<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Vaxcel, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
VAXCEL, INC.
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092
May 11, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Vaxcel, Inc. which will be held at the Hilton Hotel at Peachtree Corners, 5993
Peachtree Industrial Boulevard, Norcross, Georgia 30092, on Wednesday, June 10,
1998, at 1:30 p.m. local time.
We look forward to your attendance at the Annual Meeting so that you can
vote your shares in person and become better acquainted with members of the
Board of Directors and management team. Three items of business, which will be
considered and voted upon this year, are explained in the accompanying Proxy
Statement. Even if you are planning to attend, please complete the enclosed
proxy card and return it in the enclosed envelope so that your shares may be
voted. You will still be able to vote your shares in person if you attend the
Annual Meeting.
If you have any questions about the Proxy Statement or the 1997 Annual
Report, please contact Mark W. Reynolds at (770) 453-0195.
Sincerely,
/s/ PAUL J. WILSON
Paul J. Wilson
President and Chief Executive Officer
<PAGE> 3
VAXCEL, INC.
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092
NOTICE TO THE HOLDERS OF COMMON STOCK
OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
Notice is hereby given to the holders of the $.001 par value per share
Common Stock (the "Common Stock") of Vaxcel, Inc. (the "Company") that the
Annual Meeting of Stockholders of the Company will be held at the Hilton Hotel
at Peachtree Corners, 5993 Peachtree Industrial Boulevard, Norcross, Georgia
30092, on Wednesday, June 10, 1998, at 1:30 p.m., local time (the "Annual
Meeting"), for the following purposes:
(i) To elect five directors to serve until the 1999 Annual Meeting of
Stockholders;
(ii) To approve an amendment to the Company's 1993 Stock Option Plan
to increase the number of authorized shares of Common Stock available for
issuance thereunder from 1,000,000 to 1,500,000;
(iii) To ratify the selection of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 1998; and
(iv) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only those stockholders of record at the close of business on April 13,
1998, are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. The transfer books will not be closed. A complete list of
stockholders entitled to vote at the Annual Meeting will be available at the
Annual Meeting.
By Order of the Board of Directors,
/s/ MARK W. REYNOLDS
Mark W. Reynolds
Secretary
May 11, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN, DATE,
AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED BUSINESS REPLY ENVELOPE.
IF YOU ATTEND THE ANNUAL MEETING YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY
APPOINTMENT AND VOTE IN PERSON.
<PAGE> 4
VAXCEL, INC.
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092
May 11, 1998
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to holders of the $.001 par value per
share Common Stock ("Common Stock") of Vaxcel, Inc., a Delaware corporation (the
"Company" or "Vaxcel"), in connection with the solicitation of proxies by the
Company's Board of Directors from holders of the outstanding shares of Common
Stock for use at the Annual Meeting of Stockholders to be held at 1:30 p.m.
local time at the Hilton Hotel at Peachtree Corners, 5993 Peachtree Industrial
Boulevard, Norcross, Georgia 30092, on Wednesday, June 10, 1998, and at any
adjournments thereof (the "Annual Meeting").
At the Annual Meeting, the stockholders of the Company will vote upon the
following matters: (i) a proposal to elect five directors to the Company's Board
of Directors; (ii) a proposal to approve an amendment to the Company's 1993
Stock Option Plan to increase the number of authorized shares of Common Stock
available for issuance thereunder from 1,000,000 to 1,500,000; (iii) a proposal
to ratify the selection of Ernst & Young LLP as independent auditors for the
fiscal year ending December 31, 1998; and (iv) such other matters as may
properly come before the Annual Meeting or any adjournment thereof.
The Company's mailing address and the location of its principal executive
offices are 154 Technology Parkway, Norcross, Georgia 30092. This Proxy
Statement and the accompanying Proxy are first being mailed to stockholders of
the Company on or about May 11, 1998.
STOCKHOLDERS ENTITLED TO VOTE
Only stockholders of record of the Company at the close of business on
April 13, 1998 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. Notwithstanding the Record Date specified above, the
Company's stock transfer books will not be closed and shares may be transferred
subsequent to the Record Date. However, all votes must be cast in the names of
stockholders of record on the Record Date.
On the Record Date, there were 11,001,070 shares of the Common Stock issued
and outstanding held by approximately 275 stockholders of record. Holders of
Common Stock are entitled to one vote per share.
The Bylaws provide that the holders of shares of the Common Stock entitled
to cast a majority of the votes on the matters at issue at the Annual Meeting,
present in person or by proxy, shall constitute a quorum. For the purpose of
determining the presence of a quorum, abstentions will be counted as present,
but broker non-votes will not be counted.
The affirmative vote of a plurality of the votes of the shares present, in
person or represented by proxy, at the Annual Meeting will be required for
approval of Proposal I to elect five directors to the Company's Board of
Directors. The affirmative vote of a majority of the votes of the shares
present, in person or represented by proxy, at the Annual Meeting will be
required for approval of Proposal II, to approve an amendment to the Company's
1993 Stock Option Plan and Proposal III, to ratify Ernst & Young LLP as
independent auditors for the fiscal year ending December 31, 1998.
With regard to the election of directors: (i) votes that are withheld will
be excluded entirely from the vote and will have no effect and votes that are
withheld for a particular nominee will be excluded from the vote for that
nominee only; and (ii) abstentions and broker non-votes will have no effect
since approval by a percentage of the shares present or outstanding is not
required.
Abstentions may be specified on proposals other than the election of
directors. Abstentions will be considered present and entitled to vote at the
meeting but will not be counted as votes cast. Therefore,
1
<PAGE> 5
abstentions will have no effect on the adoption of Proposals II or III. Broker
non-votes are not considered entitled to vote and thus will have no effect on
the adoption of any of the proposals.
PROXIES
If the enclosed Proxy is executed, returned in time and not revoked, the
shares represented thereby will be voted in accordance with the instructions
indicated in such Proxy. IF NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED
IN FAVOR OF ALL PROPOSALS DESCRIBED IN THIS PROXY STATEMENT AND IN THE BEST
JUDGMENT OF THE HOLDERS OF SUCH PROXIES AS TO ANY OTHER MATTERS WHICH MAY
PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
A stockholder who has given a Proxy may revoke it at any time prior to its
exercise at the Annual Meeting by either (i) giving written notice of revocation
to the Secretary of the Company, (ii) properly submitting to the Company a duly
executed Proxy bearing a later date, or (iii) appearing at the Annual Meeting
and voting in person. All written notices of revocation of Proxies should be
addressed as follows: Vaxcel, Inc., 154 Technology Parkway, Norcross, Georgia
30092, Attention: Mark W. Reynolds, Secretary.
PROPOSAL I
ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws, the Board of Directors has set the number
of directors of the Company at five and proxies cannot be voted for a greater
number of persons.
CURRENT NOMINEES
The Board of Directors has nominated the following individuals for election
by the holders of Common Stock as directors of the Company to serve until the
Company's 1999 annual meeting of stockholders or until their successors are
elected and qualified, or their earlier death, resignation or removal.
Jack L. Bowman
Lyle A. Hohnke
Jack J. Luchese
Herbert H. McDade, Jr.
Paul J. Wilson
The persons designated as proxies intend to vote the shares represented
thereby in favor of the election to the Board of Directors of the nominees whose
names appear above, unless either authority to vote for the nominees is withheld
or such proxy has previously been revoked. It is believed that the nominees will
be available and able to serve as directors. In the event that the nominees are
unable to serve (which is not anticipated), the persons designated as proxies
will cast votes for such other persons as they may select. It is anticipated
that management stockholders of the Company will vote for the election of the
nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR ELECTION AS
DIRECTORS. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE SHARES
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE
VOTED "FOR" THE NOMINEES. THE AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES OF
SHARES OF COMMON STOCK REPRESENTED AND ENTITLED TO VOTE IN THE ELECTION AT THE
ANNUAL MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED FOR THE ELECTION OF THE
NOMINEES.
