CENTOCOR INC, DEF 14A, 1998-03-31

CENTOCOR INC
DEF 14A, 1998-03-31
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Centocor, 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)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(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):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] 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:

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(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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Notes:

<PAGE>

CENTOCOR, INC.

MALVERN, PENNSYLVANIA 19355

----------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

MAY 13, 1998

----------------

TO THE SHAREHOLDERS:

The annual meeting of shareholders of Centocor, Inc. will be held at the
Company's principal executive office, 200 Great Valley Parkway, Great Valley
Corporate Center, Malvern, Pennsylvania, on May 13, 1998, at 10:00 A.M. for
the following purposes:

1. To elect nine members of the Board of Directors, each to serve until
the next annual meeting.

2. To vote on a proposal to approve an amendment of the Company's 1987
Non-Qualified Stock Option Plan.

3. To vote on a proposal to approve an amendment of the Company's 1989
Non-Employee Directors' Non-Qualified Stock Option Plan.

4. To transact such other business as may properly come before the
meeting.

The Board of Directors has fixed March 13, 1998 as the record date for
determining the holders of Common Stock entitled to notice of and to vote at
the meeting. Consequently, only holders of Common Stock of record of the
Company at the close of business on March 13, 1998 will be entitled to notice
of and to vote at the meeting.

Please complete, date and sign the enclosed proxy and return it promptly. If
you attend the meeting, you may vote in person.

George D. Hobbs
Secretary

April 2, 1998

<PAGE>

CENTOCOR, INC.

PROXY STATEMENT

INTRODUCTION

The accompanying proxy is solicited by the Board of Directors of Centocor,
Inc., 200 Great Valley Parkway, Great Valley Corporate Center, Malvern,
Pennsylvania 19355. Copies of this Proxy Statement and the accompanying proxy
are first being mailed on or about April 2, 1998 to the holders of record of
Common Stock on March 13, 1998. A proxy may be revoked by a shareholder at any
time prior to its use by giving written notice of such revocation to the
Secretary of the Company, by appearing at the meeting and voting in person, or
by returning a later dated proxy. The expense of this solicitation will be
paid by the Company. Some of the officers and employees of the Company may
solicit proxies personally and by telephone. The Company may also use the
services of D.F. King & Co., Inc. to aid in the solicitation of proxies at an
anticipated fee of $6,000.

Holders of Common Stock of record at the close of business on March 13, 1998
will be entitled to vote at the meeting. On that date, the Company had
70,184,646 shares of common stock, par value $.01 per share, outstanding (the
"Common Stock"). Each shareholder is entitled to cast one vote per share on
all items of business properly presented at the meeting, except that
shareholders have cumulative voting rights with respect to the election of
directors, as described below. Under Pennsylvania law and the by-laws of the
Company, the presence of a quorum is required to transact business at the
meeting. The presence at the meeting, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes that all shareholders are
entitled to cast shall constitute a quorum. Proxies received with votes
withheld or abstentions will be counted in determining the presence of a
quorum, but will not be voted. Broker non-votes will not be counted in
determining the presence of a quorum and will not be voted. As a result, votes
withheld, abstentions and broker non-votes will have no impact on any matter
submitted to the shareholders for a vote, assuming a quorum is present for
such matter.

Shareholders have cumulative voting rights with respect to the election of
directors. Each shareholder is entitled to cast the number of votes in the
election of directors that is equal to the number of shares of Common Stock
held by such shareholder on the record date, multiplied by the number of
directors to be elected. A shareholder may cast all such votes for a single
nominee or may distribute votes among nominees as the shareholder sees fit.
The nine nominees for director receiving the highest number of votes cast by
shareholders entitled to vote thereon will be elected to serve on the Board of
Directors.

ELECTION OF DIRECTORS

Nine directors are to be elected at the annual meeting of shareholders to
serve one-year terms until the 1999 annual meeting of shareholders and until
their respective successors are elected and shall qualify. The persons named
in the accompanying proxy intend to vote for the election of Anthony B. Evnin,
William F. Hamilton, David P. Holveck, Antonie T. Knoppers, Ronald A.
Matricaria, Hubert J.P. Schoemaker, Richard D. Spizzirri, Lawrence Steinman
and Jean C. Tempel, unless authority to vote for one or more of such nominees
is specifically withheld in the proxy. All of the nominees are currently
directors of the Company. The persons named in the proxy will have the right
to vote cumulatively and to distribute their votes among such nominees as they
consider advisable. All the nominees have informed the Board of Directors that
they are willing to serve as directors, but if any of them should decline to
serve or become unavailable for election as a director at the meeting, an
event which the Board of Directors does not anticipate, the persons named in
the proxy will vote for such nominee or nominees as may be designated by the
Board of Directors, unless the Board of Directors reduces the number of
directors accordingly.
<PAGE>

The following table sets forth, as of March 13, 1998, information as to the
nominees, including their recent employment, positions with the Company, if
any, other directorships and age.

William F. Hamilton, Ph.D., 58.................................................. 1985
Landau Professor of Management and Technology at the Wharton School of the
University of Pennsylvania. Director, Digital Lightwave, Inc., Hunt
Manufacturing Co., Marlton Technologies, Inc. and Neose Technologies, Inc.

David P. Holveck, 52............................................................ 1994
Chief Executive Officer of the Company since January 1998; President and Chief
Executive Officer of the Company from November 1992 to December 1997; President
and Chief Operating Officer from April 1992 to October 1992; and Executive Vice
President and President--Diagnostics Division from December 1988 to April 1992.
Director, CV Therapeutics.

Antonie T. Knoppers, M.D., 83................................................... 1986
Self-employed business consultant. Former President, Chief Operating Officer and
Vice Chairman, Merck & Co., Inc., a research-based health products company.
Director, Agouron Pharmaceuticals, Inc.

Ronald A. Matricaria, 55........................................................ 1994
Chief Executive Officer of St. Jude Medical, Inc., a medical products company,
since January 1998; President and Chief Executive Officer of St. Jude Medical,
Inc. from April 1993 to December 1997; and Chairman of its Board of Directors
since January 1995. From 1970 to 1993, Mr. Matricaria was employed by Eli Lilly
and Company, Inc., a research-based pharmaceutical company, where he served in a
variety of capacities, including President of the Medical Devices and
Diagnostics Division, Executive Vice President of the Pharmaceutical Division
and President of its North American operations. Director, St. Jude Medical, Inc.
and Health Industry Manufacturers Association.

Hubert J.P. Schoemaker, Ph.D., 47............................................... 1983
Chairman of the Board of the Company since November 1987; Chief Executive
Officer of the Company from November 1987 to October 1992; President of the
Company from 1983 to 1987. Director, Apollon, Inc., Avitech, Inc., ChemGenics
Pharmaceuticals Inc. and Safeguard Scientifics Inc.

Richard D. Spizzirri, 65........................................................ 1994
Senior Counsel to the law firm of Davis Polk & Wardwell since January 1995;
Partner, Davis Polk & Wardwell from 1967 to 1994. Director, Stuart
Entertainment, Inc., SUGEN, Inc.

