granted Exercise or Base
Name Granted (#) to Employees in Fiscal Price ($/share) Expiration Date
Year
- ------------------- ------------------------- ------------------------ ------------------ ---------------
<S> <C> <C> <C> <C>
Jeffrey M. Jonas,
M.D. 150,000 40.54% 4.50 July 1, 2004
David L. Tousley,
C.P.A. 60,000 16.22% 4.50 July 1, 2004
Ernest W. Yankee,
Ph.D. 60,000 16.22% 4.50 July 1, 2004
</TABLE>
The following table sets forth certain information concerning stock options held
by the Named Officers on December 31, 1997. No stock options were exercised by
the Named Officers during the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
Aggregate Option Exercises In Last Fiscal Year and Fiscal Year-End Option Values
--------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at December 31, 1997 (#) at December 31, 1997 ($)(1)
-------------------------------- ---------------------------
Shares Acquired
Name on Exercise (#) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------ ------------------- ----------------- ------------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Jeffrey M. Jonas, M.D. -0- 132,077 336,795 $321,363.19 $535,605.31
David L. Tousley, C.P.A. -0- 35,000 150,000 $83,984.37 $251,953.13
Ernest W. Yankee, Ph.D. -0- 35,000 150,000 $83,984.37 $251,953.13
</TABLE>
(1) Value is based on the difference between the option exercise price and
$3.6875, the fair market value of the Common Stock on December 31, 1997
(based upon the closing price on such day on the Nasdaq SmallCap
Market), multiplied by the number of shares of Common Stock issuable
upon exercise of the options.
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<PAGE>
Compensation of Directors
In September 1997, as compensation for services rendered and to be rendered as
members of the Corporation's Board of Directors, the Corporation issued to each
of Mr. de Castro, Dr. Spana, Dr. Prendergast and Mr. Weiss, options to purchase
40,000 shares of Common Stock, exercisable for seven years at an exercise price
equal to $4.50 per share. Such options vest at a rate of 1/16 per quarter for a
period of four years, commencing on December 1, 1997.
The Corporation currently intends to compensate its directors on an annual
basis, at the election of each such director (which election must be made
annually by December 15th of the year immediately prior to the year in which
such compensation is earned (the "Election Date")), as follows: (i) $10,000,
payable quarterly in arrears (the "Director's Fee"), or (ii) options to purchase
that number of shares of Common Stock in an amount equal to the result obtained
by multiplying (A) two by (B) the result obtained by dividing (x) the Director's
Fee by (y) the closing price of the Common Stock on the Election Date, or the
last business day preceding the Election Date (the "Closing Price"); which
options shall vest at a rate of 1/4 per quarter over a one-year period and shall
be exercisable for a period of seven years at an exercise price equal to the
Closing Price. All directors have elected to be compensated for their 1998
services with options to purchase Common Stock and in December 1997 were each
issued options to purchase 5,161 shares of Common Stock with the foregoing terms
at an exercise price of $3.875 per share of Common Stock.
Dr. Jonas receives no compensation for service on the Board of Directors or any
committee thereof. All directors of the Corporation are reimbursed for travel
expenses incurred in attending board and committee meetings.
The Corporation may retain additional board members in the future. Certain of
the directors may have consulting agreements and/or receive stock grants in
consideration for services rendered to the Corporation, other than services
rendered as members of the Board. See "Executive Compensation" and "Certain
Relationships and Related Transactions."
Employment Agreements
On May 17, 1996, the Corporation entered into a letter of employment (the "Jonas
Employment Letter") with Jeffrey M. Jonas, M.D., pursuant to which Dr. Jonas
became the President, Chief Executive Officer and a Director of the Corporation
for an initial term of four years, effective as of June 1, 1996. Pursuant to the
terms of the Jonas Employment Letter, Dr. Jonas received a signing bonus of
$12,000, and will receive an annual salary of $200,000. Dr. Jonas also became
entitled to receive a minimum annual bonus of $25,000 at the end of the first
year of his employment and an additional discretionary bonus of up to $175,000.
Dr. Jonas also received options to acquire 318,872.5 shares of Common Stock at
an exercise price of $1.00. Such options vest at a rate of 1/16 per quarter over
a four-year period, and are exercisable for a period of seven years.
In June 1997, Dr. Jonas received a bonus of $100,000 and his annual salary was
increased to $225,000. In July 1997, Dr. Jonas received options to acquire an
additional 150,000 shares of Common Stock at an exercise price of $4.50 per
share. Such options vest at a rate of 1/12 per quarter over a three-year period,
and are exercisable for a period of seven years. The Jonas Employment Letter
also provides that the Corporation and Dr. Jonas intend to enter into a more
formal employment agreement which will contain, among other things, severance
arrangements and non-compete provisions. Dr. Jonas will also be eligible for
additional stock options and bonuses based upon outstanding performance. In the
event that a Change of Control (as defined in the Jonas Employment Letter)
occurs and, prior to the expiration of the initial term of the Jonas Employment
Letter, Dr. Jonas' employment thereunder is terminated by the Corporation
without cause or by Dr. Jonas with cause, all options previously granted to Dr.
Jonas which remain unvested will immediately vest.
On September 13, 1996, the Corporation entered into a letter of employment (the
"Tousley Employment Letter") with David L. Tousley, pursuant to which Mr.
Tousley became the Chief Financial Officer of the Corporation for an initial
term of four years. Pursuant to the terms of the Tousley Employment Letter, Mr.
Tousley received an annual
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<PAGE>
salary of $150,000 and an additional discretionary bonus of up to $125,000. Mr.