CERTAIN INFORMATION CONCERNING NOMINEES FOR DIRECTOR
The following table sets forth, for the nominees for election as directors,
the names and ages of such persons, the year in which each such person was first
elected a director, all positions and offices with the Company held by each such
person, the business experience during at least the last five years of each such
person, and any other directorships held by such person in companies that are
subject to the reporting requirements of the Securities Exchange Act of 1934 or
any company registered as an investment company
2
<PAGE> 6
under the Investment Company Act of 1940. None of the following persons serves
as a director pursuant to any arrangement or understanding between him and any
other person. For information concerning membership on Committees of the Board
of Directors, see "Meetings of the Board of Directors and Committees" below. For
information concerning directors' ownership of Common Stock, see "Beneficial
Owners of More Than Five Percent of the Company's Common Stock; Shares Held by
Directors and Executive Officers" below.
DIRECTOR POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
<TABLE>
<CAPTION>
NAME AND AGE SINCE DURING AT LEAST THE PAST FIVE YEARS, AND OTHER DIRECTORSHIPS
- ------------ ----- ------------------------------------------------------------
<S> <C> <C>
Jack L. Bowman (65).................. 1993 Prior to his retirement at the end of 1993, Mr. Bowman was
Company Group Chairman at Johnson & Johnson Company, a
position he held from 1987. From 1991 to 1993, Mr. Bowman
was responsible for Johnson & Johnson Company's diagnostic,
blood glucose monitoring, and certain over-the-counter
pharmaceutical businesses. Prior to that assignment at
Johnson & Johnson, he was responsible for a major portion of
Johnson & Johnson's global pharmaceutical businesses. From
1983 to 1987, he was Executive Vice President of American
Cyanamid Company where he was responsible for the
pharmaceutical, medical device and over-the-counter and
toiletry businesses. Mr. Bowman has also served as
President, Lederle Laboratories Division and Executive Vice
President, CIBA-GEIGY Pharmaceutical Division. Mr. Bowman
also serves as a director of NeoRx Corporation, Targeted
Genetics, Inc., Cell Therapeutics, Inc., Cellergy
Pharmaceuticals, Inc., Osiris Therapeutics, Inc. and CytRx
Corporation ("CytRx").
Lyle A. Hohnke (55).................. 1997 Dr. Hohnke served as a director of Zynaxis, Inc. from April
1996 until its merger with Vaxcel in May 1997, at which time
he was elected to the Vaxcel Board of Directors. Since 1994,
Dr. Hohnke has served as a member of Javelin Capital Fund,
LLC, a general partner of Javelin Ventures, LP, a company
engaged in venture capital investments. From 1991 to 1994
Dr. Hohnke was General Partner for Heart Land Seed Capital
Fund. Dr. Hohnke also serves as a director of Diamond Animal
Health, Inc., Southern BioSystems, Inc. and Guidestar Health
Systems, Inc. Dr. Hohnke is a nominee for election to the
board of directors of CytRx.
Jack J. Luchese (49)................. 1993 Mr. Luchese has served as President and CEO of CytRx since
March 1989, becoming Chairman of the CytRx Board in June
1995. Prior to joining CytRx, Mr. Luchese served as Vice
President and General Manager of the Armour Pharmaceutical
Corporation, and as Vice President, Corporate Business
Development and a member of the Management Committee of
Rorer Group, Inc. (now Rhone-Poulenc Rorer). Prior to
joining Rorer Group, Inc., Mr. Luchese was with Johnson &
Johnson Company for 15 years where he held various positions
in business development, licensing, sales, new product
marketing, and finance.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND AGE SINCE DURING AT LEAST THE PAST FIVE YEARS, AND OTHER DIRECTORSHIPS
- ------------ ----- ------------------------------------------------------------
<S> <C> <C>
Herbert H. McDade, Jr. (71).......... 1996 From 1989 to 1996 Mr. McDade has served as Chairman,
President and Chief Executive Officer of Chemex
Pharmaceuticals, Inc., becoming Chairman of Access
Pharmaceutical Co. (the successor corporation to Chemex) in
January, 1996. From 1986 to 1989 he was Chairman and
President of Armour Pharmaceutical Corporation, a wholly-
owned subsidiary of Rorer Group, Inc. (now Rhone-Poulenc
Rorer). Prior to 1986, Mr. McDade served as Vice President
of the Revlon Corporation. Mr. McDade also serves as a
director of CytRx.
Paul J. Wilson (46).................. 1993 Mr. Wilson has served as President, Chief Executive Officer
and a Director of Vaxcel since August 1993. Prior to joining
Vaxcel, Mr. Wilson was employed by American Cyanamid (now
part of American Home Products) from November 1974 to August
1993. From 1992 to August 1993, Mr. Wilson served as Vice
President and General Manager of American Cyanamid's
Lederle-Praxis Vaccine Division. In this position, he had
worldwide responsibility for sales, earnings, marketing,
market research, manufacturing, and quality control for
Lederle-Praxis' complete line of vaccine products. In other
positions at American Cyanamid, Mr. Wilson was Vice
President of Marketing for Lederle Laboratories from 1991 to
1992, where he had full marketing responsibility for Lederle
Laboratories' United States pharmaceuticals business. Prior
to that, he was General Manager for Lederle International's
Canadian operations from 1988 to 1991.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Board of Directors. The property, affairs and business of the Company are
under the general management of its Board of Directors as provided by the laws
of Delaware and the Bylaws of the Company. The Company has standing Audit and
Compensation Committees of the Board of Directors.
The Board of Directors held four meetings during 1997. Each director,
during the period he was a director, attended at least 75% of the meetings of
the Board of Directors. Each member of a committee, during the period he was a
committee member, attended at least 75% of the meetings of each committee on
which they served.
Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. The current members of the Audit Committee are Herbert H.
McDade, Jr. (Chairman), Lyle A. Hohnke and Jack J. Luchese. The Audit Committee
was formed subsequent to Vaxcel's merger with Zynaxis, Inc. in May 1997 and held
no meetings during 1997.
Compensation Committee. The Compensation Committee is authorized to review
annual salaries and bonuses and has the authority to determine the recipients of
options, the time or times at which options shall be granted, the exercise price
of each option, and the number of shares to be issuable upon the exercise of
each option. The Compensation Committee also is authorized to interpret the
Vaxcel, Inc. 1993 Stock Option Plan (the "Plan"), to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the term and
provisions of the respective option agreements, and to make all other
determinations deemed necessary or
4
<PAGE> 8
advisable for the administration of the Plan. Its current members are Jack. L.
Bowman (Chairman), Jack J. Luchese and Herbert H. McDade, Jr. The Compensation
Committee was formed subsequent to Vaxcel's merger with Zynaxis, Inc. in May
1997 and held one meeting during 1997.
COMPENSATION OF DIRECTORS
Directors who are employees of Vaxcel ("Employee Directors") or of CytRx
("Affiliate Employee Directors") do not currently receive any compensation for
their services as members of the Board of Directors of Vaxcel. Non-employee
Directors who do not serve on the CytRx Board ("Outside Directors") receive
$1,500 for each Board meeting attended. Non-employee Directors who also serve on
the CytRx Board ("Affiliate Directors") receive $1,250 for each Board meeting
attended when in conjunction with a CytRx Board meeting; otherwise they receive
the same fee as an Outside Director. Outside Directors and Affiliate Directors
receive $500 for each Committee meeting attended and an additional $250 for
functioning as Chairman of a Committee meeting.
All Directors, except Employee Directors, each receive an option to
purchase 5,000 shares of Vaxcel Common Stock upon joining the Board, and each
will receive 2,500 stock options each year thereafter upon their re-election to
the Board. Stock option grants to directors contain the same terms and
provisions as stock option grants to employees, except that options granted to
directors are considered Non-Qualified Stock Options for income tax reporting
purposes.
