UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-19612
IMCLONE SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 04-2834797
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
180 VARICK STREET, NEW YORK, NY 10014
(Address of principal executive offices) (Zip Code)
(212) 645-1405
Registrant's telephone number, including area code
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 12, 1998
Common Stock, par value $.001 24,420,025 Shares
<PAGE>
IMCLONE SYSTEMS INCORPORATED
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1998 (unaudited)
and December 31, 1997 1
Unaudited Statements of Operations and
Comprehensive Loss - Three and Six
months ended June 30, 1998 and 1997 2
Unaudited Statements of Cash Flows - Six
months ended June 30, 1998 and 1997 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
Part 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
IMCLONE SYSTEMS INCORPORATED
Balance Sheets
(in thousands, except share data)
June 30, December 31,
Assets 1998 1997
--------- ---------
(unaudited)
Current assets:
Cash and cash equivalents $ 3,874 $ 2,558
Securities available for sale 47,852 57,052
Prepaid expenses 576 596
Other current assets 638 589
--------- ---------
Total current assets 52,940 60,795
--------- ---------
Property and equipment:
Land 340 340
Building and building improvements 10,471 8,969
Leasehold improvements 4,832 4,832
Machinery and equipment 7,608 6,315
Furniture and fixtures 623 550
Construction in progress -- 2,159
--------- ---------
Total cost 23,874 23,165
Less accumulated depreciation and amortization (12,120) (11,294)
--------- ---------
Property and equipment, net 11,754 11,871
--------- ---------
Patent costs, net 972 944
Deferred financing costs, net 51 55
Other assets 2,318 2,115
--------- ---------
$ 68,035 $ 75,780
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,580 $ 1,731
Accrued expenses and other 696 1,440
Interest payable 43 68
Deferred revenue 283 208
Current portion of long-term liabilities 583 677
--------- ---------
Total current liabilities 3,185 4,124
--------- ---------
Long-term debt 2,200 2,200
Other long-term liabilities, less current portion 1,429 1,118
Preferred stock dividends payable 1,302 112
--------- ---------
Total liabilities 8,116 7,554
--------- ---------
Commitments and contingencies
Stockholders' equity :
Preferred stock, $1.00 par value; authorized
4,000,000 shares; issued and outstanding
Series A Convertible: 400,000 at June 30,
1998 and December 31, 1997 (preference in
liquidation $41,302 and $40,112, respectively) 400 400
Common stock, $.001 par value; authorized
45,000,000 shares; issued 24,439,142 and
24,265,072 at June 30, 1998 and December 31,
1997, respectively; outstanding 24,388,325, and
24,214,255 at June 30, 1998 and December 31,
1997, respectively 24 24
Additional paid-in capital 185,112 185,706
Accumulated deficit (125,245) (117,464)
Treasury stock, at cost; 50,817 shares at
June 30, 1998 and December 31, 1997 (492) (492)
Note receivable from officer and stockholder (136) --
Accumulated other comprehensive income:
Unrealized gain on securities available for sale 256 52
--------- ---------
Total stockholders' equity 59,919 68,226
--------- ---------
$ 68,035 $ 75,780
========= =========
See accompanying notes to financial statements.
Page 1
<PAGE>
IMCLONE SYSTEMS INCORPORATED
Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product development milestone revenues $ -- $ 2,500 $ 1,000 $ 2,500
Research and development funding from third
parties and other 765 696 1,615 771
-------- -------- -------- --------
Total revenues 765 3,196 2,615 3,271
-------- -------- -------- --------
Operating expenses:
Research and development 4,675 3,257 8,846 8,652
General and administrative 1,546 1,272 2,959 2,355
-------- -------- -------- --------
Total operating expenses 6,221 4,529 11,805 11,007
-------- -------- -------- --------
Operating loss (5,456) (1,333) (9,190) (7,736)
-------- -------- -------- --------
Other:
Interest and other income (778) (440) (1,609) (685)
Interest expense 110 145 200 340
-------- -------- -------- --------
Net interest and other income (668) (295) (1,409) (345)
-------- -------- -------- --------
Net loss (4,788) (1,038) (7,781) (7,391)
Preferred dividends (including assumed incremental yield
of $317 for the three-months ended June 30, 1998 and
$635 the six-months ended June 30, 1998) 967 -- 1,825 --
-------- -------- -------- --------
Net loss to common stockholders $ (5,755) $ (1,038) $ (9,606) $ (7,391)
======== ======== ======== ========
Net loss $ (4,788) $ (1,038) $ (7,781) $ (7,391)
Other comprehensive income:
Unrealized gain on securities available for sale:
Unrealized holding gain arising during the period 135 43 204 20
Less: Reclassification adjustment for realized gain
(loss) included in net income -- -- 2 (3)
-------- -------- -------- --------
Total other comprehensive income 135 43 202 23
-------- -------- -------- --------
Comprehensive loss $ (4,653) $ (995) $ (7,579) $ (7,368)
======== ======== ======== ========
Basic and diluted net loss per common share $ (0.24) $ (0.04) $ (0.40) $ (0.33)
======== ======== ======== ========
Weighted average shares outstanding 24,273 24,033 24,251 22,702
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
Page 2
<PAGE>
IMCLONE SYSTEMS INCORPORATED
Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
June 30,
--------------------
1998 1997
-------- --------
Cash flows from operating activities:
Net loss $ (7,781) $ (7,391)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 883 866
Expense associated with issuance
of options and warrants 310 2,634
(Gain) loss on sale of investments (2) 3
Changes in:
Prepaid expenses 20 (328)
Other current assets (49) (815)
Due from officer -- 11
Other assets (35) (8)
Interest payable (25) (47)
Accounts payable (151) 325
Accrued expenses and other (744) (635)
Deferred revenue 75 208
-------- --------
Net cash used in operating activities (7,499) (5,177)
-------- --------
Cash flows from investing activities:
Acquisitions of property and equipment (570) (436)
Purchases of securities available for sale (28,760) (54,777)
Sales of securities available for sale 37,997 37,042
Additions to patents (81) (120)
-------- --------
Net cash provided by (used in) investing
activities 8,586 (18,291)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- 23,162
Proceeds from exercise of stock options and warrants 150 1,360
Purchase of treasury stock -- (323)
Proceeds from equipment and building improvement
financings 593 --
Payments of other liabilities (514) (906)
-------- --------
Net cash provided by financing activities 229 23,293
-------- --------
Net increase (decrease) in cash and cash equivalents 1,316 (175)
Cash and cash equivalents at beginning of period 2,558 2,734
-------- --------
Cash and cash equivalents at end of period $ 3,874 $ 2,559
======== ========
See accompanying notes to financial statements.
Page 3
<PAGE>
IMCLONE SYSTEMS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation
The financial statements of ImClone Systems Incorporated ("ImClone" or the
"Company") as of June 30, 1998 and for the three and six months ended June 30,
1998 and 1997 are unaudited. In the opinion of management, these unaudited
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation. These financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, as filed with the Securities and Exchange
Commission.
Results for the interim periods are not necessarily indicative of results
for the full years.
(2) Related Party Transactions
In January 1998, the Company accepted a promissory note totaling
approximately $131,000 from its President and CEO in connection with the
exercise of a warrant to purchase 87,305 shares of the Company's common stock,
$.001 par value (the "Common Stock"). The note is due no later than two years
from issuance and is full recourse. Interest is payable on the first anniversary
date of the promissory note and on the stated maturity or any accelerated
maturity at the annual rate of 8.5%. At June 30, 1998, the total amount due the
Company, including interest, is approximately $136,000 and is classified in the
stockholders' equity section of the balance sheet as a note receivable from
officer and stockholder.
(3) Earnings Per Share
Basic and diluted Earnings Per Share ("EPS") are computed based on the
weighted average number of shares outstanding. Potentially dilutive securities,
including convertible preferred stock, options and warrants, have not been
included in the diluted EPS computation because they are anti-dilutive.
(4) Comprehensive Income
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which
establishes standards for reporting and display of comprehensive income and its
components. In accordance with SFAS 130, the Company has displayed the
components of "Other comprehensive income" and "Comprehensive loss" in the
accompanying Financial Statements. All prior-period data has been reclassified
to conform with the provisions of SFAS 130.