Lawrence Steinman, M.D., 50...................................................... 1991
Professor of Immunology, Weizmann Institute of Science, Rehovot, Israel since
1994; Professor of Neurology and Neurological Sciences and Pediatrics, Stanford
University School of Medicine since 1991; Associate Professor of Neurology,
Pediatrics and Genetics, Stanford University School of Medicine from 1985 to
1991.
</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATIONS AND BUSINESSES DIRECTOR
DURING LAST FIVE YEARS AND OTHER CURRENT DIRECTORSHIPS SINCE
------------------------------------------------------ --------
<S> <C>
Jean C. Tempel, 54.............................................................. 1993
Partner of Boston Equity Partners, an early stage private equity investment
firm. Special Limited Partner of TL Ventures and a Venture Partner of Internet
Capital Corp., both affiliates of Safeguard Scientifics, Inc., since June 1996;
General Partner, TL Ventures, from November 1993 to June 1996; President and
Chief Operating Officer of Safeguard Scientifics Inc. from January 1992 to
November 1993; Executive Vice President and Chief Operations Officer, The Boston
Company, a bank trust company, from 1986 to 1990. Director, Sonesta
International Hotels, Inc. and Trustee, Scudder Kemper Family of Mutual Funds.
</TABLE>

COMMITTEES OF THE BOARD OF DIRECTORS

The standing committees of the Board of Directors are the Audit Committee,
the Compensation Committee and the Corporate Governance and Nominating
Committee. The Audit Committee, consisting of Dr. Evnin, Dr. Hamilton and Ms.
Tempel, met twice during 1997. No member of the Audit Committee is a member of
the Company's management. The Audit Committee is responsible for determining
the adequacy of the Company's internal accounting and financial controls. The
Compensation Committee, consisting of Dr. Evnin, Dr. Hamilton, Dr. Knoppers
and Mr. Matricaria, met twice during 1997. The Compensation Committee is
responsible for reviewing matters pertaining to the compensation of the
executive officers of the Company. The Corporate Governance and Nominating
Committee was formed in 1996 to oversee the Company's compliance with its Code
of Legal and Ethical Conduct (the "Code"), which was adopted by the Company in
1996, and to nominate individuals, other than incumbent directors, for
election to the Company's Board of Directors. The Corporate Governance and
Nominating Committee, consisting of Mr. Matricaria, Mr. Spizzirri and Dr.
Steinman, met once during 1997. The Corporate Governance and Nominating
Committee will consider written recommendations by shareholders of the Company
for nominees for election as directors of the Company, provided each
recommendation, together with such information about the nominee as would be
required to be included in a proxy statement with respect to the election of
the nominee under the proxy solicitation rules of the Securities and Exchange
Commission, is received by the Secretary of the Company, in the case of an
annual meeting of shareholders, not later than the date specified in the most
recent proxy statement of the Company as the date by which shareholder
proposals for consideration at the next annual meeting of shareholders must be
received, and, in the case of a special meeting of shareholders at which
directors of the Company are to be elected, not later than the tenth day after
the date of the notice of such meeting.

BOARD MEETINGS AND ATTENDANCE OF DIRECTORS

The Board of Directors held five meetings during 1997. Each of the directors
attended at least 75% of the aggregate of all meetings of the Board and of all
committees of which he or she was a member during 1997.

COMPENSATION OF DIRECTORS

During 1997, each director who was not an employee of the Company was
compensated in the amount of $2,000 for each of four Board of Directors'
meetings attended at the Company's Malvern, Pennsylvania offices and $1,000
for one Board of Directors' meeting held by telephonic conference call. Each
director who was not an employee of the Company was also granted options to
purchase 15,000 shares of the Company's Common Stock during 1997. Options are
granted to the Company's directors with an exercise price equal to the closing
price of the Company's Common Stock on the date of grant.

3
<PAGE>

On March 18, 1998, the Board of Directors approved a new compensation policy
with respect to the Company's non-employee directors, based upon the
recommendation of the Compensation Committee and a review of the compensation
offered to directors by other biotechnology companies which the Compensation
Committee considers to be in the Company's peer group. Under the new policy,
non-employee directors will receive an annual retainer fee of $10,000, payable
quarterly; $1,500 for each meeting attended in person; $500 for each meeting
held by telephonic conference call; and $3,000 for each meeting, if any, at a
location requiring extensive travel. In addition, as discussed more fully
below, the Board of Directors amended the 1989 Non-Employee Directors' Non-
Qualified Stock Option Plan to reduce the number of options granted to non-
employee directors, per year, from 15,000 to 10,000.

AMENDMENT OF THE 1987 NON-QUALIFIED STOCK OPTION PLAN

At the annual meeting a proposal will be presented for the shareholders to
approve an amendment of the 1987 Non-Qualified Stock Option Plan ("1987 Option
Plan") to, among other things, extend the term of the 1987 Plan to December
31, 2007; to increase by 3,000,000 the number of shares of Common Stock of the
Company which may be granted to salaried employees of the Company and its
subsidiaries; to provide for the exercisability of options upon the occurrence
of certain events constituting a change of control of the Company; to
eliminate the provision for the grant of limited stock appreciation rights; to
adjust the provisions governing the exercise of options following termination
of employment; and to place limits on the number of options which may be
granted to any individual in any given year. Under the 1987 Option Plan,
223,263 shares of Common Stock remain available for grant. All options granted
prior to shareholder approval of the proposed amendment of the 1987 Plan shall
be deemed authorized and valid under, and shall be governed by, extension of
the original terms of the 1987 Option Plan, as previously amended, and shall
not be subject to the terms of the proposed amendment of the 1987 Plan to the
extent there is a material difference in the rights conferred. The 1987 Option
Plan, as amended, is set forth as Exhibit A to this Proxy Statement and is
incorporated herein by reference.

The purpose of the 1987 Option Plan, as amended, is to assist the Company in
continuing to attract and retain qualified employees and to promote the
identification of such persons' interests with those of the Company's
shareholders. On March 18, 1998 the Company had approximately 700 employees
who would have been eligible for awards under the 1987 Option Plan.

The Board of Directors, having considered and approved the proposed
amendment of the 1987 Option Plan on March 18, 1998, recommends that you vote
FOR the proposed amendment of the 1987 Option Plan. The 1987 Option Plan, as
amended, will become effective if it receives the affirmative vote of the
holders of a majority of the outstanding shares of the Company's Common Stock
present in person or by proxy at the meeting, assuming the presence of a
quorum.

Under the terms of the 1987 Option Plan, the option exercise price may not
be less than the fair market value of the underlying stock at the time the
option is granted and the option expires upon the earlier of the applicable
time period set forth in the 1987 Option Plan following the employee's
termination of employment, an expiration date fixed by the Board of Directors
and set forth in each individual option agreement, or ten years from the date
of grant. The total number of options to be granted in any year under the 1987
Option Plan, the number and selection of the persons to receive options, the
number of options granted to each and the dates when options become
exercisable are wholly within the discretion of the Board of Directors.
However, in no event will an Eligible Employee receive, in any year, options
to purchase in excess of 150,000 shares of the Company's Common Stock (subject
to adjustment in the event of stock dividends, stock splits or reverse stock
splits).

4
<PAGE>

Under the 1987 Option Plan, the price payable upon exercise of options may
be paid in cash or, under certain circumstances, in shares of Common Stock
having a fair market value equal to the option price on the date of exercise
or any combination thereof.

Upon the occurrence of certain events constituting a control transaction
with respect to the Company's Common Stock, all outstanding options to be
granted under the 1987 Option Plan, as amended, will automatically become
fully exercisable, except as the Board of Directors may otherwise provide. To
the extent such provision impedes an attempt to acquire control of the
Company, the 1987 Option Plan, as amended, may serve to perpetuate the
existing management of the Company. Under the 1987 Option Plan, the Board of
Directors of the Company may disable this provision, thereby facilitating a
change of control which the Board concludes would be in the best interests of
the Company.

The Board of Directors of the Company may make any amendments to the 1987
Option Plan which it deems necessary or advisable, provided that the Board may
seek shareholder approval of an amendment if determined to be required by or
advisable under regulations of the Securities and Exchange Commission or the
Internal Revenue Service, under the rules of any stock exchange or quotation
system on which the Company's Common Stock is listed, or other applicable law
or regulation.