BENEFICIAL OWNERS OF MORE THAN FIVE PERCENT OF THE COMPANY'S COMMON STOCK;
SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS
Based solely upon information made available to the Company, the following
table sets forth certain information with respect to the beneficial ownership of
Common Stock as of April 13, 1998 by (i) each person who is known by the Company
to beneficially own more than five percent of the Common Stock; (ii) each
director and nominee for director of the Company; (iii) each of the Named
Executive Officers (as defined under "Executive Compensation" below); and (iv)
all officers and directors as a group. Except as otherwise indicated, the
holders listed below have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
-------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENTAGE(1)
- ------------------------------------ --------- -------------
<S> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS(2):
Jack L. Bowman(3)........................................... 9,499 *
Lyle A. Hohnke(4)........................................... 94,700 *
Jack J. Luchese(5).......................................... 1,666 *
Herbert H. McDade, Jr.(6)................................... 9,499 *
Mark J. Newman(7)........................................... 75,000 *
Mark W. Reynolds............................................ 1,200 *
Paul J. Wilson(8)........................................... 157,280 1.4%
All executive officers and directors as a group (7
persons)(9)............................................... 348,844 3.1
OTHER 5% STOCKHOLDERS:
CytRx Corporation(10)....................................... 9,265,000 87.5%
154 Technology Parkway
Norcross, Georgia 30092
</TABLE>
- ---------------
* Less than 1%.
(1) Based on 11,001,070 shares of Common Stock outstanding on April 13, 1998.
(2) The business address of all such persons is: c/o Vaxcel, Inc., 154
Technology Parkway, Norcross, Georgia 30092.
(3) Includes options to purchase 9,499 shares of Common Stock exercisable
within 60 days.
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<PAGE> 9
(4) Includes 47,350 shares and warrants to purchase 47,350 shares of Common
Stock exercisable within 60 days held by Javelin Capital Fund L.P.
("Javelin"). Dr. Hohnke is a member of Javelin Venture Partners, LLC, a
general partner of Javelin and may be deemed to share voting and investment
power with respect to such shares and warrants. Dr. Hohnke has disclaimed
beneficial ownership of such shares.
(5) Includes options to purchase 1,666 shares of Common Stock exercisable
within 60 days.
(6) Includes options to purchase 9,499 shares of Common Stock exercisable
within 60 days.
(7) Includes options to purchase 75,000 shares of Common Stock exercisable
within 60 days.
(8) Includes options to purchase 155,000 shares of Common Stock exercisable
within 60 days.
(9) Includes options to purchase 298,014 shares of Common Stock exercisable
within 60 days.
(10) Does not include a warrant to purchase an indeterminable number of shares
of Common Stock exercisable within 60 days that was issued to CytRx in
connection with the merger of Zynaxis, Inc. into a subsidiary of the
Company. The number of shares issuable pursuant to the exercise of such
warrant is equal to (i) the amount that the board of directors of CytRx
reasonably determines is the minimum amount that must be contributed to the
capital of the Company in order for the Company to satisfy quantitative
requirements for inclusion of the Common Stock in the Nasdaq Small Cap
Market divided by (ii) one-half of the Per Share Price (as defined in the
Agreement and Plan of Merger and Contribution dated December 6, 1996 among
CytRx, the Company, Vaxcel Merger Subsidiary, Inc. and Zynaxis, Inc. (the
"Merger Agreement")) and multiplied by (iii) the Exchange Ratio (as defined
in the Merger Agreement).
EXECUTIVE OFFICERS OF THE COMPANY
Except for Paul J. Wilson, discussed above under "Certain Information
Concerning Nominee and Continuing Directors", the following table sets forth the
names of the executive officers of the Company, their ages, their positions with
the Company and their principal occupations and employers for at least the last
five years. For information concerning executive officers' ownership of Common
Stock, see "Beneficial Owners of More Than Five Percent of the Company's Common
Stock; Shares Held by Directors and Executive Officers."
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY AND
NAME AGE PRINCIPAL OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS
- ---- --- ---------------------------------------------------------
<S> <C> <C>
Mark J. Newman, Ph.D.............. 42 Dr. Newman has served as Vice President, Research and
Development of Vaxcel, Inc. since January 1995. Prior to
joining Vaxcel, Dr. Newman was Associate Vice President,
Research and Development, for Apollon, Inc. during 1994
where he was responsible for developing DNA-based vaccines.
Prior to that, he was Director, Immunology and Virology
Section and Senior Director, Clinical Research, at the
Biopharmaceuticals Division of Cambridge Biotech
Corporation (now called Aquila Biopharm) from 1989 to 1993.
At Cambridge, he was heavily involved with the development
and clinical testing of the QS21 saponin adjuvant for use
with subunit vaccines.
Mark W. Reynolds.................. 36 Mr. Reynolds joined CytRx in 1988 as Controller, becoming
Chief Financial Officer and Corporate Secretary in 1996. He
concurrently has served in these capacities with Vaxcel
since its inception. Prior to joining CytRx, Mr. Reynolds
was employed as a certified public accountant with Arthur
Andersen LLP in Atlanta, Georgia.
</TABLE>
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<PAGE> 10
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended December 31, 1995, 1996 and 1997 for
(i) the President and Chief Executive Officer of the Company; and (ii) each of
the four other most highly compensated executive officers of the Company whose
total salary and bonus exceeded $100,000 (determined as of December 31, 1997 and
collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ----------------------
-------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
Paul J. Wilson.................. 1997 $214,000 $ -- -- $4,750(1)
President and Chief 1996 205,250 -- -- 4,750(1)
Executive Officer 1995 191,875 -- -- 4,620(1)
Mark J. Newman.................. 1997 $129,500 $13,000 -- $4,750(1)
Vice President, 1996 122,500 22,000 40,000 4,750(1)
Research & Development 1995 108,513 20,000 175,000 29,128(2)
Mark W. Reynolds(4)............. 1997 $ 94,000 $12,500 7,500 $4,750(3)
Chief Financial Officer 1996 82,333 25,000 25,000 4,750(3)
and Secretary 1995 76,000 8,000 36,877 4,620(3)
</TABLE>
- ---------------
(1) Vaxcel's matching contribution to CytRx's 401(k) Plan. Vaxcel does not have
a 401(k) Plan, but employees of Vaxcel are eligible to participate in
CytRx's 401(k) Plan.
(2) Includes $3,830 of Vaxcel's matching contributions to the CytRx 401(k) Plan
and $25,298 of costs associated with relocation.
(3) CytRx's matching contribution to its 401(k) Plan.
(4) Mr. Reynolds is an employee of CytRx; the amounts shown in the table above
represent total compensation paid to Mr. Reynolds by CytRx for services
rendered in all capacities for CytRx and its subsidiaries. Pursuant to a
services and facilities agreement between Vaxcel and CytRx, Vaxcel pays to
CytRx a fee for the services rendered by Mr. Reynolds as well as for other
financial and administrative services. The total fee charged by CytRx to the
Company for all services and facilities pursuant to this Agreement,
including the services of Mr. Reynolds, for the year ended December 31, 1997
was approximately $90,000.
OPTION GRANTS IN LAST FISCAL YEAR
There were no grants of options or warrants to any of the Named Executive
Officers during the year ended December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUE AT DECEMBER 31,
1997
The following table sets forth the number and total value of unexercised
in-the-money options at December 31, 1997 for each of the executive officers of
the Company named in the Summary Compensation Table above, using the price per
share of the Common Stock of $.625 on December 31, 1997. No stock options were
exercised during 1997 by any of the Company's Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1997(#) AT DECEMBER 31, 1997($)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul J. Wilson............................. 155,000 345,000 $ -- $ --
Mark J. Newman............................. 75,000 140,000 -- --
Mark W. Reynolds........................... -- -- -- --
</TABLE>
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<PAGE> 11
EMPLOYMENT AGREEMENT
The employment agreement for Paul J. Wilson, President and Chief Executive
Officer of Vaxcel (the "Employment Agreement"), provides for a five-year term of
employment that commenced on August 16, 1993. Pursuant to the terms of the
Employment Agreement, Mr. Wilson's annual cash compensation is currently
$214,000. In addition, Mr. Wilson received an option to purchase up to 500,000
shares of Vaxcel Common Stock. Such option has an exercise price of $1.50 per
share. The option vests as to certain portions of shares of Common Stock over
the term of Mr. Wilson's Employment Agreement if Vaxcel achieves during such
time period certain milestones related to both the vaccine technologies and
Vaxcel. As of December 31, 1997, Mr. Wilson's option had vested as to 155,000 of
the 500,000 shares.
The Employment Agreement may be terminated by Vaxcel prior to expiration
under customary circumstances, including "for cause" (as defined in the
Employment Agreement), without cause and upon the death or disability of Mr.