(5) Reclassification
Certain amounts previously reported have been reclassified to conform to
current year presentation.
Page 4
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis by management is provided to
identify certain significant factors which affected the Company's financial
position and operating results during the periods included in the accompanying
financial statements.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 and 1997
Revenues
Revenues for the six-months ended June 30, 1998 and 1997 were $2,615,000
and $3,271,000 respectively, a decrease of $656,000, or 20%. The decrease in
revenues for the six-months ended June 30, 1998 was primarily attributable to a
decrease in milestone revenue which can vary widely from period to period
depending upon the timing of the achievement of various research and development
milestones for products under development. Revenues for the six-months ended
June 30, 1998 consisted of (i) $150,000 in research support from the Company's
partnership with the Wyeth/Lederle Vaccine and Pediatrics Division of American
Home Products Corporation ("American Home") in infectious diseases, (ii)
$1,000,000 in milestone revenue and $1,250,000 in research and support payments
from the Company's research and license agreement with Merck KGaA ("Merck") with
respect to the Company's BEC2 product candidate, (iii) $117,000 in royalty
revenue from the Company's strategic alliance with Abbott Laboratories
("Abbott") in diagnostics and (iv) $98,000 from a Phase I Small Business
Innovation Research grant from the National Cancer Institute for a program in
cancer-related angiogenesis. Revenues for the six-months ended June 30, 1997
consisted of (i) $150,000 in research support from the Company's partnership
with American Home, (ii) $1,500,000 in milestone revenue and $417,000 in
research and support payments from the Company's research and license agreement
with Merck and (iii) $1,000,000 in milestone revenue and $204,000 in royalty
revenue from the Company's strategic alliance with Abbott.
Operating: Research and Development Expenses
Total operating expenses for the six-months ended June 30, 1998 and 1997
were $11,805,000 and $11,007,000, respectively, an increase of $798,000, or 7%.
Research and development expenses for the six-months ended June 30, 1998 and
1997 were $8,846,000 and $8,652,000, respectively, an increase of $194,000 or
2%. Such amounts for the six-months ended June 30, 1998 and 1997 represented 75%
and 79%, respectively, of total operating expenses. The increase in research and
development expenses for the six-months ended June 30, 1998 was attributable to
increased expenditures associated with additional staffing in the area of
discovery research, the initiation of new supported research programs with
academic institutions, the establishment of corporate in-licensing arrangements,
and expenditures in the functional areas of product development, manufacturing
and clinical and regulatory affairs to support the Company's lead therapeutic
product candidate, C225, for human clinical trials. This increase was partially
offset by the one-time $2,233,000 non-cash compensation expense recorded for the
six-months ended June 30, 1997 in connection with the extension of the term of
an officer's warrant to purchase 397,000 shares of Common Stock.
General and Administrative Expenses
General and administrative expenses include administrative personnel
costs, costs incurred in connection with pursuing arrangements with corporate
partners and technology licensors, and expenses associated with applying for
patent protection for the Company's technology and products. Such expenses for
the six-months ended June 30, 1998 and 1997 were $2,959,000 and $2,355,000,
respectively, an increase of $604,000, or 26%. The increase in general and
administrative expenses primarily reflected (i) additional support staffing for
the expanding research, clinical, development and manufacturing efforts of the
Company, particularly with respect to C225 and (ii) expenses associated with the
pursuit of strategic corporate alliances and other corporate development
expenses. The Company expects general and administrative expenses to increase in
future periods to support planned increases in research, clinical, development
and manufacturing efforts of the Company.
Page 5
<PAGE>
Interest and Other Income and Interest Expense
Interest and other income was $1,609,000 for the six-months ended June 30,
1998 compared to $685,000 for the six-months ended June 30, 1997, an increase of
$924,000, or 135%. The increase was primarily attributable to the increased
interest income earned from higher cash balances in the Company's investment
portfolio resulting from a private placement of Series A Convertible Preferred
Stock (the "Series A Preferred Shares" or "Series A Preferred Stock") completed
in December 1997. Interest expense was $200,000 and $340,000 for the six-months
ended June 30, 1998 and 1997, respectively, a decrease of $140,000 or 41%.
Interest expense for both periods primarily included interest on an outstanding
Industrial Development Revenue Bond issued in 1990 (the "1990 IDA Bond") with a
principal amount of $2,200,000, interest recorded on capital lease obligations,
and interest recorded on a liability to Pharmacia and UpJohn Inc. ("Pharmacia"),
for the reacquisition of the worldwide rights to a recombinant mutein form of
Interleukin-6 as well as clinical material manufactured and supplied by
Pharmacia to the Company. The decrease was primarily attributable to the
December 1997 repayment of an IDA Bond issued in 1986 (the "1986 IDA Bond") with
a principal amount of $2,113,000 and the February 1998 repayment of the
remaining liability to Pharmacia.
Net Losses
The Company had net losses to common stockholders of $9,606,000 or $0.40
per share for the six-months ended June 30, 1998 compared with $7,391,000 or
$0.33 per share for the six-months ended June 30, 1997. The increase in the net
losses and per share net loss to common stockholders was due primarily to the
accrued dividends to preferred stockholders and to the factors mentioned in the
preceding paragraphs.
Three Months Ended June 30, 1998 and 1997
Revenues
Revenues for the three-months ended June 30, 1998 and June 30, 1997 were
$765,000 and $3,196,000, respectively, a decrease of $2,431,000, or 76%. The
decrease in revenues for the three-months ended June 30, 1998 was primarily
attributable to a decrease in milestone revenue which can vary widely from
period to period depending upon the timing of the achievement of various
research and development milestones for products under development. Revenues for
the three-months ended June 30, 1998 consisted of (i) $75,000 in research
support from the Company's partnership with American Home, (ii) $625,000 in
research and support payments from the Company's research and license agreement
with Merck, and (iii) $65,000 in royalty revenue from the Company's strategic
alliance with Abbott. Revenues for the three-months ended June 30, 1997
consisted of (i) $75,000 in research support from the Company's partnership with
American Home, (ii) $1,500,000 in milestone revenue and $417,000 in research and
support payments from the Company's research and license agreement with Merck,
and (iii) $1,000,000 in milestone revenue and $204,000 in royalty revenue from
the Company's strategic alliance with Abbott.
Operating: Research and Development
Total operating expenses for the three-months ended June 30, 1998 and 1997
were $6,221,000 and $4,529,000, respectively, an increase of $1,692,000 or 37%.
Research and development expenses for the three-months ended June 30, 1998 and
1997 were $4,675,000 and $3,257,000, respectively, an increase of $1,418,000 or
44%. Such amounts for the three-months ended June 30, 1998 and 1997 represented
75% and 72%, respectively, of total operating expenses. The increase in research
and development expenses for the six-months ended June 30, 1998 was attributable
to increased expenditures associated with additional staffing in the area of
discovery research, the initiation of new supported research programs with
academic institutions, the establishment of corporate in-licensing arrangements,
and expenditures in the functional areas of product development, manufacturing
and clinical and regulatory affairs to support the Company's lead therapeutic
product candidate, C225, for human clinical trials.
Page 6
<PAGE>
General and Administrative
General and administrative expenses include administrative personnel
costs, costs incurred in connection with pursuing arrangements with corporate
partners and technology licensors, and expenses associated with applying for
patent protection for the Company's technology and products. Such expenses for
the three-months ended June 30, 1998 and 1997 were $1,546,000 and $1,272,000,
respectively, an increase of $274,000 or 22%. The increase in general and
administrative expenses primarily reflected (i) additional support staffing for
the expanding research, clinical, development and manufacturing efforts of the
Company, particularly with respect to C225 and (ii) expenses associated with the
pursuit of strategic corporate alliances and other corporate development
expenses. The Company expects general and administrative expenses to increase in
future periods to support planned increases in research, clinical, development
and manufacturing efforts of the Company.
