<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
TECHNICLONE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
TECHNICLONE CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Fee previously paid by written 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.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
TECHNICLONE CORPORATION
14282 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92780-7017
(714) 838-0500
NOTICE OF RESCHEDULED ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 27, 1997
NOTICE IS HEREBY GIVEN that the rescheduled 1997 Annual Meeting of
Stockholders of TECHNICLONE CORPORATION, a Delaware corporation (the "Company"),
will be held at THE SUTTON PLACE HOTEL, 4500 MACARTHUR BOULEVARD, NEWPORT BEACH,
CALIFORNIA, 92660 on Monday, October 27, 1997, at 11:00 A.M., Pacific Time, for
the following purposes, as more fully described in the accompanying Proxy
Statement:
(1) To elect the following five (5) nominees to serve as directors until
the next annual meeting of stockholders or until their successors are
elected and have qualified:
<TABLE>
<S> <C>
Lon H. Stone Edward Joseph Legere II
Clive Taylor, M.D. Ph.D. Carmelo J. Santoro, Ph.D.
Marc E. Lippman, M.D.
</TABLE>
(2) To approve an amendment to the Company's Certificate of Incorporation
which will increase the authorized number of shares of Common Stock,
which the Company has authority to issue, from 50,000,000 shares to
60,000,000 shares (See Proposal Two, Amendment of Certificate of
Incorporation);
(3) To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending April 30, 1998; and
(4) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on August 29, 1997,
will be entitled to vote at the meeting or any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ William V. Moding
William V. Moding,
Secretary
AMENDED PROXY ATTACHED -- RE-VOTING IS REQUIRED. YOUR VOTE IS IMPORTANT.
THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING YOU SHOULD COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any stockholder present at the meeting
may withdraw his or her proxy and vote personally on each matter brought before
the meeting. Stockholders attending the meeting whose shares are held in the
name of a broker or other nominee who desire to vote their shares at the meeting
should bring with them an original proxy or letter from that firm confirming
their ownership of shares and to provide evidence of whether such stockholders
have voted previously at this meeting.
<PAGE> 3
TECHNICLONE CORPORATION
14282 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92780-7017
------------------------
AMENDED PROXY STATEMENT
------------------------
RESCHEDULED ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 27, 1997
------------------------
INTRODUCTION
This Amended Proxy Statement is being furnished in connection with the
solicitation of proxies by the
Board of Directors of TECHNICLONE CORPORATION, a Delaware corporation
("Techniclone" or the "Company"), for use at its rescheduled 1997 Annual Meeting
of Stockholders to be held on Monday, October 27, 1997, at 11:00 A.M. at THE
SUTTON PLACE HOTEL, 4500 MACARTHUR BOULEVARD, NEWPORT BEACH, CALIFORNIA, 92660.
The Proxy Statement dated August 12, 1997 ("Original Proxy"), previously
furnished to stockholders of the Company in connection with the solicitation of
proxies by the Board of Directors for the Annual Meeting is amended and
supplemented by this Amended Proxy Statement. This Amended Proxy Statement
amends the Original Proxy by (i) deleting William V. Moding and Rudolph C.
Shepard from the proposed slate of directors to be elected at the Annual Meeting
and by adding Marc E. Lippman to the list of nominees for election as directors,
(ii) deleting the proposal to amend the Company's charter documents by
increasing the authorized number of shares of Common Stock from 50,000,000 to
100,000,000 and adding in its place a proposal to amend the Company's
Certificate of Incorporation to increase the authorized number of shares of
Common Stock from 50,000,000 to 60,000,000.
This Amended Proxy Statement and the accompanying BLUE PROXY CARD are being
mailed to shareholders on or about October 3, 1997. The Company has retained the
services of Corporate Investor Communications, Inc. ("CIC") to assist in
soliciting proxies from brokers and nominees for the Annual Meeting. The
estimated costs for these services is approximately $10,000 and will be borne by
the Company. It is contemplated that this solicitation of proxies will be made
exclusively by mail; however, if it should appear desirable to do so in order to
ensure adequate representation at the meeting, CIC, directors, officers and
employees of the Company may communicate with stockholders, brokerage houses and
others by telephone, telegraph or in person to request that proxies be furnished
and may reimburse banks, brokerage houses, custodians, nominees and fiduciaries
for their reasonable expenses in forwarding proxy materials to the beneficial
owners of the shares held by them. All expenses incurred in connection with this
solicitation shall be borne by the Company.
Holders of shares of Common Stock of the Company ("stockholders") who
execute proxies retain the right to revoke them at any time before they are
voted. Any proxy given by a stockholder may be revoked or superseded by
executing a later dated proxy, by giving notice of revocation to the Secretary
of the Company, 14282 Franklin Avenue, Tustin, California 92780-7017, in writing
prior to or at the meeting or by attending the meeting and voting in person. Any
stockholder, who holds stock in the name of a broker or other nominee, who
desires to revoke a previously executed proxy or vote in person at the meeting
should furnish or bring with them an original proxy, if such person has not yet
voted at this meeting, or a copy of any proxy previously voted. A proxy, when
executed and not so revoked, will be voted in accordance with the instructions
given in the proxy. If a choice is not specified in the proxy, the proxy will be
voted "FOR" the nominees for election of directors named in this Amended Proxy
Statement, "FOR" the increase in the authorized number of shares of Common Stock
of the Company and the amendment of the Certificate of Incorporation and "FOR"
the ratification of the appointment of Deloitte & Touche LLP as the independent
auditors of the Company. This Amended Proxy Statement is first being mailed to
stockholders on or about October 3, 1997.
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<PAGE> 4
VOTING SECURITIES
The Company has two classes of securities outstanding, common stock and
preferred stock, however only the common stock (the "Common Stock") is entitled
to vote at the meeting. Holders of Common Stock of the Company of record as of
the close of business on August 29, 1997 (the "Record Date"), will be entitled
to vote at the meeting or any adjournment or postponement thereof. As of the
Record Date, there were 27,403,331 shares of Common Stock outstanding and
entitled to vote. Each holder of shares of Common Stock is entitled to one vote
for each share of Common Stock held as of the Record Date. Abstentions and
broker non-votes are each included in the determination of the number of shares
present and voting for the purpose of determining whether a quorum is present.
Under Delaware law, the five (5) nominees receiving the highest number of votes
will be elected as directors at the Annual Meeting. As a result, proxies voted
to "Withhold Authority," which will be counted, and broker non-votes, which will
not be counted, will have no practical effect. Under the General Corporation Law
of the State of Delaware, for votes cast on matters other than the election of
directors that require the affirmative vote of a majority of the shares present
and voting at the annual meeting, or the affirmative vote of a majority of the
outstanding shares, abstentions and broker non-votes will have the same effect
as votes against a proposal.