Tousley also received options to acquire 125,000 shares of Common Stock at an
exercise price of $1.00 per share. All such options vest at a rate of 1/16 per
quarter over a four-year period, and are exercisable for a period of seven
years. Mr. Tousley received a bonus of $50,000 at the end of the first year of
his employment and his annual salary was increased to $168,000.
In July 1997, Mr. Tousley received options to acquire an additional 60,000
shares of Common Stock at an exercise price of $4.50 per share. All such options
vest at a rate of 1/16 per quarter over a four-year period, and are exercisable
for a period of seven years. The Tousley Employment Letter also provides that
the Corporation and Mr. Tousley intend to enter into a more formal employment
agreement which will contain, among other things, severance arrangements and
non-compete provisions. Mr. Tousley shall also be entitled to such additional
compensation in the form of bonuses, raises or otherwise as the Board of
Directors of the Corporation may determine. In the event that a Change of
Control (as defined in the Tousley Employment Letter) occurs and, prior to the
expiration of the initial term of the Tousley Employment Letter, Mr. Tousley's
employment thereunder is terminated by the Corporation without cause or Mr.
Tousley with cause, all options previously granted to Mr. Tousley which remain
unvested will immediately vest.
On September 13, 1996, the Corporation entered into a letter of employment (the
"Yankee Employment Letter") with Ernest W. Yankee, Ph.D., pursuant to which Dr.
Yankee became an Executive Vice President of the Corporation for an initial term
of four years. Pursuant to the terms of the Yankee Employment Letter, Dr. Yankee
received an annual salary of $145,000, and an additional discretionary bonus of
up to $83,750. Dr. Yankee also received options to acquire 125,000 shares of
Common Stock at an exercise price of $1.00 per share. All such options will vest
at a rate of 1/16 per quarter over a four-year period, and are exercisable for a
period of seven years. Mr. Yankee received a bonus of $50,000 at the end of the
first year of his employment and his annual salary was increased to $168,000.
In July 1997, Dr. Yankee received options to acquire an additional 60,000 shares
of Common Stock at an exercise price of $4.50 per share. All such options will
vest at a rate of 1/16 per quarter over a four-year period, and are exercisable
for a period of seven years. The Yankee Employment Letter also provides that the
Corporation and Dr. Yankee intend to enter into a more formal employment
agreement which will contain, among other things, severance arrangements and
non-compete provisions. Dr. Yankee shall also be entitled to such additional
compensation in the form of bonuses, raises or otherwise as the Board of
Directors of the Corporation may determine. In the event that a Change of
Control (as defined in the Yankee Employment Letter) occurs and, prior to the
expiration of the initial term of the Yankee Employment Letter, Dr. Yankee's
employment thereunder is terminated by the Corporation without cause or by Dr.
Yankee with cause, all options previously granted to Dr. Yankee which remain
unvested will immediately vest.
Page 11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a private offering held in May and June 1996, the Corporation
consummated an offering of Series B Preferred Stock (the "Series B Offering")
pursuant to which the Corporation raised aggregate gross proceeds of
approximately $25,800,000. In connection with services rendered by Paramount
Capital, Inc., as placement agent ("Paramount" or the "Placement Agent"), for
the Series B Offering, and pursuant to a placement agency agreement entered into
by the Corporation and the Placement Agent, the Corporation paid the Placement
Agent cash commissions of approximately $2,324,000, a non-accountable expense
allowance of approximately $1,033,000 and placement warrants ("Series B
Placement Warrants") to acquire approximately 25,820 shares of Series B
Preferred Stock, exercisable until June 11, 2006 at an exercise price of $110
per share of Series B Preferred Stock. See "Description of Securities."
Pursuant to the placement agency agreement for the Series B Offering, on June
12, 1996, the Corporation and the Placement Agent entered into a Financial
Advisory Agreement, pursuant to which the Placement Agent acts as the
Corporation's non-exclusive financial advisor. Such engagement provides that the
Placement Agent will receive a monthly retainer of $4,000 per month for a
minimum of 24 months, plus expenses and success fees. During 1997, the Company
paid $53,368 in monthly retainer and expenses to the Placement Agent.
On October 20, 1995, the Corporation entered into an Engagement & Technology
Acquisition Agreement with The Castle Group, LLC ("The Castle Group"), which may
be deemed an affiliate of both the Corporation and the Placement Agent, pursuant
to which The Castle Group identified, negotiated and acquired for the
Corporation its license agreement with Thomas Jefferson University. In
consideration for the conveyance of the license, TJU and Dr. Berd were both
granted 229,121.5 shares of Common Stock. In connection therewith, The Castle
Group and its designees were granted and sold 916,485.5 shares of Common Stock
of the Corporation at a price of $.004 per share. Prior to the acquisition of
the TJU License, the Corporation had no technological assets other than its
former lead product under development, which was sold in December 1995.
Lindsay A. Rosenwald, M.D., a substantial shareholder of the Corporation, is the
Chairman and sole shareholder of each of the Placement Agent and Paramount
Capital Investments, LLC. Dr. Rosenwald personally collateralized loans to the
Corporation from NatWest Bank N.A., pursuant to which the Corporation incurred
principal and interest indebtedness of approximately $55,000. Such indebtedness
was paid in full as of June 30, 1996. Dr. Rosenwald also extended a line of
credit to the Corporation. As of June 30, 1996, the Corporation paid the
outstanding principal amount and accrued interest under such line of credit,
which was approximately $250,000. In addition, in 1995 and 1996, Paramount acted
as placement agent, pursuant to a placement agency agreement, for a bridge
financing for the Corporation as to which Paramount was paid $90,000 in
commissions and received warrants to purchase 31,250 shares of Common Stock. Two
of the investors in these bridge financings were private investment funds
managed by a company for which Dr. Rosenwald is President. In addition, Michael
S. Weiss, Director and Secretary of the Corporation, is a Senior Managing
Director of Paramount. Wayne Rubin, at that time the Treasurer of the
Corporation, is Chief Financial Officer of Paramount and Paramount Capital
Investments, LLC. Dr. Carl Spana, a Director of the Corporation, was at that
time a Vice President of Paramount Capital Investments, LLC. Dr. John K.A.
