SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, For Use of the
[_] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
PHARMOS CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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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
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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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<PAGE>
PHARMOS CORPORATION
99 Wood Avenue South, Suite 301
Iselin, NJ 08830
(732) 452-9556
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
NOTICE IS HEREBY GIVEN, that the Annual Meeting of the Stockholders of
Pharmos Corporation (the "Company") will be held in Edison, New Jersey at 11:00
AM on July 20, 2000 at the Sheraton Edison Hotel, 125 Raritan Center Parkway,
(i) for the election of Directors of the Company to hold office until the next
annual meeting of the stockholders and until their successors are duly elected
and qualified; (ii) to adopt the Company's 2000 Stock Option Plan; and (iii) to
transact such other business as may properly come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on June 14, 2000 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting.
If you do not expect to be personally present at the meeting, but wish your
stock to be voted for the business to be transacted thereat, the Board of
Directors requests that you fill in, sign and date the enclosed proxy and
promptly return it by mail in the postage paid envelope provided.
BY ORDER OF THE BOARD OF DIRECTORS
Haim Aviv, Ph.D.
Chairman of the Board
June 16, 2000
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
<PAGE>
PHARMOS CORPORATION
99 Wood Avenue South, Suite 301
Iselin, NJ 08830
(732) 452-9556
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 20, 2000
INTRODUCTION
The Annual Meeting is called to elect members of the Board of Directors and
to adopt the Company's 2000 Stock Option Plan. The Meeting will be open for the
transaction of such other business as may properly come before it, although, as
of the date of this proxy statement, management does not know of any other
business that will come before the Annual Meeting. If any other matters do come
before the Annual Meeting, the persons named in the enclosed form of proxy are
expected to vote said proxy in accordance with their judgment on such matters.
This proxy statement and the accompanying proxy card are first being mailed
on or about June 16, 2000 to stockholders of record as of June 14, 2000. A copy
of the Annual Report for the fiscal year ended December 31, 1999, which includes
audited financial statements, is included herewith.
The solicitation of proxies in the accompanying form is made by, and on
behalf of, the Board of Directors, and no compensation will be paid therefor.
There will be no solicitation of proxies other than by mail or personal
solicitation by officers and employees of the Company. The Company will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of proxy material to the beneficial owners of
shares held of record by such persons, and such persons will be reimbursed for
reasonable expenses incurred by them in connection therewith. A stockholder
executing the accompanying proxy has the power to revoke it at any time prior to
the exercise thereof by filing with the Secretary of the Company: (i) a duly
executed proxy bearing a later date; or (ii) a written instrument revoking the
proxy.
With regard to the election of Directors, votes may be cast in favor of or
withheld from each nominee. Abstention and "Broker Non-votes" (as defined below)
are counted for purposes of determining whether a quorum is present at the
Annual Meeting, but do not represent votes cast with respect to any proposal.
"Broker Non-votes" are shares held by a broker or nominee for which an executed
proxy is received by the Company, but which shares are not voted as to one or
more proposals because instructions have not been received from the beneficial
owners or persons entitled to vote and the broker or nominee does not have
discretionary voting power.
<PAGE>
VOTING SECURITIES
The Board of Directors has fixed the close of business on June 14, 2000 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting.
As of May 1, 2000, the outstanding capital stock of the Company consisted
of 52,485,197 shares of Common Stock. Each holder of Common Stock is entitled to
one vote for each share of Common Stock held by him or her at the close of
business on the record date.
The shares for which the accompanying proxy is solicited will be voted in
accordance with the directions given, provided that the proxy is executed and
returned by the stockholder prior to the Annual Meeting.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 15, 2000, except
as set forth in the footnotes, by (i) each person who was known by the Company
to own beneficially more than 5% of any class of the Company's Stock, (ii) each
of the Company's Directors, and (iii) all current Directors and executive
officers of the Company as a group. Except as otherwise noted, each person
listed below has sole voting and dispositive power with respect to the shares
listed next to such person's name.
Amount
Name and Address of of Beneficial Percentage
Beneficial Owner Ownership of Total (1)
- -------------------------- ------------- ------------
Haim Aviv, Ph.D.(2) 1,248,805 2.4%
c/o Pharmos Ltd.
Kiryat Weitzman
Rehovot, Israel
Marvin P. Loeb(3) 35,656 *
Trimedyne, Inc.
2810 Barranca Road
Irvine, CA 92714
E. Andrews Grinstead III(4) 124,488 *
Hybridon, Inc.
620 Memorial Drive
Cambridge, MA 02139
<PAGE>
David Schlachet -- *
Strauss Holdings Ltd.
16 Bazel Street
Petach-Tikva, Israel 49510
Mony Ben Dor -- *
The Israel Corporation
4 Weizman St.
Tel-Aviv 61336, Israel
Georges Anthony Marcel, M.D., Ph.D -- *
c/o TMC Development
9, rue de Magdebourg
75116 Paris France
Samuel D. Waksal, Ph.D. 2,000 *
c/o ImClone Systems Inc.
180 Varick Street, 6th Floor
New York, NY 10014
Elkan R. Gamzu, Ph.D. -- *
Cambridge Neuroscience, Inc.
One Kendell Square
Cambridge, MA 02139
Stephen C. Knight, M.D.(5) 25,000 *
Epix Medical, Inc.
71 Rodgers Street
Cambridge, MA 02142
All Directors and 1,597,632 3.1%
Executive Officers
as a Group (11 People) (6)
- ----------
* Indicates ownership of less than 1%.
(1) Based on 52,253,243 shares of Common Stock outstanding, plus each
individual's currently exercisable warrants or options. Assumes that no
other individual will exercise any warrants and/or options.
(2) Includes 276,153 shares of Common Stock held in the name of Avitek Ltd., of
which Dr. Aviv is the Chairman of the Board of Directors and the principal
stockholder, and, as such, shares the right to vote and dispose of such
shares. Also includes currently exercisable options and warrants to
purchase 411,876 shares of Common Stock.
<PAGE>
(3) Held jointly with his wife. Does not include shares held by his adult
children, his grandchildren or a trust for the benefit of his
grandchildren. Mr. Loeb is not standing for re-election as a Director of
the Company.
(4) Consists of currently exercisable options and warrants to purchase Common
Stock.
(5) Dr. Knight resigned as a Director of the Company in April 2000. At such
time, all of his outstanding options and warrants were exercisable.
(6) Based on the number of shares of Common Stock outstanding, plus 710,947
currently exercisable warrants and options held by the Directors and
executive officers. Does not include warrants and options held by Dr.
Knight, who resigned from the Board in April 2000.
ITEM 1 - ELECTION OF DIRECTORS
Seven Directors are to be elected at the Annual Meeting to hold office
until the next annual meeting of stockholders and until their successors have
been duly elected and qualified. The election of Directors requires the
affirmative vote of a plurality of shares cast of Common Stock voting together
present or represented at a meeting at which a quorum (one-third (1/3) of the
outstanding shares of Common Stock) is present or represented. Abstention and
Broker Non-votes are counted for purposes of determining whether a quorum is
present, but do not represent votes cast with respect to any proposal. It is the
intention of the persons named in the accompanying proxy form to vote FOR the
election of the eight persons named in the table below as Directors of the
Company, unless authority to do so is withheld. Proxies cannot be voted for a
greater number of persons than the nominees named. In the event that any of the
below listed nominees for Director should become unavailable for election for
any presently unforeseen reason, the persons named in the accompanying proxy
form have the right to use their discretion to vote for a substitute.
