<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IMMUNEX CORPORATION
(Name of Registrant as Specified in Its Charter)
IMMUNEX CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
CALCULATION OF FILING FEE
<TABLE>
<S> <C> <C> <C>
PER UNIT PRICE OR OTHER
AGGREGATE NUMBER OF UNDERLYING VALUE OF
TITLE OF EACH CLASS OF SECURITIES TRANSACTION COMPUTED PROPOSED MAXIMUM
SECURITIES TO WHICH TO WHICH TRANSACTION PURSUANT TO EXCHANGE AGGREGATE VALUE OF
TRANSACTION APPLIES APPLIES ACT RULE 0-11 TRANSACTION
</TABLE>
/ / 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.
Amount previously paid: _________
Form, schedule or
registration statement no.: _______
Filing party: ___________________
Date filed: _____________________
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
IMMUNEX CORPORATION
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, APRIL 26, 1995
------------------------
To the Shareholders of Immunex Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of IMMUNEX
CORPORATION, a Washington corporation (the "Company"), will be held at the Four
Seasons Olympic Hotel, 411 University Street, Seattle, Washington, on Wednesday,
April 26, 1995, at 9:00 a.m. (the "Annual Meeting"), for the following purposes:
1. To elect eight directors to serve until the Annual Meeting of
Shareholders next ensuing after their election and until their respective
successors are elected and shall qualify;
2. To consider and approve the increase in the number of shares issuable
under the Company's Amended 1993 Stock Option Plan by 5,000,000; and
3. To consider and transact such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
The Company's Board of Directors has fixed the close of business on March
14, 1995 as the record date for the determination of shareholders entitled to
notice of, and to vote at, the Annual Meeting.
To ensure representation at the Annual Meeting, shareholders are urged to
mark, sign, date and return the enclosed Proxy as promptly as possible, even if
they plan to attend the Annual Meeting. A return envelope, which requires no
postage if mailed in the United States, is enclosed for this purpose. Any
shareholder attending the Annual Meeting may vote in person even if such
shareholder has returned a Proxy if the Proxy is revoked in the manner set forth
in the accompanying Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Scott G. Hallquist
SECRETARY
Seattle, Washington
March 24, 1995
PLEASE NOTE THAT ATTENDANCE AT THE ANNUAL MEETING WILL BE LIMITED TO
SHAREHOLDERS OF IMMUNEX AS OF THE RECORD DATE (OR THEIR AUTHORIZED
REPRESENTATIVES) AND GUESTS OF THE COMPANY. TO OBTAIN AN ADMITTANCE TICKET,
PLEASE MARK THE APPROPRIATE BOX ON THE ENCLOSED PROXY AND AN ADMITTANCE TICKET
WILL BE SENT TO YOU. IF YOUR SHARES ARE HELD BY A BANK OR BROKER, YOU MAY OBTAIN
AN ADMITTANCE TICKET BY RETURNING THE REQUEST CARD PROVIDED TO YOU BY YOUR BANK
OR BROKER.
<PAGE>
IMMUNEX CORPORATION
---------------
PROXY STATEMENT
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited by the Board of Directors of Immunex
Corporation ("Immunex" or the "Company") for use at the Annual Meeting of
Shareholders to be held on Wednesday, April 26, 1995 at 9:00 a.m. or at any
adjournment or postponement thereof (the "Annual Meeting") for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Shareholders.
The Annual Meeting will be held at the Four Seasons Olympic Hotel, 411
University Street, Seattle, Washington. The principal executive offices of the
Company are located at 51 University Street, Seattle, Washington 98101.
The Company intends to first give or mail to shareholders definitive copies
of this Proxy Statement and accompanying Proxy on or about March 24, 1995.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record at the close of business on March 14, 1995 of shares
of common stock of the Company (the "Common Stock") will be entitled to notice
of, and to vote at, the Annual Meeting. At that date, there were issued and
outstanding 39,601,699 shares of Common Stock.
REVOCABILITY OF PROXIES
Any shareholder giving a Proxy has the power to revoke it at any time before
it is exercised. A Proxy may be revoked either by (i) filing with the Secretary
of the Company prior to the Annual Meeting, at the Company's executive offices,
either a written revocation or a duly executed Proxy bearing a later date or
(ii) attending the Annual Meeting and voting in person, regardless of whether a
Proxy has previously been given. Presence at the Annual Meeting will not revoke
the shareholder's Proxy unless such shareholder votes in person.
QUORUM
A quorum for the Annual Meeting shall consist of the holders of a majority
of the outstanding shares of Common Stock entitled to vote at the Annual
Meeting, present in person or by proxy.
SOLICITATION OF PROXIES
The Company has retained MacKenzie Partners, Inc., 156 Fifth Avenue, New
York, New York, to aid in the solicitation of Proxies. It is estimated that the
cost of these services will be approximately $5,000, plus expenses. The cost of
soliciting Proxies will be borne by the Company. Proxies will be solicited by
personal interview, mail and telephone. In addition, the Company may reimburse
brokerage firms and other persons representing beneficial owners of shares of
Common Stock for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or telefax.
VOTING
Each shareholder will be entitled to one vote for each share of Common Stock
held. Directors will be elected by a plurality of the shares of Common Stock
present by proxy or in person at the Annual Meeting. Holders of Common Stock are
not entitled to cumulate votes in the election of directors. Abstention from
voting and broker nonvotes on the election of directors will have no impact on
the outcome of this proposal. The affirmative vote of holders of a majority of
the shares of Common Stock present and entitled to vote at the Annual Meeting is
required to approve the increase in the number of shares issuable under the
Amended 1993 Stock Option Plan. Abstention from voting will have the practical
effect of voting against this proposal since such shares are present at the
meeting and entitled to vote but are not voting in favor of the proposal. Broker
nonvotes will have no effect on the outcome of this proposal since they are not
considered shares entitled to vote on the proposal.
<PAGE>
The Company is not aware, as of the date hereof, of any matters to be voted
upon at the Annual Meeting other than as stated in the accompanying Notice of
Annual Meeting of Shareholders. The enclosed Proxy gives discretionary authority
to the persons named therein to vote the shares in their best judgment if any
other matters are properly brought before the Annual Meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of December 31, 1994, certain information
regarding all shareholders known by the Company to be the beneficial owners of
more than 5% of the outstanding voting securities of the Company, based on
publicly available information. To the Company's knowledge, the beneficial
owners listed below have sole voting and investment power with respect to the
shares shown as beneficially owned.
<TABLE>
<CAPTION>
TITLE OF AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER CLASS BENEFICIAL OWNERSHIP CLASS
-------------------------------------------------------------------------------- ------------ -------------------- ----------
<S> <C> <C> <C>
American Cyanamid Company (1) Common Stock 21,153,580 53.6%
One Cyanamid Plaza
Wayne, New Jersey 07470
Wellington Management Company Common Stock 2,069,270 5.3%
75 State Street
Boston, Massachusetts 02109
<FN>
------------------------
(1) American Cyanamid Company ("Cyanamid") is a wholly owned subsidiary of
American Home Products Corporation ("American Home Products").
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 14, 1995, the number of
outstanding voting securities of the Company beneficially owned by (i) each
director and each nominee, (ii) each of the current and former executive
officers for whom compensation is reported in this Proxy Statement, and (iii)
all current directors and executive officers as a group:
<TABLE>
<CAPTION>
TITLE OF AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER CLASS BENEFICIAL OWNERSHIP CLASS
-------------------------------------------------------------------------------- ------------ -------------------- ----------
<S> <C> <C> <C>
Steven Gillis Common Stock 460,262(1) 1.2%
David L. Urdal Common Stock 74,454(2) *
Scott G. Hallquist Common Stock 49,452(2) *
Michael L. Kranda Common Stock 32,671(2) *
Edward V. Fritzky Common Stock 11,200(3) *
Douglas G. Southern Common Stock 10,534(4) *
Kirby L. Cramer Common Stock 3,000(5) *
Edith W. Martin Common Stock 3,000(5) *
John E. Lyons Common Stock 2,000(5) *
Charles J. Homcy Common Stock 200 *
Joseph J. Carr Common Stock -- --
Robert A. Essner Common Stock -- --
All current directors and executive officers as a group (15 persons) Common Stock 655,868(6) 1.7%
<FN>
------------------------
* Less than 1% of the outstanding shares of Common Stock.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
(1) Excludes 39,000 shares of Common Stock held by three trusts established by
Dr. Gillis for the benefit of his family. Dr. Gillis is not the trustee of
such trusts and disclaims beneficial ownership of such shares.
(2) Includes 8,000 shares that are issuable upon exercise of stock options that
are currently exercisable or are exercisable within 60 days.
(3) Includes 10,000 shares that are issuable upon exercise of stock options
that are currently exercisable or are exercisable within 60 days.
(4) Includes 6,000 shares that are issuable upon exercise of stock options that
are currently exercisable or are exercisable within 60 days.
(5) Includes 2,000 shares that are issuable upon exercise of stock options that
are currently exercisable or are exercisable within 60 days.
(6) Includes 51,000 shares that are issuable upon exercise of stock options
that are currently exercisable or are exercisable within 60 days.
</TABLE>
ELECTION OF DIRECTORS
A Board of Directors consisting of eight directors will be elected at the
Annual Meeting to hold office for a term of one year or until their successors
are elected and shall qualify.
Pursuant to the Amended and Restated Governance Agreement dated as of
December 15, 1992 (the "Governance Agreement"), Cyanamid is entitled to
designate three Investor Directors and one Independent Director. See
"Relationship with American Cyanamid Company and American Home Products
Corporation -- Governance Agreement -- Designation of Candidates for Board of
Directors." Dr. Charles J. Homcy, who was elected by the Board of Directors to
serve as an Investor Director, has not been renominated and is expected to
resign. Cyanamid has not yet designated a replacement Investor Director to fill
the vacancy created by the expected resignation of Dr. Homcy, nor designated a
fourth Independent Director as permitted under the Governance Agreement. Pending
Cyanamid's decision regarding such designations, one vacancy among each of the
Investor Directors and Independent Directors will exist. Therefore, only eight
nominees have been nominated and approved by the Board of Directors for election
at the Annual Meeting. However, Cyanamid is expected to designate director
nominees for election by the Board of Directors to fill such vacancies, and may
do so at any time. Proxies may not be voted for a greater number of persons than
the number of nominees named.
The Board of Directors has unanimously approved the nominees named below,
who were designated in accordance with the Governance Agreement. Unless
otherwise instructed, it is the intention of the persons named in the
accompanying Proxy to vote shares represented by properly executed Proxies for
such nominees. Although the Board of Directors anticipates that all the nominees
will be available to serve as directors of the Company, should any one or more
of them not accept the nomination, or otherwise be unwilling or unable to serve,
it is intended that the Proxies will be voted for the election of such
substitute nominees as may be designated in accordance with the Governance
Agreement.
3
<PAGE>
The following table sets forth the name and age of each nominee for election
as a director, the positions and offices held by the nominee with the Company
and the period during which the nominee has served as a director of the Company:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES DIRECTOR
NAME AGE WITH THE COMPANY SINCE
----------------- ---- ----------------------------------------- -----------
<S> <C> <C> <C>
Edward V. Fritzky 44 Chief Executive Officer; Chairman of the 1994
Board
Michael L. Kranda 41 President; Chief Operating Officer; 1991
Director
Steven Gillis 41 Director 1981
Joseph J. Carr 52 Director 1995
Kirby L. Cramer 58 Director 1987
Robert A. Essner 47 Director 1995
John E. Lyons 69 Director 1993
Edith W. Martin 49 Director 1993
</TABLE>
Mr. Fritzky was named the Company's Chief Executive Officer and Chairman of
the Board in January 1994. Mr. Fritzky served as President of Lederle
Laboratories, a division of Cyanamid, from 1992 to 1994 and as Vice President of
Lederle Laboratories from 1989 to 1992. Prior to joining Lederle Laboratories,
Mr. Fritzky was an executive of Searle Pharmaceuticals, Inc., a subsidiary of
Monsanto Company. During his tenure at Searle, Mr. Fritzky was Vice President,
Marketing, and later President and General Manager of Searle Canada, Inc. and
Lorex Pharmaceuticals, a joint venture company.
Mr. Kranda has been a director of the Company since 1991. He has been
employed by the Company since July 1985, initially as Director, Corporate
Development. From January 1986 to July 1988, he served as General Manager of
Immunology Ventures, the Company's partnership with Eastman Kodak Company. In
July 1988, Mr. Kranda was elected Executive Vice President and Chief Operating
Officer of the Company. In October 1990, he was elected President, retaining the
office of Chief Operating Officer. Mr. Kranda previously served as President of
Immunex Manufacturing Corporation, the Company's wholly owned manufacturing
subsidiary. He received his M.B.A. in Finance from the University of Washington
in 1984. Mr. Kranda currently serves as a director of the Woodland Park
Zoological Society and the Washington Research Foundation, both private
nonprofit entities.
Dr. Gillis is a co-founder of the Company and served as a director since the
Company's formation in 1981. From 1981 to 1994, Dr. Gillis was employed as
Executive Vice President and Chief Scientific Officer of the Company, and from
September 1993 to January 1994, served as Acting Chief Executive Officer and
Chairman. Dr. Gillis also served as President and Chief Executive Officer of
Immunex Research and Development Corporation ("IRDCO"), the Company's wholly
owned research and development subsidiary. IRDCO was dissolved in January 1995,
and all of its operations, assets and employees were merged with the Company.
Dr. Gillis is currently employed as Chairman and CEO of Corixa Corporation, a
privately held biotechnology company.