Prendergast, also a Director of the Corporation, was a Managing Director of
Paramount Capital Investments, LLC until December 1997.
In consideration of services rendered on behalf of the Corporation in connection
with the acquisition and negotiation of the license agreement with Rutgers, The
State University of New Jersey, on February 13, 1997, the Corporation agreed to
pay Samuel P. Wertheimer, Ph.D., $25,000, and Carl Spana, Ph.D., $15,000. In
addition, the Corporation agreed to issue to each of Drs. Wertheimer and Spana
warrants to purchase 6,375 shares of Common Stock at an exercise price of $6.00
per share, exercisable for seven years. In consideration of services rendered on
behalf of the Corporation in connection with the acquisition and negotiation of
the license agreement with The Texas A&M University System, on February 13,
1997, the Corporation agreed to pay Fred Mermelstein, Ph.D., $40,000 and to
issue to Dr. Mermelstein warrants to purchase 12,750 shares of Common Stock at
an exercise price of $6.00 per
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<PAGE>
share, exercisable for seven years. Drs. Wertheimer and Mermelstein are
employees of Paramount Capital Investments, LLC, and Dr. Spana is a Director of
the Corporation.
On March 17, 1998, the Company entered into a consulting agreement with Timothy
McInerney, pursuant to which the Company agreed to issue to Mr. McInerney
options to purchase 50,000 shares of Common Stock at an exercise price of $4.00,
exercisable for seven years. Mr McInerney is an employee of Paramount.
Pursuant to the Corporation's Certificate of Incorporation and Bylaws, the
Corporation has agreed to indemnify the Directors and Officers of the
Corporation to the maximum extent permissible under Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Corporation
pursuant to the foregoing, or otherwise, the Corporation has been advised that,
in the opinion of the Commission, such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
Page 13
<PAGE>
PROPOSAL II
PROPOSAL TO AMEND THE 1992 STOCK OPTION PLAN
Amendment to Increase the Number of Authorized Shares Under the 1992 Stock
Option Plan
The 1992 Stock Option Plan of the Corporation (the "AVAX Option Plan") was
adopted by the Board of Directors in April 1992 and was approved by the
stockholders in April 1992. The AVAX Option Plan expires by its own terms in
2002. The purposes of the AVAX Option Plan are to provide incentive to employees
and consultants of the Corporation, to encourage employee proprietary interests
in the Corporation, to encourage employees to remain in the employ of the
Corporation and to attract to the Corporation individuals of experience and
ability.
Pursuant to the AVAX Option Plan, as of April 24, 1998, options to purchase
30,000 shares of Common Stock were outstanding and fully vested at a weighted
average price of $1.20 per share, and no options had been exercised. As of April
7, 1998, the market value of the shares was $4.4375 per share, based upon the
closing price on such date on the Nasdaq SmallCap Market.
Such options do not confer upon holders thereof any voting or any other rights
of a stockholder of the Corporation. The shares of Common Stock issuable upon
exercise of the options in accordance with the terms thereof will be fully paid
and nonassessable.
Currently, the number of shares authorized for issuance under the AVAX Option
Plan is 437,500 shares. The Board of Directors has approved and recommended to
the stockholders that they approve an amendment to increase the number of shares
of Common Stock issuable pursuant to the AVAX Option Plan to 1,500,000 shares
(the "Amendment"). The purpose of the Amendment is to permit the Board of
Directors, the Corporation's Compensation Committee and its management to
continue to provide long term, equity based incentives to present and future
officers, employees and certain directors. If the Amendment is not approved, the
Corporation will not grant options to purchase shares of Common Stock under the
AVAX Option Plan in excess of that number of shares of Common Stock remaining
available under the existing AVAX Option Plan. In such event, the Corporation
may in the future be unable to continue to provide suitable long-term
equity-based incentives to directors, officers and employees.
As of April 24, 1998, of the 437,000 shares of Common Stock authorized for
issuance under the AVAX Option Plan, 407,500 shares remained available for new
grants of options to purchase shares, and 30,000 shares of Common Stock had
already been reserved for outstanding Options. The Corporation has not at the
present time determined who will receive the remaining options, if any, if the
Amendment is approved.
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<PAGE>
Stock Options Granted Under the AVAX Option Plan Since its Inception
Since its inception, and through April 24, 1998, the following persons have
received stock options pursuant to the Director Plan:
Name and Principal Position Number of Options*
--------------------------- ------------------
Dayne Myers**+ 62,500
Former President, Chief Executive
Officer and Director
John F. Dee**+ 112,500
Rajeev Samantrai**+ 31,250
Wendy Kramer**+ 53,250
Allen Forbes, M.D.+ 1,875
George Bray, M.D.+ 1,250
Jean Endicott, Ph.D.+ 1,250
Peggy Borum, Ph.D.+ 1,250
Steven Ziesel, Ph.D.+ 1,250
Edson D. de Castro** 30,000
Director
Jeffrey M. Jonas, M.D. 0
President, Chief Executive
Officer and Director
David L. Tousley, C.P.A. 0
Chief Financial Officer
Ernest W. Yankee, Ph.D. 0
Executive Vice President
Michael S. Weiss, Esq. 0
Corporate Secretary
and Director
All Current Executive Officers 0
as a Group (4 Persons)
All Current Directors who are not 30,000
Executive Officers as a Group
(3 Persons)
All Employees who are not 0
Executive Officers as a Group
- ---------------------
* Such number represents the total number of options granted to the
person or group in question under the Director Plan, without taking
into account those options which have been exercised, terminated or
expired.