Federal Income Tax Consequences. The grant by the Company of an option is
not a taxable event to the optionee. Generally, an optionee recognizes
ordinary income on the date option shares are issued to him pursuant to the
exercise of the option in an amount equal to the "spread" or the excess of the
fair market value of the shares on that date over the exercise price. Any
further gain or loss on disposition of the shares will be capital gain or loss
if the shares are held by the optionee for investment. The receipt of stock
upon exercise of a non-qualified stock option is not immediately taxable if
the sale of the stock could subject the optionee to suit under Section 16(b)
of the Securities Exchange Act of 1934 (the "Exchange Act"). Accordingly, in
the case of exercises of options by officers of the Company, the optionee
generally is not taxed until the six-month period referred to in Section 16(b)
expires. The optionee recognizes ordinary income upon the expiration of the
six-month period measured by the "spread" at the time of expiration.
Alternatively, the optionee may elect under Internal Revenue Code Section
83(b) to include the "spread" in his income at the time the option is
exercised.

The Company generally will be entitled to deduct any amount the optionee is
required to include in ordinary income at the time such amount is so
includable, provided that such amount is not deemed to be an "excess parachute
payment" (i.e., a payment due upon a change of control of the Company that is
in excess of reasonable compensation).

AMENDMENT OF THE 1989 NON-EMPLOYEE
DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN

At the annual meeting, a proposal will be presented for the shareholders to
approve an amendment to the 1989 Non-Employee Directors' Non-Qualified Stock
Option Plan ("1989 Directors' Plan") to increase from 96,250 to 350,000 (a
total increase of 253,750) the number of available shares of Common Stock for
which options may be granted to directors of the Company who are not otherwise
employees of the Company and who have not been employees of the Company for a
period of at least one year prior to the date of grant of an option under the
1989 Directors' Plan ("Eligible Directors").

The purpose of the 1989 Directors' Plan is to assist the Company in
continuing to attract and retain experienced and knowledgeable independent
directors and to further promote the identification of such directors'
interests with those of the Company's shareholders.

5
<PAGE>

On March 18, 1998 the Board of Directors amended the 1989 Directors' Plan to
reduce the number of options to be granted to Eligible Directors each year.
Each person who first becomes an Eligible Director after August 16, 1989, the
date on which the 1989 Directors' Plan was initially approved by the Board of
Directors (except any such person who is first elected a director at an annual
meeting of shareholders), is automatically granted an option to purchase that
number of shares determined by multiplying 10,000--formerly 15,000--by a
fraction, the numerator of which is the number of whole months from the date
of such election as a director until the date of the next annual meeting of
shareholders of the Company and the denominator of which is 12. Five business
days after the date of each annual meeting of shareholders of the Company, an
option to purchase 10,000 shares is granted to each Eligible Director elected
at such meeting.

There are currently seven Eligible Directors, all of whom hold options
granted pursuant to the 1989 Directors' Plan. Currently, Dr. Evnin holds
105,000 options, Drs. Hamilton and Knoppers each hold 135,000 options, Mr.
Matricaria holds 57,500 options, Mr. Spizzirri holds 50,000 options, Dr.
Steinman holds 101,100 options and Ms. Tempel holds 53,500 options under the
1989 Directors' Plan. Each of these seven directors has an interest in the
approval of the proposed amendment to the 1989 Directors' Plan and will
benefit as the recipient of options to be granted thereunder if the proposed
amendment is approved by the shareholders. The proposed amendment is necessary
to provide for the availability of enough shares of Common Stock to continue
to make grants of options to Eligible Directors under the 1989 Directors' Plan
beyond 1998.

The Board of Directors, having considered and approved the proposed
amendment of the 1989 Directors' Plan on March 18, 1998, recommends that you
vote FOR the proposed amendment. The proposed amendment to authorize
additional shares under the 1989 Directors' Plan will become effective if it
receives the affirmative vote of the holders of a majority of the outstanding
shares of the Company's Common Stock present in person or by proxy at the
meeting, assuming the presence of a quorum.

Under the terms of the 1989 Directors' Plan, the option exercise price may
not be less than the closing price per share of the Company's Common Stock on
the date the option is granted and the option expires upon the earlier of a
director ceasing to be a director (subject to extension in the case of death
or removal for any reason other than for cause) or ten years from the date of
grant. On March 13, 1998, the closing price per share of the Company's Common
Stock on the Nasdaq National Market was $37 5/16.

Under the terms of the 1989 Directors' Plan, the price payable upon exercise
of options may be paid in cash, or, in the discretion of the Board of
Directors, obligations, services performed whether or not contracted for,
contracts for services to be performed or any other tangible or intangible
property, including shares of the Company's Common Stock which have been owned
by the optionee for at least six months and have a fair market value on the
date of exercise equal to the option price, or any combination thereof.

Subject to the provisions of the 1989 Directors' Plan regarding expiration
or termination of options, on the first day of the first month after the date
of grant of an option, the option shall become exercisable as to two percent
of the shares thereto, and on each monthly anniversary of each date of grant,
the option shall become exercisable as to an additional two percent of the
shares subject thereto.

Upon the occurrence of certain events constituting a change in control of
the Company, all outstanding options granted under the 1989 Directors' Plan
will automatically become fully exercisable. Simultaneously with the grant of
an option pursuant to the 1989 Directors' Plan, a limited stock appreciation
right ("LSAR") with respect to all of the shares covered by such option shall
automatically be granted. Each LSAR provides that in the event of any
acceleration of the exercisability of the option which occurs more than six
months after the date of grant of the LSAR,

6
<PAGE>

the optionee shall have the right, for a period commencing on acceleration of
the exercisability of the option and terminating thirty days thereafter, to
exercise the LSAR. For each share for which an LSAR is exercised, the optionee
will receive an amount in cash equal to the difference between (1) the
exercise price per share of the option to which the LSAR relates, and (2) the
fair market value per share of the Common Stock issuable upon exercise of the
option on the date the LSAR is exercised.

A charge to the Company's earnings will be required if, under the facts and
circumstances, it is likely that the LSARs will become exercisable and that
optionees will exercise such rights. The charge would be measured by the
difference between the then current value of the Common Stock and the exercise
price of the option. The charge so accrued may be required to be adjusted
based on changes in the current value of the Common Stock during any period in
which the LSARs are exercisable.

Because LSARs, if exercised, will result in cash demands on the Company,
LSARs may be considered to have an adverse effect on attempts to acquire
control of the Company. To the extent that the issuance of LSARs impedes such
an acquisition, the 1989 Directors' Plan may serve to perpetuate the existing
management of the Company.

The Board of Directors of the Company may make any amendments to the 1989
Directors' Plan which it deems necessary or advisable, provided that the Board
may seek shareholder approval of an amendment if determined to be required by
or advisable under regulations of the Securities and Exchange Commission or
the Internal Revenue Service, under the rules of any stock exchange or
quotation system on which the Company's Common Stock is listed, or other
applicable law or regulation.

Federal Income Tax Consequences. The grant by the Company of an option or an
option with an LSAR is not a taxable event to the optionee. Generally, an
optionee recognizes ordinary income upon the exercise of the option in an
amount equal to the "spread" or the excess of the fair market value of the
shares on that date over the exercise price of the option. Any subsequent gain
or loss on disposition of the shares will be capital gain or loss if the
shares are held by the optionee for investment. If the disposition of the
shares could subject the optionee to suit under Section 16(b) of the Exchange
Act, the receipt of shares upon exercise of a non-qualified stock option is
not taxable until the earlier of the expiration of the six-month period
referred to in Section 16(b) or the first day on which the sale of such shares
will not subject the optionee to suit under Section 16(b), at which time the
optionee recognizes ordinary income in an amount equal to the "spread", if
any, on the date of such expiration. Alternatively, the optionee may elect
under Internal Revenue Code Section 83(b) to include the "spread" in his
income at the time the option is exercised. Upon exercise of an LSAR, the
amount of cash received is taxable to the optionee as ordinary income.