Stockholders are not entitled to cumulate their votes in the election of
directors.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Set forth below is certain information as of the Record Date regarding the
beneficial ownership of the Company's Common Stock by (i) any person who was
known by the Company to own more than five percent (5%) of the voting securities
of the Company, (ii) all directors and nominees, (iii) each of the Named
Officers identified in the Summary Compensation Table, and (iv) all current
directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE OF NUMBER OF PERCENT
OF BENEFICIAL OWNER CLASS SHARES(A) OF CLASS(B)
- ---------------------------------------------------- ------------- --------- -----------
<S> <C> <C> <C>
Legere Enterprises, Ltd. Common Stock 3,123,333 10.71%
222 South Rainbow, Suite 218
Las Vegas, Nevada 89128
Sanderling Venture Partners III, L.P. Common Stock 1,656,668 5.68%
Sanderling III Limited Partnership
Sanderling III Biomedical, L.P.
Sanderling Ventures Management
2730 Sand Hill Road, Suite 200
Menlo Park, California 94025
S.K. Partners, L.P. Common Stock 1,516,791 5.20%
667 Madison Avenue
New York, New York 10021
Lon H. Stone Common Stock 1,424,978(C) 4.88%
14282 Franklin Avenue
Tustin, California 92780
R.C. Shepard Common Stock 725,920(D) 2.49%
660 Newport Center Dr.
Newport Beach, California 92660
William V. Moding Common Stock 467,100(E) 1.60%
14282 Franklin Avenue
Tustin, California 92780
Clive R. Taylor, M.D., Ph.D. Common Stock 835,000(F) 2.86%
14282 Franklin Avenue
Tustin, California 92780
Edward Joseph Legere II Common Stock 3,131,853(G) 10.73%
222 South Rainbow, Suite 218
Las Vegas, Nevada 89128
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
NAME AND ADDRESS TITLE OF NUMBER OF PERCENT
OF BENEFICIAL OWNER CLASS SHARES(A) OF CLASS(B)
- ---------------------------------------------------- ------------- --------- -----------
<S> <C> <C> <C>
Carmelo J. Santoro Common Stock 135,000(H) 0.46%
14282 Franklin Avenue
Tustin, California 92780
Marc E. Lippman, M.D. Common Stock 135,000(I) 0.46%
3970 Reservoir Road NW
Washington, D.C. 20007
All Directors Nominees and Executive Common Stock 6,854,851(J) 23.48%
Officers as a Group (7 in number)
</TABLE>
- ---------------
(A) Except as otherwise noted below, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock,
shown as beneficially owned by them, subject to community property laws
where applicable.
(B) Percentages for the Common Stock computed on the basis of 27,403,331 shares
outstanding at August 29, 1997, plus an additional 1,783,140 shares that
could be acquired by principal stockholders through exercise of stock
options and warrants during the 60 day period ending October 31, 1997.
(C) Includes 541,535 shares owned by members of Mr. Stone's family as to which
he may be deemed to be the beneficial owner. Also includes 689,000 shares
of Common Stock subject to outstanding stock options exercisable during the
60 day period ending October 31, 1997.
(D) Includes 90,100 shares of Common Stock subject to outstanding warrants and
8,520 shares of Common Stock subject to outstanding options to purchase
Common Stock exercisable during the 60 day period ending October 31, 1997.
Also includes 40,000 shares owned by members of Mr. Shepard's family as to
which he may be deemed to be the beneficial owner.
(E) Includes 20,000 shares owned by members of Mr. Moding's family as to which
he may be deemed to be the beneficial owner. Also includes 160,000 shares
of Common Stock subject to outstanding stock options exercisable during the
60 day period ending October 31, 1997.
(F) Includes 42,000 shares owned by members of Dr. Taylor's family as to which
he may be deemed to be the beneficial owner. Also includes 677,000 shares
of Common Stock subject to outstanding stock options exercisable during the
60 day period ending October 31, 1997.
(G) Includes the 3,123,333 shares owned by Legere Enterprises, Ltd., a Nevada
limited partnership owned by Mr. Legere and members of his family and 8,520
shares of Common Stock subject to outstanding options to purchase Common
Stock exercisable during the 60 day period ending October 31, 1997.
(H) Includes 125,000 shares of Common Stock subject to outstanding stock
options exercisable during the 60 day period ending October 31, 1997.
(I) Includes 25,000 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ending October 31, 1997.
(J) Includes the securities described in notes (C), (D), (E), (F), (G), (H) and
(I).
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<PAGE> 6
PROPOSAL ONE
ELECTION OF DIRECTORS
Directors are elected at each annual stockholders' meeting to serve until
the next annual meeting or until their successors are elected. The Board of
Directors proposes the election of five (5) directors at the Meeting. Unless
authority to vote for directors has been withheld in the proxy, the persons
named in the enclosed proxy intend to vote at the Meeting FOR the election of
the nominees presented below. Under Delaware law, the five nominees receiving
the highest number of votes will be elected as directors at the Meeting. As a
result, proxies voted to "Withhold Authority," which will be counted, and broker
non-votes, which will not be counted, will have no practical effect.
With the exception of Marc E. Lippman, M.D. who is a new nominee, each of
the nominees is an incumbent director elected at the last annual meeting of
stockholders. Each of the nominees has consented to serve as a director for the
ensuing year. If any nominee becomes unavailable for any reason before the
election, then the enclosed proxy will be voted for the election of such
substitute nominees, if any, as shall be designated by the Board of Directors.
The Board of Directors has no reason to believe that any of the nominees will
become unavailable to serve.
The names and certain information concerning the persons to be nominated
for election as directors are set forth below.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH
OF THE NOMINEES NAMED BELOW.
NOMINEES
The following table sets forth the names and certain share ownership
information as of August 29, 1997, regarding the persons to be nominated for
election as directors of the Company:
<TABLE>
<CAPTION>
NUMBER OF
NAME, AGE DIRECTOR SHARES TITLE OF PERCENT
AND POSITION AGE SINCE (A) CLASS OF CLASS (B)
- --------------------------------- ---- -------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Lon H. Stone..................... 54 1982 1,424,978(C) Common Stock 4.88%
Chairman of the Board,
President, Chief Executive
Officer and Director
Clive R. Taylor, M.D., Ph.D...... 51 1988 835,000(D) Common Stock 2.86%
Director
Edward Joseph Legere II,......... 34 1992 3,131,853(E) Common Stock 10.73%
Director
Carmelo J. Santoro, Ph.D......... 55 1996 135,000(F) Common Stock 0.46%
Director
Marc E. Lippman, M.D............. 52 Nominee 135,000(G) Common Stock 0.46%
Nominee
</TABLE>
- ---------------
(A) Except as otherwise noted below, the persons named in the table have sole
voting power and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to community property
laws where applicable.