** Persons who have received five percent or greater of the options
granted under the Director Plan.
+ Persons who are no longer employed by or associated with the
Corporation and whose options have expired, become unexercisable or
been canceled. The shares of Common Stock underlying such options are
available for future grant pursuant to the terms of the AVAX Option
Plan.
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<PAGE>
Description of the AVAX Option Plan
The AVAX Option Plan provides for the grant of "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended, and nonqualified stock options ("non-ISOs") to officers, employees
and consultants (including certain directors who qualify as employees or
consultants under the AVAX Option Plan by virtue of receiving compensation in
excess of mere directors' fees for their services). ISOs may be granted only to
officers and employees (including certain directors who qualify as employees or
consultants under the AVAX Option Plan by virtue of receiving compensation in
excess of mere directors' fees for their services). The AVAX Option Plan is
administered by the Board of Directors of the Corporation (or a Committee
thereof) (the "Board") which determines the terms of the Options granted,
including the number of shares subject to the Option. The Board also determines
the acceptable form of consideration for exercising the Option, which may
include cash, check, or other option shares pursuant to a cashless exercise
provision.
The AVAX Option Plan requires that the exercise price of ISOs granted to
employees of the Corporation who, at the time of the grant of such ISOs, own
stock representing more than 10% of the voting power of all classes of stock of
the Corporation or any parent or subsidiary, must be at least equal to 110% of
the fair market value of such shares on the date of grant. The AVAX Option Plan
also requires that the exercise price of ISOs granted to any other employee of
the Corporation must be at least equal to the fair market value of such shares
on the date of grant, and that the exercise price of non-ISOs granted by the
Corporation must be equal to 85% of the fair market value per share on the date
of grant.
The maximum term of Options granted under the AVAX Option Plan is 10 years.
However, with respect to any participant who owns stock possessing more than 10%
of the voting rights of all classes of stock of the Corporation or any parent or
subsidiary, the term may be no longer than five years. No ISO may be granted
under the AVAX Option Plan to any individual if the aggregate fair market value
of the shares (determined as of the time of the Option is granted) underlying
the options which would become exercisable during any calendar year, under all
ISOs held by such individual, exceeds $100,000, unless such excess Options shall
be treated as non-ISOs.
Generally, any Option held by an individual who ceases to be employed or
retained by the Corporation may only be exercised by such individual within
three months (12 months in the case of non-ISOs) after such individual ceases to
be employed or retained by the Corporation or, in the case of total and
permanent disability, within one year after such individual ceases to be
employed or retained by the Corporation. Generally, any Option held by an
individual who dies while still employed or retained by the Corporation may be
exercised by such individual's representative within 12 months following the
date of death.
The Federal income tax aspects of ISOs and non-ISOs are generally described
below. An employee will generally not be taxed at the time of grant or exercise
of an ISO, although the excess of the fair market value of the stock over the
exercise price on exercise of an ISO will taken into account for alternative
minimum tax purposes. If the employee holds the shares acquired upon exercise of
an ISO until at least one year after issuance and two years after grant of the
Option, the employee will have long term capital gain (or loss) based on the
difference between the amount realized on the sale or disposition and the
exercise price of the Option. An employee who realized a capital gain in such
event will be entitled to capital gains tax treatment upon the sale or
disposition of the shares. If these holdings periods are not satisfied, then
upon disposition of the shares of Common Stock, the employee will recognize
ordinary income equal, in general, to the excess of the fair market value of the
shares at the time of exercise over the exercise price of the Option, plus
capital gain in respect of any additional appreciation. With respect to a
non-ISO, an optionee will not be taxed at the time of grant; upon
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exercise, however, the optionee will generally realize compensation income to
the extent that the fair market value of the shares of Common Stock exceeds the
exercise price of the Option. The Corporation generally will have a compensation
deduction to the extent that, and at the time that, an optionee realizes
compensation income with respect to an Option. In the case of an ISO, this means
that the Corporation ordinarily is not entitled to a compensation deduction.
The Board of Directors recommends a vote FOR the approval of the Amendment to
the AVAX Option Plan.
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<PAGE>
PROPOSAL III
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
Amendment to Decrease the Number of Authorized Shares Under the Certificate of
Incorporation
The Board of Directors of the Corporation has unanimously approved and
recommended adoption of an amendment to the Corporation's Certificate of
Incorporation to decrease the number of authorized shares of Common Stock
available for issuance by the Corporation from 50,000,000 to 30,000,000 as
follows:
"RESOLVED, that in the judgment of the Board of Directors of the
Corporation, it is deemed advisable and in the best interests of the
Corporation to amend (the "Charter Amendment") its Certificate of
Incorporation to decrease the number of shares of Common Stock, par value
$.004 per share, of the Corporation ("Common Stock") which the Corporation
shall have the authority to issue from 50,000,000 to 30,000,000.