7
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

To the best of the Company's knowledge, each of the following entities and
their subsidiaries, as noted below, were the only beneficial owners of more
than five percent of the Company's Common Stock as of March 13, 1998:

<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES OF PERCENT OF
BENEFICIAL OWNER(/1/) COMMON STOCK(/1/) CLASS
--------------------- ------------------- ----------
<S> <C> <C>
The Equitable Companies(/2/).................... 12,670,562(/2/) 18%
787 Seventh Avenue
New York, NY 10019
Dresdner Bank AG(/3/)........................... 4,270,833(/3/) 6.09%
Jurgen-Ponto-Platz 1
Frankfurt, Germany
</TABLE>
- --------
(1) Under the rules of the Securities and Exchange Commission (the
"Commission"), a person is deemed to be the beneficial owner of securities
if such person has, or shares, "voting power" (which includes the power to
vote, or to direct the voting of, such securities) or "investment power"
(which includes the power to dispose, or direct the disposition, of such
securities). Under those rules, more than one person may be deemed the
beneficial owner of the same securities. The information set forth in the
above table includes all shares of Common Stock of the Company over which
the above persons individually or together share voting power or
investment power adjusted, however, to eliminate the reporting of shares
more than once in order not to overstate the aggregate beneficial
ownership of such persons.
(2) Based on a Schedule 13G dated January 9, 1998 filed by Alpha Assurances
Vie Mutuelle, AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie
Mutuelle, and AXA Courtage Assurance Mutuelle, as a group (the "Mutuelle
AXA Group") pursuant to rules of the Exchange Act, AXA-UAP and The
Equitable Companies Incorporated ("Equitable"). According to such Schedule
13G, Equitable filed the Schedule 13G as a parent holding company in
accordance with Rule 13d-1(b)(ii)(G) under the Exchange Act reporting sole
voting power with respect to 12,397,417 of such shares, sole investment
power with respect to 12,669,362 of such shares and shared investment
power with respect to 1,200 of such shares; AXA-UAP filed as a parent
holding company and as the beneficial owner of a majority interest in
Equitable, reporting sole voting power with respect to 12,397,417 of such
shares and sole investment power with respect to 12,669,362 of such
shares, and the Mutuelle AXA Group filed the Schedule 13G as a parent
holding company, as a group which beneficially owns a majority interest in
AXA-UAP, reporting sole voting power with respect to 12,397,417 of such
shares and sole investment power with respect to 12,669,362 of such
shares.
(3) Based on a Schedule 13G dated January 30, 1998 filed by Dresdner Bank AG
pursuant to Rule 13d-1(b)(ii)(G) under the Exchange Act as a parent
holding company of Dresdner RCM Global Investors LLC, reporting beneficial
ownership of 4,270,833 shares, sole voting power with respect to 23,133 of
such shares and sole investment power with respect to 23,133 of such
shares. A separate Schedule 13G dated January 30, 1998 was filed by
Dresdner RCM Global Investors LLC, RCM Limited L.P. and RCM General
Corporation reporting beneficial ownership of 4,247,700 of such shares,
sole voting power with respect to 2,910,925 of those shares and sole
investment power with respect to 4,176,700 of those shares. According to
the Schedule 13G, RCM General Corporation filed pursuant to Rule 13d-
1(b)(ii)(G) under the Exchange Act as General Partner of RCM Limited L.P.,
and RCM Limited L.P. filed pursuant to Rule 13d-1(b)(ii)(G) as Managing
Agent of Dresdner RCM Global Investors LLC.

8
<PAGE>

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth, as of March 13, 1998, the number of shares
and percentage of the Company's Common Stock beneficially owned by each
director, each executive officer named in the Summary Compensation Table in
this Proxy Statement, and all directors and executive officers as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF COMMON
NUMBER OF SHARES STOCK OUTSTANDING IF
NAME BENEFICIALLY OWNED(/1/) GREATER THAN 1%
---- ----------------------- --------------------
<S> <C> <C>
Anthony B. Evnin................. 139,452
William F. Hamilton.............. 119,174
David P. Holveck................. 619,056
Antonie T. Knoppers.............. 127,032
Ronald A. Matricaria............. 30,800
Hubert J.P. Schoemaker........... 635,316
Richard D. Spizzirri............. 116,144
Lawrence Steinman................ 27,850
Jean C. Tempel................... 49,250
Joseph C. Scodari................ 47,712
Martin R. Page................... 153,595
Dominic J. Caruso................ 18,125
All directors and executive
officers as a group............. 2,083,506 2.97%
</TABLE>
- --------
(1) Includes shares which the individual named in the table has the right to
acquire, on or before May 13, 1998, through the vesting of awards under
the Company's 1983 Restricted Common Stock Award Plan (the "1983 Award
Plan") or the exercise of stock options pursuant to individual agreements
under the Company's 1987 Non-Qualified Stock Option Plan or 1989 Non-
Employee Directors' Non-Qualified Stock Option Plan, as follows: Anthony
B. Evnin--78,000; William F. Hamilton--108,000; David P. Holveck--538,000;
Antonie T. Knoppers--108,000; Ronald A. Matricaria--30,800; Hubert J.P.
Schoemaker--355,000; Richard D. Spizzirri--23,700; Lawrence Steinman--
27,850; Jean C. Tempel--26,550; Joseph C. Scodari--38,750; Martin R.
Page--146,450; Dominic J. Caruso--12,250 and all directors and executive
officers as a group--1,493,350.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's officers, directors
and persons who own more than 10% of the Company's Common Stock to file
reports of ownership and changes in ownership with the Commission. The
Commission's rules also require such reporting persons to furnish the Company
with a copy of all Section 16(a) forms they file.

Based upon a review of the copies of the forms which the Company received
and written representations from certain reporting persons, the Company
believes that the sale by Dr. Schoemaker of 400 shares of the Company's Common
Stock on September 15, 1997 was not reported on Dr. Schoemaker's Form 4 filed
on October 9, 1997. The sale has been reported on Dr. Schoemaker's Form 5 for
1997. The Company believes that all other filing requirements applicable to
its reporting persons were complied with during the fiscal year ended December
31, 1997.

9
<PAGE>

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company, who are elected to serve at the
discretion of the Board of Directors, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David P. Holveck............... 52 Chief Executive Officer
Joseph C. Scodari.............. 44 President and Chief Operating Officer
Martin R. Page................. 53 Senior Vice President--Worldwide Regulatory
Affairs and Quality Assurance
Dominic J. Caruso.............. 40 Senior Vice President and Chief Financial
Officer
Christopher C. Hentschel....... 45 Senior Vice President and Chief Scientific
Officer
</TABLE>

Mr. Holveck has been associated with Centocor since June 1983, as Chief
Executive Officer since January 1998, as President and Chief Executive Officer
from November 1992 to December 1997, as President and Chief Operating Officer
from April 1992 to October 1992, and as Executive Vice President and
President--Diagnostics Division from December 1988 to April 1992.

Mr. Scodari has been associated with Centocor since April 1996, as President
and Chief Operating Officer since January 1998, and as Executive Vice
President and President--Pharmaceutical Division from April 1996 to December
1997. Previously, Mr. Scodari was employed by Rhone-Poulenc Rorer
Pharmaceuticals (RPR). Mr. Scodari joined RPR in 1989 as Vice President of
Marketing and Business Development, and later served as Vice President and
General Manager--U.S. Pharmaceuticals, Senior Vice President and General
Manager--North America Ethicals, and most recently as Senior Vice President
and General Manager--The Americas.