Wilson. Upon termination for cause, Mr. Wilson would be entitled to receive
severance equal to from one to three months' salary, depending upon the specific
"for cause" event. Upon termination of employment without cause by Vaxcel, Mr.
Wilson would receive his salary for one year (at the then current salary rate).
Upon termination of employment by reason of death or disability, Mr. Wilson
would receive severance equal to six months' salary. The vesting of options
shall cease upon any employment termination for cause; if Mr. Wilson's
employment is terminated by Vaxcel for any other reason, certain options that
would have vested on the next anniversary will be accelerated to vest
immediately and certain others may vest during the twelve-month period after
termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was formed in May 1997 in connection
with the Company's merger with Zynaxis, Inc. Jack L. Bowman (Chairman), Jack J.
Luchese and Herbert H. McDade, Jr. were the only members of the Compensation
Committee during the fiscal year ended December 31, 1997. There are no
"interlocks" as defined by the Securities and Exchange Commission with respect
to any member of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report shall not be deemed incorporated by reference into any
filing under the Securities Act of 1933 (the "1933 Act") or under the Securities
an Exchange Act of 1934 (the "1934 Act"), except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under either the 1933 Act or the 1934 Act.
The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation practices of the Company, establishes the
compensation plans and specific compensation levels for executive officers and
administers the Company's stock option plans.
The Committee believes that the Chief Executive Officer's compensation
should be influenced by Company performance, although "performance" for a
company engaged in pharmaceutical research and development does not necessarily
correlate to profits. The Committee considers "performance" to include
achievement of product development targets and milestones, effective
fund-raising and technology licensing efforts, and effective management of
personnel and capital resources, among other criteria. The Committee also
reviews the Chief Executive Officer's compensation in light of the level of
similar executive compensation arrangements within the biopharmaceutical
industry.
The specific terms of Mr. Wilson's employment agreement are discussed under
"Employment Agreement". Mr. Wilson is eligible to be considered for an annual
cash bonus, which is solely at the discretion of the Committee based upon such
factors as the Committee deems appropriate. Mr. Wilson's performance period for
purposes of this report is January 1, 1997 through December 31, 1997. During
this performance period the Company deemed it appropriate to forego a cash bonus
to Mr. Wilson due to the Company's lack of licensing revenue during the period.
8
<PAGE> 12
The Committee believes that stock options should be granted to the Chief
Executive Officer, as well as to other executives, primarily based on the
executive's ability to influence the Company's long-term growth and
profitability. As such, Mr. Wilson's employment agreement includes warrants to
purchase 500,000 shares of Vaxcel Common Stock at an exercise price of $1.50 per
share. These warrants cover the period from Mr. Wilson's initial employment
(August 16, 1993) through August 16, 1998 and include a combination of
tenure-based vesting as well as vesting upon the achievement of corporate
objectives. The Committee believes that this arrangement provides Mr. Wilson
with the greatest incentive to accelerate achievement of corporate objectives
and thereby enhance long-term shareholder value.
The Committee has adopted similar practices with respect to compensation of
other executive officers of the Company. In establishing base salaries and cash
bonuses for executive officers, the Committee considers relative company
performance, the individual's past performance and future potential, and
compensation for persons holding similarly responsible positions at other
companies in the pharmaceutical and biotechnology industries. The relative
importance of these factors varies depending upon the individual's
responsibilities; all facts are considered in establishing both base salaries
and cash bonuses. When making comparison to other companies, the Committee
generally considers those companies included in the Nasdaq Pharmaceutical Index
(see "Company Performance").
The Committee, in conjunction with the Chief Executive Officer, has also
established a model composed of salary categories with specified percentages to
be applied to the overall level of employees' salaries (including executive
officers) to provide a guideline for annual cash bonuses and the number of stock
options to be granted. This model is used only as a guideline, as some
subjectivity must be applied in evaluating each individual's performance. As
with the Chief Executive Officer, the number of options granted is determined by
the evaluation of the Executive's ability to influence the Company's long-term
growth and profitability. The Committee also considers the aggregate number of
options granted in past years. Because the value of an option bears a direct
relationship to the Company's stock price, it is an effective incentive for
executives to create value for stockholders. The Committee therefore views stock
options as an important component of its long-term, performance-based
compensation philosophy.
For 1997, the Committee considered Section 162(m), which limits tax
deductions of public companies on compensation to certain executive officers in
excess of $1 million dollars, along with other factors in determining executive
compensation. The committee will continue to consider the effect of Section
162(m) on its compensation decisions, but has no formal policy to structure
executive compensation so that it complies with the requirements of Section
162(m).
Respectfully submitted,
Compensation Committee:
Jack L. Bowman
Jack J. Luchese
Herbert H. McDade, Jr.
9
<PAGE> 13
STOCKHOLDER RETURN COMPARISON
The following line graph presentation compares cumulative total stockholder
returns of the Company with the Nasdaq Stock Market Index and the Nasdaq
Pharmaceutical Index (the "Peer Index") for the period from June 30, 1997 to
December 31, 1997. The Company's Common Stock first began trading during June
1997. The graph and table assume that $100 was invested in each of the Company's
Common Stock, the Nasdaq Stock Market Index and the Peer Index on June 30, 1997,
and that all dividends were reinvested. This data was furnished by the Center
for Research in Security Prices, The University of Chicago.
COMPARISON OF CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
THE NASDAQ
MEASUREMENT PERIOD STOCK
(FISCAL YEAR COVERED) VAXCEL, INC. MARKET PEER INDEX
<S> <C> <C> <C>
JUNE 100 100 100
JULY 121 111 103
AUGUST 79 110 102
SEPTEMBER 61 117 112
OCTOBER 25 111 106
NOVEMBER 46 111 103
DECEMBER 36 110 101
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Directors, executive officers and
greater than ten percent stockholders are required by Securities and Exchange
Commission regulation to furnish the registrant with copies of all Section 16(a)
reports they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the year ended December 31, 1997 all
Section 16(a) filing requirements applicable to directors, executive officers
and greater than ten percent beneficial owners were complied with by such
persons.
10
<PAGE> 14
PROPOSAL II
AMENDMENT TO THE COMPANY'S 1993 STOCK OPTION PLAN
As of April 8, 1998, the Company's Board of Directors approved an amendment
to the Company's 1993 Stock Option Plan (the "Amended and Restated Plan"),
subject to stockholder approval, to increase the number of authorized shares of
the Company's Common Stock to be issuable thereunder pursuant to Section 3(a)
thereof from 1,000,000 to 1,500,000. All other terms and conditions of the 1993
Stock Option Plan remain unchanged.
Subject to adjustment as provided in the Amended and Restated Plan, the
aggregate number of shares of Common Stock reserved and available for options is
1,500,000. The maximum number of shares of Common Stock with respect to one or
more options that may be granted under the Amended and Restated Plan to any one
participant is 500,000. On February 23, 1998, subject to Board of Director and
stockholder approval of the amendment to the 1993 Stock Option Plan, the
Compensation Committee granted to Mark J. Newman, Vice President, Research and
Development of the Company, an option to purchase 500,000 shares of Common Stock
at an exercise price per share of $.625. The amendment to the 1993 Stock Option
Plan is required to effectuate the granting of Dr. Newman's option.
A summary of the Amended and Restated Plan is set forth below. The summary
is qualified in its entirety by reference to the full text of the Amended and
Restated Plan, which is attached to this Proxy Statement as Appendix A.
GENERAL
The purpose of the Amended and Restated Plan is to promote the interests of
the Company by providing incentives to eligible participants to encourage them
to acquire a proprietary interest, or to increase their proprietary interest, in
the Company. Persons that are eligible to participate in the Amended and
Restated Plan consist of officers and employees of the Company, a Parent
Corporation (as defined in Section 242 of the Internal Revenue Code of 1986, as
amended (the "Code")) or a Subsidiary Corporation (as defined in Section 242 of
the Code), members of the Company's Board of Directors, and independent
contractors and consultants who perform services for the Company. As of April
30, 1998, there were approximately nine persons eligible to participate in the
Amended and Restated Plan.