(B) Percentages computed on the basis of 27,403,331 shares outstanding at
August 29, 1997, plus an additional 1,783,140 shares that could be acquired
by principal stockholders through exercise of stock options and warrants
during the 60 day period ending October 31, 1997.
(C) Includes 541,535 shares owned by members of Mr. Stone's family as to which
he may be deemed to be the beneficial owner. Also includes 689,000 shares
of Common Stock subject to outstanding stock options exercisable during the
60 day period ending October 31, 1997.
5
<PAGE> 7
(D) Includes 42,000 shares owned by members of Dr. Taylor's family as to which
he may be deemed to be the beneficial owner. Also includes 677,000 shares
of Common Stock subject to outstanding stock options exercisable during the
60 day period ending October 31, 1997.
(E) Includes 3,123,333 shares owned by Legere Enterprises, Ltd., a Nevada
limited partnership owned by Mr. Legere and members of his family and 8,520
shares of Common Stock subject to outstanding options to purchase Common
Stock during the 60 day period ending October 31, 1997.
(F) Includes 125,000 shares of Common Stock subject to outstanding stock
options exercisable during the 60 day period ending October 31, 1997.
(G) Includes 25,000 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ending October 31, 1997.
LON H. STONE has acted as President of the Company since June 1989 and has
served as its Chairman of the Board and Chief Executive Officer since February
1, 1982. From January 1977 until February 1982 he was Director of Research and
Vice President of Research and Development for American Diagnostics Corporation,
Newport Beach, California, a company which produces medical diagnostic products.
His experience at American Diagnostics Corporation was in biomedical technology,
as well as in business and finance. From 1972 to 1977, Mr. Stone was an
Assistant Professor of Biological Science at Crafton Hills College, Yucaipa,
California.
CLIVE R. TAYLOR, M.D., PH.D., has served as a director of the Company since
November 2, 1988. He is professor of pathology at the University of Southern
California and Chairman of the Department of Pathology. Currently, Dr. Taylor
serves as an Associate Director of Laboratories for the Los Angeles County
Medical Center and is on the attending staff of the Kenneth Norris, Jr. Cancer
Hospital and Research Institute. He received his M.D. degree from Cambridge
University and his Ph.D. from Oxford University and is board certified by the
American Board of Pathology in Anatomic and Clinical Pathology. He has been
awarded numerous grants to engage in immunohistologic studies of various types
of cancer. Dr. Taylor has authored more than 200 publications and ten books in
the cancer field.
EDWARD JOSEPH LEGERE II has served as a director of the Company since
October 28, 1992. Mr. Legere is a member of the compensation and audit
committees of the Company. Mr. Legere has been President of Unified Management
Corp., a business management, trade and consulting company, since September of
1992. Mr. Legere has been general partner of Legere Enterprises, Ltd., a
biotechnology investment company located in Las Vegas, Nevada and an affiliate
of Techniclone (by stock ownership) since December of 1991 and is also the
general partner of Biotechnology Development, Ltd., a biotechnology development
and marketing company located in Las Vegas, Nevada. Mr. Legere holds a B.S.
degree in international business from Florida Atlantic University in Boca Raton,
Florida and an M.B.A. from the University of Chicago, Chicago, Illinois.
CARMELO J. SANTORO, PH.D., has served as a director of the Company since
September 27, 1996. Mr. Santoro is a member of the compensation and audit
committees of the Company. Mr. Santoro served as a director of AST Research,
Inc. since September 1990 and from June 1992 until November 1993 served as
Chairman of the Board of AST Research, Inc., an Irvine, California based company
which designs, manufactures, markets, services and supports a broad line of
personal computers including desktop, notebook and server computer systems. In
November 1993, Dr. Santoro was elected Vice Chairman of the Board of AST
Research and served as such through December 1995. Dr. Santoro is Chairman and
Chief Executive Officer of Platinum Software Corporation. Dr. Santoro was
President and Chief Executive Officer of Silicon Systems, Inc. from 1982 through
1991 and was Chairman from 1984 through 1989, when Silicon Systems, Inc. was
acquired by TDK Corporation of Tokyo, Japan. From 1980 to 1982, Dr. Santoro was
Vice President, Integrated Circuits at the Solid State Division of RCA. In
addition to Platinum Software Corporation, Dr. Santoro is currently a director
of Dallas Semiconductor Corporation and S3, Inc.
MARC E. LIPPMAN, M.D., is a nominee for the Board of Directors. Since 1995
Dr. Lippman has been Chief, Division of Hematology Oncology, Georgetown
University Medical Center in Washington, D.C. and is the Director of the Vincent
T. Lombardi Cancer Center. Prior to from 1988 through 1995 Dr. Lippman was
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<PAGE> 8
Professor of Medicine and Pharmacology, Georgetown University School of
Medicine, in Washington, D.C. Dr. Lippman is a fellow of the American College of
Physicians and has been certified as a Diplomat, American Board of Internal
Medicine and a Diplomat Subspecialty of Oncology. Dr. Lippman is the author of
numerous papers, and is on the Medical Advisory Board, Cancer Research of
America. As a leading oncologist specializing in breast cancer, he was formerly
head of the breast cancer program at the National Cancer Institute and has
authored over 550 publications. Dr. Lippman was one of the scientific founders
of Peregrine Pharmaceuticals Inc. which the Company acquired in April of 1997.
Dr. Lippman received a B.A. from Cornell University and an M.D. from Yale
Medical School.
Directors are elected on an annual basis. The present term of office for
each director will expire at the next annual meeting of Techniclone's
stockholders, or at such time as his successor is duly elected. Directors do not
receive separate cash compensation for fulfilling their duties as directors of
Techniclone. There are no family relationships among Techniclone's officers and
directors.
The Board of Directors of the Company held 11 meetings during the year
ended April 30, 1997. The Board of Directors has established a standing
Compensation Committee, which held 2 meetings in the year ended April 30, 1997
and an Audit Committee which held one meeting during the year ended April 30,
1997. Each incumbent director attended at least seventy five percent (75%) of
the aggregate number of meetings of the Board and of the Committees of which he
was a member in the year ended April 30, 1997.
The Compensation Committee reviews programs in the areas of employee and
incentive compensation plans, administers the Company's Stock Purchase Plans,
and reviews and makes recommendations to the Board of Directors with respect to
base salary adjustments and bonuses for all officers and other key personnel of
the Company. Carmelo J. Santoro and Edward Joseph Legere II are currently the
members of the Compensation Committee.
The Audit Committee is responsible for recommending to the Board of
Directors the appointment of the Company's outside auditors, examining the
results of audits and quarterly reviews and reviewing internal accounting
controls. Carmelo J. Santoro and Edward Joseph Legere II are currently the
members of the Audit Committee.