Mr. Carr was named a director of the Company in January 1995. He joined
American Home Products, a pharmaceutical and healthcare products company, in
1982, and served in various executive capacities prior to being named Vice
President in 1989. In April 1993, Mr. Carr was appointed Group Vice President,
and in May 1993 was appointed Senior Vice President.
Mr. Cramer has been a director of the Company since 1987. Mr. Cramer is
Chairman Emeritus of Hazleton Laboratories Corporation. He is a Trustee Emeritus
and Past President of the University of Virginia's Colgate Darden Graduate
School of Business Administration. He also serves on the board of directors of
Advanced Technology Laboratories, Inc., Commerce Bancorporation, Landec
Corporation and Unilab, Inc. Mr. Cramer is also a director of The Commerce Bank
of Washington, Olympic Boat Company, Unilab Group Ltd., Northwestern Trust
Company and other privately held companies.
4
<PAGE>
Mr. Essner was named a director of the Company in January 1995. He joined
American Home Products in 1989 as Senior Vice President, Sales and Marketing, of
its Wyeth-Ayerst Laboratories division ("Wyeth-Ayerst"). In 1991, he was
appointed Executive Vice President, and in March 1993, President, of
Wyeth-Ayerst. Prior to joining American Home Products, Mr. Essner was employed
by Sandoz Pharmaceuticals Corporation for 13 years, most recently as Chief
Operating Officer.
Mr. Lyons has been a director of the Company since 1993. Mr. Lyons retired
as Vice Chairman of the Board of Merck & Company ("Merck") in 1991. He joined
Merck in 1950 as a Research Chemist and held a number of senior marketing and
sales positions in the Merck, Sharp & Dohme division of Merck, serving as its
President from 1975 to 1985. He was appointed Corporate Senior Vice President in
1982, Executive Vice President of Merck in 1985, and Vice Chairman of the Board
in 1988. Mr. Lyons currently serves on the board of directors of Synaptic
Pharmaceutical Company, Matrix Pharmaceutical Company, Philadelphia College of
Pharmacy and Fordham University.
Dr. Martin has been a director of the Company since 1993. Dr. Martin is the
Executive Vice President and Chief Technology Officer of the Student Loan
Marketing Association ("Sallie Mae"), a position she has held since September
1994. In this position, she is responsible for all information technology within
Sallie Mae and all technology-driven new businesses, joint ventures and
acquisitions. Prior to joining Sallie Mae, Dr. Martin was employed as Vice
President and Chief Information Officer of the International Telecommunications
Satellite Organization ("INTELSAT") since 1992. She had overall responsibility
for all information and computing systems, which included Ground Network
Engineering and Projects, Information Systems Management, Conference Services
and Language Services. Prior to joining INTELSAT, Dr. Martin was Vice President
of The Boeing Company, and founded and directed the Boeing High Technology
Center. Dr. Martin currently serves on the board of directors of Medtronic, Inc.
and Information Resources, Inc.
INFORMATION ON COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
During the last fiscal year there were seven meetings of the Company's Board
of Directors. All incumbent directors attended at least 75% of the Board
meetings held and at least 75% of the Committee meetings held of which they were
a member, except that Dr. Homcy attended two of the four Board meetings held
during 1994 following his appointment to the Board.
In accordance with the Governance Agreement, the Board of Directors
maintains an Audit Committee, a Compensation Committee, a Nominating Committee
and a Stock Option Plan Administration Committee.
The Audit Committee, currently composed of Messrs. Cramer and Lyons and Dr.
Martin, is responsible, among other things, for recommending the selection of
certified public accountants to the Board of Directors, reviewing the scope and
results of the audits, approving nonaudit services performed by the certified
public accountants and reviewing the Company's accounting policies and
procedures and system of internal controls. During the past year, there were
four Audit Committee meetings.
The Compensation Committee, currently composed of Messrs. Cramer and Lyons
and Dr. Martin, is responsible, among other things, for recommending to the
Board of Directors the adoption and amendment of all employee benefit plans and
arrangements and the engagement of, terms of any employment agreements and
arrangements with, and terminations of, all corporate officers of the Company.
During the past year, there were two Compensation Committee meetings.
The Nominating Committee, currently composed of Messrs. Carr and Kranda, is
responsible for the nomination of directors and the solicitation of shareholder
proxies. During the past year, there was one Nominating Committee meeting.
The Stock Option Plan Administration Committee, currently composed of
Messrs. Carr, Cramer, Essner and Lyons and Drs. Martin and Homcy, is
responsible, among other things, for recommending
5
<PAGE>
to the Board of Directors the adoption and amendment of all stock option plans
of the Company and for the administration of such plans. During the past year,
there were four Stock Option Plan Administration Committee meetings.
COMPENSATION OF DIRECTORS
Independent Directors (as defined below) receive $6,000 per quarter. In
addition, they receive $1,000 per quarter for serving as the Chair of a
Committee, and $1,000 for each Board of Directors and each Committee meeting
attended in person and $500 for each such meeting attended telephonically.
Management Directors and Investor Directors (as defined below) receive no
additional compensation for attending Board or Committee meetings.
Under the Company's Stock Option Plan for Nonemployee Directors, each
Independent Director receives a one-time grant of an option to purchase 10,000
shares of Common Stock on the day such director is initially elected or
appointed to the Board. Such options vest at a rate of 20% per year over a
five-year period.
Mr. Cramer also received $14,400 during the year ended December 31, 1994 for
consulting services provided to the Company relating to the acquisition of
Cyanamid by American Home Products and the Company's stock option plans.
APPROVAL OF INCREASE IN NUMBER OF SHARES
ISSUABLE UNDER AMENDED 1993 STOCK OPTION PLAN
The Company's Amended 1993 Stock Option Plan (the "1993 Plan") provides a
means whereby selected employees, officers and directors of Immunex may be
granted incentive stock options ("ISOs") or nonqualified stock options ("NSOs")
to purchase shares of Common Stock. Approximately 700 persons are eligible for
participation in the 1993 Plan. Presently, subject to adjustment required in the
event of any recapitalization of the Company, the aggregate amount of Common
Stock that may be issued upon exercise of all options granted under the 1993
Plan may not exceed 1,225,267 shares. On February 2, 1995, the Company's Board
of Directors unanimously adopted an amendment to the 1993 Plan that, subject to
shareholder approval, would authorize an additional 5,000,000 shares to be
available for the granting of options under the 1993 Plan. As of the date of
this Proxy Statement, 5,932 shares remained available for future grant under the
1993 Plan.
The Board believes that the additional options would, among other things,
promote the interests of the Company and its shareholders by assisting the
Company in attracting, retaining and stimulating the performance of officers and
key employees. The Board believes that the existing options have contributed
substantially to the successful achievement of these objectives.
ADMINISTRATION. The 1993 Plan is administered by a Stock Option Plan
Administration Committee (the "Committee") appointed by the Board. Except for
the terms and conditions explicitly set forth in the 1993 Plan, the Committee
has the authority to determine all matters relating to options granted under the
1993 Plan, including the selection of the individuals to be granted options, the
number of shares to be subject to each option, the exercise price (which may not
be less than fair market value per share, in the case of ISOs, and not less than
par value per share, in the case of NSOs), and all the terms and conditions of
the options.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If there is any increase or
decrease in the number of issued shares of Common Stock resulting from a
split-up or consolidation of shares or any like capital adjustment, or the
payment of any stock dividend, the aggregate number and class of shares on which
options may be granted under the 1993 Plan, the number and class of shares
covered by each outstanding option and the exercise price per share thereof (but
not the total price) will be proportionately adjusted.
EFFECT OF LIQUIDATION OR RECAPITALIZATION. If the Company is involved in a
merger (other than a merger in which the holders of Common Stock immediately
prior to the merger have the same
6
<PAGE>
proportionate ownership of common stock in the surviving corporation immediately
after the merger), consolidation, reorganization, liquidation or other similar
transaction, as a result of which the Company's shareholders receive cash, stock
or other property in exchange for their shares of Common Stock, all options
granted under the 1993 Plan will terminate, but the holders of options (the
"Optionees") will have the right immediately prior to such merger,
consolidation, reorganization, liquidation or other similar transaction to
exercise such Optionee's option in whole or in part whether or not the vesting
requirements with respect thereto have been met. In the event, however, the
Company's shareholders receive capital stock of another corporation in exchange
for their shares of Common Stock in a merger, the Company and such other
corporation may determine that all outstanding options will be converted into
options to purchase shares of such other corporation's capital stock.
DESCRIPTION OF TERMS AND CONDITIONS OF OPTIONS. The following is a
description of the specific terms that all options granted under the 1993 Plan
must include. Additional terms that the Committee deems advisable and that are
not inconsistent with the 1993 Plan may be included in the written agreement to
be issued to evidence options granted.
PAYMENT OF EXERCISE PRICE. The price of shares purchased upon the exercise
of options will be paid in cash or by check. To the extent permitted by the
Committee, however, an option may be exercised by (i) delivery of shares of the
Company's capital stock held by the Optionee having a fair market value equal to
the exercise price, provided that such stock has been held by the Optionee for
at least six months, (ii) delivery of a properly executed notice, together with
irrevocable instructions to a broker to deliver to the Company the amount of
sale or loan proceeds to pay the exercise price, or (iii) delivery of a
full-recourse promissory note executed by the Optionee and secured by the shares
issued upon exercise.
TERM AND MATURITY. Subject to certain restrictions concerning greater than
10% shareholders, each option expires 10 years from the date of grant. Unless
modified by the Committee, options vest in five equal installments at the rate
of 20% per year following the date of grant.
EXERCISE OF OPTIONS. Subject to the option's vesting schedule, each option
may be exercised in whole or in part; however, no fewer than 20% of the shares
purchasable under the option (or the remaining shares then purchasable, if less
than 20%) may be purchased upon any exercise of option rights.
HOLDING PERIODS. Persons subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), must hold the shares
issued upon exercise of an option for six months from the date the option was
granted. The Committee may require an Optionee to give the Company prompt notice
of any disposition of shares of Common Stock acquired by the exercise of an ISO
prior to the expiration of two years after the date of grant of the option and
one year after the date of exercise.
TERMINATION OF RELATIONSHIP WITH THE COMPANY. Options granted under the
1993 Plan terminate and may not be exercised if the Optionee's relationship with
the Company is terminated, except that:
(i) If the Optionee dies while such Optionee has a relationship with the
Company or an affiliate, or within three months after termination of such
relationship (or 12 months in the case of totally disabled Optionees), the
option may be exercised at any time within one year following the Optionee's
death by the person or persons to whom the rights of the Optionee under the
option pass by will or by the laws of descent and distribution, but only to
the extent the option was exercisable on the date of termination;
(ii) If the Optionee's relationship with the Company is terminated by
reason of the Optionee's having become totally disabled (as defined in the
1993 Plan), the Optionee may exercise the option at any time within 12
months following such termination, but only to the extent it was
7
<PAGE>
exercisable on the date of such termination, unless by its terms it sooner
terminates and expires, in which case the Optionee shall have such shorter
period of time in which to exercise the option; and
(iii) If the Optionee's relationship with the Company is terminated for
any other reason other than by the Company for cause, the Optionee may
exercise the option at any time within 90 days after such termination, but
only to the extent it was exercisable on the date of such termination,
unless by its terms it sooner terminates and expires, in which case the
Optionee shall have such shorter period of time in which to exercise the
option.
AMENDMENT AND TERMINATION. Unless sooner terminated by the Board, the 1993
Plan will terminate on March 11, 2003. The Board may amend or terminate the 1993
Plan at any time, provided that the approval of the holders of a majority of the
Company's outstanding shares of voting capital stock voting either in person or
by proxy at a duly held shareholders meeting is necessary in order to adopt any
amendment that will (i) increase the number of shares that may be issued under
the 1993 Plan, (ii) with respect to NSOs, materially modify the eligibility
requirements, or, with respect to ISOs, change the designation of the eligible
participants or class of participants, (iii) materially increase the benefits
accruing to the participants under the 1993 Plan, or (iv) require shareholder
approval under applicable law, including, but not limited to, Section 16(b) of
the Exchange Act. Amendment or termination of the 1993 Plan may not, without the
Optionee's consent, alter or impair any rights or obligations under any
then-outstanding option.
FEDERAL INCOME TAX CONSEQUENCES. There are generally no federal income tax
consequences to the Optionee or to the Company by reason of the grant or
exercise of a valid ISO. Upon exercise of an ISO, the Optionee does not
recognize taxable income; however, the amount by which the Common Stock's fair
market value at the time of exercise exceeds the option exercise price will
constitute income for purposes of calculating the Optionee's alternative minimum
tax liability, if any. There are no federal income tax consequences to the
Company when the Optionee exercises a valid ISO.
Upon the disposition of Common Stock acquired through the exercise of an
ISO, any resulting gain or loss will constitute long-term capital gain or loss
if the disposition occurs at least two years after the grant date and one year
after the exercise date of the corresponding option or if the disposition occurs
after the Optionee's death. If these two holding periods are not met and the
disposition occurs prior to the Optionee's death, the disposition will cause the
Optionee to recognize ordinary income in the amount by which the fair market
value of the Common Stock at the time of exercise exceeded the option price;
gain attributable to further appreciation of the fair market value after the
exercise of the option will constitute long- or short-term capital gain,
depending on whether the Common Stock has been held for more than one year. If
the fair market value of the Common Stock declines during the period between the
exercise and disposition, then the amount of ordinary income that the Optionee
must recognize is limited to the amount by which the fair market value at the
time of disposition exceeds the option price. If the Optionee recognizes
ordinary income in connection with an ISO, the Company is entitled to a
corresponding business expense deduction in an amount equal to the ordinary
income recognized by the Optionee. Currently, any ordinary income that the
Optionee recognizes in connection with the ISO is not subject to withholding for
income or employment taxes, but the Internal Revenue Service is reevaluating
this position.