The following table sets forth the name, age and position of each Director
and executive officer:
Name Age Position
- ---- --- --------
Haim Aviv, Ph.D. 60 Chairman, Chief Executive Officer,
Chief Scientist
Elkan R. Gamzu, Ph.D. 57 Director
E. Andrews Grinstead III 54 Director
Samuel D. Waksal, Ph.D. 51 Director
David Schlachet 54 Director
<PAGE>
Mony Ben Dor 54 Director
Georges Anthony Marcel,
M.D., Ph.D. 59 Director
Gad Riesenfeld, Ph.D. 56 President and Chief Operating
Officer
Robert W. Cook 45 Vice President Finance and Chief
Financial Officer
Haim Aviv, Ph.D., is Chairman, Chief Executive Officer, Chief Scientist and
a Director of the Company. In 1990, he co-founded Pharmos Corporation, a New
York corporation ("Old Pharmos"), which merged into the Company in October 1992
(the "Merger"). Dr. Aviv also served as Chairman, Chief Executive Officer, Chief
Scientist and a Director of Old Pharmos prior to the Merger. Dr. Aviv was the
co-founder in 1980 of Bio-Technology General Corp. ("BTG"), a publicly-traded
company engaged in the development of products using recombinant DNA, its
General Manager and Chief Scientist from 1980 to 1985, and a Director and Senior
Scientific Consultant until August 1993. Prior to that time, Dr. Aviv was a
professor of molecular biology at the Weizmann Institute of Science. Dr. Aviv is
the principal stockholder of Avitek Ltd., a stockholder of the Company. Dr. Aviv
is also an officer and/or significant stockholder of several privately held
Israeli biopharmaceutical and venture capital companies.
E. Andrews Grinstead, III, a Director of the Company since 1991, is
Chairman of the Board and Chief Executive Officer of Hybridon, Inc., a
publicly-held biotechnology company. Mr. Grinstead joined Hybridon in 1991. From
1987 to October 1990, he was Managing Director and Group Head of the life
sciences group at PaineWebber, Inc. From 1986 to 1987, Mr. Grinstead was
Managing Director and Group Head of the life sciences group at Drexel Burnham
Lambert, Inc. From 1984 to 1986, he was a Vice President at Kidder, Peabody &
Co., Inc., where he developed the life sciences corporate finance specialty
group. Prior to his seven years on Wall Street, Mr. Grinstead served in a
variety of operational and executive positions with Eli Lilly & Company, most
recently as general manager of Venezuelan Pharmaceutical, Animal Health and
Agricultural Chemical Operations. Serves as a director of Meridian Medical
Technologies, Inc., a pharmaceutical and medical device company. Mr. Grinstead
has served as a member of the Board of Trustees for the Albert B. Sabine Vaccine
Foundation, a 501(c)(3) charitable foundation dedicated to disease prevention
since 1994, and on the Board of the Massachusetts Biotech Counsel since 1997.
Mr. Grinstead was appointed to the President's Council of the National Academy
of Sciences and the Institute of Medicine in 1992. Mr. Grinstead received an
A.B. from Harvard College in 1967, a J.D. from the University of Virginia School
of Law in 1974 and an M.B.A. from the Harvard Graduate School of Business
Administration in 1976.
<PAGE>
Elkan R. Gamzu, Ph.D., a Director of the Company since February 2000, is a
consultant to the biotechnology and pharmaceutical industries. Prior to becoming
a consultant, Dr. Gamzu held a number of senior executive positions in the
biotechnology and pharmaceutical industries, including President and Chief
Executive Officer of Cambridge Neuroscience, Inc. from 1994 until 1998. Dr.
Gamzu also served as President and chief Operating Officer and Vice President of
Development for Cambridge Neuroscience, Inc. from 1989 to 1994. Previously, Dr.
Gamzu held a variety of senior positions with Warner-Lambert and Hoffman
LaRoche, Inc.
Samuel D. Waksal, Ph.D., a Director of the Company since March 2000, is a
founder of ImClone Systems Incorporated and has been its Chief Executive Officer
and a Director since August 1985 and President since March 1987. From 1982 to
1985, Dr. Waksal was a member of the faculty of Mt. Sinai School of Medicine as
Associate Professor of Pathology and Director of the Division of Immunotherapy
within the Department of Pathology. He has served as visiting Investigator of
the National Cancer Institute, Immunology Branch, Research Associate of the
Department of Genetics, Stanford University Medical School, Assistant Professor
of pathology at Tufts University School of Medicine and Senior Scientist for the
Tufts Cancer Research Center. Dr. Waksal was a scholar of the Leukemia Society
of America from 1979 to 1984. Dr. Waksal currently serves on the Executive
Committee of the New York Biotechnology Association, the Board of Directors of
Cadus Pharmaceutical Corporation and is Chairman of the New York Council for the
Humanities.
David Schlachet, a Director of the Company since December 1994, has served
as the Chairman of Elite Industries Ltd. from July 1997. From January 1996 to
June 1997, Mr. Schlachet served as the Vice President of the Strauss Group and
Chief Executive Officer of Strauss Holdings Ltd. The Strauss Group is Israel's
largest privately owned food manufacturer. Mr. Schlachet was Vice President of
Finance and Administration at the Weizmann Institute of Science in Rehovot,
Israel from 1990 to December, 1995. Mr. Schlachet was responsible for the
Institute's administration and financial activities, including personnel, budget
and finance, funding, investments, acquisitions and collaboration with the
industrial and business communities. From 1989 to 1990, Mr. Schlachet was
President and Chief Executive Officer of YEDA Research and Development Co. Ltd.,
a marketing and licensing company at the Weizmann Institute of Science. Mr.
Schlachet is a Director of Taya Investment Company Ltd., an Israeli
publicly-held investment company.
Mony Ben Dor, a Director of the Company since September 1997, has been Vice
President of The Israel Corporations, Ltd. since May 1997, and chairman of two
publicly traded subsidiaries: H.L. Finance and Leasing and Albany Bonded
International Trade. He is also a director of a number of subsidiary companies
of Israel Chemicals Ltd. From 1992 to 1997, Mr. Ben Dor was Vice President of
Business Development for Clal Industries Ltd. (a subsidiary of Clal Israel),
which is one of the leading investment groups in Israel. He was actively
involved in the acquisition of companies including Jaffora Ltd. and a portfolio
of pharmaceutical companies including Pharmaceutical Resources Inc. and Finetech
Ltd. He served as a director representing Clal Industries in all of the
<PAGE>
acquired companies as well as other companies of Clal Industries. Prior to his
position at Clal Industries Ltd., Mr. Ben Dor served as Business Executive at
the Eisenberg Group of companies.