The Board of Directors does not have a nominating committee. Instead, the
Board of Directors screens candidates for membership on the Company's Board of
Directors.
EXECUTIVE OFFICERS
WILLIAM V. MODING was appointed Vice President -- Finance in June 1983 and
was appointed Chief Financial Officer and Secretary in November 1983. Mr. Moding
was elected a director of the Company in March 1985. He has a Master's Degree in
Business Taxation from the University of Southern California. From 1979 to 1996
Mr. Moding was a partner in the certified public accounting firm of Kanady &
Moding. This C.P.A. firm rendered financial accounting and consulting services
to the Company from Techniclone's inception in 1981 through 1996. From 1975 to
1979, Mr. Moding was a staff accountant with Deloitte, Haskins & Sells, Costa
Mesa, California.
DIRECTOR'S COMPENSATION
Directors who also are Company employees receive no compensation for
serving as directors. No compensation is paid for attending meetings of
Committees of the Board of Directors on which directors serve. Pursuant to the
Company's 1993 Employee Stock Option Plan, each year each non-employee director
is automatically granted an option to purchase 2,000 shares of Company Common
Stock at an exercise price that is equal to the fair market value of the shares
on the date of grant. These options vest twenty percent (20%) on the first
anniversary of the date of grant and 1/60 of the remaining amount each month
thereafter. Pursuant to the Company's 1996 Stock Incentive Plan, each new
director of the Company who is neither an employee or an executive officer of
the Company is automatically granted a Nonqualified Stock Option to purchase
10,000 shares of Common Stock upon commencement of service as a non-employee
director and a Nonqualified Option to purchase 5,000 shares of Common Stock at
the end of each fiscal year such employee director has
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<PAGE> 9
served at least six months during such fiscal year. These option grants are
granted at fair market value at date of grant and are exercisable one full year
after the date of grant.
Under a separate agreement, the Company granted Carmelo J. Santoro, Ph.D.,
as compensation for his services as a member of the Board of Directors a
nonqualified option to purchase 250,000 shares of the Company's Common Stock at
$4.00 per share, which was the fair market value at the date of grant. These
options vest twenty-five percent (25%) on the date of grant and twenty-five
percent (25%) annually beginning June 30, 1997. Under this agreement, Mr.
Santoro waived his participation in the 1993 and 1996 Plans as a non-employee
director.
Under a separate agreement, the Company agreed to grant Marc E. Lippman,
M.D., as compensation for his services as a member of the Board of Directors a
nonqualified option to purchase 100,000 shares of the Company's Common Stock at
$3.125 per share, which was the fair market value at the date of grant. These
options vest twenty-five percent (25%) on the date of grant and twenty-five
percent (25%) annually beginning September 18, 1998. Under this agreement, Dr.
Lippman waived his participation in the 1993 and 1996 Plans as a non-employee
director.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities 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. Officers,
directors and greater than ten percent (10%) stockholders are required by
regulations promulgated by the Securities and Exchange Commission to furnish the
Company with copies of all Section 16(a) reports they file. Based solely on the
review of copies of such reports furnished to the Company and written
representations that no other reports were required, the Company believes that
during the fiscal year ended April 30, 1997, the Company's officers, directors
and all persons who own more than ten percent (10%) of a registered class of the
Company's equity securities complied with all Section 16(a) filing requirements.
COMPENSATION OF EXECUTIVE OFFICERS
The Company paid cash compensation to Lon H. Stone, Chief Executive Officer
of the Company in the year ended April 30, 1997 of $207,000. In the year ended
April 30, 1997, Mr. Stone was granted options to purchase 400,000 shares under
the Company's 1996 Stock Incentive Plan at an exercise price of $5.00 per share.
As of April 30, 1997, options to purchase 200,000 of these shares were vested
and options to purchase the remaining 200,000 shares vest in 1998 and 2000. In
the year ended April 30, 1996, the Board of Directors granted Lon H. Stone
options to purchase 200,000 shares of stock under the Company's 1993 Stock
Option Plan at an exercise price of $1.00 per share. As of April 30, 1997,
options to purchase 100,000 of these shares were vested and options to purchase
the remaining 100,000 shares vest in 1997 and 1998. In 1991, the Board of
Directors granted Lon H. Stone options to purchase 260,000 shares of stock under
the Company's 1986 Plan at an exercise price of $0.275 per share (an aggregate
option exercise price of $71,500). Of the options to purchase 260,000 shares,
options to purchase 160,000 shares became vested in February 1994 by reason of
the Company's achievement of certain financial goals and the remaining options
to purchase 100,000 shares became exercisable by Mr. Stone in the year ended
April 30, 1997. The value of the 100,000 shares subject to these options as of
April 30, 1997 was $462,500 (assuming a stock price of $4.625 per share). These
options recently became exercisable.
Effective on November 1, 1994, the Company entered into an Employment
Agreement with Lon H. Stone, Chief Executive Officer of the Company. The
Employment Agreement, which expires on September 30, 1999, provides for an
initial annual base salary of $144,000 plus an annual incentive bonus at the
discretion of the Board of Directors of the Company. The annual base salary
under the Agreement was increased to $198,000 beginning on January 1, 1996 and
was increased to $250,000 beginning on January 1, 1997. The Agreement also
provides for a salary continuation payment plan in the event of employment
termination prior to the expiration of the Agreement. If employment termination
occurs due to death or
8
<PAGE> 10
disability, then one-half the existing salary rate is payable for a three year
period or the remaining duration of the Agreement, whichever is longer. If
termination is due to other than death, disability or reasonable cause, then the
Company must pay a cash severance benefit equal to twice the annual salary rate,
all unexercised outstanding stock options will immediately vest, the option
stock will be issued at no cost to Mr. Stone and any applicable payroll
withholding taxes will be paid by the Company as additional compensation to Mr.
Stone. If termination occurs within two years of a twenty five percent (25%) or
greater change in ownership of the Company, then the terms of the Agreement
require payment of the annual base salary for the longer of three years or the
remaining term of the Agreement.
The following table sets forth compensation received for the three years
ended April 30, 1997, by the Company's Chief Executive Officer. No other
officers of the Company earned in excess of $100,000 during the year ended April
30, 1997 (collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
--------------------------- SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
- ----------------------------------------------- ---- -------- ----- -------------------
<S> <C> <C> <C> <C>
Lon H. Stone................................... 1997 $207,000 $ 0 400,000
Chairman of the Board and 1996 $162,000 $ 0 200,000
Chief Executive Officer 1995 $112,200 $ 0 0
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in the year ended
April 30, 1997 to the Named Officers.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS ALL EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED FISCAL YEAR(1) ($/SHARE)(2) DATE VALUE
- ------------------------------------ --------- ---------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Lon H. Stone........................ 400,000 22.04 $ 5.00 01/18/06 $2,000,000
</TABLE>
- ---------------
(1) Options to purchase an aggregate of 2,419,000 shares were granted to all
employees, directors and consultants in the year ended April 30, 1997,
including the Named Officers under the Company's 1996 Stock Incentive Plan.