The Amended and Restated Plan authorizes the granting of options to
purchase shares of Common Stock ("Options"), which may be incentive stock
options or non-qualified stock options.
ADMINISTRATION
The Amended and Restated Plan will be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). The
Committee has the power, authority and discretion to determine the eligible
participants; determine the terms and conditions of the Options, to establish,
adopt or revise any rules and regulations as it may deem necessary or advisable
to administer the Amended and Restated Plan; and make all other decisions and
determinations that may be required under, or as the Committee deems necessary
or advisable to administer, the Amended and Restated Plan.
OPTIONS
The Committee is authorized to grant Options, which may be incentive stock
options ("ISOs") or nonqualified stock options ("NSOs"), to participants. All
Options will be evidenced by a written Grant Letter (as defined in the Amended
and Restated Plan). The terms of any ISO must meet the requirements of Section
422 of the Code.
No Option will be assignable or transferable by a participant other than by
will or the laws of descent and distribution or, except in the case of an ISO,
pursuant to a qualified domestic relations order that would satisfy Section
414(p)(1)(A) of the Code if such section applied to an Option issued under the
Amended and Restated Plan.
11
<PAGE> 15
Upon the participant's death or disability, all outstanding Options which
were otherwise exercisable by the grantee at the date of death may be exercised
by the grantee's personal representative at any time prior to the expiration of
one year from the date of death, but in any event no later than the date of
expiration of the exercise period. In the event of a Change in Control of the
Company (as defined in the Amended and Restated Plan), all outstanding Options
will become immediately and fully vested and exercisable. Before or after the
occurrence of an anticipated Change in Control, the Committee may provide that
outstanding Options may be canceled unilaterally by the Company in exchange for
an amount equal to (i) the same consideration each participant would receive
with respect to the Common Stock subject to the Option if such Common Stock had
been sold, transferred or exchanged in the transaction constituting the Change
in Control less (ii) the aggregate exercise price with respect to the Common
Stock subject to such Option.
TERMINATION AND AMENDMENT
The Board or the Committee may, at any time and from time to time,
terminate, amend or modify the Amended and Restated Plan without stockholder
approval; provided, however, that the Committee may condition any amendment on
the approval of stockholders of the Company if such approval is necessary or
deemed advisable with respect to tax, securities or other applicable laws,
policies or regulations. No termination, amendment, or modification of the
Amended and Restated Plan may adversely affect any Option previously granted
under the Amended and Restated Plan, without the written consent of the
participant.
CERTAIN FEDERAL INCOME TAX EFFECTS
Nonqualified Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of a non-discounted NSO. However, the participant
will realize ordinary income on the exercise of the NSO in an amount equal to
the excess of the fair market value of the Common Stock acquired upon the
exercise of such option over the exercise price, and the Company will receive a
corresponding deduction. The gain, if any, realized upon the subsequent
disposition by the participant of the Common Stock will constitute short-term or
long-term capital gain, depending on the participant's holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of a non-discounted ISO or the exercise thereof by
the participant. If the participant holds the shares of Common Stock for the
greater of two years after the date the Option was granted or one year after the
acquisition of such shares of Common Stock (the "required holding period"), the
difference between the aggregate option price and the amount realized upon
disposition of the shares of Common Stock will constitute mid- or long-term
capital gain or loss, and the Company will not be entitled to a federal income
tax deduction. If the shares of Common Stock are disposed of in a sale, exchange
or other "disqualifying disposition" during the required holding period, the
participant will realize taxable ordinary income in an amount equal to the
excess of the fair market value of the Common Stock purchased at the time of
exercise over the aggregate option price, and the Company will be entitled to a
federal income tax deduction equal to such amount.
ADDITIONAL INFORMATION
The closing price of the Common Stock, as reported by the Nasdaq National
Market on April 28, 1998, was $.46875. The affirmative vote of the holders of a
majority of the shares present or represented by proxy and entitled to vote at
the meeting on this proposal will constitute approval of the Amended and
Restated Plan.
12
<PAGE> 16
Pursuant to the terms of the 1993 Stock Option Plan, stockholder approval
is not required to amend the 1993 Stock Option Plan, however, because of certain
federal income tax considerations, among other reasons, the Board of Directors
has determined to seek stockholder approval of the amendment. If the amendment
is not approved at the Annual Meeting, the Board of Directors intends to
reconsider its determination to amend the 1993 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE AMENDMENT
TO THE 1993 STOCK OPTION PLAN TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK ISSUABLE THEREUNDER TO 1,500,000. IF A CHOICE IS SPECIFIED ON THE
PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE PROPOSAL. THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST IS REQUIRED FOR APPROVAL OF
PROPOSAL II.
PROPOSAL III
RATIFICATION OF AUDITORS
The Company's Board of Directors has selected Ernst & Young LLP to conduct
the annual audit of the financial statements of the Company for the fiscal year
ending December 31, 1998. Ernst & Young LLP has no financial interest, direct or
indirect, in the Company, and does not have any connection with the Company
except in its professional capacity as an independent auditor.
The ratification by the holders of Common Stock of the selection of Ernst &
Young LLP as independent auditors is not required by law or by the Bylaws of the
Company. The Board of Directors, consistent with the practice of many publicly
held corporations, is nevertheless submitting this selection to the holders of
Common Stock. If this selection is not ratified at the Annual Meeting, the Board
of Directors intends to reconsider its selection of independent auditors for the
fiscal year ending December 31, 1998.
The Audit Committee, which is composed of directors who are not employees
of the Company, approves in advance all material non-audit services to be
provided by Ernst & Young LLP and believes that these services have no effect on
audit independence.
Representatives of Ernst & Young LLP will be present at the Annual Meeting
and will have an opportunity to make a statement, if they so desire, and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1998. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE
STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THE SHARES WILL BE VOTED FOR THE PROPOSAL. THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE VOTES CAST IS REQUIRED FOR APPROVAL OF PROPOSAL III.
STOCKHOLDER PROPOSALS
Any proposal which a Company stockholder intends to be presented at the
next annual meeting of stockholders to be held in 1999 must be received by the
Company on or before January 11, 1999. Only proper proposals which are timely
received will be included in the Proxy Statement and Proxy.
OTHER MATTERS
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of the Company, personally, by telephone
or by telegraph. The Company has engaged Beacon Hill Partners, Inc. to
distribute proxy materials to brokers and banks for distribution to beneficial
owners of the Company's Common Stock and to solicit proxies from brokerage
firms, banks and institutional holders of shares. Beacon Hill Partners, Inc.
will be paid a fee of $1,750 plus reimbursement of expenses for its services.
13
<PAGE> 17
MISCELLANEOUS
Management does not know of any matters to be brought before the Annual
Meeting other than as described in this Proxy Statement. Should any other
matters properly come before the Annual Meeting, the persons designated as
proxies will vote in accordance with their best judgment on such matters.
AVAILABILITY OF ANNUAL REPORT
ACCOMPANYING THIS PROXY STATEMENT IS A COPY OF THE COMPANY'S ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1997. IN ADDITION, COPIES OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE WITHOUT CHARGE, EXCEPT FOR
EXHIBITS. STOCKHOLDERS WHO WOULD LIKE ADDITIONAL COPIES OF THE ANNUAL REPORT OR
THE COMPANY'S FORM 10-K SHOULD DIRECT THEIR REQUESTS IN WRITING TO: VAXCEL,
INC., 154 TECHNOLOGY PARKWAY, NORCROSS, GEORGIA 30092, ATTENTION: MARK W.
REYNOLDS.
By Order of the Board of Directors
/s/ MARK W. REYNOLDS
Mark W. Reynolds
Secretary
May 11, 1998
14
<PAGE> 18
APPENDIX A
VAXCEL, INC.