Interest and Other Income/Expense
Interest and other income was $778,000 for the three-months ended June 30,
1998 compared to $440,000 for the three-months ended June 30, 1997, an increase
of $338,000, or 77%. The increase was primarily attributable to the increased
interest income earned from higher cash balances in the Company's investment
portfolio resulting from a private placement of Series A Preferred Stock
completed in December 1997. Interest expense was $110,000 and $145,000 for the
three-months ended June 30, 1998 and June 30, 1997, respectively, a decrease of
$35,000 or 24%. Interest and other expense for both periods primarily included
interest on the 1990 IDA Bond with an aggregate principal amount of $2,200,000
and interest recorded on capital lease obligations. The decrease was primarily
attributable to the December 1997 repayment of the 1986 IDA Bond with a
principal amount of $2,113,000.
Net Losses
The Company had net losses to common stockholders of $5,755,000 or $0.24
per share for the three-months ended June 30, 1998 compared with $1,038,000 or
$0.04 per share for the three-months ended June 30, 1997. The increase in the
net losses and per share net loss to common stockholders was due primarily to
the accrued dividends to preferred stockholders and to the factors mentioned in
the preceding paragraphs.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company's principal sources of liquidity consisted
of cash and cash equivalents and securities available for sale of approximately
$51,726,000. The Company has financed its operations since inception primarily
through the public and private sales of equity securities, the sale of three
issues of IDA bonds (collectively, the "IDA Bonds") through the New York City
Industrial Development Agency (the "NYIDA"), license fees and contract research
and development fees and royalties received under agreements with collaborative
partners and interest earned on these funds. Since inception, public and private
sales of equity securities in financing transactions have raised approximately
$163,799,000 in net proceeds. The sale of the IDA Bonds in each of 1985, 1986
and 1990 raised an aggregate of $6,313,000, the proceeds of which have been used
for the acquisition, construction and installation of the Company's research and
development facility in New York City, and of which $2,200,000 is currently
outstanding. Since inception, the Company has earned approximately $31,277,000
from license fees, contract research and development fees and royalties from
collaborative partners, including approximately $2,615,000 earned during the
six-months ended June 30, 1998. Since inception the Company has earned
approximately $7,054,000 in interest income, including approximately $1,607,000
earned during the six-months ended June 30, 1998.
Page 7
<PAGE>
The Company has obligations under various capital leases for certain
laboratory, office and computer equipment and also certain building improvements
primarily under a December 1996 financing agreement (the "1996 Financing
Agreement") and an April 1998 financing agreement (the "1998 Financing
Agreement") with Finova Technology Finance, Inc. ("Finova"). The 1996 Financing
Agreement allowed the Company to finance the lease of equipment and make certain
building and leasehold improvements to existing facilities involving amounts
aggregating approximately $2,500,000. Each lease has a fair market value
purchase option at the expiration of a 42-month term. Pursuant to the 1996
Financing Agreement, the Company issued to Finova a warrant expiring December
31, 1999 to purchase 23,220 shares of Common Stock at an exercise price of $9.69
per share. The Company recorded a non-cash debt discount of approximately
$125,000 in connection with this financing, which discount is being amortized
over the 42-month term of the first lease. The 1996 Financing Agreement with
Finova expired in December 1997 and the Company did not utilize the full
$2,500,000 under the agreement. In April 1998, the Company entered into the 1998
Financing Agreement with Finova aggregating approximately $2,000,000. The terms
of the 1998 Financing Agreement are substantially similar to the now expired
1996 Financing Agreement except that each lease has a 48-month term. As of June
30, 1998, the Company had entered into eight individual leases under both the
1996 Financing Agreement and the 1998 Financing Agreement aggregating a total
cost of $2,478,000 and had $1,267,000 available under the 1998 Financing
Agreement.
The Company has expended and will continue to expend in the future
substantial funds to continue the research and development of its products,
conduct pre-clinical and clinical trials, establish clinical-scale and
commercial-scale manufacturing in its own facilities or in the facilities of
others, and market its products. The Company has entered into preliminary
discussions with several major pharmaceutical companies regarding various
alternatives concerning the funding of research and development for certain of
its products. No assurance can be given that the Company will be successful in
consummating any such alternatives. These discussions have included potential
significant strategic alliances for the development and commercialization of the
Company's lead product candidate, C225. Such strategic alliances could include
up-front license fees plus milestone fees and revenue sharing. There can be no
assurance that the Company will be successful in achieving such alliances, nor
can the Company predict the amount of funds which might be available to it if it
entered into such alliances or the time at which such funds would be made
available or the other terms of any such alliances.
In January 1998, the Company completed the construction and commissioning
of a new 1,750 square foot process development center at its Somerville, New
Jersey facility at a cost of approximately $1,650,000. The Company has also
taken steps to complete a formal design concept for large scale manufacturing at
this facility. If the Company adapts this facility to large-scale manufacturing
or does so at another location, it will incur substantial additional costs. The
lease on the Company's New York City facility expires in March 1999. The Company
expects to extend the lease and retrofit the facility to fit its needs.
The 1990 IDA Bond in the outstanding principal amount of $2,200,000
becomes due in 2004. If the lease on the Company's New York City facility is
terminated, the 1990 IDA Bond provides that it will become due 60 days prior to
such termination. The Company will incur interest on the 1990 IDA Bond
aggregating approximately $250,000 during 1998. The Company has granted the
NYIDA a security interest in substantially all facility equipment located in the
New York facility to secure the obligations of the Company to the NYIDA under
the 1990 IDA Bond.
The holders of the Series A Preferred Shares are entitled to receive
cumulative dividends at an annual rate of $6.00 per share. Dividends accrue as
of the issuance date of the Series A Preferred Shares and are payable on the
outstanding Series A Preferred Shares in cash on December 31 of each year
beginning December 31, 1999 or at the time of conversion or redemption of the
Series A Preferred Shares on which the dividend is to be paid, whichever is
sooner. Accrued dividends were $1,302,000 at June 30, 1998.
Page 8
<PAGE>
Total capital expenditures made during the six-months ended June 30, 1998
were $709,000. Of such expenditures, $139,000 have been reimbursed in accordance
with the terms of the 1998 Financing Agreement with Finova. Of the total capital
expenditures made during the six-months ended June 30, 1998, $537,000 related to
improving and equipping the Company's manufacturing facility in New Jersey. The
balance of capital additions was for equipment and computer-related purchases
for the corporate office and research laboratories in New York.
The Company anticipates that its existing capital resources, including the
on-going research support of its corporate partners, should enable it to
maintain its current and planned operations through the end of the year 2000.
However, the receipt of such ongoing research support is subject to attaining
research and development milestones, certain of which have not yet been
achieved. There can be no assurance that the Company will achieve these
milestones. The Company's future working capital and capital requirements will
depend upon numerous factors, including, but not limited to, the progress of the
Company's research and development programs, pre-clinical testing and clinical
trials, the Company's corporate partners fulfilling their obligations to the
Company, the timing and cost of seeking regulatory approvals, the cost of
manufacturing scale-up and effective commercialization activities and
arrangements, the level of resources that the Company devotes to the development
of marketing and sales capabilities, the costs involved in filing, prosecuting
and enforcing patent claims, technological advances, the status of competitors
and the ability of the Company to maintain existing and establish new
collaborative arrangements with other companies to provide funding to the
Company to support these activities. In order to fund its capital needs after
the end of the year 2000, the Company will require significant levels of
additional capital and intends to raise the capital through additional
arrangements with corporate partners, equity or debt financings or from other
sources. There is no assurance the Company will be successful in consummating
any such arrangements. If adequate funds are not available, the Company may be
required to significantly curtail its planned operations.
Uncertainties associated with the length and expense of pre-clinical and
clinical testing of any of the Company's product candidates could greatly
increase the cost of development of such products and affect the timing of any
anticipated revenues from product sales, and failure by the Company to obtain
regulatory approval for any product will preclude its commercialization. In
addition, the failure by the Company to obtain patent protection for its
products may make certain of its products commercially unattractive.