Mr. Page has been associated with Centocor since September 1987, as Senior
Vice President--Regulatory Affairs and Quality Assurance since March 1994, as
Senior Vice President--Worldwide Regulatory Affairs from August 1992 to March
1994, as Vice President--Worldwide Regulatory Affairs from June 1990 to August
1992, and as Vice President--International Regulatory Affairs from September
1987 to June 1990.

Mr. Caruso has been associated with Centocor since November 1985, as Senior
Vice President and Chief Financial Officer since January 1998, as Vice
President--Finance and Chief Financial Officer from December 1994 to December
1997, and as Vice President and Corporate Controller from January 1991 to
November 1994. Additionally, from January 1997 to July 1997, Mr. Caruso served
as the Company's Acting General Manager--Diagnostics Division.

Dr. Hentschel has been associated with Centocor since January 1998, as
Senior Vice President and Chief Scientific Officer. Previously, Dr. Hentschel
was employed by the United Kingdom Medical Research Council Collaborative
Center where he served as Chief Executive from June 1990.

10
<PAGE>

EXECUTIVE COMPENSATION AND OTHER INFORMATION

REPORT OF BOARD OF DIRECTORS' COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors, consisting entirely of
non-employee directors, is responsible for establishing and reviewing the
compensation of the Company's executive officers.

EXECUTIVE COMPENSATION POLICIES

The Company's executive compensation programs are designed to attract and
retain experienced and well-qualified executive officers who will enhance the
performance of the Company and build shareholders' equity. The Company's
executive compensation packages generally include four components: base
salary; a discretionary annual cash bonus; stock options and restricted stock
awards; and executive benefits.

In setting the compensation level for executive officers, the Committee is
guided by the following considerations:

--compensation levels should be competitive with compensation generally
being paid to executives in the pharmaceutical and biotechnology
industries to ensure the Company's ability to attract and retain superior
executives;

--a significant portion of executive officer compensation should be paid in
the form of equity-based incentives to link closely shareholders and
executive interests and to encourage stock ownership by executive
officers; and

--each individual executive officer's compensation should reflect the
performance of the Company as a whole, the performance of the officer's
business unit, if applicable, and the performance of the executive
officer.

BASE SALARY

An executive's base salary is determined by the Company's overall
performance, the responsibility of the particular position, and an assessment
of his/her performance against his/her individual responsibilities and
objectives, including, where appropriate, the impact of such performance on
the business results of the Company. The Committee also may consider non-
financial indicators, including, but not limited to, strategic developments
for which an executive officer has responsibility and intangible elements of
managerial performance. Executive officer salaries are generally reviewed
annually and adjusted on a calendar year basis based upon these
considerations.

ANNUAL CASH BONUS

The Committee may make cash awards to executive officers based on certain
financial and non-financial indicators of corporate performance. An individual
executive's annual bonus is a percentage of his/her base salary determined by
the executive's job level and scope of responsibility.

Based on the Company's performance in 1997, the Committee awarded cash
bonuses to its executive officers with respect to such year.

STOCK OPTIONS AND RESTRICTED STOCK AWARDS

The Committee may grant stock options and/or restricted stock awards to
executive officers. The Committee sets guidelines for the number of stock
options granted or shares awarded, based on the Company's performance and the
targeted value of each executive's overall compensation package. In

11
<PAGE>

setting such guidelines, the Committee evaluates the long-term incentive
packages offered to the Company's executives in relation to the long-term
incentive packages other biotechnology companies which the Committee considers
to be in the Company's peer group offer their executives. The Committee
considers the Company's peer group to be: Amgen Inc., Biogen, Inc., Genentech
Inc., Genzyme Corporation and Chiron Corporation.

The Committee granted certain executive officers stock options in 1997 as an
incentive for future performance.

EXECUTIVE BENEFITS

In order to provide an attractive package for executive officers, thereby
enabling the Company to attract and retain necessary executive talent, the
Company often supplements the standard benefits package offered to all
employees with special executive benefits.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

Mr. Holveck's 1997 compensation consisted of base salary, a cash bonus,
stock options and executive benefits.

In view of Mr. Holveck's responsibility and seniority, the Committee set his
1997 base salary at $399,623, to be competitive with base salaries paid to
other executives in the biotechnology industry with similar responsibilities
and seniority. Based on his achievement of certain objectives, in 1997 the
Committee granted Mr. Holveck a cash bonus of $154,500 and options to purchase
80,000 shares of Common Stock. These option grants, together with prior grants
and awards, reflect the Committee's policy of encouraging long-term
performance and promoting executive retention while further aligning
management's and shareholders' interest in the performance of the Company's
Common Stock.

COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)

Section 162(m) of the Internal Revenue Code, applicable in tax years
beginning on or after January 1, 1994, generally disallows a tax deduction to
publicly-held companies for annual compensation in excess of $1 million earned
by the chief executive officer or any of the other four highest compensated
officers. The deduction limit does not apply, however, to performance-based
compensation that satisfies certain requirements. The Committee does not
anticipate that in the foreseeable future any officer of the Company will earn
compensation in excess of $1 million that would not qualify as performance-
based compensation. Therefore, the Committee has not yet determined a policy
with respect to Section 162(m). The Committee intends to review the
implications to Section 162(m) when it becomes more relevant with respect to
the Company's executive compensation policies.

The Compensation Committee

Dr. Anthony B. Evnin
Dr. William F. Hamilton
Dr. Antonie T. Knoppers
Mr. Ronald A. Matricaria

12
<PAGE>

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table sets forth, for the fiscal years ended December 31,
1997, 1996, and 1995, the cash compensation paid by the Company, as well as
certain other compensation paid with respect to those years, to the chief
executive officer and each of the four other most highly compensated policy
making principals of the Company in all capacities in which they served. Cash
bonuses are stated in the year for which they are awarded, whether paid or
accrued.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------ ---------------------------
AWARDS
---------------------------
SECURITIES
NAME AND RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL STOCK AWARD(S) OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(/1/) (#)(/2/) ($)(/3/)
--------- ---- --------- -------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David P. Holveck........ 1997 $399,623 $154,500 $ 0 80,000 $10,419
Chief Executive Officer 1996 $384,500 $144,750 $1,035,000 100,000 $ 6,934
1995 $309,000 $ 0 $ 423,750 90,000 $ 6,066
Hubert J.P. Schoemaker.. 1997 $399,624 $154,500 $ 0 85,000 $10,435
Chairman of the Board 1996 $385,700 $144,750 $1,035,000 100,000 $ 6,997
1995 $371,000 $ 0 $ 423,750 90,000 $ 6,718
Joseph C. Scodari(/4/).. 1997 $311,093 $110,236 $ 0 55,000 $ 8,911
President and Chief 1996 $213,500 $115,000 $2,267,500 155,000 $ 4,124
Operating Officer
Martin R. Page.......... 1997 $217,765 $ 49,536 $ 0 21,800 $ 7,531
Senior Vice President-- 1996 $209,900 $ 47,250 $ 172,500 25,000 $ 5,080
Worldwide Regulatory 1995 $204,000 $ 0 $ 141,250 25,000 $ 4,942
Affairs and Quality
Assurance
Dominic J. Caruso....... 1997 $184,542 $ 72,874 $ 0 18,500 $ 7,098
Senior Vice President 1996 $161,200 $ 37,800 $ 172,500 25,000 $ 4,586
and Chief Financial Of- 1995 $150,000 $ 0 $ 141,250 17,000 $ 4,391
ficer
</TABLE>
- --------
(1) Of the 60,000 shares awarded to Mr. Holveck under the 1983 Award Plan
during the three fiscal years ended December 31, 1997, 25% vest each year
for four consecutive years beginning one year from the date of grant. At
December 31, 1997, Mr. Holveck held unvested awards under the 1983 Award
Plan for an aggregate of 39,500 shares with a market value of $1,313,375.