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
Amended and Restated as of February 23, 1998
The purpose of the Amended and Restated 1993 Stock Option Plan (the "Plan")
of Vaxcel, Inc. (the "Company") is to promote the interests of the Company by
providing incentives to (i) designated officers and other employees of the
Company, a Parent Corporation or a Subsidiary Corporation (as defined herein),
(ii) members of the Board of Directors (the "Board") and (iii) independent
contractors and consultants (who may be individuals or entities) who perform
services for the Company, to encourage them to acquire a proprietary interest,
or to increase their proprietary interest, in the Company. The Company believes
that the Plan will cause participants to contribute materially to the growth of
the Company, thereby benefiting the Company's stockholders. For purposes of the
Plan, the terms "Parent Corporation" and "Subsidiary Corporation" shall have the
meanings set forth in subsections (e) and (f) of Section 424 of the Internal
Revenue Code of 1986, as amended (the "Code").
Section 1. Administration. The Plan shall be administered and interpreted
by a committee of the Board (the "Committee") consisting of not less than two
persons, all of whom shall be (i) "outside directors" as that term is used in
Section 162(m) of the Code and the regulations promulgated thereunder or any
successor provisions, to the extent that Section 162(m) is applicable to the
Company as described in Section 16(d) hereof, and (ii) "non-employee directors"
as such term is defined in Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor
provisions, to the extent that Section 16 of the Exchange Act is applicable to
the Company as described in Section 16(e) hereof. The Committee shall have the
sole authority to determine (i) who is eligible to receive Grants (as defined in
Section 2 below) under the Plan, (ii) the type, size and terms of each Grant
under the Plan (subject to Section 4 below), (iii) the time when each Grant will
be made and the duration of any exercise or restriction period; (iv) any
restrictions on resale applicable to the shares to be issued or transferred
pursuant to the Grant; and (v) any other matters arising under the Plan.
Non-Employee Directors of the Board, as defined below, may receive Grants only
pursuant to the provisions of Section 5(j). The Committee may, if it so desires,
base any of the foregoing determinations upon the recommendations of management
of the Company. The Committee shall have full power and authority to administer
and to interpret the Plan and to adopt or amend such rules, regulations,
agreements and instruments as it may deem appropriate for the proper
administration of the Plan. The Committee's interpretations of the Plan and all
determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all persons having any interests in
the Plan or in any Grants under the Plan. No person acting under this Section
shall be held liable for any action or determination made in good faith with
respect to the Plan or any Grant under the Plan. Notwithstanding the above,
until such time as the Compensation Committee of the Board consists of at least
two disinterested, outside directors, the Plan shall be administered by the full
Board, which shall have the same authority designated to the Committee as set
forth herein. Any Awards granted by the full Board during such time may be later
ratified by the Committee.
Section 2. Grants. Grants under the Plan shall consist of Incentive Stock
Options (as defined in Section 5(b) below) and Nonqualified Stock Options (as
defined in Section 5(b) below) (hereinafter collectively referred to as "Grants"
or "Stock Options"). All Grants shall be subject to the terms and conditions set
forth herein and to such other terms and conditions of any nature as long as
they are not inconsistent with the Plan as the Committee deems appropriate and
specifies in writing to the participant in the document designating the Grant
(the "Grant Letter"). The Committee shall approve the form and provisions of
each Grant Letter. Grants under any section of the Plan need not be uniform as
among the participants receiving the same type of Grant, and Grants under two or
more sections of the Plan may be combined in one Grant Letter; provided,
however, that Grants to Non-Employee Directors, as defined below, shall be made
only in accordance with the provisions of Section 5(j).
A-1
<PAGE> 19
Section 3. Shares Subject to the Plan. (a) The aggregate number of shares
of the Common Stock, par value $.001 per share ("Common Stock"), of the Company
that may be issued or transferred under the Plan is 1,500,000, subject to
adjustment pursuant to Section 3(b) below. The maximum number of shares of
Common Stock for which any Grantee may be granted Stock Options under the Plan
is 500,000, subject to adjustment pursuant to Section 3(b) below. The shares may
be authorized but unissued shares or reacquired shares. If and to the extent
that Stock Options granted under the Plan terminate, expire or are canceled
without having been exercised (including shares canceled as part of an exchange
of Grants), the shares subject to such Grant shall again be available for
subsequent Grants under the Plan.
(b) If any change is made to the Common Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or any other change in capital
structure made without receipt of consideration), then unless such event or
change results in the termination of all outstanding Grants under the Plan, the
Committee shall preserve the value of the outstanding Grants by adjusting the
maximum number and class of shares issuable under the Plan to reflect the effect
of such event or change in the Company's capital structure, and by making
appropriate adjustments to the number and class of shares, the exercise price of
each outstanding Stock Option and otherwise, except that any fractional shares
resulting from such adjustments shall be eliminated by rounding any portion of a
share equal to .500 or greater up, and any portion of a share equal to less than
.500 down, in each case to the nearest whole number.
Section 4. Eligibility for Participation. Officers and other employees of
the Company, a Parent Corporation or a Subsidiary Corporation, members of the
Board, and independent contractors and consultants who perform services for the
Company shall be eligible to participate in the Plan (hereinafter referred to
individually as an "Eligible Participant" and collectively as "Eligible
Participants"). Only Eligible Participants who are officers or other employees
of the Company, a Parent Corporation or a Subsidiary Corporation shall be
eligible to receive Incentive Stock Options. All Eligible Participants shall be
eligible to receive Nonqualified Stock Options. The Committee shall select from
among the Eligible Participants those who will receive Grants (the "Grantees")
and shall determine the number of shares of Common Stock subject to each Grant;
provided, however, that members of the Board who are not employed in any
capacity by the Company (hereinafter referred to as "Non-Employee Directors")
may only receive grants of Stock Options pursuant to Section 5(j). The Committee
may, if it so desires, base any such selections or determinations upon the
recommendations of management of the Company. Nothing contained in the Plan
shall be construed to limit in any manner whatsoever the right of the Company to
grant rights or options to acquire Common Stock or awards of Common Stock
otherwise than pursuant to the Plan.
Section 5. Stock Options (a) Number of Shares. The Committee, in its
sole discretion, shall determine the number of shares of Common Stock that will
be subject to each Stock Option.
(b) Type of Stock Option and Exercise Price. (1) The Committee may grant
options qualifying as incentive stock options within the meaning of Section 422
of the Code ("Incentive Stock Options") and other stock options ("Nonqualified
Stock Options"), in accordance with the terms and conditions set forth herein,
or may grant any combination of Incentive Stock Options and Nonqualified Stock
Options (hereinafter referred to collectively as "Stock Options"). The exercise
price per share of an Incentive Stock Option shall be the fair market value (as
defined herein) of a share of Common Stock on the date of grant. If the Grantee
of an Incentive Stock Option is the owner (as determined under Section 424(d) of
the Code) of stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or a Parent Corporation or Subsidiary
Corporation, the exercise price per share in the case of an Incentive Stock
Option shall not be less than 110% of the fair market value of a share of Common
Stock on the date of grant.
(2) For all valuation purposes under the Plan, the fair market value of a
share of Common Stock shall be determined in accordance with the following
provisions:
(A) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded either on the over-the-counter
market or listed on the Nasdaq National Market, the fair market value shall
be the closing selling price of one share of Common Stock on the date in
question as such
A-2
<PAGE> 20
price is reported by the Nasdaq system or any successor system. If there is
no reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the next preceding date for
which such quotation exists shall be determinative of fair market value.
(B) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing
selling price of one share of Common Stock on the date in question on the
stock exchange determined by the Committee to be the primary market for the
Common Stock, as such prices are officially quoted on such exchange. If
there is no reported closing selling price of Common Stock on such exchange
on the date in question, then the fair market value shall be the closing
selling price on the next preceding date for which such quotation exists.
(C) If the Common Stock is at the time neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market
(or, if the Committee determines that the value as determined pursuant to
Section 5(b)(2)(A) or (B) above does not reflect fair market value), then
the Committee shall determine fair market value after taking into account
such factors as it deems appropriate.
(c) Exercise Period. The Committee shall determine the exercise period of
each Stock Option. The exercise period shall not exceed ten years from the date
of grant. However, if the Grantee of an Incentive Stock Option is the owner (as
determined under Section 424(d) of the Code) of stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or a
Parent Corporation or Subsidiary Corporation, the exercise period shall not
exceed five years from the date of grant. Notwithstanding any determinations by
the Committee regarding the exercise period of any Stock Option, a Change in
Control (as defined in Section 7) shall have the effect set forth in Section 7.