NSOs under the 1993 Plan are taxed pursuant to the rules governing options
that are not ISOs. There are no federal income tax consequences to the Optionee
or the Company by reason of the grant of a NSO. Upon exercise of a NSO, the
Optionee will recognize ordinary income in an amount equal to the difference
between the fair market value of the Common Stock on the date of exercise and
the option exercise price. Upon such exercise, the Company is required to
withhold from regular wages or supplemental wage payments an amount based on the
ordinary income recognized on the exercise of such NSO by the Optionee, or must
otherwise ensure that the amount of tax required to be withheld is available for
payment in money. The 1993 Plan permits an Optionee to satisfy such Optionee's
withholding liability by having the Company withhold that number of shares
otherwise issuable
8
<PAGE>
having a fair market value equal to the Optionee's withholding tax liability.
Subject to the test of reasonableness and satisfaction of applicable withholding
requirements, the Company will be entitled to a business expense deduction in
the tax year in which the exercise occurs in an amount equal to the ordinary
income recognized by the Optionee. There are no tax consequences to the Company
by reason of the disposition by the Optionee of Common Stock acquired upon
exercise of a NSO.
The aggregate fair market value of Common Stock available pursuant to all
ISOs exercisable by an Optionee for the first time during a calendar year may
not exceed $100,000. This limitation is applied by using the stock's fair market
value as of the grant date of the underlying option, and by considering all ISOs
under all plans of the Company or any parent or subsidiary company. To the
extent the Optionee's ISOs exceed the $100,000 limit, they will be treated as
NSOs.
The affirmative vote of holders of a majority of the shares of Common Stock
present and entitled to vote at the Annual Meeting is required to approve the
increase in the number of shares issuable under the 1993 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
INCREASE IN THE NUMBER OF SHARES ISSUABLE UNDER THE 1993 PLAN.
9
<PAGE>
RELATIONSHIP WITH AMERICAN CYANAMID COMPANY AND AMERICAN
HOME PRODUCTS CORPORATION
On June 1, 1993, the Company's predecessor ("Predecessor Immunex") was
merged (the "Merger") into Lederle Oncology Corporation, a previously
nondistinct operating unit of Cyanamid, pursuant to an Amended and Restated
Agreement and Plan of Merger dated as of December 15, 1992, among Predecessor
Immunex, Cyanamid and certain other parties thereto (the "Merger Agreement").
Each share of Common Stock of Predecessor Immunex outstanding immediately prior
to the effective time of the Merger (the "Effective Time") was converted
pursuant to the Merger into the right to receive $21 in cash and one share of
Common Stock of the newly formed entity, the Company. Cyanamid contributed $350
million in cash and certain assets and contractual obligations of its oncology
business in the United States and Canada (the "Lederle Oncology Business") to
Lederle Oncology Corporation just prior to the Effective Time. Cyanamid received
53.5% of the Company's Common Stock outstanding immediately following the
Effective Time, on a fully diluted basis.
Simultaneously with entering into the Merger Agreement, Predecessor Immunex
and Cyanamid entered into the Governance Agreement, which sets forth, among
other things, certain agreements of the parties relating to (i) the corporate
governance of the Company, including the composition of its Board of Directors,
(ii) rights of Cyanamid to purchase additional shares of the Company's Common
Stock from the Company upon the occurrence of certain events, (iii) future
acquisitions and dispositions of the Company's securities by Cyanamid, (iv)
rights of members of the Company's Board of Directors designated by Cyanamid to
approve certain corporate actions, (v) the requirement that a supermajority of
the members of the Company's Board of Directors approve certain corporate
actions, and (vi) payments to be made by Cyanamid to the Company in the event
that the products of the Lederle Oncology Business and certain other new
products of Immunex do not achieve specified revenue targets. In addition,
pursuant to the Merger Agreement, Immunex, Cyanamid and certain of their
respective subsidiaries entered into certain agreements at the closing of the
Merger relating to cooperation in research and development, supply and
manufacture of certain products, and other matters.
In November 1994, all the outstanding shares of common stock of Cyanamid
were acquired by American Home Products. Cyanamid is currently a wholly owned
subsidiary of American Home Products. Pursuant to an Agreement dated September
20, 1994 between the Company and American Home Products, American Home Products
agreed to maintain the separate existence and business operations of Cyanamid
and its subsidiaries that have obligations to the Company, with sufficient
financial assets, facilities, employees, management and other resources
necessary to permit Cyanamid and such subsidiaries to continue to perform their
obligations to the Company under the Governance Agreement and the other
agreements that were entered into in connection with the Merger. American Home
Products also agreed to be bound by the standstill provisions of the Governance
Agreement (see "Governance Agreement -- Standstill Provisions") to the extent
such provisions apply to Cyanamid.
GOVERNANCE AGREEMENT
DESIGNATION OF CANDIDATES FOR BOARD OF DIRECTORS
Pursuant to the Governance Agreement, the Company's Board of Directors
consists of nine directors. Three directors are designated by the Company (the
"Management Directors"), three are designated by Cyanamid (the "Investor
Directors"), and three independent directors are designated by agreement of the
Company and Cyanamid (the "Independent Directors"). Cyanamid has the right to
designate an additional Independent Director to the Company's Board. Cyanamid
has not yet exercised such right.
At all times during the term of the Governance Agreement, the number of
directors that Cyanamid and the management of Immunex have the right to
designate will be determined by the percentage interest of Immunex beneficially
owned by Cyanamid. If Cyanamid's interest is: (i) below 20%, Cyanamid will have
no right to designate any directors, and the management of Immunex will have the
right to designate six Management Directors; (ii) 20% or above but less than
35%, Cyanamid will
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<PAGE>
have the right to designate one Investor Director, and the management of Immunex
will have the right to designate five Management Directors; (iii) 35% or above
but less than 45%, Cyanamid will have the right to designate two Investor
Directors, and the management of Immunex will have the right to designate four
Management Directors; (iv) 45% or above but less than 65%, Cyanamid will have
the right to designate three Investor Directors, and the management of Immunex
will have the right to designate three Management Directors; and (v) 65% or
above, Cyanamid will have the right to designate four Investor Directors, by
adding an additional Investor Director to the Board of Directors, and the
management of Immunex will have the right to designate three Management
Directors.
In the event that Cyanamid's interest is such that there are more Investor
Directors or Management Directors on the Board of Directors than Cyanamid or the
management of Immunex, as the case may be, has the right to designate, Cyanamid
or the management of Immunex, as the case may be, will promptly cause to resign,
and take all other action reasonably necessary to cause the prompt removal of,
that number of Investor Directors or Management Directors, as the case may be,
as required to make the remaining number of Investor Directors or Management
Directors conform with the formula described in the preceding paragraph.
With certain exceptions, Cyanamid and the Management Directors will have the
right to designate replacements for directors designated pursuant to the
Governance Agreement by Cyanamid or the Management Directors, respectively, at
the termination of such director's term or upon death, resignation, retirement,
disqualification, removal from office or other cause. The Board of Directors
will elect each person so designated upon nomination by the Nominating
Committee, which consists of an equal number of directors designated by each of
Immunex and Cyanamid. No individual who is an officer, director, partner or
principal shareholder of any competitor of Immunex or any of its subsidiaries
(other than Cyanamid and its affiliates) may be designated to serve as a
director of Immunex.
In any election of directors or any meeting of the shareholders of Immunex
called expressly for the removal of directors, Cyanamid and its affiliates will
vote their shares of Common Stock for all nominees in proportion to the votes
cast by the other shareholders of Immunex, except that Cyanamid and its
affiliates may cast any or all of their votes, in their sole discretion, (i) in
favor of any nominee designated by Cyanamid pursuant to the Governance Agreement
and (ii) in connection with any election contest to which Rule 14a-11 under the
Exchange Act applies. With certain limited exceptions, in all other matters
submitted to a vote of shareholders of Immunex, Cyanamid may vote any or all of
its shares in its sole discretion.
CERTAIN APPROVAL RIGHTS
So long as Cyanamid has the right to designate at least two Investor
Directors to the Board of Directors, the approval of at least one of the
Investor Directors will be required for the Board of Directors to approve and
authorize certain corporate actions. Such actions include, without limitation,
the following: (i) the entry by Immunex or any of its subsidiaries into any
merger or consolidation or the acquisition by Immunex or any of its subsidiaries
of any business or assets that would constitute more than 10% of the fair market
value of the total assets of Immunex and its subsidiaries; (ii) the sale, lease,
pledge, grant of security interest in, license, transfer or other disposal by
Immunex or any of its subsidiaries of more than 10% of the fair market value of
the total assets of Immunex and its subsidiaries; (iii) with certain exceptions,
the issuance of any debt or equity securities or other capital stock of Immunex
or any of its subsidiaries; (iv) a reclassification, split, redemption or other
acquisition of any of the debt or equity securities of Immunex or any of its
subsidiaries (subject to certain exceptions); (v) any amendment to the Articles
of Incorporation or Bylaws of Immunex or any change in the size or composition
of the Board of Directors or committee thereof, except in accordance with the
Governance Agreement; (vi) the establishment of any committee of the Board of
Directors not specifically described in the Governance Agreement; (vii) any
change in accounting policies or procedures of Immunex or any of its
subsidiaries; (viii) the payment or discharge of any claim, liability or
obligation other than in the ordinary course of business, except where such
claim, liability or obligation does not exceed $350,000; (ix) the commencement
or termination of any suit, litigation or
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<PAGE>
proceeding with respect to patent rights, and any other suit, litigation or
proceeding that involves a claim, liability or obligation in excess of $350,000
or that is material to Immunex's business or assets; (x) any (a) incurrence of
indebtedness for borrowed money other than as provided for in Immunex's annual
operating plans (the "Annual Operating Plans") provided to Cyanamid from time to
time or (b) capital expenditure by Immunex or any of its subsidiaries that is
greater than both (1) $350,000 and (2) the amount provided for such expenditure
in the Annual Operating Plans; (xi) the institution by Immunex or any of its
subsidiaries of any shareholder rights plan or similar plan or device; (xii) the
acquisition by Immunex or any of its subsidiaries of technology or products
under any license or similar arrangement if the payments under all such licenses
that are not contingent upon sales of licensed technology or products would
exceed $500,000 during any year; or (xiii) the dissolution of Immunex or any of
its subsidiaries, the adoption of a plan of liquidation for Immunex or any of
its subsidiaries and any action by Immunex or any of its subsidiaries to
commence any bankruptcy or similar proceeding.
The approval of seven directors (or, if the Board of Directors consists of
more than nine persons, that number of directors that represents 70% of the
total number of directors, rounded up to the nearest whole number), including,
in the case of clause (iv) below, two Independent Directors, will be required
for the Board of Directors to approve any of the following: (i) the employment
of the chief executive officer, chief operating officer, chief financial officer
or chief scientific officer of Immunex (each, a "Senior Officer"); (ii) Annual
Operating Plans for Immunex and its subsidiaries, which shall include all
material capital expenditures and borrowing plans applicable to the year in
question; (iii) Immunex's five-year product development and facility plans; and
(iv) amendment of the Governance Agreement or provisions of Immunex's Articles
of Incorporation or Bylaws implementing the provision of the Governance
Agreement.
The approval of six directors, which six directors must include each of the
Independent Directors, will be required to approve and authorize the termination
of any Senior Officer.
SUBSCRIPTION RIGHTS OF CYANAMID
So long as Cyanamid has the right to designate at least one Investor
Director, prior to any issuance of securities by Immunex, Cyanamid must be
offered the right to purchase a pro rata share of such new securities. The
foregoing right does not apply, however, to securities issued upon exercise of
outstanding options or warrants and to certain other issuances specified in the
Governance Agreement.
So long as Cyanamid has the right to designate at least one Investor
Director, Cyanamid has the option to purchase from Immunex on a quarterly basis
additional shares of Common Stock or other voting stock of Immunex to the extent
necessary to permit Cyanamid to maintain the percentage of shares of Common
Stock or other voting stock of Immunex, as the case may be, owned by Cyanamid
and its affiliates as of the immediately preceding quarter. The per share
purchase price of such shares of Common Stock or other voting stock of Immunex,
as the case may be, will be equal to the fair market value of such shares on the
date of Cyanamid's purchase.
STANDSTILL PROVISIONS
Cyanamid has agreed, until June 1, 1998 (the "Standstill Period"), subject
to certain exceptions, not to directly or indirectly purchase or otherwise
acquire, or propose or offer to purchase or otherwise acquire, any equity
securities of Immunex, whether by tender offer, market purchase, private
negotiated purchase, Business Combination (as defined in the Governance
Agreement and described below) or otherwise if, immediately after such purchase
or acquisition, Cyanamid's beneficial interest in Immunex would exceed 53.5% on
a fully diluted basis.