Georges Anthony Marcel, M.D., Ph.D., a Director of the Company since
September 1998, is President and Chief Executive Officer of TMC Development
S.A., a biopharmaceutical consulting firm based in Paris, France. Prior to
founding TMC Development in 1992, Dr. Marcel held a number of senior executive
positions in the pharmaceutical industry, including Chief Executive Officer of
Amgen's French subsidiary, Vice President of Marketing for Rhone-Poulenc Sante
and Director of Development for Roussel-Uclaf. Dr. Marcel teaches biotechnology
industrial issues and European regulatory affairs at the Faculties of Pharmacy
of Paris and Lille. Dr. Marcel is also a member of the Gene Therapy Advisory
Committee at the French Medicines Agency.
Gad Riesenfeld, Ph.D., was named President and Secretary in February 1997,
and has served as Chief Operating Officer since March 1995. He served as
Executive Vice President from December 1994 to February 1997, Vice President of
Corporate Development and General Manager of Florida Operations from October
1992 to December 1994, and was employed by Old Pharmos from March 1992 until the
Merger. Prior thereto, he was engaged in a variety of consulting engagements
relating to the commercialization of intellectual property, primarily in the
pharmaceutical and medical fields. From March 1990 through May 1991 Dr.
Riesenfeld was a Managing Director of Kamapharm Ltd., a private company
specializing in human blood products. Prior thereto, from May 1986, he was
Managing Director of Galisar Ltd., a pharmaceutical company involved in
extracorporeal blood therapy. Dr. Riesenfeld holds a Ph.D. degree from the
Hebrew University of Jerusalem and held a scientist position, as a post
doctorate candidate, at the Cedars Sinai Medical Center in Los Angeles,
California.
Robert W. Cook was elected Vice President Finance and Chief Financial
Officer of Pharmos in January 1998. From May 1995 until his appointment as the
Company's Chief Financial Officer, he was a vice president in GE Capital's
commercial finance subsidiary, based in New York. From 1977 until 1995, Mr. Cook
held a variety of corporate finance and capital markets positions at The Chase
Manhattan Bank, both in the U.S. and in several overseas locations. He was named
a managing director of Chase in January 1986. Mr. Cook holds a degree in
international finance from The American University, Washington, D.C.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the 1999 fiscal year, there were four meetings of the Board of
Directors. Each person who served as a director in 1999 attended in excess of
75% of the aggregate of (i) the total number of meetings of the Board of
Directors held during 1999 and (ii) the total number of meetings held during
1999 by each committee of the Board of Directors
<PAGE>
on which such director served, except Marvin Loeb, who was absent from the
meeting of the Audit Committee.
The members of the Audit Committee in 1999 were David Schlachet, Mony Ben
Dor and Marvin Loeb. The Audit Committee met once in 1999. The Audit Committee
has been delegated the responsibility of reviewing with the independent auditors
the plans and results of the audit engagement, reviewing the adequacy, scope and
results of the internal accounting controls and procedures, reviewing the degree
of independence of the auditors, reviewing the auditor's fees and recommending
the engagement of the auditors to the full Board of Directors.
In 1999, the Compensation and Stock Option Committee consisted of E.
Andrews Grinstead, III, and Stephen C. Knight. Actions of the Compensation and
Stock Option Committee were taken during the year by the unanimous written
consent of the Directors. The Compensation and Stock Option Committee has the
full power and authority to interpret the provisions and supervise the
administration of the Company's stock option plans and to grant options outside
of these plans and the authority to review all matters relating to personnel of
the Company.
The Board of Directors does not have a standing nominating committee.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------ -------------------------
Stock
Name/ Restricted Underlying
Principal Position Year Salary Bonus Other Stock Options
- ---------------------- ---- ------ ----- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Haim Aviv, Ph.D
Chairman, Chief 1999 $236,418 $29,906 $ 2,829(1) 65,000
Executive Officer, and 1998 $236,347 $ 4,197(1) 100,000
Chief Scientist 1997 $227,471 $40,000 $16,119(1)
Gad Riesenfeld, Ph.D
President and 1999 $185,000 $20,000 $53,860(2) 50,000
Chief Operating Officer 1998 $175,000 $25,000 $50,728(2) 80,000
1997 $175,000 $44,948(2)
Robert W. Cook 1999 $175,000 $20,000 $ 4,800(1) 40,000
Vice President Finance 1998 $165,000 $20,000 $ 4,800(1) 150,000
and Chief Financial Officer
</TABLE>
(1) Consists of contributions to insurance premiums, car allowance and car
expenses.
(2) Consists of housing allowance, contributions to insurance premiums, and car
allowance.
The following tables set forth information with respect to the named executive
officers concerning the grant, repricing and exercise of options during the last
fiscal year and unexercised options held as of the end of the fiscal year.
<PAGE>
OPTION GRANTS FOR THE YEAR ENDED DECEMBER 31, 1999:
Common Stock % of Total
Underlying Options Exercise
Options Granted to Price Expiration
Granted Employees per Share Date
------------ ----------- --------- ----------
Haim Aviv, Ph.D 65,000 20.8% $1.25 4/16/09
Gad Riesenfeld, Ph.D. 50,000 16.0% $1.25 4/16/09
Robert W. Cook 40,000 12.8% $1.25 4/16/09
AGGREGATED OPTION EXERCISES
FOR THE YEAR ENDED DECEMBER 31, 1999
ANS OPTION VALUES AS OF DECEMBER 31, 1999:
<TABLE>
<CAPTION>
Value of Unexercised
Number of Number of Unexercised In-the-Money Options at
Shares Options at December 31, 1999 December 31, 1999
Acquired on Value ----------------------------- -----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Haim Aviv, Ph.D 0 0 349,376 140,000 $13,110 $ --
Gad Riesenfeld, Ph.D 0 0 99,333 110,000 $ 8,740 $ --
Robert W. Cook 0 0 62,500 127,500 $ 7,800 $ 7,800
</TABLE>
REPORT OF COMPENSATION COMMITTEE
The following report of the Compensation Committee is provided solely to
the shareholders of the Company pursuant to the requirements of Schedule 14A
promulgated under the Securities Exchange Act of 1934, and shall not be deemed
to be "filed" with the Securities and Exchange Commission for the purpose of
establishing statutory liability. This Report shall not be deemed to be
incorporated by reference in any document previously or subsequently filed with
the Securities and Exchange Commission that incorporates by reference all or any
portion of this Proxy Statement.
The Compensation and Stock Option Committee of the Board of Directors
establishes the general compensation policies of the Company, the compensation
plans and specific compensation levels for executive officers, and administers
the 1997 Incentive and Non-Qualified Stock Option Plan as well as the Company's
other Stock Option Plans. The Compensation and Stock Option Committee is
composed of two independent, non-employee Directors who have no interlocking
relationships as defined by the Securities and Exchange Commission other than as
described below (see "Compensation Committee Interlocks and Insider
Participation").