At December 31, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $115,000,000 which expire at
various dates from 2000 through 2012. At December 31, 1997 the Company had
research credit carryforwards of approximately $2,303,000 which expire at
various dates between years 2001 and 2012. Pursuant to Section 382 of the
Internal Revenue Code of 1986, as amended, the annual utilization of a company's
net operating loss and research credit carryforwards may be limited if the
company experiences a change in ownership of more than 50 percentage points
within a three-year period. Since 1986, the Company experienced two ownership
changes. Accordingly, the Company's net operating loss carryforwards available
to offset future federal taxable income arising before such ownership changes
are limited to $5,159,000 annually. Similarly, the Company is restricted in
using its research credit carryforwards arising before such ownership changes to
offset future federal income tax expense.
Other Items
The Company is evaluating the risks and costs associated with the year
2000 conversion. The Company is communicating with those organizations with
which it does business to ensure that year 2000 issues are being resolved in a
timely manner. If necessary, modifications and conversions by those with which
the Company does business are not completed timely, the year 2000 conversion
issue may have a material adverse effect on the Company's consolidated financial
position and results of operations. Based on the Company's ongoing evaluation,
management does not currently believe that the costs to achieve year 2000
compliance will be material to the Company's financial position or results of
operations.
Page 9
<PAGE>
Certain Factors Affecting Forward-Looking Statements--Safe Harbor Statement
Those statements contained herein that do not relate to historical
information are forward-looking statements. There can be no assurance that the
future results covered by such forward-looking statements will be achieved.
Actual results may differ materially due to the risks and uncertainties inherent
in the Company's business, including without limitation, the risks and
uncertainties associated with completing pre-clinical and clinical trials of the
Company's compounds that demonstrate such compounds' safety and effectiveness;
obtaining additional financing to support the Company's operations; obtaining
and maintaining regulatory approval for such compounds and complying with other
governmental regulations applicable to the Company's business; obtaining the raw
materials necessary in the development of such compounds; consummating
collaborative arrangements with corporate partners for product development;
achieving milestones under collaborative arrangements with corporate partners;
developing the capacity to manufacture, market and sell the Company's products,
either directly or with collaborative partners; developing market demand for and
acceptance of such products; competing effectively with other pharmaceutical and
biotechnological products; obtaining adequate reimbursement from third party
payors; attracting and retaining key personnel; protecting proprietary rights;
and those other factors set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview and Risk Factors," in
the Company's most recent Annual Report on Form 10-K.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Page 10
<PAGE>
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) An annual meeting of stockholders was held on May 27, 1998 (the
"Annual Meeting").
(b) The directors elected at the Annual Meeting were Richard Barth, Jean
Carvais, Vincent T. DeVita, Jr., Robert F. Goldhammer, David M. Kies, Paul B.
Kopperl, John Mendelsohn, William R. Miller, Harlan W. Waksal and Samuel D.
Waksal. Such persons are all of the directors of the Company whose term of
office as a director continued after the Annual Meeting.
(c) The matters voted upon at the Annual Meeting and the results of the
voting, are set forth below. Broker non-votes were not applicable.
(I) Election of directors
Name In Favor Withheld
---- -------- --------
Richard Barth 20,225,747 159,159
Jean Carvais 20,225,947 158,959
Vincent T. DeVita, Jr. 20,228,708 156,198
Robert F. Goldhammer 20,105,567 279,339
David M. Kies 20,231,947 152,959
Paul B. Kopperl 20,231,947 152,959
John Mendelsohn 20,232,147 152,759
William R. Miller 20,226,147 158,759
Harlan W. Waksal 20,232,207 152,669
Samuel D. Waksal 20,108,767 276,139
(ii) The stockholders approved the Company's 1998 Employee Stock Purchase
Plan. The stockholders voted 19,790,050 shares in favor, 388,426 shares against
and 206,430 shares abstained from voting.
(iii) The stockholders ratified the appointment by the Board of Directors
of KPMG Peat Marwick LLP as the Company's independent certified public
accountants for the fiscal year ending December 31, 1997. The stockholders voted
20,161,112 shares in favor, 211,739 shares against and 57,055 shares abstained
from voting.
Page 11
<PAGE>
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Exhibit No. Description
----------- -----------
10.67 Equipment leasing commitment from
Finova Technology Finance, Inc.
10.68 1998 Employee Stock Purchase Plan
10.69 1998 Non-Qualified Stock Option Plan,
as amended
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMCLONE SYSTEMS INCORPORATED
(Registrant)
Date: August 13, 1998 By /s/ Samuel D. Waksal
-------------------------------------
Samuel D. Waksal
President and Chief Executive Officer
Date: August 13, 1998 By /s/ Carl S. Goldfischer
-------------------------------------
Carl S. Goldfischer
Vice President, Finance and Chief
Financial Officer
Page 13
Exhibit 10.67
March 23, 1998
Mr. Paul Goldstein
Senior Director Finance, Controller
ImClone Systems, Inc.
22 Chubb Way
Somerville, NJ 08876
Dear Mr. Goldstein
FINOVA Technology Finance, Inc. ("Lessor") is pleased to offer to lease the
Equipment described below to ImClone Systems, Inc. ("Lessee").
The outline of this Commitment is a follows:
Lessee: ImClone Systems Inc.
Lessor: FINOVA Technology Finance, Inc.
Equipment: Various laboratory, computer and office equipment, and
leasehold improvements. All equipment shall be subject
to review and approval by the Lessor for its
acceptability for lease under this Commitment. The
Equipment Cost of all leasehold improvements shall not
exceed $420,000. However, no leasehold improvements may
be acceptable for lease if, at the time of closing,
their Equipment Cost plus the aggregate Equipment Cost
for previously delivered leasehold improvements shall
exceed 21% of the Equipment Cost of all Equipment then
and previously delivered under prior commitments.
Equipment Cost: $2,000,000
Equipment Location: Somerville, NJ and an office in New York, NY
Anticipated Delivery: February 1, 1998 - March 31, 1999
Closing Date: The date that the Lessor makes payment for the
Equipment covered under each schedule to the Equipment
Lease (each a "Schedule" and collectively the
"Schedules") with an aggregate cost of not less than
$75,000, but no later than March 31, 1999.
Term: From each Closing Date until 48 months from the
thirtieth day of the month next following or coincident
with that Closing Date.
<PAGE>
Monthly Rent: Monthly Rent equal to 2.420% of Equipment Cost shall be
payable monthly in advance. First and last month's rent
due in advance.
Adjustment to
Rental Payments: If on the second business day preceding the Closing
Date for each Schedule, the highest yield for four-year
U.S. Treasury Notes as published in The Wall Street
Journal is greater or less than the yield on January
12, 1998, the Monthly Rent Payments shall be increased
or decreased to reflect such change in the yield. The
yield as of January 12, 1998 is 5.26%. As of the
Closing Date, the Monthly Rent Payments shall be fixed
for the entire term.
Interim Rent: Interim Rent shall accrue from each Closing Date until
the 29th day of the month (27th day of the month in the
case of February) unless the Closing Date is on the
30th day of the month. If the Closing Date is the 31st
day of a month, Interim Rent shall accrue until the
29th day of the next following month. Interim Rent
shall be at the daily equivalent of the currently
adjusted Monthly Payment.
Net Lease: The lease shall be a net-net-net lease containing the
usual provisions in the Lessor's lease agreement and
such other or different provisions that are agreed to
by the parties. The Lessee shall be responsible for
maintenance, insurance, taxes, and all other costs and
expenses.
Taxes: Sales or use taxes shall be added to the Equipment Cost
or collected on the gross rentals, as appropriate. The
Lessee will be given an opportunity to supply tax
exemption certificates where applicable.
Insurance: Prior to any delivery of Equipment, the Lessee shall
furnish confirmation of insurance reasonably acceptable
to the Lessor covering the Equipment including primary,
all risk, physical damage, property damage and bodily
injury with appropriate loss payee endorsement in favor
of the Lessor.
Condition to Closing: Conditions precedent to each Closing Date shall include
that no payment is then past due to the Lessor or any
assign of the Lessor from the Lessee, that the Lessee
is in compliance with the material provisions of this
Commitment and the lease, that information requested by
the Lessor and all documentation then required by the
Lessor's counsel has been received by the Lessor
including resolutions of the Board of Directors of the
Lessee authorizing the transactions contemplated by
this Commitment and an opinion of counsel for the
Lessee satisfactory to counsel for the Lessor, that the
Lessee is not in default under any material contract to
which it is a party or by which it or its property is
bound, and that there has not been any material adverse
change or threatened material adverse change in the
financial or other condition, business, operations,
properties, assets or prospects of the Lessee since
December 31, 1996 or from the written information that
<PAGE>
has been supplied to the Lessor prior to the date of
this Commitment by the Lessee.