(2) The exercise price may be paid in cash, or shares of the Company's Common
Stock valued at fair market value on the date of exercise. All options are
issued for an exercise price at least equal to fair market value on the date
of grant. Fair market value is the closing price of the Company's Common
Stock on the date of grant.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information on option exercises in the year
ended April 30, 1997 by the Named Officers and the value of unexercised options
held by the Named Officers as of April 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT OPTIONS AT
APRIL 30, 1997 APRIL 30, 1997(1)
SHARES ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lon H. Stone..... -0- -0- 689,000 300,000 $ 1,950,625 $ 287,500
</TABLE>
- ---------------
(1) The closing price of the Company's Common Stock on April 30, 1997 on NASDAQ
was $4.625.
9
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In the year ended April 30, 1997 the members of the Compensation Committee
were Carmelo J. Santoro and Edward Joseph Legere II, who are non-employee
directors of the Company.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is a standing committee of the Board of
Directors of the Company. Carmelo J. Santoro and Edward Joseph Legere are the
current members of the Compensation Committee. The Compensation Committee is
responsible for adopting and evaluating the effectiveness of compensation
policies and programs for the Company and for making determinations regarding
the compensation of the Company's executive officers, subject to review by the
full Board of Directors.
The following report is submitted by the members of the Compensation
Committee with respect to the executive compensation policies established by the
Compensation Committee and compensation paid or awarded to executive officers
for the year ended April 30, 1997.
Compensation Policies and Objectives. The Compensation Committee determines
the Chief Executive Officer's compensation and the compensation of all executive
officers by taking into consideration (i) what other chief executive officers
and executive officers in the industry receive as compensation, (ii) the cash
position of the Company, and (iii) what the Company can afford to pay. As the
Company has a history of operating losses, no specific relationship of the
Company's financial performance was used in determining the executive officer's
compensation. The Compensation Committee took into consideration the
compensation of executive officers of ImmunoMedics, IDEC, ImmunoGen and NeoRx as
its group within the industry for consideration of executive salaries. In
addition, the Board utilized the J. Robert Scott, Coopers & Lybrand Executive
Salary Survey in making its decision with respect to the Chief Executive
Officer's compensation. While the Compensation Committee considers the salary of
other executive officers in the industry important in the consideration of its
decision with respect to the executive officer's compensation, the controlling
factors were the cash position of the Company and what the Company can afford to
pay. None of the other executive officers of the Company receive compensation
for fulfilling their duties as officers.
Stock Options and Equity-Based Programs. In order to align the financial
interests of executive officers and other key employees with those of the
stockholders, the Company grants stock options to its executive officers and
other key employees on a periodic basis. Moreover, the Compensation Committee
generally has followed the practice of granting options on terms which provide
that the options become exercisable in cumulative annual installments, generally
over a three-to-five-year period. The Compensation Committee believes that these
features of the option grants not only provide an incentive for executive
officers and other key employees to remain in the employ of the Company, but
also make the Company's earnings performance and longer term growth in share
prices important for the executives who receive stock options.
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report, and
the performance graph below, shall not be incorporated by reference into any
such filings.
Stock Option Plans. Techniclone has five stock option plans, (i) the 1982
Stock Option Plan (the "1982 Plan"), (ii) the Incentive Stock Option,
Nonstatutory Stock Option and Restricted Stock Purchase Plan -- 1986 (the "1986
Plan"), (iii) Incentive Stock Option and Nonqualified Stock Option Plan-1993
(the "1993 Plan"), (iv) the Cancer Biologics Incorporated, Incentive Stock
Option, Nonqualified Stock Option and Restricted Stock Purchase Plan -- 1987
(the "CBI Plan") and (v) the 1996 Stock Incentive Plan (the "1996 Plan"). All of
the Plans except for the 1993 Plan and the 1996 Plan have been terminated by the
Board of Directors with respect to the grant of additional options under such
plans. The purpose of the Plans is to enable Techniclone to attract and retain
employees and consultants of ability and to motivate such persons to use their
best efforts on behalf of the Company and its subsidiaries by providing them
with equity participation in the Company. Pursuant to the 1982 Plan, 450,000
shares of Common Stock were reserved for issuance upon the exercise of options
granted to key officers, directors, consultants and employees. Pursuant to the
1986 Plan,
10
<PAGE> 12
500,000 shares of Common Stock were reserved for issuance upon the exercise of
options granted to key employees, including officers and directors who are
employees of the Company. Pursuant to the CBI Plan, 2,000,000 shares of Common
Stock were reserved for issuance upon exercise of options. Pursuant to the 1993
Plan, 750,000 shares of Common Stock are reserved for issuance upon the exercise
of options to employees of the Company. Pursuant to the 1996 Plan, upon approval
of the Plan 4,000,000 shares of Common Stock were reserved for issuance upon the
exercise of options. In addition the shares reserved for issuance under the 1996
Plan are increased at the end of each fiscal year twenty percent (20%) of any
increase (other than any increase due to stock awards under any of the Plans) in
the number of authorized and issued shares above 20,869,675 (the number of
authorized and issued shares at September 27, 1996). At April 30, 1997, the
number of shares for which options may be granted under the 1996 Plan increased
to 5,171,522. Certain options granted under the 1986 Plan, the 1982 Plan, the
CBI Plan, the 1993 Plan and the 1996 Plan are intended to qualify as "incentive
stock options" within the meaning of Section 422A of the Internal Revenue Code
of 1986. At April 30, 1997, stock options to purchase 444,000 shares had been
granted under the 1982 Plan of which none remain outstanding, stock options to
purchase 486,000 shares had been granted under the 1986 Plan of which 310,000,
shares remain outstanding, stock options to purchase 1,972,000 shares had been
granted under the CBI Plan and assumed by the Company of which 806,000 remain
outstanding, stock options to purchase 701,205 shares had been granted under the
1993 Plan of which 548,250 shares remain outstanding and stock options to
purchase 2,419,000 shares had been granted under the 1996 Plan of which
2,394,000 shares remain outstanding. The 1982, 1986 and CBI Plans have been
terminated by the Board of Directors with respect to the grant of additional
options under such Plans. The CBI Plan was assumed by the Company in connection
with the merger of Cancer Biologics Incorporated with and into the Company.