The Compensation and Stock Option Committee, being responsible for
overseeing and approving executive compensation and grants of stock options, is
in a position to appropriately balance the current cash compensation
considerations with the longer-range incentive-oriented growth outlook
associated with stock options. The main objectives of the Company's compensation
structure include rewarding individuals for their respective contributions to
the Company's performance, establishing executive
<PAGE>
officers with a stake in the long-term success of the Company and providing
compensation policies that will attract and retain qualified executive
personnel.
The Compensation and Stock Option Committee believes that the chief
executive officer's (CEO) compensation should be heavily influenced by Company
performance. Although Dr. Aviv's existing agreements with the Company (see
"Employment/Consulting Contracts/Directors' Compensation") provide for a base
level of salary and consulting compensation, the Committee determines the
appropriate level of bonuses and increases, if any, based in large part on
Company performance. The Committee also considers the salaries of CEOs of
comparably-sized companies and their performance. Stock options are granted to
the CEO, as to other executives, primarily based on the executive's ability to
influence the Company's long-term growth.
The Compensation and Stock Option Committee has adopted similar policies
with respect to compensation of other officers of the Company. The Committee
establishes base salaries that are within the range of salaries for persons
holding positions of similar responsibility at other companies. In addition, the
Committee considers factors such as relative Company performance, the
executive's past performance and future potential in establishing the base
salaries of executive officers.
As with the CEO, the number of options granted to the other officers is
determined by the subjective evaluation of the executive's ability to influence
the Company's long-term growth. All options are granted at no less than the
current market price. Since the value of an option bears a direct relationship
to the Company's stock price, it is an effective incentive for managers to
create value for stockholders. The Committee therefore views stock options as an
important component of its long-term, performance-based compensation philosophy.
Members of the Compensation and
Stock Option Committee
E. Andrews Grinstead, III
Stephen C. Knight
EMPLOYMENT/CONSULTING CONTRACTS/DIRECTORS' COMPENSATION
Haim Aviv, Ph.D. In addition to serving as Chairman of the Board and Chief
Executive Officer of the Company, Dr. Aviv has provided consulting services
under a consulting agreement with an initial three-year term ended May 3, 1993.
The term automatically renews for additional one-year periods unless either the
Company or Dr. Aviv terminates the agreement at least 90 days prior to a
scheduled expiration date. The agreement has been renewed on an annual basis and
presently expires on May 3, 2001. Dr. Aviv is entitled to severance pay equal to
25% of his salary in the event of termination or non-renewal without cause.
Under the agreement, Dr. Aviv is required to
<PAGE>
render certain consulting services to the Company and in consideration therefor,
Dr. Aviv is entitled to receive $170,000 per year, subject to yearly increases
and review.
The Company's subsidiary, Pharmos Ltd., employs Dr. Aviv as its Chief
Executive Officer under an employment agreement with Dr. Aviv pursuant to which
Dr. Aviv receives $66,000 per year, subject to yearly increases and review. Dr.
Aviv is required to devote at least 50% of his business time and attention to
the business of Pharmos, Ltd. and to serve on its Board of Directors. In March
2000, Dr. Aviv's base aggregate compensation of $236,000 per year was increased
by 5% to an aggregate of $247,800 effective January 1, 2000.
Gad Riesenfeld, Ph.D. In October 1992, Old Pharmos entered into a one-year
employment agreement with Dr. Riesenfeld, which is automatically renewable for
successive one-year terms unless either party gives three months prior notice of
non-renewal. Under the Agreement, Dr. Riesenfeld devotes his full time to
serving as President and Chief Operating Officer of the Company. Dr.
Riesenfeld's annual gross salary in 1999 was $185,000. In March 2000, Dr.
Riesenfeld's base compensation of $185,000 was increased by 5% to $194,250
effective January 1, 2000.
Robert W. Cook. In January 1998, the Company entered into a one-year
employment agreement with Mr. Cook, which is automatically renewable for
successive one-year terms unless either party gives three months prior notice of
non-renewal. Under the Agreement, Mr. Cook devotes his full time to serving as
Vice President Finance and Chief Financial Officer of the Company. Mr. Cook's
annual gross salary in 1999 was $175,000. In March 2000, Mr. Cook's base
compensation of $175,000 was increased by 5% to $183,750, effective January 1,
2000.
Elkan R. Gamzu, Ph.D. In January 2000, the Company entered into a
consulting agreement with Dr. Gamzu with a term of one year (subject to
extension by written agreement of the Company and Dr. Gamzu), pursuant to which
Dr. Gamzu may provide certain assistance and consulting services to the Company
as and when needed. The agreement provides for compensation on a per diem basis
in connection with the provision of such assistance and consulting services at
the rate of $3,000 per day. As of May 1, 2000, an aggregate of $8,255.25 had
been paid to Dr. Gamzu pursuant to the consulting agreement.
Directors' Compensation. In 1999, Directors did not receive any
compensation for service on the Board or for attending Board meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Stock Option Committee in 1999 were E.
Andrews Grinstead, III, and Stephen C. Knight. There were no interlocks on the
Compensation and Stock Option Committee in 1999.
PERFORMANCE GRAPH
The following graph compares the Company's cumulative stock-holder's return
for the five year period ended December 31, 1999 with the cumulative total
return of the
<PAGE>
NASDAQ Equity Market Index and the NASDAQ Pharmaceuticals Index over the same
period.
COMPARISON OF CUMULATIVE TOTAL RETURN
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
Nasdaq Composite 100.00 141.33 173.89 213.07 300.25 542.43
Nasdaq Pharmaceuticals 100.00 183.41 183.98 189.98 241.68 451.62
Pharmos Corporation 100.00 107.07 107.07 145.77 116.18 157.14
TRANSACTIONS AND/OR INDEBTEDNESS WITH MANAGEMENT
None.
SECTION 16 FILINGS
No person who, during the fiscal year ended December 31, 1999, was a
director, officer or beneficial owner of more than ten percent of the Company's
Common Stock, a "Reporting Person", failed to file on a timely basis, reports
required by Section 16 of the Securities Exchange Act of 1934 (the "Act") during
the most recent fiscal year. The foregoing is based solely upon a review by the
Company of Forms 3 and 4 during the most recent fiscal year as furnished to the
Company under Rule 16a-3(d) under the Act, and Forms 5 and amendments thereto
furnished to the Company with respect to its most recent fiscal year, and any
representation received by the Company from any reporting person that no Form 5
is required.