The prohibitions on Cyanamid's acquisition of equity securities of Immunex
do not apply during any period in which Cyanamid or any of its affiliates
beneficially owns, in the aggregate, less than 5% of the then-outstanding shares
of Common Stock (assuming exercise or conversion of any rights, options or
warrants to purchase Common Stock held by Cyanamid and its affiliates, but
assuming no
12
<PAGE>
other exercise or conversion of outstanding rights, options or warrants to
purchase Common Stock). In addition, such prohibitions do not apply with respect
to any of the following: (i) any Permitted Acquisition Transaction (as defined
in the Governance Agreement and described below) that is disclosed to the Board
of Directors promptly after the decision has been made to propose such
transaction; (ii) any issuance of securities pursuant to Cyanamid's subscription
rights set forth in the Governance Agreement; (iii) open-market purchases made
by Cyanamid from time to time of equity securities of Immunex if (a) immediately
after any such market purchases, Cyanamid's beneficial interest in Immunex would
not exceed 70% and (b) Cyanamid's intention to make such market purchases is
disclosed to the Board of Directors and shareholders of Immunex at least two
trading days prior to any such purchases and such purchases are completed within
30 days of such notice; and (iv) any cash tender offer by Cyanamid or any
affiliate of Cyanamid if, immediately after such tender offer, Cyanamid's
beneficial interest in Immunex would not exceed 70%.
Cyanamid has agreed that, during the Standstill Period, it will not, and
will not permit its subsidiaries to: (i) after submitting a definitive proposal
for a Permitted Acquisition Transaction to the Board of Directors, make any
public announcement with respect to such transaction without the prior approval
of the Board of Directors, except as required by law; (ii) make or participate
in any "solicitation" of "proxies" (as such terms are used in the proxy rules of
the Securities and Exchange Commission (the "Commission")) to vote or seek to
advise, encourage or influence any person or entity with respect to the voting
of any shares of capital stock of Immunex; or (iii) deposit any shares of Common
Stock into a voting trust or subject any shares of Common Stock to any
arrangement or agreement with respect to the voting of such securities or form,
join or in any way participate in any "group" (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any shares of Common Stock.
A "Permitted Acquisition Transaction," as defined in the Governance
Agreement, means either (i) a cash tender offer for all outstanding Common Stock
that is conditioned upon approval by at least a majority of the shareholders of
Immunex other than Cyanamid and its affiliates (the "Unaffiliated Shareholders")
or (ii) a Business Combination that is conditioned upon approval by at least a
majority of the Unaffiliated Shareholders, and that satisfies all the following
conditions: (a) the Board of Directors receives an opinion from a nationally
recognized independent investment banking firm selected by the Board of
Directors (excluding the Investor Directors) that the price and other financial
terms of the transaction are fair from a financial point of view to the
Unaffiliated Shareholders; (b) the Board of Directors, in accordance with the
Governance Agreement, concludes that the price and other terms of the
transaction are fair to and in the best interests of the Unaffiliated
Shareholders and recommends that the Unaffiliated Shareholders accept the tender
offer or otherwise approve the transaction; and (c) neither such investment
banking firm's opinion nor such recommendation of the Board of Directors is
withdrawn prior to the consummation of the transaction. In addition, a merger
following the consummation of a tender offer described in clause (i) of this
paragraph that offers the same consideration as such tender offer is deemed to
be a Permitted Acquisition Transaction.
The term "Business Combination," as defined in the Governance Agreement,
means any one of the following transactions: (i) any merger or consolidation of
Immunex or any subsidiary of Immunex with (a) Cyanamid or (b) any corporation
(other than Immunex) which is, or after such merger or consolidation would be,
an affiliate or associate of Cyanamid; (ii) any tender or exchange offer by
Cyanamid or any affiliate or associate of Cyanamid for any equity securities of
Immunex or any of its subsidiaries; (iii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition by Immunex (in one transaction or a series
of transactions) to or with Cyanamid or any affiliate or associate of Cyanamid
(other than Immunex) of more than 10% of the fair market value of the total
assets of Immunex and its subsidiaries; (iv) the issuance, exchange or transfer,
other than pursuant to Cyanamid's subscription rights under the Governance
Agreement, by Immunex or any of its subsidiaries (in one transaction or a series
of transactions) of any securities of Immunex or any subsidiary thereof to
Cyanamid or any affiliate or associate of Cyanamid (other than Immunex) in
exchange for cash, securities or other consideration (or a combination thereof)
having an aggregate fair market value
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<PAGE>
equal to or in excess of 10% of the fair market value of the total assets of
Immunex and its subsidiaries; (v) the adoption of any plan or proposal for the
liquidation or dissolution of Immunex proposed by or on behalf of Cyanamid or
any affiliate or associate of Cyanamid (other than Immunex); or (vi) any
reclassification of securities (including any reverse stock split),
recapitalization of Immunex, or any merger or consolidation of Immunex with any
subsidiary thereof, or any other transaction to which Immunex is a party
(whether or not with or into or otherwise involving Cyanamid or any affiliate or
associate of Cyanamid) that has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class of
equity or convertible securities of Immunex or any subsidiary thereof which is
directly or indirectly owned by Cyanamid or any affiliate or associate of
Cyanamid (other than Immunex).
MATERIAL TRANSACTIONS WITH CYANAMID
Immunex may not enter into any contract, agreement or transaction with
Cyanamid or any of its affiliates that is material to Immunex's business, taken
as a whole, unless two-thirds of the members of the Board of Directors, other
than the Investor Directors and including at least two Independent Directors,
approve such contract, agreement or transaction.
TRANSFER OF IMMUNEX COMMON STOCK BY CYANAMID
Cyanamid has agreed that, during the Standstill Period, it will not, and
will not permit any entity that is directly or indirectly wholly owned by
Cyanamid to, transfer any shares of Common Stock, except (i) pursuant to a
registered underwritten public offering in accordance with the registration
rights provisions of the Governance Agreement, (ii) in accordance with the
volume and manner of sale limitations of Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), or (iii) to any
wholly owned subsidiary of Cyanamid. During the Standstill Period, Cyanamid may
not transfer any interest in any Common Stock to any purchaser or group (within
the meaning of Section 13(d)(3) of the Exchange Act) of purchasers if, after
giving effect to such sale, such purchaser or group of purchasers would, to
Cyanamid's knowledge, own, or have the right to acquire, 5% or more of the
then-outstanding shares of Common Stock. Other than through a block trade in an
underwritten offering, Cyanamid may not, directly or through any of its
subsidiaries, transfer any interest in shares of Common Stock in excess of 1%
per day of the then-outstanding shares of Common Stock.
Notwithstanding the foregoing paragraph, after June 1, 1996, Cyanamid and
its wholly owned subsidiaries may transfer (an "Acquisition Sale") all (but not
less than all) the shares of Common Stock beneficially owned by them to any
other person other than an affiliate of Cyanamid, provided that such other
person has offered to acquire all outstanding shares of Common Stock on the same
terms and conditions as such Acquisition Sale. In addition, if Cyanamid intends
to engage in an Acquisition Sale it is required to notify Immunex of such intent
and, for three months subsequent to such notice, Immunex will have the
opportunity to present to Cyanamid a potential buyer willing to purchase all
(but not less than all) the shares of Common Stock beneficially owned by
Cyanamid and its wholly owned subsidiaries. In the event that a potential buyer
is presented, Cyanamid may not consummate an Acquisition Sale on terms less
favorable to Cyanamid than those proposed by such potential buyer.
During the Standstill Period, Cyanamid may not sell, transfer or otherwise
dispose of any of the capital stock of any wholly owned subsidiary of Cyanamid
that owns Common Stock, except to another wholly owned subsidiary of Cyanamid.
REGISTRATION RIGHTS
The holders of at least 25% of the Registrable Securities (as defined in the
Governance Agreement) (the "Initiating Holders") may request that Immunex file a
registration statement under the Securities Act covering the registration of any
or all Registrable Securities held by such Initiating Holders. Immunex will not
be obligated to effect more than two such registrations. The Governance
Agreement, however, does not limit the number of registrations on Form S-3 that
may be requested
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<PAGE>
and obtained if Immunex is eligible to use Form S-3, provided that the estimated
aggregate offering price to the public exceeds $25 million and the other
provisions of the Governance Agreement are satisfied.
Subject to certain conditions, if Immunex proposes to file a registration
statement under the Securities Act on any form (other than on Form S-4 or S-8)
that also would permit the registration of Registrable Securities, and such
filing is to be on behalf of Immunex or selling holders of its securities for
the general registration of shares of Common Stock for cash, Immunex must give
notice thereof to the holders of the registration rights and permit such holders
to include Registrable Securities in the registration.
Cyanamid's registration rights are subject to certain conditions set forth
in the Governance Agreement. In addition, the Governance Agreement sets forth
specific procedures relating to such registration rights and detailed
obligations of the parties with respect thereto. All expenses incident to the
performance by Immunex of its obligations with respect to the registration of
Cyanamid's shares of Common Stock will be borne by Immunex, except that the
Initiating Holders will pay all expenses incident to the second registration. In
addition, the holders of Registrable Securities will bear and pay the
underwriting commissions and discounts applicable to securities offered for
their account in connection with any registrations, filings and qualifications
made pursuant to the Governance Agreement, as well as related counsel fees.
Immunex and the holders of Registrable Securities each have agreed to indemnify
the other, in certain instances, with respect to liabilities incurred in
connection with such registrations.
GUARANTY PAYMENTS BY CYANAMID
Until December 31, 1997, Cyanamid has agreed to make certain payments to
Immunex if revenues from products of the Lederle Oncology Business and certain
other products of Immunex do not achieve certain annual targets. The targets for
1995 through 1997 are listed below as "Target Revenue." Payments are required
for any calendar year in which Target Revenue exceeds the "Actual Revenue,"
i.e., the sum of Immunex's net sales of Lederle Oncology Products, New Oncology
Products and Additional Products plus certain other revenues related to
Additional Products (as such terms are described below).
The payment for any year in which Target Revenue is not realized equals (i)
the amount by which Target Revenue for the calendar year exceeded Actual Revenue
for such year (a "Revenue Shortfall") reduced by (ii) the total of the following
costs for such year ("Avoided Costs"): (a) variable manufacturing costs
(including packaging and similar costs); (b) variable distribution costs; (c)
commissions; (d) royalties and similar fees paid to third parties; and (e) all
costs for advertising, promotion, marketing, distribution or selling of any
Product (as described below) that were contemplated in the Annual Operating Plan
for such year that were not incurred because any approval required for such
Product or any new label indication therefor was not received by the date
contemplated by such Annual Operating Plan ("Avoided Introductory Costs").
Notwithstanding the foregoing, the Revenue Shortfall may not exceed the
difference between the Target Revenue and the Base Revenue set forth below and
Cyanamid's payment obligation may not exceed the amounts set forth below as
"Cyanamid's Maximum Obligation." Immunex recorded a receivable from Cyanamid of
$35,768,000 for the Revenue Shortfall for 1994. Cyanamid paid this amount in
March 1995.
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Target Revenue................................................. $168.6 $190.5 $216.5
Base Revenue................................................... 102.0 103.0 122.7
Maximum Revenue Shortfall...................................... 66.6 87.5 93.8
Cyanamid's Maximum Obligation.................................. 45.3 56.0 60.0
</TABLE>
For purposes of calculating Cyanamid's payment obligations, Avoided Costs
may not exceed 15% of any Revenue Shortfall in 1995 and 20% of any Revenue
Shortfall in each of 1996 and 1997; provided, however, that in the event total
Avoided Costs exceed such ceilings, Cyanamid may reduce
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<PAGE>
its Revenue Shortfall obligation by the amount of such excess that constitutes
Avoided Introductory Costs. Cyanamid may reduce its Revenue Shortfall obligation
for 1997 by any amount by which Actual Revenue exceeded Target Revenue in any
prior calendar year.
Subject to certain conditions, Cyanamid may discharge its Revenue Shortfall
obligation otherwise than by payment of the applicable cash amount under the
Governance Agreement if such alternative consideration provides Immunex with
equivalent value.
The term "Cyanamid Oncology Products" is defined in the Governance Agreement
to mean NOVANTRONE mitoxantrone, methotrexate injectable, leucovorin calcium,
thiotepa, AMICAR aminocaproic acid, LEVOPROME methotrimeprazine, Cyanamid's
generic anticancer products that are the subject of filings seeking regulatory
approval and photodynamic therapy compounds and related devices. The term "New
Oncology Products" means all oncology products useful (to the extent useful) in
the diagnosis or treatment of cancerous or precancerous, transitional or
neoplastic diseases or conditions in humans resulting from research conducted by
Cyanamid, the Company, or research jointly sponsored by Cyanamid and the
Company, or any such product with respect to which Cyanamid or the Company
(except for any such product that is acquired solely through the Company's own
efforts) is the licensee or distributor (to the extent of such license or
distribution rights) or is otherwise subsequently acquired by Cyanamid or the
Company, including, without limitation: (i) cytotoxics (including
photosensitizers) and cytokine modulators; (ii) small molecule hematopoietic
stimulators; (iii) cytokines and cytokine receptors; (iv) MDR reversal agents;
(v) anti-tumor monoclonal antibody conjugates; (vi) RAS pathway antagonists; and
(vii) receptors other than TNFR. New Oncology Products will exclude such
products to the extent that the Company or Cyanamid cannot grant license rights
to the other due to preexisting agreements entered into prior to December 15,
1992. Should either party, however, have those rights returned to it, such
product will immediately become a New Oncology Product. For purposes of
determining Actual Revenues only, New Oncology Products will exclude any product
of Immunex that was marketed, clinically tested or in preclinical testing as of
the Effective Time. The term "Additional Products" is defined in the Governance
Agreement to mean such additional products designated (on an annual basis) by
Cyanamid, with the concurrence of the Board of Directors, that are not Cyanamid
Oncology Products, New Oncology Products or Copromoted Products from which sales
or copromotion revenues are to be included in Immunex's consolidated income
statements by reason of the fact that the Annual Operating Plan of Immunex
forecasts a Revenue Shortfall in respect of Cyanamid Oncology Products, New
Oncology Products and Copromoted Products. The term "Products" is defined in the
Governance Agreement to mean, in the aggregate, Cyanamid Oncology Products, New
Oncology Products and Additional Products.