The Lessor shall not be responsible for any failure of
suppliers or manufactures of the Equipment or their
distributors to perform their obligations to the Lessor
or the Lessee. The Lessee shall provide quarterly
financial statements and status reports during the
Commitment period.
Purchase Option: The Lessee shall have the option to purchase all (but
not less than all) the Equipment, at the expiration of
the term of the lease for the then current Fair Market
Value of the Equipment, plus applicable sales and other
taxes.
Automatic Renewal: In the event the Lessee does not exercise the Purchase
Option described above, the lease shall automatically
renew for a term of one year with Monthly rentals equal
to 1.50% of Equipment Cost payable monthly in advance.
At the expiration of the renewal period, the Lessee
shall have the option to purchase all (but not less
than all) the Equipment for its then current Fair
Market Value, plus applicable sales and other taxes.
Additional Covenants: There shall be no actual or threatened material
conflict with, or material violation of, any regulatory
statute, standard or rule relating to the Lessee, its
present or future operations, or the Equipment.
All statements made by the Lessee to the Lessor shall
be correct in all material respects and shall not omit
any material fact necessary to make the statements not
misleading in light of the circumstances in which they
are made. There shall be no material breach of the
representations and warranties of the Lessee in the
lease during the term of the lease and any renewal
periods. The representations shall include that the
Equipment Cost of each item of the Equipment does not
exceed the fair and usual price for like quantity
purchases of such item and reflects all discounts,
rebates and allowances for the Equipment given to
Lessee or any affiliate of Lessee by the manufacturer,
supplier or anyone else including, without limitation,
discounts for advertising, prompt payment, testing or
other services.
Fees and Expenses: The Lessee shall be responsible for the Lessor's
reasonable expenses in connection with the transaction.
Survival: The Commitment Letter shall survive closing. However,
if there is any conflict between the terms and
conditions of the Master Equipment Lease Agreement and
Schedules and those of this Commitment Letter, the
Master Equipment Lease Agreement and Schedules shall
control.
Commitment-Expiration: This Commitment shall expire on March 31, 1998, unless
prior thereto either extended in writing by the Lessor
or accepted as provided below by the Lessee. A $15,000
Commitment Fee shall be due upon signing of this
<PAGE>
letter. The $15,000 previously paid Application Fee
shall be applied towards the Commitment Fee. The
Commitment Fee shall be first applied to the costs and
expenses of the Lessor in connection with the
transaction, and any remainder shall be applied to the
second month's rent due under the Schedules on a
pro-rata basis.
Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed duplicate
copy of this letter to me by April 1, 1998.
Sincerely,
FINOVA TECHNOLOGY FINANCE, INC.
By: /s/ Linda A. Moschitto
---------------------------------------
Linda A. Moschitto
Director - Contract Administration
Accepted this 1 day of April, 1998
IMCLONE SYSTEMS, INC.
By: /s/ Paul A. Goldstein
----------------------------
Typed or Printed Name:
Paul A. Goldstein
Title: Senior Director Finance, Controller
Exhibit 10.68
IMCLONE SYSTEMS INCORPORATED
1998 EMPLOYEE STOCK PURCHASE PLAN
The following constitutes the provisions of the 1998 Employee Stock
Purchase Plan of ImClone Systems Incorporated.
1. PURPOSE.
The purpose of the Plan is to provide employees of the Company and its
Affiliates with an opportunity to purchase Common Stock of the Company. It
is the intention of the Company that the Options granted under the Plan be
considered options issued under an "Employee Stock Purchase Plan" as that
term is defined under Section 423(b) of the Code. The provisions of the
Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "AFFILIATE" as used in the Plan means any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "BOARD" shall mean the Board of Directors of the Company, or a committee
of the Board of Directors named by the Board to administer the Plan.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(d) "COMMON STOCK" shall mean the Common Stock, $0.001 par value, of the
Company.
(e) "COMPANY" shall mean ImClone Systems Incorporated, a Delaware corporation.
(f) "COMPENSATION" shall mean all compensation that is taxable income for
federal income tax purposes, including, payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses, commissions
and other compensation.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an employee of the Company or
any Affiliate. Continuous Status as an Employee shall not be considered
interrupted in the case of a leave of absence agreed to in writing by the
Company or any Affiliate, provided that such leave is for a period of not
more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(h) "CONTRIBUTIONS" shall mean all amounts credited to the account of a
participant pursuant to the Plan.
<PAGE>
(i) "EXERCISE DATE" shall mean the last day of each Offering Period of the
Plan.
(j) "OFFERING DATE" shall mean the first business day of an Offering Period
under the Plan.
(k) "OFFERING PERIOD" shall mean any of the three month periods commencing on
each of July 1, October 1, January 1 and April 1 of each year (or such
other periods as may be determined by the Board which shall comply with
Section 423(b)(7) of the Code); provided that the initial offering period
shall commence at a time to be determined by the Board.
(l) "OPTION" shall mean an option granted under Section 6 of this Plan.
(m) "PLAN" shall mean this ImClone Systems Incorporated 1998 Employee Stock
Purchase Plan.
3. ELIGIBILITY.
(a) Options may be granted only to employees of the Company or any Affiliate.
An employee of the Company or any Affiliate shall not be eligible to
participate in an Offering Period, unless on the Offering Date of such
Offering Period, such employee has maintained Continuous Status as an
Employee for a period of six (6) months preceding such Offering Date. In
addition, no employee of the Company or any Affiliate shall be eligible to
be granted an Option under the Plan, unless, on the Offering Date, such
employee's customary employment with the Company or such Affiliate is at
least twenty (20) hours per week and at least five (5) months per calendar
year.
(b) No employee shall be eligible for the grant of an Option under the Plan
if, immediately after any such grant, such employee owns stock possessing
five percent (5%) or more of the total combined voting power or value of
all classes of stock of the Company or of any Affiliate. For purposes of
this subparagraph 3(b), the rules of Section 424(d) of the Code shall
apply in determining the stock ownership of any employee, and stock which
such employee may purchase under all outstanding rights and options shall
be treated as stock owned by such employee.
(c) An eligible employee may be granted an Option under the Plan only if such
Option, together with any other options granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase
stock of the Company or any Affiliate to accrue at a rate which exceeds
twenty-five thousand dollars ($25,000) of fair market value of such stock
(determined at the time such Options are granted) for each calendar year
in which such Options are outstanding at any time. Any Option granted
under the Plan shall be deemed to be modified to the extent necessary to
satisfy this paragraph 3(c).
(d) Officers of the Company shall be eligible to participate in the Plan;
provided, however, that the Board may provide in an Offering Period that
2
<PAGE>
certain employees who are highly compensated employees within the meaning
of Section 423(b)(4)(D) of the Code shall not be eligible to participate.
4. OFFERING PERIODS.
The Plan shall be implemented by a series of Offering Periods, with a new
Offering Period commencing on July 1, October 1, January l and April 1 of
each year (or such other periods as may be determined by the Board which
shall comply with Section 423(b)(7) of the Code); provided that the
initial Offering Period shall commence at a time to be determined by the
Board. The Plan shall continue until terminated in accordance with
paragraph 17 or paragraph 21 hereof. In addition, employees shall not be
entitled to enroll in the Plan or exercise any Options granted under the
Plan during any period in which the Company has restricted the purchase or
sale of its securities by its employees.