Of the 60,000 shares awarded to Dr. Schoemaker under the 1983 Award Plan
during the three fiscal years ended December 31, 1997, 25% vest each year
for four consecutive years beginning one year from the date of grant. At
December 31, 1997, Dr. Schoemaker held unvested awards under the 1983 Award
Plan for an aggregate of 39,500 shares with a market value of $1,313,375.

Of the 65,000 shares awarded to Mr. Scodari under the 1983 Award Plan
during the three fiscal years ended December 31, 1997, 25% vest each year
for four consecutive years beginning one year from the date of grant. At
December 31, 1997, Mr. Scodari held unvested awards under the 1983 Award
Plan for an aggregate of 48,750 shares with a market value of $1,620,938.

Of the 15,000 shares awarded to Mr. Page under the 1983 Award Plan during
the three fiscal years ended December 31, 1997, 25% vest each year for four
consecutive years beginning one year from the date of grant. At December
31, 1997, Mr. Page held unvested awards under the 1983 Award Plan for an
aggregate of 9,750 shares with a market value of $324,186.

13
<PAGE>

Of the 15,000 shares awarded to Mr. Caruso under the 1983 Award Plan during
the three fiscal years ended December 31, 1997, 25% vest each year for four
consecutive years beginning one year from the date of grant. At December
31, 1997, Mr. Caruso held unvested awards under the 1983 Award Plan for an
aggregate of 9,170 shares with a market value of $304,903.

The vesting of all the foregoing unvested shares may be accelerated under
certain events constituting a change in control of the Company. With
respect to restricted stock awards, shares of Common Stock are not issued
prior to the vesting of an award. The holder of unvested restricted stock
awards has no rights as a shareholder of the Company, including no right to
receive dividends. The Company has not paid any dividends on its Common
Stock and does not expect to pay any dividends in the foreseeable future.

(2) All of the options granted to Mr. Holveck, Dr. Schoemaker, Mr. Scodari,
Mr. Page and Mr. Caruso in the three fiscal years ended December 31, 1997
were granted in tandem with limited stock appreciation rights ("LSARs").
LSARs may be exercised only upon the occurrence of certain events
constituting a change in control of the Company, only during the 30-day
period following shareholder approval of any such event (but may not in
any event be exercised for six months after the date of grant of the
LSAR), and will be exercisable only if and to the extent that the options
to which they relate are exercisable. For each share for which an LSAR is
exercised, the optionee will receive an amount in cash equal to the
difference between (1) the exercise price per share of the option to which
the LSAR relates and (2) the fair market value per share of the Common
Stock issuable upon exercise of the option on the date the LSAR is
exercised.

(3) All of such amounts constitute contributions made by the Company to the
Company's Qualified Savings and Retirement Plan for the accounts of the
named principals.

(4) Mr. Scodari became an officer and employee of the Company effective as of
April 8, 1996.

14
<PAGE>

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

The following table sets forth information concerning the grant of stock
options and LSARs under the Company's 1987 Non-Qualified Stock Option Plan to
the principals named in the Summary Compensation Table during the fiscal year
ended December 31, 1997:

OPTION/LSAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/LSARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS/LSARS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED (#) IN FISCAL YEAR ($/SH)(/1/) DATE(/2/) 5% ($) 10% ($)
---- ------------- -------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David P. Holveck........ 80,000(/3/) 10.44% $34.00 12/22/07 $1,710,583 $4,334,972
Hubert J.P. Schoemaker.. 85,000(/3/) 11.09% $34.00 12/22/07 $1,817,494 $4,605,908
Joseph C. Scodari....... 55,000(/3/) 7.18% $34.00 12/22/07 $1,176,026 $2,980,293
Martin R. Page.......... 21,800(/3/) 2.84% $34.00 12/22/07 $ 466,134 $1,181,280
Dominic J. Caruso....... 18,500(/3/) 2.41% $34.00 12/22/07 $ 395,572 $1,002,462
</TABLE>
- --------
(1) The price payable upon exercise of options may be paid in cash, property,
services rendered, or, under certain circumstances, in shares of the
Company's Common Stock having a fair market value equal on the date of
exercise to the exercise price, or any combination thereof.
(2) Each of the options generally expires upon the earlier of six months after
the employee's termination of employment or the expiration date noted
above.
(3) Such options will first become exercisable as to one-quarter of the option
shares on December 22, 1998. The remainder will become exercisable as to
one-quarter of the option shares on December 22, 1999, one-quarter of the
option shares on December 22, 2000 and one-quarter of the option shares on
December 22, 2001. The exercisability of all of the options will
accelerate upon the occurrence of certain events constituting a change in
control of the Company. All of such options were granted in tandem with
LSARs.

The following table sets forth information with respect to option exercises
during the fiscal year ended December 31, 1997 and the unexercised options and
LSARs held by each of those principals as of the end of such fiscal year:

AGGREGATED OPTION/LSAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/LSAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/LSARS OPTIONS/LSARS AT
SHARES AT FY-END (#) FY-END ($)
ACQUIRED ON VALUE REALIZED -------------------------- -------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David P. Holveck........ 28,000 $ 872,125 528,000(/1/) 230,000(/1/) $10,249,125 $1,548,125
Hubert J.P. Schoemaker.. 434,000 $13,395,906 343,750(/1/) 236,250(/1/) $ 3,880,781 $1,574,843
Joseph C. Scodari....... 0 $ 0 38,750(/1/) 171,250(/1/) $ 0 $ 0
Martin R. Page.......... 14,000 $ 872,125 143,950(/2/) 63,050(/1/) $ 3,170,061 $ 469,061
Dominic J. Caruso....... 21,875 $ 499,844 12,250(/1/) 53,250(/1/) $ 115,749 $ 322,624
</TABLE>
- --------
(1) All of such options were granted in tandem with LSARs.
(2) 88,750 of such options were granted in tandem with LSARs.

15
<PAGE>

PERFORMANCE GRAPH

The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock during the five fiscal
years ended December 31, 1997 with the cumulative total return on the Nasdaq
Stock Market Index (U.S. and Foreign Companies) and the Hambrecht & Quist
Biotechnology Index. The comparison assumes $100 was invested on December 31,
1992 in the Company's Common Stock and in each of the foregoing indices and
further assumes reinvestment of dividends. The Company did not declare or pay
any dividends during the comparison period.

[GRAPH APPEARS HERE]

TRANSACTIONS INVOLVING MANAGEMENT

At various times in 1997, various executive officers were awarded and vested
in shares awarded pursuant to the 1983 Award Plan, and were granted and
exercised options pursuant to the 1987 Non-Qualified Stock Option Plan.

The Company has arrangements with all executive officers other than Mr.
Holveck pursuant to which each will receive severance payments of up to twelve
months compensation in certain cases in the event of termination of his
employment by the Company. The Company has an arrangement with Mr. Holveck
pursuant to which he will receive a lump-sum payment of twelve months
compensation in certain cases in the event of termination of his employment by
the Company.

The terms of currently unexercisable options for an aggregate of 1,143,046
shares and currently unvested restricted stock awards for an aggregate of
172,060 shares granted to all executive officers and certain other employees
of the Company provide for the acceleration of the exercisability of such
options and the vesting of such common stock awards upon the occurrence of
certain events constituting a change in control of the Company.