TERMINATION
The Governance Agreement will terminate at the earlier of (i) such time as
Cyanamid and its affiliates beneficially own 95% of all classes and series of
Common Stock and (ii) such time as Cyanamid and its affiliates no longer own any
such shares.
RESEARCH AND DEVELOPMENT AGREEMENT
In connection with the Merger, Cyanamid and Immunex entered into a Research
and Development Agreement (the "Research and Development Agreement") under
which, among other things, the parties collaborate in the research and
development and commercialization of New Oncology Products. Cyanamid and Immunex
formed a Collaboration Committee, which is responsible for planning, supervising
and coordinating the collaborative development and commercialization of New
Oncology Products. During the years 1993 through 1997, Immunex agreed to
contribute certain amounts in support of Cyanamid's oncology research and
development programs, within certain limits. During 1994, Immunex contributed
$15,300,000, and during the years 1995 through 1997, Immunex has agreed to pay
the amounts shown below as Immunex Contribution. To the extent that actual
Cyanamid oncology research and development expenses for any year exceed the
Total Oncology
16
<PAGE>
Research and Development Budget Amount shown below, Immunex will also pay 50% of
such excess, provided that any such excess greater than 3% of the Total Oncology
Research and Development Budget Amount shown below is approved by the Board of
Directors.
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Total Oncology Research and Development
Budget Amount.................................................... $63.3 $69.6 $76.6
Immunex Contribution............................................... 15.8 26.1 38.3
</TABLE>
After 1997, Immunex has agreed to contribute 50% of the funding budgeted for
Cyanamid's oncology discovery research program. Immunex and Cyanamid each will
bear development costs relating to each New Oncology Product to the extent such
costs relate to approval to sell such product in the United States, its
territories and possessions and Canada, in the case of Immunex (the "Immunex
Territory"), or in all other countries of the world, in the case of Cyanamid
(the "Cyanamid Territory").
Cyanamid granted to Immunex a royalty-free exclusive license under all
patents and technology owned or controlled by Cyanamid relating to New Oncology
Products to make, have made, use and sell all New Oncology Products in the
Immunex Territory, subject to Cyanamid's retained right to make, have made and
use New Oncology Products in the Immunex Territory. In addition, Cyanamid and
Immunex each granted to the other a royalty-free exclusive license to their
respective portions of any jointly owned technology to make, have made, use and
sell such technology in the Cyanamid Territory or the Immunex Territory, as the
case may be. Immunex and Cyanamid have agreed to cooperate in preparing, filing,
maintaining and defending all such patents and in protecting all such
technology, in each case relating to the New Oncology Products. In the event
that a New Oncology Product is to be manufactured by Cyanamid for Immunex or by
Immunex for Cyanamid, the manufacturing party will supply the reasonable
clinical and commercial requirements of the other party for such product under a
supply agreement to be entered into by Immunex and Cyanamid, at a cost that will
reimburse the manufacturing party for its manufacturing and (within certain
limits) process development costs (including an allocation for general and
administrative costs) allocable to such product, plus, with respect to
commercial requirements, a reasonable profit. To the extent Immunex develops
products or technology other than New Oncology Products and determines not to
market such products or technology itself, Immunex will offer to Cyanamid
exclusive marketing rights to any such products or technology before offering
any marketing rights to third parties.
If Cyanamid were to own less than 50% of the Common Stock, Cyanamid would
have the right to terminate the Research and Development Agreement on 60 days'
notice.
ONCOLOGY PRODUCT LICENSE AGREEMENT
In connection with the Merger, Cyanamid and Immunex entered into an Oncology
Product License Agreement under which Immunex granted to Cyanamid and certain of
its subsidiaries an exclusive license under the patents and know-how acquired by
Immunex to make, have made and use Contributed Lederle Products other than
Distributed Products (the "Assigned Products"), thereby permitting Cyanamid to
manufacture the Assigned Products in the Immunex Territory for supply to Immunex
and for ultimate sale by Cyanamid and its sublicensees in the Cyanamid
Territory. Cyanamid pays to Immunex a royalty equal to 5% of the net sales by
Cyanamid of the Assigned Products manufactured in the Immunex Territory and sold
in the Cyanamid Territory. Immunex and Cyanamid have agreed to cooperate in
preparing, filing, maintaining and defending all patents, and in protecting all
technology, relating to Assigned Products. Immunex recognized revenue under this
agreement of $2,571,000 during 1994.
IMMUNEX NEW ONCOLOGY PRODUCT LICENSE AGREEMENT
Cyanamid and Immunex have entered into an Immunex New Oncology Product
License Agreement (the "Immunex New Oncology Product License Agreement") under
which Immunex granted to Cyanamid a co-exclusive license to make, have made, use
and sell in the Cyanamid Territory New
17
<PAGE>
Oncology Products resulting from the research and development efforts of Immunex
("Immunex New Oncology Products"). Cyanamid pays to Immunex a royalty equal to
5% of the net sales of Immunex New Oncology Products in the Cyanamid Territory
by Cyanamid. Immunex and Cyanamid cooperate in preparing, filing, maintaining
and defending all patents, and in protecting all technology, in each case
relating to the Immunex New Oncology Products covered by the Immunex New
Oncology Product License Agreement. In the event that an Immunex New Oncology
Product is to be manufactured by Immunex for Cyanamid or by Cyanamid for
Immunex, the manufacturing party has agreed to supply the reasonable clinical
and commercial requirements of the other party for such product under a supply
agreement to be entered into by Immunex and Cyanamid, at a price that will
reimburse the manufacturing party for its manufacturing and process development
costs (including an allocation for general and administrative costs) allocable
to such product, plus, with respect to commercial requirements, a reasonable
profit. Immunex recognized revenue under this agreement of $327,000 during 1994.
TRADEMARK LICENSE AGREEMENT
Cyanamid and Immunex have entered into a United States Trademark License
Agreement under which Cyanamid granted to Immunex an exclusive license in the
United States to use certain trademarks in connection with the marketing,
distribution and sale of the Lederle Oncology Products in the Immunex Territory.
In consideration for the grant of such license, Immunex has agreed to pay
Cyanamid a royalty equal to 2% of the net sales by Immunex of products in the
Immunex Territory that are sold using the trademarks. The royalties incurred by
Immunex during 1994 totaled $1,702,000.
SUPPLY AGREEMENT, TOLL MANUFACTURING AGREEMENT AND METHOTREXATE DISTRIBUTORSHIP
AGREEMENT
In connection with the Merger, Cyanamid and Immunex entered into a Supply
Agreement, under which Cyanamid agreed to supply the reasonable commercial
requirements of Immunex, subject to specific maximum quantities, for AMICAR
aminocaproic acid, oral formulations of leucovorin calcium (currently marketed
forms only), and thiotepa (currently marketed forms only) at a price equal to
125% of Cyanamid's manufacturing costs (including reasonable overhead charges
and certain other costs) for such products. In addition, Lederle Parenterals,
Inc. ("LPI"), a subsidiary of Cyanamid that operates a pharmaceutical
manufacturing facility in Carolina, Puerto Rico, and Immunex Carolina
Corporation ("ICC"), a subsidiary of Immunex that manufactured pharmaceuticals
in Puerto Rico in 1994, have entered into a Toll Manufacturing Agreement under
which LPI toll converts raw materials provided by ICC into injectable
formulations of NOVANTRONE mitoxantrone, leucovorin calcium, AMICAR aminocaproic
acid and LEVOPROME methotrimeprazine at a price equal to 125% of LPI's costs
relating to such toll conversion. ICC was dissolved in December 1994 and its
rights under the Supply Agreement were assigned to Immunex. LPI and Immunex have
also entered into a Methotrexate Distributorship Agreement whereby LPI supplies
methotrexate to Immunex at prices that are adjusted annually. Immunex and ICC
purchased inventory at a cost of $10,062,000 from Cyanamid and LPI under these
agreements during 1994.
SERVICES AGREEMENT
Cyanamid and Immunex have entered into a United States Services Agreement
(the "Services Agreement") under which Cyanamid may provide certain medical
support, government sales, sales, education, pricing and contract
administration, market research, industry affairs, advertising and sales
promotion, warehousing, distribution, credit and collections, legal and merger
transition services to Immunex. As Immunex progressively assumes responsibility
for such services, Immunex will have the right to terminate its obligations
under the Services Agreement, on a function-by-function basis, on 12 months'
notice to Cyanamid. Immunex incurred costs totaling $6,759,000 under the terms
of this agreement during 1994. Cyanamid also incurred certain additional
expenses not included in the service fees for which Immunex agreed to directly
reimburse Cyanamid. These expenses totaled $893,000 during 1994.
18
<PAGE>
DISTRIBUTORSHIP AGREEMENT FOR CANADA
Cyanamid Canada, Inc. ("Cyanamid Canada") and Immunex have entered into a
distributorship agreement under which Immunex appointed Cyanamid Canada as its
distributor in Canada for certain products. Immunex agreed to supply the
products to Cyanamid Canada at established prices that are subject to annual
adjustment. Immunex sold $1,946,000 of inventory to Cyanamid Canada during 1994.
LOAN AGREEMENT
Immunex and Cyanamid Agricultural de Puerto Rico, Inc. ("CAPRI"), a Cyanamid
subsidiary, entered into a Loan Agreement in September 1993 (as amended, the
"Loan Agreement"). Pursuant to the Loan Agreement, CAPRI has agreed to lend
Immunex up to the lesser of $50 million or 110% of the amount receivable by
Immunex from Cyanamid under the revenue guaranty for working capital purposes on
a revolving credit basis. Interest accrues on outstanding balances at LIBOR plus
1% and is payable on maturity of individual borrowings. Unless extended by
mutual agreement, the Loan Agreement expires on March 31, 1996. As of December
31, 1994, Immunex had borrowed $34 million under the Loan Agreement. This amount
was repaid in March 1995.
EXECUTIVE OFFICERS
The following individuals are executive officers of the Company who will
serve in the capacities noted until April 26, 1995, or until the election and
qualification of their successors. Each officer named below is expected to be
reelected at the Company's Board of Directors meeting to be held on April 26,
1995.
<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITIONS AND OFFICES WITH THE COMPANY SINCE
-------------------------- --- ----------------------------------------------------------------------- ---------
<S> <C> <C> <C>
Edward V. Fritzky 44 Chief Executive Officer 1994
Michael L. Kranda 41 President; Chief Operating Officer 1988
Scott G. Hallquist 41 Senior Vice President; Secretary; General Counsel 1987
Peggy V. Phillips 41 Senior Vice President, Pharmaceutical Development 1995
Douglas G. Southern 52 Senior Vice President; Chief Financial Officer; Treasurer 1991
Leonard R. Stevens 45 Senior Vice President, Strategic and New Product Planning 1993
Douglas E. Williams 36 Senior Vice President, Discovery Research 1995
David L. Urdal 45 Senior Vice President, Manufacturing and Process Sciences 1990
</TABLE>
For the biographical summaries of Messrs. Fritzky and Kranda, see "Election
of Directors."
Mr. Hallquist has been employed by the Company since June 1986, initially as
Director, Legal Affairs. He was elected to serve as Secretary in May 1987 and as
Vice President and General Counsel in January 1989. Mr. Hallquist was elected
Senior Vice President in October 1990, retaining the offices of General Counsel
and Secretary. Prior to joining the Company, he was employed by E.I. du Pont de
Nemours and Company as patent counsel. Mr. Hallquist received M.B.A. and J.D.
degrees from the University of North Carolina in 1981. Mr. Hallquist is a
director of Qual-Med Washington Health Plan, Inc., a health maintenance
organization and subsidiary of Health Systems International, Inc.
Ms. Phillips joined the Company in 1986, was named Senior Vice President,
Pharmaceutical Development in September 1994, and was elected an executive
officer of the Company in February 1995. From 1991 until its dissolution in
January 1995, Ms. Phillips had served as Senior Vice President and Chief
Operating Officer of IRDCO, the Company's wholly owned research and development
corporation. Ms. Phillips received an M.S. in microbiology from the University
of Idaho.
Mr. Southern has been Senior Vice President, Chief Financial Officer and
Treasurer of the Company since January 1991. Prior to joining the Company, Mr.
Southern was employed as Senior Vice President, Chief Financial Officer,
Treasurer and Secretary of Pay 'N Pak Stores, Inc. ("Pay 'N
19
<PAGE>
Pak"), a retail firm headquartered in Seattle, Washington. Mr. Southern resigned
from Pay 'N Pak in June 1990. Pay 'N Pak filed for protection under Chapter 11
of the Federal Bankruptcy Code on September 21, 1991.
Mr. Stevens joined the Company in July 1993 as Vice President, Strategic and
New Product Planning, and was elected Senior Vice President in 1994. Mr. Stevens
had been employed by Lederle Laboratories since December 1989, where he served
in several capacities, including Director of Medical Education and Programs,
Director of Professional Education and Director of Oncology Marketing, prior to
being appointed as Vice President and General Manager of Oncology in June 1992.
Mr. Stevens was an Account Supervisor for Klemtner Advertising from April to
December 1989. He was employed by Alcide Corporation, an animal healthcare
products company, as Vice President of Sales and Marketing from October 1988 to
April 1989, after being employed by G.D. Searle for over 10 years, most recently
as Director, Marketing. Mr. Stevens received an M.B.A from the University of
Pittsburgh in 1977.
Dr. Williams joined the Company in 1988. He served as Vice President of
Research and Development from 1992 until September 1994, when he was appointed
to his current position of Senior Vice President, Discovery Research. Dr.