5. PARTICIPATION; CONTRIBUTIONS.
(a) An eligible employee may become a participant in the Plan by completing an
enrollment form ("Enrollment Form") provided by the Company and filing it
with the Company prior to the applicable Offering Date, unless a later
time for filing the Enrollment Form is set by the Board for all eligible
employees with respect to a given Offering Period. The Enrollment Form
shall set forth the percentage of the participant's Compensation (which
shall be a whole percentage not less than 1% and not more than 15%) to be
paid as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following the
Offering Date and shall end on the last payroll paid on or prior to the
Exercise Date of the Offering Period to which the Enrollment Form is
applicable, unless sooner terminated by the participant as provided in
paragraph 8. All payroll deductions made by a participant shall be
credited to such participant in an account under the Plan. A participant
may not make payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in paragraph 8.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and paragraph 3(c) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such
Offering Period and any other Offering Period ending within the same
calendar year equals $21,250. Payroll deductions shall recommence at the
rate provided in such participant's Enrollment Form at the beginning of
the first Offering Period which is scheduled to end in the following
calendar year, unless terminated by the participant as provided in
paragraph 8.
3
<PAGE>
6. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each eligible employee
participating in such Offering Period shall be granted an Option to
purchase on the Exercise Date of such Offering Period a number of shares
of Common Stock determined by dividing such employee's Contributions
accumulated prior to such Exercise Date and retained in the participant's
account as of the Exercise Date by 85% of the fair market value of a share
of the Common Stock on the Exercise Date; provided however, that such
purchase shall be subject to the limitations set forth in Sections 3(b), 3
(c), 3(d) and 10 hereof. The fair market value of a share of the Common
Stock shall be determined as provided in Section 6(b) below.
(b) The fair market value of the Common Stock on a given date shall be
determined by the Board in its discretion; provided that (i) if the Common
Stock is listed on a stock exchange, the fair market value per share shall
be the closing price on such exchange on such date as reported in the Wall
Street Journal (or, (A) if not so reported, as otherwise reported by the
exchange, and (B) if not reported on such date, then on the last prior
date on which a sale of the Common Stock was reported); or (ii) if not
listed on an exchange but traded on the National Association of Securities
Dealers Automated Quotation ("Nasdaq") National Market, the fair market
value per share shall be the last reported sale price on such date as
reported in the Wall Street Journal (or (A) if not so reported, as
otherwise reported by the Nasdaq National Market and (B) if not reported
on such date, then on the last prior date on which a sale of the Common
Stock was reported) or (iii) if traded on Nasdaq SmallCap and not the
National Market the fair market value per share shall be the mean of the
closing bid and asked price per share of the Common Stock on such date, as
reported in the Wall Street Journal (or, (A) if not so reported, as
otherwise reported by Nasdaq, and (B) if not so reported on such date,
then on the last prior date on which a sale of the Common Stock was
reported); or (iv) if the Common Stock is otherwise publicly traded, but
not listed on a stock exchange or traded on Nasdaq, the fair market value
per share shall be determined in good faith by the Board in its
discretion.
7. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in paragraph 8,
such participant's Option for the purchase of shares of Common Stock will
be exercised automatically on the Exercise Date of the Offering Period and
the maximum number of full shares of Common Stock subject to the Option
will be purchased for such participant at the applicable purchase price
with the accumulated Contributions in such participant's account. If a
fractional number of shares of Common Stock results, then such number
shall be rounded down to the next whole number and the excess
Contributions shall be carried forward to the next Exercise Date, unless
such participant withdraws the Contributions pursuant to paragraph 8(a) or
is no longer eligible to participate in the Plan, in which case such
amount shall be distributed to the participant without interest. The
shares purchased upon exercise of an Option hereunder shall be deemed to
be transferred to the participant on the Exercise Date. During a
participant's lifetime, a participant's Option to purchase shares
hereunder is exercisable only by such participant.
4
<PAGE>
(b) Shares shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such shares of Common
Stock pursuant thereto shall comply with all applicable provisions of law,
domestic or foreign, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, the
rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares of Common Stock may then be listed,
and shall be further subject to the approval of counsel for the Company
with respect to such compliance. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the shares of
Common Stock are being purchased only for investment and without any
present intention to sell or distribute such shares of Common Stock if, in
the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.
8. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the Contributions
credited to his or her account under the Plan at any time prior to the
Exercise Date of the Offering Period by written notice to the Company. All
of the participant's Contributions credited to such participant's account
will be paid to such participant promptly after receipt of such
participant's notice of withdrawal and such participant's Option for the
current Offering Period will be automatically terminated, and no further
Contributions for the purchase of shares of Common Stock will be made
during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an Employee,
prior to the Exercise Date of the Offering Period for any reason,
including retirement or death, the Contributions credited to such
participant's account will be returned to such participant or, in the case
of his or her death, to the person or persons entitled thereto under
paragraph 12, and his or her Option will be automatically terminated.
(c) In the event an employee fails to remain in Continuous Status as an
Employee of the Company for at least 20 hours per week during the Offering
Period in which the employee is a participant, such participant will be
deemed to have elected to withdraw from the Plan and the Contributions
credited to such participant's account will be returned to such
participant and the Option terminated.
(d) A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in a succeeding Offering
Period or in any similar plan which may hereafter be adopted by the
Company.
9. INTEREST.
No interest shall accrue on the Contributions of a participant in the
Plan.
5
<PAGE>
10. STOCK.
The maximum number of shares of Common Stock which shall be made available
for sale under the Plan shall be 500,000 shares subject to adjustment upon
changes in capitalization of the Company as provided in paragraph 16.
Shares sold under the Plan may be newly issued shares or shares reacquired
in private transactions or open market purchases, but all shares sold
under the Plan regardless of source shall be counted against the 500,000
share limitation. If the total number of shares of Common Stock which
would otherwise be subject to Options granted pursuant to Section 6(a)
hereof on the Offering Date of an Offering Period exceeds the number of
shares of Common Stock then available under the Plan (after deduction of
all shares of Common Stock for which Options have been exercised or are
then outstanding), the Company shall make a pro rata allocation of the
shares of Common Stock remaining available for Option grant in as uniform
a manner as shall be reasonably practicable and as it shall determine to
be equitable. Any amounts remaining in an employee's account not applied
to the purchase of Common Stock pursuant to this Section 10 shall be
refunded on or promptly after the Exercise Date. In such event, the
Company shall give written notice of such reduction of the number of
shares of Common Stock subject to the Option to each employee affected
thereby and shall similarly reduce the rate of Contributions, if
necessary.
11. ADMINISTRATION.
The Board shall supervise and administer the Plan and shall have full
power to adopt, amend and rescind any rules deemed desirable and
appropriate for the administration of the Plan and not inconsistent with
the Plan, to construe and interpret the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan.
12. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares of Common Stock and cash, if any, from the
participant's account under the Plan in the event of such participant's
death subsequent to the end of the Offering Period but prior to delivery
of such participant's shares of Common Stock and cash. In addition, a
participant may file a written designation of a beneficiary who is to
receive any cash from the participant's account under the Plan in the
event of such participant's death prior to the Exercise Date of the
Offering Period. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the participant (and his
or her spouse, if any) at any time by written notice. In the event of the
death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's
death, the Company shall deliver such shares of Common Stock and/or cash
to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of
6
<PAGE>
the participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
13. TRANSFERABILITY.
Neither Contributions credited to a participant's account nor any rights
with regard to the exercise of an Option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any
way other than by will, the laws of descent and distribution or as
provided in paragraph 12 hereof by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw
Contributions in accordance with paragraph 8.
14. USE OF FUNDS.
All Contributions received or held by the Company under the Plan may be
used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such Contributions.
15. REPORTS.
Individual accounts will be maintained for each participant in the Plan.
Statements of account will be given to participants, the per share
purchase price, the number of shares purchased and the remaining cash
balance, if any.
16. ADJUSTMENTS UPON CHANGES IN STOCK.
If any change is made in the shares of Common Stock subject to the Plan or
subject to any Option granted under the Plan (through merger,
consolidation, reorganization, distribution of substantially all of the
assets of the Company, spin-off of a subsidiary's voting securities to the
Company's shareholders, recapitalization, stock dividend, split-up,
combination of shares, exchange of shares, issuance of rights to
subscribe, or change in capital structure), appropriate adjustments shall
be made by the Board as to the maximum number of shares subject to the
Plan and the number of shares and price per share subject to outstanding
Options as shall be equitable to prevent dilution or enlargement of Option
rights. Any determination made by the Board hereunder shall be final,
binding and conclusive upon each participant.