ITEM 2 - PROPOSAL TO ADOPT THE 2000 STOCK OPTION PLAN
The Company's 1983, 1984, 1986 and 1988 Incentive Stock Option Plans (the
"Incentive Plans"), which are virtually identical, provide for the issuance,
pursuant to the exercise of stock options granted thereunder, of an aggregate of
225,000 shares of Common Stock. The Company's Non-Qualified Stock Option Plan
(the "Non-Qualified Plan"), which was approved by the Directors, provides for
the issuance, pursuant to the exercise of stock options under the Non-Qualified
Plan, of a maximum of 175,000 shares of Common Stock. The Company's 1991 Stock
Option Plan (the "1991 Plan"), adopted by Old Pharmos, provides for the
issuance, pursuant to the exercise of stock options granted thereunder, of a
maximum of 56,062 shares of Common Stock. The Company's 1992 Stock Option Plan
(the "1992 Plan") provides for the issuance, pursuant to the
<PAGE>
exercise of stock options granted thereunder, of a maximum of 750,000 shares of
Common Stock. The Company's 1997 Stock Option Plan, as amended (the "1997
Plan"), provides for the issuance, pursuant to the exercise of stock options
granted thereunder, of a maximum of 1,500,000 shares of Common Stock. Incentive
Stock Options may only be granted to employees of the Company. Non-Qualified
Stock Options may be granted to employees, Directors, consultants, advisers and
contractors of the Company. The Incentive Plans, the Non-Qualified Plan, the
1991 Plan, the 1992 Plan and the 1997 Plan are sometimes collectively referred
to herein as the "Prior Plans".
The Board of Directors has adopted, subject to stockholder approval, the
2000 Stock Option Plan ("2000 Plan") which, in most material respects, is
similar to the Prior Plans. The annual meeting will consider whether to approve
the 2000 Plan. The full text of the 2000 Plan is appended to this Joint Proxy
Statement as Appendix A, and the following summary is qualified in its entirety
by reference to the 2000 Plan.
The purpose of the 2000 Plan is to allow employees, outside Directors and
consultants of the Company and its subsidiaries to increase their proprietary
interest in, and to encourage such employees to remain in the employ of, or
maintain their relationship with, such entities. It is intended that options
granted under the 2000 Plan will qualify either as incentive stock options under
Section 422 of the Code or as non-qualified options. Options granted under the
2000 Plan will only be exercisable for Common Stock.
The 2000 Plan will be administered by a committee appointed by the Board of
Directors (the "Compensation Committee") or by the Board itself. The
Compensation Committee will designate the persons to receive options, the number
of shares subject to the options and the terms of the options, including the
option price and the duration of each option, subject to certain limitations.
The maximum number of shares of Common Stock available for issuance under
the 2000 Plan is 1,500,000 shares, subject to adjustment in the event of stock
splits, stock dividends, mergers, consolidations and the like. Common Stock
subject to options granted under the 2000 Plan that expire or terminate will
again be available for options to be issued under the 2000 Plan.
The price at which shares of Common Stock may be purchased upon exercise of
an incentive stock option must be at least 100% of the fair market value of
Common Stock on the date the option is granted (or at least 110% of fair market
value in the case of a person holding more than 10% of the outstanding shares of
Common Stock (a "10% Stockholder")).
The aggregate fair market value (determined at the time the option is
granted) of Common Stock with respect to which incentive stock options are
exercisable for the first time in any calendar year by an optionee under the
2000 Plan or any other plan of the Company or a subsidiary, shall not exceed
$100,000. The Compensation Committee will fix the time or times when, and the
extent to which, an option is exercisable, provided that no option will be
exercisable earlier than one year or later than ten years after the
<PAGE>
date of grant (or five years in the case of a 10% Stockholder). The option price
is payable in cash or by check. In addition, the Board of Directors may grant a
loan to an employee, pursuant to the loan provision of the 2000 Plan, for the
purpose of exercising an option or may permit the option price to be paid in
shares of Common Stock at the then current fair market value, as defined in the
2000 Plan.
Subject to the terms of the 2000 Plan, the Board of Directors at its sole
discretion shall determine when an option shall expire. A stock option agreement
may provide for expiration prior to the end of its term in the event of the
termination of the optionee's service to the Company or death or any other
circumstances.
The 2000 Plan provides that outstanding options shall vest and become
immediately exercisable in the event of a "sale" of the Company, including (i)
the sale of more than 75% of the voting power of the Company in a single
transaction or a series of transactions, (ii) the sale of substantially all
assets of the Company, (iii) approval by the stockholders of a reorganization,
merger or consolidation, as a result of which the stockholders of the Company
will own less than 50% of the voting power of the reorganized, merged or
consolidated company.
The Board of Directors may amend, suspend or discontinue the 2000 Plan, but
it must obtain stockholder approval to (i) increase the number of shares subject
to the 2000 Plan or (ii) change the designation of the class of persons eligible
to receive options.
Under current federal income tax law, the grant of incentive stock options
under the 2000 Plan will not result in any taxable income to the optionee or any
deduction for the Company at the time the options are granted. The optionee
recognizes no gain upon the exercise of an option. However the amount by which
the fair market value of Common Stock at the time the option is exercised
exceeds the option price is an "item of tax preference" of the optionee, which
may cause the optionee to be subject to the alternative minimum tax. If the
optionee holds the shares of Common Stock received on exercise of the option at
least one year from the date of exercise and two years from the date of grant,
he will be taxed at the time of sale at long-term capital gains rates, if any,
on the amount by which the proceeds of the sale exceed the option price. If the
optionee disposes of the Common Stock before the required holding period is
satisfied, ordinary income will generally be recognized in an amount equal to
the excess of the fair market value of the shares of Common Stock at the date of
exercise over the option price, or, if the disposition is a taxable sale or
exchange, the amount of gain realized on such sale or exchange if that is less.
If, as permitted by the 2000 Plan, the Board of Directors permits an optionee to
exercise an option by delivering already owned shares of Common Stock valued at
fair market value) the optionee will not recognize gain as a result of the
payment of the option price with such already owned shares. However, if such
shares were acquired pursuant to the previous exercise of an option, and were
held less than one year after acquisition or less than two years from the date
of grant, the exchange will constitute a disqualifying disposition resulting in
immediate taxation of the gain on the already owned shares as ordinary income.
It is not clear how the gain will be computed on the disposition of shares
acquired by payment with already owned shares.
<PAGE>
The Company from time to time engages in discussions with pharmaceutical
and biotechnology companies about potential business and/or product
consolidations, joint ventures, acquisitions, mergers or other business
combinations. If any such transaction is ever consummated, the existence of
these additional outstanding stock options under the 2000 Plan could have the
effect of reducing the aggregate consideration received by existing stockholders
in such transaction.
The affirmative vote of a plurality of shares cast of Common Stock voting
together present or represented at a meeting at which a quorum (one-third (1/3)
of the outstanding shares of Common Stock) is required for approval of the 2000
Plan. Abstention and Broker Non-votes are counted for purposes of determining
whether a quorum is present, but do not represent votes cast with respect to any
proposal. The Board of Directors believes that, in the competitive market for
highly qualified personnel, it is critical for companies to offer a variety of
benefits in order to attract, retain and motivate key employees of outstanding
ability. Accordingly, the Board of Directors recommends a vote FOR adoption of
the 2000 Plan. Unless they are otherwise directed by the stockholders, the
proxies intend to vote FOR this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION OF
THE 2000 STOCK OPTION PLAN (ITEM 2 ON THE ENCLOSED PROXY CARD).
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed PricewaterhouseCoopers as its independent public
accountants to examine the financial statements of the Company for the current
fiscal year. The selection of PricewaterhouseCoopers was approved by the Board
of Directors prior to their appointment. PricewaterhouseCoopers has advised the
Company that they do not have any material financial interests in, or any
connection with (other than as independent auditors, tax advisors and management
consultants), the Company.