16
<PAGE>

OTHER BUSINESS

The Board of Directors knows of no business that will be presented at the
meeting other than the election of directors, the proposal to approve the
amendment of the 1987 Non-Qualified Stock Option Plan and the proposal to
approve the amendment of the 1989 Non-Employee Directors' Non-Qualified Stock
Option Plan. If any other matter is properly presented to the meeting, the
persons named in the accompanying proxy will have discretionary authority to
vote proxies with respect to such matter in accordance with their best
judgment.

ADDITIONAL INFORMATION

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

KPMG Peat Marwick LLP, independent certified public accountants, audited the
consolidated financial statements of the Company for the year ended December
31, 1997. Representatives of KPMG Peat Marwick LLP are expected to attend the
1998 annual meeting of shareholders, will have the opportunity to make a
statement if they desire to do so and are expected to be available to answer
appropriate questions. The Board of Directors has selected KPMG Peat Marwick
LLP as the independent public accountants to audit the Company's consolidated
financial statements for the year ending December 31, 1998.

DEADLINE FOR SHAREHOLDERS' PROPOSALS

The Company must receive any proposal which a shareholder wishes to submit
to the 1999 annual meeting of shareholders before December 3, 1998, if the
proposal is to be considered by the Board of Directors for inclusion in the
proxy material for that meeting.

George D. Hobbs
Secretary

April 2, 1998

17
<PAGE>

EXHIBIT A

CENTOCOR, INC.
1987 NON-QUALIFIED STOCK OPTION PLAN
(AS AMENDED APRIL 10, 1991, MARCH 18, 1998, AND TO REFLECT MAY 1991 TWO-FOR-
ONE STOCK SPLIT)

1. OBJECTIVES

The objectives of this Plan are to assist Centocor, Inc. (the "Company") in
attracting and retaining qualified employees and to promote the identification
of such employees' interests with those of the Company's shareholders.

2. DEFINITIONS

"Board" shall mean the Board of Directors of the Company.

"Date of grant" in relation to any option granted under this Plan shall mean
the date on which the Board or the Committee (as defined below) granted the
option.

"Eligible Employee" shall mean officers (who may also be directors) and
employees regularly employed by the Company or any Subsidiary.

"Exercise" in respect of an option shall mean the delivery by the optionee
to the Company of (a) written notice of exercise of the option as to a
specified number of Shares; and (b) payment of the option price for such
shares.

"Optionee" shall mean a person holding an option granted under this Plan
which has not been exercised or surrendered and has not expired.

"Plan" shall mean this 1987 Non-Qualified Stock Option Plan, as amended.

"Shares" shall mean shares of Common Stock, par value $.01 per share, of the
Company.

"Subsidiary" shall mean a corporation in which, at the time in question, the
Company owns at least 50% of the voting stock outstanding.

3. MAXIMUM NUMBER OF SHARES TO BE OPTIONED AND ADJUSTMENTS IN OPTIONED SHARES

The maximum number of Shares for which options may be granted hereunder is
9,450,000 of which 3,223,263 remain available. This number shall be adjusted
if the number of outstanding Shares of the Company is increased or reduced by
split-up, reclassification, stock dividend or reverse stock split. The number
of Shares previously optioned and not theretofore delivered and the option
price per Share shall likewise be adjusted whenever the number of outstanding
Shares is increased or reduced by any such procedure. The maximum number of
Shares for which options may be granted shall be increased by: (i) Shares for
which options have expired or have been surrendered and (ii) Shares that are
tendered to the Company as full or partial payment or settlement of the option
price or in payment of any applicable withholding for federal, state, city,
local or foreign income, payroll or other taxes incurred in connection with
the exercise of an option.

4. ADMINISTRATION AND INTERPRETATION

This Plan shall be administered by the Board or a committee of the Board
(the "Committee") which shall be comprised of at least that number of members
of the Board, designated by the Board, required by applicable regulations
(including Rule 16b-3 under the Securities Exchange Act of 1934 and Treasury
Reg. 1.162-27), who meet any applicable criteria specified by such
regulations. The Board and the Committee may each make such rules and
establish such procedures as each deems appropriate for the administration of
this Plan. In the event of any disagreement as to the interpretation of the
Plan or any rule or procedure thereunder, the decision of the Board shall be
final and binding upon all persons in interest.

A-1
<PAGE>

5. GRANTING OF OPTIONS

The Board and the Committee are each authorized to grant options to selected
Eligible Employees pursuant to this Plan. The number of Shares, if any,
optioned in each year, the Eligible Employees to whom options are granted, and
the number of Shares optioned to each Eligible Employee shall be wholly within
the discretion of the Board or the Committee. However, in no event will an
Eligible Employee receive, in any year, options to purchase in excess of
150,000 Shares.

6. PREVIOUSLY GRANTED NON-QUALIFIED OPTIONS

This Plan includes non-qualified options to purchase 6,207,493 Shares which
have been previously granted to Eligible Employees. All options granted prior
to shareholder approval of the proposed amendments to the Plan which are
contained herein and which were adopted by the Board on March 18, 1998,
including all options granted up to and including May 13, 1998, shall be
deemed authorized and valid under and shall be governed by extension of the
original terms of the Plan, as previously amended, and shall not be subject to
the terms of the proposed amendments herein to the extent the Board concludes
that there is a material difference in the rights conferred. The Shares
issuable on exercise of such options are included in the maximum number of
Shares for which options may be granted hereunder.

7. OPTION TERMS

Subject to the limitations prescribed in Sections 5 and 6 above, the options
granted under this Plan shall be on the terms stated in clauses (a) through
(f) below. The Board and the Committee may each specify additional terms not
inconsistent with this Plan by rules of general application or by specific
direction in connection with a particular option or group of options.

(a) The option price shall be fixed by the Board or the Committee, but
shall not be less than 100% of the fair market value of the underlying
Shares on the date of grant.

(b) A Stock option may be exercised, in whole or in part, by giving
written notice of exercise to the Company specifying the number of Shares
to be purchased. Such notice shall be accompanied by payment in full of the
purchase price, plus any required withholding taxes, in cash or, if
permitted by the terms of the related grant agreement or otherwise approved
in advance by the Committee, in shares of Stock already owned by the
Participant valued at the fair market value of the Stock on the date of
exercise. The Committee may also permit Participants, either on a selected
or aggregate basis, to simultaneously exercise options and sell the Shares
thereby acquired pursuant to a brokerage or similar arrangement approved in
advance by the Committee and to use the proceeds from such sale to pay the
exercise price and withholding taxes.

(c) The option shall not be transferable otherwise than by will or the
laws of descent and distribution and shall be exercisable, during the
Optionee's lifetime, only by him or her.

(d) The option shall expire ten years after the date of grant, unless the
Board fixes an earlier date.

(e) The option shall terminate and may not be exercised if the Optionee
ceases to be an employee of the Company or any Subsidiary, except to the
extent provided in Section 8 hereof.

(f) In the event that the Company is succeeded by another company in a
reorganization, merger, consolidation, separation or liquidation, or
otherwise, the successor entity shall assume the outstanding options
granted under this Plan or the Committee shall adjust the options on an
equitable basis, subject to the provisions of Section 12 hereof.

8. EXERCISE RIGHTS UPON TERMINATION OF EMPLOYMENT

No option may be exercised unless the holder is at the time of such exercise
an Employee, except as otherwise provided in clauses (a) through (e) below.