17. AMENDMENT OR TERMINATION.
The Board may at any time terminate or amend the Plan. Except as provided
in paragraph 16, no such termination may affect Options previously
granted, nor may an amendment make any change in any Option therefore
granted which adversely affects the rights of any participant. In
addition, to the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any applicable law or regulation),
7
<PAGE>
the Company shall obtain stockholder approval in such a manner and to such
a degree as so required.
18. NOTICES.
All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
19. RIGHT TO TERMINATE EMPLOYMENT.
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any participant the right to continue in the employment
of the Company or any Affiliate, or affect any right which the Company or
any Affiliate may have to terminate the employment of such participant.
20. RIGHTS AS A STOCKHOLDER.
Neither the granting of an Option nor a deduction from payroll shall
constitute a participant the owner of shares covered by an Option. No
participant shall have any right as a stockholder unless and until an
Option has been exercised, and the shares of Common Stock underlying the
Option have been registered in the Company's share register.
21. TERM OF PLAN.
The Plan shall become effective upon its adoption by each of the Board and
the stockholders and shall continue in effect for a term of ten (10) years
unless sooner terminated earlier under paragraph 17.
22. APPLICABLE LAW.
This Plan shall be governed in accordance with the laws of Delaware.
8
Exhibit 10.69
IMCLONE SYSTEMS INCORPORATED
1998 NON-QUALIFIED STOCK OPTION PLAN, AS AMENDED(1)
ARTICLE I
Purpose of Plan
1.1 General Purpose. The purpose of this Non-Qualified Stock Option Plan
(the "Plan") is to promote the interests of ImClone Systems Incorporated (the
"Company") by affording key consultants, advisors, and non-officer employees an
opportunity to acquire a proprietary interest in the Company pursuant to stock
options issued by the Company, and thus to create in such persons increased
personal interest in its continued success.
1.2 Statutory Stock Option. Options granted under the Plan are intended
to be "non-qualified" stock options under the Internal Revenue Code of 1986, as
amended (the "Code").
ARTICLE II
Shares Subject to Plan
2.1 Description of Shares. Subject to Article VII hereof, the stock to
which the Plan applies is shares of the Company's common stock, $.001 par value
("Common Stock"), either authorized but unissued or Treasury shares. The number
of shares of Common Stock to be issued or sold pursuant to options granted
hereunder shall not exceed 1,000,000 shares.
- ----------
(1) Amended by the Board of Directors on July 7, 1998.
1
<PAGE>
2.2 Restoration of Unpurchased Shares. Any shares subject to an option
granted hereunder that, for any reason, expires or is terminated unexercised as
to such shares may again be subject to an option to be granted hereunder.
ARTICLE III
Administration; Committees; Amendments
3.1 Administration. The Plan shall be administered by any of the
Compensation and Stock Option Committee (the "Committee") or the Board of
Directors of the Company (the "Board"). The Committee shall be comprised of not
less than two persons who shall be appointed by the Board from among the members
of the Board.
3.2 Duration; Removal; Etc. The members of the Committee shall serve at
the pleasure of the Board, which shall have the power at all times to remove
members from the Committee or to add members thereto. Vacancies in the
Committee, however caused, shall be filled by action of the Board.
3.3 Meetings; Actions of Committee. The Committee may select one of its
members as its Chairman and shall hold meetings at such times and places as it
may determine. All decisions or determinations of the Committee and the Board
shall be made by the majority vote or decision of all of its members, whether
present at a meeting or not; provided, however, that any decision or
determination reduced to writing and signed by all of the members shall be as
fully effective as if this had been made at a meeting duly called and held. The
Committee and the Board may make such rules and regulations for the conduct of
its business not inconsistent herewith as it may deem advisable.
2
<PAGE>
3.4 Interpretation. The interpretation and construction by the Committee
or the Board of the provisions of the Plan or of the options granted hereunder
shall be final, unless in the case of the Committee otherwise determined by the
Board. No member of the Board or of the Committee shall be liable for an action
taken or determination made in good faith.
3.5 Amendments or Discontinuation. The Board may make such amendments,
changes, and additions to the Plan, or may discontinue and terminate the Plan,
as it may deem advisable from time to time; provided, however, that no action
shall affect or impair any options theretofore granted under the Plan.
ARTICLE IV
Participants; Participation Guidelines; Duration of Plan
4.1 Eligibility and Participation. Options shall be granted only to
persons ("Participants") who at the time of granting are key consultants,
advisors, or non-officer employees of the Company or a subsidiary. The Committee
or the Board shall determine the key consultants, advisors, and non-officer
employees to be granted options hereunder, the number of shares of Common Stock
subject to such options, the exercise prices of options, the terms thereof and
any other provisions not inconsistent with the Plan. Persons who are disabled
within the meaning of the Code shall not be eligible for the grant of options.
4.2 Guidelines for Participation. In selecting Participants and
determining the numbers of shares of Common Stock for which options are to be
granted, either the Committee or the Board shall consult with officers and
directors of the Company, and shall take into account the duties of the
respective persons, their present and potential contributions to the success of
the Company, and such other factors of the Committee or the Board shall deem
relevant.
3
<PAGE>
4.3 Duration of Plan. All options under the Plan shall be granted within
ten years from the date the Plan is approved by the Committee and the Board.
ARTICLE V
Terms and Conditions of Options
5.1 Individual Stock Option Agreements. All stock options granted
pursuant to the Plan shall be evidenced by stock option agreements ("Stock
Option Agreements"), which need not be identical, between the Company and the
Participant in such form as any of the Committee or the Board shall from time to
time approve, subject to the terms of the Plan.
5.2 Number of Shares. Each Stock Option Agreement shall state the total
number of shares of Common Stock with respect to which the option is granted,
the terms and conditions of the option, and the exercise price or prices
thereof, it being understood that the Committee or the Board shall have
authority to prescribe in any Stock Option Agreement that the option evidenced
thereby may be exercisable in full or in part, as to any number of shares
subject thereto, at any time or from time to time during said term as the
Committee or the Board may determine; provided that no option granted pursuant
to the Plan shall be exercisable after the expiration of ten years from the date
such option is granted. Except as otherwise provided in any Stock Option
Agreement, an option may be exercised at any time or from time to time during
the term of the option as to any or all full (but no fractional) shares which
have become purchasable under such option. The Committee or the Board shall have
the right to accelerate, in whole or in part, from time to time, conditionally
or unconditionally, the right to exercise any option granted hereunder.
5.3 Option Price. The price at which the shares of Common Stock subject
to each option granted under this Plan may be purchased (the "option price" or
"exercise price") shall be
4
<PAGE>
determined by any of the Committee or the Board, which shall have the authority
at the time the option is granted to prescribe in any Stock Option Agreement
that the price per share, with the passage of pre-determined periods of time,
shall increase from the original price to higher prices.
5.4 Method of Exercising Option; Full Payment. Subject to the terms of
Section 6.1 and Section 6.2 hereof, options granted pursuant to the Plan may be
exercised only if the Participant was, at all times during the period beginning
on the date the option was granted and ending on the date of such exercise, a
key consultant, advisor or a non-officer employee of the Company or a
subsidiary. Options shall be exercised by written notice to the Company,
addressed to the Company at its principal place of business. Such notice shall
state the Participant's election to exercise the option and the number of shares
of Common Stock in respect of which it is being exercised, and shall be signed
by the Participant so exercising the option. Such notice shall be accompanied by
(a) the Stock Option Agreement (which, if not exercised for all the shares
subject thereto, shall be appropriately endorsed and returned to the
Participant); (b) payment of the full purchase price of such shares, which
payment shall be by wire transfer, certified or bank check or in stock of the
Company that has been owned by the Participant for at least six months, or as
agreed to by the Board, other consideration; and such written representations
and other documents as may be desirable, in the opinion of the Company's legal
counsel, for purposes of compliance with state or Federal securities or other
laws. In the case of payment made in stock of the Company, the stock shall be
valued at its Fair Market Value (as hereinafter defined) on the last business
day prior to the date of exercise. The term "Fair Market Value" for the Common
Stock on any particular date shall mean the last reported sale price of the
Common Stock on the principal market on which the Common Stock trades on such
date or, if no trades of Common Stock are made or reported on such date, then on
the next
5
<PAGE>
preceding date on which the Common Stock traded. The Company shall deliver a
certificate or certificates representing shares of Common Stock purchased
pursuant to such notice to the purchaser as soon as practicable after receipt of
such notice, subject to Article VIII hereof. Either the Committee or the Board
may amend an already outstanding Stock Option Agreement to add a provision
permitted by clause (b) of this Section 5.4, and no such amendment, by itself,
shall be deemed to constitute the grant of a new option for purposes of this
Plan.