PricewaterhouseCoopers is expected to be present at the Annual Meeting and
will have the opportunity to make a statement, if they desire to do so, and they
are expected to be available to respond to appropriate questions.
STOCKHOLDERS' PROPOSALS FOR 2001
ANNUAL MEETING OF STOCKHOLDERS
Proposals which stockholders intend to present at the 2001 annual meeting
of stockholders must be received by the Company by April 1, 2001 to be eligible
for inclusion in the proxy material for that meeting.
<PAGE>
ANNUAL REPORT ON FORM 10-K
Upon sending a written request to Pharmos Corporation, 99 Wood Avenue
South, Suite 301, Iselin, NJ 08830, Attention: President, stockholders may
obtain, free of charge, a copy of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999, and any amendments thereto, as filed
with the Securities and Exchange Commission.
OTHER MATTERS
As of the date of this Proxy Statement, the only business which management
expects to be considered at the Annual Meeting is the election of Directors and
the adoption of the 2000 Stock Option Plan. If any other matters come before the
meeting, the persons named in the enclosed form of proxy are expected to vote
the proxy in accordance with their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
HAIM AVIV, PH.D.
Chairman of the Board
Dated: June 16, 2000
<PAGE>
APPENDIX A
PHARMOS CORPORATION
2000 STOCK OPTION PLAN
ADOPTED ON MARCH 28, 2000
<PAGE>
SECTION 1. Establishment And Purpose...................................1
SECTION 2. Administration..............................................1
SECTION 3. Eligibility.................................................1
SECTION 4. Stock Subject To Plan.......................................1
SECTION 5. Terms And Conditions Of Options.............................2
SECTION 6. Payment For Shares..........................................4
SECTION 7. Adjustment Of Shares........................................4
SECTION 8. Securities Law Requirements.................................6
SECTION 9. No Retention Rights.........................................6
SECTION 10. Duration and Amendments.....................................6
SECTION 11. Definitions.................................................7
SECTION 12. Execution...................................................9
i
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PHARMOS CORPORATION 2000 STOCK PLAN
SECTION 1. Establishment And Purpose.
The purpose of the Plan is to offer selected individuals an opportunity to
acquire a proprietary interest in the success of the Company, or to increase
such interest, through the granting of Options to purchase Shares of the
Company's Stock. Options granted under the Plan may include Nonstatutory Options
as well as ISOs intended to qualify under Section 422 of the Code.
Capitalized terms are defined in Section 11.
SECTION 2. Administration.
(a) Committees of the Board of Directors. The Plan may be administered by
one or more Committees. Each Committee shall consist of one or more members of
the Board of Directors who have been appointed by the Board of Directors. Each
Committee shall have such authority and be responsible for such functions as the
Board of Directors has assigned to it. If no Committee has been appointed, the
entire Board of Directors shall administer the Plan. Any reference to the Board
of Directors in the Plan shall be construed as a reference to the Committee (if
any) to whom the Board of Directors has assigned a particular function.
(b) Authority of the Board of Directors. Subject to the provisions of the
Plan, the Board of Directors shall have full authority and discretion to take
any actions it deems necessary or advisable for the administration of the Plan.
All decisions, interpretations and other actions of the Board of Directors shall
be final and binding on all Optionees and all persons deriving their rights from
an Optionee.
SECTION 3. Eligibility.
Only Employees, Outside Directors and Consultants shall be eligible for the
grant of Options or the direct award or sale of Shares. Only Employees shall be
eligible for the grant of ISOs.
SECTION 4. Stock Subject To Plan.
(a) Basic Limitation. Shares offered under the Plan may be authorized but
unissued Shares or treasury Shares. The aggregate number of Shares that may be
issued under the Plan (either directly or upon exercise of Options or other
rights to acquire Shares) shall not exceed 1,500,000 Shares, subject to
adjustment pursuant to Section 7. The number of Shares that are subject to
Options or other rights outstanding at any time under the Plan shall not exceed
the number of Shares that then remain available for issuance under the Plan. The
Company, during
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the term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.
(b) Additional Shares. In the event that any outstanding Option or other
right for any reason expires or is canceled or otherwise terminated, the Shares
allocable to the unexercised portion of such Option or other right shall again
be available for the purposes of the Plan. In the event that Shares issued under
the Plan are reacquired by the Company pursuant to any forfeiture provision,
right of repurchase or right of first refusal, such Shares shall again be
available for the purposes of the Plan, except that the aggregate number of
Shares which may be issued upon the exercise of ISOs shall in no event exceed
1,500,000 Shares (subject to adjustment pursuant to Section 7).
SECTION 5. Terms And Conditions Of Options.
(a) Stock Option Agreement. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company. Such
Option shall be subject to all applicable terms and conditions of the Plan and
may be subject to any other terms and conditions which are not inconsistent with
the Plan and which the Board of Directors deems appropriate for inclusion in a
Stock Option Agreement. The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical.
(b) Number of Shares Each Stock Option Agreement shall specify the number
of Shares that are subject to the Option. The Stock Option Agreement shall also
specify whether the Option is an ISO or a Nonstatutory Option.
(c) Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price under any Option shall be determined by the Board of
Directors at its sole discretion, subject to the following limitations: (i) the
Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of
a Share on the date of grant (110% for an ISO granted to a Greater Than
Ten-Percent Stockholder) and (ii) in no event may the Exercise Price of any
Option be less than the par value of a Share.
(d) Special Rule for Incentive Options. Consistent with Section 422 of the
Code and any regulations, notices or other official pronouncements of general
applicability, to the extent the aggregate Fair Market Value (as of the time the
Option is granted) of the Shares of Stock with respect to which ISOs are
exercisable for the first time by an Optionee during any calendar year (under
all plans of his employer corporation and its Parent and Subsidiary
corporations) exceeds $100,000, such Options shall not be treated as ISO's.
Nothing in this special rule shall be construed as limiting the exercisability
of any Option, unless the Stock Option Agreement expressly provides for such a
limitation.
(e) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Board of Directors may require for
the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with such exercise. The Optionee shall
also make such arrangements as the Board of Directors may require
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<PAGE>
for the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with the disposition of Shares acquired
by exercising an Option.
(f) Exercisability. Each Stock Option Agreement shall specify the date when
all or any installment of the Option is to become exercisable. The
exercisability provisions of any Stock Option Agreement shall be determined by
the Board of Directors at its sole discretion.
(g) Basic Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed 10 years from the date of grant (five years,
in the case of an ISO granted to a Greater Than Ten-Percent Stockholder).
Subject to the preceding sentence, the Board of Directors at its sole discretion
shall determine when an Option is to expire. A Stock Option Agreement may
provide for expiration prior to the end of its term in the event of the
termination of Optionee's Service or death or any other circumstances.