Williams was elected an executive officer of the Company in February 1995. He
received a Ph.D. in physiology from the State University of New York at Buffalo,
Roswell Park Memorial Institute Division.
Dr. Urdal has been employed by the Company since 1982, initially as Staff
Scientist. In 1983, Dr. Urdal was promoted to Senior Staff Scientist and, in
1986, to Vice President and Assistant Director of Research and Development. In
1988, Dr. Urdal was appointed Director of Development and became Vice President
of Immunex Research and Development Corporation upon its incorporation in 1989.
In 1990, Dr. Urdal was elected President of Immunex Manufacturing Corporation
and in February 1995 he was named Senior Vice President, Manufacturing and
Process Sciences, of the Company. During the period from September 1993 until
Mr. Fritzky's election in January 1994, Dr. Urdal served as a director of the
Company. Dr. Urdal received a Ph.D. in biochemical oncology in 1980 from the
University of Washington.
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth certain information as to (i) the Company's
chief executive officer, (ii) the Company's four other most highly compensated
executive officers, and (iii) Dr. Gillis, who served as the Company's Executive
Vice President and Chief Scientific Officer prior to his resignation on
September 29, 1994, for services rendered in all capacities for the Company
during the fiscal years ended December 31, 1994, 1993 and 1992.
20
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
/AWARDS
ANNUAL -------------
COMPENSATION SHARES ALL
------------------ UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION (1)
-------------------------------------------- --------- -------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
Edward V. Fritzky .......................... 1994 $306,674 $ 79,219 125,000 $523,483
Chief Executive Officer
Steven Gillis (2) .......................... 1994 $277,096 0 0 $25,084
Former Executive Vice President; Chief 1993 $350,000 $175,000 40,000 $17,639
Scientific Officer 1992 $312,500 $117,188 2,778 $ 2,442
Michael L. Kranda .......................... 1994 $288,768 $ 75,797 0 $19,325
President; Chief Operating Officer 1993 $275,016 $ 88,000 40,000 $13,866
1992 $220,500 $ 82,688 1,960 $2,392
Scott G. Hallquist ......................... 1994 $236,250 $ 67,922 0 $17,258
Senior Vice President; Secretary; 1993 $225,000 $101,250 40,000 $11,609
General Counsel 1992 $191,750 $ 71,906 1,704 $2,446
David L. Urdal ............................. 1994 $203,500 $ 58,506 0 $14,412
Senior Vice President, 1993 $185,000 $ 74,000 40,000 $9,658
Manufacturing and Process 1992 $163,000 $ 61,125 1,159 $2,590
Sciences
Douglas G. Southern ........................ 1994 $155,820 $ 44,798 0 $9,638
Senior Vice President; Chief 1993 $148,400 $ 43,778 30,000 $3,550
Financial Officer; Treasurer 1992 $140,000 $ 52,500 996 $3,338
<FN>
------------------------
(1) Consists of matching contributions to a 401(k) savings plan of $6,500,
$24,572, $18,838, $16,877, $13,877, and $8,487 and payment of excess life
insurance premiums of $1,584, $512, $488, $381, $536, and $1,152 for Mr.
Fritzky, Dr. Gillis, Mr. Kranda, Mr. Hallquist, Dr. Urdal, and Mr.
Southern, respectively, in 1994. In addition, for Mr. Fritzky also consists
of $515,399 for reimbursement of costs and expenses incurred in connection
with his relocation to Washington.
(2) Dr. Gillis resigned as an officer of the Company in September 1994.
</TABLE>
OPTION GRANTS
The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1994 to the Company's chief executive
officer. None of the other current or former executive officers for whom
compensation is reported in this Proxy Statement was granted any options during
the fiscal year ended December 31, 1994.
OPTION GRANTS IN 1994 FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) (1) DATE (2) 5% 10%
----------------------------- ------------- --------------- ------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward V. Fritzky............ 50,000 28% $ 13.75 10/20/04 $432,365 $1,095,698
75,000 42% $ 18.88 1/26/04 $890,515 $2,256,939
<FN>
------------------------
(1) The exercise price of the options is equal to the fair market value of the
underlying Common Stock on the date of grant.
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
(2) The options vest on a five-year schedule, becoming fully exercisable on
January 26 and October 20, 1999, provided the holder remains employed by
the Company. The options terminate 10 years from the date of grant.
(3) Future value of current year grants assuming appreciation of 5% and 10% per
year over the 10-year option period. The actual value realized may be
greater than or less than the potential realizable values set forth in the
table.
</TABLE>
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information as of December 31, 1994
regarding options held by the Company's chief executive officer and the other
current and former executive officers for whom compensation is reported in this
Proxy Statement. None of such officers exercised any options during the fiscal
year ended December 31, 1994.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
-------------------------- -------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------------------------------------------------------- ----------- ------------- ---------- -------
<S> <C> <C> <C> <C>
Edward V. Fritzky......................................... -- 125,000 0 $56,500
Steven Gillis............................................. -- -- -- --
Michael L. Kranda......................................... 8,000 32,000 0 0
Scott G. Hallquist........................................ 8,000 32,000 0 0
David L. Urdal............................................ 8,000 32,000 0 0
Douglas G. Southern....................................... 6,000 24,000 0 0
</TABLE>
EMPLOYMENT AGREEMENTS
Immunex entered into employment agreements with Drs. Gillis and Urdal and
Messrs. Hallquist and Kranda in connection with the Merger. Each employment
agreement became effective as of the Effective Time. Following Mr. Fritzky's
election as Chairman, Immunex entered into a substantially similar employment
agreement with Mr. Fritzky with an effective date of January 21, 1994. The
employment agreement with Dr. Gillis was terminated with the mutual consent of
the Company and Dr. Gillis effective September 29, 1994. The employment
agreements with Messrs. Fritzky, Hallquist and Kranda and Dr. Urdal (the
"Employment Agreements") are effective for a term of three years from their
effective date. Each Employment Agreement provides that the employee will hold a
position at least commensurate with that held by the employee as of its
effective date. The annual base salary payable to Messrs. Fritzky, Hallquist and
Kranda and Dr. Urdal pursuant to such Employment Agreements is $325,000,
$225,000, $275,000 and $185,000, respectively. Such annual base salary may not
be reduced during the term of the Employment Agreement. If the employment of the
employee is terminated by the Company without Cause or by the employee for Good
Reason (each as defined in the Employment Agreement), the employee will be
entitled to receive his base salary and certain other payments until the later
of two years from the date his employment was terminated and the end of the
three-year term of such Employment Agreement. Dr. Gillis and the Company agreed
that termination of the Employment Agreement with Dr. Gillis occurred without
Good Reason; accordingly, no salary or other payments were made to Dr. Gillis
that had not accrued prior to termination.
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE AND THE STOCK
OPTION PLAN ADMINISTRATION COMMITTEE
The Company's compensation policy as established by its Board of Directors
(the "Board") is intended to provide competitive compensation to all employees,
giving consideration to the relative contribution and performance of each
individual employee. It is the Company's policy to compensate its executive
officers at levels consistent with industry norms, primarily in the form of base
salary,
22
<PAGE>
together with incentive bonuses of up to 37.5% of base salary. In addition, it
is the Company's policy to grant stock options to each of its executive
officers, based on individual and Company performance and in amounts consistent
with industry norms, so as to align their interests with shareholder value. The
biotechnology industry is extremely competitive with respect to recruitment and
retention of qualified personnel; accordingly, the Company's management employs
surveys of biotechnology industry compensation levels to ensure that the
Company's compensation practices are comparable to other biotechnology
companies, thereby enabling it to attract and retain key employees.
Determining the compensation levels of the Company's executive officers is
the responsibility of the Board, through its Compensation Committee, which has
overall responsibility for the Company's compensation policies for senior
management, and its Stock Option Plan Administration Committee, which is
responsible for administering the Company's stock option plans. The Compensation
Committee makes recommendations to the Board as to the salaries of, and
incentive bonuses awarded to, the Company's CEO and other executive officers.
The Stock Option Plan Administration Committee determines the number and terms
of options granted to the Company's CEO, other executive officers and all other
employees.
Executive compensation consists of three major components: base salary,
annual incentive bonus and stock options. Base salaries of the CEO and other
executive officers are subjectively determined, based on annual surveys of
similar positions at other biotechnology companies (described below as the
Comparison Group), together with assessments of individual performance and the
Company's achievement of predetermined operating goals that are established
annually by the Board (the goals established for 1994 are described below). The
Compensation Committee does not assign relative weights to the factors on which
base salaries are based. Assessments of individual performance include
subjective evaluations of the value of individual executives to the Company. The
surveys employed include some, but not all, of the companies included in the
Nasdaq Pharmaceutical Index, which is one of the indices used in the Company's
performance graph that appears elsewhere in this Proxy Statement. During 1993
and 1994, the compensation survey data used by the Company for comparative
purposes is reported as of June of each year. The Company's Compensation
Committee meets in December of each year to determine the annual salary
component of executive compensation to be paid in the following calendar year,
and the amount of incentive bonus compensation, in the form of both cash and
stock options, to be awarded executives for performance in the current year.
Thus, the 1994 salaries paid executives were determined by reference to 1993
compensation survey data, adjusted upwards for inflation during the term between
June 1993 and December 1993. The survey data considered by the Compensation
Committee in determining executive salaries included salary information provided
by 36 biotechnology companies having more than 300 employees (the "1993
Comparison Group"), as well as a subgroup of the 10 largest biotechnology
companies (the "1993 Comparison Subgroup"). The Compensation Committee believes
that each of the 1993 Comparison Group and the 1993 Comparison Subgroup were
representative of industry norms in late 1993, and each are weighted
approximately equally by the Compensation Committee. The 1993 Comparison
Subgroup consisted of Amgen, Inc., Biogen, Inc., Genentech, Inc., Chiron
Corporation, Collagen Corporation, Genetics Institute, Genzyme Corporation,
Repligen Corporation and Synergen Corporation. In June 1994, the Company
obtained an updated compensation survey reflecting 1994 salaries paid in the
industry. The 1994 Compensation Group consisted of 47 biotechnology companies
having more than 300 employees, and the 1994 Compensation Subgroup consisted of
each of the companies in the 1993 Compensation Subgroup, but added Scios Nova,
Inc. and biotechnology affiliates or subsidiaries of Baxter Healthcare, Berlex
Biosciences, Boehringer Mannheim, Bristol-Myers Squibb Company, Hoffmann-La
Roche, Inc., American Cyanamid Company (Lederle Praxis), Miles, Inc., Novo
Nordisk and Syntex Corporation, and deleted Collagen Corporation and Repligen
Corporation. The comparisons noted below take into account 1994 compensation
survey information. In the case of Mr. Fritzky, the Compensation Committee
established a base salary for 1994 of $325,000, which represented approximately
91% of the average 1994 compensation for CEOs in the 1994 Comparison Group and
69% of the average 1994 compensation for CEOs in the Comparison Subgroup. The
Compensation Committee established 1994 base salaries for the Company's other
executive officers
23
<PAGE>
ranging from 100% to 132% of the average 1994 compensation for executives
performing similar functions in companies included in the 1994 Comparison Group,
and from 84% to 117% of the average 1994 compensation for executives performing
similar functions in companies included in the Comparison Subgroup.
Under the Company's compensation plans, annual incentive bonuses are
calculated as a percentage of base salary and are based in part on achievement
of corporate operating goals and in part on individual contributions toward
achieving such goals. The CEO and each of the other named executive officers are
eligible for a team bonus of up to 25% of base salary, based on the achievement
of corporate operating goals, and an additional individual bonus of up to 12.5%
of base salary based on individual contributions toward achievement of corporate
operating goals and subjective evaluation of individual performance. Individual
bonuses in excess of 12.5% of base salary have been awarded under circumstances
determined by the Compensation Committee to merit special recognition. Corporate
operating goals are established at the beginning of each year and approved by
the Board. Achievement of corporate operating goals provides the Compensation
Committee and the Board with a basis for the award of incentive bonuses.
For 1994, the Compensation Committee elected to award Mr. Fritzky and the
other named executive officers a team bonus of 65% of the amount for which each
officer was eligible (i.e., 65% of 25% of base salary). The Compensation
Committee's decision took into account that the Company had achieved 10 of 12 of
its established 1994 corporate operating goals within the time frames prescribed
by the Board. These goals (which were not assigned relative weights and are not
listed in order of relative importance) were: (i) achievement of 1994 budgeted
net product sales; (ii) submission of a product license application ("PLA")
amendment for use of Leukine-Registered Trademark- in treating acute
nonlymphocytic leukemia and completion of all responses to FDA questions
concerning a pending PLA amendment for use of Leukine in treating
chemotherapy-induced neutropenia by established dates; (iii) attainment of
patient-accrual targets for PIXY321 pivotal clinical trials; (iv) achievement of
specified PIXY321 manufacturing and validation objectives; (v) commencement of
specified clinical studies for Novantrone-Registered Trademark-; (vi)
development of a five-year strategic plan for the Company as a whole and
formation of a strategic planning committee for Company information systems;
(vii) consolidation of distribution, customer service and credit/collections
functions into a single operation; (viii) completion of staffing of the medical
development function; (ix) use of a multifunctional review system to prioritize
pre- development projects and the identification of at least two new product
candidates from such pre-development projects; (x) assessment of the impact of
healthcare reform initiatives upon Company business and product development
strategies; (xi) preparation and filing of an IND for IL-4 receptor by a defined
date; and (xii) achievement of a specified net loss target. The Compensation
Committee's determination of the team bonus and individual bonuses took into
account that the Company had not achieved its 1994 budgeted net product sales or
the net loss target established by the beginning of 1994. However, in awarding a
team bonus of 65%, the Compensation Committee took into account that management
has taken action in the third and fourth quarters to significantly reduce
operating expenses and that all other operating goals had substantially been
achieved. Although attainment of the goal concerning consolidation of
distribution functions was deferred due to the reorganization of Cyanamid
subsequent to its acquisition by American Home Products, the Compensation
Committee took into account that the Company had completed a plan to achieve
this goal that would be implemented in the first half of 1995.