5.5 Rights as a Shareholder. No Participant shall have any rights as a
shareholder with respect to shares of Common Stock subject to an option granted
under the Plan until the date of the issuance to such Participant of a stock
certificate in respect of such shares. No adjustment shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is issued.
5.6 Other Provisions. Stock Option Agreements entered into pursuant to
the Plan may contain such other provisions (not inconsistent with the Plan) as
each of the Committee or the Board may deem necessary or desirable, including,
but not limited to, covenants on the part of the Participant not to compete, not
to sell Common Stock obtained from the exercise of options for specified periods
of time, and remedies available to the Company in the event of the breach of any
such covenant.
ARTICLE VI
Termination; Transferability
6.1 Termination. Except as otherwise provided in connection with the
grant of any option or the termination of any Participant, the right to exercise
any unexercised portion of any option granted under the Plan shall terminate on
the date of termination of the relationship
6
<PAGE>
between the Participant and the Company or a subsidiary, for any reason, without
regard to cause, other than by reason of death or disability. The option may not
be exercised thereafter, and the shares of Common Stock subject to the
unexercised portion of such option may again be subject to new options under the
Plan.
6.2 Death or Disability of Participant. Except as otherwise permitted in
connection with the grant of any option or the death or disability of a
Participant, in the event a Participant dies or is disabled while he is a
consultant, advisor or non-officer employee of the Company or a subsidiary, any
options theretofore granted to him shall be exercisable only within the next 12
months immediately succeeding such death or disability and then only (a) in the
case of death, by the person or persons to whom the Participants rights under
the option shall pass by will or the laws of descent and distribution, and in
the case of disability, by such Participant or his legal representative, and (b)
if and to the extent that he was entitled to exercise the option at the date of
his death or disability.
6.3 Transferability. Options granted to a Participant under the Plan
shall not be transferable otherwise than by will, by the laws of descent and
distribution, or (if authorized in the applicable Stock Option Agreement)
pursuant to a qualified domestic relations order ("QDRO") as defined by the
Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. During the
Participant's lifetime, options shall be exercised only by such Participant,
such Participant's guardian or legal representative, or (if authorized in the
applicable Stock Option Agreement) such Participant's transferee pursuant to a
QDRO.
7
<PAGE>
ARTICLE VII
Capital Adjustments
7.1 Capital Adjustments. If any change is made in the shares of Common
Stock subject to the Plan or subject to any option granted under the Plan
(through merger, consolidation, reorganization, recapitalization, stock
dividend, split-up, combination of shares, exchange of shares, issuance of
rights to subscribe, or change in capital structure), appropriate adjustments
shall be made by either the Committee or the Board as to the maximum number of
shares subject to the Plan and the number of shares and price per share subject
to outstanding options as shall be equitable to prevent dilution or enlargement
of option rights. Any determination made by either the Committee or the Board
under this Article VII shall be final, binding and conclusive upon each
Participant.
ARTICLE VIII
Legal Requirements, Etc.
8.1 Revenue Stamps. The Company shall be responsible and shall pay for
any transfer, revenue, or documentary stamps with respect to shares issued upon
the exercise of options granted under the Plan.
8.2 Legal Requirements. The Company shall not be required to issue
certificates for shares upon the exercise of any option unless and until, in the
opinion of the Company's legal counsel, such issuance would not result in a
violation of any state or Federal securities or other law. Certificates for
shares, when issued, shall have, if required in the opinion of the Company's
legal counsel, the following legend, or statements of other restrictions,
endorsed thereon, and may not immediately be transferable:
8
<PAGE>
The shares of Common Stock evidenced by this certificate have been issued
to the registered owner in reliance upon written representations that
these shares have been purchased for investment. These shares may not be
sold, transferred, or assigned unless, in the opinion of the Company and
its legal counsel, such sale, transfer, or assignment will not be in
violation of the Securities Act of 1933, as amended, applicable rules and
regulations of the Securities and Exchange Commission and any applicable
state securities laws.
8.3 Private Offering. The options to be granted under the Plan are
available only to a limited number of present and future key consultants,
advisors and non-officer employees of the Company who have knowledge of the
Company's financial condition, management, and affairs. Such options are not
intended to provide additional capital for the Company, but are to encourage
stock ownership by the Company's key personnel. By the act of accepting an
option, in the absence of an effective registration statement under the
Securities Act of 1933, as amended, Participants shall agree that upon exercise
of such option, they will acquire the shares of Common Stock that are the
subject thereof for investment and not with any intention at such time to resell
or redistribute the same, and they shall confirm such agreement at the time of
exercise, but the neglect or failure to confirm the same in writing shall not be
a limitation of such agreement.
ARTICLE IX
General
9.1 Application of Funds. The proceeds received by the Company from the
sale of shares of Common Stock pursuant to the exercise of options therefor
shall be used for general corporate purposes.
9.2 Right of the Company to Terminate Relationship. Nothing contained in
the Plan or in a Stock Option Agreement shall confer upon any Participant any
right to be continued as a consultant, advisor or non-officer employee of the
Company, or interfere in any way with the
9
<PAGE>
right of the Company to terminate such relationship for any reason whatsoever,
with or without cause, at any time.
9.3 No Obligation to Exercise. The granting of an option hereunder shall
impose no obligation upon the Participant to exercise such option.
9.4 Effectiveness of Plan. The Plan shall become effective upon its
adoption by the Committee and ratification of the Board. Options may be granted
under the Plan prior to the ratification of the Plan by the Board, but no such
option may be exercised prior to such approval.
9.5 Other Benefits. Participation in the Plan shall not preclude a
Participant from eligibility in any other stock benefit plan of the Company or
any old age benefit, insurance, pension, profit sharing, retirement, bonus or
other plan which the Company has adopted, or may, at any time, adopt.
9.6 Tax Requirements. The exercise or surrender of any option under this
Plan shall constitute a Participant's full and complete consent to whatever
action the Committee or the Board elect to satisfy the Federal and state
withholding requirements, if any, which the Committee in its discretion deems
applicable to such exercise.
9.7 Interpretations and Adjustments. To the extent permitted by Law, an
interpretation of the Plan and a decision on any matter within either the
Committee or the Board's discretion made in good faith is binding on all
persons. A misstatement or other mistake of fact shall be corrected when it
becomes known, and the person responsible shall make such adjustment on account
thereof as he considers equitable and practicable.
9.8 Information. The Company shall, upon request or as may be
specifically required hereunder, furnish or cause to be furnished, all of the
information or documentation which is
10
<PAGE>
necessary or required by either the Committee or the Board to perform its duties
and functions under the Plan.
9.9 Governing Law. The Plan and any and all options granted thereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York from time to time in effect.
9.10 Certain Definitions.
9.10.1 "Parent". The term "parent" shall mean a "parent corporation" as
defined in Section 424(e) of the Code.
9.10.2 "Subsidiary". The term "subsidiary" shall mean a "subsidiary
corporation" as defined in Section 424(f) of the Code.
9.10.3 "Disabled". The term "disabled" shall have the definition set forth
in Section 22(a) (3) of the Code.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Information taken from June 30, 1998 Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,874
<SECURITIES> 47,852
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,940
<PP&E> 23,874
<DEPRECIATION> (12,120)
<TOTAL-ASSETS> 68,035
<CURRENT-LIABILITIES> 3,185
<BONDS> 2,200
0
400
<COMMON> 24
<OTHER-SE> 59,495
<TOTAL-LIABILITY-AND-EQUITY> 68,035
<SALES> 0
<TOTAL-REVENUES> 765
<CGS> 0
<TOTAL-COSTS> 6,221
<OTHER-EXPENSES> (778)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110
<INCOME-PRETAX> (4,788)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,788)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,788)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