(d) Vesting of Stock Options and Restrictions on Shares. The vesting
period for Stock Options shall commence on the date of grant and shall end on
the date or dates, determined by the Committee, that shall be specified in the
Grant Letter. The Committee may impose upon the shares of Common Stock issuable
upon the exercise of a Stock Option such restrictions as it deems appropriate
and specifies in the Grant Letter. During any period in which such restrictions
apply, the Committee, in such circumstances as it deems equitable, may determine
that all such restrictions shall lapse. Notwithstanding any other provision of
the Plan, all outstanding Stock Options shall become immediately and fully
vested and immediately exercisable upon a Change in Control of the Company (as
defined in Section 7 below).
(e) Manner of Exercise. A Grantee may exercise a Stock Option by
delivering a duly completed notice of exercise to the Corporate Secretary of the
Company, together with payment of the exercise price and any applicable tax
withholdings. Such notice may include instructions authorizing the Company to
deliver the certificates representing the shares of Common Stock issuable upon
the exercise of such Stock Option to any designated registered broker or dealer
("Designated Broker"). Such instructions shall designate the account into which
the shares are to be deposited. The Grantee may tender such notice of exercise,
which has been properly executed by the Grantee, and the aforementioned delivery
instructions to any Designated Broker.
(f) Termination of Eligible Status, Disability or Death. (1) If a Grantee
terminates employment or otherwise ceases to be an Eligible Participant for any
reason (other than, in the case of an individual, the death of such individual)
any Stock Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within three months after the date on which the Grantee ceases
to be an Eligible Participant (or within such other period of time, which may be
longer or shorter than three months, as may be specified in the Grant Letter),
but in any event no later than the date of expiration of the exercise period,
except that in the case of an individual Grantee who is disabled within the
meaning of Section 22(e)(3) of the Code, such period shall be one year rather
than three months (except as otherwise provided in the Grant Letter).
(2) In the event of the death of an individual Grantee while he or she is
an Eligible Participant or within not more than three months after the date on
which the Grantee ceases to be an Eligible Participant (or within such other
period of time, which may be longer or shorter than three months, as may be
specified in the Grant Letter), any Stock Option which was otherwise exercisable
by the Grantee at the date of death may be
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<PAGE> 21
exercised by the Grantee's personal representative at any time prior to the
expiration of one year from the date of death, but in any event no later than
the date of expiration of the exercise period.
(g) Satisfaction of Exercise Price. The Grantee shall pay the exercise
price in cash, or, with the consent of the Committee in its sole discretion, by
delivering (or attesting his or her ownership of) shares of Common Stock already
owned by the Grantee and having a fair market value on the date of exercise
equal to the exercise price, or a combination of cash and shares of Common
Stock; provided however, that if shares of Common Stock are used to pay the
exercise price of a Stock Option, such shares must have been held by the Grantee
for at least six months. The Committee shall determine any other methods by
which the exercise price of a Stock Option may be paid, the form of payment,
including, without limitation, "cashless exercise" arrangements, and the methods
by which shares of Common Stock shall be delivered or deemed to be delivered to
Grantees. Without limiting the power and discretion conferred on the Committee
pursuant to the preceding sentence, the Committee may, in the exercise of its
discretion, but need not, allow a Grantee to pay the exercise price of a Stock
Option by directing the Company to withhold from the shares of Common Stock that
would otherwise be issued upon exercise of the Stock Option that number of
shares having a fair market value on the exercise date equal to the exercise
price, all as determined pursuant to rules and procedures established by the
Committee. The Grantee shall pay the exercise price and the amount of
withholding tax due, if any, at the time of exercise. Shares of Common Stock
shall not be issued or transferred upon any purported exercise of a Stock Option
until the option price and the withholding obligation are fully paid.
(h) Limits on Incentive Stock Options. Each Grant of an Incentive Stock
Option shall provide that:
(1) the Stock Option is not transferable by the Grantee, except, in
the case of an individual Grantee, by will or the laws of descent and
distribution;
(2) the Stock Option is exercisable only by the Grantee, except as
otherwise provided herein or in the Grant Letter in the event of the death
of an individual Grantee; and
(3) the aggregate fair market value of the Common Stock on the date of
the Grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year under the Plan and
under any other stock option plan of the Company shall not exceed $100,000.
(i) Replacement Stock Options. If a Stock Option granted pursuant to the
Plan may be exercised by a Grantee by means of a stock-for-stock swap method of
exercise as provided in Section 5(g) above, then the Committee may, in its sole
discretion and at the time of the original Grant, authorize the Grantee to
automatically receive a replacement Stock Option pursuant to this Section of the
Plan. This replacement Stock Option shall cover a number of shares of Common
Stock determined by the Committee, but in no event more than the number of
shares equal to the difference between the number of shares of the original
Stock Option exercised and the net shares received by the Grantee from such
exercise. The per share exercise price of the replacement Stock Option shall
equal the then current fair market value of a share of Common Stock, and shall
have a term extending to the expiration date of the original Stock Option. The
Committee shall have the right, in its sole discretion and at any time, to
discontinue the automatic grant of replacement Stock Options if it determines
the continuance of such grants to no longer be in the best interest of the
Company.
(j) Stock Option Grants to Non-Employee Directors. Each Non-Employee
Director will receive a grant of a Nonqualified Stock Option to purchase 5,000
shares of Common Stock upon the date he or she first becomes a member of the
Board, and thereafter will receive a grant of a Nonqualified Stock Option to
purchase 1,500 shares of Common Stock (subject to adjustment as provided in this
Plan) as of the date of the Company's Annual Meeting of Stockholders each year.
(1) Option Exercise Price. Stock Options granted under this Section 5(j)
shall have a per share exercise price equal to the fair market value of a share
of Common Stock on the date of grant, and such Stock Option shall become
exercisable, with respect to 33% of the shares of Common Stock underlying the
option, on each anniversary following the date of grant.
(2) Administration. The provisions of this Section 5(j) are intended to
operate automatically and not require administration. However, to the extent
that administrative determinations are required, the provisions
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of this Section 5(j) shall be made by the members of the Board who are not
eligible to receive Grants under this Section 5(j), but in no event shall such
determinations affect the eligibility of Grantees, the determination of the
exercise price, the timing of the Grants or the number of shares subject to
Stock Options hereunder.
(3) Applicability of Plan Provisions. Except as otherwise provided in this
Section 5(j), the Nonqualified Stock Options to Non-Employee Directors shall be
subject to the provisions of this Plan applicable to Nonqualified Stock Options
to other persons.
Section 6. Transferability of Stock Options. No Stock Option shall be
assignable or transferable by a Grantee other than by will or the laws of
descent and distribution or, except in the case of an Incentive Stock Option,
pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A)
of the Code if such section applied to a Stock Option issued under the Plan;
provided, however, that the Committee may (but need not) permit other transfers
where the Committee concludes that such transferability (i) does not result in
accelerated taxation, (ii) does not cause any Stock Option intended to be an
Incentive Stock Option to fail to be described in Code Section 422(b), and (iii)
is otherwise appropriate and desirable, taking into account any state or federal
tax or securities laws applicable to transferable stock options.
Only a Grantee or his or her permitted transferee (or, in the case of an
individual Grantee, his or her authorized legal representative) may exercise
rights under a Grant. Upon the death of an individual Grantee, the personal
representative or other person entitled to succeed to the rights of the Grantee
("Successor Grantee") may exercise such rights. A Successor Grantee shall
furnish proof satisfactory to the Company of such person's right to receive the
Grant under the Grantee's will or under the applicable laws of descent and
distribution.
Section 7. Change of Control. For purposes of the Plan, "Change in
Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
by a Person who is on April 1, 1997 the beneficial owner of 25% or more of
the Outstanding Company Voting Securities, (ii) any acquisition directly
from the Company, including a public offering of Outstanding Company Voting
Securities, (iii) any acquisition by the Company, (iv) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (v) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of April 1, 1997, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to April 1, 1997 whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(3) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
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of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Voting Securities, and
(ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 25% or more of the combined voting power of
the then outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
If a Change in Control occurs, then each Stock Option shall become
immediately and fully vested and immediately exercisable. Before or after the
occurrence of an anticipated Change in Control, the Committee, in its
discretion, may provide that outstanding Stock Options may be canceled
unilaterally by the Company in exchange for an amount equal to (x) the same
consideration each Employee and Non-Employee Director otherwise would receive
with respect to Common Stock subject to the Stock Option if such Common Stock
has been sold, surrendered, exchanged or otherwise in the transaction
constituting the Change in Control, less (y) the aggregate exercise price with
respect to the Common Stock subject to such Stock Option.