The Compensation Committee also elected to award Mr. Fritzky and the other
named executive officers individual bonuses ranging from 6% to 12.5% of base
salary, based upon the Compensation Committee's subjective assessment of each
officer's achievements in 1994. In determining individual bonuses, the
Compensation Committee considered each individual executive's contribution to
the Company's operating goals. Mr. Fritzky received an individual bonus equal to
8.1% of his 1994 base salary.
To qualify compensation for deductibility for federal income tax purposes,
it is the Company's policy to meet the requirements for exclusion from the limit
on deduction imposed by Section 162(m)
24
<PAGE>
of the Code by paying performance-based compensation if possible and, with
respect to cases in which it is not possible to meet the requirements for
exclusion from Section 162(m) of the Code, the Company intends to minimize any
award of compensation in excess of the limit.
Stock options have been granted periodically to the CEO and other named
executive officers to encourage management of the Company from the perspective
of an owner with an equity interest in the business. Stock options are awarded
by the Stock Option Plan Administration Committee, which is comprised of the
nonmanagement directors of the Company. Options to purchase 125,000 shares were
granted to Mr. Fritzky in 1994. No options were granted to any other named
executive officers in 1994. The number of options awarded to Mr. Fritzky was
determined based upon the Compensation Committee's subjective assessment of the
level of stock option compensation that would be appropriate to provide a
long-term incentive to Mr. Fritzky linked to an increase in the value of the
Company's common stock.
COMPENSATION COMMITTEE
Kirby J. Cramer
John E. Lyons
Edith W. Martin
STOCK OPTION PLAN ADMINISTRATION COMMITTEE
Frank V. AtLee (retired)
David R. Bethune (retired)
Kirby L. Cramer
John E. Lyons
Edith W. Martin
25
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN (1)
AMONG THE COMPANY, NASDAQ COMPOSITE INDEX AND NASDAQ PHARMACEUTICAL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NASDAQ COMPOSITE NASDAQ PHARMACEUTICAL COMPANY
<S> <C> <C> <C>
12/31/89 100 100 100
12/31/90 84.92 119.95 185.71
12/31/91 136.28 318.78 307.79
12/31/92 158.58 265.53 266.23
12/31/93 180.93 236.63 151.76
12/31/94 176.92 178.4 138.91
</TABLE>
------------------------
(1) Assumes $100 invested at the close of trading on December 31, 1989 in the
Common Stock, in the Nasdaq Composite Index and in the Nasdaq Pharmaceutical
Index.
NOTE: Stock price performance shown above for the Common Stock is historical and
not necessarily indicative of future price performance.
SECTION 16 REPORTING
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Commission. Officers, directors and greater than 10%
shareholders are required by Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for those persons, the Company believes that during 1994 all filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with by such persons.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP, certified public
accountants, to act as independent auditor of the Company for the fiscal year
ending December 31, 1995. Ernst & Young LLP has been auditor of the Company
since the Company's inception.
26
<PAGE>
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting, with the opportunity to make a statement, if the representative
so desires, and is expected to be available to respond to appropriate questions
from shareholders.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR
1995 ANNUAL MEETING
Under the Commission's proxy rules, shareholder proposals that meet certain
conditions may be included in the Company's proxy statement and proxy for a
particular annual meeting. Proposals of shareholders that are intended to be
presented by such shareholders at the Company's 1995 Annual Meeting must be
received by the Company no later than November 28, 1995 to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
Receipt by the Company of any such proposal from a qualified shareholder in a
timely manner will not ensure its inclusion in the Company's proxy material
because there are other requirements in the proxy rules for such inclusion.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matters for action at the Annual Meeting other than the matters
specifically referred to in this Proxy Statement. If other matters properly come
before the Annual Meeting, it is intended that the holders of the Proxies will
act in respect thereto in accordance with their best judgment.
Copies of the 1994 Annual Report of the Company are being mailed to
shareholders, together with this Proxy Statement, form of Proxy and Notice of
Annual Meeting of Shareholders. Additional copies may be obtained from the
Secretary of the Company, 51 University Street, Seattle, Washington 98101.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 1994, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS INCLUDED IN
THE COMPANY'S 1994 ANNUAL REPORT TO SHAREHOLDERS.
BY ORDER OF THE BOARD OF DIRECTORS
Scott G. Hallquist
SECRETARY
Seattle, Washington
March 24, 1995
27
<PAGE>
/X/ PLEASE MARK
YOUR CHOICE
LIKE THIS
--------
Common
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER IN
THE SPACES PROVIDED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR
ALL NOMINEES" IN ITEM 1 AND "FOR" ITEM 2.
--------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR all Nominees" in Item 1 and "FOR"
Item 2.
--------------------------------------------------------------------------------
WITHHOLD
AUTHORITY
FOR all to vote for
Nominees all nominees
Item 1. Election of the eight / / / /
nominees to serve as
directors for the ensuing
year and until their
successors are elected
and qualify:
Joeseph J. Carr, Kirby L. Cramer, Robert A. Essner,
Edward V. Fritzky, Steven Gillis, Michael L. Kranda,
John E. Lyons and Edith W. Martin
WITHHOLD for the following only: (Write the name of the nominee(s) in the
space below)
__________________________________________
Unless otherwise directed, all votes will be apportioned equally among those
persons for whom authority is given to vote.
FOR AGAINST ABSTAIN
Item 2. Approve the increase in the / / / / / /
number of shares issuable
under the Amended 1993 Stock
Option Plan.
I plan to attend the Annual Meeting / /
Please sign exactly as your name appears hereon.
Attorneys, trustees, executors and other fiduciaries
acting in a representative capacity should sign their
names and give their titles. An authorized person
should sign on behalf of corporations, partnerships,
associations, etc. and give his or her title. If your
shares are held by two or more persons, each person must
sign. Receipt of the notice of meeting and proxy statement
is hereby acknowledged.
COMMENTS/ADDRESS CHANGE / /
PLEASE MARK THIS BOX IF YOU HAVE
WRITTEN COMMENTS/ADDRESS CHANGE
ON THE REVERSE SIDE
Signature(s)_____________________________________ Date _____________________
Note: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
-------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
IMMUNEX CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS--APRIL 26, 1995
The undersigned hereby appoint(s) Edward V. Fritzky and Michael L.
P Kranda and each of them as proxies, with full power of substitution,
to represent and vote as designated all shares of Common Stock of
R Immunex Corporation held of record by the undersigned on March 14,
1995 at the Annual Meeting of Shareholders of the Company to be held
O at the Four Seasons Olympic Hotel, 411 University Street, Seattle,
Washington, at 9:00 a.m. on Wednesday, April 26, 1995, with authority
X to vote upon the following matters and with discretionary authority as
to any other matters that may properly come before the meeting or any
Y adjournment or postponement thereof.
IMPORTANT--PLEASE DATE AND SIGN ON THE OTHER SIDE.
----------------
See Reverse Side
----------------
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
APPENDIX A
IMMUNEX CORPORATION
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the Amended and Restated 1993 Stock Option Plan (this
"Plan") is to provide a means whereby selected employees, directors and officers
of Immunex Corporation (the "Company"), or of any parent or subsidiary (as
defined in subsection 5.8 and referred to hereinafter as "related corporations")
thereof, may be granted incentive stock options and/or nonqualified stock
options to purchase the Common Stock (as defined in Section 3) of the Company,
in order to attract and retain the services or advice of such employees,
directors and officers and to provide added incentive to such persons by
encouraging stock ownership in the Company.
SECTION 2. ADMINISTRATION
This Plan shall be administered by a Stock Option Plan Administration
Committee (the "Committee") appointed by the Board of Directors of the Company
(the "Board"). The Committee shall be composed of two or more members of the
Board who are "disinterested persons" as defined in Rule 16b-3(d) of the
Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act"). The administrator of this Plan shall hereinafter be referred to as the
"Plan Administrator."
2.1 PROCEDURES
The Board shall designate one of the members of the Plan Administrator as
chairman. The Plan Administrator may hold meetings at such times and places as
it shall determine. The acts of a majority of the members of the Plan
Administrator present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Plan Administrator members, shall be valid acts of
the Plan Administrator.
2.2 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan, the
Plan Administrator shall have the authority, in its discretion, to determine all
matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price, and all other terms and conditions
of the options. Grants under this Plan need not be identical in any respect,
even when made simultaneously. The interpretation and construction by the
-1-
<PAGE>
Plan Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), the regulations thereunder and any amendments
thereto.
2.3 SECTION 16(b) COMPLIANCE AND BIFURCATION OF PLAN
It is the intention of the Company that, if any of the Company's equity
securities are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, this Plan shall comply in all respects with Rule 16b-3 under the Exchange
Act and, if any Plan provision is later found not to be in compliance with such
Section, the provision shall be deemed null and void, and in all events this
Plan shall be construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are officers
and directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning this Plan with respect to other participants.
SECTION 3. STOCK SUBJECT TO THIS PLAN
The stock subject to this Plan shall be the Company's Common Stock, par
value $.01 per share (the "Common Stock"), presently authorized but unissued
or now held or subsequently acquired by the Company as treasury shares. Subject
to adjustment as provided in Section 7, the aggregate amount of Common Stock to
be delivered upon the exercise of all options granted under this Plan shall not
exceed 6,225,267 shares. If any option granted under this Plan shall expire or
be surrendered, exchanged for another option, cancelled or terminated for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall thereupon again be available for purposes of this Plan, including
for replacement options which may be granted in exchange for such expired,
surrendered, exchanged, cancelled or terminated options.
SECTION 4. ELIGIBILITY
An incentive stock option may be granted only to any individual who, at the
time the option is granted, is an employee of the Company or any related
corporation. A nonqualified stock option may be granted to any employee,
-2-
<PAGE>
director or officer of the Company or any related corporation, whether an
individual or an entity. Any party to whom an option is granted under this Plan
shall be referred to hereinafter as an "Optionee."
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with this
Plan. Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the exercise
of each option and the price per share at which such option is exercisable (the
"exercise price") shall be as established by the Plan Administrator, provided
that the Plan Administrator shall act in good faith to establish the exercise
price which shall be not less than the fair market value per share of the Common
Stock at the time the option is granted with respect to incentive stock options
and not less than the par value per share of the Common Stock at the time the
option is granted with respect to nonqualified stock options and also provided
that, with respect to incentive stock options granted to greater than 10%
stockholders, the exercise price shall be as required by subsection 6.1.
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to granting
incentive stock options to greater than 10% stockholders, the term of each
incentive stock option shall be as established by the Plan Administrator and, if
not so established, shall be 10 years from the date it is granted but in no
event shall it exceed 10 years. The term of each nonqualified stock option
shall be as established by the Plan Administrator and, if not so established,
shall be 10 years. To ensure that the Company or related corporation will
achieve the purpose and receive the benefits contemplated in this Plan, any
option granted to any Optionee hereunder shall, unless the condition of this
sentence is waived or modified in the agreement evidencing the option or by
resolution adopted at any time by the Plan Administrator, be exercisable
according to the following schedule:
-3-
<PAGE>
Period of Optionee's
Continuous Relationship
With the Company or Related
Corporation From the Date Portion of Total Option
the Option Is Granted Which Is Exercisable
---------------------------------------------------------------
after one year 20%
after two years 40%
after three years 60%
after four years 80%
after five years 100%
5.3 EXERCISE
Subject to the vesting schedule described in subsection 5.2, each option
may be exercised in whole or in part at any time and from time to time;
provided, however, that no fewer than 20% of the shares purchasable under the
option (or the remaining shares then purchasable under the option, if less than
20%) may be purchased upon any exercise of option rights hereunder and that only
whole shares will be issued pursuant to the exercise of any option and that the
exercise price shall not be less than the par value per share of the Common
Stock at the time the option is exercised. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are exercisable
solely by such Optionee. Options shall be exercised by delivery to the Company
of notice of the number of shares with respect to which the option is exercised,
together with payment of the exercise price.
5.4 PAYMENT OF EXERCISE PRICE
Payment of the option exercise price shall be made in full at the time the
notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check or personal check (unless at the time of
exercise the Plan Administrator in a particular case determines not to accept a
personal check) for the Common Stock being purchased.
The Plan Administrator can determine at any time before exercise that
additional forms of payment will be permitted. To the extent permitted by the
Plan Administrator and applicable laws and regulations (including, but not
limited to, federal tax and securities laws and regulations and state corporate
law), an option may be exercised by:
-4-
<PAGE>
(a) delivery of shares of stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market value
to be determined in good faith by the Plan Administrator; provided, however,
that payment in stock held by an Optionee shall not be made unless the stock
shall have been owned by the Optionee for a period of at least six months;
(b) delivery of a full-recourse promissory note executed by the
Optionee in an amount which shall not exceed that portion of the exercise price
which is in excess of the amount determined to be stated capital pursuant to
Section 154 of the Delaware General Corporation Law; provided that (i) such note
delivered in connection with an incentive stock option shall, and such note
delivered in connection with a nonqualified stock option may, in the sole
discretion of the Plan Administrator, bear interest at a rate specified by the
Plan Administrator but in no case less than the rate required to avoid
imputation of interest (taking into account any exceptions to the imputed
interest rules) for federal income tax purposes, and (ii) the Plan Administrator
in its sole discretion shall specify the term and other provisions of such note
at the time an incentive stock option is granted or at any time prior to
exercise of a nonqualified stock option, and (iii) the Plan Administrator may
require that the Optionee pledge the Optionee's shares to the Company for the
purpose of securing the payment of such note and may require that the
certificate representing such shares be held in escrow in order to perfect the
Company's security interest, and (iv) the Plan Administrator in its sole
discretion may at any time restrict or rescind this right upon notification to
the Optionee;
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with the exercise.