(h) Nontransferability. No Option may be transferred other than by will or
by the laws of descent and distribution, and during the lifetime of the Optionee
may be exercised only by the Optionee or by the Optionee's guardian or legal
representative; provided, however, that an Option that is not an ISO may be
otherwise transferred to the extent, if any, permitted by the Board of
Directors.
(i) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by the Optionee's Option until such Shares are issued pursuant to the
terms of such Option.
(j) Modification and Extension of Options. Within the limitations of the
Plan, the Board of Directors may modify or extend Options. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, impair the Optionee's rights or increase the Optionee's obligations
under such Option.
(k) Substitution of Options. The Board of Directors may grant Options under
the Plan in substitution for options held by employees of another corporation
who concurrently become employees of the Company or a Parent or Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Parent or Subsidiary, or as the result of the acquisition by the
Company of property or stock of the employing corporation. The Company may
direct that substitute awards be granted on such terms and conditions as the
Board of Director considers appropriate in the circumstances.
(l) Restrictions on Transfer of Shares and Minimum Vesting. Any Shares
issued upon exercise of an Option shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Board of Directors may determine. Such restrictions shall be
set forth in the applicable Stock Option Agreement and shall apply in addition
to any restrictions that may apply to holders of Shares generally.
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SECTION 6. Payment For Shares.
(a) General Rule. The entire Exercise Price of Shares issued under the Plan
shall be payable, at the time when such Option is exercised, in cash or cash
equivalents payable to the order of the Company, except as otherwise provided in
this Section 6.
(b) Surrender of Stock. Unless a Stock Option Agreement otherwise provides,
all or any part of the Exercise Price may be paid by surrendering, or attesting
to the ownership of, Shares that are already owned by the Optionee. Such Shares
shall be surrendered to the Company in good form for transfer and shall be
valued at their Fair Market Value on the date when the Option is exercised. The
Optionee shall not surrender, or attest to the ownership of, Shares in payment
of the Exercise Price if such action would cause the Company to recognize
compensation expense (or additional compensation expense) with respect to the
Option for financial reporting purposes.
(c) Promissory Note. Unless a Stock Option Agreement otherwise provides,
all or a portion of the Exercise Price of Shares issued under the Plan may be
paid with a full-recourse promissory note (provided that the Optionee is an
Employee of the Company). The Shares shall be pledged as security for payment of
the principal amount of the promissory note and interest thereon. The interest
rate payable under the terms of the promissory note shall not be less than the
minimum rate (if any) required to avoid the imputation of additional interest
under the Code. Subject to the foregoing, the Board of Directors (at its sole
discretion) shall specify the term, interest rate, amortization requirements (if
any) and other provisions of such note.
(d) Exercise/Sale. Unless a Stock Option Agreement otherwise provides (or
if otherwise approved by the Board of Directors), and if Stock is publicly
traded, payment may be made all or in part by the delivery (on a form prescribed
by the Company) of an irrevocable direction to a securities broker approved by
the Company to sell Shares and to deliver all or part of the sales proceeds to
the Company in payment of all or part of the Exercise Price and any withholding
taxes.
(e) Exercise/Pledge. Unless a Stock Option Agreement otherwise provides (or
if otherwise approved by the Board of Directors), and if Stock is publicly
traded, payment may be made all or in part by the delivery (on a form prescribed
by the Company) of an irrevocable direction to pledge Shares to a securities
broker or lender approved by the Company, as security for a loan, and to deliver
all or part of the loan proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.
SECTION 7. ACQUISITION EVENTS AND OTHER Adjustment Of Shares.
(a) Acquisition Events. In the event of a consolidation or merger in which
the Company is not the surviving corporation or in the event of any transaction
that results in the acquisition of substantially all of the Company's
outstanding Stock by a single person or entity or by a group of persons and/or
entities acting in concert, or in the event of the sale or other transfer of
substantially all of the Company's assets (all the foregoing being referred to
as "Acquisition
4
<PAGE>
Events"), outstanding Options shall be subject to the agreement of merger or
consolidation. Such agreement, without the Optionee's consent, may provide for
any of the following:
(i) The continuation of such outstanding Options by the Company (if
the Company is not the surviving corporation);
(ii) The assumption of the Plan and such outstanding Options by the
surviving corporation or its parent;
(iii) The substitution by the surviving corporation or its parent of
options with substantially the same terms for such outstanding Options; or
(iv) The cancellation of such outstanding Options without payment of
any consideration.
The provisions of Section 7(b) below shall not apply to any Option that is
terminated pursuant to this Section 7(a).
(b) Other Events. In the event that the outstanding Shares of Stock are
changed into or exchanged for a different number or kind of shares or other
securities or property (including cash) of the Company or of another corporation
by reason of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capital stock, reorganization,
merger, sale or other transfer of substantially all the Company's assets to
another corporation, consolidation, or other transaction described in Section
424(a) of the Code, the Board of Directors shall make appropriate adjustments
(in such manner as it deems equitable in its sole discretion) in (i) the number
and kind of shares of Stock, other securities or property for the purchase of
which Options may be granted under the Plan, (ii) the number and kind of shares
of Stock, other securities or property as to which outstanding Options, or
portions thereof then unexercised, shall be exercisable, (iii) the Exercise
Price and other terms of outstanding Options and (iv) any other relevant
provisions of the Plan. Any adjustment of the Plan or in outstanding Options
shall be effective on the effective date of the event giving rise to such
adjustment. The Board of Directors may also adjust the number of Shares subject
to outstanding options, the Exercise Price of outstanding Options and the terms
of outstanding Options to take into consideration any other event (including,
without limitation, accounting changes) if the Board of Directors determines
that such adjustment is appropriate to avoid distortion in the operation of the
Plan. All determinations and adjustments made by the Board of Directors pursuant
to this Section 7(b) shall be binding on all persons.
(c) Reservation of Rights. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
(d) Sale or Merger. "Sale" means: (i) sale (other than a sale by the
Company) of securities entitled to more than 75% of the voting power of the
Company in a single transaction or a related series of transactions; or (ii)
sale of substantially all of the assets of the Company; or
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(iii) approval by the stockholders of the Company of a reorganization, merger or
consolidation of the Company, as a result of which the persons who were the
stockholders of the Company immediately prior to such reorganization, merger or
consolidation do not own securities immediately after the reorganization, merger
or consolidation entitled to more than 50% of the voting power of the
reorganized, merged or consolidated company. Notwithstanding the other
provisions of this Section 7, immediately prior to a Sale, each Optionee may
exercise his or her Option as to all Shares then subject to the Option,
regardless of any vesting conditions otherwise expressed in the Option. Voting
power, as used in this Section 7(d), shall refer to those securities entitled to
vote generally in the election of directors, and securities of the Company not
entitled to vote but which are convertible into, or exercisable for, securities
of the Company entitled to vote generally in the election of directors shall be
counted as if converted or exercised, and each unit of voting securities shall
be counted in proportion to the number of votes such unit is entitled to cast.
SECTION 8. Securities Law Requirements.