Section 8. Stockholder Approval; Effective Date. The Plan was approved by
the Board of Directors of the Company and became effective on June 1, 1993. The
Plan, as amended and restated, was approved by the Board of Directors and the
sole stockholder of the Company on April 17, 1997, effective as of such date.
Section 9. Amendment and Termination of the Plan. (a) Amendment. The
Board or the Committee may, at any time and from time to time, amend, modify or
terminate the Plan without stockholder approval; provided, however, that the
Board or Committee may condition any amendment or modification on the approval
of stockholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations.
(b) Termination of Plan. The Plan shall terminate on June 1, 2003 unless
earlier terminated by the Board or unless extended by the Board with the
approval of the stockholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not result in the
termination or amendment of the Grant unless the Grantee consents or unless the
Committee acts under Section 16(b) below. The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 16(b) below or may be amended by agreement
of the Company and the Grantee which is consistent with the Plan.
Section 10. Funding of the Plan. The Plan shall be unfunded and shall not
create (or be construed to create) a trust or separate fund or funds. The Plan
shall not establish any fiduciary relationship between the Company and any
participant or beneficiary of a participant. To the extent any person holds any
obligation of the Company by virtue of an award granted under the Plan, such
obligation shall merely constitute a general unsecured liability of the Company
and accordingly shall not confer upon such person any right, title or interest
in any assets of the Company.
Section 11. Rights of Eligible Participants. Nothing in the Plan shall
entitle any Eligible Participant or other person to any claim or right to any
Grant under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Eligible Participant or Grantee any rights to be
retained by the Company in any capacity, whether as an employee, non-employee
member of the Board, independent contractor, consultant or otherwise.
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Section 12. Withholding of Taxes. The Company shall have the right to
require the Grantee to pay to the Company the amount of any taxes which the
Company is required to withhold in respect of such Grants or to take whatever
action it deems necessary to protect the interests of the Company in respect of
such tax liabilities, including, without limitation, withholding a portion of
the shares of Common Stock otherwise deliverable pursuant to the Plan. The
Company's obligation to issue or transfer shares of Common Stock upon the
exercise of a Stock Option shall be conditioned upon the Grantee's compliance
with the requirements of this Section to the satisfaction of the Committee.
Section 13. Agreements with Grantees. Each Grant made under the Plan
shall be evidenced by a Grant Letter containing such terms and conditions as the
Committee shall approve.
Section 14. Requirements for Issuance of Shares. No Common Stock shall be
issued or transferred under the Plan unless and until all applicable legal
requirements have been complied with to the satisfaction of the Committee. The
Committee shall have the right to condition any Stock Option on the Grantee's
undertaking in writing to comply with such restrictions on any subsequent
disposition of the shares of Common Stock issued or transferred thereunder as
the Committee shall deem necessary or advisable as a result of any applicable
law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
Section 15. Headings. The section headings of the Plan are for reference
only. In the event of a conflict between a section heading and the content of a
section of the Plan, the content of the section shall control.
Section 16. Miscellaneous. (a) Substitute Grants. The Committee may make
a Grant to an employee, a non-employee director, or an independent contractor or
consultant of another corporation, if such person shall become an Eligible
Participant by reason of a corporate merger, consolidation, acquisition of stock
or property, reorganization or liquidation involving the Company, a Parent
Corporation or a Subsidiary Corporation and such other corporation. Any such
Grant shall be made in substitution for a stock option granted by the other
corporation ("Substituted Stock Incentives"), but the terms and conditions of
the substitute Grant may vary from the terms and conditions required by the Plan
and from those of the Substituted Stock Incentives. The Committee shall
prescribe the provisions of the substitute Grants.
(b) Compliance with Law. The Plan, the exercise of Grants and the
obligations of the Company to issue or transfer shares of Common Stock under
Grants shall be subject to all applicable laws and required approvals by any
governmental or regulatory agencies. The Committee may revoke any Grant if it is
contrary to law or modify any Grant to bring it into compliance with any valid
and mandatory government regulations. The Committee may also adopt rules
regarding the withholding of taxes on payments to Grantees. The Committee may,
in its sole discretion, agree to limit its authority under this Section.
(c) Ownership of Stock. A Grantee, transferee or Successor Grantee shall
have no rights as a stockholder with respect to any shares of Common Stock
covered by a Grant until the shares are issued or transferred to the Grantee,
transferee or Successor Grantee on the stock transfer records of the Company.
(d) Code Section 162(m). The deduction limits of Code Section 162(m) and
the regulation thereunder do not apply to the Company until such time, if any,
as any class of the Company's equity securities is registered under Section 12
of the Exchange Act or the Company otherwise meets the definition of a "publicly
held corporation" under Treasury Regulation 1.162-27(c) or any successor
provision. Upon becoming a publicly held corporation, the deduction limits of
Code Section 162(m) and the regulations thereunder shall not apply to
compensation payable under this Plan until the expiration of the reliance period
described in Treasury Regulation 1.162-27(f) or any successor regulation.
(e) Section 16 of the Exchange Act. The provisions of Section 16 of the
Exchange Act and the regulation thereunder do not apply to the Company until
such time, if any, as any class of the Company's equity securities is registered
under Section 12 of the Exchange Act.
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APPENDIX B
PROXY VAXCEL, INC.
154 TECHNOLOGY PARKWAY
NORCROSS, GEORGIA 30092
ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Vaxcel, Inc. (the "Company"), Norcross,
Georgia, hereby constitutes and appoints Paul J. Wilson and Mark W. Reynolds or
either one of them, each with full power of substitution, to vote the number of
shares of Common Stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders to be held at the
Hilton Hotel at Peachtree Corners, 5993 Peachtree Industrial Boulevard,
Norcross, Georgia, on Wednesday, June 10, 1998, at 1:30 p.m., local time, or at
any adjournments thereof (the "Annual Meeting"), upon the proposals described in
the Notice of Annual Meeting of Stockholders and Proxy Statement, both dated May
11, 1998, the receipt of which is acknowledged, in the manner specified below.
1. ELECTION OF DIRECTORS. On the proposal to elect the following nominees for
directors to serve until the 1999 Annual Meeting of Stockholders of the
Company and until their successors are elected and qualified:
Jack L. Bowman, Lyle A. Hohnke, Jack J. Luchese, Herbert H. McDade, Paul J.
Wilson
<TABLE>
<S> <C> <C> <C>
[ ] FOR [ ] WITHHOLD AUTHORITY
TO WITHHOLD AUTHORITY FOR THE NOMINEE, WRITE THE NAME OF THE NOMINEE IN THE SPACE PROVIDED:
-------------------------------------------------------------------------------------------------------------------
</TABLE>
2. AMENDMENT TO 1993 STOCK OPTION PLAN. On the proposal to amend the Company's
1993 Stock Option Plan to increase the number of authorized shares of Common
Stock issuable thereunder to 1,500,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. SELECTION OF AUDITORS. On the proposal to ratify the selection of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be dated and signed on reverse side)
4. OTHER PROPOSALS. In their sole discretion, the Proxies are authorized to
vote upon such other business as may properly come before the Annual Meeting
or any adjournments thereof.
<TABLE>
<S> <C> <C> <C>
[ ] FOR [ ] WITHHOLD AUTHORITY
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3 AND WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
Please sign exactly as your name appears on your stock certificate and date.
Where shares are held jointly, each stockholder should sign. When signing as
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Shares Held:
-----------------------------
Signature of Stockholder
-----------------------------
Signature of Stockholder (If
held jointly)
Dated: , 1998
----------------------
Month Day
THIS PROXY IS SOLICITED ON BEHALF OF VAXCEL INC.'S BOARD OF DIRECTORS AND MAY BE
REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE.