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(a) If an Optionee becomes disabled, he or she may exercise his or her
options within one year after the date of disability, but in no event later
than the date on which the option would have expired if the Optionee had
not become disabled. During such period the option may be exercised only to
the extent that the Optionee was entitled to do so at the date of
disability and, to the extent the option is not so exercised, it shall
expire at the end of such period. For purposes of this clause, an Optionee
shall be deemed to be disabled if he or she is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of more
than 12 months.

(b) If an Optionee is deemed by the Committee to have retired from the
Company during a period in which he or she is entitled to exercise an
option (including the period referred to in clause (a) of this Section),
the option shall terminate three years after the date of retirement, but in
no event later than the date on which the option would have expired if the
Optionee had not retired.

(c) If an Optionee dies during a period in which he or she is entitled to
exercise an option (including the periods referred to in clauses (a) and
(b) of this Section), the option shall terminate one year after the date of
death, but in no event later than the date on which the option would have
expired if the Optionee had lived. During such period, the option may be
exercised by the Optionee's executor or administrator or by any person or
persons who have acquired the option directly from the Optionee by bequest
or inheritance, but only to the extent that the Optionee was entitled to do
so at the date of death and, to the extent the option is not so exercised,
it shall expire at the end of such period.

(d) If an Optionee ceases to be an Employee of the Company or any
Subsidiary for any reason other than those stated in clauses (a) through
(c) of this Section, he or she may exercise options granted hereunder for a
period not to exceed three months after the date of such termination, but
in no event later than the date on which the option would have expired if
the Optionee had remained an Employee of the Company or any Subsidiary.
During such period the option may be exercised only to the extent that the
Optionee was entitled to do so on the date of termination of employment
and, to the extent the option is not so exercised, it shall expire at the
end of such three month period. This provision shall not apply if the
Optionee's employment was terminated for "cause," which shall include
theft; falsification of records; fraud; embezzlement; gross negligence or
willful misconduct; causing the Company to violate any Federal, state or
local law, administrative regulation or ruling having the force and effect
of law; insubordination; conflict of interest; diversion of corporate
opportunity; or conduct that results in publicity that reflects unfavorably
on the Company.

(e) Notwithstanding the provisions of this Plan in clauses (a) through
(d) of this Section, the Board or the Committee may permit the exercise of
any option for any period following the Optionee's termination of
employment not in excess of the original term of the option on such terms
and conditions as it shall deem appropriate and specify in the related
grant agreement or in an amendment to such agreement.

9. ADDITIONAL REQUIREMENTS

Upon the exercise of an option granted hereunder the Board may require the
Optionee to deliver the following:

(a) A written statement that the Optionee (or such other person) is
purchasing the Shares for investment and not with a view toward their
distribution or sale and will not sell or transfer any Shares received upon
the exercise of the option except in accordance with the Securities Act of
1933 and applicable state securities laws; and

(b) Evidence reasonably satisfactory to the Company that at the time of
exercise the Optionee (or such other person) meets such other requirements
as the Board may determine.

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10. COMMON STOCK SUBJECT TO OPTION

The Shares issuable upon exercise of options granted hereunder may be
unissued Shares or treasury Shares, including Shares bought on the open
market. The Company at all times during the term of this Plan shall reserve
for issuance the number of Shares issuable upon exercise of options granted
hereunder.

11. COMPLIANCE WITH GOVERNMENTAL AND OTHER REGULATIONS

The Company will not be obligated to issue and sell the Shares subject to
options granted hereunder if, in the opinion of its counsel, such issuance and
sale would violate any applicable Federal or state securities laws. The
Company will seek to obtain from each regulatory commission or agency having
jurisdiction such authority as may be required to issue and sell Shares
issuable upon exercise of any option granted hereunder. Inability of the
Company to obtain from any such regulatory commission or agency authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares upon exercise of an option granted hereunder shall relieve the
Company from any liability for failure to issue and sell such Shares until the
time when such authority is obtained or is obtainable.

12. CONTROL TRANSACTION

(a) Effect on Grants. In the event of a Control Transaction (as defined
below) involving the Common Stock of the Company, except as the Board of
Directors may otherwise expressly provide prior to the date upon which the
Control Transaction occurs, and notwithstanding any other provision of the
Plan to the contrary, all options then outstanding shall become fully
exercisable as of the date of the Control Transaction.

(b) Control Transaction Defined. "Control Transaction" shall have the
meaning ascribed to that term in Subchapter 25E of the Pennsylvania Business
Corporations Law of 1988, as amended, 15 Pa.C.S. (S) 2541 et. seq.

13. NON-ASSIGNMENT OF OPTIONS

Except as otherwise provided in Paragraph 7(c) hereof, any option granted
hereunder and the rights and privileges conferred hereby shall not be
transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of such option, right or privilege contrary
to the provisions hereof, or upon the levy of any attachment or similar
process upon the rights and privileges conferred hereby, such option and the
rights and privileges conferred hereby shall immediately terminate.

14. RIGHTS OF OPTIONEE IN STOCK

Neither any Optionee nor the legal representatives, heirs, legatees or
distributees of any Optionee, shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any Shares issuable upon
exercise of an option granted hereunder unless and until such Shares are
issued to him, her or them and such person or persons have received a
certificate or certificates therefore.

15. DELIVERY OF SHARES ISSUED PURSUANT TO OPTION

Subject to the other terms and conditions of this Plan, upon the exercise of
an option granted hereunder, the Company shall sell to the Optionee the Shares
with respect to which the option has been exercised.

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16. WITHHOLDING OF APPLICABLE TAXES

The Company shall have the right to reduce the number of Shares otherwise
required to be issued upon exercise of an option granted hereunder by an
amount which would have a fair market value on the date of such exercise equal
to all Federal, state, city or other taxes as shall be required to be withheld
by the Company pursuant to any statute or other governmental regulation or
ruling. In connection with such withholding, the Company may make any such
arrangements as are consistent with this Plan as it may deem appropriate.

17. PLAN AND OPTIONS NOT TO AFFECT EMPLOYMENT

Neither this Plan nor any option granted hereunder shall confer upon any
Eligible Employee any right to continue in the employ of the Company or any
Subsidiary.

18. AMENDMENT OF PLAN

The Board may make all such amendments to the Plan which it deems necessary
or advisable, provided that the Board may seek shareholder approval of an
amendment if determined to be required by or advisable under regulations of
the Securities and Exchange Commission or the Internal Revenue Service, the
rules of any stock exchange or quotation system on which the Company's stock
is listed or other applicable law or regulation.

19. NOTICES

Any notice required or permitted hereunder shall be sufficiently given only
if sent by registered or certified mail, postage prepaid, addressed to the
Secretary of the Company at 200 Great Valley Parkway, Malvern, Pennsylvania
19355-1307, and to the Optionee at the address on file with the Company at the
time of grant hereunder, or to such other address as either party may
hereafter designate in writing by notice similarly given by one party to the
other.

20. SUCCESSORS

The Plan shall be binding upon and inure to the benefit of any successor or
successors of the Company.

21. SEVERABILITY

If any part of this Plan shall be determined to be invalid or void in any
respect, such determination shall not affect, impair, invalidate or nullify
the remaining provisions of this Plan, which shall continue in full force and
effect.

22. TERMINATION OF THE PLAN

The Board may terminate this Plan at any time. Otherwise, this Plan shall
terminate on January 1, 2008, unless extended by the Board. Termination of the
Plan shall not deprive Optionees of their rights under previously granted
options.

23. EFFECTIVE DATE OF PLAN

This Plan shall become effective upon adoption of the Plan by the Board, but
the exercisability of any option granted hereunder is subject to the express
condition that within 12 months after the date on which this Plan is adopted
by the Board this Plan shall have been duly approved by the shareholders of
the Company.

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0904-PS-98