The 1982, 1986, CBI Plan, 1993 and 1996 Plans are administered by the
Compensation Committee which determines the terms of options granted under the
Plans, including the exercise or purchase price, conditions of purchase
(including repurchase rights in favor of the Company), number of shares subject
to the option or right and the exercisability thereof. Except with respect to
the 1996 Plan, the exercise price of all options granted under the Plans must be
at least equal to the fair market value of such shares on the date of grant and
the maximum term of each option is ten years.
No options were granted to or exercised by officers or directors during the
year ended April 30, 1997 under the 1982 Plan.
No options were granted or exercised by officers or directors during the
year ended April 30, 1997 under the 1986 Plan. As of April 30, 1997, Lon Stone
held options to purchase a total of 260,000 shares at $.275 per share under the
1986 Plan. Of the options to purchase 260,000 shares, options to purchase
160,000 shares became vested in February 1994 by reason of the Company's
achievement of certain financial goals and the remaining options to purchase
100,000 shares become exercisable by Mr. Stone in the year ended April 30, 1997.
Options to purchase a total of 310,000 shares are outstanding under the 1986
Plan. Options outstanding under the 1986 Plan expire at various dates through
2003. No stock purchase rights have been granted under the 1986 Plan in the year
ended April 30, 1997.
No options were granted or exercised by officers or directors during the
year ended April 30, 1997 under the CBI Plan. Options to purchase 806,000 shares
are outstanding under the CBI Plan, all of which were exercisable as of April
30, 1997. Options outstanding under the CBI Plan expire in 2003.
No options were exercised by officers or directors during the year ended
April 30, 1997 under the Company's 1993 Stock Option Plan. During the year ended
April 30, 1997, R.C. Shepard and Edward Joseph Legere II were granted "formula
grants" under the 1993 Plan to purchase 2,000 shares of Common Stock of the
Company. These grants vest twenty percent (20%) on the first anniversary of the
date of grant and 1/60 of the remaining amount each month thereafter. Options to
purchase 548,250 shares are outstanding under the 1993 Plan. Options outstanding
under the 1993 Plan expire at various dates through 2005.
During the year ended April 30, 1997, Lon H. Stone, Chief Executive
Officer, was granted options to purchase 400,000 shares under the Company's 1996
Stock Incentive Plan, William V. Moding, Chief Financial Officer and Secretary,
was granted options to purchase 320,000 shares under the Company's 1996 Stock
Incentive Plan, David Allen, Vice President of Operations and General Manager
was granted options to
11
<PAGE> 13
purchase 115,000 shares under the Company's 1996 Stock Incentive Plan. Elizabeth
Gorbett-Frost, Vice President -- Finance and Administration, was granted options
to purchase 160,000 shares under the Company's 1996 Stock Incentive Plan and Ken
Berger, Vice President -- Scientific and Regulatory Affairs was granted options
to purchase 35,000 shares under the Company's 1996 Stock Incentive Plan. These
stock options granted to Mr. Stone, Mr. Moding and Mr. Berger vest fifty percent
(50%) on the date of grant, vest twenty-five percent (25%) in 1999 and vest
twenty-five percent (25%) in 2000. Stock Options granted to Mr. Allen and Ms.
Gorbett-Frost vest in 1997 through 2001. As of April 30, 1997 options to
purchase an aggregate of 2,493,000 shares were outstanding under the 1996 Stock
Incentive Plan.
Certain Relationships and Related Transactions. During the fiscal year
ended April 30, 1997, the Company incurred and paid expenses of $62,000 to
Kanady & Moding C.P.A.'s, an accounting firm in which Mr. William V. Moding, an
executive officer and retiring director of the Company, is a partner, for
accounting and consulting services rendered to the Company. Similar expenses in
the amount of $89,000 and $60,000 were incurred and paid to Mr. Moding's firm
during the fiscal year ended April 30, 1996 and 1995, respectively. On October
1, 1996 Mr. Moding commenced full-time employment with the Company and Mr.
Moding's accounting firm no longer renders services to the Company.
During the year ended April 30, 1997, the Company incurred and paid
expenses of $343,768 to Stradling, Yocca, Carlson & Rauth, a law firm in which
Mr. R .C. Shepard, an officer and a retiring director of the Company, is an
officer and stockholder which renders legal services to the Company. Similar
expenses in the amount of $145,781 and $89,333 were incurred to Mr. Shepard's
firm during the year ended April 30, 1996 and 1995, respectively.
On January 17, 1997, the Company loaned Lon H. Stone, a director and the
Chief Executive Officer of the Company, $350,000 pursuant to a Promissory Note.
The highest loan balance during the year ended April 30, 1997 was $356,914. The
purpose of the loan was to provide Mr. Stone with the additional cash necessary
to purchase a new residence. The Board of Directors determined that it was in
the best interest of the Company to loan Mr. Stone the money. The Note is
collateralized by real estate and bears interest at seven percent (7%) per
annum. The Note is due and payable on January 31, 2000.
On April 30, 1997 the Company requested that Mr. Moding exchange $203,500
of non-interest bearing outstanding notes which Mr. Moding issued to pay for
options purchased from the Company pursuant to the Company's option plans which
provide that promissory notes may be used to exercise options. Mr. Moding agreed
to, and did, exchange two non-interest bearing notes with a maturity date at
April 30, 1999, for two new notes aggregating $203,500. The Notes are secured by
both personal assets of Mr. Moding and 204,000 shares of the Common Stock of the
Company held by Mr. Moding. The new Notes bear interest at six percent (6%) per
annum and are payable in 7 equal annual installments beginning April 30, 1998.
On April 30, 1997 the Company requested that Mr. Shepard exchange $203,083
(the highest amount outstanding during the fiscal year ended April 30, 1997) of
non-interest bearing outstanding notes which Mr. Shepard issued to pay for
options purchased from the Company pursuant to the Company's option plans which
provides that promissory notes may be used to exercise options. Mr. Shepard
agreed to, and did, exchange two non-interest bearing notes with a maturity date
of April 30, 1999, for two new notes aggregating $203,083. The Notes are secured
by personal assets of Mr. Shepard and 203,000 shares of the Common Stock of the
Company held by Mr. Shepard. The new Notes bear interest at six percent (6%) per
annum and are payable in 7 equal annual installments beginning April 30, 1998.
12
<PAGE> 14
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns for the
Company, NASDAQ Market Index and NASDAQ Peer group for the period that commenced
on April 30, 1992 and ended April 30, 1997.
COMPARISON OF CUMULATIVE TOTAL RETURNS
(NASDAQ MARKET INDEX)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD INDUSTRY
(FISCAL YEAR COVERED) TECHNICLONE CP INDEX BROAD MARKET
--------------------- -------------- -------- ------------
<S> <C> <C> <C>
1992 100 100 100
1993 93.50 82.11 119.48
1994 102.17 78.45 134.11
1995 43.48 98.53 146.43
1996 213.04 167.02 204.40
1997 160.87 147.48 217.88
</TABLE>
The total cumulative returns on investment shown for the Company, the
NASDAQ Market Index and Peer Group Index are based on the assumptions that on
May 1, 1992, $100 was invested in the Company's Common Stock and in each Index
and that all dividends were reinvested.