5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation shall have the right to retain and
withhold from any payment of cash or Common Stock under this Plan the amount of
taxes required by any government to be withheld or otherwise deducted and paid
with respect to such payment. At its discretion, the Company may require an
Optionee receiving shares of Common Stock to reimburse the Company for any such
taxes required to be withheld by the Company and withhold any distribution in
whole or in part until the Company is so reimbursed. In lieu
-5-
<PAGE>
thereof, the Company shall have the right to withhold from any other cash
amounts due or to become due from the Company to the Optionee an amount equal to
such taxes. The Company may also retain and withhold or the Optionee may elect,
subject to approval by the Company at its sole discretion, to have the Company
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld by the Company to reimburse the
Company for any such taxes and cancel (in whole or in part) any such shares so
withheld. In order to qualify such election for exemption under Rule 16b-3
promulgated under Section 16(b) of the Exchange Act, any election made by an
officer or director who is subject to Section 16 of the Exchange Act must be an
irrevocable election made six months prior to the date the option exercise
becomes taxable or such irrevocable election must become effective during the
quarterly 10-day window period required under Section 16(b) of the Exchange Act
for exercises of stock appreciation rights.
5.6 HOLDING PERIODS
5.6.1 SECURITIES EXCHANGE ACT SECTION 16
No director or officer subject to Section 16(b) of the Exchange Act may
sell shares of Common Stock obtained upon the exercise of a stock option within
six months after the date the option was granted.
5.6.2 TAXATION OF STOCK OPTIONS
The Plan Administrator may require an Optionee to give the Company prompt
notice of any disposition of shares of Common Stock acquired by the exercise of
an incentive stock option prior to the expiration of two years after the date of
grant of the option and one year from the date of exercise.
5.7 NONTRANSFERABILITY OF OPTIONS
Options granted under this Plan and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar process. Any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any option under this Plan or of any
right or privilege conferred hereby, contrary to the Code or to the provisions
of this Plan, or the sale or levy or any attachment or similar process upon the
rights and privileges conferred hereby shall be null and void. Notwithstanding
the foregoing, if the Company permits, an Optionee may, during the Optionee's
lifetime, designate a person who may exercise the option after
-6-
<PAGE>
the Optionee's death by giving written notice of such designation to the Plan
Administrator. Such designation may be changed from time to time by the
Optionee by giving written notice to the Plan Administrator revoking any earlier
designation and making a new designation.
5.8 TERMINATION OF RELATIONSHIP
If the Optionee's relationship with the Company or any related corporation
ceases for any reason other than termination for cause, death or total
disability, and unless by its terms the option sooner terminates or expires,
then the Optionee may exercise, for a three-month period, that portion of the
Optionee's option which is exercisable at the time of such cessation, but the
Optionee's option shall terminate at the end of such period following such
cessation as to all shares for which it has not theretofore been exercised,
unless such provision is waived in the agreement evidencing the option. If, in
the case of an incentive stock option, an Optionee's relationship with the
Company or any related corporation changes (I.E., from employee to nonemployee,
such as a consultant), such change shall constitute a termination of an
Optionee's employment with the Company or any related corporation and the
Optionee's incentive stock option shall terminate in accordance with this
subsection 5.8. Upon the expiration of the three-month period following
cessation of employment in the case of an incentive stock option, or at any time
prior to the expiration of the option in the case of a nonqualified stock
option, the Plan Administrator shall have sole discretion in a particular
circumstance to extend the exercise period following such cessation to any date
up to the termination or expiration of the option. If, however, in the case of
an incentive stock option, the Optionee does not exercise the Optionee's option
within three months after cessation of employment, the option will no longer
qualify as an incentive stock option under the Code.
If an Optionee is terminated for cause, any option granted hereunder shall
automatically terminate as of the first discovery by the Company of any reason
for termination for cause, and such Optionee shall thereupon have no right to
purchase any shares pursuant to such option. "Termination for cause" shall mean
dismissal for dishonesty, conviction or confession of a crime punishable by law
(except minor violations), fraud, misconduct or disclosure of confidential
information.
If an Optionee's relationship with the Company or any related corporation
is suspended pending an investigation of whether or not the Optionee shall be
terminated for cause, all the Optionee's rights under any option granted
hereunder
-7-
<PAGE>
likewise shall be suspended during the period of investigation.
If an Optionee's relationship with the Company or any related corporation
ceases because of a total disability, the Optionee's option shall not terminate
or, in the case of an incentive stock option, cease to be treated as an
incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical impairment
of the Optionee which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which causes
the Optionee to be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties for the Company and to be engaged in
any substantial gainful activity. Total disability shall be deemed to have
occurred on the first day after the Company and the two independent physicians
have furnished their opinion of total disability to the Plan Administrator.
Options granted under the Plan shall not be affected by any change of
relationship with the Company so long as the Optionee continues to be an
employee, director, officer, agent, consultant, advisor or independent
contractor of the Company or of a related corporation; however, a change in an
Optionee's status from an employee to a nonemployee (e.g., consultant or
independent contractor) shall result in the termination of an outstanding
incentive stock option held by such Optionee. The Plan Administrator, in its
absolute discretion, may determine all questions of whether particular leaves of
absence constitute a termination of services; provided, however, that with
respect to incentive stock options, such determination shall be subject to any
requirements contained in the Code. The foregoing notwithstanding, with respect
to incentive stock options, employment shall not be deemed to continue beyond
the first 90 days of such leave, unless the Optionee's reemployment rights are
guaranteed by statute or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all classes of stock of each of the corporations other than the
Company is owned by one of the other corporations in such chain. When referring
to a parent corporation, the term "related corporation" shall mean any
corporation in an unbroken chain of corporations ending with the Company if, at
the time of the granting of the option, each of the corporations other than the
Company owns
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<PAGE>
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.
5.9 DEATH OF OPTIONEE
If an Optionee dies while he or she has a relationship with the Company or
any related corporation or within the three-month period (or 12-month period in
the case of totally disabled Optionees) following cessation of such
relationship, any option held by such Optionee to the extent that the Optionee
would have been entitled to exercise such option, may be exercised within one
year after his or her death by the personal representative of his or her estate
or by the person or persons to whom the Optionee's rights under the option shall
pass by will or by the applicable laws of descent and distribution.
5.10 NO STATUS AS STOCKHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a stockholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.11 CONTINUATION OF RELATIONSHIP
Nothing in this Plan or in any option granted pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ or other
relationship of the Company or of a related corporation, or to interfere in any
way with the right of the Company or of any such related corporation to
terminate his or her employment or other relationship with the Company at any
time.
5.12 MODIFICATION AND AMENDMENT OF OPTION
Subject to the requirements of Code Section 422 with respect to incentive
stock options and to the terms and conditions and within the limitations of this
Plan, the Plan Administrator may modify or amend outstanding options granted
under this Plan. The modification or amendment of an outstanding option shall
not, without the consent of the Optionee, impair or diminish any of his or her
rights or any of the obligations of the Company under such option. Except as
otherwise provided in this Plan, no outstanding option shall be terminated
without the consent of the Optionee. Unless the Optionee agrees otherwise, any
changes or adjustments made to outstanding incentive stock options granted under
this Plan shall be made in such a manner so as
-9-
<PAGE>
not to constitute a "modification" as defined in Code Section 424(h) and so as
not to cause any incentive stock option issued hereunder to fail to continue to
qualify as an incentive stock option as defined in Code Section 422(b).
5.13 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan, to
the extent that the aggregate fair market value of the stock (determined at the
time the incentive stock option is granted) with respect to which incentive
stock options are exercisable for the first time by the Optionee during any
calendar year (under this Plan and all other incentive stock option plans of the
Company, a related corporation or a predecessor corporation) exceeds $100,000,
such options shall be treated as nonqualified stock options. The previous
sentence shall not apply if the Internal Revenue Service issues a public rule,
issues a private ruling to the Company, any Optionee or any legatee, personal
representative or distributee of an Optionee or issues regulations changing or
eliminating such annual limit.
SECTION 6. GREATER THAN 10% STOCKHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If incentive stock options are granted under this Plan to employees who own
more than 10% of the total combined voting power of all classes of stock of the
Company or any related corporation, the term of such incentive stock options
shall not exceed five years and the exercise price shall be not less than 110%
of the fair market value of the Common Stock at the time the incentive stock
option is granted. This provision shall control notwithstanding any contrary
terms contained in an option agreement or any other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an employee
shall be deemed to own the stock owned, directly or indirectly, by or for his or
her brothers, sisters, spouse, ancestors and lineal descendants. Stock owned,
directly or indirectly, by or for a corporation, partnership, estate or trust
shall be deemed to be owned proportionately by or for its stockholders, partners
or beneficiaries. If an employee or a person related to the employee owns an
unexercised option or warrant to purchase stock of the Company, the stock
subject to that portion of the option or warrant which is unexercised shall not
be counted in determining stock ownership. For purposes of this Section 6,
stock owned by an employee shall include all stock actually
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<PAGE>
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be granted
under this Plan, the number and class of shares covered by each outstanding
option and the exercise price per share thereof (but not the total price), and
each such option, shall all be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock of the Company resulting
from a split-up or consolidation of shares or any like capital adjustment, or
the payment of any stock dividend.
7.1 EFFECT OF LIQUIDATION OR REORGANIZATION
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, upon a merger (other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger have the same proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere reincorporation
or the creation of a holding company) or liquidation of the Company, as a result
of which the stockholders of the Company receive cash, stock or other property
in exchange for or in connection with their shares of Common Stock, any option
granted hereunder shall terminate, but the Optionee shall have the right
immediately prior to any such merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation to exercise such Optionee's
option in whole or in part whether or not the vesting requirements set forth in
the option agreement have been satisfied.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the stockholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), the Company and the corporation issuing the Exchange Stock, in
their sole discretion, may determine that all options granted hereunder
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shall be converted into options to purchase shares of Exchange Stock instead of
terminating in accordance with the provisions of subsection 7.1.1. The amount
and price of converted options shall be determined by adjusting the amount and
price of the options granted hereunder in the same proportion as used for
determining the number of shares of Exchange Stock the holders of the Common
Stock receive in such merger, consolidation, acquisition of property or stock,
separation or reorganization. Unless accelerated by the Board, the vesting
schedule set forth in the option agreement shall continue to apply to the
options granted for the Exchange Stock.
7.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments shall be made by the Plan Administrator, and its
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. Unless an Optionee agrees otherwise,
any change or adjustment to an incentive stock option shall be made in such a
manner so as not to constitute a "modification" as defined in Code Section
424(h) and so as not to cause his or her incentive stock option issued hereunder
to fail to continue to qualify as an incentive stock option as defined in Code
Section 422(b).
SECTION 8. SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under this
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of any
shares hereunder. Inability of the Company to obtain from any regulatory body
having jurisdiction, the authority deemed by the Company's counsel to be
necessary for the lawful issuance and sale of any shares hereunder or the
unavailability of an exemption from registration for the issuance and sale of
any shares hereunder
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shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on stock
certificates in order to assure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Optionees
as may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange, all stock issued hereunder if not previously listed on such exchange
shall be authorized by that exchange for listing thereon prior to the issuance
thereof.
SECTION 9. AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may at any time suspend, amend or terminate this Plan, provided
that except as set forth in Section 7, and to the extent required by any
applicable law or requirement, the approval of a majority of stock represented
by stockholders voting either in person or by proxy at a duly held stockholders'
meeting is necessary within 12 months before or after the adoption by the Board
of any amendment which will:
(a) increase the number of shares that may be issued under this Plan;
(b) with respect to nonqualified stock options, materially modify the
requirements as to eligibility for participation in this Plan or, with respect
to incentive stock
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options, change the designation of the participants or class of participants
eligible for participation in this Plan;
(c) materially increase the benefits accruing to the participants
under this Plan; or
(d) otherwise require stockholder approval under any applicable law
or regulation including but not limited to Section 16(b) of the Exchange Act.
Any amendment made to this Plan which would constitute a "modification" to
incentive stock options outstanding on the date of such amendment, shall not be
applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
9.2 AUTOMATIC TERMINATION
Unless sooner terminated by the Board, this Plan shall terminate ten years
from the earlier of (a) the date on which this Plan is adopted by the Board or
(b) the date on which this Plan is approved by the stockholders of the Company.
No option may be granted after such termination or during any suspension of this
Plan. The amendment or termination of this Plan shall not, without the consent
of the option holder, alter or impair any rights or obligations under any option
theretofore granted under this Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN
This Amended and Restated Plan shall become effective upon adoption by the
Board so long as it is approved by a majority of stock represented by
stockholders voting either in person or by proxy at a duly held stockholders'
meeting any time within 12 months before or after the adoption of this Amended
and Restated Plan.
Plan adopted by the Board of Directors on March 11, 1993 and approved by the
sole stockholder on March 11, 1993. Ratified by the Board of Directors on June
1, 1993. Amended on July 14, 1993. Amendment to increase number of shares
issuable adopted by the Board of Directors on February 2, 1995.
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