"RESOLVED that the President, the Chief Executive Officer, the Chief
Financial Officer, one or more Vice Presidents (one or more of whom may be
designated Executive Vice President or Senior Vice President), and the
Treasurer of the Corporation (the "Authorized Officers") be, and each of
them hereby is, authorized in the name and on behalf of the Corporation, to
take all such action and to execute the Charter Amendment and any further
instruments and documents as shall be necessary or desirable in connection
therewith, in the name and on behalf of the Corporation, with such changes
therein as the Authorized Officer executing the same shall approve as
necessary or desirable, such approval to be conclusively established by the
execution thereof; and that the Corporation be, and it hereby is,
authorized and empowered to perform its obligations thereunder.
"RESOLVED that it is recommended that the stockholders of the Corporation
approve the Charter Amendment in its entirety at the Annual Stockholders
Meeting of the Corporation to be held on June 3, 1998."
The proposed Charter Amendment to the Certificate of Incorporation will be
effected by amending Article 4(a)(1) thereof to read in full as follows:
"FOURTH: (A)(1) The aggregate number of shares which the Corporation shall have
authority to issue is Thirty Five Million (35,000,000), of which Five Million
(5,000,000) shares, having a par value of $.01 per share, shall be designated
`Preferred Stock' and Thirty Million (30,000,000) shares, having a par value of
$.004 per share, shall be designated `Common Stock.'"
As of April 7, 1998, 4,874,658 shares of Common Stock were outstanding out of
the 50,000,000 currently authorized shares of Common Stock.
Purpose of the Charter Amendment
The proposed decrease in the authorized shares of Common Stock is intended to
provide the Corporation with annual savings on payments of Delaware franchise
tax that would be due were the Corporation to have a greater number of
authorized shares of Common Stock.
Anti-takeover effects
Although SEC rules require disclosure of provisions in a certificate of
incorporation which have anti-takeover effects, neither the management nor the
Board of Directors of the Corporation views the proposed decrease in the
authorized amount of shares of Common Stock of the Corporation in this
perspective. Although increases in the authorized number of shares of a company
are sometimes viewed as efforts to oppose hostile takeover bids, this proposal
to decrease authorized shares has not been prompted by an effort by anyone to
gain control of the
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Corporation, and the Corporation is not aware of any such attempt.
Voting Requirement
Under Section 242(b) of the General Corporation Law (the "GCL") of the State of
Delaware, an amendment to a Certificate of Incorporation of a Delaware
corporation must be approved by the affirmative vote of the holders of a
majority of all classes of issued and outstanding stock of the corporation,
taken together as a class, if so provided in the Certificate of Incorporation or
any amendment thereto which created such classes of stock such as a certificate
of designations. The Corporation's Certificate of Incorporation, as amended,
authorizes the issuance of 55,000,000 shares, of which 50,000,000 is designated
Common Stock and 5,000,000 is designated Series B Convertible Preferred Stock.
In accordance with Section 242(b) of the GCL, the Corporation's Certificate of
Designations creating the class of Series B Convertible Preferred Stock of the
Corporation provides that the holders of Common Stock and Series B Convertible
Preferred Stock shall vote together as one class. In addition, because an
affirmative vote of the majority of outstanding shares of stock is required, any
ballot or proxy marked "abstain" or not submitted will have the same effect as a
negative vote.
The Board of Directors recommends that the stockholders vote FOR the approval of
the amendment to the Corporation's Certificate of Incorporation to decrease the
authorized number of shares of Common Stock.
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<PAGE>
PROPOSAL IV
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Ernst & Young, LLP, independent
certified public accountants, to serve as auditors for the fiscal year ending
December 31, 1998. Ernst & Young, LLP has served as the Corporation's auditors
since the fiscal year ended December 31, 1994. It is expected that a member of
the firm will be present at the Annual Meeting with the opportunity to make a
statement if so desired and will be available to respond to appropriate
questions. Stockholder ratification of the Corporation's independent public
accountants is not required under Delaware law or under the Corporation's
Certificate of Incorporation or its By-Laws. If the stockholders do not ratify
the selection of Ernst & Young, LLP, as the Corporation's independent public
accountants for the fiscal year ended December 31, 1998, the Corporation's Board
of Directors will evaluate what would be in the best interests of the
Corporation and its stockholders and consider whether to select new independent
public accountants for the current fiscal year or whether to wait until the
completion of the audit for the current fiscal year before changing independent
public accountants.
The Board of Directors recommends a vote FOR the ratification of the selection
of Ernst & Young, LLP.
VOTING PROCEDURES
The presence, in person or by proxy, of at least a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting is necessary to
establish a quorum for the transaction of business. Shares represented by
proxies pursuant to which votes have been withheld from any nominee for
director, or which contain one or more abstentions or broker "non-votes," are
counted as present for purposes of determining the presence or absence of a
quorum for the Annual Meeting. A "non-vote" occurs when a broker or other
nominee holding shares for a beneficial owner votes on one proposal, but does
not vote on another proposal because the broker does not have discretionary
voting power and has not received instructions from the beneficial owner.
The holders of shares of Series B Preferred Stock and Common Stock shall vote
together as one class on all matters submitted to a vote of the stockholders of
the Corporation at the Annual Meeting. On each matter properly brought before
the Annual Meeting, holders of shares of Common Stock will be entitled to one
vote for each share of Common Stock held as of the Record Date and holders of
Series B Preferred Stock shall be entitled to approximately 26.0875 votes for
each share of Series B Preferred Stock held as of the Record Date.