The Peer Group chosen were companies in the NASDAQ Market Index with the
Standard Industrial Classification Code 2836 (Biological Products, except
diagnostic substances). The Peer Group included the following issuers: Advanced
Tissue Sciences, Alfacell Corporation, AMBI, Inc., American Biogenetic Sciences,
Amgen Inc., Anergen Inc., Anika Therapeutics, Inc., Ansan Pharmaceuticals,
Aphton Corp., Ariad Pharmaceuticals, Autoimmune Inc., Aviron, Back Bay
Restaurant Group, Biocryst Pharmaceuticals, Biogen Inc., Biomatrix Inc., Biomira
Inc., Biotime Inc., Cel-Sci Corp., Cerus Corporation, Chrysalis International
Corp., Creative Biomolecules, Cryolife, Inc., Cypress Bioscience, Inc.,
Cytotherapeutics Inc., Cytrx Corporation, Diacrin Inc., Embrex Inc., Enzon Inc.,
Galagen, Inc., Genmedicine, Inc., Genta Incorporated, Genzyme Corp., Genzyme
Corp Tissue Reproduction, Genzyme Transgenics Corp., Gilead Sciences Inc.,
Gliatech, Inc., Hybridon, Inc., Idec Pharmaceuticals CP, IGI Inc., Imclone
Systems Inc., Immune Response Corp., Immunex Corp., Integra Lifesciences CP,
Interferon Sciences, Inc., La Jolla Pharmaceutical, Lifecore Biomedical Inc.,
LXR Biotechnology Inc., Magainin Pharmaceuticals, Medarex Inc., Martek
Biosciences Corp., Medimmune Inc., Nabi Inc., Neurex Corp., Neurobioligical
Technology, North American Vaccine, Northfield Laboratories, NovaVax Inc., NPS
Pharmaceuticals, NYER Medical Group, Inc., Onyx Pharmaceuticals, Inc., Oravax,
Inc., Oxigene Inc., Procept Inc., Protein Design Labs Inc., Quigen NV, Repligen
Corp., Ribi Immunochem Res Inc., Sangstat Medical Corp., Senetek Plc Adr,
Seragen Inc., Serologicals Corp., Somatogen Inc., Sparta Pharmaceuticals, Sugen,
Inc., Symbollon CP CLA, Targeted Genetics CP, Techne Corp., Texas Biotechnology
Corp., Titan Pharmaceutical Inc., TransKaryotic Therapies, Trega Biosciences,
Inc., Vical Inc., Vion Pharmaceuticals, Viragen (Europe) LTD, Viragen, Inc.,
Virus
13
<PAGE> 15
Research Institute and Zonagen Inc. Management believes that an actual Peer
Group for the Company would be difficult to identify because the Company is a
development stage research and development Company with a limited operating
history.
PROPOSAL TWO
AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF THE COMPANY TO
INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has directed that there be submitted to the
stockholders of the Company at the meeting a proposed amendment to the Company's
Certificate of Incorporation to increase the authorized number of shares of
Common Stock from 50,000,000 to 60,000,000. As of August 31, 1997 the Company
had approximately 27,400,000 shares outstanding. In the last fiscal year, the
Company issued 12,000 shares of 5% Adjustable Convertible Class C Preferred
Stock (the "Class C Preferred Stock") which shares are convertible into an
indeterminate number of shares of Common Stock. In connection with the Series C
Preferred Stock investment, the Board of Directors agreed to, and did reserve
15,500,000 of authorized but unissued shares of Common Stock for issuance upon
conversion of the shares of the Class C Preferred Stock and the exercise of the
warrants issuable upon conversion thereof. The Company has commitments to issue
1,600,000 shares for the Class B Preferred Stock and Warrants. The Company has
reserved for issuance for options previously granted 4,795,000 shares. With the
above reservation of shares totaling 49,295,000, the Company does not have a
sufficient number of non-reserved, authorized and unissued shares of Common
Stock. As a result the Company may not be able to raise additional money,
undertake acquisitions or take any other action requiring the issuance of its
Common Stock unless the authorized number of shares of Common Stock is
increased. In connection with its agreement with the purchasers of the Class C
Preferred Stock the Company agreed to submit to its stockholders for approval a
charter amendment increasing the authorized number of shares of Common Stock of
the Company to an amount deemed reasonable by the Company and the placement
agent.
The Company believes that it needs to have the stockholders authorize
10,000,000 additional shares of the Company's Common Stock to provide for
flexibility in future business transactions.
In addition, the Company may not require conversion of the Class C
Preferred Stock to Common Stock unless the Company has reserved for issuance to
holders of the Class C Preferred Stock, Common Stock which is equal to 150% of
the number of shares of Common Stock issuable upon conversion of the Class C
Preferred Stock. If after October 1, 1997, the number of shares of Common Stock
reserved for issuance upon the conversion of the Class C Preferred Stock
(Reserved Amount) for any three (3) consecutive trading days (the last of such
three (3) trading days being the "Authorization Trigger Date") is less than 150%
of the number of shares of Common Stock issuable upon conversion of all shares
of Class C Preferred Stock (including shares of Class C Preferred Stock which
are issued as dividends on shares of Class C Preferred Stock and shares of Class
C Preferred Stock issuable with respect to then accrued and unpaid dividends)
and the exercise of all warrants (including warrants to be issuable upon
conversion of the Class C Preferred Stock) on such trading days, the Company is
required to immediately notify the holders of the Class C Preferred Stock and
the warrants of such occurrence and is required to take immediate action
(including seeking stockholder approval to authorize the issuance of additional
shares of Common Stock) to increase the Reserved Amount to 150% of such number
of shares of Common Stock. If within ninety (90) days after an Authorization
Trigger Date, the Company fails to increase the Reserved Amount, each holder of
Class C Preferred Stock shall thereafter have the option, exercisable in whole
or in part at any time and from time to time to require the Company purchase for
cash, a portion of the holder's Class C Preferred Stock so that, after giving
effect to such purchase, the holder's allocated portion of the Reserved Amount
will equal or exceed 150% of such total number of shares of Common Stock
allocable to such holder. If the Company fails to redeem any of such shares of
Class C Preferred Stock within five (5) business days after its receipt of a
redemption notice such an event is then a redemption default.