The Company shall not be obligated to deliver any Shares of Stock (a)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, and (b) if the outstanding Stock
is at the time listed on any stock exchange or other stock market, until the
Shares to be delivered have been listed or authorized to be listed on such
exchange or other stock market upon official notice of issuance, and (c) until
all other legal matters in connection with the issuance and delivery of such
Shares have been approved by the Company's counsel. If the sale of Stock has not
been registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Option, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
SECTION 9. No Retention Rights.
Nothing in the Plan or in any right or Option granted under the Plan shall
confer upon the Optionee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining the Optionee)
or of the Optionee, which rights are hereby expressly reserved by each, to
terminate his or her Service at any time and for any reason, with or without
cause.
SECTION 10. Duration and Amendments.
(a) Term of the Plan. The Plan, as set forth herein, shall become effective
on the date of its adoption by the Board of Directors, subject to the approval
of the Company's stockholders. In the event that the stockholders fail to
approve the Plan within 12 months after its adoption by the Board of Directors,
any grants of Options that have already occurred shall be rescinded, and no
additional grants shall be made thereafter under the Plan. The Plan shall
terminate
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automatically 10 years after its adoption by the Board of Directors and may be
terminated on any earlier date pursuant to Section 10(b).
(b) Right to Amend or Terminate the Plan. The Board of Directors may amend,
suspend or terminate the Plan at any time and for any reason; provided, however,
that any amendment of the Plan that increases the number of Shares available for
issuance under the Plan (except as provided in Section 7), or that otherwise
materially changes the class of persons who are eligible for the grant of ISOs,
will be subject to the approval of the stockholders of the Company. Stockholder
approval shall not be required for any other amendment of the Plan.
(c) Effect of Amendment or Termination. No Shares shall be issued or sold
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Option previously granted under the Plan.
SECTION 11. Definitions.
(a) "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a committee of the Board of Directors, as
described in Section 2(a).
(d) "Company" shall mean Pharmos Corporation, a Nevada corporation.
(e) "Consultant" shall mean a person who performs bona fide services for
the Company, a Parent or a Subsidiary as a consultant or advisor, excluding
Employees and Outside Directors.
(f) "Employee" shall mean any individual who is a common-law employee of
the Company, a Parent or a Subsidiary.
(g) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Board of Directors in
the applicable Stock Option Agreement.
(h) "Fair Market Value" shall be determined by the Committee or the Board
of Directors in its discretion; provided, that if the Stock is listed on a stock
exchange, the Fair Market Value per Share shall be the closing price on such
exchange on the date of grant of the Option as reported in the Wall Street
Journal (or, (i) if not so reported, as otherwise reported by the exchange, and
(ii) if not reported on the date of grant, then on the last prior date on which
a sale of the Stock was reported); or if not listed on an exchange but traded on
the National Association of Securities Dealers Automated Quotation National
Market System ("NASDAQ"), the Fair Market Value per Share shall be the closing
price per share of the Stock for the date of grant, as reported in the Wall
Street Journal (or, (i) if not so reported, as
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otherwise reported by NASDAQ, and (ii) if not reported on the date of grant,
then on the last prior date on which a sale of the Common Stock was reported);
or, if the Stock is otherwise publicly traded, the mean of the closing bid price
and asked price for the last known sale.
(i) "Greater Than Ten-Percent Stockholder" as of any time shall mean any
Employee who at such time owns directly, or is deemed to own by reason of the
attribution rules set forth in Section 424(d) of the Code, stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company.
(j) "ISO" shall mean an employee incentive stock option described in
Section 422(b) of the Code.
(k) "Nonstatutory Option" shall mean a stock option not described in
Sections 422(b) or 423(b) of the Code.
(l) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.
(m) "Optionee" shall mean an individual who holds an Option.
(n) "Outside Director" shall mean a member of the Board of Directors who is
not an Employee.
(o) "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
(p) "Plan" shall mean this Pharmos Corporation 2000 Stock Option Plan.
(q) "Service" shall mean service as an Employee, Outside Director or
Consultant.
(r) "Share" shall mean one share of Stock, as adjusted in accordance with
Section 7 (if applicable).
(s) "Stock" shall mean the Common Stock of the Company, with a par value of
$0.03 per Share.
(t) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions pertaining
to the Optionee's Option.
(u) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation
8
<PAGE>
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
SECTION 12. Execution.
To record the adoption of the Plan by the Board of Directors, the Company
has caused its authorized officer to execute the same.
PHARMOS CORPORATION
-----------------------------------------
Robert W. Cook
Vice President/Finance and Administration,
Chief Financial Officer
9
<PAGE>
PHARMOS CORPORATION
99 Wood Avenue South - Suite 301
Iselin, New Jersey 08830
(732) 452-9556
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
Annual Meeting of Stockholders - July 20, 2000
The undersigned, as stockholder of Pharmos Corporation (the "Company")
hereby appoints Haim Aviv and Gad Riesenfeld and each of them, with full power
of substitution, the true and lawful proxies and attorneys in fact of the
undersigned, to vote, as designated on the reverse side of this proxy card, the
number of shares of Common Stock of the Company which the undersigned would be
entitled to vote, as fully and with the same effect as the undersigned might do
if personally present, at the Annual Meeting of Stockholders of the Company to
be held on July 20, 2000 at 11:00 AM in Edison, New Jersey at the Sheraton
Edison Hotel, 125 Raritan Center Parkway, and any adjournments thereof on the
following matters as set forth in the Proxy Statement and Notice dated June 16,
2000.
(To be Signed on Reverse Side)
[X] Please mark your votes as in this example.
FOR all WITHHOLD NOMINEES:
Nominees AUTHORITY to Haim Aviv
listed at right vote for all E. Andrews Grinstead
(except as nominees listed Elkan R. Gamzu
1. Election of marked to the at right Samuel D. Waksal
Directors of the contrary) David Schlachet
Company (Item [_] [_] Tony Marcel
No. 1 in the Mony Ben Dor
Proxy Statement).
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, PRINT
that nominee's name on the line below)
- --------------------------------------------------------------------------------
2. Proposal to adopt the Pharmos For Against Abstain
Corporation 2000 Stock Option [_] [_] [_]
Plan (Item No. 2 in the Proxy
Statement).
<PAGE>
3. In the discretion of such proxies upon all other matters which may properly
come before the Annual Meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted for the election of the nominees to the board of directors identified
above, for the approval of the amendment, for the amendment of the option plan
and, in the discretion of the proxies named, on such other matters as may
properly come before the Annual Meeting.
This proxy is revocable at any time, and the undersigned reserves the right to
attend the Annual Meeting and vote in person. The undersigned hereby revokes any
proxy heretofore given in respect of the shares of the Company.
THE BOARD OF DIRECTORS URGES THAT YOU FILL IN, SIGN AND DATE THE PROXY AND
RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED ENVELOPE. NO POSTAGE IS NECESSARY IF
MAILED IN THE UNITED STATES.
CORRECT ADDRESS IF NECESSARY
Signature(s)___________________________________________
Date__________________
Note: Please sign exactly as name(s) appear on your Stock Certificate. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If more than one name is shown, as in the case of joint
tenancy, each party must sign. If a corporation, please sign in full corporate
name by the president or other authorized officer.