Proposal I. Directors are elected by a plurality of the votes cast, in person or
by proxy, at the Annual Meeting. The five nominees receiving the highest number
of affirmative votes of the shares present, in person or represented by proxy,
and voting on the election of directors at the Annual Meeting will be elected as
directors. Shares represented by all proxies received by the Board of Directors
and not so marked as to withhold authority to vote for any individual nominee or
for all nominees will be voted (unless one or more nominees are unable to serve)
for the election of the nominees. Where the stockholder properly withheld
authority to vote for a particular nominee or nominees, such stockholder's
shares will not be counted toward such nominee's achievement of a plurality.
Proposal III. In accordance with Delaware law, the proposal to amend the
Certificate of Incorporation of the Corporation must be approved by the
affirmative vote of the holders of a majority of all classes of issued and
outstanding stock of the Corporation, taken together as a class. Because a
majority vote of outstanding shares of stock is required, any ballot or proxy
marked "abstain" or not submitted will have the same effect as a negative vote.
Other Matters. For all other proposals described in this Proxy Statement and
submitted to stockholders at the Annual Meeting, the affirmative vote of the
majority of shares present, in person or represented by proxy, and voting on
that matter is required for approval. Abstentions are included in the number of
shares present or represented and voting on each matter and, therefore, with
respect to votes on a specific proposal, will have the
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<PAGE>
effect of negative votes. Shares subject to broker "non-votes" are not
considered to have been voted for the particular matter and have the practical
effect of reducing the number of affirmative votes required to achieve a
majority for such matter by reducing the total number of shares from which the
majority is calculated. If any other matter not discussed in this Proxy
Statement should be presented at the Annual Meeting upon which a vote may be
properly taken, shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance with the judgment of
the persons named in the proxies.
Page 21
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any matters which will be brought before
the Annual Meeting other than those specifically set forth herein. If any other
matter properly comes before the Annual Meeting, it is intended that the persons
named in and acting under the enclosed proxy or their substitutes will vote
thereon in accordance with their best judgment.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the Proxy Statement to be
furnished to all stockholders entitled to vote at the next annual meeting of
stockholders of the Corporation must be received at the Corporation's principal
executive offices not later than December 27, 1998. In order to curtail
controversy as to the date on which a proposal was received by the Corporation,
it is suggested that proponents submit their proposals by Certified Mail, Return
Receipt Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation. Proxies
will be solicited principally through the mails. Further solicitation of proxies
from some stockholders may be made by directors, officers and regular employees
of the Corporation personally, by telephone, telegraph or special letter. No
additional compensation, except for reimbursement of reasonable out-of-pocket
expenses will be paid for any such further solicitation. In addition, the
Corporation may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Corporation
registered in the name of a nominee. The Corporation will reimburse such persons
for their reasonable out-of-pocket costs.
ANNUAL REPORT ON FORM 10-KSB
Copies of the Corporation's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997, as filed with the Securities and Exchange Commission,
are available to stockholders without charge upon written request addressed to
Erika Rich, Office Manager, AVAX Technologies, Inc., 4520 Main Street, Suite
930, Kansas City, Missouri 64111.
Your cooperation in giving this matter your immediate attention and returning
your proxy is appreciated.
By Order of the Board of Directors,
/s/ Michael S. Weiss
--------------------
Michael S. Weiss
Corporate Secretary
Kansas City, Missouri
April 29, 1998
Page 22
<PAGE>
APPENDIX A
Please date, sign and mail your proxy card back as
soon as possible!
Annual Meeting of Stockholders
AVAX TECHNOLOGIES, INC.
Wednesday, June 3, 1998
AVAX TECHNOLOGIES, INC.
Annual Meeting of Stockholders to be held on Wednesday, June 3, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Jeffrey M. Jonas,
M.D. and Carl Spana, Ph.D., and each of them, with full power of substitution,
as proxies to represent and vote all shares of Common Stock and Series B
Convertible Preferred Stock of AVAX TECHNOLOGIES, INC. (the "Corporation") which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Corporation to be held on June 3, 1998, at 10:00
a.m., Loch Lloyd Country Club, 16750 Country Club Drive, Belton, Missouri,
64012, and at all adjournments or postponements thereof, upon matters set forth
in the Notice of Annual Meeting of Stockholders and Proxy Statement dated April
27, 1998, a copy of which has been received by the undersigned. Each share of
Series B Convertible Preferred Stock is entitled to 26.0875 votes. The proxies
are further authorized to vote, in their discretion, upon such other business as
may properly come before the meeting or any adjournments or postponements
thereof. Each of Items 1 through 4 is proposed by the Corporation.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES SET FORTH ABOVE AS DIRECTORS, FOR THE APPROVAL
OF THE AMENDMENT TO THE AVAX OPTION PLAN, FOR THE APPROVAL OF THE AMENDMENT TO
THE CORPORATION'S CERTIFICATE OF INCORPORATION AND FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG, LLP AS INDEPENDENT AUDITORS.
SEE REVERSE SIDE
Page 23
<PAGE>
|X| Please mark your votes as in this example.
1. To elect a Board of Directors to serve until the next Annual Meeting of
Stockholders and until their respective successors have been duly elected
and qualified, or until their earlier resignation or removal.
<TABLE>
<CAPTION>
<S> <C>
FOR ALL NOMINEES listed Nominees -
at right (except as marked to the Jeffrey M. Jonas, M.D.
contrary below): [ ] Edson D. de Castro
John K.A. Prendergast, Ph.D.
Carl Spana, Ph.D.