14
<PAGE> 16
As can be seen above, failure to approve this amendment to the Company's
Certificate of Incorporation may result in the Company being required to
immediately hold another stockholder meeting to attempt to increase the
authorized shares to prevent a "Redemption Event" as that term is defined in the
Certificate of Designation. In the event the Company is unable to hold another
stockholder meeting or is unable to obtain approval of the stockholders to
increase the authorized shares of Common Stock, the Company will be required, if
notified, to redeem or convert some of the Class C Preferred Stock. The forced
redemption or conversion of a portion of the Class C Preferred Stock would have
a material adverse effect on the Company, its business and results of
operations.
The Board of Directors believes the availability of authorized but unissued
Common Stock can be of considerable value by providing a form of consideration
for raising capital, licensing of potential products and technologies, acquiring
other companies or technologies and for issuances to employees and other persons
with important business relationships with the Company. In addition, the Company
believes that a CEO candidate and other executives that may be hired in the
future will require that options be granted to them. Many participants in
biotechnology licensing or joint venture transactions demand the right to
purchase a substantial amount of equity as part of the licensing or joint
venture transaction and if the Company does not have the authorized shares such
transactions may not be possible. Accordingly, the Board of Directors believes
that it is in the best interest of the Company and its stockholders to approve
the increase in authorized shares to 60,000,000 shares of Common Stock.
The Amendment to the Certificate of Incorporation will be effected by
filing a Certificate of Amendment of Certificate of Incorporation, as attached
hereto as Exhibit A (the "Certificate of Amendment") with the Delaware Secretary
of State. The Company intends to make this filing as soon as possible after the
approval of the Certificate of Amendment by the stockholders of the Corporation.
The stockholders approval of Proposal Two will constitute their approval of
the increase in the authorized number of shares of Common Stock from 50,000,000
to 60,000,000 pursuant to the Certificate Amendment.
VOTE REQUIRED FOR THE AMENDMENT OF CERTIFICATE OF INCORPORATION PROPOSAL
The affirmative vote of the holders of a majority of the outstanding shares
of Techniclone's Common Stock entitled to vote will be required for approval of
the Amendment to the Certificate of Incorporation Proposal, which also will
constitute approval of increase in the authorized number of shares of Common
Stock from 50,000,000 to 60,000,000 pursuant to the Certificate of Amendment of
the Certificate of Incorporation. Accordingly, abstentions and broker non-votes
will have the same effect as votes against the proposal. Proxies solicited by
management will be voted FOR approval of the Amendment to the Certificate of
Incorporation Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT OF
CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as independent
auditors, to audit the financial statements of the Company for the fiscal year
ending April 30, 1998, and recommends that stockholders vote for ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
annually since fiscal year 1983. Its representatives are expected to be present
at the meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
15
<PAGE> 17
ANNUAL REPORT
The 1997 Annual Report to Stockholders of the Company was previously sent
to each stockholder of record as of August 29, 1997. The Annual Report is not to
be regarded as proxy solicitation material.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 1998 Annual
Meeting of Stockholders and presentation in the Company's Proxy Statement with
respect to such meeting should arrange for such proposal to be delivered to the
Company at its principal place of business no later than April 30, 1998 in order
to be considered for inclusion in the Company's proxy statement relating to that
meeting. Matters pertaining to such proposals, including the number and length
thereof, eligibility of persons entitled to have such proposals included and
other aspects are regulated by the Securities Exchange Act of 1934, Rules and
Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer.
OTHER MATTERS
Management is not aware of any other matters to come before the meeting. If
any other matter not mentioned in this Proxy Statement is brought before the
meeting, the proxy holders named in the enclosed Proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
By Order of the Board of Directors
/s/ William V. Moding
William V. Moding
Secretary
SEPTEMBER 30, 1997
COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K/A FOR THE FISCAL YEAR ENDED APRIL 30, 1997 WILL BE
PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE SECRETARY,
TECHNICLONE CORPORATION, 14282 FRANKLIN AVENUE, TUSTIN, CALIFORNIA 92780-7017.
16
<PAGE> 18
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
A-1
<PAGE> 19
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
TECHNICLONE CORPORATION,
A DELAWARE CORPORATION
TECHNICLONE CORPORATION, a Delaware corporation organized and existing
under and by virtue of the Delaware General Corporation Law (hereinafter
referred to as the "Corporation"), hereby certifies as follows:
1. That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of the Corporation, declaring said amendment
to be advisable and directing said amendment to be submitted to the
stockholders of the Corporation at its Annual Meeting. The resolution
setting forth the proposed amendment is as follows:
"RESOLVED, that the Certificate of Incorporation be amended by
changing the first sentence of ARTICLE 4 so that it shall read as
follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 65,000,000, of which (i)
60,000,000 shares shall be designated "Common Stock" and shall have a
par value of $0.001 per share; and (ii) 5,000,000 shares shall be
designated "Preferred Stock" and shall have a par value of $0.001 per
share."
2. That thereafter, pursuant to resolution of the Board of Directors,
the Annual Meeting of the stockholders of the Corporation was duly called
and held, upon notice in accordance with Section 222 of the Delaware
General Corporation Law, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
3. That said amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by Lon H. Stone, its President, and attested to by
William V. Moding, its Secretary, this 28th day of October, 1997.
TECHNICLONE CORPORATION,
a Delaware corporation
By:
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Lon H. Stone, President
ATTEST:
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William V. Moding, Secretary
A-2
<PAGE> 20
PROXY
TECHNICLONE CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 27, 1997
The undersigned hereby appoints Lon H. Stone and William V. Moding, and
each of them, individually, the attorney, agent and proxy of the undersigned,
each with the power to appoint his substitute, to represent and vote, as
designated below, all shares of Common Stock of Techniclone Corporation held of
record by the undersigned on August 29, 1997, at the Annual Meeting of
Stockholders to be held at The Sutton Place Hotel, located at 4500 MacArthur
Boulevard, Newport Beach, California 92660, on October 27, 1997, at 11:00 a.m.,
and at any and all adjournments thereof.
1. ELECTION OF DIRECTORS:
[ ] FOR [ ] WITHHOLD AUTHORITY
the election of all nominees to vote for any nominee listed
listed below (except as marked below.
to the contrary below).
Lon H. Stone, Clive Taylor, M.D., Ph.D., Edward Joseph Legere, II, Carmelo J.
Santoro, Ph.D. and Marc E. Lippman, M.D.
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2. Approval of the amendment to the Company's Certificate
of Incorporation to increase the authorized shares of
Common Stock to 60,000,000, as set forth in the
Company's Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the appointment of Deloitte & Touche LLP
as independent auditors of the Company for the fiscal year
ending April 30, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 21
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted FOR Proposals 1, 2 and 3.
Name:
----------------------
Common Shares:
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Dated: , 1997
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Signature
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Signature if held jointly
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both should
sign. When signing as attorney,
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.