WITHHOLD AUTHORITY to vote for Michael S. Weiss
all nominees listed at right: [ ]
</TABLE>
To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below:
2. To consider and approve an amendment to the Corporation's 1992 Stock Option
Plan (the "AVAX Option Plan") that increases the number of shares of Common
Stock available for issuance under the AVAX Option Plan from 437,500 to
1,500,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To consider and approve an amendment to the Corporation's Certificate of
Incorporation to decrease the number of authorized shares of Common Stock
available for issuance by the Corporation from 50,000,000 to 30,000,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. To ratify the selection of the firm of Ernst & Young, LLP, as auditors for
the fiscal year ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
I/We will attend the meeting. [ ] YES [ ] NO
________________________________ Date: ______________________
(Signature of Stockholder)
________________________________ Date: ______________________
(Signature if held jointly)
Note: Please sign this Proxy exactly as your name or names appear on the books
of the Corporation. Joint owners should each sign personally. Attorney,
executor, administrator, trustee or guardian must give full title as such. If a
corporation or partnership, the signature should be that of an authorized person
who should state his or her title.
Page 24
APPENDIX B
WALDEN LABORATORIES, INC.
1992 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1992 Stock Option Plan are to
provide incentive to Employees and Consultants of the Company, to encourage
Employee proprietary interest in the Company, to encourage Employees to remain
in the employ of the Company and to attract to the Company individuals of
experience and ability.
Options granted under this Plan may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Administrator and as
reflected in the terms of the written option agreement.
2. Definitions. As used in this Plan, the following definitions shall apply:
(a) "Administrator" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" shall have the meaning set forth in Section 4(a)
below.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4(a) below, if one is appointed.
(f) "Common Stock" shall mean the $0.001 par value Common Stock of the
Company.
(g) "Company" shall mean WALDEN LABORATORIES, INC. (formerly APPEX
TECHNOLOGIES, INC.), a Delaware corporation, or any successor corporation to the
Company.
(h) "Consultant" shall mean (i) any person who is engaged by the Company
or any subsidiary to render consulting services and is compensated for such
consulting services, and (ii) any director of the Company whether compensated
for such services or not; provided, however, that if the Company registers any
class of any equity security pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended, the term Consultant shall thereafter not include
directors who are not compensated for their services or who are paid only a
director's fee by the Company.
(i) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator; provided, however, either that
such
<PAGE>
leave must be for a period of not more than ninety (90) days or that
re-employment upon the expiration of such leave must be guaranteed by contract
or by statute.
(j) "Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the
National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall
be the average of the closing sales prices for such stock as quoted on
such system for the last five trading days before the date of
determination (if for a given day no sales were reported, the closing bid
on that day shall be used), as such prices are reported in The Wall
Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its
Fair Market Value shall be the average of the mean between the bid and
asked prices for the Common Stock for the last five days before the date
of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(l) "Incentive Stock Option" shall mean an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" shall mean a stock option granted pursuant to the Plan.
(o) "Optioned Stock" shall mean the Common Stock subject to an Option.
(p) "Optionee" shall mean an Employee or Consultant who receives an
Option.
(q) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(r) "Plan" shall mean this 1992 Stock Option Plan, as amended and
restated.
(s) "Share" shall mean a share of Common Stock, adjusted in accordance
with Section 11 below.
-2-
<PAGE>
(t) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 below, the
maximum aggregate number of shares that may be optioned and sold under the Plan
is 1,750,000* shares of Common Stock. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without having
been exercised in full, then the unpurchased Shares that were subject to the
Option shall, unless the Plan has been terminated, become available for fixture
grant under the Plan.
Notwithstanding any other provision of the Plan, shares issued under the Plan
and later repurchased by the Company shall not become available for fixture
grant or sale under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3
promulgated under the Exchange Act or any successor rule thereto, as in
effect at the time that discretion is being exercised with respect to the
Plan ("Rule 16b-3"), and by the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable
securities laws and the Code (collectively, the "Applicable Laws"), the
Plan may (but need not) be administered by different administrative
bodies with respect to directors, officers who are not directors and
Employees who are neither directors nor officers.
(ii) Administration with respect to Directors and Officers. With respect
to grants of Options to Employees or Consultants who are also officers or
directors of the Company, the Plan shall be administered by (A) the
Board, if the Board may administer the Plan in compliance with Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary
plan, or (B) a Committee designated by the Board to administer the Plan,
which Committee shall be constituted (I) in such a manner as to permit
the Plan to comply with Rule 16b-3 as it applies to a plan intended to
qualify thereunder as a discretionary plan and (II) in such a manner as
to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons. With respect to
grants of Options to Employees or Consultants who are neither directors
nor officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws.
- --------
* By virtue of reverse stock splits, this number has been changed to 437,500
as of April 15, 1998.
(iv) General. Once a Committee has been appointed pursuant to subsection
(ii) or (iii) of this Section 4(a), such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of any Committee and
appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill vacancies
(however caused) and remove all
-3-
<PAGE>
members of a Committee and thereafter directly administer the Plan, all
to the extent permitted by the Applicable Laws and, in the case of a
Committee appointed under subsection (ii), to the extent permitted by
Rule 16b-3 as it applies to a plan intended to qualify thereunder as a
discretionary plan.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in
its discretion
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to whom
Options may from time to time be granted under the Plan;
(iii) to determine whether and to what extent Options are granted
under the Plan;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted under the Plan;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any
waiver or forfeiture restrictions regarding any Option and/or the shares
of Common Stock relating thereto, based in each case on such factors as
the Administrator shall determine, in its sole discretion); and
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted.
(c) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility
(a) Options may be granted only to Employees and Consultants. Incentive
Stock Options may be granted only to Employees. An Employee or Consultant
who has been granted an Option may, if he or she is otherwise eligible,
be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of Stock Options are exercisable for the
-4-
<PAGE>
first time by an Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall
be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his or her right or the Company's
right to terminate his or her employment or consulting relationship at
any time, with or without cause,
6. Term of Plan. The Plan shall become effective upon the earlier to occur of
its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section 18 below. It shall continue in effect for a
term of ten (10) years unless sooner terminated under Section 13 below.
7. Term of Option. The term of each Option shall be ten (10) years from the date
of grant thereof or such shorter term as may be provided in the Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter time as may be provided in the Stock Option
Agreement.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than one hundred ten percent (110%) of the Fair
Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant.
(ii) In the case of any Option, the per Share exercise price shall be no
less than eighty-five percent (85%) of the Fair Market Value per
Share on the date of grant.
-5-
<PAGE>
(b) The Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of payment.
In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely oft
(i) cash;
(ii) check;
(iii) other Shares which (a) in the case of Shares acquired upon exercise
of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (b) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised;
(iv) delivery of an irrevocable subscription agreement for the Shares to
be issued which irrevocably obligates the holder to take and pay
for the shares not more than twelve (12) months after the date of
delivery of the subscription agreement;
(v) any combination of such methods of payment; or
(vi) such other consideration and method of payment for the issuance of
Shares to the extent permitted under Section 157 of the Delaware
General Corporation Law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
under this Plan shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Optionee, and shall be
permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) above. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 below.
-6-
<PAGE>
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as an Emoloyee or Consultant. If an Employee or
Consultant ceases to serve as an Employee or Consultant, then he or she may, but
only within three (3) months (twelve (12) months in the case of a Nonstatutory
Stock Option) or such other shorter period as is specified by the Administrator
after the date he or she ceases to be an Employee or Consultant of the Company
(but in no event later than the date of expiration of the term of such Option as
set forth in the Option Agreement), exercise his or her Option to the extent
that he or she was entitled to exercise it at the date of such termination. To
the extent that he or she was not entitled to exercise the Option at the date of
such termination, or if he or she does not exercise such Option (which he or she
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section 9(b)
above, if an Employee or Consultant is unable to continue his or her employment
or consulting relationship with the Company as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), then he or
she may, but only within twelve (12) months from the date of termination or such
other shorter period as is specified by the Administrator (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent he or she was
entitled to exercise it at the date of termination of employment or consulting.
To the extent that he or she was not entitled to exercise the Option at the date
of termination, or if he or she does not exercise such Option (which he or she
was entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his or her death
an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of
the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death or such other shorter period as is
specified by the Administrator (but in no event later than the date of
expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or
Consultant three (3) months after the date of death; or
(ii) within three (3) months after the termination of Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time
within three (3) months following the date of death or such other shorter
period as is specified by the Administrator (but in no event later than
the date of expiration of the term of such Option as set forth in the
Option Agreement), by the Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of
termination.
-7-
<PAGE>
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of the
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
10. Non-Transferability of Options. The Option 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. The designation of a beneficiary
by an Optionee shall not constitute a transfer. An Option may be exercised,
during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding, and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Administrator shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
shall terminate immediately prior to the consummation of such proposed action.
In the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless such successor corporation does not agree to assume the Option or to
substitute an equivalent option, in which case such Option shall terminate upon
the consummation of the merger.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
-8-
<PAGE>
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the Plan from
time to time in such respects as the Board may deem advisable; provided,
however, that the following revisions or amendments shall require approval of
the stockholders of the Company in the manner describe in Section 18 of the
Plan:
(i) any increase in the number of Shares subject to the Plan, other than
in connection with an adjustment under Section 11 above;
(ii) any change in the designation of the class of persons eligible to be
granted Options; or
(iii) if the Company has a class of equity security registered under
Section 12 of the Exchange Act at the time of such revision or amendment,
any material increase in the benefits accruing to participants under the
Plan.
(b) Stockholder Approval. If any amendment requiring stockholder approval under
Section 13(a) above is made subsequent to the first registration of any class of
equity security by the Company under Section 12 of the Exchange Act, then such
stockholder approval shall be solicited as described in Section 18 below.
(c) Effect of Amendment or Termination. Any such amendment or termination of the
Plan shall not affect Options already granted and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto complies with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed.
The exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
-9-
<PAGE>
Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares under this Plan, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option agreements in
such form as the Administrator shall approve.
17. Annual Report To Optionees. The Board of Directors shall cause an annual
report to be sent to the Optionees not later than one hundred twenty (120) days
after the close of the fiscal year adopted by the corporation. Such report shall
be sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five
(35) days) before the annual meeting of stockholders to be held during the next
fiscal year. The annual report shall contain (i) a balance sheet as of the end
of the fiscal year, (ii) an income statement for the fiscal year, (iii) a
statement of cash flow for the fiscal year, and (iv) any report of independent
accountants or, if there is not such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long as the
shares of the Company are held by fewer than one hundred (100) holders of
record.
18. Stockholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted.
(b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required
approval of the stockholders of the Company obtained after such
registration shall be solicited substantially in accordance with Section
14(a) of the Exchange Act and the rules and regulations promulgated
thereunder.
(c) If any required approval by the stockholders of the Plan itself or of
any amendment thereto is solicited at any time otherwise than in the
manner described in Section 18(b) hereof, then the Company shall, at or
prior to the first annual meeting of stockholders held subsequent to the
later of (1) the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act or (2) the granting of
an Option hereunder to an officer or director after such registration, do
the following:
(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment
were then being solicited) by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is
furnished; and
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(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information
is first sent or given to stockholders,
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